<PAGE>
As filed with the Securities and Exchange Commission on October 12, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
Form S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MEDIMMUNE, INC.
(Exact name of registrant as specified in its charter)
-----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 2836 52-1555759
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Telephone: (301) 417-0770
(Address, including zip code and telephone number,including
area code, of registrant's principal executive offices)
-----------------------
Wayne T. Hockmeyer, Ph.D.
Chairman and Chief Executive Officer
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Telephone: (301) 417-0770
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Frederick W. Kanner Margaret L. Wolff
Richard D. Pritz Skadden, Arps, Slate, Meagher & Flom LLP
Dewey Ballantine LLP 919 Third Avenue
1301 Avenue of the Americas New York, NY 10022-3897
New York, NY 10019 (215) 735-3000
(212) 259-8000
</TABLE>
Approximate date of commencement of proposed sale to the public: Upon
consummation of the merger referred to herein.
-----------------------
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) 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. [ ]
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. [ ]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount To Be Offering Price Aggregate Offering Amount of
Securities To Be Registered Registered (1) Per Unit Price (2) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value $0.01 per share 5,655,560 NA $603,731,030 $167,837
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the maximum number of shares expected to be issued in connection
with the merger, calculated as the product of (a) 33,170,440, the aggregate
number of shares of common stock, par value $0.01 per share, of U.S. Bioscience,
Inc., outstanding on September 17, 1999 assuming exercise of all options and
warrants (whether or not currently exercisable) and (b) 0.1705, the maximum
fraction of a share of MedImmune's common stock issuable for each share of
common stock of U.S. Bioscience.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act, and based upon the average of
the high and low sales prices of MedImmune's common stock on the Nasdaq on
October 5, 1999 ($106.75).
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
- -------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
- -------------------------------------------------------------------------------
Subject to Completion, dated October 12, 1999
---------------------------------------------
U.S. BIOSCIENCE, INC.
One Tower Bridge
100 Front Street
West Conshohocken, PA 19428
________, 1999
Dear Stockholder:
We are pleased to inform you that U.S. Bioscience has signed a merger
agreement with MedImmune, Inc. As a result of the proposed merger, each of your
U.S. Bioscience shares will be converted into 0.1500 MedImmune shares, subject
to adjustment based on MedImmune's trading price, and U.S. Bioscience will
become a wholly owned subsidiary of MedImmune. The adjustment mechanism is
explained in detail on page 1 of the attached proxy statement/prospectus.
MedImmune common stock is listed on the Nasdaq Stock Market under the
symbol "MEDI" and its closing price was $___ per share on ________ __, 1999.
U.S. Bioscience has scheduled a special meeting of its stockholders to be
held on _______ __, 1999 to consider and vote on the merger agreement. We
cannot complete the merger without the approval of the holders of a majority of
the outstanding shares of U.S. Bioscience common stock.
After careful consideration, your board of directors has unanimously
approved the merger agreement and determined that the merger is fair to and in
the best interest of U.S. Bioscience and its stockholders. The board of
directors unanimously recommends that you vote "FOR" the merger agreement.
In arriving at its determination and recommendation, the board of directors
took into account the factors described in the attached proxy
statement/prospectus, including the opinion of Morgan Stanley & Co. Incorporated
to the effect that the merger consideration is fair from a financial point of
view to U.S. Bioscience stockholders.
Your vote is very important. Please promptly complete, date, sign and
return the enclosed proxy card in the prepaid envelope enclosed to ensure that
your shares will be represented at the special meeting. If you do not vote at
all, it will, in effect, count as a vote against the merger.
<PAGE>
You should consider the matters discussed under "Risk Factors Relating to
the Merger" on page 18 of the attached proxy statement/prospectus before voting.
Please review carefully the entire proxy statement/prospectus.
We look forward to the successful combination of U.S. Bioscience and
MedImmune and to your continued support as a stockholder of MedImmune.
On behalf of the board of directors of U.S. Bioscience, we urge you to vote
"FOR" approval of the merger and the related merger agreement.
C. Boyd Clarke
President and Chief Executive Officer
-------------------------
Your vote is important.
Please complete, sign, date and return your proxy.
-------------------------
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved the merger described in this
proxy statement/prospectus or the MedImmune common stock to be issued in
connection with the merger, or determined if the proxy statement/prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
- -------------------------------------------------------------------------------
This proxy statement/prospectus is dated ___________, 1999, and is first
being mailed to stockholders on or about ____________, 1999.
<PAGE>
U.S. BIOSCIENCE, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _____________, 1999
To the Stockholders of U.S. Bioscience, Inc.:
We will hold a special meeting of the stockholders of U.S. Bioscience, Inc.
on _________, 1999, at 10:00 a.m., local time, at the Philadelphia Marriott
West, 111 Crawford Avenue, West Conshohocken, PA 19428, for the following
purpose:
To consider and vote upon a proposal to adopt the merger agreement among
MedImmune, a wholly-owned subsidiary of MedImmune and U.S. Bioscience. In
the merger, U.S. Bioscience will become a wholly-owned subsidiary of
MedImmune, and all outstanding shares of U.S. Bioscience common stock will
be converted into the right to receive shares of MedImmune common stock.
We will transact no other business at the special meeting except such
business as may properly be brought before the special meeting or any
adjournment of it by the U.S. Bioscience board of directors.
Only stockholders who owned shares of U.S. Bioscience common stock at the
close of business on [Record Date], 1999, the record date for the special
meeting, are entitled to notice of, and to vote at, the special meeting and any
adjournments or postponements of it.
We cannot complete the merger unless the merger agreement is adopted by the
affirmative vote of holders of a majority of our outstanding shares of common
stock. U.S. Bioscience stockholders have no appraisal rights under Delaware
law in connection with the merger.
For more information about the merger, please review the accompanying proxy
statement/prospectus and the merger agreement attached as Annex 1.
The enclosed proxy is solicited by the Board of Directors of U.S.
Bioscience.
A complete list of the stockholders entitled to vote at the special
meeting will be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the special meeting, at the offices of U.S. Bioscience, One
Tower Bridge, 100 Front Street, West Conshohocken, Pennsylvania 19428.
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy and return it promptly in the enclosed postage-
paid envelope.
Please do not send any stock certificates at this time.
By Order of the Board of Directors,
Martha E. Manning
<PAGE>
Secretary
West Conshohocken, Pennsylvania
____________, 1999
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about MedImmune and U.S. Bioscience from documents that
are not included in or delivered with this proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can 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 and telephone numbers:
MedImmune, Inc. U.S. Bioscience, Inc.
35 West Watkins Mill Road One Tower Bridge
Gaithersburg, Maryland 20878 100 Front Street
Attention: Investor Relations West Conshohocken, PA 19428
Telephone: (301) 417-0770 Attention: Martha E. Manning
Telephone: (610) 832-0570
If you would like to request documents, please do so by __________ __, 1999
in order to receive them before the special meeting.
See "Where You Can Find More Information" on page 68.
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Questions and Answers About The Merger............................................. iv
SUMMARY............................................................................ 6
The Companies..................................................................... 6
General........................................................................... 6
The Merger Agreement and Stock Option Agreement................................... 10
The Special Meeting............................................................... 12
Comparative Per Share Information................................................. 14
Selected Historical Financial Information of MedImmune............................. 15
Selected Historical Financial Information of U.S. Bioscience....................... 16
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION........................ 17
RISK FACTORS RELATING TO THE MERGER................................................ 18
The Merger......................................................................... 20
Background of the Merger.......................................................... 20
Reasons for the Merger and the U.S. Bioscience Board of Directors Recommendation.. 22
Opinion of Morgan Stanley & Co. Incorporated...................................... 25
MedImmune Earnings................................................................ 32
Interests of U.S. Bioscience Directors and Management in the Merger............... 32
Material United States Federal Income Tax Consequences of the Merger.............. 35
Accounting Treatment.............................................................. 36
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares.. 37
Regulatory Matters................................................................ 38
Appraisal Rights.................................................................. 39
Resale of MedImmune Common Stock.................................................. 39
THE MERGER AGREEMENT AND STOCK OPTION AGREEMENT.................................... 40
The Merger Agreement.............................................................. 40
The Stock Option Agreement........................................................ 49
Comparison of Rights of Common Stockholders of MedImmune and U.S. Bioscience....... 62
THE SPECIAL MEETING................................................................ 65
Date, Time and Place.............................................................. 65
Purpose of Special Meeting........................................................ 65
Record Date; Shares Entitled to Vote; Quorum...................................... 65
Votes Required.................................................................... 65
Voting By U.S. Bioscience Directors and Executive Officers........................ 65
Voting of Proxies................................................................. 65
Revocability of Proxies........................................................... 66
Solicitation of Proxies........................................................... 66
Legal Matters...................................................................... 67
Experts............................................................................ 67
Future Stockholder Proposals....................................................... 67
Where You Can Find More Information................................................ 68
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Special Note Regarding Forward-Looking Statements.................................. 70
</TABLE>
ANNEXES
Annex 1 - Agreement and Plan of Merger
Annex 2 - Stock Option Agreement
Annex 3 - Opinion of Morgan Stanley & Co. Incorporated
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why is U.S. Bioscience recommending the merger?
A: We anticipate that the merger will create greater value for our
stockholders and more growth and business expansion opportunities than
would be available as an independent company.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete, sign and date your proxy and
return it in the enclosed return envelope as soon as possible, so that
your shares may be represented at the special meeting. If you sign and
send in your proxy and do not indicate how you want to vote, we will count
your proxy as a vote in favor of adoption of the merger agreement. If you
abstain from voting or do not vote, it will have the same effect as a vote
against the merger agreement.
The special meeting will take place on ____________________, 1999, at
10:00 a.m., local time, at the Philadelphia Marriott West, 111 Crawford
Avenue, West Conshohocken, PA 19428. You may attend the special meeting
and vote your shares in person, rather than completing, signing, dating
and returning your proxy.
Q: Can I change my vote after I have sent my proxy card?
A: Yes. You can change your vote at any time before your proxy is voted at
the special meeting. You can do this in one of three ways. First, you can
send a written notice stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy. If you choose either of
these two methods, you must submit your notice of revocation or your new
proxy to the Secretary of U.S. Bioscience at One Tower Bridge, 100 Front
Street, West Conshohocken, PA 19428, Attention: Martha E. Manning. Third,
you can attend the special meeting and vote in person. Simply attending
the meeting, however, will not revoke your proxy.
Q: If my U.S. Bioscience shares are held in "street name" by my broker, will
my broker vote my shares for me?
A: No. Your broker will vote your shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, which will have the same
effect as a vote against the merger.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, you will receive written instructions
for exchanging your stock certificates. Please do not send in your stock
certificates with your proxy.
Q: When do you expect the merger to be completed?
iv
<PAGE>
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger shortly after the U.S. Bioscience stockholder meeting.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional
copies of this proxy statement/prospectus or the enclosed proxy, you
should contact:
Corporate Investor Communications, Inc. 111 Commerce Road Carlstadt, NJ
07072-2586 Telephone: (201) 896-1900 Telecopier: (201) 804-0910
v
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important
to you. To understand the merger fully and for a more complete description of
some of the topics presented, you should carefully read this entire proxy
statement/prospectus and the other documents to which we have referred you. See
"Where You Can Find More Information" on page 68. In most cases, we have
included page references parenthetically to direct you to a more complete
description of the topics presented in this summary.
The Companies
MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
(301) 417-0770
MedImmune, Inc., located in Gaithersburg, Maryland, is a biotechnology
company focused on developing and marketing products that address medical needs
in areas such as infectious disease, transplantation medicine, autoimmune
disorders and cancer. MedImmune markets three products through its hospital-
based sales force and has five new product candidates in clinical trials.
U.S. Bioscience, Inc.
One Tower Bridge
100 Front Street
West Conshohocken, Pennsylvania 19428
(610) 832-0570
U.S. Bioscience, Inc., based in West Conshohocken, Pennsylvania, is a
pharmaceutical company specializing in the development and commercialization of
products for patients with cancer and AIDS. The company has three products on
the market. In addition to its headquarters, U.S. Bioscience has a manufacturing
facility located in Nijmegen, The Netherlands, an analytical laboratory in
Exton, PA., and a subsidiary near London to coordinate clinical trials in
Europe.
General
What U.S. Bioscience Stockholders Will Receive in the Merger (Page 40)
In the merger, holders of U.S. Bioscience common stock will receive a
fraction of a share of MedImmune common stock equal to the exchange ratio for
each share of U.S. Bioscience common stock that they own. The exchange ratio
will be calculated as follows:
If the average per share closing price of MedImmune common stock as
reported in The Wall Street Journal during a valuation period of the 20
consecutive trading days ending on the
<PAGE>
third trading day before the special meeting (excluding the last five trading
days of 1999 and the first two trading days of 2000) is:
. greater than $140, the exchange ratio will be $19.10 divided by the
average per share closing price of MedImmune's common stock;
. $140 or lower but more than $132, the exchange ratio will be 0.1364;
. $132 or lower but more than $120, the exchange ratio will be $18.00
divided by the average per share closing price of MedImmune's common
stock;
. $120 or lower but more than $100, the exchange ratio will be 0.1500;
. $100 or lower but more than $88, the exchange ratio will be $15 divided by
the average per share closing price of MedImmune's common stock;
. $88 or lower, the exchange ratio will be 0.1705; and
. less than $80, U.S. Bioscience may terminate the merger agreement unless
MedImmune notifies U.S. Bioscience that it is increasing the exchange
ratio to $13.64 divided by the average per share closing price of
MedImmune's common stock.
U.S. Bioscience stockholders will receive cash for any fractional shares of
MedImmune common stock they would otherwise receive in the merger. This amount
will be calculated by multiplying the fractional share interest to which they
would otherwise be entitled by the closing price of MedImmune common stock on
the closing date.
This is a table showing a range of prices of MedImmune common stock, along
with the corresponding exchange ratios and corresponding value of the fraction
of a share of MedImmune common stock to be received by U.S. Bioscience
stockholders for each share of U.S. Bioscience common stock they hold.
<TABLE>
<CAPTION>
Average Closing
Price of Value of MedImmune
MedImmune Common Stock Received in
Common Stock Exchange Ratio the Merger
-------------------- --------------- ----------------------------
<S> <C> <C>
$ 80 (1)....... 0.1705 $13.64
82........... 0.1705 13.98
84........... 0.1705 14.32
86........... 0.1705 14.66
88........... 0.1705 15.00
90........... 0.1667 15.00
92........... 0.1630 15.00
94........... 0.1596 15.00
96........... 0.1563 15.00
98........... 0.1531 15.00
100.......... 0.1500 15.00
102.......... 0.1500 15.30
104.......... 0.1500 15.60
106.......... 0.1500 15.90
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
108.......... 0.1500 16.20
110.......... 0.1500 16.50
112.......... 0.1500 16.80
114.......... 0.1500 17.10
116.......... 0.1500 17.40
118.......... 0.1500 17.70
120.......... 0.1500 18.00
122.......... 0.1475 18.00
124.......... 0.1452 18.00
126.......... 0.1429 18.00
128.......... 0.1406 18.00
130.......... 0.1385 18.00
132.......... 0.1364 18.00
134.......... 0.1364 18.28
136.......... 0.1364 18.55
138.......... 0.1364 18.82
140.......... 0.1364 19.10
142.......... 0.1345 19.10
144.......... 0.1326 19.10
146.......... 0.1308 19.10
</TABLE>
(1) If the average closing price of MedImmune common stock is less than
$80, U.S. Bioscience may terminate the merger agreement unless MedImmune
notifies it that the exchange ratio will be $13.64 divided by the average
closing price. If U.S. Bioscience does not exercise its right to terminate, the
exchange ratio will be 0.1705 MedImmune shares for each U.S. Bioscience share,
which will result in a value of less than $13.64 per U.S. Bioscience share.
All valuations in this section assume that the value of a MedImmune share
is equal to the average closing price during the valuation period. The market
value of MedImmune common stock on the day the merger is completed may vary from
the average closing price of MedImmune common stock used to calculate the
exchange ratio. As a result, the market value of the shares of MedImmune common
stock you receive in the merger may be more or less than the value attributed to
your shares of U.S. Bioscience common stock in calculating the exchange ratio.
See "Risk Factors Relating to the Merger" on page 18.
We will issue a press release before the special meeting disclosing the
exchange ratio once it has been calculated. In addition, you may obtain the
exchange ratio by calling Corporate Investor Communications, Inc. at (201) 896-
1900 beginning on the trading day before the special meeting.
U.S. Bioscience Board Of Directors Recommendation To Stockholders (Page 22)
The U.S. Bioscience board of directors believes that the terms of the
merger and the merger agreement are fair to and in the best interests of U.S.
Bioscience and its stockholders and unanimously recommends that the stockholders
vote "FOR" the adoption of the merger agreement.
8
<PAGE>
To review the background and reasons for the merger, as well as certain risks
related to the merger, see pages 20, 22 and 18.
Opinion of Financial Advisor to U.S. Bioscience (Page 25)
In deciding to approve the merger, the U.S. Bioscience board considered the
opinion of Morgan Stanley & Co. Incorporated, its financial advisor, that, as
of September 21, 1999, and based upon and subject to the various considerations
in its letter, the consideration to be received by the holders of U.S.
Bioscience common stock pursuant to the merger agreement is fair from a
financial point of view to such holders. The opinion was provided for the
information and assistance of the U.S. Bioscience board in connection with the
merger and is not a recommendation as to how any holder of U.S. Bioscience
common stock should vote with respect to the merger. The full text of the
written opinion of Morgan Stanley, which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with the
opinion, is attached as Annex 3. You are urged to read the opinion carefully
and in its entirety.
Material United States Federal Income Tax Consequences of the Merger (Page 35)
The merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986. It is a condition to U.S.
Bioscience's obligation to complete the merger that U.S. Bioscience receive an
opinion from Skadden, Arps, Slate, Meagher & Flom LLP to the effect that the
merger so qualifies. The condition relating to the tax opinion cannot be waived
without the express written consent of MedImmune and will not be waived after
receipt of stockholder approval unless further stockholder approval is obtained
with appropriate disclosure. Assuming the merger qualifies as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, holders of
U.S. Bioscience common stock will not recognize gain or loss for United States
federal income tax purposes as a result of the exchange of their U.S. Bioscience
common stock for MedImmune common stock in the merger (except for gain or loss
recognized because of cash received instead of fractional shares of MedImmune
common stock).
Tax matters are very complicated and holders of U.S. Bioscience common
stock are strongly urged to consult their tax advisors as to the specific tax
consequences to them of the merger, including the applicability and effect of
federal, state, local, foreign and other applicable tax laws in their particular
circumstances.
Accounting Treatment (Page 35)
MedImmune and U.S. Bioscience expect the merger to qualify as a pooling of
interests transaction, which means that MedImmune and U.S. Bioscience will be
treated as if they had always been combined for accounting and financial
reporting purposes.
Ownership of MedImmune Following the Merger
Based on the number of outstanding shares of U.S. Bioscience common stock
on the record date and an exchange ratio of 0.1500 MedImmune shares per U.S.
Bioscience share, U.S. Bioscience stockholders would receive approximately
__________ shares of MedImmune common stock in the merger. Based on that number
and on the number of outstanding shares of MedImmune common stock on the record
date, U.S. Bioscience stockholders would own approximately ____% of the
outstanding shares of MedImmune common stock following the merger.
9
<PAGE>
Interests of U.S. Bioscience Directors and Management in the Merger (Page 32)
In addition to their interests as stockholders, the directors and officers
of U.S. Bioscience have interests in the merger that are different from, or in
addition to, your interests. These interests exist because of rights they have
pursuant to the terms of benefit and compensation plans maintained by U.S.
Bioscience and pursuant to the terms of each officer's severance agreement with
U.S. Bioscience.
Some of these benefit and compensation plans provide for acceleration of
vesting or lapse of restrictions on the stock-based rights of directors and
executive officers in connection with the merger. Each executive officer's
severance agreement also provides the executive officer with severance benefits
if his or her employment is terminated under specified circumstances following
the merger.
In addition, MedImmune will indemnify the directors and executive officers
of U.S. Bioscience for a period of six years following the merger for events
occurring before the merger.
The members of the U.S. Bioscience board of directors knew about these
additional interests and considered them when approving the merger.
Appraisal Rights
Under Delaware law, U.S. Bioscience stockholders have no appraisal rights
in connection with the merger.
Regulatory Matters (Page 38)
United States antitrust laws prohibit MedImmune and U.S. Bioscience from
completing the merger until they have furnished information and materials to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and any required waiting period has ended. MedImmune and U.S. Bioscience each
filed the required notification and report forms with the Antitrust Division and
the Federal Trade Commission on October 5, 1999.
Both MedImmune and U.S. Bioscience conduct operations in a number of other
foreign countries where regulatory filings, notifications or approvals with
applicable commissions and other authorities may be required in connection with
consummation of the merger. The parties do not anticipate that any such foreign
filings will materially affect the consummation of the merger.
The Merger Agreement and Stock Option Agreement
(Page 40)
The merger agreement is attached as Annex 1 to this proxy
statement/prospectus. The stock option agreement is attached as Annex 2 to this
proxy statement/prospectus. U.S. Bioscience encourages you to read these
agreements carefully.
10
<PAGE>
Conditions to the Completion of the Merger (Page 40)
The obligation of MedImmune and U.S. Bioscience to effect the merger is
subject to a number of conditions, including the following:
. adoption of the merger agreement by U.S. Bioscience stockholders
. the receipt of regulatory approvals and the absence of legal
restraints or governmental litigation
. MedImmune and U.S. Bioscience each having received letters from their
accountants concurring with their managements' conclusions that no
conditions exist that would preclude accounting for the merger as a
pooling of interests
. the accuracy of the representations made by the other party in the
merger agreement and the performance of the covenants made by the
other party in the merger agreement
. the absence of a material adverse change in the other party
U.S. Bioscience's obligation to complete the merger is also contingent upon
receipt of an opinion of counsel to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986.
Termination of the Merger Agreement (Page 44)
1. MedImmune and U.S. Bioscience can jointly agree to terminate the merger
agreement.
2. MedImmune or U.S. Bioscience can terminate the merger agreement if:
. the merger has not been completed by March 31, 2000
. a law or court order prohibiting the merger becomes final and
nonappealable
. U.S. Bioscience stockholders do not adopt the merger agreement at the
special meeting
. the other party breaches any of its representations, warranties,
covenants or agreements under the merger agreement that results in a
failure of specified conditions to the merger and has not cured the
breach within 15 days after receipt of notice of such breach
3. MedImmune can terminate the merger agreement if the U.S. Bioscience board of
directors:
. withdraws, modifies or changes its approval or recommendation of the
merger in a manner adverse to MedImmune
. approves or recommends a third party takeover proposal
4. U.S. Bioscience can terminate the merger agreement:
. in response to an unsolicited proposal to acquire more than 50% of the
U.S. Bioscience common stock or all or substantially all of its assets on
terms that the
11
<PAGE>
U.S. Bioscience board of directors determines to be more favorable to U.S.
Bioscience than the merger, but only if it has given MedImmune five days'
notice of the terms of the other proposal and has paid the required
termination fee
. if the average share price of MedImmune common stock in the 20 consecutive
trading days ending three trading days before the special meeting falls
below $80, unless MedImmune notifies U.S. Bioscience that it is increasing
the exchange ratio to $13.64 divided by the average per share closing
price
Termination Fees (Page 45)
U.S. Bioscience must pay MedImmune a termination fee of $15 million plus
up to $2 million of documented expenses relating to the merger if:
. (a) a third party makes a takeover proposal, (b) the merger agreement is
terminated because the stockholders of U.S. Bioscience do not approve the
merger or due to a willful and material breach by U.S. Bioscience and (c)
within 12 months of the termination, U.S. Bioscience enters into an
acquisition agreement or consummates a takeover proposal
. U.S. Bioscience terminates the merger agreement in response to an
unsolicited superior proposal, as described in paragraph 4 above
. MedImmune terminates the merger agreement due to a change in U.S.
Bioscience's recommendation of the merger or because U.S. Bioscience
recommends another transaction, as described in paragraph 3 above
The Stock Option Agreement (Page 49)
U.S. Bioscience has granted an option to MedImmune to purchase a number of
newly issued shares of U.S. Bioscience common stock equal to 19.9% of U.S.
Bioscience's outstanding common stock at an option price of $16.50 per share if
any of the events occur that entitle MedImmune to receive the termination fee
under the merger agreement. The stock option agreement limits MedImmune's total
profit under the stock option to $17 million less any termination fee and
documented expenses it actually receives under the merger agreement.
The Special Meeting
(Page 65)
The special meeting of U.S. Bioscience stockholders will be held at the
Philadelphia Marriott West, 111 Crawford Avenue, West Conshohocken, PA 19428, at
10:00 a.m., local time, on _________, 1999. At the special meeting, we will ask
U.S. Bioscience stockholders to adopt the merger agreement.
12
<PAGE>
Record Date; Voting Power
U.S. Bioscience stockholders are entitled to vote at the special meeting if
they were holders of record of shares of U.S. Bioscience common stock as of the
close of business on [record date], the record date.
On the record date, there were ___________ shares of U.S. Bioscience common
stock outstanding and entitled to vote at the special meeting. Stockholders
will have one vote at the special meeting for each share of U.S. Bioscience
common stock that they owned on the record date.
Votes Required
The affirmative vote of the holders of a majority of the outstanding U.S.
Bioscience common stock is required to adopt the merger agreement.
Voting By U.S. Bioscience Directors and Executive Officers
At the close of business on the record date, directors and executive
officers of U.S. Bioscience owned and were entitled to vote _______ shares of
U.S. Bioscience common stock, which represented approximately __% of the shares
of U.S. Bioscience common stock outstanding on that date.
Market Prices and Dividend Information
MedImmune common stock is traded on the Nasdaq Stock Market under the
symbol "MEDI" and U.S. Bioscience common stock is listed on The American Stock
Exchange under the symbol "UBS." The following table sets forth, for the periods
indicated, the high and low sales prices per share of MedImmune common stock and
of U.S. Bioscience common stock as reported in published financial sources.
MedImmune's per share data has been restated to account for MedImmune's two-for-
one stock split effective on December 31, 1998. Neither MedImmune nor U.S.
Bioscience has ever declared or paid any cash dividends on its common stock and
neither anticipates paying any cash dividends in the foreseeable future.
<TABLE>
<CAPTION>
MedImmune U.S. Bioscience
-------------------------- --------------------------------
High Low High Low
-------------------------- --------------------------------
1997:
<S> <C> <C> <C> <C>
First quarter....................... $ 8 3/4 $ 6 11/16 $ 17 3/8 $ 11 3/8
Second quarter...................... 9 7/8 5 11/16 11 3/4 8 11/16
Third quarter....................... 18 5/8 8 1/4 12 1/16 9 1/4
Fourth quarter..................... 21 7/8 15 1/2 13 1/2 8 3/8
1998:
First quarter....................... 29 1/8 19 3/8 12 1/4 7 13/16
Second quarter...................... 32 15/16 22 11/16 11 3/16 8 1/16
Third quarter....................... 34 7/8 21 8 5/8 4 7/8
Fourth quarter...................... 50 11/16 25 5/8 9 1/4 4 1/2
1999:
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
First quarter....................... 66 43 13 1/8 6 3/4
Second quarter...................... 74 1/8 45 1/16 12 3/8 7 1/16
Third quarter....................... 120 5/8 68 7/8 14 5/8 7 7/8
Fourth quarter (through October _).. [ ] [ ] [ ] [ ]
</TABLE>
Stockholders are urged to obtain current market quotations prior to making
any decision with respect to the merger.
The following table presents closing prices for MedImmune and U.S.
Bioscience common shares on September 21, 1999, the last full trading day prior
to the public announcement of the proposed merger, and on __________, 1999, the
last practicable trading day prior to the date of this proxy
statement/prospectus. The table also presents the pro forma value of the
fraction of a share of MedImmune common stock that would be received by U.S.
Bioscience stockholders for each share of U.S. Bioscience stock they hold if the
price of MedImmune common stock shown were the average trading price of
MedImmune common stock during the valuation period. We cannot assure you what
the market prices of the MedImmune common stock will be at the merger date or
during the period when the exchange ratio is calculated.
<TABLE>
<CAPTION>
Pro Forma Value of
MedImmune U.S. Bioscience MedImmune Common Stock
Date Common Stock Common Stock Received in the Merger
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 21, 1999 $102 1/16 $11 1/2 $15.30
[ ], 1999
</TABLE>
Comparative Per Share Information
The following table shows historical per share data of MedImmune and U.S.
Bioscience and also shows similar information reflecting the combination of the
two companies, which is referred to as "pro forma" information. In presenting
the comparative pro forma information, it is assumed that the companies have
been combined for accounting and financial reporting purposes for all periods
presented, as required by "pooling of interests" accounting.
The comparative per share data is derived from, and should be read with,
the historical financial statements of MedImmune and U.S. Bioscience that are
included in the documents described under "Where You Can Find More Information"
on page 68.
The U.S. Bioscience "equivalent pro forma" data was calculated by
multiplying the corresponding pro forma combined data by an exchange ratio of
0.1500. This information shows how each share of U.S. Bioscience common stock
would have participated in net income and book value of MedImmune if the
companies had always been combined for accounting and financial reporting
purposes for all periods presented. These amounts, however, are not intended to
reflect future per share levels of net income or book value of MedImmune. For
each of the periods presented, neither party declared or paid any cash
dividends.
<TABLE>
<CAPTION>
Six months ended June 30, Year ended December 31,
------------------------------ --------------------------------------------
1999 1998 1998 1997 1996
---------------- ------------ ------------ -------------- --------------
Net income (loss) per basic share
<S> <C> <C> <C> <C> <C>
MedImmune historical......... $0.33 ($0.10) $ 1.06 ($0.80) ($0.70)
U.S. Bioscience historical... ($0.19) ($0.13) ($0.37) ($0.33) ($0.43)
Pro forma combined........... $0.94 (1) ($0.15) $ 0.83 ($0.90) ($0.86)
Equivalent pro forma per
U.S. Bioscience share........ $0.14 ($0.02) $ 0.12 ($0.13) ($0.13)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net income (loss) per diluted share
MedImmune historical......... $0.29 ($0.10) $ 0.91 ($0.80) ($0.70)
U.S. Bioscience historical... ($0.19) ($0.13) ($0.37) ($0.33) ($0.43)
Pro forma combined........... $0.81 (1) ($0.15) $ 0.72 ($0.90) ($0.86)
Equivalent pro forma per
U.S. Bioscience share........ $0.12 ($0.02) $ 0.11 ($0.13) ($0.13)
Book value per share
(at end of period)
MedImmune historical......... $4.81 $ 3.84
U.S. Bioscience historical... $1.99 $ 1.59
Pro forma combined........... $5.93 $ 4.26
Equivalent pro forma per
U.S. Bioscience share........ $0.89 $ 0.64
(1) Includes the pro forma impact of an adjustment to deferred taxes of $0.71 per basic share and $0.61 per diluted share.
</TABLE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF MEDIMMUNE
The following table sets forth, for the periods and at the dates indicated,
MedImmune's summary consolidated historical financial information. The
information as of and for the five years ended December 31, 1998 is from
MedImmune's audited historical financial statements and notes. The information
as of and for the six months ended June 30, 1998 and 1999 is from MedImmune's
unaudited financial statements. Stockholders should read this information
together with the audited and unaudited financial statements, including the
notes to those financial statements, included in MedImmune's annual report for
the year ended December 31, 1998 and quarterly report for the quarter ended June
30, 1999. See "Where You Can Find More Information" on page 68.
<TABLE>
<CAPTION>
(in thousands, except per share data) Six Months Ended
June 30, Years Ended December 31,
---------------------------------------------------------------------------------------
1999 1998 1998 1997 (1) 1996 (1) 1995 (1) 1994 (1)
----------- --------- ----------- ------------ ---------- ---------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues
Product sales........................... $135,196 $ 51,043 $163,440 $ 65,271 $ 35,782 $ 16,173 $ 12,054
Other................................... 3,764 32,886 37,268 15,693 5,317 11,263 6,804
Total Revenues......................... $138,960 $ 83,929 $200,708 $ 80,964 $ 41,099 $ 27,436 $ 18,858
Research and development expenses........ 17,635 12,995 25,775 40,669 32,192 26,417 21,939
Net earnings (loss)...................... 18,474 (5,363) 56,240 (2) (36,895) (29,544) (22,671) (18,828)
Earnings (loss) per common share (1)
Basic................................... $ 0.33 ($0.10) $ 1.06 ($0.80) ($0.70) ($0.71) ($0.64)
Diluted................................. $ 0.29 ($0.10) $ 0.91 ($0.80) ($0.70) ($0.71) ($0.64)
Balance Sheet Data (at end of period):
Cash and marketable securities........... $184,232 $130,967 $134,882 $ 50,326 $114,765 $ 38,039 $ 22,527
Total assets............................. 395,836 234,598 353,120 170,336 163,971 57,332 44,724
Long-term debt........................... 80,236 84,769 83,195 85,363 70,874 1,984 2,090
Shareholders' equity..................... $272,621 $109,790 $209,833 $ 40,536 $ 72,865 $ 43,779 $ 34,194
(1) Earnings (loss) per share data have been restated to give effect for the
two-for-one stock split on December 31, 1998.
(2) Includes deferred income tax benefit of $47,428.
</TABLE>
15
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF U.S. BIOSCIENCE
The following table sets forth, for the periods and at the dates indicated,
U.S. Bioscience's summary consolidated historical financial information. The
information as of and for the five years ended December 31, 1998 is from U.S.
Bioscience's audited consolidated historical financial statements and notes.
The information as of and for the six months ended June 30, 1998 and 1999 is
from U.S. Bioscience's unaudited financial statements. Stockholders should read
this information together with the audited and unaudited consolidated financial
statements, including the notes to those financial statements, included in U.S.
Bioscience's Annual Report for the year ended December 31, 1998 and quarterly
report for the quarter ended June 30, 1999. See "Where You Can Find More
Information" on page 68.
<TABLE>
<CAPTION>
(in thousands, except per share data) Six Months Ended
June 30, Years Ended December 31,
------------------ ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(Unaudited)
Statement of Operations Data:
Revenues
Net sales................................. $ 11,590 $ 8,422 $ 20,730 $ 12,986 $ 10,785 $ 8,724 $ 7,210
Net investment income..................... 1,383 1,447 2,736 2,824 2,335 1,223 1,234
Licensing, royalty and other income....... 3,533 5,584 6,005 11,914 7,344 21,398 102
--------- --------- --------- --------- --------- --------- ---------
Total Revenues........................... $ 16,506 $ 15,453 $ 29,471 $ 27,724 $ 20,464 $ 31,345 $ 8,546
Expenses
Cost of sales............................. 2,560 2,582 5,788 4,158 2,956 2,559 1,694
Selling, general and administrative costs. 7,146 7,030 13,546 14,387 12,275 16,583 13,233
Research and development costs............ 11,687 9,032 19,042 16,905 14,383 12,186 17,608
Interest expense.......................... 54 82 149 183 537 255 52
--------- --------- --------- --------- --------- --------- ---------
Total Expenses........................... 21,447 18,726 38,525 35,633 30,151 31,583 32,587
--------- --------- --------- --------- --------- --------- ---------
Net loss................................... ($ 4,941) ($3,273) ($ 9,054) ($ 7,909) ($ 9,687) ($ 238) ($24,041)
Basic and diluted net loss per common share ($0.19) ($0.13) ($0.37) ($0.33) ($0.43) ($0.01) ($1.19)
Weighted average number of common shares 26,672 24,267 24,307 23,872 22,396 20,436 20,127
outstanding...............................
Balance Sheet Data (at end of period):
Cash, cash equivalents and marketable $ 56,898 $ 47,803 $ 41,949 $ 50,651 $ 36,677 $ 45,596 $ 24,428
securities................................
Working capital............................ 22,261 41,717 18,680 32,835 34,126 42,577 21,536
Total assets............................... 69,374 59,457 52,722 62,381 49,111 61,880 34,464
Long-term debt............................. 406 760 523 1,135 1,845 19,088 997
Provision for litigation................... - - - - - - 2,301
Other long-term liabilities................ 1,878 1,883 1,922 1,832 1,462 1,036 788
Accumulated deficit........................ (136,522) (125,799) (131,580) (122,526) (114,617) (104,930) (104,692)
Stockholders' equity....................... $ 54,485 $ 44,088 $ 38,733 $ 47,024 $ 36,894 $ 28,788 $ 23,939
</TABLE>
16
<PAGE>
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined financial information is presented to reflect
the estimated impact of the merger on the historical consolidated financial
statements of MedImmune and U. S. Bioscience using the "pooling of interests"
method of accounting. The unaudited pro forma combined financial information is
qualified in its entirety by reference to, and should be read in conjunction
with, the unaudited pro forma combined financial statements and notes thereto,
included elsewhere herein, and the historical consolidated financial statements
and notes thereto of MedImmune and U.S. Bioscience which are incorporated by
reference in this proxy statement/prospectus. See "Unaudited Pro Forma Combined
Financial Statements." The unaudited pro forma combined financial data give
effect to the merger as if it had been consummated, with respect to statement of
operations information, at the beginning of the periods presented or, with
respect to balance sheet data, as of the date presented. The unaudited pro forma
combined financial data have been included for illustrative purposes only, and
are not necessarily indicative of the results of operations or financial
position that would have occurred had the merger been consummated at the dates
indicated, nor are they necessarily indicative of future results of operations
or financial position of the merged companies.
<TABLE>
<CAPTION>
(in thousands, except per share data) Six months ended June 30, Year ended December 31,
----------------------------- ------------------------------------
Pro forma combined statement of operations data: 1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Total revenues........................................... $154,083 $97,935 $ 227,443 $105,864 $ 59,228
Net earnings (loss)...................................... $ 55,993(1) $ (8,636) $ 47,186(1) $(44,804) $(39,231)
Basic earnings (loss) per share at 0.15 exchange ratio... $0.94 ($0.15) $0.83 ($0.90) ($0.86)
Shares used in calculation of basic earnings (loss) per 59,571 56,109 56,776 49,845 45,398
share at 0.15 exchange ratio............................
Diluted earnings (loss) per share at 0.15 exchange ratio. $0.81 ($0.15) $0.72 ($0.90) ($0.86)
Shares used in calculation of diluted earnings (loss) per 69,784 56,109 67,110 49,845 45,398
share at 0.15 exchange ratio............................
Pro forma combined balance sheet data: June 30, December
1999 31, 1998
------------ ------------
Cash and marketable securities........................... $ 241,157 $ 176,831
Working capital.......................................... 202,004 186,653
Total assets............................................. 518,111 405,842
Long term debt, net of current portion................... 80,642 83,718
Shareholders' equity..................................... 360,007 248,566
Book value per share at 0.15 exchange ratio.............. $ 5.93 $ 4.26
_______________________
(1)Includes deferred income tax benefit of $42.5 million and $47.4 million for
the six months ended June 30, 1999 and the twelve months ended December 31,
1998, respectively.
</TABLE>
17
<PAGE>
RISK FACTORS RELATING TO THE MERGER
In addition to the other information included and incorporated by reference
in this proxy statement/prospectus, U.S. Bioscience stockholders should consider
carefully the matters described below in determining whether to adopt the merger
agreement.
Although the exchange ratio for MedImmune common stock to be received in
the merger will be adjusted in the event of any change in the price of MedImmune
common stock before the special meeting, it will not be adjusted for changes
occurring after the special meeting.
Under the merger agreement, each share of U.S. Bioscience common stock will
be converted into the right to receive a fraction of a share of MedImmune common
stock based on an exchange ratio to be calculated shortly before the special
meeting of stockholders. Once the exchange ratio is determined, it will be a
fixed number that will not be adjusted for any increase or decrease in the
market price of MedImmune common stock and the value of the MedImmune common
stock to be received by U.S. Bioscience stockholders in the merger will
fluctuate with changes in the MedImmune common stock price. The market value of
MedImmune common stock on the day the merger is completed may vary from the
average closing price of MedImmune common stock used to calculate the exchange
ratio. These prices may vary because of changes in the business, operations or
prospects of MedImmune or U.S. Bioscience, market assessments of the likelihood
that the merger will be completed, the timing of the completion of the merger,
the prospects of post-merger operations, regulatory considerations, general
market and economic conditions and other factors. As a result, the market value
of the shares of MedImmune common stock you receive in the merger may be more or
less than the value attributed to your shares of U.S. Bioscience common stock in
calculating the exchange ratio.
The price of MedImmune common stock may be affected by factors different
from those affecting the price of U.S. Bioscience common stock.
Upon completion of the merger, holders of U.S. Bioscience common stock will
become holders of MedImmune common stock. MedImmune's business differs from
that of U.S. Bioscience and MedImmune's results of operations, as well as the
price of MedImmune common stock, may be affected by factors different from those
affecting U.S. Bioscience's results of operations and the price of U.S.
Bioscience common stock. For a discussion of MedImmune's and U.S. Bioscience's
businesses and certain factors to consider in connection with such businesses,
see MedImmune's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, U.S. Bioscience's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, and the Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K which are incorporated by reference in this proxy statement/prospectus.
See "Where You Can Find More Information."
Integration of U.S. Bioscience into MedImmune may be difficult and expensive to
achieve.
The merger involves the integration of companies that have previously
operated independently. No assurance can be given that MedImmune will integrate
the operations of MedImmune and U.S. Bioscience without encountering
difficulties, including possible
18
<PAGE>
unanticipated costs, failure to retain key U.S. Bioscience employees or the
diversion of management attention. In addition, following the merger, the
combined company may not realize the increased revenues and cost savings that
MedImmune expects to achieve or that would justify the investment made.
19
<PAGE>
THE MERGER
Background of the Merger
Following internal strategic discussions at MedImmune with Dr. Wayne T.
Hockmeyer, Chairman and Chief Executive Officer, Mr. Melvin D. Booth, President
and Chief Operating Officer, Mr. David M. Mott, Vice Chairman and Chief
Financial Officer and other MedImmune senior officers, on August 16, 1999, Mr.
David M. Mott called Mr. C. Boyd Clarke, President and Chief Executive Officer
of U.S. Bioscience, and expressed MedImmune's interest in discussing possible
business development opportunities.
On August 24, 1999, Dr. Hockmeyer and Mr. Booth met with Mr. Mott to
evalute pursuing a possible business relationship with U.S. Bioscience.
Following these discussions U.S. Bioscience and MedImmune entered into a
confidentiality agreement to facilitate the discussion of a possible business
relationship.
On August 26, 1999, representatives of the two companies, including Dr.
Hockmeyer and Mr. Clarke, met at MedImmune's executive offices in Gaithersburg,
Maryland for a preliminary discussion of each company's product development
programs and capabilities.
On August 30, 1999, Dr. Hockmeyer, Mr. Booth and Mr. Mott met and agreed
that Mr. Mott would call Mr. Clarke and express interest in pursuing a possible
merger of the two companies. Following this discussion Mr. Clarke reported to
the Executive Committee of the U.S. Bioscience board the substance of his
discussions with Mr. Mott and MedImmune's potential interest in a transaction
with U.S. Bioscience. Following Mr. Clarke's report, the Executive Committee
authorized Mr. Clarke to pursue further discussions with MedImmune.
On September 7, 1999, MedImmune and U.S. Bioscience entered into an
expanded confidentiality agreement. On September 7 and 8, 1999, Mr. Booth,
Mr. Mott and other key representatives of MedImmune and its financial and legal
advisors met with representatives of U.S. Bioscience and its financial advisor
at U.S. Bioscience's offices to conduct due diligence on U.S. Bioscience. On
September 13, 1999 Dr. Hockmeyer, Mr. Booth and other representatives of
MedImmune met at MedImmune's offices in Gaithersburg, Maryland with Mr. Clarke
and other representatives of U.S. Bioscience to facilitate scientific due
diligence on U.S. Bioscience.
Following internal MedImmune senior management discussion, on September 14,
1999 Mr. Mott called Mr. Clarke to express the continued interest of MedImmune's
senior management in considering a possible merger transaction. Messrs. Mott and
Clarke discussed the importance of structuring the transaction as a stock-for-
stock merger that would be tax-free to U.S. Bioscience stockholders and that
would be accounted for as a pooling-of-interests. Mr. Clarke also raised with
Mr. Mott the necessity of incorporating downside price protection for U.S.
Bioscience stockholders.
On September 15, 1999, the U.S. Bioscience board held a special meeting so
that management and U.S. Bioscience's financial and legal advisors could update
the board on the status of the discussions with MedImmune. At that meeting,
representatives of Morgan Stanley reviewed with the board preliminary financial
information relating to U.S. Bioscience, MedImmune and the terms of a possible
transaction with MedImmune. Following discussions with management and its
financial and legal advisors, the U.S. Bioscience board authorized management to
proceed with the negotiation of a merger with MedImmune along the lines
discussed with the board.
20
<PAGE>
Also on September 15, 1999, Dr. Hockmeyer convened a meeting of MedImmune's
board of directors to consider the possible acquisition of U.S. Bioscience. A
presentation was made regarding U.S. Bioscience and contacts with U.S.
Bioscience regarding the possible transaction. The board authorized management
to pursue discussions.
On September 16, 1999, MedImmune's legal advisors distributed drafts of the
merger agreement and the stock option agreement to representatives of U.S.
Bioscience.
On September 17, 1999, representatives of U.S. Bioscience conducted
additional legal and regulatory due diligence at MedImmune's offices in
Gaithersburg, Maryland. Following these meetings, Dr. Hockmeyer met with Mr.
Clarke to discuss the proposed transaction including such subjects as structure,
pricing, personnel retention and business plans.
From September 18, 1999 to September 21, 1999, representatives of MedImmune
and U.S. Bioscience and their respective financial and legal advisors negotiated
the terms of a merger agreement.
In the morning on September 21, 1999, the U.S. Bioscience board held its
regularly scheduled board meeting. At that meeting, among other things,
management reviewed the status of negotiations with MedImmune, representatives
of Morgan Stanley made a financial presentation to the board relating to the
proposed transaction, and U.S. Bioscience's legal advisors described in detail
the status of negotiations on the merger agreement. At that meeting the board
authorized management and its financial and legal advisors to finalize the
documentation for the merger as directed by the board.
During the course of the day on September 21, 1999, representatives of
MedImmune and U.S. Bioscience completed their negotiations of the terms of the
merger agreement and stock option agreement.
On September 21, 1999, MedImmune held a special Board meeting. Management
together with MedImmune's legal and financial advisors reviewed the proposed
transaction, including the terms of the merger agreement. Following
discussions, the MedImmune Board determined that the transactions contemplated
by the merger agreement were in the best interests of MedImmune and its
stockholders and unanimously approved the merger agreement.
In the evening on September 21, 1999, U.S. Bioscience held a special board
meeting. Management together with U.S. Bioscience's legal and financial advisors
reviewed the terms of the merger agreement that were revised since the meeting
earlier in the day. Morgan Stanley rendered its oral opinion that as of
September 21, 1999, and subject to and based upon the various considerations in
its opinion, the consideration to be received by the U.S. Bioscience
stockholders in the merger was fair to the U.S. Bioscience stockholders from a
financial point of view. Following discussions, the U.S. Bioscience board
determined, among other things, that the terms of the proposed merger were fair
to and in the best interests of U.S. Bioscience and its stockholders and
unanimously approved the merger agreement and the stock option agreement.
Thereafter the definitive merger agreement and stock option were executed.
On September 22, 1999, prior to the commencement of trading, MedImmune and U.S.
Bioscience issued a joint press release announcing the merger.
21
<PAGE>
Reasons for the Merger and the U.S. Bioscience Board of Directors Recommendation
In reaching its decision to approve the merger agreement and the merger,
and to recommend adoption of the merger agreement by U.S. Bioscience's
stockholders, the U.S. Bioscience board consulted with its management team and
advisors and considered the proposed merger agreement and the stock option
agreement and the transactions contemplated by the merger agreement and the
stock option agreement. The following discussion of the factors considered by
the U.S. Bioscience board in making its decision is not intended to be
exhaustive but includes all material factors considered by the U.S. Bioscience
board.
The U.S. Bioscience board considered the following factors as reasons that
the merger will be beneficial to U.S. Bioscience and its stockholders:
. the complementary nature of the following aspects of the respective
businesses of MedImmune and U.S. Bioscience which should have
substantial positive impact on the ability to realize more fully the
value of U.S. Bioscience products:
-the timing of their profitability and anticipated financial
growth
-their product focus on cancer and infectious disease
-their technical capabilities and research programs
-their commercial focus, including niche marketing and overlap
in the identity of key partners
. their business organizations
. the pipeline of products that MedImmune has under development
. MedImmune's rapid growth, strong income statement and balance sheet
and an equity security that is significantly more liquid than the
U.S. Bioscience common stock
. the U.S. Bioscience stockholders will receive shares of MedImmune
common stock in the merger which will enable them to participate in
the future of the combined company
. the U.S. Bioscience organization is likely to be retained in large
part which will play a significant role in ensuring that the
anticipated future values will be generated for stockholders
. the terms and conditions of the merger agreement and the belief of
the U.S. Bioscience board that the parties will be able to satisfy
the closing conditions and promptly complete the acquisition
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. information regarding historical market prices and other information
with respect to U.S. Bioscience common stock and MedImmune common
stock
. the consideration to be received by U.S. Bioscience stockholders in
the merger and the fact that the implied value of the MedImmune
common stock to be received by U.S. Bioscience stockholders in the
merger represents a substantial premium over the 52-week historical
per share price of U.S. Bioscience
. the expectation that the merger will be treated as a tax-free
reorganization for U.S. federal income tax purposes
. the analysis and presentation of the opinion of Morgan Stanley that,
as of September 21, 1999, and based upon and subject to the various
considerations in its opinion, the consideration to be received in
the merger by the holders of U.S. Bioscience common stock was fair
from a financial point of view to such holders
In the course of deliberations, the U.S. Bioscience board also considered a
number of additional factors relevant to the merger, including:
. rapid consolidation in the biotech industry
. the need for greater relative size in order to fund adequately
research and development and generate growth so as to compete
effectively in the biotech industry
. the need to have the appropriate equity market capitalization in
order to meet the thresholds for coverage by the equity analyst
community
. the importance of having a highly liquid equity security to interest
the investment community
. the fact that over the course of the last two years U.S. Bioscience
had discussions with potential strategic partners that did not
result in any potential transaction that would satisfy the foregoing
needs
. the fact that each of the other strategic alternatives for U.S.
Bioscience, including product acquisitions, acquisitions of smaller
companies and a merger-of-equals type transaction, if in fact
achievable, suffered from inherent risks and that none were likely
to produce the immediate short-term and long-term benefits that
could be attainable from the MedImmune transaction
. MedImmune's requirement, as a condition to proceeding on the terms
set forth in the merger agreement, that it receive the protections
afforded by the stock option agreement and the termination fee and
no solicitation provisions contained in the merger agreement and,
with respect to those provisions, the U.S. Bioscience board weighed
a number of factors including the following factors:
-the attractiveness of the exchange ratio and the benefits of the
merger
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- the mechanics of the termination fee and the stock option and the
possibility that the stock option would be exercised, which would
preclude the use of pooling-of-interests accounting treatment by
any other third party interested in acquiring U.S. Bioscience
- the U.S. Bioscience board was advised and believed that the
preclusion of pooling-of-interests accounting treatment, in the
event the termination fee were paid and the stock option were
exercised, was not likely to prevent the most logical potential
third-party acquirors from making an offer to acquire U.S.
Bioscience
- the U.S. Bioscience board was advised and believed that the amount
of the termination fee was within the range of termination fees
agreed to in comparable transactions and that it was not likely to
preclude third party intervention
- that under the merger agreement, prior to stockholder approval of
the merger, U.S. Bioscience would be able to provide information
to, and discuss and negotiate with, any third party making a
proposal with respect to an unsolicited financially superior
alternative transaction, subject to the terms and conditions of
the merger agreement
. information relating to the business, assets, management,
competitive position, operating performance, share trading
performance and prospects of each of U.S. Bioscience and
MedImmune, including the prospects of U.S. Bioscience if it were
to continue as an independent company
. current industry, market and economic conditions
The U.S. Bioscience board also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including:
. the recognition that MedImmune common stock has traded at a high
valuation, and the risk that such valuation might not be
sustained, or may decline, in the future
. the risk that, despite the efforts of U.S. Bioscience and
MedImmune, after the merger key personnel might leave
. the risk that the potential benefits of the merger might not be
fully realized
The U.S. Bioscience board believed that certain of these risks were
unlikely to occur, that U.S. Bioscience or MedImmune could avoid or mitigate
others, and that, overall, these risks were outweighed by the potential benefits
of the merger.
In view of the variety of factors considered in connection with its
evaluation of the merger agreement and the merger and the stock option
agreement, the U.S. Bioscience board did not find it practicable to and did not
quantify or otherwise assign relative weight to the specific
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<PAGE>
factors considered in reaching its determination. In addition, individual
members of the U.S. Bioscience board may have given different weight to
different factors.
Recommendation of the U.S. Bioscience Board of Directors
After careful consideration, the U.S. Bioscience board has unanimously
determined that the terms of the merger agreement and the merger are fair to,
and in the best interests of, U.S. Bioscience and its shareholders and has
approved the merger agreement and the stock option agreement. The U.S.
Bioscience board unanimously recommends that the stockholders of U.S. Bioscience
vote "FOR" the adoption of the merger agreement.
Opinion of Morgan Stanley & Co. Incorporated
Pursuant to a letter agreement dated as of September 7, 1999, Morgan
Stanley was engaged to provide financial advisory services and a financial
fairness opinion in connection with the merger. Morgan Stanley was selected by
U.S. Bioscience to act as U.S. Bioscience's financial advisor based on Morgan
Stanley's qualifications, expertise, reputation and its knowledge of the
business and affairs of U.S. Bioscience. At the meeting of the board of
directors of U.S. Bioscience on September 21, 1999, Morgan Stanley rendered its
oral opinion to the U.S. Bioscience board of directors, subsequently confirmed
in writing, that as of that date, and based upon and subject to the
considerations set forth in the written opinion, the consideration to be
received by the holders of U.S. Bioscience common stock pursuant to the merger
agreement was fair from a financial point of view to those holders.
The full text of the written opinion of Morgan Stanley dated September 21,
1999, which sets forth, among other things, the assumptions made, procedures
followed, matters considered and limitations on the scope of the review
undertaken by Morgan Stanley in rendering its opinion, is attached as Annex 3 to
this proxy statement/prospectus. Stockholders are urged to, and should, read the
opinion carefully and in its entirety. Morgan Stanley's opinion is directed to
the U.S. Bioscience board of directors and addresses only the fairness of the
consideration to be received by the holders of U.S. Bioscience common stock
pursuant to the merger agreement from a financial point of view to such holders
as of the date of the opinion. Morgan Stanley's opinion does not address any
other aspect of the merger and does not constitute a recommendation to any
holder of U.S. Bioscience common stock as to how to vote at the special meeting.
The summary of the opinion of Morgan Stanley set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of such opinion.
In arriving at its opinion, Morgan Stanley, among other things:
. reviewed certain publicly available financial statements and other
information of U.S. Bioscience and MedImmune
. reviewed certain internal financial statements and other financial
and operating data concerning U.S. Bioscience prepared by the
management of U.S. Bioscience
. reviewed certain financial projections prepared by the management of
U.S. Bioscience
25
<PAGE>
. discussed the past and current operations and financial condition and
the prospects of U.S. Bioscience with senior executives from U.S.
Bioscience
. reviewed the pro forma impact of the merger on MedImmune earnings per
share
. reviewed the reported prices and trading activity for U.S. Bioscience
common stock and MedImmune common stock
. reviewed the financial performance of U.S. Bioscience and MedImmune
and the prices and trading activity of U.S. Bioscience common stock
and MedImmune common stock with that of certain other comparable
publicly traded companies and their securities
. reviewed certain internal financial statements and other financial
and operating data concerning MedImmune prepared by the management of
MedImmune;
. discussed the past and current operations and financial condition and
the prospects of MedImmune with senior executives of MedImmune
. reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions
. participated in discussions and negotiations among representatives of
U.S. Bioscience and MedImmune and their financial and legal advisors
. reviewed the signed merger agreement and certain related documents;
and
. performed such other analyses and considered such other factors as
Morgan Stanley deemed appropriate
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
projections of U.S. Bioscience, including information relating to certain
strategic, financial and operational benefits anticipated from the merger,
Morgan Stanley assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of U.S. Bioscience and MedImmune. In addition, Morgan
Stanley has assumed that the merger will be consummated in accordance with the
terms set forth in the merger agreement, including, among other things, that the
merger will be accounted for as a "pooling-of-interests" business combination in
accordance with U.S. Generally Accepted Accounting Principles and the merger
will be treated as a tax-free reorganization and/or exchange, each pursuant to
the Internal Revenue Code of 1986. Morgan Stanley has not made any independent
valuation or appraisal of the assets or liabilities of U.S. Bioscience, nor has
it been furnished with any such appraisal. The Morgan Stanley opinion is
necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to it as of September 21, 1999. In
arriving at its opinion, Morgan Stanley was not authorized to solicit, and did
not solicit, interest from any party with respect to the acquisition of U.S.
Bioscience or any of its assets nor did it negotiate with any parties, other
than MedImmune, in the possible acquisition of U.S. Bioscience or certain of its
constituent businesses.
The following is a summary of the material analyses performed by Morgan
Stanley in connection with its opinion. Morgan Stanley presented certain
analyses at a meeting of the U.S.
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<PAGE>
Bioscience board of directors on September 21, 1999 based on closing prices as
of the dates specified in each analysis.
These summaries of financial analyses include information presented in tabular
format. In order to fully understand the financial analyses used by Morgan
Stanley, 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.
Historical and Comparative Stock Price Performance. Morgan Stanley's analyses
of U.S. Bioscience common stock and MedImmune common stock performance consisted
of a historical analysis of closing prices and trading volumes over periods from
September 16, 1994 to September 20, 1999 and September 17, 1998 to September 20,
1999 respectively. In addition, Morgan Stanley reviewed the recent stock price
performance of U.S. Bioscience and MedImmune and compared such performance with
that of comparable stock indexes for the period of September 17, 1998 to
September 17, 1999. Morgan Stanley's analysis of U.S. Bioscience consisted of a
comparison of U.S. Bioscience's historical common stock price performance with
that of:
. the Russell 2000
. an index of selected comparable biotechnology companies consisting of
Amgen Inc., Biogen, Inc., Genzyme, Chiron Corporation, Genentech,
Biochem Pharma Inc., and Immunex Corporation, which we refer to as
the "biotechnology index"
. an index of selected pharmaceutical companies consisting of Johnson &
Johnson, Merck & Co., Inc., Pfizer Inc., Bristol-Myers Squibb
Company, Eli Lilly and Company, Schering-Plough Corporation, American
Home Products, Abbott Laboratories, Warner-Lambert Company and
Pharmacia & Upjohn, Inc. which we refer to as the "pharmaceutical
index"
Morgan Stanley observed that U.S. Bioscience for the period of September 17,
1998 to September 17, 1999, outperformed the Russell 2000 and the pharmaceutical
index and underperformed the biotechnology index.
Morgan Stanley's analysis of MedImmune consisted of a comparison of
MedImmune's historical common stock price performance with that of:
. the Russell 2000
. the biotechnology index
. the pharmaceutical index
Morgan Stanley observed that MedImmune for the period of September 17, 1998 to
September 17, 1999, outperformed the Russell 2000, the biotechnology index and
the pharmaceutical index.
Morgan Stanley also observed that the implied offer price of $16.35 per share
represented the following premiums to U.S. Bioscience's historical stock price:
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<PAGE>
Price Premium Implied
----- ---------------
1 Day Prior $11.50 42.1%
1 Week Prior $11.88 37.6%
Last Twelve Month High $13.13 24.5%
1 Year Prior $ 7.44 219.8%
Peer Group Comparison. As part of its analysis, Morgan Stanley compared
certain publicly available financial information of U.S. Bioscience with certain
publicly available financial information of certain comparable biotechnology
companies, as well as compared certain publicly available financial information
of MedImmune with certain publicly available financial information of certain
comparable biotechnology companies. The following are the companies included in
the respective analyses:
Amgen Inc.
Biogen, Inc.
Genzyme General
MedImmune, Inc.
Chiron Corporation
Biochem Pharma Inc.
IDEC Pharmaceuticals Corporation
Centocor Inc.
Genentech
Gilead Sciences
Immunex Corp.
For this analysis Morgan Stanley examined a range of estimates based on
consensus securities research analysts. The following table presents, as of
September 17, 1999, the mean and median multiples of the comparable
biotechnology companies referred to above and the trading multiples of U.S.
Bioscience and MedImmune:
<TABLE>
<CAPTION>
Price/Earnings 2000E P/E/Projected Net
Income Five-Year
2000E 2001E CAGR
--------- --------- ------------------------
<S> <C> <C> <C>
Comparable Biotechnology Mean................... 46.9x 36.9x 1.6x
Comparable Biotechnology Median................. 48.0 40.0 1.3
U.S. Bioscience................................. 49.7 17.8 0.8
MedImmune....................................... 59.6 42.2 1.1
</TABLE>
No company utilized as a comparison in the peer group comparison
analysis is identical to U.S. Bioscience or MedImmune. In evaluating the peer
groups, Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of U.S. Bioscience or
MedImmune, such as the impact of competition on the business of U.S. Bioscience,
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<PAGE>
MedImmune or the industry generally, industry growth and the absence of any
adverse material change in the financial condition and prospectus of U.S.
Bioscience, MedImmune or the industry or in the financial markets in general.
Mathematical analysis, such as determining the mean or median, is not in itself
a meaningful method of using peer group data.
Review of Premiums Paid in Precedent Transactions. Using publicly
available information, Morgan Stanley reviewed the premiums paid and/or payable
in the following announced, pending and completed comparable pharmaceutical and
biotechnology acquisition transactions:
July, 1999 Johnson & Johnson/Centocor
June, 1999 Abbott/ Alza
June, 1999 PNU/ Sugen
June, 1999 Celltech/Chiroscience
March, 1999 Gilead/NeXstar
January, 1999 Warner-Lambert/Agouron
October, 1998 Watson/TheraTech
October, 1998 Alza/Sequus
April, 1998 Elan/Neurex
February, 1998 Baxter/Somatogen
November, 1997 Sequana/Arris
March, 1996 Elan/Athena
August, 1995 Univax/NABI
July, 1995 Sandoz/GTI
April, 1995 Viagene/Chiron
February, 1995 Ligand/Glycomed
January, 1995 Glaxo/Affymax
November, 1994 Chiron/Ciba
November, 1994 Synergen/Amgen
October, 1994 Vestar/NeXagen
March, 1994 Eli Lilly/Sphinx
June, 1993 AIS/RPR
May, 1992 Nova/Scios
December, 1991 SyStemix/Sandoz
September, 1991 GENIZ/AHP
July, 1991 Cetus/Chiron
Morgan Stanley believed that the precedent transactions were not
identical to the merger and made judgements and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, as qualified below, in applying the following
representative premiums to the relevant share prices for U.S. Bioscience common
stock as of September 20, 1999.
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Premium to LTM high: -20% +20%
Price Implied $10.50 $15.75
Premium to Unaffected: 15% 60%
Price Implied $13.29 $18.49
No transaction utilized as a comparison in the precedent transactions
review is identical to the merger. In reviewing premiums in the transactions
listed above, Morgan Stanley made judgments and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of U.S.
Bioscience or MedImmune, such as the impact of competition on U.S. Bioscience,
MedImmune or the industry generally, industry growth and the absence of any
adverse material change in the financial conditions and prospects of U.S.
Bioscience, or the industry or in the financial markets in general. Mathematical
analysis, such as determining the mean or median, is not in itself a meaningful
method of using comparable transaction data.
Discounted Cash Flow Equity Value. Morgan Stanley performed discounted
cash flow analysis of U.S. Bioscience to determine a range of present values for
U.S. Bioscience based on financial projections prepared by the management of
U.S. Bioscience. Unlevered free cash flow was calculated as the after-tax
operating earnings of U.S. Bioscience, excluding any interest income and
interest expense, plus depreciation and amortization, plus deferred taxes, plus
(or minus) net changes in non-cash working capital, minus capital expenditures.
Morgan Stanley calculated terminal values by applying a range of multiples to
net income in fiscal year 2004 from 12.0x to 15.0x. The unlevered free cash
flows and terminal values were then discounted to present values as of August
31, 1999 using discount rates of 14% to 16%. Based on this analysis and the
assumptions set forth above, Morgan Stanley calculated per share equity value
estimates ranging from approximately $10.57 to approximately $13.70, excluding
any potential operational benefits to be realized from the merger. Morgan
Stanley noted that U.S. Bioscience common stock closed at $11.56 on September
20, 1999 which fell within the U.S. Bioscience discounted cash flow equity value
range per share. In addition, Morgan Stanley noted that the implied offer price
of $16.35 per share of U.S. Bioscience common stock fell beyond the high end of
the U.S. Bioscience discounted cash flow equity value range per share.
Exchange Ratio Analysis. Morgan Stanley analyzed the ratios of the
closing prices of U.S. Bioscience common stock divided by the corresponding
prices of MedImmune's common stock over various periods during the one year
period ending September 20, 1999. The following table presents the range of
implied exchange ratios over the periods covered:
Period Ending September 20, 1999 Implied Exchange Ratio
As of September 20, 1999.......................... 0.11x
One Month Average................................. 0.11x
Three Month Average............................... 0.11x
Six Month Average................................. 0.14x
One Year Average.................................. 0.17x
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Pro Forma Merger Analysis. Morgan Stanley analyzed the pro forma
impact of the merger on MedImmune's pro forma projected earnings per share for
the calendar years 1999, 2000 and 2001. Such analysis was based on consensus
earnings projections by securities research analysts for MedImmune as of
September 20, 1999 and financial projections prepared by management of U.S.
Bioscience. Based on this analysis, Morgan Stanley observed that, assuming that
the merger was accounted for as a pooling of interests business combination, the
merger would result in earnings per share accretion, for MedImmune's
shareholders of 1.1%, 4.0% and 2.3% for calendar years 2000, 2001, and 2002,
respectively, before taking into account any synergies or one-time charges.
In connection with the review of the merger by the U.S. Bioscience
board of directors, Morgan Stanley performed a variety of financial and
comparative analyses for purposes of its fairness opinion. The summary set forth
above does not purport to be a complete description of the analyses performed by
Morgan Stanley in connection with the merger. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor. Furthermore, Morgan Stanley
believes that selecting any portion of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In addition, Morgan Stanley may have given various analyses and factors more or
less weight than other analyses and factors and may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting from any particular analysis described above should not be
taken to be Morgan Stanley's view of the actual value of U.S. Bioscience or
MedImmune.
In performing its analyses, Morgan Stanley made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of U.S. Bioscience or
MedImmune. Any estimates contained in Morgan Stanley's analysis are not
necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by such estimates.
The analyses performed were prepared solely as part of Morgan Stanley's analysis
of the fairness of the consideration to be received by the holders of shares of
U.S. Bioscience's common stock pursuant to the merger agreement from a financial
point of view to such holders and were conducted in connection with the delivery
of the Morgan Stanley opinion to the board of directors of U.S. Bioscience. The
analyses do not purport to be appraisals or to reflect the prices at which U.S.
Bioscience common stock or MedImmune common stock might actually trade.
The consideration to be received by the holders of shares of U.S.
Bioscience's common stock pursuant to the merger agreement and other terms of
the merger agreement were determined through arm's length negotiations between
U.S. Bioscience and MedImmune and were approved by the U.S. Bioscience board of
directors. Morgan Stanley provided advice to U.S. Bioscience during such
negotiations; however, Morgan Stanley did not recommend any specific
consideration to U.S. Bioscience or that any specific consideration constituted
the only appropriate consideration for the merger. In addition, as described
above, Morgan Stanley's opinion and presentation to the U.S. Bioscience board of
directors was one of many factors taken into consideration by the U.S.
Bioscience board of directors in making its decision to approve the merger.
Consequently, the Morgan Stanley analyses as described above should not be
viewed as
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<PAGE>
determinative of the opinion of the U.S. Bioscience board of directors with
respect to the value of U.S. Bioscience or of whether the U.S. Bioscience board
of directors would have been willing to agree to a different consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the ordinary course of Morgan Stanley's trading and brokerage
activities, Morgan Stanley or its affiliates may at any time hold long or short
positions, trade or otherwise effect transactions, for its own account or for
the account of customers, in the equity or debt securities or senior loans of
U.S. Bioscience or MedImmune.
Pursuant to an engagement letter dated September 7, 1999, Morgan Stanley
provided financial advisory services and a financial opinion in connection with
the merger, and U.S. Bioscience agreed to pay Morgan Stanley, upon consummation
of the merger, a fee equal to approximately $5.6 million to $6.3 million,
assuming a range of share prices for U.S. Bioscience at closing greater than or
equal to $15.00 and less than $17.00, respectively, subject to adjustment should
the share price be outside of that range at closing. U.S. Bioscience has also
agreed to reimburse Morgan Stanley for its expenses incurred in performing its
services. In addition, U.S. Bioscience has agreed to indemnify Morgan Stanley
and its affiliates, their respective directors, officers, agents and employees
and each person, if any, controlling Morgan Stanley or any of its affiliates
against certain liabilities and expenses, including certain liabilities under
the federal securities laws, related to or arising out of Morgan Stanley's
engagement and any related transactions. In the past, Morgan Stanley and its
affiliates have provided financial advisory services for U.S. Bioscience and
MedImmune and have received customary fees for the rendering of these services.
MedImmune Earnings
MedImmune expects the merger to be neutral to earnings in year 2000 and
accretive thereafter. There can be no assurances that such expectations will be
realized. See "Risk Factors Relating to the Merger" and "Special Note Regarding
Forward Looking Statements."
Interests of U.S. Bioscience Directors and Management in the Merger
The officers of U.S. Bioscience and the members of the U.S. Bioscience
board of directors may have interests in the merger that are different from, or
in addition to, the interests of stockholders generally. Several officers of
U.S. Bioscience, including those who are also directors, have severance
agreements and they, as well as the non-employee directors are, or may become,
entitled to specific benefits under U.S. Bioscience's benefit plans as a result
of the merger. All such additional interests are described below, to the extent
material, and except as described below these persons have, to the knowledge of
MedImmune and U.S. Bioscience, no material interest in the merger apart from
stockholders generally.
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<PAGE>
Severance Agreements. U.S. Bioscience has entered into severance
agreements with twelve officers, including its President and Chief Executive
Officer, each Executive Vice President and specified Vice Presidents, pursuant
to which U.S. Bioscience has agreed to provide specified severance benefits.
Each of the severance agreements provides that if the officer's employment
with U.S. Bioscience is terminated:
. by U.S. Bioscience for any reason other than the officer's death,
disability or "for cause" (as defined in the agreements to cover
specified serious misconduct), or
. if the officer resigns for "good reason" (as defined in the
agreements to cover a downgrading of the officer by U.S. Bioscience
or non-fulfillment by U.S. Bioscience of certain contractual
commitments to the officer),
within three years (or one year for three Vice Presidents) following a change in
control of U.S. Bioscience (as defined in the agreements, which definition
includes the merger), the officer will be entitled to a lump sum severance
payment. That lump sum payment will be equal to the product determined by
multiplying the highest annual compensation paid or payable by U.S. Bioscience
to the officer with respect to each of the three calendar years ending with the
year in which the date of termination occurs, by the number of years (including
any fraction of a year) remaining in the three-year period (or one-year period
for three Vice Presidents) commencing with the date of the change in control of
U.S. Bioscience. The compensation base upon which such payment is calculated
includes bonuses and deferred compensation as well as salary. In addition,
instead of any fringe benefits to be paid to the officer with respect to the
remainder of the three-year period (or one-year period for three Vice
Presidents), the officer will receive an additional lump-sum equal to the
product of multiplying $20,000 (or, in the case of the President and Chief
Executive Officer, $30,000) by the number of years (including any fraction of a
year) remaining in the three-year period (or one-year period for three Vice
Presidents), and a further payment designed to compensate the officer for lost
pension benefits by reason of his or her termination of employment earlier than
three years (or one year for three Vice Presidents) following a change in
control of U.S. Bioscience. The severance agreements provide that payments
required to be made to an officer are to be reduced to the extent they would not
be deductible for federal income tax purposes due to the provisions of Section
280G of the Internal Revenue Code, as determined by independent tax counsel.
If the employment of U.S. Bioscience's four most highly compensated
executive officers were terminated upon the merger in 1999, under circumstances
entitling them to benefits under their severance agreements and assuming a U.S.
Bioscience common stock price of $16.00 per share, the approximate total amount
of lump sum severance payment for those executive officers would be as follows:
Mr. Clarke, $482,627, Mr. Kriebel, $429,051, Ms. Manning, $338,202, and Dr.
Oster, $891,846. The approximate aggregate total amount of lump severance
payment for the other eight officers who have severance agreements under such
circumstances would be $2,677,610.
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<PAGE>
Incentive Compensation and Stock Ownership Plans. Under the merger
agreement, all awards of stock options and restricted stock on the date of the
merger under any equity based incentive award plans maintained by U.S.
Bioscience will be converted into similar awards with respect to MedImmune
common stock. In accordance with the terms of the applicable plans, all
restrictions and conditions applicable to the outstanding awards of stock
options or restricted stock will be deemed to have been satisfied as of the date
of the completion of the merger and all such awards shall become fully vested
and exercisable as of such date.
Based upon awards outstanding as of September 21, 1999, the vesting of
35,729 restricted shares of U.S. Bioscience common stock would be accelerated
upon consummation of the merger. The holders and numbers of U.S. Bioscience
shares awarded as restricted stock that will vest as a result of stockholder
approval of the merger are: Mr. Clarke, 8,073, Mr. Kriebel, 5,350, Ms. Manning,
5,104, Dr. Oster, 5,926, and all other executive officers, 11,276.
Based upon awards outstanding as of September 21, 1999, the vesting and
exercisability of stock options to purchase 2,758,186 shares of U.S. Bioscience
common stock would be accelerated upon stockholder approval of the merger. The
holders and numbers of U.S. Bioscience shares underlying unvested options that
will become exercisable upon completion of the merger are: Mr. Clarke, 339,500,
Mr. Kriebel, 194,000, Ms. Manning, 163,000, Dr. Oster, 163,000 and all other
executive officers, 703,615. The number of U.S. Bioscience shares underlying
unvested options that will become exercisable by non-employee directors of U.S.
Bioscience upon completion of the merger is 105,080.
Pension Restoration Plan. The U.S. Bioscience Pension Restoration Plan is
a non-qualified defined contribution plan that provides benefits in excess of
limitations imposed by the Internal Revenue Code upon benefits payable under
U.S. Bioscience's tax-qualified plans. The terms of the Pension Restoration Plan
provide that, upon a change in control of U.S. Bioscience (as defined in the
Pension Restoration Plan, which completion of the merger), all accrued rights of
a participant will be fully vested in the event the participant's employment is
terminated following the change in control.
Indemnification; Directors and Officers Insurance. MedImmune has agreed
that all rights to indemnification for acts or omissions occurring at or prior
to the completion of the merger currently existing in favor of U.S. Bioscience's
current or former directors or employees or officers as provided in U.S.
Bioscience's certificate of incorporation, by-laws or any existing
indemnification agreements shall continue following the merger. For six years
after the completion of the merger, MedImmune will maintain U.S. Bioscience's
liability insurance in respect of acts or omissions occurring at or prior to the
completion of the merger, covering each person covered by U.S. Bioscience's
officers' and directors' liability insurance policy in effect on September 21,
1999. However, MedImmune may substitute its own policies containing terms which
are no less favorable to U.S. Bioscience's covered persons, but will not be
obligated to pay premiums in excess of 200% of the yearly amount paid by U.S.
Bioscience in its last fiscal year, and if MedImmune cannot obtain the same
coverage for the 200% amount, MedImmune will nevertheless be obligated to
provide whatever coverage may be obtained for the 200% amount.
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Material United States Federal Income Tax Consequences of the Merger
The following general discussion summarizes the anticipated material United
States federal income tax consequences of the merger to holders of U.S.
Bioscience common stock who exchange such stock solely for MedImmune common
stock in the merger. This discussion addresses only such stockholders who hold
their U.S. Bioscience common stock as a capital asset, and does not address all
of the United States federal income tax consequences that may be relevant to
particular stockholders in light of their individual circumstances or to
stockholders who are subject to special rules, such as:
. financial institutions,
. tax-exempt organizations,
. insurance companies,
. dealers in securities or foreign currencies,
. traders in securities who elect to apply a mark-to-market method of
accounting,
. foreign holders,
. persons who hold such shares as a hedge against currency risk or as
part of a straddle, constructive sale or conversion transaction, or
. holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service.
It is based upon the Internal Revenue Code, applicable Treasury regulations,
Internal Revenue Service rulings and judicial decisions in effect as of the date
of this proxy statement and prospectus, all of which are subject to change,
possibly with retroactive effect. Tax consequences under state, local, foreign
and other applicable laws are not addressed.
Holders of U.S. Bioscience common stock are strongly urged to consult their
tax advisors as to the specific tax consequences to them of the merger,
including tax return reporting requirements and the applicability and effect of
federal, state, local, foreign and other applicable tax laws in their particular
circumstances.
It is a condition to the consummation of the merger that U.S. Bioscience
receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, special tax
counsel to U.S. Bioscience, to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. The condition relating to the tax opinion cannot be waived without the
express written consent of MedImmune and will not be waived after receipt of the
U.S. Bioscience stockholder approval unless further stockholder approval is
obtained with appropriate disclosure. The opinion will be based on customary
assumptions and representations made by, among others, U.S. Bioscience and
MedImmune. An opinion of counsel represents counsel's best legal judgment and
is not binding on the Internal Revenue Service or any court.
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No ruling has been, or will be, sought from the Internal Revenue Service as to
the United States federal income tax consequences of the merger.
Assuming the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, holders of U.S. Bioscience common
stock who exchange their U.S. Bioscience common stock solely for MedImmune
common stock in the merger will not recognize gain or loss for United States
federal income tax purposes, except with respect to cash, if any, they receive
in lieu of a fractional share of MedImmune common stock. Each holder's
aggregate tax basis in the MedImmune common stock received in the merger will be
the same as his or her aggregate tax basis in the U.S. Bioscience common stock
surrendered in the merger, decreased by the amount of any tax basis allocable to
any fractional share interest for which cash is received. The holding period of
the MedImmune common stock received in the merger by a holder of U.S. Bioscience
common stock will include the holding period of U.S. Bioscience common stock
that he or she surrendered in the merger.
A holder of U.S. Bioscience common stock who receives cash in lieu of a
fractional share of MedImmune common stock generally should recognize gain or
loss equal to the difference between the amount of cash received and his or her
tax basis in the MedImmune common stock that is allocable to the fractional
share. That gain or loss generally will constitute capital gain or loss. In
the case of an individual stockholder, any such capital gain generally will be
subject to a maximum United States federal income tax rate of 20% if the
individual has held his or her U.S. Bioscience common stock for more than 12
months at the effective time of the merger. The deductibility of capital losses
is subject to limitations for both individuals and corporations.
Accounting Treatment
The merger is expected to qualify as a pooling of interests transaction.
Under this accounting treatment, upon completion of the merger, the assets and
liabilities of U.S. Bioscience would be added to those of MedImmune at their
recorded book values and the stockholders' equity accounts of MedImmune and U.S.
Bioscience would be combined on MedImmune's consolidated balance sheet. On a
pooling of interests accounting basis, MedImmune will retroactively restate its
financial statements issued after completion of the merger to reflect the
consolidated combined financial position and results of operations of MedImmune
and U.S. Bioscience as if the merger had taken place as of the earliest period
covered by such financial statements. See "Unaudited Selected Pro Forma
Combined Financial Information" and "Unaudited Pro Forma Combined Financial
Statements." Completion of the merger is conditioned upon the receipt by
MedImmune and U.S. Bioscience of letters from PricewaterhouseCoopers LLP and
Ernst & Young LLP regarding those firms' concurrence with MedImmune management's
and U.S. Bioscience management's conclusions that, as of the date the merger is
completed, the merger qualifies for pooling of interests treatment for financial
reporting purposes under Accounting Principles Board Opinion No. 16 and its
related interpretations and applicable Securities and Exchange Commission rules
and regulations, if the merger is completed in accordance with the merger
agreement. See "The Merger Agreement and Stock Option Agreement -- The Merger
Agreement -- Conditions to the Completion of the Merger."
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Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares
The conversion of U.S. Bioscience common stock into the right to receive
MedImmune common stock will occur automatically at the effective time of the
merger. As soon as reasonably practicable after the completion of the merger,
American Stock Transfer and Trust Company of New York, the exchange agent, will
send a transmittal letter to each former U.S. Bioscience stockholder. The
transmittal letter will contain instructions for obtaining shares of MedImmune
common stock in exchange for shares of U.S. Bioscience common stock. U.S.
Bioscience stockholders should not return stock certificates with the enclosed
proxy.
After the effective time of the merger, each certificate that previously
represented shares of U.S. Bioscience common stock will no longer be
outstanding, will automatically be canceled, will cease to exist and will
represent only the right to receive the MedImmune common stock into which such
shares were converted in the merger and the right to receive cash for any
fractional shares of MedImmune common stock as described in the Summary of this
proxy statement/prospectus.
Until holders of certificates previously representing U.S. Bioscience
common stock have surrendered those certificates to the exchange agent for
exchange, holders will not receive dividends or distributions on the MedImmune
common stock into which such shares have been converted with a record date after
the effective time of the merger, and will not receive cash for any fractional
shares of MedImmune common stock. When holders surrender such certificates,
they will receive any unpaid dividends and any cash for fractional shares of
MedImmune common stock, in each case without interest. In the event of a
transfer of ownership of U.S. Bioscience common stock which is not registered in
the records of U.S. Bioscience's transfer agent, a certificate representing the
proper number of shares of MedImmune common stock may be issued to a person
other than the person in whose name the certificate so surrendered is registered
if:
. such certificate is properly endorsed or otherwise is in proper form
for transfer and
. the person requesting such issuance will (1) pay any transfer or
other taxes resulting from the issuance of shares of MedImmune common
stock to a person other than the registered holder of that
certificate or (2) establish to the reasonable satisfaction of
MedImmune that such tax has been paid or is not applicable.
All shares of MedImmune common stock issued upon surrender of shares of
U.S. Bioscience common stock, including any cash paid instead of any fractional
shares of MedImmune common stock, will be issued in full satisfaction of all
rights relating to such shares of U.S. Bioscience common stock.
No fractional shares of MedImmune common stock will be issued to any U.S.
Bioscience stockholder upon surrender of certificates previously representing
U.S. Bioscience common stock. Each U.S. Bioscience stockholder who would
otherwise have been entitled to receive a fraction of a share of MedImmune
common stock will receive cash in an amount equal to the product obtained by
multiplying (1) the fractional share interest to which such holder would
otherwise be entitled by (2) the closing price for a share of MedImmune common
stock on the closing date as reported in The Wall Street Journal.
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A transmittal form with instructions for the surrender of U.S. Bioscience
common stock certificates will be mailed to U.S. Bioscience stockholders shortly
after completion of the merger. Stockholders should not transmit their stock
certificates at this time.
Regulatory Matters
United States Antitrust. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and related rules, certain transactions, including the
merger, may not be completed unless information has been furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and waiting period requirements have been satisfied. On October 5, 1999,
MedImmune and U.S. Bioscience each filed a Notification and Report Form with the
Antitrust Division of the Department of Justice and the Federal Trade
Commission. Under the applicable provisions of the Hart-Scott-Rodino Act,
MedImmune and U.S. Bioscience may not consummate the merger until the expiration
of a 30-calendar-day waiting period following the October 5, 1999 filing by
MedImmune and U.S. Bioscience. Accordingly, the waiting period will expire at
11:59 p.m., New York City time, on November 4, 1999 unless the Department of
Justice or the Federal Trade Commission either terminates such waiting period
or, before the waiting period expires, extends to MedImmune and U.S. Bioscience
a request for additional information or documentary material. If such a request
is made, the merger may not be completed until 20 days after both MedImmune and
U.S. Bioscience substantially comply with the request, unless the waiting period
is terminated earlier by the Department of Justice or the Federal Trade
Commission. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the Department
of Justice or the Federal Trade Commission raises substantive issues in
connection with a proposed transaction, the parties frequently negotiate with
the relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while negotiations
continue. The expiration or termination of the applicable waiting period under
the Hart-Scott-Rodino Act is a condition to the completion of the merger. At
any time before or after the effective time of the merger, the Antitrust
Division, the Federal Trade Commission or others could take action under the
antitrust laws, including seeking to prevent the merger, to rescind the merger
or to conditionally approve the merger upon the divestiture of substantial
assets of MedImmune or U.S. Bioscience. There can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.
Foreign Antitrust. Both MedImmune and U.S. Bioscience conduct operations
in a number of other foreign countries where regulatory filings, notifications
or approvals with applicable commissions and other authorities may be required
in connection with consummation of the merger. The parties do not anticipate
that any such foreign filings will materially affect the consummation of the
merger.
General. It is possible that any of the governmental entities with which
filings are made may seek, as conditions for granting approval of the merger,
various regulatory concessions. There can be no assurance that:
. MedImmune or U.S. Bioscience will be able to satisfy or comply with
such conditions
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. compliance or noncompliance will not have adverse consequences for
MedImmune after completion of the merger
See "The Merger Agreement and Stock Option Agreement -- The Merger Agreement --
Conditions to the Completion of the Merger."
Appraisal Rights
Under Delaware law, holders of U.S. Bioscience common stock are not
entitled to appraisal rights in connection with the merger.
Resale of MedImmune Common Stock
MedImmune common stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any U.S. Bioscience stockholder who may be deemed to be an
"affiliate" of U.S. Bioscience for purposes of Rule 145 under the Securities Act
or for purposes of qualifying the merger for pooling of interests accounting
treatment. It is a condition to the completion of the merger that each such
affiliate agree not to transfer any MedImmune common stock received in the
merger except in compliance with the resale provisions of Rule 144 or 145 under
the Securities Act or as otherwise permitted under the Securities Act. In
addition, it is a condition to the completion of the merger that each such
affiliate agree not to make any such disposition within 30 days prior to the
completion of the merger and until after such time as financial results covering
at least 30 days of combined operations of MedImmune and U.S. Bioscience after
the merger have been published. This proxy statement/prospectus does not cover
resales of MedImmune common stock received by any person upon completion of the
merger, and no person is authorized to make any use of this proxy
statement/prospectus in connection with any such resale.
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THE MERGER AGREEMENT AND STOCK OPTION AGREEMENT
The following description summarizes the material provisions of the merger
agreement and the stock option agreement. Stockholders should read carefully
the merger agreement and the stock option agreement, which are attached as
Annexes 1 and 2 to this proxy statement/prospectus.
The Merger Agreement
What U.S. Bioscience Stockholders Will Receive in the Merger. In the
merger, holders of U.S. Bioscience common stock will receive a fraction of a
share of MedImmune common stock based on an exchange ratio for each share of
U.S. Bioscience common stock that they own. The exchange ratio will be
calculated as follows:
If the average per share closing price of MedImmune common stock as
reported in The Wall Street Journal during a valuation period of the 20 trading
days ending with the third trading day before the special meeting (excluding the
last five trading days of 1999 and the first two trading days of 2000) is:
. greater than $140, the exchange ratio will be $19.10 divided by the
average per share closing price of MedImmune's common stock;
. $140 or lower but more than $132, the exchange ratio will be 0.1364;
. $132 or lower but more than $120, the exchange ratio will be $18.00
divided by the average per share closing price of MedImmune's common
stock;
. $120 or lower but more than $100, the exchange ratio will be 0.1500;
. $100 or lower but more than $88, the exchange ratio will be $15
divided by the average per share closing price of MedImmune's common
stock; and
. $88 or lower, the exchange ratio will be 0.1705.
If the average per share closing price of MedImmune common stock is less
than $80, on the second trading day prior to the special meeting U.S. Bioscience
may notify MedImmune that it is terminating the merger agreement unless
MedImmune notifies U.S. Bioscience on the trading day prior to the date of the
special meeting that it is increasing the exchange ratio to $13.64 divided by
the average per share closing price of MedImmune common stock.
U.S. Bioscience stockholders will receive cash for any fractional shares of
MedImmune common stock they would otherwise receive in the merger. This amount
will be calculated by multiplying the fractional share interest to which they
are entitled by the closing price of MedImmune common stock on the closing date
as reported in The Wall Street Journal.
The actual value of the MedImmune common stock on the day the merger is
completed may vary from the value of such stock based on the average closing
price. As a result, the market value of the shares of MedImmune common stock
you receive in the merger may be more or less than the value attributed to your
shares of U.S. Bioscience common stock in calculating the exchange ratio.
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Form of the Merger. Subject to the terms and conditions of the merger
agreement and in accordance with Delaware law, at the effective time of the
merger, Marlin Merger Sub Inc., a wholly-owned subsidiary of MedImmune and a
party to the merger agreement, will merge with and into U.S. Bioscience. U.S.
Bioscience will survive the merger as a wholly-owned Delaware subsidiary of
MedImmune, and will continue under the name "U.S. Bioscience, Inc."
Effective Time of the Merger. The merger will become effective upon the
filing of a certificate of merger with the Secretary of State of the State of
Delaware or such later time as is agreed upon by MedImmune and U.S. Bioscience
and specified in the certificate of merger. The filing of the certificate of
merger will occur as soon as practicable, but no later than the second business
day after satisfaction or waiver of the conditions to the completion of the
merger described in the merger agreement unless another date is agreed to by
MedImmune and U.S. Bioscience.
Conditions to the Completion of the Merger. Each party's obligation to
effect the merger is subject to the following:
. adoption of the merger agreement by the U.S. Bioscience stockholders
. approval for listing on the Nasdaq Stock Market of the MedImmune
common stock to be issued to U.S. Bioscience stockholders in the
merger
. expiration or termination of the Hart-Scott-Rodino Act waiting period
applicable to the merger
. the absence of a restraining order, injunction or other court order
or statute, law, rule, legal restraint or prohibition preventing the
completion of the merger
. the absence of a stop order or proceedings seeking a stop order for
the registration statement on Form S-4 of which this proxy
statement/prospectus forms a part
. MedImmune and U.S. Bioscience each having received letters from their
accountants concurring with their managements' conclusions that no
conditions exist that would preclude accounting for the merger as a
pooling of interests transaction
. the absence of governmental litigation relating to the merger,
MedImmune's ability to own U.S. Bioscience or specified similar
matters
. the accuracy of the other party's representations and the other party
having performed its covenants under the merger agreement
. the absence of a material adverse effect on the other party
In addition, MedImmune's obligation to effect the merger is subject to the
following additional conditions:
. MedImmune having received letters from affiliates of U.S. Bioscience
restricting their ability to sell the shares of MedImmune common
stock they will receive in the merger
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. the receipt of all material consents and all consents and
authorizations required under applicable environmental laws required
to operate U.S. Bioscience's business
Finally, U.S. Bioscience's obligation to effect the merger is subject to
U.S. Bioscience having received from Skadden, Arps, Slate, Meagher & Flom LLP,
its special tax counsel, an opinion stating that the merger will qualify for
United States federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code.
No Solicitation. The merger agreement provides that U.S. Bioscience and
its subsidiaries will not, nor will they authorize or permit any of their
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by them to, directly or
indirectly through another person:
. solicit, initiate or encourage (including by way of furnishing
information) or take any other action designed or reasonably likely
to facilitate the making of any takeover proposal, or any proposal
which may be reasonably expected to lead to a takeover proposal, as
described below
. participate in any discussions or negotiations regarding any takeover
proposal
provided, however, that if, at any time before stockholders approve the merger,
the U.S. Bioscience board of directors determines in good faith, based on advice
of outside counsel, that failure to do so would be reasonably likely to result
in a breach of its fiduciary duties under applicable law, U.S. Bioscience may,
in response to a superior proposal, as described below, that was not solicited
by it, subject to providing prior written notice to MedImmune:
. furnish under a customary and reasonable confidentiality agreement
information about U.S. Bioscience and its subsidiaries to any person
making a superior proposal
. participate in discussions or negotiations regarding such superior
proposal
As used in the merger agreement, the term "takeover proposal" means any
bona fide inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business or assets that constitutes:
. 15% or more of the net revenues, net income or assets of U.S.
Bioscience or its subsidiaries, taken as a whole;
. 15% or more of any class of equity securities of U.S. Bioscience or
any of its subsidiaries;
. any tender offer or exchange offer that if completed would result in
any person beneficially owning 15% or more of any class of equity
securities of U.S. Bioscience or any of its subsidiaries; or
. any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving U.S.
Bioscience or any of its subsidiaries
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The term "superior proposal" means any bona fide proposal made by a third
party
. to acquire, directly or indirectly, more than 50% of U.S.
Bioscience's common stock or all or substantially all the assets of
U.S. Bioscience;
. that is on terms which the U.S. Bioscience board of directors, in its
good faith judgment, based on the advice of a financial advisor of
nationally recognized reputation, determines to be more favorable to
U.S. Bioscience and its stockholders than the merger, after taking
into account the terms of the merger agreement as it may be proposed
to be amended by MedImmune;
. that is reasonably capable of being promptly consummated;
. that has financing (to the extent required) then committed or which,
in the good faith judgment of the U.S. Bioscience board of directors,
is reasonably capable of being obtained; and
. that does not require regulatory approvals, including antitrust
approvals, that could not reasonably be expected to be promptly
obtained.
None of U.S. Bioscience, its board of directors or any committee of the
board will withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to MedImmune, the approval or recommendation by the U.S.
Bioscience board of directors or such committee of the merger or the merger
agreement.
None of U.S. Bioscience, its board of directors or any committee of the
board will:
. cause U.S. Bioscience to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement
related to any takeover proposal;
. approve or recommend, or propose publicly to approve or recommend,
any takeover proposal;
. amend, waive or make any determination under its rights agreement
dated as of May 19, 1995 between U.S. Bioscience and American Stock
Transfer and Trust Company of New York, or redeem the rights;
. waive or fail to enforce the terms of a confidentiality or standstill
agreement; in each case to permit or facilitate a takeover proposal.
Notwithstanding the foregoing, at any time before stockholder approval of
the merger, in response to a superior proposal that was not solicited by U.S.
Bioscience and that did not otherwise result from a breach of the provisions of
the merger agreement described above, the U.S. Bioscience board of directors may
terminate the merger agreement and concurrently cause U.S. Bioscience to enter
into a definitive agreement regarding a superior proposal, but only at a time
that is after the fifth day following MedImmune's receipt of written notice
advising MedImmune that the U.S. Bioscience board of directors is prepared to
accept a superior proposal specifying the material terms and conditions of such
proposal, including a copy of any proposed agreement, and identifying the person
making such superior proposal. U.S. Bioscience must pay a fee in the amount of
$15 million (plus documented expenses of MedImmune of up to $2 million) to
MedImmune prior to such termination. See "-- Termination of the Merger
Agreement" and "-- Termination Fees."
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U.S. Bioscience is required to advise MedImmune promptly of any inquiries
relating to a possible takeover proposal.
Termination of the Merger Agreement
1. MedImmune and U.S. Bioscience can jointly agree to terminate the merger
agreement at any time.
2. MedImmune or U.S. Bioscience can terminate the merger agreement if:
. the merger has not been completed by March 31, 2000, provided that this
right to terminate will not be available to any party whose action or
failure to act has been a principal cause of or resulted in the failure
of the merger to be completed by that date,
. a law, court order or other legal action that prohibits the completion of
the merger becomes final and cannot be appealed, provided that the party
seeking to exercise this right to terminate shall have used reasonable
best efforts to prevent the entry of, and remove, such restraint,
. the holders of U.S. Bioscience common stock do not adopt the merger
agreement at the special meeting, or
. the other party breaches any of its representations, warranties,
covenants or agreements under the merger agreement that results in a
failure of specified conditions to the merger and has not cured the
breach within 15 days after receipt of notice of such breach.
3. MedImmune can terminate the merger agreement if U.S. Bioscience directors:
. withdraw, modify or change the approval or recommendation of the merger
in a manner adverse to MedImmune,
. approve or recommend a takeover proposal,
. approve or recommend that U.S. Bioscience stockholders tender their
shares into any tender offer or exchange offer that is a takeover
proposal or is related thereto, or
. indicate any intention to do any of the foregoing.
4. U.S. Bioscience can terminate the merger agreement:
. to accept an unsolicited superior proposal, as described under "No
Solicitation," above, or
. if the average share price of MedImmune common stock in the 20 trading
days ending three trading days before the special meeting falls below
$80, unless MedImmune notifies U.S. Bioscience that it is increasing the
exchange
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ratio to $13.64 divided by the average per share closing price. See "What
U.S. Bioscience Stockholders Will Receive in the Merger."
Termination Fees
U.S. Bioscience must pay MedImmune a $15 million termination fee plus up to
$2 million of documented expenses of MedImmune if:
1. All of the following events occur:
. it is publicly announced that any person has made, or any person
has announced an intention to make, a takeover proposal;
. the merger agreement is terminated by U.S. Bioscience or
MedImmune because the stockholders of U.S. Bioscience do not
approve the merger or by MedImmune due to a willful and material
breach of the merger agreement by U.S. Bioscience; and
. within 12 months of the termination of the merger agreement, U.S.
Bioscience enters into an acquisition agreement with respect to a
takeover proposal or consummates a takeover proposal.
2. Either of the following occur:
. U.S. Bioscience terminates the merger agreement to accept an
unsolicited superior proposal; or
. MedImmune terminates the merger agreement because U.S. Bioscience
directors:
-withdraw, modify or change their approval or recommendation of
the merger in a manner adverse to MedImmune;
-approve or recommend a takeover proposal;
-approve or recommend that U.S. Bioscience stockholders tender
their shares into any tender offer or exchange offer that is a
takeover proposal or is related thereto; or
-indicate any intention to do any of the foregoing.
Conduct of the Business of U.S. Bioscience Pending the Merger. Under the
merger agreement, U.S. Bioscience has agreed that, prior to the effective time
of the merger, it will carry on its business in the ordinary course consistent
with past practice and in compliance with applicable laws and regulations and
will use reasonable best efforts to preserve intact its current business
organizations, to keep available the services of its current officers and
employees and preserve its relationships with those persons having business
dealings with it. In addition, U.S. Bioscience has agreed that, among other
things and subject to certain exceptions, neither it nor any of its subsidiaries
may:
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. declare, set aside or pay any dividends, split, combine or
reclassify any of its capital stock or buy back or redeem any of
its securities;
. issue or encumber any securities other than pursuant to exercise of
stock options and warrants currently outstanding;
. amend its certificate of incorporation or by-laws
. acquire or merge with any other person, or acquire more than
$500,000 of assets, except for purchases of raw materials or
supplies in the ordinary course of business consistent with past
practice
. sell, lease or encumber its properties or assets, except for
inventory sold in the ordinary course of business consistent with
past practice and sales of up to $500,000 of goods and services
. borrow money or guarantee debts, except for short-term borrowings
incurred in the ordinary course of business consistent with past
practice
. loan money or invest in any other person (other than its
subsidiaries)
. make any new capital expenditures or enter into any agreement
providing for payments in excess of $100,000 individually or $500,000
in the aggregate
. pay or settle any liabilities except in the ordinary course of
business consistent with past practice
. change or terminate any of its material contracts
. enter into contracts relating to the distribution, sale, license,
marketing or manufacturing of products
. except as otherwise contemplated by the merger agreement or as
required to comply with applicable law:
-adopt, change or terminate any collective bargaining agreement or
employee, director or consultant plan
-increase the compensation of any employee (other than pursuant to
normal reviews)
-pay any benefit not required under any benefit plan
-increase the severance pay of any director, officer or employee
-adopt or change any employment agreement
-grant any awards under any bonus, incentive, performance or
benefit plan
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-amend or modify any stock option
-fund or secure payment of compensation or benefits under any
employee plan, agreement, contract or arrangement or benefit plan
-accelerate the vesting of payment of any compensation or benefit
under any benefit plan
. enter into any material contracts
. change accounting methods
. breach any representation or warranty or take any action resulting
in a failure of a condition to the merger
. change, transfer or license any intellectual property rights
. authorize or commit or agree to take, any of the foregoing actions
Conduct of the Business of MedImmune Pending the Merger. Under the merger
agreement, MedImmune has agreed that, prior to the effective time of the merger,
it will carry on its business in all material respects in the ordinary course,
and neither it nor any of its subsidiaries may:
. declare, set aside or pay any dividends or split, combine or
reclassify any of its capital stock
. amend its certificate of incorporation or by-laws
. take any action to prevent, impair or delay the merger
. breach any representation or warranty or take any action resulting
in a failure of a condition to the merger
. authorize any of, or commit or agree to take any of, the foregoing
actions
The merger agreement permits MedImmune to take any of the foregoing actions
in connection with: capital expenditures, sales and marketing activities,
technology transfers (in or out), financing activities and merger and
acquisition activities
U.S. Bioscience Stock Options. The merger agreement provides that at the
effective time of the merger, each U.S. Bioscience stock option outstanding
immediately prior to the effective time of the merger, regardless of whether or
not vested, will be deemed to constitute an option to acquire, on the same terms
and conditions as were applicable under the U.S. Bioscience stock option, a
number of MedImmune common shares determined by multiplying the number of shares
of U.S. Bioscience common stock subject to such option by the exchange ratio,
rounded to the nearest whole share. The option exercise price per MedImmune
share, rounded up to the nearest whole cent, will equal:
47
<PAGE>
. the aggregate exercise price for the shares of U.S. Bioscience common
stock otherwise purchasable pursuant to the U.S. Bioscience option
divided by
. the aggregate number of MedImmune common shares deemed purchasable
pursuant to the U.S. Bioscience option.
At the effective time, MedImmune will assume the U.S. Bioscience stock
plans and all obligations of U.S. Bioscience under the U.S. Bioscience stock
plans, including obligations with respect to stock options outstanding at the
effective time. MedImmune has agreed, at or prior to the effective time of the
merger, to reserve for issuance the number of MedImmune common shares that will
become subject to these substitute options. As soon as practicable after the
effective time of the merger, MedImmune will file a registration statement, with
respect to the MedImmune common shares subject to these substitute options
(except to the extent the shares have already been registered), and will
maintain the effectiveness of the registration statement for so long as such
options remain outstanding.
Employee Benefits. The merger agreement provides that MedImmune will
treat all service under all compensation and benefit plans and procedures by
employees of U.S. Bioscience before the effective time of the merger as service
with MedImmune for all purposes (other than for purposes of benefit accrual
under any defined benefit pension plan). MedImmune will waive any pre-existing
condition and waiting period under any welfare or employee benefit plan for the
benefit of U.S. Bioscience employees to the extent any pre-existing condition or
waiting period did not apply to an employee immediately prior to the effective
time, and MedImmune will provide credit for any co-payments or deductibles paid
prior to the effective time during the calendar year in satisfying applicable
deductible or out-of-pocket requirements under any welfare plans or other
employee benefit plans.
Expenses. Whether or not the merger is completed, all fees and expenses
incurred in connection with the merger, the merger agreement and the stock
option agreement will be paid by the party incurring such fees or expenses,
except as otherwise provided in the merger agreement and the stock option
agreement and except that MedImmune and U.S. Bioscience will share equally the
expenses incurred in connection with filing, printing and mailing this proxy
statement/prospectus and the registration statement of which it is a part and
the filing fees for the premerger notification and report forms under the Hart-
Scott-Rodino Act and any similar foreign antitrust laws.
Representations and Warranties. The merger agreement contains customary
representations and warranties.
Amendment; Extension and Waiver. Subject to applicable law:
. the merger agreement may be amended by the parties in writing at
any time, except that after the merger agreement has been adopted
by the stockholders of U.S. Bioscience, no amendment may be entered
into which requires further approval by U.S. Bioscience
stockholders unless such further approval is obtained
48
<PAGE>
. at any time prior to the effective time of the merger, a party may,
by written instrument signed on behalf of such party, extend the
time for performance of the obligations of any other party to the
merger agreement, waive inaccuracies in representations and
warranties of any other party contained in the merger agreement or
in any related document and except as provided in the merger
agreement, waive compliance by any other party with any agreements
or conditions in the merger agreement
The Stock Option Agreement
General. Simultaneously with entering into the merger agreement, MedImmune
and U.S. Bioscience entered into a stock option agreement under which U.S.
Bioscience granted MedImmune an option to purchase a number of shares of common
stock equal to 19.9% of the outstanding common stock of U.S. Bioscience at a
price per share of $16.50.
Exercise of the Option. Except as described below, the option is
exercisable in whole at any time after the occurrence of any event entitling
MedImmune to receive the termination fee under the merger agreement. See "The
Merger Agreement - Termination Fees" for a description of the events entitling
MedImmune to receive the termination fee. The right to purchase shares under the
stock option agreement will expire upon the earliest to occur of:
. the completion of the merger
. 180 days after U.S. Bioscience pays the $15 million termination fee
and up to $2 million of documented expenses of MedImmune
contemplated by the merger agreement.
. termination of the merger agreement so long as no event has
occurred which would cause U.S. Bioscience to have to pay the
termination fee and expenses, or
. 13 months after termination of the merger agreement, under
circumstances which could result in U.S. Bioscience having to pay
the termination fee and expenses unless during such 13 month period
such an event shall occur
Cash Payment for the Option. MedImmune may, at any time the option is
exercisable, cause U.S. Bioscience to pay to MedImmune cash in exchange for
cancellation of the option or for the repurchase of shares of U.S. Bioscience
common stock acquired through the exercise of the option, in an amount equal to
the number of shares of U.S. Bioscience common stock subject to the option
multiplied by the higher of the following, less $16.50 if the option has not
been exercised:
. the highest price per share paid or proposed to be paid by any
person pursuant to a takeover proposal; or
. the average closing price on The American Stock Exchange of shares
of U.S. Bioscience common stock for the five trading days
immediately preceding the
49
<PAGE>
date upon which MedImmune requested cash payment for the option or
for its shares of U.S. Bioscience common stock acquired through the
option
Profit Limitation. The stock option agreement provides that in no event
will MedImmune's total profit from the option exceed $17 million minus the sum
of any termination fee paid plus documented expenses actually received by
MedImmune.
Total profit is calculated as the sum of
. the amount received by MedImmune pursuant to the cash payment
provision described above; and
. the net consideration, if any, received by MedImmune pursuant to
the sale of option shares to any unaffiliated party, less the
$16.50 per share exercise price and any cash paid by MedImmune to
U.S. Bioscience, as described below.
If MedImmune's total profit from the option would otherwise exceed such
amount, MedImmune is required to:
. reduce the number of shares of U.S. Bioscience common stock subject
to the option;
. pay cash to U.S. Bioscience;
. waive its rights under the stock option agreement; or
. any combination of the foregoing.
In addition, the stock option agreement provides that the option may not be
exercised for a number of shares as would, as of the date of the exercise,
result in a "notional total profit" of more than $17 million minus the sum of
any termination fee paid plus documented expenses actually received by MedImmune
and, if exercise of the option otherwise would exceed such amount, MedImmune
would take the actions described in the preceding paragraph. Notional total
profit means the amount of profit MedImmune would receive if it sold all shares
for which it is exercising the option at the closing market price for the shares
as of the close of business on the preceding trading day.
Registration Rights and Listing. MedImmune has certain rights to require
registration by U.S. Bioscience of any shares purchased under the option under
the securities laws if necessary for MedImmune to be able to sell such shares
and to require the listing of such shares on The Nasdaq Stock Market or other
national securities exchange.
Effect of Stock Option Agreement. The stock option agreement is intended
to increase the likelihood that the merger will be completed on the terms set
forth in the merger agreement. Consequently, certain aspects of the stock
option agreement may discourage persons who might now or prior to the effective
time of the merger be interested in acquiring all of or a significant interest
in U.S. Bioscience from considering or proposing such an acquisition, even if
such persons were prepared to offer higher consideration per share for U.S.
Bioscience common stock
50
<PAGE>
than that implicit in the exchange ratio contemplated by the merger agreement or
a higher price per share for U.S. Bioscience common stock than the market price.
If the stock option were exercised, it would preclude the use of pooling-of-
interests for accounting purposes by any interested third parties.
51
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet as of June
30, 1999 and unaudited pro forma combined statements of operations for the six
months ended June 30, 1999 and for the three years ended December 31, 1998 are
presented to reflect the estimated impact of the merger on the historical
consolidated financial statements of MedImmune and U.S. Bioscience using the
pooling of interests method of accounting. For a description of the pooling of
interests accounting with respect to the merger and certain other accounting
matters, see "The Merger -- Anticipated Accounting Treatment." The unaudited
pro forma combined financial statements have been prepared from, should be read
with and are qualified in their entirety by reference to, the historical
consolidated financial statements and notes thereto of MedImmune and U.S.
Bioscience which are incorporated by reference in this proxy
statement/prospectus.
The unaudited pro forma combined balance sheet as of June 30, 1999
combines MedImmune's and U.S. Bioscience's historical consolidated balance
sheets as of June 30, 1999, giving effect to the merger as if it had occurred as
of that date. The unaudited pro forma combined statements of operations for the
six months ended June 30, 1999 and for the three years ended December 31, 1998
combine MedImmune's and U.S. Bioscience's historical consolidated statements of
operations for the six months ended June 30, 1999 and for the three years ended
December 31, 1998 giving effect to the merger as if it had occurred at the
beginning of each period presented.
The unaudited pro forma combined financial statements have been
included for illustrative purposes only and are not necessarily indicative of
the results of operations or financial position that would have occurred had the
merger been consummated at the dates indicated, nor are they necessarily
indicative of future results of operations or financial position of the merged
companies.
52
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Adjustments Pro Forma
MedImmune U.S. Bioscience (See Notes) Combined
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales $135,196 $11,590 $146,786
Other revenue 3,764 3,533 7,297
---------- --------------- ----------- ---------
Total revenues 138,960 15,123 0 154,083
---------- --------------- ----------- ---------
Costs and Expenses
Cost of sales 35,821 2,560 38,381
Research and development 17,635 11,687 29,322
Selling, administrative and general 46,915 7,146 54,061
Other operating expenses 11,884 -- 11,884
---------- --------------- ----------- ---------
Total expenses 112,255 21,393 0 133,648
---------- --------------- ----------- ---------
Operating income (loss) 26,705 (6,270) 0 20,435
Interest income 4,763 1,383 6,146
Interest expense (1,833) (54) (1,887)
---------- --------------- ----------- ---------
Income (loss) before income taxes 29,635 (4,941) 0 24,694
Deferred income tax provision (benefit) 11,161 -- (42,460)(4) (31,299)
---------- --------------- -------------- ---------
Net earnings (loss) $18,474 ($4,941) $42,460 $55,993
========== =============== ============== =========
Per share exchange ratio of 0.1364
Net earnings (loss) per share
Basic $0.33 ($0.19) $0.95
Diluted $0.29 ($0.19) $0.82
Shares used in calculation of net
earnings (loss) per share
Basic 55,570 26,672 (23,034)(2) 59,208
Diluted 65,682 26,672 (22,942)(2) 69,412
Per share exchange ratio of 0.15
Net earnings (loss) per share
Basic $0.33 ($0.19) $0.94
Diluted $0.29 ($0.19) $0.81
Shares used in calculation of net
earnings (loss) per share
Basic 55,570 26,672 (22,671)(2) 59,571
Diluted 65,682 26,672 (22,570)(2) 69,784
Per share exchange ratio of 0.1705
Net earnings (loss) per share
Basic $0.33 ($0.19) $0.93
Diluted $0.29 ($0.19) $0.81
Shares used in calculation of net
earnings (loss) per share
Basic 55,570 26,672 (22,124)(2) 60,118
Diluted 65,682 26,672 (22,009)(2) 70,345
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Adjustments Pro Forma
MedImmune U.S. Bioscience (See Notes) Combined
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Product sales $51,043 $8,422 $59,465
Other revenue 32,886 5,584 38,470
---------- --------------- ----------- ---------
Total revenues 83,929 14,006 0 97,935
---------- --------------- ----------- ---------
Costs and Expenses
Cost of sales 36,758 2,582 39,340
Research and development 12,995 9,032 22,027
Selling, administrative and general 16,144 7,030 23,174
Other operating expenses 24,938 -- 24,938
---------- --------------- ----------- ---------
Total expenses 90,835 18,644 0 109,479
---------- --------------- ----------- ---------
Operating loss (6,906) (4,638) 0 (11,544)
Interest income 3,561 1,447 5,008
Interest expense (2,018) (82) (2,100)
---------- --------------- ----------- ---------
Loss before income taxes (5,363) (3,273) 0 (8,636)
Deferred income tax provision (benefit) -- -- -- --
---------- --------------- ----------- ---------
Net loss ($5,363) ($3,273) $ 0 ($ 8,636)
========== =============== =========== =========
Per share exchange ratio of 0.1364
Net loss per share
Basic ($0.10) ($0.13) ($0.15)
Diluted ($0.10) ($0.13) ($0.15)
Shares used in calculation of net
loss per share
Basic 52,469 24,267 (20,957)(2) 55,779
Diluted 52,469 24,267 (20,957)(2) 55,779
Per share exchange ratio of 0.15
Net loss per share
Basic $0.10) ($0.13) ($0.15)
Diluted ($0.10) ($0.13) ($0.15)
Shares used in calculation of net
loss per share
Basic 52,469 24,267 (20,627)(2) 56,109
Diluted 52,469 24,267 (20,627)(2) 56,109
Per share exchange ratio of 0.1705
Net loss per share
Basic ($0.10) ($0.13) ($0.15)
Diluted ($0.10) ($0.13) ($0.15)
Shares used in calculation of net
loss per share
Basic 52,469 24,267 (20,130)(2) 56,606
Diluted 52,469 24,267 (20,130)(2) 56,606
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Adjustments Pro Forma
MedImmune U.S. Bioscience (See Notes) Combined
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales $163,440 $20,730 $184,170
Other revenue 37,268 6,005 43,273
---------- --------------- ----------- ---------
Total revenues 200,708 26,735 0 227,443
---------- --------------- ----------- ---------
Costs and Expenses
Cost of sales 70,236 5,788 76,024
Research and development 25,775 19,042 44,817
Selling, administrative and general 62,008 13,546 75,554
Other operating expenses 36,495 -- 36,495
---------- --------------- ----------- ---------
Total expenses 194,514 38,376 0 232,890
---------- --------------- ----------- ---------
Operating income (loss) 6,194 (11,641) 0 (5,447)
Interest income 6,659 2,736 9,395
Interest expense (4,041) (149) (4,190)
---------- --------------- ----------- ---------
Income (loss) before income taxes 8,812 (9,054 0 (242)
Deferred income tax provision (benefit) (47,428 -- 0 (47,428)
---------- --------------- ----------- ---------
Net earnings (loss) $56,240 ($9,054) $0 $47,186
========== =============== =========== =========
Per share exchange ratio of 0.1364
Net earnings (loss) per share
Basic $1.06 ($0.37) $0.84
Diluted $0.91 ($0.37) $0.73
Shares used in calculation of net earnings
(loss) per share
Basic 53,130 24,307 (20,991)(2) 56,446
Diluted 63,401 24,307 (20,934)(2) 66,774
Per share exchange ratio of 0.15
Net earnings (loss) per share
Basic $1.06 ($0.37) $0.83
Diluted $0.91 ($0.37) $0.72
Shares used in calculation of net earnings
(loss) per share
Basic 53,130 24,307 (20,661)(2) 56,776
Diluted 63,401 24,307 (20,598)(2) 67,110
Per share exchange ratio of 0.1705
Net earnings (loss) per share
Basic $1.06 ($0.37) $0.82
Diluted $0.91 ($0.37) $0.72
Shares used in calculation of net earnings
(loss) per share
Basic 53,130 24,307 (20,162)(2) 57,275
Diluted 63,401 24,307 (20,090)(2) 67,617
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Adjustments Pro Forma
MedImmune U.S. Bioscience (See Notes) Combined
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales $ 65,271 $ 12,986 $ $ 78,257
Other revenue 15,693 11,914 27,607
---------- --------------- ----------- ---------
Total revenues 80,964 24,900 0 105,864
---------- --------------- ----------- ---------
Costs and Expenses
Cost of sales 34,433 4,158 38,591
Research and development 40,669 16,905 57,574
Selling, administrative and general 31,735 14,387 46,122
Other operating expenses 11,543 -- 11,543
---------- --------------- ----------- ---------
Total expenses 118,380 35,450 0 153,830
---------- --------------- ----------- ---------
Operating loss (37,416) (10,550) 0 (47,966)
Interest income 4,004 2,824 6,828
Interest expense (3,483) (183) (3,666)
---------- --------------- ----------- ---------
Loss before income taxes (36,895) (7,909) 0 (44,804)
Deferred income tax provision (benefit) -- -- -- --
---------- --------------- ----------- ---------
Net loss ($36,895) ($7,909) $0 ($44,804)
========== =============== =========== =========
Per share exchange ratio of 0.1364
Net loss per share
Basic ($0.80) ($0.33) ($0.90)
Diluted ($0.80) ($0.33) ($0.90)
Shares used in calculation of net
loss per share
Basic 46,264 23,872 (20,616)(2) 49,520
Diluted 46,264 23,872 (20,616)(2) 49,520
Per share exchange ratio of 0.15
Net loss per share
Basic ($0.80) ($0.33) ($0.90)
Diluted ($0.80) ($0.33) ($0.90)
Shares used in calculation of net
loss per share
Basic 46,264 23,872 (20,291)(2) 49,845
Diluted 46,264 23,872 (20,291)(2) 49,845
Per share exchange ratio of 0.1705
Net loss per share
Basic ($0.80) ($0.33) ($0.89)
Diluted ($0.80) ($0.33) ($0.89)
Shares used in calculation of net
loss per share
Basic 46,264 23,872 (19,802)(2) 50,334
Diluted 46,264 23,872 (19,802)(2) 50,334
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(in thousands, except per share data)
Pro Forma
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Adjustments Pro Forma
MedImmune U.S. Bioscience (See Notes) Combined
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales $35,782 $10,785 $46,567
Other revenue 5,317 7,344 12,661
---------- --------------- ----------- ---------
Total revenues 41,099 18,129 0 59,228
---------- --------------- ----------- ---------
Costs and Expenses
Cost of sales 19,678 2,956 22,634
Research and development 32,192 14,383 46,575
Selling, administrative and general 22,165 12,275 34,440
Other operating expenses -- -- --
---------- --------------- ----------- ---------
Total expenses 74,035 29,614 0 103,649
---------- --------------- ----------- ---------
Operating loss (32,936) (11,485) 0 (44,421)
Interest income 5,655 2,335 7,990
Interest expense (2,263) (537) (2,800)
---------- --------------- ----------- ---------
Loss before income taxes (29,544) (9,687) 0 (39,231)
Deferred income tax provision (benefit) -- -- -- --
---------- --------------- ----------- ---------
Net loss ($29,544) ($9,687) $0 ($39,231)
========== =============== =========== =========
Per share exchange ratio of 0.1364
Net loss per share
Basic ($0.70) ($0.43) ($0.87)
Diluted ($0.70) ($0.43) ($0.87)
Shares used in calculation of net
loss per share
Basic 42,038 22,396 (19,341)(2) 45,093
Diluted 42,038 22,396 (19,341)(2) 45,093
Per share exchange ratio of 0.15
Net loss per share
Basic ($0.70) ($0.43) ($0.86)
Diluted ($0.70) ($0.43) ($0.86)
Shares used in calculation of net
loss per share
Basic 42,038 22,396 (19,036)(2) 45,398
Diluted 42,038 22,396 (19,036)(2) 45,398
Per share exchange ratio of 0.1705
Net loss per share
Basic ($0.70) ($0.43) ($0.86)
Diluted ($0.70) ($0.43) ($0.86)
Shares used in calculation of net
loss per share
Basic 42,038 22,396 (18,577)(2) 45,857
Diluted 42,038 22,396 (18,577)(2) 45,857
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
PRO FORMA COMBINED BALANCE SHEET AS OF JUNE 30, 1999
(in thousands)
Pro Forma
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Adjustments Pro Forma
MedImmune U.S. Bioscience (See Notes) Combined
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $6,347 $14,740 $21,087
Marketable securities 177,885 31,679 209,564
Trade receivables, net -- 3,829 3,829
Contract receivables, net 2,274 -- 2,274
Inventory, net 15,887 2,681 18,568
Deferred tax assets 12,183 -- 12,183
Other current assets 7,054 898 7,952
---------- --------------- ----------- ---------
Total Current Assets 221,630 53,827 0 275,457
Property and equipment, net 77,265 5,041 82,306
Inventory, noncurrent 5,096 -- 5,096
Deferred tax assets, net 83,618 -- 52,901(4) 136,519
Marketable securities -- 10,506 10,506
Other assets 8,227 -- 8,227
---------- --------------- ----------- ---------
Total Assets $395,836 $69,374 $52,901 $518,111
========== =============== =========== =========
Liabilities and Shareholders' Equity
Accounts payable, trade $2,072 $2,483 $4,555
Accrued expenses 20,954 9,040 20,000(3) 49,994
Accrued interest 2,559 -- 2,559
Product royalties payable 12,249 -- 12,249
Other current liabilities 3,014 1,082 4,096
---------- --------------- ----------- ---------
Total Current Liabilities 40,848 12,605 20,000 73,453
Long-term debt 80,236 406 80,642
Other liabilities 2,131 1,878 4,009
---------- --------------- ----------- ---------
Total Liabilities 123,215 14,889 20,000 158,104
---------- --------------- ----------- ---------
Commitments and Contingencies
Shareholders' Equity
Preferred Stock -- -- --
Common Stock 566 274 (233)(5) 607
Paid-in capital 333,613 192,289 10,674 (4)(5) 536,576
Deferred compensation -- (354) (354)
Accumulated deficit (61,558) (136,522) 22,460)(3)(4) (175,620)
Accumulated other comprehensive loss -- (954) (954)
Cost of treasury stock -- (248) (248)
---------- --------------- ----------- ---------
Total Shareholders' Equity 272,621 54,485 32,901 360,007
Total Liabilities and
Shareholders' Equity $395,836 $69,374 $52,901 $518,111
========== =============== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1. General
There were no transactions between MedImmune and U.S. Bioscience during
any period presented.
There are no material differences between the accounting policies of
MedImmune and U.S. Bioscience. Certain amounts in the historical financial
statements of MedImmune and U.S. Bioscience have been reclassified for
presentation of the unaudited pro forma combined financial statements.
Note 2. Pro forma combined earnings (loss) per share
Under the merger agreement, U.S. Bioscience stockholders will receive
between 0.1364 and 0.1705, subject to certain adjustments, of a share of
MedImmune stock for each outstanding share of U.S. Bioscience common stock. The
exchange ratios used in computing share and per share amounts in the
accompanying unaudited pro forma combined financial statements were 0.1364,
0.1500, and 0.1705, which represent examples of the potential range in the
fraction of a share of MedImmune common stock that each U.S. Bioscience
stockholder may receive for each share of U.S. Bioscience common stock owned.
The pro forma combined statement of operations for the six months ended
June 30, 1999 and for the year ended December 31, 1998 include an adjustment to
reflect the impact, using the treasury stock method, of potential common shares
of U.S. Bioscience which have a dilutive impact with respect to fully diluted
pro forma earnings per share.
The following is a reconciliation of the numerator and denominator of
the diluted pro forma EPS computation, based on an exchange ratio of 0.15:
<TABLE>
<CAPTION>
Six months ending Twelve months ending
June 30, 1999 December 31, 1998
------------------------ ------------------------
<S> <C> <C>
Numerator:
Pro forma net earnings...................................... $55,993 $47,186
Interest on 7% convertible notes, net of amounts capitalized
and related taxes -MedImmune............................... 720 1,468
------------------------ ------------------------
Numerator for pro forma diluted EPS $56,713 $48,654
======================== ========================
Denominator:
Pro forma weighted average shares outstanding-basic......... 59,571 56,776
Effect of dilutive securities:
Stock options - MedImmune................................. 4,014 4,173
7% convertible notes - MedImmune.......................... 6,098 6,098
Stock options - U.S. Bioscience........................... 101 63
------------------------ ------------------------
Denominator for pro forma diluted EPS....................... 69,784 67,110
======================== ========================
</TABLE>
The following table shows the number of shares and warrants and related
price ranges of those shares that were excluded from the pro forma diluted EPS
computations from above.
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<PAGE>
These options to purchase common stock and warrants were excluded as the
exercise prices of the options and warrants were in excess of the average stock
price during the periods reported, and thus would have been anti-dilutive.
<TABLE>
<CAPTION>
Twelve months
Six months ending ending December
June 30, 1999 31, 1998
------------------- ------------------
MedImmune:
<S> <C> <C> <C>
Price range of stock options: $58.88 to $71.25 118,700
Price range of stock options: $29.75 to $48.50 830,600
U.S. Bioscience - converted at .15 exchange ratio:
Price range of stock options: $10.00 to $30.20 391,237
Price range of stock options: $8.75 to $30.20 418,822
Warrants: $11.17 80,602
</TABLE>
No reconciliation of the numerators and denominators is necessary for the six
months ended June 30, 1998, or the twelve months ended December 31, 1997 and
1996, as losses were reported and inclusion of potential common shares would be
anti-dilutive.
Note 3. Merger costs
MedImmune and U.S. Bioscience expect to incur approximately $20 million of
non-recurring expenses related to the merger. These expenses include, but are
not limited to, professional fees, regulatory filing costs, severance payments,
fees of financial advisors and other unusual and non-recurring items. Although
MedImmune believes this estimate of non-recurring expenses is accurate, certain
material additional costs may be incurred in connection with the merger. Merger
related expenses will be recorded primarily in the period in which the merger is
consummated, which is currently estimated to occur in the fourth quarter of
1999; some merger related expenses were incurred and will be recorded in the
third quarter of 1999. Because the foregoing charges are non-recurring in
nature, they have not been reflected in the pro forma combined statements of
operations.
Note 4. Income taxes
The pro forma combined balance sheet as of June 30, 1999 reflects an
adjustment to the deferred tax valuation allowance of U.S. Bioscience in the
amount of $52.9 million, which includes $10.4 million of tax benefits related to
the exercise of stock options, which is credited directly to additional paid-in
capital. The pro forma combined statement of operations for the six months ended
June 30, 1999 includes $42.5 million, which primarily reflects the realization
of the federal net operating loss carryforwards of U.S. Bioscience. Changes in
the federal income tax regulations which occurred in June 1999 will allow
certain federal net operating losses of U.S. Bioscience arising prior to the
merger to be utilized to offset future anticipated taxable income of MedImmune
and U.S. Bioscience.
Note 5. Common stock
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<PAGE>
The pro forma combined balance sheet as of June 30, 1999 reflects an
adjustment to common stock and paid-in capital for the conversion of U.S.
Bioscience shares, based on an exchange ratio of 0.1500, to MedImmune shares for
shares outstanding as of the balance sheet date, assuming the merger was
consummated on June 30, 1999.
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<PAGE>
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF MEDIMMUNE AND U.S. BIOSCIENCE
The rights of U.S. Bioscience stockholders are currently governed by the
certificate of incorporation and the by-laws of U.S. Bioscience. The rights of
MedImmune stockholders are currently governed by the restated certificate of
incorporation and the amended by-laws of MedImmune. Both U.S. Bioscience and
MedImmune are incorporated under the laws of the State of Delaware and,
accordingly, the rights of the shareholders of each are currently, and will
continue to be, governed by the Delaware General Corporation Law.
As a result of the merger, current stockholders of U.S. Bioscience will
become stockholders of MedImmune and their rights will be governed by the
restated certificate of incorporation and the by-laws of MedImmune.
The following is a summary of the principal differences between the current
rights of U.S. Bioscience stockholders and the rights of MedImmune stockholders.
This summary is not intended to be complete and is qualified in its entirety by
reference to the relevant provisions of the restated certificate of
incorporation and by-laws of MedImmune, the certificate of incorporation and by-
laws of U.S. Bioscience and Delaware law.
Board of Directors
<TABLE>
<CAPTION>
MedImmune/Combined Company
U.S. Bioscience Stockholders' Rights Stockholders' Rights
------------------------------------ --------------------
<S> <C> <C>
Size of Board The U.S. Bioscience board of directors MedImmune's board of directors
is currently fixed by a resolution of the currently consists of nine directors,
board of directors at eight. The bylaws but the bylaws authorize the whole board
require that the number be not less than to change this number from time to time.
three and no more than twelve. The "whole board" refers to the number
of directors from time to time
authorized to be on the board regardless
of the number of directors then in
office.
Removal of The U.S. Bioscience bylaws provide that MedImmune directors or the entire board
Directors the entire board of directors or any may be removed with or without cause, at
individual director may be removed from any time by the vote of the holders
office with or without cause by a of two-thirds of the shares then entitled
majority of holders of the outstanding to vote or by written consent of the
shares entitled to vote. stockholders.
Vacancies The U.S. Bioscience bylaws provide that The vacancies on MedImmune's board may
any vacancies on the U.S. Bioscience be filled by vote of stockholders or by
board and newly created directorships their written consent or by vote of the
resulting from any increase in the board of directors or by the directors'
authorized number of directors elected written consent. If the number of
by all of the directors then in office is less than a
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
stockholders having the right to quorum, the vacancies may be filled by a
vote as a single class may be filled vote of a majority of the directors then
by a majority of the directors then in in office.
office, although less than a quorum, or
by a sole remaining director.
</TABLE>
Stockholder Meetings
<TABLE>
<CAPTION>
MedImmune/Combined Company
U.S. Bioscience Stockholders' Rights Stockholders' Rights
------------------------------------ --------------------
<S> <C> <C>
Quorum The U.S. Bioscience bylaws require that, MedImmune's bylaws require that at each
unless the certificate of incorporation meeting of stockholders, except where
provides otherwise (which it does not), otherwise provided by the restated
the presence, in person or by proxy, of certificate of incorporation or the
the holders of a majority of the bylaws, the holders of a majority of the
outstanding shares entitled to vote issued and outstanding shares of stock
shall constitute a quorum but in no of the corporation entitled to vote at
event shall a quorum consists of less such meeting, present in person or
than one-third of the shares entitled to represented by proxy, will constitute a
vote at a meeting. quorum for the transaction of business.
Special The U.S. Bioscience charter permits the The MedImmune bylaws permit the board of
Meetings of board of directors, the chief executive directors, the chairman, if any, the
Stockholders officer, and the holders of record of president, or the secretary or the
not less than a majority of all the record holders of at least a majority of
shares outstanding and entitled to vote the shares of common stock of MedImmune
to call special meetings. issued and outstanding, to call special
meetings.
</TABLE>
Amendments to Organizational Documents
<TABLE>
<CAPTION>
MedImmune/Combined Company
U.S. Bioscience Stockholders' Rights Stockholders' Rights
------------------------------------ --------------------
<S> <C> <C>
Amendments U.S. Bioscience by-laws may be adopted, MedImmune's bylaws may be adopted,
to Bylaws amended or repealed by the stockholders amended or repealed by the vote of the
entitled to vote thereon at any regular holders of a majority of the shares then
or special meeting or, if the entitled to vote at an election of
certificate of incorporation so directors or by consent of the
provides, by the board of directors. stockholders or by the vote of the Board
or by the directors' written consent.
</TABLE>
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<PAGE>
Authorized Capital Stock
<TABLE>
<CAPTION>
MedImmune/Combined Company
U.S. Bioscience Stockholders' Rights Stockholders' Rights
------------------------------------ --------------------
<S> <C> <C>
The U.S. Bioscience certificate of The MedImmune restated certificate of
incorporation authorizes the issuance of incorporation authorizes the issuance of
up to 50,000,000 shares of common stock, up to 120,000,000 shares of common
par value $0.01 per share and 5,000,000 stock, par value $0.01 per share and
shares of preferred stock, par value 5,524,525 shares of preferred stock, par
$0.005. As of [month, day], 1999, value $0.01 per share. As of [month,
xx,xxx,xxx shares of common stock and no day ], 1999, xxx,xxx,xxx shares of
shares of preferred stock were issued common stock and no shares of preferred
and outstanding. stock were issued and outstanding.
</TABLE>
Indemnification of Directors and Officers
<TABLE>
<CAPTION>
MedImmune/Combined Company
U.S. Bioscience Stockholders' Rights Stockholders' Rights
------------------------------------ --------------------
<S> <C> <C>
Charter and The U.S. Bioscience certificate and The MedImmune bylaws provide for
Bylaw bylaws provide for indemnification of indemnification of officers and
Provisions directors, officers, employees or agents directors of MedImmune to the fullest
to the fullest extent authorized by the extent authorized by Delaware law.
Delaware law, except that the
certificate also provides that, if a
director, officer, employee or agent
initiates a proceeding, the corporation
will indemnify such person only if the
board had authorized the proceeding.
</TABLE>
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<PAGE>
THE SPECIAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of U.S.
Bioscience as of the record date as part of the solicitation of proxies by the
U.S. Bioscience board of directors for use at the special meeting.
Date, Time and Place
We will hold the special meeting at the Philadelphia Marriott West, 111
Crawford Avenue, West Conshohocken, PA 19428, at 10:00 a.m., local time, on
______________, 1999.
Purpose of Special Meeting
At the special meeting, we will ask U.S. Bioscience stockholders to adopt
the merger agreement. The U.S. Bioscience board of directors believes that the
terms of the merger and the merger agreement are fair to and in the best
interests of U.S. Bioscience and its stockholders and unanimously recommends
that the stockholders vote "FOR" the adoption of the merger agreement.
Record Date; Shares Entitled to Vote; Quorum
Only holders of record of U.S. Bioscience common stock at the close of
business on [Record date], 1999, the record date, are entitled to notice of and
to vote at the special meeting. On the record date, _________ shares of U.S.
Bioscience common stock were outstanding and entitled to vote and held by
approximately ________ holders of record. A quorum is present at the special
meeting if a majority of the shares of U.S. Bioscience common stock outstanding
and entitled to vote on the record date are represented at the special meeting
in person or by proxy. In the event that a quorum is not present at the special
meeting, it is expected that the meeting will be adjourned or postponed to
solicit additional proxies. Holders of record of U.S. Bioscience common stock
on the record date are entitled to one vote per share at the special meeting on
the proposal to adopt the merger agreement.
Votes Required
The adoption of the merger agreement requires the affirmative vote of a
majority of the outstanding shares of U.S. Bioscience common stock.
Voting By U.S. Bioscience Directors and Executive Officers
At the close of business on the record date, directors and executive
officers of U.S. Bioscience owned and were entitled to vote _______ shares of
U.S. Bioscience common stock, which represented approximately __% of the shares
of U.S. Bioscience common stock outstanding on that date.
Voting of Proxies
All shares represented by properly executed proxies received in time for
the special meeting will be voted at the special meeting in the manner specified
by the holders. Properly
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<PAGE>
executed proxies that do not contain voting instructions will be voted "FOR"
adoption of the merger agreement.
Shares of U.S. Bioscience common stock represented at the special meeting
but not voting, including shares of U.S. Bioscience common stock for which
proxies have been received but for which holders of shares have abstained and
shares held in street name by brokers who have not received voting instructions
from their beneficial owners, will be treated as present at the special meeting
for purposes of determining the presence or absence of a quorum for the
transaction of all business.
Only shares affirmatively voted for adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as votes in favor of the merger. If a U.S. Bioscience
stockholder abstains from voting or does not vote, either in person or by proxy,
it will have the same effect as a vote against the merger. Brokers who hold
shares of U.S. Bioscience common stock in street name for customers who are the
beneficial owners of such shares may not give a proxy to vote those customers'
shares in the absence of specific instructions from those customers. These non-
voted shares are referred to as broker non-votes and will have the same effect
as votes against the merger.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
U.S. Bioscience does not expect that any matter other than the proposal to
adopt the merger agreement will be brought before the special meeting. If,
however, the U.S. Bioscience board of directors properly presents other matters,
the persons named as proxies will vote in accordance with their judgment.
Revocability of Proxies
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person at the special meeting. A stockholder may
revoke a proxy at any time prior to its exercise by filing with the Secretary of
U.S. Bioscience a properly executed revocation of proxy, by submitting a
properly executed proxy to the Secretary of U.S. Bioscience bearing a later date
or by appearing at the special meeting and voting in person. Attendance at the
special meeting will not itself constitute revocation of a proxy.
Solicitation of Proxies
U.S. Bioscience will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of U.S. Bioscience and its subsidiaries may solicit proxies from
stockholders by telephone or other electronic means or in person. U.S.
Bioscience will cause brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of stock
held of record by such persons. U.S. Bioscience will reimburse such custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in doing
so.
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<PAGE>
Corporate Investor Communications, Inc. will assist in the solicitation of
proxies by U.S. Bioscience. U.S. Bioscience will pay Corporate Investor
Communications, Inc. a fee of $______, plus reimbursement of certain out-of-
pocket expenses, and will indemnify Corporate Investor Communications, Inc.
against any losses arising out of its proxy soliciting services on behalf of
U.S. Bioscience.
Stockholders Should Not Send Stock Certificates with Their Proxies. A
transmittal form with instructions for the surrender of U.S. Bioscience common
stock certificates will be mailed to U.S. Bioscience stockholders shortly after
completion of the merger.
LEGAL MATTERS
The legality of MedImmune common stock offered by this proxy
statement/prospectus will be passed upon for MedImmune by Dewey Ballantine LLP,
New York, New York.
EXPERTS
The financial statements of MedImmune incorporated in this proxy
statement/prospectus by reference to the MedImmune Annual Report on Form 10-K
for the year ended December 31, 1998, 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.
The consolidated financial statements of U.S. Bioscience, Inc. at December
31, 1998 and 1997, and for each of the three years in the period ended December
31, 1998 appearing in U.S. Bioscience, Inc.'s Annual Report (Form 10-K) for the
year ended December 31, 1998, have been audited by Ernst & Young, LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
FUTURE STOCKHOLDER PROPOSALS
Due to the contemplated consummation of the merger, U.S. Bioscience does
not currently expect to hold a 2000 annual meeting of stockholders because U.S.
Bioscience will be a wholly-owned subsidiary of MedImmune. In the event the
merger is not consummated, U.S. Bioscience must receive any proposal which a
stockholder wishes to submit to the 2000 annual meeting of stockholders at its
headquarters no later than November 18, 1999, if the proposal is to be
considered by the U.S. Bioscience board for inclusion in the proxy material for
that meeting. A stockholder of U.S. Bioscience may wish to have a proposal
presented at the 2000 Annual Meeting of Stockholders, but not to have such
proposal included in U.S. Bioscience's proxy statement and form of proxy
relating to that meeting. If notice of any such proposal, directed to the
attention of Martha E. Manning, Secretary of U.S. Bioscience, is not received by
February 3, 2000, then such proposal shall be deemed "untimely" for purposes of
Rule 14a-4(c) promulgated under the Securities Exchange Act of 1934 and,
therefore, U.S. Bioscience will have the right to exercise discretionary voting
authority with respect to such proposal. Stockholder proposals should be
directed to Martha E. Manning, Secretary, at the address of U.S. Bioscience set
forth in this proxy statement/prospectus.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
MedImmune and U.S. Bioscience file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that MedImmune and U.S. Bioscience file with the Securities and Exchange
Commission at the Securities and Exchange Commission's public reference rooms at
the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and
Exchange Commission filings are also available to the public from commercial
document retrieval services and at the Internet world wide web site maintained
by the Securities and Exchange Commission at "http://www.sec.gov." Reports,
proxy statements and other information concerning MedImmune may also be
inspected at the offices of The Nasdaq Stock Market, which is located at 1735 K
Street, N.W., Washington, D.C. 20006. Reports, proxy statements and other
information pertaining to U.S. Bioscience may also be inspected at the offices
of the American Stock Exchange at 86 Trinity Place, New York, New York 10006-
1881.
MedImmune filed a registration statement on Form S-4 on ___________, 1999
to register with the Securities and Exchange Commission the MedImmune common
stock to be issued to U.S. Bioscience stockholders in the merger. This proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of MedImmune in addition to being a proxy statement of U.S.
Bioscience. As allowed by Securities and Exchange Commission rules, this proxy
statement/prospectus does not contain all the information you can find in
MedImmune's registration statement or the exhibits to the registration
statement.
The Securities and Exchange Commission allows MedImmune and U.S. Bioscience
to "incorporate by reference" information into this proxy statement/prospectus,
which means that the companies can disclose important information to you by
referring you to other documents filed separately with the Securities and
Exchange Commission. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that MedImmune and U.S. Bioscience have previously filed with the
Securities and Exchange Commission. These documents contain important business
and financial information about MedImmune and U.S. Bioscience that is not
included in or delivered with this proxy statement/prospectus.
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<PAGE>
<TABLE>
<CAPTION>
MedImmune Filings Period
- ----------------- ------
<S> <C>
Annual Report on Form 10-K............... Fiscal Year ended December 31, 1998
Quarterly Reports on Form 10-Q........... Quarters ended March 31, 1999 and June 30, 1999
Current Reports on Form 8-K.............. Reports filed September 22, 1999, September 17,
1999, September 2, 1999, August 18, 1999, August 17,
1999, July 23, 1999, July 13, 1999, July 7, 1999,
June 24, 1999, May 25, 1999 (three reports), May 21,
1999 (three reports), February 26, 1999 and February
1, 1999
Description of Common Stock.............. Incorporated by reference to MedImmune's
Registration Statement on Form 8-A dated April 4,
1991
U.S. Bioscience Filings Period
- ----------------------- ------
Annual Report on Form 10-K............... Fiscal Year ended December 31, 1998
Quarterly Reports on Form 10-Q........... Quarters ended March 31, 1999 and June 30, 1999
Current Reports on Form 8-K.............. Reports filed September 24, 1999 and February 3, 1999
</TABLE>
MedImmune and U.S. Bioscience also incorporate by reference additional
documents that may be filed with the Securities and Exchange Commission under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this
proxy statement/prospectus and the date of the special meeting. These 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.
MedImmune has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to MedImmune and U.S.
Bioscience has supplied all such information relating to U.S. Bioscience.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the companies,
the Securities and Exchange Commission or the Securities and Exchange
Commission's Internet web site as described above. Documents incorporated by
reference are available from the companies without charge, excluding all
exhibits, except that if the companies have specifically incorporated by
reference an exhibit in this proxy statement/prospectus, the exhibit will also
be provided without charge. 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>
MedImmune, Inc. U.S. Bioscience, Inc.
35 West Watkins Mill Road One Tower Bridge
Gaithersburg, Maryland 20878 100 Front Street
Attention: Investor Relations West Conshohocken, Pennsylvania 19428
Telephone: (301) 417-0770 Attention: Martha E. Manning
Telephone: (800) 898-4404
</TABLE>
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<PAGE>
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. We have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement/prospectus. This proxy statement/prospectus is dated
___________, 1999. You should not assume that the information contained in this
proxy statement prospectus is accurate as of any date other than that date.
Neither the mailing of this proxy statement/prospectus to stockholders nor the
issuance of MedImmune common stock in the merger creates any implication to the
contrary.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Statements in this proxy statement/prospectus that are not historical facts are
hereby identified as "forward-looking statements" for the purpose of the safe
harbor provided by Section 21E of the Exchange Act and Section 27A of the
Securities Act. Such forward-looking statements, including, without limitation,
those relating to the future business prospects, revenues and income, in each
case relating to MedImmune and U.S. Bioscience, wherever they occur in this
proxy statement/prospectus, are necessarily estimates reflecting and involve a
number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements. Such
forward-looking statements should, therefore, be considered in light of various
important factors, including those set forth in this proxy statement/prospectus.
Important factors that could cause actual results to differ materially from
estimates or projections contained in the forward-looking statements include
without limitation:
. the failure of the merger to be consummated
. the ability of the companies to successfully integrate
. challenges inherent in new product development and marketing
. governmental laws and regulations, including possible healthcare
reform
. the availability of favorable tax and accounting treatment for the
merger
. competitive factors, including technological advances achieved and
patents attained by competitors and generic competition as patents on
MedImmune's and U.S. Bioscience's products expire
. government laws and regulations affecting domestic and foreign
operations, including those relating to trade, monetary and fiscal
policies, taxes, price controls, regulatory approval of new products
and licensing
. those factors listed in the companies' reports and filings with the
U.S. Securities and Exchange Commission.
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking
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statements are found at various places throughout this proxy
statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
December 31, 1998 of MedImmune, including any amendments, and the Annual Report
on Form 10-K for the year ended December 31, 1998 of U.S. Bioscience, including
any amendments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this proxy
statement prospectus. Neither MedImmune nor U.S. Bioscience undertakes any
obligation to publicly update or release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of unanticipated events.
The foregoing list sets forth some, but not all, of the factors that could
impact upon MedImmune's and U.S. Bioscience's ability to achieve results
described in any forward-looking statements. Investors are cautioned not to
place undue reliance on such statements that speak only as of the date made.
Investors also should understand that it is not possible to predict or identify
all such factors and that this list should not be considered a complete
statement of all potential risks and uncertainties. Investors should also
realize that if underlying assumptions prove inaccurate or unknown risks or
uncertainties materialize, actual results could vary materially from MedImmune's
and U.S. Bioscience's projections. MedImmune and U.S. Bioscience undertake no
obligation to update any forward-looking statements as a result of future events
or developments.
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ANNEX 1
-------
================================================================================
Agreement and Plan of Merger
Dated as of September 21, 1999
among
MedImmune, Inc.
Marlin Merger Sub Inc.
and
U.S. Bioscience, Inc.
================================================================================
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER............................................................................. 1
Section 1.1. The Merger................................................................ 1
Section 1.2. Closing................................................................... 2
Section 1.3. Effective Time............................................................ 2
Section 1.4. Certificate of Incorporation and Bylaws................................... 2
Section 1.5. Directors and Officers.................................................... 2
Section 1.6. Effects of the Merger..................................................... 2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE
OF CERTIFICATES........................................................... 2
Section 2.1. Effect on Capital Stock................................................... 2
Section 2.2. Exchange of Certificates.................................................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................................... 7
Section 3.1. Representations and Warranties of the Company............................. 7
Section 3.2. Representations and Warranties of Parent and Sub.......................... 22
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS............................................. 28
Section 4.1. Conduct of Business....................................................... 28
Section 4.2. No Solicitation........................................................... 32
ARTICLE V ADDITIONAL AGREEMENTS.................................................................. 34
Section 5.1. Preparation of the Form S-4 and the Proxy Statement; Stockholders
Meeting................................................................ 34
Section 5.2. Letters of the Company's Accountants...................................... 35
Section 5.3. Letters of Parent's Accountants........................................... 36
Section 5.4. Access to Information; Confidentiality.................................... 36
Section 5.5. Reasonable Best Efforts................................................... 37
Section 5.6. Stock Options............................................................. 37
Section 5.7. Indemnification, Exculpation and Insurance................................ 39
Section 5.8. Fees and Expenses......................................................... 39
Section 5.9. Public Announcements...................................................... 40
Section 5.10. Affiliates................................................................ 40
Section 5.11. Stock Exchange Listing.................................................... 41
Section 5.12. Pooling of Interests...................................................... 41
Section 5.13. Tax Treatment............................................................. 41
Section 5.14. Stockholder Litigation.................................................... 41
Section 5.15. Rights Agreement.......................................................... 41
Section 5.16. Conveyance Taxes.......................................................... 42
ARTICLE VI CONDITIONS PRECEDENT.................................................................. 42
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger................ 42
Section 6.2. Conditions to Obligations of Parent and Sub............................... 43
Section 6.3. Conditions to Obligation of the Company................................... 44
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 6.4. Frustration of Closing Conditions......................................... 44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................................... 45
Section 7.1. Termination............................................................... 45
Section 7.2. Effect of Termination..................................................... 46
Section 7.3. Amendment................................................................. 46
Section 7.4. Extension; Waiver......................................................... 46
ARTICLE VIII GENERAL PROVISIONS.................................................................. 46
Section 8.1. Nonsurvival of Representations and Warranties............................. 46
Section 8.2. Notices................................................................... 47
Section 8.3. Definitions............................................................... 47
Section 8.4. Interpretation............................................................ 49
Section 8.5. Counterparts.............................................................. 49
Section 8.6. Entire Agreement; No Third-Party Beneficiaries............................ 49
Section 8.7. Governing Law............................................................. 50
Section 8.8. Assignment................................................................ 50
Section 8.9. Enforcement............................................................... 50
Section 8.10. Severability.............................................................. 50
</TABLE>
Exhibit A Form of Company Affiliate Letter
Exhibit B Form of Parent Affiliate Letter
ii
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 21,
1999, among MedImmune, Inc., a Delaware corporation ("Parent"), Marlin Merger
Sub Inc., a Delaware corporation and a newly formed, direct, wholly owned
subsidiary of Parent ("Sub"), and U.S. Bioscience, Inc., a Delaware corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable this Agreement and the merger of Sub with
and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $0.01 per share, of the Company ("Company
Common Stock"), other than Company Common Stock owned by Parent, Sub or the
Company, will be converted into the right to receive common stock, par value
$0.01 per share, of Parent ("Parent Common Stock") as set forth herein;
WHEREAS, in order to induce Parent to execute and deliver this Agreement,
Parent and the Company are entering into a stock option agreement (the "Option
Agreement"), pursuant to which the Company is granting Parent the option to
purchase shares of Company Common Stock, upon the terms and subject to the
conditions set forth therein;
WHEREAS, for U.S. Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368 of the Code; and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction under generally
accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time. Following the Effective Time, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
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Section 1.2. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second Business Day after satisfaction
or waiver of the conditions set forth in ARTICLE VI (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions), at the offices of Dewey Ballantine
LLP, 1301 Avenue of the Americas, New York, New York 10019, unless another date
or place is agreed to by the parties hereto.
Section 1.3. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file a certificate
of merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware, or at such other time as Parent and the Company shall agree and
specify in the Certificate of Merger (the time the Merger becomes effective
being the "Effective Time").
Section 1.4. Certificate of Incorporation and Bylaws.
(a) The Certificate of Incorporation of Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided therein or by
applicable law, provided that the name of the Surviving Corporation shall be
changed to the name of the Company.
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided therein or by applicable law.
Section 1.5. Directors and Officers.
(a) The directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(b) The officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
Section 1.6. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
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(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock that is owned by the Company, Parent or Sub shall
automatically be canceled and retired and shall cease to exist, and no Parent
Common Stock or other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.2(e),
each issued and outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 2.1(b)) shall be converted into the right
to receive a number of validly issued, fully paid and nonassessable shares of
Parent Common Stock equal to the Exchange Ratio (the "Merger Consideration"). As
of the Effective Time, all such shares of Company Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of Company Common Stock shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.2, without interest. Notwithstanding
the foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class, by reason of the occurrence or
record date of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or similar transaction,
the Merger Consideration shall be appropriately adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange or similar transaction.
(d) The "Exchange Ratio" shall be 0.1500, provided that, if the
Parent Share Price shall be (i) greater than $140, the Exchange Ratio shall be
$19.10 divided by the Parent Share Price, (ii) $140 or lower but more than $132,
the Exchange Ratio shall be 0.1364, (iii) $132 or lower but more than $120, the
Exchange Ratio shall be $18 divided by the Parent Share Price, (iv) $100 or
lower but more than $88, the Exchange Ratio shall be $15 divided by the Parent
Share Price, (v) $88 or lower, the Exchange Ratio shall be 0.1705 (except as
provided in paragraph (e) below). The Exchange Ratio shall be rounded to the
nearest 1/10,000th of a share. "Parent Share Price" shall be the average of the
closing prices of the shares of Parent Common Stock on the Nasdaq National
Market for the 20 consecutive trading days ending on the third trading day prior
to the date of the Stockholders Meeting, as reported by The Wall Street Journal
(or, if not reported thereby, any other authoritative source), provided, that
the last five trading days of 1999 and the first two trading days of 2000 shall
not be considered trading days for purposes of this sentence.
(e) If the Parent Share Price shall be less than $80, the Company
may, no later than 12:00 noon New York City time, on the second trading day
prior to the date of the Stockholders Meeting, deliver a notice to Parent to the
effect that the Company is
3
<PAGE>
terminating this Agreement pursuant to Section 2.1(e). Such termination shall be
effective at 10:00 a.m. New York City time on the trading day following Parent's
receipt of such notice, unless Parent shall, prior to such time, deliver a
notice (the "Top-Up Notice") to the effect that the Exchange Ratio shall be
$13.64 divided by the Parent Share Price.
Section 2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit
with American Stock Transfer and Trust Company of New York or such other bank or
trust company as may be designated by Parent (the "Exchange Agent") and which
shall be reasonably acceptable to the Company, for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance with this ARTICLE II,
through the Exchange Agent, certificates representing the shares of Parent
Common Stock (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time
and any cash payments in lieu of any fractional shares of Parent Common Stock,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1(c), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in surrendering the Certificates in
exchange for certificates representing the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate representing that
number of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this ARTICLE II after taking into account
all the shares of Company Common Stock then held by such holder under all such
Certificates so surrendered, (y) cash in lieu of fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(e), and
(z) any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c) (in each case, after giving effect to any required
withholding taxes), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a Person other than the Person in whose name the Certificate so surrendered is
registered, if, upon presentation to the Exchange Agent, such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the Person
requesting such issuance shall pay any transfer or other
4
<PAGE>
taxes required by reason of the issuance of shares of Parent Common Stock to a
Person other than the registered holder of such Certificate or establish to the
reasonable satisfaction of Parent that such tax has been paid or is not
applicable. Notwithstanding anything to the contrary contained herein, no
certificate representing Parent Common Stock or cash in lieu of a fractional
share interest shall be delivered to a person who is a "affiliate" (as
contemplated by Section 5.10(a) hereof) of the Company unless such affiliate has
theretofore executed and delivered to Parent the agreement referred to in
Section 5.10(a). Until surrendered as contemplated by this Section 2.2(b), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration, cash in
lieu of any fractional shares of Parent Common Stock as contemplated by Section
2.2(e) and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c). No interest will be paid or will accrue on any cash
payable to holders of Certificates pursuant to Section 2.1(c) or Section 2.2(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(e) until the holder of record of such Certificate shall
surrender such Certificate in accordance with this ARTICLE II. Subject to the
effect of applicable escheat or similar laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, 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 such surrender and a payment date
subsequent to such 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) No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this ARTICLE II (including any cash paid pursuant
to Section 2.2(c) or Section 2.2(e)) shall be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to the shares of Company
Common Stock previously represented by such Certificates, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
5
<PAGE>
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this ARTICLE
II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Parent shall relate to such
fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Parent.
(ii) Notwithstanding any other provision of this Agreement,
each holder of shares of Company Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a
share of Parent Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount, less the amount of any withholding taxes which may
be required thereon, equal to such fractional part of a share of Parent
Common Stock multiplied by the per share closing price of Parent Common
Stock on the Nasdaq National Market on the Closing Date, as such price is
reported by The Wall Street Journal (or, if not reported thereby, any other
authoritative source).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this ARTICLE
II shall thereafter look only to Parent for, and Parent shall remain liable for,
payment of their claim for Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock and any dividends or distributions with respect to
Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any Person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash in lieu of
fractional shares of Parent Common Stock or cash from the Exchange Fund, in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(i) Lost Certificates. If 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, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct 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,
6
<PAGE>
stolen or destroyed Certificate the Merger Consideration and any cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Parent
Common Stock deliverable in respect thereof, in each case pursuant to this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company. Except as set
forth on the disclosure schedule delivered by the Company to Parent prior to the
execution of this Agreement, which disclosure schedule specifies the section or
subsection of this Agreement to which the exception relates (the "Company
Disclosure Schedule"), the Company represents and warrants to Parent and Sub as
follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and its operating Subsidiaries listed in Section 3.1(a) of the Company
Disclosure Schedule (the "Operating Subsidiaries") is a corporation duly
organized, validly existing and, to the extent applicable, in good standing
under the laws of the jurisdiction in which it is organized and has all
requisite corporate power and authority to carry on its business as now being
conducted. Each of the Company and its Operating Subsidiaries is duly qualified
or licensed to do business and, to the extent applicable, is in good standing in
each jurisdiction in which the nature of its business or the ownership, leasing
or operation of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate would not have a Material Adverse
Effect on the Company. The Company has made available to Parent prior to the
execution of this Agreement complete and correct copies of its Restated
Certificate of Incorporation, as amended (the "Company Certificate of
Incorporation") and Bylaws (the "Bylaws"), and the comparable organizational
documents of each of its Operating Subsidiaries, in each case as amended to the
date hereof.
(b) Subsidiaries. Exhibit 22 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 lists all the Subsidiaries of
the Company. All the outstanding shares of capital stock of, or other equity
interests in, each such Subsidiary have been validly issued and are fully paid
and nonassessable and are owned directly or indirectly by the Company free and
clear of all Liens, and free of any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests. Other than
such Subsidiaries of the Company, neither the Company nor any Subsidiary owns
any equity interest in any person.
(c) Capital Structure. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $.005 per share ("Preferred Stock"). At the close of
business on September 17, 1999, (i) 27,516,867 shares of Company Common Stock
were issued and outstanding, (ii) 23,906 shares of Company Common Stock were
held by the Company in its treasury, (iii) 5,116,977 shares of Company Common
Stock were issuable pursuant to outstanding Company Stock Options, (iv) no
shares of Preferred Stock were issued or outstanding, (v) 500,000 shares of
Series A Preferred Stock were reserved for issuance in
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<PAGE>
connection with the Rights issued pursuant to the Rights Agreement and (vi)
537,346 shares of Company Common Stock were issuable under the Warrants for the
purchase of 472,293, 53,735 and 11,318 shares, respectively, of the Company's
common stock, granted to Domain Partners IV, L.P., Proquest Investments L.P. and
DP IV Associates, L.P., respectively, on February 2, 1999. Except as set forth
above in this Section 3.1(c) at the close of business on September 17, 1999, no
shares of capital stock or other voting securities of the Company were issued,
issuable, reserved for issuance or outstanding. Except as set forth above in
this Section 3.1(c) and pursuant to the Option Agreement, there are no
outstanding stock appreciation rights or rights to receive shares of Company
Common Stock on a deferred basis granted under the Company Stock Plans or
otherwise. All outstanding shares of capital stock of the Company are, and all
shares which may be issued pursuant to the Company Stock Plans will be, when
issued in accordance with the terms thereof, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except as set
forth above in this Section 3.1(c), there are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. Section 3.1(c) of the Company
Disclosure Schedule lists each outstanding Stock Option and the holder thereof,
the number of shares issuable thereunder and the grant date, exercise price and
expiration date thereof. Except as set forth above in this Section 3.1(c) or
resulting from the issuance of shares of Company Common Stock pursuant to Stock
Options outstanding as of the close of business on September 17, 1999 or the
Option Agreement, (x) there are not issued, issuable, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of the
Company, (B) any securities of the Company convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of the Company, (C)
any warrants, calls, options or other rights to acquire from the Company or any
Company Subsidiary, and no obligation of the Company or any Company Subsidiary
to issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of the
Company and (y) there are not any outstanding obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities. Neither the Company nor any Subsidiary is a party to
any voting agreement with respect to the voting of any such securities. Except
as set forth in this Section 3.1(c), there are no issued, issuable, reserved for
issuance or outstanding (A) securities of the Company or any Company Subsidiary
convertible into or exchangeable or exercisable for shares of capital stock or
other voting securities or ownership interests in any Company Subsidiary, (B)
warrants, calls, options or other rights to acquire from the Company or any
Company Subsidiary, and no obligation of the Company or any Company Subsidiary
to issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable or exercisable for any
capital stock, voting securities or ownership interests in, any Company
Subsidiary or (C) obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Company Subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. Except as set forth above in this
Section 3.1(c), neither the Company nor any
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<PAGE>
Subsidiary is a party to or bound by any agreement regarding any securities of
the Company or any Subsidiary.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The Company has all requisite
corporate power and authority to enter into the Option Agreement and to
consummate the transactions contemplated thereby. The execution and delivery of
this Agreement and the Option Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement and the Option
Agreement have been duly authorized by all necessary corporate action on the
part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or the Option Agreement or to
consummate the transactions contemplated hereby and thereby, subject, in the
case of the Merger, to receipt of the Stockholder Approval and the filing of the
Certificate of Merger. The Board of Directors of the Company has unanimously
approved this Agreement, determined that this Agreement and the transactions
contemplated hereby are fair to and in the best interests of the Company and its
stockholders and declared that the Merger is advisable. This Agreement and the
Option Agreement have been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by each of the other
parties thereto, constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms (except insofar
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by principles governing availability of equitable remedies).
The execution and delivery of this Agreement and the Option Agreement do
not, and the consummation of the Merger and the other transactions contemplated
by this Agreement and the Option Agreement and compliance with the provisions of
this Agreement and the Option Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a benefit under, or result in the creation of any
pledge, claim, lien, charge, encumbrance or security interest of any kind or
nature whatsoever (collectively, "Liens") in or upon any of the properties or
assets of the Company or any Subsidiary under, (i) the Company Certificate of
Incorporation or Bylaws or the comparable organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, bond, note, mortgage,
indenture, lease or other contract, agreement, obligation, commitment,
arrangement, understanding, instrument, permit or license applicable to the
Company or any of its Subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in the
following paragraph, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree, in each case applicable to the Company or any of its
Subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not have a Material Adverse
Effect on the Company.
9
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No consent, approval, order or authorization of, action by or in respect
of, or registration, declaration or filing with, any Federal, state, local or
foreign government, any court, administrative, regulatory or other governmental
agency, commission or authority or any non-governmental self-regulatory agency,
commission or authority (each, a "Governmental Entity") is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the Option Agreement by the Company
or the consummation by the Company of the Merger or the other transactions
contemplated by this Agreement or the Option Agreement, except for (1) the
filing of a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and any applicable filings and approvals under similar foreign antitrust
laws and regulations, (2) the filing with the Securities and Exchange Commission
(the "SEC") of (A) a proxy statement relating to the adoption by the Company's
stockholders of this Agreement (as amended or supplemented from time to time,
the "Proxy Statement") and (B) such reports under Section 13(a), 13(d), 15(d) or
16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), as may be
required in connection with this Agreement, the Option Agreement and the
transactions contemplated by this Agreement or the Option Agreement, (3) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (4) such filings with and approvals of the American Stock Exchange
("AMEX") to permit the shares of Company Common Stock that are to be issued
pursuant to the Option Agreement to be traded on AMEX and (5) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made individually or in the
aggregate would not have a Material Adverse Effect on the Company.
(e) SEC Documents. The Company has timely filed all reports,
schedules, forms, statements and other documents (including exhibits and other
information incorporated therein) with the SEC required to be filed by the
Company since January 1, 1998 (the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except to
the extent that information contained in any SEC Document has been revised or
superseded by a later-filed Filed SEC Document, none of the SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP, applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to
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normal year-end audit adjustments not material in amount). Except (i) as set
forth in the Filed SEC Documents or (ii) for liabilities set forth in this
Agreement or the Option Agreement, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which, individually or in the aggregate,
would have a Material Adverse Effect on the Company. For purposes of this
Agreement, a "Filed SEC Document" shall mean an SEC Document filed by the
Company and publicly available prior to the date of this Agreement.
(f) Information Supplied. None of the information to be supplied by
the Company specifically for inclusion or incorporation by reference in the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of Parent Common Stock in the Merger
(the "Form S-4") will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading and the Proxy Statement will not, on the date it is first mailed to
the Company's stockholders and at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except as set forth in the
Filed SEC Documents filed after December 31, 1998 and for liabilities set forth
in this Agreement, since December 31, 1998, (i) the Company and its Subsidiaries
have conducted their businesses in the ordinary course consistent with past
practice and (ii) there has not been any Material Adverse Change. Except as set
forth in the Filed SEC Documents and for actions in the ordinary course of
business, consistent with past practice, since June 30, 1999, neither the
Company nor any Subsidiary has taken any action, or failed to take any action,
which if such action or failure occurred during the period from the date of this
Agreement to the Effective Time would constitute a material violation of
Sections 4.1(a) (i), (iii), (iv), (v) (other than with respect to licensing),
(vi), (vii) or (viii), and neither the Company nor any Subsidiary has
authorized, or commited or agreed, to take any of such actions.
(h) Litigation. There is no suit, action or proceeding pending or, to
the Knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties that individually or
in the aggregate would have a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule, order, action, demand, or requirement of any
Governmental Entity or arbitrator outstanding against, or, to the Knowledge of
the Company, any or investigation by any Governmental Entity involving, the
Company or any of its Subsidiaries that individually or in the aggregate would
have a Material Adverse Effect.
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(i) Contracts. As of the date of this Agreement, neither the Company
nor any 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, marketing, manufacturing, third party suppliers
of active ingredients, bulk product and finished product to the Company, other
than contracts filed as exhibits to the SEC Documents. 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. As of the date hereof, the Company has made
available to Parent true and correct copies of all such contracts. Neither the
Company nor any of its 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 to which it is a party or by which it or any of its properties or assets
is bound, except for violations or defaults that individually or in the
aggregate are not reasonably likely to have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is a party to or otherwise bound by any
agreement or covenant not to compete or by any agreement or covenant restricting
in any material respect the development, marketing or distribution of the
Company's or its Subsidiaries' products or services or the conduct of their
businesses
(j) Compliance with Laws.
(i) Each of the Company and its Subsidiaries is in
compliance with all statutes, laws, ordinances, rules, regulations, judgments,
orders and decrees of any Governmental Entity (other than Environmental Laws)
(collectively, "Legal Provisions") applicable to its business or operations,
except for instances of possible noncompliance that individually or in the
aggregate would not have a Material Adverse Effect on the Company. Each of the
Company and its Subsidiaries has in effect all approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights of or
with all Governmental 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 Material Adverse Effect on the Company. 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
Material Adverse Effect on the Company. The Merger, in and of itself, would not
cause the revocation or cancellation of any such Permit that individually or in
the aggregate is reasonably likely to have a Material Adverse Effect on the
Company.
(ii) Except for those matters that individually or in the
aggregate are not reasonably likely to have a Material Adverse Effect on the
Company: (A) each of the Company and its Subsidiaries is, and has been, in
compliance with all applicable Environmental Laws; (B) during the period of
ownership or operation by the Company or its 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
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or threatened Releases of Hazardous Material at, in, on, under or affecting such
properties or any contiguous site; (C) prior to the period of ownership or
operation by the Company or its Subsidiaries of any of its currently or
previously owned, leased or operated properties, to the Knowledge of the
Company, 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 its
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 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 its Subsidiaries' properties, activities, or any other
properties. The term "Environmental Laws" means all applicable U.S., U.K., and
Dutch laws, statutes, treaties, rules, codes, ordinances, regulations,
certificates, orders, directives, interpretations, licenses, permits, and other
authorizations of any Governmental 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 in The Netherlands and being applicable to the Company, dealing
with the protection of health, welfare or the environment, including, without
limitation, flood, pollution or disaster laws and health and environmental
protection laws and regulations, and all other rules and regulations promulgated
thereunder and any provincial, municipal, waterboard 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.
(k) Absence of Changes in Benefit Plans. There has not been any
adoption or amendment in any material respect by the Company or any of its
Subsidiaries of any collective bargaining agreement or any Benefit Plan (defined
below), or any material change in any actuarial or other assumption used to
calculate funding obligations with respect to any Pension Plans (defined below),
or any change in the manner in which contributions to any Pension Plans are made
or the basis on which such contributions are determined. As of the date of this
Agreement, there exist no currently binding
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employment, consulting, severance, termination or indemnification agreements,
arrangements or understandings between the Company or its Subsidiaries and any
current or former officer, director or employee of the Company or its
Subsidiaries which provide for payments in excess of $50,000 and which are not
terminable on 60 days or less notice without penalty. There are no collective
bargaining or other labor union agreements to which the Company or its
Subsidiaries is a party or by which it is bound.
(l) ERISA Compliance.
(i) Section 3.1(l)(i) of the Company Disclosure Schedule
contains a list, and in the case of Subsidiaries, a description of each
pension, retirement, savings, profit sharing, medical, dental, health,
disability, life, death benefit, group insurance, deferred compensation,
stock option, stock purchase, restricted stock, bonus or incentive,
severance pay, employment or termination, and other employee benefit or
compensation plan, trust arrangement, contract, agreement (including
pursuant to any collective bargaining agreement), policy, practice or
commitment, whether formal or informal, written or oral, in each case that
are binding commitments of the Company and its Subsidiaries, under which
(1) current or former employees, directors or independent contractors of
the Company or any of its Subsidiaries participate or are entitled to
participate by reason of their relationship with the Company or any of its
Subsidiaries, (2) to which the Company or any of its Subsidiaries is a
party or a sponsor or a fiduciary thereof or by which the Company or any of
its Subsidiaries (or any of their rights, properties or assets) is
currently bound or (3) with respect to which the Company or any of its
Subsidiaries has any obligation to make payments or contributions,
including, without limitation, any employee benefit plan that is subject to
or governed by the laws of any jurisdiction other than the laws of the
United States (a "Foreign Plan"), all "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes referred to herein as "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA) (sometimes referred to herein as "Welfare Plans") (all of the
foregoing referred to collectively herein as "Benefit Plans"), and all
other Benefit Plans maintained, or contributed to, by the Company, its
Subsidiaries or any Person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (a "Commonly Controlled Entity") for the benefit of any current or
former officers, directors or employees of the Company and its Subsidiaries
(including any such plans maintained for current or former foreign
employees). The Company has made available to Parent true, complete and
correct copies of (1) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (2) the most recent annual report on
Form 5500 required to be filed with the Internal Revenue Service (the
"IRS") with respect to each Benefit Plan, (3) the most recent summary plan
description for each Benefit Plan for which such summary plan description
is required and (4) each trust agreement and group annuity contract
relating to any Benefit Plan. Each Benefit Plan maintained or contributed
to by the Company or any of its Subsidiaries has been administered in all
material respects in accordance with its terms. The Company, its
Subsidiaries
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and all the Benefit Plans maintained or contributed to by the Company or
any of its Subsidiaries are all in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other applicable laws,
including laws of foreign jurisdictions.
(ii) All Pension Plans maintained or contributed to by the
Company or any of its Subsidiaries intended to be tax-qualified have been
the subject of determination letters from the IRS to the effect that such
Pension Plans are qualified and exempt from United States Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code, and no
such determination letter has been revoked nor has any event occurred since
the date of its most recent determination letter or application therefor
that would adversely affect its qualification or materially increase its
costs. All Pension Plans maintained or contributed to by the Company or any
of its Subsidiaries required to have been approved by any foreign
Governmental Entity have been so approved and no such approval has been
revoked nor has any event occurred since the date of its most recent
approval or application therefor that would adversely affect its approval
or materially increase its costs.
(iii) Neither the Company nor any Commonly Controlled
Entity has (1) at any time in the six years prior to the Closing Date
maintained or contributed to any Benefit Plan that is subject to Title IV
of ERISA or Section 412 of the Code or (2) has any unsatisfied liability
under Title IV of ERISA or Section 412 of the Code. None of the Company,
its Subsidiaries, or any Commonly Controlled Entity contributes to a
"multiemployer plan" as defined in Section 3(37) of ERISA.
(iv) With respect to any Welfare Plan maintained or
contributed to by the Company or any of its Subsidiaries, there are no
understandings, agreements or undertakings, written or oral, that would
prevent any such plan (including any such plan covering retirees or other
former employees) from being amended or terminated without material
liability to the Company on or at any time after the Effective Time.
(v) No pending or, to the knowledge of the Company,
threatened disputes, lawsuits, claims (other than routine claims for
benefits), investigations, audits or complaints to, or by, any person or
governmental authority have been filed or are pending with respect to any
Benefit Plans or the Company or any of its Subsidiaries in connection with
any Benefit Plan or the fiduciaries or administrators thereof. With respect
to each Benefit Plan, there has not occurred, and no person or entity is
contractually bound to enter into, any nonexempt "prohibited transaction"
within the meaning of Section 4975 of the Code or Section 406 of ERISA, nor
any transaction that would result in a civil penalty being imposed under
Section 409 or 502(i) of ERISA.
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(vi) There are no unfunded liabilities with respect to any
Foreign Plan other than would not individually or in the aggregate have a
Material Adverse Effect on the Company.
(vii) All contributions to and payments with respect to or
under the Benefit Plans that are required to be made with respect to
periods ending on or before the Effective Time have been made or accrued
before the Effective Time by the Company in accordance with the appropriate
plan documents, financial statements, actuarial report, collective
bargaining agreements or insurance contracts or arrangements.
(viii) No Welfare Plan providing medical or death benefits
(whether or not insured) with respect to current or former employees of the
Company or any Subsidiary continues such coverage or provides such benefits
beyond their date of retirement or other termination of service (other than
coverage the cost of which is fully paid by the former employee or his or
her dependents).
(ix) Except as set forth in Section 3.1(l)(ix) of the
Company Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event
under any plan, policy, arrangement or agreement (including under any
collective bargaining agreement) or any trust or loan that will or would
reasonably be expected to result in any payment (whether of severance pay
or otherwise), acceleration of, forgiveness of indebtedness owing from,
vesting of, distribution of, or increase in or obligation to fund, any
benefits with respect to any current or former employee, director or
consultant of the Company.
(m) Labor Relations. (a) As of the date hereof, there is no pending
or, to the Knowledge of the Company, threatened union organizational campaign
effort, collective bargaining negotiations, bargaining impasse, implementation
of final offer, labor dispute, grievance or arbitration matter, economic or
unfair labor practice strike, boycott, work stoppage, slowdown, work-to-rule or
intermittent strike against the Company or any of its Subsidiaries, (b) no
lockout is in effect and (c) no permanent or temporary strike replacements are
currently employed at any Company facility. Neither the Company nor any of its
Subsidiaries, nor their respective representatives or employees, has committed
any unfair labor practices in connection with the operation of the respective
businesses of the Company or any of its Subsidiaries, and there is no pending
or, to the Knowledge of the Company, threatened charge, complaint, decision,
order, notice-posting requirement, settlement agreement or injunctive action or
order against the Company or any of its Subsidiaries by the National Labor
Relations Board or any similar governmental or adjudicatory agency or court,
except in each case as would not have a Material Adverse Effect on the Company.
The Company and its Subsidiaries have in the past been and are in compliance in
all respects with all applicable collective bargaining agreements and laws
respecting employment, employment practices, employee classification, labor
relations, safety and health, wages, hours and terms and
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conditions of employment, except where the failure to be in compliance would not
have a Material Adverse Effect on the Company. Neither the Company nor any of
its Subsidiaries has experienced within the past 12 months a "plant closing" or
"mass layoff" within the meaning of the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. (S)(S) 2101 et seq. Section 3.1(m) of the Company
Disclosure Schedule also sets forth the aggregate number of employees who work
for the Company and its Subsidiaries, specifying the number of such employees
who belong to a union or are otherwise covered by an employment agreement or a
collective bargaining agreement.
(n) Taxes. Each of the Company and its Subsidiaries has timely filed
all Tax Returns required to be filed by it, or requests for extensions to file
such Tax Returns have been timely filed and granted and have not expired, and
all such filed Tax Returns are complete and accurate in all respects, except to
the extent that failures to (i) file, (ii) have extensions granted that remain
in effect or (iii) be complete and accurate in all respects, as applicable,
individually or in the aggregate, would not have a Material Adverse Effect. The
Company and each of its Subsidiaries has paid (or the Company has paid on its
behalf) all Taxes shown as due on such Tax Returns, except to the extent that a
failure to pay all Taxes shown as due on such Tax Returns, individually or in
the aggregate, would not have a Material Adverse Effect. The most recent
financial statements contained in the Filed SEC Documents reflect an adequate
reserve for all Taxes payable by the Company and its Subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements, except to the extent that any failures to reflect such reserves,
individually or in the aggregate, would not have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, asserted or assessed against the
Company or any of its Subsidiaries that are not adequately reserved for on the
Company's financial statements in accordance with GAAP except to the extent that
such Taxes, individually or in the aggregate, would not have a Material Adverse
Effect. No requests for waivers of the time to assess any Taxes against the
Company or any of its Subsidiaries have been granted or are pending, except for
requests with respect to such Taxes that have been adequately reserved for in
the most recent financial statements contained in the Filed SEC Documents, or,
to the extent not adequately reserved, the assessment of which would,
individually or in the aggregate, not have a Material Adverse Effect. Neither
the Company nor any of its Affiliates 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. Neither the Company nor any of its Subsidiaries has distributed the
stock of any corporation in a transaction satisfying the requirements of Section
355 of the Code since April 16, 1997. Neither the stock of the Company nor the
stock of any of its Subsidiaries has been distributed in a transaction
satisfying the requirements of Section 355 of the Code since April 16, 1997. As
used in this Agreement, "Taxes" shall include all U.S. Federal, state and local,
domestic and foreign, income, franchise, property, sales, use, excise and other
taxes, tariffs or governmental charges of any nature whatsoever, including any
obligations for withholding taxes from payments due or made to any other person
and any interest, penalties or additions to tax and "Tax Returns" shall include
any return, report or similar statement (including attached schedules) required
to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
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(o) 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") in the event that the excise
tax of Section 4999(a) of the Code is imposed on such Person. The Benefit 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 its 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.
(p) Title to Properties.
(i) Each of the Company and its Subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets 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 properties in which the Company or any of its Subsidiaries has a
leasehold interest, are free and clear of all Liens, except for Liens that
individually or in the aggregate would not materially interfere with the
ability of the Company and its Subsidiaries to conduct their respective
businesses as currently conducted.
(ii) Each of the Company and its 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 is not
reasonably likely to have a Material Adverse Effect. Each of the Company
and its Subsidiaries enjoys peaceful and undisturbed possession under all
such material leases, except for failures to do so that individually or in
the aggregate are not reasonably likely to have a Material Adverse Effect.
(q) Intellectual Property. Each of the Company and its 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
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programs (collectively, "Intellectual Property Rights") which if the Company or
its Subsidiaries did not own or validly license or otherwise have the right to
use would have a Material Adverse Effect on the Company. Section 3.1(q) of the
Company Disclosure Schedule sets forth, as of the date hereof, a list of all
granted patents, pending patent applications, trademarks and applications
therefor owned by or licensed to the Company or any of its Subsidiaries. No
claims are pending or, to the Knowledge of the Company, threatened that the
Company or any of its Subsidiaries is infringing the rights of any Person with
regard to any Intellectual Property Right which have or would have a Material
Adverse Effect on the Company. To the Knowledge of the Company, no Person is
infringing the rights of the Company or any of its Subsidiaries with respect to
any Intellectual Property Right which would have a Material Adverse Effect on
the Company. As of the date hereof, the Company has no Knowledge that the
business of the Company and its Subsidiaries as presently conducted or as
presently contemplated does or will infringe (i) any granted patent or existing
trademark or (ii) any patent granted from a pending patent application. No
claims are pending or, to the Knowledge of the Company, are threatened
challenging the ownership of or license to the Intellectual Property Rights
owned by or licensed to the Company and its Subsidiaries which have or would
have a Material Adverse Effect on the Company.
(r) Voting Requirements. The affirmative vote of a majority of the
outstanding shares of Company Common Stock to adopt this Agreement (the
"Stockholder Approval") is the only vote of the holders of any class or series
of the Company's capital stock necessary to adopt this Agreement and approve the
transactions contemplated hereby.
(s) State Takeover Statutes. The Board of Directors of the Company
has approved the terms of this Agreement and the Option Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Option Agreement, and such approval represents all the action
necessary to render inapplicable to this Agreement, the Option Agreement, the
Merger and the other transactions contemplated by this Agreement and the Option
Agreement, the provisions of Section 203 of the DGCL. No other state takeover
statute or similar statute or regulation applies to or purports to apply to this
Agreement, the Option Agreement, the Merger or the other transactions
contemplated by this Agreement or the Option Agreement.
(t) Brokers. No broker, investment banker, financial advisor or other
Person, other than Morgan Stanley & Co. Incorporated, the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement and the Option Agreement based upon
arrangements made by or on behalf of the Company. The Company has delivered to
Parent true and complete copies of all agreements under which any such fees or
expenses are payable and all indemnification and other agreements related to the
engagement of the Persons to whom such fees are payable.
(u) Opinion of Financial Advisor. The Company has received the
opinion of Morgan Stanley & Co. Incorporated, dated the date hereof, to the
effect that, as of such
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date, the Merger Consideration is fair from a financial point of view to the
holders of shares of Company Common Stock, a signed copy of which opinion has
been delivered to Parent.
(v) Accounting Matters. Neither the Company nor any of its Affiliates
has taken or agreed to take any action or knows of any fact or circumstance that
is reasonably likely to prevent Parent from accounting for the business
combination to be effected by the Merger as a pooling of interests. The
Company's management has consulted with and has made representations to its
advisors regarding the Company's management's conclusion that the Merger will
qualify as a pooling of interests business combination. Based upon the Company's
management's consultations with its advisors, nothing has come to the Company's
management's attention that would preclude the Merger from qualifying as a
pooling of interests business combination, subject to the occurrence of any
events between (i) the initiation and the consummation of the Merger and (ii)
for a period of two years subsequent to the consummation of the Merger that
would preclude the Parent from accounting for the Merger as a pooling of
interests business combination.
(w) Supply Relationships. The Company and its Subsidiaries have in
place supply agreements or arrangements sufficient to meet the needs of the
business of the Company as it is currently being conducted, and to the knowledge
of the Company, no material adverse change in those agreements or arrangements
is reasonably anticipated.
(x) Rights Agreement. The Company has taken all actions necessary to
cause the Rights Agreement, dated as of May 19, 1995, between the Company and
American Stock Transfer and Trust Company of New York, as rights agent (the
"Rights Agreement") to be amended to (i) render the Rights Agreement
inapplicable to this Agreement, the Option Agreement, the Merger and the other
transactions contemplated by this Agreement and the Option Agreement, (ii)
ensure that (y) none of Parent, Sub or any other Subsidiary of Parent is an
Acquiring Person (as defined in the Rights Agreement) pursuant to the Rights
Agreement by virtue of the execution of this Agreement and the Option Agreement
or the consummation of the Merger or the other transactions contemplated by this
Agreement and the Option Agreement and (z) a Distribution Date or a Stock
Acquisition Date (as such terms are defined in the Rights Agreement) does not
occur by reason of the execution of this Agreement and the Option Agreement, the
consummation of the Merger or the consummation of the other transactions
contemplated by this Agreement and the Option Agreement and (iii) provide that
the Expiration Date (as defined in the Rights Agreement) shall occur immediately
prior to the Effective Time. A correct and complete copy of the Rights
Agreement, as amended to date, has been furnished to Parent.
(y) Regulatory Compliance.
(i) 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
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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 is not reasonably likely to have a Material Adverse Effect on
the Company. Neither the Company nor its Subsidiaries has received any
notice or other communication from the FDA or any other Governmental Entity
(A) contesting the premarket approval of, the uses of or the labeling and
promotion of any of the Company's or its Subsidiaries' products or (B)
otherwise alleging any violation of any Legal Provision by the Company or
its Subsidiaries which, in either case, would have a Material Adverse
Effect.
(ii) 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 of which the Company has
Knowledge (whether completed or pending) seeking the recall, withdrawal,
suspension or seizure of any Pharmaceutical Product are pending against the
Company or any of its Subsidiaries, nor have any such proceedings been
pending at any time since January 1, 1998 which would reasonably be
expected to have a Material Adverse Effect.
(iii) 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 its
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 is not reasonably likely to have a Material Adverse
Effect on the Company. As to each such drug, the Company and any relevant
Subsidiary of the Company, and the officers, employees or agents of the
Company or such Subsidiary have included in the application for such drug,
where required, the certification described in 21 U.S.C. 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 reasonably be expected to
have a Material Adverse Effect. In addition, the Company and its
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.
(iv) Each article of any drug manufactured and/or
distributed by the Company or any of its 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
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violation of 21 U.S.C. sec. 355 (or similar Legal Provisions), except where
such failure in compliance with the foregoing would not reasonably be
expected to have a Material Adverse Effect on the Company.
(v) Neither the Company, nor any Subsidiary of the
Company, nor any officer, employee or agent of either the Company or any
Subsidiary of the Company has made an untrue statement of a material fact
or fraudulent statement to the FDA or other Governmental Entity, failed to
disclose a material fact required to be disclosed to the FDA or any other
Governmental 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 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 Subsidiary of the Company, nor any officer, employee or
agent of either the Company or any Subsidiary of the Company, 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.
(vi) Except as disclosed in the Filed SEC Documents,
neither the Company nor any Subsidiary of the Company has received any
written notice that the FDA or any other Governmental 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 Subsidiary, or commenced,
or overtly threatened to initiate, any action to enjoin production at any
facility of the Company or any Subsidiary which would reasonably be
expected to have a Material Adverse Effect.
(z) Year 2000 Compliance. The Company has adopted and implemented a
commercially reasonable plan to provide (x) that the change of the year from
1999 to the year 2000 will not materially and adversely affect the information
and business systems of the Company or its Subsidiaries and (y) that the impacts
of such change on the vendors and customers of the Company and its Subsidiaries
will not have a Material Adverse Effect on the Company. In the Company's
reasonable best estimate, no expenditures materially in excess of currently
budgeted items previously disclosed in the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 will be required in order to cause the
information and business systems of the Company and its Subsidiaries to operate
properly following the change of the year 1999 to the year 2000. Between the
date of this Agreement and the Effective Time, the Company shall continue to use
reasonable best efforts to implement the plan previously disclosed in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
Section 3.2. Representations and Warranties of Parent and Sub. Except as
set forth on the disclosure schedule delivered by Parent to the Company prior to
the execution of this Agreement, which disclosure schedule specifies the section
or
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subsection of this Agreement to which the exception relates (the "Parent
Disclosure Schedule"), Parent and Sub represent and warrant to the Company as
follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated and has all requisite
corporate power and authority to carry on its business as now being conducted.
Each of Parent and Sub is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate would not have a Material
Adverse Effect on Parent. Parent has made available to the Company complete and
correct copies of its Restated Certificate of Incorporation and Bylaws and the
Certificate of Incorporation and Bylaws of Sub, in each case as amended to the
date hereof.
Sub was formed solely for the purpose of effecting the Merger and, since
the date of its incorporation, Sub has not engaged in any activities and has not
incurred any liabilities or obligations other than in connection with its
formation and in connection with or as contemplated by this Agreement.
(b) Subsidiaries. As of the date hereof, Parent has no Subsidiaries
other than Sub. All the outstanding shares of capital stock of, or other equity
interests, in Sub have been validly issued and are fully paid and nonassessable
and are owned directly or indirectly by Parent free and clear of all Liens, and
free of any restriction on the right to vote, sell or otherwise dispose of such
capital stock or other ownership interests.
(c) Capital Structure. The authorized capital stock of Parent
consists of 120,000,000 shares of Parent Common Stock and 5,524,525 shares of
Preferred Stock, par value $.01 per share ("Preferred Stock"). At the close of
business on September 20, 1999, (i) 63,271,596 shares of Parent Common Stock
were issued and outstanding, (ii) no shares of Parent Common Stock were held by
Parent in its treasury, (iii) 7,016,237 shares of Parent Common Stock were
issuable pursuant to outstanding Parent Stock Options, (iv) no shares of
Preferred Stock were issued or outstanding, and (v) 1,200,000 shares of Series B
Junior Preferred Stock were reserved for issuance in connection with the rights
issued pursuant to the Amended and Restated Rights Agreement, dated as of
October 31, 1998, by and between the Company and American Stock Transfer & Trust
Company, as Rights Agent. Except as set forth above in this Section 3.2(c) at
the close of business on September 20, 1999, no shares of capital stock or other
voting securities of Parent were issued, issuable, reserved for issuance or
outstanding. Except as set forth above in this
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Section 3.2(c), as of the date hereof there are no outstanding stock
appreciation rights or rights to receive shares of Parent Common Stock on a
deferred basis granted under any employee or director benefit plans or
arrangements of Parent or otherwise (the "Parent Stock Plans"). All outstanding
shares of capital stock of Parent are, and all shares which may be issued
pursuant to Parent Stock Plans will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth above in this Section 3.2(c),
as of the date hereof there are no bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Parent may vote. Except as set forth above in this Section
3.2(c) or resulting from the issuance of shares of Parent Common Stock pursuant
to options or other benefits issued or granted pursuant to the Parent Stock
Plans outstanding as of the close of business on September 20, 1999, as of the
date hereof (x) there are not issued, issuable, reserved for issuance or
outstanding (A) any shares of capital stock or other voting securities of
Parent, (B) any securities of Parent convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of Parent, (C) any
warrants, calls, options or other rights to acquire from Parent or any
Subsidiary of Parent, and no obligation of the Parent or any Subsidiary of
Parent to issue, any capital stock, voting securities or securities convertible
into or exchangeable or exercisable for capital stock or voting securities of
the Parent, and (y) there are not any outstanding obligations of the Parent or
any Subsidiary of Parent to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities.
(d) Authority; Noncontravention. Each of Parent and Sub has all
requisite corporate power and authority to enter into this Agreement (and, in
the case of Parent, the Option Agreement), and to consummate the transactions
contemplated by this Agreement (and, in the case of Parent, those contemplated
by the Option Agreement). The execution and delivery of this Agreement (and, in
the case of Parent, the Option Agreement) and the consummation of the
transactions contemplated by this Agreement (and, in the case of Parent, those
contemplated by the Option Agreement) have been duly authorized by all necessary
corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement (and, in the case of Parent, the Option Agreement) or to consummate
the transactions contemplated hereby (or, in the case of Parent, those
contemplated by the Option Agreement). This Agreement (and, in the case of
Parent, the Option Agreement) has been duly executed and delivered by Parent and
Sub, as applicable, and, assuming the due authorization, execution and delivery
by each of the other parties thereto, constitute legal, valid and binding
obligations of Parent and Sub, as applicable, enforceable against Parent and
Sub, as applicable, in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by principles governing availability of equitable remedies).
The execution and delivery of this Agreement and the Option Agreement do
not, and the consummation of the Merger and the other transactions contemplated
by this Agreement and the Option Agreement and compliance with the provisions of
this Agreement and the Option Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Parent or any of its Subsidiaries
under (i) the Restated Certificate of Incorporation or Bylaws of Parent or the
comparable organizational documents of any of its Subsidiaries, (ii) any loan or
credit agreement, bond, note, mortgage, indenture, lease or other contract,
agreement,
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obligation, commitment, arrangement, understanding, instrument, permit or
license applicable to Parent or any of its Subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following paragraph, any (A) statute, law, ordinance,
rule or regulation or (B) judgment, order or decree, in each case applicable to
Parent or Sub or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not have a Material Adverse
Effect on Parent.
No consent, approval, order or authorization of, action by or in respect
of, or registration, declaration or filings with, any Governmental Entity is
required by or with respect to Parent or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by Parent and Sub (and, in the
case of Parent, the Option Agreement) or the consummation by Parent and Sub of
the Merger or the other transactions contemplated by this Agreement (and, in the
case of Parent, those contemplated by the Option Agreement), except for (1) the
filing of a premerger notification and report form under the HSR Act and any
applicable filings and approvals under similar foreign antitrust laws and
regulations, (2) the filing with the SEC of (A) the Form S-4 and (B) such
reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement or the Option Agreement and the
transactions contemplated by this Agreement or the Option Agreement, (3) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business and such filings with
Governmental Entities to satisfy the applicable requirements of state securities
or "blue sky" laws, (4) filings with the Nasdaq and (5) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate, would
not have a material adverse effect on Parent.
(e) Parent SEC Documents. Parent has timely filed all reports,
schedules, forms, statements and other documents (including exhibits and other
information incorporated therein) with the SEC required to be filed by the
Company since January 1, 1998 (the "Parent SEC Documents"). As of their
respective dates, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Parent SEC Documents, and none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except to
the extent that information contained in any Parent SEC Document has been
revised or superseded by a later-filed SEC Document filed by Parent and publicly
available prior to the date of this Agreement, none of the Parent SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations
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of the SEC with respect thereto, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial position of
Parent and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments not material in amount). Except (i) as set forth in the Parent SEC
Documents or (ii) for liabilities set forth in this Agreement or the Option
Agreement, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, would have a Material Adverse Effect on
Parent.
(f) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Form S-4 will, at the time the Form S-4 becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, and the Proxy Statement will not at the date it is first mailed to
the Company's stockholders and at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 will comply in all material respects with the
requirements of the Securities Act and the rules and regulations thereunder,
except that no representation or warranty is made by Parent or Sub with respect
to statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Form S-4.
(g) Absence of Certain Changes or Events. Except for liabilities set
forth in this Agreement, since December 31, 1998, there has not been any Parent
Material Adverse Change.
(h) Litigation. There is no suit, action or proceeding pending or, to
the Knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries or any of their respective properties that individually or in the
aggregate would have a Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against, or, to the Knowledge of Parent, any action, demand,
requirement or investigation by any Governmental Entity involving, Parent or any
of its Subsidiaries that individually or in the aggregate would have a Material
Adverse Effect.
(i) Compliance with Laws. Each of Parent and its Subsidiaries is in
compliance with all Legal Provisions applicable to its business or operations,
except for instances of possible noncompliance that individually or in the
aggregate would not have a Material Adverse Effect on Parent. Each of Parent and
its Subsidiaries has in effect all 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 Material Adverse Effect on Parent.
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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 Material Adverse Effect on Parent. The Merger, in and
of itself, would not cause the revocation or cancellation of any such Permit
that individually or in the aggregate is reasonably likely to have a Material
Adverse Effect on Parent.
(j) Accounting Matters. Neither Parent nor any of its Affiliates has
taken or agreed to take any action that would prevent Parent from accounting for
the business combination to be effected by the Merger as a pooling of interests.
Parent's management has consulted with and has made representations to its
advisors regarding Parent's management's conclusion that the Merger will qualify
as a pooling of interests business combination. Based upon Parent's management's
consultations with its advisors, nothing has come to Parent's management's
attention that would preclude the Merger from qualifying as a pooling of
interests business combination, subject to the occurrence of any events between
(i) the initiation and the consummation of the Merger and (ii) for a period of
two years subsequent to the consummation of the Merger that would preclude the
Parent from accounting for the Merger as a pooling of interests business
combination.
(k) Tax Matters. Neither Parent nor any of its Affiliates have 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. Neither Parent nor any of its
Subsidiaries has distributed the stock of any corporation in a transaction
satisfying the requirements of Section 355 of the Code since April 16, 1997.
Neither the stock of Parent nor the stock of any of its Subsidiaries has been
distributed in a transaction satisfying the requirements of Section 355 of the
Code since April 16, 1997.
(l) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(m) Parent Stockholder Approval. This Agreement and the transactions
contemplated hereby, including the issuance of shares of Parent Common Stock
pursuant to ARTICLE II hereof, does not require the approval of the holders of
Parent Common Stock.
(n) Parent Common Stock. All outstanding shares of Parent Common
Stock are, and all shares of Parent Common Stock which may be issued pursuant to
this Agreement shall be when issued duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
(o) Brokers. No broker, investment banker, financial advisor or other
Person, other than Merrill Lynch & Co., the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's, financial advisors or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent.
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(p) Year 2000 Compliance. Parent has adopted and implemented a
commercially reasonable plan to provide (x) that the change of the year from
1999 to the year 2000 will not materially and adversely affect the information
and business systems of the Parent or its Subsidiaries and (y) that the impacts
of such change on the vendors and customers of Parent and its Subsidiaries will
not have a Material Adverse Effect on Parent. In Parent's reasonable best
estimate, no expenditures materially in excess of currently budgeted items
previously disclosed in Parent's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 will be required in order to cause the information and
business systems of Parent and its Subsidiaries to operate properly following
the change of the year 1999 to the year 2000. Between the date of this Agreement
and the Effective Time, Parent shall continue to use reasonable best efforts to
implement the plan previously disclosed in Parent's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1. Conduct of Business.
(a) Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time, or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.1, and except as may be
agreed in writing by Parent, as may be expressly permitted pursuant to this
Agreement or as set forth in Section 4.1 of the Company Disclosure Schedule, the
Company shall, and shall cause its Subsidiaries to, carry on their respective
businesses in the ordinary course consistent with past practice and in
compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, use all reasonable best efforts to
preserve intact its current business organizations, keep available the services
of its current officers and key employees and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them with the intention that its goodwill and ongoing
business shall be preserved. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time, or the
date, if any, on which this Agreement is earlier terminated pursuant to Section
7.1, and except as may be agreed in writing by Parent, as may be expressly
permitted pursuant to this Agreement or as set forth in Section 4.1 of the
Company Disclosure Schedule, the Company shall not, and shall not permit any of
its Subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property), in respect
of, any of its capital stock, other than dividends or distributions by a
direct or indirect wholly owned Subsidiary of the Company to its parent,
(y) split, combine or reclassify any of its capital stock or amend the
terms of any outstanding securities (including Stock Options) or (z)
purchase, redeem or otherwise acquire any shares of its capital stock or
any other securities;
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(ii) issue, deliver, sell, grant, pledge or otherwise
encumber or subject to any Lien any shares of its capital stock, any other
securities or any rights, warrants or options to acquire, any such shares,
or securities (other than (x) the issuance of shares of Company Common
Stock upon the exercise of Stock Options outstanding on the date hereof and
in accordance with their terms on the date hereof, (y) the issuance of
shares of Company Common Stock pursuant to the Option Agreement or (z) the
issuance of Company Common Stock pursuant to Warrants outstanding as of the
date of this Agreement in accordance with their terms on the date hereof),
or any "phantom" stock, "phantom" stock rights, stock appreciation rights
or stock based performance units;
(iii) amend its Certificate of Incorporation or Bylaws or
other comparable charter or organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing assets of, or by any other manner, any
Person or division, business or equity interest of any Person other than
assets which in the aggregate do not exceed $500,000 or purchases of raw
materials or supplies in the ordinary course of business consistent with
past practice;
(v) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or
assets (including securitizations), except sales of inventory in the
ordinary course of business consistent with past practice and sales of
goods and services not in excess of $500,000 in the aggregate;
(vi) (x) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any of its Subsidiaries, guarantee any debt securities of
another Person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice or (y) make any loans, advances or capital
contributions to, or investments in, any other Person, other than in the
ordinary course of business or to or in any direct or indirect wholly owned
Subsidiary of the Company;
(vii) make or agree to make any new capital expenditure
(including leases and in-licenses), or enter into any agreement or
agreements providing for payments which are in excess of $100,000
individually or $500,000 in the aggregate;
(viii) (w) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction in the ordinary course of business consistent
with past practice or in accordance with
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their terms, of liabilities disclosed, reflected or reserved against in the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Filed SEC Documents or incurred since the date of
such financial statements in the ordinary course of business consistent
with past practice, (x) cancel any indebtedness, (y) waive or assign any
claims or rights of substantial value or (z) waive any benefits of, or
agree to modify in any respect (A) any standstill or similar agreements to
which the Company or any of its Subsidiaries is a party or (B) other than
in the ordinary course of business, any confidentiality or similar
agreements to which the Company or any of its Subsidiaries is a party;
(ix) except in the ordinary course of business consistent
with past practice, modify, amend or terminate any material contract or
agreement to which the Company or any of its Subsidiaries is a party,
including, without limitation, the agreements referred to in Section
4.1(a)(ix) of the Company Disclosure Schedule;
(x) enter into any contracts, agreements, binding
arrangements or understandings relating to the distribution, sale, license,
marketing or manufacturing by third parties of the Company's or its
Subsidiaries' products or products licensed by the Company or its
Subsidiaries, other than pursuant to any such contracts, agreements,
arrangements or understandings currently in place (that have been disclosed
in writing to Parent prior to the date hereof) in accordance with their
terms as of the date hereof;
(xi) except as otherwise set forth in this Agreement or as
required to comply with applicable law, (A) adopt, enter into, terminate or
amend in any material respect (I) any collective bargaining agreement or
Benefit Plan or (II) any other agreement, plan or policy involving the
Company or its Subsidiaries, and one or more of its current or former
directors, officers, consultants, or employees, (B) except as disclosed in
writing prior to the date hereof, increase in any manner the compensation,
bonus or fringe or other benefits of, or pay any bonus to, any current or
former officer, director or employee, other than in the case of employees
who are neither current nor former officers or directors, increases made in
connection with normal periodic reviews and related compensation and
benefit increases which are consistent with past practice, (C) pay any
benefit or amount not required under any Benefit Plan or any other benefit
plan or arrangement of the Company or its Subsidiaries as in effect on the
date of this Agreement, (D) increase in any manner the severance or
termination pay of any current or former director, officer or employee, (E)
enter into or amend any employment, deferred compensation, consulting,
severance, termination or indemnification agreement, arrangement or
understanding with any current or former employee, officer or director, (F)
grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant of
stock options, stock appreciation rights, performance units, restricted
stock, "phantom" stock or other stock related awards), or remove any
existing restrictions in any Benefit Plans or agreements or awards made
thereunder, (G) amend or modify any Stock Option, (H) take any action to
fund or
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in any other way secure the payment of compensation or benefits under any
employee plan, agreement, contract or arrangement or Benefit Plan, (I) take
any action to accelerate the vesting of payment of any compensation or
benefit under any Benefit Plan;
(xii) except as otherwise set forth in this Agreement,
enter into any material agreement, other than contracts for the sale of the
Company's or its Subsidiaries' products in the ordinary course of business,
other than pursuant to any contracts, agreements, arrangements or
understandings currently in place (that have been disclosed in writing to
Parent prior to the date of this Agreement);
(xiii) except as required by GAAP, make any change in
accounting methods, principles or practices;
(xiv) take any action that would, or that could reasonably
be expected to, result in (i) any of the representations and warranties of
the Company set forth in this Agreement or the Option Agreement that are
qualified by materiality becoming untrue, (ii) any of such representations
and warranties that are not so qualified becoming untrue in any material
respect or (iii) any of the conditions to the Merger set forth in ARTICLE
VI not being satisfied;
(xv) transfer or license to any Person or otherwise
extend, amend or modify any rights to the Intellectual Property Rights of
the Company and its Subsidiaries other than pursuant to any contracts,
agreements, arrangements or understandings currently in place (that have
been disclosed in writing to Parent prior to the date of this Agreement);
or
(xvi) authorize, or commit or agree to take, any of the
foregoing actions.
(b) Conduct of Business by Parent. During the period from the date of
this Agreement to the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.1, and except as may be
agreed in writing by the Company, or as may be contemplated by this Agreement or
Section 4.1(b) of the Parent Disclosure Schedule, (i) Parent shall and shall
cause its Subsidiaries to carry on their respective businesses in all material
respects in the ordinary course and (ii) Parent shall not, and shall not permit
any of its Subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property), in
respect of, any of its capital stock, other than dividends or distributions
by a direct or indirect wholly owned Subsidiary of Parent to its parent, or
(y) split, combine or reclassify any of its capital stock;
(ii) amend its Certificate of Incorporation or other
comparable charter or organizational documents;
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(iii) take any action that would reasonably be expected to
prevent, impair or materially delay the ability of the Company or Parent to
consummate the transactions contemplated by this Agreement;
(iv) take any action that would, or that could reasonably
be expected to, result in (x) any of the representations and warranties of
Parent set forth in this Agreement that are qualified by materiality
becoming untrue, (y) any of such representations and warranties that are
not so qualified becoming untrue in any material respect or (z) any of the
conditions to the Merger set forth in ARTICLE VI not being satisfied; or
(v) authorize, or commit or agree to take, any of the
foregoing actions.
(c) Advice of Changes. The Company and Parent shall promptly advise
the other party orally and in writing of (i) any representation or warranty made
by it (and, in the case of Parent, made by Sub) contained in this Agreement or
the Option Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation of warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure of it (and, in the case of Parent, by Sub) to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or the Option Agreement; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement or the Option
Agreement, (iii) any fact or development which would result in the failure of
any condition hereto not to be satisfied, (iv) any notice or claim by any third
party that its consent is or may be required in connection with the transactions
contemplated hereby and (v) any communication from any governmental entity in
connection with the transactions contemplated hereby.
(d) Certain Tax Matters. From the date hereof until the Effective
Time, (i) the Company will promptly notify Parent of any action, suit,
proceeding, claim or audit (collectively, "Actions") pending against or with
respect to the Company or its Subsidiaries in respect of any Tax where there is
a reasonable possibility of a determination or decision with respect to the
Company's Tax liabilities or Tax attributes that is reasonably likely to have a
Material Adverse Effect on the Company and the Company will not settle or
compromise any such Action without Parent's prior written consent, which consent
shall not be unreasonably withheld, and (ii) the Company and its Subsidiaries
will not make any material Tax election, or change any material Tax accounting
method, principle or practice, without the prior written consent of Parent,
which consent will not be unreasonably withheld.
Section 4.2. No Solicitation.
(a) The Company shall not, nor shall it authorize or permit any of
its Subsidiaries, any of their respective officers, directors or employees or
any investment banker, financial advisor, attorney, accountant or other advisor
or representative retained
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by the Company or its Subsidiaries, directly or indirectly through another
Person, (i) to solicit, initiate or encourage (including by way of furnishing
information), or take any action designed or reasonably likely to facilitate,
the making of a proposal which constitutes, or may reasonably be expected to
lead to, any Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that if, at any
time prior to the Stockholder Approval, the Board of Directors of the Company
determines in good faith, based on advice of outside counsel, that failure to do
so would be reasonably likely to result in a breach of its fiduciary duties
under applicable law, the Company may, in response to a Superior Proposal that
was unsolicited and that did not otherwise result from a breach of this Section
4.2, and subject to providing prior written notice of its decision to take such
action to Parent (the "Company Notice") and compliance with Section 4.2(c), (x)
furnish information with respect to the Company to the Person making the
Superior Proposal pursuant to a customary and reasonable confidentiality
agreement no less favorable to the Company than the Confidentiality Agreement
(as defined below) and (y) participate in discussions or negotiations regarding
such Superior Proposal. The Company and its Subsidiaries, their respective
officers, directors and employees and any investment banker, financial advisor,
attorney, accountant and other advisor or representative retained by the Company
or its Subsidiaries shall immediately cease any existing discussions regarding
any Takeover Proposal.
(b) Neither the Company, nor the Board of Directors of the Company
nor any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Parent or Sub, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Merger. Neither the Company, nor the Board of Directors of the
Company nor any committee thereof shall (i) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Takeover Proposal,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal, (iii) (x) redeem the Rights, (y) waive or amend any
provisions of the Rights Agreement or (z) take any action with respect to, or
make any determination under, the Rights Agreement, or (iv) waive or fail to
enforce the terms of any confidentiality or standstill agreement, in any such
case to permit or facilitate a Takeover Proposal. Notwithstanding the foregoing,
at any time before the Stockholder Approval, in response to a Superior Proposal
which was unsolicited and which did not otherwise result from a breach of this
Section 4.2, the Board of Directors of the Company may (subject to this sentence
and the definition of the term "Superior Proposal") terminate this Agreement and
concurrently with such termination cause the Company to enter into a definitive
Acquisition Agreement with respect to such Superior Proposal (the determination
of whether a proposal is a Superior Proposal to be made after consideration of
any modification proposed by Parent), but only (x) at a time that is after the
fifth day following Parent's receipt of written notice advising Parent that the
Board of Directors of the Company is prepared to accept such Superior Proposal,
specifying the material terms and conditions of such Superior Proposal
(including a copy of any proposed agreement) and identifying the person making
such Superior Proposal and (y) after Parent shall have received the Termination
Fee and the Expenses.
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(c) In addition to the obligations of the Company set forth in
Section 4.2(a) and Section 4.2(b) hereof, the Company promptly shall advise
Parent orally and in writing of any request for information or of any Takeover
Proposal, or any inquiry with respect to or which could lead to any Takeover
Proposal, the material terms and conditions of such request, Takeover Proposal
or inquiry, and the identity of the Person making any such request, Takeover
Proposal or inquiry. The Company will keep Parent informed on a prompt basis of
the status and details (including amendments or proposed amendments) of any such
request, Takeover Proposal or inquiry. The Company will promptly provide Parent
with a copy of any written materials received from any third party with respect
to or which could lead to any Takeover Proposal and of any materials provided to
such third party. The Company shall immediately provide Parent with any such
information or materials if so requested by Parent.
(d) Nothing contained in this Section 4.2 shall prohibit the Company
from (x) taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or (y) making any disclosure to
the Company's stockholders if, in the good faith judgment of the majority of the
members of the Board of Directors of the Company, based on advice of outside
counsel, failure to so disclose would be inconsistent with its duties under
applicable law; provided, subject to Section 4.2(b) that neither the Company nor
its Board of Directors nor any committee thereof shall withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement or the Merger or approve or recommend, or propose publicly to approve
or recommend, a Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. Preparation of the Form S-4 and the Proxy Statement;
Stockholders Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and the Company shall file with the SEC the
Proxy Statement and Parent shall prepare and file with the SEC the Form S-4, in
which the Proxy Statement will be included as a prospectus. Each of the Company
and Parent shall use its reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
The Company will use its reasonable best efforts to cause the Proxy Statement to
be mailed to the Company's stockholders as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. Parent shall also take
any action (other than qualifying to do business in any jurisdiction in which it
is not now so qualified or to file a general consent to service of process)
required to be taken under any applicable state securities laws in connection
with the issuance of Parent Common Stock in the Merger and the Company shall
furnish all information concerning the Company and the holders of Company Common
Stock as may be reasonably requested in connection with any such action and the
preparation, filing and distribution of the Proxy Statement. No filing of, or
amendment or supplement to, the Form S-4 will be made by Parent, or to the Proxy
Statement will be made by the Company, without providing the other party the
opportunity to review and comment
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thereon. Parent will advise the Company, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective, the issuance of any
stop order, the suspension of the qualification of 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 Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. The Company
will advise Parent, promptly after it receives notice thereof, of any request by
the SEC for amendment of the Proxy Statement or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time prior
to the Effective Time any information relating to the Company or Parent, or any
of their respective Affiliates, officers or directors, should be discovered by
the Company or Parent which should be set forth in an amendment or supplement to
any of the Form S-4 or the Proxy Statement, so that any of such documents would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly filed with
the SEC and, to the extent required by law, disseminated to the stockholders of
the Company.
(b) The Company will, as soon as reasonably practicable, establish a
record date for, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders Meeting") for the purpose of obtaining the
Stockholder Approval. Unless the Company has terminated this Agreement pursuant
to Section 4.2(b) hereof, the Company will, through its Board of Directors,
recommend to its stockholders adoption of this Agreement. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
this Section 5.1(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any Takeover Proposal.
Section 5.2. Letters of the Company's Accountants.
(a) The Company shall use its reasonable best efforts to cause to be
delivered to Parent two letters from Ernst & Young LLP, the Company's
independent public accountants, one dated a date within two Business Days before
the date on which the Form S-4 shall become effective and one dated a date
within two Business Days before the Closing Date, each addressed to Parent and
the Company, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
(b) The Company shall use its reasonable best efforts to cause to be
delivered to Parent a letter from Ernst & Young LLP, addressed to Parent and the
Company, dated as of the Closing Date, stating that (i) Ernst & Young LLP
concurs with the Company management's conclusion that, subject to customary
qualifications, the Company meets the requirements to be a party to a pooling of
interests transaction for financial reporting purposes under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations and (ii)
the basis for such a concurrence is Ernst & Young LLP's belief that the criteria
for such accounting treatment have been met.
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Section 5.3. Letters of Parent's Accountants.
(a) Parent shall use its reasonable best efforts to cause to be
delivered to the Company two letters from PricewaterhouseCoopers LLP, Parent's
independent public accountants, one dated a date within two Business Days before
the date on which the Form S-4 shall become effective and one dated a date
within two Business Days before the Closing Date, each addressed to the Company
and Parent, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company a letter from PricewaterhouseCoopers LLP, addressed to
the Company and Parent, dated as of the Closing Date, stating that (i)
PricewaterhouseCoopers LLP concurs with Parent's management's conclusion that,
subject to customary qualifications, the Merger qualifies for pooling of
interests treatment for financial reporting purposes under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations and (ii)
the basis for such a concurrence is PricewaterhouseCoopers LLP's belief that the
criteria for such accounting treatment have been met.
Section 5.4. Access to Information; Confidentiality.
(a) Subject to the Confidentiality Agreement dated as of September 7,
1999, between Parent and the Company (as it may be amended from time to time,
the "Confidentiality Agreement"), the Company shall afford to Parent, and to
Parent's officers, employees, accountants, counsel, financial advisors and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time or the termination of this Agreement to all
its properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall furnish promptly to Parent (a) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of United States Federal or state
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as required by
law, Parent will hold, and will cause its officers, employees, accountants,
counsel, financial advisors and other representatives and Affiliates to hold,
any nonpublic information received from the Company, directly or indirectly, in
accordance with the Confidentiality Agreement. Parent will make all reasonable
best efforts to minimize disruption to the business of the Company and its
Subsidiaries which may result from the requests for data and information
hereunder. All requests for access and information shall be coordinated through
senior executives of the parties to be designated.
(b) Subject to the Confidentiality Agreement, Parent agrees to
provide to the Company, from time to time prior to the date on which Stockholder
Approval is obtained, such information as the Company shall reasonably request
to evaluate Parent and its business, financial condition, operations and
prospects and shall furnish promptly to the Company a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of United States Federal or state securities
laws. Except as provided by law, the Company will hold, and
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will cause its officers and employees to hold, any nonpublic information
received from Parent, directly or indirectly, in accordance with the
Confidentiality Agreement. The Company will make all reasonable best efforts to
minimize disruption to the business of the Parent and its Subsidiaries which may
result from the requests for data and information hereunder. All requests for
access and information shall be coordinated through senior executives of the
parties to be designated.
Section 5.5. Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement and the Option Agreement, including
using reasonable best efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions to Closing to be satisfied,
(ii) the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by any Governmental Entity,
(iii) the obtaining of all necessary consents, approvals or waivers from third
parties (provided that if obtaining any such consent, approval or waiver would
require any action other than the payment of a nominal amount, such action shall
be subject to the consent of Parent, not to be unreasonably withheld), (iv) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the Option Agreement or the
consummation of the transactions contemplated hereby or thereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (v) the execution and delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement and the
Option Agreement. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall if any state takeover statute or
similar statute becomes applicable to this Agreement, the Option Agreement, the
Merger or any other transactions contemplated by this Agreement or the Option
Agreement, take all action necessary to ensure that the Merger and the other
transactions contemplated by this Agreement and the Option Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Option Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Option Agreement, the Merger and
the other transactions contemplated by this Agreement and the Option Agreement.
Nothing in this Agreement shall be deemed to require Parent to agree to, or
proffer to, divest or hold separate any assets or any portion of any business of
Parent, the Company or any of their respective Subsidiaries.
Section 5.6. Stock Options.
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(a) As of the Effective Time, each outstanding option to purchase
shares of Company Common Stock (a "Stock Option") granted under any plan or
arrangement providing for the grant of options to purchase shares of Company
Common Stock to current or former officers, directors, employees or consultants
of the Company or its Subsidiaries (the "Company Stock Plans"), whether vested
or unvested, shall be converted into an option to acquire, on the same terms and
conditions as were applicable under the Stock Option, the number of shares of
Parent Common Stock (rounded to the nearest whole share) determined by
multiplying the number of shares of Company Common Stock subject to such Stock
Option by the Exchange Ratio, at a price per share of Parent Common Stock equal
to (A) the aggregate exercise price for the shares of Company Common Stock
otherwise purchasable pursuant to such Stock Option divided by (B) the aggregate
number of shares of Parent Common Stock deemed purchasable pursuant to such
Stock Option (each, as so adjusted, an "Adjusted Option"); provided that such
exercise price shall be rounded up to the nearest whole cent. The transactions
contemplated by this Agreement constitute a `change in control' for purposes of
the Company Stock Plans.
(b) The adjustments provided herein with respect to any Stock Options
that are "incentive stock options" as defined in Section 422 of the Code shall
be and are intended to be effected in a manner which is consistent with Section
424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the
need of any further corporate action, Parent shall assume the Company Stock
Plans, with the result that all obligations of the Company under the Company
Stock Plans, including with respect to Stock Options outstanding at the
Effective Time, shall be obligations of Parent following the Effective Time.
(d) At or prior to the Effective Time, Parent shall take all
corporate action necessary to reserve for issue a sufficient number of shares of
Parent Common Stock for delivery upon exercise of Stock Options. As soon as
practicable after the Effective Time, Parent shall file a Registration Statement
on Form S-3 or Form S-8 as the case may be (or any successor or other
appropriate forms), with respect to the shares of Parent Common Stock subject to
such Stock Options, and shall maintain the effectiveness of such registration
statement and the current status of the prospectus or prospectuses contained
therein, for so long as such Stock Options remain outstanding.
(e) Parent shall take, and shall cause the Surviving Corporation and
its Subsidiaries and all other affiliates of Parent to take, the following
actions: (i) waive any limitations regarding pre-existing conditions and
eligibility waiting periods under any welfare or other employee benefit plan
maintained by any of them for the benefit of employees of the Company or any of
its Subsidiaries immediately prior to the Effective Time (the "Employees") to
the extent such pre-existing condition or waiting period did not apply to the
Employee under a comparable plan of the Company immediately prior to the
Effective Time, (ii) provide each Employee with credit for any co-payments and
deductibles paid prior to the Effective Time for the calendar year in which the
Effective Time occurs, in satisfying any applicable deductible or out-of-pocket
requirements under such welfare plans or other employee benefit plans, and (iii)
for all purposes (other than
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for purposes of benefit accruals under any defined benefit pension plan) under
all compensation and benefit plans and policies applicable to the employees,
treat all service by the Employees with the Company or any of its Subsidiaries
or Affiliates before the Effective Time as service with Parent and its
Subsidiaries and Affiliates.
Section 5.7. Indemnification, Exculpation 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 Company Certificate of Incorporation,
the Bylaws 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) For six years after the Effective Time, Parent shall cause the
Company to maintain in effect the Company's current officers', directors' and
employees' liability insurance in respect of acts or omissions occurring at or
prior to the Effective Time, covering each Person currently covered by the
Company's officers' and directors' liability insurance policy (a copy of which
has been heretofore delivered to Parent), on terms with respect to such coverage
and amount no less favorable than those of such policy in effect on the date
hereof; provided that Parent may substitute therefor policies of Parent
containing terms with respect to coverage and amount no less favorable to such
directors and officers; provided, however, that in satisfying its obligation
under this Section 5.7(b) Parent shall not be obligated to pay premiums in
excess of 200% of the amount per annum paid by the Company in its last full
fiscal year; and provided further that if Parent is not able to obtain such
coverage for such 200% amount, Parent shall nevertheless be obligated to provide
such coverage as may be obtained for such 200% amount.
(c) The provisions of this Section 5.7 are (i) intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such Person
may have by contract or otherwise.
Section 5.8. Fees and Expenses.
(a) Except as provided below, all fees and expenses incurred in
connection with this Agreement, the Option Agreement, the Merger and the other
transactions contemplated by this Agreement and the Option Agreement shall be
paid by the party incurring such fees or expenses, whether or not the Merger is
consummated, except that each of Parent and the Company shall bear and pay one-
half of (i) the costs and expenses incurred in connection with filing, printing
and mailing the Proxy Statement and the Form S-4 and (ii) the filing fees for
the premerger notification and report forms under the HSR Act and any similar
foreign antitrust laws.
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(b) In the event that (1) a bona fide Takeover Proposal shall have
been publicly disclosed or has been made directly to the Company's stockholders
or any Person has announced an intention (whether or not conditional) to make a
bona fide Takeover Proposal and thereafter this Agreement is terminated by
either (x) Parent or the Company pursuant to Section 7.1(b)(iii) or (y) by
Parent pursuant to Section 7.1(d) (provided that the breach or failure to
perform giving rise to Parent's right to terminate under Section 7.1(d) shall be
willful and material) and, in either case, within 12 months of termination the
Company enters into an Acquisition Agreement with respect to a Takeover Proposal
or a Takeover Proposal is consummated or (2) this Agreement is terminated (x) by
the Company pursuant to Section 7.1(f) or (y) by Parent pursuant to Section
7.1(e), then the Company shall pay Parent a fee equal to $15 million (the
"Termination Fee"), payable by wire transfer of immediately available funds,
such payment to be made (A) in the case of the termination contemplated by
clause (1), on the earlier of the date the Company enters into an Acquisition
Agreement or a Takeover Proposal is consummated, (B) in the case of a
termination contemplated by clause (2)(x), no later than immediately prior to
such termination and (c) in the case of termination contemplated by clause 2(y),
no later than the date of such termination. Simultaneously with the payment of
the Termination Fee, the Company shall reimburse Parent for all of its
documented out-of-pocket expenses incurred in connection with this Agreement and
the transactions contemplated hereby (including documented fees and expenses of
accountants, attorneys and financial advisors) up to an aggregate of $2,000,000
(the "Expenses"). The Company acknowledges that the agreements contained in this
Section 5.8(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement. If Parent shall successfully bring an action to enforce its rights
under this Section 5.8(b), the Company shall reimburse Parent for its reasonable
fees and expenses in connection therewith and shall pay Parent interest on the
Termination Fee and Expenses from the date the Termination Fee becomes payable
to the date of payment at the publicly announced prime rate of Citibank, N.A. in
effect on the date the Termination Fee became payable.
Section 5.9. Public Announcements. Parent and the Company will consult
with each other before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger and the
Option Agreement, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement and the Option
Agreement shall be in the form heretofore agreed to by the parties.
Section 5.10. Affiliates.
(a) As soon as practicable after the date hereof, and in no event
more than 45 days prior to the date of the 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 for purposes
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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 and applicable SEC rules and
regulations. The Company shall use its reasonable best efforts to cause each
such Person to deliver to Parent at least 30 days prior to the Closing Date a
written agreement substantially in the form attached as Exhibit A hereto.
(b) As soon as practicable after the date hereof, and in no event
more than 45 days prior to the date of the Company Stockholder Meeting, Parent
shall deliver to the Company 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 Parent for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and its related interpretations and applicable SEC rules and
regulations. Parent shall use its reasonable best efforts to cause each such
Person to deliver to Parent at least 30 days prior to the Closing Date a written
agreement substantially in the form attached as Exhibit B hereto.
Section 5.11. Stock Exchange Listing. To the extent Parent does not issue
treasury shares in the Merger which are already listed, Parent shall use its
reasonable best efforts to cause the shares of Parent Common Stock to be issued
in the Merger to be approved for listing on the Nasdaq, subject to official
notice of issuance, prior to the Closing Date. The Company shall use its
reasonable best efforts to cause the shares of Company Common Stock to be issued
pursuant to the Option Agreement to be approved for quotation on Nasdaq, as
promptly as practicable after the date hereof, and in any event prior to the
earlier of (x) the Closing Date or (y) termination of this Agreement under
circumstances where the Option issued pursuant to the Option Agreement is or may
become exercisable by Parent.
Section 5.12. Pooling of Interests. Each of the Company and Parent will
use reasonable best efforts to cause the Merger to be accounted for as a pooling
of interests under Opinion 16 of the Accounting Principles Board and its related
interpretations and applicable SEC rules and regulations, and such accounting
treatment to be accepted by each of the Company's and Parent's independent
public accountants, and by the SEC, respectively, and each of the Company and
Parent agrees that it will voluntarily take no action that would cause such
accounting treatment not to be obtained.
Section 5.13. Tax Treatment. Parent and the Company intend that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code. Parent and the Company shall each use all reasonable efforts to cause the
Merger to so qualify.
Section 5.14. Stockholder Litigation. The Company shall give Parent the
opportunity to participate, on an advisory basis, in the defense of any
stockholder litigation against the Company and/or its directors relating to the
transactions contemplated by this Agreement or the Option Agreement.
Section 5.15. Rights Agreement. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section 3.1(x)
hereof) requested in
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writing by Parent in order to render the rights (the "Rights") issued pursuant
to the Rights Agreement inapplicable to the Merger and the other transactions
contemplated by this Agreement and the Option Agreement.
Section 5.16. Conveyance Taxes. (a) The Company and the Parent shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transaction contemplated by
this Agreement that are required or permitted to be filed on or before the
Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
(b) Nasdaq Listing. The shares of Parent Company Stock issuable to
the Company's stockholders as contemplated by this Agreement shall have been
approved for listing on Nasdaq, subject to official notice of issuance.
(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other judgment or order issued by any
court of competent jurisdiction or other statute, law, rule, legal restraint or
prohibition (collectively, "Restraints") shall be in effect preventing the
consummation of the Merger; provided, however, that each of the parties that
have used its reasonable best efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(f) Pooling Letters. Parent and the Company shall have received
letters from Ernst & Young LLP and PricewaterhouseCoopers LLP, dated as of the
Closing Date, in each case, addressed to Parent and the Company, stating in
substance the matters to be stated by Ernst & Young LLP and
PricewaterhouseCoopers LLP, pursuant to Section 5.2(b) and Section 5.3(b),
respectively.
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(g) No Governmental Litigation. There shall not be pending any suit,
action or proceeding by any Governmental Entity, (i) challenging the acquisition
by Parent or Sub of any shares of Company Common Stock, seeking to restrain or
prohibit the consummation of the Merger, or seeking to place limitations on the
ownership of shares of Company Common Stock (or shares of common stock of the
Surviving Corporation) by Parent or Sub or seeking to obtain from the Company,
Parent or Sub any damages that are material in relation to the Company, (ii)
seeking to prohibit or materially limit the ownership or operation by the
Company or its Subsidiaries, Parent or any of Parent's Subsidiaries of any
material portion of any business or of any assets of the Company, Parent or any
of Parent's Subsidiaries, or to compel the Company, Parent or any of Parent's
Subsidiaries to divest or hold separate any material portion of any business or
of any assets of the Company, Parent or any of their respective Subsidiaries, as
a result of the Merger or (iii) seeking to prohibit Parent or any of its
Subsidiaries from effectively controlling in any material respect the business
or operations of the Company or its Subsidiaries.
Section 6.2. Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. Each representation and warranty
of the Company contained in this Agreement that is qualified as to materiality
shall be true and correct, and each representation and warranty of the Company
contained in this Agreement that is not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and as
of the Closing Date as though made on the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date, in
which case as of such earlier date. Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) Letters from Company Affiliates. Parent shall have received from
each Person named in the letter referred to in Section 5.10(a) an executed copy
of an agreement substantially in the form of Exhibit A hereto.
(d) No Material Adverse Effect. No fact or development shall have
occurred and be continuing which has had or would be reasonably likely to result
in any change, effect, event, occurrence or state of facts (or any development
that has had or is reasonably likely to have any change or effect) that is
materially adverse to the business, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole.
(e) Consents. All consents, the absence of which, in the aggregate,
would be reasonably likely to have a Material Adverse Effect, shall have been
obtained.
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(f) Environmental Laws. Any consents and authorizations required
under any Environmental Law for the operation of the Surviving Corporation after
the Closing shall have been obtained.
Section 6.3. Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. Each representation and warranty
of Parent and Sub contained in this Agreement that is qualified as to
materiality shall be true and correct, and each representation and warranty of
Parent and Sub contained in this Agreement that is not so qualified shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on the Closing Date, except
to the extent such representations and warranties expressly relate to an earlier
date, in which case as of such earlier date. The Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent to such
effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
(c) No Material Adverse Effect. No fact or development shall have
occurred and be continuing which has had or would be reasonably likely to result
in any change, effect, event, occurrence or state of facts (or any development
that has had or is reasonably likely to have any change or effect) that is
materially adverse to the business, financial condition or results of operations
of Parent and its Subsidiaries, taken as a whole.
(d) Tax Opinion. The Company shall have received an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, special tax counsel to the Company,
dated as of the Effective Time, 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, 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. The Company may not waive or amend this condition without the express
written consent of Parent.
Section 6.4. Frustration of Closing Conditions. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section 6.1,
Section 6.2 or Section 6.3 as the case may be, to be satisfied if such failure
was caused by such party's failure to use reasonable best efforts to consummate
the Merger and the other transactions
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contemplated by this Agreement and the Option Agreement, as required by and
subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by March
31, 2000 for any reason; provided, however, that the right to terminate
this Agreement under this Section 7.1(b)(i) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to be consummated on or before such
date;
(ii) if any Restraint having any of the effects set forth
in Section 6.1(d) shall be in effect and shall have become final and
nonappealable; provided that the party seeking to terminate this Agreement
pursuant to this Section 7.1(b)(ii) shall have used reasonable best efforts
to prevent the entry of and to remove such Restraint; or
(iii) if the Stockholder Approval shall not have been
obtained at the Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof;
(c) by the Company, if Parent shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 6.3(a) or Section 6.3(b), and
(B) is not cured by Parent within 15 calendar days following receipt of written
notice of such breach or failure to perform from the Company;
(d) by Parent, if the Company shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 6.3(a) or Section 6.3(b), and
(B) is not cured by the Company within 15 calendar days following receipt of
written notice of such breach or failure to perform from Parent;
(e) by Parent, if the directors of the Company shall have (i)
withdrawn, modified or changed the approval or recommendation of the Board of
Directors of the
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Company or any committee thereof of this Agreement or the Merger in a manner
adverse to Parent or Sub, (ii) approved or recommended to the stockholders of
the Company a Takeover Proposal, (iii) approved or recommended that the
stockholders of the Company tender their shares of Company Common Stock into any
tender offer or exchange offer that is a Takeover Proposal or is related thereto
or (iv) indicated any intention to do any of the foregoing; or
(f) by the Company in accordance with Section 4.2(b).
(g) by the Company as set forth in Section 2.1(e) unless Parent shall
have delivered a Top-Up Notice as contemplated by such Section.
Section 7.2. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.1(t)[brokers], the penultimate sentence of Section
5.4(a) [Parent to keep confidential nonpublic information received from the
Company], the last sentence of Section 5.4(b)[Company to keep confidential
nonpublic information received from Parent] and Section 5.8[fees and expenses],
this Section 7.2 and ARTICLE VIII, which provisions shall survive such
termination, and except to the extent that such termination results from the
willful or material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
Section 7.3. Amendment. This Agreement may be amended by the parties
hereto at any time before or after the Stockholder Approval; provided, however,
that after any such approval, there shall be made no amendment that by law
requires further approval by the stockholders of the Company without such
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 7.4. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso of Section 7.3, waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any
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covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
Section 8.2. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given, and
shall be effective upon receipt, if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
if to Parent or Sub, to:
MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Telephone: (301) 417-0770
Telecopier: (301) 527-4200
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Telephone: (212) 259-8000
Telecopier: (212) 259-6333
Attention: Frederick W. Kanner
if to the Company, to:
U.S. Bioscience, Inc.
One Tower Bridge
100 Front Street, Suite 400
West Conshohocken, Pennsylvania 19428
Telephone: (800) 898-4404
Telecopier: (610) 832-4500
with a copy to:
Skadden, Arps, Slate Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Telephone: (212) 735-3000
Telecopier: (212) 735-2000
Attention: Margaret L. Wolff
Section 8.3. Definitions. For purposes of this Agreement:
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(a) an "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person;
(b) "Business Day" means any day other than Saturday, Sunday or any
other day on which banks are legally permitted to be closed in New York;
(c) "Knowledge" of any Person that is not an individual means, with
respect to any matter in question, the actual knowledge of any of such person's
executive officers or other employees having primary responsibility for such
matter;
(d) "Material Adverse Change" or "Material Adverse Effect", as used
with respect to the Company or Parent, as the case may be, means any change,
effect, event, occurrence or state of facts (or any development that has had or
is reasonably likely to have any change or effect) that is materially adverse to
the business, financial condition or results of operations of such entity and
its Subsidiaries, taken as a whole, or which would prevent or materially delay
the consummation of the transactions contemplated hereby;
(e) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(f) a "Subsidiary" of any Person means, with respect to such Person,
any corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the Board of
Directors or other governing body of such corporation or other legal entity;
(g) "Superior Proposal" means any bona fide proposal made by a third
party (i) to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Company Common Stock then outstanding or
all or substantially all the assets of the Company and its Subsidiaries taken as
a whole, (ii) that is otherwise on terms which the Board of Directors of the
Company determines in its good faith judgment (based on advice from a financial
advisor of nationally recognized reputation) to be more favorable to the Company
and its stockholders than the Merger after taking into account the terms of this
Agreement (as it may be proposed to be amended by Parent), (iii) which is
reasonably capable of being consummated on a prompt basis, (iv) for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of the Company, is reasonably capable of
being obtained by such third party and (v) for which no regulatory approvals,
including antitrust approvals, are required that are not reasonably be expected
to be obtained on prompt basis; and
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(h) "Takeover Proposal" means any bona fide inquiry, proposal or
offer from any Person relating to any direct or indirect acquisition or purchase
of a business or assets that constitute 15% or more of the net revenues, net
income or the assets of the Company or its Subsidiaries, taken as a whole, or
15% or more of any class of equity securities of the Company or its Subsidiaries
or any tender offer or exchange offer that if consummated would result in any
Person beneficially owning 15% or more of any class of equity securities of the
Company or any of its Subsidiaries or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
Section 8.4. Interpretation. When a reference is made in this Agreement to
an Article, a Section, Exhibit or Schedule, such reference shall be to an
Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
Section 8.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.6. Entire Agreement; Third-Party Beneficiaries. This Agreement,
the Option Agreement and the Confidentiality Agreement (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement, the Option Agreement and the Confidentiality Agreement and (b) except
for the provisions of Section 5.7, are not intended to confer upon any Person
other than the parties any rights or remedies.
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Section 8.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned Subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
Section 8.9. Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in any state court in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
of any state court located in the State of Delaware in the event any dispute
arises out of this Agreement or the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court and (c) agrees that it
will not bring any action relating to this Agreement or the transactions
contemplated by this Agreement in any court other than a Federal court located
in the State of Delaware or a state court located in the State of Delaware.
Section 8.10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
MEDIMMUNE, INC.
By: /s/ Wayne T. Hockmeyer
----------------------
Name: Wayne T. Hockmeyer, Ph.D.
Title: Chairman and Chief Executive Officer
MARLIN MERGER SUB INC.
By: /s/ Wayne T. Hockmeyer
----------------------
Name: Wayne T. Hockmeyer, Ph.D.
Title: Chairman and Chief Executive Officer
U.S. BIOSCIENCE, INC.
By: /s/ C. Boyd Clarke
------------------
Name: C. Boyd Clarke
Title: President and Chief Executive Officer
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ANNEX 2
-------
STOCK OPTION AGREEMENT (this "Agreement"), dated as of September 21, 1999,
between MedImmune, Inc., a Delaware corporation ("Grantee"), and U.S.
Bioscience, Inc., a Delaware corporation ("Issuer").
RECITALS
--------
A. Grantee, Marlin Merger Sub Inc., a wholly owned subsidiary of Grantee
("Sub"), and Issuer have entered into an Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"; defined terms used but not defined
herein have the meanings set forth in the Merger Agreement), providing for,
among other things, the merger of Sub with and into Issuer; and
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
---------------
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase that number of shares which equals 19.9% of the issued and outstanding
Issuer Common Shares (the "Option Shares") immediately prior to the exercise of
this Option at a price per share (the "Option Price") equal to $16.50, payable
in cash. The number of Option Shares and the Option Price are subject to
adjustment as set forth herein.
2. Exercise and Termination of Option. (a) If Grantee is not in
----------------------------------
material breach of the Merger Agreement, subject to the terms and conditions
hereof, Grantee may exercise the Option in whole at any time after the
occurrence of a Trigger Event and prior to the close of business on the
Termination Date (the "Exercisability Period"). "Trigger Event" shall mean an
event which obligates Issuer to pay the Termination Fee pursuant to Section
5.8(b) of the Merger Agreement. "Termination Date" shall mean the earliest of
(i) the Effective Time of the Merger, (ii) 180 days after the date full payment
contemplated by Section 5.8(b) of the Merger Agreement is made by Issuer to
Grantee thereunder, (iii) the termination of the Merger Agreement so long as no
Trigger Event has occurred or could still occur pursuant to Section 5.8(b) the
Merger Agreement or (iv) 13 months after the termination of the Merger Agreement
under circumstances which could result in Grantee's becoming entitled to receive
the Termination Fee from Issuer pursuant to Section 5.8(b), unless during such
13 month period a Trigger Event shall occur. Notwithstanding the occurrence of
the Termination Date, Grantee shall be entitled to purchase the Option Shares
pursuant to the exercise of the Stock Option, on the terms and subject to the
conditions hereof, to the extent Grantee exercised the Stock Option prior to the
occurrence of the Termination Date.
<PAGE>
(b) If Grantee is entitled to and wishes to exercise the Option, it
shall deliver to Issuer a written notice (the date of receipt of which is
referred to as the "Notice Date") specifying (i) it intends to such exercise and
(ii) a place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing of such purchase; provided
that if the closing of the purchase and sale pursuant to the Option (the
"Closing") cannot be consummated by reason of any applicable judgment, decree,
order, law or regulation, the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and, provided further that, without
limiting the foregoing, if prior notification to or approval of any regulatory
authority is required in connection with such purchase, Grantee and, if
applicable, Issuer shall promptly file the required notice or application for
approval and shall expeditiously process the same (and Issuer shall cooperate
with Grantee in the filing of any such notice or application and the obtaining
of any such approval), and the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which, as the case may be,
(i) any required notification period has expired or been terminated or (ii) such
approval has been obtained, and in either event, any requisite waiting period
has passed. Issuer shall take any action reasonably requested by Grantee to
cause the Closing to occur as promptly as practicable. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto. Any
extensions of the periods specified in this Section 2(b) shall extend the
Exercisability Period on a day for day basis.
(c) Notwithstanding anything herein to the contrary, it shall be a
condition to the exercise of this Option and the purchase of the Option Shares
that (i) no preliminary or permanent injunction or other order, decree or ruling
against the sale or delivery of the Option Shares issued by any federal or state
court of competent jurisdiction in the United States is in effect at such time,
(ii) any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated
at or prior to such time, and (iii) any approval required to be obtained prior
to the delivery of the Option Shares under the laws of any jurisdiction shall
have been obtained and shall be in full force and effect.
3. Payment and Delivery of Certificates.
------------------------------------
(a) At the Option Closing, Grantee will pay to Issuer in immediately
available funds by wire transfer to a bank account designated in writing by
Issuer an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased at such Option Closing; provided that failure or refusal
of Issuer to designate such a bank account shall not preclude Grantee from
exercising the Option.
(b) At the Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer will deliver, or
cause to be delivered, to Grantee a certificate or certificates representing the
Option Shares to be purchased at such Option Closing, which Option Shares will
be fully paid and non-assessable and free and clear of all Liens (except for any
such Lien due to the issuance of the Option Shares
2
<PAGE>
not being registered under the Securities Act and Liens arising from acts of
Grantee). If at the time of issuance of Option Shares pursuant to an exercise of
the Option hereunder, Issuer shall have issued any securities similar to rights
under a shareholder rights plan, then each Option Share issued pursuant to such
exercise will also represent such a corresponding right with terms substantially
the same as and at least as favorable to Grantee as are provided under any such
shareholder rights plan then in effect.
(c) Certificates for the Option Shares delivered at the Option Closing
will have typed or printed thereon a restrictive legend which will read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY BE REOFFERED OR SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
It is understood and agreed that such legend will be removed by delivery
of substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, or Grantee has delivered to
Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in
customary form to the effect that such legend is not required for purposes of
the Securities Act.
(d) Subject to applicable laws, when the Grantee provides the Exercise
Notice and the tender of the applicable purchase price in immediately available
funds (or offer of such tender if the proviso to the Section 3(a) is
applicable), the Grantee shall be deemed to be the holder of record of the
Issuer Common Shares issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such Issuer Common Shares shall not then be actually delivered to the Grantee.
4. Representations and Warranties of Issuer. Issuer hereby represents
----------------------------------------
and warrants to Grantee as follows:
(a) Issuer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The execution, delivery
and performance by Issuer of this Agreement and the consummation of the
transactions contemplated hereby (i) are within Issuer's corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii) require no
action by or in respect of, or filing with, any Governmental Entity, except for
compliance with any applicable requirements of the HSR Act and any applicable
filings and approvals under similar foreign antitrust laws and regulations and
such filings with and approvals of the American Stock Exchange necessary to
permit the Options Shares to be traded on the American Stock Exchange, (iv) do
not contravene, or conflict with the certificate of incorporation or by-laws of
Issuer, (v) do not contravene or conflict with or constitute a violation of any
provision of any law, regulation or judgment, injunction, order or decree
binding upon Issuer or any of its subsidiaries and (vi) will not require any
consent, approval or notice under and will not conflict with, or result in the
breach or termination
3
<PAGE>
of any provision of or constitute a default (with or without the giving of
notice or the lapse of time or both) under, or allow the acceleration of the
performance of, any material obligation of Issuer or any of its Subsidiaries
under, or result in the creation of a Lien upon, any of the properties, assets
or business of Issuer or any of its Subsidiaries under any indenture, mortgage,
deed of trust, lease, licensing agreement, contract, instrument or other
agreement to which Issuer or any of its Subsidiaries is a party or by which
Issuer or any of its Subsidiaries or any of their respective assets or
properties is subject or bound other than, in the case of each of (iii), (iv),
(v) or (vi), any such items that would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect on Issuer or prevent or
materially impair the ability of Issuer to consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Issuer and constitutes a valid and binding agreement of Issuer,
enforceable in accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratiorium or
other similar laws affecting creditors' rights generally or by principles
governing availability of equitable remedies).
(c) Except for any filings required to be made under the HSR Act and any
applicable filings and approvals under similar foreign antitrust laws and
regulations and such filings with and approvals of the American Stock Exchange
necessary to permit the Options Shares to be traded on the American Stock
Exchange, Issuer has taken all necessary corporate and other action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
until such time as the obligation to deliver Option Shares upon the exercise of
the Option terminates, will have reserved for issuance, upon any exercise of the
Option, the number of Option Shares subject to the Option. All of the Issuer
Common Shares to be issued pursuant to the Option are duly authorized and, upon
issuance and delivery thereof pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, and free and clear of
all Liens (except for any such Lien due to the issuance of the Option Shares not
being registered under the Securities Act and Liens arising from acts of
Grantee), and not subject to any preemptive rights.
5. Representations and Warranties of Grantee. Grantee hereby represents
-----------------------------------------
and warrants to Issuer that:
(a) Grantee is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The execution, delivery
and performance by Grantee of this Agreement and the consummation of the
transactions contemplated hereby (i) are within Grantee's corporate powers, (ii)
have been duly authorized by all necessary corporate action.
(b) The Option Shares or other securities acquired by Grantee upon
exercise of the Option will not be and the option is not being acquired by
Grantee with the intention of making a public distribution thereof and the
Option Shares will not be transferred or otherwise disposed of except in a
transaction registered, or exempt from registration, under the Securities Act.
4
<PAGE>
6. Adjustment upon Changes in Capitalization, Etc.
----------------------------------------------
(a) In the event of any change in Issuer Common Shares by reason of
stock dividends, stock splits, split-ups, spin-offs, recapitalizations,
recombinations, extraordinary dividends or the like, the type and number of
Option Shares, and the Option Price, as the case may be, shall be adjusted
appropriately to reflect such event and proper provision shall be made in any
agreement governing any such transaction to provide for such adjustment and the
full satisfaction of the Issuer's obligations hereunder, provided that in no
event shall the number of shares of Issuer Common Stock subject to the Option
exceed 19.9% of the number of shares of Issuer Common Stock issued and
outstanding on the date of exercise.
(b) Without limiting the parties' relative rights and obligations under
the Merger Agreement, if the Issuer enters into an agreement with respect to an
Takeover Proposal or other transaction involving the exchange or conversion of
Issuer Common Shares for shares or other securities of the Issuer or another
person, then the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option with identical terms appropriately adjusted to
acquire the number and class of shares or other securities or property that
Grantee would have received in respect of Issuer Common Shares if the Option had
been exercised immediately prior to the consummation of such Takeover Proposal,
or the record date therefor, as applicable.
(c) If, at any time during the Exercisability Period, Grantee sends to
Issuer a notice (a "Cash-Out Notice") indicating Grantee's election to exercise
its right pursuant to this Section 6(c), then Issuer shall pay to Grantee, on
the date specified in the Cash-Out Notice, which shall be a date not earlier
than three business days nor later than 15 business days from the Cash-Out
Notice, in exchange for the cancellation of the Option (if the Option has not
been exercised) or the repurchase of any Issuer Common Shares issued to Grantee
pursuant hereto which Grantee then beneficially owns and has requested that
Issuer repurchase (if the Option has been exercised), at a price per share equal
to the higher of (x) if applicable, the highest price per share of Common Stock
paid or proposed to be paid by any Person pursuant to any Takeover Proposal
(non-cash consideration to be valued as set forth in Section 7(e) hereof) or (y)
the average of the closing prices of the shares of Common Stock on the principal
securities exchange or quotation system on which the Common Stock is then listed
or traded as reported in The Wall Street Journal (or another authoritative
source) for the five consecutive trading days immediately preceding the date of
the Cash-Out Notice, less, if the Option has not been exercised, the Option
Price in respect of each Option Share being cancelled. Notwithstanding the
termination of the Option, Grantee will be entitled to exercise its rights under
this Section 6(c) if it has exercised such rights in accordance with the terms
hereof prior to the termination of the Option. The payment contemplated by this
Section 6(c) shall be made in immediately available funds to an account
specified by Grantee. Amounts paid under this Section shall be suject to Section
7(a) hereof.
5
<PAGE>
7. Profit Limitations.
------------------
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Total Option Profit (as hereinafter defined) exceed in the aggregate
$17 million minus the sum of any Termination Fee plus Expenses actually received
by Grantee pursuant to the terms of the Merger Agreement (such amount, the
"Profit Limit") and, if any payment to be made to Grantee otherwise would cause
such aggregate amount to be exceeded, the Grantee, at its sole election, shall
either (i) reduce the number of Issuer Common Shares subject to this Option,
(ii) pay cash to Issuer, (iii) waive rights under this Agreement or (iv) any
combination thereof, so that the Total Option Profit shall not exceed the Profit
Limit after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of Issuer Common Shares as would, as of the
date of exercise, result in a Notional Total Option Profit (as hereinafter
defined) which would exceed in the aggregate the Profit Limit and, if it
otherwise would exceed such amount, the Grantee, at its sole election, shall on
or prior to the date of exercise either (i) reduce the number of Issuer Common
Shares subject to such exercise, (ii) pay cash to Issuer, (iii) waive rights
under this Agreement or (iv) any combination thereof, so that the Notional Total
Option Profit shall not exceed the Profit Limit after taking into account the
foregoing actions, provided that this paragraph (b) shall not be construed as to
restrict any exercise of the Option in whole that is not prohibited hereby on
any subsequent date.
(c) As used herein, the term "Total Option Profit" shall mean the
aggregate amount (before taxes) of the following: (i) any amount received by
Grantee pursuant to the Cash-Out Right and (ii)(x) the net consideration, if
any, received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, valuing any non-cash consideration at its fair market value
(as defined below), less (y) the Exercise Price and any cash paid by Grantee to
Issuer pursuant to Section 7(a)(iii) or Section 7(b)(iii), as the case may be.
(d) As used herein, the term "Notional Total Option Profit" with respect
to the number of Issuer Common Shares as to which Grantee may propose to
exercise the Option shall be the Total Option Profit with respect to such number
of Issuer Common Shares as to which Grantee proposes to exercise and all other
Option Shares held by Grantee and its affiliates as of such date, assuming that
all such shares were sold for cash at the closing market price for Issuer Common
Shares as of the close of business on the preceding trading day (less customary
brokerage commissions or underwriting discounts).
(e) As used herein, the "fair market value" of any non-cash
consideration consisting of:
(i) securities listed on a national securities exchange or
traded on NASDAQ shall be equal to the average closing price per share of such
security as
6
<PAGE>
reported on such exchange or NASDAQ for the five trading days before the date of
determination; and
(ii) consideration which is other than cash or securities of the
form specified in clause (i) above shall be determined by a nationally
recognized independent investment banking firm mutually agreed upon by the
parties five business days prior to the event requiring selection of such
banking firm, provided that if the parties are unable to agree within three
business days as to the investment banking firm, then the parties shall each
select one firm, and those firms shall select a third nationally recognized
independent investment banking firm 48 hours, which third firm shall make such
determination as promptly as reasonably practicable. The third firm's
determination shall be final and binding on each of the parties.
8. Registration Rights. Issuer will, if requested by Grantee at any time
-------------------
and from time to time within three years of the exercise of the Option, as
promptly as practicable (but in no event later than 90 days after receipt of
such request) prepare and file up to three registration statements under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares of securities that have been acquired by
or are issuable to Grantee upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Grantee, including a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision, and Issuer will use its best efforts to qualify such shares
or other securities under any applicable state securities laws. A Registration
Statement shall not be deemed filed if it is withdrawn by Issuer, subject to a
stop or similar order or not kept effective in accordance with the following
sentence. Issuer will use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefor, and to keep such registration statement
effective for such period not in excess of 180 calendar days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations of Issuer hereunder to
file a registration statement and to maintain its effectiveness may be suspended
for up to 60 calendar days in the aggregate if the Board of Directors of Issuer
shall have determined that the filing of such registration statement or the
maintenance of its effectiveness would require premature disclosure of material
nonpublic information that would materially and adversely affect Issuer or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction involving Issuer. Any
registration statement prepared and filed under this Section 8, and any sale
covered thereby, will be at Issuer's expense except for underwriting discounts
or commissions, brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee will provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If, during the time periods referred to in the first sentence of this
Section 8, Issuer effects a registration under the Securities Act of Issuer
Common Shares for its own account or for any other stockholders of Issuer (other
than on Form S-4 or Form S-8, or any successor form), it will allow Grantee the
right to participate in such registration, and such participation will not
affect the obligation of Issuer to effect demand registration statements for
Grantee under this Section 8; provided that, if the managing underwriters
7
<PAGE>
of such offering advise Issuer in writing that in their opinion the number of
Issuer Common Shares requested to be included in such registration exceeds the
number which can be sold in such offering, Issuer will include only the shares
requested to be included therein by Grantee that may be included therein without
adversely affecting the success of the offering. In connection with any
registration pursuant to this Section 8, Issuer and Grantee will provide each
other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification, and contribution in connection with such
registration.
9. Listing. If Issuer Common Shares or any other securities to be
-------
acquired upon exercise of the Option are then listed on The Nasdaq National
Market (or any other national securities exchange or national securities
quotation system), Issuer, upon the request of Grantee, will promptly file an
application to list the Issuer Common Shares or other securities to be acquired
upon exercise of the Option on The Nasdaq National Market (or any such other
national securities exchange or national securities quotation system) and will
use reasonable efforts to obtain approval of such listing as promptly as
practicable.
10. Loss or Mutilation. Upon receipt by Issuer of evidence reasonably
------------------
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
11. Miscellaneous.
-------------
(a) Expenses. Except as otherwise provided in this Agreement or in the
Merger Agreement, each of the parties hereto will bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants, and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; Third-Party Beneficiaries. This Agreement, the
Merger Agreement (including the documents and instruments attached thereto as
exhibits or schedules or delivered in connection therewith) and the
Confidentiality Agreement (i) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this
8
<PAGE>
Agreement, and (ii) except as provided in Section 8.06 of the Merger Agreement,
are not intended to confer upon any Person other than the parties any rights or
remedies.
(e) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of law or otherwise, by Issuer or
Grantee without the prior written consent of the other, except that Grantee may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to any direct or indirect wholly owned
Subsidiary of Grantee, but no such assignment shall relieve Grantee of any of
its obligations hereunder. Any assignment or delegation in violation of the
preceding sentence will be void. Subject to the first and second sentences of
this Section 11(g), this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
(h) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in order
to consummate the transactions provided for by such exercise. Issuer will not
take any actions which would frustrate the exercise of the Option or the other
transactions contemplated hereby.
(i) Section 16(b). Any time period hereunder shall be extended to the
extent necessary for any Grantee to avoid liability under Section 16(b) of the
Exchange Act.
(j) Enforcement. The parties agree that irreparable damage would occur
and that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties will be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in any state
court located in the State of Delaware, the foregoing being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit itself to the personal jurisdiction
of any Federal court located in the State of Delaware or any state court located
in the State of Delaware in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (iii) agrees that it will not bring
any action relating to this Agreement or any of
9
<PAGE>
the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a state court located in the
State of Delaware.
(k) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
10
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
MEDIMMUNE, INC.
/s/ Wayne T. Hockmeyer
----------------------
Name: Wayne T. Hockmeyer, Ph.D.
Title: Chairman and Chief Executive Officer
U.S. BIOSCIENCE, INC.
/s/ C. Boyd Clarke
------------------
Name: C. Boyd Clarke
Title: President and Chief Executive
Officer
11
<PAGE>
Annex 3
-------
September 21, 1999
Board of Directors
U.S. Bioscience, Inc.
One Tower Bridge
100 Front Street, Suite 400
West Conshohocken, PA 19428
Members of the Board:
We understand that U.S. Bioscience, Inc. (the "Company"), MedImmune, Inc.
("MedImmune") and Marlin Merger Sub Inc., a wholly owned subsidiary of MedImmune
("Acquisition Sub") propose to enter into an Agreement and Plan of Merger dated
September 21, 1999 (the "Merger Agreement"), which provides, among other things,
for the merger (the "Merger") of Acquisition Sub with and into the Company.
Pursuant to the Merger, the Company will become a wholly owned subsidiary of
MedImmune and each outstanding share of common stock, par value $0.01 per share
(the "Common Stock") of the Company, other than shares held in treasury or held
by MedImmune or Acquisition Sub, will be converted into the right to receive a
certain number of shares of common stock, par value $0.01 per share (the "Buyer
Common Stock"), of MedImmune, determined pursuant to a certain formula set forth
in the Merger Agreement. The terms and conditions of the Merger are more fully
set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Common Stock pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and MedImmune;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) reviewed certain financial projections prepared by the management of the
Company;
(iv) discussed the past and current operations and financial condition and the
prospects of the Company with senior executives of the Company;
(v) reviewed the pro forma impact of the Merger on MedImmune's earnings per
share;
(vi) reviewed the reported prices and trading activity for the Common Stock
and the Buyer Common Stock;
<PAGE>
(vii) reviewed the financial performance of the Company and MedImmune and the
prices and trading activity of the Common Stock and the Buyer Common
Stock with that of certain other comparable publicly-traded companies
and their securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(ix) reviewed certain internal financial statements and other financial and
operating data concerning MedImmune prepared by the management of
MedImmune;
(x) discussed the past and current operations and financial condition and
the prospects of MedImmune with senior executives of MedImmune;
(xi) participated in discussions and negotiations among representatives of
the Company and MedImmune and their financial and legal advisors;
(xii) reviewed the signed Merger Agreement and certain related documents; and
(xiii) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company and MedImmune. In addition, we have
assumed that the Merger will be consummated in accordance with the terms set
forth in the Merger Agreement, including, among other things, that the Merger
will be accounted for as a "pooling-of-interests" business combination in
accordance with U.S. Generally Accepted Accounting Principles and the Merger
will be treated as a tax-free reorganization and/or exchange, each pursuant to
the Internal Revenue Code of 1986. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisal. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets nor did we negotiate with any parties, other than
MedImmune, in the possible acquisition of the Company or certain of its
constituent businesses.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates ("Morgan Stanley")
have provided financial advisory and financing services for the Company and
MedImmune and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company except that this opinion may be included in its
entirety in any filing made by the Company with
<PAGE>
respect to the transaction with the Securities and Exchange Commission. In
addition, this opinion does not in any manner address the prices at which the
Buyer Common Stock will trade following consummation of the Merger, and Morgan
Stanley expresses no opinion or recommendation as to how the shareholders of the
Company should vote at the shareholders' meeting held in connection with the
Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement is fair from a financial point of view to
such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ Susan S. Huang
By: ---------------------------
Susan S. Huang
Principal
<PAGE>
PART II
Information Not Required in Prospectus
Item 20. Indemnification of Directors and Officers
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware (the "DGCL") empowers a corporation to indemnify any person who was
or is a party or who is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful.
Subsection (b) of 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 or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person acted in any of the capacities set forth above, against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of 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 upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in 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; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; the indemnification provided for by Section
145 shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such person's heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on behalf of any
person who is or was a
II-1
<PAGE>
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
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 the corporation
would have the power to indemnify him against such liabilities under Section
145.
MedImmune provides liability insurance for its directors and officers which
provides for coverage against loss from claims made against directors and
officers in their capacity as such, including liabilities under Securities Act
of 1933.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation of its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for a
transaction from which the director derived an improper personal benefit.
Article EIGHTH of MedImmune's Certificate of Incorporation limits the liability
of directors to the fullest extent permitted by Section 102(b)(7).
Item 21. Exhibits and Financial Statement Schedules
Exhibit No. Exhibit
2.1 Agreement and Plan of Merger, dated as of September 21, 1999,
among MedImmune, Inc., Marlin Merger Sub Inc. and U.S.
Bioscience, Inc. (included as Annex 1 to the Proxy
Statement/Prospectus filed as part of this Registration
Statement).
5.1 Opinion of Dewey Ballantine LLP together with consent.*
8.1 Tax opinion of Skadden, Arps, Slate, Meagher & Flom LLP together
with consent.*
10.1 Stock Option Agreement, dated as of September 21, 1999, between
MedImmune, Inc. and U.S. Bioscience, Inc. (included as Annex 2
to the Proxy Statement/Prospectus filed as part of this
Registration Statement).
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Ernst & Young LLP, independent certified public
accountants.
23.3 Consent of Morgan Stanley & Co. Incorporated.*
24.1 Power of Attorney (included on the Signature Page of this
Registration Statement).
99.1 Form of Proxy
_________________
* To be filed by amendment.
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<PAGE>
Item 22. Undertakings
(1) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this Registration Statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(3) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act, and is used in connection with
an offering of securities subject to Rule 415, will be filed as 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 Act, 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.
(4) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions hereof, 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.
(5) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This
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<PAGE>
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(6) The undersigned Registrant hereby undertakes 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Gaithersburg, State of
Maryland, on October 12, 1999.
MEDIMMUNE, INC.
By: /s/ Wayne T. Hockmeyer, Ph.D.
____________________________________
Wayne T. Hockmeyer, Ph.D.
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents, that each of the persons whose signature
appears below appoints and constitutes Wayne T. Hockmeyer, Ph.D. and David M.
Mott, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to execute any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully and to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agent or any of
them, or their substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Wayne T. Hockmeyer, Ph.D. Chairman and Chief Executive October 12, 1999
- ------------------------------------- Officer and Director (Principal
Wayne T. Hockmeyer, Ph.D. executive officer)
/s/ David M. Mott Vice Chairman and Chief October 12, 1999
- ------------------------------------- Financial Officer and Director
David M. Mott (Principal financial and
accounting officer)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Melvin D. Booth Chief Operating Officer October 12, 1999
- ------------------------------------- and Director
Melvin D. Booth
/s/ Franklin H. Top, Jr., M.D. Executive Vice President, October 12, 1999
- ------------------------------------- Medical Director and Director
Franklin H. Top, Jr., M.D.
/s/ M. James Barrett, Ph.D. Director October 12, 1999
- -------------------------------------
M. James Barrett, Ph.D.
/s/ James H. Cavanaugh, Ph.D. Director October 12, 1999
- -------------------------------------
James H. Cavanaugh, Ph.D.
/s/ Lawrence C. Hoff Director October 12, 1999
- -------------------------------------
Lawrence C. Hoff
/s/ Gordon S. Macklin Director October 12, 1999
- -------------------------------------
Gordon S. Macklin
Director
- -------------------------------------
Barbara Hackman Franklin
</TABLE>
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<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of MedImmune, Inc. of our report dated January 25, 1999,
except for Note 18, which is as of February 24, 1999, relating to the financial
statements, which appear in MedImmune, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1998. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PriceWaterhouseCoopers LLP
McLean, Virginia
October 8, 1999
<PAGE>
Exhibit 23.2
------------
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Experts" and
"Accounting Treatment" in the Proxy Statement of U.S. Bioscience, Inc. that is
made part of the Registration Statement (Form S-4) and Prospectus of MedImmune,
Inc. for the registration of 5,655,560 shares of common stock and to the
incorporation by reference therein of our report dated February 15, 1999, with
respect to the consolidated financial statements of U.S. Bioscience, Inc.
included in its Annual Report (Form 10-K) for the year ended December 31, 1998,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 7, 1999
<PAGE>
Exhibit 99.1
------------
U.S. BIOSCIENCE, INC.
One Tower Bridge, 100 Front Street, West Conshohocken, PA 19428
This Proxy Is Solicited on Behalf of the Board of Directors of U.S. Bioscience,
Inc. for the Special Meeting of Stockholders to be Held [month, day], 1999
The undersigned, a record holder of shares of common stock of U.S.
BIOSCIENCE, INC. as of [month, day], 1999, hereby constitutes and appoints C.
BOYD CLARKE, ROBERT I. KRIEBEL and MARTHA E. MANNING, and each of them acting
individually, as the attorney and proxy of the undersigned, with full power of
substitution, for and in the name and stead of the undersigned, to attend the
Special Meeting of Stockholders of the Company to be held on [month, day], 1999,
at [time] at [The Philadelphia Marriott West, 111 Crawford Avenue, West
Conshohocken, Pennsylvania], and any adjournments or postponements thereof, and
thereat to vote as specified in this proxy all shares of Common Stock, which the
undersigned would be entitled to vote if personally present, upon the matter set
forth below and described in the accompanying proxy statement/prospectus and
upon all matters that may properly come before the Special Meeting.
The U.S. Bioscience Board Of Directors Recommends A Vote For The Following
Proposal:
To consider and vote upon a proposal to adopt the merger agreement among
MedImmune, a wholly-owned subsidiary of MedImmune and U.S. Bioscience. In
the merger, U.S. Bioscience will become a wholly-owned subsidiary of
MedImmune, and all outstanding shares of U.S. Bioscience common stock will
be converted into the right to receive shares of MedImmune common stock.
FOR [_] AGAINST [_] ABSTAIN [_]
The proxy will be voted as you specify above with respect to the matter set
forth above. If this proxy is executed but no choice is indicated, the shares
represented by this proxy will be voted for the approval and adoption of the
agreement and plan of merger and otherwise in the discretion of the proxy
holders.
Please be sure to sign and date the Proxy on the reverse side. (Continued
and to be signed on reverse side)
<PAGE>
[Reverse]
(Continued from other side)
NOTE: Please sign this Proxy exactly as name(s) appears on this Proxy.
When signing as attorney-in-fact, executor, administrator, trustee or
guardian, pleas add your title as such. If signer is a corporation,
please sign in full corporate name by duly authorized officer or
officers. Where stock is issued in the name of two or more persons,
all such persons should sign. The undersigned hereby acknowledges
receipt of the Notice of the Special Meeting and of the Proxy
Statement/Prospectus.
Dated:_____________________________________, 1999
Signed:______________________________________
______________________________________
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
