<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1997
REGISTRATION STATEMENT NO. 333-20119
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
AMENDMENT NO. 1
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________
MEDAREX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEW JERSEY 8731 22-2822175
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1545 ROUTE 22 EAST
ANNANDALE, NEW JERSEY 08801
(908) 713-6001
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------------
DONALD L. DRAKEMAN
MEDAREX, INC.
1545 ROUTE 22 EAST
ANNANDALE, NEW JERSEY 08801
(908) 713-6001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------------
COPY TO:
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DWIGHT A. KINSEY, ESQ. DAVID RONN, ESQ.
SATTERLEE STEPHENS BURKE & BURKE LLP BRACEWELL & PATTERSON, L.L.P.
230 PARK AVENUE SOUTH TOWER PENNZOIL PLACE
NEW YORK, NEW YORK 10169 711 LOUISIANA STREET, SUITE 2900
(212) 818-9200 HOUSTON, TEXAS 77002-2781
(713) 221-1212
</TABLE>
______________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------
If the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box [X].
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
<PAGE>
MEDAREX, INC.
Cross Reference Sheet Pursuant to Rule 404(a) of
Regulation C and Item 501(b) of Regulation S-K
Showing Location in the Proxy Statement and Prospectus
of the Information Required by Part I of Form S-4
<TABLE>
<CAPTION>
LOCATION OR
HEADING IN
PROXY STATEMENT
ITEM OF FORM S-4 AND PROSPECTUS
- ---------------- --------------
A. INFORMATION ABOUT THE TRANSACTION
- -- ---------------------------------
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1. Forepart of Registration Statement and Outside Front..................... Forepart of Registration
Cover Page of Prospectus Statement; Outside Front Cover Page of Proxy
Statement and Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus................... Inside Front Cover Page of
of Proxy Statement and
Prospectus; Table of
Contents; AVAILABLE
INFORMATION; INCORPORATION
BY REFERENCE
3. Risk Factors, Ratio of Earnings to Fixed Charges, and
Other Information......................................................... SUMMARY;
RISK FACTORS
4. Terms of the Transaction.................................................. SUMMARY; THE
MERGER; THE
MERGER AGREEMENT;
COMPARISON OF
STOCKHOLDER RIGHTS;
INCORPORATION BY
REFERENCE
5. Pro Forma Financial Information........................................... SUMMARY; MEDAREX AND
HBI UNAUDITED PRO FORMA
COMBINED CONDENSED
FINANCIAL STATEMENTS
6. Material Contacts with the Company Being Acquired......................... THE MERGER
7. Additional Information Required for Reoffering by Persons and............. *
Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel.................................... *
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................................ *
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1
<PAGE>
<TABLE>
<CAPTION>
B. INFORMATION ABOUT THE REGISTRANT
--------------------------------
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10. Information with Respect to S-3 Registrants............................... SUMMARY; SELECTED
INFORMATION
CONCERNING MEDAREX;
INCORPORATION BY
REFERENCE
11. Incorporation of Certain Information by Reference......................... INCORPORATION BY
REFERENCE
12. Information with Respect to S-2 or S-3 Registrants........................ *
13. Incorporation of Certain Information by Reference......................... *
14. Information with Respect to Registrants Other than S-3 or S-2
Registrants............................................................... *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
- -- --------------------------------------------
15. Information with Respect to S-3 Companies................................. *
16. Information with Respect to S-2 or S-3 Companies.......................... SUMMARY; SELECTED
INFORMATION
CONCERNING HBI;
INCORPORATION BY
REFERENCE
17. Information with Respect to Companies Other than S-2 or S-3
Companies................................................................. *
D. VOTING AND MANAGEMENT INFORMATION
- -- ---------------------------------
18. Information if Proxies, Consents or Authorizations are to be
Solicited................................................................. Outside Front Cover
of Proxy Statement and
Prospectus; SUMMARY;
SPECIAL MEETING; THE
MERGER; SELECTED
INFORMATION
CONCERNING MEDAREX;
SELECTED
INFORMATION
CONCERNING HBI;
INCORPORATION BY
REFERENCE
19. Information if Proxies, Consents or Authorizations are not
to be Solicited; or in an Exchange Offer.................................. *
</TABLE>
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* Not applicable or the answer is negative.
2
<PAGE>
HOUSTON BIOTECHNOLOGY INCORPORATED
(A DELAWARE CORPORATION)
3608 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 27, 1997
To the Stockholders of
Houston Biotechnology Incorporated:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Houston Biotechnology Incorporated, a Delaware corporation ("HBI"),
will be held at the offices of HBI at 3608 Research Forest Drive, The Woodlands,
Texas 77381, at 10:00 a.m., local time, on February 27, 1997, to consider and
act upon the following matters which are described in more detail in the
accompanying Proxy Statement and Prospectus:
1. To consider and vote upon a proposal recommended by the Board of
Directors of HBI to approve and adopt a plan of merger in accordance with the
Agreement and Plan of Merger dated December 18, 1996, among HBI, Medarex, Inc.
("Medarex") and Medarex Acquisition Corp. ("Merger Sub") pursuant to which (i)
Merger Sub shall be merged with and into HBI with HBI being the surviving
corporation and resulting in HBI being a wholly-owned subsidiary of Medarex, and
(ii) each share of common stock, par value $0.01 per share, of HBI shall be
converted into the right to receive 0.182 shares of Medarex common stock, par
value $0.01 per share; and
2. To transact any and all other business that may properly come before
the Special Meeting or any adjournment or adjournments thereof.
HBI has fixed the close of business on January 24, 1997, as the record date
for determining stockholders entitled to notice of, and to vote at, the Special
Meeting and any adjournment thereof. A complete list of the stockholders
entitled to vote at the meeting or any adjournment thereof will be maintained at
HBI's principal executive offices, will be open to examination by any
stockholder for any purpose germane to the meeting during ordinary business
hours for a period of ten days prior to the meeting, and will be produced at the
time and place of the meeting during the whole time thereof.
Any stockholder of HBI giving a proxy has the unconditional right to revoke
his proxy at any time prior to the voting thereof (i) by attendance at the
Special Meeting and voting in person, (ii) by delivering a duly executed proxy
bearing a later date, or (iii) by giving written notice of revocation to HBI
addressed to Mr. J. Russell Denson, President, Houston Biotechnology
Incorporated, 3608 Research Forest Drive, The Woodlands, Texas 77381; no such
revocation shall be effective, however, until such notice of revocation has been
received by HBI at or prior to the meeting. If a stockholder does not specify a
choice on his proxy, the proxy will be voted in favor of the above proposals.
Further information regarding the Special Meeting is set forth in the attached
Proxy Statement and Prospectus.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. HOWEVER, WHETHER
OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE COMPLETE,
SIGN, VOTE AND RETURN THE ACCOMPANYING PROXY WITHOUT DELAY IN THE ENCLOSED
POSTPAID ENVELOPE. THE PROXY IS REVOCABLE AND WILL NOT BE USED IF YOU ARE
PRESENT AND PREFER TO VOTE IN PERSON.
By Order of the Board of Directors
/s/ J. RUSSELL DENSON
__________________________________
J. Russell Denson
President
The Woodlands, Texas: January 29, 1997
<PAGE>
MEDAREX, INC.
HOUSTON BIOTECHNOLOGY INCORPORATED
PROXY STATEMENT AND PROSPECTUS
---------------------------------------------
GENERAL INFORMATION
This Proxy Statement and Prospectus ("Proxy Statement and Prospectus") is
being furnished to the stockholders of Houston Biotechnology Incorporated, a
Delaware corporation ("HBI"), in connection with the solicitation of proxies by
HBI's Board of Directors ("HBI Board") for use at the Special Meeting of
Stockholders of HBI ("Special Meeting") to be held at the offices of HBI at 3608
Research Forest Drive, The Woodlands, Texas 77381, at 10:00 a.m., local time, on
February 27, 1997, and at any adjournments or postponements of the Special
Meeting. At the Special Meeting, holders of record as of January 24, 1997, of
common stock, par value $0.01 per share, of HBI ("HBI Common Stock") will be
requested to consider and vote upon a proposal recommended by the HBI Board to
approve and adopt a plan of merger in accordance with the Agreement and Plan of
Merger dated December 18, 1996 ("Merger Agreement") among HBI, Medarex, Inc., a
New Jersey corporation ("Medarex"), and Medarex Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Medarex ("Merger Sub"), pursuant
to which (i) Merger Sub shall be merged with and into HBI ("Merger") with HBI
being the surviving corporation and resulting in HBI being a wholly-owned
subsidiary of Medarex, and (ii) each share of HBI Common Stock shall be
converted into the right to receive 0.182 shares of Medarex common stock, par
value $0.01 per share ("Medarex Common Stock"). As part of the Merger, all of
the outstanding warrants to acquire HBI Common Stock issued pursuant to that
certain Warrant Agreement dated May 24, 1993 (the "HBI Warrants") and all
outstanding options to acquire HBI Common Stock will be assumed by Medarex.
This Proxy Statement and Prospectus also includes and constitutes the
Prospectus of Medarex filed as part of its Registration Statement on Form S-4
(together with all amendments thereto, the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the issuance of Medarex
Common Stock pursuant to the Merger Agreement and the Medarex common stock
purchase warrants ("Medarex Warrants") to be issued in the Merger in exchange
for the HBI Warrants as well as the shares of Medarex Common Stock issuable upon
exercise of the Medarex Warrants.
This Proxy Statement and Prospectus and the accompanying form of proxy are
first being mailed on or about January 29, 1997, to all stockholders of record
of HBI as of the Record Date (as defined below).
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH A DECISION TO VOTE WITH RESPECT TO THE PROPOSALS SET FORTH IN THIS PROXY
STATEMENT AND PROSPECTUS, SEE "RISK FACTORS" BEGINNING ON PAGE 11.
THE HBI BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT AND THE MERGER.
---------------------------------------------
THE SECURITIES TO WHICH THIS PROXY STATEMENT AND PROSPECTUS RELATE HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT AND
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------------------
The date of this Proxy Statement and Prospectus is January 29, 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED BY HBI OR MEDAREX TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT AND PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HBI OR
MEDAREX. THIS PROXY STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT AND PROSPECTUS OR A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE,
OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT AND PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROXY STATEMENT AND PROSPECTUS
RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN SINCE THE DATE HEREOF.
TABLE OF CONTENTS
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Page
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GENERAL INFORMATION.................................................... 1
SUMMARY................................................................ 4
RISK FACTORS........................................................... 11
Risks Related to the Merger Agreement and the Merger................. 11
Risks Related to Medarex............................................. 11
Risks Related to the Industry........................................ 15
COMPARATIVE MARKET PRICE DATA.......................................... 16
DIVIDENDS.............................................................. 16
PROXY STATEMENT AND PROSPECTUS......................................... 17
SPECIAL MEETING........................................................ 17
Purpose of the Meeting............................................... 17
Voting Rights........................................................ 17
MEDAREX AND HBI
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.......... 18
THE MERGER............................................................. 23
Background of the Merger............................................. 23
Recommendation of the HBI Board; Effects and Reasons for the Merger.. 24
Fairness Opinion..................................................... 25
Certain Federal Income Tax Consequences of the Merger................ 25
Federal Securities Law Matters....................................... 27
Accounting Treatment................................................. 27
Appraisal Rights..................................................... 28
THE MERGER AGREEMENT................................................... 28
General Description of the Merger.................................... 28
Closing; Effective Time.............................................. 29
Exchange of Stock Certificates and Warrants.......................... 29
No Fractional Shares................................................. 29
Representations and Warranties....................................... 29
Certain Covenants.................................................... 30
Additional Agreements................................................ 31
No Solicitations of Other Transactions............................... 31
</TABLE>
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<PAGE>
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Insurance; Indemnification........................................... 32
Conditions to the Merger............................................. 32
Termination.......................................................... 32
Expenses and Termination Fee......................................... 33
Amendment and Waiver................................................. 33
Convertible Notes.................................................... 34
License Agreement.................................................... 34
SELECTED INFORMATION CONCERNING MEDAREX................................ 35
General.............................................................. 35
Description of Medarex Capital Stock................................. 36
Shares Eligible For Future Sale...................................... 37
SELECTED INFORMATION CONCERNING HBI.................................... 37
General.............................................................. 37
Securities Ownership of Certain Beneficial Owners and Management..... 39
COMPARISON OF STOCKHOLDER RIGHTS....................................... 40
General Stockholder Vote Requirements................................ 40
Cumulative Voting.................................................... 41
Rights of Dissenting Stockholders.................................... 41
Stockholders' Consent to Corporate Action............................ 41
Preemptive Rights.................................................... 42
Dividends and Other Distributions.................................... 42
By-Laws.............................................................. 42
Directors............................................................ 42
Limitations of Liability of Directors and Officers................... 42
Stockholder Protection Legislation................................... 43
LEGAL OPINION.......................................................... 44
EXPERTS................................................................ 44
SOLICITATION OF PROXIES................................................ 44
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS........................ 44
AVAILABLE INFORMATION.................................................. 45
INCORPORATION BY REFERENCE............................................. 45
DATE FOR RECEIPT OF PROPOSALS.......................................... 46
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS............................... 47
OTHER MATTERS.......................................................... 47
</TABLE>
Annex A - Fairness Opinion
Annex B - Merger Agreement
-3-
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the detailed information appearing elsewhere in
this Proxy Statement and Prospectus or incorporated herein by reference.
Capitalized terms used and not otherwise defined in this summary have the
meanings given to them elsewhere herein. Stockholders of HBI are urged to read
this Proxy Statement and Prospectus in its entirety.
SPECIAL MEETING
This Proxy Statement and Prospectus is being furnished to holders of shares of
HBI Common Stock, in connection with the solicitation of proxies by the HBI
Board for use at the Special Meeting of HBI to be held at 3608 Research Forest
Drive, The Woodlands, Texas 77381, at 10:00 a.m., local time, on February 27,
1997, and at any adjournments thereof. At the Special Meeting, holders of record
as of January 24, 1997, of HBI Common Stock will be requested to consider and
vote upon a proposal to approve and adopt the Merger Agreement and the Merger.
The HBI Board has fixed the close of business on January 24, 1997, as the record
date for the determination of holders of HBI Common Stock entitled to notice of
and to vote at the Special Meeting ("Record Date"). See "Special Meeting."
The HBI Board approved the Merger Agreement, the Merger and the transactions
contemplated thereby by the unanimous vote of its directors and recommends that
HBI stockholders vote "FOR" approval and adoption of the Merger Agreement and
the Merger. See "The Merger--Background of the Merger;--Recommendation of the
HBI Board; Effects of and Reasons for the Merger."
THE MERGER
Pursuant to the Merger Agreement and the Merger, Merger Sub shall be merged with
and into HBI with HBI being the surviving corporation and resulting in HBI being
a wholly-owned subsidiary of Medarex. At the effective time of the Merger (the
"Effective Time"), each share of HBI Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive 0.182 (the "Exchange Ratio") shares of Medarex Common Stock. All
outstanding HBI Warrants and all outstanding options to acquire HBI Common Stock
will be assumed by Medarex. Consequently, after the Effective Time, HBI Warrants
and options to acquire HBI Common Stock will be exercisable into such number of
shares of Medarex Common Stock equal to the number of shares of HBI Common Stock
subject to such HBI Warrant or option immediately prior to the Effective Time
multiplied by the Exchange Ratio and the exercise price shall be equal to the
exercise price of such HBI Warrant or option immediately prior to the Effective
Time divided by the Exchange Ratio. ACCORDINGLY, IT IS NOT NECESSARY FOR HOLDERS
OF HBI WARRANTS OR OPTIONS TO EXERCISE SUCH HBI WARRANTS OR OPTIONS PRIOR TO THE
EFFECTIVE TIME TO RECEIVE THE ECONOMIC EQUIVALENT OF THE CONSIDERATION TO BE
RECEIVED BY HOLDERS OF HBI COMMON STOCK IN THE MERGER. See "The Merger
Agreement--General Description of the Merger."
The Medarex Common Stock is traded on the Nasdaq National Market ("Nasdaq")
under the symbol "MEDX." Simultaneously with the closing of the Merger, it is
expected that the Medarex Warrants will be listed on Nasdaq. See "The Merger--
Exchange of Stock Certificates" and "Selected Information Concerning Medarex--
Description of Medarex Capital Stock."
-4-
<PAGE>
PARTIES TO THE MERGER
Medarex
Medarex is an antibody-based biopharmaceutical company developing therapeutic
products for cancer, AIDS and other life-threatening diseases based on
proprietary technology in the field of immunology. Medarex's products are
designed either to enhance and direct a specific immune response or to block or
diminish an undesirable immunological activity. Medarex's broad technology
platform has led to several products now in clinical trials and to three
strategic alliances and has the potential to provide the foundation for new
products and new strategic alliances in various therapeutic areas. At present,
Medarex has five products in ten human clinical trials for the treatment of
breast cancer, head and neck cancer and a variety of other solid tumor cancers,
leukemia and AIDS. As of the date of this Proxy Statement and Prospectus,
Medarex does not have any products in Phase III clinical trials and none of the
products under development by Medarex has been approved by the United States
Food and Drug Administration ("FDA") for sale. See "Medarex and HBI Unaudited
Pro Forma Combined Condensed Financial Statements," "Selected Information
Concerning Medarex" and "Incorporation by Reference."
HBI
HBI is engaged primarily in the research and development of monoclonal antibody
and other biopharmaceutical products to prevent secondary cataract and treat
glaucoma, disorders that impair or destroy human vision. HBI's principal
expertise is its monoclonal antibody-based immunoconjugate technology, which
involves the linking of a monoclonal antibody to another substance such as a
drug or an anti-proliferative agent. HBI has no products approved for sale by
the FDA and its current product candidates are not expected to generate
significant revenues, if any, for a number of years. See "Selected Information
Concerning HBI" and "Incorporation by Reference."
Merger Sub
Merger Sub, a wholly-owned subsidiary of Medarex, was formed to facilitate the
Merger and has engaged in no activities other than activities incidental to the
Merger.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares of
HBI Common Stock entitled to vote thereon is required to approve and adopt the
Merger Agreement and the Merger. On the Record Date, there were 5,638,707 shares
of HBI Common Stock issued and outstanding and the executive officers and
directors of HBI had the right to vote 20,853 (approximately 0.37%) shares of
HBI Common Stock. Each holder of HBI Common Stock will be entitled to one vote
for each share of HBI Common Stock owned of record as of the Record Date. See
"Special Meeting--Voting Rights" and "Selected Information Concerning HBI--
Securities Ownership of Certain Beneficial Owners and Management."
If a stockholder returns a signed proxy card, but does not indicate how his or
her shares are to be voted, the shares represented by the proxy card will be
voted "FOR" the adoption and approval of the Merger Agreement and the Merger.
RECOMMENDATION OF THE
HBI BOARD; EFFECTS OF AND
REASONS FOR THE MERGER
The HBI Board believes that the terms of the Merger are fair to and that the
Merger is in the best interests of HBI and its stockholders. Accordingly, the
HBI Board has unanimously approved the Merger Agreement, the Merger and the
transactions contemplated thereby and recommends approval of the
-5-
<PAGE>
Merger Agreement and the Merger by HBI stockholders. The HBI Board believes
that the Merger offers HBI stockholders the opportunity to participate in an
enterprise with a broader technology portfolio and greater financial strength
and that, without the Merger or a similar strategic transaction, HBI would lack
the critical mass, financial strength and other characteristics to maximize its
potential.
See "The Merger--Background of the Merger," "--Recommendation of the HBI Board;
Effects of and Reasons for the Merger" and "--Fairness Opinion."
FAIRNESS OPINION
Strategen, L.L.C. ("Strategen") delivered its written opinion dated December 16,
1996, to the HBI Board to the effect that the terms of the Merger are fair to
the stockholders of HBI from a financial point of view. The full text of the
written opinion of Strategen, which sets forth certain assumptions, factors and
limitations on the review undertaken, is attached as Annex A to this Proxy
Statement and Prospectus and should be read carefully in its entirety.
Strategen's opinion is directed only to the fairness of the terms of the Merger
to the stockholders of HBI from a financial point of view and is not intended to
be and does not constitute a recommendation to any stockholder of HBI as to how
such stockholder should vote with respect to the Merger Agreement and Merger.
See "The Merger--Fairness Opinion" and Annex A hereto.
CONDITIONS TO THE MERGER;
TERMINATION OF THE MERGER
AGREEMENT
In addition to the approval and adoption of the Merger Agreement and the Merger
by the stockholders of HBI, the consummation of the Merger is subject to the
satisfaction or waiver of certain other conditions, including among others (i)
authorization for the listing on the Nasdaq, upon official notice of issuance,
of Medarex Common Stock issuable to HBI stockholders in the Merger, (ii)
effectiveness of the Registration Statement, and (iii) there being in effect no
injunction or other order, legal constraint or prohibition preventing the
consummation of the Merger. The Merger Agreement may be terminated upon the
occurrence of certain events, including, by either Medarex or HBI if the Merger
shall not have been consummated by June 30, 1997. See "The Merger Agreement--
Conditions to the Merger" and "--Termination."
TERMINATION FEE
Upon the termination of the Merger Agreement in certain specified circumstances,
Medarex would be entitled to receive a fee from HBI in an amount of $750,000.
See "The Merger Agreement--Expenses and Termination Fee."
COMPARISON OF STOCKHOLDER
RIGHTS
The rights of HBI's stockholders are governed by the Delaware General
Corporation Law (the "DGCL"), HBI's Restated Certificate of Incorporation, as
amended (the "HBI Charter"), and HBI's By-Laws, as amended (the "HBI By-Laws").
As of the Effective Time, stockholders of HBI will become stockholders of
Medarex. As such, their rights will thereafter be governed by the New Jersey
Corporation Act ("NJCA"), Medarex's Restated Certificate of Incorporation, as
amended (the "Medarex Charter"), and Medarex's By-Laws, as amended (the "Medarex
By-Laws"). See "Comparison of Stockholder Rights" for a summary of the material
differences between the rights of holders of Medarex Common Stock and the rights
of holders of HBI Common Stock.
-6-
<PAGE>
APPRAISAL RIGHTS
No stockholder of HBI shall have appraisal rights with respect to the Merger.
See "The Merger--Appraisal Rights."
ACCOUNTING TREATMENT
The Merger is expected to be accounted for using the purchase method of
accounting. This method of accounting treats a business combination as the
acquisition of one enterprise by another. See "The Merger--Accounting
Treatment."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER
It is the intention of Medarex and HBI that the Merger will qualify as a "tax
free reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), for accounting and financial reporting
purposes. See "The Merger--Certain Federal Income Tax Consequences of the
Merger."
-7-
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED
PRO FORMA FINANCIAL INFORMATION
The summary of historical financial data of Medarex and HBI presented below
is derived from the historical audited financial statements of HBI and Medarex,
except for the data presented below for the nine months ended September 30, 1996
and 1995, which are derived from the unaudited financial statements which, in
the opinion of management of HBI and Medarex, as applicable, reflect all
adjustments, consisting of only normal, recurring adjustments, necessary for the
fair presentation of such information. The summary pro forma financial data of
Medarex as of and for the nine-months ended September 30, 1996 and the year
ended December 31, 1995, are derived from the pro forma financial statements of
Medarex that appear elsewhere in this Proxy Statement and Prospectus. The pro
forma balance sheet dated as of September 30, 1996 gives effect to the Merger as
if it had occurred on September 30, 1996. The pro forma statement of operations
data give effect to the Merger as if it had occurred on January 1, 1995.
The pro forma financial information of Medarex does not purport to
represent what Medarex's results of operations or financial position actually
would have been had the Merger, in fact, occurred on the date or at the
beginning of the period indicated, nor is it intended to project Medarex's
results of operations or financial position for any future data or period. The
data presented below should be read in conjunction with the selected historical
financial data, managements' discussion and analysis of financial condition and
results of operations, the financial statements and the related notes thereto
incorporated herein by reference. See "Incorporation by Reference."
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF HBI(1)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993(2) 1992(3) 1991
---------- ---------- ---------- ---------- ---------- ----------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $1,009,541 $ 78,332 $ 526,048 $ 298,127 $ 461,728 $ 395,753 $ 471,873
Expenses:
Research and development 1,179,757 1,612,918 2,152,390 3,274,078 3,218,344 2,976,532 2,813,027
General and administrative and other 462,977 594,096 849,896 1,254,423 1,068,008 636,913 362,208
Minority interest --- --- --- --- (379,863) (397,209) ---
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses 1,642,734 2,207,014 3,002,286 4,528,501 3,906,489 3,216,236 3,175,235
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss $ (633,193) $(2,128,682) $(2,476,238) $(4,230,374) $(3,444,761) $(2,820,483) $(2,703,362)
========== =========== =========== =========== =========== =========== ===========
Net loss per share $(0.11) $(0.38) $(0.44) $(0.84) $(1.10) $(1.07) $(1.03)
Weighted average common shares
outstanding 5,638,707 5,638,707 5,638,707 5,043,581 3,147,159 2,628,232 2,628,232
BALANCE SHEET DATA:
Cash and cash equivalents $ 163,674 $ 540,340 $ 572,058 $ 2,238,272 $ 3,460,329 $ 4,682,275 $ 6,488,915
Total assets 556,751 1,093,367 1,110,562 3,042,278 4,340,422 5,609,303 10,184,626
Long term debt and capital
lease obligations 210,289 157,323 140,423 190,013 204,560 --- ---
Minority interest --- --- --- --- --- 921,080 ---
Stockholders' investment (762,311) 218,440 (129,116) 2,347,122 3,806,028 4,241,304 10,039,950
</TABLE>
- ------------------
(1) Until April 30, 1992, substantially all of HBI's research and
development activities on the Immunotoxin (as defined below) related to a
contract performed for Houston Biotech Partners, L.P. (the "Partnership"). On
that date, HBI acquired the assets and liabilities of the Partnership in
exchange for 2,628,232 shares of HBI Common Stock (the "Combination"). On July
30, 1993, HBI consummated a rights offering (the "Rights Offering"), resulting
in the sale of 657,101 shares of HBI Common Stock and 535,087 warrants to
purchase HBI Common Stock. Additionally, to qualify the HBI Warrants for
listing on the AMEX, HBI distributed 128,422 HBI Warrants pro rata to HBI's
stockholders. On July 30, 1993, the Partnership was dissolved and 2,628,232
shares of HBI Common Stock were distributed to the partners. HBI Common Stock
and HBI Warrants commenced trading on the AMEX on August 2, 1993 under the
symbols HBI and HBIWS, respectively. The terms of the Rights Offering contained
an adjustment feature pursuant to which HBI agreed to issue one HBI Warrant to
each stockholder of record on January 26, 1994 in the event that the sum of the
closing prices of (i) one share of HBI Common
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<PAGE>
Stock and (ii) one HBI Warrant averaged less than $5.00 for the 15 trading days
prior to January 26, 1994. On February 11, 1994, HBI issued an aggregate of
3,858,183 HBI Warrants to stockholders of record on January 26, 1994.
The Combination of HBI and the Partnership was accounted for as a
reverse acquisition with the Partnership treated as the acquiror of HBI. The
selected financial data of HBI for the five years in the period ended December
31, 1995 reflect the historical data of the Partnership until its dissolution on
July 30, 1993.
(2) For 1993, amounts reflect the Partnership's 82% interest in HBI
through July 30, 1993, with 18% reflected as minority interest. On that date,
the Partnership was dissolved and its shares were distributed to its partners.
Beginning August 1, 1993, amounts reflect 100% of HBI's activities with no
minority interest. Accordingly, the financial statements as of December 31,
1993 are not comparable to prior periods.
(3) For 1992, amounts reflect the Partnership's activities through
April 30, 1992 (the date of the Combination) and beginning May 1, 1992, its
approximately 82% interest in HBI. Accordingly, the financial statements as of
December 31, 1992, are not comparable to previous periods.
(4) Weighted average shares used in computing net loss per share equals
the number of shares issued to the Partnership in conjunction with the
Combination until dissolution of the Partnership on July 30, 1993. Weighted
average shares used in computing net loss per share after dissolution of the
Partnership includes all shares outstanding.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF MEDAREX
<TABLE>
<CAPTION>
Nine Months Ended September 30, Year Ended December 31,
------------------------------- --------------------------------------------
(unaudited) (Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- ------- -------
STATEMENT OF OPERATIONS
DATA:
Revenues:..................
Sales................... $ 210 $ 253 $ 312 $ 378 $ 406 $ 365 $ 366
Contract and license
revenues............... 1,551 981 1,467 200 --- --- 1,309
-------- -------- -------- -------- -------- ------- -------
Total revenues.......... $ 1,762 $ 1,234 $ 1,778 $ 578 $ 406 $ 365 $ 1,675
Costs and Expenses:
Cost of sales........... $ 100 $ 94 $ 123 $ 91 $ 82 $ 66 $ 57
Research and development 5,560 4,805 6,442 5,905 3,798 2,531 1,431
General and
administrative......... 1,863 1,691 2,275 2,154 2,361 2,165 873
-------- -------- -------- -------- -------- ------- -------
Total costs and
expenses............ $ 7,522 $ 6,591 $ 8,840 $ 8,150 $ 6,240 $ 4,761 $ 2,362
Operating loss.... (5,761) (5,356) (7,062) (7,573) (5,834) (4,396) (687)
Interest and dividend
income.................... 1,091 380 561 348 421 399 318
Interest expense........... (4) (6) (8) (11) (2) --- (217)
-------- -------- -------- -------- -------- ------- -------
Net loss................... $ (4,674) $ (4,983) $ (6,509) $ (7,236) $ (5,415) $(3,997) $ (585)
======== ======== ======== ======== ======== ======= =======
Net loss per share......... $(0.32) $(0.55) $(0.69) $(1.00) $(0.86) $(0.79) $(0.15)
Weighted average common
shares outstanding........ 14,515 9,024 9,457 7,269 6,304 5,049 3,838
BALANCE SHEET DATA:
Cash, cash equivalents and
marketable securities..... $ 33,733 $ 7,490 $ 15,729 $ 9,434 $ 9,687 $15,938 $11,349
Working capital............ 33,480 6,114 14,549 8,017 8,330 15,918 11,228
Total assets............... 38,212 10,901 19,240 13,017 12,640 16,943 11,942
Long term obligations...... 116 47 40 60 78 --- ---
Accumulated deficit........ (29,297) (23,096) (24,623) (18,113) (10,877) (5,462) (1,465)
Total stockholders' equity. 36,872 8,976 17,375 11,097 10,943 16,603 11,634
</TABLE>
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<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA OF MEDAREX
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1996 December 31, 1995
------------------ ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:.............................. $ 2,756 $ 2,245
Costs and Expenses..................... 9,165 22,483
Net loss........................... (5,307) (19,626)
Net loss per share..................... (.34) (1.87)
Shares used in computation of
net loss per share............... 15,542 10,483
BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities........................ $ 33,897
Working capital........................ 31,216
Total assets........................... 38,769
Long term obligations.................. 326
Accumulated deficit.................... (39,938)
Total stockholders' equity............. 34,735
</TABLE>
RISK FACTORS
Stockholders of HBI should consider carefully the factors discussed in detail
elsewhere in this Proxy Statement and Prospectus under the caption "Risk
Factors," which include risks related to the failure of the stockholders to
adopt and approve the Merger Agreement and the Merger and Medarex's ability to
operate the combined companies.
PRINCIPAL EXECUTIVE OFFICES
HBI's principal executive offices are located at 3608 Research Forest Drive, The
Woodlands, Texas 77381. HBI's telephone number is (713) 363-0999. Medarex's
principal executive offices are located at 1545 Route 22 East, Annandale, New
Jersey 08801. Medarex's telephone number is (908) 713-6001.
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<PAGE>
RISK FACTORS
In addition to the other information in this Proxy Statement and
Prospectus, the stockholders of HBI should consider carefully the risk factors
set forth below.
RISKS RELATED TO THE MERGER AGREEMENT AND THE MERGER
Operating Losses of HBI. During the last three years, HBI has
incurred recurring losses from operations. In addition, HBI's independent
public accountants, Arthur Andersen LLP, have included in their auditors' report
which covers HBI's financial statements for each of the fiscal years ended
December 31, 1994 and 1995, an explanatory paragraph which describes the
uncertainties that raise substantial doubt about HBI's ability to continue as a
going concern. There can be no assurance that (i) if the Merger is not
consummated, HBI will be able to continue operations or will be able to secure
financing sources, or (ii) after the Effective Time, Medarex will be able to
provide sufficient working capital to fund the operations of HBI.
Exercise of Rights under License Agreement. Medarex has made loans
aggregating $750,000 to HBI as required by the Merger Agreement. The notes
issued by HBI to Medarex to evidence such loans are secured by HBI's grant to
Medarex of an exclusive, transferable, perpetual license to use, further
develop, manufacture, sell and otherwise commercialize HBI's 4197X-RA
immunotoxin (the "Immunotoxin") in North America. If the notes are not paid in
full when due and payable, Medarex shall be able to exercise its rights under
the license. In that regard, should the HBI stockholders fail to approve and
adopt the Merger Agreement, HBI shall have 120 days in which to repay the
$750,000 principal amount plus all accrued interest. In such event, it is
unlikely that HBI could locate a financing source and HBI would lose the rights
to use and market the Immunotoxin in North America. See "The Merger Agreement--
Convertible Notes and "--License Agreement."
Additional Financing Requirements and Access to Capital Funding. The
operation of Medarex's business, including HBI, requires substantial capital
resources. It is anticipated that Medarex's current sources of liquidity will
be sufficient to meet the capital requirements of Medarex for a period of at
least 36 months from the date of this Proxy Statement and Prospectus, including
the anticipated additional expenses related to HBI's operations. The
acceleration of the development of Medarex's products will result in an increase
in the rate at which Medarex uses capital and in Medarex's rate of losses.
Medarex will continue to spend substantial funds to complete research and
development of its products for which Medarex is likely to require additional
funds. Medarex has no established bank lines of credit or other arrangements to
obtain financing. No assurance can be given that funds from operations or
additional funds will be available for Medarex to finance its development on
acceptable terms, if at all, in which case Medarex's business will be materially
adversely affected.
Challenges of Operating Combined Companies. Medarex's management will
face a number of challenges in combining the business of HBI with Medarex with
no assurance that such combination can be made successfully. The operations of
Medarex are located in New Jersey and the operations of HBI are located in
Texas, which presents logistical challenges in terms of consolidating
operations. Medarex management has not determined the extent to which it will
be able to make any consolidation, and there can be no assurance that any such
consolidation will significantly reduce costs and expenses. Any combination of
HBI's and Medarex's businesses is not anticipated to significantly reduce
competition.
Possible Limitation on Use of Net Operating Loss Carryforwards and
Certain Capitalized Costs. The Code provides for a limitation on the use of net
operating loss carryforwards and the ability to deduct certain capitalized costs
in the event of an ownership change. The Merger will result in HBI undergoing an
ownership change, and will limit HBI's ability to utilize its net operating
losses and to deduct certain capitalized research and development costs. The
full effect of these limitations has not been determined. In addition, it is
possible that the Merger, when included with other stock transactions of Medarex
during 1995 and 1996, will result in an ownership change for Medarex. Stock
transactions in 1989 and 1992 previously resulted in limitations on Medarex's
net operating loss carryforwards. The effect of an ownership change as a result
of the Merger has not been determined.
RISKS RELATED TO MEDAREX
History of Operating Losses and Accumulated Deficit. Medarex has
experienced operating losses in each year since its inception and, as of
September 30, 1996, had an accumulated deficit of $29,296,940. Medarex expects
its operating losses to increase at an accelerating rate over the next several
years as Medarex expands and accelerates its clinical trials and product
development efforts. In prior years, a significant portion of Medarex's
revenues was generated from collaborative development agreements. Medarex
currently has three such revenue-producing agreements, and its operating results
may be adversely affected if certain required milestones are not met. There is
no assurance that Medarex will be able to meet such milestones. The ability of
Medarex to achieve a profitable level of operations is dependent in large part
on obtaining regulatory approvals
-11-
<PAGE>
for its products, entering into agreements for product development and
commercialization and making the transition to a manufacturing and marketing
company, the achievement of any of which cannot be assured.
Early Stage of Product Development. Medarex's therapeutic products
are under development and no revenues have been generated from the sale thereof.
In addition, Medarex has generated only minimal revenues from the sale or
licensing of its research products. As of the date of this Proxy Statement and
Prospectus, Medarex does not have any products in Phase III clinical trials and
none of the products under development by Medarex have been approved by the FDA
for sale. If Medarex's products in preclinical studies advance to the clinical
stage, there can be no assurance that any positive therapeutic effects of these
products will be demonstrated in clinical trials or that toxic side effects will
not occur. With respect to those products which Medarex currently has in
various phases of clinical studies, there can be no assurance that these
products will prove to be effective or that significant toxic side effects will
not occur negating the therapeutic utility, if any, of the product. Furthermore,
any products which are successfully developed will be subject to various FDA
regulatory requirements including, but not limited to, FDA approval prior to
their commercial distribution. Such approval may take two to four years or more
following submission of the requisite marketing application, if it is complete,
and may never be obtained. Generally, only a small percentage of new
therapeutic products developed in the laboratory is eventually approved by the
FDA for commercial sale. No assurance can be given that Medarex will succeed in
the development and marketing of any therapeutic products.
Dependence on Strategic Alliances. Medarex has entered into strategic
alliances relating to the research and development and sales, marketing and co-
promotion of several of Medarex's potential products. Under these arrangements,
Medarex has granted to its corporate partners license rights in and to certain
of Medarex's potential products in exchange for the payment of license fees and
commitments for additional funding in the form of additional equity purchases,
research and development payments and milestone fees. Most of these payments
are subject to Medarex's achieving certain milestones or to the satisfaction of
Medarex's collaborators with testing results of the related product. Should
these arrangements be terminated, Medarex may be required to seek additional
funding from other sources and its research and product development efforts
would be adversely affected.
Patents and Proprietary Rights. Certain of the processes by which
Medarex is able to produce its products are proprietary; some of these
technologies are legally owned by Medarex and some are legally owned by others
and licensed, either on an exclusive or a non-exclusive basis, to Medarex.
Medarex believes that patent protection of materials or processes it develops
and any products that may result from Medarex's and licensors' research and
development efforts are important to the possible commercialization of Medarex's
products. Biotechnology firms' ability to obtain patents is generally highly
uncertain and involves complex legal and factual questions. To date, no
consistent policy has emerged regarding the breadth of claims allowed in
biotechnology patents. Accordingly, there can be no assurance that patent
applications relating to Medarex's products or technology will result in patents
being issued or that, if issued, the patents will afford protection against
competitors with similar technology. It is possible that patents issued to
Medarex will be successfully challenged. In addition, companies that obtain
patents claiming products or processes that are necessary for or useful to the
development of Medarex's products or otherwise covering aspects of Medarex's
technology can bring legal actions against Medarex claiming infringement.
Litigation to establish the validity of patents, to defend against infringement
claims or to assert infringement claims against others, if required, can be
lengthy and expensive. There can be no assurance that Medarex will have the
financial resources necessary to enforce any patent rights it may hold. Medarex
may be required to obtain licenses from others to develop, manufacture or market
its products. There can be no assurance that Medarex will be able to obtain such
licenses on commercially reasonable terms or that the patents underlying the
licenses will be valid and enforceable.
Medarex also relies upon unpatented proprietary technology, and no
assurance can be given that others will not independently develop substantially
equivalent proprietary information or techniques or otherwise gain access to
Medarex's proprietary technology or disclose such technology or that Medarex can
meaningfully protect its rights in such unpatented proprietary technology.
Medarex attempts and will continue to attempt to protect its
proprietary materials and processes by relying on trade secret laws and
nondisclosure and confidentiality agreements and exclusive licensing
arrangements with its employees and certain other persons who have access to
its proprietary materials or processes or who have licensing or research
arrangements exclusive to Medarex, including Medarex's Scientific Founders (as
defined below). Despite these protections, no assurance can be given that
others will not independently develop or obtain access to such materials or
processes or that Medarex's competitive position will not be adversely affected
thereby. Medarex does not have confidentiality agreements with members of
Medarex's Scientific Advisory Board. To the extent members of Medarex's
Scientific Advisory Board have consulting arrangements with or are employed by a
competitor of Medarex, Medarex could be materially adversely affected by the
disclosure of its confidential information by such members of the Scientific
Advisory Board.
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<PAGE>
Dilution. As of January 24, 1997, there were outstanding (i)
1,806,600 shares of Medarex Common Stock reserved for issuance pursuant to
options and warrants exercisable by 64 individuals who are present or former
employees, officers, directors and consultants of Medarex, at a weighted average
exercise price of $3.61 per share; and (ii) 120,474 shares of Medarex Common
Stock issuable upon the exercise of certain additional warrants at an exercise
price of $4.19 per share. Any exercise of such options and warrants will take
place at a time when Medarex would be able, in all likelihood, to obtain funds
from the sale of Medarex Common Stock at prices higher than the exercise price
thereof. As a result, HBI stockholders may incur substantial dilution of their
holdings of Medarex Common Stock.
In addition, upon consummation of the Merger, the outstanding options
to purchase HBI Common Stock will be converted into options to purchase up to
150,817 shares of Medarex's Common Stock at exercise prices ranging from $3.09
to $54.95 per share and the HBI Warrants will be converted into Medarex Warrants
to purchase 822,924 shares of Medarex Common Stock at an exercise price of
$51.54 per share.
The exercise of all or a portion of such options and HBI Warrants may
result in a significant increase in the number of shares of Medarex Common Stock
that will be subject to trading on the Nasdaq, and the issuance and sale of the
shares of Medarex Common Stock upon the exercise thereof may have an adverse
effect on the price of the Common Stock. See "--Possible Volatility of
Securities Prices."
Future Sales of Common Stock. Of the 17,594,992 shares of Medarex
Common Stock outstanding as of January 24, 1997, 3,130,263 are "restricted
securities" as that term is defined in Rule 144 under the Securities Act and
under certain circumstances may be sold without registration pursuant to such
rule. Medarex is unable to predict the effect that sales made under Rule 144 or
otherwise may have on the then prevailing market price of the Medarex Common
Stock. The issuance of a significant number of additional securities, or even
the possibility thereof, may depress the market price of such securities. See
"--Possible Volatility of Securities Prices."
Medarex has also filed registration statements on Form S-3 under the
Securities Act relating to 1,210,888 shares of Medarex Common Stock being
offered by certain selling security holders. Such shares of Medarex Common
Stock are freely tradeable without restriction or further registration under the
Securities Act, except for shares, if any, held by "affiliates" of Medarex which
shares will be subject to resale limitations of Rule 144.
Medarex has filed registration statements on Form S-8 under the
Securities Act to register the shares of Medarex Common Stock issuable under its
Amended and Restated 1987 Stock Option Plan (282,450 shares), Amended and
Restated EMP Plan (451,500 shares), Amended and Restated 1991 Stock Option Plan
(250,000 shares), 1992 Stock Option Plan (250,000 shares), 1994 Stock Option
Plan (300,000 shares), 1995 Stock Option Plan (350,000 shares) and 1996 Stock
Option Plan (350,000 shares). Upon consummation of the Merger, Medarex intends
to file a registration statement on Form S-8 to register up to 145,248 shares of
Medarex Common Stock issuable upon the exercise of the outstanding options to
purchase HBI Common Stock. Shares issued under such plans other than shares
issued to affiliates of Medarex, will be freely tradeable in the public market.
In addition, up to 822,924 shares of Medarex's Common Stock issuable
upon the exercise of the HBI Warrants assumed by Medarex under the terms of the
Merger have been registered pursuant to the Registration Statement and are
covered by this Proxy Statement and Prospectus. Said shares will be freely
tradeable without restrictions or further registration under the Securities Act.
Manufacturing and Marketing. Medarex has not yet commercially
introduced any products, except for sales of research products to scientists.
To be successful, Medarex's therapeutic products must be manufactured in
commercial quantities in compliance with regulatory requirements and at
acceptable costs. While Medarex believes its current facilities are adequate
for the production of its proposed products for clinical trials, such facilities
are not yet adequate for the production of any products for commercial sale. In
order to manufacture its products for such purposes, Medarex will have to
enhance its existing facilities and obtain requisite consents or acquire new
facilities, which will require additional funds and approval by the FDA and
other regulatory agencies. Medarex has no experience in large-scale
manufacturing, and no assurance can be given that Medarex will be able to make
the transition to commercial production successfully or achieve profitability.
Although Medarex intends to market certain of its products through a direct
sales force, if and when regulatory approval is obtained, it currently has no
marketing or sales staff. To the extent that Medarex determines not to, or is
unable to, arrange third party distribution for its products, significant
additional expenditures, management resources and time will be required to
develop a sales force. There can be no assurance that Medarex will be able to
establish such a sales force or be successful in gaining market acceptance for
its products.
-13-
<PAGE>
Product Liability. The clinical investigation, marketing and sale of
human health care products entail an inherent risk of allegations of product
liability, and there can be no assurance that product liability claims will not
be asserted against Medarex. Medarex currently has product liability insurance
coverage in the amount of $5,000,000 for use of its investigational products
during human clinical studies. Medarex expects to seek to obtain product
liability insurance if and when its products are commercialized; however, there
can be no assurance that adequate insurance coverage will be available at
acceptable costs, if at all, or that a product liability claim would not
materially adversely affect the business or financial condition of Medarex. Some
medical centers will not participate in FDA-approved clinical studies unless a
company has adequate product liability insurance.
Dependence on Key Personnel and Attraction of Key Employees and
Consultants. Medarex's success is dependent on certain key management and
scientific personnel. Competition for qualified employees among biotechnology
companies is intense, and the loss of key personnel, or the inability to attract
and retain the additional highly skilled employees required for the expansion of
Medarex's activities, could adversely affect its business. In the near future,
Medarex will also need to hire additional personnel skilled in the clinical
testing and regulatory process as it develops products with commercial
potential. There can be no assurance that Medarex will be able to attract or
retain such personnel. Medarex has obtained insurance on the lives of each of
Donald L. Drakeman, President and Chief Executive Officer, and Michael A.
Appelbaum, Senior Vice President - Finance and Administration, Secretary,
Treasurer and Chief Financial Officer, of which Medarex is the sole beneficiary,
in the amount of $2,000,000 for Dr. Drakeman and $1,000,000 for Mr. Appelbaum.
Dr. Drakeman and Mr. Appelbaum are subject to certain restrictions set forth in
their respective employment agreements. Medarex has experienced and expects to
continue to experience a period of significant growth in the number of new
employees necessary to support Medarex's business operations. Medarex's need to
manage growth effectively will also require it to continue to implement and
improve its operational, financial and management information systems and to
train, motivate and manage its employees. Medarex's failure to manage growth
effectively would have a material adverse effect on Medarex's results of
operations and its ability to execute its business strategy.
Medarex has obtained a substantial amount of its technology from the
Trustees of Dartmouth College ("Dartmouth"), and Dartmouth currently maintains
an equity interest in Medarex. Drs. Michael W. Fanger and Paul M. Guyre, two of
Medarex's principal founders (who, together with Dr. Edward D. Ball, formerly of
Dartmouth Medical School and now a faculty member at the University of
Pittsburgh Medical School, are Medarex's "Scientific Founders"), are members of
the faculty of Dartmouth Medical School.
Conflicts of Interest. Medarex relies on members of its Scientific
Advisory Board, which includes distinguished scientists with a wide range of
experience in the research and development of biopharmaceutical products, to
assist Medarex in formulating its research and development strategy. All of the
members of the Scientific Advisory Board are employed other than by Medarex and
may have commitments to or consulting or advisory contracts with other entities
that may limit their availability to Medarex.
Possible Volatility of Securities Prices. The market prices of
securities of biotechnology companies, including Medarex, have been volatile.
Various factors and events may have a significant impact on the trading prices
of Medarex Common Stock, including announcements by Medarex or any of its
competitors concerning testing results, the achievement of or failure to achieve
certain milestones, patents, regulatory approvals, proprietary rights,
arrangements with collaborative partners, technological innovations or new
commercial products, public concern about the safety of biotechnology in
general, or the sale or attempted sale of a large amount of Medarex Common Stock
into the market. See "Comparative Market Price Data."
Dividends. Medarex has not paid any cash dividends, and it is
unlikely that Medarex will pay any dividends in the foreseeable future.
Earnings, if any, will be retained in the business for further development and
expansion. There can be no assurance that Medarex will ever be in the position
to pay cash dividends.
Anti-takeover Provisions. The New Jersey Shareholder Protection Act
(the "NJ Protection Act") may make the acquisition of control of Medarex more
difficult or expensive. Generally, the NJ Protection Act prohibits an
"interested stockholder" from engaging in certain "business combinations" with
the corporation for a period of five years, unless the board of directors
approves the business combination prior to the date the stockholder becomes an
"interested stockholder." The NJ Protection Act could discourage an acquisition
attempt or other transactions in which stockholders might receive a premium over
the then current market price for their Medarex Common Stock. See "Comparison
of Stockholder Rights."
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RISKS RELATED TO THE INDUSTRY
Government Regulation. The research and development activities of
Medarex and HBI, as well as the investigation, manufacture, labeling,
distribution, marketing and sale of therapeutic products are subject to
extensive and rigorous regulation, including pre-market approval, by the FDA and
other state and foreign agencies. The process of obtaining FDA approval is
costly and time-consuming, and there can be no assurance that any product that
either Medarex or HBI may develop will be deemed to be safe and effective by the
FDA and granted marketing approval. Even if marketing approvals are obtained, a
product and its manufacturer are subject to continuing review, and later
discovery of previously unknown problems with a product or its manufacturer may
result in the imposition of restrictions on or sanctions against the product or
its manufacturer, including withdrawal of products from the market and other
enforcement actions. Delays in obtaining regulatory approvals may adversely
affect the marketing of any of Medarex's or HBI's products and the ability of
Medarex and HBI to receive product revenues and royalties.
Governmental Reforms. Health care reform is an area of increasing
national and international attention and a priority of many elected officials.
Several proposals to modify the current health care system in the United States
to improve access and control costs are currently being considered by both
federal and state governments. Any such reform measures could adversely affect
the amount of reimbursement available from governmental or private payors or
could affect the ability to set prices for newly approved therapeutic products.
Similar proposals are being considered by governmental officials in other
significant pharmaceutical markets, including Europe. It is uncertain what
proposals will be adopted or what actions governmental or private payors for
health care goods and services may take in response to proposed or actual
legislation in the United States or other important markets. Neither Medarex
nor HBI can predict the outcome of health care reform proposals or the effect
any such reforms may have on the business of either Medarex or HBI. Any such
proposals, if adopted, could have a material adverse effect on Medarex or HBI.
No Assurance of Adequate Reimbursement. The success of Medarex's and
HBI's products in the United States and other significant markets will depend in
part upon the extent to which a consumer will be able to obtain reimbursement
for the cost of such products from government health administration authorities,
private health insurers and other organizations. Uncertainty exists as to the
reimbursement status of any newly approved therapeutic product. There also can
be no assurance that adequate third party reimbursement by private insurers will
be available for such products. Even if approved for marketing, there can be no
assurance that (i) patients will have sufficient resources to pay for the
therapy, (ii) governmental or private payors will provide reimbursement for such
therapy, or (iii) any reimbursement policies will not adversely affect Medarex's
or HBI's ability to sell its products on a profitable basis.
Technological Change and Competition. The biotechnology industry is
subject to rapid and significant technological change. Competitors of Medarex
and HBI are engaged in all areas of biotechnology in the United States and
abroad and are numerous and include, among others, major pharmaceutical and
chemical companies, specialized biotechnology firms, universities and other
research institutions. There can be no assurance that Medarex's and HBI's
competitors will not succeed in developing technologies and products that are
more effective than any which are being developed by Medarex and HBI or which
would render Medarex's and HBI's technology and products obsolete or non-
competitive. Many of these competitors have substantially greater financial and
technical resources and production and marketing capabilities than Medarex and
HBI. In addition, many of Medarex's and HBI's competitors have significantly
greater experience than Medarex and HBI in undertaking preclinical testing and
clinical trials of new or improved therapeutic products and obtaining FDA and
other regulatory approvals of products for use in health care. Accordingly,
Medarex's and HBI's competitors may succeed in obtaining FDA approval for
products more rapidly than Medarex or HBI.
-15-
<PAGE>
COMPARATIVE MARKET PRICE DATA
Medarex Common Stock has traded on Nasdaq under the symbol "MEDX" since
June 20, 1991. HBI Common Stock has traded on the American Stock Exchange (the
"AMEX") under the symbol "HBI" since August 2, 1993. The following table sets
forth the high and low sales prices for the Medarex Common Stock on Nasdaq and
for the HBI Common Stock on AMEX for the calendar quarters indicated, in each
case based on published financial sources.
<TABLE>
<CAPTION>
Medarex HBI
Common Stock Common Stock
------------------- -----------------------
High Low High Low
--------- ------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal Year 1994
First Quarter.............................. $ 8 1/8 $5 3/4 $ 3 1/8 $ 1 13/16
Second Quarter............................. 7 1/4 3 7/8 2 3/8 1
Third Quarter.............................. 6 1/4 3 3/4 1 5/8 1
Fourth Quarter............................. 4 1/4 2 1/2 2 1/2 3/4
Fiscal Year 1995
First Quarter.............................. 4 1/8 2 3/8 1 1/16 5/8
Second Quarter............................. 6 1/2 2 3/4 1 5/16
Third Quarter.............................. 7 1/2 4 3/8 7/8 1/2
Fourth Quarter............................. 7 1/8 6 1/2 7/8 3/8
Fiscal Year 1996
First Quarter.............................. 7 1/8 6 1/2 2 3/16 7/16
Second Quarter............................. 12 1/4 6 1/4 2 11/16 1
Third Quarter.............................. 9 5 3/8 2 3/4
Fourth Quarter............................. 9 6 1/4 1 3/8 5/8
Fiscal Year 1997
First Quarter (through January 24, 1997).. 9 7/8 6 5/8 1 9/16 1
</TABLE>
- ----------------
The proposed Merger was publicly announced at the commencement of
trading on December 9, 1996 after the execution of a letter of intent between
Medarex and HBI. The closing sale price of a share of Medarex Common Stock on
the Nasdaq on December 6, 1996 (the last trading day prior to such announcement)
was $ 8 3/8, and the closing sale price of a share of HBI Common Stock on AMEX
on such date was $ 15/16.
On January 24, 1997 (the last practicable date prior to the mailing
of this Proxy Statement and Prospectus), the closing sale price of a share of
Medarex Common Stock on the Nasdaq was $ 9 1/8 and the closing sale price of a
share of HBI Common Stock on the AMEX was $ 1 3/8.
HBI STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
MEDAREX COMMON STOCK AND THE HBI COMMON STOCK BEFORE DECIDING HOW TO VOTE.
DIVIDENDS
Medarex has not paid any cash dividends on the Medarex Common Stock
and does not anticipate paying cash dividends in the foreseeable future. Medarex
intends to retain any earnings to finance the growth of Medarex. The Medarex
Board of Directors will review its dividend policy from time to time to
determine the feasibility and desirability of paying dividends, after giving
consideration to Medarex's earnings, financial condition, capital requirements
and such other factors as the Medarex Board of Directors deems relevant. HBI
has not paid any cash dividends on the HBI Common Stock and does not intend to
pay any dividends prior to the Effective Time.
-16-
<PAGE>
MEDAREX, INC.
HOUSTON BIOTECHNOLOGY INCORPORATED
PROXY STATEMENT AND PROSPECTUS
-------------------
This Proxy Statement and Prospectus is being furnished to holders of
shares of HBI Common Stock in connection with the solicitation of proxies by the
HBI Board for use at the Special Meeting. At the Special Meeting, holders of
record of HBI Common Stock as of the Record Date will be requested to consider
and vote upon a proposal recommended by the HBI Board to approve and adopt the
Merger Agreement and the Merger pursuant to which (i) Merger Sub shall be merged
with and into HBI with HBI being the surviving corporation and resulting in HBI
being a wholly-owned subsidiary of Medarex, and (ii) each share of HBI Common
Stock shall be converted into the right to receive 0.182 shares of Medarex
Common Stock.
In addition, this Proxy Statement and Prospectus serves as the
prospectus of Medarex under the Securities Act for the issuance of up to
1,026,245 shares of Medarex Common Stock and 822,924 Medarex Warrants issuable
pursuant to the Merger Agreement as well as up to 822,924 shares of Medarex
Common Stock issuable upon exercise of the Medarex Warrants.
SPECIAL MEETING
PURPOSE OF THE MEETING
At the Special Meeting, the holders of HBI Common Stock will be asked
to consider and vote upon (i) a proposal to approve and adopt the Merger
Agreement and the Merger, and (ii) such other matters as may properly be brought
before the Special Meeting.
THE HBI BOARD UNANIMOUSLY APPROVED THE MERGER, THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT STOCKHOLDERS OF
HBI VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER PURSUANT TO THE MERGER
AGREEMENT.
See "The Merger--Background of the Merger;--Recommendation of the HBI
Board; Effects of and Reasons for the Merger."
DATE, TIME AND PLACE; RECORD DATE
The Special Meeting is scheduled to be held at 3608 Research Forest
Drive, The Woodlands, Texas, on February 27, 1997, at 10:00 a.m., local time.
The HBI Board has fixed the close of business on January 24, 1997, as the Record
Date. As of the Record Date, there were 5,638,707 shares of HBI Common Stock
issued and outstanding.
VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of
the aggregate issued and outstanding shares of HBI Common Stock entitled to vote
at the Special Meeting is necessary to constitute a quorum to transact business.
Assuming the presence of a quorum, the affirmative vote by the holders of a
majority of the outstanding shares of HBI Common Stock entitled to vote thereon
is required to approve and adopt the Merger Agreement and the Merger.
Abstentions on a specific proposal will be considered as present, but will not
be counted as voting in favor of such proposal. Broker non-votes, however, will
be deemed shares not entitled to vote on such matters, and therefore, will not
count as votes for or against the proposal, and will not be included in
calculating the number of votes necessary for approval of such matter. However,
because the proposal to approve the Merger Agreement requires the affirmative
vote of a specified percentage of outstanding shares, the nonvoting of shares,
abstentions or broker non-votes with regard to this proposal will have the same
effect as votes against the proposal. Holders of record of HBI Common Stock on
the Record Date are entitled to one vote per share on each proposal to be
presented to HBI stockholders at the Special Meeting. Votes at the Special
Meeting will be tabulated by an Inspector of Elections appointed by HBI.
If a stockholder attends the Special Meeting, he or she may vote by
ballot. When a proxy card is returned, properly signed and dated, the shares of
HBI Common Stock represented thereby will be voted in accordance with the
instructions on the proxy card. If a stockholder does not return a signed proxy
card, his or her shares of HBI Common Stock will not be voted and thus will have
the effect of a vote against the Merger Agreement and the Merger. Stockholders
are urged to mark the box on the proxy card to indicate how their shares of HBI
Common Stock are to be voted. If a stockholder returns a signed proxy
-17-
<PAGE>
card but does not indicate how his or her shares of HBI Common Stock are to be
voted, the shares of HBI Common Stock represented by the proxy card will be
voted "FOR" approval and adoption of the Merger Agreement and the Merger. The
proxy card also confers discretionary authority on the individuals appointed by
the HBI Board and named on the proxy card to vote the shares of HBI Common Stock
represented thereby on any other matter that is properly presented for action at
the Special Meeting.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF HBI. STOCKHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT AND
PROSPECTUS AND TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY TO HBI IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
MEDAREX AND HBI
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements give effect to the Merger under the purchase method of accounting.
The pro forma combined condensed financial statements are derived from and
should be read in conjunction with the respective historical financial
statements and the notes thereto of Medarex and HBI, which are incorporated by
reference in this Proxy Statement and Prospectus. The pro forma combined
condensed balance sheet combines Medarex's September 30, 1996 unaudited balance
sheet with HBI's September 30, 1996 unaudited balance sheet. The pro forma
combined condensed statements of operations combine Medarex's historical
condensed statements of operations for the fiscal year ended December 31, 1995
and the unaudited nine months ended September 30, 1996 with the corresponding
HBI historical condensed statements of operations for the fiscal year ended
December 31, 1995 and the unaudited nine months ended September 30, 1996,
respectively.
The unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the Merger had been consummated
at the beginning of the periods presented, nor is it necessarily indicative of
future operating results or financial position.
In the opinion of management of Medarex, all adjustments necessary to
present fairly this pro forma information have been made.
-18-
<PAGE>
MEDAREX, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Acquisition
Pro Forma
Medarex HBI Adjustments Total
------------- ------------- ------------------- -------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 20,013,274 $ 163,674 $ 20,176,948
Marketable securities 13,720,034 13,720,034
Other current assets 970,392 56,819 1,027,211
------------ ------------ ------------
Total current assets 34,703,700 220,493 34,924,193
Property and equipment, net 1,221,198 324,145 1,545,343
Other assets 2,287,234 12,113 2,299,347
------------ ------------ ------------
Total assets $ 38,212,132 $ 556,751 $ 38,768,883
============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities $ 1,223,948 $ 1,108,773 $ 1,375,000(2) $ 3,707,721
Long-term debt and other long-term
obligations 116,090 210,289 326,379
Stockholders' equity:
Common Stock 175,883 56,387 (46,125)(2) 186,145
Warrants 3,795,725 (3,795,725)
Capital in excess of
par value 65,804,521 21,847,646 (13,354,509)(2) 74,297,658
Unrealized gain on
securities 188,630 188,630
Accumulated deficit (29,296,940) (26,462,069) 15,821,359(3) (39,937,650)
------------ ------------ ------------ ------------
Total stockholders' equity 36,872,094 (762,311) (1,375,000) 34,734,783
------------ ------------ ------------ ------------
Total liabilities and stockholders'
equity $ 38,212,132 $ 556,751 $ -- $ 38,768,883
============ ============ ============ ============
</TABLE>
See notes to pro forma combined condensed financial statements
-19-
<PAGE>
MEDAREX, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Acquisition
Pro Forma
Medarex HBI Adjustments Total
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract and license revenues $ 1,551,191 $ 925,000 $ 2,476,191
Other revenue 210,468 69,013 279,481
----------- ----------- -----------
Total revenues 1,761,659 994,013 2,755,672
Costs and expenses
Research and development 5,559,690 1,179,757 6,739,447
General and administrative 1,862,846 462,977 2,325,823
Other 99,839 -- 99,839
----------- ----------- -----------
Operating loss (5,760,716) (648,721) (6,409,437)
Interest and dividend income, net 1,086,545 15,528 1,102,073
----------- ----------- -----------
Net loss $(4,674,171) $ (633,193) $(5,307,364)
=========== =========== ===========
Net loss per share $ (0.32) $ (0.34)
Shares used in computation
of net loss per share 14,515,314 15,541,559
</TABLE>
See notes to pro forma combined condensed financial statements
-20-
<PAGE>
MEDAREX, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Acquisition
Pro Forma
Medarex, Inc. HBI Adjustments Total
----------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Contract and license revenues $ 1,466,667 $ -- $ 1,466,667
Other revenue 311,733 466,386 778,119
------------ ------------ -------------
Total revenues 1,778,400 466,386 2,244,786
Costs and expenses
Research and development 6,442,159 2,152,390 8,594,549
General and administrative 2,274,892 849,896 3,124,788
Acquisition of in-process technology 10,640,710(3) 10,640,710
Other 123,421 -- 123,421
----------- ------------ ---------- -------------
Operating loss (7,062,072) (2,535,900) 10,640,710 (20,238,682)
Interest and dividend income, net 552,762 59,662 612,424
----------- ------------ ---------- -------------
Net loss $ (6,509,310) $ (2,476,238) $10,640,710 $ (19,626,258)
============ ============ =========== =============
Net loss per share $ (0.69) $ (1.87)
Shares used in computation
of net loss per share 9,456,763 10,483,008
</TABLE>
See notes to pro forma combined condensed financial statements
-21-
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Medarex anticipates acquiring all of the assets and liabilities of HBI in
exchange for 1,026,245 shares of Medarex Common Stock, 822,924 Medarex
Warrants and 150,817 options. The total cost of the proposed acquisition is
anticipated to be approximately $10.65 million, including assets acquired
of $556,751, liabilities assumed of $1,319,062, estimated transaction costs
of $650,000 and other estimated costs, including the consolidation of
facilities and reductions in workforce of approximately $725,000. Medarex
will record a charge to operations for the amount of in-process technology
immediately following the consummation of the proposed acquisition.
(2) The pro forma combined condensed balance sheet includes the adjustments
necessary as if the acquisition had occurred on September 30, 1996 to
reflect the preliminary allocation of the cost of the proposed acquisition
to the fair value of the net assets acquired, accrual of certain other
acquisition-related liabilities and issuance of Medarex Common Stock as
discussed in Note 1 and the elimination of HBI's equity accounts.
These adjustments are summarized as follows:
(a) Elimination of certain HBI equity accounts:
Capital stock $ (56,787)
HBI Warrants (3,795,725)
Capital in excess of par value (21,847,646)
Accumulated deficit 26,462,069
(b) Accrual of certain acquisition related
costs $ 1,375,000
(c) Charge to operations at date of
acquisition for in-process technology $ 10,640,710
(as per an independent valuation)
(d) Issuance of Medarex Common Stock, Medarex Warrants and options as
discussed in Note 1. The value of the shares has been computed
based on the closing price of Medarex Common Stock on December 20,
1996 (date Merger Agreement was announced) of $7.75 per share. A
value of $550,000 has been assigned to the Medarex Warrants and
options.
Medarex Common Stock 10,262
Capital in excess of par value 8,493,137
(3) The pro forma combined condensed statement of operations for the year ended
December 31, 1995 and the nine months ended September 30, 1996 include all
adjustments necessary to reflect the acquisition as if it had occurred on
January 1, 1995.
The pro forma adjustments are as follows for the year ended
December 31, 1995: Charge to operations for in-process
technology (as per an independent valuation) ........... $10,640,710
The net loss per share and the shares in computing net loss per share for
the year ended December 31, 1995 and the nine months ended September 30,
1996 are based upon the historical weighted average common shares
outstanding for the respective periods adjusted to reflect, as of January
1, 1995, the issuance of up to 1,026,245 shares of Medarex Common Stock as
described in Note 1. The Medarex Common Stock issuable upon the conversion
of options and HBI Warrants is excluded as the effect would be anti-
dilutive.
-22-
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
Effective December 29, 1995, HBI and Santen Pharmaceutical Co., Ltd.
("Santen") entered into a license agreement covering the marketing in Japan of
the Immunotoxin. Scheduled payments totaled $1,250,000 from December, 1995
through June, 1996 and $500,000 from July, 1996 through December, 1996. As noted
in HBI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
HBI's management anticipated that payments by Santen would fund HBI's activities
into the third quarter of 1996, and that additional funds would then be
required. Accordingly, HBI began seeking funds from a variety of sources and
considering its financing alternatives. Such alternatives included (i) a
license, sale or other disposition of the Immunotoxin or certain rights related
thereto, (ii) a sale of securities in a public or private offering, (iii) a sale
or other reorganization of HBI, or (iv) the combination of HBI with another
entity. As noted in the HBI's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996, HBI began to defer payment to certain vendors
in the third quarter of 1996 and anticipated that HBI would be able to continue
operations until mid-December 1996 without further funds.
In the fourth quarter of 1995, J. Russell Denson, President and Chief
Executive Officer of HBI, began discussions with Paramount Capital, Inc., a New
York based investment banking firm ("Paramount"), and in June, 1996, entered
into a letter of understanding for a proposed offering of units to consist of
preferred stock and warrants of HBI. Negotiations on the terms of such offering
continued through October 1996 at which time a Confidential Term Sheet and
Subscription Agreement were substantially completed detailing an offering of
units at a price per unit of $100,000 with a minimum offering of $1.5 million
and a maximum offering of $7.5 million (with an over-allotment of $2.5 million).
Each unit consisted of (i) 10,000 shares of preferred stock convertible into HBI
Common Stock at a price of the lesser of $0.75 or 75% of the average closing bid
price of the HBI Common Stock on the AMEX for the 20 consecutive trading days
immediately preceding the initial closing date or any other closing date for the
offering, whichever was lowest, and (ii) warrants to purchase 133,333 shares of
HBI Common Stock with an exercise price equal to the conversion price for the
preferred stock. HBI was required to enter into a Placement Agent Agreement and
Financial Advisory Agreement with Paramount, however, the terms of these
agreements were not completely negotiated. On October 1, 1996, Mr. Denson made
a presentation to Paramount's sales force based on the terms of the Confidential
Term Sheet and Subscription Agreement. Afterward, Paramount proposed that (i)
additional technology be licensed into HBI and (ii) the HBI Board and management
be restructured to enhance the offering. Discussions with Paramount continued
until November 27, 1996, when such discussions were terminated.
On October 15, 1996, Mr. Denson had an initial meeting with the CEO of
InSite Vision Incorporated ("InSite") who indicated that InSite was interested
in exploring a merger with HBI. After several due diligence meetings, InSite
delivered an outline of a letter of intent to HBI on October 24, 1996, detailing
a merger of a subsidiary of InSite with HBI. Negotiations between InSite and
HBI began with respect to a preliminary agreement and plan of reorganization
that would be amended and restated as a definitive agreement. Negotiations
continued through December 7, 1996, and resulted in a proposed preliminary
agreement that provided for (i) a loan of $400,000 upon execution of the
preliminary agreement (with additional loans totaling $600,000 to be made at
selected future dates) secured by a United States license for the Immunotoxin,
(ii) an exchange ratio of 0.25 shares of InSite common stock for each share of
HBI Common Stock (a value of $1.23 per share at that date), (iii) the
negotiation and execution of a definitive agreement by December 31, 1996,
subject to completion of due diligence and the execution of lock up and voting
agreements by affiliates of HBI, and (iv) several conditions to closing,
including execution of employment agreements by certain employees and a waiver
by Nasdaq for the issuance of InSite's common stock in the proposed merger or
the successful completion of a consent solicitation to HBI Warrant holders to
amend the warrant agreement governing the HBI Warrants. Upon the failure of the
parties to consummate the merger and, in certain instances the failure of HBI to
repay the loans within specified periods, InSite would be able to exercise its
rights under the license. As of December 7, 1996, although the majority of the
operative documents were negotiated, there were still several points that HBI
felt required further negotiation including the exchange ratio, the conditions
to the execution of the definitive agreement, the conditions to closing and the
provisions of the note whereby InSite would be able to exercise rights under the
license upon certain defaults.
On October 16, 1996, Mr. Denson was contacted by a representative of
Medarex who indicated that Medarex was interested in exploring a merger with
HBI. After several due diligence meetings and completing its initial
evaluation, Medarex delivered a letter of intent to HBI on November 20, 1996.
Such letter of intent was not binding, required HBI to suspend ongoing
discussions with Paramount and InSite and contemplated additional due diligence.
On November 21, 1996, Mr. Denson informed the President of Medarex that HBI
could not suspend other discussions without a firm letter of intent and a
meaningful cash payment. After further due diligence, Medarex delivered a
revised letter of intent on December 6, 1996. Negotiations continued through
December 7, 1996, and resulted in a letter of intent that provided for (i) a
loan of $500,000 upon execution of the letter of intent (with an additional
$250,000 loan to be made on January 15, 1997) secured by a North
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<PAGE>
American license for the Immunotoxin, (ii) an exchange ratio of 0.182 shares of
Medarex Common Stock for each share of HBI Common Stock (a value of $1.52 per
share at that date), (iii) a ten-day period in which to negotiate a definitive
agreement, and (iv) other terms substantially similar to the terms of the Merger
Agreement as detailed in this Proxy Statement and Prospectus.
The HBI Board held a meeting on December 8, 1996, to discuss Medarex,
InSite and each party's respective offer, including such factors as:
. exchange ratio and value to HBI's stockholders based on recent closing
prices of each party's common stock, including certain moving stock
price averages;
. financial strength, including the ability of each party to finance
itself long-term;
. business prospects, including the merits of each party's technology;
. management;
. ability of each party to close the transaction;
. conditions to closing for each offer and timing of closing under each
offer;
. risk of actual grant of license if the transaction failed to close;
and
. necessity to obtain a waiver from Nasdaq for the issuance of InSite's
common stock in the merger or alternatively, to conduct a consent
solicitation to holders of HBI Warrants.
Based on the above factors, the HBI Board concluded that Medarex's offer was
superior to InSite's for HBI's stockholders. Before making a final decision, the
HBI Board considered whether InSite would be willing to substantially improve
its offer and the risks of not accepting Medarex's offer while further
negotiations were conducted with InSite. Factors discussed included the detail
of the negotiation process with InSite and InSite's express statements regarding
certain salient terms of its offer that could not be improved as requested by
HBI.
HBI and Medarex executed a letter of intent on December 8, 1996, that
provided for the basic terms of the Merger as detailed in this Proxy Statement
and Prospectus. Upon execution of the letter of intent, Medarex loaned $500,000
to HBI secured by an exclusive, transferable, perpetual license to use, further
develop, manufacture, sell and otherwise commercialize the Immunotoxin in North
America.
On December 13, 1996, InSite delivered a letter to Mr. Denson offering the
same terms as had existed in the preliminary merger agreement with a change in
the exchange ratio to 0.3 shares of InSite common stock for each share of HBI
Common Stock (a value of $1.73 per share at that date). The HBI Board met on
December 13, 1996, to discuss InSite's offer. After again discussing the factors
detailed above together with a detailed comparative analysis of each party's
offer based on average stock prices over various periods, the HBI Board
concluded that Medarex's offer remained superior and therefore rejected InSite's
revised offer.
On December 16, 1996, the HBI Board met and unanimously approved the form
of documentation for the transaction with Medarex and authorized Mr. Denson to
complete the negotiations and to execute and deliver the appropriate documents
and instruments. Final negotiations on the Merger Agreement continued and
Medarex and HBI executed the Merger Agreement and related documents effective as
of December 18, 1996.
RECOMMENDATION OF THE HBI BOARD; EFFECTS AND REASONS FOR THE MERGER
The HBI Board believes that the terms of the Merger are fair to, and in the
best interests of, HBI and its stockholders. Accordingly, the HBI Board has
unanimously approved the Merger Agreement, the Merger and the transactions
contemplated thereby, and recommends approval of the Merger Agreement and the
Merger by HBI stockholders.
The HBI Board believes that the Merger offers HBI stockholders the
opportunity to participate in an enterprise with a broader technology portfolio
and greater financial strength and that, without the Merger or similar strategic
transaction, HBI would lack the critical mass, financial strength and other
characteristics to maximize its potential.
In reaching its conclusions, the HBI Board considered, among other things,
(i) the Merger Agreement, the Merger and the proposed specific terms thereof,
(ii) information concerning the financial condition, business operations and
prospects of each of HBI and Medarex, (iii) historical market prices and trading
information with respect to HBI Common Stock and Medarex Common Stock, (iv) the
potential efficiencies, economies of scale, and other synergies that may be
realized as a result of the combination of HBI's and Medarex's businesses, and
(v) the proposed structure of the Merger to permit HBI stockholders to receive
shares of Medarex Common Stock.
-24-
<PAGE>
THE HBI BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE MERGER AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT THE STOCKHOLDERS OF HBI
VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
FAIRNESS OPINION
Strategen was engaged to render to the HBI Board an opinion as to the
fairness to the stockholders of HBI, from a financial point of view, of the
terms of the Merger. The HBI Board selected Strategen on the basis of
Strategen's experience (i) in the life sciences industry, (ii) in the evaluation
of businesses and their securities in connection with transactions similar to
the Merger, and (iii) with HBI for which Strategen has previously acted in an
investment banking capacity by providing assistance in discussions with third
parties with respect to a strategic alliance or similar arrangement for HBI.
The terms of the Merger, including the consideration to be paid to the
stockholders of HBI in the Merger, was determined by negotiations between HBI
and Medarex, and Strategen did not participate in such negotiations nor make any
recommendations with regard thereto.
At the December 16, 1996, meeting of the HBI Board, Strategen delivered its
written opinion to the effect that the terms of the Merger are fair to the HBI
stockholders from a financial point of view. The full text of the written
opinion of Strategen, which sets forth certain assumptions, factors and
limitations on the review undertaken, is attached as Annex A to this Proxy
Statement and Prospectus and should be read carefully in its entirety.
Strategen's opinion is directed only to the fairness of the terms of the Merger
to the HBI stockholders from a financial point of view and is not intended to be
and does not constitute a recommendation to any stockholder of HBI as to how
such stockholder should vote with respect to the Merger Agreement and Merger.
In rendering its opinion, Strategen reviewed the basic terms and conditions
of the proposed documentation relating to the Merger Agreement, the Merger and
the transactions contemplated thereby, and held discussions with HBI's President
concerning the business, operations, financial resources and prospects of HBI
and with Medarex's President concerning the business, operations, financial
resources and prospects of Medarex. Strategen also reviewed (i) the reported
price and trading activity for HBI Common Stock and Medarex Common Stock and
compared such information to other biotechnology companies, (ii) the premiums
paid and the terms of other selected biotechnology merger or acquisition
transactions, and (iii) the general terms of alternative transactions proposed
to HBI prior to Medarex's offer.
HBI has paid Strategen $32,500 in consideration of the delivery of
Strategen's opinion. In addition, HBI agreed to reimburse Strategen for its
reasonable and verifiable out-of-pocket expenses and to indemnify Strategen
against certain liabilities, including liabilities under the federal securities
laws.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes certain of the principal federal income
tax considerations associated with the Merger and the resulting conversion of
HBI Common Stock into Medarex Common Stock and cash in lieu of fractional shares
under the Code. As it is not feasible to describe all of the tax consequences
associated with the Merger, each HBI stockholder should consult his or her tax
adviser with respect to the particular tax consequences of the Merger applicable
to his or her specific circumstances. The following discussion applies to HBI
stockholders who hold their HBI Common Stock as capital assets and does not
address the potential tax consequences applicable to HBI stockholders who are
dealers in securities or who acquired their HBI Common Stock through stock
option or stock purchase programs or other employee plans or otherwise as
compensation, which stockholders are subject to special treatment under the Code
(such as insurance companies, tax exempt organizations, financial institutions,
non-resident alien individuals or foreign entities).
The following summary is based on the Code, applicable Treasury
Regulations, judicial authority and administrative rulings and practice, all as
of the date of this Proxy Statement and Prospectus. There can be no assurance
that future legislative, judicial or administrative changes or interpretations
will not adversely affect the statements and conclusions set forth herein. Any
such changes or interpretations could be applied retroactively and could affect
the tax consequences of the Merger to HBI, Medarex and their respective
stockholders. The following discussion addresses only certain federal income
tax matters and does not consider any state, local or foreign tax consequences
of the Merger or other transactions described in this Proxy Statement and
Prospectus.
Neither Medarex nor HBI has requested or will request any ruling from the
Internal Revenue Service ("Service") in connection with the Merger. However,
the Merger has been structured with the intention that it qualify as a tax-free
reorganization under Code Section 368(a). Bracewell & Patterson, L.L.P., HBI's
attorneys, have delivered to HBI an opinion
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to the effect that (i) the Merger will be a reorganization for federal income
tax purposes as defined by Code Section 368(b), (ii) HBI will be a party to the
reorganization as defined under Code Section 368(b), (iii) no gain or loss will
be recognized by HBI as a result of the Merger, and (iv) no gain or loss will be
recognized by any HBI stockholder as a result of the Merger with respect to the
conversion of HBI Common Stock into the Medarex Common Stock. Such tax opinion
is subject to certain assumptions and qualifications and is based, among other
things, on representations and assumptions relating to certain facts and
circumstances of the Merger, including the intentions of the parties to the
Merger, which assumptions have been made with the consent of HBI. Such opinion
will neither be binding on the Service nor preclude it from adopting a contrary
position.
The obligation of HBI to consummate the Merger is conditioned upon the
nonwithdrawal or modification of such opinion of HBI's attorneys. Although
HBI's attorneys anticipate that the opinion shall not be withdrawn or modified,
the Merger will not be consummated unless such condition is met or waived by
HBI. HBI currently anticipates that such opinion will not be withdrawn or
modified and that HBI will not be required to waive such condition to closing.
Qualification of the Merger as a reorganization depends on compliance with
certain technical requirements of federal income tax law, including, among
others the requirement that a continuity of proprietary interest be maintained
by the stockholders of the merged corporation. To satisfy this requirement, the
stockholders of HBI must not, pursuant to a plan or intention existing at or
prior to the Merger, dispose of so much of either (i) their shares of HBI Common
Stock in anticipation of the Merger, or (ii) the Medarex Common Stock received
pursuant to the Merger such that the holders of shares of HBI Common Stock, in
the aggregate, would no longer have a significant equity interest in the HBI
business being conducted by the surviving corporation after the Merger. It is
the position of the Service that the continuity of interest requirement
generally will be considered satisfied if the stockholders of the merged
corporation receive in the aggregate (and have no plan to dispose of) stock of
the acquiring corporation equal in value to at least 50% of the value of all of
the formerly outstanding stock of the acquired corporation as of the effective
date of the reorganization, and a decision of the United States Supreme Court
indicates that continuity of interest in the range of 40% is sufficient.
With the exception of cash paid in lieu of fractional shares, the Merger
Agreement provides that all of the consideration paid by Medarex to HBI
stockholders in exchange for their HBI Common Stock pursuant to the Merger will
consist of Medarex Common Stock. However, satisfaction of the continuity of
proprietary interest requirement depends in part on actions that may be taken by
HBI stockholders either before or after the consummation of the Merger over
which neither HBI nor Medarex has any control. Accordingly, there can be no
assurance that the continuity of interest requirement will be satisfied with
respect to the Merger. If the continuity of interest (or any other requirement
for reorganization treatment under the Code) is not satisfied, the Merger will
not be treated as a tax-free reorganization and material adverse tax
consequences may result to some or all of the holders of HBI Common Stock.
Tax Consequences of Merger to HBI Stockholders. Assuming the Merger is
treated as a reorganization under the Code, the following federal income tax
consequences, among others, generally will apply to HBI stockholders:
(i) except for cash received in lieu of fractional share interests, a
holder of shares of HBI Common Stock who, pursuant to the Merger, exchanges such
shares for Medarex Common Stock will not recognize any gain or loss upon such
exchange;
(ii) the aggregate adjusted tax basis in the shares of Medarex Common
Stock received in such exchange will be equal to the aggregate adjusted tax
basis of the shares of HBI Common Stock surrendered therefor (decreased by the
amount of any tax basis allocable to fractional shares of Medarex Common Stock
in lieu of which cash will be paid);
(iii) each holder of HBI Common Stock who held such stock as a capital
asset at the Effective Time of the Merger will include in his or her holding
period for the Medarex Common Stock received in the Merger the holding period of
the shares of HBI Common Stock exchanged for such shares;
(iv) a holder of shares of HBI Common Stock who receives cash in the
Merger in lieu of a fractional share interest in Medarex Common Stock will be
treated as if the fractional share interest of Medarex Common Stock was
distributed to such holder and then redeemed by Medarex for cash. The deemed
redemption will be treated as a distribution in full payment in exchange for the
fractional share interest of the Medarex Common Stock deemed received by the
holder under Code Section 302(a). Accordingly, such holder will recognize a
gain or loss equal to the difference between the amount of cash received and the
portion of such holder's adjusted tax basis in the shares of HBI Common Stock
allocable to the fractional share interest of Medarex Common Stock. The gain or
loss will be long-term capital gain or loss provided the shares of HBI Common
Stock deemed surrendered for such fractional share interest of Medarex Common
Stock were held as a capital asset as of the Effective Time and for a period of
more than one year; and
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(v) each holder of an HBI Warrant who, pursuant to the Merger and by
operation of the warrant agreement governing such warrants, will be entitled to
purchase Medarex Common Stock, will not recognize gain or loss upon such
assumption. The aggregate adjusted basis of the HBI Warrants will not be
affected by such assumption.
Irrespective of the reorganization status of the Merger, a recipient of
shares of Medarex Common Stock will recognize income if and to the extent any
such shares are considered to be received in exchange for services or property
(other than HBI Common Stock). All or a portion of such income may be taxable
as ordinary income. Gain also will be recognized if and to the extent any HBI
stockholder is treated as receiving (directly or indirectly) consideration other
than Medarex Common Stock in exchange for his or her HBI Common Stock.
Subsequent to the Merger and upon Medarex's assumption of the HBI Warrants,
Medarex will offer to exchange Medarex Warrants for each HBI Warrant. The terms
of the Medarex Warrants will be identical to the HBI Warrants.
Tax Consequences to Medarex and HBI. Assuming the Merger is treated as a
reorganization under the Code, generally no gain or loss will be recognized by
Medarex, Merger Sub or HBI as a result of the Merger. The Merger will not have
any tax consequences to Medarex stockholders.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS NOT A
COMPLETE DESCRIPTION OF ALL OF THE POTENTIAL TAX CONSEQUENCES THAT MAY OCCUR AS
A RESULT OF THE MERGER. HBI STOCKHOLDERS AND HBI WARRANT HOLDERS SHOULD
THEREFORE CONSULT THEIR TAX ADVISORS REGARDING THE FEDERAL TAX CONSEQUENCES OF
THE MERGER, THE EXERCISE OF ANY OPTIONS TO PURCHASE HBI COMMON STOCK ASSUMED BY
MEDAREX IN THE MERGER, THE EXCHANGE OF THE MEDAREX WARRANTS FOR THE HBI WARRANTS
AND THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR OTHER
JURISDICTION OF THE ABOVE-DESCRIBED TRANSACTIONS.
FEDERAL SECURITIES LAW MATTERS
The issuance of Medarex Common Stock pursuant to the Merger Agreement and
the issuance of the Medarex Warrants and the Medarex Common Stock issuable upon
exercise of the Medarex Warrants have been registered under the Securities Act.
The Medarex Common Stock and Medarex Warrants will be available for resale
without restriction (i) immediately and without limitation, except for shares
issued to any person who may be deemed to be an "Affiliate" (as such term is
defined for purposes of Rule 145 under the Securities Act) of HBI at the time of
the Special Meeting and (ii) immediately after expiration of the Restricted
Period (as defined below) by the present holders of HBI Common Stock who are
Affiliates of HBI and who comply with the requirements of Rule 145 (d)(1) in
effecting such resales. Medarex has agreed that until the third anniversary of
the Effective Time, Medarex will ensure that Rule 144 and Rule 145 remain
available for Affiliates of HBI to resell their shares of Medarex Common Stock
and Medarex Warrants. Persons who may be deemed to be Affiliates of HBI
generally include individuals or entities that control, are controlled by, or
are under common control with, HBI, and may include certain officers and
directors of HBI as well as beneficial holders of 10 percent or more of HBI
Common Stock.
If the Merger is consummated, the HBI Common Stock and the HBI Warrants
will no longer be traded on the AMEX and will be deregistered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the purchase
method of accounting under generally accepted accounting principles. Under this
method, upon the Effective Time:
(i) the fair market value of the Medarex Common Stock to be issued to the
holders of HBI's securities will be determined;
(ii) the carrying value of the HBI assets acquired and the HBI liabilities
assumed by Medarex as a result of the Merger will be adjusted to the fair value
thereof at the Effective Time using available market data, then prevailing
interest rates and the then anticipated maturity dates of such HBI assets and
liabilities, with any such adjustments being amortized over the expected lives
of such assets and liabilities;
(iii) the value assigned to in-process technology has been determined
pursuant to an independent valuation as required under generally accepted
accounting principles, such in-process technology will be expensed at the
Effective Time; and
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(iv) Medarex will include HBI's results of operations after the Effective
Time in Medarex's consolidated statements of operations.
Reference is made to the pro forma combined condensed balance sheet of
Medarex following the Merger for an example of the purchase accounting
adjustments. See "Medarex and HBI Unaudited Pro Forma Combined Condensed
Financial Statements."
APPRAISAL RIGHTS
Since both HBI and Merger Sub are Delaware corporations, the DGCL applies
to whether HBI's stockholders have appraisal rights. Generally, stockholders of
a Delaware corporation who dissent from a merger or consolidation of the
corporation are entitled to appraisal rights. There are, however, no statutory
rights of appraisal with respect to stockholders of a corporation whose shares
are either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders, where such stockholders receive only (a) shares of stock of
the corporation surviving or resulting from the merger of consolidation or
shares of stock of any other corporation which, at the effective date of the
merger or consolidation, will be either listed on a national securities exchange
or designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders or (b) cash in lieu of fractional interests
therein.
Since the HBI Common Stock is listed on AMEX and such stockholders shall
receive only shares of Medarex Common Stock (which at the Effective Time will be
listed on Nasdaq) or cash in lieu of fractional shares, the exceptions from the
Delaware statutory right of appraisal apply to the Merger and HBI's stockholders
do not have statutory rights of appraisal with respect to the Merger.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is attached to this Proxy
Statement and Prospectus as Annex B and is incorporated herein by reference.
GENERAL DESCRIPTION OF THE MERGER
Pursuant to the Merger Agreement, Merger Sub shall be merged with and into
HBI with HBI being the surviving corporation and resulting in HBI being a
wholly-owned subsidiary of Medarex. At the Effective Time, each share of HBI
Common Stock issued and outstanding immediately prior to the Effective Time will
be converted into the right to receive 0.182 shares of Medarex Common Stock.
After the Effective Time, HBI Warrants and options to acquire HBI Common Stock
will be exercisable into such number of shares of Medarex Common Stock equal to
the number of shares of HBI Common Stock subject to such option or HBI Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio and the
exercise price shall be equal to the exercise price of such option or HBI
Warrant immediately prior to the Effective Time divided by the Exchange Ratio.
Accordingly, it is not necessary for holders of options or HBI Warrants to
exercise such options or HBI Warrants prior to the Effective Time to receive the
economic equivalent of the consideration to be received by holders of HBI Common
Stock in the Merger. No fractional shares of Medarex Common Stock will be
issued in the Merger, and holders of HBI Common Stock whose shares are converted
in the Merger will be entitled to a cash payment in lieu of fractional shares of
Medarex Common Stock. See "--No Fractional Shares."
Pursuant to the Merger Agreement, the outstanding HBI Warrants currently
listed for trading on AMEX, shall be assumed by Medarex as detailed above and
shall be exchanged for Medarex Warrants. Medarex has applied for the listing
for trading of the Medarex Warrants on Nasdaq which listing application is
expected to be effective as of the Effective Time.
Medarex Common Stock is traded on the Nasdaq under the symbol "MEDX." See
"Comparison of Stockholder Rights" for a description of certain material
differences between the rights of holders of Medarex Common Stock and the rights
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of holders of HBI Common Stock. See "Selected Information Concerning Medarex--
Description of Medarex Capital Stock" for a description of the rights,
privileges and preferences of the Medarex Common Stock.
CLOSING; EFFECTIVE TIME
The closing of the transactions contemplated by the Merger Agreement will
take place as promptly as practicable (and in any event within two business
days) following satisfaction or waiver of the conditions to closing set forth in
the Merger Agreement or at such other time as Medarex and HBI agree. The Merger
will become effective upon the issuance of a certificate of merger by the
Secretary of State of the State of Delaware pursuant to the DGCL.
EXCHANGE OF STOCK CERTIFICATES AND WARRANTS
As soon as reasonably practicable after the Effective Time, Continental
Stock Transfer & Trust Company, which has been designated as the exchange agent
(the "Exchange Agent") for the Merger, will mail transmittal instructions and a
letter of transmittal to each holder of HBI Common Stock. The transmittal
instructions and the letter of transmittal will describe the procedures to
exchange certificates that prior to the Merger represented HBI Common Stock (the
"Certificates") for Medarex Common Stock. HBI STOCKHOLDERS SHOULD NOT SUBMIT
THEIR CERTIFICATES FOR EXCHANGE UNLESS AND UNTIL THEY HAVE RECEIVED THE
TRANSMITTAL INSTRUCTIONS AND LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
When a HBI stockholder delivers his or her Certificates to the Exchange
Agent together with a properly executed letter of transmittal and any other
required documents, such Certificates will be canceled and the HBI stockholder
will receive Medarex Common Stock representing the number of shares of Medarex
Common Stock to which the HBI stockholder is entitled under the Merger Agreement
and payment in lieu of any fractional shares of Medarex Common Stock. If any
Medarex Common Stock is to be issued in a name other than that in which the
corresponding Certificate is registered, it is a condition to the exchange of
the Certificate that the HBI stockholder comply with applicable transfer
requirements set forth in such letter of transmittal and pay any applicable
transfer or other taxes.
HBI stockholders will not be entitled to receive any dividends or other
distributions on the Medarex Common Stock until the Merger has been consummated
and they have exchanged their Certificates for Medarex Common Stock. Subject to
applicable law, such dividends and distributions which have a record date after
the Effective Time, if any, will be accumulated and, at the time a HBI
stockholder surrenders his or her Certificates to the Exchange Agent, all
accrued and unpaid dividends and distributions, together with any cash payments
in lieu of fractional shares of Medarex Common Stock, will be paid without
interest.
As soon as reasonably practicable after the Effective Time, Medarex or the
Exchange Agent shall mail transmittal instructions and a letter of transmittal
to each holder of an HBI Warrant to effect the exchange of HBI Warrants for
Medarex Warrants in a similar fashion as described above.
NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Medarex Common
Stock shall be issued upon surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights as a stockholder of Medarex. Each holder of shares of HBI Common Stock
exchanged pursuant to the Merger who would have been entitled to receive a
fractional share of Medarex Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to the product obtained by multiplying (i)
the fractional share interest to which such holder (after taking into account
all shares of HBI Common Stock held at the Effective Time by such holder) would
otherwise be entitled by (ii) the closing price for Medarex Common Stock on
Nasdaq on the last business day immediately preceding the closing date of the
Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of Medarex and HBI relating to, among other things (i) organization and
similar corporate matters, (ii) capital structure, (iii) the authorization,
execution,
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delivery, performance and enforceability of the Merger Agreement and the
transactions contemplated thereby, (iv) the absence of violations of or
conflicts with their respective charters and by-laws, any instruments or laws,
and any required consents or approvals, (v) compliance with all permits,
licenses, exemptions, orders and approvals of all governmental entities,
including the FDA, (vi) the documents and reports required to be filed and
filed by each of them with the Commission and the accuracy of the information
contained therein, (vii) the accuracy of the information provided by each of
them with respect to the Registration Statement and Proxy Statement and
Prospectus, (viii) the absence of certain events, changes or effects, (ix)
litigation and (x) the use of brokers. Medarex has made representations and
warranties relating to the operations of Merger Sub. HBI has made
representations and warranties relating to (i) employee representation by labor
unions or employee involvements in any other organizational activity, (ii)
retirement and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974, as amended, (iii) tax matters, (iv)
intellectual property rights, (v) leases, (vi) compliance with environmental
laws, (vii) effectiveness of material contracts, (viii) affiliated parties and
transactions, (ix) conduct of preclinical trials in accordance with protocols
filed with appropriate regulatory authorities, and (x) the opinion of Strategen.
HBI's representations are made only as of the date of the Merger Agreement,
while Medarex's representations are made as of that date and as of the closing
of the Merger.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, during the period from the date of the
Merger Agreement until the Effective Time, HBI agreed to (except as permitted by
the Merger Agreement or as consented to in writing by Medarex) (i) conduct its
business in the ordinary course and in a manner consistent with past practice
and in compliance with applicable laws, (ii) use its reasonable best efforts to
preserve intact the business organization of HBI, (iii) keep available the
services of present officers, employees and consultants and preserve its present
relationships with its customers, suppliers and other persons with whom HBI has
significant business relations, (iv) preserve and maintain in effect all of
HBI's intellectual property, (v) not declare, set aside or pay any dividend or
make other distributions in respect of, any of its capital stock, or split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of HBI capital stock, or purchase, redeem or otherwise acquire or
agree to acquire any shares of capital stock of HBI or any other securities
convertible into shares of capital stock or any rights, warrants or options to
acquire any such shares or convertible securities, (vi) not authorize for
issuance, issue, deliver, sell or agree or commit to issue, sell or deliver,
pledge or otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants, or
options to acquire any such shares, voting securities or convertible securities
or any other securities or equity equivalents, (vii) except to the extent
required by existing HBI employee benefit plans, not increase the compensation
or benefits of any of its directors, officers or employees, except for increases
in compensation which are made in the ordinary course of business in accordance
with past practice, or grant any severance or termination pay not currently
required to be paid under existing HBI employee benefit plans, or establish,
adopt, enter into or amend or terminate any HBI employee benefit plan, or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees, (viii) not amend the HBI Charter or the HBI
By-Laws or alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of HBI, (ix) except as
allowed by the Merger Agreement, not acquire or agree to acquire by means of
merger or consolidation, or by purchasing a substantial portion of the stock or
assets of any business or any corporation, partnership, joint venture,
association or other business organization or division thereof, other than in
the ordinary course of business consistent with past practice, (x) not sell,
lease, license, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of any of its properties or assets other than in the ordinary
course of business consistent with past practice, (xi) except for the
Convertible Notes described in the Merger Agreement and summarized below (See
"--Convertible Notes"), not incur any indebtedness for borrowed money (or
guarantees thereof), issue or sell any debt securities or warrants or other
rights to acquire any debt securities of HBI, guarantee any debt securities of
another or enter into any "keep well" agreements to maintain the financial
condition of any other person, or make any loans, advances or capital
contributions to, or investments in, any other person, (xii) not expend, or
commit to expend funds for capital expenditures other than in accordance with
current HBI capital expenditure plans in excess of $10,000 in any one
transaction or series of related transactions, (xiii) not adopt a plan of
complete or partial liquidation or resolutions providing for or authorizing such
a liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization, (xiv) not recognize any labor union, (xv)
not change any of the accounting methods, practices or principles used by HBI,
(xvi) not make any tax election or settle or compromise any income tax liability
in excess of $10,000, except as permitted by the Merger Agreement, (xvii) not
settle or compromise any litigation in which HBI is a defendant or settle, pay
or compromise any claims not required to be paid, (xviii) not enter into any new
line of business, (xix) not commence any new preclinical or clinical trials or
submit any data or other materials or enter into any discussions with the FDA or
any other governmental entity, or (xx) not authorize
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any of, or commit to agree to take any of the foregoing actions or any other
action which would make any of the representations or warranties of HBI
contained in the Merger Agreement untrue and incorrect.
Pursuant to the Merger Agreement, during the period from the date of the
Merger Agreement until the Effective Time, the Merger Sub has agreed not to
engage in any activities of any nature except as provided in, or in connection
with, the transactions contemplated by the Merger Agreement.
ADDITIONAL AGREEMENTS
Pursuant to the Merger Agreement, Medarex and HBI have agreed that (i) HBI
will afford Medarex access to HBI's officers, properties, offices, plants and
information as Medarex may reasonably request, (ii) Medarex and the Merger Sub
will abide by the terms of the Confidentiality Agreement dated December 18, 1995
between Medarex and HBI, and (iii) HBI and Medarex will comply with all legal
requirements imposed on each other with respect to the Merger and furnish
information to the other party in connection with such legal requirements. HBI
has agreed to use its reasonable best efforts to cause each affiliate (as
defined under Rule 144 of the Securities Act for purposes of Rule 145 of the
Securities Act) to execute prior to the closing date of the Merger a written
agreement in the form of Exhibit 4.6 to the Merger Agreement included in Annex B
attached hereto. See "The Merger--Federal Securities Law Matters." Medarex has
agreed to maintain HBI's employee benefit plans and compensation for HBI's
employees in a substantially similar fashion as previously maintained by HBI.
Medarex has also agreed to file and maintain registration statements with the
Commission after the Effective Time relating to the issuance of shares of
Medarex Common Stock upon the exercise of options under the former HBI stock
option plans.
NO SOLICITATIONS OF OTHER TRANSACTIONS
The Merger Agreement provides that HBI shall not nor shall HBI authorize or
permit any of its officers, directors or employees, or any investment banker,
financial advisor, attorney, accountant or other representative retained by HBI
to, solicit, initiate, encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the making
of any proposal which constitutes or may reasonably be expected to lead to, a
Transaction Proposal (as defined below) or enter into or maintain or continue
any discussions or negotiate with any person in furtherance of such inquiries or
to obtain a Transaction Proposal, or agree to or endorse any Transaction
Proposal. The HBI Board may, without violating the terms of the Merger
Agreement (i) furnish information to any person or entity who makes an
unsolicited inquiry concerning a possible Transaction Proposal, (ii) enter into
any negotiations or discussions with any person or entity that makes an
unsolicited Transaction Proposal regarding that Transaction Proposal, or (iii)
enter into an unsolicited Transaction Proposal if, in the case of clauses (ii)
or (iii), the HBI Board determines in good faith, after advice of counsel, that
(a) the failure to do so could reasonably be deemed to be a breach of its
fiduciary duties under applicable law, or (b) failing to make, withdrawing,
modifying or changing a recommendation to HBI's stockholders with respect to the
approval and adoption of the Merger Agreement if the HBI Board determines in
good faith, after advice of counsel, that making such recommendation, or failure
to withdraw, modify or change such recommendation could reasonably be deemed a
breach of its fiduciary duties under applicable law. The HBI Board may, without
violating the Merger Agreement, take and disclose to HBI stockholders a position
with respect to any tender or exchange offer as contemplated by Rule 14e-2 under
the Exchange Act, or make such other disclosures to HBI stockholders as, based
upon the advice of counsel, may be required by law. HBI must immediately notify
Medarex of any negotiations, requests for information or discussions with
respect to a Transaction Proposal, and keep Medarex fully informed of the status
and details of any such Transaction Proposal or request, subject to the
fiduciary duties of the HBI Board as set forth above.
A "Transaction Proposal" means (i) any acquisition or purchase of
substantially all of the assets of, or any controlling interest in, or any debt
or equity offering of, HBI or any Business Combination, as defined below, or
(ii) any proposal, plan or agreement to do any of the foregoing. A "Business
Combination means (i) the acquisition by any person (other than Medarex or any
of its subsidiaries) of beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of, or the right to acquire beneficial
ownership of, or the formation of any group (as such term is defined for
purposes of Rule 13d-5 under the Exchange Act) which beneficially owns or has
the right to acquire beneficial ownership of, 50% or more of the total voting
power of all then outstanding stock and other securities of HBI entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors of HBI ("Voting Stock"); (ii) the consolidation or merger of HBI with
or into any person (other than Medarex or any of its subsidiaries) in a
transaction in which HBI shall not be the surviving or continuing corporation;
(iii) the merger or consolidation of any person (other than Medarex or any of
its
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subsidiaries) with or into HBI in a transaction in which HBI is the surviving or
continuing corporation but in which the shares of Voting Stock outstanding
immediately prior to such transaction shall represent less than 50% of the total
voting power of all Voting Stock of the surviving or continuing corporation
outstanding immediately after such merger or consolidation; (iv) any sale or
other transfer (including by way of dividend or distribution of assets to HBI's
stockholders), in one transaction or in a series of related transactions, of all
or a substantial portion of HBI's consolidated assets or business to any person
(other than Medarex or any of its subsidiaries) or group; or (v) any licensing
or other arrangement entered into by HBI regarding the right to use, further
develop, manufacture, sell or otherwise commercialize the Immunotoxin in North
America.
INSURANCE; INDEMNIFICATION
The Merger Agreement provides that all rights to indemnification existing
in favor of the present and former officers, directors, employees and agents of
HBI as provided in the HBI Charter and the HBI By-Laws shall survive the Merger
and continue in full force and effect without time limitation from and after the
Effective Time. Further, the charter and by-laws of the surviving corporation
of the Merger with respect to indemnification shall not be amended, repealed or
otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights of the individuals thereunder.
CONDITIONS TO THE MERGER
The respective obligations of Medarex and HBI to effect the Merger are
subject to a number of conditions, including among others (i) the Merger
Agreement shall have been approved and adopted by the affirmative vote of the
holders of majority of the outstanding shares of HBI Common Stock entitled to
vote thereon, (ii) the shares of Medarex Common Stock issuable in the Merger
shall have been authorized for listing on the Nasdaq, upon official notice of
issuance, (iii) all consents, approvals, authorizations or permits or, actions
by, or filings with or notifications to any governmental entity or any third
party, the failure of which to obtain or file would have a material adverse
effect on the consummation of the Merger of the business of the Surviving
Corporation, shall have been filed, occurred or been obtained, (iv)
effectiveness of the Registration Statement, and (v) no injunction or other
order, legal restraint or prohibition preventing the consummation of the Merger
shall be in effect. The obligations of Medarex and Merger Sub to effect the
Merger are also subject to the conditions that (i) the representations and
warranties of HBI set forth in the Merger Agreement shall be true and correct as
of the date of the Merger Agreement except as does not have a Material Adverse
Effect (as defined below), and (ii) HBI shall have performed and complied in all
material respects with all of its agreements and covenants set forth in the
Merger Agreement to be performed or complied with by HBI. The obligation of HBI
to effect the Merger is also subject to (i) the representations and warranties
of Medarex and Merger Sub set forth in the Merger Agreement shall be true and
correct as of the date of the closing date of the Merger except as does not have
a Material Adverse Effect (as defined below), (ii) Medarex and Merger Sub shall
have performed and complied in all material respects with all of their
agreements and covenants set forth in the Merger Agreement to be performed and
complied with by Medarex or Merger Sub, and (iii) the opinion of counsel to HBI
to the effect that the Merger will be treated for federal income tax purposes as
a reorganization under Section 368(a) of the Code referred to in this Proxy
Statement and Prospectus shall not have been withdrawn or modified in any
material respect. For the purposes of the Merger Agreement, the term "Material
Adverse Effect" means with respect to Medarex or HBI, as the case may be, a
material adverse change in or effect on (i) the business, prospects, results of
operations or condition (financial or other) of such party, or (ii) the ability
of such party to consummate any of the transactions contemplated by the Merger
Agreement.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of HBI (i) by mutual
consent of Medarex and HBI, (ii) by Medarex, upon any breach of any
representation, warranty, covenant or agreement of HBI set forth in the Merger
Agreement that, either individually or in the aggregate, would constitute
grounds for Medarex to elect not to consummate the Merger due to a failure of
the conditions to Medarex's obligation to close specified above, if such breach
cannot be cured prior to the closing date of the Merger or has not been cured
within 45 days after the date on which written notice of such breach is given by
Medarex to HBI, (iii) by HBI, upon any breach of any representation, warranty,
covenant or agreement of Medarex set forth in the Merger Agreement that, either
individually or in the aggregate, would constitute grounds for HBI to elect not
to consummate the Merger due to a failure of the conditions to HBI's obligation
to close specified above, if such breach cannot be cured prior to the closing
date of the Merger or has not been cured within 45 days after the date on which
written notice of such breach is given by HBI to Medarex, (iv) by either
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Medarex or HBI, if any permanent injunction or action by any governmental entity
shall have become final and nonappealable, (v) by either Medarex or HBI, if
(other than due to the willful failure of the party seeking to terminate the
Merger Agreement to perform its obligations thereunder which are required to be
performed at or prior to the Effective Time) the Merger shall not have been
consummated by June 30, 1997, (vi) by either Medarex or HBI, if the approval of
the stockholders of HBI of the Merger Agreement and the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of HBI stockholders, (vii) by either Medarex or HBI, if (a) the HBI
Board shall have approved or have recommended to the stockholders of HBI a
Transaction Proposal or shall have resolved to do the foregoing, or (b) a
Takeover Proposal is commenced (other than by Medarex of any of its subsidiaries
of affiliates) and the HBI Board recommends that the stockholders of HBI tender
their shares in such Takeover Proposal or otherwise fails to recommend that such
stockholders reject such Takeover Proposal within ten business days of the
commencement thereof, provided however, that in each case the Merger Agreement
may only be terminated by HBI if and only to the extent that the HBI Board,
after advice of independent legal counsel, determines in good faith that failure
to take such action could reasonably be deemed to constitute a breach of the HBI
Board's fiduciary duties under applicable law, or (viii) by Medarex, in the
event of a material adverse change in the business, prospects or financial
condition of HBI caused by an event, occurrence or circumstance ("Material
Adverse Change") unanticipated and unknown by HBI as of the date of the Merger
Agreement and arising after the date of the Merger Agreement solely from facts
and circumstances not in existence as of the date of the Merger Agreement. A
Material Adverse Change shall not include any matter which Medarex knows or
should have known of or discovered or should have discovered in its due
diligence review of HBI.
In the event of termination of the Merger Agreement by either Medarex or
HBI as described above, the Merger Agreement shall become void and there will be
no liability or obligation on the part of either Medarex, HBI, Merger Sub or
their respective officers or directors pursuant to the Merger Agreement, except
as set forth below or unless such termination arises from a willful and material
breach of the Merger Agreement.
EXPENSES AND TERMINATION FEE
Except as set forth below, the Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses.
The Merger Agreement provides that if the Merger Agreement is terminated
because (i) the Merger Agreement and the Merger failed to receive the requisite
vote for approval and adoption by the stockholders of HBI and at the time of
such meeting there shall exist a tender offer or exchange offer for not less
than a majority of the outstanding Voting Stock of HBI (a "Takeover Proposal"),
or (ii) the HBI Board approved or has recommended to the stockholders a
Transaction Proposal or has resolved to do the foregoing, or a Takeover Proposal
is commenced and the HBI Board recommends that the stockholders of HBI tender
their shares in such Takeover Proposal or has otherwise failed to recommend that
such stockholders reject such Takeover Proposal within ten business days of the
commencement thereof, then HBI shall pay to Medarex a fee of $750,000. Any cash
payment required to be made in such circumstance shall be made within sixty days
after the date that HBI enters into a definitive agreement with respect to such
Transaction Proposal or the completion of any such Takeover Proposal.
Termination of HBI's obligations shall not occur until such payment has been
made. HBI further covenants and agrees that it will not enter into a
definitive agreement relating to a Transaction Proposal that would require
payment of such amounts unless the other party thereto unconditionally agrees in
writing to assume, undertake and perform all of HBI's payment obligations under
this provision and to pay any legal expenses incurred by Medarex in connection
with the enforcement thereof.
In addition, the Merger Agreement provides that if the Merger Agreement
shall be terminated by Medarex due to a Material Adverse Change, Medarex shall
be obligated to purchase a number of shares of HBI Common Stock having a value
equal to $750,000 at a price per share of HBI Common Stock of $.9375, payable at
the option of Medarex in cash or registered and freely tradeable shares of
Medarex Common Stock having a market value of $750,000. In the event that
Medarex elects to pay such amount in Medarex Common Stock, HBI agrees not to
transfer, convey, hypothecate, sell or otherwise dispose of more than 10,000
shares of Medarex Common Stock in any five consecutive trading days.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by action taken by or on behalf of the
respective boards of directors of Medarex and HBI; provided that, after approval
of the Merger Agreement by the stockholders of HBI, no amendment may be
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made that would reduce the amount or change the type of consideration into which
each share of HBI Common Stock shall be converted upon consummation of the
Merger. The Merger Agreement may not be amended except by an instrument in
writing signed on behalf of Medarex, Merger Sub and HBI.
At any time prior to the Effective Time, either Medarex or HBI may (i)
extend the time for the performance of any of the obligations to be performed by
another party, (ii) waive any inaccuracies in the representations and warranties
by another party contained in the Merger Agreement or in any document delivered
pursuant to the Merger Agreement, or (iii) waive compliance with any of the
agreements of another party or conditions contained in the Merger Agreement.
Any such extension or waiver will only be valid if set forth in a writing signed
by the party to be bound thereby.
CONVERTIBLE NOTES
On December 9, 1996, Medarex loaned $500,000 to HBI evidenced by a
Convertible Note, which note was amended and restated as of the execution of the
Merger Agreement. Pursuant to the Merger Agreement, Medarex loaned an
additional $250,000 to HBI on January 15, 1997, evidenced by a Convertible Note
with substantially similar terms to the initial note (together, the notes are
referred to as the "Notes"). Principal and interest on the Notes are subject to
prepayment in whole or in part without penalty; however, HBI must give five days
notice to Medarex prior to any prepayment.
Based on the termination circumstances described under "The Merger
Agreement--Termination," principal and all accrued interest on the Notes are:
(i) due and payable in 60 days after termination of the Merger Agreement by
Medarex due to a breach by HBI, (ii) automatically converted into HBI Common
Stock at a rate of $1.00 per share as of the date of termination of the Merger
Agreement by HBI for a breach by Medarex, if an injunction preventing the Merger
is final and nonappealable or if the Merger is not consummated by June 30, 1997,
(iii) due and payable in full 120 days after the termination of the Merger
Agreement if the HBI stockholders do not approve the Merger Agreement at the
Special Meeting; provided, however, that if a Takeover Proposal exists at the
time of the Special Meeting, the principal and interest are due and payable at
the time the $750,000 payment is required as detailed above in the second
paragraph of "The Merger Agreement--Expenses and Termination Fee," (iv) due and
payable at the time the $750,000 payment is required as detailed above in the
second paragraph of "The Merger Agreement--Expenses and Termination Fee" after
termination of the Merger Agreement by Medarex or HBI due to the exercise of the
HBI Board's fiduciary duties, or (v) automatically converted into HBI Common
Stock at a rate of $0.9375 upon termination of the Merger Agreement by Medarex
for a Material Adverse Change.
Other than as set forth above, Medarex has the right to convert the Notes
into HBI Common Stock at a price of $1.00 per share at any time. The HBI Common
Stock issuable upon conversion of the Notes is subject to adjustment upon
certain events, including among others, a capital reorganization or
reclassification of the HBI Common Stock, declaration of a stock dividend on the
HBI Common Stock, the issuance of additional securities to all holders of HBI
Common Stock or the distribution of assets of HBI to its stockholders. In
addition, Medarex has two demand rights to require HBI to register the HBI
Common Stock issued upon conversion of the Notes and has "piggyback"
registration rights if HBI proposes to register any HBI Common Stock under the
Securities Act for sale to the public.
LICENSE AGREEMENT
The Notes are secured by the grant by HBI to Medarex of an exclusive,
transferable, perpetual license to use, further develop, manufacture, sell and
otherwise commercialize the Immunotoxin in North America. The license is held
in escrow pending the payment or conversion in full of the Notes, at which time
the license will be released to HBI, or the default under the Notes by HBI, at
which time the license will be released to Medarex. If the Notes are not paid
in full at the specified time as detailed above, Medarex shall be able to
exercise its rights under the license. In that regard, should the HBI
stockholders fail to approve and adopt the Merger Agreement, HBI shall have 120
days in which to arrange financing to repay the $750,000 principal amount of the
Notes plus all accrued interest. If the HBI stockholders fail to vote to
approve the Merger Agreement, it is unlikely that such a financing source could
be located within the specified time period and therefore, HBI would lose the
rights to use and market the Immunotoxin in North America.
THE HBI BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT AND THE MERGER.
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SELECTED INFORMATION CONCERNING MEDAREX
GENERAL
Medarex is an antibody-based biopharmaceutical company developing
therapeutic products for cancer, AIDS and other life threatening diseases based
on proprietary technology in the field of immunology. Medarex's products are
designed either to enhance and direct a specific immune response or to block or
diminish an undesirable immunological activity. Medarex's broad technology
platform has led to several products now in clinical trials and to three
strategic alliances and has the potential to provide the foundation for new
products and new strategic alliances in various therapeutic areas. At present,
Medarex has six products in human clinical trials for the treatment of
breast cancer, head and neck cancer, and a variety of other solid tumor cancers,
leukemia and AIDS. Medarex is developing three of its products through
strategic alliances with Ciba-Geigy Limited, of Basel, Switzerland ("Ciba"),
Merck KgaA, of Darmstadt, Germany ("E.Merck") and Centeon L.L.C. ("Centeon"), a
Delaware limited liability company formed as a joint venture of Hoechst AG and
Rhone-Poulenc Rorer, Inc.
Medarex's principal products under development are bispecific, that is,
they are designed to attach to both disease targets and immune system killer
cells simultaneously. This dual binding ability is essentially a target-trigger
combination in which one portion of the bispecific binds to a Trigger molecule
on killer cells and the other targets and binds to the tumor cell or infectious
agent (a "pathogen") to be eliminated. After joining the killer cell and the
tumor cell or pathogen, the bispecific triggers the killer cell's destruction of
the target. Based on early clinical trial results, management believes that its
Bispecifics have the potential to cause the destruction of tumors and pathogens
that ordinarily might escape detection by the body's immune system.
The Trigger portion of Medarex's Bispecific products may be linked to a
variety of different targeting mechanisms, such as recombinant proteins, single
chain antibodies and antibody fragments. For this reason, Medarex believes that
its Bispecifics may be designed for the treatment of a wide range of cancers,
viruses, bacteria and parasites. Medarex has patented the Trigger molecule and
has obtained licenses to a number of targeting mechanisms.
In May, 1995, Medarex entered into a strategic alliance with Ciba pursuant
to which Ciba obtained a worldwide exclusive license to MDX-210, Medarex's
Bispecific therapeutic for tumors that overexpress an antigen known as HER-2.
These tumors include a significant number of breast, ovarian, prostate and other
tumors. MDX-210 is currently in Phase I/II clinical trials. In 1994, Medarex
entered into a collaborative arrangement with E. Merck pursuant to which Medarex
is developing MDX-447 for the treatment of cancers that overexpress the
epidermal growth factor receptor ("EGF-R"). Cancers in which EGF-R is
overexpressed include head and neck, breast, brain, non-small cell lung and
bladder tumors. MDX-447 is currently in Phase I/II clinical trials. Medarex is
currently in discussions with biotechnology and pharmaceutical companies and
academic institutions to establish collaborations for the creation and
development of additional bispecific products. In addition, in April 1996,
Medarex entered into a strategic alliance with Centeon to develop and market
MDX-33, Medarex's product for the treatment of ITP, an autoimmune condition in
which a person's platelets are destroyed by his own immune system. MDX-33 may
diminish the triggering function on various killer cells, potentially
diminishing the autoimmune activity. MDX-33 is currently in Phase I clinical
trials. Medarex believes that its bispecific products may also act as
therapeutic vaccines. In addition to destroying the target cells, they may
stimulate the patient's own immune system to generate a further active immune
response leading to the production of specific antibodies and killer cells that
may cause on-going destruction of the tumor or pathogen. Research programs are
also underway to develop bispecific products as tumor vaccines.
Additional information concerning Medarex and its subsidiaries is contained
in Medarex's Annual Report on Form 10-K for the year ended December 31, 1995,
its Quarterly Reports for the periods ended March 31, 1996, June 30, 1996 and
September 30, 1996 and its other public filings. See "Available Information"
and "Incorporation by Reference."
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DESCRIPTION OF MEDAREX CAPITAL STOCK
Medarex Common Stock. Medarex is authorized to issue 40,000,000 shares of
Medarex Common Stock. As of January 24, 1997, there were 17,594,992 shares of
Medarex Common Stock issued and outstanding and Medarex had approximately 360
holders of record. The transfer agent and registrar for the Medarex Common
Stock is Continental Stock Transfer & Trust Company, Two Broadway, New York, New
York 10004.
Voting. Each share of Medarex Common Stock entitles the holder thereof to
one vote on all matters submitted to a vote of the stockholders. Since the
holders of Medarex Common Stock do not have cumulative voting rights, holders of
more than 50% of the outstanding shares can elect all of the directors of
Medarex and holders of the remaining shares by themselves cannot elect any
directors. The holders of Medarex Common Stock do not have preemptive rights or
rights to convert their Medarex Common Stock into other securities. Holders of
Medarex Common Stock are entitled to receive ratably such dividends as may be
declared by the Medarex Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of Medarex,
holders of Medarex Common Stock have the right to a ratable portion of the
assets remaining after payment of liabilities. All shares of Medarex Common
Stock outstanding (including the shares of Medarex Common Stock to be issued in
the Merger and upon exercise of the Medarex Warrants) are, or will be upon
issuance, fully paid and non-assessable.
Medarex Preferred Stock. Medarex's authorized preferred stock consists of
2,000,000 shares, par value $1.00 per share. There are currently no shares of
preferred stock issued and outstanding. Medarex's Charter grants the Medarex
Board of Directors the authority to issue by resolution shares of preferred
stock in one or more series and (i) to fix the number of shares constituting any
such series, the voting powers, if any, designations, preferences, and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including the rate or rates at which, and the other
terms and conditions on which, dividends shall be payable, (ii) whether and on
what terms the shares constituting any series shall be redeemable, subject to
sinking fund provisions, or convertible or exchangeable into securities of
Medarex, and (iii) the liquidation preferences, if any, of such series, without
further vote or action by the stockholders. For example, the Medarex Board of
Directors is authorized to issue a series of preferred stock that would have the
right to vote, separately or with any other series of preferred stock, on any
proposed amendment to the Medarex Charter or any other proposed corporate
action, including business combinations and other transactions. The Medarex
Board of Directors currently does not contemplate the issuance of any preferred
stock and is not aware of any pending or proposed transactions that would be
affected by such issuance.
Certain Special Charter and By-law Provisions. The Medarex Charter and
Medarex By-Laws as in effect on the date hereof contain certain provisions that
may delay, defer or prevent a change in control of Medarex. Specifically, the
Board of Directors is classified. Directors are elected for three year terms
with only one class of board members elected each year. In addition, the
Medarex By-Laws provide that special meetings of stockholders may be called only
by the President, the Chairman of the Board of Directors, the Board of Directors
or by the holders of not less than 33% of the Medarex capital stock entitled to
vote at such meetings.
Furthermore, the Medarex Charter incorporates all of the provisions of the
NJ Protection Act, which provides that a resident New Jersey corporation such as
Medarex may not engage in certain Business Combinations with any Interested
Stockholder, as such terms are defined therein, for a period of five years
following the date (the "Acquisition Date") that such Interested Stockholder
became the owner, directly or indirectly, of 10% or more of the voting power of
Medarex, unless (i) such transaction is approved by the Medarex Board of
Directors prior to the Acquisition Date, or (ii) the holders of two-thirds
(66 2/3%) of the voting stock of Medarex, excluding the shares of the Interested
Stockholder, approve such transaction. The NJ Protection Act also precludes the
purchase by Medarex (except as hereinafter noted) at a premium over market of
any of its voting stock from an Interested Stockholder who has owned such
securities for less than five years. Notwithstanding the foregoing, such a
purchase would be permitted if (i) the same offer were made to all other holders
of the same kind of securities, (ii) the transaction were approved by the
holders of 66 2/3% of the outstanding voting stock of Medarex excluding the
shares of any Interested Stockholder, or (iii) the Board of Directors of Medarex
approved the transaction prior to such Interested Stockholder's Acquisition
Date. The Medarex Charter does not provide for any additional anti-takeover
protection other than those set forth in the NJ Protection Act. Also See
"Comparison of Stockholder Rights--Stockholder Protection Legislation."
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SHARES ELIGIBLE FOR FUTURE SALE
As of January 24, 1997, Medarex had 17,594,992 shares of Common Stock
outstanding, without taking into account shares of Common Stock issuable upon
exercise of outstanding options and warrants. Medarex has filed registration
statements on Form S-3 under the Securities Act relating to 1,210,888 shares of
Common Stock being offered by certain selling security holders. Such shares of
Common Stock are freely tradeable without restriction or further registration
under the Securities Act, except for shares, if any, held by "affiliates" of
Medarex which shares will be subject to resale limitations of Rule 144.
Of such 17,594,992 shares of Common Stock outstanding, 3,130,263 shares
(the "Restricted Shares") were issued and sold by Medarex in private
transactions in reliance upon one or more exemptions contained in the Securities
Act or upon the exercise of stock options. The Restricted Shares are deemed to
be "restricted securities" within the meaning of Rule 144 and may be publicly
sold only if registered under the Securities Act or sold pursuant to Rule 144.
All of the Restricted Shares have been held for more than two years and are
eligible for public sale in accordance with the requirements of Rule 144, as
described below.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including persons deemed to be affiliates of
Medarex, whose restricted securities have been fully paid for and held for at
least two years from the later of the date of issuance by Medarex or acquisition
from an affiliate, may sell such securities in brokers' transactions or directly
to market makers, provided that the number of shares sold in any three month
period may not exceed the greater of 1% of the then outstanding shares of Common
Stock or the average weekly trading volume of the Common Stock in the over-the-
counter market during the four calendar weeks preceding the sale. Sales under
Rule 144 are also subject to certain notice requirements and the availability of
current public information about Medarex. After three years have elapsed from
the later of the issuance of restricted securities by Medarex and their
acquisition from an affiliate, such securities may be sold without limitation by
persons who are not affiliates under the rule.
Medarex has filed registration statements under the Securities Act on Form
S-8 to register the shares of Common Stock issuable under its Amended and
Restated 1987 Stock Option Plan (282,450 shares), Amended and Restated EMP Plan
(451,500), Amended and Restated 1991 Stock Option Plan (250,000), 1992 Stock
Option Plan (250,000 Shares), 1994 Stock Option Plan (300,000 shares), 1995
Stock Option Plan (350,000 shares) and 1996 Stock Option Plan (350,000 shares).
Shares issued under such plans other than shares issued to affiliates of
Medarex, will be freely tradeable in the public market. In addition, upon
completion of the Merger, Medarex intends to file a registration statement under
the Securities Act on Form S-8 to register up to 145,248 shares of Medarex
Common Stock issuable under the outstanding HBI options assumed by Medarex.
Such shares will be freely tradeable in the public market.
In addition, up to 822,924 shares of Medarex's Common Stock issuable upon
the exercise of the HBI Warrants assumed by Medarex under the terms of the
Merger have been registered pursuant to the Registration Statement and are
covered by this Prospectus. Said shares will be freely tradeable without
restrictions or further registration under the Securities Act.
No predictions can be made as to the effect, if any, that sales of shares
or the availability of shares for sale will have on the market prices prevailing
from time to time. Moreover, Medarex cannot predict the number of shares of
Common Stock that may be sold in the future pursuant to Rule 144 because such
sales will depend upon, among other factors, the market prices of the Common
Stock and the individual circumstances of the holders thereof. Nevertheless,
sales of substantial amounts of the Common Stock in the public market following
the offering made hereby could have a significant adverse effect on prevailing
market prices and could impair Medarex's future ability to raise capital through
the sale of its equity securities. See "Risk Factors--Possible Volatility of
Securities Prices."
SELECTED INFORMATION CONCERNING HBI
GENERAL
HBI is engaged primarily in the research and development of monoclonal
antibody and other biopharmaceutical products to prevent secondary cataract and
treat glaucoma, disorders that impair or destroy human vision. HBI's principal
expertise is its monoclonal antibody-based immunoconjugate technology, which
involves the linking of a monoclonal antibody
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to another substance such as a drug or an anti-proliferative agent. HBI has no
products approved for sale by the FDA and its current product candidates are not
expected to generate significant revenues, if any, for a number of years.
HBI was incorporated in Delaware in 1984 and commenced substantial
operations in 1986. A total of approximately $38 million has been raised on
behalf of HBI and its affiliates since 1986. To date, the majority of HBI's
efforts have been directed toward development of the Immunotoxin for the
prevention of secondary cataract. A Phase I human clinical trial has been
completed for this product and patient enrollment in a Phase I/II human clinical
trial was completed in July 1994. Interim analyses of the data from the Phase
I/II clinical trial have revealed statistically significant differences in rates
of lens capsule opacification between patients receiving the 50-unit dose and
patients receiving the placebo at six and twelve months post cataract surgery.
Patient enrollment in a Phase II human clinical study of patients requiring
cataract surgery in both eyes was completed in January 1996. In addition, HBI
is researching drug-conjugates to enhance the success of glaucoma filtering
surgery. All other research activities were curtailed as a result of spending
reduction plan implemented February 1, 1995.
Effective December 29, 1995, HBI and Santen entered into a Codevelopment
and License Agreement covering the marketing in Japan of the Immunotoxin to
prevent the formation of secondary cataract. To maintain exclusive marketing
rights, Santen is required to provide $7,750,000 over the next six years to
support HBI's development of the Immunotoxin. Santen is responsible for
development costs related to obtaining Japanese regulatory approval. Once the
Immunotoxin is approved for marketing in Japan, Santen will purchase the product
from HBI and will pay royalties on sales. HBI received $250,000 in November
1995 from Santen under an Option Agreement relating to the Codevelopment and
License Agreement, and $1,750,000 of the $7,750,000 was paid as of December 31,
1996. It is expected that Santen will pay $1,000,000 of the $7,750,000 during
1997. Santen may elect not to make any scheduled payment, but in such event, the
license may be made non-exclusive or terminated by HBI.
During 1995 and 1996, payments made by Santen were funding HBI's
activities, but such payments fell short of funding requirements beginning in
the third quarter of 1996. Accordingly, HBI sought funding from a variety of
sources and considered a number of financing alternatives. In connection with
the Merger, Medarex has loaned HBI an aggregate of $750,000 to be used
exclusively for operating expenses in the ordinary course of HBI's business.
See "The Merger--Background of the Merger" for a description of HBI's efforts to
secure such financing and see "The Merger--Convertible Notes" for a description
of the loans made by Medarex to HBI pursuant to the Merger Agreement.
Additional information concerning HBI is contained in HBI's Annual Report
on Form 10-K for the year ended December 31, 1995, its Quarterly Reports for the
periods ended March 31, 1996, June 30, 1996 and September 30, 1996 and its other
public filings. See "Available Information" and "Incorporation by Reference."
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 24, 1997, the name of each
person who, to the knowledge of HBI's management, beneficially owned more than
5% of the record shares of HBI Common Stock outstanding at such date, the number
of shares owned by each such person, and the percentage of the outstanding
shares represented thereby. The number of shares shown as beneficially owned is
determined under rules of the Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the person has the sole or
shared voting power or investment power and also any shares which the person has
the right to acquire within 60 days through the exercise of any stock option,
warrant or other right.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY PRINCIPAL HOLDERS
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND NATURE OF
ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
---------------- ---------- -----------
<S> <C> <C>
LBI Group, Inc.
c/o Lehman Brothers Inc.
World Financial Center
200 Vesey Street
New York, NY 10184 1,017,360(1) 16.53%
CIM Fund Managers Limited
c/o Colonial Mutual Life Assurance Society Limited
Dominican House, 4 Priory Court, Pilgrim Street
London, EC4V 6DQ England UK 771,600(2) 13.68%
Victor K. Atkins, Jr.
33 Flying Point Road
Southampton, NY 11968 628,876(3) 10.78%
</TABLE>
- ----------------------------
(1) Includes 500,341 shares of HBI Common Stock and 517,019 immediately
exercisable HBI Warrants held by LBI Group, Inc., an affiliate of Lehman
Brothers Inc.
(2) Includes 316,000 shares owned by Co-op Pension Funds, 300,000 shares owned
by Co-op Wholesale Society and 155,000 shares owned by Co-op Bank Pension
Fund.
(3) Includes (i) 434,435 shares of HBI Common Stock, (ii) 172,441 immediately
exercisable HBI Warrants; and (iii) 22,000 fully vested options to purchase
shares of HBI Common Stock.
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The following table sets forth the beneficial ownership of the HBI
Common Stock as of January 24, 1997, as to (i) all directors and nominees, (ii)
the executive officers of HBI, and (iii) the directors and executive officers as
a group. Beneficial ownership is determined in the same manner as described
above.
BENEFICIAL OWNERSHIP OF HBI COMMON STOCK BY DIRECTORS,
DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL OUTSTANDING
NAME OF OWNERSHIP OF COMMON
BENEFICIAL OWNER HBI COMMON STOCK(1) STOCK
---------------- --------------------- -----------
<S> <C> <C>
J. Russell Denson..................... 234,917(2) 4.00%
William D. Gutermuth.................. 57,500(3) 1.01%
Robert S. Lemer....................... 40,000(4) *
A. Douglas Peabody.................... 102,132(5) 1.78%
Donald S. Clark, Ph.D................. 90,320(6) 1.58%
All directors and executive officers
as a group (6 persons)............. 605,994(7) 9.74%
</TABLE>
- -------------------------
* Less than 1%
(1) Except as indicated in the footnotes to this table, the stockholders named
in the table have sole voting and investment power with respect to all
shares of HBI Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
(2) Includes (i) 300 shares of HBI Common Stock owned by family members as to
which Mr. Denson disclaims beneficial ownership; (ii) 4,517 immediately
exercisable HBI Warrants; (iii) 100 immediately exercisable warrants owned
by a family member as to which Mr. Denson disclaims beneficial ownership;
(iv) 215,000 fully vested options to purchase shares of HBI Common
Stock, and (v) 12,500 options that will vest upon consummation of the
Merger.
(3) Includes 45,000 fully vested options to purchase shares of HBI Common
Stock and 5,000 options that will vest upon consummation of the Merger.
(4) Includes 35,000 fully vested options to purchase shares of HBI Common
Stock and 5,000 options that will vest upon consummation of the Merger.
(5) Includes 13,927 immediately exercisable HBI Warrants, 75,000 fully
vested options to purchase shares of HBI Common Stock and 5,000 options
that will vest upon consummation of the Merger.
(6) Includes 3,220 immediately exercisable HBI Warrants, 77,730 fully vested
options to purchase shares of HBI Common Stock and 7,270 options
that will vest upon consummation of the Merger.
(7) Includes 22,341 immediately exercisable warrants, 518,560 fully vested
options to purchase shares of HBI Common Stock and 43,940 options
that will vest upon consummation of the Merger.
COMPARISON OF STOCKHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of Medarex Common Stock and the rights of holders of HBI Common Stock.
Medarex is incorporated under the laws of the State of New Jersey and,
accordingly, the rights of stockholders are governed by the Medarex Charter, the
Medarex By-laws and the NJCA. HBI is incorporated under the laws of the State of
Delaware and, accordingly, the rights of holders of HBI Common Stock are
governed by the HBI Charter, the HBI By-laws and the DGCL. This summary does not
purport to be complete and is qualified in its entirety by reference to the NJCA
and the DGCL, which statutes may change from time to time, and the Medarex
Charter and the Medarex By-laws, which also may be changed.
GENERAL STOCKHOLDER VOTE REQUIREMENTS
Unless otherwise specified in a Delaware corporation's certificate of
incorporation, the DGCL generally provides that an amendment to the certificate
of incorporation, a sale or other disposition of all or substantially all of a
corporation's assets,
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or a merger or consolidation of a corporation with another corporation requires
the affirmative vote of a majority of the outstanding stock entitled to vote
thereon. The Medarex Charter and the Medarex By-Laws presently do not contain a
provision specifying a greater vote in such circumstances (other than as set
forth below with respect to the NJ Protection Act).
Under the DGCL, if the shares of a corporation are divided into classes, the
holders of the outstanding shares of each class are entitled to vote as a class
upon any proposed amendment to the certificate of incorporation (whether or not
entitled to vote thereon by the provisions of the certificate of incorporation)
if the amendments increase or decrease the aggregate number of authorized shares
of such class, increase or decrease the par value of shares of such class, or
alter or change the powers, preferences, or special rights of the shares of such
class so as to adversely affect them. However, the number of authorized shares
of any such class or classes of stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
holders of a majority of the stock of the corporation entitled to vote (without
a class vote) if the certificate of incorporation so provides. Medarex's
Charter does not provide for such increase or decrease of the number of
authorized shares.
CUMULATIVE VOTING
Under both the DGCL and the NJCA, stockholders do not have cumulative voting
rights in the election of directors unless the certificate of incorporation so
provides. Neither the HBI Charter nor the Medarex Charter provide for
cumulative voting.
RIGHTS OF DISSENTING STOCKHOLDERS
Generally, stockholders of a Delaware corporation who dissent from a merger
or consolidation of the corporation are entitled to appraisal rights. There
are, however, no statutory rights of appraisal with respect to stockholders of a
corporation whose shares are either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders, where such stockholders receive only (a)
shares of stock of the corporation surviving or resulting from the merger of
consolidation or shares of stock of any other corporation which, at the
effective date of the merger or consolidation, will be either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 stockholders or (b) cash in
lieu of fractional interests therein. Delaware law does not provide appraisal
rights to stockholders who dissent from the sale of all or substantially all of
the corporation's assets unless the certificate of incorporation provides
otherwise. Since the exceptions from the Delaware statutory right of appraisal
apply to the Merger, stockholders of HBI do not have statutory rights of
appraisal with respect to the Merger. See "The Merger--Appraisal Rights."
Shareholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporation transactions are generally entitled to appraisal
rights. No statutory right of appraisal exists, however, where the stock of the
New Jersey corporation is listed on a national securities exchange, or is held
of record by not less than 1,000 holders, or the consideration to be received
pursuant to the merger, consolidation or sale consists of cash or securities or
other obligations which, after the transaction, will be listed on a national
securities exchange or held of record by not less than 1,000 holders.
STOCKHOLDERS' CONSENT TO CORPORATE ACTION
Unless otherwise provided in the certificate of incorporation, the DGCL
provides that any corporate action or authorization which requires the
affirmative vote of stockholders may be taken without a meeting, if a consent in
writing to such action is signed by the holders of outstanding stock having not
less than the minimum number of votes necessary to approve such action.
Except as otherwise provided by the certificate of incorporation (and
Medarex's Charter presently contains no such restrictions), the NJCA permits any
action required or permitted to be taken at any meeting of a corporation's
shareholders, other than the annual election of directors, to be taken without a
meeting upon the written consent of shareholders who would have been entitled to
cast the minimum number of votes necessary to authorize such action at a meeting
of shareholders at which all shareholders entitled to vote were present and
voting. The annual election of directors, if not conducted at a
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<PAGE>
shareholders' meeting, may be effected only by unanimous written consent. Under
the NJCA, a shareholder vote on a plan of merger or consolidation, if not
conducted at a shareholders' meeting, may only be effected by either: (i)
unanimous written consent of all shareholders entitled to vote on the issue with
advance notice to any other shareholders, or (ii) written consent of
shareholders who would have been entitled to cast the minimum number of votes
necessary to authorize such action at a meeting, together with advance notice to
all other shareholders.
PREEMPTIVE RIGHTS
Under both the DGCL and the NJCA, stockholders have only such preemptive
rights as may be provided in their respective certificates of incorporation.
Neither the HBI Charter nor the Medarex Charter provide stockholders with
preemptive rights.
DIVIDENDS AND OTHER DISTRIBUTIONS
Subject to any restrictions contained in a corporation's certificate of
incorporation, the DGCL generally provides that a corporation may declare and
pay dividends out of surplus (defined as net assets minus stated capital) or,
when no surplus exists, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. The HBI Charter does not
include any such restrictions.
Unless there are other restrictions contained in a New Jersey corporation's
certificate of incorporation (and the Medarex Charter presently contains none),
the NJCA generally provides that a New Jersey corporation may declare and pay
dividends on its outstanding stock so long as the corporation is not insolvent
and would not become insolvent as a consequence of the dividend payment.
BY-LAWS
Under the DGCL, the authority to adopt, amend, or repeal the by-laws of a
Delaware corporation is held exclusively by the stockholders, unless such
authority is conferred upon the board of directors in the certificate of
incorporation. The HBI Charter confers this authority on both the board of
directors and the stockholders and the affirmative vote of at least 66 2/3
percent of the voting power of all of the then outstanding shares of HBI Common
Stock is required for such action.
The board of directors of a New Jersey corporation has the power to adopt,
amend, or repeal the corporation's by-laws, unless such powers are reserved in
the certificate of incorporation to the shareholders. The Medarex Charter does
not reserve such powers to its shareholders.
DIRECTORS
Both the HBI Charter and the Medarex Charter provide for directors to be
classified into three classes, as nearly equal in number as possible, with each
group to serve a three-year term. An HBI director may be removed for cause by
the affirmative vote of at least 80% of the outstanding HBI Common Stock or by a
majority of the HBI Board. The provisions of the HBI Charter providing for
classification and removal of directors may be amended only by the affirmative
vote of the holders of at least 80% of the HBI Common Stock unless such
amendment is declared advisable by at least 75% of the HBI Board. There are no
such restrictions on removal of directors or amendment of the classification
provision in the Medarex Charter.
LIMITATIONS OF LIABILITY OF DIRECTORS AND OFFICERS
Under the NJCA, a corporation may include in its certificate of incorporation
a provision which would, subject to the limitations described below, eliminate
or limit directors' or officers' liability to the corporation or its
shareholders for monetary damage for breaches of their fiduciary duty of care.
A similar provision under the DGCL, applies to directors, but not officers. Both
the HBI Charter and the Medarex Charter eliminate or provide for such limits to
a director's liability.
Under Delaware law, a director cannot be relieved of liability (i) for
breaches of the duty of loyalty, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
the payment of
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<PAGE>
unlawful dividends or expenditure of funds for unlawful stock purchases or
redemptions, or (iv) for transactions from which such director derived an
improper personal benefit.
Under New Jersey law, a director or officer cannot be relieved from liability
or otherwise indemnified for any breach of duty based upon an act or omission
(i) in breach of such person's duty of loyalty to the corporation or its
shareholders, (ii) not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper personal benefit.
STOCKHOLDER PROTECTION LEGISLATION
Section 203 of the DGCL ("Section 203"), in general, prohibits a "business
combination" between a corporation and an "interested stockholder" within three
years of the date such stockholder became an "interested stockholder," unless
(i) prior to such date the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, or (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 35% of the voting stock of the corporation
outstanding at the time the transaction commenced, exclusive of shares owned by
directors who are also officers and by certain employee stock plans, or (iii)
after such date, the business combination is approved by the board of directors
and authorized by the affirmative vote at a stockholders' meeting of at least 66
2/3% of the outstanding voting stock which is not owned by the interested
stockholder. The term "business combination" is defined to include, among
other transactions between the interested stockholder and the corporation or any
direct or indirect majority-owned subsidiary thereof, a merger or consolidation;
a sale, pledge, transfer or other disposition (including as a part of
dissolution) of assets having an aggregate market value equal to 10% or more of
either the aggregate market value of all assets of the corporation on a
consolidated basis or the aggregate market value of all the outstanding stock of
the corporation; certain transactions that would increase the interested
stockholder's proportion of share ownership of the stock of any class or series
of the corporation or such subsidiary; and any receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or other
financial benefits provided by or through the corporation or any such
subsidiary. In general, and subject to certain exceptions, an "interested
stockholder" is any person who is the owner of 15% or more of the outstanding
voting stock (or, in the case of a corporation with classes of voting stock with
disparate voting power, 15% or more of the voting power of the outstanding
common stock) of the corporation, and the affiliates and associates of such
person. The term "owner" is broadly defined to include any person that
individually or with or through its affiliates or associates, among other
things, beneficially owns such stock or has the right to acquire such stock
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement or understanding or upon the exercise of
warrants or options or otherwise or has the right to vote such stock pursuant to
any agreement or understanding, or has an agreement or understanding with the
beneficial owner of such stock for the purpose of acquiring, holding, voting or
disposing of such stock. The restrictions of Section 203 do not apply to
corporations that have elected, in the manner provided therein, not to be
subject to such Section or which do not have a class of voting stock that is
listed on a national securities exchange or authorized for quotation on an
interdealer quotation system of a registered national securities association or
held of record by more than 2,000 stockholders. The HBI Charter does make such
an election.
The NJ Protection Act prohibits certain transactions involving an "interested
shareholder" and a "resident domestic corporation." An "interested shareholder"
is one that is directly or indirectly a beneficial owner of 10% or more of the
voting power of the outstanding voting stock of a resident domestic corporation.
The NJ Protection Act prohibits certain business combinations between an
interested shareholder and a resident domestic corporation for a period of five
years after the date the interested shareholder acquired its stock, unless the
business combination was approved by the resident domestic corporation's board
of directors prior to the "stock acquisition date." After the five-year period
expires, the prohibition on certain business combinations continues unless the
business combination is approved by the affirmative vote of two-thirds of the
voting stock not beneficially owned by the interested stockholder, the business
combination is approved by the board prior to the interested stockholder's stock
acquisition date or certain fair price provisions are satisfied. The term
"business combination" is defined to include, among others, transactions between
an interested stockholder and a resident domestic corporation; a merger or
consolidation; a sale, lease exchange, mortgage, pledge, transfer or other
disposition of assets of the resident domestic corporation having an aggregate
market value in excess of 10% or more of either the aggregate market value of
all the assets of the resident domestic corporation on a consolidated basis or
the aggregate market value of all the outstanding stock of that resident
domestic corporation; certain transactions that would increase the interested
stockholder's percentage ownership in the resident domestic corporation; and any
receipt by an interested stockholder of the benefit of any loans,
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<PAGE>
advances, guarantees, pledges or certain other financial benefits provided by or
through the corporation. The NJ Protection Act also prohibits the interested
stockholder from engaging in any of these business combinations through its
"affiliates" and "associates" or by engaging in such business combinations with
a subsidiary of the resident domestic corporation. The Medarex Charter provides
that the NJ Protection Act shall be applicable to Medarex and such charter
provision may be amended only by the affirmative vote of the holders of sixty-
six and two-thirds percent of the issued and outstanding voting stock of Medarex
including sixty-six and two-thirds percent of the outstanding voting stock held
by persons other than "interested stockholders;" provided, however, that such
provision may be amended by the affirmative vote of the holders of sixty-six and
two-thirds percent of the issued and outstanding voting stock of Medarex or the
approval of a majority of the Disinterested Directors (as defined in the Medarex
Charter) and the holders of a majority of the issued and outstanding voting
stock of Medarex.
LEGAL OPINION
The validity of the shares of Medarex Common Stock offered by this Proxy
Statement and Prospectus will be passed upon for Medarex by Satterlee Stephens
Burke & Burke LLP, New York, New York.
EXPERTS
The financial statements of Medarex at December 31, 1994 and 1995, and for
each of the three years in the period ended December 31, 1995 and the period
from July 15, 1987 (inception) to December 31, 1995 appearing in the Medarex
Annual Report on Form 10-K 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 upon the authority of
such firm as experts in accounting and auditing.
The financial statements of HBI appearing in the HBI Annual Report on Form
10-K for each of the three years in the period ended December 31, 1995 have been
audited by Arthur Andersen LLP, independent public accountants as set forth in
their report thereon included therein and incorporated herein by reference in
reliance upon such report of said firm and upon the authority of said firm as
experts in accounting and auditing. Reference is made to such report which
contains an explanatory paragraph that describes the uncertainties that raise
substantial doubt about HBI's ability to continue as a going concern.
SOLICITATION OF PROXIES
HBI and Medarex will share equally the expenses in connection with the
printing and mailing of this Proxy Statement and Prospectus. The costs of
solicitation of proxies will be borne by HBI. HBI will reimburse brokers,
fiduciaries, custodians and other nominees for reasonable out of pocket expenses
incurred in sending this Proxy Statement and Prospectus and other proxy
materials to, and obtaining instructions relating to such materials from,
beneficial owners of stock. HBI stockholder proxies may be solicited by
directors, officers, regular employees or agents of HBI, in person, by letter or
by telephone or by telegram.
HBI will also reimburse custodians, nominees and fiduciaries for forwarding
proxies and proxy materials to the beneficial owners of their stock in
accordance with regulations of the Commission, the AMEX and the Nasdaq.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Portions of this Proxy Statement and Prospectus include forward looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Although HBI and Medarex believe that the expectations
reflected in such forward looking statements are based upon reasonable
assumptions, they can give no assurance that their expectations will be
achieved. Important factors that could cause actual results to differ
materially from HBI's and Medarex's expectations are disclosed in conjunction
with the forward looking statements included herein ("Cautionary Disclosures").
Subsequent written and oral forward looking statements attributable to HBI,
Medarex or persons acting on their behalf are expressly qualified in their
entirety by the Cautionary Disclosures.
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AVAILABLE INFORMATION
HBI and Medarex are subject to the reporting requirements of the
Exchange Act, and in accordance therewith, are required to file reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected, without charge, and copied at
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at: Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Additionally, copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Copies of such material may also be
accessed through the Commission's Internet web site at http://www.sec.gov.
Medarex Common Stock is listed and traded on the Nasdaq. Such reports, proxy
statements and other information of Medarex may also be inspected at the offices
of Nasdaq, 1735 K Street, N.W., Washington, D.C. 20006. HBI Common Stock is
listed and traded on the AMEX. Such reports, proxy statements and other
information of HBI may be inspected at the offices of the AMEX at 86 Trinity
Place, New York, New York 10006. If the Merger is consummated, Medarex will
continue to file reports, proxy statements and other information with the
Commission pursuant to the Exchange Act, but HBI will no longer be subject to
the reporting requirements of the Exchange Act.
Medarex has filed with the Commission the Registration Statement under
the Securities Act with respect to shares of Medarex Common Stock to be issued
pursuant to the Merger Agreement. This Proxy Statement and Prospectus, which is
filed as part of the Registration Statement, does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain items of which are omitted in accordance with the
rules and regulations of the Commission. Statements made in this Proxy Statement
and Prospectus concerning the contents of any contract, agreement or other
document referred to are summaries of the terms of such contract, agreement or
other document and are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is hereby made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Copies of all or any portion of
the Registration Statement may be obtained from the Public Reference Section of
the Commission, upon payment of the prescribed fees.
A copy of HBI's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and HBI's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1996, accompany this Proxy Statement and Prospectus. Such
reports contain financial statements, prepared in conformity with generally
accepted accounting principles, for the fiscal year ended December 31, 1995 and
the fiscal quarter ended September 30, 1996, respectively, and certain other
information and should be read in connection with this Proxy Statement and
Prospectus.
A copy of Medarex's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and Medarex's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996, accompany this Proxy Statement and
Prospectus. Such reports contain financial statements, prepared in conformity
with generally accepted accounting principles, for the fiscal year ended
December 31, 1995 and the fiscal quarter ended September 30, 1996, respectively,
and certain other information and should be read in connection with this Proxy
Statement and Prospectus.
INCORPORATION BY REFERENCE
THIS PROXY STATEMENT AND PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS
RELATING TO HBI ARE AVAILABLE UPON REQUEST FROM HOUSTON BIOTECHNOLOGY
INCORPORATED, 3608 RESEARCH FOREST DRIVE, THE WOODLANDS, TEXAS 77381, ATTENTION:
ANN MURRAY, TELEPHONE (713) 363-0999. DOCUMENTS RELATING TO MEDAREX ARE
AVAILABLE UPON REQUEST FROM MEDAREX, INC., 1545 ROUTE 22 EAST, ANNANDALE, NEW
JERSEY 08801, ATTENTION: MICHAEL A. APPLEBAUM, TELEPHONE (908) 713-6001. TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY
FEBRUARY 15, 1997. COPIES OF DOCUMENTS THAT ARE REQUESTED WILL BE SENT BY
FIRST-CLASS MAIL, POSTAGE PAID.
Medarex and HBI hereby undertake to provide without charge to any
beneficial owner of HBI Common Stock to whom a copy of this Proxy Statement and
Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any and all of the documents referred to below which have been
or may be incorporated herein by reference, other
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than exhibits to such documents, unless such exhibits are specifically
incorporated herein by reference. Requests for such documents should be
directed to the persons indicated in the immediately preceding paragraph.
The following HBI documents filed with the Commission (File No. 1-
12210) are incorporated by reference herein:
(i) HBI's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 10-K, which includes the report of
independent public accountants on the financial statements
included therein, said report containing an explanatory
paragraph that describes the uncertainties that raise
substantial doubt about HBI's ability to continue as a going
concern;
(ii) HBI's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1996;
(iii) HBI's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1996;
(iv) HBI's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1996;
(v) the portions of the Proxy Statement for the Annual Meeting of
Stockholders held on June 20, 1996 that have been incorporated
by reference in HBI's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995; and
(vi) all other documents filed by HBI pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Proxy Statement and Prospectus and prior to the date of
the HBI Special Meeting.
The following Medarex documents filed with the Commission (File No.
0-19312) are incorporated by reference herein:
(i) Medarex's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(ii) Medarex's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1996;
(iii) Medarex's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1996;
(iv) Medarex's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996;
(v) the portions of the Proxy Statement for the Annual Meeting of
Stockholders held on May 16, 1996 that have been incorporated
by reference in Medarex's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995; and
(vi) all other documents filed by Medarex pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Proxy Statement and Prospectus and prior to the
date of the HBI Special Meeting.
Any statement contained in this Proxy Statement and Prospectus or in a
document incorporated by reference in this Proxy Statement and Prospectus will
be deemed to be modified or superseded for purposes of this Proxy Statement and
Prospectus to the extent that a statement contained in this Proxy Statement and
Prospectus or in any other subsequently filed document which is also
incorporated by reference in this Proxy Statement and Prospectus modifies or
supersedes such statement. Any statement so modified or superseded will not be
deemed, except as modified or superseded, to constitute a part of this Proxy
Statement and Prospectus.
DATE FOR RECEIPT OF PROPOSALS
Pursuant to Rule 14a-8 under the Securities and Exchange Act of 1934,
as amended, the former stockholders of HBI (as stockholders of Medarex) may
present proper proposals for inclusion in Medarex's proxy statement for
consideration at its Annual Meeting of Stockholders by submitting proposals to
Medarex in a timely manner. To be so included for the 1998
-46-
<PAGE>
Annual Meeting, stockholder proposals must be received by Medarex by December 1,
1997, and must otherwise comply with the requirements of Rule 14a-8.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
One or more representatives of Arthur Andersen LLP, independent public
accountants for HBI, are expected to be present at the Special Meeting, will
have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
OTHER MATTERS
It is not intended that any business other than the proposals
described above will be presented at the Special Meeting. With respect, however,
to any other matters or proposals that may properly come before the Special
Meeting, it is the intention of the persons named as proxies in any proxy
solicited hereunder to vote such proxy in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS OF
HOUSTON BIOTECHNOLOGY INCORPORATED
/s/ J. RUSSELL DENSON
_____________________________________
J. Russell Denson
President
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<PAGE>
----------------
AGREEMENT AND PLAN OF MERGER
AMONG
MEDAREX, INC.,
MEDAREX ACQUISITION CORP.
AND
HOUSTON BIOTECHNOLOGY INCORPORATED
DATED: DECEMBER 18, 1996
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<C> <S> <C>
AGREEMENT AND PLAN OF MERGER.......................................... A-1
Article I The Merger.................................................. 1
Section 1.1 The Merger........................................... 1
Section 1.2 Closing.............................................. 1
Section 1.3 Effective Time of the Merger......................... 1
Section 1.4 Effects of the Merger................................ 1
Section 1.5 Certificate of Incorporation; By-Laws................ 1
Section 1.6 Directors and Officers............................... 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............................. 3
Section 2.3 Assumption of Options and Warrants................... 4
Article III Representations and Warranties............................ 5
Section 3.1 Representations and Warranties of the Company........ 5
Section 3.2 Representations and Warranties of Parent and Merger
Sub.................................................. 12
Article IV Conduct of Business Pending the Merger; Other Covenants.... 16
Section 4.1 Conduct of Business of the Company Pending the
Merger............................................... 16
Section 4.2 Conduct of Business of Merger Sub.................... 17
Section 4.3 Stockholders' Meeting................................ 17
Section 4.4 Preparation of Form S-4 and the Proxy
Statement/Prospectus................................. 18
Section 4.5 Access to Information; Confidentiality............... 18
Section 4.6 Affiliates........................................... 18
Section 4.7 No Solicitation...................................... 18
Section 4.8 Employee Benefits Matters............................ 19
Section 4.9 Directors' and Officers' Indemnification and
Insurance............................................ 20
Section 4.10 Further Action; Reasonable Best Efforts.............. 20
Section 4.11 Notification of Certain Matters...................... 20
Section 4.12 Public Announcements................................. 20
Section 4.13 Tax Free Reorganization Treatment.................... 21
Section 4.14 Rule 144 Information................................. 21
Section 4.15 Loan to Company...................................... 21
Article V Conditions of Merger........................................ 21
Section 5.1 Conditions to Obligation of Each Party to Effect the
Merger............................................... 21
Section 5.2 Conditions to Obligations of Parent and Merger Sub... 21
Section 5.3 Conditions to Obligations of the Company............. 22
Article VI Termination, Amendment and Waiver.......................... 22
Section 6.1 Termination.......................................... 22
Section 6.2 Effect of Termination................................ 23
Section 6.3 Fees and Expenses.................................... 23
Section 6.4 Amendment............................................ 24
Section 6.5 Waiver............................................... 25
</TABLE>
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<TABLE>
<S> <C> <C>
Article VII General Provisions............................................. 25
Section 7.1 Non-Survival of Representations, Warranties and Agreements.. 25
Section 7.2 Notices..................................................... 25
Section 7.3 Certain Definitions......................................... 26
Section 7.4 Severability................................................ 26
Section 7.5 Entire Agreement; Assignment................................ 27
Section 7.6 Parties in Interest......................................... 27
Section 7.7 Governing Law............................................... 27
Section 7.8 Consent to Jurisdiction..................................... 27
Section 7.9 Headings.................................................... 27
Section 7.10 Counterparts................................................ 27
</TABLE>
EXHIBITS
1.3 Certificate of Merger
4.6 Affiliates Letter
ii
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<TABLE>
<CAPTION>
TERM PAGE NUMBER
---- -----------
<S> <C>
"Additional Loan".................................................. 21
"Agreement"........................................................ 1
"Business Combination"............................................. 24
"Certificate of Merger"............................................ 1
"Certificates"..................................................... 3
"Closing".......................................................... 1
"Closing Date"..................................................... 1
"Code"............................................................. 1
"Company".......................................................... 1
"Company By-laws".................................................. 2
"Company Certificate of Incorporation"............................. 2
"Company Common Stock"............................................. 2
"Company Non-Plan Options"......................................... 5
"Company Options".................................................. 4
"Company Plans".................................................... 9
"Company Preferred Stock".......................................... 5
"Company Securities"............................................... 6
"Company Warrants"................................................. 4
"Confidentiality Agreement"........................................ 18
"Consents"......................................................... 21
"Convertible Note"................................................. 6
"DGCL"............................................................. 1
"Effective Time"................................................... 1
"Environmental Laws"............................................... 12
"ERISA"............................................................ 9
"Exchange Act"..................................................... 7
"Exchange Agent"................................................... 3
"Exchange Fund".................................................... 3
"Exchange Ratio"................................................... 2
"FDA".............................................................. 7
"Form S-4"......................................................... 7
"Fractional Share Payment"......................................... 2
"Governmental Entity".............................................. 7
"Hazardous Substance".............................................. 12
"Indemnified Parties".............................................. 20
"Intellectual Property"............................................ 11
"License Agreement"................................................ 21
"Material Adverse Change".......................................... 23
"Material Adverse Effect" (For the Company)........................ 5
"Material Adverse Effect" (For Parent and Merger Sub).............. 13
"Merger"........................................................... 1
"Merger Consideration"............................................. 2
"Merger Sub"....................................................... 1
"NASD"............................................................. 14
"NASDAQ"........................................................... 2
"Notes"............................................................ 6
"Parent"........................................................... 1
"Parent Common Shares"............................................. 2
"Parent Preferred Shares".......................................... 13
"Parent SEC Reports"............................................... 14
"Plans"............................................................ 4
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE NUMBER
---- -----------
<S> <C>
"Proxy Statement/Prospectus"....................................... 7
"Purchase Price"................................................... 24
"Requisite Regulatory Approvals"................................... 21
"Returns".......................................................... 10
"Representatives".................................................. 18
"SEC".............................................................. 7
"SEC Reports"...................................................... 7
"Securities Act"................................................... 7
"Specified Contracts".............................................. 12
"Stockholder's Meeting"............................................ 17
"Surviving Corporation"............................................ 1
"Takeover Proposal"................................................ 23
"Tax".............................................................. 11
"Transaction Proposal"............................................. 19
"Voting Stock"..................................................... 24
"1996 10-Q's"...................................................... 7
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated December 18, 1996 (the "Agreement"),
among Medarex, Inc., a New Jersey corporation (the "Parent"), Medarex
Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary
of Parent ("Merger Sub"), and Houston Biotechnology Incorporated, a Delaware
corporation (the "Company").
WHEREAS, the Board of Directors of the Company, Parent and Merger Sub have
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate the business combination transaction provided for
herein in which the Merger Sub will merge with and into the Company with the
Company being the surviving corporation in the Merger (the "Merger"), thereby
becoming a direct wholly-owned subsidiary of Parent.
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, mutual covenants and agreements herein contained
and intending to be legally bound hereby, Parent, Merger Sub and the Company
hereby 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 General Corporation Law of
the State of Delaware (the "DGCL"), at the Effective Time (as defined in
Section 1.3 below), the Merger Sub shall be merged with and into the Company.
Upon the Effective Time, the separate corporate existence of the Merger Sub
shall cease, and the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation") under the name Houston Biotechnology
Incorporated.
Section 1.2 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 6.1, and subject to the satisfaction or waiver of the conditions set
forth in Article V, the closing of the Merger (the "Closing") will take place
as promptly as practicable (and in any event within two business days)
following satisfaction or waiver of the conditions set forth in Article V,
other than those conditions which by their terms are to be satisfied at the
Closing (the "Closing Date"), at the offices of Satterlee Stephens Burke &
Burke LLP, 230 Park Avenue, New York, New York 10169, unless another date,
time or place is agreed to in writing by the parties.
Section 1.3 Effective Time of the Merger. As soon as practicable after the
satisfaction of or waiver of the conditions set forth in Article V, the
parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") in substantially the form
attached hereto as Exhibit 1.3 with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the DGCL (the date and time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of Merger) being the
"Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in Sections 259, 260 and 261 of the DGCL.
Section 1.5 Certificate of Incorporation; By-Laws. (a) At the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be
the Restated Certificate of Incorporation, as amended, of the
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Company, as in effect immediately prior to the Effective Time (the "Company
Certificate of Incorporation"), as amended by the Certificate of Merger.
(b) At the Effective Time, the By-Laws of the Surviving Corporation shall be
the By-Laws of the Company, as in effect immediately prior to the Effective
Time (the "Company By-laws"), until thereafter amended or repealed in
accordance with their terms and the Certificate of Incorporation of the
Surviving Corporation and as provided by law.
Section 1.6 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed, as the case may be, and qualified.
ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates
Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any shares of
Common Stock, par value $.01 per share, of the Company (the "Company Common
Stock"), or any shares of capital stock of Merger Sub:
(a) Common Stock of Merger Sub. Each share of Common Stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall remain issued, outstanding and unchanged as
validly issued, fully paid and nonassessable shares of Common Stock of the
Surviving Corporation, which shall be all of the issued and outstanding
capital stock of the Surviving Corporation as of the Effective Time;
(b) Conversion of Company Common Stock. Except as otherwise provided
herein and subject to Section 2.1(c), each issued and outstanding share of
Company Common Stock shall be converted into the (the "Merger
Consideration") right to receive from Parent 0.182 of a share of Parent
common stock, $.01 par value per share (the "Parent Common Shares") (said
0.182 hereinafter the "Exchange Ratio"). If Parent declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination
of shares or similar transaction between the date of this Agreement and the
Effective Time, the Exchange Ratio set forth herein shall be appropriately
adjusted for purposes of this Section 2.1(b).
(c) No Fractional Shares. (i) Notwithstanding any other provision of this
Agreement, no certificates or scrip representing fractional Parent Common
Shares shall be issued upon the surrender for exchange of certificates
representing shares of Company Common Stock, and such fractional share
interests will not entitle the owner thereof to vote or to any rights as a
shareholder 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 Parent Common Share (after taking into account all shares of Company
Common Stock held by such holder at the Effective Time) shall receive,
in lieu thereof, an amount in cash ("Fractional Share Payment")
(payable in dollars, without interest) equal to the product obtained by
multiplying (A) the fractional share interest to which such holder
(after taking into account all shares of Company Common Stock held at
the Effective Time by such holder) would otherwise be entitled by (B)
the closing price for a Parent Common Share on The Nasdaq National
Market ("NASDAQ") on the last business day immediately preceding the
Closing Date.
(d) Cancellation and Retirement of Common Stock. As of the Effective
Time, all shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a
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<PAGE>
certificate representing 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 Fractional Share Payment.
(e) Prior to the mailing of the Proxy Statement/Prospectus (as defined in
Section 3.1(e)(ii)), Parent shall appoint Continental Stock Transfer &
Trust Company to act as exchange agent (the "Exchange Agent") for the
payment of the Merger Consideration and any Fractional Share Payment.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective Time, Parent shall deposit
with the Exchange Agent, for the benefit of the holders of shares of Company
Common Stock, the estimated aggregate Fractional Share Payment (the "Exchange
Fund") and will authorize the Exchange Agent to issue Parent Common Shares
constituting the Merger Consideration, for exchange in accordance with this
Article II. Parent shall deposit with the Exchange Agent any additional funds
in excess of the Exchange Fund necessary to pay any Fractional Share Payment
required to be paid under this Agreement.
(b) Exchange Procedures. Promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each record holder, as of the Effective
Time, of an outstanding certificate or certificates that immediately prior to
the Effective Time represented shares of Company Common Stock (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the
Certificate(s) and payment therefor. Upon surrender to the Exchange Agent of
such Certificates, together with such letter of transmittal duly executed, and
acceptance thereof by the Exchange Agent, the holder of a Certificate shall be
entitled to a certificate or certificates representing the number of full
Parent Common Shares and the Fractional Share Payment, if any, into which the
Certificates surrendered shall have been converted pursuant to this Agreement.
The Exchange Agent shall accept such Certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose in order to
effect an orderly exchange thereof in accordance with normal exchange
practices. After the Effective Time, there shall be no further transfer on the
records of the Company or its transfer agent of certificates representing
shares of Company Common Stock and if such certificates are presented to the
Company for transfer, they shall be cancelled against delivery of the
certificate or certificates for Parent Common Shares and Fractional Share
Payment as hereinabove provided. If any certificate for such Parent Common
Shares is to be issued to a person other than the registered holder of a
Certificate surrendered for exchange, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and that the person
requesting such exchange shall pay to Parent or the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates for
such Parent Common Shares in a name other than that of the registered holder
of the Certificate(s) surrendered, or establish to the satisfaction of parent
or the Exchange Agent that such tax has been paid or is not applicable. 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 and Fractional Share
Payment, if any, as contemplated by Section 2.1. No interest will be paid or
will accrue on any Fractional Share Payment.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Shares with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the Parent Common Shares issuable in respect
thereof and no Fractional Share Payment shall be paid to any such holder until
the surrender of such Certificate in accordance with this Article II. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the Certificate, without interest, the
amount of any Fractional Share Payment to which such holder is entitled and
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 Certificate.
(d) No Further Ownership Rights in Company Common Stock. All Parent Common
Shares issued upon the surrender for exchange of Certificates in accordance
with the terms of this Article II (including any Fractional
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<PAGE>
Share Payment) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of Company Common Stock
heretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation, with respect to shares of Company Common
Stock outstanding immediately prior to the Effective Time, 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.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for twelve months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of shares of Company Common Stock who have not theretofore complied
with this Article II shall thereafter look only to Parent and only as general
creditors thereof for payment of their claim for Parent Common Shares, any
Fractional Share Payment and any dividends or distributions with respect to
Parent Common Shares to which such holders may be entitled.
(f) No Liability. None of Parent, Merger Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any Parent Common Shares (or
dividends or distributions with respect thereto) or Fractional Share Payment
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
prior to five years after the Effective Time (or immediately prior to such
earlier date on which any Parent Common Shares, any Fractional Share Payment
or any dividends or distributions with respect to Parent Common Shares in
respect of such Certificate would otherwise escheat to or become the property
of any Governmental Entity (as defined in Section 3.1(e)(ii)), any such
shares, cash, dividends or distributions in respect of such Certificates
shall, to the extent permitted by applicable law, become the property of
Parent, free and clear of all claims or interest of any person previously
entitled thereto other than the holder of such Certificate as specified in
Section 2.2(e).
Section 2.3 Assumption of Options and Warrants. (a) As of the Effective
Time, Parent shall assume each option to purchase shares of Company Common
Stock ("Company Options") outstanding at the Effective Time under the
Company's 1992 Subordinated Stock Option Plan, 1994 Replacement Stock Option
Plan and 1994A Stock Option Plan (the "Plans") and each Company Option shall
thereafter be exercisable for a number of shares of Parent Common Shares equal
to the number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio. The
exercise price per share of Parent Company Shares for such Company Options
shall be the exercise price per share under such Company Option divided by the
Exchange Ratio, rounded to the nearest $.01, all in accordance with Section
425(a) of the Code and the regulations promulgated thereunder, without regard
to whether the Company Option qualifies as an incentive stock option with the
meaning of Section 422A of the Code, although an assumed Company Option is
intended to be an incentive stock option if the Company Option so qualifies.
At the Effective Time, Parent shall also assume all of the Company's
obligations under the Plans. Parent shall take all corporate and other action
necessary to reserve and make available sufficient shares of Parent Common
Shares for issuance upon exercise of all such Company Options and shall
prepare and file with the SEC as promptly as practical after the Effective
Time the appropriate registration statements relating to the issuance of such
shares upon exercise of such options and maintain the effectiveness of such
registration statements.
(b) As of the Effective Time, Parent shall assume each of the outstanding
warrants to purchase an aggregate of 4,521,558 shares of Company Common Stock
outstanding at the Effective Time (the "Company Warrants"), and each Company
Warrant shall entitle the holder thereof to purchase the number of shares of
Parent Common Shares equal to the number of shares of Company Common Stock
subject to such Company Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio and the exercise price per share of Parent
Company Shares pursuant to such Company Warrant shall be the exercise price
per Company Common Share under such Company Warrant divided by the Exchange
Ratio, rounded to the nearest $.01. Parent will take all corporate and other
action necessary to reserve and make available sufficient shares of Parent
Common Stock for issuance upon exercise of such Company Warrants. At the
Effective Time, Parent shall assume all of the Company's obligations
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<PAGE>
under the warrant agreement under which the Company Warrants were issued and
shall use its best efforts to comply with the terms of such warrant agreement
with respect to causing such Company Warrants to be listed on NASDAQ as of the
Effective Time.
(c) As of the Effective Time, Parent shall assume the options to purchase an
aggregate of 30,600 shares of Company Common Stock issued in favor of Dr.
David W. Parke, INCO Venture Capital, Louis Rose and The Woodlands Corporation
(the "Company Non-Plan Options"). Each Company Non-Plan Option shall
thereafter be exercisable for a number of shares of Parent Common Shares equal
to the number of shares of Company Common Stock subject to such Company Non-
Plan Option immediately prior to the Effective Time multiplied by the Exchange
Ratio. The exercise price per share of Parent Common Shares for such Company
Non-Plan Options shall be the exercise price per share under such Company Non-
Plan Option divided by the Exchange Ratio, rounded to the nearest $.01. At the
Effective Time, Parent shall also assume all of the Company's obligations
under the agreements containing the Company Non-Plan Options. Parent shall
take all corporate and other action necessary to reserve and make available
sufficient shares of Parent Common Shares for issuance upon exercise of all
such Company Non-Plan Options.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent and Merger Sub as follows:
(a) Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority and
any necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing
or to have such power, authority and governmental approvals would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect (as defined below) on the Company. The Company is duly
qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. The Company has no subsidiaries.
When used with respect to the Company, the term "Material Adverse Effect"
means any material adverse change in or effect on (i) the business, prospects,
results of operations or condition (financial or other) of the Company or (ii)
the ability of the Company to consummate any of the transactions contemplated
hereby.
(b) Company Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Company
Certificate of Incorporation and the Company By-Laws. The Company is not in
violation of any of the provisions of the Company Certificate of
Incorporation or the Company By-Laws.
(c) Capitalization. The authorized capital stock of the Company consists
of 40 million shares of Company Common Stock and 15 million shares of
preferred stock, par value $.01 per share (the "Company Preferred Stock").
As of the date hereof, (i) 5,638,707 shares of Company Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable and were not issued in violation of the preemptive (or
similar) rights of any stockholder of the Company; (ii) no shares of
preferred stock were issued and outstanding; (iii) no shares of Company
Common Stock were held in the treasury of the Company; (iv) 876,814 shares
of Company Common Stock were reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of outstanding
Company Options issued pursuant to the Plans; (v) 4,521,558 shares of
Company Common Stock were reserved for issuance and issuable upon
A-5
<PAGE>
exercise of Company Warrants and payment of the applicable exercise price;
(vi) 30,600 shares of Company Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding Company Non-Plan Options; and (vii) up to 800,000 shares of
Company Common Stock plus such number of shares to be issued upon the
conversion of any accrued interest were reserved for issuance and issuable
upon or otherwise deliverable in connection with the conversion of the
Convertible Note dated the date hereof issued by the Company to Parent (the
"Convertible Note") or the Additional Note (as defined herein) to be issued
by the Company to Parent pursuant to Section 4.15 hereof (the Convertible
Note and the Additional Note are sometimes hereinafter collectively
referred to as the "Notes"). Since November 30, 1996, no options to
purchase shares of Company Common Stock have been granted and no shares of
Company Common Stock have been issued except for shares issued pursuant to
the exercise of Company Options or upon the exercise of Company Warrants.
Except as set forth above, as of the date hereof, there are outstanding (i)
no shares of capital stock or other voting securities of the Company; (ii)
no securities of the Company convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of the
Company; and (iii) no options, calls, warrants or other rights to acquire
from the Company, and no obligation of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or other voting securities of the Company
(collectively, "Company Securities"). There are no outstanding obligations
of the Company to repurchase, redeem or otherwise acquire any Company
Securities or to provide funds to or make any investment (in the form of a
loan, capital contribution, guarantee or otherwise). The Company does not
own any equity securities of any corporation, partnership, trust, company
or other corporate entity.
(d) Authority Relative to Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than the approval and
adoption of the Merger and this Agreement by the holders of a majority of
the outstanding shares of Company Common Stock). This Agreement has been
duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally. The only vote of the holders of any class or series of
outstanding securities of the Company required for approval of this
Agreement and the Merger is the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock.
(e) No Conflict; Required Filings and Consents. (i) The execution,
delivery and performance of this Agreement by the Company does not (A)
conflict with or violate the Company Certificate of Incorporation or
Company By-Laws; (B) assuming that all consents, approvals and
authorizations contemplated by subsection (ii) below have been obtained and
all filings described in such subsection have been made, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
the Company or by which its properties are bound or affected; or (C) result
in any breach or violation of or constitute a default (or an event which
with notice or lapse of time or both would become a default) or result in
the loss of a benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or encumbrance on any of the properties or assets of the Company
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchises, or other instrument or obligation to
which the Company is a party or by which the Company or its properties are
bound or affected, except, in the case of clauses (B) and (C), for any such
conflicts, violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
(ii) The execution delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby by
the Company do not require any consent,
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approval, authorization or permit of, action by, filing with or
notification to, any United States federal, state or local court,
administrative agency or commission, or entity created by rule,
regulation or order of any United States federal, state or local
commission or other governmental agency, authority or instrumentality
(a "Governmental Entity"), or any third party to any agreement,
contract, license or other instrument or obligation to which the
Company is a party, except for (A) the filing with the Securities and
Exchange Commission (the "SEC") and the American Stock Exchange of (1)
a registration statement on Form S-4 (the "Form S-4") under the
Securities Act of 1933, as amended (the "Securities Act"), in
connection with the issuance of Parent Common Shares in the Merger and
pursuant to which the Company Warrants, as converted and assumed, shall
be registered, including therein a combined proxy statement and
prospectus as amended or supplemented from time to time, (the "Proxy
Statement/Prospectus") and (2) such other filings under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement and the transactions
contemplated hereby and the obtaining from the SEC of such orders as
may be required in connection therewith; (B) consents, authorizations,
approvals or filings pursuant to the applicable provisions of federal
and state securities laws; (C) applicable filings under state anti-
takeover laws, if any; (D) the filing and recordation of the
Certificate of Merger as required by the DGCL; and (E) such consents,
approvals, authorizations or permits of, actions by or notifications to
a Governmental Entity or third party the failure of which to obtain
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company does not conduct business
in, nor is it otherwise subject to the laws of, any jurisdiction
outside the United States as it relates to this Agreement and the
consummation of the Merger and other transactions contemplated hereby
and the Company makes no representation or warranty with respect to any
consent, approval, authorization or permit of, action by, filing with
or notification to any non-United States Governmental Entity that may
be required in connection with the execution, delivery and performance
of this Agreement by the Company and the consummation of the
transactions contemplated hereby.
(f) Compliance. (i) The Company holds, and is in compliance with, all
permits, licenses, exemptions, orders and approvals of all Governmental
Entities, including the Food and Drug Administration ("FDA") and U.S.
Department of Health and Human Services, and committees thereof, necessary
for the operation of the business of the Company, except to the extent the
failure to so hold or comply would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Company, there are no proceedings pending, threatened or
contemplated by any Governmental Entity seeking to terminate, revoke or
materially limit any such permit, license, exemption, order or approval.
(ii) Since January 1, 1991, neither the Company nor, to the best
knowledge of the Company, any of its respective executive officers,
directors or employees has been the subject of any investigation or
order of any Governmental Entity arising under applicable laws, and to
the best knowledge of the Company, no such investigation or order is
pending or threatened, except for such investigations or orders,
including those pending or threatened, which individually or in the
aggregate would not reasonably be expected to have a Material Adverse
Effect.
(g) SEC Filings; Financial Statements. (i) The Company has filed all
forms, reports, statements and documents required to be filed with the SEC
since January 1, 1993, pursuant to Sections 12(b), 12(g), 13, 14 or 15(d)
of the Exchange Act (collectively, the "SEC Reports"), each of which
complied in all material respect with the applicable requirements of the
Exchange Act and the rules and regulations of the SEC thereunder, as in
effect on the date so filed. The Company has delivered to Parent, in the
form filed with the SEC (including any amendments thereto) copies of (A)
its Annual Report on Form 10-K for each of the three fiscal years ended
December 31, 1993, 1994 and 1995, and the Quarterly Report on Form 10-Q for
the quarters ended March 31, June 30, September 30, 1996 (the "1996 10-
Q's"); (B) all definitive proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held since January 1,
1993; and (C) all other SEC Reports or registration statements filed by the
Company with the SEC since January 1, 1993. None of such forms, reports or
documents (including any financial statements or schedules included or
incorporated by reference therein) filed by the Company contained, when
filed (in
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the case of documents filed pursuant to the Exchange Act) or when declared
effective by the SEC (in the case of registration statements filed under
the Securities Act), 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 the light of the circumstances under
which they were made, not misleading.
(ii) Each of the audited and unaudited consolidated financial
statements of the Company (including, in each case, any related notes
thereto) included in its SEC Reports complied as to form when filed in
all material respects with the rules and regulations of the SEC with
respect thereto, has been prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto)
and fairly presents the consolidated financial position of the Company
at the respective dates thereof and the consolidated results of its
operations and changes in cash flows for the periods indicated (subject
in the case of unaudited statements, to normal year-end audit
adjustments).
(iii) Except as and to the extent set forth on the balance sheet of
the Company at December 31, 1995, including the notes thereto, included
in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, the Company does not have any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) which
would be required to be reflected on a balance sheet or in the notes
thereto prepared in accordance with generally accepted accounting
principles, except for liabilities or obligations incurred in the
ordinary course of business since December 31, 1995, which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(h) Information Supplied. None of the information supplied or to be
supplied by the Company in writing or otherwise approved in writing by the
Company for inclusion in (i) 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 not misleading, and
(ii) the Proxy Statement/Prospectus will not, at the date it is first
mailed to the Company's stockholders or at the time of the Stockholders'
Meeting (as defined herein), contain any statement which, in the light of
the circumstances under which such statement is made, is false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meeting or any amendment or supplement thereto. The Proxy
Statement/Prospectus will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the
Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Sub for inclusion
or incorporation by reference in the Proxy Statement/Prospectus.
(i) Absence of Certain Changes or Events. Since January 1, 1996, except
as disclosed in the SEC Reports filed since that date, the Company has
conducted its business only in the ordinary course and in a manner
consistent with past practice and, since such date except as disclosed in
the SEC Reports or in the ordinary course of business and consistent with
past practice, there has not been (A) any change, event or development in
or affecting the Company that constitutes or would reasonably be expected
to have either individually or in the aggregate a Material Adverse Effect
(provided that for the purposes of this clause (A) changes caused by
changes in stock market conditions in the United States that generally
affect companies in the biotechnology industry shall not be deemed to
constitute a Material Adverse Effect); (B) any change by the Company in its
accounting methods or principles except as recommended by the Company's
independent accountants prior to such change; (C) any declaration, setting
aside or payment of any dividends or distributions in respect of any series
of capital stock of the Company; (D) any increase in or establishment of
any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including without limitation the
granting of stock options, stock appreciation rights, performance awards,
or restricted stock awards), stock purchase or other employee benefit plan
or agreement or arrangement, or any other increase in the compensation
payable or to become payable to any present or
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former directors, officers above the rank of Vice President of the Company,
except for increases in base compensation and annual cash bonuses; or (E)
any other action which, if it had been taken after the date hereof, would
have required the consent of Parent under Section 4.1 hereof.
Except as otherwise disclosed in the SEC Reports or in this Agreement or the
Disclosure Schedule, as of the date hereof the Company does not know or have
reason to know of any facts or circumstances or of any change, event or
development in or affecting the Company that would reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect.
(j) Absence of Litigation. Except as disclosed in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, there are
no suits, claims, actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company or any properties
or rights of the Company, before any court, arbitrator or other
Governmental Entity, domestic or foreign, that individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect
or to delay or prevent the consummation of the transactions contemplated
hereby beyond June 30, 1997. Neither the Company nor any of its properties
is or are subject to any order, writ, judgment, injunction, decree,
determination or award having, or which would reasonably be expected to
have, a Material Adverse Effect on the Company or which would prevent or
delay the consummation of the transactions contemplated hereby beyond June
30, 1997.
(k) Labor Matters. The Company is not a party to any collective
bargaining agreement. Since January 1, 1996, the Company has not (i) had
any employee strikes, work stoppages, slowdowns or lockouts; (ii) received
any requests for certifications of bargaining units or any other requests
for collective bargaining; or (ii) become aware of any efforts to organize
employees of the Company into a collective bargaining unit.
(l) Employee Benefit Plans. (i) Section 3.1(l) of the Disclosure Schedule
contains a true and complete list of each "employee benefit plan" (within
the meaning of section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including, without limitation, multi-
employer plans within the meaning of ERISA section 3(37)), stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of
the transaction contemplated by this Agreement), whether formal or
informal, legally binding or not, under which any employee or former
employee of the Company has any present or future right to benefits or
under which the Company has any present or future liability. All such
plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "Company Plans."
(ii) Except as set forth in Section 3.1(l) of the Disclosure
Schedule, with respect to each Company Plan, the Company has delivered,
or made available, to the Parent a current, accurate and complete copy
(or, to the extent no such copy exists, an accurate description)
thereof and, to the extent applicable, (A) any related trust agreement,
annuity contract or other funding instrument; (B) the most recent
determination letter; (C) any summary plan description and other
written communications (or a description or any oral communications) by
the Company to its employees concerning the extent of the benefits
provided under a Company Plan; and (D) for the three most recent years
(I) the Form 5500 and attached schedules; (II) audited financial
statements; (III) actuarial valuation reports; and (IV) attorney's
response to auditor's request for information.
(iii) (A) Each Company Plan has been established and administered in
all material respects in accordance with its terms, and in all material
respects in compliance with the applicable provisions of ERISA, the
Code and other applicable laws, rules and regulations; (B) each Company
Plan which is intended to be qualified within the meaning of Code
section 401(a) has received a favorable determination letter or has
filed a timely request for a determination letter as to its
qualification and, to the knowledge of the Company, nothing has
occurred, whether by action or failure to act, which would cause the
loss of such qualification; (C) with respect to any Company Plan, no
actions, suits or claims
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(other than routine claims for benefits in the ordinary course) are
pending or threatened, no facts or circumstances exist which, to the
knowledge of the Company, would give rise to any such actions, suits or
claims, except for such action, suits or claims the effects of which
would not individually or in the aggregate reasonably be expected to
result in a Material Adverse Effect, and the Company will promptly
notify Parent of any pending or threatened claims arising between the
date hereof and the Closing Date; (D) neither the Company nor to the
knowledge of the Company any other party has engaged in a prohibited
transaction, as such term is defined under Code section 4975 or ERISA
section 406, which would subject the Company or Parent to any taxes,
penalties or other liabilities under Code section 4975 or ERISA
sections 409 or 502(i) that is reasonably likely to result in material
liability; (E) no event has occurred and no condition exists that would
subject the Company to any tax, fine or penalty imposed by ERISA, the
Code or other applicable laws, rules and regulations including, but not
limited to, the taxes imposed by Code sections 4971, 4972, 4977, 4979,
4980B, 4976(a) or the fine imposed by ERISA section 502(c) that is
reasonably likely to result in a material liability to the Company; (F)
all insurance premiums required to be paid with respect to Company
Plans as of the date hereof have been or will be paid prior thereto;
(G) all contributions required to be made prior to the date hereof
under the terms of any Company Plan, the Code, ERISA or other
applicable laws, rules and regulations have been or will be made; and
(H) no Company Plan provides for an increase in benefits on or after
the date hereof.
(iv) No Company Plan is, or has ever been, subject to Title IV of
ERISA and, except as set forth in Section 3.1(l) of the Disclosure
Schedule, there are no unfunded Company Plans under which benefits are
payable presently, or in the future, to present or former employees of
the Company.
(v) Each Company Plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of
the Code meets such requirements in all material respects, and the
Company has received a favorable determination from the Internal
Revenue Service with respect to any trust intended to be exempt from
taxation within the meaning of Code section 501(c)(9).
(vi) Except as set forth on Section 3.1(l) of the Disclosure
Schedule, no Company Plan exists which could result in the payment to
any Company employee of any money or other property or rights or
accelerate or provide any other rights or benefits to any Company
employee as a result of the transactions contemplated by this
Agreement, whether or not such payments would constitute a parachute
payment within the meaning of Code section 280G.
(m) Tax Matters. (i) Except as set forth in the SEC Reports filed prior
to the date of this Agreement or except as set forth in Section 3.1(m) of
the Disclosure Schedule, (A) the Company has filed, been included in or
sent, all returns, declarations and reports and information returns and
statements required to be filed or sent by the Company relating to any
Taxes (as defined below) with respect to any income, properties or
operations of the Company (collectively, "Returns"); (B) as of the time of
filing, the Returns were correct in all material respects; (C) the Company
has timely paid or made provision for all Taxes that have been shown as due
and payable on the Returns that have been filed; (D) the Company has made
or will make provisions for all Taxes payable for any periods that end
before the Effective Time for which no Returns have yet been filed and for
any periods that begin before the Effective Time and end after the
Effective Time to the extent such Taxes are attributable to the portion of
any such period ending at the Effective Time; (E) the charges, accruals and
reserves for Taxes reflected on the books of the Company are adequate under
generally accepted accounting principles to cover the Tax liabilities
accruing or payable by the Company in respect of periods prior to the date
hereof; (F) the Company is not delinquent in the payment of any Taxes nor
has requested any extensions of time within which to file or send any
Return, which Return has not since been filed or sent; (G) no deficiency
for any Taxes has been proposed, asserted or assessed, in writing, against
the Company other than those Taxes being contested in good faith by
appropriate proceedings (if necessary, Section 3.1(m) of the Disclosure
Schedule shall set forth the nature of the proceedings, the type of return,
the deficiencies proposed, asserted or assessed and the amount hereof, and
the taxable year in question); (H) the Company has not granted any
extension of the limitation period
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applicable to any Tax claims other than those Taxes being contested in good
faith by appropriate proceedings; (I) the Company is not subject to
liability for Taxes of any person; (J) the Company is not and has not been
a party to any tax sharing agreement; and (K) the Company is not or has not
been a party to any nexus or allocation agreements with any State of the
United States.
(ii) "Tax" means with respect to any person (A) any net income, gross
income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, value-added, windfall profits, custom
duty or other tax, capital stock, social security (or similar),
unemployment, disability, transfer, alternative or add-on minimum,
estimated or other governmental assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition to tax
or additional amount imposed by any taxing authority (domestic or
foreign) on such person and (B) any liability of the Company or any
subsidiary for the payment of any amount of the type described in
clause (A) as a result of being a member of an affiliated or combined
group.
(n) Intellectual Property. (i) The Company owns, is licensed or otherwise
possesses legally enforceable rights to use (in each case, free and clear
of any liens or encumbrances of any kind), the patents, know-how,
trademarks, service marks, brand names and computer software and any
applications for such patents, know-how, trademarks, tradenames, service
marks and brand names, computer software or other intellectual property and
proprietary rights used in or necessary for the conduct of its business as
currently conducted (collectively, "Intellectual Property"). The
Intellectual Property filed with the United States Patent and Trademark
Office is listed in Section 3.1(n) of the Disclosure Schedule. Each license
or other agreement relating to Intellectual Property to which the Company
is a party has been complied with by the Company in all material respects
and is in full force and effect; (ii) the Company has not licensed or
otherwise granted to others any rights to use any such Intellectual
Property except as contemplated by this Agreement, the Notes and the
License Agreement (as defined below) or as set forth in Section 3.1(n) of
the Disclosure Schedule; (iii) to the best of the Company's knowledge and
except as set forth in Section 3.1(n) of the Disclosure Schedule, the use
of such Intellectual Property by the Company does not infringe on or
otherwise violate the rights of any person and is in accordance with any
applicable license pursuant to which the Company acquired the right to use
such Intellectual Property; and (iv) to the knowledge of the Company and
except as set forth in Section 3.1(n) of the Disclosure Schedule, no person
is challenging, infringing on or otherwise violating any right of the
Company with respect to such Intellectual Property. To the Company's
knowledge, all such patents, trademarks, service marks, and copyrights held
by the Company or licensed by the Company are valid and subsisting. The
Company is not, nor will it be as a result of the execution and delivery of
this Agreement or the performance of its obligations hereunder, be in
breach of any license, sublicense or other agreement, relating to the
Intellectual Property or any third party right to such Intellectual
Property except for such breaches that individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect.
(o) Title to Properties; Liens and Encumbrances. Section 3.1(o) of the
Disclosure Schedule sets forth a complete and accurate list of all real
properties leased by the Company. Except as set forth in Section 3.1(o) of
the Disclosure Schedule and except for such defects in the title as would
not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, the Company has valid leasehold interests
in its respective real properties and has valid title to all of its
respective other properties and assets (except for leased properties and
assets, in which case the Company has a valid leasehold interest therein),
subject only to (i) statutory liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent or the validity of which is being contested in good faith by
appropriate proceedings, (ii) liens securing indebtedness of the Company
which is created substantially simultaneously with the purchase of the
relevant properties or assets and which do not encumber property other than
such property or assets, and (iii) liens that either individually or in the
aggregate would not reasonably be expected to have a Material Adverse
Effect. The Company does not own any real property in fee.
(p) Environmental Matters. The property, assets and operations of the
Company are in compliance in all material respects with all applicable
federal, state, local or foreign laws, rules, orders, decrees,
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judgments, injunctions, licenses, permits or regulations relating to
environmental matters (collectively, the "Environmental Laws"), except to
the extent that failure to comply with such Environmental Laws would not
have a Material Adverse Effect. None of the property, assets or operations
of the Company are the subject of any federal state, local or foreign
investigation evaluating whether any remedial action is needed to respond
to a release or threatened release into the environment, of any substance
regulated by, or which would form the basis of liability, under any
Environmental Laws (a "Hazardous Substance"), or are in contravention of
any federal, state, local or foreign law, order or regulation that would
have a Material Adverse Effect. The Company has not received any notice or
claim, nor are there pending, threatened or reasonably anticipated lawsuits
against it with respect to material violations of an Environmental Law or
in connection with the release or threatened release of any Hazardous
Substance into the environment. The Company has no material contingent
liability in connection with any release or threatened release of any
Hazardous Substance into the environment.
(q) Certain Contracts and Agreements. (i) Section 3.1(q) of the
Disclosure Schedule sets forth a list of all material contracts, licenses,
agreements or leases other than this Agreement and the agreements
contemplated hereby (the "Specified Contracts"). True and correct copies of
the most current version of said Specified Contracts have been made
available to Parent. The Company is not in default in the performance of
any of its material obligations under any Specified Contract. No event has
occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default of
any of its material obligations by the Company under any Specified Contract
or, to the Company's knowledge, by any other party thereto.
(ii) The Company is not a party to any contract containing non-
competition clauses, restrictive covenants or similar provisions that
would limit Parent's or the Surviving Corporation's ability after the
Closing to engage in any line of business in any geographic area or to
compete against any person.
(r) Transactions with Affiliates. Except as disclosed in the SEC Reports
filed prior to the date of this Agreement, there are no contracts,
agreements, arrangements or understandings of any kind between any
affiliate of the Company, on the one hand, and the Company, on the other
hand, other than any such contracts, agreements, arrangements and
understandings that either individually or in the aggregate are de minimis
in nature.
(s) The preclinical tests and clinical trials of the Company were and, if
still pending, are being conducted in all material respects in accordance
with protocols filed with the appropriate regulatory authorities for each
such clinical trial or human trial, as the case may be. The Company has no
knowledge of any other studies or tests the results of which are
inconsistent with or otherwise call into question the results described or
referred to in the SEC Reports. The Company has not received any notices or
other correspondence from the FDA or any other Governmental Entity
requiring the termination, suspension or modification of any human trials
that are described in the SEC Reports or the results of which are referred
to in the SEC Reports.
(t) Opinion of Financial Advisor. The Company has received the opinion of
Strategen, L.L.C., to the effect that the Merger is fair to the holders of
the Company Common Stock from a financial point of view.
(u) Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
(v) Scope of Representations. Anything to the contrary in this Section
3.1 notwithstanding, no representation or warranty made by the Company in
this Agreement shall be deemed to be untrue or incorrect at the date hereof
if the failure of such representation or warranty to be true and correct as
of such date (or as of any other specified date) does not have,
individually or in the aggregate, a Material Adverse Effect on the Company
at the date hereof.
Section 3.2 Representations and Warranties of Parent and Merger Sub. Parent
and Merger Sub, jointly and severally, hereby represent and warrant to the
Company as follows:
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(a) Corporate Organization. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
Jersey; Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and each of Parent
and Merger Sub has the requisite corporate power and authority and any
necessary governmental authority to own, operate or lease its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power, authority and governmental approvals could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Parent and Merger Sub are each duly qualified or licensed as a foreign
corporation to do business, and each are in good standing, in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
When used with respect to Parent or Merger Sub, the term "Material Adverse
Effect" means any material adverse change in or effect on (i) the business,
prospects, results of operations or condition (financial or other) of Parent
and its subsidiaries taken as a whole or (ii) the ability of Parent or Merger
Sub to consummate any of the transactions contemplated hereby.
(b) Charter and By-Laws. Parent has heretofore furnished to the Company
complete and correct copies of the Certificate of Incorporation and By-Laws
of Parent each as currently in effect and of the Certificate of
Incorporation and By-Laws of Merger Sub each as currently in effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of
its respective Certificate of Incorporation or By-Laws.
(c) Capitalization. The authorized capital stock of Parent consists of 40
million Parent Common Shares and two million Preferred Shares, without par
value (hereinafter referred to as "Parent Preferred Shares"). As of
November 30, 1996, (i) 17,592,992 Parent Common Shares were issued and
outstanding, and (ii) no Parent Preferred Shares were issued and
outstanding. All of the Parent Common Shares issuable in exchange for
Company Common Stock at the Effective Time in accordance with the terms of
this Agreement have been duly authorized and reserved for issuance and,
when so issued, will be validly issued, fully paid and nonassessable and
not issued in violation of the preemptive rights of any shareholder of
Parent.
(d) Authority Relative to Agreement. Each of Parent and Merger Sub has
all necessary corporate power and authority to enter into this Agreement,
to perform its obligations hereunder and to consummate the transaction
contemplated hereby. The execution, delivery and performance of this
Agreement by each of Parent and Merger Sub and the consummation by each of
Parent and Merger Sub of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part
of Parent or Merger Sub, and no other corporate proceedings on the part of
Parent or Merger Sub or their stockholders are necessary to authorize this
Agreement or to consummate such transaction. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of Parent and Merger Sub enforceable
against them in accordance with its terms.
(e) No Conflict; Required Filings and Consents. (i) The execution,
delivery and performance of this Agreement by Parent and Merger Sub do not
and will not: (A) conflict with or violate the Certificate of Incorporation
or By-Laws of Parent or Merger Sub; (B) assuming that all consents,
approvals and authorizations contemplated by subsection (ii) below have
been obtained and all filings described in such subsection have been made,
conflict with or violate any law, rule, regulation, order judgment or
decree applicable to Parent or Merger Sub or by which either of them or
their respective properties are bound or affected; or (C) result in any
breach or violation of or constitute a default (or an event which with
notice or lapse of time or both could become a default) or result in the
loss of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or encumbrance on any of the property or assets of Parent or Merger
Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which Parent or Merger Sub is a party or by which Parent or Merger Sub or
any of their respective
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properties are bound or affected, except, in the case of clauses (B) and
(C), for any such conflicts, violations, breaches, defaults or other
occurrences which could not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect on Parent.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub and the consummation of the transactions
contemplated hereby by Parent and Merger Sub do not and will not
require any consent, approval, authorization or permit of, action by,
filing with or notification to, and federal, state or local
Governmental Entity, except for: (A) the filing with the SEC of the
Form S-4 and the obtaining from the SEC of such orders as may be
required in connection therewith; (B) filings with the National
Association of Securities Dealers Inc. ("NASD") on which the Parent
Common Shares are currently eligible for trading; (C) the filing and
recordation of the Certificate of Merger as required by the DGCL; and
(D) applicable filings under state anti-takeover laws, if any.
(f) Compliance. (i) Parent and its subsidiaries hold, and are in
compliance with, all permits, licenses, exemptions, orders and approvals of
all Governmental Entities necessary for the operation of the businesses of
Parent and each subsidiary, except to the extent the failure to so hold or
comply will not have, individually or in the aggregate, a Material Adverse
Effect, and to the best knowledge of Parent there are no proceedings
pending, threatened or contemplated by any Governmental Entity seeking to
terminate, revoke or materially limit any such permit, license, exemption,
order or approval. Neither Parent nor any of its subsidiaries nor the
conduct of their business is in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree applicable to
Parent or any of its subsidiaries or by which its or any of their
respective properties are bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or
its or any of their respective properties are bound or affected, except for
any such conflicts, defaults or violations which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
As of the date of this Agreement, no investigation by any United States
Governmental Entity with respect to Parent is pending, or to best knowledge
of Parent, threatened, other than, in each case, those the outcome of
which, individually or in the aggregate, would not have a Material Adverse
Effect.
(g) SEC Filings; Financial Statements. (i) Parent and each of its
subsidiaries has filed all forms, reports, statements and documents
required to be filed with the SEC since January 1, 1993, pursuant to
Sections 12(b), 12(g), 13, 14 or 15(d) of the Exchange Act (collectively,
the "Parent SEC Reports"), each of which complied in all material respect
with the applicable requirements of the Exchange Act and the rules and
regulations of the SEC thereunder, as in effect on the date so filed.
Parent has delivered to the Company, in the form filed with the SEC
(including any amendments thereto) copies of (A) its Annual Report on Form
10-K for each of the three fiscal years ended December 31, 1993, 1994 and
1995, and the Quarterly Report on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1996; (B) all definitive proxy statements
relating to Parent's meetings of stockholders (whether annual or special)
held since January 1, 1993; and (C) all other Parent SEC Reports or
registration statements filed by Parent with the SEC since January 1, 1993.
None of such forms, reports or documents (including any financial
statements or schedules included or incorporated by reference therein)
filed by Parent contained, when filed (in the case of documents filed
pursuant to the Exchange Act) or when declared effective by the SEC (in the
case of registration statements filed under the Securities Act), 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 the light of the circumstances under which they were made, not
misleading.
(ii) Each of the audited and unaudited consolidated financial
statements of Parent (including, in each case, any related notes
thereto) included in the Parent SEC Reports complied as to form when
filed in all material respects with the rules and regulations of the
SEC with respect thereto, has been prepared in accordance with U.S.
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the
notes thereto) and fairly presents the consolidated financial position
of Parent and its subsidiaries at the respective dates thereof and the
consolidated results of its operations and changes in cash flows for
the periods indicated (subject in the case of unaudited statements, to
normal year-end audit adjustments).
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(iii) Except as and to the extent set forth on the balance sheet of
Parent at December 31, 1995, including the notes thereto, included in
Parent's Annual Report on Form 10-K for the year ended December 31,
1995, Parent does not have any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a balance sheet or in the notes thereto
prepared in accordance with generally accepted accounting principles,
except for liabilities or obligations incurred in the ordinary course
of business, which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(h) Information Supplied. None of the information supplied or to be
supplied by Parent or Merger Sub in writing or otherwise approved by Parent
for inclusion in (i) the Form S-4 will, at the time it 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 not misleading, and (ii) the Proxy
Statement/Prospectus will, at the date the Proxy Statement/Prospectus is
first mailed to the Company's stockholders or at the time of the
Stockholders' Meeting, contain any statement which, in the light of the
circumstances under which such statement is made, is false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the Stockholders' Meeting or
any amendment or supplement thereto. The Form S-4 will comply as to form in
all material respects with the requirements of the Securities Act and the
rules and regulations promulgated thereunder, except that no representation
or warranty is made by Parent or Merger Sub with respect to statements made
or incorporated by reference therein based on information supplied by the
Company for inclusion or incorporation by reference in the Form S-4.
(i) Absence of Certain Changes or Events. Since December 31, 1995, except
as disclosed in the Parent SEC Reports filed since that date, Parent has
conducted its business only in the ordinary course and in a manner
consistent with past practice and, since such date except as disclosed in
the Parent SEC Reports, there has not been any change, event or development
in or affecting Parent that constitutes or would reasonably be expected to
have a Material Adverse Effect on Parent or to delay or prevent the
consummation of the transactions contemplated hereby beyond June 30, 1997.
In addition to the foregoing, as of the date hereof Parent does not know or
have reason to know of any facts or circumstances or of any change, event
or development in or affecting Parent or its subsidiaries that would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
(j) Absence of Litigation. There are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of Parent,
threatened against Parent or any of its subsidiaries, or any properties or
rights of Parent or any of its subsidiaries, before any court, arbitrator
or other Governmental Entity, domestic or foreign, that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect. Neither Parent nor any of its subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which could
reasonably be expected to have, a Material Adverse Effect or to delay or
prevent the consummation of the transactions contemplated hereby beyond
June 30, 1997.
(k) Brokers. No broker, finder or investment banker (other than Smith
Barney Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Merger
Sub.
(l) Ownership of Company Common Stock. As of the date of this Agreement,
Parent and its subsidiaries beneficially own shares of Company Common Stock
representing less than 5% of the outstanding shares of Company Common
Stock.
(m) Scope of Representations. Anything to the contrary in this Section
3.2 notwithstanding, no representation or warranty made by Parent in this
Agreement shall be deemed to be untrue or incorrect at the date hereof if
the failure of such representation or warranty to be true and correct as of
such date (or as of any other specified date) does not have, individually
or in the aggregate, a Material Adverse Effect at the date hereof.
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ARTICLE IV
Conduct of Business Pending the Merger; Other Covenants
Section 4.1 Conduct of Business of the Company Pending the Merger. The
Company covenants and agrees that, during the period from the date hereof to
the Effective Time, except as otherwise required by the terms of this
Agreement or unless Parent shall otherwise agree in writing, the business of
the Company shall be conducted only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice and in compliance with applicable laws; and the Company
shall use its reasonable best efforts to preserve intact the business
organization of the Company, to keep available the services of the present
officers, employees and consultants of the Company and to preserve the present
relationships of the Company with its customers, suppliers and other persons
with whom the Company or any of its subsidiaries has significant business
relations and to preserve and maintain in effect all of the Company's
Intellectual Property.
By way of amplification and not in limitation of the foregoing, the Company
shall not, between the date of this Agreement and the Effective Time, directly
or indirectly do, or propose or commit to do, any of the following without the
prior written consent of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for,
shares of its capital stock, or (iii) purchase, redeem or otherwise acquire
or agree to acquire any shares of capital stock of the Company or any other
securities convertible into shares of capital stock or any rights, warrants
or options to acquire any such shares or convertible securities;
(b) authorize for issuance, issue, deliver, sell or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock,
any other voting securities or any securities convertible into, or any
rights warrants or options to acquire, any such shares, voting securities
or convertible securities or any other securities or equity equivalents
(including without limitation stock appreciation rights);
(c) except to the extent required under existing Company Plans as in
effect on the date of this Agreement, (i) increase the compensation or
fringe benefits of any of its directors, officers or employees, except for
increases in compensation of employees and officers of the Company or its
subsidiaries in the ordinary course of business in accordance with past
practice, or (ii) grant any severance or termination pay not currently
required to be paid under existing Company Plans, except on an individual
basis in the ordinary course of business and consistent with past practice,
or (iii) establish, adopt, enter into or amend or terminate any Company
Plan or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees except as required by law
or as provided in this Agreement; provided that the provisions of this
Section 4.1 shall not prohibit the Company and its subsidiaries from hiring
personnel from time to time in the ordinary course of their business,
consistent with past practice and in consultation with Parent;
(d) amend the Company Certificate of Incorporation, the Company By-Laws
or other comparable charter or organizational documents or alter through
merger, liquidation, reorganization, restructuring or in any other fashion
the corporate structure or ownership of the Company;
(e) except as allowed pursuant to Section 4.7 of this Agreement, acquire
or agree to acquire (i) by merging or consolidation with, or by purchasing
a substantial portion of the stock or assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof or (ii) any assets (not
otherwise subject to paragraph (h) below) other than in the ordinary course
of business consistent with past practice;
(f) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets other than
in the ordinary course of business consistent with past practice and in
amounts that are not, individually or in the aggregate, material to the
Company;
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(g) (i) except for the Notes, incur any indebtedness for borrowed money
or guarantee any such indebtedness of another person (other than or
endorsements of negotiable instruments and similar guarantees in the
ordinary course of business consistent with past practice), issue or sell
any debt securities or warrants or other rights to acquire any debt
securities of the Company, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain the financial
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
(including deposits) incurred in the ordinary course of business consistent
with past practice, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person;
(h) expend, or commit to expend, funds for capital expenditures other
than in accordance with the Company's current capital expenditure plans in
excess of $10,000 in any one transaction or related series of transactions;
(i) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(j) recognize any labor union (unless legally required to do so) or enter
into any collective bargaining agreement;
(k) except as may be required as a result of a change in generally
accepted accounting principles or as recommended by the Company's
independent accountants and consented to in writing by Parent (which
consent shall not be unreasonably withheld) prior to such change, change
any of the accounting methods, practices or principles used by the Company;
(l) make any Tax election or settle or compromise any income Tax
liability in excess of $10,000 except for the sales and use tax matter set
forth in Section 3.1(m) of the Disclosure Schedule or file any federal
income tax return prior to the last day prescribed by law, in the case of
any of the foregoing, material to the business, financial condition or
results of operations of the Company, without the prior consent of Parent,
which consent shall not be unreasonably withheld;
(m) settle or compromise any litigation in which the Company is a
defendant (whether or not commenced prior to the date of this Agreement) or
settle, pay or compromise any claims not required to be paid;
(n) enter into any new line of business;
(o) commence any new preclinical or clinical trials or submit any data or
other materials or enter into any discussions with the FDA or any other
Governmental Entity; or
(p) authorize any of, or commit or agree to take any of, the foregoing
actions or any action which would make any of the representations or
warranties of the Company contained in this Agreement untrue and incorrect
as of the date when made if such action had then been taken.
In addition to the foregoing, the Company hereby further covenants and
agrees that during the period from the date hereof to the Effective Time, the
Company will only use monies received by it from Parent pursuant to the Notes
in consultation with Parent.
Section 4.2 Conduct of Business of Merger Sub. Merger Sub has not engaged,
and during the period from the date of this Agreement to the Effective Time,
Merger Sub shall not engage, in any activities of any nature except as
provided in, or in connection with the transactions contemplated by, this
Agreement.
Section 4.3 Stockholders' Meeting. The Company will take all action
necessary in accordance with and subject to applicable law and the Company
Certificate of Incorporation and the Company By-Laws to convene a meeting of
its stockholders (the "Stockholder's Meeting") as soon as practicable after
the date of this Agreement to consider and vote upon the adoption and approval
of this Agreement. Subject to the next succeeding sentence, the Company,
through its Board of Directors, shall recommend to its stockholders approval
of the foregoing matters, and such recommendation, together with a copy of the
opinion referred to in Section 3.1(t), shall be included in the Proxy
Statement/Prospectus. The Board of Directors of the Company may fail to make
such
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recommendation, or withdraw, modify or change such recommendation, if and only
if the Board, after advice of outside counsel, determines in good faith that
the making of such recommendation, or the failure to so withdraw, modify or
change such recommendation, could reasonably be deemed to constitute a breach
of its fiduciary duties under applicable law.
Section 4.4 Preparation of Form S-4 and the Proxy
Statement/Prospectus. Promptly following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy
Statement/Prospectus, and Parent shall prepare and file with the SEC the Form
S-4, in which the Proxy Statement/Prospectus 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/Prospectus 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 use its reasonable best
efforts to take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under
any applicable state securities laws in connection with the issuance of Parent
Common Shares in the Merger, and the Company shall furnish all information
concerning the Company and the holders of the Company Common Stock as may be
reasonably requested in connection with any such action. The information
provided and to be provided by Parent, Merger Sub and the Company,
respectively, for use in the Form S-4 shall, at the time the Form S-4 becomes
effective and on the date of the Stockholder's Meeting referred to above, be
true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information not misleading, and the Company, Parent and Merger Sub each agree
to correct any information provided by it for use in the Form S-4 which shall
have become false or misleading.
Section 4.5 Access to Information; Confidentiality. (a) From the date hereof
to the Effective Time, the Company (i) shall, and shall cause its officers,
directors, employees, auditors and other agents to, afford the officers,
auditors and other agents of Parent, reasonable access at all reasonable times
(during normal business hours so as not to unduly or unreasonably interfere
with the business of the Company) to its senior officers, agents, properties,
offices and other facilities and to all books and records, and shall furnish
Parent and such other persons with all financial, operating and other data and
information as Parent, through its officers, may from time to time reasonably
request, and (ii) shall make available its senior officers, upon reasonable
prior notice and during normal business hours, to confer on a regular basis
with the appropriate officers of Parent regarding the ongoing operations of
the Company, the implementation of the transactions contemplated hereby and
other matters related hereto. No investigation pursuant to this Section 4.5
shall affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
(b) Each of Parent and Merger Sub will hold information it receives pursuant
to Section 4.5(a)(i) which is nonpublic in confidence to the extent required
by, and in accordance with, the provisions of the letter dated December 18,
1995 between Parent and the Company (the "Confidentiality Agreement").
Section 4.6 Affiliates. Prior to the Closing Date, the Company shall deliver
to Parent a letter identifying all persons who are, on the record date
established for the Stockholders Meeting, "affiliates" of the Company for
purposes of Rule 145 under the Securities Act. The Company shall use its
reasonable best efforts to cause each such person to deliver to Parent on or
prior to the Closing Date a written agreement substantially in the form
attached as Exhibit 4.6 hereto.
Section 4.7 No Solicitation. Subject to the proviso below, the Company shall
not, nor shall the Company authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative (collectively, "Representatives") retained by it to,
solicit, initiate, encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to
lead to, any Transaction Proposal (as defined below) or enter into or maintain
or continue any discussions or negotiate with any person in furtherance of
such inquiries or to obtain a Transaction Proposal, or agree to or endorse any
Transaction Proposal, and the Company shall notify Parent orally (as promptly
as practicable, and in any event
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within two business days) as to any Transaction Proposal which it or any of
its Representatives may receive, specifying in reasonable detail the material
terms thereof and, if requested by Parent, the Company shall furnish a written
summary of such material terms (other than the identity of the party making
such Transaction Proposal). Nothing contained in this Section 4.7 or this
Agreement to the contrary shall restrict the Board of Directors of the Company
from (i) furnishing information to any person or entity who makes an
unsolicited inquiry concerning a possible Transaction Proposal, or (ii)
entering into negotiations or discussions with any person or entity that makes
an unsolicited Transaction Proposal regarding that Transaction Proposal, or
(iii) entering into an unsolicited Transaction Proposal, if, in the case of
either clauses (ii) or (iii), the Board of Directors of the Company determines
in good faith, after advice of counsel, that (a) the failure to do so could
reasonably be deemed a breach of its fiduciary duties under applicable law or
(b) failing to make, withdrawing, modifying or changing a recommendation to
the Company's stockholders with respect to the approval and adoption of this
Agreement if the Board of Directors of the Company determines in good faith,
after advice of counsel, that making such recommendation, or failure to
withdraw, modify or change such recommendation, could reasonably be deemed a
breach of its fiduciary duties under applicable law. The Company shall provide
such information to Parent regarding any inquiry, negotiation, discussion or
proposal under this Section 4.7 as is necessary, in the reasonable judgment of
the Board of Directors of the Company, to achieve a level playing field so
that Parent shall not be at a disadvantage, provided that the name of any such
other person need not be disclosed to Parent. The Company shall obtain a
confidentiality agreement from the person making such inquiries or proposals
containing substantially the same terms and provisions as that obtained from
Parent, provided that to the extent such confidentiality agreement with such
third party contains provisions that are more favorable to such third party
than the comparable provisions in the Confidentiality Agreement, such
provisions in the Confidentiality Agreement shall be amended correspondingly.
As use herein, the term "Transaction Proposal" means (x) any acquisition or
purchase of substantially all of the assets of, or any controlling interest
in, or any debt or equity offering of, the Company or any Business
Combination, as defined below, or (y) any proposal, plan or agreement to do
any of the foregoing. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. This
section shall not prohibit accurate disclosure by the Company in any document
that is required to be filed by the Company with the SEC, including without
limitation any filings made in compliance with Rule 14e-2 promulgated under
the Exchange Act.
Section 4.8 Employee Benefits Matters. (a) Except as otherwise provided in
this Section 4.8, on and after the Effective Time, Parent shall, or shall
cause Surviving Corporation to, maintain the Company Plans set forth in
Section 3.1(l) of the Disclosure Schedule (other than the Plans) for the
benefit of employees of the Company as such Company Plans are in effect
immediately prior to the Effective Time; provided that Parent or Surviving
Corporation may replace any Company Plan with a plan of Parent which provides
benefits that are substantially similar to those benefits provided to Parent's
employees.
(b) Except as otherwise provided in this Section 4.8, on and after the
Effective Time, Parent shall, or shall cause Surviving Corporation to maintain
compensation for Company employees, as in effect on the date of this
Agreement, subject to increases in accordance with Company policy.
(c) On and after the Effective Time, Company employees shall be entitled to
participate in the equity compensation plans of Parent for employees of Parent
on the same basis as similarly situated employees of Parent.
(d) On and after the Effective Time, the base salary and other compensation
and benefits described in Section 4.8 (a) through (d) hereof may be altered by
the Surviving Corporation consistent with the Company's past practices, to
remain competitive or in accordance with industry practice; provided that the
aggregate compensation and benefits provided to the Surviving Corporation
employees shall be no less favorable than the compensation and benefits
provided to Company employees immediately prior to the Effective Time and may
be reduced only in the event of a material adverse change in the business of
the Surviving Corporation.
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(e) Neither the Company nor Parent will terminate the employment of any
employee of the Company, unless for cause, prior to April 9, 1997, and Parent
agrees to enter into reasonable severance arrangements with any Company
employee terminated after such date in accordance with its current practice.
Section 4.9 Directors' and Officers' Indemnification and Insurance. It is
understood and agreed that the Company shall defend, indemnify and hold
harmless, and after the Effective Time, the Surviving Corporation and the
Parent shall, jointly and severally, defend, indemnify and hold harmless, each
present and former employee, agent, director and officer of the Company (the
"Indemnified Parties") to the full extent required or permitted under (a)
Delaware law and (b) as provided in their respective charters and by-laws,
which rights to be defended, indemnified and held harmless shall survive the
Merger and shall continue in full force and effect without time limitation
from and after the Effective Time. Without limiting the foregoing, the
Company, and after the Effective Time the Surviving Corporation and the
Parent, will periodically advance expenses as incurred with respect to the
foregoing, to the fullest extent permitted by applicable law; provided the
person to whom the expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification. In addition, the Certificate of Incorporation and the By-laws
of the Surviving Corporation with respect to indemnification, shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, agents or
employees of the Company or otherwise entitled to indemnification pursuant to
the Company's Certificate of Incorporation. In the event that the Surviving
Corporation transfers all or substantially all of its operations to another
corporation or other entity, proper provision shall be made so that the
successor or transferee thereof shall assume any remaining obligations of the
Surviving Corporation set forth in this Section 4.9.
Section 4.10 Further Action; Reasonable Best Efforts. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including but not limited to (i)
cooperating in the preparation and filing of the Proxy Statement/Prospectus
and Form S-4, and any amendments to any thereof and (ii) using its reasonable
best efforts to make all required regulatory filings and applications and to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities and parties to contracts as
are necessary for the consummation of the transaction contemplated by this
Agreement and to fulfill the conditions to the Merger. To the extent
practicable in the circumstances and subject to applicable laws, each party
shall provide the other with the opportunity to review all information
relating to the other party, or any of its subsidiaries, which appears in any
filing made with, or written materials submitted to, any Governmental Entity
in connection with obtaining the necessary regulatory approvals for the
consummation of the transactions contemplated by this Agreement. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall use their reasonable best efforts to
take all such necessary action.
Section 4.11 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
the occurrence or non-occurrence of any event which would likely cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, and (ii) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 4.11 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 4.12 Public Announcements. Each party shall consult with the other
before issuing any press release or otherwise making any public statements
with respect to the Merger and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be
required by law or any listing agreement with its securities exchange or
quotation system, provided, however, that each party may talk to their
shareholders without the consent of the other in accordance with applicable
law.
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Section 4.13 Tax Free Reorganization Treatment. None of Parent, Merger Sub,
the Company or any of their respective affiliates shall take or cause to be
taken any action, whether before or after the Effective Time, which would
disqualify the Merger as a tax-free reorganization within the meaning of
Section 368 of the Code.
Section 4.14 Rule 144 Information. Parent hereby agrees that from the
Effective Time until the third anniversary of the Effective Time, if Parent is
not subject to Section 13 or 15(d) of the Exchange Act, it will ensure that
there is publicly available the information specified in Rule 144(c)(2) under
the Securities Act.
Section 4.15 Loan to Company. On January 15, 1997, Parent will make a loan
(the "Additional Loan") in the amount of $250,000 to the Company to be used by
the Company exclusively for operating expenses in the ordinary course. The
Company shall use such funds in consultation with Parent. The Additional Loan
will be evidenced by a promissory note in substantially the form of the
Convertible Note and will be secured by that certain License Agreement dated
of even date herewith between the Company and Parent (the "License
Agreement").
ARTICLE V
Conditions of Merger
Section 5.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon.
(b) Other Approvals. Other than the filing contemplated by Section 1.3,
all consents, approvals, authorizations or permits of, actions by, or
filings with or notifications to, and all expirations of waiting periods
imposed by, any Governmental Entity or any third party (all the foregoing,
"Consents") which are necessary for the consummation of the Merger, other
than immaterial Consents the failure to obtain which would have no material
adverse effect on the consummation of the Merger or the business of the
Surviving Corporation, shall have been filed, occurred or been obtained
(all such permits, approvals, filings and consents and the lapse of all
such waiting periods being referred to as the "Requisite Regulatory
Approvals"), all conditions, if any, to such Requisite Regulatory Approvals
shall have been satisfied and all such Requisite Regulatory Approvals shall
be in full force and effect.
(c) No Injunctions or Restrains; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding by any Governmental Entity seeking any of the foregoing be
pending. There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(d) 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, and any "blue sky" and other state
securities laws applicable to the issuance of Parent Common Shares in the
Merger shall have been complied with.
Section 5.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of the following conditions unless waived by Parent and Merger
Sub:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct as of the
date of this Agreement except to the extent such
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representations and warranties speak as of an earlier date, with such
exceptions as, either individually or in the aggregate, do not have, and
would not reasonably be expected to have, a Material Adverse Effect on the
Company, and Parent shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed all obligations required to be performed by it under this
Agreement at or prior to the Closing Date with such exceptions as, either
individually or in the aggregate, do not have, and would not reasonably be
expected to have, a Material Adverse Effect on the Company, and Parent
shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer of the Company to such effect.
Section 5.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
unless waived by the Company:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent such representations
and warranties speak as of an earlier date, with such exceptions as, either
individually or in the aggregate, do not have, and would not reasonably be
expected to have, a Material Adverse Effect on Parent, and the Company
shall have received a certificate signed on behalf of the Parent by the
Chief Executive Officer and the Chief Financial Officer of Parent to such
effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and
Merger Sub shall have performed all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, with such
exceptions as, either individually or in the aggregate, do not have, and
would not reasonably be expected to have, a Material Adverse Effect on
Parent, and the Company shall have received a certificate signed on behalf
of Parent by the Chief Executive Officer and the Chief Financial Officer of
Parent to such effect.
(c) Tax Opinion. The opinion, based on appropriate representations of the
Company, Parent and others, of Bracewell & Patterson, L.L.P., counsel to
the Company, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, dated on or about the date of and referred to in the
Proxy Statement/Prospectus as first mailed to stockholders of the Company,
shall not have been withdrawn or modified in any material respect.
ARTICLE VI
Termination, Amendment and Waiver
Section 6.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by Parent, upon any breach of any representation, warranty, covenant
or agreement of the Company set forth in this Agreement that, either
individually or in the aggregate, would constitute grounds for Parent to
elect not to consummate the Merger pursuant to Section 5.2(a) or (b), if
either (A) such breach cannot be cured prior to the Closing Date, or (B)
has not been cured within 45 days after the date on which written notice of
such breach is given by Parent to the Company, specifying in reasonable
detail the nature of such breach;
(c) by the Company, upon any breach of any representation, warranty,
covenant or agreement of Parent set forth in this Agreement that, either
individually or in the aggregate, would constitute grounds for the Company
to elect not to consummate the Merger pursuant to Section 5.3(a) or (b), if
either (A) such breach cannot be cured prior to the Closing Date, or (B)
has not been cured within 45 days after the date on which
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written notice of such breach is given by the Company to Parent, specifying
in reasonable detail the nature of such breach;
(d) by either Parent or the Company, if any permanent injunction or
action by any Governmental Entity preventing the consummation of the Merger
shall have become final and nonappealable; provided that such right of
termination shall not be available to any party if such party shall have
failed to make reasonable efforts to prevent or contest the imposition of
such injunction or action and such failure materially contributed to such
imposition;
(e) by either Parent or the Company if (other than due to the willful
failure of the party seeking to terminate this Agreement to perform its
obligations hereunder which are required to be performed at or prior to the
Effective Time) the Merger shall not have been consummated on or prior to
June 30, 1997.
(f) by either Parent or the Company, if the approval of the stockholders
of the Company of this Agreement and the Merger required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of stockholders
or at any adjournment thereof;
(g) by either Parent or the Company, if (i) the Board of Directors of the
Company shall have approved or have recommended to the stockholders of the
Company a Transaction Proposal or shall have resolved to do the foregoing;
or (ii) a Takeover Proposal (as defined herein) is commenced (other than by
Parent or any of its subsidiaries or affiliates), and the Board of
Directors of the Company recommends that the stockholders of the Company
tender their shares in such Takeover Proposal or otherwise fails to
recommend that such stockholders reject such Takeover Proposal within ten
business days of the commencement thereof; provided, however, that in each
case this Agreement may only be terminated by the Company if, and only to
the extent that, the Board of Directors of the Company, after advice of
independent legal counsel, determines in good faith that failure to take
such action could reasonably be deemed to constitute a breach of the
Board's fiduciary duties under applicable law; or
(h) by Parent in the event of a material adverse change in the business,
prospects or financial condition of the Company caused by an event,
occurrence or circumstance (a "Material Adverse Change"), unanticipated and
unknown by the Company as of the date of this Agreement and arising after
the date hereof solely from facts and circumstances not in existence as of
the date hereof. Without limiting the generality of the foregoing, a
Material Adverse Change shall not include any matter which Parent knows or
should have known of or discovered or should have discovered in its due
diligence review of the Company.
Notwithstanding the foregoing, a Material Adverse Change shall include a
determination made in good faith by Medarex prior to the earlier of the date
that the Proxy Statement/Prospectus is first mailed to the stockholders of the
Company or January 31, 1997 that both (A) a license related to the patent
referred to in Section 3.1(n)(iii) of the Disclosure Schedule is required in
order to continue development of the Company's secondary cataract product, and
(B) such license is not available, and will not be available, on commercially
reasonable terms.
Section 6.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 6.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except as set
forth in Section 4.5(b), Section 6.3, if applicable, and Section 7.1;
provided, however, that nothing herein shall relieve any party from liability
for any willful and material breach hereof; provided further, however, that
the recommendation of another transaction by the Company's Board of Directors
in accordance with Section 4.7 shall not constitute a willful and material
breach of this Agreement by the Company.
Section 6.3 Fees and Expenses. (a) The Company agrees that if this Agreement
shall be terminated pursuant to:
(i) Section 6.1(f) because the Agreement and the Merger shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at a meeting of stockholders of the Company called to vote
thereon and at the time of such meeting there shall exist a tender offer or
exchange offer for not less than a majority of the outstanding Voting Stock
(as defined herein) of the Company (a "Takeover Proposal"); or
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(ii) Section 6.1(g);
then in any such case, the Company shall pay to Parent $750,000.
(b) Any cash payment required to be made pursuant to Section 6.3(a) shall be
made upon the date which is 60 days after the date the Company enters into a
definitive agreement with respect to such Transaction Proposal or the
completion of any such Takeover Proposal, by wire transfer of immediately
available funds to an account designated by Parent, and termination of the
Company's obligations under Section 6.3(a) shall not occur until such payment
shall have been made pursuant hereto. The Company covenants and agrees that it
will not enter into a definitive agreement relating to a Transaction Proposal
that would, if consummated, require the payment of any amounts by the Company
pursuant to Section 6.3(a) unless the other party or parties thereto agree
unconditionally in writing (a copy of which shall be furnished to Parent as
soon as practicable after the public announcement of such proposed Transaction
Proposal) to assume, undertake and perform all of the Company's payment
obligations under this Section 6.3, and to pay any legal expenses incurred by
Parent in connection with the enforcement thereof.
(c) For purposes of this Section 6.3:
(i) the term "Business Combination" shall mean (A) the acquisition by any
person (other than Parent or any of its subsidiaries) of beneficial
ownership (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) of, or the right to acquire beneficial ownership of, or the
formation of any group (as such term is defined for purposes of Rule 13d-5
under the Exchange Act) which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the total voting power of all then
outstanding Voting Stock of the Company; (B) the consolidation or merger of
the Company with or into any person (other that Parent or any of its
subsidiaries) in a transaction in which the Company shall not be the
surviving or continuing corporation; (C) the merger or consolidation of any
person (other than Parent or any of its subsidiaries) with or into the
Company in a transaction in which the Company is the surviving or
continuing corporation but in which the shares of Voting Stock outstanding
immediately prior to such transaction shall represent less than 50% of the
total voting power of all Voting Stock of the surviving or continuing
corporation outstanding immediately after such merger or consolidation; (D)
any sale or other transfer (including by way of dividend or distribution of
assets to the Company's stockholders), in one transaction or in a series of
related transactions, of all or substantial portion of the Company's
consolidated assets or business to any person (other than Parent or any of
its subsidiaries) or group; or (E) any licensing or other arrangement
entered into by the Company regarding the right to use, further develop,
manufacture, sell or otherwise commercialize the Company's 4197X-RA
immunotoxin product in North America; and
(ii) the term "Voting Stock" means all outstanding stock and other
securities of the Company entitled (without regard to the occurrence of any
contingency) to vote in the election of directors of the Company.
(d) In the event this Agreement shall be terminated pursuant to Section 6.1
(h), then within fifteen (15) days of such termination Parent shall be
obligated to purchase a number of shares of Company Common Stock having a
value equal to $750,000 (or $1,000,000 if the Additional Loan has not been
made), at a price per share of $.9375 (the "Purchase Price") for, at the sole
option of Parent, cash or registered and freely tradeable Parent Common Shares
having a market value, calculated as the average closing price of Parent
Common Shares for the twenty (20) trading days prior to the date such payment
is made, of $750,000 or $1,000,000, as applicable. In the event Parent shall
pay the Purchase Price in Parent Common Shares, the Company hereby agrees that
it shall not transfer, convey, hypothecate, sell or otherwise dispose of more
than 10,000 shares in any five (5) consecutive trading days.
(e) Except as specifically provided in Section 6.2 and this Section 6.3,
each party shall bear its own expenses in connection with this Agreement and
the transactions contemplated hereby.
Section 6.4 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of Parent and the respective Boards of
Directors of Merger Sub and the Company at any time prior to
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the Effective Time; provided, however, that, after approval of the Merger by
the stockholders of the Company, no amendment may be made which would reduce
the amount or change the type of consideration into which each share of the
Company Stock shall be converted upon consummation of the Merger. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
Section 6.5 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid and
set forth in an instrument in writing signed by the party or parties to be
bound thereby.
ARTICLE VII
General Provisions
Section 7.1 Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 6.1, except that those set forth in Sections 2.2, 2.3, Section 4.5(b),
Section 4.8, Section 4.9, Section 4.10, Section 4.14, Section 6.3 and this
Article VII shall survive termination indefinitely (or to such earlier date as
shall be specified by the terms of such provisions).
Section 7.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Parent or Merger Sub:
Medarex, Inc.
1545 Route 22 East
Annandale, New Jersey 08801-0953
Attention: Donald L. Drakeman--President
Phone: 609-713-6001
Fax: 609-713-6002
with a copy to:
Satterlee Stephens Burke & Burke LLP
230 Park Avenue
New York, New York 10169
Attention: Dwight Kinsey, Esq.
Phone: 212-818-9200
Fax: 212-818-9606 or 9607
if to the Company:
Houston Biotechnology Incorporated
3608 Research Forest Drive
The Woodlands, Texas 77381
Attention: J. Russell Denson--President
Phone: 713-363-6999
Fax: 713-363-3715
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with a copy to:
Bracewell & Patterson L.L.P.
South Tower Pennzoil Place
711 Louisiana Street
Suite 2900
Houston, Texas 77002-2781
Attention: David Ronn, Esq.
Phone: 713-223-2900
Fax: 713-221-1212
Section 7.3 Certain Definitions. For purpose of this Agreement, the term:
(a) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common Stock
means a person who shall be deemed to be the beneficial owner of such
shares of Company Common Stock (i) which such person or any of its
affiliates or associates beneficially owns, directly or indirectly, (ii)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other persons with
whom such person or any of its affiliates or person with whom such person
or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares;
(c) "business day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are required or
permitted to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "knowledge" means knowledge after reasonable inquiry of, in the case
of the Company, any Vice President or more senior officer, and in the case
of Parent, any Senior Vice President or more senior officer;
(f) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (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 holder
of which is generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity.
Section 7.4 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 so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. 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 in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
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Section 7.5 Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Notes, the Escrow Agreement dated the date hereof among the
Company, Parent and Satterlee Stephens Burke & Burke LLP, the License
Agreement and the Confidentiality Agreement, which shall remain in full force
and effect. This Agreement shall not be assigned by operation of law or
otherwise, except that Parent and Merger Sub may assign all or any of their
respective rights and obligations hereunder to any other direct subsidiary or
subsidiaries of Parent, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations.
Section 7.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 7.7 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 7.8 Consent to Jurisdiction. Each of the parties hereto by execution
hereof (i) hereby irrevocably submits to the jurisdiction of the federal and
state courts of the State of Delaware for the purpose of any action, suit or
proceeding arising out of or based upon this Agreement or the subject matter
hereof and (ii) hereby waives to the extent not prohibited by applicable law,
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such action, suit or proceeding, any claim that it is not subject personally
to the jurisdiction of the above-named courts, that it is immune from
extraterritorial injunctive relief or other injunctive relief, that its
property is exempt or immune from attachment or execution, that any such
action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than one of the
above-named courts should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this agreement or the subject matter hereof may not be
enforced in or by any of the above-named courts. Each of the parties hereto
hereby consents to service of process in any such suit, action or proceeding
in any manner permitted by the laws of the State of Delaware, agrees that
service of process by registered or certified mail, return receipt requested,
is reasonably calculated to give actual notice and waives and agrees not to
assert by way of motion, as a defense or otherwise, in any such action, suit
or proceeding, any claim that service of process made in accordance with this
Section 7.8 does not constitute good and sufficient service of process. The
provisions of this Section 7.8 shall not restrict the ability of any party to
enforce in any court any judgment obtained in a federal or state court of the
State of Delaware.
Section 7.9 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 7.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, all as of the date written above.
Medarex, Inc.
By: /s/ Donald L. Drakeman
-------------------------------
Name: Donald L. Drakeman
Title: President
Medarex Acquisition Corp.
By: /s/ Michael A. Appelbaum
-------------------------------
Name: Michael A. Appelbaum
Title: Vice President
Houston Biotechnology Incorporated
By: /s/ J. Russell Denson
-------------------------------
Name: J. Russell Denson
Title: President
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EXHIBIT 1.3
CERTIFICATE OF MERGER
OF
MEDAREX ACQUISITION CORP.
WITH AND INTO
HOUSTON BIOTECHNOLOGY INCORPORATED
Pursuant to Section 251(c) of the Delaware General Corporate Law, Houston
Biotechnology Incorporated, the surviving corporation in a merger with Medarex
Acquisition Corp. certifies as follows:
1. Houston Biotechnology Incorporated and Medarex Acquisition Corp. are
both Delaware corporations.
2. An Agreement and Plan of Merger dated as of December 18, 1996 (the
"Merger Agreement"), providing for the merger of Medarex Acquisition Corp.
with and into Houston Biotechnology Incorporated (the "Merger") has been
approved, adopted, certified, executed and acknowledged by Houston
Biotechnology Incorporated and Medarex Acquisition Corp. in accordance with
Section 251 of the Delaware General Corporation Law.
The stockholders of Houston Biotechnology Incorporated approved the
Merger of the corporations in a meeting duly called and convened, a quorum
being present in person and by proxy, and acting throughout. The sole
stockholder of Medarex Acquisition Corp. approved the Merger of the
corporations by written consent in lieu of meeting pursuant to Section 228
of the Delaware General Corporation Law.
3. The surviving corporation in the Merger is Houston Biotechnology
Incorporated.
4. Pursuant to the Merger, the Certificate of Incorporation of Houston
Biotechnology Incorporated is amended and restated in the form attached
hereto as Exhibit A.
5. The executed Merger Agreement is on file at the principal place of
business of the surviving corporation, the address of which is
Houston Biotechnology Incorporated
3608 Research Forest Drive
The Woodlands, Texas 77381
6. A copy of the Merger Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of Houston
Biotechnology Incorporated or Medarex Acquisition Corp.
IN WITNESS WHEREOF, the surviving corporation has caused this certificate of
merger to be signed and attested by its duly authorized officers.
Dated: , 1996
By: _________________________________
President
Attested:
By: _________________________________
, Secretary
<PAGE>
EXHIBIT A
TO CERTIFICATE OF MERGER
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HOUSTON BIOTECHNOLOGY INCORPORATED
First: The name of the Corporation is:
HOUSTON BIOTECHNOLOGY INCORPORATED
Second: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle 19801. The name of its registered agent at such address is The
Corporation Trust Company.
Third: The nature of the business and the purposes for which the Corporation
is organized are:
To engage in any business and in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware
and to possess and employ all powers and privileges now or hereafter
granted or available under the laws of the State of Delaware to such
corporations.
Fourth: The total number of shares of stock which the Corporation shall have
authority to issue is Three Thousand (3,000) shares all of which are to be
Common Stock with a par value of one cent ($.01) per share.
Fifth: The board of directors of the Corporation is authorized to make,
alter or repeal by-laws of the Corporation, but the stockholders may make
additional by-laws and may alter or repeal any by-law whether adopted by them
or otherwise.
Sixth: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (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 Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
an improper personal benefit. If the Delaware General Corporation Law
hereafter is amended to eliminate or limit further the liability of a
director, then, in addition to the elimination of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent provided or permitted by the Delaware General
Corporation Law. Any repeal or modification of this Article SIXTH shall not
adversely affect any right or protection of a director under this Article
SIXTH, as in effect immediately prior to such repeal or modification, with
respect to any liability that would have accrued, but for this Article SIXTH,
prior to such repeal or modification.
<PAGE>
EXHIBIT 4.6
FORM OF COMPANY AFFILIATE LETTER
Gentlemen:
The undersigned, a holder of shares of common stock, par value $.01 per
share ("Company Stock"), of Houston Biotechnology Incorporated, Inc., a
Delaware corporation (the "Company"), may be entitled to receive in connection
with the merger (the "Merger") of the Company with Medarex Acquisition Corp.,
a Delaware corporation, securities (the "Parent Securities") of Medarex, Inc.,
a Delaware corporation ("Parent"). The undersigned acknowledges that the
undersigned may be deemed an "affiliate" of the Company within the meaning of
Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as amended
(the "Act"), although nothing contained herein should be construed as an
admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer any Parent Securities
received by the undersigned in exchange for any shares of Company Stock
pursuant to the Merger may be restricted unless such transaction is registered
under the Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the
sale of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with the Company that the
undersigned will not sell, assign or transfer any of the Parent Securities
that the undersigned receives in exchange for shares of Company Stock pursuant
to the Merger except (i) pursuant to an effective registration statement under
the Act, (ii) in conformity with the volume and other limitations of Rule 145
or (ii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the Securities and Exchange Commission
(the "SEC"), is not required to be registered under the Act.
In the event of a sale or other disposition by the undersigned of Parent
Securities pursuant to Rule 145, the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any Parent Securities disposed of
by the undersigned, but that upon receipt of such evidence of compliance the
transfer agent shall effectuate the transfer of Parent Securities sold as
indicated in the letter.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Parent Securities received by the
undersigned in the Merger or held by a transferee thereof, which legends will
be removed by delivery of substitute certificates upon receipt of an opinion
in form and substance reasonably satisfactory to Parent from independent
counsel reasonably satisfactory to Parent to the effect that such legends are
no longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Parent
Securities and (ii) the receipt by Parent of this letter is an inducement to
Parent's obligations to consummate the Merger.
Very truly yours,
<PAGE>
ANNEX 1
TO EXHIBIT 4.6
[Name] [Date]
On the undersigned sold the securities ("Securities") of Medarex, Inc.,
a Delaware corporation (the "Company"), described below in the space provided
for that purpose (the "Securities"). The Securities were received by the
undersigned in connection with the merger of Medarex Acquisition Corp., a
Delaware corporation, with and into Houston Biotechnology Incorporated.
Based upon the most recent report or statement filed by the Company with the
Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Securities were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Act or in transactions
directly with a "market maker" as that term is defined in Section 3(a)(38) of
the Securities Exchange Act of 1934, as amended. The undersigned further
represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such
sale.
Very truly yours,
[SPACE TO BE PROVIDED FOR DESCRIPTION OF SECURITIES]
<PAGE>
[LETTERHEAD OF STRATEGEN]
[LOGO]
December 16, 1996
Board of Directors
Houston Biotechnology Incorporated
3608 Research Forest Drive
The Woodlands, TX 77381
Gentlemen:
We understand that Houston Biotechnology Incorporated ("HBI" or the "Company")
is considering an acquisition proposal made by Medarex, Inc. ("Medarex"). HBI
shareholders will receive 0.182 shares of Medarex common stock in exchange for
each share of HBI common stock. Our firm has been asked by HBI for its opinion
(the "Opinion") as to the fairness of the terms of the acquisition proposal,
from a financial point of view, to the shareholders of the Company.
Strategen, L.L.C. ("Strategen") is a merchant banking firm specializing in the
life sciences located in New York City engaged in the evaluation of businesses
and their securities in connection with private placements, mergers and
acquisitions and valuations for corporate and other purposes. Strategen has
been acting in an investment banking capacity for HBI since March, 1995. Our
financial advisory services for the Company have included assistance in
discussions with third parties with respect to a strategic alliance or similar
arrangement with the Company.
In arriving at our Opinion, Strategen reviewed the basic terms and conditions of
the acquisition proposal and held discussions with HBI and Medarex senior
management concerning the business, operations, financial resources and
prospects for the Company. In addition, Strategen reviewed the reported price
and trading activity for HBI and Medarex common shares and compared certain
financial and stock market information for certain other biotechnology companies
with this information. Strategen also reviewed premiums paid in selected merger
and acquisition transactions involving biotechnology companies and compared the
terms of this acquisition proposal with such data. In arriving at its Opinion,
Strategen relied upon and assumed the accuracy and completeness of all financial
and other information publicly available or furnished to or otherwise reviewed
by or discussed with us and did not independently verify such information.
<PAGE>
The Board of Directors
Houston Biotechnology Incorporated
December 16, 1996
Page Two
Our advisory services and Opinion expressed herein are provided for the
information of the Board of Directors of HBI in its evaluation of the
acquisition proposal. Our Opinion may be published or otherwise used or
referred to in documents relating to this acquisition and public reference to
Strategen may be made in such documents.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion on the date hereof that the terms of the acquisition proposal are fair
to the shareholders of the Company from a financial point of view.
Very truly yours,
STRATEGEN, L.L.C.
By: /s/ James B. Dwyer III
----------------------
James B. Dwyer III
Managing Director
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation, as amended, and Article XIII of
the Registrant's Amended and Restated By-Laws provide for the indemnification of
its Officers and Directors under certain circumstances and are incorporated
herein by reference.
Section 14A:3-5 of The New Jersey Business Corporation Act (the "NJBCA")
empowers a New Jersey corporation to indemnify any person who is or was a
director, officer, employee or agent of the indemnifying corporation or of any
constituent corporation absorbed by the indemnifying corporation in a
consolidation or merger and any person who is or was a director, officer,
trustee, employee or agent of any other enterprise, serving as such at the
request of the indemnifying corporation, or of any such constituent corporation,
or legal representative of any such director, officer, trustee, employee or
agent (a "corporate agent"), against his expenses and liabilities incurred in
connection with any proceeding involving the corporate agent, other than a
proceeding by or in the right of the corporation, if (a) such corporate agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and (b) with respect to any
criminal proceeding, such corporate agent had no reason to believe that his
conduct was unlawful. In addition, a corporation may indemnify such corporate
agent against his expenses in connection with any preceeding by or in the right
of the corporation to procure a judgment in its favor which involves such
corporate agent by reason of his having been such corporate agent, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation. However, in such proceeding no
indemnification shall be provided in respect of any claim, issue or matter as to
which such corporate agent shall have been adjudged to be liable to the
corporation, unless and only to the extent that the Superior Court of the State
of New Jersey or the court in which such proceeding was brought shall determine
upon application that despite the adjudication of liability, but in view of all
circumstances of the case, such corporate agent is fairly and reasonably
entitled to indemnity for such expenses as the Superior Court or such other
court shall deem proper.
Under the NJBCA a corporation shall indemnify a corporate agent against
expenses to the extent that such corporate agent has been successful on the
merits or otherwise in any proceeding referred to above or in defense of any
claim, issue or matter therein.
The indemnification and advancement of expenses provided by or granted
pursuant to the NJBCA shall not exclude any other rights, including the right to
be indemnified against liabilities and expenses incurred in proceedings by or in
the right of the corporation, to which a corporate agent may be entitled under a
certificate of incorporation, by-law, agreement, vote of shareholders, or
otherwise; provided that no indemnification shall be made to or on behalf of a
corporate agent if a judgment or other final adjudication adverse to the
corporate agent establishes that his acts or omissions (a) were in breach of his
duty of loyalty to the corporation
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<PAGE>
or its shareholders, (b) were not in good faith or involved a knowing violation
of law or (c) resulted in receipt by the corporate agent of an improper personal
benefit.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in that 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.
The Registrant maintains a standard form of officers' and directors'
liability insurance policy which provides coverage to the officers and directors
of the Registrant for certain liabilities, including certain liabilities which
may arise out of this Registration Statement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<C> <S>
/17/2.1 Agreement and Plan of Merger among Medarex, Inc., Medarex Acquisition Corp.
and Houston Biotechnology Incorporated dated December 18, 1996, together with
the exhibits thereto.
/16/3.1 Restated Certificate of Incorporation, as amended, of the Registrant.
/1/3.2 Amended and Restated By-laws of the Registrant.
/1/4.1 Form of Specimen of Common Stock Certificate.
*4.2 Form of Warrant Agreement between Houston Biotechnology Incorporated and
Mellon Securities Trust Company.
*4.3 Form of Specimen of Warrant Certificate (included as Exhibit A to Warrant
Agreement filed as Exhibit 4.2).
5.1 Opinion of Satterlee Stephens Burke & Burke LLP re: legality of securities being
registered.
8.1 Opinion of Bracewell & Patterson, L.L.P. as to federal income tax matters.
/4/10.1 Lease of the Registrant's executive offices dated August 1, 1992.
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
/1/10.2 Lease of the Registrant's laboratory facilities.
/1/10.3 1991 Employee Stock Option Plan.
/1/10.4 Letter of Intent dated April 25, 1991 between Lower Pyne Associates, L.P. and
Medarex, Inc.
/1/10.5 Joint Venture Agreement by and among Trustees of Dartmouth College, Essex
Medical Products, Inc. and the Registrant, dated as of July 15, 1987.
/1/10.6 Exclusive License Agreement by and between Trustees of Dartmouth College and
the Registrant, dated July 15, 1987.
/1/10.7 Non-Exclusive License Agreement by and between Trustees of Dartmouth College
and the Registrant, dated July 15, 1987.
/1/10.8 Assignment Agreement by and between the Registrant and Michael W. Fanger,
dated July 15, 1987.
/1/10.9 Consulting Agreement between the Registrant and Michael W. Fanger, dated as of
July 15, 1987.
/1/10.10 Assignment Agreement by and between the Registrant and Paul M. Guyre, dated
July 15, 1987.
/1/10.11 Consulting Agreement between the Registrant and Paul M. Guyre, dated as of July
15, 1987.
/1/10.12 Assignment Agreement by and between the Registrant and Edward Ball, dated July
15, 1987.
/1/10.13 Consulting Agreement between the Registrant and Edward Ball, dated as of July
15, 1987.
/1/10.14 Stock Purchase Agreement among Essex Vencap, Inc. and Medarex Founders and
the Registrant, dated as of June 15, 1989.
/1/10.15 Amended and Restated Research and Development and Umbrella Agreement
between Fondation Nationale de Transfusion Sanguine and the Registrant, dated
March 7, 1991.
/1/10.16 AML/SCCL License Agreement between Fondation Nationale de Transfusion
Sanguine and the Registrant, dated February 13, 1990.
/1/10.17 HIV License Agreement between Fondation Nationale de Transfusion Sanguine
and the Registrant, dated February 13, 1990.
/1/10.18 HIV Targeting Antibody License Agreement between Fondation Nationale de
Transfusion Sanguine and the Registrant, dated February 13, 1990.
/1/10.18A Amendment to AML/SCCL License Agreement, the HIV License Agreement and
the HIV Targeting Antibody License Agreement dated March 7, 1991.
/1/10.19 Medarex Targeted Immunostimulation License Agreement between the Registrant
and Fondation Nationale de Transfusion Sanguine, dated March 7, 1991.
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
/1/10.20 FNTS Targeted Immunostimulation License Agreement between Fondation
Nationale de Transfusion Sanguine and the Registrant, dated March 7, 1991.
/1/10.21 Agreement of SmithKline Beecham Pharmaceuticals and the Registrant with respect
to Research Collaboration, dated February 1, 1990.
/1/10.21A Amendment to Agreement of SmithKline Beecham Pharmaceuticals and the
Registrant with respect to Research Collaboration dated July 5, 1990.
/1/10.22 Research Agreement between the Registrant and The Upjohn Company, dated
October 18, 1990.
/1/10.23 Agreement dated as of May 16, 1991 by and among Trustees of Dartmouth
College and the Registrant relating to the assignment of certain patents and the
modification of the Joint Venture Agreement.
/1/10.24 Assignment of certain patent rights by Trustees of Dartmouth College to the
Registrant dated May 16, 1991.
/1/10.25 Loan Agreement by and between Dr. Edward Ball, Dr. Paul Guyre, Dr. Donald
Drakeman, Dr. Michael Fanger, and First New Hampshire Bank of Lebanon,
dated October 25, 1990.
/1/10.26 Security Agreement between the Registrant and First New Hampshire Bank of
Lebanon, dated October 25, 1990.
/1/10.27 Distribution Agreement between the Registrant and Funakoshi Pharmaceutical Co.,
Ltd., dated as of June 1, 1989, expiring May 31, 1990.
/1/10.28 Employment Agreement by and between the Registrant and Dr. Donald Drakeman,
dated as of April 1, 1991, as amended.
/1/10.29 Employment Agreement by and between the Registrant and Dr. Nathan B. Dinces,
dated as of April 1, 1991, as amended.
/1/10.30 Form of Financial Advisory and Investment Banking Agreement between the
Registrant and Josephthal Lyon & Ross Incorporated.
/1/10.31 License Agreement between the Registrant and Cetus Corporation dated as of
February 19, 1991.
/1/10.32 Form of invention and confidential information agreement between registrant and
its employees.
/1/10.33 Stock Purchase Plan.
/1/10.34 Settlement Agreement by and between the Registrant and Fondation Nationale de
Transfusion Sanguine, dated December 9, 1991.
/1/10.35 Amended and Restated HIV Targeting Antibody License Agreement by and
between the Registrant and Fondation Nationale de Transfusion Sanguine, dated
December 9, 1991.
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
/2/10.36 HBV Cell Line License Agreement by and between the Registrant and Fondation
Nationale de Transfusion Sanguine, dated December 9, 1991.
/3/10.37 Employment Agreement by and between the Registrant and Michael A.
Appelbaum, dated as of July 29, 1991.
/4/10.38 Agreement dated November 28, 1991 between Scotgen Limited and the Company
pertaining to the genetic engineering of one of the Company's antibodies.
/5/10.39 Amended and Restated 1987 Stock Option Plan.
/6/10.40 Letter of Intent between Registrant and The Bayson Company dated March 16,
1992.
/6/10.41 Form of Consulting Agreement between the Registrant and Paul M. Guyre, dated
as of March 17, 1992.
/6/10.42 Form of Consulting Agreement between the Registrant and Edward Ball, dated as
of March 17, 1992.
/6/10.43 Form of Consulting Agreement between the Registrant and Michael W. Fanger,
dated as of March 17, 1992.
/6/10.44 Agreement In Principle dated as of July 10, 1992 between the Registrant and Dr.
Daniel Beck of Centre Hospitalier Universiter Vaudrois.
/6/10.45 Agreement In Principle dated as of July 23, 1992 by and among Institut Curie,
Immuno-Designed Molecules, SARL and the Registrant.
/7/10.46 Underwriting Agreement by and between the Registrant and Rosenkrantz Lyon &
Ross Incorporated as Representative of the Several Underwriters, dated June 20,
1991.
/9/10.47 Placement Agent Agreement between the Registrant and Josephthal Lyon & Ross
Incorporated, dated as of November 13, 1992.
/9/10.48 Placement Agent Warrant Agreement between the Registrant and Josephthal Lyon
& Ross Incorporated, dated as of December 14, 1992.
/9/10.49 Placement Agent Agreement between the Registrant and Josephthal Lyon & Ross
Incorporated, dated as of December 17, 1992.
/9/10.50 Placement Agent Warrant Agreement between the Registrant and Josephthal Lyon
& Ross Incorporated, dated as of December 18, 1992.
/8/10.51 1992 Employee Stock Option Plan.
/10/10.52 Lease of Registrant's Laboratory Facility (Clinton, New Jersey).
/11/10.53 Amendment to Lease of Registrant's Laboratory Facility (Clinton, New Jersey).
/11/10.54 Employment Agreement by and between the Registrant and Yashwant M. Deo,
dated as of July 8, 1993.
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
/12/10.55 Financing Agreement dated as of December 1, 1993 by and among the Registrant,
G. Musuri and FAM S.A.
/12/10.56 Consulting Agreement dated February 10, 1994 by and among the Registrant and
Dr. Julius A. Vida.
/13/10.57 Letter of Intent dated March 30, 1994 between the Registrant and E. Merck.
(Confidential Portions omitted and filed separately with the Securities and
Exchange Commission)
/14/10.58 Sublease of Registrant's Laboratory Facility (West Lebanon, New Hampshire).
/14/10.59 Sublease of Registrant's Executive Offices (Annandale, New Jersey).
/15/10.60 Sublease of Registrant's New Hampshire Facility, dated May 25, 1994.
/9/10.61 1995 Stock Option Plan
/9/10.62 Stock Purchase Agreement dated May 16, 1995 between the Registrant and CIBA-
GEIGY Limited.
/9/10.63 Development and Commercialization Agreement dated May 16, 1995 between the
Registrant and CIBA-GEIGY Limited. (Confidential Portions omitted and filed
separately with the Securities and Exchange Commission)
/9/10.64 Registration Rights Agreement dated May 16, 1995 between the Registrant and
CIBA-GEIGY.
/13/10.65 Letter of Josephthal Lyon & Ross Incorporated dated April 12, 1996.
/18/10.66 Convertible Note dated December 18, 1996 executed by Houston Biotechnology
Incorporated in favor of the Registrant.
/19/10.67 License Agreement effective December 18, 1996 between Houston Biotechnology
Incorporated and the Registrant.
/20/10.68 Escrow Agreement dated as of December 18, 1996 among Houston Biotechnology
Incorporated, the Registrant and Satterlee Stephens Burke & Burke LLP, as escrow
agent.
*10.69 Convertible Note dated January 15, 1997 executed by Houston Biotechnology
Incorporated in favor of the Registrant.
/4/11 Statement re: computation of per share earnings.
*13.1 Registrant's Annual Report on Form 10-K filed on March 14, 1996.
*13.2 Registrant's Quarterly Report on Form 10-Q filed on November 14, 1996.
*13.3 Annual Report on Form 10-K filed on April 1, 1996 for Houston Biotechnology
Incorporated.
*13.4 Quarterly Report on Form 10-Q filed on November 14, 1996 for Houston
Biotechnology Incorporated.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
/21/21 Subsidiaries of the Registrant.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Satterlee Stephens Burke & Burke LLP (included in their opinion filed
as Exhibit 5.1.)
23.4 Consent of Bracewell & Patterson, L.L.P. (included in their opinion filed as
Exhibit 8.1).
*23.5 Consent of Stratagen, L.L.C. (included in their opinion which is attached as Annex
A to the Proxy Statement and Prospectus).
*24.1 Power of Attorney (included in signature page).
99.1 Form of Proxy Card for Houston Biotechnology Incorporated.
- ---------------
</TABLE>
/*/ Previously filed.
/1/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 33-39956)
filed on April 12, 1991.
/2/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Current Report on Form 8-K dated December 20, 1991.
/3/ Incorporated by reference to exhibit number 10.33 to the
Registrant's Current Report on Form 8-K dated August 9, 1991.
/4/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Annual Report on Form 10-K filed on March 14, 1996.
/5/ Incorporated by reference to exhibit number 4 to the Registrant's
Registration Statement on Form S-8 (File No. 33-44276) filed on
November 29, 1991.
/6/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 33-46509)
filed on March 18, 1992.
/7/ Incorporated by reference to the exhibit number 1.1 to the
Registrant's Registration Statement on Form S-1 (File No. 33-39956)
filed on April 12, 1991.
/8/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Annual Report on Form 10-K filed on March 15, 1993.
/9/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Post Effective Amendment No. 5 to Registration
Statement on Form S-1 (File No. 33-57366) filed on September 15,
1995.
/10/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q filed on May 14, 1993.
/11/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q filed on August 16, 1993.
/12/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Annual Report on Form 10-K filed on February 15, 1994.
/13/ Incorporated by reference to the identically numbered exhibit to
the Registrant's Registration Statement on Form S-1 (File No. 33-
57324) filed on February 15, 1994.
/14/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Quarterly Report on Form 10-K filed on May 13, 1994.
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<PAGE>
/15/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Quarterly Report on Form 10-Q filed on August 12, 1994.
/16/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 33-98244).
/17/ Incorporated by reference to exhibit number 99.1 to the
Registrant's Current Report on Form 8-K filed on January 2, 1997.
/18/ Incorporated by reference to exhibit number 99.2 to the
Registrant's Current Report on Form 8-K filed on January 2, 1997.
/19/ Incorporated by reference to exhibit number 99.3 to the
Registrant's Current Report on Form 8-K filed on January 2, 1997.
/20/ Incorporated by reference to exhibit number 99.4 to the
Registrant's Current Report on Form 8-K filed on January 2, 1997.
/21/ Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-3 (File No. 333-16373).
(b) Financial Statement Schedules
All schedules are omitted because of the absence of the conditions
under which they are required, or because the information called for is included
in the financial statements or notes thereto.
(c) 4(b) Information
The opinion of Stratagen, L.L.C. is included as Annex A to the Proxy
Statement and Prospectus included in Part I of this Registration Statement.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
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<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities and Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
(5) 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 a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
registrant 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.
(6) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (5) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to this registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities 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.
(7) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents, by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(8) 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.
See Item 20, "Indemnification of Directors and Officers."
II-9
<PAGE>
SIGNATURES
----------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ANNANDALE, STATE OF NEW JERSEY, ON THE 27TH DAY OF JANUARY, 1997.
MEDAREX, INC.
By:/s/ Charles R. Schaller*
-------------------------------------
Charles R. Schaller
Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT TO 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/ Charles R. Schaller Chairman of the Board January 27,1997
Charles R. Schaller *
- --------------------------------------------
/s/ Donald L. Drakeman President, Chief Executive Officer and January 27,1997
Donald L. Drakeman Director (Principal Executive Officer)
- --------------------------------------------
/s/ Michael A. Appelbaum Senior Vice President - Finance and January 27,1997
Michael A. Appelbaum * Administration, Secretary, Treasurer, Chief
- -------------------------------------------- Financial Officer and Director (Principal
Financial and Accounting Officer)
/s/ Michael W. Fanger Director January 27, 1997
Michael W. Fanger *
- --------------------------------------------
/s/ Julius A. Vida Director January 27, 1997
Julius A. Vida *
- --------------------------------------------
/s/ Irwin Lerner Director January 27, 1997
Irwin Lerner *
- --------------------------------------------
/s/ W. Leigh Thompson Jr. Director January 27, 1997
W. Leigh Thompson Jr. *
- --------------------------------------------
/s/ Robert Iggulden Director January 27, 1997
Robert Iggulden *
- --------------------------------------------
</TABLE>
* By: /s/ Donald L. Drakeman
--------------------------------------
Donald L. Drakeman, as attorney-in fact, pursuant to Power of Attorney
previously filed.
<PAGE>
INDEX TO EXHIBITS
Location of
Exhibit in
Sequential
Exhibit No. Description of Document Numbering System
- ----------- ------------------------ -----------------
5.1 Opinion of Satterlee Stephens Burke & Burke LLP
re legality of securities being registered.
8.1 Opinion of Bracewall & Patterson, L.L.P. as
to federal income tax matters.
99.1 Form of Proxy Card for Houston
Biotechnology Incorporated.
<PAGE>
EXHIBIT 5.1
January 27, 1997
Medarex, Inc.
1545 Route 22 East
Annandale, NJ 08801
Re: Medarex, Inc. - Registration Statement on Form S-4
--------------------------------------------------
Gentlemen:
We have acted as counsel to Medarex, Inc., a New Jersey corporation
(the "Company"), in connection with the preparation of a Registration Statement
on Form S-4 (including the proxy statement and prospectus forming a part
thereof) (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the issuance of up to 1,026,445
shares (the "Shares") of the Company's common stock, par value $.01 per share
(the "Common Stock") in connection with the merger (the "Merger") of Medarex
Acquisition Corp. ("Sub") with and into Houston Biotechnology Incorporated
("HBI") pursuant to an Agreement and Plan of Merger dated December 18, 1996 (the
"Merger Agreement") by and among the Company, Sub and HBI. In addition, the
Registration Statement relates to the issuance of up to 822,924 common stock
purchase warrants of the Company (the "Company Warrants") in connection with the
Merger and 822,924 shares of the Company's Common Stock issuable upon the
exercise of the Company Warrants. As such counsel, you have requested our
opinion as to the matters described herein relating to the issuance of the
Shares.
We have examined the Company's Restated Certificate of Incorporation,
as amended; the Company's Amended and Restated By-Laws; minutes of the Company's
corporate proceedings, as made available to us by officers of the Company; an
executed copy of the Registration Statement, as amended through the date hereof,
and all schedules and exhibits thereto in the form filed with the Securities and
Exchange Commission; and such matters of law deemed necessary by us in order to
deliver this opinion. In the course of such examination, we have assumed the
genuineness of all signatures, the authority of all signatories to sign on
behalf
<PAGE>
of their principals, if any, the authenticity of all documents submitted to us
as original documents and the conformity to original documents of all documents
submitted to us as certified or photostatic copies. As to certain factual
matters, we have relied, without investigation, upon certificates of officers
and employees of the Company who we believe to be reliable, and upon
certificates, telegrams and other documents from, and oral conversation with,
public officials.
Based upon the foregoing, we are of the opinion that the Shares and
the Company Warrants when issued and delivered in accordance with the terms of
the Merger Agreement will be duly and validly authorized and legally issued,
fully paid and non-assessable with no personal liability attaching to ownership
thereof.
In addition, following the effective date of the Registration
Statement, when certificates for the shares of the Company's Common Stock to be
issued and sold by the Company upon exercise of the Company Warrants have been
duly executed, countersigned and delivered against due receipt of consideration
therefore as described in the Registration Statement, such shares of the
Company's Common Stock will be duly and validly authorized and legally issued,
fully paid and non-assessable with no personal liability attaching to the
ownership thereof.
We understand that this opinion is to be filed as an exhibit to the
Registration Statement. We consent to such filing and to the use of our name in
the Prospectus included therein under the caption "Legal Matters."
Very truly yours,
SATTERLEE STEPHENS BURKE & BURKE LLP
<PAGE>
January 27, 1997
Houston Biotechnology Incorporated
3608 Research Forest Drive
The Woodlands, Texas 77381
Re: FEDERAL INCOME TAX CONSEQUENCES TO HOUSTON BIOTECHNOLOGY INCORPORATED
AND THE STOCKHOLDERS OF HOUSTON BIOTECHNOLOGY INCORPORATED AS A RESULT
OF THE MERGER OF MEDAREX ACQUISITION CORP., A WHOLLY-OWED SUBSIDIARY
OF MEDAREX, INC., INTO HOUSTON BIOTECHNOLOGY INCORPORATED
Dear Ladies & Gentlemen:
We have acted as counsel to Houston Biotechnology Incorporated, a Delaware
corporation ("Company"), in connection with the proposed merger (the "Merger")
of Medarex Acquisition Corp., a newly-formed Delaware corporation (the "Merger
Sub") and wholly-owned subsidiary of Medarex, Inc., a New Jersey corporation
("Medarex"), with and into the Company, pursuant to the terms of the Agreement
and Plan of Merger dated as of December 18, 1996 ("Merger Agreement") by and
among Medarex, Merger Sub, and the Company. The terms of the Merger are more
fully described in the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on January 21, 1997, under file #333-20119
jointly prepared by the Company and Medarex,as amended as of the date hereof
(the "Registration Statement"). For purposes of this letter, capitalized terms
used and not otherwise defined herein shall have the meanings ascribed thereto
in the Merger Agreement.
You have advised that Medarex proposes to acquire 100% of the Company's
outstanding capital common stock, par value $.01 per share ("Company Common
Stock") by way of the Merger. In particular, it is our understanding that the
Merger will be implemented by having Merger Sub merge with and into the Company.
As a result of the Merger, all Company Stockholders will exchange their shares
of Company Common Stock for shares of common stock of Medarex, par value $.01
per share ("Medarex Common Stock").
You have further advised that, with respect to the Company's outstanding
warrants to purchase Company Common Stock (the "Warrants") governed by the
Warrant Agreement dated as of May 24, 1993, between the Company and Mellon
Securities Trust Company, as Warrant Agent
<PAGE>
Houston Biotechnology Incorporated
January 27, 1997
Page 2
("Warrant Agreement"), Medarex will, pursuant to the Merger, assume the
Company's obligations with respect to the Warrants and, by operation of the
existing terms of the Warrant Agreement, holders of the Warrants ("Warrant
Holders") will, after the Merger, upon exercise of the Warrants be entitled to
purchase Medarex Common Stock in lieu of Company Common Stock. Medarex's
assumption of the Company's obligation under the Warrants, and the Warrant
Holder's right to acquire Medarex Common Stock in lieu of Company Common Stock
shall be referred to as the "Substitution". It is our understanding that
subsequent to the Merger, in a separate transaction outside the scope of our
opinion, Medarex will offer to exchange the Warrants for Medarex warrants with
identical terms. However, such exchange will not be mandatory.
The Company has requested our opinions as to:
. the federal income tax consequences of the Merger to the Company and the
holders of Company Common Stock ("Company Stockholder"); and
. the federal income tax consequences to Warrant Holders who, pursuant to
the Merger, will be entitled to purchase Medarex Common Stock.
In connection with the opinions rendered below, we have examined the following:
1. the Company's Certificate of Incorporation, as amended;
2. the Company's By-Laws, as amended;
3. the Warrant Agreement;
4. the Merger Agreement together with the exhibits thereto;
5. the Registration Statement;
6. Medarex's Certificate of Incorporation, as amended;
7. Medarex's By-Laws, as amended;
8. the Merger Sub's Certificate of Incorporation;
<PAGE>
Houston Biotechnology Incorporated
January 27, 1997
Page 3
9. the Merger Sub's By-Laws; and
10. such other documents as we have deemed necessary or appropriate for
purposes of this opinion.
In connection with the opinions set out below and with the consent of the
Company, we have assumed generally that:
. each of the documents referred to above has been duly authorized,
executed, and delivered, is authentic, if an original, or accurate, if a
copy, and has not been amended;
. each party has full power, authority, and legal right to enter into and
perform the terms of the Merger Agreement and the transactions contemplated
thereby;
. the Company and Medarex and their authorized representatives will make the
factual representations as set out in the forms of representation letter,
reviewed by Company and Medarex, regarding these matters, and that such
representations are correct.
Based on the documents, assumptions, and representations described above, we are
of the opinion that, for federal income tax purposes:
(a) the Merger will constitute a reorganization described in section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
("Code");
(b) the Company will be a party to the reorganization within the meaning
of section 368(b) of the Code;
(c) the Company will not recognize any gain or loss as a result of
participating in the Merger;
(d) a Company Stockholder who, as a result of the Merger, exchanges his or
her Company Common Stock for Medarex Common Stock will not recognize
any gain or loss upon such exchange;
<PAGE>
Houston Biotechnology Incorporated
January 27, 1997
Page 4
(e) a Company Stockholder's aggregate adjusted tax basis in the shares of
Medarex Common Stock received pursuant to the Merger in exchange for
Company Common Stock will be equal to the aggregate adjusted tax basis
of the shares of Company Common Stock surrendered therefore (decreased
by the amount of any tax basis allocable to fractional shares of
Medarex Common Stock in lieu of which cash will be paid);
(f) each Company Stockholder who held Company Common Stock as a capital
asset at the Effective Time will include in his or her holding period
for Medarex Common Stock received in the Merger the holding period of
the shares of Company Common Stock exchanged for such shares;
(g) a Company Stockholder who receives cash in the Merger in lieu of a
fractional share of Medarex Common Stock will be treated as if the
fractional share interest of Medarex Common Stock was distributed to
such Company Stockholder and then redeemed by Medarex for cash. The
deemed redemption will be treated as a distribution in full payment in
exchange for the fractional share interest of Medarex Common Stock
deemed received by the holder under section 302(a) of the Code.
Accordingly, such Company Stockholder will recognize gain or loss
equal to the difference between the amount of cash received and the
portion of such Company Stockholder's adjusted tax basis in the shares
of Company Common Stock allocable to the fractional share interest of
Medarex Common Stock. The gain or loss will be long-term capital gain
or loss provided shares of Company Common Stock deemed surrendered for
such fractional share interest of Medarex Common Stock were held by
the Company Stockholder as a capital asset as of the effectiveness of
the Merger for a period of more than one year.
(i) unless an exemption applies, under the backup withholding rules of
Code Section 3406, an exchange agent (such as Medarex) shall be
required to withhold, and will withhold, 31% of all cash payments to
which a Company Stockholder is entitled pursuant to the Merger unless
such Company Stockholder provides his or her taxpayer identification
number (Social Security Number in the case of an individual, or
<PAGE>
Houston Biotechnology Incorporated
January 27, 1997
Page 5
Employer Identification Number in other cases) and certifies that such
number is correct.
(j) the Warrant Holders will not recognize gain or loss upon the
Substitution because it will not constitute a taxable exchange under
Code Section 1001. The Warrant Holder's aggregate adjusted tax basis
in the Warrants will not be effected.
The foregoing opinions are limited to the federal income tax matters addressed
herein, and no other opinions are rendered with respect to other federal tax
matters or to any issues arising under the tax laws of any state or locality.
The foregoing opinions are based on current provisions of the Code and the
Regulations, published administrative interpretations thereof, and published
court decisions as of the date of this opinion. The Service has not issued
Regulations or administrative interpretations with respect to various provisions
of the Code relating to reorganizations or conversions of stock. No assurance
can be given that future legislative, judicial or administrative change or
interpretations which occur after the date hereof will not adversely affect the
conclusions set out herein. Moreover, there is no assurance that the Internal
Revenue Service will not successfully contest some or all of the conclusions set
out herein.
These opinions are being furnished solely for the benefit of the Company and
Company Stockholders in connection with the Merger and may not be used or relied
upon for any other purpose. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. In giving this consent, we do not
admit that we are in the category of persons whose
<PAGE>
Houston Biotechnology Incorporated
January 27, 1997
Page 6
consent is required by Section 7 of the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder by the Securities and Exchange
Commission.
You are hereby advised that William D. Gutermuth is a member of the Board of
Directors and a stockholder of the Company.
Very truly yours,
/s/ Bracewell & Patterson, L.L.P.
Bracewell & Patterson, L.L.P.
<PAGE>
HOUSTON BIOTECHNOLOGY INCORPORATED
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, FEBRUARY 27, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes, appoints and authorizes J. Russell Denson
and Donald S. Clark, Ph.D., as the true and lawful attorneys, agents and
proxies of the undersigned, with full power of substitution, to represent and
to vote all shares of common stock of Houston Biotechnology Incorporated
("HBI") held of record by the undersigned on January 24, 1997 at the Special
Meeting of Stockholders to be held at the offices of HBI at 3608 Research
Forest Drive, The Woodlands, Texas 77381, at 10:00 a.m., local time, on
February 27, 1997, and at any adjournment(s) thereof, in accordance with the
instructions noted below, and with discretionary authority with respect to such
other matters, not known or determined at the time of solicitation of this
Proxy, as may properly come before said meeting or any adjournment(s) thereof.
Receipt of the notice of the meeting and the Proxy Statement and Prospectus
dated January 29, 1997, is hereby acknowledged.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE STOCKHOLDER'S SPECIFICATIONS HEREON. IN THE ABSENCE OF SUCH
SPECIFICATIONS, THE PROXY WILL BE VOTED "FOR" THE PROPOSALS SET OUT ON THE
REVERSE SIDE.
1. To consider and vote upon a proposal recommended by the Board of Directors
to approve and adopt a plan of merger in accordance with the Agreement and Plan
of Merger dated December 18, 1996, among HBI, Medarex, Inc. ("Medarex") and
Medarex Acquisition Corp. ("Merger Sub") pursuant to which (i) Merger Sub shall
be merged with and into HBI with HBI being the surviving corporation and
resulting in HBI being a wholly-owned subsidiary of Medarex, and (ii) each
share of common stock, par value $0.01 per share, of HBI shall be converted
into the right to receive 0.182 shares of Medarex common stock, par value $0.01
per share.
[_] FOR [_] AGAINST [_] ABSTAIN
2. To transact any and all other business that may properly come before the
Special Meeting or any adjournment or adjournments thereof.
IN THEIR DISCRETION, THE AFOREMENTIONED PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT
THEREOF.
DATED: ______________________________, 1997.
--------------------------------------------
Signature of Stockholder
--------------------------------------------
Signature of Stockholder
*Please sign as name appears. Joint owners
each should sign. When signing as attorney,
trustee, administrator, executor, etc.,
please indicate your full title as such. If
signor is a corporation, please give full
corporate name by duly authorized officer.
If a partnership, please sign in
partnership name by authorized person.
PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY.
PLEASE DO NOT FOLD THIS PROXY.
