<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE
ACT OF 1934
COCENSYS, INC.
(NAME OF SUBJECT COMPANY)
PURDUE ACQUISITION CORPORATION
PURDUE PHARMA L.P.
(BIDDERS)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
191263201
(CUSIP NUMBER OF CLASS OF SECURITIES)
HOWARD R. UDELL, ESQ.
PURDUE ACQUISITION CORPORATION
C/O PURDUE PHARMA L.P.
100 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06850-3590
(203) 853-0123
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------
Copy To:
STUART D. BAKER, ESQ.
CHADBOURNE & PARKE LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(212) 408-5100
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$6,816,299 $1,364
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* For purposes of calculating the amount of the filing fee only. The amount
assumes the purchase of 5,876,120 shares of Common Stock, par value $0.001
per share (the "Shares") of the Subject Company, at a price per Share of
$1.16 in cash. Such number of shares represents all the Shares outstanding on
August 5, 1999, plus the number of Shares issuable upon the exercise of all
outstanding options of the Subject Company and the conversion into Shares of
the Series D Preferred Stock of the Subject Company.
** 1/50th of one percent of the Transaction Value.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date filed: N/A
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14D-1
CUSIP NO. 191263201 PAGE 2 OF 7 PAGES
<TABLE>
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1 NAME OF REPORTING PERSONS:
PURDUE ACQUISITION CORPORATION
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSONS:
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) [ ] (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS:
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(e) or 2(f):
N/A [
]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION:
STATE OF DELAWARE
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
125(1)
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
*(2)
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10 TYPE OF REPORTING PERSON
CO
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</TABLE>
* less than 0.1%
(1) An executive officer of Purdue Acquisition Corporation ("Offeror"), an
indirect wholly owned subsidiary of Purdue Pharma L.P. ("Parent"), owns
indirectly 125 Shares of the Subject Company. Offeror and Parent disclaim
beneficial ownership of such Shares. See Annex A of the Offer to Purchase.
(2) Based on a representation of the Subject Company.
2
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14D-1
CUSIP NO. 191263201 PAGE 3 OF 7 PAGES
<TABLE>
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1 NAME OF REPORTING PERSONS:
PURDUE PHARMA L.P.
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSONS:
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) [ ] (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS:
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(e) or 2(f):
N/A
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION:
State of Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
125(1)
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
*(2)
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10 TYPE OF REPORTING PERSON
PN
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</TABLE>
* less than 0.1%
(1) See footnote on previous page.
(2) See footnote on previous page.
3
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This Tender Offer Statement on Schedule 14D-1 ("Schedule 14D-1") relates to
a tender offer by Purdue Acquisition Corporation, a Delaware corporation
("Offeror"), and an indirect wholly owned subsidiary of Purdue Pharma L.P., a
Delaware limited partnership ("Parent"), to purchase all outstanding shares of
Common Stock, par value $0.001 per share (the "Common Stock"), of CoCensys,
Inc., a Delaware corporation (the "Company"), at a purchase price of $1.16 per
share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase and in the related Letter
of Transmittal (which together constitute the "Offer"), copies of which are
filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and which are
incorporated herein by reference, with respect to the acquisition of securities
of the same class referred to in Item 1 of this statement. Offeror has been
formed in connection with the Offer and the transactions contemplated thereby.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is CoCensys, Inc., a Delaware
corporation, and the address of its principal executive offices is 213
Technology Drive, Irvine, California 92618.
(b) The exact title of the class of equity securities being sought in the
Offer is Common Stock, par value $0.001 per share, of the Company, including the
associated rights to purchase Series A Junior Participating Preferred Stock
issued under the Rights Agreement of the Company. The information set forth in
the Introduction to the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) -- (d); (g) The information set forth in the Introduction and Section 9
("Certain Information Concerning PNC, Parent and Offeror") of the Offer to
Purchase, and in Annex A thereto, is incorporated herein by reference.
(e) -- (f) None of Offeror, Parent, or, to the best of their knowledge, any
of the persons listed in Annex A of the Offer to Purchase, has during the last
five years (i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal or
state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning PNC, Parent and Offeror") and Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") of the
Offer to Purchase, and in Annex A thereto, is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 10 ("Source and Amount of Funds")
of the Offer to Purchase is incorporated herein by reference.
(b) -- (c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) -- (e) The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") and Section 13 ("The Merger Agreement and the Series E Purchase
Agreement") of the Offer to Purchase is incorporated herein by reference.
4
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(f) -- (g) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) -- (b) The information set forth in Annex A to the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning PNC, Parent and Offeror"), Section 11 ("Background of the
Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 13 ("The Merger Agreement and the Series E Purchase Agreement") of the
Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) -- (c) The information set forth in Section 16 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
(e) The information set forth in Section 16 ("Certain Legal Matters") of
the Offer to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
5
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ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase, dated August 12, 1999.
(a)(2) Letter of Transmittal with respect to the Shares.
(a)(3) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees for Shares.
(a)(4) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees for
Shares.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) IRS Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated August 12, 1999.
(a)(8) Press Release issued by Parent on August 6, 1999.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of August 5, 1999,
among Parent, Offeror and the Company.
(c)(2) Series E Purchase Agreement, dated as of August 5, 1999,
between Offeror and the holder of the Series E Preferred.
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
6
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 12, 1999
PURDUE PHARMA L.P., by its
general partner, PURDUE PHARMA INC.
By: /s/ HOWARD R. UDELL
------------------------------------
Name: Howard R. Udell
Title: Vice President and General
Counsel
PURDUE ACQUISITION CORPORATION
By: /s/ HOWARD R. UDELL
------------------------------------
Name: Howard R. Udell
Title: Vice President
7
<PAGE> 8
EXHIBIT INDEX
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(a)(1) Offer to Purchase, dated August 12, 1999.
(a)(2) Letter of Transmittal with respect to the Shares.
(a)(3) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees for Shares.
(a)(4) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees for
Shares.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) IRS Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated August 12, 1999.
(a)(8) Press Release issued by Parent on August 6, 1999.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of August 5, 1999,
among Parent, Offeror and the Company.
(c)(2) Series E Purchase Agreement, dated as of August 5, 1999,
between Offeror and the holder of the Series E Preferred.
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE
RIGHTS)
OF
COCENSYS, INC.
AT
$1.16 NET PER SHARE
BY
PURDUE ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PURDUE PHARMA L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, SEPTEMBER 9, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) SUCH
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE ("SHARES"), OF
COCENSYS, INC., A DELAWARE CORPORATION (THE "COMPANY"), THAT, WHEN ADDED TO THE
NUMBER OF SHARES TO BE RECEIVED BY PURDUE ACQUISITION CORPORATION UPON THE
CONVERSION OF ALL OF THE SERIES E PREFERRED STOCK (AS DEFINED BELOW) PURCHASED
BY PURDUE ACQUISITION CORPORATION UNDER THE SERIES E PURCHASE AGREEMENT (AS
DEFINED BELOW), WOULD CONSTITUTE AT LEAST 90% OF THE FULLY DILUTED SHARES (AS
DEFINED BELOW) AND (II) SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF
MERGER, DATED AS OF AUGUST 5, 1999, AMONG PURDUE PHARMA L.P., PURDUE ACQUISITION
CORPORATION AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS
UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT (EACH AS
DEFINED BELOW), HAS DETERMINED THAT THE MERGER IS ADVISABLE AND THAT THE TERMS
OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF THE SHARES ACCEPT THE
OFFER AND TENDER THEIR SHARES IN THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (i) complete and sign the Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal and mail or deliver the Letter of Transmittal with the certificates
evidencing such tendered Shares and all other required documents to the
Depositary, or follow the procedure for book-entry transfer set forth in Section
2, or (ii) request such stockholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section 2.
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase.
The Dealer Manager for the Offer is:
BANCBOSTON ROBERTSON STEPHENS
AUGUST 12, 1999
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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INTRODUCTION................................................ 3
1. Terms of the Offer..................................... 5
2. Procedure for Tendering Shares......................... 7
3. Withdrawal Rights...................................... 10
4. Acceptance for Payment and Payment for Shares.......... 11
5. Certain Federal Income Tax Consequences................ 12
6. Price Range of Shares; Dividends....................... 13
7. Certain Effects of the Transaction..................... 13
8. Certain Information Concerning the Company............. 14
9. Certain Information Concerning PNC, Parent and the
Offeror................................................ 17
10. Source and Amount of Funds............................. 18
11. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company.......................... 18
12. Purpose of the Offer and the Merger; Plans for the
Company................................................ 20
13. The Merger Agreement and the Series E Purchase
Agreement.............................................. 21
14. Dividends and Distributions............................ 27
15. Certain Conditions of the Offer........................ 28
16. Certain Legal Matters.................................. 30
17. Fees and Expenses...................................... 31
18. Miscellaneous.......................................... 31
ANNEX A. CERTAIN INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF PNI, THE OFFEROR AND PNC,
THE GENERAL PARTNER OF PNLP....................... A-1
</TABLE>
2
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To the Holders of Common Stock of CoCensys, Inc.:
INTRODUCTION
Purdue Acquisition Corporation, a Delaware corporation (the "Offeror") and
an indirect wholly owned subsidiary of Purdue Pharma L.P., a Delaware limited
partnership ("Parent"), hereby offers to purchase all outstanding shares of
Common Stock, par value $0.001 per share (the "Common Stock"), including the
associated rights to purchase Series A Junior Participating Preferred Stock
issued under the Rights Agreement (as defined below) (the "Rights" and, together
with the Common Stock, the "Shares") of CoCensys, Inc., a Delaware corporation
(the "Company"), at a purchase price of $1.16 per Share (the "Offer Price"), net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"). Tendering holders of Shares will not be
obligated to pay brokerage fees or commissions or, except as set forth in the
Letter of Transmittal, transfer taxes on the purchase of Shares by the Offeror
pursuant to the Offer. The Offeror will pay all charges and expenses of
BancBoston Robertson Stephens Inc. (the "Dealer Manager"), American Stock
Transfer & Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the
"Information Agent") in connection with the Offer.
The Offeror is wholly owned by Purdue Neuroscience Inc., a Delaware
corporation ("PNI"), that in turn is wholly owned by Purdue Neuroscience L.P., a
Delaware limited partnership ("PNLP"). Parent owns 100% of the limited
partnership interest in PNLP. Purdue Neuroscience Corporation, a New York
corporation ("PNC"), is the general partner of PNLP. The Offeror, PNC, PNI and
PNLP were formed in connection with the Offer and transactions contemplated
thereby. For information concerning PNC, Parent and the Offeror, see Section 9.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE MERGER IS ADVISABLE
AND THAT THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF THE
SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE SUCH NUMBER OF SHARES
THAT, WHEN ADDED TO THE NUMBER OF SHARES TO BE RECEIVED BY THE OFFEROR UPON THE
CONVERSION OF ALL OF THE SERIES E PREFERRED STOCK TO BE PURCHASED BY THE OFFEROR
UNDER THE SERIES E PURCHASE AGREEMENT, WOULD CONSTITUTE AT LEAST 90% OF THE
FULLY DILUTED SHARES (AS DEFINED BELOW) (THE "MINIMUM CONDITION"), AND (ii)
SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15.
HAMBRECHT & QUIST LLC, THE COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED TO
THE COMPANY'S BOARD OF DIRECTORS ITS WRITTEN OPINION THAT, AS OF THE DATE OF
SUCH OPINION, THE CONSIDERATION TO BE OFFERED TO THE HOLDERS OF COMMON STOCK OF
THE COMPANY PURSUANT TO THE OFFER AND THE MERGER IS FAIR TO SUCH STOCKHOLDERS
FROM A FINANCIAL POINT OF VIEW. A COPY OF SUCH OPINION IS CONTAINED IN THE
COMPANY'S STATEMENT ON SCHEDULE 14D-9, WHICH IS BEING DISTRIBUTED TO THE
COMPANY'S STOCKHOLDERS CONCURRENTLY HEREWITH.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of August 5, 1999 (the "Merger Agreement"), among Parent, the Offeror and the
Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Offeror will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger (as
such, the "Surviving Corporation") as an indirect wholly owned subsidiary of
Parent. In the Merger, each outstanding Share (other than Shares owned by the
Company as treasury stock, Parent, the Offeror or any other subsidiary or
affiliate of Parent or by stockholders, if any, who are entitled to and who
properly demand and perfect appraisal
3
<PAGE> 4
rights under Delaware law) will be converted into the right to receive from the
Surviving Corporation the Offer Price in cash, without interest (the "Merger
Consideration"). See Section 13.
The Merger is subject to a number of conditions, including approval by
stockholders of the Company, if such approval is required by applicable law. If
the Offeror acquires 90% or more of the outstanding Shares pursuant to the
Offer, the Series E Purchase Agreement or otherwise, the Offeror would be able
to effect the Merger pursuant to the short-form merger provisions of the
Delaware General Corporation Law (the "DGCL"), without prior notice to, or any
action by, any other stockholder of the Company. In such event, the Offeror
could, and intends to, effect the Merger without prior written notice to, or any
action by, any other stockholder of the Company. See Section 13.
The Offeror has entered into a Purchase Agreement dated as of August 5,
1999 (the "Series E Purchase Agreement") with the holder of the Series E
Convertible Preferred Stock of the Company (the "Series E Preferred Stock").
Under the Series E Purchase Agreement, the holder of the Series E Preferred
Stock has agreed to sell, and the Offeror has agreed to purchase, immediately
following consummation of the Offer all of the Series E Preferred Stock
beneficially owned by it, representing approximately 31% of the Fully Diluted
Shares on an as-converted basis at the currently scheduled Expiration Date, for
an aggregate purchase price of $2,200,000. The obligation of the holder of the
Series E Preferred Stock to sell, and the obligation of the Offeror to purchase,
the Series E Preferred Stock under the Series E Purchase Agreement, are subject
to the Offeror having accepted Shares for payment under the Offer in accordance
with the Merger Agreement. The Series E Preferred Stock will be convertible at
the option of the holder into approximately 2,634,493 Shares at the currently
scheduled Expiration Date. See Section 13.
The Merger Agreement is more fully described in Section 13. The Company has
informed the Offeror that, as of August 5, 1999, there were 4,873,480 Shares
issued and outstanding, 774,597 Shares issuable upon the exercise of outstanding
options to purchase Shares ("Company Stock Options") and 227,425 Shares issuable
upon the conversion by the Company of the Series D Convertible Preferred Stock
of the Company (the "Series D Preferred Stock"). In connection with the
execution of the Merger Agreement and the consummation of the Merger, (i) all
outstanding Company Stock Options will be accelerated and fully vested and each
Share subject to any Company Stock Option will be converted into the right to
receive an amount in cash equal to the excess, if any, of the Offer Price over
the per share exercise price of such Company Stock Option; (ii) each of the
holders of outstanding warrants to purchase Shares ("Warrants") has agreed to
cancel such Warrants for de minimus consideration, subject to the Offeror having
accepted Shares for payment under the Offer in accordance with the Merger
Agreement; (iii) the Series C Convertible Preferred Stock of the Company (the
"Series C Preferred Stock"), without any action of the holder thereof in
accordance with applicable law, automatically will be converted into the right
to receive an amount in cash equal to the number of Shares into which the Series
C Preferred Stock is convertible (143,021 Shares according to the Company)
multiplied by the Offer Price; (iv) the Company converted the Series D Preferred
Stock on August 5, 1999 into 227,425 Shares in accordance with the terms
governing the Series D Preferred Stock; and (v) the Company agreed to prepay
with no premium the $1 million convertible note issued by the Company to the
Warner-Lambert Company (the "WL Note") in cash in accordance with the agreement
between the Company and the Warner-Lambert Company. For purposes of this Offer,
"Fully Diluted Shares" shall mean all outstanding Shares after giving effect to
the exercise of all Company Stock Options and the conversion of the Series D
Preferred Stock and the Series E Preferred Stock at the currently scheduled
Expiration Date, but without giving effect to the exercise of any Warrants or
the conversion of the Series C Preferred Stock or the conversion of the WL Note
into Shares. Based upon the foregoing, the Offeror believes that there will be
8,509,995 Fully Diluted Shares at the currently scheduled Expiration Date.
Because the Shares subject to the Series E Purchase Agreement will represent
approximately 31% of the Fully Diluted Shares, the Minimum Condition will be
satisfied if at least an aggregate of 5,024,503 Shares and Company Stock Options
are validly tendered and not withdrawn prior to the Expiration Date. If the
Minimum Condition is satisfied and the Offeror accepts for payment Shares
tendered pursuant to the Offer, the Offeror will be able to effect the Merger
pursuant to the short-form merger provisions of the DGCL without prior notice
to, or any action by, any other stockholder of the Company.
4
<PAGE> 5
Certain federal income tax consequences of the sale and purchase of Shares
pursuant to the Offer and the conversion of Shares pursuant to the Merger are
described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay promptly after the
Expiration Date for all Shares validly tendered prior to the Expiration Date and
not theretofore withdrawn in accordance with Section 3. The term "Expiration
Date" means 12:00 midnight, New York City time, on Thursday, September 9, 1999,
unless and until the Offeror shall have extended the period of time during which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Offer, as so extended by the Offeror, will
expire.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION AND THE
SATISFACTION OF THE OTHER CONDITIONS SET FORTH IN SECTION 15.
In the Merger Agreement the Offeror has agreed that without the consent of
the Company it may extend the Offer (a) if at the scheduled or extended
Expiration Date any of the conditions to the Offeror's obligation to accept
Shares for payment are not satisfied or waived, until such time as such
conditions are satisfied or waived, (b) for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "Commission") or the staff thereof applicable to the Offer, (c) for a
period not to exceed an aggregate of ten business days, notwithstanding that all
conditions to the Offer are satisfied as of the Expiration Date, if, immediately
prior to such Expiration Date, the Shares tendered and not withdrawn pursuant to
the Offer, when added to the number of Shares to be received by the Offeror upon
conversion of all of the Series E Preferred Stock purchased by the Offeror under
the Series E Purchase Agreement, equal less than 90% of the Fully Diluted Shares
and (d) until 10 business days following the expiration of the 10 business day
period referred to in clause (iv) of condition (c) of Section 15 and, if such
clause (iv) of condition (c) shall not have been satisfied, for so long as the
Offeror shall determine until, in its sole discretion, all conditions of the
Offer are satisfied or waived. Without limiting the right of the Offeror to
extend the Offer pursuant to the immediately preceding sentence, in the event
that (i) the Minimum Condition has not been satisfied or (ii) any condition set
forth in paragraph (a) of Section 15 is not satisfied at the scheduled
Expiration Date, the Offeror shall extend the Expiration Date in increments of
five business days each until the earliest to occur of (x) the satisfaction or
waiver of the Minimum Condition or such other condition, or the Offeror
reasonably determines that any Offer Condition is not capable of being satisfied
on or prior to October 15, 1999, (y) the termination of the Merger Agreement in
accordance with its terms and (z) October 15, 1999; provided, however, that if
any person or group (within the meaning of Section 13(d)(3) of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act")) has publicly made an
Acquisition Proposal (as defined in Section 13 hereof) or disclosed in writing
its intention to make an Acquisition Proposal, the Offeror shall not be required
to extend the Offer for more than five business days from the date of such
publication or written disclosure of such Acquisition Proposal unless the
Company's Board of Directors has reaffirmed its recommendation that the
stockholders of the Company accept the Offer. As used in this Offer to Purchase,
"business day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
In addition, the Offeror has agreed in the Merger Agreement that it will
not, without the written consent of the Company, (a) reduce the number of Shares
subject to the Offer, (b) reduce the Offer Price, (c) add to or modify (other
than by waiver) the conditions set forth in Section 15, (d) except as set forth
in the immediately preceding paragraph, extend the Offer, (e) change the form of
the consideration payable in the Offer, (f) waive the Minimum Condition, or (g)
amend or alter any other term of the Offer in any manner materially adverse to
the holders of the Shares.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Offeror reserves the right, in its sole
discretion, at any time and from time to time, and
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regardless of whether or not any of the events or facts set forth in Section 15
hereof shall have occurred, to, (a) extend the period of time during which the
Offer is open, and thereby delay acceptance for payment of and the payment for
any Shares, by giving oral or written notice of such extension to the Depositary
and (b) amend the Offer in any other respect by giving oral or written notice of
such amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID
ON THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE OFFEROR EXERCISES
ITS RIGHT TO EXTEND THE OFFER.
If by 12:00 midnight, New York City time, on Thursday, September 9, 1999
(or any date or time then set as the Expiration Date), any or all of the
conditions to the Offer have not been satisfied or waived, the Offeror reserves
the right (but shall not be obligated), subject to the terms and conditions
contained in the Merger Agreement and to the applicable rules and regulations of
the Commission to, (a) terminate the Offer and not accept for payment or pay for
any Shares and return all tendered Shares to tendering stockholders, (b) waive
any or all of the unsatisfied conditions and accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn, (c) extend the Offer and, subject to the right of stockholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered during the period or periods for which the Offer is extended or (d)
amend the Offer.
There can be no assurance that the Offeror will exercise its right to
extend the Offer beyond any required extensions. Any extension, waiver,
amendment or termination will be followed as promptly as practicable by a public
announcement. In the case of an extension, Rule 14e-l(d) under the Exchange Act
requires that the announcement be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(c) under the
Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d)
under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
Offer be promptly disseminated to stockholders in a manner reasonably designed
to inform stockholders of such change) and without limiting the manner in which
the Offeror may choose to make any public announcement, the Offeror will not
have any obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Offeror extends the Offer or if the Offeror is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Offeror's rights under the
Offer, the Depositary may retain tendered Shares on behalf of the Offeror, and
such Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 3. However, the ability of
the Offeror to delay the payment for Shares that the Offeror has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that
a bidder pay the consideration offered or return the securities deposited by or
on behalf of holders of securities promptly after the termination or withdrawal
of such bidder's offer.
If the Offeror makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the Company's consent, a waiver of the Minimum Condition), the
Offeror will disseminate additional tender offer materials and extend the Offer
to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act. The minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer,
other than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances then existing, including the
relative materiality of the changed terms or information. With respect to a
change in price or a change in the percentage of securities sought, a minimum
period of 10 business days is generally required to allow for adequate
dissemination to stockholders.
Consummation of the Offer is conditioned upon the satisfaction of the
Minimum Condition and the other conditions set forth in Section 15. Subject to
the terms and conditions contained in the Merger Agreement, the Offeror reserves
the right (but shall not be obligated) to waive any or all such conditions.
However, if the Offeror waives or amends the Minimum Condition (which action may
not be taken without the Company's consent) during the last five business days
during which the Offer is open, the Offeror will be required to
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extend the Expiration Date so that the Offer will remain open for at least five
business days after the announcement of such waiver or amendment is first
published, sent or given to holders of Shares and may also be required to extend
the Offer if other conditions are waived, depending on the materiality of the
waiver.
The Company has provided the Offeror with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Offeror to record holders of
Shares, and will be furnished to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder lists, or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
The Merger Agreement provides that prior to the effectiveness of the
Merger, all outstanding Company Stock Options whether or not then fully
exercisable, shall be accelerated and converted into the right to receive after
the Effective Time (as defined in the Merger Agreement) from the Company, for
each Share subject to any Company Stock Option, an amount in cash equal to the
excess, if any, of the Offer Price over the per share exercise price of such
Company Stock Option, without interest (less any applicable withholding taxes).
All Company Stock Options not exercised at the Effective Time shall terminate
and be canceled and shall cease to exist. See Section 13, "The Merger Agreement
and the Series E Purchase Agreement -- Company Stock Options; Warrants."
Notwithstanding the foregoing, the Board of Directors of the Company, with
the written consent of Parent, has adopted resolutions providing for the
acceleration of all Company Stock Options contingently upon and subject to
consummation of the Offer. Holders of Company Stock Options who wish to tender
Shares for which their Company Stock Options are exercisable should follow the
procedures set forth in Section 2, "Procedure for Tendering Shares -- Tender of
Shares from Exercise of Company Stock Options."
2. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message (as defined herein), and any other
required documents, must be received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedure set forth below. In addition, either (i) certificates representing
such Shares must be received by the Depositary along with the Letter of
Transmittal or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation (as defined
in Section 4) must be received by the Depositary, in each case prior to the
Expiration Date, or (ii) the guaranteed delivery procedures set forth below must
be complied with. No alternative, conditional or contingent tenders will be
accepted.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution that is
a participant in the Book-Entry Transfer Facility's system may make book-entry
delivery of Shares by causing the Book-Entry Transfer Facility to transfer such
Shares into the Depositary's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
Although delivery of Shares may be effected through book-entry at the Book-Entry
Transfer Facility prior to the Expiration Date, (i) the Letter of Transmittal
(or a manually signed facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message in connection with
a book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase or (ii) the guaranteed delivery
procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
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Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made, or delivered to, or certificates
evidencing unpurchased Shares are to be issued or returned to, a person other
than the registered owner or owners, then the tendered certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available, or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless be
tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Offeror, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message
and any other documents required by the Letter of Transmittal are received
by the Depositary within three trading days after the date of such Notice
of Guaranteed Delivery. The term "trading day" is any day on which The
Nasdaq Stock Market, Inc.'s National Market ("Nasdaq") is open for
business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or by mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND SOLE RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. DELIVERY OF THE LETTER OF TRANSMITTAL AND ACCOMPANYING SHARES WILL
BE DEEMED EFFECTIVE AND RISK OF LOSS WITH RESPECT TO SUCH LETTER OF TRANSMITTAL
AND ACCOMPANYING CERTIFICATE(S) WILL PASS ONLY WHEN SUCH LETTER OF TRANSMITTAL
AND ACCOMPANYING CERTIFICATE(S) ARE ACTUALLY RECEIVED BY THE DEPOSITARY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
(iii) any other documents required by the Letter of Transmittal.
Appointment. By executing a Letter of Transmittal as set forth above
(including through delivery of an Agent's Message), the tendering stockholder
will irrevocably appoint designees of the Offeror as such stockholder's
attorneys-in-fact and proxies in the manner set forth in the Letter of
Transmittal, each with full
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power of substitution, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
the Offeror and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after August 5, 1999.
All such proxies shall be considered coupled with an interest in the tendered
Shares. Such appointment will be effective when, and only to the extent that,
the Offeror accepts for payment Shares tendered by such stockholder as provided
herein. Upon such acceptance for payment, all prior powers of attorney and
proxies given by such stockholder with respect to such Shares or other
securities or rights will, without further action, be revoked and no subsequent
powers of attorney and proxies may be given (and, if given, will not be deemed
effective). The designees of the Offeror will thereby be empowered to exercise
all voting and other rights with respect to such Shares or other securities or
rights in respect of any annual, special or adjourned meeting of the Company's
stockholders, or otherwise, as they in their sole discretion deem proper. The
Offeror reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Offeror's acceptance for payment of such
Shares, the Offeror must be able to exercise full voting and other rights with
respect to such Shares and other securities or rights, including voting at any
meeting of stockholders then scheduled.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after August 5, 1999), and (ii) when the same are accepted for payment by the
Offeror, the Offeror will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims. The Offeror's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
stockholder and the Offeror upon the terms and subject to the conditions of the
Offer.
Tender of Shares from Exercise of Company Stock Options. Holders of
Company Stock Options who wish to tender Shares for which their Company Stock
Options are exercisable may do so either (a) by first exercising their Company
Stock Options and delivering to the Depositary certificates for Shares being so
tendered or (b) by executing a Letter of Transmittal appointing the Depositary
as their agent to exercise if, and only if, the Offer is consummated, their
Company Stock Options for the number of Shares to be tendered indicated in the
Letter of Transmittal. In the case of clause (b), only a number of whole Shares
for which the Company Stock Options are exercisable may be tendered. The
Depositary will, in the event the Offer is consummated, pay the Company for each
Share tendered pursuant to clause (b) an amount equal to the exercise price of
the Company Stock Option exercised, and pay the holder of the Company Stock
Option tendered pursuant to clause (b) for each such Share tendered an amount
equal to the Offer Price minus the exercise price of the exercised Company Stock
Option. The amount paid to employees pursuant to clause (b) shall be reduced by
such amount of wage and employment withholding taxes as may be required to be
deducted and withheld with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended, or under any provision of state,
local or foreign law. In any event, such payments for Shares tendered upon
exercise of such Company Stock Options that are accepted for payment pursuant to
the Offer will only be made after the receipt by the Depositary of such Shares
as described in Section 4. Holders of Company Stock Options who elect to tender
Shares pursuant to clause (b) above by executing a Letter of Transmittal, in
addition to the matters described under "Appointment" above, will irrevocably
appoint the Depositary as such holder's agent and attorney-in-fact in the manner
set forth in the Letter of Transmittal, with full power of substitution, to the
full extent of such holder's rights, to exercise the Company Stock Options for
the Shares being tendered. Notwithstanding the foregoing, Company Stock Options
contigent tendered will be deemed not to have been exercised if the Offeror
fails to accept Shares for payment pursuant to the Offer. In the event Company
Stock Options are registered in a name other than the name of the tendering
holder, or to the extent deemed necessary or appropriate by the Depositary or
the Offeror to exercise such Company Stock Options, additional documents may be
required to transfer record ownership of the Company Stock Options into the name
of the tendering holder or the name of the Depositary.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT "BACKUP" FEDERAL INCOME
TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF
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SHARES PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST PROVIDE THE
DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER
("TIN") AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL
INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE
LETTER OF TRANSMITTAL. FOREIGN HOLDERS MUST SUBMIT A COMPLETED FORM W-8 TO AVOID
BACKUP WITHHOLDING. THIS FORM MAY BE OBTAINED FROM THE DEPOSITARY. SEE
INSTRUCTIONS 8 AND 9 SET FORTH IN THE LETTER OF TRANSMITTAL.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Offeror, be unlawful. The Offeror
also reserves the absolute right to waive any of the conditions of the Offer,
subject to the limitations set forth in the Merger Agreement, or any defect or
irregularity in the tender of any Shares. Subject to the terms of the Merger
Agreement and applicable law, the Offeror's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
Instructions to the Letter of Transmittal) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects and irregularities have been cured or waived. None of the Offeror,
Parent, PNC, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 3, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after Sunday, October 10, 1999. If purchase of or payment for Shares is delayed
for any reason or if the Offeror is unable to purchase or pay for Shares for any
reason, then, without prejudice to the Offeror's rights under the Offer,
tendered Shares may be retained by the Depositary on behalf of the Offeror and
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as set forth in this Section 3, subject to Rule
14e-1(c) under the Exchange Act, which provides that no person who makes a
tender offer shall fail to pay the consideration offered or return the
securities deposited by or on behalf of security holders promptly after the
termination or withdrawal of the Offer.
For a withdrawal of Shares tendered pursuant to the Offer to be effective,
a written, telegraphic, telex or facsimile transmission notice of withdrawal
must be timely received by the Depositary at its address set forth on the back
cover page of this Offer to Purchase. Any notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name in which the certificates representing such Shares
are registered, if different from that of the person who tendered the Shares. If
certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 2, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and must otherwise comply with
such Book-Entry Transfer Facility's procedures. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Offeror, in its sole discretion, and its determination will be final and
binding on all parties. None of the Offeror, Parent, PNC, the Dealer Manager,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
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Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 2.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 3 promptly after the later to occur of (a) the
Expiration Date and (b) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the conditions set forth in Section
15. Subject to compliance with Rule 14e-1(c) under the Exchange Act, the Offeror
expressly reserves the right to delay payment for Shares in order to comply in
whole or in part with any applicable law. See Sections 1 and 16. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) certificates for such
Shares or timely confirmation (a "Book-Entry Confirmation") of a book-entry
transfer of such Shares into the Depositary's account at the Book-Entry Transfer
Facility, pursuant to the procedures set forth in Section 2, (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with all required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message and (iii) any other documents required
by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares (which will include all Shares received and
tendered from the exercise of Company Stock Options exercised at such time) for
payment. In all cases, payment for Shares purchased pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payment from the Offeror and transmitting such payment to tendering
stockholders. If, for any reason whatsoever, acceptance for payment of any
Shares tendered pursuant to the Offer is delayed, or the Offeror is unable to
accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to the Offeror's rights under Section 1, the Depositary may,
nevertheless, on behalf of the Offeror, retain tendered Shares, and such Shares
may not be withdrawn, except to the extent that the tendering stockholders are
entitled to withdrawal rights as described in Section 3 above and as otherwise
required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID BY THE OFFEROR BECAUSE OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer to the Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within the
Book-Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being
paid for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
The Offeror reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Offeror of its obligations under the Offer or prejudice the rights
of tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
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5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to holders whose Shares are purchased
pursuant to the Offer or whose Shares are converted to cash in the Merger
(including pursuant to the exercise of appraisal rights). The discussion is for
general information only and does not purport to consider all aspects of federal
income taxation that may be relevant to holders of Shares. The discussion is
based on current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing, proposed and temporary regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change. The discussion applies only to holders of Shares in whose
hands such Shares are capital assets within the meaning of Section 1221 of the
Code, and may not apply to Shares received pursuant to the exercise of employee
stock options or otherwise as compensation, to Shares held in connection with a
"straddle", "hedging", "conversion" or other risk reduction transaction, or to
certain types of holders of Shares (such as insurance companies, tax-exempt
organizations, financial institutions, broker-dealers in securities or foreign
currencies, holders subject to the United States federal alternative minimum
tax, or persons who have a fractional currency other than the United States
dollar) who may be subject to special rules. This discussion does not discuss
the federal income tax consequences to a holder of Shares who, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD
CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE
RULES DISCUSSED BELOW TO SUCH HOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
HOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes. In general, for federal
income tax purposes, a holder of Shares will recognize gain or loss equal to the
difference between the holder's adjusted tax basis in the Shares sold pursuant
to the Offer or converted to cash in the Merger and the amount of cash received
therefor. Gain or loss must be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) sold pursuant
to the Offer or converted to cash in the Merger. Such gain or loss will be
capital gain or loss, and in the case of an individual, will be taxable at a
maximum federal rate of 20% if the holder held the Shares for more than one year
on the date of sale (in the case of the Offer) or the Effective Time (in the
case of the Merger). Individuals who held Shares for one year or less on the
date of sale (in the case of the Offer) or the Effective Time (in the case of
the Merger) will be taxable at a maximum federal rate of 39.6%. For individual
taxpayers, the deductibility of capital losses is subject to limitations.
Payments to corporate taxpayers, whether capital gains or ordinary income, are
subject to a maximum regular tax rate of 35%. The receipt of cash for Shares
pursuant to the exercise of appraisal rights will generally be taxed in the same
manner as described above. Payments in connection with the Offer or the Merger
may be subject to "backup withholding" at a rate of 31%, unless a holder of
Shares (a) is a corporation or comes within certain exempt categories and, when
required, demonstrates this fact or (b) on a properly completed Substitute Form
W-9 provides a correct TIN to the payor, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A holder who does not provide a correct TIN may be
subject to penalties imposed by the Internal Revenue Service. Any amount paid as
backup withholding does not constitute an additional tax and will be creditable
against the holder's federal income tax liability. Each holder of Shares should
consult with his or her own tax advisor as to his or her qualification for
exemption from backup withholding and the procedure for obtaining such
exemption. Holders tendering their Shares in the Offer may prevent backup
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal. See Section 2. Similarly, holders who convert their Shares into
cash in the Merger may prevent backup withholding by completing a Substitute
Form W-9 and submitting it to the paying agent for the Merger.
12
<PAGE> 13
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are currrently traded on the OTC Bulletin Board ("OTC") under
the symbol COCN. Prior to July 14, 1999, the Shares were listed on Nasdaq under
the same symbol. Nasdaq notified the Company by letter, dated December 1, 1998,
that it was not in compliance with the $1.00 minimum closing bid price
requirement for the continued listing of its Shares. A hearing on the issue was
held on April 29, 1999, and the Company was notified by letter, dated July 13,
1999, that the Company's Shares had been delisted from Nasdaq. On July 14, 1999,
the Shares commenced trading on the OTC.
The following table sets forth for the periods indicated the high and low
sales prices per Share on Nasdaq or the OTC as reported by the Company in its
1998 Annual Report on Form 10-K with respect to the fiscal years ended December
31, 1997 and December 31, 1998, and as reported by published financial sources
with respect to periods after December 31, 1998. At the Special Meeting of
Stockholders held on January 27, 1999, stockholders authorized the Board of
Directors of the Company to effect a reverse stock split within a range of one
new share of common stock for every six, seven or eight outstanding shares of
stock. The Board subsequently approved a reverse split of one-for-eight
effective April 15, 1999. All share and per share amounts have been restated to
reflect this reverse stock split.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ended December 31, 1997:
First Quarter............................................ $63.00 $36.00
Second Quarter........................................... $47.00 $21.50
Third Quarter............................................ $50.00 $23.00
Fourth Quarter........................................... $48.50 $23.50
Fiscal Year Ended December 31, 1998:
First Quarter............................................ $36.00 $23.00
Second Quarter........................................... $29.00 $16.50
Third Quarter............................................ $21.50 $ 7.00
Fourth Quarter........................................... $18.00 $ 2.00
Year Ending December 31, 1999:
First Quarter............................................ $ 3.50 $ 1.50
Second Quarter........................................... $ 3.00 $ 0.63
Third Quarter (through August 11, 1999).................. $ 1.13 $ 0.63
</TABLE>
On August 5, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing price per
Share on the OTC, as reported by Dow Jones Interactive, was $0.875. On August
11, 1999, the last full day of trading prior to the commencement of the Offer,
the closing price per Share on the OTC, as reported by Dow Jones Interactive,
was $1.09. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
Since its inception, the Company has not declared or paid any dividends on
the Shares.
7. CERTAIN EFFECTS OF THE TRANSACTION.
Market for the Shares. The purchase of the Shares by the Offeror pursuant
to the Offer will reduce the number of Shares that might otherwise trade
publicly and will reduce the number of holders of Shares, which will adversely
affect the liquidity and market value of the remaining Shares held by
stockholders other than the Offeror.
OTC Bulletin Board Listing. In order for the Shares to continue to be
quoted on the OTC, the Company is required to be current in its Exchange Act
filings and have at least one registered market maker. The extent of the public
market for the Shares and the availability of such quotations would, however,
depend on the number of holders of Shares remaining at such time, the interest
in maintaining a market in the Shares on the part of securities firms, the
possible termination of registration under the Exchange Act, as described below,
and other factors. According to the Company, as of August 5, 1999, there were
approximately 376 holders of record of Shares and approximately 5,800 beneficial
owners of Shares and as of August 5, 1999, there were 4,873,480 shares
outstanding.
13
<PAGE> 14
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders of Shares. It is the
intention of the Offeror to seek to cause an application for such termination to
be made as soon after consummation of the Offer as the requirements for
termination of registration of the Shares are met. If such registration were
terminated, the Company would no longer legally be required to disclose publicly
in proxy materials distributed to stockholders the information which it now must
provide under the Exchange Act or to make public disclosure of financial and
other information in annual, quarterly and other reports required to be filed
with the Commission under the Exchange Act; and the officers, directors and 10%
stockholders of the Company would no longer be subject to the "short-swing"
insider trading reporting and profit recovery provisions of the Exchange Act.
Furthermore, if such registration were terminated, persons holding "restricted
securities" of the Company may be deprived of their ability to dispose of such
securities under Rule 144 or 144A promulgated under the Securities Act of 1933,
as amended (the "Securities Act").
If the registration of the Shares is not terminated prior to the Merger,
then the Shares will be delisted from all stock exchanges and the registration
of the shares under the Exchange Act will be terminated following the
consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers. If registration of Shares under the Exchange Act were terminated,
the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Although neither the Offeror
nor Parent has any knowledge that would indicate that statements contained
herein based upon such documents are untrue, neither the Offeror, Parent, any
affiliate of the Offeror or Parent, nor the Dealer Manager or Information Agent
assumes any responsibility for the accuracy or completeness of any information
concerning the Company or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to the Offeror, Parent or their affiliates.
The Company is a corporation organized under the laws of Delaware with its
principal executive offices located at 213 Technology Drive, Irvine, California
92618. According to the Company's Form 10-K for the year ended December 31,
1998, as amended ("Company's 1998 Form 10-K"), the Company is a
biopharmaceutical company dedicated to the discovery and development of small
molecule drugs to treat neurological and psychiatric disorders. The Company's
technology focuses on the exploration of novel receptors and their ligands and
inhibitors through three technology platforms: specific GABA(A) receptor
modulators named epalons; glutamate receptor antagonists; and sodium channel
blockers. The Company is working to build a portfolio of products for disorders
of the central nervous system, both through discovery and development of
products utilizing the technical expertise and creativity of its scientists and
through the in-licensing of new technology and product candidates. The Company
conducts discovery and development of its products through internal resources
and by licensing its technologies to collaboration partners who fund further
research and development of its products.
Recent Developments.
On December 1, 1998, Nasdaq notified the Company by letter that it was not
in compliance with the $1.00 minimum closing bid price requirement for the
continued listing of its Shares. A hearing on the issue
14
<PAGE> 15
was held April 29, 1999, and the Company was notified by letter, dated July 13,
1999, that the Company's Shares had been delisted from Nasdaq. On July 14, 1999,
the Shares commenced trading on the OTC.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
Company's 1998 Form 10-K, which is incorporated herein by reference, and
provided by the Company for the quarter ended June 30, 1999. More comprehensive
financial information is included in the Company's 1998 Form 10-K and other
documents filed by the Company with the Commission, and the following summary is
qualified in its entirety by reference to such reports and such other documents
and all the financial information (including any related notes) contained
therein. The Company's 1998 Form 10-K and other documents should be available
for inspection and copies thereof should be obtainable in the manner set forth
below under "-- Available Information."
COCENSYS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------
1999 1998 1998 1997 1996
------- -------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues:
Co-promotion revenues............ $ -- $ 540 $ 540 $ 3,264 $ 9,085
Co-development revenues.......... 1,377 1,021 2,046 8,650 6,073
------- -------- -------- -------- --------
Total revenues................... 1,377 1,561 2,586 11,914 15,158
OPERATING EXPENSES
Research and development......... 4,985 7,422 15,745 23,308 20,949
Marketing, general and
administrative................. 1,622 2,032 3,894 9,975 13,862
Restructuring charges............ 2,196 -- -- -- --
------- -------- -------- -------- --------
Total operating expenses......... 8,803 9,454 19,639 32,283 34,811
------- -------- -------- -------- --------
Operating loss...................... (7,426) (7,893) (17,053) (21,369) (19,653)
------- -------- -------- -------- --------
Gain on disposition of sales
force(1)....................... -- 750 1,000 4,728 --
Gain on disposition of interest
of Cytovia, Inc.(2)............ 3,326 0
Interest income.................. 245 434 908 898 1,304
Interest expense................. (85) (44) (81) (78) (139)
------- -------- -------- -------- --------
Net loss............................ (3,940) (6,753) (15,226) (15,821) (18,488)
Accretion of preferred stock for
beneficial conversion feature.... 168 890 -- --
Dividends on preferred stock........ 760 323 1,052 -- --
------- -------- -------- -------- --------
Net loss attributable to common
shareholders..................... $(4,700) $ (7,244) $(17,168) $(15,821) $(18,488)
======= ======== ======== ======== ========
Basic and diluted loss per
share(3)......................... $ (1.13) $ (2.49) $ (5.60) $ (5.60) $ (6.79)
======= ======== ======== ======== ========
Shares used in computing basic and
diluted loss per share........... 4,170 2,915 3,066 2,822 2,723
======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------- ---------------------------------
1999 1998 1997 1996
--------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments........ $ 5,616 $ 12,195 $ 12,960 $ 17,999
Working capital............................... (1,714) 5,315 8,374 14,434
Total assets.................................. 7,445 15,099 16,916 22,051
Long-term obligations......................... 186 392 1,101 324
Accumulated deficit........................... (120,851) (116,151) (98,983) (83,162)
Total stockholders' equity.................... (392) 7,506 10,831 16,947
</TABLE>
- ---------------
(1) In October 1997, the Company sold its sales and marketing force as discussed
in note 4 to the financial statements of the Company.
(2) On May 6, 1999, the Company sold its interest in Cytovia, Inc. for $3.3
million.
(3) The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Accounting Standard No. 128, "Earnings
per Share" ("SFAS No. 128"). For further discussion of earnings per share
and the impact of SFAS No. 128, see the notes to the financial statements of
the Company.
15
<PAGE> 16
Available Information. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. The Company is required to
disclose in such proxy statements certain information, as of particular dates,
concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interests of such persons in transactions with the Company. Such
reports, proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street (Suite 400), Chicago,
Illinois 60661. Copies of such material may also be obtained by mail, at
prescribed rates, from the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such material may also be accessed electronically
by means of the Commission's World Wide Web site on the internet at
http://www.sec.gov which includes documents the Company has filed via the SEC's
EDGAR System.
9. CERTAIN INFORMATION CONCERNING PNC, PARENT AND THE OFFEROR.
The Offeror, a Delaware corporation, is an indirect wholly owned subsidiary
of Parent. To date, the Offeror has not conducted any business other than that
incident to its formation, the execution and delivery of the Merger Agreement
and the Series E Purchase Agreement and the commencement of the Offer. It is not
anticipated that, prior to the consummation of the Offer and the Merger, the
Offeror will have any significant assets or liabilities or will engage in any
activities other than those incident to the Offer and the Merger. The principal
executive office of the Offeror is located c/o Purdue Pharma L.P., 100
Connecticut Avenue, Norwalk, Connecticut 06850.
PNI, a Delaware corporation, is a holding company and has not conducted any
business other than that incident to its formation. PNI is currently wholly
owned by PNLP, a Delaware limited partnership and a holding company that has not
conducted any business other than that incident to its formation. The principal
executive offices of PNI and PNLP are located c/o Purdue Pharma L.P., 100
Connecticut Avenue, Norwalk, Connecticut 06850.
PNC, a New York corporation, is the general partner of PNLP, and has not
conducted any business other than that incident to its formation. The principal
executive office of PNC is located c/o Purdue Pharma L.P., 100 Connecticut
Avenue, Norwalk, Connecticut 06850.
Parent, a Delaware limited partnership, is a pharmaceutical company
headquartered in Connecticut. The principal executive office of Parent is
located at 100 Connecticut Avenue, Norwalk, Connecticut 06850.
Parent and its associated companies are engaged in the research,
development, production, marketing, sales, distribution and licensing of ethical
pharmaceuticals, over-the-counter medicines and hospital products. Parent and
its associated companies' primary distribution and manufacturing arms are
located in the United States, United Kingdom, Germany and Canada. They also have
facilities in Switzerland, Ireland, Austria and Denmark, and joint ventures in
India, China and other international locations. Products are marketed and sold
in other countries by Parent's associated companies and joint ventures and are
also licensed in over 100 countries.
Parent and its associated companies are wholly owned, directly or
indirectly through family trusts and holding companies, 50% by the family of
Mortimer D. Sackler, M.D. and 50% by the family of Raymond R. Sackler, M.D.
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of the directors and
executive officers of the Offeror, PNI and PNC are set forth in Annex A to this
Offer to Purchase.
Except as set forth in this Offer to Purchase, none of the Offeror, Parent,
PNC or, to the best of their knowledge, any of the persons listed in Annex A
hereto, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, but not
limited to,
16
<PAGE> 17
any contract, arrangement, understanding or relationship concerning the transfer
or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies. Except as set forth in this Offer to Purchase,
there have been no contacts, negotiations or transactions between PNC, the
Offeror or Parent, or, to the best of their knowledge, any of the persons listed
in Annex A hereto, on the one hand, and the Company or its affiliates, on the
other hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets. Except as described in this Offer to
Purchase, none of PNC, the Offeror, Parent or, to the best knowledge of Parent
or the Offeror, any of the persons listed in Annex A hereto, has had any
transaction with the Company or any of its executive officers, directors or
affiliates that would require disclosure under the rules and regulations of the
Commission applicable to the Offer.
The Offeror has entered into the Series E Purchase Agreement with the
holder of the Series E Preferred Stock. Under the Series E Purchase Agreement,
the holder of the Series E Preferred Stock has agreed to sell, and the Offeror
has agreed to purchase, immediately upon consummation of the Offer all of the
Series E Preferred Stock beneficially owned by it, representing approximately
31% of the Fully Diluted Shares on an as-converted basis at the currently
scheduled Expiration Date, for an aggregate purchase price of $2,200,000. The
obligation of the holder of the Series E Preferred Stock to sell, and the
obligation of the Offeror to purchase, the Series E Preferred Stock under the
Series E Purchase Agreement, are subject to the Offeror having accepted Shares
for payment under the Offer in accordance with the Merger Agreement. The Series
E Preferred Stock will be convertible at the option of the holder into
approximately 2,634,493 Shares at the currently scheduled Expiration Date.
Available Information. Neither the Offeror nor Parent is subject to the
information requirements of the Exchange Act and, accordingly, do not file
reports or other information with the Commission under the Exchange Act relating
to its business, financial position, results of operations or other matters.
However, the Offeror and Parent have filed a Schedule 14D-1 and exhibits thereto
with the Commission in connection with the Offer and the Merger.
10. SOURCE AND AMOUNT OF FUNDS.
The Offer is not conditioned upon any financing arrangements. Parent and
the Offeror estimate that the total amount of funds required by the Offeror to
(i) purchase all of the Shares pursuant to the Offer and pay the Merger
Consideration, and (ii) pay fees and expenses incurred in connection with the
Offer and the Merger will be approximately $9.2 million. The Offeror has
obtained all required funds from capital contributions from PNI made prior to
commencement of the Offer.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
On May 19, 1998, a former executive of the Company approached an executive
of Parent at a biotechnology partnering conference to discuss potential interest
in a research and development collaboration and technology licensing arrangement
for some of its programs in the areas of epilepsy, pain, neuroprotection and
neurodegenerative disease treatments. Through ensuing correspondence and
conversations, Parent expressed interest in the Company's programs in sodium ion
channel modulation and AMPA/Kainate modulators for the treatment of pain, a core
business area of Parent.
On August 4, 1998, a conference call was held between executives of the
Company and Parent. The Company stated that it planned to take its lead sodium
channel blocker compound, Co 102862, through Phase II clinical evaluation to
demonstrate efficacy in humans and to maximize the value of the product for its
stockholders before licensing. The Company was primarily interested in
establishing a research collaboration partnership for the AMPA program in a
manner similar to their collaboration with Parke-Davis.
Between August 28 and October 21, 1998, the Company and Parent negotiated a
confidentiality agreement (the "Confidentiality Agreement") to support further
discussions regarding these programs. During October 1998, the Company informed
Parent that it had changed its licensing strategy and would begin partnering
discussions for its sodium channel blocker program. Executives of the Company
visited
17
<PAGE> 18
Parent on November 17, 1998 for detailed scientific discussions with executives
of Parent. After the discussions both parties decided to negotiate a licensing
agreement for the sodium channel blocker program. The Confidentiality Agreement
was amended on December 7, 1998 to expand the scope of confidential disclosures
to include the Company's glycine site NMDA antagonist and nociceptin/orphanin FQ
receptor modulation programs. The Company provided its proposed terms for a
development and collaboration agreement for the sodium channel blocker program
to Parent on December 11, 1998.
On December 8, 1998, the Company entered into an engagement letter with
Hambrecht & Quist LLC ("H&Q") to represent the Company as its exclusive
financial advisor in connection with the potential sale of the Company.
On December 17, 1999, executives of Parent visited the Company to discuss
all of the Company's programs in pain management and to conduct a preliminary
due diligence investigation with respect to the previously discussed development
and research collaboration agreement.
Following discussions with an executive of the Company and internal
discussions and evaluations, on January 13, 1999 at the Hambrecht & Quist
Healthcare Investor Conference in San Francisco, Parent developed and presented
a non-binding offer letter with respect to the licensing programs under
discussion to the executives of the Company, including the Chairman of the
Company. Over the next two months, negotiations continued regarding license
terms and conditions which resulted in a second non-binding offer letter, dated
February 26, 1999, describing a proposed product license, development and
research collaboration agreement and a development services agreement ("February
26, 1999 Offer Letter").
On March 10, 1999, the Chairman and executives of the Company visited
Parent and met with executives of Parent to discuss the proposed collaboration
between the companies and to better understand the principles underlying the
proposed relationship.
On March 16, 1999, a group of seven scientists from Parent visited the
Company to conduct further technical due diligence to support the February 26,
1999 Offer Letter.
On April 16, 1999, Parent sent to the Company a revised non-binding offer
letter describing a proposed product license, development and research
collaboration agreement which was subject to Parent's testing and verification
of efficacy of the lead compound, Co 102862 ("April 16, 1999 Offer Letter").
On May 17, 1999, while executives from both parties were attending the
Biotechnology Industry Organization's annual meeting in Seattle, they met to
discuss ways to resolve the subject condition in the April 16, 1999 Offer
Letter. During the course of conversation, an executive from the Company asked
if Parent had authorized a person from BancBoston Robertson Stephens Inc.
("BancBoston Robertson Stephens") to initiate acquisition discussions with the
Company. Parent's executive stated that BancBoston Robertson Stephens met with
Parent in early April where they discussed a range of companies for potential
transactions but Parent had not yet engaged or authorized any investment banker
to contact the Company on its behalf. The Company's executive stated if Parent
was interested in acquiring the Company they could contact the Chairman of the
Board directly since they already had established a relationship. When asked,
the Company executive indicated that Parent would be considered a friendly
suitor given the strong congruence of mutual scientific and product interests
between the parties.
On June 7, executives of Parent telephoned the Chairman of the Company and
confirmed with the Company that the Company would view Parent as a friendly
suitor.
On June 9, 1999, before the Company's Board of Directors meeting,
executives of Parent telephoned the Company's Chairman to confirm Parent's
interest in acquiring the Company and to present certain terms of the proposed
acquisition. Later that day, the Company's Chairman confirmed by telephone that
the Company's Board of Directors would entertain an offer from Parent and
suggested a period of exclusivity for negotiating terms of the proposed
transaction.
On June 10, 1999, Parent confirmed to the Company its intention to proceed
to negotiate without exclusivity while conducting an expedited due diligence
process.
18
<PAGE> 19
On June 11, 1999, Parent signed an engagement letter dated May 13, 1999,
with BancBoston Robertson Stephens pursuant to which Parent engaged BancBoston
Robertson Stephens to represent Parent as its investment banker in a transaction
with the Company. During May and June 1999, BancBoston Robertson Stephens had
held exploratory, informational and confirmatory discussions with H&Q.
On June 18, 1999, executives of Parent visited the Company and its
executives to discuss the transaction. On such date, the CA was amended in order
to expand the scope of the agreement to include information and discussions
related to the Company's finances, business, operations and technologies in
order for Parent to determine its level of interest in pursuing a transaction
with the Company.
On June 23, 1999, a non-binding proposal letter was sent by Parent to the
Company describing a preliminary offer to purchase the Company, including the
Company's outstanding preferred stock and liabilities, at a price between the
then current market value (an aggregate of approximately $7.2 million) and $9.5
million in cash, subject to certain conditions. After consulting with the
Company's advisors and several members of the Company's Board of Directors, the
Chairman of the Company agreed to receive Parent's due diligence team for an
evaluation of the Company. On-site due diligence was conducted by Parent and its
representatives at the Company from June 30 through July 8, 1999.
On July 9, 1999, a revised non-binding proposal letter and draft agreement
and plan of merger was sent by Parent to the Company for consideration. After
discussions between the parties and their representatives, a further revised
non-binding proposal letter was signed by the Company on July 15, 1999 (the
"Revised Proposal Letter"). The Revised Proposal Letter was subject to certain
conditions, including, among other things, Offeror reaching satisfactory
agreements with the holder of the Series E Preferred Stock, and the Company
reaching satisfactory agreements with certain warrant and option holders and
with respect to the WL Note (the "Ancillary Agreements").
Between July 15, 1999 and August 5, 1999, drafts of the Merger Agreement
and the Ancillary Agreements were delivered to the Company and its
representatives. Numerous discussions and negotiations took place between the
parties and their representatives pursuant to which the parties agreed upon the
terms of the proposed transaction and finalized the definitive agreements,
including the Merger Agreement and the Ancillary Agreements.
On August 4, 1999, H&Q delivered its oral opinion to the Board of Directors
of the Company that the consideration to be received by the holders of common
stock of the Company in connection with the proposed Merger is fair, from a
financial point of view, to such stockholders. On August 4, 1999, the Board of
Directors of Parent, the Board of Directors of the Offeror and the Board of
Directors of the Company each approved the proposed transaction.
On August 5, 1999, H&Q delivered its written opinion to the Board of
Directors of the Company that the consideration to be received by the holders of
Common Stock of the Company in the Merger is fair to such stockholders from a
financial point of view. On August 5, 1999, a duly appointed committee of the
Board of Directors of the Company ratified the Board of Directors of the
Company's approval of the transaction, and Parent, the Offeror and the Company
entered into the Merger Agreement.
The transaction was publicly announced before U.S. financial markets opened
on August 6, 1999. A copy of Parent's press release announcing the execution of
the Merger Agreement is filed as Exhibit (a)(8) hereto and is incorporated
herein by reference.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
Purpose. The purpose of the Offer is to enable Parent to acquire control
of, and the entire equity interest in, the Company. The Offer, as the first step
in the acquisition of the Company, is intended to facilitate the acquisition of
all the Shares. Parent currently intends, as soon as practicable following
consummation of the Offer, to propose and seek to consummate the Merger. The
purpose of the Merger is to acquire all Shares not tendered and purchased
pursuant to the Offer. Pursuant to the Merger, each then outstanding Share
(other than Shares owned by the Offeror, Parent or any of their affiliates,
Shares held in the treasury of the Company and Shares owned by the stockholders
who properly perfect any appraisal rights under the DGCL) would be
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converted into the right to receive an amount in cash equal to the price per
Share paid by the Offeror pursuant to the Offer. If the Offeror acquires,
pursuant to the Offer, the Series E Purchase Agreement or otherwise, voting
power with respect to at least a majority of the outstanding Shares, the Offeror
will have certain rights to designate a majority of the directors on the
Company's Board of Directors. See "The Merger Agreement -- Board of Directors"
in Section 13. The Company has agreed that, upon the acceptance for payment by
the Offeror of such number of Shares that, together with the Shares held by the
Offeror from the conversion of the Series E Preferred Stock, would constitute a
majority of the outstanding Shares, the Offeror will designate such number of
directors to sit on the Board as will give the Offeror a majority of the Board
of Directors.
Appraisal Rights. Holders of Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares at
the Effective Time will have certain rights pursuant to the provisions of
Section 262 of the DGCL ("Section 262") to dissent and demand appraisal of their
Shares. Under Section 262, dissenting stockholders who comply with the
applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per Share
to be paid in the Merger or the market value of the Shares. The value so
determined could be more or less than the price per Share to be paid in the
Merger.
The foregoing summary of Section 262 does not purport to be complete and is
qualified in its entirety by reference to Section 262. FAILURE TO FOLLOW THE
STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY
RESULT IN THE LOSS OF SUCH RIGHTS.
Going Private Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act which is applicable to certain "going private" transactions.
The Offeror does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the Offeror purchases
Shares in the Offer. If applicable, Rule 13e-3 requires, among other things,
that certain financial information concerning the fairness of the Merger and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to the consummation of the
Merger.
Except as otherwise described in this Offer to Purchase, the Offeror and
Parent have no current plans or proposals that would relate to, or result in,
any extraordinary corporate transaction involving the Company, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries,
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries, any change in the Company's capitalization or dividend policy or
any other material change in the Company's business, corporate structure or
personnel.
13. THE MERGER AGREEMENT AND THE SERIES E PURCHASE AGREEMENT.
The Merger Agreement. The Merger Agreement provides that following the
satisfaction or waiver of the conditions described below under "Conditions to
the Obligations of the Parties to Effect the Merger," the Offeror will be merged
with and into the Company, with the Company surviving the Merger and each then
outstanding Share (other than Shares owned by the Company, Parent, the Offeror,
any other subsidiary or affiliate of Parent or by stockholders, if any, who are
entitled to and who properly exercise dissenters' rights under Delaware law)
will be converted into the right to receive an amount in cash equal to the price
per Share paid pursuant to the Offer, without interest.
The Offer is conditioned upon, among other things, the Minimum Condition,
and the Offeror has agreed in the Merger Agreement that it will not, without the
written consent of the Company, waive the Minimum Condition.
Vote Required To Approve Merger. The DGCL provides that if a parent
company owns at least 90% of each class of voting stock of a subsidiary, such
parent company can effect a short-form merger with that subsidiary without the
action of the other stockholders of the subsidiary. Accordingly, if, as a result
of the
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Offer or the conversion of the Series E Preferred Stock or otherwise, the
Offeror owns at least 90% of the outstanding Shares, the Offeror could, and
intends to, effect the Merger without prior notice to, or any action by, any
other stockholder of the Company.
If a parent company owns less than 90% of each class of voting stock of a
subsidiary, the DGCL requires, among other things, that the adoption of any plan
of merger or consolidation of the Company must be approved by the Board of
Directors and generally by the holders of the Company's outstanding voting
securities. The Board of Directors of the Company has unanimously approved the
Offer and the Merger; consequently, the only additional action of the Company
that may be necessary to effect the Merger is approval by the Company's
stockholders if the "short-form" merger procedure described above is not
available. Under the DGCL, the affirmative vote of holders of a majority of the
outstanding Shares (including any Shares owned by the Offeror) is generally
required to approve the Merger. If the Offeror acquires, through the Offer, the
conversion of the Series E Preferred Stock or otherwise, voting power with
respect to a majority of the outstanding Shares, it would have sufficient voting
power to effect the Merger without the vote of any other stockholder of the
Company.
Conditions to the Obligations of the Parties to Effect the Merger. The
Merger Agreement provides that the obligation of the parties to effect the
Merger is subject to the satisfaction of certain conditions, including the
following: (a) if required by applicable law, the Merger Agreement and the
transactions contemplated thereby shall have been approved by the affirmative
vote of the holders of a majority of the Shares; (b) no statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity") or other legal restraint or prohibition preventing the consummation of
the Merger shall be in effect; provided, however, that each of the Company, the
Offeror and Parent shall have used reasonable efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered; and (c) the Offeror shall have
previously accepted for payment and paid for Shares pursuant to the Offer.
Termination of the Merger Agreement. The Merger Agreement may be
terminated at any time prior to the Effective Time, whether before or after
approval of the terms of the Merger Agreement by the stockholders of the
Company:
(1) by mutual written consent of Parent and the Company, by action of
the Board of Directors of the General Partner on behalf of the Parent and
by the Board of Directors of the Company;
(2) by either Parent or the Company if neither the Offer nor the
Merger shall have been consummated on or before December 31, 1999 unless
such date is otherwise extended by Parent in its sole discretion; provided,
however, that neither Parent nor the Company may terminate the Merger
Agreement under the foregoing clause if such party shall have materially
breached the Merger Agreement;
(3) by either Parent or the Company if any court of competent
jurisdiction in the United States or other United States Governmental
Entity has issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
provided, however, that the party seeking to terminate the Merger Agreement
shall have used its best efforts to remove or lift such order, decree,
ruling or other action;
(4) by the Company if, prior to the Effective Time, any person has
made a bona fide proposal relating to an Acquisition Proposal (as defined
below), or has commenced a tender or exchange offer for the Shares, and the
Board of Directors of the Company determines in good faith (i) after
consultation with its financial advisors, that such transaction constitutes
a Superior Proposal (as defined below) and (ii) after receiving advice from
outside legal counsel to the Company, that the failure to engage in such
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negotiations or discussions or provide such information would be reasonably
determined to constitute a breach of the fiduciary duties of the Board of
Directors of the Company under applicable law;
(5) by Parent if, (A) Parent shall not have materially breached the
Merger Agreement and (B) the Board of Directors of the Company shall have
(i) failed to recommend to the stockholders of the Company that they accept
the Offer, tender their Shares pursuant to the Offer and approve and adopt
the Merger Agreement (the "Stockholder Acceptance"), (ii) withdrawn or
modified its approval or recommendation of the Merger Agreement, the Offer
or the Merger, (iii) shall have approved or recommended an Acquisition
Proposal (as defined below), (iv) shall have resolved to effect any of the
foregoing or (v) shall have otherwise taken steps to impede the Stockholder
Acceptance;
(6) by the Company, if the Offeror or Parent shall have (i) failed to
commence the Offer within five business days after the public announcement
by Parent and the Company of the Merger Agreement, (ii) failed to pay for
Shares pursuant to the Offer in accordance with the Merger Agreement or
(iii) breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in the
Merger Agreement, which breach or failure to perform in respect of clause
(iii) is incapable of being cured or has not been cured within 20 days
after the giving of written notice to Parent or the Offeror, as applicable;
(7) by Parent or the Offeror prior to the Offeror's obligation to
accept Shares for payment pursuant to the Offer in the event of a breach by
the Company of any representation, warranty, covenant or other agreement
contained in the Merger Agreement which (i) would give rise to the failure
of a condition set forth in paragraph (c), (d) or (e) of Section 15 and
(ii) cannot be or has not been cured within 20 days after the giving of
written notice to the Company;
(8) by either Parent or the Company, if the Stockholder Acceptance
shall not have been obtained at a Stockholders Meeting; if required by
applicable law; or
(9) by either Parent or the Company if, as the result of the failure
of any of the conditions set forth in Section 15, the Offeror shall have
terminated the Offer in accordance with its terms without the Offeror
having purchased any Shares pursuant to the Offer; provided, however, that
the right to terminate the Merger Agreement pursuant to this clause shall
not be available to any party whose failure to fulfill any of its
obligations under, or breach of any provisions of, the Merger Agreement or
results in the failure of any such condition.
Acquisition Proposals. The Merger Agreement provides that, from the date
thereof until such time as Parent's designees shall constitute a majority of the
members of the Board of Directors of the Company or the termination of the
Merger Agreement, neither the Company nor any of its officers, directors, or
employees shall, and the Company will instruct its agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by the Company) not to, initiate, solicit or knowingly encourage,
directly or indirectly, any inquiries or the making or implementation of any
Acquisition Proposal (including, without limitation, any Acquisition Proposal to
its stockholders) or, other than in the event that the Board of Directors of the
Company determines in good faith, after receiving advice from outside counsel,
that failure to do so would be reasonably determined to constitute a breach of
its fiduciary duties to the Company's stockholders under applicable law, and in
response to an unsolicited request therefor by a person who a majority of the
Board of Directors of the Company believes intends to submit a Superior
Proposal, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or release any third party from any obligations under any
existing standstill agreement or arrangement, or otherwise knowingly facilitate
any effort or attempt to make or implement an Acquisition Proposal; and that it
will immediately cease and cause to be terminated any existing activities,
discussion or negotiations with any parties conducted heretofore with respect to
any of the foregoing, and it will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
section; provided, however, that nothing contained in this section shall
prohibit the Company or its Board of Directors from taking and disclosing to the
Company's stockholders a position with respect to a tender offer by a third
party pursuant to Rule 14d-9 and 14e-2(a) promulgated under the Exchange Act or
from making such disclosure to the Company's stockholders which, in the judgment
of the
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Board of Directors of the Company after receiving advice of outside counsel, may
be required under applicable law. The Merger Agreement provides that the Company
shall promptly advise Parent in writing of the receipt, directly or indirectly,
of any inquiries, discussions, negotiations, or proposals relating to an
Acquisition Proposal (including the specific terms thereof and, subject to any
confidentiality obligations of the Company existing as of August 5, 1999, the
identity of the other party or parties involved) and furnish to Parent within 24
hours of such receipt an accurate description of all material terms (including
any changes or adjustment to such terms as a result of negotiations or
otherwise) of any such written proposal in addition to any non-public
information provided to any third party relating thereto. In addition, the
Company shall promptly advise Parent, in writing, if the Board of Directors of
the Company shall make any determination as to any Acquisition Proposal. The
Merger Agreement defines "Acquisition Proposal" as any inquiry, proposal or
offer from any person relating to any direct or indirect acquisition or purchase
of 20% or more of any class of equity securities of the Company, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of the
Company, any merger, consolidation, business combination, sale of substantially
all the assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company, other than the transactions contemplated by
the Merger Agreement, or any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Offer and/or the Merger or which would reasonably be expected to dilute
materially the benefits to Parent of the transactions contemplated thereby. For
purposes of the Merger Agreement, "Superior Proposal" means any Acquisition
Proposal which a majority of the disinterested directors of the Company
determines in its good faith judgment (based on the advice of the Company's
independent financial advisor) to be more favorable to the stockholders of the
Company than the Offer or the Merger, and for which financing, to the extent
required, is then committed.
Fees and Expenses. The Merger Agreement provides that, in the event that
(i) the Merger Agreement is terminated pursuant to clause 4 or 5 under
"Termination of the Merger Agreement" above, or (ii) any person (other than
Parent or any of its affiliates) shall have made or proposed, communicated or
disclosed in a manner which is or otherwise becomes public an Acquisition
Proposal prior to the Effective Time and, thereafter, the Merger Agreement is
terminated in connection with such Acquisition Proposal, then the Company shall
pay to Parent $237,500 as liquidated damages and not as a penalty. The parties
agree that such amount is a reasonable estimate of the costs and expenses that
would be incurred and the value of services consumed by and on behalf of Parent
and the Offeror if the transactions contemplated hereunder were not to go
forward as a result of such a termination. Except as otherwise specifically
provided for in the Merger Agreement, whether or not the Merger is consummated,
all costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement shall be paid by the party
incurring such expenses.
The Merger Agreement provides that the prevailing party in any legal action
undertaken to enforce the Merger Agreement or any provision thereof shall be
entitled to recover from the other party the costs and expenses (including
attorneys' and expert witness fees and expenses) incurred in connection with
such action.
Conduct of Business by the Company. The Merger Agreement provides that,
except as contemplated by the Merger Agreement or as expressly agreed to in
writing by Parent (such consent not to be unreasonably withheld), during the
period from the date of the Merger Agreement until such time as Parent's
designees shall constitute a majority of the members of the Board of Directors
of the Company, the Company will conduct its operations according to its
ordinary and usual course of business and consistent with past practice and use
commercially reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and employees
and preserve its relationships with customers, suppliers, licensors, licensees,
advertisers, distributors and others having material business dealings with it
and to preserve goodwill. Without limiting the generality of the foregoing, and
except as (x) otherwise expressly provided in the Merger Agreement, (y) required
by law, or (z) set forth on Schedule 6.01 to the Merger Agreement, the Company
will not without the consent of Parent (such consent not to be unreasonably
withheld):
(i) (a) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such, other than dividends declared prior to the date of the
Merger Agreement, (b) split,
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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 (c) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) other than in connection with the exercise of options and
warrants outstanding prior to the date hereof in accordance with their
current terms, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or
equity equivalent or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or equity equivalent;
(iii) amend its Certificate of Incorporation or By-Laws;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or
agree to acquire any assets;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets;
(vi) amend or otherwise modify, or terminate, any Contract;
(vii) incur any additional indebtedness (including for this purpose
any indebtedness evidenced by notes, debentures, bonds, leases or other
similar instruments, or secured by any lien on any property, conditional
sale obligations, obligations under any title retention agreement and
obligations under letters of credit or similar credit transaction) in a
single transaction or a group of related transactions, enter into a
guaranty, or engage in any other financing arrangements having a value in
excess of $10,000, or make any loans, advances or capital contributions to,
or investments in, any other person;
(viii) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure or ownership;
(ix) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(x) revalue any of its assets, including, without limitation, writing
down the value of its inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(xi) make any tax election, change any annual tax accounting period,
amend any tax return, settle or compromise any income tax liability, enter
into any closing agreement, settle any tax claim or assessment, surrender
any right to claim a tax refund or fail to make the payments or consent to
any extension or waiver of the limitations period applicable to any tax
claim or assessment;
(xii) except in the ordinary course of business, settle or compromise
any pending or threatened suit, action or claim with a cost of $10,000 or
more;
(xiii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted, contingent or otherwise) other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or contemplated
by, the financial statements (or the notes thereto) of the Company or
incurred in the ordinary course of business consistent with past practice;
(xiv) increase in any manner the compensation or fringe benefits of
any of its directors, officers and other key employees or pay any pension
or retirement allowance not required by any existing plan or agreement to
any such employees, or become a party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit plan or agreement or
employment agreement with or for the benefit of any employee, other than
increases in the compensation of employees who are not officers or
directors of the Company made in the ordinary course of business consistent
with past practice, or, except to the extent required by law, voluntarily
accelerate the vesting of any compensation or benefit;
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(xv) waive, amend or allow to lapse any term or condition of any
confidentiality, "standstill", consulting, advisory or employment agreement
to which the Company is a party (except for any agreement which terminates
in accordance with its express terms);
(xvi) approve any annual operating budgets for the Company;
(xvii) change the Company's dividend policy;
(xviii) enter into any transaction with affiliates;
(xix) enter into any business other than the business currently
engaged in by the Company;
(xx) pursuant to or within the meaning of any bankruptcy law, (a)
commence a voluntary case, (b) consent to the entry of an order for relief
against it in an involuntary case, (c) consent to the appointment of a
custodian of it or for all or substantially all of its property or (d) make
a general assignment for the benefit of its creditors;
(xxi) purchase or lease or enter into a binding agreement to purchase
or lease any real property;
(xxii) enter into or amend, modify or terminate any employment
agreement with any officer or employee;
(xxiii) enter into any joint venture, lease, license, management
agreement, research agreement, development agreement, option or other
obligation relating to new development, or any other agreement of the
Company, including without limitation any agreement or arrangement relating
to Intellectual Property Rights (as defined in the Merger Agreement); or
(xxiv) take, or agree in writing or otherwise to take, any of the
foregoing actions.
Board of Directors. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, a majority of the Shares by the
Offeror pursuant to the Offer, the Offeror shall be entitled and obligated to
designate, subject to compliance with Section 14(f) of the Exchange Act, a
majority of the directors on the Company's Board of Directors, and the Company
shall, at such time, cause the Offeror's designees to be so elected by its
existing Board of Directors. Subject to applicable law, the Company has agreed
to take all action requested by Parent necessary to effect any such election,
including mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder.
Company Stock Options; Warrants. The Merger Agreement provides that prior
to the Effective Time, the Board of Directors of the Company (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions and take
all action necessary to provide that the outstanding Company Stock Options and
Warrants, whether or not then fully vested or exercisable, shall, at the
Effective Time, be canceled and retired and shall cease to exist, and the
holders thereof entitled to receive the consideration from the Surviving
Corporation, if any, determined in accordance with the Merger Agreement,
including obtaining all necessary consents of the holders of Company Stock
Options and Warrants to the foregoing cancellation and treatment of such Company
Stock Options and Warrants. In addition, the Company shall take all necessary
action to provide that the employee stock purchase plans and the stock options
plans of the Company shall be terminated as of the Effective Time.
Notwithstanding the foregoing, the Board of Directors of the Company, with
the written consent of Parent, has adopted resolutions providing for the
acceleration of all Company Stock Options contigently upon and subject to
consummation of the Offer.
Rights Agreement. The Company has distributed one Right for each
outstanding share of Common Stock pursuant to the Rights Agreement, dated as of
May 15, 1995, by and between the Company and American Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agreement"). Pursuant to the Merger
Agreement, the Company has executed and delivered an Amendment to the Rights
Agreement, dated as of August 5, 1999 (the "Rights Agreement Amendment"), by and
between the Company and the Rights Agent which provides that, among other
things, (a) neither the Merger Agreement, nor any of the
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transactions contemplated thereby, including the Offer and the Merger, will
result in the occurrence of a "Distribution Date" (as defined in the Rights
Agreement) or otherwise cause the Rights to become exercisable by the holders
thereof and (b) the Rights will automatically on and as of the Effective Time be
void and of no further force or effect.
Indemnification and Insurance. In the Merger Agreement, Parent and the
Offeror have agreed that all rights to indemnification for acts or omissions
occurring prior to the Effective Time that are in existence as of the date of
the Merger Agreement in favor of the current or former directors or officers
(the "Indemnified Parties") of the Company as provided in its certificate of
incorporation or by-laws or existing indemnification contracts (all of which
have been disclosed on Schedule 4.10 to the Merger Agreement) shall survive the
Merger and shall continue in full force and effect in accordance with their
terms.
Pursuant to the Merger Agreement, Parent will, for a period of six years
from the Effective Time, unless Parent agrees in writing to guarantee the
indemnification obligations set forth above, maintain in effect the Company's
current directors' and officers' liability insurance covering those persons who
are currently covered by the Company's directors' and officers' liability
insurance policy except that, to the extent that such coverage is not obtainable
at less than or equal to 150% of the current per annum cost, Parent will be
obligated to purchase only so much coverage as may then be obtained for such
amount.
The Merger Agreement provides that the indemnification obligations set
forth in the Merger Agreement shall be binding on all successors and assigns of
Parent and the Surviving Corporation.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
Procedure for Termination, Amendment, Extension or Waiver. The Merger
Agreement provides that in the event the Offeror's designees are appointed or
elected to the Board of Directors of the Company as described above under "Board
of Directors", after the acceptance for payment of Shares pursuant to the Offer
and prior to the Effective Time, the affirmative vote of the directors of the
Company not designated by Parent or the Offeror is required for the Company to
amend or terminate the Merger Agreement, exercise or waive any of its rights or
remedies under the Merger Agreement, or extend the time for performance of the
Offeror's and Parent's respective obligations under the Merger Agreement.
Series E Purchase Agreement. The Offeror has entered into the Series E
Purchase Agreement with the holder of the Series E Preferred Stock. Under the
Series E Purchase Agreement, the holder of the Series E Preferred Stock has
agreed to sell, and the Offeror has agreed to purchase, immediately upon
consummation of the Offer all of the Series E Preferred Stock beneficially owned
by it, representing approximately 31% of the Fully Diluted Shares on an
as-converted basis at the currently scheduled Expiration Date, for an aggregate
purchase price of $2,200,000. The obligation of the holder of the Series E
Preferred Stock to sell, and the obligation of the Offeror to purchase, the
Series E Preferred Stock under the Series E Purchase Agreement, are subject to
the Offeror having accepted Shares for payment under the Offer in accordance
with the Merger Agreement. The Series E Preferred Stock will be convertible at
the option of the holder, subject to certain conditions, into approximately
2,634,493 Shares at the currently scheduled Expiration Date.
14. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the paragraphs under the caption
"Conduct of Business by the Company" under Section 13, and nothing herein shall
constitute a waiver by the Offeror or Parent of any of its rights under the
Merger Agreement or a limitation of remedies available to the Offeror or Parent
for any breach of the Merger Agreement, including termination thereof.
If, on or after August 5, 1999, the Company should (a) split, combine or
otherwise change the Shares or its capitalization, (b) acquire or otherwise
cause a reduction in the number of outstanding Shares or other securities or (c)
issue or sell additional Shares, shares of any other class of capital stock,
other voting securities or any securities convertible into, or rights, warrants
or options, conditional or otherwise, to acquire any of the foregoing, other
than Shares issued pursuant to the exercise of outstanding Company stock options
26
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or warrants, then, subject to the provisions of Section 15, the Offeror, in its
sole discretion, may make such adjustments as it deems appropriate in the Offer
Price and other terms of the Offer, including, without limitation, the number or
type of securities offered to be purchased.
If, on or after August 5, 1999, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to stockholders of record on a date prior to
the transfer of the Shares purchased pursuant to the Offer to the Offeror or its
nominee or transferee on the Company's stock transfer records, then, subject to
the provisions of Section 15, (a) the Offer Price may, in the sole discretion of
the Offeror, be reduced by the amount of any such cash dividend or cash
distribution and (b) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering stockholders will (i) be received and
held by the tendering stockholders for the account of the Offeror and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of the Offeror, accompanied by appropriate
documentation of transfer, or (ii) at the direction of the Offeror, be exercised
for the benefit of the Offeror, in which case the proceeds of such exercise will
promptly be remitted to the Offeror. Pending such remittance and subject to
applicable law, the Offeror will be entitled to all rights and privileges as
owner of any such noncash dividend, distribution, issuance or proceeds and may
withhold the entire Offer Price or deduct from the Offer Price the amount or
value thereof, as determined by the Offeror in its sole discretion.
15. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer or the Merger Agreement, and in
addition to (and not in limitation of) the Offeror's right to extend and amend
the Offer at any time in its sole discretion (subject to the provisions of the
Merger Agreement), the Offeror shall not be required to accept for payment or,
subject to applicable rules and regulations of the SEC, including Rule 14e-1(c)
under the Exchange Act (relating to the Offeror's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to pay
for, and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any Shares tendered pursuant to the Offer
unless there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer such number of Shares that, when added to the number of
Shares to be received by the Offeror upon the conversion of all of the Series E
Preferred purchased by the Offeror under the Series E Purchase Agreement would
satisfy the Minimum Condition as of the Expiration Date. Notwithstanding any
other term of the Offer or the Merger Agreement, the Offeror shall not be
required to accept for payment or, subject as aforesaid, to pay for any Shares
not theretofore accepted for payment or paid for, and may terminate the Offer
if, at any time on or after the date of the Merger Agreement and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions exists or shall occur and remain in effect:
(a) there shall be threatened, instituted or pending by any
Governmental Entity or instituted or pending by any person any suit,
action, investigation or proceeding (i) challenging the acquisition by
Parent or the Offeror of any Shares under the Offer or seeking to restrain,
prohibit or delay the making or consummation of the Offer or the Merger or
the performance of any of the other transactions contemplated by the Merger
Agreement, or seeking to obtain from the Company, Parent or the Offeror any
damages that are material in relation to the Company, (ii) seeking to
prohibit or impose any limitations on Parent's or the Offeror's ownership
or operation (or that of any of their respective subsidiaries or
affiliates) of all or a material portion of their or the Company's
businesses or assets, or to compel Parent, the Offeror, the Company or
their respective subsidiaries and affiliates to dispose of or hold separate
any material portion of the business or assets of the Company or Parent,
the Offeror and their respective subsidiaries (provided that any
prohibition, limitation, restriction or other action or requirement with
respect to any of the Intellectual Property Rights of the Company, or
rights or obligations related to or arising from the Intellectual Property
Rights of the Company, shall be deemed a material portion for purposes
hereof), (iii) seeking to make illegal, impose material limitations on the
ability of the Offeror, or render the Offeror unable, to accept for
payment, pay for or purchase some or all
27
<PAGE> 28
of the Shares pursuant to the Offer and the Merger, (iv) seeking to impose
material limitations on the ability of the Offeror or Parent (or any of
their affiliates) to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it
on all matters properly presented to the Company's stockholders, or (v)
which otherwise is reasonably likely to have a material adverse effect on
the Parent, the Offeror or Company;
(b) there shall be any statute, rule, regulation, judgment, decree,
order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken
by any Governmental Entity or court that could reasonably be expected to,
in the judgment of the Parent, result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (v) of paragraph (a)
above;
(c) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the
Offeror its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any Acquisition Proposal, (ii)
the Company shall have entered into any agreement with any other Person
pursuant to any Acquisition Proposal, (iii) the Board of Directors of the
Company or any committee thereof shall have resolved to take any of the
foregoing actions, or (iv) the Board of Directors of the Company shall have
failed to reject any Acquisition Proposal within 10 business days after
receipt by the Company or public announcement thereof;
(d) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case at the date of the Merger Agreement and at the scheduled or extended
expiration of the Offer, other than any matters that individually or in the
aggregate would not have a material adverse effect on the Company
(provided, however, that the failure of any representations and warranties
with respect to, arising from or related to the Intellectual Property
Rights of the Company to be true and correct in any material respect shall
be deemed to have a material adverse effect on the Company);
(e) the Company shall have failed to perform in any respect any
material obligation or to comply in any respect with any material agreement
or material covenant of the Company to be performed or complied with by it
under the Merger Agreement, which failure to perform or comply is not
substantially cured within 10 days after Parent provides the Company with
notice of such failure;
(f) there shall be any securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
the Company is a party or by which it is bound obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the
Company, or securities convertible into or exercisable for shares of
capital stock or other voting securities of the Company, which gives any
person any right to acquire equity securities of the Surviving Corporation
at or following the Effective Time;
(g) the Merger Agreement shall have been terminated in accordance with
its terms; or
(h) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or over-the-counter market in the United States, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) any general limitation
(whether or not mandatory) by any governmental authority on the extension
of credit by banks or other lending institutions, (iv) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof, (v) a change in general
financial, bank or capital market conditions which materially and adversely
affects the ability of financial institutions in the United States to
extend credit or syndicate loans.
The foregoing conditions are for the sole benefit of Parent and the
Offeror, may be asserted by Parent or the Offeror regardless of the
circumstances giving rise to such condition (including any action or inaction by
Parent or the Offeror not in violation of the Merger Agreement) and may be
waived by Parent or the Offeror in whole or in part at any time and from time to
time in the sole discretion of Parent or the Offeror, subject in
28
<PAGE> 29
each case to the terms of the Merger Agreement. The failure by Parent or the
Offeror at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time. Terms used herein but
not defined herein shall have the meanings assigned to such terms in the Merger
Agreement.
16. CERTAIN LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Offeror as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Offeror has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such matter,
subject, however, to the Offeror's right to decline to purchase Shares if any of
the conditions specified in Section 15 shall have occurred. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions, or that adverse
consequences might not result to the Company's business or that certain parts of
the Company's business might not have to be disposed of if any such approvals
were not obtained or other action taken.
U.S. Antitrust. The Hart-Scott-Rodino Act ("HSR Act") imposes a
15-calendar day waiting period for consummation of a cash tender offer following
the filing of a Notification and Report Form. The HSR Act does not apply,
however, to the acquisition of companies with annual net sales and total assets
below certain thresholds. Parent believes that the Offer and the Merger are not
subject to the HSR Act because the Company has annual net sales (as reported in
its 1998 Form 10-K) and total assets (as provided by the Company for the quarter
ended June 30, 1999) of less than $15 million. Therefore, Parent does not intend
to file a Notification and Report Form with respect to the Offer under the HSR
Act.
Filings with, notifications to, and authorizations and approvals of certain
antitrust authorities in jurisdictions other than the United States may be
required. There can be no assurance that any authorizations, approvals or
decisions required by such authorities will be granted or that such authorities
will not challenge the Offer or the Merger. Parent and the Company believe,
however, that the failure to obtain such authorizations and approvals would not
be material.
At any time before or after the Offeror's purchase of Shares pursuant to
the Offer, an antitrust enforcement agency could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or the
consummation of the Merger or seeking the divestiture of Shares acquired by the
Offeror or the divestiture of substantial assets of Parent or its affiliates or
the Company. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if such a challenge is made,
of the results thereof.
Section 203 of the DGCL. Section 203 of the DGCL, in general, prohibits a
Delaware corporation such as the Company from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers) with an
"Interested Stockholder" (defined generally as a person that is the beneficial
owner of 15% or more of a corporation's outstanding voting stock) for a period
of three years following the date that such person became an Interested
Stockholder unless, among other things, prior to the date such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder. Neither the Offeror nor any of
its affiliates (as such term is defined in Section 203 of the DGCL) became an
Interested Stockholder prior to approval of the transaction by the Board of
Directors of the Company. Therefore, Section 203 of the DGCL is inapplicable to
the Merger.
Other State Takeover Laws. A number of other states have adopted laws and
regulations applicable to attempts to acquire securities of corporations which
are incorporated, or have substantial assets, stockholders, principal executive
offices or principal places of business, or whose business operations otherwise
have substantial economic effects in such states. In Edgar v. MITE Corp., in
1982, the Supreme Court of the United States (the "U.S. Supreme Court")
invalidated on constitutional grounds the Illinois Business Takeover statute,
which, as a matter of state securities law, made takeovers of corporations
meeting certain
29
<PAGE> 30
requirements more difficult. However in 1987, in CTS Corp. v. Dynamics Corp. of
America, the U.S. Supreme Court held that the State of Indiana may, as a matter
of corporate law and, in particular, with respect to those aspects of corporate
law concerning corporate governance, constitutionally disqualify a potential
acquirer from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders. The state law before the U.S. Supreme
Court was by its terms applicable only to corporations that had a substantial
number of stockholders in the state and were incorporated there.
The Offeror does not know whether any state takeover statutes or
regulations will, by their terms, apply to the Offer or the Merger and has not
complied with any such laws. Should any person seek to apply any state takeover
law, the Offeror will take such action as then appears desirable, which may
include challenging the validity or applicability of any such statute in
appropriate court proceedings. In the event it is asserted that one or more
state takeover laws is applicable to the Offer or the Merger, and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer, the Offeror might be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, the Offeror might be unable to accept for payment any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer and
the Merger. In such case, the Offeror may not be obligated to accept for payment
any Shares tendered. See Section 15.
17. FEES AND EXPENSES.
Neither the Offeror nor Parent, nor any officer, director, stockholder,
agent or other representative of the Offeror or Parent, will pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent and the Depositary) for soliciting tenders of Shares pursuant to the
Offer. Brokers, dealers, commercial banks and trust companies and other nominees
will, upon request, be reimbursed by the Offeror for customary mailing and
handling expenses incurred by them in forwarding materials to their customers.
BancBoston Robertson Stephens is acting as Dealer Manager in connection
with the Offer and has provided certain financial advisory services to Parent in
connection with the proposed acquisition of the Shares. Parent and its
associated companies have agreed to pay BancBoston Robertson Stephens a
transaction fee of $750,000 for its services upon consummation of the Offer.
BancBoston Robertson Stephens will not receive a separate fee for its services
as Dealer Manager in connection with the Offer. Parent and its associated
companies also have agreed to reimburse BancBoston Robertson Stephens for its
out-of-pocket expenses related to its engagement, including the fees of its
counsel, and have agreed to indemnify BancBoston Robertson Stephens against
certain liabilities and expenses.
The Offeror has retained MacKenzie Partners, Inc., as Information Agent,
and American Stock Transfer & Trust Company, as Depositary, in connection with
the Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services hereunder and reimbursement for their
reasonable out-of-pocket expenses. The Information Agent and the Depositary will
also be indemnified by the Offeror against certain liabilities in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telex, telegraph and personal interviews and may request brokers, dealers and
other nominee stockholders to forward materials relating to the Offer to
beneficial owners of Shares.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Offeror by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer to
Purchase or in the Letter of Transmittal and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror or Parent.
30
<PAGE> 31
The Offeror and Parent have filed with the Commission a Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained at the same places and in the same manner as set
forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
PURDUE ACQUISITION CORPORATION
August 12, 1999
31
<PAGE> 32
ANNEX A
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF PNI, THE OFFEROR
AND PNC, THE GENERAL PARTNER OF PNLP
1. Directors and Executive Officers of PNI and the Offeror. Set forth
below is the name, current business address, present principal occupation or
employment and five-year employment history of each director and executive
officer of PNI and the Offeror. Each person named below is a citizen of the
United States of America. Each person's business address is c/o Purdue Pharma
L.P., 100 Connecticut Avenue, Norwalk, Connecticut 06850.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS,
NAME POSITIONS WITH THE OFFEROR AND CERTAIN DIRECTORSHIPS
- ---- ----------------------------------------------------------
<S> <C>
Stuart D. Baker.............................. Director, Vice President and Assistant Secretary of the
Offeror and PNI since August 1999; Vice President of
Parent since 1994; and Partner at Chadbourne & Parke LLP
since 1969. Mr. Baker owns indirectly 125 Shares (less
than 0.1%) through Beaux Arts Wall Paper Co., Inc., a
corporation wholly owned by Mr. Baker, with a business
address at 30 Rockefeller Plaza, Room 3248, New York, New
York 10112.
Howard R. Udell.............................. Director, Vice President and Assistant Secretary of the
Offeror and PNI since August 1999; Vice President and
General Counsel of Parent since 1992; and Partner at
Millard, Greene & Udell since 1976.
Paul D. Goldenheim, M.D...................... Vice President of the Offeror and PNI since August 1999;
Vice President of Parent since 1994.
Edward B. Mahony............................. Vice President of the Offeror and PNI since August 1999;
Vice President of Parent since 1994.
James J. Dolan............................... Vice President of the Offeror and PNI since August 1999;
Vice President of Parent since 1997 and Executive
Director, Licensing and Business Development of Parent
since 1994.
</TABLE>
2. General Partner of PNLP. Set forth below is the name of each director
and executive officer of PNC, the general partner of PNLP. Unless otherwise
indicated, for each person identified below all information concerning the
citizenship, current business address, present principal occupation or
employment and five-year employment history of such person is the same as the
information given above.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS,
NAME POSITIONS WITH THE OFFEROR AND CERTAIN DIRECTORSHIPS
- ---- ----------------------------------------------------------
<S> <C>
Stuart D. Baker.............................. Director, Vice President and Assistant Secretary since
August 1999.
Howard R. Udell.............................. Director, Vice President and Assistant Secretary since
August 1999.
Paul D. Goldenheim, M.D...................... Vice President since August 1999.
Edward B. Mahony............................. Vice President since August 1999.
James J. Dolan............................... Vice President since August 1999.
</TABLE>
Parent and its associated companies are wholly owned, directly or
indirectly through family trusts and holding companies, 50% by the family of
Mortimer D. Sackler, M.D. and 50% by the family of Raymond R. Sackler, M.D.
A-1
<PAGE> 33
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each stockholder of the Company or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at one
of the addresses set forth below:
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
40 Wall Street (718) 234-5001 40 Wall Street
46th Floor 46th Floor
New York, New York 10005 New York, New York 10005
</TABLE>
Confirm Receipt of
Facsimile by Telephone:
(718) 921-8200
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Dealer Manager for the Offer is:
BANCBOSTON ROBERTSON STEPHENS
590 MADISON AVENUE, 36TH FLOOR
NEW YORK, NEW YORK 10022
(212) 319-8900 (CALL COLLECT)
The Information Agent for the Offer is:
[MACKENZIE LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
(800) 322-2885 (TOLL-FREE)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
COCENSYS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 12, 1999
BY
PURDUE ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PURDUE PHARMA L.P.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, SEPTEMBER 9, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or
Overnight Delivery:
40 Wall Street (718) 234-5001
46th Floor 40 Wall Street
New York, New York 10005 Confirm Receipt of 46th Floor
Facsimile by Telephone: New York, New York 10005
(718) 921-8200
</TABLE>
YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE
THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The names and addresses of the registered holders should be printed, if not
already below, exactly as they appear on the certificates evidencing Shares (as
defined below) tendered hereby or Company Stock Options (as defined in the Offer
to Purchase). The certificates evidencing Shares, the Shares and/or the number
of Company Stock Options (and the related exercise price) that the undersigned
wishes to tender should be indicated in the appropriate boxes.
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESSES OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES TO BE
SHARE RECEIVED AND
CERTIFICATE NUMBER OF TENDERED UPON
OR OPTION SHARES EXERCISE OF OPTION NUMBER OF
GRANT REPRESENTED BY COMPANY EXERCISE SHARES
NUMBER(S)* CERTIFICATE(S)* STOCK OPTIONS PRICE TENDERED**
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
TOTAL
SHARES
- ---------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the
Depositary are being tendered. See Instruction 4.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
This Letter of Transmittal is to be completed by stockholders of CoCensys,
Inc. if certificates are to be forwarded herewith or, unless an Agent's Message
(as defined in the Offer to Purchase) is utilized, if delivery of Shares (as
defined below) is to be made by book-entry transfer to the Depositary's account
at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedures set forth in Section 2 of the Offer to Purchase. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Depositary.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their Shares and all other documents required hereby to the
Depositary by the Expiration Date (as defined in the Offer to Purchase), or who
cannot comply with the book-entry transfer procedures on a timely basis, may
nevertheless tender their Shares pursuant to the guaranteed delivery procedures
set forth in Section 2 of the Offer to Purchase. See Instruction 2. This Letter
of Transmittal may also be used to tender Shares issuable upon the exercise of
Company Stock Options (as defined in the Offer to Purchase).
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
----------------------------------------------------------------------------
The Depository Trust Company Account Number
-----------------------------------------------------------------------
Transaction Code Number
----------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
----------------------------------------------------------------------------
Window Ticket Number (if any)
----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------------------------------------
Name of Institution that Guaranteed Delivery
---------------------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER:
The Depository Trust Company Account Number:
----------------------------------------------------------------------
Transaction Code Number:
----------------------------------------------------------------------------
IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST
OR DESTROYED, SEE INSTRUCTION 12.
2
<PAGE> 3
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Purdue Acquisition Corporation, a
Delaware corporation (the "Offeror") an indirect wholly owned subsidiary of
Purdue Pharma L.P., a Delaware limited partnership ("Parent"), the
above-described shares of Common Stock, par value $0.001 per share (the "Common
Stock"), including the associated rights to purchase Series A Junior
Participating Preferred Stock issued under the Rights Agreement (as defined in
the Offer to Purchase)(the "Rights" and together with the Common Stock, the
"Shares") of CoCensys, Inc., a Delaware corporation (the "Company"), pursuant to
the Offeror's offer to purchase all of the outstanding Shares at a purchase
price of $1.16 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated August 12, 1999 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together with the Offer
to Purchase constitute the "Offer"). Any Shares issuable upon the exercise of
Company Stock Options tendered hereby as indicated above (the "Option Shares")
will only be received by the Depositary and tendered by it and the Company Stock
Options will only be exercised by it in the event that the Offer is consummated.
The Offer is being made in connection with the Agreement and Plan of Merger,
dated as of August 5, 1999 (the "Merger Agreement"), among Parent, the Offeror
and the Company.
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Offeror all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof on or after August 5, 1999) and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and all such other Shares or
securities), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares (and all such other Shares or securities or
rights), or transfer ownership of such Shares (and all such other Shares or
securities) on the account books maintained by the Book-Entry Transfer Facility,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Offeror, (b) present such Shares (and
all such other Shares or securities) for transfer on the books of the Company
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and all such other Shares or securities), all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Offeror as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in such
manner as each such attorney and proxy or his substitute shall in his sole
judgment deem proper, with respect to all of the Shares tendered hereby which
have been accepted for payment by the Offeror prior to the time of any vote or
other action (and any and all other Shares or other securities or rights issued
or issuable in respect of such Shares on or after August 5, 1999) at any meeting
of stockholders of the Company (whether annual or special and whether or not an
adjourned meeting) or otherwise. This proxy is irrevocable, shall be coupled
with an interest, and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Offeror in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and all such other Shares or other securities or rights), and no
subsequent proxies will be given or written consents will be executed by the
undersigned (and if given or executed, will not be deemed effective).
If the undersigned is tendering Option Shares to be received from an
exercise by the Depositary of Company Stock Options on behalf of the
undersigned, in addition to the matters described above, the undersigned hereby
irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to the full extent of the undersigned's rights with respect to such Company
Stock Options, (a) to exercise Company Stock Options for the Shares to be
tendered, (b) to cause the transfer of record ownership of such Company Stock
Options into the name of the undersigned or the Depositary if deemed by the
Depositary or the Offeror to be necessary or appropriate to exercise such
Company Stock Options for the Shares being tendered and (c) to receive the
Option Shares issuable upon exercise of such Company Stock Options tendered
hereunder. Notwithstanding the foreging, the undersigned understands and agrees
that such Company Stock Options will be deemed not to have been exercised if the
Offeror fails to accept Shares for payment pursuant to the Offer.
If the undersigned is tendering Option Shares from an exercise of Company
Stock Options, the undersigned, upon request, shall execute and deliver all
additional documents deemed by the Depositary or the Offeror to be necessary or
desirable to effectuate the exercise of such Company Stock Options into the
Shares tendered hereby, including, without limitation, such documents as shall
be necessary to effect the transfer of record ownership of such Company Stock
Options into the name of the undersigned or the Depositary.
The undersigned hereby represents and warrants (and if more than one, each
undersigned hereby represents and warrants jointly and severally) that the
undersigned has full power and authority to tender, sell, assign and transfer
the Shares tendered hereby and that when the same are accepted for payment by
the Offeror, the Offeror will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims.
3
<PAGE> 4
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby (and
all such other Shares or other securities or rights).
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Offeror upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of any Shares purchased, and
return any Shares not tendered or not purchased, in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased and return any certificates for Shares not tendered or not purchased
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are completed, please
issue the check for the purchase price of any Shares purchased and return any
Shares not tendered or not purchased in the name(s) of, and mail said check and
any certificates to, the person(s) so indicated. The undersigned recognizes that
the Offeror has no obligation, pursuant to the "Special Payment Instructions,"
to transfer any Shares from the name of the registered holder(s) thereof if the
Offeror does not accept for payment any of the Shares so tendered. The payment
made to the undersigned for each Option Share tendered will be an amount equal
to the Offer Price minus the exercise price of the exercised Company Stock
Option. The amount paid to employees for Option Shares will be reduced by such
amount of wage and employment withholding taxes as may be required to be
deducted and withheld with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended, or under any provision of state,
local or foreign law. For each Option Share tendered, an amount equal to the
exercise price of the Company Stock Option exercised for such Option Share shall
be paid to the Company.
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be issued in the name of someone other than the undersigned, or if
Shares tendered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at The Depository Trust
Company.
Issue check and/or certificate(s) to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
Credit unpurchased Shares delivered by book-entry transfer to an
account maintained at The Depository Trust Company.
------------------------------------------------------------
(ACCOUNT NUMBER)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that shown under "Description of Shares Tendered."
Mail check and/or certificate(s) to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address --------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
------------------------------------------------------------
4
<PAGE> 5
IMPORTANT -- SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9)
X
- --------------------------------------------------------------------------------
X:
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated:
- ------------------------, 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on share
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following information.
See Instructions 1 and 5.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full title)
- --------------------------------------------------------------------------------
(SEE INSTRUCTIONS)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone Number ( )
- --------------------------------------------------------------------------
Employer Identification or Social Security Number
- ----------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED-SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone Number ( )
- --------------------------------------------------------------------------
Dated:
- ------------------------, 1999
5
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below,
signatures on all Letters of Transmittal must be guaranteed by a member in good
standing of the Securities Transfer Agents Medallion Program or by any other
bank, broker, dealer, credit union, savings association or other entity which is
an "eligible guarantor institution," as such term is defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (each of the foregoing
constituting an "Eligible Institution"), unless the Shares tendered thereby are
tendered (i) by a registered holder of Shares who has not completed either the
box labeled "Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If the certificates evidencing Shares
are registered in the name of a person or persons other than the signer of this
Letter of Transmittal, or if payment is to be made or delivered to, or
certificates evidencing unpurchased Shares are to be issued or returned to, a
person other than the registered owner or owners, then the tendered certificates
must be endorsed or accompanied by duly executed stock powers, in either case
signed exactly as the name or names of the registered owner or owners appear on
the certificates or stock powers, with the signatures on the certificates or
stock powers guaranteed by an Eligible Institution as provided herein. See
Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of
Transmittal is to be used either if certificates are to be forwarded herewith
or, unless an Agent's Message is utilized, if the delivery of Shares is to be
made by book-entry transfer pursuant to the procedures set forth in Section 2 of
the Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well as
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) and any other documents required by this Letter of
Transmittal or an Agent's Message in the case of a book-entry delivery, must be
received by the Depositary at one of its addresses set forth on the front page
of this Letter of Transmittal by the Expiration Date. Stockholders who cannot
deliver their Shares and all other required documents to the Depositary by the
Expiration Date must tender their Shares pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such
procedures: (a) such tender must be made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Offeror, must be received by the
Depositary prior to the Expiration Date; and (c) the certificates for all
tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with
respect to such Shares), together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message, and any other documents required by this Letter of Transmittal
must be received by the Depositary within three trading days after the date of
such Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to
Purchase. The term "trading day" is any day on which Nasdaq is open for
business.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Except as provided herein for tendering Option Shares, no alternative,
conditional or contingent tenders will be accepted and no fractional Shares will
be purchased. All tendering stockholders, by execution of this Letter of
Transmittal (or facsimile thereof), waive any right to receive any notice of the
acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to stockholders who tender by
book-entry transfer). If fewer than all the Shares represented by any
certificate delivered to the Depositary are to be tendered, fill in the number
of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such case, a new certificate for the remainder of the Shares
represented by the old certificate will be sent to the person(s) signing this
Letter of Transmittal unless otherwise
6
<PAGE> 7
provided in the appropriate box on this Letter of Transmittal, as promptly as
practicable following the expiration or termination of the Offer. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made, or Shares not
tendered or not purchased are to be returned, in the name of any person other
than the registered holder(s). Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate must be
endorsed or accompanied by, appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Offeror of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. The Offeror will pay any stock transfer taxes
with respect to the sale and transfer of any Shares to it or its order pursuant
to the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), then the amount of any stock
transfer taxes (whether imposed on the registered holder(s), such other person
or otherwise) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes, or exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instruction. If the check for the
purchase price of any Shares purchased is to be issued, or any Shares not
tendered or not purchased are to be returned, in the name of a person other than
the person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Stockholders tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account at the Book-Entry Transfer Facility as
such stockholder may designate under "Special Payment Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above.
8. Substitute Form W-9. A tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify whether the stockholder is subject to backup withholding of
federal income tax. If a tendering stockholder is subject to backup withholding,
the stockholder must cross out item (2) of the Certification box of the
Substitute Form W-9. Failure to provide the information on the Substitute Form
W-9 may subject the tendering stockholder to federal income tax withholding of
31% of the payment of the purchase price. If the tendering stockholder has not
been issued a TIN and has applied for a number or intends to apply for a number
in the near future, he or she should write "Applied For" in the space provided
for the TIN in Part I, and sign and date the Substitute Form W-9 and the
Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is
written in Part I, the Depositary will withhold 31% on
7
<PAGE> 8
all payments of the purchase price, but such withholdings will be refunded if
the tendering stockholder provides a TIN within 60 days.
9. Foreign Holders. Foreign holders must submit a completed IRS Form W-8
to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
10. Requests for Assistance or Additional Copies. Requests for additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and questions or requests for
assistance should be directed to the Information Agent or the Dealer Manager at
their respective addresses or telephone numbers.
11. Waiver of Conditions. The conditions of the Offer may be waived by
Offeror (subject to certain limitations in the Offer to Purchase), in whole or
in part, at any time or from time to time, in Offeror's sole discretion.
12. Lost, Destroyed or Stolen Certificates. If any certificate(s)
evidencing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE
HEREOF), PROPERLY COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE
GUARANTEES, OR IN THE CASE OF BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, TOGETHER
WITH SHARE CERTIFICATES OR BOOK-ENTRY CONFIRMATIONS AND ALL OTHER REQUIRED
DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR A PROPERLY COMPLETED AND DULY
EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR
PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his or her social security number. If a tendering
stockholder is subject to backup withholding, he or she must cross out item (2)
of the Certification box on the Substitute Form W-9. If the Depositary is not
provided with the correct TIN, the stockholder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a W-8, signed under penalties of
perjury, attesting to that individual's exempt status.
A Form W-8 may be obtained from the Depositary. Exempt stockholders, other
than foreign individuals, should furnish their TIN, write "Exempt" on the face
of the Substitute Form W-9 below and sign, date and return the Substitute Form
W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his or her correct TIN by completing the
form below certifying that the TIN provided on the Substitute Form W-9 is
correct (or that such stockholder is awaiting a TIN), and that such stockholder
is not subject to backup withholding because (i) such stockholder has not been
notified
8
<PAGE> 9
by the Internal Revenue Service that such stockholder is subject to backup
withholding as a result of a failure to report all interest or dividends, or
(ii) the Internal Revenue Service has notified such stockholder that such
stockholder is no longer subject to backup withholding. To prevent possible
erroneous backup withholding, exempt stockholders (other than certain foreign
individuals) should certify in accordance with the Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 that such stockholder
is exempt from backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder(s) of the Shares.
If the Shares are in more than one name or are not in the name of the actual
holder(s), consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
number to report. If the tendering stockholder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future, such
stockholder should write "Applied For" in the space provided for the TIN in Part
I, and sign and date the Substitute Form W-9 and the Certificate of Awaiting
Taxpayer Identification Number. If "Applied For" is written in Part I, the
Depositary will withhold 31% on all payments of the purchase price, but such
withholdings will be refunded if the tendering stockholder provides a TIN within
60 days.
9
<PAGE> 10
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
- --------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--Please provide your TIN in the box at right and
FORMW-9 certify by signing and dating below. -------------------------------
Social Security Number
or Employer
Identification Number
(if awaiting TIN write
"Applied For")
-------------------------------------------------------------------------------------------
PART II--For Payees exempt from backup withholding, see the attached Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
DEPARTMENT OF THE instructed therein.
TREASURY, INTERNAL -------------------------------------------------------------------------------------------
REVENUE SERVICE Certification--Under penalties of perjury, I certify that:
PAYER'S REQUEST FOR (1) The number shown on this form is my correct Taxpayer Identification Number (or a
TAXPAYER IDENTIFICATION Taxpayer Identification Number has not been issued to me) and either (a) I have mailed or
NUMBER ("TIN") AND delivered an application to receive a Taxpayer Identification Number to the appropriate
CERTIFICATION FOR Internal Revenue Service ("IRS") or Social Security Administration office or (b) I
PAYEE EXEMPT FROM intend to mail or deliver an application in the near future (I understand that if I do
BACKUP WITHHOLDING not provide a Taxpayer Identification Number to the Depository, 31% of all reportable
payments made to me will be withheld, but will be refunded if I provide a certified
Taxpayer Identification Number within 60 days); and
(2) I am not subject to backup withholding either because I have not been notified by the
IRS that I am subject to backup withholding as result of a failure to report all interest
or dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
-------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by
the IRS that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from the IRS that you are
no longer subject to backup withholding, do not cross out item (2). (Also see instructions
in the enclosed Guidelines.)
Signature Date:
----------------------------------------------- --------------------
Name:
-------------------------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have
mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social
Security Administration Officer or (2) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a TIN by the time of payment, 31% of all payments
pursuant to the Offer made to me thereafter will be withheld until I provide a number.
Signature:
------------------------------------------------- Date:
--------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
The Information Agent for the Offer is:
[MACKENZIE LOGO]
156 Fifth Avenue
New York, New York 10010
Call Collect: (212) 929-5500
Call Toll-Free: (800) 322-2885
The Dealer Manager for the Offer is:
BANCBOSTON ROBERTSON STEPHENS
590 Madison Avenue
36th Floor
New York, New York 10022
Call Collect: (212) 319-8900
<PAGE> 1
BANCBOSTON ROBERTSON STEPHENS
590 MADISON AVENUE, 36TH FLOOR
NEW YORK, NEW YORK 10022
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
COCENSYS, INC.
AT
$1.16 NET PER SHARE
BY
PURDUE ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PURDUE PHARMA L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, SEPTEMBER 9, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
August 12, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Purdue Acquisition Corporation, a Delaware
corporation (the "Offeror"), an indirect wholly owned subsidiary of Purdue
Pharma L.P., a Delaware limited partnership ("Parent"), to act as Dealer Manager
in connection with the Offeror's offer to purchase all outstanding shares of
Common Stock, par value $0.001 per share (the "Common Stock"), including the
associated rights to purchase Series A Junior Participating Preferred Stock
issued under the Rights Agreement (as defined in the Offer to Purchase) (the
"Rights" and together with the Common Stock, the "Shares"), of CoCensys, Inc. a
Delaware corporation (the "Company"), at a purchase price of $1.16 per Share,
net to the seller in cash (subject to applicable withholding of taxes), without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated August 12, 1999 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, together with any supplements or
amendments thereto, collectively constitute the "Offer") enclosed herewith. The
Offer is being made in connection with the Agreement and Plan of Merger, dated
as of August 5, 1999, among Parent, the Offeror and the Company (the "Merger
Agreement"). Holders of Shares whose certificates for such Shares (the
"Certificates") are not immediately available or who cannot deliver their
Certificates and all other required documents to the Depositary or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are copies
of the following documents:
1. The Offer to Purchase;
2. The Letter of Transmittal to tender Shares for your use and for
the information of your clients. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares;
<PAGE> 2
3. The letter to stockholders of the Company from the Chairman,
President and Chief Executive Officer of the Company accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9;
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if neither of the two procedures for tendering Shares set forth
in the Offer to Purchase can be completed on a timely basis;
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of a
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. A return envelope addressed to American Stock Transfer & Trust
Company, as Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE, PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, SEPTEMBER 9, 1999
UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is $1.16 per Share, net to the seller in cash
(subject to applicable withholding of taxes) without interest thereon.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Thursday, September 9, 1999, unless the Offer is
extended (the "Expiration Date").
4. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the Expiration Date that number
of Shares that, when added to the number of Shares to be received by
Offeror upon the conversion of all of the Series E Preferred Stock (as
defined in the Offer to Purchase) to be held by Offeror upon consummation
of the transactions contemplated by the Series E Purchase Agreement (as
defined in the Offer to Purchase), would constitute at least 90% of the
Fully Diluted Shares (as defined in the Offer to Purchase) and (ii) the
satisfaction of certain other terms and conditions. See Section 15 of the
Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and any
required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) or other required
documents should be sent to the Depositary and certificates representing the
tendered Shares or a timely Book-Entry Confirmation (as defined in the Offer to
Purchase) should be delivered to the Depositary in accordance with the
instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may be
effected by following the guaranteed delivery procedures specified in Section 2
of the Offer to Purchase.
Neither the Offeror, the Parent nor any officer, director, stockholder,
agent or other representative of the Offeror will pay any fees or commissions to
any broker, dealer or other person (other than the Dealer Manager, the
Depositary and the Information Agent as described in the Offer to Purchase) for
soliciting tenders of Shares pursuant to the Offer. The Offeror will, however,
upon request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding any of the enclosed materials to your clients. The Offeror
will pay or cause to be paid any transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
MacKenzie Partners, Inc., the Information Agent for the Offer, 156 Fifth Avenue,
New York, New York 10010, (800) 322-2885 (toll-free) or
2
<PAGE> 3
BancBoston Robertson Stephens, the Dealer Manager for the Offer, at 590 Madison
Avenue, 36th Floor, New York, New York 10022, (212) 319-8900 (call collect).
Requests for additional copies of the enclosed materials may be directed to
the Information Agent at the above address and telephone number.
Very truly yours,
BancBoston Robertson Stephens
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PARENT, THE OFFEROR, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
COCENSYS, INC.
AT
$1.16 NET PER SHARE
BY
PURDUE ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PURDUE PHARMA L.P.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, SEPTEMBER 9, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
August 12, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated August 12,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"), relating to the offer by Purdue Acquisition Corporation, a Delaware
corporation (the "Offeror") and an indirect wholly owned subsidiary of Purdue
Pharma L.P., a Delaware limited partnership (the "Parent"), to purchase all of
the outstanding shares of Common Stock, par value $0.001 per share (the "Common
Stock"), including the associated rights to purchase Series A Junior
Participating Preferred Stock issued under the Rights Agreement (as defined in
the Offer to Purchase) (the "Rights" and, together with the Common Stock, the
"Shares"), of CoCensys, Inc., a Delaware corporation (the "Company"), at a
purchase price of $1.16 per Share, net to the seller in cash (subject to
applicable withholding of taxes), without interest thereon, upon the terms and
subject to the conditions set forth in the Offer. This material is being
forwarded to you as the beneficial owner of Shares carried by us in your account
but not registered in your name.
Also enclosed is the Letter to Stockholders of the Company from the
Chairman, President and Chief Executive Officer of the Company accompanied by
the Company's Solicitation/Recommendation Statement on Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any
or all of the Shares held by us for your account, upon the terms and conditions
set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $1.16 per Share, net to the seller in cash
(subject to applicable withholding of taxes), without interest thereon,
upon the terms and subject to the conditions set forth in the Offer.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Thursday, September 9, 1999, unless the Offer is
extended (the "Expiration Date").
<PAGE> 2
4. The Offer is being made pursuant to the Agreement and Plan of
Merger dated as of August 5, 1999 (the "Merger Agreement"), among Parent,
the Offeror and the Company pursuant to which, following the consummation
of the Offer and the satisfaction or waiver of certain conditions, the
Offeror will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger as an indirect wholly owned subsidiary of
Parent. In the Merger, each outstanding Share (other than Shares owned by
the Company as treasury stock, Parent, the Offeror or any other subsidiary
or affiliate of Parent or by stockholders, if any, who are entitled to and
who properly demand and perfect appraisal rights under Delaware law) will
be converted into the right to receive $1.16 per Share, net to the seller
in cash (subject to applicable withholding of taxes), without interest
thereon, as set forth in the Merger Agreement and the Offer.
5. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE SUCH NUMBER
OF SHARES, THAT, WHEN ADDED TO THE NUMBER OF SHARES TO BE RECEIVED BY
OFFEROR UPON THE CONVERSION OF ALL OF THE SERIES E PREFERRED STOCK (AS
DEFINED IN THE OFFER TO PURCHASE) PURCHASED BY OFFEROR UNDER THE SERIES E
PURCHASE AGREEMENT (AS DEFINED IN THE OFFER TO PURCHASE), WOULD CONSTITUTE
AT LEAST 90% OF THE FULLY DILUTED SHARES (AS DEFINED IN THE OFFER TO
PURCHASE) AND (II) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS
IN THE OFFER TO PURCHASE.
6. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OFFER, THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE MERGER
IS ADVISABLE AND THAT THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND
RECOMMENDS THAT HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES IN THE OFFER.
7. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer.
If you wish to have us tender any or all of the Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US PROMPTLY TO PERMIT US TO TENDER YOUR SHARES ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Offeror by BancBoston Robertson Stephens Inc.
or by one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS)
OF
COCENSYS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated August 12, 1999, and the related Letter of Transmittal
(which together with any amendments or supplements thereto, collectively
constitute the "Offer") in connection with the offer by Purdue Acquisition
Corporation, a Delaware corporation (the "Offeror"), an indirect wholly owned
subsidiary of Purdue Pharma L.P., a Delaware limited partnership, to purchase
all outstanding shares of Common Stock, par value $0.001 per share (the "Common
Stock"), including the associated rights to purchase Series A Junior
Participating Preferred Stock issued under the Rights Agreement (as defined in
the Offer to Purchase) (the "Rights" and, together with the Common Stock, the
"Shares"), of CoCensys, Inc., a Delaware corporation.
This will instruct you to tender to the Offeror the number of Shares
indicated below (or, if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to be Tendered:*
____________ Shares
<TABLE>
<S> <C>
SIGN HERE
-----------------------------------------------------------
Account Number: ---------------------------------------- -----------------------------------------------------------
Signature(s)
-----------------------------------------------------------
Date: , 1999 -----------------------------------------------------------
(Print Name(s))
-----------------------------------------------------------
-----------------------------------------------------------
(Print Address(es))
-----------------------------------------------------------
(Area Code and Telephone Number(s))
-----------------------------------------------------------
(Taxpayer Identification or
Social Security Number(s))
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE
RIGHTS)
OF
COCENSYS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, SEPTEMBER 9, 1999, UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of Common Stock, par
value $0.001 per share (the "Common Stock"), including the associated rights to
purchase Series A Junior Participating Preferred Stock issued under the Rights
Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with
the Common Stock, the "Shares") of CoCensys, Inc., a Delaware corporation (the
"Company"), are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach American Stock Transfer & Trust Company (the
"Depositary") on or prior to the Expiration Date (as defined in the Offer to
Purchase). Such form may be delivered by hand, facsimile transmission, or mail
to the Depositary. See Section 2 of the Offer to Purchase, dated August 12, 1999
(the "Offer to Purchase").
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail By Facsimile Transmission: By Hand or Overnight Courier:
40 Wall Street (718) 234-5001 40 Wall Street
46th Floor Confirm Receipt of 46th Floor
New York, New York 10005 Facsimile by Telephone: New York, New York 10005
(718) 921-8200
</TABLE>
If you require additional information, please call the Depositary at
(212) 936-5100 (within New York) or (800) 937-5449 (outside New York).
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES
NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Purdue Acquisition Corporation, a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated August 12, 1999 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), receipt of which are
hereby acknowledged, the number of Shares of the Company set forth below,
pursuant to the guaranteed delivery procedure set forth in Section 2 of the
Offer to Purchase.
Certificate No(s). (if available)
- --------------------------------------------------------------------------------
Number of Shares tendered
- --------------------------------------------------------------------------------
Check if Shares will be tendered by book-entry transfer
Account Number at The Depository Trust Company
- ----------------------------------------------------------------------
Dated
- --------------------------------------------------------------------------------
Name(s) of Record Holder(s)
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address(es)
- --------------------------------------------------------------------------------
(ZIP CODE)
Area Code and Tel. No.
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program (a) represents that
the above named person(s) "own(s)" the Shares tendered hereby within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended,
(b) represents that such tender of Shares complies with Rule 14e-4 under the
Exchange Act, and (c) guarantees delivery to the Depositary, at one of its
addresses set forth above, of certificates representing the Shares tendered
hereby in proper form for transfer, or confirmation of book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company, in
each case with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees or an
Agent's Message (as defined in Section 4 of the Offer to Purchase), and any
other required documents, within three Nasdaq National Market trading days after
the date hereof.
Name of Firm:
- ---------------------------------------------
- -------------------------------------------------------
(AUTHORIZED
SIGNATURE)
- -------------------------------------------------------
(TITLE)
Address:
- ---------------------------------------------------- Name:
- -----------------------------------------------
(PLEASE TYPE OR
PRINT)
- -------------------------------------------------------------
(ZIP CODE)
Title:
- -------------------------------------------------
Area Code and
Telephone Number:
- --------------------------------------- Date:
- ----------------------------------------- , 1999.
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person(3) person(3)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
</TABLE>
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ------------------------------------------------------------
9. A valid trust, estate, or pension The legal entity
trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A futures commission merchant registered with the Commodity Futures Trading
Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to an appropriate nominee.
- Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
- Payments described in section 6049(b)(5) of the Code to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
- Payments made to an appropriate nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT
SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM
W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give correct taxpayer identification numbers to
payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a correct taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 1
EXHIBIT a(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below), is made
solely by the Offer to Purchase, dated August 12, 1999, and the related Letter
of Transmittal and is being made to all holders of Shares. Offeror (as defined
below) is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Offeror becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Offeror will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Offeror cannot comply with such state statute, the Offer will not be
made to, nor will tenders be accepted from or on behalf of, the holders of
Shares in such state. In any jurisdiction where the securities, "blue sky" or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Offeror by BancBoston Robertson
Stephens Inc., the Dealer Manager, or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
(Including the associated Series A Junior Participating
Preferred Stock Purchase Rights)
of
CoCensys, Inc.
at
$1.16 Net Per Share
by
Purdue Acquisition Corporation
an indirect wholly owned subsidiary of
Purdue Pharma L.P.
Purdue Acquisition Corporation, a Delaware corporation ("Offeror") and an
indirect wholly owned subsidiary of Purdue Pharma L.P., a Delaware limited
partnership ("Parent"), is offering to purchase all of the outstanding shares of
common stock, par value $0.001 per share (the "Common Stock"), including the
associated rights to purchase Series A Junior Participating Preferred Stock
issued under the Rights Agreement (as defined in the Offer to Purchase) (the
"Rights" and, together with the Common Stock, the "Shares"), of CoCensys, Inc.,
a Delaware corporation (the "Company"), at a purchase price of $1.16 per Share
(such price, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price"), net to the seller in cash (subject to
applicable withholding of taxes), without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated August 12, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer"). Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Offeror pursuant to the Offer. Following the Offer, Offeror intends to effect
the Merger (as defined below).
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, SEPTEMBER 9, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the expiration of the Offer such
number of Shares that, when added to the number of Shares to be received by
Offeror upon the conversion of all of the Series E Preferred Stock (as defined
below) purchased by Offeror under the Series E Purchase Agreement (as defined
below), would constitute at least 90% of the Fully Diluted Shares (as defined
below) (the "Minimum Condition") and is also subject to certain other terms and
conditions described in the Offer to Purchase.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of August 5, 1999 (the "Merger Agreement"), among Parent, Offeror and the
Company. The Merger Agreement provides that, among other things, as promptly as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction or waiver of the other conditions set forth in the Merger Agreement
and in accordance with the applicable provisions of the Delaware General
<PAGE> 2
Corporation Law (the "DGCL"), Offeror will be merged with and into the Company
(the "Merger"), the separate corporate existence of Offeror will cease and the
Company will continue as the surviving corporation and will be a wholly owned
indirect subsidiary of Parent. At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by the Company as treasury stock,
Parent, Offeror or any other subsidiary or affiliate of Parent or by
stockholders, if any, who properly demand and perfect their appraisal rights
under the DGCL) will be converted automatically into the right to receive the
Offer Price, without interest.
The Board of Directors of the Company has unanimously approved the Offer,
the Merger and the Merger Agreement, has determined that the Merger is advisable
and that the terms of each of the Offer and the Merger are fair to and in the
best interests of the Company's stockholders and recommends that holders of the
Shares accept the Offer and tender their Shares in the Offer.
Concurrently with the execution of the Merger Agreement, Offeror entered
into a Purchase Agreement, dated as of August 5, 1999 (the "Series E Purchase
Agreement"), with the holder of the Series E Convertible Preferred Stock of the
Company (the "Series E Preferred Stock"). Under the Series E Purchase Agreement,
the holder of the Series E Preferred Stock has agreed to sell, and Offeror has
agreed to purchase, immediately following consummation of the Offer all of the
Series E Preferred Stock beneficially owned by it, representing approximately
31% of the Fully Diluted Shares on an as-converted basis at the currently
scheduled Expiration Date (as defined herein), for an aggregate purchase price
of $2,200,000. The obligation of the holder of the Series E Preferred Stock to
sell, and the obligation of Offeror to purchase, the Series E Preferred Stock
under the Series E Purchase Agreement, are subject to Offeror having accepted
Shares for payment under the Offer in accordance with the Merger Agreement. The
Series E Preferred Stock will be convertible at the option of the holder into
approximately 2,634,493 Shares at the currently scheduled Expiration Date.
For purposes of the Offer, "Fully Diluted Shares" means all outstanding
Shares after giving effect to the exercise of all Company Stock Options (as
defined in the Offer to Purchase) and the conversion of the Series D Preferred
Stock of the Company and the Series E Preferred Stock at the currently scheduled
Expiration Date, but without giving effect to (i) the exercise of any
outstanding warrants to purchase Shares of the Company, (ii) the conversion of
the Series C Preferred Stock of the Company, or (iii) the conversion of an
outstanding note of the Company into Shares. Based upon the foregoing, Offeror
believes that there will be 8,509,995 Fully Diluted Shares at the currently
scheduled Expiration Date. Because the Shares subject to the Series E Purchase
Agreement will represent approximately 31% of the Fully Diluted Shares, the
Minimum Condition will be satisfied if at least an aggregate of 5,024,503 Shares
and Company Stock Options are validly tendered and not withdrawn prior to the
Expiration Date. If the Minimum Condition is satisfied and Offeror accepts for
payment Shares tendered pursuant to the Offer, Offeror will be able to effect
the Merger pursuant to the short-form merger provisions of the DGCL without
prior notice to, or any action by, any other stockholder of the Company.
For purposes of the Offer, Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when Offeror gives oral or written notice to American Stock
Transfer & Trust Company (the "Depositary") of Offeror's acceptance of such
Shares (which will include all Shares received and tendered from the exercise of
Company Stock Options exercised at such time) for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, payment of Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from Offeror and
transmitting such payments to validly tendering stockholders whose Shares have
been accepted for payment. Under no circumstances will interest on the Offer
Price for the Shares be paid, regardless of any extension of the Offer or any
delay in making such payment.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Thursday, September 9, 1999, unless and until Offeror, in accordance with the
terms of the Merger Agreement, extends the period of time during which the Offer
is open, in which event the term "Expiration Date" will mean the latest time and
<PAGE> 3
date at which the Offer, as so extended by Offeror, will expire. Subject to the
terms and conditions of the Merger Agreement, Offeror may extend the period of
time during which the Offer is open at any time in its sole discretion and
thereby delay acceptance for payment of, and payment for, any Shares, by giving
oral or written notice of such extension to the Depositary and by making a
public announcement thereof by no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. During any
such extension, all Shares previously tendered and not withdrawn will remain
tendered pursuant to the Offer, subject to the rights of a tendering stockholder
to withdraw his Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time on or prior to the Expiration Date and,
unless theretofore accepted for payment by Offeror pursuant to the Offer, may
also be withdrawn at any time after Sunday, October 10, 1999. For a withdrawal
of tendered Shares to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover page of the Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If certificates evidencing Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution (as defined in Section 2 of the Offer
to Purchase), the signature(s) on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer as set forth in Section 2 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility (as defined in Section 2 of the Offer to Purchase)
to be credited with the withdrawn Shares and must otherwise comply with such
Book-Entry Transfer Facility's procedures. All questions as to the form and
validity (including the time of receipt) of any notice of withdrawal will be
determined by Offeror, in its sole discretion, and its determination will be
final and binding on all parties.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference. The Company has provided Offeror with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares whose names
appear on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
The Offer to Purchase and the Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Copies of the Offer to Purchase and the related Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent at its address and telephone number set forth below and will
be furnished promptly at Offeror's expense. No fees or commissions will be paid
by Offeror to brokers, dealers or other persons (other than the Dealer Manager
and Information Agent) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MACKENZIE LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
<PAGE> 4
The Dealer Manager for the Offer is:
BancBoston Robertson Stephens
590 Madison Avenue, 36th Floor
New York, New York 10022
(212) 319-8900 (Call Collect)
August 12, 1999
<PAGE> 1
Exhibit (a)(8)
FRIDAY AUGUST 6, 12:01 AM EASTERN TIME
COMPANY PRESS RELEASE
SOURCE: PURDUE PHARMA L.P.
PURDUE PHARMA L.P. AND COCENSYS, INC.
ANNOUNCE THE SIGNING OF DEFINITIVE AGREEMENT
PURDUE OFFERING TO PURCHASE ALL OUTSTANDING SHARES OF COCENSYS, INC.'S COMMON
STOCK
NORWALK, Conn., Aug. 6/PRNewswire/--Purdue Pharma L.P. today announced the
execution of a definitive agreement whereby Purdue Acquisition Corporation, an
indirect wholly-owned subsidiary of Purdue Pharma L.P., would offer to purchase
for cash all outstanding shares of CoCensys, Inc. (OTC Bulletin Board: COCN -
news) common stock for $1.16 per share. The board of directors of CoCensys has
unanimously approved the transaction and resolved to recommend that CoCensys
shareholders accept the offer.
Under the terms of the merger agreement, Purdue Acquisition Corporation will
promptly commence a tender offer for all of the outstanding common shares of
CoCensys, Inc. Simultaneously with the execution of the merger agreement, Purdue
Acquisition Corporation entered into a purchase agreement with the holder of the
Series E Convertible Preferred Stock of CoCensys, pursuant to which Purdue
Acquisition Corporation has agreed to purchase all of the Series E Preferred
Stock upon consummation of the tender offer. The Series E Preferred Stock is
convertible into approximately 28% of the fully diluted shares of common stock
of CoCensys. Purdue Acquisition Corporation plans to convert the Series E
Preferred Stock into common stock immediately following consummation of the
tender offer. Purdue Acquisition Corporation's tender offer is conditioned upon,
among other things, there being validly tendered and not withdrawn such number
of shares that, when added to the number of shares of common stock to be
received by Purdue Acquisition Corporation upon conversion of the Series E
Preferred Stock, equals at least ninety percent of the fully diluted outstanding
common shares of CoCensys. After the consummation of the tender offer, Purdue
Acquisition Corporation has agreed to acquire any of the remaining outstanding
shares of CoCensys pursuant to a second-step merger at the same price per share
paid for shares tendered.
CoCensys is a biopharmaceutical company that discovers and develops products for
the treatment of neurological and psychiatric disorders. CoCensys' product
development programs focus on novel small molecule compounds for the treatment
of epilepsy, anxiety, Parkinson's and other neurodegenerative diseases,
neuropathic pain, migraine, insomnia and stroke. CoCensys has development
programs with the Wyeth-Ayerst Laboratories Division of American Home Products
Corporation to develop analogs of naturally-occurring neuroactive compounds,
"epalons", for the treatment of anxiety, with Parke-Davis, a division of
Warner-Lambert Company, to identify and develop subtype-selective NMDA receptor
antagonists for the treatment of a variety of neurological and psychiatric
diseases, and with Senju Pharmaceutical and Parke-Davis for the exploration of
ophthalmic indications of CoCensys' glutamate receptor antagonist compounds.
More information about CoCensys is available on its web site at
www.cocensys.com.
Purdue Pharma L.P., headquartered in Norwalk, Connecticut, U.S. and its
associated companies, including the Mundipharma companies and Napp
Pharmaceutical Group, Ltd., comprise a privately-held, worldwide pharmaceutical
network with discovery, development, manufacturing, marketing and distribution
capabilities. The companies maintain a leading presence in the field of pain
management with their products OxyContin(R) (oxycodone hydrochloride
controlled-release) tablets and MS Contin(R) (morphine sulfate
controlled-release) tablets. The network also includes a biologic therapeutics
business, Purdue BioPharma L.P., based in Princeton, New Jersey, focused on the
development of antibody-based therapeutics and vaccines. More information about
Purdue is available on its web site at www.pharma.com.
Michael Friedman, Vice President of Purdue Pharma L.P. stated, "Purdue Pharma
expects to benefit from the merger through enhanced research and development
capabilities and strengthened ties with leading pharmaceutical companies. The
combined company will enable us to capitalize on our key competencies and
strengthen our position as a leading pain management company."
"CoCensys and Purdue Pharma are an excellent strategic fit. Purdue Pharma has
the market presence to capitalize on CoCensys' leading research programs," said
Friedman.
After the merger is consummated, Purdue Pharma L.P. intends to continue to
operate CoCensys' Irvine, CA facility.
Purdue Acquisition Corporation expects that the necessary filings with the
Securities and Exchange Commission in connection with the tender offer will be
made within the next several days and that offer documents will be mailed to
CoCensys shareholders promptly thereafter.
BancBoston Robertson Stephens advised Purdue Pharma L.P. and is acting as dealer
manager for the tender offer. Hambrecht & Quist advised CoCensys and provided a
fairness opinion to the board of directors of CoCensys.
This news release contains forward-looking statements including statements
concerning the projected impact of the proposed merger on earnings results and
sales growth. These statements are based on current expectations; actual results
may differ materially.
<PAGE> 1
EXHIBIT (C)(1)
AGREEMENT AND PLAN OF MERGER
Among
PURDUE PHARMA L.P.,
PURDUE ACQUISITION CORPORATION
and
COCENSYS, INC.
Dated as of August 5, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I The Offer ................................................................................... 2
SECTION 1.01. The Offer ............................................................................ 2
SECTION 1.02. Company Actions ...................................................................... 4
ARTICLE II The Merger ................................................................................. 7
SECTION 2.01. The Merger ........................................................................... 7
SECTION 2.02. Closing .............................................................................. 7
SECTION 2.03. Effective Time ....................................................................... 7
SECTION 2.04. Effects of the Merger................................................................. 8
SECTION 2.05. Certificate of Incorporation and By-laws.............................................. 8
SECTION 2.06. Directors ............................................................................ 8
SECTION 2.07. Officers ............................................................................. 8
ARTICLE III Effect of the Merger on the Capital
Stock of the Constituent Corporations; Exchange of
Certificates.............................................................................. 8
SECTION 3.01. Effect on Capital Stock............................................................... 8
SECTION 3.02. Exchange of Certificates.............................................................. 10
ARTICLE IV Representations and Warranties of the Company............................................... 12
SECTION 4.01. Organization ......................................................................... 12
SECTION 4.02. Subsidiaries ......................................................................... 13
SECTION 4.03. Capitalization ....................................................................... 13
SECTION 4.04. Authority ............................................................................ 15
SECTION 4.05. Consents and Approvals; No Violations................................................. 15
SECTION 4.06. SEC Reports and Financial Statements.................................................. 16
SECTION 4.07. Absence of Certain Changes or Events.................................................. 17
SECTION 4.08. No Undisclosed Liabilities............................................................ 18
SECTION 4.09. Information Supplied.................................................................. 18
SECTION 4.10. Benefit Plans ........................................................................ 19
SECTION 4.11. Other Compensation Arrangements....................................................... 21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.12. Litigation ........................................................................... 21
SECTION 4.13. Compliance with Applicable Law........................................................ 22
SECTION 4.14. Tax Matters .......................................................................... 22
SECTION 4.15. State Takeover Statutes............................................................... 24
SECTION 4.16. Brokers; Fees and Expenses............................................................ 24
SECTION 4.17. Opinion of Financial Advisor.......................................................... 25
SECTION 4.18. Intellectual Property................................................................. 25
SECTION 4.19. Labor Relations and Employment........................................................ 27
SECTION 4.20. Change of Control..................................................................... 28
SECTION 4.21. Environmental Matters................................................................. 28
SECTION 4.22. Material Contracts.................................................................... 32
SECTION 4.23. Property. ............................................................................ 34
SECTION 4.24. Insurance. ........................................................................... 35
SECTION 4.25. Year 2000 Compliance.................................................................. 35
ARTICLE V Representations and Warranties of Parent and Sub............................................. 36
SECTION 5.01. Organization ......................................................................... 36
SECTION 5.02. Authority ............................................................................ 36
SECTION 5.03. Consents and Approvals; No Violations................................................. 37
SECTION 5.04. Information Supplied.................................................................. 37
SECTION 5.05. Interim Operations of Sub............................................................. 38
SECTION 5.06. Financing ............................................................................ 38
ARTICLE VI Covenants .................................................................................. 38
SECTION 6.01. Conduct of Business of the Company.................................................... 38
SECTION 6.02. No Solicitation ...................................................................... 42
SECTION 6.03. Other Actions ........................................................................ 44
SECTION 6.04. Notice of Certain Events.............................................................. 44
ARTICLE VII Additional Agreements...................................................................... 45
SECTION 7.01. Stockholder Approval; Preparation of Proxy Statement.................................. 45
SECTION 7.02. Access to Information................................................................. 46
SECTION 7.03. Reasonable Efforts.................................................................... 47
SECTION 7.04. Options and Warrants.................................................................. 47
SECTION 7.05. Directors ............................................................................ 47
SECTION 7.06. Redemption of Stockholders Rights Plan................................................ 48
SECTION 7.07. Fees and Expenses 48
SECTION 7.08. Indemnification; Insurance............................................................ 49
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
SECTION 7.09. Certain Litigation.................................................................... 50
SECTION 7.10. 401(k) Plan .......................................................................... 50
SECTION 7.11. Environmental Remediation............................................................. 50
ARTICLE VIII Conditions ............................................................................... 51
SECTION 8.01. Conditions to Each Party's Obligation to Effect the Merger............................ 51
ARTICLE IX Termination, Amendment and Waiver........................................................... 52
SECTION 9.01. Termination .......................................................................... 52
SECTION 9.02. Effect of Termination................................................................. 53
SECTION 9.03. Amendment ............................................................................ 54
SECTION 9.04. Extension; Waiver .................................................................... 54
ARTICLE X Miscellaneous ............................................................................... 55
SECTION 10.01. Nonsurvival of Representations and Warranties........................................ 55
SECTION 10.02. Notices ............................................................................. 55
SECTION 10.03. Interpretation ...................................................................... 56
SECTION 10.04. Counterparts ........................................................................ 57
SECTION 10.05. Entire Agreement; Third Party Beneficiaries.......................................... 57
SECTION 10.06. Governing Law ....................................................................... 57
SECTION 10.07. Publicity ........................................................................... 57
SECTION 10.08. Assignment .......................................................................... 57
SECTION 10.09. Enforcement ......................................................................... 58
</TABLE>
Exhibits
Exhibit A - Conditions of the Offer
iii
<PAGE> 5
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as
of August 5, 1999, is among PURDUE PHARMA L.P., a Delaware limited partnership
("Parent"), PURDUE ACQUISITION CORPORATION, a Delaware corporation and an
indirect wholly owned subsidiary of Parent ("Sub"), and COCENSYS, INC., a
Delaware corporation (the "Company").
WHEREAS the Board of Directors of PURDUE PHARMA INC., a New
York corporation and the general partner of Parent (the "General Partner") and
the respective Boards of Directors of Sub and the Company have approved the
acquisition of the Company by Parent on the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes
to cause Sub to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all the outstanding
shares of Common Stock, par value $0.001 per share, of the Company (the "Company
Common Stock"; all the outstanding shares of Company Common Stock together with
the rights (the "Rights") associated with each such share issued in connection
with the Company's Rights Agreement, dated as of May 15, 1995, by and between
the Company and American Stock Transfer and Trust Company, as Rights Agent (the
"Rights Plan"), being hereinafter collectively referred to as the "Shares") at a
purchase price of $1.16 per Share (the "Offer Price"), net to the holder in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in this Agreement; and the Board of Directors of the Company has
determined that the Offer and the Merger (as defined below) are in the best
interests of the Company's stockholders and has adopted resolutions approving
this Agreement, the Offer and the Merger, determining that the Merger is
advisable and recommending that the holders of Shares accept the Offer, and
approving the acquisition of Shares by Sub pursuant to the Offer;
WHEREAS the Board of Directors of the General Partner on
behalf of Parent and the respective Boards of Directors of Sub and the Company
have each approved the merger of Sub with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement,
whereby each share of Company Common Stock, other than shares of Company Common
Stock owned directly or indirectly by Parent or the Company and Dissenting
Shares (as
<PAGE> 6
defined in Section 3.01(f)), will be converted into the right to receive the
price per Share paid in the Offer;
WHEREAS Parent has required as a condition to entering into
this Agreement, among other things, that the holder of the outstanding Series E
Preferred Stock (as defined herein) of the Company (the "Preferred Stockholder")
enter into a Stock Purchase Agreement (the "Preferred Stock Purchase Agreement")
pursuant to which the Preferred Stockholder has agreed, among other things, to
sell the Series E Preferred Stock to Sub, immediately upon, and subject to,
consummation of the Offer; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of the
execution and delivery of this Agreement, Sub shall, and Parent shall cause Sub
to, commence the Offer. The obligation of Sub, and of Parent to cause Sub, to
commence the Offer and accept for payment, and pay for, any Shares tendered
pursuant to the Offer shall be subject to the conditions set forth in Exhibit A
(the "Offer Conditions") and to the terms and conditions of this Agreement. Sub
expressly reserves the right, subject to compliance with the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), to modify the terms of the Offer,
except that, without the written consent of the Company, Sub shall not (i)
reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price,
(iii) add to or modify (other than by waiver) the Offer Conditions, (iv) except
as provided in the next two sentences, extend the Offer, (v) change the form of
consideration payable in the
2
<PAGE> 7
Offer, (vi) waive the Minimum Condition (as defined in Exhibit A), or (vii)
amend or alter any other term of the Offer in any manner materially adverse to
the holders of the Shares. Notwithstanding the foregoing, at any time prior to
termination of this Agreement, Sub may, without the consent of the Company,
extend the Offer, (A) if at the scheduled or extended expiration date of the
Offer any of the Offer Conditions shall not be satisfied or waived, until such
time as such conditions are satisfied or waived, (B) for any period required by
any rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer, (C) for a
period not to exceed an aggregate of 10 business days, notwithstanding that all
conditions to the Offer are satisfied as of such expiration date of the Offer,
if, immediately prior to such expiration date (as it may be extended), the
Shares tendered and not withdrawn pursuant to the Offer, when added to the
number of shares of Company Common Stock to be received by Sub upon conversion
of all of the Series E Preferred Stock to be held by Sub upon consummation of
the Preferred Stock Purchase Agreement, equal less than 90% of the Fully Diluted
Shares (as defined in Exhibit A) as of the scheduled expiration date of the
Offer, as it may be extended from time to time, and (D) until 10 business days
following the expiration of the 10 business day period referred to in clause
(iv) of condition (c) of Exhibit A and, if such clause (iv) of condition (c)
shall not have been satisfied, for so long as Parent and Sub shall determine
until, in their sole discretion, all conditions of the Offer are satisfied or
waived. Without limiting the right of Sub to extend the Offer pursuant to the
immediately preceding sentence, in the event that (i) the Minimum Condition has
not been satisfied or (ii) any condition set forth in paragraph (a) of Exhibit A
is not satisfied at the scheduled expiration date of the Offer, Sub shall, and
Parent shall cause Sub to, extend the expiration date of the Offer in increments
of five business days each until the earliest to occur of (x) the satisfaction
or waiver of the Minimum Condition or such other condition, or Parent reasonably
determines that any Offer Condition is not capable of being satisfied on or
prior to October 15, 1999, (y) the termination of this Agreement in accordance
with its terms and (z) October 15, 1999; provided, however, that if any person
or group (within the meaning of Section 13(d)(3) of the Exchange Act) has
publicly made an Acquisition Proposal (as defined in Section 6.02(b)) or
disclosed in writing its intention to make an Acquisition Proposal, Sub shall
not be required pursuant to
3
<PAGE> 8
this sentence to extend the Offer for more than five business days from the date
of such publication or written disclosure of such Acquisition Proposal unless
the Company's Board of Directors has reaffirmed its recommendation that the
stockholders of the Company accept the Offer. Subject to the terms and
conditions of the Offer and this Agreement, Sub shall, and Parent shall cause
Sub to, accept for payment, and pay for, all Shares validly tendered and not
withdrawn pursuant to the Offer that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer as soon as practicable after the
expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal (such Schedule 14D-1 and the
documents included therein pursuant to which the Offer will be made, together
with any supplements or amendments thereto, the "Offer Documents") and shall
mail the Schedule 14D-1 to the stockholders of the Company. Parent and Sub agree
that the Offer Documents shall comply as to form in all material respects with
the Exchange Act, and the rules and regulations promulgated thereunder, and the
Offer Documents, on the date first filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation or warranty is made by Parent or Sub with respect to
information supplied by the Company or any of its stockholders specifically for
inclusion or incorporation by reference in the Offer Documents. Parent, Sub and
the Company each agrees promptly to correct any information provided by it for
use in the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect, and Parent and Sub further
agree to take all steps necessary to amend or supplement the Schedule 14D-1 and,
as applicable, the Offer Documents and to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Offer Documents as so corrected
to be disseminated to holders of Shares, in each case as and to the extent
required by applicable securities laws. The Company and its counsel shall be
given reasonable opportunity to review and comment upon the Offer Documents
4
<PAGE> 9
prior to their filing with the SEC or dissemination to the stockholders of the
Company. Parent and Sub agree to provide the Company and its counsel any
comments Parent, Sub or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
(c) The Company agrees that neither the Offer nor purchases of
Shares thereunder breach the terms of the Confidentiality Agreement (as defined
in Section 7.02 below).
(d) Parent shall provide or cause to be provided to Sub on a
timely basis the funds necessary to purchase any and all Shares that Sub becomes
obligated to purchase pursuant to the Offer.
SECTION 1.02. Company Actions. (a) Subject to Section 6.02(a),
the Company hereby approves of and consents to the Offer and represents and
warrants that (i) the Board of Directors of the Company (the "Board"), at a
meeting duly called and held, duly adopted resolutions approving this Agreement,
the Offer and the Merger, determining that the Merger is advisable and that the
terms of the Offer and the Merger are fair to, and in the best interests of, the
Company and the Company's stockholders and recommending that the holders of
Shares accept the Offer and tender their Shares pursuant to the Offer and
approve the Merger and this Agreement, if required under applicable law, and
(ii) Hambrecht & Quist LLC (the "Financial Advisor") has delivered to the Board
its opinion (the "Fairness Opinion") to the effect that, as of the date thereof
and based upon and subject to the matters set forth in such Fairness Opinion,
the consideration to be received by the holders of Shares in the Offer and the
Merger is fair to the holders of Shares from a financial point of view. The
Company represents that such approval constitutes approval of the Offer, this
Agreement and the transactions contemplated hereby, including the Merger, for
purposes of Section 203 of the Delaware General Corporation Law, as amended (the
"DGCL"), such that Section 203 of the DGCL will not apply to the transactions
contemplated by this Agreement. The Company hereby consents to the inclusion in
the Offer Documents of such recommendation of the Board. The Company has been
authorized by the Financial Advisor to permit, subject to the prior review and
consent by the Financial Advisor (such consent not to be unreasonably withheld),
the inclusion of the Fairness Opinion
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(or a reference thereto) in the Offer Documents, the Schedule 14D-9 (as
hereinafter defined) and the Proxy Statement (as hereinafter defined), as may be
required under applicable law.
(b) Promptly after the time the Offer Documents are filed with
the SEC, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as
amended from time to time, the "Schedule 14D-9") containing the recommendation
described in paragraph (a) and shall mail the Schedule 14D-9 to the stockholders
of the Company in compliance with Rule 14d-9 promulgated under the Exchange Act.
To the extent practicable, the Company shall cooperate with Parent and Sub in
mailing or otherwise disseminating the Schedule 14D-9 with the appropriate Offer
Documents to the Company's stockholders. The Schedule 14D-9 shall comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder and, on the date filed with the SEC
and on the date first published, sent or given to the Company's stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation or warranty is made by the Company
with respect to information supplied by Parent or Sub specifically for inclusion
in the Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so
amended or supplemented to be filed with the SEC and disseminated to the
Company's stockholders, in each case as and to the extent required by applicable
securities laws. Parent and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to stockholders of the Company. The Company agrees to provide
Parent and its counsel any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
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(c) In connection with the Offer, the Company shall furnish or
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Sub such information and
assistance (including updated lists of stockholders, security position listings
and computer files) as Parent may reasonably request in communicating the Offer
to the Company's stockholders. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Merger, Parent and Sub and
their agents shall hold in confidence the information contained in any such
labels, listings and files, will use such information only in connection with
the Offer and the Merger and, if this Agreement shall be terminated, will, upon
such termination, promptly deliver, and will use their best efforts to cause
their agents promptly to deliver, to the Company all copies of such information
(and all copies of information derived therefrom) then in their possession or
control. The Company acknowledges that Sub intends to commence the Offer by
sending Offer materials to the holders of the Shares and, therefore, time is of
the essence with respect to the obligations of the Company as set forth in this
subparagraph.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, Sub
shall be merged with and into the Company at the Effective Time (as defined in
Section 2.03) in accordance with Section 253 of the DGCL. Following the
Effective Time, the separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Sub in accordance with the DGCL. At the election of Parent, any direct or
indirect wholly owned subsidiary (as defined in Section 10.03) of Parent may be
substituted for Sub as a constituent corporation in the Merger. In such event,
the parties agree
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to execute an appropriate amendment to this Agreement in order to reflect the
foregoing.
SECTION 2.02. Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. (New York City time) on a date to be
specified by Parent or Sub, which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Article VIII (the
"Closing Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza,
New York, New York 10112, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 2.03. Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the Company
shall file with the Secretary of State of Delaware a certificate of merger or
other appropriate documents (in any such case, the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Delaware Secretary of State, or at such other time as Sub and the Company shall
agree should be specified in the Certificate of Merger (the time the Merger
becomes effective being hereinafter referred to as the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 2.05. Certificate of Incorporation and By-laws. (a)
The Certificate of Incorporation of Sub, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law; provided, however, that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is CoCensys, Inc."
(b) The By-Laws of Sub as in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
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SECTION 2.06. Directors. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, and the Company
shall procure, prior to and as a condition to the Closing, the resignation of
each of its directors effective as of the Closing.
SECTION 2.07. Officers. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.01. Effect on Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the Company,
Parent, Sub or the holder of any Shares or shares of capital stock of the
Company or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become 1,000 fully paid and
nonassessable shares of Common Stock, par value $.001 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock.
Each share of Company Common Stock that is owned by the Company or held in
treasury and each Share that is owned by Parent, Sub or any other subsidiary of
Parent shall automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section
3.01(f), each Share issued and outstanding (other than Shares to be canceled in
accordance with Section 3.01(b)) shall be converted into the right to receive
from the Surviving Corporation in cash, without interest, the price paid in the
Offer (the "Merger Consideration"). As of the
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Effective Time, all such Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration,
without interest.
(d) Effect on Options. All stock options (individually, an
"Option" and collectively, the "Options") outstanding immediately prior to the
Effective Time, whether or not then fully exercisable, automatically shall be
accelerated and converted into the right to receive after the Effective Time
from the Surviving Corporation, for each share of Company Common Stock subject
to any Option, an amount in cash equal to the excess, if any, of the Merger
Consideration over the per share exercise price of such Option, without
interest. All Options not exercised at the Effective Time shall terminate and be
canceled and shall cease to exist. All amounts payable pursuant to this
paragraph shall be subject to all applicable withholding of taxes and shall be
paid as soon as practicable following the Effective Time.
(e) Effect on Warrants. All warrants for the purchase of
Company Common Stock (individually, a "Warrant" and collectively, the
"Warrants") outstanding immediately prior to the Effective Time, whether or not
then fully exercisable, automatically shall be converted into the right to
receive after the Effective Time from the Surviving Corporation, for each share
of Common Stock subject to any Warrant, an amount in cash equal to the excess,
if any, of the Merger Consideration over the per share exercise price of such
Warrant, without interest. All Warrants not exercised at the Effective Time
shall terminate and be canceled and shall cease to exist. All amounts payable
pursuant to this paragraph shall be subject to all applicable withholding of
taxes and shall be paid as soon as practicable following the Effective Time.
(f) Shares of Dissenting Stockholders. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding Shares
held by a person (a "Dissenting Stockholder") who complies with all the
provisions of Delaware law concerning the right of holders of Company Common
Stock to dissent from the Merger and require appraisal of their Shares
("Dissenting Shares") shall not be converted as described in Section 3.01(c) but
shall become the right to
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receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the laws of the State of Delaware. If, after the
Effective Time, such Dissenting Stockholder withdraws his demand for appraisal
or fails to perfect or otherwise loses his right of appraisal, in any case
pursuant to the DGCL, his Shares shall be deemed to be converted as of the
Effective Time into the right to receive the Merger Consideration. The Company
shall give Parent (i) prompt notice of any demands for appraisal of Shares
received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, such consent not to be
unreasonably withheld, make any payment with respect to, or settle, offer to
settle or otherwise negotiate, any such demands.
(g) Withholding Tax. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Shares outstanding immediately prior to the Effective Time such
amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Shares outstanding
immediately prior to the Effective Time in respect of which such deduction and
withholding was made.
SECTION 3.02. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act as
paying agent in the Merger (the "Paying Agent"), and, from time to time on,
prior to or after the Effective Time, Parent shall make available, or cause the
Surviving Corporation to make available, to the Paying Agent funds in amounts
and at the times necessary for the payment of the Merger Consideration upon
surrender of certificates representing Shares as part of the Merger pursuant to
Section 3.01 (it being understood that any and all interest earned on funds made
available to the Paying Agent pursuant to this Agreement shall be turned over to
Parent).
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(b) Exchange Procedure. As soon as reasonably practicable
after the Effective Time, Parent shall cause the Paying Agent to mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates (or affidavits of loss in lieu thereof) to the Paying Agent and
shall be in a form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which the Shares theretofore
represented by such Certificate shall have been converted pursuant to Section
3.01, and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 3.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.01. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All
cash paid upon the surrender of Certificates in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such
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Certificates. At the Effective Time, the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in this
Article III.
(d) Termination of Fund; No Liability. At any time following
six months after the Effective Time, the Surviving Corporation shall be entitled
to require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule attached to this Agreement
setting forth exceptions to the Company's representations and warranties set
forth herein (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as set forth below. The Company Disclosure Schedule
will be arranged in sections corresponding to sections of this Agreement to be
modified by such disclosure schedule.
SECTION 4.01. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not
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have a material adverse effect (as defined in Section 10.03) on the Company. The
Company is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger. The Company has made available to Parent complete and
correct copies of its Certificate of Incorporation and By-laws.
SECTION 4.02. Subsidiaries. The Company has no subsidiaries
(as defined in Section 10.03). Except as set forth on Schedule 4.02 of the
Company Disclosure Schedule, the Company does not own, directly or indirectly,
any capital stock or other ownership interest in any corporation, partnership,
joint venture, business, trust or other entity.
SECTION 4.03. Capitalization. The authorized capital stock of
the Company consists of 750,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $.001 per share (the "Preferred Stock"), of
which 350,000 shares have been designated as Series A Junior Participating
Preferred Stock (the "Series A Preferred Stock"), 100,000 shares have been
designated as Series B Convertible Preferred Stock (the "Series B Preferred
Stock"), 100,000 shares have been designated as Series C Convertible Preferred
Stock (the "Series C Preferred Stock"), 100,000 shares have been designated as
Series D Convertible Preferred Stock (the "Series D Preferred Stock") and 10,000
shares have been designated as Series E Convertible Preferred Stock (the "Series
E Preferred Stock"). As of the date hereof, (a) 4,873,480 shares of Company
Common Stock were issued and outstanding; (b) 100,000 shares of the Series C
Preferred Stock were issued and outstanding; (c) 100,000 shares of the Series D
Preferred Stock were issued and outstanding; (d) 1,159.2 shares of the Series E
Preferred Stock were issued and outstanding; (e) no shares of Company Common
Stock were held by the Company in its treasury; (f) 869,353 shares of Company
Common Stock were reserved for issuance upon exercise of outstanding Options;
(g) a maximum of 235,352 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Warrants; (h) a maximum of 350,000
shares of Series A Preferred Stock and no shares of Company
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Common Stock were reserved for issuance in connection with the Rights
distributed to the holders of the Company Common Stock pursuant to the Rights
Plan; (i) a maximum of 143,021 shares of Company Common Stock were reserved for
issuance upon the conversion of the Series C Preferred Stock; (j) a maximum of
575,000 shares of Company Common Stock were reserved for issuance upon the
conversion of the Series D Preferred Stock; (k) a maximum of 2,471,000 shares of
Company Common Stock were reserved for issuance upon the conversion of the
Series E Preferred Stock; (l) a maximum of 1,067,000 shares of Company Common
Stock were reserved for issuance in connection with the $1 million convertible
note issued by the Company to Warner-Lambert Company; and (m) a maximum of
18,839 shares of Company Common Stock were reserved for issuance under the
Company's 1995 Employee Stock Purchase Plan. Except as set forth above, as of
the date of this Agreement, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company are, and all shares which may
be issued will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth on
Schedule 4.03 of the Company Disclosure Schedule, there are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth above, and except as set forth on Schedule 4.03 of the Company Disclosure
Schedule, as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company is a party or by which it is bound obligating
the Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the Company or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking,
including any securities pursuant to which rights to acquire capital stock
became exercisable only after a change of control of the Company or upon the
acquisition of a specified amount of the Common Stock or voting powers of the
Company. Except as set forth on Schedule 4.03 of the Company Disclosure
Schedule, as of the date of this Agreement, there are not any outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the
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Company. Except as set forth on Schedule 4.03 of the Company Disclosure
Schedule, since March 31, 1999, no shares of the capital stock of the Company
have been issued other than pursuant to the exercise of Company stock options
and warrants already in existence and outstanding on such date, and the Company
has not granted any stock options, warrants or other rights to acquire any
capital stock of the Company. There are no securities issued by the Company or
agreements, arrangements or other understandings to which the Company is a party
giving any person any right to acquire equity securities of the Surviving
Corporation at or following the Effective Time and all securities, agreements,
arrangements and understandings relating to the right to acquire equity
securities of the Company (whether pursuant to the exercise of options, warrants
or otherwise) provide that, at and following the Effective Time, such right
shall entitle the holder thereof to receive the consideration he would have
received in the Merger had he exercised his right immediately before the
Effective Time.
SECTION 4.04. Authority. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of the terms of this Agreement by the holders
of a majority of the Shares (the "Company Stockholder Approval"), if required by
applicable law). The execution, delivery and performance of this Agreement and
the consummation by the Company of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (in each case, other than, with respect to the
Merger, the Company Stockholder Approval, if required by applicable law). The
only votes of the holders of any class or series of Company capital stock
necessary to approve the Merger are the affirmative votes of the holders of a
majority of the outstanding shares of Common Stock, voting separately as a
class. This Agreement has been duly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding obligation of Parent and
Sub, constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general
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application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
SECTION 4.05. Consents and Approvals; No Violations. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Schedule 14D-9 and a proxy statement relating to any
approval by the Company's stockholders of this Agreement (the "Proxy
Statement"), if required by applicable law), Section 203 of the DGCL and the
laws of other states in which the Company is qualified to do or is doing
business, state takeover laws and foreign laws, neither the execution, delivery
or performance of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or By-laws of
the Company, (ii) require any filing with, or permit, authorization, consent or
approval of, any federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity") (except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger), (iii) except as set forth on Schedule 4.05 of the
Company Disclosure Schedule, result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company is a party or by which it or any of its properties or assets may be
bound; provided, however, that certain contracts and agreements set forth on
Schedule 4.05 of the Company Disclosure Schedule, (A) provide for their
termination upon a change of control of the Company or (B) contain provisions
restricting their assignment pursuant to a merger, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its properties or assets, except in the case of clauses (iii) or (iv)
for violations, breaches or defaults that would not have a material adverse
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effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger.
SECTION 4.06. SEC Reports and Financial Statements. The
Company has filed with the SEC, and has heretofore made available to Parent true
and complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it under the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act") (such forms, reports, schedules,
statements and other documents, including any financial statements or schedules
included therein, are referred to as the "Company SEC Documents"). Except as set
forth in Schedule 4.06 of the Company Disclosure Schedule, the Company SEC
Documents, at the time filed, (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder. The financial statements of the Company included in the Company SEC
Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Forms 10-Q and 8-K of the SEC) and fairly
present in all material respects (subject, in the case of the unaudited
statements, to normal, year-end audit adjustments that will not be material in
amount or effect) the financial position of the Company (and its consolidated
subsidiaries, to the extent applicable) as at the dates thereof and the results
of its (or their) operations and cash flows for the periods then ended.
SECTION 4.07. Absence of Certain Changes or Events. Except as
set forth on Schedule 4.07 of the Company Disclosure Schedule, since March 31,
1999, the Company has conducted its business only in the ordinary course, and
there has not been any material adverse change (as defined in Section 10.03)
with respect to the Company. Except as set forth on Schedule 4.07 of the Company
Disclosure Schedule, since March 31, 1999, there has not been (i) any
declaration, setting aside or
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payment of any dividend or other distribution with respect to its capital stock
or any redemption, purchase or other acquisition of any of its capital stock (or
securities convertible into its capital stock), (ii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iii) (w) any granting by
the Company to any officer or director of the Company of any increase in
compensation other than in the ordinary course of business, (x) any granting by
the Company to any such officer or director of any increase in severance or
termination pay, (y) except employment arrangements in the ordinary course of
business consistent with past practice with employees other than any executive
officer of the Company, any entry by the Company into any employment, severance
or termination agreement with any such employee or executive officer or director
or (z) any increase in or establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit-sharing, stock option (including the
granting of stock options, stock appreciation rights, performance awards or
restricted stock awards or the amendment of any existing stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan or agreement or arrangement, (iv) any
damage, destruction or loss, whether or not covered by insurance, that has or
reasonably could be expected to have a material adverse effect on the Company,
(v) any payment to an affiliate of the Company other than in the ordinary course
of business consistent with past practice, (vi) any revaluation by the Company
of any of its material assets, (vii) mortgage, lien, pledge, encumbrance,
charge, agreement, claim or restriction placed upon any of the material
properties or assets of the Company, (viii) any material change in accounting
methods, principles or practices by the Company or (ix) (A) any licensing or
other agreement with regard to the acquisition or disposition of any
Intellectual Property Rights (as defined in Section 4.18) or rights thereto
other than licenses or other agreements in the ordinary course of business
consistent with past practice or (B) any amendment or consent with respect to
any licensing agreement filed, or required to be filed, by the Company with the
SEC.
SECTION 4.08. No Undisclosed Liabilities. Except as and to the
extent set forth in the Company Fiscal Year 1998 Financial Statements, as of
December 31, 1998, and except as
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subsequently disclosed in Company SEC Documents, or as set forth on Schedule
4.08 of the Company Disclosure Schedule, the Company had no liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles to be reflected on
a balance sheet of the Company (including the notes thereto). Since December 31,
1998, except as and to the extent set forth in the Company SEC Documents, the
Company has not incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, other than in the ordinary course of business and that
would not have a material adverse effect on the Company. As of the date of this
Agreement, the Company does not have indebtedness for borrowed money in excess
of $1,000,000.
SECTION 4.09. Information Supplied. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the information to be filed by the Company in connection with the Offer
pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information
Statement"), or (iv) the Proxy Statement, will, in the case of the Offer
Documents, the Schedule 14D-9 and the Information Statement, at the respective
times the Offer Documents, the Schedule 14D-9 and the Information Statement are
filed with the SEC or first published, sent or given to the Company's
stockholders, or, in the case of the Proxy Statement, at the time the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting (as defined in Section 7.01) to the extent required by
applicable law, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub specifically for inclusion or incorporation by reference therein.
SECTION 4.10. Benefit Plans. (a) Each "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended
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("ERISA")) (a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (a "Welfare Plan") and each other plan, pension or
welfare arrangement or policy (written or oral) relating to stock options, stock
purchases, compensation, deferred compensation, bonuses, severance, fringe
benefits or other employee benefits, in each case maintained or contributed to,
or required to be maintained or contributed to, by the Company for the benefit
of any present or former employee, officer or director (each of the foregoing, a
"Benefit Plan") has been administered in all material respects in accordance
with its terms. The Company and all the Benefit Plans are in compliance in all
material respects with the applicable provisions of ERISA, the Code and all
other applicable laws.
(b) Schedule 4.10 of the Company Disclosure Schedule sets
forth a complete list of each Benefit Plan as well as each employment,
termination, indemnity, consulting and severance agreement and any and all other
contracts, binding arrangements and understandings (whether written or oral)
with any present or former directors, officers, employees or consultants of the
Company.
(c) None of the Pension Plans is subject to Title IV of ERISA
or Section 412 of the Code and none of the Company or any other person or entity
that, together with the Company, is treated as a single employer under Section
414 (b), (c), (m) or (o) of the Code (each, including the Company, a "Commonly
Controlled Entity"): (i) currently has an obligation to contribute to, or during
any time during the last six years had an obligation to contribute to, a Pension
Plan subject to Title IV of ERISA or Section 412 of the Code, or (ii) has
incurred any liability to the Pension Benefit Guaranty Corporation, which
liability has not been fully paid. All contributions and other payments required
to be made by the Company to any Pension Plan with respect to any period ending
before the Closing Date have been made or reserves adequate for such
contributions or other payments have been or will be set aside therefor and have
been or will be reflected in financial statements.
(d) Neither the Company nor any Commonly Controlled Entity is
required to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such
withdrawal has resulted or would result in any "withdrawal liability" (within
the
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meaning of Section 4201 of ERISA) or "mass withdrawal liability" within the
meaning of PBGC Regulation 4219.2 that has not been fully paid.
(e) Except as set forth on Schedule 4.10 of the Company
Disclosure Schedule, each Benefit Plan (and its related trust, if any) that is
intended to be qualified under Section s 401 and 501(a) of the Code has been
determined by the IRS to qualify under such sections and nothing has occurred to
cause the loss of such qualified status.
(f) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without material liability to
the Company.
(g) Except as set forth on Schedule 4.10 of the Company
Disclosure Schedule, or as required under Section 4980B of the Code, the Company
does not have any obligation to provide post-retirement health benefits.
(h) The Company has heretofore delivered to Parent correct and
complete copies of each of the following:
(i) All written, and descriptions of all binding
oral, employment, termination, consulting and severance agreements,
contracts, arrangements and understandings listed on Schedule 4.10 of
the Company Disclosure Schedule;
(ii) Each Benefit Plan and all amendments thereto;
the trust instrument and/or insurance contracts, if any, forming a part
of such Benefit Plan and all amendments thereto;
(iii) The most recent IRS Form 5500 and all schedules
thereto, if any;
(iv) The most recent determination letter issued by
the IRS regarding the qualified status of each such Pension Plan;
(v) The most recent accountant's report, if any; and
(vi) The most recent summary plan description, if
any.
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SECTION 4.11. Other Compensation Arrangements. Except as
disclosed in the Company SEC Documents or on Schedule 4.11 of the Company
Disclosure Schedule, or except as provided in this Agreement, as of the date of
this Agreement, the Company is not a party to any oral or written (i) consulting
agreement not terminable on not more than 60 calendar days notice (except for
third party agreements for the development of, and assignment to, the Company of
Intellectual Property in the ordinary course of business) and involving the
payment of more than $30,000 per annum, (ii) agreement with any executive
officer or other key employee of the Company (x) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of the nature contemplated by this Agreement
or (y) providing any term of employment or compensation guarantee extending for
a period longer than two years or the payment of more than $30,000 per annum or
(iii) agreement or plan, including any stock option plan, stock appreciation
right plan, restricted stock plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement, other than as contemplated by Section 3.01(d), or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
SECTION 4.12. Litigation. Except as set forth on Schedule 4.12
of the Company Disclosure Schedule, there is no suit, claim, action, proceeding
or investigation pending before any Governmental Entity or, to the knowledge of
the Company, overtly threatened against the Company that could reasonably be
expected to have a material adverse effect on the Company. The Company is not
subject to any outstanding order, writ, injunction or decree that could
reasonably be expected to have a material adverse effect on the Company.
SECTION 4.13. Compliance with Applicable Law. The Company
holds all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of its business (the
"Company Permits"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals that would not have a material
adverse effect on the Company. Except as set forth on Schedule 4.13 of the
Company Disclosure Schedule, the Company is in compliance with the terms of the
Company Permits, except
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where the failure so to comply would not have a material adverse effect on the
Company. Except as disclosed in the Company SEC Documents and except as set
forth on Schedule 4.13 of the Company Disclosure Schedule, to the best knowledge
of the Company, the business of the Company is not being conducted in violation
of any law, ordinance or regulation of any Governmental Entity, except for
possible violations that would not have a material adverse effect on the Company
or prevent or materially delay the consummation of the Offer and/or the Merger.
As of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to the Company is pending or, to the knowledge of the
Company, overtly threatened, nor has any Governmental Entity indicated an
intention to conduct any such investigation or review, other than, in each case,
those the outcome of which would not be reasonably expected to have a material
adverse effect on the Company or prevent or materially delay the consummation of
the Offer and/or the Merger.
SECTION 4.14. Tax Matters. Except as disclosed in the Company
SEC Documents or on Schedule 4.14 of the Company Disclosure Schedule:
(a) The Company (and any affiliated group of which the Company
is now or has ever been a member) has timely filed all federal income tax
returns and all other material tax returns and reports required to be filed by
it. All such returns are complete and correct in all material respects. The
Company (i) has paid to the appropriate authorities all taxes required to be
paid by it, except taxes for which an adequate reserve has been established on
the financial statements contained in the Company SEC Documents or the Company
Fiscal Year 1998 Financial Statements, and (ii) has withheld and paid to the
appropriate authorities all material withholding taxes required to be withheld
by it. The most recent financial statements contained in the Company SEC
Documents reflect an adequate reserve for all taxes payable by the Company for
all taxable periods and portions thereof through the date of such financial
statements.
(b) No federal income tax return or other material tax return
of the Company is under audit or examination by any taxing authority, and no
written or unwritten notice of such an audit or examination has been received by
the Company. Each material deficiency resulting from any audit or examination
relating to taxes by any taxing authority has been
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paid, except for deficiencies being contested in good faith. No material issues
relating to taxes were raised in writing by the relevant taxing authority in any
completed audit or examination that can reasonably be expected to recur in a
later taxable period. The federal income tax returns of the Company do not
contain any positions that could give rise to a material substantial
understatement penalty within the meaning of Section 6662 of the Code.
(c) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection of any
taxes and no power of attorney with respect to any taxes has been executed or
filed with any taxing authority.
(d) No material liens for taxes exist with respect to any
assets or properties of the Company, except for liens for taxes not yet due.
(e) The Company is not a party to and is not bound by any tax
sharing agreement, tax indemnity obligation or similar agreement, arrangement or
practice with respect to taxes (including any advance pricing agreement, closing
agreement or other agreement relating to taxes with any taxing authority).
(f) The Company will not be required to include in a taxable
period ending after the Effective Time taxable income attributable to income
that accrued in a prior taxable period but was not recognized in any prior
taxable period as a result of the installment method of accounting, the
completed contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign tax law.
(g) The Company (i) is not a party to a safe harbor lease
within the meaning of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982, (ii) is not a "consenting corporation" under Section
341(f) of the Code, (iii) has not agreed or is not obligated to make any
payments for services which would not be deductible pursuant to Sections
162(a)(1), 162(m) or 280G of the Code, (iv) has not participated in an
international boycott as defined in Section 999 of the Code, (v) is not required
to
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make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise, (vi) does not own any assets which directly or
indirectly secure any debt the interest on which is tax-exempt under Section
103(a) of the Code, or (vii) does not own any asset which is tax-exempt use
property within the meaning of Section 168(h) of the Code.
(h) The Company is not a party to any joint venture,
partnership or other arrangement or contract which is treated as a partnership
for tax purposes, or has elected to be treated as a branch or a partnership
pursuant to Treasury Regulation Section 301.7701-3.
(i) The Company is a United States person within the meaning
of Section 7701(a)(30) of the Code.
(j) As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, sales, excise, withholding
and other taxes, tariffs or governmental charges of any nature whatsoever.
(k) For purposes of this Section 4.14, all references to the
Company shall include any former subsidiary of the Company, as the context may
require.
SECTION 4.15. State Takeover Statutes. The Board of Directors
of the Company has approved the Offer, the Merger, this Agreement and the
acquisition of Shares by Sub pursuant to the Offer and such approval is
sufficient to render inapplicable to the Offer, the Merger, this Agreement and
the transactions contemplated by this Agreement the provisions of Section 203 of
the DGCL. To the knowledge of the Company, no other state takeover statute or
similar statute or regulation, including without limitation Section 2115 or
Chapters 11 and 12 of the California Corporations Code, applies or purports to
apply to the Offer, the Merger, this Agreement, or any of the transactions
contemplated by this Agreement.
SECTION 4.16. Brokers; Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Hambrecht &
Quist LLC, the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf
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of the Company. The estimated fees and expenses incurred and to be incurred by
the Company in connection with this Agreement and the transactions contemplated
by this Agreement (including the fees of the Company's legal counsel and the
legal counsel for its financial advisor) are set forth in a letter dated August
5, 1999 from the Company to Parent.
SECTION 4.17. Opinion of Financial Advisor. The Board of
Directors of the Company has received the opinion of Hambrecht & Quist LLC,
dated August 5, 1999, to the effect that, as of that date, the consideration to
be received by the holders of Shares pursuant to the Offer and the Merger is
fair to such holders from a financial point of view, and a complete and correct
signed copy of such opinion has been, or promptly upon receipt thereof will be,
delivered to Parent for inclusion in the Offer Documents.
SECTION 4.18. Intellectual Property. (a) The list of patents
and patent applications (collectively the "Company Patent Rights") as listed on
Schedule 4.18 of the Company Disclosure Schedule is a complete and correct
listing of all the patents and patent applications owned solely or jointly by
the Company, and, to the knowledge of the Company, there are no unpaid
maintenance fees, patents that have lapsed, or abandonment of patent
applications, or any reason why any patent application should not be allowed.
(b) The Company is the sole and exclusive owner of all right,
title, and interest in the trademarks ("Registered Marks") and trademark
applications ("Pending Marks") listed on Schedule 4.18 to the Company Disclosure
Schedule, and to the knowledge of the Company, the Company has not allowed any
of the Registered Marks or Pending Marks to be abandoned, canceled, or to
expire.
(c) Except as set forth on Schedule 4.18 of the Company
Disclosure Schedule, to the knowledge of the Company, other than patent and
trademark prosecution by the Company, there are no legal or governmental
proceedings pending relating to patents, trade secrets, trademarks, service
marks or other proprietary information or materials of the Company, and to the
knowledge of the Company no such proceedings are overtly threatened or
contemplated by Governmental Entity or other person.
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(d) The Company has made available to Parent true and correct
copies of all license agreements relating to the Intellectual Property Rights to
which the Company is a party listed on Schedule 4.18 to the Company Disclosure
Schedule.
(e) Except as set forth on Schedule 4.18 of the Company
Disclosure Schedule, the Company owns, or is licensed or otherwise has the right
to use (in each case, clear of any liens or encumbrances of any kind), all
Intellectual Property Rights used in or necessary for the conduct of its
business as currently conducted, and no claims are pending or, to the knowledge
of the Company, overtly threatened that the Company is infringing on or
otherwise violating the rights of any person with regard to any Intellectual
Property Rights owned by and/or licensed to the Company, and to the knowledge of
the Company, no person is infringing on or otherwise violating any right of the
Company with respect to any Intellectual Property owned by and/or licensed to
the Company.
(f) None of the former or current members of management or key
personnel of the Company, including all former and current employees, agents,
consultants and contractors who have contributed to or participated in the
conception and development of Intellectual Property Rights of the Company have
any valid claim against the Company in connection with the involvement of such
persons in the conception and development of any Intellectual Property Rights of
the Company, and to the knowledge of the Company no such claim has been asserted
or overtly threatened.
(g) The Company has taken reasonable and necessary steps to
protect its Intellectual Property Rights, and to the knowledge of the Company no
Intellectual Property Rights have been lost or are in jeopardy of being lost
through failure to act by the Company.
(h) For purposes of this Agreement, "Intellectual Property
Rights" shall mean inventions, discoveries and ideas, whether patented,
patentable or not in any jurisdiction, patents, patent applications (including
reexaminations, reissues, extensions and the like), trademarks (registered or
unregistered), service marks, brand names, certification marks, trade dress,
assumed names, trade names and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing,
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including any extension, modification or renewal of any such registration or
application; trade secrets, know-how and confidential information and rights in
any jurisdiction to limit the use or disclosure thereof by any person; writings
and other works, whether copyrighted, copyrightable or not in any jurisdiction;
registration or applications for registration of copyrights in any jurisdiction,
and any renewals or extensions thereof; computer programs and software
(including source code, object code and data); licenses, immunities, covenants
not to sue and the like relating to the foregoing; any similar intellectual
property or proprietary rights and any claims or causes of action arising out of
or related to any infringement or misappropriation of any of the foregoing.
SECTION 4.19. Labor Relations and Employment. (a) Except as
set forth on Schedule 4.19 of the Company Disclosure Schedule, (i) there is no
labor strike, dispute, slowdown, stoppage or lockout actually pending, or, to
the best knowledge of the Company, threatened against the Company, and during
the past three years there has not been any such action; (ii) no union claims to
represent the employees of the Company; (iii) the Company is not a party to or
bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company; (iv) none of the
employees of the Company is represented by any labor organization and the
Company does not have any knowledge of any current union organizing activities
among the employees of the Company, nor are there representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal; (v) to the knowledge of
the Company, the Company is, and has been at all times, in material compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation;
(vi) there is no unfair labor practice charge or complaint against the Company
pending or, to the knowledge of the Company, threatened before the National
Labor Relations Board or any similar state or foreign agency; (vii) there is no
grievance with respect to or relating to the Company
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arising out of any collective bargaining agreement or other grievance procedure;
(viii) no charges with respect to or relating to the Company are pending before
the Equal Employment Opportunity Commission or any other agency responsible for
the prevention of unlawful employment practices; (ix) the Company has not
received notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company and no such
investigation is in progress; and (x) there are no complaints, lawsuits or other
proceedings pending or to the knowledge of the Company threatened in any forum
by or on behalf of any present or former employee of the Company alleging breach
of any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship.
(b) To the knowledge of the Company, since the enactment of
the Worker Adjustment and Retraining Notification ("WARN") Act, there has not
been (i) a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company; or (ii) a "mass layoff" (as defined in
the WARN Act) affecting any site of employment or facility of the Company; nor
has the Company been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth on Schedule 4.19 of the Company
Disclosure Schedule, to the knowledge of the Company, none of the employees of
the Company has suffered an "employment loss" (as defined in the WARN Act) since
three months prior to the date of this Agreement.
SECTION 4.20. Change of Control. Except as set forth on
Schedule 4.20 of the Company Disclosure Schedule, the transactions contemplated
by this Agreement will not constitute a "change of control" under, require the
consent from or the giving of notice to a third party pursuant to, permit a
third party to terminate or accelerate vesting, repayment or repurchase rights,
give rise to any right, license or encumbrance or create any other detriment
under the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, lease, contract, agreement or other instrument or obligation
to which the Company is a party,
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including without limitation any Intellectual Property Rights of the Company, or
by which it or any of its properties or assets may be bound, except where the
adverse consequences resulting from such change of control or where the failure
to obtain such consents or provide such notices would not, individually or in
the aggregate, have a material adverse effect on the Company.
SECTION 4.21. Environmental Matters. (a) Except as set forth
on Schedule 4.21 of the Company Disclosure Schedule, the Company has been and is
in compliance with all applicable Environmental Laws (as this term and the other
terms in this section are defined below), except for such violations and
defaults as would not, individually or in the aggregate, have a material adverse
effect on the Company.
(b) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule, to the knowledge of the Company, the Company possesses all
required Environmental Permits; all such Environmental Permits are in full force
and effect; there are no pending or, to the knowledge of the Company, threatened
proceedings to revoke such Environmental Permits and the Company is in
compliance with all terms and conditions thereof, except for such failures to
possess or comply with Environmental Permits as would not, individually or in
the aggregate, have a material adverse effect on the Company.
(c) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule, and except for matters which would not, individually or in
the aggregate, have a material adverse effect on the Company, to the knowledge
of the Company, the Company has not received any notification that the Company
or any former subsidiary as a result of any of the current or past operations of
the Business, or any property currently or formerly owned or leased or used in
connection with the Business, is or may be adversely affected by any proceeding,
investigation, claim, lawsuit or order by any Governmental Entity or other
person relating to whether (i) any Remedial Action is or may be needed to
respond to a Release or threat of Release into the environment of Hazardous
Substances arising out of or caused by any current or past operations of the
Company or any of its former subsidiaries, (ii) any Environmental Liabilities
and Costs imposed by, under or pursuant to Environmental Laws as in effect on or
prior to the date hereof shall be sought, or proceeding commenced, arising from
the current or past operations of the Business or
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(iii) the Company or any former subsidiary is or may be a "potentially
responsible party" for a Remedial Action, pursuant to any Environmental Law for
the costs of investigating or remediating Releases or threatened Releases into
the environment of Hazardous Substances, whether or not such Release or
threatened Release has occurred or is occurring at properties currently or
formerly owned or operated by the Company and its former subsidiaries.
(d) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule and except for Environmental Permits, the Company has not
entered into any written agreement with any entity or persons including any
Governmental Entity by which the Company has assumed the responsibility, either
directly or by services rendered or as a guarantor or surety, to pay for the
remediation of any condition arising from or relating to a Release of Hazardous
Substances as defined under Environmental Laws as in effect on or prior to the
date hereof into the environment in connection with the Business, including for
cost recovery by third parties with respect to such Releases or threatened
Releases.
(e) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule, to the knowledge of the Company, there is not now and has
not been at any time in the past, a Release in connection with the current or
former conduct of the Business of substances that would constitute Hazardous
Substances as regulated under Environmental Laws as in effect on or prior to the
date hereof for which the Company is required or is reasonably likely to be
required to perform, at its own expense, or to pay for a Remedial Action
pursuant to Environmental Laws as currently in effect, or will incur
Environmental Liabilities and uncompensated costs that would, individually or in
the aggregate, have a material adverse effect on the Company.
(f) For purposes hereof:
(i) "Business" means the current and former
businesses of the Company and its subsidiaries including, but not
limited to, businesses or subsidiaries that have been previously sold
by the Company, or otherwise disposed of or merged into the Company, or
any predecessors thereto.
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(ii) "Environmental Laws" means all Laws relating to
the protection of human health or the environment, or to any emission,
discharge, generation, processing, storage, holding, abatement,
existence, Release, threatened Release or transportation of any
chemical or substance, including, but not limited to, (i) CERCLA, the
Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the Toxic Substances Control Act, property transfer statutes
or requirements and (ii) all other requirements pertaining to
reporting, licensing, permitting, investigation or remediation of
Hazardous Substances in the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport or handling of
Hazardous Substances or relating to human health or safety from
exposure to Hazardous Substances.
(iii) "Environmental Liabilities and Costs" means all
damages, natural resource damages, claims, losses, expenses, costs,
obligations, and liabilities (collectively, "Losses"), whether direct
or indirect, known or unknown, current or potential, past, present or
future, imposed by, under or pursuant to Environmental Laws, including,
but not limited to, all Losses related to Remedial Actions, and all
fees, capital costs, disbursements, penalties, fines and expenses of
counsel, experts, contractors, personnel and consultants and the value
of any services that might be provided by the Company in lieu thereof
and expenditures necessary to cause any such property or the Company or
any former subsidiary to be in compliance with requirements of
Environmental Laws.
(iv) "Environmental Permits" means any federal,
state, provincial or local permit, license, registration, consent,
order, administrative consent order, certificate, approval or other
authorization necessary for the conduct of the Business as currently
conducted, and wherever it is currently conducted, under any applicable
Environmental Law.
(v) "Governmental Entity" means any government or
subdivision thereof, domestic, foreign or supranational or any
administrative, governmental or
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regulatory authority, agency, commission, tribunal or body, domestic,
foreign or supranational.
(vi) "Hazardous Substances" means any substance that
(a) is defined, listed or identified or otherwise regulated under any
Environmental Law (including, without limitation, radioactive
substances, polycholorinated-biphenyls, petroleum and petroleum
derivatives and products) or (b) requires investigation, removal or
remediation under applicable Environmental Law.
(vii) "Laws" means all (A) constitutions, treaties,
statutes, laws (including, but not limited to, the common law), rules,
regulations, ordinances or codes of any Governmental Entity, (B)
Environmental Permits, and (C) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Entity.
(viii) "Release" means as defined in CERCLA.
(ix) "Remedial Action" means all actions required by
any Governmental Entity pursuant to Environmental Law or otherwise
taken as necessary to comply with Environmental Law to (A) clean up,
remove, treat or in any other way remediate any Hazardous Substances;
(B) prevent the release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or
the environment; or (C) perform studies, investigations or monitoring
in respect of any such matter.
SECTION 4.22. Material Contracts. (a) The Company is not in
default under or in violation of any provision of any Contract (as hereinafter
defined), except for such defaults or violations which would not, individually
or in the aggregate, reasonably be expected to result in a material adverse
effect on the Company.
(b) Except as set forth on Schedule 4.22(b) of the Company
Disclosure Schedule, the Company is not a party to or bound by any:
(i) employment agreement or employment contract
that has an aggregate future liability in excess of $30,000 and is not
terminable by the Company by notice of not more than 60 days for a cost
of less than $20,000;
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(ii) employee collective bargaining agreement or
other contract with any labor union;
(iii) covenant of the Company not to compete;
(iv) agreement, contract or other arrangement with
any current or former officer, director, or affiliate or relative
thereof, of the Company (other than employment agreements covered by
clause (i) above);
(v) lease, sublease or similar agreement involving
annual payments in excess of $30,000 under which the Company is a
lessor or sublessor of, or makes available for use to any person, (A)
any Company Property (as hereinafter defined) or (B) any portion of any
premises otherwise occupied by the Company;
(vi) lease or similar agreement with any person
under which (A) the Company is lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned
by any person or (B) the Company is a lessor or sublessor of, or makes
available for use any person, any tangible personal property owned or
leased by the Company, in any such case which has an aggregate annual
future liability or receivable, as the case may be, in excess of
$30,000 and is not terminable by the Company by notice of not more than
60 days for a cost of less than $20,000;
(vii) (A) continuing contract for the future purchase
of materials, supplies or equipment (other than purchase contracts and
orders for inventory in the ordinary course of business consistent with
past practice) in excess of $30,000 annually, (B) management, service,
consulting or other similar type of contract or (C) advertising
agreement or arrangement, in any such case which has an aggregate
future liability to any person in excess of $30,000 and is not
terminable by the Company by notice of not more than 60 days for a cost
of less than $20,000;
(viii) license, option or other agreement relating in
whole or in part to intellectual property (including any license or
other agreement under which the Company is licensee or licensor of any
such intellectual
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property, other than as set forth on Schedule 4.18 of the Company
Disclosure Schedule);
(ix) agreement, contract or other instrument under
which the Company has borrowed any money from, or issued any note,
bond, debenture or other evidence of indebtedness to, any person or any
other note, bond, debenture or other evidence of indebtedness issued to
any person;
(x) agreement, contract or other instrument
(including so-called take-or-pay or keepwell agreements) under which
(A) any person has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or (B) the Company has
directly or indirectly guaranteed indebtedness, liabilities or
obligations of any person (in each case other than endorsements for the
purpose of collection in the ordinary course of business);
(xi) agreement, contract or other instrument under
which the Company has, directly or indirectly, made any advance, loan,
extension or credit or capital contribution in excess of $20,000 to, or
other investment in any person;
(xii) mortgage, pledge, security agreement, deed of
trust or other instrument granting a lien or other encumbrance upon any
Company Property;
(xiii) agreement or instrument providing for
indemnification of any person with respect to liabilities relating to
any current or former business of the Company, a former subsidiary or
any predecessor person exclusive of indemnifications included in other
documents listed in the Company Disclosure Schedule or granted to
sellers of real property owned or leased by the Company or its
affiliates; or
(xiv) any other material agreement, contract,
management contract, lease, license, commitment or instrument to which
the Company is a party or by or to which it or any of its assets or
business is bound or subject, not covered by any of the categories
specified in clauses (i) through (xiii) above.
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Except as set forth on Schedule 4.22(b) of the Company
Disclosure Schedule, all agreements, contracts, leases, licenses, commitments or
instruments of the Company listed in the Company Disclosure Schedule
(collectively, the "Contracts") are valid, binding and in full force and effect
and are enforceable by the Company in accordance with their respective terms.
Except as set forth on Schedule 4.22(b) of the Company Disclosure Schedule, the
Company has performed all material obligations required to be performed by it to
date under the Contracts and it is not (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder and, to the knowledge of the Company, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder nor has any other
party to any of the Contracts taken any action or failed to take any action that
would (with or without the lapse of time or the giving of notice or both) cause
any of the Contracts to terminate, or threatened, or otherwise indicated to the
Company that such party intends to, is considering, or may terminate any of the
Contracts. Except as set forth on Schedule 4.22(b) of the Company Disclosure
Schedule, there are no change of control or similar provisions or any
obligations arising under any Contract with are created, accelerated or
triggered by the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby or thereby.
SECTION 4.23. Property. Schedule 4.23 of the Company
Disclosure Schedule accurately identifies all real property, leases and other
rights in real property, structures and other buildings of the Company
(collectively, the "Company Properties"). All properties and assets of the
Company, real and personal, material to the conduct of its business are, except
for changes in the ordinary course of business since March 31, 1999, reflected
in the balance sheet, and except as set forth on Schedule 4.23 of the Company
Disclosure Schedule, the Company has good and marketable title to real and
personal property reflected on the balance sheet or acquired by it since the
date of the balance sheet, free and clear of all Liens (as defined below) and
defects of title other than Permitted Liens (as defined below). All real
property, structures and other buildings and material equipment of the Company
are currently used in the operation of the business, are adequately maintained
and are in satisfactory operating condition and repair for the requirements of
the business as
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presently conducted. "Liens" means any mortgages, pledges, claims, liens,
charges, encumbrances, agreements, restrictions and security interests of any
kind or nature whatsoever. "Permitted Liens" means any Liens for (i) taxes or
other charges or levies of a Governmental Entity which are not due and payable
or which are being contested in good faith by appropriate proceedings as
described on Schedule 4.23 of the Company Disclosure Schedule and as to which
adequate financial reserves have been established and described on Schedule 4.23
of the Company Disclosure Schedule; (ii) workmen's, repairmen's or other similar
Liens (inchoate or otherwise) arising or incurred in the ordinary course of
business in respect of obligations which are not overdue; (iii) minor title
defects, easements or Liens affecting real property, which defects, easements or
Liens do not, individually or in the aggregate, materially impair the continued
use, occupancy, value or marketability of title of the real property to which
they relate, assuming that the property is used on substantially the same basis
as such property is currently being used by the Company.
SECTION 4.24. Insurance. Schedule 4.24 of the Company
Disclosure Schedule accurately identifies each material insurance policy
(including policies providing property, casualty, environmental liability,
liability, malpractice and workers compensation insurance) and all other
material types of insurance maintained by the Company, together with carriers
and liability limits for each such policy. Each such policy is duly in force and
no notice has been received by the Company from any insurance carrier purporting
to cancel or reduce coverage under any such policy. The Company is current in
all premiums or other payments due thereunder and no notice has been received by
the Company from any insurance carrier purporting to increase any such premiums
in any material respect. All insurance coverage held for the benefit of the
Company is adequate to cover risks customarily insured against by similar
companies in its industry.
SECTION 4.25. Year 2000 Compliance. Except as set forth on
Schedule 4.25 of the Company Disclosure Schedule, the Company's disclosure in
the Company's March 31, 1999, Form 10-Q under the caption "Impact of Year 2000"
accurately sets forth in all material respects the Company's year 2000
compliance status regarding its internal systems, including IT and non-IT
systems, and technical infrastructure.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
SECTION 5.01. Organization. Parent is a limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite limited partnership power
and authority to carry on its business as now being conducted, except where the
failure to be so formed, existing and in good standing or to have such power and
authority would not be reasonably expected to prevent or materially delay the
consummation of the Offer and/or the Merger. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not be reasonably expected to prevent or materially delay
the consummation of the Offer and/or the Merger.
SECTION 5.02. Authority. Parent has requisite limited
partnership power and authority and Sub has requisite corporate power and
authority, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary partnership action on the part of Parent
and corporate action on the part of Sub and no other partnership proceedings on
the part of Parent or corporate proceedings on the part of Sub are necessary to
authorize this Agreement or to consummate such transactions. No vote of the
limited partner of Parent is required to approve this Agreement or the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Sub, as the case may be, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, constitutes a valid
and binding obligation of each of Parent and Sub enforceable against them in
accordance with its terms, except (i) as limited by
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applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
SECTION 5.03. Consents and Approvals; No Violations. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Offer Documents), the DGCL, the laws of other states
in which Parent is qualified to do or is doing business, state takeover laws and
foreign laws, neither the execution, delivery or performance of this Agreement
by Parent and Sub nor the consummation by Parent and Sub of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the certificate of limited partnership or the limited partnership
agreement of Parent or the certificate of incorporation or by-laws of Sub, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not be
reasonably expected to prevent or materially delay the consummation of the Offer
and/or the Merger), (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of clauses
(iii) and (iv) for violations, breaches or defaults which would not,
individually or in the aggregate, be reasonably expected to prevent or
materially delay the consummation of the Offer and/or the Merger.
SECTION 5.04. Information Supplied. None of the information
supplied or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the Information Statement, or (iv) the Proxy Statement will, in
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the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the Company's stockholders, or, in the case of the Proxy Statement, at
the time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholders Meeting to the extent required by applicable law,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Offer Documents will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by Parent or Sub
with respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or incorporation
by reference therein.
SECTION 5.05. Interim Operations of Sub. Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
SECTION 5.06. Financing. Sub will have sufficient funds to pay
the Offer Price upon consummation of the Offer and the Merger Consideration upon
consummation of the Merger and all related fees and expenses.
ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of Business of the Company. Except as
contemplated by this Agreement or as expressly agreed to in writing by Parent
(such consent not to be unreasonably withheld), during the period from the date
of this Agreement until such time as Parent's designees shall constitute a
majority of the members of the Board of Directors of the Company, the Company
will conduct its operations according to its ordinary and usual course of
business and consistent with past practice and use commercially reasonable
efforts to preserve intact its current business organization,
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keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having material business dealings with it and to
preserve goodwill. Without limiting the generality of the foregoing, and except
as (x) otherwise expressly provided in this Agreement, (y) required by law, or
(z) set forth on Schedule 6.01 of the Company Disclosure Schedule, the Company
will not without the consent of Parent (such consent not to be unreasonably
withheld):
(a) (i) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such, other than dividends declared
prior to the date of this Agreement, (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 any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(b) other than in connection with the exercise of options and
warrants outstanding prior to the date hereof in accordance with their
current terms, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or equity equivalent;
(c) amend its Certificate of Incorporation or By-Laws;
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets;
(e) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets;
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(f) amend or otherwise modify, or terminate, any Contract;
(g) incur any additional indebtedness (including for this
purpose any indebtedness evidenced by notes, debentures, bonds, leases
or other similar instruments, or secured by any lien on any property,
conditional sale obligations, obligations under any title retention
agreement and obligations under letters of credit or similar credit
transaction) in a single transaction or a group of related
transactions, enter into a guaranty, or engage in any other financing
arrangements having a value in excess of $10,000, or make any loans,
advances or capital contributions to, or investments in, any other
person;
(h) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure or
ownership;
(i) except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the
accounting principles or practices used by it;
(j) revalue any of its assets, including, without limitation,
writing down the value of its inventory or writing off notes or
accounts receivable other than in the ordinary course of business;
(k) make any tax election, change any annual tax accounting
period, amend any tax return, settle or compromise any income tax
liability, enter into any closing agreement, settle any tax claim or
assessment, surrender any right to claim a tax refund or fail to make
the payments or consent to any extension or waiver of the limitations
period applicable to any tax claim or assessment;
(l) except in the ordinary course of business, settle or
compromise any pending or threatened suit, action or claim with a cost
of $10,000 or more;
(m) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted, contingent or otherwise)
other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of the
Company or incurred in the ordinary course of business consistent with
past practice;
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(n) increase in any manner the compensation or fringe benefits
of any of its directors, officers and other key employees or pay any
pension or retirement allowance not required by any existing plan or
agreement to any such employees, or become a party to, amend or commit
itself to any pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the benefit of
any employee, other than increases in the compensation of employees who
are not officers or directors of the Company made in the ordinary
course of business consistent with past practice, or, except to the
extent required by law, voluntarily accelerate the vesting of any
compensation or benefit;
(o) waive, amend or allow to lapse any term or condition of
any confidentiality, "standstill", consulting, advisory or employment
agreement to which the Company is a party (except for any agreement
which terminates in accordance with its express terms);
(p) approve any annual operating budgets for the Company;
(q) change the Company's dividend policy;
(r) enter into any transaction with affiliates;
(s) enter into any business other than the business currently
engaged in by the Company;
(t) pursuant to or within the meaning of any bankruptcy law,
(i) commence a voluntary case, (ii) consent to the entry of an order
for relief against it in an involuntary case, (iii) consent to the
appointment of a custodian of it or for all or substantially all of its
property or (iv) make a general assignment for the benefit of its
creditors;
(u) purchase or lease or enter into a binding agreement to
purchase or lease any real property;
(v) enter into or amend, modify or terminate any employment
agreement with any officer or employee;
(w) enter into any joint venture, lease, license, management
agreement, research agreement, development agreement, option or other
obligation relating to new development, or any other agreement of the
Company, including without limitation any agreement or arrangement
relating to Intellectual Property Rights; or
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(x) take, or agree in writing or otherwise to take, any of the
foregoing actions.
During the period from the date of this Agreement through the
Effective Time, (i) as requested by Parent, the Company shall confer on a
regular basis with one or more representatives of Parent with respect to
material operational matters; (ii) the Company shall, within 30 days following
each fiscal month, deliver to Parent financial statements, including an income
statement and balance sheet for such month; and (iii) upon the knowledge of the
Company of any material adverse change to the Company, any material litigation
or material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the breach in
any material respect of any representation or warranty contained herein, the
Company shall promptly notify Parent thereof.
Notwithstanding any provision contained in this Agreement,
action taken by the Company which is permitted under this Section 6.01 shall not
constitute a misrepresentation or breach of warranty or covenant. The Company
shall have the right to update the Company Disclosure Schedule, as it relates to
Section 4.07, between the date hereof and the Effective Time to reflect actions
taken by the Company which are permitted to be taken pursuant to this Section
6.01.
SECTION 6.02. No Solicitation. (a) The Company agrees that
from the date of this Agreement until such time as the Parent's designees shall
constitute a majority of the Board of Directors of the Company or the
termination of this Agreement (i) that neither it nor any of its officers,
directors or employees shall, and that the Company will instruct its agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its subsidiaries) not to initiate,
solicit or knowingly encourage, directly or indirectly, any inquiries or the
making or implementation of any Acquisition Proposal (including, without
limitation, any Acquisition Proposal to its stockholders) or, other than in the
event that the Board of Directors of the Company determines in good faith, after
receiving advice from outside counsel, that failure to do so would be reasonably
determined to constitute a breach of its fiduciary duties to the Company's
stockholders under applicable law, and in response to an unsolicited
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request therefor by a person who a majority of the Board of Directors of the
Company believes intends to submit a Superior Proposal (as defined below),
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or release any third party from any obligations under any existing
standstill agreement or arrangement, or otherwise knowingly facilitate any
effort or attempt to make or implement an Acquisition Proposal; and (ii) that it
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, and it will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 6.02; provided, however, that nothing contained in this Section 6.02
shall prohibit the Company or its Board of Directors from taking and disclosing
to the Company's stockholders a position with respect to a tender offer by a
third party pursuant to Rule 14d-9 and 14e-2(a) promulgated under the Exchange
Act or from making such disclosure to the Company's stockholders which, in the
judgment of the Board of Directors of the Company after receiving advice of
outside counsel, may be required under applicable law. From and after the
execution of this Agreement, the Company shall promptly advise Parent in writing
of the receipt, directly or indirectly, of any inquiries, discussion,
negotiations, or proposals relating to an Acquisition Proposal (including the
specific terms thereof and, subject to any confidentiality obligations of the
Company existing as of the date hereof, the identity of the other party or
parties involved) and furnish to Parent within 24 hours of such receipt an
accurate description of all material terms (including any changes or adjustment
to such terms as a result of negotiations or otherwise) of any such written
proposal in addition to any non-public information provided to any third party
relating thereto. In addition, the Company shall promptly advise Parent, in
writing, if the Board of Directors of the Company shall make any determination
as to any Acquisition Proposal.
(b) For purposes hereof: (i) "Acquisition Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of any class of equity securities of the
Company, any tender offer or exchange offer that if consummated would result in
any person beneficially owning 20% or more of any
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class of equity securities of the Company, any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company, other
than the transactions contemplated by this Agreement, or any other transaction
the consummation of which could reasonably be expected to impede, interfere
with, prevent or materially delay the Offer and/or the Merger or which would
reasonably be expected to dilute materially the benefits to Parent of the
transactions contemplated hereby; and (ii) "Superior Proposal" means an
Acquisition Proposal which a majority of the disinterested directors of the
Company determines in its good faith judgment (based on advice of the Company's
independent financial advisor) to be more favorable to the stockholders of the
Company than the Offer or the Merger, and for which financing, to the extent
required, is then committed.
SECTION 6.03. Other Actions. Except as otherwise contemplated
by this Agreement, neither the Company, on the one hand, nor the Parent nor Sub
or any of their respective subsidiaries on the other hand, shall take any action
that would reasonably be expected to result in (i) any of the representations
and warranties of the Company on the one hand, or of Parent or Sub on the other
hand, set forth in this Agreement that are qualified as to materiality becoming
untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect, or (iii) except as otherwise
permitted by Section 6.02, any of the Offer Conditions not being satisfied.
SECTION 6.04. Notice of Certain Events. The Company and Parent
shall promptly notify each other of:
(a) any notice or other communication from any
person alleging that the consent of such person is or may be
required in connection with the transactions contemplated by
this Agreement;
(b) any notice or other communication from any
Government Entity in connection with the transactions
contemplated by this Agreement;
(c) any action, suits, claims, investigations or
proceedings commenced or, to the knowledge of the notifying
party, threatened against, relating to or
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involving or otherwise affecting such party or any of its
subsidiaries;
(d) an administrative or other order or notification
relating to any material violation or claimed violation of
law;
(e) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to
the Closing Date; and
(f) any material failure of any party to comply with
or satisfy 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 6.04
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Stockholder Approval; Preparation of Proxy
Statement. (a) If the Company Stockholder Approval is required by law, the
Company will, at Parent's request, as soon as practicable following the
acceptance for payment of, and payment for, any Shares by Sub pursuant to the
Offer and the expiration of the Offer, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Stockholders Meeting") for the purpose
of obtaining the Company Stockholder Approval. The Company will, through its
Board of Directors, recommend to its stockholders that the Company Stockholder
Approval be given. Notwithstanding the foregoing, if Sub or any other subsidiary
of Parent shall acquire at least 90% of the outstanding Shares, the parties
shall, at the request of Parent, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after the expiration
of the Offer without a Stockholders Meeting in accordance with Section 253 of
the DGCL. Without limiting the generality of the foregoing, the
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Company agrees that its obligations pursuant to the first sentence of this
Section 7.01(a) shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company of any Acquisition Proposal or
(ii) the withdrawal or modification by the Board of Directors of the Company of
its approval or recommendation of the Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is required by law,
the Company will, at Parent's request, as soon as practicable following the
acceptance for payment of, and payment for, any Shares by Sub pursuant to the
Offer and the expiration of the Offer, prepare and file a preliminary Proxy
Statement with the SEC and will use commercially reasonable efforts to respond
to any comments of the SEC or its staff and to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after responding
to all such comments to the satisfaction of the staff. The Company will notify
Parent promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Stockholders Meeting there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company will promptly prepare and mail to its
stockholders such an amendment or supplement. The Company will not mail any
Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects, provided that Parent shall identify its objections and fully
cooperate with the Company to create a mutually satisfactory Proxy Statement.
(c) Parent agrees to cause all Shares purchased pursuant to
the Offer to be voted in favor of the Company Stockholder Approval.
SECTION 7.02. Access to Information. From the date hereof
until such time as Parent's designees shall constitute a majority of the members
of the Board of Directors of the Company, the Company shall give Parent and Sub,
their counsel, financial advisors, auditors and other authorized representatives
reasonable full access to the offices, properties, books and record of the
Company during normal
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business hours, will furnish to Parent and Sub, their counsel, financial
advisors, financial institutions auditors and other authorized representatives
such financial and operating data and other information as such may be
reasonably requested and will instruct the employees of the Company, their
counsel and financial advisors to cooperate with Parent and Sub in their
investigation of the Business; provided, that (i) no investigation pursuant to
this Section 7.02 shall affect any representation or warranty given by the
Company to Parent and Sub hereunder; (ii) any information provided to Parent
and/or Sub pursuant to this Section 7.02 shall be subject to the Confidentiality
and Non-Disclosure Agreement dated September 28, 1998, as amended, by and
between the Company and Purdue Pharma L.P., a Delaware limited partnership and
affiliated companies (the "Confidentiality Agreement"), the terms of which shall
continue to apply, except as otherwise agreed by the parties thereto, unless and
until Parent and Sub shall have purchased a majority of the outstanding Shares
pursuant to the Offer and notwithstanding termination of this Agreement; and
(iii) the Company shall be required to disclose information that would otherwise
jeopardize protections offered under the attorney-client privilege or the
work-product doctrine only to appropriate counsel to the parties whose access to
such information would not jeopardize such privileges; provided, however, that
the parties agree to otherwise provide such information in a manner that will
not jeopardize such privileges.
SECTION 7.03. Reasonable Efforts. Each of the Company, Parent
and Sub agree to use its reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements which may be
imposed on itself with respect to the Offer and the Merger (which actions shall
include furnishing all information required in connection with approvals of or
filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them in connection with the Offer and the Merger. Each of
the Company, Parent and Sub will use its reasonable efforts to take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party required to
be obtained or made by Parent, Sub or the Company in connection with the Offer
and the Merger or the taking of any action contemplated thereby or
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by this Agreement, except that no party need waive any substantial rights or
agree to any substantial limitation on its operations or to dispose of any
assets.
SECTION 7.04. Options and Warrants. Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any committee
thereof) shall adopt appropriate resolutions and take all action necessary to
provide that the outstanding Options and Warrants, whether or not then fully
vested or exercisable, shall, at the Effective Time, be canceled and retired and
shall cease to exist, and the holders thereof entitled to receive the
consideration from the Surviving Corporation, if any, determined in accordance
with Section 3.01(d) and (e) hereof, respectively, including obtaining all
necessary consents of the holders of Options and Warrants to the foregoing
cancellation and treatment of such Options and Warrants. In addition, the
Company shall take all necessary action to provide that the stock options plans
of the Company shall be terminated as of the Effective Time.
SECTION 7.05. Directors. Promptly upon the acceptance for
payment of, and payment for, a majority of the outstanding Shares by Sub
pursuant to the Offer, Sub shall be entitled and obligated to designate such
number of directors on the Board of Directors of the Company as will give Sub,
subject to compliance with Section 14(f) of the Exchange Act, a majority of such
directors, and the Company shall, at such time, cause Sub's designees to be so
elected by its existing Board of Directors; provided, however, that in the event
that Sub's designees are elected to the Board of Directors of the Company, until
the Effective Time such Board of Directors shall have at least two directors who
are directors on the date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided, further, that, in such
event, if the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall designate a person
to fill such vacancy who shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or officers or affiliates of Parent or
any of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Subject to applicable law, the Company
shall take all action requested by Parent necessary to effect any such election,
including
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mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company agrees to make such mailing together with the
mailing of the Schedule 14D-9 (provided that Sub shall have provided to the
Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company will promptly, at the option of Parent, either increase
the size of the Company's Board of Directors and/or obtain the resignation of
such number of its current directors as is necessary to enable Sub's designees
to be elected or appointed to, and to constitute a majority of, the Company's
Board of Directors as provided above.
SECTION 7.06. Redemption of Stockholders Rights Plan. Promptly
upon the execution of this Agreement, the Board of Directors of the Company
shall take all action necessary to amend the Rights Plan (i) to provide that (A)
the Rights will not separate from the Shares as a result of the execution of
this Agreement and the consummation of the Offer and Merger, and (B) none of the
Company, Parent, Sub nor the Surviving Corporation shall have any obligations
under the Rights Plan to any holder (or former holder) of Rights as of and
following the Effective Time, and (ii) as otherwise may be necessary to render
the Rights Plan inapplicable to the transactions contemplated by the Offer and
the Merger.
SECTION 7.07. Fees and Expenses. (a) Except as otherwise
specifically provided for herein, whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
(b) The prevailing party in any legal action undertaken to
enforce this Agreement or any provision hereof shall be entitled to recover from
the other party the costs and expenses (including attorneys' and expert witness
fees and expenses) incurred in connection with such action.
(c) Parent and the Company shall cooperate in the preparation,
execution and filing of all returns, applications or other documents regarding
any real property transfer, stamp, recording, documentary or other taxes and any
other fees and similar taxes which become payable in connection with
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the Merger (collectively, "Transfer Taxes"). The Company will pay all of the
Transfer Taxes.
SECTION 7.08. Indemnification; Insurance. (a) Parent and Sub
agree that all rights to indemnification for acts or omissions occurring prior
to the Effective Time now existing in favor of the current or former directors
or officers (the "Indemnified Parties") of the Company as provided in its
Certificate of Incorporation or By-laws or existing indemnification contracts
(all of which have been disclosed on Schedule 4.10 of the Company Disclosure
Schedule) shall survive the Merger and shall continue in full force and effect
in accordance with their terms.
(b) For six years from the Effective Time, Parent shall,
unless Parent agrees in writing to guarantee the indemnification obligations set
forth in Section 7.08(a), maintain in effect the Company's current directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been heretofore delivered to Parent); provided, however, that
in no event shall Parent be required to expend in any one year an amount in
excess of 150% of the annual premiums currently paid by the Company for such
insurance (which the Company represents is currently not more than $185,000);
and, provided, further, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated only to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) This Section 7.08 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company, Parent, the
Surviving Corporation and the Indemnified Parties, and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
SECTION 7.09. Certain Litigation. The Company agrees that it
will not settle any litigation commenced after the date hereof against the
Company or any of its directors by any stockholder of the Company relating to
the Offer, the Merger or this Agreement, without the prior written consent of
Parent. In addition, the Company will not voluntarily cooperate with any third
party which may hereafter seek to restrain or prohibit or otherwise oppose the
Offer or the
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Merger and will cooperate with Parent and Sub to resist any such effort to
restrain or prohibit or otherwise oppose the Offer or the Merger, unless the
Board of Directors of the Company determines in good faith, after consultation
with outside counsel, that failing so to cooperate with such third party or
cooperating with Parent or Sub, as the case may be, would constitute a breach of
the director's fiduciary duties under applicable law.
Section 7.10. 401(k) Plan. The Company agrees to take, or
cause to be taken, all actions necessary to identify and correct all compliance
and form defects related to the Company's 401(k) plan, including without
limitation all action necessary to correct any compliance or form defect
identified in the Memorandum dated July 21, 1999, from Ernst & Young to the
Company and any other compliance or form defects that may be identified after
the date thereof, and further agrees to take all necessary action to provide
that the Company's 401(k) plan shall be terminated effective immediately prior
to the acceptance for payment of Shares by Sub in the Offer. The Company agrees
and acknowledges that no employees of the Company shall be entitled to
participate in any defined contribution plan (including but not limited to any
401(k) plan or similar plan) of Parent or any of its affiliates for a period of
one year following the effective date of termination of the Company's 401(k)
plan.
Section 7.11. Environmental Remediation. The Company agrees to take, or
cause to be taken, all actions necessary to comply by September 10, 1999 in all
material respects with the corrective actions recommended in the Tenant
Environmental Inspection Report dated May 18, 1999, as requested by the
Company's building property manager in the letter to the Company dated July 9,
1999.
ARTICLE VIII
CONDITIONS
SECTION 8.01. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction prior to the Closing Date of the following
conditions (provided, however, that paragraphs (b) and (c) shall be conditions
to each party's obligation to effect the Merger
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only until such time as Parent's designees shall constitute a majority of the
members of the Board of Directors of the Company).
(a) Company Stockholder Approval. If required by applicable
law, the Company Stockholder Approval shall have been obtained.
(b) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement that are qualified as to
materiality shall be true and correct and any representations and warranties
that are not so qualified shall be true and correct in all material respects at
and as of the Effective Time, with the same force and effect as if made at and
as of the Effective Time, other than such representations and warranties as are
expressly made as of another date, and Parent and Sub shall have received a
certificate of the Company to that effect signed by a duly authorized officer
thereof.
(c) Agreements and Covenants. The Company shall have performed
or complied with in all material respects all agreements and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Effective Time, including without limitation the redemption of the Rights Plan,
and Parent and Sub shall have received a certificate of the Company to such
effect signed by a duly authorized officer thereof.
(d) No Injunctions or Restraints. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect;
provided, however, that each of the parties shall have used reasonable efforts
to prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered.
(e) Purchase of Shares. Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after the Company
Stockholder Approval (if required by applicable law):
(a) by mutual written consent of Parent and the Company, by
action of the Board of Directors of the General Partner on behalf of the Parent
and by the Board of Directors of the Company;
(b) by either Parent or the Company if neither the Offer nor
the Merger shall have been consummated on or before December 31, 1999, unless
such date is otherwise extended by Parent in its sole discretion; provided,
however, that neither Parent nor the Company may terminate this Agreement
pursuant to this Section 9.01(b) if such party shall have materially breached
this Agreement;
(c) by either Parent or the Company if any court of competent
jurisdiction in the United States or other United States Governmental Entity has
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; provided, however, that
the party seeking to terminate this Agreement shall have used its best efforts
to remove or lift such order, decree, ruling or other action;
(d) by the Company if, prior to the Effective Time, any person
has made a bona fide proposal relating to an Acquisition Proposal, or has
commenced a tender or exchange offer for the Shares, and the Board determines in
good faith (i) after consultation with its financial advisors, that such
transaction constitutes a Superior Proposal and (ii) after having received the
advice of outside legal counsel to the Company, that the failure to engage in
such negotiations or discussions or provide such information would be reasonably
determined to constitute a breach of the fiduciary duties of the Board of
Directors of the Company under applicable law;
(e) by Parent, if (A) Parent shall not have materially
breached this Agreement and (B) the Board shall
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have (i) failed to recommend to the holders of the Shares that they accept the
Offer, tender their Shares pursuant to the Offer and approve and adopt this
Agreement (the "Stockholder Acceptance"), (ii) withdrawn or modified its
approval or recommendation of this Agreement, the Offer or the Merger, (iii)
shall have approved or recommended an Acquisition Proposal, (iv) shall have
resolved to effect any of the foregoing or (v) shall have otherwise taken steps
to impede the Stockholder Acceptance;
(f) by either Parent or the Company, if the Company
Stockholder Approval shall not have been obtained at a Stockholders Meeting, if
required by applicable law;
(g) by the Company, if Sub or Parent shall have (A) failed to
commence the Offer within five business days after the public announcement (on
the date hereof or the following day) by Parent and the Company of this
Agreement, (B) failed to pay for Shares pursuant to the Offer in accordance with
Section 1.01(a) hereof or (C) breached in any material respect any of their
respective representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform in respect of clause (C)
is incapable of being cured or has not been cured within 20 days after the
giving of written notice to Parent or Sub, as applicable;
(h) by Parent or Sub prior to Sub's obligation to accept
Shares for payment pursuant to the Offer in the event of a breach by the Company
of any representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
paragraph (c), (d) or (e) of Exhibit A and (ii) cannot be or has not been cured
within 20 days after the giving of written notice to the Company; or
(i) by either Parent or the Company if, as the result of the
failure of any of the conditions set forth in Exhibit A to this Agreement, Sub
shall have terminated the Offer in accordance with its terms without Sub having
purchased any Shares pursuant to the Offer; provided, however, that the right to
terminate this Agreement pursuant to this Section 9.01(i) shall not be available
to any party whose failure to fulfill any of its obligations under, or breach of
any provisions of, this Agreement or results in the failure of any such
condition.
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SECTION 9.02. Effect of Termination. In the event of a
termination of this Agreement pursuant to Section 9.01, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Parent, Sub or the Company or their respective officers or directors, except
with respect to Section 7.02, Section 7.07, this Section 9.02 and Article X;
provided, however, that nothing herein shall relieve any party for liability for
any willful breach hereof. Further, if this Agreement is terminated pursuant to
Section 9.01(d) or (e), or any person (other than Parent or any of its
affiliates) shall have made, or proposed, communicated or disclosed in an manner
which is or otherwise becomes public an Acquisition Proposal prior to the
consummation of the Offer and thereafter this Agreement is terminated in
connection with such Acquisition Proposal, the Company shall pay to Parent the
amount of Two Hundred Thirty Seven Thousand Five Hundred Dollars ($237,500.00)
as liquidated damages and not as a penalty. The parties agree that such amount
is a reasonable estimate of the costs and expenses that would be incurred and
the value of services consumed by and on behalf of Parent and Sub if the
transactions contemplated hereunder were not to go forward as a result of such a
termination.
SECTION 9.03. Amendment. This Agreement may be amended by the
parties hereto, by action taken or authorized by the Board of Directors of the
General Partner on behalf of the Parent and the Board of Directors of the
Company, at any time before or after obtaining the Company Stockholder Approval
(if required by law), but, after any such approval, no amendment shall be made
which by law requires further approval by such stockholders without obtaining
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto. Following the
election or appointment of the Sub's designees pursuant to Section 7.05 and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors then in office shall be required by the Company to (i)
amend or terminate this Agreement by the Company, (ii) exercise or waive any of
the Company's rights or remedies under this Agreement or (iii) extend the time
for performance of Parent and Sub's respective obligations under this Agreement.
SECTION 9.04. Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action
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taken or authorized by the Board of Directors of the General Partner on behalf
of the Parent and the Board of Directors of the Company, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) subject to Section 9.03, waive
compliance with any of the provisions of this Agreement or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. The failure of any party hereto to assert any of its rights
hereunder or otherwise shall not constitute a waiver of those rights.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Nonsurvival of Representations and Warranties.
The representations and warranties in this Agreement or in any instrument
delivered pursuant hereto shall terminate at the Effective Time or termination
of this Agreement or, in the case of the Company, shall terminate upon the
acceptance for payment of, and payment for, Shares by Sub pursuant to the Offer,
unless the survival thereof is provided for by their terms.
SECTION 10.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to:
Purdue Pharma L.P.
100 Connecticut Avenue
Norwalk, Connecticut 06850-3590
Attention: Howard R. Udell, Esq.
Telecopy No.: (203) 851-5204
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with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Stuart D. Baker, Esq.
Telecopy No.: (212) 489-7130
and
(b) if to the Company, to:
CoCensys, Inc.
213 Technology Drive
Irvine, California 92618
Attention: F. Richard Nichol, Ph.D.
Telecopy No.: (949) 753-6141
with a copy to:
Cooley Godward LLP
3000 El Camino Real
Palo Alto, CA 94306
Attention: Alan C. Mendelson and Suzanne
Sawochka Hooper
Telecopy No.: (650) 857-0663
SECTION 10.03. Interpretation. When a reference is made in
this Agreement to an Article or a Section, such reference shall be to an Article
or a Section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such
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voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person. As used in this Agreement,
"material adverse change" or "material adverse effect" means, when used in
connection with the Company, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in any change or
effect) that, individually or in the aggregate with other favorable and
unfavorable changes or effects, is materially adverse to the business, financial
condition, results of operations or prospects of the Company. Notwithstanding
the foregoing, a material adverse change or material adverse effect shall not
include any material adverse change or material adverse effect resulting from or
arising out of (i) this Agreement or the transactions contemplated by this
Agreement or the announcement or pendency of the Offer or the Merger, (ii) any
occurrence or condition affecting the biotechnology or biopharmaceutical
industries generally, or (iii) any changes in general economic, regulatory or
political conditions. As used in this Agreement, a corporate party's "knowledge"
means the actual knowledge of any director or executive officer.
SECTION 10.04. Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 10.05. Entire Agreement; Third Party Beneficiaries.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 7.08, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
SECTION 10.06. Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York without
regard to any applicable conflicts of law, except to the extent the DGCL shall
be held to govern the terms of the Merger.
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SECTION 10.07. Publicity. Except as otherwise required by law
or the rules of the NASDAQ National Market, for so long as this Agreement is in
effect, neither the Company nor Parent shall, or shall permit any of its
affiliates to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 10.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct or indirect wholly owned subsidiary of Parent. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 10.09. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of New York or Delaware or in a New York or
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit to the personal jurisdiction of any federal court located in
the States of New York or Delaware or any New York or Delaware state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action relating to
this Agreement or any of the transactions contemplated hereby in any court other
than a federal court sitting in the State of New York or Delaware or a New York
or Delaware state court and (iv) waives any right to trial by jury with respect
to any claim or proceeding
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related to or arising out of this Agreement or any of the transactions
contemplated hereby.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
PURDUE PHARMA L.P., by its
general partner, PURDUE PHARMA INC.
By: /s/ James J. Dolan
________________________
Name: James J. Dolan
Title: Vice President
PURDUE ACQUISITION CORPORATION
By: /s/ James J. Dolan
________________________
Name: James J. Dolan
Title: Vice President
COCENSYS, INC.
By: /s/ F. Richard Nichol
________________________
Name: F. Richard Nichol, Ph.D.
Title: Chairman and Chief Executive Officer
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EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement,
and in addition to (and not in limitation of) Sub's right to extend and amend
the Offer at any time in its sole discretion (subject to the provisions of this
Agreement), Sub shall not be required to accept for payment or, subject to
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Sub's obligation to pay for or return tendered Shares
after the termination or withdrawal of the Offer), to pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any Shares tendered pursuant to the Offer unless there shall have
been validly tendered and not withdrawn prior to the expiration of the Offer
such number of Shares that, when added to the number of shares of Company Common
Stock to be received by Sub upon the conversion of all of the Series E Preferred
Stock to be held by Sub upon consummation of the Preferred Stock Purchase
Agreement, would constitute at least ninety percent (90%) of the Fully Diluted
Shares (as defined below) as of the expiration date of the Offer, as it may be
extended from time to time (the "Minimum Condition"). For the purposes of this
Agreement: (i) "Fully Diluted Shares" shall mean all outstanding securities
entitled generally to vote in the election of directors of the Company after
giving effect to the exercise or conversion of all options, rights and
securities exercisable or convertible into such voting securities (other than
the Series C Preferred Stock), and (ii) both "Shares tendered" and "Fully
Diluted Shares" shall include those shares that would be received upon the
exercise of stock options contingently tendered to the Offer. Furthermore,
notwithstanding any other term of the Offer or this Agreement, Sub shall not be
required to accept for payment or, subject as aforesaid, to pay for any Shares
not theretofore accepted for payment or paid for, and may terminate the Offer
if, at any time on or after the date of this Agreement and before the acceptance
of such Shares for payment or the payment therefor, any of the following
conditions exists or shall occur and remain in effect:
(a) there shall be threatened, instituted or pending by any
Governmental Entity or instituted or pending by any person any suit, action,
investigation or proceeding
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(i) challenging the acquisition by Parent or Sub of any Shares under the Offer
or seeking to restrain, prohibit or delay the making or consummation of the
Offer or the Merger or the performance of any of the other transactions
contemplated by this Agreement, or seeking to obtain from the Company, Parent or
Sub any damages that are material in relation to the Company, (ii) seeking to
prohibit or impose any limitations on Parent's or Sub's ownership or operation
(or that of any of their respective subsidiaries or affiliates) of all or a
material portion of their or the Company's businesses or assets, or to compel
Parent, Sub, the Company or their respective subsidiaries and affiliates to
dispose of or hold separate any material portion of the business or assets of
the Company or Parent, Sub and their respective subsidiaries (provided that any
prohibition, limitation, restriction or other action or requirement with respect
to any of the Intellectual Property Rights of the Company, or rights and
obligations related to or arising from the Intellectual Property Rights of the
Company, shall be deemed a material portion for purposes hereof), (iii) seeking
to make illegal, impose material limitations on the ability of Sub, or render
Sub unable, to accept for payment, pay for or purchase some or all of the Shares
pursuant to the Offer and the Merger, (iv) seeking to impose material
limitations on the ability of Sub or Parent (or any of their affiliates) to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote the Shares purchased by it on all matters properly presented
to the Company's stockholders, or (v) which otherwise is reasonably likely to
have a material adverse effect on the Parent, Sub or Company;
(b) there shall be any statute, rule, regulation, judgment,
decree, order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court that could reasonably be expected to, in the
judgment of the Parent, result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c)(i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or Sub
its approval or recommendation of the Offer, the Merger or this Agreement, or
approved or recommended any Acquisition Proposal, (ii) the Company shall have
entered into any agreement with any other Person pursuant
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to any Acquisition Proposal, (iii) the Board of Directors of the Company or any
committee thereof shall have resolved to take any of the foregoing actions or
(iv) the Board of Directors of the Company shall have failed to reject any
Acquisition Proposal within 10 business days after receipt by the Company or
public announcement thereof;
(d) any of the representations and warranties of the Company
set forth in this Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each case at
the date of this Agreement and at the scheduled or extended expiration of the
Offer, other than any matters that individually or in the aggregate would not
have a material adverse effect on the Company (provided, however, that the
failure of any representations and warranties with respect to, arising from or
related to the Intellectual Property Rights of the Company to be true and
correct in any material respects shall be deemed to have a material adverse
effect on the Company);
(e) the Company shall have failed to perform in any respect
any material obligation or to comply in any respect with any material agreement
or material covenant of the Company to be performed or complied with by it under
this Agreement, which failure to perform or comply is not substantially cured
within 10 days after Parent provides the Company with notice of such failure;
(f) there shall be any securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which it is bound obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company, or securities
convertible into or exercisable for shares of capital stock or other voting
securities of the Company, which gives any person any right to acquire equity
securities of the Surviving Corporation at or following the Effective Time;
(g) this Agreement shall have been terminated in accordance
with its terms; or
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(h) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in securities on any national securities
exchange or over-the-counter market in the United States, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any general limitation (whether or not mandatory) by any
governmental authority on the extension of credit by banks or other lending
institutions, (iv) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof, (v)
a change in general financial, bank or capital market conditions which
materially and adversely affects the ability of financial institutions in the
United States to extend credit or syndicate loans.
The foregoing conditions are for the sole benefit of Parent
and Sub, may be asserted by Parent or Sub regardless of the circumstances giving
rise to such condition (including any action or inaction by Parent or Sub not in
violation of this Agreement) and may be waived by Parent or Sub in whole or in
part at any time and from time to time in the sole discretion of Parent or Sub,
subject in each case to the terms of this Agreement. The failure by Parent or
Sub at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time. Terms used herein but
not defined herein shall have the meanings assigned to such terms in the
Agreement of which this Exhibit A is a part.
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Exhibit (c)(2)
AGREEMENT
PURCHASE AGREEMENT (the "Agreement"), dated as of August 5,
1999, between RGC International Investors, LDC. ("Seller) and Purdue Acquisition
Corporation ("Purchaser").
WHEREAS, Seller is the owner of 1,159.2 shares (the "Shares")
of Series E Convertible Preferred Stock (the "Series E Preferred") of CoCensys,
Inc., a Delaware corporation ("CoCensys");
WHEREAS, Seller is the owner of certain stock purchase
warrants (the "Warrants") to purchase shares of common stock of CoCensys (the
"Common Stock"); and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
desires to purchase from Seller, the Shares and the Warrants (collectively, the
"Purchased Interests"), subject to the terms and conditions set forth below.
NOW, THEREFORE, Seller and Purchaser hereby agree as follows:
1. Purchase and Sale. Subject to the terms and conditions set
forth herein, and in reliance on the representations, warranties and
agreements set forth herein, Seller hereby agrees to sell to Purchaser
and Purchaser hereby agrees to purchase from Seller all of the right,
title and interest of Seller in and to the Purchased Interests, for an
aggregate sum of $2,200,000 in cash (the "Purchase Price"). In the
event the amount of cash paid by Purchaser for all of the equity
interest in CoCensys exceeds $8,451,000, the Purchase Price shall be
increased by a dollar amount in cash equal to the amount of such excess
multiplied by 0.26.
2. Closing. The consummation of the purchase and sale of the
Purchased Interests (the "Closing") shall take place immediately
following satisfaction of all conditions to close set forth below, or
such other date as Purchaser and Seller shall agree (the "Closing
Date"). At the Closing, Seller will deliver to Purchaser certificates
for the Purchased Interests, with the endorsements on the reverse
thereof, or an assignment separate from the certificates, duly
completed and executed, and Purchaser shall pay the Purchase Price by
wire transfer pursuant to Seller's instructions.
3. Representations and Warranties of Seller. Seller hereby
represents and warrants to Purchaser that (a) Seller has the requisite
legal power to enter into this Agreement and perform its obligations
under the terms of this Agreement; (b) Seller is the owner, free and
clear of any liens, pledges, encumbrances, options, restrictions,
charges, voting trusts, agreements or claims (collectively, "Liens"),
of the Purchased Interests (other than a general brokerage account
pledge, which automatically will be removed upon transfer of the
Purchased Interests from Seller's brokerage account) and has the power
to transfer its right title and interest
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in the Purchased Interests to Purchaser; and (c) upon Closing,
Purchaser will acquire good and valid title, free and clear of any
Liens of, against or relating to Seller, to the Purchased Interests.
All requisite legal action on the part of Seller necessary for the
authorization, execution and delivery of this Agreement, the
performance of all Seller's obligations hereunder and for the sale and
delivery of the Purchased Interests has been taken or will be taken
prior to the Closing. This Agreement, when executed and delivered,
shall constitute a valid and legally binding obligation of Seller in
accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors.
4. Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to Seller that Purchaser has the
requisite legal power to enter into this Agreement and to purchase the
Purchased Interests and perform its obligations under the terms of this
Agreement. All requisite legal action on the part of Purchaser
necessary for the authorization, execution and delivery of this
Agreement, the performance of all Purchaser's obligations hereunder and
for the purchase of the Purchased Interests and payment of the Purchase
Price has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered, shall constitute a valid and
legally binding obligation of Purchaser in accordance with its terms,
subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors.
5. Conditions to Closing. The respective obligation of each
party to effect the purchase and sale of the Purchased Interests is
subject to the fulfillment, at or prior to the Closing, of all of the
following conditions, any of which may be waived by either party:
(a) Representations and Warranties True; Performance
of Obligations. The representations and warranties made by
each party shall be true and correct in all material respects
on the Closing Date with the same force and effect as if they
had been made on and as of said date; and each party shall
have performed all obligations and conditions herein required
to be performed by it on or prior to the Closing.
(b) Consents and Approvals; No Violations. All
authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States
or of any state that are required in connection with the
lawful sale and transfer of the Purchased Interests pursuant
to this Agreement shall have been duly obtained and shall be
effective on and as of the Closing. No stop order or other
order enjoining the sale of the Purchased Interests shall have
been issued and no proceedings for such purpose shall be
pending or, to the knowledge of either party, threatened by
the SEC or any commissioner of corporations or similar officer
of any other state having jurisdiction over this transaction.
At the time of the Closing, the sale of the Purchased
Interests shall be legally permitted by all laws and
regulations to which Purchaser and Seller are subject.
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(c) Close on Tender. Purchaser shall have accepted
for payment and paid for shares of Common Stock pursuant to
the cash tender offer for all of the outstanding shares of
Common Stock of CoCensys contemplated by the Agreement and
Plan of Merger, dated as of August 5, 1999, among Purdue
Pharma L.P., Purchaser and CoCensys (the "Merger Agreement").
6. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate simultaneously with the
termination of the Merger Agreement, unless otherwise agreed by the
parties.
7. Further Assurances. Each party agrees to take all steps and
to execute all documents necessary to effectuate the transaction
contemplated hereby.
8. Consent to Jurisdiction. All legal actions or proceedings
brought against Purchaser or Seller with respect to this Agreement may
be brought in any state or federal court of competent jurisdiction in
the State of New York, and by execution and delivery of this Agreement,
each of Purchaser and Seller accepts for itself and in connection with
its properties, the jurisdiction of the aforesaid courts. Each of
Purchaser and Seller hereby expressly and irrevocably waives any claim
or defense in any such action or proceeding based on any alleged lack
of personal jurisdiction, improper venue or forum non conveniens or any
similar basis. Each of Purchaser and Seller further irrevocably
consents to the service of any complaint, summons, notice or other
process relating to any legal action or proceeding by delivery thereof
to it by hand or by mail to its respective address set forth below its
signature hereto. Nothing herein shall affect the right of Purchaser or
Seller to bring proceedings against the other party in the courts of
any other jurisdiction or to serve process in any manner permitted by
law.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of New York, without
regard to principles of conflicts of law.
10. Notices. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal
delivery or three (3) days following mailing by registered or certified
mail, postage and fees prepaid, addressed to the parties at the address
set forth in the signature block below.
11. Successors and Assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by
either party without the prior written consent of the other party,
except that (i) Purchaser may assign, in its sole discretion, any or
all of its rights, interests and obligations hereunder to any
subsidiary of Parent that may be substituted for Purchaser as
contemplated by Section 10.08 of the Merger Agreement. Subject to the
preceding sentence, this Agreement shall bind and inure to the benefit
of the successors and assigns of Seller and Purchaser, and be
enforceable by the parties and their respective successors and assigns.
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12. Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the sale to
Purchaser or any entity affiliated with Purchaser of the Purchased
Interests, and supersedes and merges all prior agreements or
understandings, whether written or oral. This Agreement may not be
amended, modified or revoked, in whole or in part, except by an
agreement in writing signed by each of the parties hereto.
13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of
which together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
SELLER:
RGC International Investors, LDC
By: Rose Glen Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.
/s/ Wayne Bloch
By: ___________________
Wayne Bloch, Managing Director
3 Bala Plaza- East
Suite 200
Bala Cynwyd, Pennsylvania 19004
PURCHASER:
Purdue Acquisition Corporation
/s/ James J. Dolan
By: _________________________
James J. Dolan
Vice President
100 Connecticut Avenue
Norwalk, Connecticut 06850
5
