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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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SYNTEX CORPORATION
(Name of Subject Company)
SYNTEX CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
871616 10
(CUSIP Number of Class of Securities)
NEIL W. FLANZRAICH, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
3401 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
(415) 855-5050
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With a copy to:
<TABLE>
<S> <C>
BRIAN J. MCCARTHY, ESQ. HARVEY J. GOLDSCHMID, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM HOLTZMANN, WISE & SHEPARD
300 SOUTH GRAND AVENUE 1271 AVENUE OF THE AMERICAS
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10020
(213) 687-5000 (212) 554-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Syntex Corporation, a Panama corporation
(the "Company"), and the address of the principal executive offices of the
Company is 3401 Hillview Avenue, Palo Alto, California 94304. The title of the
class of equity securities to which this statement relates is the common stock,
par value $1.00 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by Roche Capital Corporation, a
Panama corporation (the "Purchaser") and an indirectly wholly owned subsidiary
of Roche Holding Ltd, a Switzerland corporation ("Parent"), disclosed in a
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated May 6,
1994, to purchase all outstanding Shares at $24.00 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated May 6, 1994 (the "Offer to Purchase") and the related Letter of
Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to an Acquisition Agreement and Plan of
Merger, dated as of May 1, 1994 (the "Merger Agreement"), among the Company, the
Purchaser and Roche (Panama) Corporation, a Delaware corporation and wholly
owned subsidiary of the Purchaser ("Merger Subsidiary"). The Merger Agreement
provides, among other things, that as soon as practicable after the consummation
of the Offer and satisfaction or waiver of all conditions to the Merger, Merger
Subsidiary will be merged with and into the Company (the "Merger"), with the
Company as the surviving corporation (the "Surviving Corporation"). A copy of
the Merger Agreement is attached hereto as Exhibit 1 and incorporated herein by
reference.
Based on the information in the Schedule 14D-1, the principal executive
offices of each of the Purchaser and Parent are located at c/o Durling &
Durling, Edificio Vallarino, Ultimo Piso, Calle 52 y Elvira Mendez, Panama,
Republic of Panama.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and its executive officers, directors or
affiliates is described in the attached Schedule I or set forth below.
Stock Options. Pursuant to the terms of the Company's 1984 Stock Option
and Stock Appreciation Rights Plan and 1991 Stock Option Plan for Non-Employee
Directors, all outstanding stock options and stock appreciation rights ("SARs")
under these plans, whether or not such stock options and SARs would otherwise
then be exercisable, will become immediately exercisable upon a change in
control of the Company (as defined in such plans), which would occur upon
completion of the Offer. Pursuant to the Merger Agreement, all stock options and
SARs outstanding immediately prior to the time the Merger becomes effective (the
"Effective Time") will be converted into the right to receive from the Company
an amount in cash equal to the excess, if any, of $24.00 (or any other higher
price per Share paid in the Offer) over the applicable exercise price per Share
of such stock option or SAR, multiplied by the number of Shares subject to such
stock option or SAR, subject to any required withholding of taxes.
Executive Severance Agreements. The Company has previously entered into
agreements with Paul E. Freiman, Chairman of the Board and Chief Executive
Officer, James N. Wilson, President and Chief Operating Officer, Gerhard von
Mutzenbecher, Vice President, Thomas L. Gutshall, Executive Vice President,
Robert L. Roe, Senior Vice President, Robert A. Lewis, Senior Vice President,
and seven other executive officers and certain other employees of the Company.
These agreements provided for the payment of certain severance and other
benefits upon termination of the executive's employment by the Company without
Cause or by the executive for Good Reason (each as defined in the agreements)
following a change in control of the Company (as defined in the agreements).
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On April 28, 1994, the Board of Directors of the Company (the "Board of
Directors"), based upon the recommendation of the Compensation and Benefits
Committee of the Board of Directors (the "Compensation and Benefits Committee"),
authorized amendments to the agreements. The amendments (i) reduce severance
payments under the agreements by the amount of the executive's benefit, if any,
under the Company's enhanced severance plan; (ii) eliminate benefits under the
Company's Security of Employment Plan; (iii) generally require the executives to
remain with the Company until at least December 31, 1994, unless a change in
control occurs earlier; (iv) enlarge in some respects and reduce in other
respects the grounds upon which an executive may terminate his or her employment
for Good Reason following a change in control; (v) eliminate the tax-related cap
on benefits payable under the original agreements; (vi) provide that a tax
"gross-up" payment would be made by the Company in the event of the imposition
of an excise tax upon the executive pursuant to Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"); (vii) base the calculation of the
bonus component of the severance payment upon the executives' average bonuses
for the past three years; (viii) provide for continued benefits under the
Company's welfare benefit plans and accrual under the Company's pension benefit
plans during the period in which the executives are entitled to severance
payments; and (ix) make certain other relatively minor changes in the
administration of the agreements. The transactions contemplated by the Merger
Agreement would constitute a change in control for purposes of the executive
severance agreements. The Company believes that, if a change in control were to
occur pursuant to the Offer and all of the executive officers terminated their
employment for Good Reason or had their employment terminated by the Company
without Cause within one month of the Merger, the amount of cash severance
benefits payable to the executives pursuant to these agreements and the
Company's enhanced severance plan, excluding the tax gross-up referred to above,
would be approximately $16.3 million (as discounted for present value, as
provided in the agreements). A copy of the form of amended severance agreement
between the Company and each of such executive officers is attached hereto as
Exhibit 2 and incorporated herein by reference.
Call-to-Action Incentive Plan. At its 1993 Annual Meeting of Stockholders,
the Company adopted a long-term incentive plan under which stock option and
deferred cash incentive awards were granted to certain executive officers of the
Company ("Call-to-Action Incentive Plan"). All of the stock option awards
granted under the plan to the executive officers, which have an exercise price
of $18.125 and $20.00 per Share, would become fully exercisable upon the
occurrence of a change in control (as defined in the Call-to-Action Incentive
Plan), and a pro rata portion of the deferred cash incentive awards is payable
upon the occurrence of a change in control. The transactions contemplated by the
Merger Agreement would constitute a change in control for purposes of the
Call-to-Action Incentive Plan. The Company believes that if a change in control
were to occur pursuant to the Offer, deferred cash incentive awards in the
aggregate amount of approximately $1,370,000 would be payable pursuant to the
Call-to-Action Incentive Plan to the executive officers.
Retiree Health Plans. On April 28, 1994, the Board of Directors, based
upon the recommendation of the Compensation and Benefits Committee, approved a
resolution providing that any amendment to the Company's Retiree Health Care
Plans shall affect all retirees covered by and eligible to receive benefits
thereunder as of the date of such amendment in the same manner and may not
discriminate in favor of or against any such single retiree or group of
retirees.
Syntex Umbrella Pension Plan. On April 28, 1994, the Board of Directors
based upon the recommendation of the Trust Review Committee, approved a
resolution providing that the assets held in trust for the benefit of the
participants and beneficiaries of the Syntex Umbrella Pension Plan (which
provides benefits for certain employees located outside the United States) may
not be used for any purpose other than providing benefits to participants and
beneficiaries of such plan, prior to the satisfaction of all liabilities under
such plan.
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST
Certain Relationships with the Company. In December 1993, the Board of
Directors created a special committee (the "Special Committee") to review
strategic options facing the Company without any preconceived notions as to what
would best serve the Company's stockholders, employees and customers in the near
and long term and to consider and make recommendations with respect to the
available means to maximize stockholder value. The initial members of the
Special Committee were Anthony Solomon
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(Chairman), Julius R. Krevans and Robert S. Miller, Jr. In late February 1994,
the Special Committee was expanded to include Paul E. Freiman and Dr. George
Rosenkranz.
In consideration of services rendered through February 22, 1994, the
Chairman of the Special Committee received $100,000 and each of the two other
members of the Special Committee who served on the Special Committee prior to
that date received $50,000. In addition, in consideration for services rendered
after February 22, 1994, and subject to the approval of the Compensation and
Benefits Committee of the Board of Directors, it is anticipated that the
nonexecutive directors on the Special Committee may receive additional
compensation based upon the Compensation and Benefits Committee's determination
as to, among other things, the service of the members of the Special Committee
and the results of the Special Committee's efforts.
For legal services rendered to the Company in connection with the
transactions contemplated by the Merger Agreement and certain related
activities, the law firm of Holtzmann, Wise & Shepard, of which Howard M.
Holtzmann, a director of the Company, is a partner, is to receive a fee of
$2,200,000.
Limited Director Liability and Indemnification. The Company's Amended
Articles of Incorporation contain provisions which limit the directors' personal
liability to the Company and its stockholders for monetary damages for breaches
of the fiduciary duty as a director. The provision limits the liability of
officers or directors acting in their capacities as officers or directors, and
extends to claims on behalf of persons or entities other than the Company or its
stockholders. The provision does not eliminate directors' liability for monetary
damages (i) for breach of the duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) for dividends,
distributions or stock repurchases in violation of the General Corporation Law
of the Republic of Panama ("Panama Law") or (iv) for any transaction from which
a director derived an improper personal benefit.
The Company's Amended Articles of Incorporation also contain provisions to
the general effect that each director and officer shall be indemnified by the
Company against liabilities and expenses in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) to which such director may be made a party or with which such director
may become involved by reason of being a director, officer, employee or agent of
the Company or any other organization at the request of the Company.
In addition, the Merger Agreement provides that the Purchaser will cause
the Surviving Corporation to indemnify and hold harmless the present and former
officers and directors of the Company in respect of acts or omissions occurring
prior to the Effective Time to the maximum extent provided under the Company's
Amended Articles of Incorporation and bylaws in effect on the date thereof,
provided that such indemnification shall (to the maximum extent permitted by
law) be mandatory rather than permissive except in instances involving willful
misconduct or bad faith and that the Surviving Corporation shall advance
expenses, including attorneys' fees, promptly on demand and delivery of any
required undertaking. The Merger Agreement also provides that the Purchaser
cause to be maintained in effect for not less than three years from the
Effective Time the current policies of the directors' and officers' liability
insurance with respect to acts or omissions prior to the Effective Time,
provided, that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are no less
advantageous so long as such substitution does not result in gaps or lapses in
coverage, and provided that the Purchaser shall not be obligated to cause the
Surviving Corporation to pay premiums in excess of the amount per annum the
Company paid in its last full fiscal year. The Surviving Corporation will pay
all expenses (including attorneys' fees) that may be incurred by any indemnified
party in enforcing the indemnity and the other obligations described above. The
obligations of the Surviving Corporation to indemnify such indemnified parties
may not be terminated or modified in a manner adverse to the directors and
officers to whom this indemnity applies without the consent of such director or
officer.
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THE MERGER AGREEMENT
The following is a summary of the Merger Agreement. Such summary is
qualified in its entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the condition that there
will be validly tendered in accordance with the terms of the Offer prior to the
expiration date of the Offer and not withdrawn a number of Shares that, together
with the Shares then owned by the Purchaser, represents at least a majority of
the Shares outstanding on a fully diluted basis (the "Minimum Condition"), and
certain other conditions set forth in the Merger Agreement. The Purchaser has
expressly reserved the right to waive the Minimum Condition (but not below
77,400,000 Shares) or any of the other conditions to the Offer and to make any
change in the terms or conditions of the Offer. The Purchaser has, however,
agreed that no change in the Offer may be made which changes the form of
consideration to be paid or decreases the price per Share or the number of
Shares sought in the Offer, which imposes conditions to the Offer in addition to
the Minimum Condition and those other conditions set forth in the Merger
Agreement or which makes any other change in the terms or conditions of the
Offer that is materially adverse to the holders of Shares.
The Merger. The Merger Agreement provides that, unless the Merger Agreement
is terminated (see "Termination" below), provided that all conditions to the
consummation of the Merger have been satisfied or, to the extent permitted under
the Merger Agreement, waived, at the Effective Time, Merger Subsidiary shall be
merged with and into the Company, whereupon the separate existence of Merger
Subsidiary will cease and the Company will be the Surviving Corporation. The
Merger Agreement further provides that the articles of incorporation and bylaws
of Merger Subsidiary in effect at the Effective Time shall be the articles of
incorporation and bylaws, respectively, of the Surviving Corporation, and that,
from and after the Effective Time until successors are duly elected or appointed
and qualified in accordance with applicable law, (i) the directors of Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, and (ii) the officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation.
Board Representation. The Merger Agreement provides that promptly upon the
purchase by the Purchaser of a majority of the outstanding Shares on a fully
diluted basis (including shares purchased pursuant to the Offer), the Purchaser
shall be entitled to designate that number of directors, rounded up to the next
whole number, on the Board of Directors that equals the product of (i) the total
number of directors on the Board of Directors (giving effect to the election of
any additional directors pursuant to the terms of the Merger Agreement) and (ii)
the percentage that the number of Shares owned by the Purchaser and its
affiliates (including shares so purchased) bears to the total number of Shares
outstanding, and the Company shall upon request by the Purchaser, at the
Company's election, either increase the number of directors or seek and accept
resignations of incumbent directors. At such times, the Company will use its
best efforts to cause individuals designated by the Purchaser to constitute the
same percentage as such individuals represent on the Board of Directors of (x)
each committee of the Board of Directors (other than any committee of the Board
of Directors established to take action under the Merger Agreement), (y) each
board of directors of each subsidiary of the Company and (z) each committee of
each such board. Notwithstanding the foregoing, nothing contained in the Merger
Agreement shall require any current member of the Special Committee to resign
from the Board of Directors. Subject to the foregoing, the Company is to use its
best efforts to ensure that all of the members of the Board of Directors and
such boards and committees as of the date of the Merger Agreement shall remain
members of the Board of Directors and such boards and committees until the
Effective Time.
The Company's obligations to appoint the Purchaser's designees to the Board
of Directors will be subject to compliance with Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder.
Consideration To Be Paid in the Merger. The Merger Agreement provides that
each Share outstanding immediately prior to the Effective Time shall be
converted into the right to receive, at the election of the holder, either (i)
$24.00 in cash (or any higher price per Share paid in the Offer), payable to the
holder thereof, without interest ("Cash Election") or (ii) subject to certain
restrictions, 0.024 shares of limited conversion preferred stock ("LCPS"), each
full share of which shall have a stated value and liquidation value of $1,000
(or
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proportionately higher for any higher price per Share paid in the Offer) ("Stock
Election"). The Purchaser will only be obligated to issue LCPS to the extent the
LCPS would be "held of record" (as defined in Rule 12g-5 under the Exchange Act)
by not more than 299 persons. If the issuance of shares of LCPS in respect of
all Shares as to which effective Stock Elections are made would result in LCPS
being "held of record" by more than 299 persons, subject to the terms of the
Merger Agreement, the Purchaser will issue LCPS to the maximum number of persons
who have made valid Stock Elections such that, after giving effect to such
issuance, the LCPS are held of record by 299 persons. In the event more than 299
holders of Shares make otherwise valid Stock Elections, the Purchaser and the
Special Committee may jointly agree, in their discretion, as to the method for
selecting holders who will be entitled to receive LCPS pursuant to otherwise
valid Stock Elections, which method may consist of a lottery, selection by lot
or according to the aggregate number of Shares as to which a holder makes a
valid Stock Election, or any other method. In the event the Purchaser and the
Special Committee are unable to agree on such a method, holders who made a Stock
Election will be deemed to have made a Cash Election. Notwithstanding any
provisions of the Merger Agreement, the Purchaser will not be obligated to
accept Stock Elections with respect to 15% of the Shares outstanding as of the
date of the Merger Agreement. No fractional shares of LCPS will be issued; in
lieu thereof, a cash payment will be made in an amount determined by multiplying
the stated value of the LCPS by the fraction of a share of LCPS to which such
holder would otherwise have been entitled.
The LCPS will be subject to mandatory redemption at the end of its ten-year
term. Holders of LCPS shall be entitled to receive cumulative dividends at a
rate of 3% per annum on the liquidation value of each share; such dividends to
be payable annually. Holders of LCPS will have no voting rights except (i) as
required under Panama Law and (ii) that the approval of at least a majority of
the outstanding shares will be required to change the terms and provisions of
LCPS in a manner that affects adversely the rights and preference of such
holders. The Purchaser may redeem outstanding shares of LCPS with the consent of
the holder to be so redeemed, and if such redemption, in the reasonable judgment
of the Purchaser, shall be necessary to (i) terminate reporting and registration
requirements of the Purchaser under the Exchange Act and (ii) avoid application
of registration or reporting obligations under applicable securities laws to the
Purchaser, any affiliate thereof or securities issuable upon exchange of LCPS.
If the Purchaser were to redeem less than all outstanding shares of LCPS for the
purposes described in clauses (ii) or (iii) of the preceding sentence, shares
would be redeemed in the inverse order of size of the aggregate number of shares
held of record (within the meaning of Rule 12g5-1 under the Exchange Act, as
amended from time to time) of each holder or in such other reasonable manner as
may be selected by the Purchaser in its sole discretion. Shares of LCPS may not
be transferred except (i) in the case of LCPS held by an individual, to the
estate or member of the immediate family of such individual or to an entity all
of the owners of which are members of the immediate family of such individual,
(ii) in the case of a corporation or a partnership, to a wholly owned subsidiary
of such corporation or partnership or (iii) in either case, to an institution
qualified as tax exempt under Section 501(c)(3) of the Code. Shares of LCPS may
only be exchanged prior to the mandatory redemption date beginning on the second
anniversary of the issuance of such shares, (or, if earlier, upon adoption by
the Purchaser of a plan of liquidation, dissolution or winding-up of the
Purchaser), for Genusscheine of Parent ("Non-voting Equity Securities")
provided, however, that such exchange of shares of LCPS will only be available
to persons exempt from registration under applicable securities laws. Each share
of LCPS is exchangeable annually for a number of Non-voting Equity Securities
equal to the stated value of each share of LCPS divided by the Exchange Ratio
(as defined in the Certificate of Designation of Limited Conversion Preferred
Stock of Roche Capital Corporation (the "Certificate of Designation"), subject
to adjustment as provided in the Certificate of Designation. No fractional
Non-voting Equity Securities will be issued. Prior to effecting any exchange,
the Purchaser shall have received from each exchanging holder a certification of
such information as the Purchaser may deem necessary to determine the
availability of an exemption from registration under applicable securities laws
of such exchanging holder and an opinion of counsel to the Purchaser that such
exchanges are exempt from registration. The rights of holders to exchange shares
of LCPS shall terminate, at the election of the Purchaser, at any time the
Securities and Exchange Commission (the "Commission") requires that Parent (i)
become a reporting company subject to the requirements of Section 12 of the
Exchange Act or (ii) provide to the Commission financial or other information
with respect to Parent not then published elsewhere by Parent. In the event the
rights of holders of the LCPS to exchange shares of LCPS are terminated by the
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Purchaser as described in the preceding sentence, holders whose rights are so
terminated will have the right to require the Purchaser to redeem such holders'
LCPS at a redemption price equal to the aggregate stated value, plus any accrued
and unpaid dividends, as of the date such holder requests redemption. Each
holder's right to exchange shares of LCPS will be exercisable only against the
Purchaser.
The Merger Agreement provides that prior to the purchase of Shares pursuant
to the Offer, the Board of Directors (or, if appropriate, any committee thereof
administering the Stock Plans (as defined below) shall adopt such resolutions or
take such other actions as are required to adjust, effective immediately prior
to the Effective Time, the terms of all outstanding employee and director stock
options to purchase Shares ("Stock Options") and all outstanding SARs, whether
or not presently exercisable, granted under any stock option or stock
appreciation rights plan, program or arrangement of the Company or its
subsidiaries (collectively, the "Stock Plans") to provide that (i) each Stock
Option together with any SAR related thereto or granted in tandem therewith and
(ii) each SAR granted independent of, and not related to, any Stock Option (a
"Free-standing SAR"), in each case outstanding immediately prior to the
Effective Time shall be converted into the right of the holder of such Stock
Option or Free-standing SAR, as the case may be, to receive a cash payment at
that time from the Company or an amount determined by multiplying (x) the
excess, if any, of the cash paid in the Cash Election over the applicable
exercise price per Share of such Stock Option or strike price per Share of such
Free-standing SAR, as the case may be, by (y) with respect to each Stock Option
and related SAR, the number of Shares the holder of the Stock Option could have
purchased (assuming full vesting of all Stock Options) had such holder exercised
such Stock Option in full immediately prior to the Effective Time or, with
respect to each Free-standing SAR, the number of Shares with respect to which
the Free-standing SAR was granted (assuming full vesting of all Free-standing
SARs). All amounts payable pursuant to this provision shall be subject to any
required withholding of taxes and shall be paid without interest.
Moreover, prior to the purchase of Shares pursuant to the Offer, the Board
of Directors (or, if appropriate, any committee administering the Stock Plans)
shall adopt such resolutions or take such other actions as are required to
provide that the Stock Plans shall terminate as of a date prior to the
occurrence of a change in control as defined in the Syntex Security of
Employment Plan (the "Stock Plan Termination Date"), except with respect to
Stock Options and SARs that are outstanding as of the Stock Plan Termination
Date which Stock Options and SARs shall be adjusted immediately prior to the
Effective Time as described in the preceding paragraph, and to provide that the
provisions in any other Employee Plan or Benefit Arrangement (as defined in the
Merger Agreement) providing for the issuance, transfer or grant of capital stock
of the Company shall be deleted as of the Stock Plan Termination Date, and the
Company shall take all necessary actions to provide that following the Effective
Time, no holder of a Stock Option or SAR or any participant in any Stock Plan or
other Employee Plan or Benefit Arrangement shall have any right thereunder to
acquire any capital stock of the Company or the Surviving Corporation.
Representations and Warranties. The Merger Agreement contains a number of
representations and warranties by the Company, including representations with
respect to its corporate existence and power, corporate authorizations,
governmental authorizations, capitalization, subsidiaries, Commission filings,
financial statements, material liabilities, litigation, taxes, employee
benefits, compliance with laws, finders' fees, and environmental matters.
Agreement with Respect to the Conduct of Business Pending the Merger. The
Merger Agreement provides that between the date of the Merger Agreement and the
Effective Time, unless the Purchaser shall have consented in writing, the
business of the Company and its subsidiaries will be conducted in the ordinary
course of business consistent with past practice; each of the Company and its
subsidiaries will use its best efforts to preserve intact its business
organization and to keep available the services of its present officers and key
employees, subject to the terms of the Merger Agreement. Among other things,
subject to certain exceptions, neither the Company nor any of its subsidiaries
will (a) adopt or propose any change in its articles of incorporation or bylaws;
(b) merge or consolidate with any other person or acquire a material amount of
assets of any other person; (c) sell, lease, license or otherwise surrender,
relinquish or dispose of any assets or property which are material to the
Company and its subsidiaries as a whole except (i) pursuant to existing
contracts or commitments, (ii) in the ordinary course consistent with past
practice or (iii) as the Purchaser may agree in writing; (d) agree or commit to
do any of the foregoing; or (e)(i) take, or agree or commit to take, any action
that would make any representation and warranty of the Company thereunder
inaccurate in any respect at, or as
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of any time prior to, the Effective Time or (ii) omit, or agree or commit to
omit, to take any action necessary to prevent any such representation or
warranty from being inaccurate in any respect at any such time, provided,
however, that the Company may take or omit to take such action the effect of
which can (without any uncertainty) be cured at or prior to the Effective Time
or a date on which Shares can be purchased pursuant to the Offer.
The Merger Agreement provides that, as soon as reasonably practicable, (a)
the Company will prepare and file with the Commission a proxy statement relating
to the meeting of the Company's stockholders to be held in connection with the
Merger and (b) the Purchaser will prepare and file with the Commission a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), in connection with the registration of LCPS to be issued in
the Merger (the "Registration Statement"). Purchaser will use its best efforts
to cause the Registration Statement to be declared effective by the Commission
as promptly as practicable. Purchaser will promptly take any action required to
be taken under foreign or state securities or Blue Sky laws in connection with
the issuance of LCPS.
The Merger Agreement further provides that, as soon as reasonably
practicable, the Company will cause a meeting of its stockholders to be duly
called and held for the purpose of voting on the approval and adoption of the
Merger Agreement and the Merger. The Board of Directors will, subject to their
fiduciary duties as advised by counsel, recommend approval and adoption of the
Merger Agreement and the Merger by the Company's stockholders. In connection
with such meeting, the Company will, subject to the fiduciary duties of its
Board of Directors, use all reasonable efforts to obtain the necessary approvals
by its stockholders of the Merger Agreement and the transactions contemplated
thereby.
The Merger Agreement also contains provisions relating to (i) the parties'
obligations to use their best efforts, (ii) certain filings and consents and
(iii) coordination of public announcements.
Other Offers. The Merger Agreement provides that from the date of the
execution of the Merger Agreement until the termination thereof, the Company and
its subsidiaries will not, and will use their best efforts to cause their
respective officers, directors, employees or other agents not to, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal (as hereinafter defined), (ii) subject to the fiduciary
duties of the Board of Directors under applicable law as advised by counsel,
waive any provision of any standstill or similar agreements entered into by the
Company or (iii) subject to the fiduciary duties of the Board of Directors under
applicable law as advised by counsel to the Company, engage in negotiations
with, or disclose any nonpublic information relating to the Company or any
subsidiary or afford access to the properties, books or records of the Company
or any subsidiary to, any person that may be considering making, or has made, an
Acquisition Proposal; provided that, on or prior to May 14, 1994, the provisions
of this sentence shall not apply to any party that is bound by a standstill or
similar agreement with the Company on May 1, 1994 ("Existing Bidder"). The
Merger Agreement does not, however, prohibit the Company and the Board of
Directors from (i) taking and disclosing a position with respect to a tender
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act and (ii) making such disclosures to the Company's stockholders
which, in the judgment of and subject to the fiduciary duties of the Board of
Directors with the advice of counsel, may be required under applicable law.
The Company has agreed that it will (i) promptly notify the Purchaser after
receipt of any Acquisition Proposal or any inquiries indicating that any person
is considering making or wishes to make an Acquisition Proposal, (ii) promptly
notify the Purchaser after receipt of any request for nonpublic information
relating to the Company or any subsidiary or for access to the properties, books
or records of the Company or any of its subsidiaries by any person that may be
considering making, or has made, an Acquisition Proposal and (iii) subject to
the fiduciary duties of the Board of Directors under applicable law as advised
by counsel to the Company, keep the Purchaser advised of the status and
principal financial terms of any such Acquisition Proposal, indication or
request. The term "Acquisition Proposal" as used in the Merger Agreement means
any offer or proposal for, or any indication of interest in, a merger or other
business combination involving the Company or any of its subsidiaries or the
acquisition of any equity interest in, or a substantial portion of the assets
of, the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement.
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Conditions to the Merger. The respective obligations of the Company, the
Purchaser and Merger Subsidiary to consummate the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions: (i) the Merger Agreement shall have been adopted by the affirmative
vote of the stockholders of the Company in accordance with Panama Law; (ii) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, relating to the Merger shall have expired; (iii) no
provision of any applicable law or regulation and no judgment, injunction, order
or decree shall prohibit the consummation of the Merger; provided that, neither
party may assert this condition unless it has used its best efforts to oppose
such judgment, injunction, order or decree and to avail itself of all rights of
appeal or it has determined, in its reasonable judgment, that such efforts would
not have a substantial likelihood of success; (iv) all actions by or in respect
of or filings with any governmental body, agency, official, or authority
required to permit the consummation of the Merger, including, without
limitation, filing articles of merger or other appropriate documents for
registration in the Mercantile Registry of the Republic of Panama and pursuant
to the Delaware General Corporation Law, shall have been obtained or made (other
than those actions or filings which, if not obtained or made prior to the
consummation of the Merger, would not individually or in the aggregate
reasonably be expected to have a material adverse effect); and (v) the
Registration Statement shall have been declared effective and no stop order
suspending the effectiveness of the Registration Statement shall be in effect
and no proceedings for such purpose shall be pending before or threatened by the
Commission.
The obligations of the Purchaser and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions: (i)
either (A) Committee on Foreign Investment in the United States ("CFIUS") shall
have determined (either by action or nonaction) not to investigate the Offer and
the Merger under the Defense Production Act of 1950, as amended ("Exon-Florio"),
or (B) if CFIUS shall have determined to make such an investigation, such
investigation shall have been completed and the President shall have determined
(either by action or nonaction) not to take any action under Exon-Florio with
respect to the transactions contemplated by the Merger Agreement; (ii) the
Company shall have performed in all material respects all of its obligations
under the Merger Agreement required to be performed by it at or prior to the
Effective Time pursuant to the terms thereof; and (iii) the representations and
warranties of the Company contained in the Merger Agreement and in any
certificate or other writing delivered by the Company pursuant thereto shall be
true at and as of the Effective Time as if made at and as of such time. In the
event the Purchaser has not acquired Shares in the Offer, each of the conditions
to the Offer, subject to certain specified modifications, shall have been
satisfied or waived prior to the Effective Time.
The obligation of the Company to effect the Merger is further subject to
the satisfaction or waiver at or prior to the Effective Time of the condition
that the Purchaser and Merger Subsidiary shall have performed in all material
respects each of their obligations under the Merger Agreement required to be
performed by them at or prior to the Effective Time pursuant to the terms
thereof and the representations and warranties of the Purchaser and Merger
Subsidiary contained in the Merger Agreement and in any certificate or other
writing delivered by the Purchaser or Merger Subsidiary pursuant thereto shall
be true at and as of the Effective Time as if made at and as of such time.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, notwithstanding any approval of the Merger Agreement by the
stockholders of the Company, (i) by mutual written consent of the Company and
the Purchaser; (ii) by either the Company or the Purchaser if (x), either the
Purchaser shall have failed to commence the Offer within 15 days following May
1, 1994 or (y) the Purchaser shall not have purchased any Shares pursuant to the
Offer prior to December 31, 1994; provided, however, that the passage of the
period referred to in clause (y) shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order, decree or ruling or action
restraining, enjoining or otherwise prohibiting the purchase of Shares pursuant
to the Offer or the consummation of the Merger, and provided further that the
right to terminate the Merger Agreement under clause (ii) shall not be available
to any party whose failure to fulfill any obligation under the Merger Agreement
has been the cause of or resulted in any of the circumstances described in
clauses (x) or (y); (iii) by the Purchaser or the Company if prior to the
purchase of Shares pursuant to the Offer or the Effective Time, the Board of
Directors shall have withdrawn or materially modified its approval or
recommendation of the Offer, the Merger or the Merger Agreement, recommended
another Acquisition Proposal or entered into a definitive agreement or agreement
in principle with respect to another Acquisition Proposal, or resolved to do any
of the foregoing; (iv) by either the Company
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or the Purchaser, if there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining the Purchaser or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; (v) by either the Purchaser or the
Company, if the meeting of stockholders of the Company held for the purpose of
voting on the approval and adoption of the Merger Agreement and the Merger shall
have been held and the stockholders of the Company shall have failed to approve
and adopt the Merger Agreement and the Merger at such meeting; and (vi) by the
Purchaser, if the Purchaser shall have received any communication from the
Department of Justice or Federal Trade Commission (each an "HSR Authority")
(which communication shall be confirmed to the other parties by the HSR
Authority) that causes such party to reasonably believe that any HSR Authority
has authorized the institution of litigation challenging the transactions
contemplated by the Merger Agreement under the U.S. antitrust laws, which
litigation will include a motion seeking an order or injunction prohibiting the
consummation of any of the transactions contemplated by the Merger Agreement.
Agreement With Respect to Employee Matters. The Merger Agreement provides
that for a period of at least one year after the Effective Time, the Purchaser
shall cause the Company to continue to maintain the Company's existing
compensation, severance, welfare and pension benefit plans, programs and
arrangements (other than any stock based plans, programs and arrangements) for
the benefit of current and former employees and directors of the Company and its
subsidiaries (subject to such modification as may be required by applicable law
or to maintain the tax exempt status of any such plan which is intended to be
qualified under Section 401(a) of the Code), provided that (i) nothing in the
Merger Agreement shall prohibit the Purchaser from replacing any such existing
plan or plans, program(s) or arrangement(s) with a plan or plans, program(s) or
arrangement(s) which provide such employees and directors with benefits which
are not less favorable in the aggregate than the benefits that would have been
provided under the Company's existing plan(s), program(s) or arrangement(s) to
the extent such replacement is permitted under the terms of the applicable plan,
program or arrangement and (ii) nothing in the Merger Agreement shall obligate
the Purchaser to provide such employees and directors with any stock based
compensation (including, without limitation, stock options or stock appreciation
rights) after the Effective Time.
The Merger Agreement also provides that in light of the Purchaser's desire
that the Company provide appropriate employee incentives in the future, the
Purchaser has agreed promptly to develop, and the Company and the Purchaser
shall promptly cooperate in developing, a new performance based incentive
compensation plan for the benefit of employees of the Company and its
subsidiaries as an appropriate substitute for the current Stock Plans.
The Company has agreed not to, and to cause its subsidiaries not to, amend
or modify any existing Employee Plan or Benefit Arrangement, nor enter into or
otherwise establish, adopt or maintain any new employee plans, programs,
agreements or arrangements, or grant any additional Free-standing SARs or other
awards based upon the value of the Company's equity securities prior to and
including the Effective Time without the prior consent of the Purchaser.
The Merger Agreement also provides that the Purchaser currently intends to
maintain the Company's headquarters at its present location in Palo Alto,
California.
From and after the Effective Time, for purposes of determining eligibility,
vesting and benefit accrual under any replacement compensation, severance,
welfare, pension benefit or savings plan of the Purchaser or any of its
affiliates in which employees of the Company and its subsidiaries become
eligible to participate, service with the Company or any of its subsidiaries
shall be credited as if such services were rendered to the Purchaser or any of
its affiliates, provided that (i) the Purchaser shall not be obligated to permit
employees of the Company and its subsidiaries to participate in nor, upon
participation, to receive such credited service, with respect to, any plan
maintained by the Purchaser or its affiliates which is not intended to
constitute a replacement plan for any existing plan, program or arrangement of
the Company and its subsidiaries and (ii) the Purchaser shall not be required to
give any such employee credit for such prior service with the Company or any of
its subsidiaries for purposes of any plan which is a "defined benefit plan"
within the meaning of Section 3(35) of the Employee Retirement Income Security
Act of 1974, other than the Syntex U.S. Employees Pension Plan or any successor
plan to the assets and liabilities thereof.
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No provision of the Merger Agreement with respect to employee matters shall
create any third party beneficiary rights in any current or former employee or
director of the Company or its subsidiaries (including any beneficiary thereof)
under the Merger Agreement or in respect of continued or resumed employment or
in respect of any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement.
Agreement With Respect to Director and Officer Indemnification and
Insurance. The Merger Agreement provides that the Purchaser will cause the
Surviving Corporation to indemnify and hold harmless the present and former
officers and directors of the Company in respect of acts or omissions occurring
prior to the Effective Time to the maximum extent permitted under the Company's
articles of incorporation and bylaws in effect on the date of the Merger
Agreement; provided that such indemnification shall (to the maximum extent
permitted by law) be mandatory rather than permissive except in instances
involving willful misconduct or bad faith and that the Surviving Corporation
shall advance expenses, including attorneys' fees, promptly on demand and
delivery of any required undertaking. For three years after the Effective Time,
the Purchaser will cause to be maintained the policies of officers' and
directors' liability insurance in effect as of the date of the Merger Agreement
in respect of acts or omissions occurring prior to the Effective Time covering
each such person covered by the Company's officers' and directors' liability
insurance policy on the date of the Merger Agreement; provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which in all material respects are no
less advantageous for so long as such substitution does not result in gaps or
lapses in coverage; and provided further that in satisfying these obligations,
the Purchaser shall not be obligated to cause the Surviving Corporation to pay
premiums in excess of the amount per annum the Company paid in its last full
fiscal year, which amount has been disclosed to the Purchaser. The Purchaser
shall cause the Surviving Corporation to pay all expenses (including attorneys'
fees) that may be incurred by any indemnified party in enforcing the indemnity
and other obligations provided for in the Merger Agreement with respect thereto.
The Purchaser has agreed that should the Surviving Corporation fail to comply
with the foregoing obligations, the Purchaser shall be responsible therefor.
Fees and Expenses. The Merger Agreement provides that the Company will pay
the Purchaser, in immediately available funds, so long as the Purchaser shall
not have materially breached its obligations under the Merger Agreement,
promptly, but in no event later than two business days, after (i) the
termination of the Merger Agreement by the Purchaser or the Company if prior to
the purchase of Shares pursuant to the Offer or the Effective Time, the Board of
Directors of the Company shall have withdrawn or materially modified its
approval or recommendation of the Offer, the Merger or the Merger Agreement,
recommended another Acquisition Proposal or entered into a definitive agreement
or agreement in principle with respect to another Acquisition Proposal, or
resolved to do any of the foregoing or (ii) if any person or "group" (as defined
in Section 13(d)(3) of the Exchange Act), other than the Purchaser or its
affiliates or any group of which any of them is a member, shall have acquired
beneficial ownership of more than 50% of any class or series of capital stock of
the Company (including the Shares), through acquisition of stock, the formation
of a group or otherwise, or shall have been granted any option, right, or
warrant, conditional or otherwise, to acquire beneficial ownership of more than
50% of any class or series of capital stock of the Company (including the
Shares) a fee for reimbursement of costs and expenses of (x) $20,000,000, if
such event occurs on or before May 14, 1994, or (y) $35,000,000, if such event
occurs after May 14, 1994. Subject to the foregoing, all costs and expenses
incurred in connection with the Merger Agreement shall be paid by the party
incurring such cost or expense.
Amendment and Waivers. Subject to the provisions of the Merger Agreement
described above in "Board Representation" any provision of the Merger Agreement
may be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, the Purchaser and Merger Subsidiary or in the case of a waiver, by
the party against whom the waiver is to be effective; provided that after the
adoption of the Merger Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (ii) any term of the
articles of incorporation of the Surviving Corporation or (iii) any of the terms
or conditions of the Merger Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company. No
failure or delay by any party in exercising any right, power or privilege under
the Merger Agreement shall operate as a waiver thereof nor shall any single or
partial exercise
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<PAGE> 12
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies provided in the Merger
Agreement shall be cumulative and not exclusive of any rights or remedies
provided by law.
GUARANTY
Parent has agreed, by means of a separate Guaranty dated as of May 1, 1994
(the "Guaranty") to guarantee to the Company the prompt and full performance and
discharge by the Purchaser and Merger Subsidiary (together, the "Obligors") of
all of the covenants, agreements, obligations, liabilities, representations and
warranties of the Obligors under the Merger Agreement (collectively, the
"Obligations"), including, without limitation, the due and punctual payment of
all amounts which may become due and payable to the Company. If the Obligors
shall default in the due and punctual performance of any of the Obligations or
in the full and timely payment of any amounts owed pursuant to the Obligations,
Parent will promptly cause to be performed such Obligations and will promptly
cause full payment to be made of any amount due with respect thereto at its sole
cost and expense.
Parent has further guaranteed to those officers and directors of the
Company whom the Purchaser has agreed will be indemnified and held harmless
pursuant to Section 7.03 of the Merger Agreement the full and complete
performance by the Obligors of each and all of the obligations set forth in said
Section 7.03, including, without limitation, the amounts due and payable to such
officers and directors.
The foregoing is a summary of the Guaranty, a copy of which is attached
hereto as Exhibit 3 and incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Guaranty.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
The Board of Directors has approved the Merger Agreement and the
transactions contemplated thereby and unanimously recommends that all holders of
Shares who wish to receive cash tender such Shares pursuant to the Offer.
(b) Background; Reasons for the Recommendation.
Over the past several months, the Board of Directors and the Company's
senior management have been actively studying the changing healthcare
environment, evaluating the increasingly competitive pharmaceutical industry and
analyzing the Company's current and future prescription pharmaceutical product
line to determine how it might fit into the changing environment. The Company
was aware that many other companies were considering or had entered into a
variety of strategic transactions to strengthen their positions for the future,
recognizing the uncertainties surrounding the future of the pharmaceutical
industry and the rapid pace of change in the industry. Such transactions
included joint ventures, joint marketing arrangements, acquisitions of new
product lines, acquisitions of other companies in related fields or
consolidations with other companies. In addition, the Company continuously had
to take into account the fact that its United States patent on naproxen, one of
the Company's most significant products, expired in December 1993. This
expiration caused the Company's revenues from this product to decline sharply.
In recent years, the Company and Parent have from time to time explored
opportunities for collaboration, strategic alliance or some form of combination.
In December 1993, Parent communicated to the Company Parent's possible interest
in pursuing an acquisition of the Company at a price per Share ranging from the
low $20s to $27.
In December 1993, the Board of Directors created the Special Committee to
review the strategic options facing the Company without any preconceived notions
as to what would best serve the Company's stockholders, employees and customers
in the near and long term and to consider and make recommendations with respect
to the available means to maximize stockholder value. Following its creation the
Special Committee undertook, with the assistance of Wilkerson Group (a financial
consulting firm), Goldman, Sachs & Co. ("Goldman Sachs"), legal advisors and
members of the Company's management, a review of the Company's financial
condition and prospects, including the effect on the Company of the expiration
of its United States patent on naproxen, the status of the Company's research
and development pipeline and the potential for realizations of values therefrom,
the impact of managed healthcare on the pharmaceutical
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industry as a whole and the Company in particular, and the changing healthcare
environment. In addition, the Special Committee reviewed the impact on the
Company and the possible values for Shares attributable to different strategic
alternatives, including the implementation of a restructuring plan to reduce the
Company's costs during a period of lower revenues, certain alliances and
business combinations with companies of smaller or similar size in the
pharmaceutical or biotech industries and the possible sale of the Company.
In February 1994, the Special Committee entered into a written engagement
letter with Goldman Sachs to serve as independent financial advisor in
connection with various strategic alternatives which the Company was
considering. Beginning in February 1994, the Special Committee and the Board of
Directors determined to approach a number of companies which might be interested
in engaging in a strategic alliance, business combination or acquisition
transaction with the Company. The Special Committee was expanded at this time to
include Paul E. Freiman and Dr. George Rosenkranz. At the same time, the Company
continued to develop plans with respect to additional restructuring efforts that
it could undertake in the event that a satisfactory result from available
alternatives was not achieved. One of the parties so approached was Parent, and
on February 28, 1994, the Company and Parent entered into a confidentiality and
standstill agreement which governed the conditions of disclosure of certain
financial and other information of the Company. A copy of such confidentiality
and standstill agreement between the Company and Parent is attached hereto as
Exhibit 4 and incorporated herein by reference.
Following its review of certain financial and other information regarding
the Company, during the week of March 8, 1994, Parent communicated to
representatives of the Company its interest in acquiring the Company for $20 per
share. After being advised that the Special Committee was not prepared to
recommend such a transaction, and following additional discussions with the
Company's representatives, Parent indicated a willingness to consider a
transaction in which it would pay $20 per share together with a participation
right based on the sales of one of the Company's new products (in the clinical
testing stage) or, alternatively, $23 per share. After consideration, the
Special Committee indicated to Parent and the Board of Directors that it was
unable to recommend any such transaction.
Throughout the remainder of March and April 1994, representatives of the
Company continued to approach a number of parties who might be interested in a
transaction with the Company and, as a result of those efforts, the Company
entered into confidentiality and standstill agreements with three of such
parties. In connection therewith, during the week of April 18, 1994,
representatives of the Company indicated to Parent and other parties that,
although no determination had been made to recommend a sale of the Company, the
Special Committee was interested in receiving proposals to acquire or otherwise
engage in a strategic alliance or business combination with the Company in order
to determine which alternative would best serve the interests of the Company's
stockholders. The Special Committee set a preliminary deadline of the end of the
week of May 9, 1994, for receipt of any such proposals.
After initial discussions concerning Parent's participation in the process
outlined by the Special Committee, Parent indicated that it might consider
unilaterally submitting a proposal to the Company at a time other than that
proposed by the Special Committee in connection with such process. Immediately
prior to the Company's regularly scheduled Board of Directors meeting on April
28, 1994, Parent submitted a written proposal to the Company which by its terms
expired on May 1, 1994. The terms of Parent's proposal were substantially
similar to the transactions contemplated by the Merger Agreement. After
reviewing the terms of Parent's proposal together with their financial and legal
advisors, the Special Committee and the Board of Directors determined to allow
their advisors and representatives to proceed with negotiating definitive
agreements with respect to Parent's proposal provided that the other parties
that had entered into confidentiality and standstill agreements with the Company
would continue to be afforded the opportunity to review financial and other
information provided by the Company and to submit proposals under the process
previously outlined by the Special Committee. Negotiations with respect to
Parent's proposal then ensued.
At a meeting held on May 1, 1994, the Special Committee reconvened and,
after reviewing matters with the legal and financial advisors, determined by a
unanimous vote of those members who were present that the transactions
contemplated by the Merger Agreement are fair to and in the best interests of
the stockholders of the Company and they recommended that the Board of Directors
approve the Merger Agreement and the
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transactions contemplated thereby, although the Special Committee made no
recommendation with respect to the election by stockholders to receive shares of
a new issue of a limited conversion preferred stock to be issued by the
Purchaser in connection with the Merger. After hearing the report of the Special
Committee, the Board of Directors approved the Merger Agreement and the
transactions contemplated thereby and unanimously recommended that all holders
of Shares who wish to receive cash tender such Shares pursuant to the Offer.
With respect to the Merger, the Board of Directors unanimously recommended that
the stockholders of the Company vote in favor of approval and adoption of the
Merger Agreement and the Merger, although the Board of Directors made no
recommendation with respect to the election to receive shares of a new issue of
a limited conversion preferred stock to be issued by the Purchaser in connection
with the Merger. A copy of a press release announcing, among other things, the
recommendations of the Special Committee and the Board of Directors is attached
hereto as Exhibit 5 and is incorporated herein by reference. A copy of a letter
to stockholders from the Company, which will accompany this Schedule 14D-9, is
attached hereto as Exhibit 6 and is incorporated herein by reference.
In determining to recommend the approval of the Merger Agreement and the
transactions contemplated thereby to the full Board of Directors, and in
approving the Merger Agreement and the transactions contemplated thereby and
recommending that all holders of Shares who wish to receive cash tender such
Shares pursuant to the Offer, the Special Committee and the Board of Directors,
respectively, considered a number of factors, including:
(i) the knowledge of the Special Committee and the Board of Directors
of the competitive uncertainties that could result from changes in the
pharmaceutical and healthcare industries and the belief of the Special
Committee and the Board of Directors as to the risks associated with such
changes with respect to the Company;
(ii) presentations by the management of the Company, and its
consulting and financial advisors, regarding the financial condition,
results of operations, business and prospects of the Company, including the
status of the Company's research and development pipeline, the impact of
the expiration of the United States naproxen patent on the Company and the
competitive uncertainty that could result from major changes in the
pharmaceutical, medical diagnostic and healthcare industries;
(iii) that the $24.00 per Share Offer price represents (A) a premium
of approximately 57% over the closing sales price for the Shares on the New
York Stock Exchange (the "NYSE") on April 29, 1994, the last trading day
prior to the public announcement of the execution of the Merger Agreement;
(B) a premium of approximately 88% over the closing sales price for the
Shares on the NYSE one week prior to April 29, 1994; and (C) a premium of
approximately 73% over the closing sales price for the Shares on the NYSE
four weeks prior to April 29, 1994;
(iv) that the trading price of the Shares had not exceeded the $24.00
per Share Offer price since December 14, 1992, and that since May 6, 1992,
the Share price was on a downward trend from a high of $46 1/4 to a low of
$12 3/4 on April 22, 1994;
(v) the opinion of Goldman Sachs to the effect that as of the date of
the opinion the $24.00 per Share cash consideration to be received by the
holders of the Shares in the transactions contemplated by the Merger
Agreement is fair to such holders. A copy of the opinion of Goldman Sachs
is attached hereto and filed as Exhibit 7, and is incorporated herein by
reference. STOCKHOLDERS ARE URGED TO READ THE OPINION OF GOLDMAN SACHS
CAREFULLY IN ITS ENTIRETY;
(vi) that the Merger Agreement is structured so as not to be
contingent upon the outcome of the Company's ongoing clinical testing;
(vii) that the Merger Agreement is structured to permit the Company to
continue the process established by the Special Committee such that, on or
before May 14, 1994, the Company may receive acquisition and other
proposals from third parties that were bound by a standstill agreement with
the Company on the date on which the Merger Agreement was executed, and
engage in negotiations with, or disclose nonpublic information or afford
access to, any such party;
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(viii) that the Merger Agreement is structured to permit the Company
in the exercise of the fiduciary duties of the Board of Directors to engage
in negotiations with, or disclose nonpublic information or afford access
to, any third party that may be considering making, or has made, an
Acquisition Proposal, or waive any standstill or similar agreements entered
into by the Company;
(ix) the terms and conditions of the Merger Agreement, including that
the Purchaser could under certain circumstances be entitled to fees and
expenses of $20,000,000 on or prior to May 14, 1994, and $35,000,000
thereafter, upon termination of the Merger Agreement in certain
circumstances, including without limitation the modification or withdrawal
of the Board of Directors' recommendation with respect to the Offer and the
Merger, or if any person or group were to acquire beneficial ownership of
more than 50% of any class or series of the Company's capital stock;
(x) the ability of the Purchaser to consummate the Offer and the
Merger without conditioning the Offer on obtaining any specific financing
commitments; and
(xi) a review of the terms of the limited conversion preferred stock
of the Purchaser to be issued in connection with the Merger (including the
dividend rate, the exchange ratio, the redemption provisions, the
restrictions on transferability and the right to exchange, the uncertainty
regarding the optional redemption or exchange of such stock and other
provisions) and, after consultation with Goldman Sachs, the determination
of the Board of Directors that the limited conversion preferred stock would
be expected to trade, if it were not restricted from trading by its terms,
at a discount to the $24.00 cash price offered in the Offer and the Merger,
and the knowledge of the Special Committee and the Board of Directors that,
despite such terms, the Company's long-term stockholders who have a low tax
basis in their Shares might desire to have the opportunity to receive
consideration for their Shares in a tax-free manner.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Goldman Sachs has been retained by the Special Committee of the Company to
act as independent financial advisor to the Company with respect to the Offer,
the Merger and matters arising in connection therewith. Pursuant to a letter
agreement dated March 1, 1994, which replaced a February 1994 letter agreement
among the parties, if the Offer and the Merger are consummated, the Company will
pay Goldman Sachs, for its services in connection with the foregoing matters, a
fee of approximately $10,750,000, which amount includes minimum fees of $600,000
that were payable to Goldman Sachs at the start of the engagement. The Company
has also agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including the fees and expenses of its counsel, and to indemnify
Goldman Sachs against certain liabilities, including liabilities arising under
the federal securities laws.
Goldman Sachs has provided certain investment banking services to the
Company from time to time for which they have received customary compensation.
In the ordinary course of their business, Goldman Sachs actively trades the debt
and equity securities of the Company for their own account and for the accounts
of customers and Goldman Sachs may, therefore, at any time hold a long or short
position in such securities.
The Company has also agreed to pay to the investment banking firm of Allen
& Company Incorporated a fee of $2,500,000 for the services it has rendered in
participating in originating the Offer and assisting in negotiating the Merger.
Allen & Company Incorporated has provided investment banking services to the
Company on a wide variety of matters for a number of years, and Marvyn Carton,
who has been a director of the Company since 1957, is a director of Allen &
Company Incorporated and was an Executive Vice President of Allen & Company
Incorporated until his retirement in 1991. In addition, members of the Allen
family, who have been stockholders of the Company since its inception, presently
own in the aggregate approximately 12,100,000 Shares. Such Allen family members
may also compensate Allen & Company Incorporated for services in connection with
the Offer and the Merger.
14
<PAGE> 16
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in Schedule II hereto, no transactions in the
Shares have been effected during the past 60 days by the Company or, to the best
of the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best of the Company's knowledge, except for (i) Shares the sale
of which may trigger liability for the holder(s) under Section 16(b) of the
Exchange Act, and (ii) those Shares as to which a holder chooses to avail
himself of the stock election in the Merger (which, to the best of the Company's
knowledge, would be voted by such holder in favor of the Merger at the
appropriate time), each executive officer, director and affiliate of the Company
currently intends to tender all Shares over which he or she has sole dispositive
power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) The Company has been engaged in discussions with third parties
regarding certain possible transactions involving the Company and in connection
with such discussions has entered into confidentiality and standstill
agreements. See Item 4(b) above.
Except as set forth above or in Items 3(b) and 4(b), the Company is not
engaged in any negotiation in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described above or in Items 3(b) or 4 above, there are no
transactions, Board of Directors' resolutions, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or more
of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's stockholders.
15
<PAGE> 17
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C>
Exhibit 1 Acquisition Agreement and Plan of Merger, dated as of May 1, 1994, among Syntex
Corporation, Roche Capital Corporation and Roche (Panama) Corporation
Exhibit 2 Form of Executive Severance Agreement entered into by and between Syntex
Corporation and its executive officers and certain other employees
Exhibit 3 Guaranty, dated as of May 1, 1994, made by Roche Holding Ltd
Exhibit 4 Confidentiality and standstill agreement, dated February 28, 1994, between
Syntex Corporation and Roche Holding Ltd
Exhibit 5 Press Release issued jointly by Syntex Corporation and Roche Holding Ltd, dated
May 2, 1994
Exhibit 6 Letter to Stockholders of the Company dated May 6, 1994*
Exhibit 7 Opinion of Goldman, Sachs & Co. dated May 1, 1994*
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
16
<PAGE> 18
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 6, 1994 SYNTEX CORPORATION
By /s/ NEIL W. FLANZRAICH
Neil W. Flanzraich
Senior Vice President and Chief
Legal Officer
17
<PAGE> 19
SCHEDULE I
SYNTEX CORPORATION
3401 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about May 6, 1994 as a
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on May 6, 1994. You are receiving this Information Statement in
connection with the possible election of persons designated by the Purchaser to
a majority of the seats on the Board of Directors of the Company. The Merger
Agreement requires the Company, at the request of the Purchaser, to take all
action necessary to cause the Purchaser's designees to be elected to the Board
of Directors under the circumstances described therein. This Information
Statement is required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. See "Board of Directors -- Right to Designate Directors; The
Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
6, 1994. The Offer is scheduled to expire at 12:00 midnight, New York City time,
on June 6, 1994 unless the Offer is extended.
The information contained in this Information Statement concerning the
Purchaser has been furnished to the Company by the Purchaser, and the Company
assumes no responsibility for the accuracy or completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of April 27, 1994, there were
221,134,238 Shares outstanding. The Board of Directors currently consists of
thirteen members and there are currently no vacancies on the Board of Directors.
Each director holds office until such director's successor is elected and
qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of a majority of the outstanding Shares on a fully diluted basis
(including the Shares purchased pursuant to the Offer), the Purchaser will be
entitled to designate such number of directors (the "Purchaser Designees"),
rounded up to the next whole number, on the Company's Board of Directors that
equals the product of (i) the total number of directors on the Company's Board
of Directors (giving effect to the election of any additional directors in
accordance with this mechanism) and (ii) the percentage that the number of
Shares owned by the Purchaser and its affiliates (including Shares so purchased)
bears to the total number of Shares outstanding. The
<PAGE> 20
Company will, upon request of the Purchaser, at the Company's election, either
increase the number of directors or seek and accept such resignations from
incumbent directors as is necessary to enable the Purchaser's Designees to be so
elected to the Board. The Company has also agreed to use its best efforts to
cause the Purchaser Designees to constitute the same percentage as such
individuals represent on the Board of Directors for each committee of the Board
of Directors, the board of each subsidiary and each committee of each such
board. Subject to the foregoing and other provisions of the Merger Agreement,
the Company has agreed to use its best efforts to ensure that all of the members
of the Board of Directors and such boards and committees as of the date of the
Merger Agreement will remain members of the Board of Directors and such boards
and committees until the Effective Time.
Notwithstanding the Company's obligations outlined above, nothing shall
require any current member of the Special Committee of the Board of Directors to
resign from the Board of Directors.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule I to the
Offer to Purchase, a copy of which is being mailed to the Company's stockholders
together with this Schedule 14D-9. The Purchaser has informed the Company that
each of the directors and executive officers listed in Schedule I to the Offer
to Purchase has consented to act as a director, if so designated. The
information on such Schedule I is incorporated herein by reference.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a specified minimum number of Shares
pursuant to the Offer, which purchase cannot be earlier than June 6, 1994, and
that, upon assuming office, the Purchaser Designees will thereafter constitute
at least a majority of the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the most recent practicable date
information with respect to persons known to management to be the beneficial
owners of more than five percent of any class of voting securities of the
Company:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- --------------------------- ----------------- --------
<C> <S> <C> <C>
Common Stock Charles Allen Jr., 12,104,459(2) 5.5%
Herbert Allen, and members
of their families
711 Fifth Avenue,
New York, New York
10022(1)
</TABLE>
- ---------------
(1) Such persons are not necessarily a group within the meaning of Section
13(d)(3) of the Exchange Act.
(2) All such securities are outstanding Shares directly owned as of April 1,
1994.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The name, principal occupation, business experience and age of each
director and executive officer and his or her term of office and period of
previous service as a director (where applicable) of the Company and the number
of Shares and percentage of outstanding Shares of the Company beneficially owned
by each director and executive officer as of April 1, 1994, are set forth below.
There are no family relationships among any of the named individuals, and no
individual was selected as a director pursuant to any arrangement or
understanding with any other person.
<TABLE>
<CAPTION>
AMOUNT
DIRECTOR'S OR EXECUTIVE OFFICER'S AND NATURE
NAME AND YEAR OF YEAR TERM
FIRST BECAME DIRECTOR (WHERE BENEFICIAL WILL
APPLICABLE) POSITION(S) HELD OWNERSHIP(1) EXPIRE
- ----------------------------------- -------------------------------- ------------ ---------
<S> <C> <C> <C>
Paul E. Freiman.................... Chairman of the Board of 284,454(2)(3) 1994
(1985) Directors and Chief Executive
Officer
James N. Wilson.................... President and Chief Operating 65,574(2)(3) 1996
(1990) Officer and Director
</TABLE>
I-2
<PAGE> 21
<TABLE>
<CAPTION>
AMOUNT
DIRECTOR'S OR EXECUTIVE OFFICER'S AND NATURE
NAME AND YEAR OF YEAR TERM
FIRST BECAME DIRECTOR (WHERE BENEFICIAL WILL
APPLICABLE) POSITION(S) HELD OWNERSHIP(1) EXPIRE
- ----------------------------------- -------------------------------- ------------ ---------
<S> <C> <C> <C>
Dana G. Leavitt.................... Director 9,250(4) 1996
(1982)
Robert S. Miller, Jr. ............. Director 1,000 1996
(1993)
Miriam Stoppard.................... Director 1,250(4) 1996
(1991)
Julius R. Krevans.................. Director 2,450(4) 1994
(1989)
Leonard Marks, Jr. ................ Director 4,250(4) 1994
(1970)
Anthony M. Solomon................. Director 3,650(4) 1994
(1985)
Marvyn Carton...................... Director 156,250(4)(5) 1995
(1957)
John H. Fried...................... Director 119,025(2)(4) 1995
(1982)
Howard M. Holtzmann................ Director 400,000 1995
(1957)
Charles A. Lynch................... Director 2,250(4) 1995
(1989)
George Rosenkranz.................. Director 1,747,860(4)(6) 1995
(1957)
Gerhard von Mutzenbecher........... Vice President 88,920
Thomas L. Gutshall................. Executive Vice President 137,622(4)(6)
Robert L. Roe...................... Senior Vice President 85,280
Development Research
Robert A. Lewis.................... Senior Vice President, 63,950(4)
President, Discovery-Research
</TABLE>
- ---------------
(1) Unless otherwise indicated in a footnote, each person listed in the table
possesses sole voting and sole investment power with respect to the Shares
shown in the table to be owned by him or her. No person listed owns more
than one percent of the class.
(2) Includes Shares issuable upon the exercise of stock options presently
exercisable or which become exercisable within 60 days from April 1, 1994,
granted pursuant to the Company's 1984 Stock Option and Stock Appreciation
Rights plan as follows: Mr. Freiman, 207,750 Shares; Dr. Fried, 49,500
Shares; Mr. Wilson, 63,200 Shares; Dr. von Mutzenbecher, 66,150 Shares; Mr.
Gutshall, 121,250 Shares; Mr. Roe, 71,250 Shares; Mr. Lewis, 57,792 Shares;
Mr. Flanzraich, 91,150 Shares; Mr. Powers, 52,950 Shares; Mr. Booth, 53,000
Shares; Mr. Ells, 35,750 Shares; Ms. Friedman, 32,200 Shares; and Mr.
Holder, 48,650 Shares.
(3) Includes 867 Shares held by the trustee of the Syntex U.S. Employees
Retirement Savings Plan in the account of Mr. Freiman, 374 Shares held in
the account of Mr. Wilson, 7,831 Shares held in the account of Mr.
Flanzraich, 3,954 Shares held in the account of Mr. Ells, 1,111 Shares held
in the account of Ms. Friedman, 1,520 Shares held in the account of Mr.
Holder.
(4) Includes 1,250 Shares (1,000 in the case of Dr. Rosenkranz, and 250 in the
case of Dr. Fried) issuable to each director indicated in the table upon the
exercise of stock options granted pursuant to the Company's 1991 Stock
Option Plan for Non-Employee Directors, which became exercisable within 60
days from September 1, 1993.
(5) Does not include 3,000 Shares owned by Mr. Carton's wife as to which he has
no voting power or investment power and disclaims beneficial ownership.
I-3
<PAGE> 22
(6) Does not include 65,920 Shares owned by Dr. Rosenkranz's wife as to which he
has no voting power or investment power and disclaims beneficial ownership.
(7) Does not include 1,500 Shares owned by Mr. Gutshall's minor child as to
which he has no investment power or voting power and disclaims beneficial
ownership.
PAUL E. FREIMAN. Mr. Freiman has been a director of the Company since 1985
and is a member of the Finance Committee, the Nominating Committee, the Board
Committee on Science at Syntex and the Special Committee. Mr. Freiman joined
Syntex Laboratories, Inc. in 1962 as a medical service representative. He was
named Vice President, Marketing and Medical Services of Syntex Laboratories,
Inc. in 1972 and Senior Vice President of that subsidiary in 1976. Mr. Freiman
served as President of Syntex Laboratories, Inc. from 1978 to 1983. In 1981, he
was elected a Vice President of the Company and in August 1985 was named a
Senior Vice President of the Company with responsibility for the Company's human
pharmaceutical business activities worldwide. In January 1986, Mr. Freiman was
elected Executive Vice President of the Company with responsibility for the
Company's human pharmaceutical and agribusiness activities worldwide and in
January 1987 was elected President and Chief Operating Officer of the Company.
In August 1989, Mr. Freiman was named Chief Executive Officer of the Company and
was elected Chairman of the Board of Directors in July 1990. Mr. Freiman is 59
years of age.
JAMES N. WILSON. Mr. Wilson was elected a director of the Company in 1990
and assumed the office of President and Chief Operating Officer of the Company
on January 1, 1991. He is a member of the Finance Committee. From 1988 until
1990, Mr. Wilson was Chairman and Chief Executive Officer of Neurex Corporation,
a company engaged in pharmaceutical research. From 1982 to 1988, he was
President and Chief Executive Officer of LifeScan, a diagnostic company. Prior
thereto he was employed by the Company for fourteen years in a number of
marketing and management positions including President of Syntex Ophthalmics
from 1977 to 1981. Mr. Wilson is 49 years of age.
DANA G. LEAVITT. Mr. Leavitt has been a director of the Company since 1982
and is a member of the Audit Committee and the Compensation and Benefits
Committee. Mr. Leavitt is President of Leavitt Management Company, a management
consulting firm. He was President and Chief Executive Officer of Transamerica
Title Insurance Company from 1964 to 1972, a Vice President of Transamerica
Corporation from 1969 to 1971, a Group Vice President of Transamerica
Corporation from 1971 to 1977 and an Executive Vice President of Transamerica
Corporation from 1977 to 1981. Mr. Leavitt also served as a director of
Transamerica Corporation from 1975 to 1981. Mr. Leavitt currently serves as a
director of Chicago Title and Trust Company, Chicago Title Insurance Company,
Ticor Title Insurance Company and Sacramento Savings Bank. Mr. Leavitt is 68
years of age.
ROBERT S. MILLER, JR. Mr. Miller joined the Board of Directors in
September 1993 and is Chairman of the Audit Committee, a member of the Finance
Committee and a member of the Special Committee. He was Chief Financial Officer
of Chrysler Corporation from 1981 to 1990 and Vice Chairman of the Board of that
company from 1990 to 1992. He then became a senior partner in James D.
Wolfensohn, Inc., investment bankers, where he specialized in advising companies
in transition from 1992 to 1993. He is currently Vice President and Treasurer of
Moore Mill and Lumber Company, a privately held company in the timber industry.
He serves on the Boards of Directors of U.S. Bancorp, Federal-Mogul Corporation,
Fluke Corporation, and Pope & Talbot, Inc. Mr. Miller is 52 years of age.
MIRIAM STOPPARD. Dr. Stoppard was elected a director of the Company in
1991 and is a member of the Compensation and Benefits Committee and the Board
Committee on Science at Syntex. She is the author of numerous books dealing with
healthcare issues, particularly in the field of women's healthcare and babycare.
She has written articles for various journals in the United States and England
and currently writes a syndicated weekly column dealing with health and
medicine, as well as regular features for the U.K. TV Times. Dr. Stoppard has
also appeared as a healthcare commentator on numerous radio and television
programs. Dr. Stoppard was affiliated with Syntex Pharmaceutical Ltd. from 1968
until 1980, serving as Managing Director of that company from 1977 until 1980.
She currently serves as a director of Riverside Radio and Phipps P.R. Dr.
Stoppard is 56 years of age.
JULIUS R. KREVANS. Dr. Krevans has been a director of the Company since
1989. He is a member of the Finance Committee, the Compensation and Benefits
Committee, the Board Committee on Science at
I-4
<PAGE> 23
Syntex and the Special Committee. From July 1982 until May 1993, Dr. Krevans
served as Chancellor of the University of California, San Francisco, and now
serves on the faculty of that institution's School of Medicine. Prior to his
appointment as Chancellor, Dr. Krevans served as a Professor of Medicine and
Dean of the School of Medicine at the University of California, San Francisco
from 1971 to 1982. Dr. Krevans is a member of the Institute of Medicine,
National Academy of Sciences, and led its committee for the National Research
Agenda on Aging until 1991. He is Chairman of the Bay Area Economic Forum, a
member of the Medical Panel of the A.P. Giannini Foundation, and a member of the
Board of Directors of the Bay Area BioScience Center. Dr. Krevans is 70 years of
age.
LEONARD MARKS, JR. Mr. Marks has been a director of the Company since
1970. He is Chairman of the Compensation and Benefits Committee and is a member
of the Audit, Trust Review and Finance Committees. Mr. Marks is a financial and
management consultant and a partner in Marks, Hoffman Associates, a venture
capital firm. Mr. Marks served as Executive Vice President of Castle & Cooke,
Inc., a company engaged in food production and real estate, from 1972 until his
retirement in October 1985. Mr. Marks serves as a director of Airlease
Management Services, Inc. and Alexion Pharmaceutical, Inc. Mr. Marks is 72 years
of age.
ANTHONY M. SOLOMON. Mr. Solomon has been a director of the Company since
1985. He is Chairman of the Nominating Committee and a member of the Audit,
Finance and Trust Review Committees and is Chairman of the Special Committee.
Mr. Solomon was Chairman of the Board of S.G. Warburg (U.S.A.) Inc. from April
1986 to July 1989. He served as a Director of S.G. Warburg Group until June
1991. He served as President and Chief Executive Officer of the Federal Reserve
Bank of New York from April 1980 until his retirement on January l, 1985. Prior
to joining the Federal Reserve Bank of New York, Mr. Solomon served for
approximately three years as Undersecretary of the United States Treasury for
Monetary Affairs. He is currently serving as chairman of the U.K. Fund and the
Europe Fund boards managed by Mercury Asset Management Company of the S.G.
Warburg Group. Mr. Solomon also serves on the Board of Overseers of the
TIAA/CREF (Teachers Insurance and Annuity Association/College Retirement
Equities Fund). He is an advisor to the Banca Comerciale Italiana in Milan,
Italy and is an advisor to the Blackstone Group in New York, New York. Mr.
Solomon is 74 years of age.
MARVYN CARTON. Mr. Carton has been a director of the Company since 1957
and is Chairman of the Finance Committee and the Trust Review Committee. Mr.
Carton is a director of Allen & Company Incorporated, investment bankers, a
position which he has held for more than the last five years. Mr. Carton was
also an Executive Vice President of Allen & Company Incorporated until his
retirement on December 31, 1991. Mr. Carton serves as a director of Acquisition
Resources Ltd. and the 3rd Century fund of Brown University. Mr. Carton is 76
years of age.
JOHN H. FRIED. Dr. Fried has been a director of the Company since 1982 and
is a member of the Finance Committee and the Board of Directors' Committee on
Science at Syntex. Dr. Fried served as President of Syntex Research from 1976
until his retirement as an executive officer of the Company on March 31, 1992.
He was a Senior Vice President of the Company from 1981 until October 1985. Dr.
Fried was Vice Chairman of the Board of the Company from October 1985 until
December 31, 1992. Dr. Fried is also a director of Corvas International Inc. and
a director and chairman of Alexion Pharmaceutical Inc. Dr. Fried is 64 years of
age.
HOWARD M. HOLTZMANN. Mr. Holtzmann has been a director of the Company
since 1957. Mr. Holtzmann has been a partner of the law firm of Holtzmann, Wise
& Shepard for more than the last five years. Holtzmann, Wise & Shepard is
principal outside counsel for the Company and has performed services for the
Company as more fully described below. Mr. Holtzmann is 72 years of age.
CHARLES A. LYNCH. Mr. Lynch has been a director of the Company since 1989
and is a member of the Compensation and Benefits Committee. Mr. Lynch is the
Chairman of Market Value Partners Company, a firm engaged in making equity
investments in, and providing remedial management services to, emerging and
financially distressed companies. From August 1988 to May 1989, Mr. Lynch was
President and Chief Executive Officer of Levolor Corporation, a company engaged
in the manufacture of window coverings. Prior to joining Levolor Corporation,
Mr. Lynch served as Chairman of the Board and Chief Executive Officer of DHL
Airways, Inc., an express courier company, from September 1986 to June 1988 and
Chairman of the Board and Chief Executive Officer of Saga Corporation, a food
service company, from 1978 to June 1986.
I-5
<PAGE> 24
Mr. Lynch is Chairman of the Board of Greyhound Lines, Inc. and a director of
Fresh Choice Restaurants, Mid-Peninsula Bank, Nordstrom, Inc., Hexel Corporation
and Pacific Mutual Life Insurance Company. Mr. Lynch is 66 years of age.
GEORGE ROSENKRANZ. Dr. Von Rosenkranz has been a director of the Company
since 1957 and is the Chairman of the Board of Directors' Committee on Science
at Syntex and a member of the Finance and Nominating Committees. Dr. Rosenkranz
was President of the Company from its inception in 1957 to June 1976 and
Chairman of the Board from 1973 until his retirement as an officer of the
Company on September 30, 1981. Dr. Von Rosenkranz is 77 years of age.
GERHARD VON MUTZENBECHER. Mr. Mutzenbecher has been the President, Syntex
Pharmaceuticals, Europe and Vice President, Syntex Corporation since 1992. From
1988 to 1992 he served as the Regional Vice President, Europe and Mexico, Syntex
Pharmaceuticals International Limited. Mr. Mutzenbecher is 59 years old.
THOMAS L. GUTSHALL. Mr. Gutshall has been an Executive Vice President of
the Company since 1988. Mr. Gutshall is 56 years of age.
ROBERT L. ROE. Mr. Roe has been the President, Developmental Research
since 1992. From 1989 to 1992 he served as the Executive Vice President and
Director, Medical Research and Pharmaceutical Development, Syntex Research. From
1988 through 1989, Mr. Roe served as the Senior Vice President and Director,
Medical Research, Syntex Research. Mr. Roe is 53.
ROBERT A. LEWIS. Mr. Lewis has been the President, Discovery Research
since 1992. From 1989 to 1992 he served as Executive Vice President and
Director, Basic Research and Drug Evaluation, Syntex Research. From 1988 to
1989, he served as the Senior Vice President and Director, Basic Research,
Syntex Research. Mr. Lewis is 49 years of age.
NEIL W. FLANZRAICH. Mr. Flanzraich has been the Senior Vice President and
General Counsel since 1992. From 1988 to 1992 he served as Senior Vice President
and Co-General Counsel. Mr. Flanzraich is 51 years of age.
RICHARD P. POWERS. Mr. Powers has been the Senior Vice President and Chief
Financial Officer since 1988. Mr. Powers is 53 years of age.
MELVIN D. BOOTH. Mr. Booth has been the President of Syntex Laboratories
since 1993. From 1992 to 1993 he served as the President of Syntex
Pharmaceuticals Pacific and Vice President of the Company. From 1991 to 1992 he
served as an Area Vice President of Syntex, Inc. From 1988 to 1991 he served as
the President of Syntex, Inc., Canada. Mr. Booth is 49 years of age.
ROBERT H. ELLS. Mr. Ells has been the Group Vice President, Pharmaceutical
and Chemical Operations and Services since 1993. From 1988 to 1993 he served as
Vice President, Chemical Operations and Engineering Services of the Company. Mr.
Ells is 57 years of age.
DARLENE FRIEDMAN. Ms. Friedman has been the Vice President, Human
Resources of the Company since 1993. From 1992 to 1993 she served as the Vice
President, Human Resources, Syntex (U.S.A.) Inc. During 1992 she served as
Executive Director, Human Resources for the Company. From 1991 to 1992 she
served as Corporate Director, Human Resources. From 1988 to 1991 she served as
Director of Human Resources. Ms. Friedman is 51 years of age.
GEORGE HOLDER. Mr. Holder has been the Vice President and President of
Syntex Agribusiness, Inc. since 1988. Mr. Holder is 57 years of age.
JEAN-CHARLES PSCHUDIN. Mr. Pschudin joined the Company on March 28, 1994
as Vice President and will succeed Mr. von Mutzenbecher as President, Syntex
Pharmaceuticals, Europe, when Mr. von Mutzenbecher retires on July 31, 1994.
From 1985 until 1994, Mr. Pschudin was with Johnson & Johnson International,
serving most recently as a European sector Vice President. Mr. Pschudin is 51
years of age.
I-6
<PAGE> 25
BOARD AND COMMITTEE MEETINGS
The Board of Directors held eight regular meetings and one special meeting
during fiscal 1993. Each director, except Mr. Holtzmann and Dr. Stoppard,
attended over 75% of the total number of meetings of the Board of Directors and
the committees thereof of which he or she was a member during fiscal 1993.
The standing committees of the Board of Directors are the Audit Committee,
the Compensation and Benefits Committee, the Finance Committee, the Nominating
Committee, the Trust Review Committee and the Board of Directors' Committee on
Science at Syntex.
During fiscal 1993, the Audit Committee, comprising Mr. Jerome Farmer
(Chairman), Mr. Leavitt, Mr. Marks and Mr. Solomon, held seven meetings. Mr.
Farmer died after the end of the fiscal year, and Mr. Miller succeeded him as
Chairman of the Audit Committee. The Audit Committee recommends to the Board of
Directors the appointment of the independent public accountants and reviews with
representatives of the independent public accountants the scope of their
examination, their fees, the results of their examination and any problems
identified by the independent public accountants regarding internal controls,
together with their recommendations. The Audit Committee also meets with the
director of the Company's Audit Services Department to review the activities of
the internal audit staff and its reports on the functioning of the Company's
program for compliance with its policy on business conduct and its policies and
procedures on internal accounting controls.
The Compensation and Benefits Committee, comprising Mr. Marks (Chairman),
Dr. Krevans, Mr. Leavitt, Mr. Lynch and Dr. Stoppard, held eight meetings during
fiscal 1993. The functions of the Compensation and Benefits Committee include
the granting of stock options, the making of recommendations to the Board of
Directors with respect to the salaries and incentive awards for the executive
officers of the Company and certain key employees of the Company and its
subsidiaries, and the making of recommendations to the Board of Directors with
respect to major compensation and benefits programs.
The Finance Committee, comprising Mr. Carton (Chairman), Mr. Farmer, Mr.
Freiman, Dr. Fried, Dr. Krevans, Mr. Marks, Dr. Rosenkranz, Mr. Solomon and Mr.
Wilson, held nine meetings during fiscal 1993. Mr. Miller succeeded Mr. Farmer
as a member of this committee after the end of the fiscal year. The Finance
Committee reviews the Company's financial policies and their implementation and,
where appropriate, makes recommendations to the Board of Directors for
modification or continuation thereof. The Finance Committee also reviews the
Company's basic financial plans before their submission to the Board of
Directors, the Company's asset and liability management programs and proposed
acquisitions, divestitures and capital expenditures. The Finance Committee has
authority to approve capital expenditures within limits established by the Board
of Directors.
The Nominating Committee, comprising Mr. Solomon (Chairman), Mr. Freiman
and Dr. Rosenkranz, held three meetings during fiscal 1993. The Nominating
Committee considers and recommends to the Board of Directors a slate of nominees
for election as directors of the Company at the Annual Meeting of Stockholders
and, when vacancies occur, candidates for election by the Board of Directors.
The Nominating Committee also periodically evaluates the size and composition of
the Board of Directors and makes recommendations with respect thereto.
The Trust Review Committee, comprising Mr. Carton (Chairman), Mr. Farmer
and Mr. Marks, held four meetings during fiscal 1993. Mr. Solomon succeeded Mr.
Farmer as a member of this committee after the end of the fiscal year. The Trust
Review Committee monitors the management of the assets of such of the Company's
employee benefit plans as the Board of Directors shall designate. The Trust
Review Committee also reviews the actuarial methods and assumptions used to
determine the liabilities and funding requirements of such employee benefit
plans.
The Board of Directors' Committee on Science at Syntex, comprising Dr.
Rosenkranz (Chairman), Mr. Freiman, Dr. Fried, Dr. Krevans, Dr. Stoppard, Dr.
Robert A. Lewis, Dr. Robert L. Roe, and three outside scientific consultants,
held four meetings during fiscal 1993. The Board of Directors' Committee on
Science at Syntex acts in an advisory capacity to the Board of Directors, the
Chief Executive Officer of the Company and the Presidents of Syntex Discovery
Research and Syntex Development Research with respect to matters pertaining to
scientific research and other activities for which scientific expertise may be
helpful. The
I-7
<PAGE> 26
Committee reports annually to the Board of Directors concerning the Company's
research strategy, together with such recommendations as the Committee may
consider appropriate.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company or any of its
subsidiaries receives an annual retainer of $20,000 and a fee of $1,200 for each
meeting of the Board of Directors, and $850 for each meeting of a committee,
that he or she attends (other than meetings of the Special Committee). The
Chairman of the Finance Committee receives an annual retainer of $75,000; the
Chairman of the Board of Directors' Committee on Science at Syntex receives an
annual retainer of $25,000; the Chairman of the Audit Committee receives an
annual retainer of $20,000; and the Chairman of the Compensation and Benefits
Committee receives an annual retainer of $15,000; these chairmen do not receive
fees for committee meeting attendance. Both the Chairman of the Trust Review
Committee and the Chairman of the Nominating Committee receive a fee of $1,000
in lieu of the regular fee for each meeting of their respective committees they
attend. Dr. Rosenkranz and Mr. Solomon have consultant agreements with the
Company that are described under "Certain Transactions" below.
The Syntex Corporation Board of Directors Pension Plan (the "Plan") is an
unfunded, noncontributory, defined benefit plan. A director with five or more
years of Board of Directors service is eligible to receive benefit payments
under the Plan provided that his or her Board of Directors membership terminates
on or after his or her 65th birthday, and provided that he or she does not have,
and has not received, any vested benefit under any pension plan maintained for
the benefit of employees of the Company or any of its subsidiaries. The annual
benefit payable to an eligible director is determined as follows: less than 5
years of Board of Directors service -- none; 5 or more years of service -- 30%
of the director's Average Annual Retainer plus 6% per year for each of the first
3 years in excess of 5 years and 7% for the fourth year in excess of 5 years, up
to a maximum of 55% of the director's Average Annual Retainer. The term "Average
Annual Retainer" is defined in the Plan as the average annual amount received by
a director as director fees, committee chairmanship fees and meeting fees during
the period of three consecutive calendar years within the period of the
director's Board of Directors service in which the cumulative amount of such
fees is the greatest.
The Syntex Corporation 1991 Stock Option Plan for Non-Employee Directors
(the "Director Plan") provides automatic annual grants of stock options to
eligible directors. An initial option to purchase 2,000 Shares of the Company's
Common Stock was granted to each non-employee director on October 1, 1991, and
additional grants of 1,000 Shares each were made on October 1, 1992, and October
1, 1993. Mr. Holtzmann has declined to accept any options granted to him under
the Director Plan, and Dr. Rosenkranz has declined to accept the options granted
in 1992 and 1993. Subsequent grants of options to purchase 1,000 Shares each
will be made on the first business day of October in each year until 2001 to all
non-employee Directors who are in office on the date of grant at an exercise
price equal to the mean between the high and low selling prices of the Shares of
the Company on that date. An option for 2,000 Shares will be granted to any new
non-employee director on the date of the first meeting at which he or she serves
as a member of the Board of Directors. All options granted under the Director
Plan are non-statutory options not intended to qualify under Section 422 of the
Code. Options vest in equal increments over a four-year period but are cancelled
if the director does not remain in office for at least one year following the
date of grant.
On one occasion during the 1993 fiscal year the Company afforded Mr.
Holtzmann the use of the corporate aircraft as an ambulance, at a cost of
$37,475. The Company also made the corporate aircraft available to Dr.
Rosenkranz for a personal trip during the fiscal year, at a cost of $11,589.
The Company has agreed to reimburse certain non-employee directors on
account of taxes paid by them on medical benefits provided by the Company. The
amount of such reimbursements for taxes paid during the 1993 fiscal year were as
follows: Mr. Carton, $4,201; Mr. Holtzmann, $3,336; Mr. Leavitt, $1,649; Mr.
Lynch, $4,029; Mr. Marks, $3,124; and Mr. Solomon, $56,073. A reimbursement in
the amount of $7,641 was paid to Mr. Jerome Farmer, who served as a director
throughout the 1993 fiscal year.
I-8
<PAGE> 27
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes, for each of the three fiscal years ended
July 31, 1993, 1992 and 1991, the compensation awarded to, paid to or earned by
the Chief Executive Officer (the "CEO") of the Company and the other five most
highly compensated executive officers of the Company (the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
NUMBER OF
SECURITIES
ANNUAL COMPENSATION OTHER ANNUAL UNDERLYING ALL OTHER
----------------------- COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) (3) ($)(4)
- -------------------------------- ----- -------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Paul E. Freiman................. 1993 676,670 252,000 -- 425,000 36,834
Chairman of the Board; 1992 633,333 350,000 50,000
Chief Executive Officer 1991 583,333 425,000 40,000
James N. Wilson................. 1993 446,252 145,000 -- 275,000 26,276
President and Chief 1992 400,000 201,500 20,000
Operating Officer 1991 218,750 143,000 62,600
Gerhard von Mutzenbecher........ 1993 348,090 99,800 -- 89,000 2,400
Vice President 1992 312,826 145,500 18,500
1991 277,274 132,800 20,000
Thomas L. Gutshall.............. 1993 323,434 109,300 49,911 99,000 18,219
Executive Vice President 1992 302,417 160,400 15,000
1991 279,583 177,200 20,000
Robert L. Roe................... 1993 318,333 109,300 -- 104,000 17,837
Senior Vice President 1992 263,000 153,200 25,000
1991 225,000 123,100 11,000
Robert A. Lewis................. 1993 318,333 109,300 -- 104,000 11,798
Senior Vice President 1992 248,667 144,800 25,000
1991 207,083 113,100 11,000
</TABLE>
- ---------------
(1) Bonuses paid to all Named Executive Officers except Mr. Freiman for fiscal
years 1991 and 1992 were awarded pursuant to the Company's Management
Incentive Compensation Plan, and bonuses for the 1993 fiscal year were
awarded pursuant to the Company's Short-term Compensation Plan. Mr.
Freiman's bonus for each year was recommended by the Compensation and
Benefits Committee and approved by the Board of Directors.
(2) The only type of Other Annual Compensation for each of the Named Executive
Officers was in the form of perquisites. In the case of Mr. Gutshall, the
total amount indicated includes the incremental cost to the Company of his
personal use of the corporate aircraft, which was $30,852, the personal use
portion of his Company provided car, which was $15,492, and his home
security system. In the case of the other Named Executive Officers, the
total amount of such perquisites was less than the level required for
reporting.
(3) Includes options awarded under the Company's Call-to-Action Incentive Plan
in the following amounts: Mr. Freiman, 370,000 Shares; Mr. Wilson, 250,000
Shares; all other Named Executive Officers, 84,000 Shares each. No Shares of
restricted stock were awarded, and no long-term incentive plan payments were
made, to Mr. Freiman or any other Named Executive Officer in fiscal 1991,
1992 or 1993.
(4) Includes amounts contributed by the Company to the Company's Employee
Retirement Savings Plan in the following amounts: Mr. Freiman, $8,994.00;
Mr. Wilson, $8,994.00; Mr. Gutshall, $8,994.00; Dr. Roe, $9,596.99; and Dr.
Lewis, $9,878,24. Also includes amounts contributed by the Company to the
Company's Supplemental Employee Retirement Savings Plan for the account of
each executive officer in the following amounts: Mr. Freiman, $24,839.50;
Mr. Wilson, $14,581.98; Mr. Gutshall, $7,274.66; and Dr. Roe, $6,319.68. The
remainder represents the value contributed for the executive officer's life
insurance premium, except that the amount indicated for Dr. von Mutzenbecher
represented the amount of premiums paid by the Company for his coverage
under the Company's Umbrella Medical and Life Insurance Plan, whose
participants include certain management-level employees located outside of
the United States.
I-9
<PAGE> 28
STOCK OPTION GRANTS IN FISCAL 1993
The following table sets forth the number of stock options granted to each
of the Named Executive Officers in fiscal 1993.
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR
COVERED BY GRANTED TO EXERCISE % OF STOCK OPTION TERM(2)
STOCK OPTIONS EMPLOYEES PRICE PER PRICE ON EXPIRATION -------------------------------
NAME GRANTED IN 1993(1) SHARE DATE OF GRANT DATE 0% 5% 10%
- ------------------- ------------- ------------- --------- ------------- ---------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul E. Freiman.... 55,000(3) 1.08 $19.3125 100 4/21/03 0 $ 668,004 $1,692,853
370,000(4) 7.24 $ 20.00 110 7/29/03 0 $3,522,314 $9,989,744
James N. Wilson.... 25,000(3) 0.49 $19.3125 100 4/21/03 0 $ 303,638 $ 769,748
250,000(4) 4.89 $ 20.00 110 7/29/03 0 $2,379,942 $6,794,827
Gerhard von 5,000(3) 0.10 $19.3125 100 4/21/03 0 $ 60,728 $ 153,896
Mutzenbecher.....
84,000(4) 1.64 $ 20.00 110 7/29/03 0 $ 799,661 $2,267,942
Thomas L.
Gutshall......... 15,000(3) 0.29 $19.3125 100 4/21/03 0 $ 182,183 $ 461,687
84,000(4) 1.64 $ 20.000 110 7/29/03 0 $ 799,661 $2,267,942
Robert L. Roe...... 20,000(3) 0.39 $19.3125 100 4/21/03 0 $ 242,911 $ 615,583
84,000(4) 1.64 $ 20.00 110 7/29/03 0 $ 799,661 $2,267,942
Robert A. Lewis.... 20,000(3) 0.39 $19.3125 100 4/21/03 0 $ 242,911 $ 615,583
84,000(4) 1.64 $ 20.00 110 7/29/03 0 $ 799,661 $2,267,942
</TABLE>
- ---------------
(1) Percentage indicated does not take into account grants of options for 100
Shares each that were made under the Call-to-Action Incentive Plan on July
29, 1993, to a large number of employees who do not participate in the
Company's 1984 Stock Option and Stock Appreciation Rights Plan and who are
employed in various countries. It is estimated that the number of Shares
subject to these grants is approximately 850,000, but the precise number
cannot be determined until employee records for the countries in question
have been compiled and verified.
(2) The actual value realized may be greater or less than the amounts indicated.
If the stock price increased by 5% per year for a period of ten years from
the date of grant, the total increase in stockholder value would be
$2,683,624,311 over the value on April 21, 1993, and $2,518,611,869 over the
value on July 29, 1993. If the stock price increased by 10% per year, the
total increase in stockholder value would be $6,800,831,513 over the value
on April 21, 1993, and $6,382,657,407 over the value on July 29, 1993.
(3) Options were granted under the 1984 Stock Option and Stock Appreciation
Rights Plan. Options vest in equal annual installments over a four year
period from the date of grant, provided, however, that all options become
immediately exercisable upon a change in control (as defined in the plan) of
the Company.
(4) Options were granted under Call-to-Action Incentive Plan. Options vest
within 60 days after July 31, 1995 based upon the extent to which certain
performance goals are met; provided, however, that all of the options become
immediately exercisable upon a change in control (as defined in the
Call-to-Action Plan) of the Company.
I-10
<PAGE> 29
AGGREGATED OPTION EXERCISES IN FISCAL 1993
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth the aggregated option exercises for the
Named Executive Officers in fiscal 1993 and the difference between the market
value of the Shares at fiscal year-end and the exercise price of exercisable and
unexercisable options.
<TABLE>
<CAPTION>
NUMBER OF SHARES COVERED BY VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS AT JULY THE-MONEY OPTIONS AT JULY
NUMBER OF 31, 1993 31, 1993(2)
SHARES ACQUIRED VALUE ------------------------------ ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- -------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul E. Freiman............ -0- $ -0- 164,000 490,000 $ 508,245 -0-
James N. Wilson............ -0- -0- 36,300 321,300 -0- -0-
Gerhard von Mutzenbecher... 10,000 120,391 66,625 109,575 279,741 -0-
Thomas L. Gutshall......... 9,400 132,555 105,500 123,500 445,419 -0-
Robert L. Roe.............. 5,144 75,892 62,350 130,750 227,909 -0-
Robert A. Lewis............ -0- -0- 41,292 130,750 10,464 -0-
</TABLE>
- ---------------
(1) Includes Shares covered by options granted under the Call-to-Action
Incentive Plan.
(2) On July 30, 1993 (the last business day of the Company's fiscal year), the
average of the high and low prices of the Shares on the New York Stock
Exchange was $17.9375.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following deferred cash incentives were awarded by the Board of
Directors to the Named Executive Officers on July 29, 1993, under the Syntex
Corporation Call-to-Action Incentive Plan.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK BASED PLANS(1)
NUMBER OF -------------------------------------
SHARES, UNITS PERIOD TO THRESHOLD TARGET MAXIMUM
NAME OF OTHER RIGHTS PAY-OUT(2) ($) ($) ($)
- --------------------------------- --------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Paul E. Freiman.................. N/A 7/31/95 0 1,100,000 1,650,000
James N. Wilson.................. N/A 7/31/95 0 733,000 1,099,500
Gerhard von Mutzenbecher......... N/A 7/31/95 0 250,000 375,000
Thomas L. Gutshall............... N/A 7/31/95 0 250,000 375,000
Robert L. Roe.................... N/A 7/31/95 0 250,000 375,000
Robert A. Lewis.................. N/A 7/31/95 0 250,000 375,000
</TABLE>
- ---------------
(1) The amount of the deferred cash incentive payment depends on the rating
assigned by the Compensation and Benefits Committee to the Company's
performance against the goals under the Call-to-Action Incentive Plan made
during the performance period. If the rating is below "meets expectations,"
no payout will be made. If the rating is "meets expectations," the payout
will be 75% of the targeted amount. The targeted amount will be paid if the
rating is "exceeds expectations," and the maximum amount payable, which is
150% of the targeted amount, will be paid if the rating is "outstanding."
Intermediate amounts can also be awarded for ratings falling between these
levels.
(2) Performance is measured over the period ending July 31, 1995; the amount of
the payment will be determined within 60 days after that date, and the
payment will then be made.
PENSION PLAN
The Syntex U.S. Employees Pension Plan (the "Pension Plan") is a
non-contributory, defined benefit plan that covers United States employees of
the Corporation and its subsidiaries (other than bargaining unit employees). The
Pension Plan provides for normal retirement at age 65 with a benefit based upon
both years of service and the employee's highest average annual compensation in
five consecutive calendar years during
I-11
<PAGE> 30
his or her last ten years of employment. Annual benefits are calculated as 1.5
percent of final average compensation multiplied by the employee's number of
years of credited service. The Syntex U.S. Employees Amended Supplemental
Pension Plan (the "Supplemental Pension Plan") provides for payment of
additional benefits (1) corresponding to the reductions in benefit levels
resulting from changes in the Pension Plan made in 1989, and (2) in excess of
the maximum limitation on benefits payable under the Pension Plan imposed by the
Internal Revenue Code of 1986, as amended.
The following table presents the annual pension benefits payable in
specified compensation and years of service classifications under the Pension
Plan and the Supplemental Pension Plan. The amounts shown in this table are
subject to reduction for the primary Social Security benefit that an individual
would receive at his Social Security retirement date. Benefits under the Pension
Plan and the Supplemental Pension Plan are computed as a straight-life annuity.
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)
-----------------------------------------------------
COMPENSATION(1) 15 20 25 30 35
- -------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 200,000................................... $ 55,000 $ 73,400 $ 91,600 $ 110,000 $ 128,000
300,000.................................. 82,500 110,000 137,500 165,000 192,500
500,000.................................. 137,500 183,300 229,200 275,000 320,800
700,000.................................. 192,500 256,700 320,800 385,000 449,200
900,000.................................. 247,500 330,000 412,500 495,000 577,500
1,100,000.................................. 302,500 403,300 504,200 605,000 705,800
1,300,000.................................. 357,500 476,700 595,800 715,000 834,200
</TABLE>
- ---------------
(1) Compensation for purposes of the Pension Plan means total salary or wages,
including shift differentials, vacation and sick leave pay, overtime, salary
reduction contributions made pursuant to the Syntex Corporation Employee
Retirement Savings Plan, commissions and bonuses. Neither Mr. Freiman's
covered compensation nor that of any other Named Executive Officer differs
substantially (by more than 10%) from the salary and bonus information set
forth in the Summary Compensation Table.
(2) The following are the approximate years of Credited Service under the
Pension Plan for the Named Executive Officers: Mr. Freiman, 31; Mr. Wilson,
16; Mr. Gutshall, 12; Dr. Roe, 17; and Dr. Lewis, 7. Dr. von Mutzenbecher
particpates in a separate pension plan for certain employees located outside
the United States, which provides benefits comparable to those provided
under the Pension Plan and Supplemental Pension Plan. Dr. von Mutzenbecher
has 30 years of credited service under the applicable plan.
SEVERANCE AGREEMENTS
The Company has entered into agreements with Messrs. Freiman, Wilson, von
Mutzenbecher, Gutshall, Lewis and Roe, and with certain other key executives,
which provide certain benefits if, following a change in control (as defined in
the agreements) of the Company, the Company terminates the executive's
employment for any reason other than disability or for cause, or so alters his
or her terms and conditions of employment as to afford the executive good reason
to terminate his or her employment. In the event of such termination, the
executive will be entitled to a termination payment equal to the sum of his or
her annual base salary at the time of termination and the average of his or her
last three bonus awards prior to the change in control multiplied by three if
such termination occurs within the first year after the change in control, or
multiplied by two if the termination occurs during the second or third year
after the change in control, minus any amount the executive receives under the
Company's enhanced severance plan. In addition, the Company will provide the
executives with a tax "gross-up" payment in the event of the imposition of an
excise tax upon the executive pursuant to Section 4999 of the Code. These
executive officers also participate in the Company's enhanced severance plan,
under which employees are generally entitled to severance payments of 12 weeks'
salary plus an additional two weeks' salary for each year of service with the
Company up to 13 years of service, for a maximum severance entitlement of 38
weeks' salary. The Named Executive Officers are participants in the Company's
Call-to-Action Incentive Plan. Upon a change in control (as defined in the plan)
of the Company, all stock options granted under the plan become fully
exercisable and a pro rata portion of the
I-12
<PAGE> 31
deferred cash incentive awards is payable to the executives. Options and stock
appreciation rights issued under the Company's 1984 Stock Option and Stock
Appreciation Rights Plan also become immediately exercisable upon a change in
control (as defined in the plan) of the Company.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Dr. Miriam Stoppard, a non-employee director who serves on the Compensation
and Benefits Committee, was Managing Director of Syntex Pharmaceuticals Ltd.
from 1976 until 1980.
CERTAIN TRANSACTIONS
Dr. Rosenkranz entered into an agreement with the Company pursuant to which
he acted as a consultant to the Company for a four-year period commencing
October 1, 1987. This agreement was renewed for additional two-year periods
commencing October 1, 1991, and October 1, 1993, at an annual fee of $57,750.
Mr. Solomon entered into an agreement with the Company pursuant to which he
has acted as a consultant to the Company for a two-year period commencing
February 1, 1989, at an annual fee of $50,000. The agreement was renewed for
additional two-year periods commencing February 1, 1991 and February 1, 1993,
and it is automatically renewable for additional two-year terms unless
terminated by either party upon written notice given at least 90 days prior to
the anniversary date of the agreement.
During the fiscal year ended July 31, 1993, the law firm of Holtzmann, Wise
& Shepard, of which Mr. Holtzmann, a director of the Company, is a partner,
rendered general legal services to the Company and its subsidiaries for which
fees of $2,379,771 have been approved. For additional information regarding fees
received in connection with the transactions contemplated by the Merger
Agreement, see Item 3 of the Schedule 14D-9.
In March 1992, the Company entered into a loan agreement with Mr. Melvin D.
Booth, an executive officer of the Company, pursuant to which the Company loaned
Mr. Booth $200,000 to be used toward the purchase of a principal residence in
California. This loan was made in connection with Mr. Booth's relocation, and no
interest is charged thereon. One fifth of the principal amount of the loan will
be forgiven for each full year that Mr. Booth remains an active employee of the
Company, and any remaining balance must be repaid within one year from the date
of any termination of employment, except a termination following a change in
control (as defined in the agreement) of the Company. The amount of the loan
that remained outstanding as of October 1, 1993, was $160,000.
In November 1992 and June 1993, the Company made loans to Dr. Robert L.
Roe, an executive officer of the Company, in the amounts of $50,000 and
$100,000, respectively, under promissory notes bearing interest at the rate of 6
percent per year. Dr. Roe repaid the $100,000 loan, together with accrued
interest, in July 1993, and the amount of the loan that remained outstanding as
of October 1, 1993, was $50,000.
Between August 1993 and April 1994, the Company made loans to Richard
Powers, an executive officer of the Company, in the aggregate amount of
$155,000, under promissory notes bearing simple interest at the rate of 6
percent per year.
In the opinion of the Company, there were no material or significant
transactions in which directors or officers were interested, other than those
set forth herein.
I-13
<PAGE> 32
SCHEDULE II
CERTAIN TRANSACTIONS IN SHARES OF COMMON STOCK OF
SYNTEX CORPORATION EFFECTED DURING THE PAST 60 DAYS
I. The following stock options were exercised by executive officers of the
Company:
<TABLE>
<CAPTION>
PARTY DATE NUMBER OF PRICE
EFFECTING OF SHARES PER
TRANSACTION TRANSACTION PURCHASED SHARE
--------------------------------------- ----------- --------- ---------
<S> <C> <C> <C>
Melvin D. Booth........................ 3/10/94 6,400 $ 4.83595
Neil W. Flanzraich..................... 3/09/94 20,000 $ 4.83595
Thomas L. Gutshall..................... 4/28/94 4,800 $ 5.12500
4/28/94 4,200 $7.25780
4/29/94 3,400 $7.25780
5/02/94 3,200 $5.12500
Robert L. Roe.......................... 3/09/94 1,500 $ 4.83595
3/11/94 4,750 $4.83595
3/21/94 1,350 $4.83595
</TABLE>
II-1
<PAGE> 33
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C> <C>
Exhibit 1 Acquisition Agreement and Plan of Merger, dated as of May 1, 1994, among
Syntex Corporation, Roche Capital Corporation and Roche (Panama) Corporation
Exhibit 2 Form of Executive Severance Agreement entered into by and between Syntex
Corporation and its executive officers and other employees
Exhibit 3 Guaranty, dated as of May 1, 1994, made by Roche Holding Ltd
Exhibit 4 Confidentiality and standstill agreement, dated February 28, 1994, between
Syntex Corporation and Roche Holding Ltd
Exhibit 5 Press Release issued jointly by Syntex Corporation and Roche Holding Ltd,
dated May 2, 1994
Exhibit 6 Letter to Stockholders of the Company dated May 6, 1994*
Exhibit 7 Opinion of Goldman, Sachs & Co. dated May 1, 1994*
</TABLE>
- ---------------
* Included in copies mailed to shareholders.
<PAGE> 1
EXHIBIT 1
ACQUISITION AGREEMENT AND PLAN OF MERGER
dated as of
May 1, 1994
among
Syntex Corporation,
Roche Capital Corporation
and
Roche (Panama) Corporation
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I
THE OFFER
SECTION 1.01. The Offer . . . . . . . . . . . . . 1
SECTION 1.02. Company Action . . . . . . . . . . 2
SECTION 1.03. Directors . . . . . . . . . . . . . 4
ARTICLE II
THE MERGER
SECTION 2.01. The Merger . . . . . . . . . . . . 6
SECTION 2.02. Conversion of Shares . . . . . . . 6
SECTION 2.03. Surrender and Payment . . . . . . . 9
SECTION 2.04. Stock Options . . . . . . . . . . . 11
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.01. Articles of Incorporation . . . . . 12
SECTION 3.02. Bylaws . . . . . . . . . . . . . . 12
SECTION 3.03. Directors and Officers . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 4.01. Corporate Existence and Power . . . 13
SECTION 4.02. Corporate Authorization . . . . . . 13
SECTION 4.03. Governmental Authorization . . . . 13
SECTION 4.04. Non-Contravention . . . . . . . . . 14
SECTION 4.05. Capitalization . . . . . . . . . . 14
SECTION 4.06. Subsidiaries . . . . . . . . . . . 15
SECTION 4.07. SEC Filings . . . . . . . . . . . . 16
SECTION 4.08. Financial Statements . . . . . . . 16
SECTION 4.09. Disclosure Documents . . . . . . . 17
SECTION 4.10. Absence of Certain Changes . . . . 18
SECTION 4.11. No Undisclosed Material
Liabilities . . . . . . . . . . . 19
SECTION 4.12. Litigation . . . . . . . . . . . . 19
SECTION 4.13. Taxes . . . . . . . . . . . . . . . 20
SECTION 4.14 Employee Benefit . . . . . . . . . 22
SECTION 4.15. Compliance with Laws . . . . . . . 24
SECTION 4.16. Finders' Fees . . . . . . . . . . . 24
SECTION 4.17. Environmental Matters . . . . . . 24
</TABLE>
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<TABLE>
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
SECTION 5.01. Corporate Existence and Power . . . 26
SECTION 5.02. Corporate Authorization . . . . . . 26
SECTION 5.03. Governmental Authorization. . . . . 26
SECTION 5.04. Non-Contravention . . . . . . . . . 26
SECTION 5.05. Disclosure Documents . . . . . . . 27
SECTION 5.06. Finders' Fees . . . . . . . . . . . 28
SECTION 5.07. Financing . . . . . . . . . . . . . 28
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company . . . . . . 29
SECTION 6.02. Stockholder Meeting; Proxy
Material . . . . . . . . . . . . 29
SECTION 6.03. Access to Information . . . . . . . 30
SECTION 6.04. Other Offers . . . . . . . . . . . 31
SECTION 6.05. Notice of Certain Events . . . . . 32
ARTICLE VII
COVENANTS OF BUYER
SECTION 7.01. Obligations of Merger Subsidiary . 33
SECTION 7.02. Voting of Shares . . . . . . . . . 33
SECTION 7.03. Director and Officer Liability . . 33
SECTION 7.04. Employee Matters . . . . . . . . . 34
ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
SECTION 8.01. Best Efforts . . . . . . . . . . . 35
SECTION 8.02. Certain Filings . . . . . . . . . . 36
SECTION 8.03. Public Announcements . . . . . . . 36
SECTION 8.04. Further Assurances . . . . . . . . 37
</TABLE>
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<TABLE>
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ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of
Each Party . . . . . . . . . . . 37
SECTION 9.02. Conditions to the Obligations of
Buyer and Merger Subsidiary . . . 38
SECTION 9.03. Conditions to the Obligation of the
Company to Effect the Merger . . 38
ARTICLE X
TERMINATION
SECTION 10.01. Termination . . . . . . . . . . . 39
SECTION 10.02. Effect of Termination . . . . . . 40
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices . . . . . . . . . . . . . 40
SECTION 11.02. Survival of Representations and
Warranties . . . . . . . . . . . 41
SECTION 11.03. Amendments; No Waivers . . . . . . 42
SECTION 11.04. Expenses . . . . . . . . . . . . . 42
SECTION 11.05. Successors and Assigns . . . . . . 43
SECTION 11.06. Governing Law . . . . . . . . . . 43
SECTION 11.07. Counterparts; Effectiveness . . . 43
SECTION 11.08. Validity . . . . . . . . . . . . . 43
SECTION 11.09. Entire Agreement . . . . . . . . . 43
SECTION 11.10. Definition . . . . . . . . . . . . 43
</TABLE>
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ACQUISITION AGREEMENT AND PLAN OF MERGER
ACQUISITION AGREEMENT AND PLAN OF MERGER dated as of May 1, 1994
among Syntex Corporation, a Panama corporation (the "Company"), Roche Capital
Corporation, a Panama corporation ("Buyer") and an indirectly, wholly owned
subsidiary of Roche Holding Ltd, a Swiss corporation ("Parent"), and Roche
(Panama) Corporation, a Delaware corporation and wholly owned subsidiary of
Buyer ("Merger Subsidiary").
The parties hereto agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that none of the conditions
set forth in Annex I hereto shall have been occurred, Buyer shall, as promptly
as practicable after the date hereof, but in no event later than five business
days following the public announcement of the terms of this Agreement, commence
an offer (the "Offer") to purchase all of the outstanding shares of common
stock, $1.00 par value (the "Shares"), of the Company at a price of $24.00 per
Share, net to the seller in cash (the "Offer Price"). The Offer shall be
subject to the condition that there shall be validly tendered in accordance
with the terms of the Offer prior to the expiration date of the Offer and not
withdrawn a number of Shares which, together with the Shares then owned by
Buyer, represents at least a majority of the Shares outstanding on a fully
diluted basis (the "Minimum Condition") and to the other conditions set forth
in Annex I hereto. Buyer expressly reserves the right to waive the Minimum
Condition (but not below 77,400,000 shares) or any of the other conditions to
the Offer and to make any change in the terms or conditions of the Offer;
provided that no change may be made which changes the form of consideration to
be paid or decreases the price per Share or the number of Shares sought in the
Offer or which imposes conditions to the Offer in addition to those set forth
in Annex I or makes any other change in the terms or conditions of the Offer
which is materially adverse to the holders of Shares. Subject to the terms and
conditions of the Offer, Buyer shall pay for Shares which have been validly
tendered and not withdrawn pursuant to the Offer at the earliest such time
following expiration of the Offer that all conditions to the Offer shall have
been satisfied or waived by Buyer.
<PAGE> 6
Buyer covenants and agrees that, subject to the terms and conditions of this
Agreement, including but not limited to the conditions of the Offer set forth
in Annex I hereto, it will accept for payment and pay for Shares validly
tendered and not withdrawn pursuant to the Offer as soon as it is permitted to
do so under applicable law.
(b) As soon as practicable on the date of commencement of the Offer,
Buyer shall file with the SEC (as defined in Section 4.07) a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer which will contain the
offer to purchase and form of the related letter of transmittal (together with
any supplements or amendments thereto, collectively the "Offer Documents").
Buyer 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 it shall have
become false or misleading in any material respect. Buyer agrees to take all
steps necessary to cause the Offer Documents as so corrected to be filed with
the SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to their being filed with the SEC. Buyer and Merger
Subsidiary agree to provide the Company and its counsel in writing with any
comments Buyer, Merger Subsidiary or their counsel may receive from the SEC or
its Staff with respect to the Offer Documents promptly after the receipt of
such comments.
SECTION 1.02. Company Action. (a) The Company hereby consents to
the Offer and represents as of the date hereof that its Board of Directors, at
a meeting duly called and held, has by a unanimous vote of those directors who
were present and voting (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (as defined in Section
2.01), are fair to and in the best interest of the Company's stockholders, (ii)
approved this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, which approval satisfies the relevant requirements of the
General Corporation Law of the Republic of Panama (the "Panama Law"), and (iii)
(A) accepted the Declaration dated May 1, 1994 setting forth information
regarding the Buyer and the Buyer's future plans regarding the Company (the
"Declaration") as satisfying Panama Law and all Executive Decrees relating to
declarations, including but not limited to Executive Decree No. 45 of December
5, 1977, as amended by Executive Decree No. 51 of July 12, 1985 (the "Decree")
and (B) determined not to deliver the Declaration to the National Securities
Commission of the Republic of Panama as
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<PAGE> 7
permitted by Article 5 of the Decree nor to submit the Declaration to a meeting
of Shareholders of the Corporation for their consideration, as permitted by
Article 5-A of the Decree. The Company represents that its Board of Directors
unanimously recommends acceptance of the Offer and approval and adoption of
this Agreement and the Merger by its stockholders; provided, however, that
subject to Section 11.04, any such recommendation may be withdrawn or modified
to the extent that the Board of Directors deems it necessary to do so in the
exercise of their fiduciary duties under applicable law as advised by counsel
to the Company.
The Company further represents that Arias, Fabrega y Fabrega has
advised the Company's Board of Directors of its opinion to the effect that the
Declaration was delivered in substantially proper form and content to the
Company pursuant to the Decree, that the Declaration contains substantially all
the information and documentation required by the Decree to be delivered for
proper appraisal and recommendation of a purchase offer for securities of a
company under the Decree, and that the Declaration provides sufficient
disclosure under Panamanian law for the making and consummation of the Offer.
In so advising the Company's Board of Directors, Arias, Fabrega y Fabrega shall
have relied on the representation of the Buyer that (i) there were no audited
financial statements for the Buyer for the fiscal year ending December 31, 1993
available on the date thereof, (ii) the audited financial statements for the
Buyer for the fiscal year ending December 31, 1993 will be ready and released
on or about May 10th, 1994, (iii) the financial position of Buyer as of not
more than ninety days prior to the date thereof, was, in all material respects,
no worse than the financial position of the Buyer as of December 31, 1992 and
(iv) the Declaration is true in all material respects and that the statements
included in the Declaration do not omit any material information necessary to
make such statements not misleading in any material respect under the
circumstances in which such statements were made.
The Company further represents that Goldman Sachs & Co. has
delivered to the Company's Board of Directors its written opinion to the effect
that, as of the date of said opinion, the cash consideration to be received by
the holders of Shares in the transactions contemplated by this Agreement is
fair to such holders. To the knowledge of the Company, all of its directors
and members of the operating committee intend either to tender their Shares
pursuant to the Offer or to vote, as shareholders, in favor of the Merger and
adoption of this Agreement.
3
<PAGE> 8
In connection with the Offer, the Company will promptly furnish
Buyer with a list of its stockholders, mailing labels and any available listing
or computer file containing the names and addresses of all record holders of
Shares and lists of securities positions of Shares held in stock depositories,
in each case to the best knowledge of the Company true and correct as of the
most recent practicable date, and will provide to Buyer such additional
information (including, without limitation, updated lists of stockholders,
mailing labels and lists of securities positions) and such other assistance as
Buyer may reasonably request in connection with the Offer. 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, Buyer and its affiliates and associates 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 deliver to the Company all copies of, and
any extracts and summaries from, such information then in their possession.
(b) As soon as practicable on the day that the Offer is commenced
the Company will file with the SEC (as defined in Section 5.07) a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
which shall reflect the recommendations of the Company's Board of Directors
referred to above. The Company and Buyer each agree promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect. The
Company agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to holders of Shares,
in each case as and to the extent required by applicable United States federal
securities laws. Buyer and its counsel shall be given an opportunity to review
and comment on the Schedule 14D-9 prior to its being filed with the SEC and
shall be provided with any comments the Company and its counsel may receive
from the SEC or its Staff with respect to the Schedule 14D-9 promptly after
receipt of such comments. Notwithstanding anything contained in this Section
1.02, if the Board of Directors determines in the exercise of their fiduciary
duties to withdraw, modify or amend the recommendation of the Board of
Directors referred to above, such withdrawal, modification or amendment shall
not constitute a breach of this Agreement.
SECTION 1.03. Directors. (a) Promptly upon the purchase by Buyer
of a majority of the outstanding Shares on
4
<PAGE> 9
a fully diluted basis (including Shares purchased pursuant to the Offer), and
subject to the last sentence of this Section 1.03(a), Buyer shall be entitled
to designate the number of directors, rounded up to the next whole number, on
the Company's Board of Directors that equals the product of (i) the total
number of directors on the Company's Board of Directors (giving effect to the
election of any additional directors pursuant to this Section) and (ii) the
percentage that the number of Shares owned by Buyer and its affiliates
(including Shares so purchased) bears to the total number of Shares
outstanding, and the Company shall upon request by Buyer, at the Company's
election, either increase the number of directors or seek and accept
resignations of incumbent directors. At such times, and subject to the last
sentence of this Section 1.03(a) the Company will use its best efforts to cause
individuals designated by Buyer to constitute the same percentage as such
individuals represent on the Company's Board of Directors of (x) each committee
of the Board (other than any committee of the Board established to take action
under this Agreement), (y) each board of directors of each Subsidiary (as
defined in Section 5.06) and (z) each committee of each such board.
Notwithstanding the foregoing, nothing contained in this Section shall require
any current member of the Special Committee of the Board of Directors to resign
from the Board of Directors. Subject to the foregoing, the Company shall use
its best efforts to ensure that all of the members of the Board of Directors
and such boards and committees as of the date hereof shall remain members of
the Board of Directors and such boards and committees until the Effective Time
(as defined in Section 2.01).
(b) The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the 1934 Act (as defined in
Section 4.03) and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under Section 14(f) and Rule 14f-1 to fulfill its
obligations under this Section 1.03. Buyer will supply to the Company in
writing and be solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
(c) Following the election or appointment of Buyer's designees
pursuant to this Section 1.03 and prior to the Effective Time, except as
provided in Section 2.02(g), any amendment of this Agreement or the articles of
5
<PAGE> 10
incorporation or by-laws of the Company, any termination or amendment of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Buyer or Merger
subsidiary or any exercise or waiver of any of the Company's rights hereunder,
will require the concurrence of a majority of the directors of the Company then
in office who are neither designated by Buyer, employees of the Company or any
of its subsidiaries nor otherwise affiliated with Buyer, and who, if serving on
the Board currently, were disinterested directors in connection with the
Board's consideration of this Agreement.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. (a) Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section
2.01(b)), Merger Subsidiary shall be merged with and into the Company (the
"Merger"), whereupon the separate existence of Merger Subsidiary shall cease,
and the Company shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger in Article X
hereof, the Company and Merger Subsidiary will file articles of merger or other
appropriate documents for registration in the Mercantile Registry of the
Republic of Panama and make all other filings or recordings required by Panama
Law and the General Corporations Law of the State of Delaware ("Delaware GCL")
in connection with the Merger. The Merger shall become effective at such time
as articles of merger or other appropriate documents are duly filed in the
Mercantile Registry of the Republic of Panama (the "Effective Time").
(c) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises and be subject
to all of the restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Panama Law and the Delaware GCL.
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<PAGE> 11
SECTION 2.02. Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of Buyer, Merger
Subsidiary, the Company or the holder of any of the following securities:
(a) each Share held by the Company as treasury stock or owned by
Buyer or any subsidiary of Buyer immediately prior to the Effective Time
shall be canceled, and no payment shall be made with respect thereto;
(b) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation; and
(c) each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in Section 2.02(a), be converted into
the right to receive, at the election of the holders of Shares, either (i)
subject to the restrictions set forth in Section 2.02(g), 0.024 shares of
Limited Conversion Preferred Stock of Buyer, which Limited Conversion
Preferred Stock shall have terms substantially as set forth in Exhibit A
and shall have a stated value and liquidation value of $1,000 (or
proportionately increased for any higher price per Share paid in the
Offer) (the "LCPS") or (ii) $24.00 in cash, or any higher price per Share
paid in the Offer, payable to the holder thereof, without interest ("Cash
Consideration").
(d) Prior to the date of the Company Stockholder Meeting
contemplated by Section 6.02, Buyer and the Company shall prepare a form
(an "Election Form") pursuant to which a holder of Shares may specify the
number of Shares owned by such holder that such holder desires to be
converted into a right to receive cash in the Merger and the number of
Shares owned by such holder that such holder desires to be converted into
a right to receive shares of LCPS in the Merger. The Company shall cause
an Election Form (and a letter of transmittal for use in exchanging
certificates representing Shares for the consideration set forth in
Section 2.02(c) (the "Merger Consideration")) mailed to each holder of
Shares who shall request such an Election Form.
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<PAGE> 12
(e) Each holder of Shares (other than holders of Shares which, in
accordance with subsection (a) above, are to be canceled in the Merger)
shall have the right to specify in an Election Form the number of Shares
owned by such holder that such holder desires to have converted into the
right to receive cash in the Merger (a "Cash Election") and the number of
Shares owned by such holder that such holder desires to have converted
into the right to receive shares of LCPS in the Merger (a "Stock
Election"). A Cash Election or a Stock Election shall be effective only
if the Exchange Agent appointed by Buyer pursuant to Section 2.03 shall
have received no later than 5:00 p.m. New York City time on the date three
business days prior to the date of the Company Stockholder Meeting (the
"Election Deadline") (i) an Election Form covering the Shares to which
such Cash Election and/or Stock Election applies, executed and completed
in accordance with the instructions set forth in such Election Form and
(ii) the certificate or certificates representing such Shares, in such
form and with such endorsements, stock powers and signature guarantees as
may be required by such Election Form. A Cash Election or Stock Election
may be revoked or changed only by delivering to the Exchange Agent, prior
to the Election Deadline, a written notice of revocation or, in the case
of a change, a properly completed revised Election Form that identifies
the share certificates to which such revised Election Form applies.
Delivery to the Exchange Agent prior to the Election Deadline of a revised
Election Form with respect to any certificate representing Shares shall
result in the revocation of all prior Election Forms with respect to all
Shares evidenced by such certificate. Any termination of this Agreement
in accordance with Article X shall result in the revocation of all
Election Forms delivered to the Exchange Agent on or prior to the date of
such termination. If an Election Form is revoked (either by delivery of a
written notice of revocation or by delivery of a revised Election Form),
the share certificates to which such Election Form applies, if previously
delivered to the Exchange Agent, shall be returned to the person revoking
such Election Form unless such person otherwise instructs the Exchange
Agent. For purposes of this Agreement, "Non-Electing Shares" means all
Shares (other than Shares that are to be canceled in the Merger) as to
which neither an effective Cash Election nor an effective Stock Election
has been made as of the Election Deadline. All Non-Electing Shares shall
be deemed to have made the Cash Election.
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<PAGE> 13
(f) Buyer and the Company shall have the right to make rules, not
inconsistent with the terms of this Agreement, governing the validity and
effectiveness of Election Forms, the manner and extent to which Cash
Elections and Stock Elections are to be taken into account in making the
determinations required by this Section and the payment of the Merger
Consideration.
(g) Notwithstanding any other provision of this Agreement to the
contrary, Buyer shall be obligated to issue shares of LCPS only to the
extent that the LCPS would be "held of record" (as such term is defined in
the 1934 Act and Rule 12g-5 thereunder) by not more than 299 Persons. If
the issuance of shares of LCPS in respect of all Shares as to which
effective Stock Elections are made would result in the LCPS being "held of
record" by more than 299 Persons, subject to the terms of this Agreement,
Buyer shall issue LCPS to the maximum number of Persons who have made a
valid Stock Election such that, after giving effect to such issuance, the
LCPS are held of record by 299 Persons. In the event more than 299
holders of Shares make a valid Stock Election, Buyer and the Special
Committee of the Board of Directors of the Company shall jointly agree, in
their discretion, as to the method for selecting the holders who shall be
entitled to receive shares of LCPS in the Stock Election; such method may
consist of a lottery, selection by lot or the aggregate number of Shares
as to which a holder makes a valid Stock Election, or any other method.
In the event Buyer and the Special Committee of the Board of Directors are
unable to agree on such a method, holders who made a Stock Election shall
be deemed to have made a Cash Election.
(h) A Stock Election must be made with respect to at least one
hundred Shares to be a valid Stock Election.
(i) Notwithstanding any provision of this Agreement, Buyer shall not
be obligated to accept Stock Elections with respect to more than 15% of
the Shares outstanding as of the date hereof.
SECTION 2.03. Surrender and Payment. (a) Prior to the record date
for the Company Stockholder Meeting, Buyer shall appoint an agent (the
"Exchange Agent") for the purposes of receiving the Election Forms, determining
(in accordance with Section 2.02) the form of the Merger Consideration to be
received by each holder of Shares and exchanging certificates (the
"Certificates") that prior to
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<PAGE> 14
the Effective Time represented Shares for the Merger Consideration. Buyer will
make available to the Exchange Agent, as needed, the Merger Consideration to be
paid in respect of the Shares.
(b) Each holder of Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
Certificate or Certificates, together with a properly completed letter of
transmittal covering the Shares formerly represented by such Certificate or
Certificates, will be entitled to receive the Merger Consideration payable in
respect of such Shares. Until so surrendered, each such Certificate shall,
after the Effective Time, represent for all purposes, only the right to receive
such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
person other than the registered holder of the Shares represented by the
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such payment that the Certificate or Certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Certificates or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
this Agreement, "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further registration
of transfers of Shares. If, after the Effective Time, Certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article II.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.03(a) that remains unclaimed by the
holders of Shares six months after the Effective Time shall be returned to
Buyer, upon demand, and any such holder who has not exchanged his Shares for
the Merger Consideration in accordance with this Section prior to that time
shall thereafter look only to Buyer for payment of the Merger Consideration in
respect of his Shares. Buyer shall indemnify the Surviving Corporation for any
payment of the Merger Consideration it may be required
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to make to a holder of Shares after the Merger Consideration has been returned
to Buyer. Notwithstanding the foregoing none of Buyer, the Company or the
Surviving Corporation shall be liable to any holder of Shares for any amount
paid to a public official pursuant to applicable abandoned property laws. Any
amounts remaining unclaimed by holders of Shares three years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property
of Buyer free and clear of any claims or interest of any person previously
entitled thereto.
(f) No dividends, interest or other distributions with respect to
securities of Buyer constituting part of the Merger Consideration shall be paid
to the holder of any unsurrendered certificates representing Shares until such
certificates are surrendered as provided in this Section. Upon such surrender,
there shall be paid, without interest, to the person in whose name the
certificates representing the securities of Buyer into which such Shares were
converted are registered, all dividends, interest and other distributions
payable in respect of such securities on a date subsequent to, and in respect
of a record date after, the Effective Time.
SECTION 2.04. Stock Options. (a) Prior to the purchase of Shares
pursuant to the Offer, the Board of Directors of the Company (or, if
appropriate, any committee administering the Stock Plans (as defined below))
shall adopt such resolutions or take such other actions as are required to
adjust, effective immediately prior to the Effective Time, the terms of all
outstanding employee and director stock options to purchase Shares ("Stock
Options") and all outstanding stock appreciation rights ("SARs"), whether or
not presently exercisable, heretofore granted under any stock option or stock
appreciation rights plan, program or arrangement of the Company or its
Subsidiaries (collectively, the "Stock Plans") to provide that (i) each Stock
Option together with any SAR related thereto or granted in tandem therewith and
(ii) each SAR granted independent of, and not related to, any Stock Option (a
"Free-standing SAR"), in each case outstanding immediately prior to the
Effective Time shall be converted into the right of the holder of such Stock
Option or Free-standing SAR, as the case may be, to receive a cash payment at
that time from the Company of an amount determined by multiplying (x) the
excess, if any, of the Cash Consideration over the applicable exercise price
per Share of such Stock Option or strike price per Share of such Free-standing
SAR, as the
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case may be by (y) with respect to each Stock Option and related SAR, the
number of Shares the holder of the Stock Option could have purchased (assuming
full vesting of all Stock Options) had such holder exercised such Stock Option
in full immediately prior to the Effective Time or, with respect to each
free-standing SAR, the number of Shares with respect to which the Free-Standing
SAR was granted (assuming full vesting of all free-standing SARs). All amounts
payable pursuant to this Section 2.04(a) shall be subject to any required
withholding of taxes and shall be paid without interest.
(b) Prior to the purchase of Shares pursuant to the Offer, the
Board of Directors of the Company (or, if appropriate, any committee
administering the Stock Plans) shall adopt such resolutions or take such other
actions as are required to provide that the Stock Plans shall terminate as of a
date prior to the occurrence of a "Change in Control" as defined in the Syntex
Security of Employment Plan (the "Stock Plan Termination Date"), except with
respect to Stock Options and SARs that are outstanding as of the Stock Plan
Termination Date which Stock Options and SARs shall be adjusted immediately
prior to the Effective Time as contemplated by Section 2.04(a), and to provide
that the provisions in any other Employee Plan or Benefit Arrangement (each as
defined in Section 4.14) providing for the issuance, transfer or grant of
capital stock of the Company shall be deleted as of the Stock Plan Termination
Date, and the Company shall take all necessary actions to provide that
following the Effective Time, no holder of a Stock Option or SAR or any
participant in any Stock Plan or other Employee Plan or Benefit Arrangement
shall have any right thereunder to acquire any capital stock of the Company or
the Surviving Corporation.
SECTION 2.05. Adjustments. If at any time during the period
between the date of this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Buyer shall occur, including by reason
of any reclassification, recapitalization, stock split or combination, exchange
or readjustment of shares, or any stock dividend thereon with a record date
during such period, the number of shares of LCPS constituting all or part of
the Merger Consideration shall be appropriately adjusted.
SECTION 2.06. Fractional Shares. No fractional shares of LCPS
shall be issued in the Merger. All fractional shares of LCPS that a holder of
Shares would otherwise be entitled to receive as a result of the Merger shall
be aggregated and if a fractional share results from
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such aggregation, such holder shall be entitled to receive, in lieu thereof, an
amount in cash determined by multiplying the stated value of the LCPS by the
fraction of a share of LCPS to which such holder would otherwise have been
entitled.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.01. Articles of Incorporation. The articles of
incorporation of Merger Subsidiary in effect at the Effective Time shall be the
articles of incorporation of the Surviving Corporation until amended in
accordance with applicable law, except that the name of the Surviving
Corporation shall be that of the Company at the date hereof.
SECTION 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.03. Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, (i) the directors of Merger Subsidiary at the
Effective Time shall be the directors of the Surviving Corporation, and (ii)
the officers of the Company at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer that:
SECTION 4.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Republic of Panama, and has the requisite corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not, individually
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or in the aggregate, have a material adverse effect on the business, assets,
financial condition or results of operations of the Company and the
Subsidiaries (as defined in Section 4.06), taken as a whole (a "Material
Adverse Effect") or would not reasonably be expected to result in a Material
Adverse Effect. The Company has heretofore delivered to Buyer true and complete
copies of the Company's articles of incorporation and bylaws as currently in
effect.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers and, except for any required approval by the Company's
stockholders in connection with the consummation of the Merger, have been duly
authorized by all necessary corporate action. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company.
SECTION 4.03. Governmental Authorization. The execution, delivery
and performance by the Company of this Agreement and the consummation of the
Merger by the Company require no action by or in respect of, or filing by the
Company with, any governmental body, agency, official or authority other than
(i) the filing of articles of merger or other appropriate documents for
registration in the Mercantile Registry of the Republic of Panama in accordance
with Panama Law and the Delaware GCL; (ii) compliance with any applicable
requirements of the HSR Act; and (iii) compliance with any applicable
requirements of the United States Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "1934 Act"); and (iv)
such filings or registration with, or authorizations, consents or approvals of
governmental bodies, agencies, officials or authorities, the failure of which
to make or obtain, individually or in the aggregate, would not result in or
could not reasonably be expected to result in a Material Adverse Effect or
materially affect the consummation of the transactions contemplated by this
Agreement.
SECTION 4.04. Non-Contravention. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not (i)
contravene or conflict with the articles of incorporation or bylaws of the
Company, (ii) assuming compliance with the matters referred to in Sections 4.03
and 5.03, contravene or conflict with or constitute a violation of any
provision of any material law, regulation, judgment, injunction, order or
decree binding
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upon or applicable to the Company or any Subsidiary, (iii) except as disclosed
in writing to Buyer prior to the date hereof, to the knowledge of the Company,
require any consent, approval or notice under and will not conflict with, or
result in the breach or termination of any provision of or constitute a default
(with or without the giving of notice or the lapse of time or both) under, or
give rise to any right of termination, cancellation, or loss of any benefit to
which the Company or any Subsidiary is entitled under any provision of any
material agreement, contract, license or other instrument binding on the
Company or any Subsidiary, or allow the acceleration of the performance of, any
material obligation of the Company or any of its subsidiaries under any
material indenture, mortgage, deed of trust, lease, license, contract,
instrument or other agreement to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or any of their
respective assets or properties is subject or bound or (iv) result in the
creation or imposition of any Lien on any material asset of the Company or any
Subsidiary. For purposes of this Agreement, "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
SECTION 4.05. Capitalization. The authorized capital stock of the
Company consists of 600,000,000 Shares. As of April 27, 1994, there were
outstanding 221,134,238 Shares and employee stock options to purchase an
aggregate of 11,562,042 Shares (of which, options to purchase an aggregate of
5,578,520 Shares were exercisable), in addition to options granted to
substantially all employees of the Company in 1992 and 1993 with respect to an
aggregate amount of approximately 1,000,000 Shares, none of which were
exercisable. All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in this Section and except for changes since April 27, 1994
resulting from the exercise of employee stock options outstanding on such date,
there are outstanding (i) no shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company or any Subsidiary convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, and (iii) no options or other rights to acquire from the Company or
any Subsidiary, and no obligation of the Company or any Subsidiary to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the
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Company or any Subsidiary to repurchase, redeem or otherwise acquire any
Company Securities.
SECTION 4.06. Subsidiaries. (a) Each Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has the requisite corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
make such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have or could
not reasonably be expected to have a Material Adverse Effect. For purposes of
this Agreement, "Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are directly
or indirectly owned by the Company. Except as disclosed in writing to Buyer
prior to the date hereof, all Subsidiaries and their respective jurisdictions
of incorporation are identified in the Company's annual report on Form 10-K for
the fiscal year ended July 31, 1993 (the "Company 10-K").
(b) All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary, is owned by the Company, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). There are no outstanding (i)
securities of the Company or any Subsidiary convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests
in any Subsidiary, and (ii) options or other rights to acquire from the Company
or any Subsidiary, and no other obligation of the Company or any Subsidiary to
issue, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Subsidiary (the items in clauses (i)
and (ii) being referred to collectively as the "Subsidiary Securities"). There
are no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any outstanding Subsidiary Securities.
SECTION 4.07. SEC Filings. (a) The Company has delivered to Buyer
(i) the annual reports on Form 10-K for
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its fiscal years ended July 31, 1991, 1992 and 1993, (ii) its quarterly reports
on Form 10-Q for its fiscal quarters ended October 31, 1993 and January 31,
1994 (the latter referred to herein as the "Company 10-Q"), (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of the Company held since December 7, 1992, and
(iv) all of its other reports, statements, schedules and registration
statements filed with the United States Securities and Exchange Commission (the
"SEC") since December 7, 1992 (collectively, the "SEC Filings").
(b) As of its filing date, each of the SEC Filings, complied as to
form in all material respects and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
SECTION 4.08. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company included in its annual reports on Form 10-K and the quarterly
reports on Form 10-Q referred to in Section 4.07 fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and changes in financial
position for the periods then ended (subject to normal year-end adjustments in
the case of any unaudited interim financial statements). For purposes of this
Agreement, "Balance Sheet" means the consolidated Balance Sheet of the Company
as of July 31, 1993 and "Balance Sheet Date" means July 31, 1993.
SECTION 4.09. Disclosure Documents. (a) Each document required to
be filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "Company Disclosure Documents"), including,
without limitation, the Schedule 14D-9, the proxy or information statement of
the Company (the "Company Proxy Statement"), if any, to be filed with the SEC
in connection with the Merger, and any amendments or supplements thereto will,
when filed, comply as to form in all material respects with the applicable
requirements of the 1934 Act.
(b) At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company, at the time
such stockholders vote on adoption of this Agreement and at the Effective
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Time, the Company Proxy Statement, as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. At the
time of the filing of any Company Disclosure Document other than the Company
Proxy Statement and at the time of any distribution thereof to the Company's
stockholders, such Company Disclosure Document will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) The representations and warranties contained in this Section
4.09 will not apply to statements included in or omissions from the Company
Disclosure Documents based upon information furnished to the Company in writing
by Buyer specifically for use therein.
(d) The information with respect to the Company or any Subsidiary
that the Company furnishes to Buyer in writing specifically for use in the
Offer Documents will not, at the time of the filing thereof, at the time first
published, sent or given to the holders of Shares and immediately prior to the
time Buyer accepts any Shares for payment, 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 made therein, in the light of the
circumstances under which they were made, not misleading.
(e) The information with respect to the Company or any Subsidiary
that the Company furnishes to Buyer in writing specifically for use in the
Registration Statement (as defined in Section 5.05(c)) will not contain at the
time the Registration Statement becomes effective or at the Effective Time, 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 made therein,
not misleading.
SECTION 4.10. Absence of Certain Changes. Except as disclosed in
writing to Buyer prior to the date hereof, since the Balance Sheet Date, the
Company and Subsidiaries have in all material respects conducted their business
in the ordinary course consistent with past practice and there has not been:
(a) any material adverse change in the business, assets, financial
condition or results of operations of
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the Company and the Subsidiaries taken as a whole or any event, occurrence
or development of a state of circumstances or facts which would reasonably
be expected to result in such a material adverse change (a "Material
Adverse Change");
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company (other than quarterly cash dividends on the Shares not in excess
of $.26 per Share per quarter and having customary record and payment
dates), or any repurchase, redemption or other acquisition by the Company
or any Subsidiary of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any
Subsidiary;
(c) any amendment of any material term of any outstanding security
of the Company or of any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any material indebtedness for borrowed money or any creation
or assumption by the Company or any Subsidiary of any Lien on any material
asset other than in the ordinary course of business consistent with past
practices;
(e) any making of any loan, advance or capital contributions to or
investment in any person other than loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries made in the
ordinary course of business consistent with past practices;
(f) any change in any method of accounting or accounting practice
by the Company or any Subsidiary, except for any such change required by
reason of a concurrent change in generally accepted accounting principles;
or
(g) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary, (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any Subsidiary, (iii) any
increase in benefits payable under any existing severance or termination
pay policies or employment agreements, or
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(iv) any increase in compensation, bonus or other benefits payable to
directors, officers or employees of the Company or any Subsidiary, other
than in the ordinary course of business consistent with past practice
other than fees payable to the Special Committee of the Board of Directors
not exceeding the amounts disclosed in writing to Buyer.
SECTION 4.11. No Undisclosed Material Liabilities. Except as
previously disclosed to Buyer in writing, there are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than:
(i) liabilities disclosed or provided for in the Balance Sheet or
in the Company 10-Q;
(ii) liabilities which in the aggregate are not material to the
Company and the Subsidiaries, taken as a whole; and
(iii) liabilities under this Agreement and fees and expenses related
thereto previously disclosed in writing to Buyer.
SECTION 4.12. Litigation. Except as set forth in the Company 10-K,
the Company 10-Q or disclosed in writing to Buyer prior to the date hereof,
there is no action, suit, investigation or proceeding (or, to the knowledge of
the Company, any basis for any Person to assert any claim likely to result in
liability or any other adverse determination) pending against, or to the
knowledge of the Company threatened against or affecting, the Company or any
Subsidiary or any of their respective properties before any court or arbitrator
or any governmental body, agency or official which, if determined or resolved
adversely to the Company or any Subsidiary in accordance with the plaintiff's
demands, would individually or in the aggregate reasonably be expected to have
a Material Adverse Effect or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the Offer or the Merger or any of
the other transactions contemplated hereby.
SECTION 4.13. Taxes. Except as set forth in the Company 10-K or
10-Q, to the knowledge of the Company, (a) the Company and the Subsidiaries
have filed, been included in or sent, all material returns, declarations and
reports and information returns and statements required to
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be filed or sent by or relating to any of them relating to any Taxes (as
defined below) with respect to any material income, properties or operations of
the Company or any Subsidiary prior to the Effective Time (collectively,
"Returns"); (b) as of the time of filing, the Returns correctly reflected in
all material respects the facts regarding the income, business, assets,
operations, activities and status of the Company and the Subsidiaries and any
other information required to be shown therein; (c) the Company and the
Subsidiaries have timely paid or made provision for all material Taxes that
have been shown as due and payable on the Returns that have been filed; (d) the
Company and the Subsidiaries have made or will make provision for all material
Taxes payable for any periods that end before the Effective Time for which no
Returns have yet been filed and for any periods that begin before the Effective
Time and end after the Effective Time to the extent such Taxes are attributable
to the portion of any such period ending at the Effective Time; (e) the
charges, accruals and reserves for taxes reflected on the books of the Company
and the Subsidiaries are adequate to cover the Tax liabilities accruing or
payable by the Company and the Subsidiaries in respect of periods prior to the
date hereof; (f) neither the Company nor any Subsidiary is delinquent in the
payment of any material Taxes or has requested any extension of time within
which to file or send any material Return, which Return has not since been
filed or sent; (g) no material deficiency for any Taxes has been proposed,
asserted or assessed in writing against the Company or any Subsidiary (or any
member of any affiliated or combined group of which the Company or any
Subsidiary is or has been a member for which either the Company or any
Subsidiary could be liable) other than those Taxes being contested in good
faith; (h) neither the Company nor any Subsidiary has granted any extension of
the limitation period applicable to any material Tax claims other than those
Taxes being contested in good faith; and (i) neither the Company nor any
Subsidiary is or has been a party to any material tax sharing agreement with
any corporation which, as of the Effective Time, is not a member of the
affiliated group of which the Company is a member.
"Tax" means with respect to any person (i) any net income, gross
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, value-added or windfall profit tax, custom duty or other
tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition to tax or
additional amount imposed by any taxing authority (domestic or foreign) on
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such person and (ii) any liability of the Company or any Subsidiary for the
payment of any amount of the type described in clause (i) as a result of being
a member of an affiliated or combined group.
SECTION 4.14. Employee Benefits. (a) The Company has provided
Buyer with complete age, salary, bonus, service and related data as of a date
no earlier than March 31, 1994 for employees and former employees of the
Company and its Subsidiaries or, to the extent not so provided shall provide
Buyer with such data as is maintained by the Company or its Subsidiaries or
reasonably obtainable as soon as practicable after the date hereof.
(b) Section I of Schedule 4.14 identifies each "employee benefit
plan", as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974 ("ERISA"), which (i) is subject to any provision of ERISA and (ii)
is maintained, administered or contributed to by the Company or any of its
ERISA Affiliates (as defined below) and covers any current or former employee
or director of the Company or any Subsidiary or under which the Company or any
of its ERISA Affiliates has any liability (collectively, the "Employee Plans").
Copies of each Employee Plan (and, if applicable, related trust agreements) and
all amendments thereto and written interpretations thereof have been furnished
to Buyer or, to the extent not so furnished, shall be furnished as soon as
practicable after the date hereof, in either case together with (x) the most
recent annual report (Form 5500 including, if applicable, Schedule B thereto)
prepared in connection with any such Employee Plan and (y) the most recent
actuarial valuation report prepared in connection with any such plan. For
purposes of this Section 4.14, "ERISA Affiliate" of any person means any other
person which, together with such person, would be treated as a single employer
under Section 414 of the Internal Revenue Code of 1986, as amended (the
"Code").
(c) To the knowledge of the Company, no condition exists and no
event has occurred that could constitute grounds for termination of any
Employee Plan subject to Title IV of ERISA (a "Title IV Plan") or, with respect
to any Employee Plan which is a multiemployer plan as defined in Section 3(37)
of ERISA (a "Multiemployer Plan"), presents a material risk of a complete or
partial withdrawal under Title IV of ERISA. To the knowledge of the Company,
if a "complete withdrawal" by the Company and all of its ERISA Affiliates were
to occur as of the Effective Time with respect to all Employee Plans which are
Multiemployer Plans, neither the Company nor any of its ERISA Affiliates would
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incur any material withdrawal liability under Title IV of ERISA.
(d) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date (after giving effect to any timely effective
remedial amendments that may have been necessary to maintain such Employee
Plans qualified status), and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code; provided however, that in order to
maintain such qualified and tax exempt status, certain of such Employee Plans
may be required to be amended during the currently pending remedial amendment
period to conform to the Tax Reform Act of 1986 and subsequent legislation in a
manner that is consistent with the manner in which such Employee Plan has
operated. The Company has furnished to the Buyer copies of the most recent
Internal Revenue Service determination letters with respect to each such Plan.
Each Employee Plan has been maintained in compliance in all material respects
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code,
which are applicable to such Employee Plan.
(e) Except to the extent specifically set forth and quantified in
Section II of Schedule 4.14, there is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company or any
Subsidiary that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to the terms of Section
280G of the Code.
(f) Section III of Schedule 4.14 identifies each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an Employee Plan, (ii) is
entered into, maintained or contributed to, as the case may be, by the Company
or any of its Subsidiaries and (iii) covers any current or former employee or
director of the Company or any of its Subsidiaries. Such contracts, plans and
arrangements as are described above, copies or descriptions of all of which
have been furnished previously to Buyer, or, to the extent not so furnished,
shall be furnished as soon as practicable after
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the date hereof, are referred to collectively herein as the "Benefit
Arrangements". Each Benefit Arrangement has been maintained in compliance in
all material respects with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations that are applicable to such
Benefit Arrangement.
(g) Except as disclosed in writing to Buyer prior to the date
hereof, there has been no amendment to, written interpretation or announcement
(whether or not written) by the Company or any of its Subsidiaries relating to,
or change in employee participation or coverage under, any Employee Plan or
Benefit Arrangement which would increase materially the expense of maintaining
such Employee Plan or Benefit Arrangement above the level of the expense
incurred in respect thereof for the fiscal year ended on the Balance Sheet
Date.
(h) (i) As of the Balance Sheet Date, the fair market value of the
assets of each Title IV Plan (excluding for these purposes any accrued but
unpaid contributions) exceeded the present value of all benefits accrued under
such Title IV Plan determined using the assumptions and methods set forth in
the most recent actuarial valuation report delivered by the Company's
independent auditors with respect to such Plan.
(ii) As of the Balance Sheet Date, the aggregate unfunded liability
of the Company and its ERISA Affiliates in respect to all Employee Plans
described under Sections 4(b)(5) or 401(a)(1) of ERISA, computed using
reasonable actuarial assumptions consistent with GAAP and determined as if all
benefits under such plans were vested as of such date, did not exceed
$14,000,000.
(iii) With respect to each Benefit Arrangement which is maintained for
the benefit of non United States employees of the Company or its Subsidiaries,
as of the Balance Sheet Date, according to the actuarial assumptions and
valuations most recently used for the purpose of funding each such Benefit
Arrangement (or, if the same has no such assumptions and valuations or is
unfunded, according to reasonable actuarial assumptions and valuations
consistent with GAAP), the total amount or value of the funds available under
such Benefit Arrangement to pay benefits accrued thereunder, together with any
reserve or accrual with respect thereto, exceeded the present value of all
benefits (actual or contingent) accrued as of the Balance Sheet Date of all
participants and past participants therein who are employees or former
employees of the Company or its Subsidiaries.
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(iv) Except for (x) the accelerated payment of Deferred Cash
Incentive Awards under the Company's Call-To-Action Incentive Plan which will
result in an aggregate payment of not more than $2,000,000, and (y) the
acceleration of vesting of stock options and stock appreciation rights which
are to be adjusted pursuant to Section 2.04, no employee or former employee of
the Company or any Subsidiary will become entitled to any compensation, bonus,
retirement, severance, job security or similar benefit or enhanced such benefit
solely as a result of the transactions contemplated hereby, without regard to
any events that may occur after the Effective Time. Immediately after giving
effect to the transactions contemplated hereby, the aggregate maximum
contingent liability of the Surviving Corporation and its subsidiaries in
respect of cash termination and severance benefits under the Employee Plans and
Benefit Arrangements will not exceed $355,000,000.
SECTION 4.15. Compliance with Laws. Except as previously disclosed
to Buyer in writing, to the knowledge of the Company, neither the Company nor
any Subsidiary is in violation of, or has violated, any applicable provisions
of any laws, statutes, ordinances or regulations which would, individually or
in the aggregate, result in or could reasonably be expected to result in a
Material Adverse Effect.
SECTION 4.16. Finders' Fees. Except for Goldman, Sachs & Co.,
whose fees have been disclosed in writing to Buyer and will be paid by the
Company, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf, of the Company or
any Subsidiary who might be entitled to any fee or commission from Buyer or any
of its Affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 4.17. Environmental Matters. (a) To the knowledge of the
Company, except as previously disclosed to Buyer in writing, there are no
Environmental Liabilities of the Company or any Subsidiary other than:
(i) Environmental Liabilities disclosed or provided for in the
Company 10-K or the Company 10-Q;
(ii) Environmental Liabilities that individually or in the aggregate
are not material to the Company and the Subsidiaries, taken as a whole;
and
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(iii) Environmental Liabilities that individually or in the aggregate
have not had and are not reasonably expected to have a Material Adverse
Effect.
(b) The following terms as used in this Section shall have the
following meanings:
"Environmental Liabilities" means any and all liabilities of the
Company or any Subsidiary (including any entity which is a predecessor of the
Company or any Subsidiary), whether accrued, contingent, absolute, determined,
determinable, vested, potential, known or otherwise, and any existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, which (i) arise under or relate to matters
covered by Environmental Laws and (ii) relate to actions occurring or
conditions existing on or prior to the Effective Time.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, and governmental restrictions, now in effect
or in effect at the Effective Time, relating to human health, the environment
or to emissions, discharges or releases of pollutants, contaminants or other
hazardous substances or wastes into the environment, including without
limitation ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or other hazardous
substances or wastes or the clean-up or other remediation thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to the Company that:
SECTION 5.01. Corporate Existence and Power. Each of Buyer and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
Since the date of its incorporation, Merger Subsidiary has not engaged in any
activities other than in connection with or as contemplated
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by this Agreement or in connection with arranging any financing required to
consummate the transactions contemplated hereby.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Buyer and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement has
been duly and validly executed and delivered by each of Buyer and Merger
Subsidiary and constitutes a valid and binding agreement of Buyer and Merger
Subsidiary.
SECTION 5.03. Governmental Authorization. The execution, delivery
and performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated by
this Agreement, to the knowledge of Buyer and Merger Subsidiary, require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than (i) the filing of the articles of merger or
other appropriate documents in accordance with Panama Law and the Delaware GCL,
(ii) compliance with any applicable requirements of the HSR Act, (iii)
compliance with any applicable requirements of the 1934 Act, (iv) the filing of
a notice pursuant to Section 721 of the Defense Production Act of 1950, as
amended ("Exon-Florio") and (v) compliance with the applicable requirements of
the Securities Act of 1933 (the "1933 Act"), and (vi) compliance with any
applicable foreign or state securities or Blue Sky laws.
SECTION 5.04. Non-Contravention. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the certificate or
articles of incorporation or bylaws of Buyer or Merger Subsidiary, (ii)
assuming compliance with the matters referred to in Section 5.03, contravene or
conflict with any provision of law, regulation, judgment, order or decree
binding upon Buyer or Merger Subsidiary or (iii) constitute a default under or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of Buyer or Merger Subsidiary or to a loss of any benefit
to which Buyer or Merger Subsidiary is entitled under any agreement, contract
or other instrument binding upon Buyer or Merger Subsidiary.
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SECTION 5.05. Disclosure Documents. (a) The information with
respect to Buyer and its subsidiaries (including without limitation Merger
Subsidiary), Parent and their respective Affiliates that Buyer furnishes to the
Company in writing specifically for use in any Company Disclosure Document will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading (i) in
the case of the Company Proxy Statement, at the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company, at the time the stockholders vote on adoption of
this Agreement and at the Effective Time and (ii) in the case of any Company
Disclosure Document other than the Company Proxy Statement, at the time of the
filing thereof and at the time of any distribution thereof to the Company's
stockholders.
(b) The Offer Documents, when filed, will comply as to form in all
material respects with the applicable requirements of the 1934 Act and will not
at the time of the filing thereof, at the time first published, sent or given
to the holders of Shares and at the time of consummation of the Offer, 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 made
therein, in the light of the circumstances under which they were made, not
misleading, provided, that this representation and warranty will not apply to
statements included in or omissions from the Offer Documents based upon
information furnished to Buyer or Merger Subsidiary in writing by the Company
specifically for use therein.
(c) The Registration Statement to be filed by Buyer with the SEC
with respect to the offering of the LCPS in connection with the Merger (the
"Registration Statement") and any amendments or supplements thereto will, at
the time the Registration Statement becomes effective or at the Effective Time,
comply as to form in all material respects with the requirements of the 1933
Act and will 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 contained therein, not misleading; provided that the
foregoing representation shall not apply to statements or omissions in the
Registration Statement based upon information furnished to Buyer or Merger
Subsidiary in writing by the Company specifically for use therein.
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(d) Buyer agrees to cause the Surviving Corporation to satisfy any
claims or liabilities arising directly or indirectly as a result of Section
2.04(b) or the actions required thereby.
SECTION 5.06. Finders' Fees. Except for J.P. Morgan Securities
Inc., whose fees will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary who might be entitled to any fee or commission
from the Buyer or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 5.07. Financing. Buyer has or will have, prior to the
expiration of the Offer and the Effective Date of the Merger, sufficient funds
available to purchase all of the Shares outstanding on a fully diluted basis in
the Offer and the Merger and to pay all related fees and expenses pursuant to
the Offer and the Merger.
SECTION 5.08. Capitalization. The authorized capital stock of
Buyer consists of 500 shares of Common Stock. As of April 28, 1994, there were
outstanding 500 shares of Common Stock. All outstanding shares of capital
stock of Buyer have been duly authorized and validly issued and are fully paid
and nonassessable. The shares of LCPS to be issued as part of the Merger
Consideration have been duly authorized and when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and nonassessable and the issuance thereof is not subject to
any preemptive or other similar right. The non-voting securities issuable upon
exchange of LCPS will, at the time of exchange be validly issued and will be
fully paid and non-assessable.
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ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Conduct of the Company. From the date hereof until
the Effective Time, the Company and the Subsidiaries shall conduct their
business in the ordinary course consistent with past practice and shall use
their best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and key employees, subject to the terms of this Agreement.
Without limiting the generality of the foregoing, and except as otherwise
provided in this Agreement, from the date hereof until the Effective Time
without the consent of Buyer:
(a) the Company will not adopt or propose any change in its
articles of incorporation or bylaws;
(b) the Company will not, and will not permit any Subsidiary to,
merge or consolidate with any other Person or acquire a material amount of
assets of any other Person;
(c) the Company will not, and will not permit any Subsidiary to,
sell, lease, license or otherwise surrender, relinquish or dispose of any
assets or property which are material to the Company and its Subsidiaries as a
whole except (i) pursuant to existing contracts or commitments, (ii) in the
ordinary course consistent with past practice; or (iii) as Buyer may agree in
writing;
(d) the Company will not, and will not permit any Subsidiary to,
agree or commit to do any of the foregoing; and
(e) the Company will not, and will not permit any Subsidiary to (i)
take, or agree or commit to take, any action that would make any representation
and warranty of the Company hereunder inaccurate in any respect at, or as of
any time prior to, the Effective Time or (ii) omit, or agree or commit to omit,
to take any action necessary to prevent any such representation or warranty
from being inaccurate in any respect at any such time, provided however that
the Company shall be permitted to take or omit to take such action which can
(without any uncertainty) be cured at or prior to the Effective Time or a date
on which Shares can be purchased pursuant to the Offer.
SECTION 6.02. Stockholder Meeting; Proxy Material. The Company
shall cause a meeting of its
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stockholders (the "Company Stockholder Meeting") to be duly called and held as
soon as reasonably practicable for the purpose of voting on the approval and
adoption of this Agreement and the Merger. The Board of Directors of the
Company shall, subject to their fiduciary duties as advised by counsel,
recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders. In connection with such meeting, the Company (i) will
promptly prepare and file with the SEC, will use all reasonable efforts to have
cleared by the SEC and will thereafter mail to its stockholders as promptly as
practicable a proxy statement and all other proxy materials for such meeting,
(ii) will, subject to the fiduciary duties of its Board of Directors, use all
reasonable efforts to obtain the necessary approvals by its stockholders of
this Agreement and the transactions contemplated hereby and (iii) will
otherwise comply with all legal requirements applicable to such meeting.
SECTION 6.03. Access to Information. From the date hereof until
the Effective Time, the Company will give Buyer, its counsel, financial
advisors, auditors and other authorized representatives reasonable access
during normal business hours to the offices, properties, books and records of
the Company and the Subsidiaries, will furnish to Buyer, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such persons may reasonably request and
will instruct the Company's employees, counsel and financial advisors to
cooperate with Buyer in its investigation of the business of the Company and
the Subsidiaries; provided that no investigation pursuant to this Section shall
affect any representation or warranty given by the Company to Buyer hereunder;
and provided, further, that the foregoing shall not require the Company to
permit any inspection, or to disclose any information, which in the reasonable
judgment of the Company would result in the disclosure of any trade secrets of
third parties or violate any obligation of the Company with respect to
confidentiality if the Company shall have used reasonable efforts to obtain the
consent of such third party to such inspection or disclosure. All requests for
information made pursuant to this Section shall be directed to an executive
officer of the Company or such person as may be designated by any such officer.
(b) Each of Buyer and Merger Subsidiary agrees to be bound by the
letter agreement dated February 28, 1994, between Parent and the Company as if
the references to Parent therein were to Buyer and Merger Subsidiary, except
that Buyer and Merger Subsidiary may (i) enter into this
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Agreement, (ii) acquire Shares pursuant to the Offer and the Merger so long as
this Agreement shall not have been breached by Buyer or Merger Subsidiary or
terminated in accordance with its terms and (iii) in the event described in the
last sentence of Section 2.02(g), agree with any shareholder of the Company to
exchange such shareholder's Shares for a security having terms no more
favorable to such shareholder than the terms of the LCPS (so long as all such
exchanges are effected on the same terms) and (iv) Buyer and its subsidiaries
may make such disclosures in the Offer Documents as Buyer may determine in its
reasonable discretion is required by applicable law.
SECTION 6.04. Other Offers. (a) From the date hereof until the
termination hereof, the Company and the Subsidiaries will not, and will use
their best efforts to cause their respective officers, directors, employees or
other agents not to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal (as hereinafter defined), (ii)
subject to the fiduciary duties of the Board of Directors under applicable law
as advised by counsel, waive any provision of any standstill or similar
agreements entered into by the Company or (iii) subject to the fiduciary duties
of the Board of Directors under applicable law as advised by counsel to the
Company, engage in negotiations with, or disclose any nonpublic information
relating to the Company or any Subsidiary or afford access to the properties,
books or records of the Company or any Subsidiary to, any Person that may be
considering making, or has made, an Acquisition Proposal; provided that, on or
prior to May 14, 1994 the provisions of this sentence shall not apply to any
party that is bound by a standstill or similar agreement with the Company on
the date hereof (an "Existing Bidder"). Nothing contained in this Section 6.04
shall prohibit the Company and its Board of Directors from (i) taking and
disclosing a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the 1934 Act, and (ii) making
such disclosures to the Company's stockholders which, in the judgment of and
subject to the fiduciary duties of the Board of Directors with the advice of
counsel, may be required under applicable law.
(b) The Company will (i) promptly notify Buyer after receipt of any
Acquisition Proposal or any inquiries indicating that any person is considering
making or wishes to make an Acquisition Proposal, (ii) promptly notify Buyer
after receipt of any request for nonpublic information relating to the Company
or any Subsidiary or for access to the properties, books or records of the
Company or any Subsidiary by any Person that may be considering making, or
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has made, an Acquisition Proposal and (iii) subject to the fiduciary duties of
the Board of Directors under applicable law as advised by counsel to the
Company, keep Buyer advised of the status and principal financial terms of any
such Acquisition Proposal, indication or request. The term "Acquisition
Proposal" as used herein means any offer or proposal for, or any indication of
interest in, a merger or other business combination involving the Company or
any Subsidiary or the acquisition of any equity interest in, or a substantial
portion of the assets of, the Company or any Subsidiary, other than the
transactions contemplated by this Agreement.
SECTION 6.05. Notice of Certain Events. The Company shall notify
Buyer, and Buyer shall notify the Company, as promptly as practicable following
its receipt of:
(i) 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;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) notice that any actions, suits, claims, investigations or
proceedings have been commenced or, to the knowledge threatened against,
or involving the Company or any Subsidiary, or Buyer, as applicable,
which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 4.12 or which relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 6.06. Rule 145 Affiliates. Prior to the Effective Time,
the Company shall cause to be delivered to Buyer an opinion of Skadden, Arps,
Slate, Meagher & Flom or Holtzmann, Wise & Shepard in form and substance
satisfactory to counsel to Buyer, identifying all persons who might, in the
opinion of counsel to the Company, at the time of the meeting of the Company
Stockholder Meeting, be deemed to be "affiliates" of the Company for purposes
of Rule 145 under the 1933 Act (the "1933 Act Affiliates"). The Company shall
use its best efforts to cause each person who is identified as a possible 1933
Act Affiliate to enter into prior to the Effective Time an agreement in form
and substance reasonably acceptable to Buyer pursuant to which each such person
acknowledges his responsibilities as such an "affiliate".
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ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
SECTION 7.01. Obligations of Merger Subsidiary. Buyer will take
all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement and to consummate the Merger on the terms and conditions
set forth in this Agreement.
SECTION 7.02. Voting of Shares. Buyer agrees to vote all Shares
beneficially owned by it in favor of adoption of this Agreement and the Merger
at the Company Stockholder Meeting.
SECTION 7.03. Director and Officer Liability. Buyer will cause the
Surviving Corporation to indemnify and hold harmless the present and former
officers and directors of the Company in respect of acts or omissions occurring
prior to the Effective Time to the maximum extent permitted under the Company's
articles of incorporation and bylaws in effect on the date hereof; provided
that, such indemnification shall (to the maximum extent permitted by law) be
mandatory rather than permissive except in instances involving willful
misconduct or bad faith and that the Surviving Corporation shall advance
expenses, including attorneys' fees promptly on demand and delivery of any
required undertaking. For three years after the Effective Time, Buyer will
cause to be maintained the current policies of officers' and directors'
liability insurance in respect of acts or omissions occurring prior to the
Effective Time covering each such person currently covered by the Company's
officers' and directors' liability insurance policy; provided that the
Surviving Corporation may substitute therefore policies of at least the same
coverage containing terms and conditions which in all material respects are no
less advantageous for so long as such substitution does not result in gaps or
lapses in coverage; and provided further that in satisfying its obligation
under this Section, Buyer shall not be obligated to cause the Surviving
Corporation to pay premiums in excess of the amount per annum the Company paid
in its last full fiscal year, which amount has been disclosed to Buyer. Buyer
shall cause the Surviving Corporation to pay all expenses (including attorneys'
fees) that may be incurred by any indemnified party in enforcing the indemnity
and other obligations provided for in this Section 7.03. Buyer agrees that
should the Surviving Corporation fail to comply with the foregoing obligations,
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Buyer shall be responsible therefor. The obligations of Buyer under this
Section 7.03 shall not be terminated or modified in such manner as to adversely
affect directors and officers to whom this Section 7.03 applies without the
consent of such director or officer. Directors and officers to whom this
Section 7.03 applies shall be third party beneficiaries of this Section.
SECTION 7.04. Employee Matters.
(a) For a period of at least one year after the Effective Time,
Buyer shall cause the Company to continue to maintain the Company's existing
compensation, severance, welfare and pension benefit plans, programs and
arrangements (other than any stock based plans, programs and arrangements) for
the benefit of current and former employees and directors of the Company and
its Subsidiaries (subject to such modification as may be required by applicable
law or to maintain the tax exempt status of any such plan which is intended to
be qualified under Section 401(a) of the Code), provided that (i) nothing
herein shall prohibit Buyer from replacing any such existing plan or plans,
program(s) or arrangement(s) with a plan or plans, program(s) or arrangement(s)
which provide such employees and directors with benefits which are not less
favorable in the aggregate than the benefits that would have been provided
under the Company's existing plan(s), program(s) or arrangement(s) to the
extent such replacement is permitted under the terms of the applicable plan,
program or arrangement and (ii) nothing herein shall obligate the Buyer to
provide such employees and directors with any stock based compensation
(including, without limitation, stock options or stock appreciation rights)
after the Effective Time.
In the light of Buyer's desire that the Company provide appropriate
employee incentives in the future, the Buyer agrees promptly to develop, and
the Company and Buyer shall promptly cooperate in developing, a new performance
based incentive compensation plan for the benefit of employees of the Company
and its Subsidiaries as an appropriate substitute for the current Stock Plans.
(b) The Company hereby agrees not to, and to cause its Subsidiaries
not to, amend or modify any existing Employee Plan or Benefit Arrangement, nor
enter into or otherwise establish, adopt or maintain any new employee plans,
programs, agreements or arrangements, or grant any additional Free-standing
SARs or other awards based upon the value of the Company's equity securities
prior to and including the Effective Time without the prior written consent of
the Buyer.
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(c) It is the Buyer's current intention to maintain the Company's
headquarters at its present location in Palo Alto, California.
(d) From and after the Effective Time, for purposes of determining
eligibility, vesting and benefit accrual under any replacement compensation,
severance, welfare, pension benefit or savings plan of Buyer or any of its
affiliates in which employees of the Company and its Subsidiaries become
eligible to participate, service with the Company or any of its Subsidiaries
shall be credited as if such services were rendered to Buyer or any of its
affiliates; provided that (i) Buyer shall not be obligated to permit employees
of the Company and its Subsidiaries to participate in nor, upon participation,
to receive such credited service, with respect to, any plan maintained by Buyer
or its affiliates which is not intended to constitute a replacement plan for
any existing plan, program or arrangement of the Company and its Subsidiaries
and (ii) Buyer shall not be required to give any such employee credit for such
prior service with the Company or any of its Subsidiaries for purposes of any
plan which is a "defined benefit plan" within the meaning of Section 3(35) of
ERISA, other than the Syntex U.S. Employees Pension Plan or any successor plan
to the assets and liabilities thereof.
(e) No provision of this Section 7.04 shall create any third party
beneficiary rights in any current or former employee or director of the Company
or its Subsidiaries (including any beneficiary thereof) hereunder or in respect
of continued or resumed employment or in respect of any benefits that may be
provided, directly or indirectly, under any employee benefit plan or
arrangement.
SECTION 7.05. Registration Statement. Buyer shall promptly prepare
and file with the SEC under the 1933 Act the Registration Statement and shall
use its best efforts to cause the Registration Statement to be declared
effective by the SEC as promptly as practicable. Buyer shall promptly take any
action required to be taken under state securities or Blue Sky laws in connect
with the issuance of LCPS in the Merger. Notwithstanding the foregoing, this
Section 7.05 shall not require Buyer, Merger Subsidiary or Parent to furnish,
other than for Buyer and its Subsidiaries, financial statements prepared in
accordance with United States generally accepted accounting principles or any
reconciliation of financial statements with generally accepted accounting
principles.
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ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
The parties hereto agree that:
SECTION 8.01. Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each party will use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement; provided that Buyer
and its Affiliates shall not be required to agree to any consent decree or
order in connection with the objections of any HSR Authority to the
transactions contemplated by this Agreement; and provided further that the
foregoing shall not require Parent or Buyer to furnish, other than for Buyer
and its United States subsidiaries, financial statements prepared in accordance
with United States generally accepted accounting principles or any
reconciliation of financial statements with United States generally accepted
accounting principles.
(b) The Company will use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done all things reasonably
necessary, proper or advisable to permit Buyer to make the determination
provided for in paragraph (f) of Annex I to this Agreement as soon as
practicable after the date of this Agreement.
SECTION 8.02. Certain Filings. The Company and Buyer and Merger
Subsidiary shall cooperate with one another (a) in connection with the
preparation of the Company Disclosure Documents and the Offer Documents, (b) in
determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority, including the filing or
notification required under the Merger Control Regulation of the European
Community, or by the competition authorities of its Member States or any other
jurisdiction is required, proper or advisable or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (c) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information so required, proper
or advisable in connection with the transactions contemplated hereby or with
the Company Disclosure Documents or the Offer Documents and seeking timely to
obtain any such actions, consents, approvals or waivers.
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SECTION 8.03. Public Announcements. Buyer and the Company will
consult with each other before issuing any press release or making any public
statement or any filing with any governmental body, agency, official or
authority with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law or any listing
agreement with any national securities exchange, will use all reasonable
efforts not to issue any such press release or make any such public statement
or such filing prior to such consultation.
SECTION 8.04. Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under
any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of Each Party. The
respective obligations of the Company, Buyer and Merger Subsidiary to
consummate the Merger are subject to the satisfaction or waiver at or prior to
the Effective Time of the following conditions:
(i) this Agreement shall have been adopted by the affirmative vote
of the stockholders of the Company in accordance with Panama Law;
(ii) any applicable waiting period under the HSR Act relating to the
Merger shall have expired;
(iii) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of
the Merger; provided that neither party may assert this condition unless
it has used its best efforts to oppose such judgment, injunction, order or
decree and to avail itself of all rights of appeal or it has determined,
in its
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reasonable judgment, that such efforts would not have a substantial
likelihood of success;
(iv) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation
of the Merger, including, without limitation, filing articles of merger or
other appropriate documents for registration in the Mercantile Registry of
the Republic of Panama and pursuant to the Delaware GCL shall have been
obtained or made (other than those actions or filings which, if not
obtained or made prior to the consummation of the Merger, would not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect); and
(v) the Registration Statement shall have been declared effective
and no stop order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the SEC.
SECTION 9.02. Conditions to the Obligations of Buyer and Merger
Subsidiary. The obligations of Buyer and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a)(i) either (A) the Committee on Foreign Investment in the United
States shall have determined not to investigate the Offer and the Merger
under Exon-Florio (either by action or nonaction) or (B) if such Committee
shall have determined to make such an investigation, such investigation
shall have been completed and the President shall have determined (either
by action or nonaction) not to take any action under Exon-Florio with
respect to the transactions contemplated by this Agreement;
(ii) the Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof; and
(iii) the representations and warranties of the Company contained in
this Agreement and in any certificate or other writing delivered by the
Company pursuant hereto shall be true at and as of the Effective Time as
if made at and as of such time.
(b) In the event Buyer has not acquired Shares in the Offer, each of
the conditions set forth in Annex I
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hereto shall have been satisfied or waived prior to the Effective Time,
provided that for the purpose of this Section 9.02(b), the reference in
clause (d)(i) of Annex I to "25%" shall be deemed to read "50%" and the
phrase "or proposed to acquire" shall be deleted.
SECTION 9.03. Conditions to the Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger is further
subject to the satisfaction or waiver at or prior to the Effective Time of the
condition that Buyer and Merger Subsidiary shall have performed in all material
respects each of their obligations under this Agreement required to be
performed by them at or prior to the Effective Time pursuant to the terms
hereof and the representations and warranties of Buyer and Merger Subsidiary
contained in this Agreement and in any certificate or other writing delivered
by Buyer or Merger Subsidiary pursuant hereto shall be true at and as of the
Effective Time as if made at and as of such time.
ARTICLE X
TERMINATION
SECTION 10.01. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(i) by mutual written consent of the Company and Buyer;
(ii) by either the Company or Buyer if (x) either Buyer shall have
failed to commence the Offer within 15 days following the date of this
Agreement or (y) Buyer shall not have purchased any Shares pursuant to the
Offer prior to December 31, 1994; provided, however, that the passage of
the period referred to in clause (y) shall be tolled for any part thereof
during which any party shall be subject to a nonfinal order, decree or
ruling or action restraining, enjoining or otherwise prohibiting the
purchase of Shares pursuant to the Offer or the consummation of the
Merger; and provided further that the right to terminate this Agreement
under this clause (ii) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of or
resulted in any of the circumstances described in clauses (x) or (y);
40
<PAGE> 45
(iii) by Buyer or the Company if prior to the purchase of Shares
pursuant to the Offer or the Effective Time, the Board of Directors of the
Company shall have withdrawn or materially modified its approval or
recommendation of the Offer, the Merger or this Agreement, recommended
another Acquisition Proposal or entered into a definitive agreement or
agreement in principle with respect to another Acquisition Proposal, or
resolved to do any of the foregoing;
(iv) by either the Company or Buyer, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Buyer
or the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable;
(v) by either Buyer or the Company, if the Company Stockholder
Meeting shall have been held and the stockholders of the Company shall
have failed to approve and adopt this Agreement and the Merger at such
meeting; and
(vi) by Buyer, if Buyer shall have received any communication from
the Department of Justice or Federal Trade Commission (each an "HSR
Authority") (which communication shall be confirmed to the other parties
by the HSR Authority) that causes such party to reasonably believe that
any HSR Authority has authorized the institution of litigation challenging
the transactions contemplated by this Agreement under the U.S. antitrust
laws, which litigation will include a motion seeking an order or
injunction prohibiting the consummation of any of the transactions
contemplated by this Agreement.
SECTION 10.02. Effect of Termination. If this Agreement is
terminated pursuant to Section 10.01, this Agreement shall become void and of
no effect with no liability on the part of any party hereto, except for fraud
and for willful breach of a material obligation contained herein and except
that the agreements contained in Section 11.04 shall survive the termination
hereof.
41
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy,
telex or similar writing) and shall be given,
if to Buyer or Merger Subsidiary, to:
Dr. Felix Amrein
Roche Capital Corporation
Grenzacherstrasse 124
CH - 4002 Basel
Telecopier: 011-41-61-688-1396
with a copy to: Peter R. Douglas
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: (212) 450-4800; and
if to the Company, to:
Syntex Corporation
3401 Hillview Avenue
Palo Alto, California 94304
Telecopier: (415) 852-1144
Attention: Neil Flanzraich
with a copy to: Holtzmann, Wise & Shepard
1271 Avenue of the Americas
New York, New York 10020
Telecopier: (212) 554-8181
Attention: Harvey Goldschmid
and a copy to: Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Telecopier: (212) 735-2000
Attention: Joseph H. Flom
or such other address or telex number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (i) if given by telex, when
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such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received or (ii) if given by any other means, when
delivered at the address specified in this Section.
SECTION 11.02. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto (other than the Guaranty
of Roche Holding Ltd, dated May 1, 1994) shall not survive the Effective Time
except for the provisions of Article II and Sections 7.03, 7.04 and 8.04
hereof.
SECTION 11.03. Amendments; No Waivers. (a) Subject to the
provisions of Section 1.03 hereof, any provision of this Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by the
Company, Buyer and Merger Subsidiary or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that after the adoption of
this Agreement by the stockholders of the Company, no such amendment or waiver
shall, without the further approval of such stockholders, alter or change (i)
the amount or kind of consideration to be received in exchange for any shares
of capital stock of the Company, (ii) any term of the articles of incorporation
of the Surviving Corporation or (iii) any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the holders of
any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.04. Expenses. (a) The Company will pay Buyer, in
immediately available funds, so long as Buyer shall not have materially
breached its obligations under this Agreement, promptly, but in no event later
than two business days, after the termination of this Agreement pursuant to
clause (iii) of Section 10.01 or if any Person or "group" (as defined in
Section 13(d)(3) of the Exchange Act), other than Buyer or its Affiliates or
any group of which any of them is a member, shall have acquired beneficial
ownership of more than 50% of any class or series of capital stock of the
Company (including the Shares), through acquisition of stock, the formation of
a group or otherwise, or shall have been
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<PAGE> 48
granted any option, right, or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 50% of any class or series of capital stock
of the Company (including the Shares) hereof a fee for reimbursement of costs
and expenses of (x) $20,000,000, if such event occurs on or before May 14,
1994, or (y) $35,000,000, if such event occurs after May 14, 1994.
(b) Subject to Section 11.04(a), all costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost
or expense.
SECTION 11.05. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto except that Buyer may
transfer or assign, in whole or from time to time in part, to one or more of
its direct or indirect wholly owned subsidiaries of its ultimate parent entity,
the right to purchase shares pursuant to the Offer, but any such transfer or
assignment will not relieve Buyer of its obligations under the Offer or
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
SECTION 11.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without
regard to the principles of conflicts of laws.
SECTION 11.07. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 11.08. Validity. If any provision of this Agreement, or
the application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 11.09. Entire Agreement. This Agreement, the Guaranty of
Roche Holding Ltd. dated May 1, 1994 including
44
<PAGE> 49
the documents and instruments referred to herein, together with the letter
agreement, dated February 28, 1994, between Parent and the Company, constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties or any of them, with respect to the
subject matter hereof.
SECTION 11.10. Definition. For purposes of this Agreement the
phrases "to the knowledge of the Company" or "known to the Company" mean (i)
known to any senior manager of the Company or any material Subsidiary or (ii)
could reasonably be expected to be known by any of such persons.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
SYNTEX CORPORATION
By: /s/ Paul E. Freiman
----------------------------
Name: Paul E. Freiman
Title: Chief Executive Officer
ROCHE CAPITAL CORPORATION
By: /s/ Henri B. Meier
----------------------------
Name: Henri B. Meier
Title: Vice President
ROCHE (PANAMA) CORPORATION
By: /s/ Henri B. Meier
---------------------------
Name: Henri B. Meier
Title: Vice President
45
<PAGE> 50
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer pursuant to the
Acquisition Agreement and Plan of Merger (the "Agreement") dated as of May 1,
1994 among Syntex Corporation (the "Company"), Roche Capital Corporation
("Buyer") and Roche (Panama) Corporation (the "Merger Subsidiary"), Buyer
shall not be required to accept for payment or pay for any Shares, and may
terminate the Offer, unless (i) a majority of the outstanding Shares on a fully
diluted basis has been tendered pursuant to the Offer by the expiration of the
Offer and not withdrawn; (ii) the applicable waiting period under the HSR Act
shall have expired or been terminated; (iii) either (A) the Committee on
Foreign Investment in the United States shall have determined not to
investigate the Offer and the Merger under Exon-Florio (either by action or
nonaction) or (B) if such Committee shall have determined to make such an
investigation, such investigation shall have been completed and the President
shall have determined (either by action or nonaction) not to take any action
under Exon-Florio with respect to the transactions contemplated by this
Agreement; provided, however, that prior to December 31, 1994, Buyer shall not
terminate the Offer by reason of the nonsatisfaction of either of the
conditions set forth in clauses (ii) or (iii) above and shall extend the Offer
(it being understood that this provision shall not prohibit Buyer from
terminating the Offer or failing to extend the Offer by reason of the
nonsatisfaction of any other condition of the offer); or if prior to the
acceptance for payment of Shares, any of the following conditions exist:
(a) there shall be instituted or pending any action or proceeding
by any government or governmental authority or agency, domestic or
foreign, or by any other person, domestic or foreign, before any court or
governmental authority or agency, domestic or foreign, that has a
substantial likelihood of success, (i) challenging or seeking to make
illegal, to delay materially or otherwise directly or indirectly to
restrain or prohibit the making of the Offer, the acceptance for payment
of or payment for some of or all the Shares by Buyer or the consummation
by Buyer of the Merger, seeking to obtain material damages or otherwise
directly or indirectly relating to the transactions contemplated by the
Offer or the Merger, (ii) seeking to restrain or prohibit Buyer's
ownership or operation (or that of its subsidiaries or
<PAGE> 51
Affiliates) of all or any material portion of the business or assets of
the Company and its subsidiaries, taken as a whole, or of Buyer and its
subsidiaries or Affiliates, taken as a whole, or to compel Buyer or any of
its subsidiaries or Affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or of Buyer and its subsidiaries or
Affiliates, taken as a whole, (iii) seeking to impose or confirm material
limitations on the ability of Buyer or any of its subsidiaries or
Affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or
owned by Buyer or any of its subsidiaries or Affiliates on all matters
properly presented to the Company's stockholders, (iv) seeking to require
divestiture by Buyer or any of its subsidiaries or Affiliates of any
Shares, or (v) that otherwise, in the reasonable judgment of Buyer, is
likely to materially adversely affect the Company and its subsidiaries,
taken as a whole, or Buyer and its subsidiaries or Affiliates, taken as a
whole;
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by
any court, government or governmental authority or agency, domestic or
foreign, other than the application of the waiting period provisions of
the HSR Act or Exon- Florio to the Offer or the Merger, that has a
substantial likelihood of resulting in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above;
(c) any material adverse change in the business, assets, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole, shall have occurred other than as disclosed to Buyer in
writing or there shall be any event, occurrence or development of a state
of circumstances or facts which individually or in the aggregate would
reasonably be expected to result in such a material adverse change;
(d) (i) it shall have been publicly disclosed or Buyer shall have
otherwise learned that any person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Buyer or its Affiliates or any
group of which any of them is a member, shall have acquired or proposed to
acquire beneficial ownership of more than 25% of any class or series of
capital stock of the Company
ii
<PAGE> 52
(including the Shares), through the acquisition of stock, the formation of
a group or otherwise, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of more
than 25% of any class or series of capital stock of the Company (including
the Shares); (ii) any person or group shall have entered into a definitive
agreement or an agreement in principle with the Company with respect to a
merger, consolidation or other business combination with the Company; or
(iii) the Board of Directors of the Company (or any duly authorized
committee thereof) shall have withdrawn or materially modified its
approval or recommendation of the Offer or the Merger;
(e) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under this Agreement,
or any of the representations and warranties of the Company set forth in
this Agreement shall not be true when made or at and as of such time as if
made at and as of such time;
(f) Buyer, acting in good faith, shall not have satisfied itself
that there exists no potential environmental liability of the Company or
any Subsidiary that has a reasonable prospect individually or in the
aggregate of resulting in a Material Adverse Effect which liability (i)
relates to any site in Missouri or Illinois and is not specifically
disclosed in the footnotes to the financial statements in the Company 10-K
or Company 10-Q; or (ii) arises or may arise from (x) any site in Missouri
or Illinois identified or referred to in any writing delivered by the
Company to Buyer prior to the date hereof or (y) any circumstance or
condition identified in any such writing; or
(g) the Agreement shall have been terminated in accordance with its
terms;
which, in the judgment of Buyer in any such case, and regardless of the
circumstances (including any action or omission by Buyer) giving rise to any
such condition, makes it inadvisable to proceed with such acceptance for
payment or payment.
For purposes of this Annex I, the term "foreign" shall mean any
jurisdiction other than the United States, in which either the Company and its
Subsidiaries or Buyer and its Affiliates has any material assets or operations.
Each other term used herein that is defined in the Agreement shall have the
meaning assigned to such term in the Agreement.
iii
<PAGE> 1
EXHIBIT 2
FORM OF EXECUTIVE SEVERANCE AGREEMENT
[Name
Home Address]
Dear [ ]:
The Board of Directors of Syntex Corporation (the "Company"), believes
that it is in the Company's best interest to amend its arrangements that are
intended to provide security to certain key employees of the Company and/or its
Affiliates upon a Change in Control of the Company and thereby to induce such
individuals to continue in their employment and to enhance their ability to
perform effectively and without undue distraction should the Company be rumored
to be or become the target of an attempted acquisition.
Accordingly, the Company proposes and does hereby agree to provide to
you, upon the terms and conditions hereinafter set forth, the benefits
described below in the event that your employment with the Company and its
Affiliates is terminated, after a Change in Control, either by the Company
without Cause or by you for Good Reason. In consideration therefor, by
accepting this Agreement you hereby agree to remain in the employ of the
Company until the earliest of (a) December 31, 1994, or (b) the date of a
Change in Control, or (c) the date your employment terminates by reason of your
death or Disability, or (d) the date that you commence retirement
1
<PAGE> 2
benefits under the Company's pension plan, or (e) the date on which the Company
terminates your employment for any reason or without any reason.
1. Term of Agreement: This Agreement is effective on the date
hereof and shall continue in effect to and including December 31, 1995;
provided, however, that on December 31, 1994, and on each December 31
thereafter, this Agreement automatically shall be extended for an additional
entire calendar year (for example, at December 31, 1994, through December 31,
1996) unless, before any such December 31, you or the Company give notice to
the other that this Agreement is to terminate on the next following December
31st (for example, on December 31, 1995, if notice is given prior to December
31, 1994).
Notwithstanding the foregoing, if there is a Change of Control while
this Agreement is in effect, the term of this Agreement automatically shall be
extended for a three-year period measured from the date of such Change in
Control.
2. Definitions: As used in this Agreement:
(a) "Affiliate" means any corporation, firm or
partnership directly or indirectly controlled by, controlling or under common
control with the Company.
(b) "Annual Bonus" means the total amount of all cash
awards paid or payable to you with respect to a fiscal
2
<PAGE> 3
year of the Company under the Management Incentive Compensation Plan
(previously in effect) and/or the 1993 Syntex Corporation Short-Term
Compensation Plan and/or any successor, replacement or supplemental annual
bonus plan.
(c) "Average Annual Bonus" means the average annual
amount of the Annual Bonuses paid or payable to you for the most recent three
(3) fiscal years of the Company for which the Compensation and Benefits
Committee of the Board has finally determined and approved Annual Bonuses (or
finally determined that no Annual Bonus will be paid) prior to a Change in
Control. In the event that you have not been in the employment of the Company
and/or its Affiliates during the entirety of such three (3) fiscal years, your
Average Annual Bonus shall be determined by dividing the total amount of Annual
Bonuses paid or payable to you for such three (3) fiscal years by the number of
years (including fractional parts of years as fractional years) during such
three (3) fiscal years that you were so employed.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means (i) your willful and continued failure
to substantially perform your duties with the Company and/or its Affiliates
(other than any such failure resulting from your incapacity due to physical or
mental illness) after there is delivered to you by the Board a written demand
for substantial performance which sets forth in detail the specific
3
<PAGE> 4
respects in which it believes you have not substantially performed your duties,
or (ii) your willfully engaging in gross misconduct which is materially and
demonstrably injurious to the Company. For purposes of determining whether any
such Cause is present, no act, or failure to act, by you shall be considered
"willful" if done, or omitted to be done, by you in good faith and in the
reasonable belief that your act or omission was in the best interests of the
Company and/or required by applicable law.
(f) "Change in Control" means a change in control of the
Company of a nature required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934 (the "1934 Act") as in effect on April 1, 1994, or, if Item 6(e) shall
cease to be in effect, any regulations of similar import issued by the
Securities and Exchange Commission; provided that, without limitation, a Change
in Control shall be deemed to have occurred if and when individuals who were
members of the Board immediately prior to a meeting of the shareholders of the
Company involving a contest for the election of directors of the Company do not
constitute a majority of the Board following such election.
(g) "Code" means the United States Internal Revenue Code
of 1986, as amended, and where reference is made to a specific section of the
Code, if such section shall cease to be in effect, the reference shall be
deemed to be to any successor
4
<PAGE> 5
section of similar import which is contained in the Code or elsewhere in the
United States federal tax laws.
(h) "Departure Date" means the last day on which you
render services as an employee to the Company or an Affiliate (or the Company's
successor).
(i) "Disability" means a physical or mental illness or
injury which is of such nature or effect, and which has continuously prevented
you from performing your duties with the Company and its Affiliates for a
period of sufficient duration, that you are, or upon application would be,
entitled to long term disability benefits under the Company's Long-Term
Disability Plan or any successor or replacement plan then in effect.
(j) "Good Reason" means the occurence of any one or more
of the following events after a Change in Control:
(i) without your express written consent, the
assignment to you of any duties or the substantial reduction of your duties,
either of which is inconsistent with your position with the Company and/or its
Affiliates (or the duties and responsibilties of such position) immediately
prior to a Change in Control, or any removal of you from or any failure to
re-elect you to any such position (other than your position as a member of the
Board);
(ii) a reduction by the Company and/or any
Affiliate in your base salary or in any bonus compensation formula applicable
to you (including but not limited to the
5
<PAGE> 6
method used to determine Annual Bonuses) as in effect prior to a Change in
Control;
(iii) a material reduction by the Company and/or
any Affiliate in the aggregate level of employee benefits to which you are
entitled prior to a Change in Control;
(iv) the Company's (or an Affiliate's) requiring
you to be based more than fifty (50) miles from your current location (except
for required travel on the Company's (or the Affiliate's) business to an extent
substantially consistent with your present business travel obligations), or the
relocation of your office to a place more than fifty (50) miles from its
present location, without your express written consent;
(v) any purported termination of your
employment by the Company and/or any Affiliate which is not effected pursuant
to a Notice of Termination and procedures applicable to such termination (i.e.
termination for Disability or for Cause), or any purported termination for
which the grounds relied upon are not valid;
(vi) the failure of the Company to obtain the
assumption of this Agreement by any successor as contemplated in Paragraph 9
hereof.
(k) "Notice of Termination" means a written notice
advising that your employment with the Company and its Affiliates is or will be
terminated, which the Company gives you or you give the Company following a
Change in Control.
6
<PAGE> 7
(l) "Payment Period" means a period of thirty-six (36)
consecutive calendar months beginning with the first calendar month following
the calendar month in which your Departure Date occurs if Notice of Termination
is given one (1) year or less after a Change in Control or a period of
twenty-four (24) consecutive calendar months beginning with the first calendar
month following the calendar month in which your Departure Date occurs if
Notice of Termination is given more than one (1) year, but not more than three
(3) years, after a Change in Control.
3. Compensation Upon Termination of Employment
Following a Change in Control:
If, while this Agreement is in effect, there occurs both a
Change in Control and, thereafter, the giving of a Notice of Termination
pursuant to which the Company terminates your employment other than for Cause
or Disability or pursuant to which you terminate your employment with the
Company and its Affiliates for Good Reason, you shall be entitled to a
termination payment ("Termination Payment") and other benefits, determined as
follows:
(a) If the Notice of Termination is given not more than
one (1) year after the Change in Control, the Termination Payment shall be an
amount equal to (x) three (3) times the sum of (i) your annual base
compensation in effect immediately prior to the Change in Control and (ii) your
Average Annual Bonus reduced by (y) any severance benefit payable to you under
7
<PAGE> 8
the Syntex Corporate Enhanced Severance Pay Plan in connection with such notice
of termination.
(b) If the Notice of Termination is given more than one
(1) year, but not more than three (3) years, after the Change in Control, the
Termination Payment shall be an amount equal to (x) two (2) times the sum of
(i) your annual base compensation in effect immediately prior to the Change in
Control and (ii) your Average Annual Bonus reduced by (y) any severance benefit
payable to you under the Syntex Corporate Enhanced Severance Pay Plan in
connection with such notice of termination.
(c) The Company shall pay you the Termination Payment in
equal monthly installments ("Monthly Installments"), on the first day of each
calendar month during the Payment Period. In lieu of Monthly Installments, but
only if you so elect by written notice to the Company before the effective date
of a Change in Control, the Company shall pay you the Termination Payment in a
single lump sum in an amount equal to the present value of such Monthly
Installments on your Departure Date, payable not later than five (5) days
thereafter. Such present value shall be determined by using the 180 day
Treasury Bill rate posted by Citibank, N.A. on your Departure Date.
(d) During the Payment Period (without regard to whether
or not a lump sum election is made pursuant to Paragraph 3(c)), the Company and
its Affiliates shall provide
8
<PAGE> 9
to you life insurance, medical, dental, disability and accidental death
benefits at a level at least substantially equal (individually and
collectively) to the level of such benefits provided to you immediately prior
to the Change in Control.
(e) The Company shall provide to you a benefit
determined in accordance with the terms of the Syntex U.S. Employees
Supplemental Pension Benefits Plan as in effect immediately prior to the Change
in Control, or its exact equivalent as it pertains to you (the "Supplemental
Pension Plan"). For purposes of determining the amount of such benefit, the
Company shall give you the following additional credits for service, age and
compensation that shall be included in computing your combined benefit under
the Supplemental Pension Plan and the Syntex U.S. Employees Pension Plan (but
these additional credits shall not be included in the computation of the amount
of your benefit under the Syntex U.S. Employees Pension Plan that is applied as
an offset in the computation of your benefit under the Supplemental Pension
Plan):
(i) Effective as of your Departure Date, the
Company shall credit you for purposes of accrual of benefits and vesting of
benefits with an additional three (3) years of service if the Notice of
Termination is given one (1) year or less after the Change in Control or an
additional two (2) years of service if the Notice of Termination is given more
than one
9
<PAGE> 10
(1) year, but not more than three (3) years, after the Change in Control.
(ii) For purposes of determining whether you are
entitled to use the preferential early retirement actuarial factors (which
factors are applicable to persons who have attained age fifty (50) with ten
(10) years of service prior to severance), the Company shall increase your age
as of your Departure Date by three (3) years if the Notice of Termination is
given one (1) year or less after the Change in Control or by two (2) years if
the Notice of Termination is given more than one (1) year, but not more than
three (3) years, after the Change in Control; provided, however, that your
actual age at the time you commence benefits shall be used to compute such
benefit (but using the preferential actuarial factors if applicable under the
preceding clause).
(iii) For purposes of determining your final
average compensation, the Company shall credit you as of your Departure Date
with an additional three (3) completed calendar years of covered compensation
if the Notice of Termination is given one (1) year or less after the Change in
Control or an additional two (2) completed calendar years of covered
compensation if the Notice of Termination is given more than one (1) year, but
not more than three (3) years, after the Change in Control, each in the amount
of one-third (1/3) of your Termination Payment if the Notice of Termination is
given one (1) year or less after the Change in Control or in the
10
<PAGE> 11
amount of one-half (1/2) of your Termination Payment if the Notice of
Termination is given more than one (1) year, but not more than three (3) years,
after the Change in Control.
(f) In addition to the foregoing, if the portion of the
value of the Termination Payment and benefits provided hereunder that is
required to be taken into account under Section 280G of the Code, together with
the portion of the value of all other items of compensation to you that is
required to be taken into account under Section 280G of the Code, equals or
exceeds the lowest amount that would result in a "parachute payment" to you
within the meaning of Section 280G(b)(2)(A) of the Code, then the Company shall
pay you additional amounts which in total equal the amount of any and all tax
liabilities that you incur under Section 4999 of the Code (including any such
tax liabilities on amounts paid under this Paragraph 3(f)), plus the amount of
any and all U.S. federal and state income tax liabilities you are expected to
incur on the amounts that you receive under this Paragraph 3(f) (including
income tax liabilities on amounts provided hereunder to cover such income tax
liabilities). The anticipated amount of the tax liability that you can be
expected to incur under Section 4999 of the Code shall be determined by the
Company's independent financial auditors, or by a tax professional designated
by such independent auditors, acting in good faith. Such anticipated tax
liability, together with associated income tax liabilities (as computed below)
shall be paid to you with
11
<PAGE> 12
your Termination Payment. If the Internal Revenue Service assesses you with
any tax under Section 4999 of the Code in excess of the amount determined as
set forth above, then the Company shall pay to you, upon your delivery of a
copy of the IRS notice of such assessment to the Company, the amount of such
additional tax assessed, together with any penalties, interest and additions
assessed thereon and together with associated income tax liabilities (as
computed below). The additional amount for U.S. federal and state income taxes
shall be computed using the following formula:
Income tax amount = (r x E)/(1 - r)
where E is your Code Section 4999 tax liability, and r is the sum of the
highest marginal federal income tax rate and the highest marginal income tax
rate in your state of residence applicable to individuals for the year in which
payment is received reduced by the product of such state and federal tax rates
[r = fit rate + sit rate - (fit rate x sit rate)].
(g) Anything contained in the above provisions of this
Paragraph 3 to the contrary notwithstanding, the Company shall have no
obligation to make any payments or to provide any benefits under the above
provisions of this Paragraph 3 if, after a Change in Control, the Company
terminates your employment for Cause or Disability, or your employment
terminates due to your death or your resignation other than for Good Reason.
12
<PAGE> 13
4. Termination for Cause: Anything contained in this Agreement
to the contrary notwithstanding, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to and an opportunity for
you, together with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of conduct constituting
Cause as defined herein and specifying the particulars thereof in detail.
5. Termination for Disability: Anything contained in this
Agreement to the contrary notwithstanding, you shall not be deemed to have been
terminated for Disability unless and until the Company shall have delivered to
you a written Notice of Termination for Disability (advising you that you have
thirty (30) days to return to work) and you have not returned to the full-time
performance of your duties within thirty (30) days after your receipt of such
Notice of Termination.
6. Disputes: To dispute a termination for Good Reason by you,
the Company must give you written notice of such dispute within ten (10)
business days after it receives your
13
<PAGE> 14
Notice of Termination. To dispute a termination for Cause or Disability by the
Company, you must give the Company written notice of such dispute within thirty
(30) days after you receive the Notice of Termination.
Any dispute, whether initiated by the Company or by you,
with respect to whether termination of your employment was under circumstances
entitling you to a Termination Payment and benefits hereunder or with respect
to the amount and/or adequacy of any payments and/or benefits to be provided
hereunder, that cannot be resolved by mutual agreement shall be resolved by
binding and final arbitration. Any claim in arbitration with respect to
whether termination of your employment was under circumstances entitling you to
a Termination Payment and benefits hereunder must be filed within thirty (30)
days following receipt of a notice of dispute that is delivered in accordance
with the provisions of the initial paragraph of this Paragraph 6. Any claim in
arbitration with respect to the amount and/or adequacy of any payments and/or
benefits to be provided hereunder must be filed within thirty (30) days
following receipt of a notice of dispute that is delivered by you to the
Company or by the Company to you at any time prior to the making of such
payment or the provision of such benefit or within thirty (30) days thereafter.
The arbitration shall be held in Palo Alto, California, and
shall be conducted under the Commercial
14
<PAGE> 15
Arbitration Rules of the American Arbitration Association. Within thirty (30)
days of receipt of a claim in arbitration, the Northern California Regional
Director of the American Arbitration Association shall appoint three
arbitrators to determine the dispute(s). The arbitration panel must conduct
hearings and render its award no later than ninety (90) days after the receipt
of the claim in arbitration by the American Arbitration Association.
The Company shall pay all reasonable fees and expenses,
including attorney's and consultant's fees, incurred by you in good faith in
connection with any dispute hereunder, without regard to the outcome of such
dispute.
7. No Mitigation: No payment or benefit to which you are
entitled pursuant to Paragraph 3 hereof shall be reduced by reason of any
compensation, benefit or other income received by you for services rendered or
otherwise after termination of your employment with the Company.
8. Covenant Not to Compete: You agree that:
(a) As an executive, with important responsibilties and
knowledge of operations, your services are a valuable asset and that you have
access to business information of critical importance to the Company.
Therefore, to protect the integrity and success of the Company's operations,
you agree that during
15
<PAGE> 16
the term of this Agreement prior to your Departure Date you will keep
confidential all information gained in your employment with the Company and/or
its Affiliates and will not, without the prior written consent of the Company,
enter into the employment of, or invest in or contribute to, participate in the
activities of, or act as consultant to or advise any enterprise in whatever
form organized and carried on which is directly competitive with any business
activity then conducted or planned by the Company or its Affiliates, provided,
however, that you may make investments in publicly traded securities of any
issuer if the securities owned by you represent less than one percent (1%) of
the class of such securities of such issuer then issued and outstanding.
(b) For the period of two (2) years following your
Departure Date, or, if longer, the period during which you receive Monthly
Installments you will not disclose such information or use it for any purpose
whatsoever.
(c) Any Invention and Trade Secret Agreement,
Proprietary and Invention Agreement or other agreement, however titled or even
untitled, between you and the Company or any Affiliate, which is in effect on
the date hereof and which relates to inventions, improvements, processes,
patents, trade secrets and/or confidential information of any description,
shall continue in full force and effect in accordance with the terms thereof
and you agree that the provisions of
16
<PAGE> 17
subparagraphs (a) and (b) of this Paragraph 8 shall not be deemed to contravene
or limit in any way any such agreement and that no such agreement shall be
deemed to contravene or limit the provisions of the said subparagraphs (a) and
(b).
9. Successors: The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform the obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. Upon such assumption, the term "Company"
as used throughout this Agreement shall refer to the successor to the Company's
business and assets as aforesaid which executes and delivers the agreement
provided for in this paragraph or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law, and the term
"Board" as used throughout this Agreement shall refer to the Board of Directors
of such successor Company.
10. Notice: For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered in person or by United
States registered mail,
17
<PAGE> 18
return receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement, provided that all
notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
11. Other Plans and Arrangements: Your prior agreement with the
Company dated -------------- is hereby rescinded and revoked. Furthermore, by
entering into this Agreement, you hereby waive any rights you may have under
the Syntex Corporation Security of Employment Plan dated January 25, 1990.
Additionally, if upon a termination of your employment following a Change in
Control you are entitled to receive a Termination Payment and other benefits
hereunder, you shall not be entitled to receive (and you hereby waive any right
you might otherwise have to receive) any severance pay or salary continuation
benefits except as provided under the Syntex Corporation Enhance Pay Plan; any
continuation of life insurance, medical, dental, disability, accidental death
or other welfare benefits (other than COBRA rights); or any continuation of
retirement benefit accruals under any other salary continuation or severance
benefit plan or program of the
18
<PAGE> 19
Company. However, this Agreement is not intended to, and shall not, supersede
or affect your participation in or rights under any other employee benefit plan
or program of the Company or its Affiliates (including any salary continuation
or severance benefit plan or program if you do not receive a Termination
Payment and the other benefits provided hereunder), even if benefits under such
plan or program may be accelerated or otherwise enhanced as a result of a
Change in Control.
12. Miscellaneous: No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by you and the Chief Executive Officer of the
Company or such officer as may be specifically designated by the Board of
Directors of the Company. No waiver of either party hereto at any time of the
breach of, or lack of compliance with, any conditions or provisions of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives,
19
<PAGE> 20
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amounts are still payable to you
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee, legatee, or other
designee or, if there be no such designee, to your estate.
13. Validity: The invalidity and unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
14. Applicable Law: This Agreement shall be interpreted and
enforced in accordance with the laws of the State of California.
If this letter correctly sets forth our agreement, sign and return to
the Company one copy of this letter.
SYNTEX CORPORATION
BY
-----------------------------
Chief Executive Officer
Accepted and agreed to as of
the date first above written:
- ----------------------
20
<PAGE> 1
EXHIBIT 3
SECTION 1. The Guaranty. (a) For valuable consideration, Roche
Holding Ltd, a Swiss corporation ("Guarantor"), hereby unconditionally and
irrevocably guarantees to Syntex Corporation, a Panama corporation (the
"Company") the prompt and full performance and discharge by Roche Capital
Corporation, a Panama corporation ("Buyer") and Roche (Panama) Corporation, a
Delaware corporation ("Merger Subsidiary") (together, the "Obligors") of all of
the covenants, agreements, obligations, liabilities, representations and
warranties of the Obligors under the Acquisition Agreement and Plan of Merger
dated as of May 1, 1994 (the "Agreement") among the Company, Buyer and Merger
Subsidiary (collectively, the "Obligations"), in accordance with the terms
hereof and thereof. Guarantor hereby guarantees to the Company full and
complete performance by the Obligors of each and all of the Obligations,
including, without limitation, the due and punctual payment of all amounts
which may become due and payable to the Company. Guarantor acknowledges and
agrees that, with respect to all obligations to pay money, such guaranty shall
be a guaranty of payment and not of collection. If the Obligors shall default
in the due and punctual performance of any of the Obligations or in the full
and timely payment of any amounts owed pursuant to the Obligations, Guarantor
will promptly cause to be performed such Obligations and will promptly cause
full payment to be made of any amount due with respect thereto at its sole cost
and expense.
(b) Guarantor further guarantees to those officers and directors
of the Company whom the Buyer has agreed will be indemnified and held harmless
pursuant to Section 7.03 of the Agreement the full and complete performance by
the Obligors of each and all of the obligations set forth in said Section 7.03,
including, without limitation, any amounts due and payable to such officers and
directors.
SECTION 2. Guaranty Unconditional. The liabilities and
obligations of Guarantor to the Company pursuant to this Guaranty shall be
unconditional and irrevocable and shall not be conditioned or contingent upon
the pursuit of any remedies against either Obligor or any other person.
<PAGE> 2
SECTION 3. Waivers of the Guarantor. (a) Guarantor hereby
waives any right, whether legal or equitable, statutory or non-statutory, to
require the Company to proceed against or take any action against or pursue any
remedy with respect to the Obligors or any other person or make presentment or
demand for performance or give any notice of nonperformance or pursue any other
remedy in their power whatsoever before the Company may enforce rights against
Guarantor hereunder. The unconditional obligation of Guarantor hereunder will
not be affected, impaired or released by any extension, waiver, amendment or
thing whatsoever which would release a guarantor (other than performance).
This Guaranty shall be construed as a continuing, absolute and unconditional
guaranty of payment without regard to the validity or enforceability of the
Agreement.
(b) Guarantor hereby waives irrevocably any defense other than
payment in full of the indebtedness, including without limitation any defense
based upon or arising by reason of any disability or incapacity of the Obligors
or lack of authority of any officer or director of the Obligors, the
unenforceability of the indebtedness or any part thereof for any cause, or the
cessation for any cause of the liability of the Obligors other than by payment
in full of the indebtedness and any immunity (whether on the basis of
sovereignty or otherwise) from the jurisdiction, attachment or execution to
which it or its property might otherwise be entitled in any action arising out
of or based upon this Guaranty which may be instituted in the courts of the
Republic of Panama, the State of New York, the United States of America, or any
other domestic or foreign jurisdiction.
SECTION 4. Definitions. Terms used herein that are defined in
the Acquisition Agreement are, unless otherwise defined, used herein as therein
defined.
SECTION 5. Representations and Warranties. (a) Corporate
Existence and Power. The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of Switzerland, and has the
requisite corporate powers required to carry on its business as now conducted.
The Guarantor is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect on
the
2
<PAGE> 3
financial condition, business or results of operations of the Guarantor.
(b) Corporate Authorization. The execution, delivery and
performance by the Guarantor of this Guaranty and the consummation by the
Guarantor of the transactions contemplated hereby are within the Guarantor's
corporate powers and have been duly authorized by all necessary corporate
action. This Guaranty has been duly and validly executed and delivered by
Guarantor and constitutes a valid and binding obligation of the Guarantor,
enforceable in accordance with its terms, except as (i) the enforceability
hereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
(c) Governmental Authorization. The execution, delivery and
performance by the Guarantor of this Guaranty require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority other than such filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain would not reasonably be
expected to have a material adverse effect on the financial condition, business
or results of operations of Guarantor.
(d) Non-Contravention. The execution, delivery and performance
by the Guarantor of this Guaranty and the consummation by the Guarantor of the
transactions contemplated hereby do not and will not (i) contravene or conflict
with the certificate of incorporation or bylaws of the Guarantor, (ii) assuming
compliance with the matters referred to in Section 5(c), contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the
Guarantor or any of its subsidiaries or (iii) constitute a default under or
give rise to a right of termination, cancellation or acceleration of any right
or obligation of the Guarantor or to a loss of any benefit to which the
Guarantor is entitled under any provision of any agreement, contract or other
instrument binding upon the Guarantor or any license, franchise, permit or
other similar authorization held by the Guarantor, except such as would not
have a material adverse effect on the business, financial condition or results
of operations of the Guarantor and its subsidiaries, taken as a whole.
SECTION 6. Covenants of Guarantor. (a) Guarantor hereby agrees
to vote any Shares beneficially
3
<PAGE> 4
owned by it, and to cause any Shares beneficially owned by any of its
subsidiaries to be voted, in favor of adoption of the Agreement and the Merger
at the meeting of the Company's stockholders called for that purpose.
SECTION 7. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopier
or similar writing) and shall be given to:
Dr. Felix Amrein
Roche Holding Ltd
Grenzacherstrasse 124
CH - 4002 Basel
Switzerland
Telecopier: 011-41-61-688-1396
with a copy to:
Peter R. Douglas, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Telecopier: (212) 450-4800
or such other address or telecopier number as such party may hereafter specify
for the purpose by notice to the parties to the Agreement. Each such notice,
request or other communication shall be effective (i) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section and the appropriate confirmation is received or (ii) if given by any
other means, when delivered at the address specified in this Section.
SECTION 8. Authorized Agent and Venue. The Guarantor hereby
appoints Davis Polk & Wardwell as its authorized agent upon whom process may be
served in any action or proceeding arising out of or based upon this Guaranty.
Any dispute arising out of this Guaranty or out of any other agreement executed
in connection with the transactions contemplated by this guaranty shall be
brought in any State or Federal court in the State of New York, and, by
execution and delivery of this Guaranty, each of the parties to this Guaranty
accepts for itself the exclusive jurisdiction of such courts and irrevocably
agrees to be bound by any judgment rendered thereby.
SECTION 9. Successors and Assigns. The provisions of this
Guaranty shall be binding upon and inure to the benefit of and enforceable by
the Company and its respective successors and assigns. This Guaranty is
4
<PAGE> 5
intended (i) to be for the benefit of holders of Shares outstanding at the
Effective Time and for the benefit of the officers and directors referred to in
Section 1(b) hereof and (ii) to grant to such holders, officers and directors,
respectively the rights of the Company specified herein.
SECTION 10. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW.
SECTION 11. Attorney's Fees and Costs. In addition to the
amounts guaranteed under this Guaranty, the Guarantor agrees to pay all
reasonable attorneys' fees and all other costs and expenses incurred by the
beneficiaries hereof in enforcing this Guaranty in any action or proceeding
arising out of, or relating to, this Guaranty.
SECTION 12. Nonwaiver of Rights of Obligees. No right or power
of any person under this Guaranty shall be deemed to have been waived by any
act or conduct on the part of such person, or by any neglect to exercise that
right or power, or by any delay in so doing; and every right or power shall
continue in full force and effect until specifically waived or released by an
instrument in writing executed by such person.
SECTION 13. Invalidity. If any provision of this Guaranty
contravenes or is held invalid under the laws of any jurisdiction, this
Guaranty shall be construed as though it did not contain that provision, and
the rights and liabilities of the parties shall be construed and enforced
accordingly.
5
<PAGE> 6
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed as of this 1st day of May 1994.
ROCHE HOLDING LTD
By /s/ Henri B. Meier
-------------------
Name: Henri B. Meier
Title: Vice President
Agreed and Accepted:
SYNTEX CORPORATION
By /s/ Paul E. Freiman
-----------------------
Name: Paul E. Freiman
Title: Chief Executive Officer
6
<PAGE> 1
EXHIBIT 4
---------
SYNTEX CORPORATION
3601 Hillview Avenue, P.O. Box 10850
Palo Alto, California 94383
February 28, 1994
Dr. Henri B. Meier
Roche Holding AG
Schaffhauserrheinweg 125
CK-4002 Basel, Switzerland
Dear Dr. Meier:
To facilitate a possible sale or merger transaction, Syntex Corporation
("Syntex") plans to provide Roche Holding AG ("Roche") with certain highly
confidential and proprietary technical and business information.
In addition, other major corporations, including several in the
pharmaceutical business, recently have been the subject of attempted hostile
takeovers. In light of this activity, and to enable us to work together
candidly and openly, we propose that Syntex and Roche agree as follows:
1. This agreement shall govern the conditions of disclosure by
Syntex to Roche of oral and written confidential technical, marketing and
business information dealing with Syntex's products and business (the
"Information"). In connection therewith, Roche hereby agrees:
(a) not knowingly to use Information except for the sole
purpose of evaluating a possible strategic alliance
or business transaction, and
(b) not knowingly to disclose Information to others (except
to its employees and agents who reasonably require the
same for the sole purpose described herein and who are
bound to it by similar obligations as to
confidentiality) without the express written permission
of Syntex, except that Roche shall not be prevented
from using or disclosing Information that:
<PAGE> 2
(i) Roche can demonstrate by written records
was known to Roche prior to the date of
disclosure hereunder; or
(ii) is developed independently by Roche with-
out the benefit, knowledge or use of any
Information by the individual claiming to
have made such development; or
(iii) is now public knowledge, or becomes public
knowledge in the future other than by
breach of this agreement by Roche; or
(iv) is lawfully disclosed to Roche by a third
party who is not legally obligated to
Syntex to retain such information in con-
fidence.
2. The furnishing of Information to Roche shall not constitute any
grant, option or license to Roche under any patent or other rights now or here-
after held by Syntex.
3. Roche hereby agrees to return to Syntex promptly upon request
any physical materials provided to it hereunder and to destroy any copies
thereof or workpapers derived therefrom.
4. The obligations of Roche under the terms of paragraphs 1, 2 and
3 hereof shall remain in effect for ten (10) years from the date hereof.
5. Commencing on the date hereof and expiring on the tenth
anniversary of the date hereof (the "Standstill Period"), neither party will,
directly or indirectly, acquire any amount of any class of the other's voting
securities, whether in open market purchases or otherwise. During the
Standstill Period, neither party will initiate, or be a member of any group
that initiates, any offer for tenders of voting securities of the other party
that could result in such party's or such group's acquisition of any amount of
any class of the other's voting securities. This paragraph 5 and paragraph 6
shall not apply for any period (measured from the date hereof) longer than the
shortest period for which similar restrictions are imposed by any
confidentiality, standstill or similar agreement between Syntex and another
party with respect to a possible acquisition of Syntex or a business
combination, merger, strategic alliance or similar transaction with Syntex (a
"Transaction") which agreement is entered into
2
<PAGE> 3
on or after November 15, 1993 and before February 28, 1995 (the "Measuring
Period") and pursuant to which Syntex provides information of substantially
similar or greater scope or detail than that provided to Roche hereunder
("Relevant Information"). If, during the Measuring Period, Syntex provides to
another party, in connection with a possible Transaction, Relevant Information
but such Relevant Information is provided on terms materially less restrictive
on such other party than paragraphs 5, 6 and 7, than such terms, to the extent
les restrictive, shall apply to Roche as well. Syntex will promptly inform
Roche in writing of any such change in the period or applicable terms of this
agreement.
6. During the Standstill Period, neither party will present to
the other's shareholders or board of directors any proposal for a merger or
other form of acquisition or consolidation that previously has not been
approved in writing by the offeree's Chief Executive Officer nor, without the
other company's prior consent, solicit proxies or become a "participant" in any
"election context" (as such terms are used in Rule 4a-1 and Rule 14a-11 of
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Act")).
7. Notwithstanding the other provisions of this agreement, Roche
may acquire voting securities of Syntex (not exceeding 2 million shares of
Syntex common stock or the equivalent) in the ordinary course of Roche's
portfolio investment activities provided that any investment decision to
acquire such voting securities is not made by persons who have had access to
any Information or who are aware (other than from public disclosures) of the
transactions contemplated by this agreement.
8. Syntex and Roche each acknowledge that damages would be an
inadequate remedy for the breach of this agreement. Accordingly, each company
may obtain injunctive and other equitable relief, without the necessity of
posting a bond, for any breach or threatened breach of this agreement.
9. This agreement will apply not only to Syntex and Roche, but
also to each of their successors and assigns and to any corporation or other
business entity controlled by, controlling or under common control with, either
of them. References in this agreement to Syntex and Roche include such
successors, assigns, corporations and entities.
3
<PAGE> 4
10. As used in this agreement, the term "group shall have the
meaning ascribed to such term in Section 13(d)(3) of the Act; the terms
"control," "controlling" and "controlled by" shall have the meaning
ascribed to such terms in Section 12b-2 of the Act, and the term "voting
securities" shall mean the common stock of each company and any other
securities having voting power under ordinary circumstances for the election
of directors of each company and any securities convertible into options,
warrants, call, or rights to acquire, any such shares of common stock or such
other securities.
11. Unless otherwise required by law, neither Roche nor Syntex
shall publicly disclose the transactions contemplated by this agreement or the
existence of discussions with respect thereto.
12. This agreement shall be interpreted and enforced in accordance
with the Federal laws of the United States as applicable and the laws of the
State of Delaware (regardless of the choice of law principles of California,
Delaware or any other jurisdiction). Each party submits to jurisdiction in the
State of Delaware for the purposes of enforcing the provisions of this
agreement.
If the foregoing is acceptable to you, please indicate by
signing and returning the enclosed copy of this agreement.
Very truly yours,
SYNTEX CORPORATION
By: /s/ Neil Flanzraich
---------------------
Name: Neil Flanzraich
Title: General Counsel
Accepted and agreed:
ROCHE HOLDING AG
By: /s/ Henri B. Meier
---------------------
Name : Henri B. Meier
Title: Chairman
<PAGE> 1
EXHIBIT 5
5/1 10 pm PDT draft
CONFIDENTIAL
CONTACT;
Kathleen Gary - Syntex Max Gurtner - Roche
(415) 855-5924 41-61-688-5554
Linda Thomas - Syntex
(415) 852-1321
FOR IMMEDIATE RELEASE:
ROCHE TO ACQUIRE SYNTEX;
SYNTEX BOARD UNANIMOUSLY RECOMMENDS CASH OFFER
PALO ALTO, Calif., and BASEL, Switzerland, May 2, 1994/PR
Newswire--Syntex Corporation (NYSE:SYN) and Roche Holding Ltd, Basel announced
today that they have entered into a definitive agreement for the acquisition of
Syntex by a subsidiary of Roche in a transaction in which Syntex shareholders
would receive $24.00 in cash per Syntex common share. The transaction values
Syntex at approximately $5.3 billion in total.
The $24.00 cash price represents a premium of approximately 57 percent
over last Friday's closing price of Syntex stock on the New York Stock
Exchange.
The transaction will be effected by means of a first-step cash tender
offer for all of Syntex's outstanding common stock. The tender offer is
expected to commence on or before May 9 and to remain open for at least 20
business days. The tender offer will be followed by a merger in which
shareholders whose shares are not purchased in the tender offer will receive
$24.00 per share in cash or, at their election, subject to certain
restrictions,
1
<PAGE> 2
shares of a limited conversion preferred stock of a new Syntex holding company.
The new preferred stock will pay dividends annually at a three percent rate and
will be subject to mandatory redemption ten years after issuance. The
preferred stock will be nontransferable, subject to limited exceptions, and
will be exchangeable, on a limited basis, for non-voting equity securities
(NESs) of Roche at a premium of 50 percent over Roche NES closing price on
Friday, April 29.
The tender offer is subject to certain conditions, including that at
least a majority of Syntex shares are tendered and certain regulatory approvals
are obtained.
After receiving the recommendation of a Special Committee of
directors, the Board of Directors of Syntex has approved the merger agreement
and has recommended that stockholders tender their shares in the offer and vote
in favor of the merger. The Board's approval was based on a number of factors,
including the opinion of Goldman, Sachs & Co. that the $24.00 per share in cash
to be received by the holders of Syntex shares in the transactions contemplated
by the agreement is fair.
Mr. Paul Freiman, Syntex Chairman and Chief Executive Officer, said,
"We have spent many months intensively studying the healthcare environment,
evaluating the increasingly competitive marketplace, and analyzing our current
and future prescription pharmaceutical product line. Given the speed of
changes in the industry and a radically different competitive situation, we
ultimately felt the need to align with a strong global partner. We now
strongly believe that the sale of Syntex to Roche would be in the best
interests of our shareholders, our customers and our employees.
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<PAGE> 3
"Roche is truly a global company, with strong operations in major
parts of the world where Syntex has little or no presence, such as South
America, Japan and the Middle East. Roche has a far greater ability to fully
commercialize the compounds in our pipeline that we do. Roche and Syntex have
already successfully cooperated in the U.S., where we have co-promoted
Toradol(R) (ketorolac) since 1990. The proposed combination of our companies
would help us see that patients everywhere have access to the new drugs we have
discovered and are developing," Mr. Freiman said.
Roche Chairman and Chief Executive Officer Mr. Fritz Gerber said,
"Innovative products and critical mass in development, marketing and sales are
key to success in today's competitive environment. Syntex's substantial
ethical business and its leadership in the indication area of pain and
inflammation would ideally complement the pharma portfolio of Roche and add a
further center of excellence to the Roche group."
With Syntex's market share, Roche would move to position six in the
U.S. pharma market and in the world pharma market, it would become number four
in terms of sales.
Syntex is a multinational healthcare company, incorporated in Panama,
that discovers, develops, manufactures and markets prescription pharmaceutical
products, animal health products and medical diagnostic systems. The company
currently has more than 9,000 employees. There are research subsidiaries in
Palo Alto, Calif., Scotland, Mexico, and Japan. Syntex's leading prescription
pharmaceutical products are Naprosyn(R) (naproxen), a nonsteroidal
anti-inflammatory drug to treat inflammation and pain, and Toradol, a
nonsteroidal anti-inflammatory drug for the short-term management of pain.
Syntex's main products also include medicines to treat allergies,
cardiovascular and cerebrovascular diseases. In December 1993,
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Syntex launched its own generic version of naproxen. On the basis of R&D
spending of 19 percent sales, Syntex has built up a pharma pipeline which
offers the chance to enter into indications with a high market potential. The
company currently has in clinical trials compounds being studied for the
prevention and treatment of organ transplant rejection, and for the treatment
of Alzheimer's disease, osteoporosis, and peripheral artery disease, among
others. Total worldwide sales in fiscal 1993 were U.S.$2.1 billion, of which
70 percent were in the United States. Pharmaceutical sales accounted for
approximately 85 percent of Syntex's worldwide sales. Syntex's net income in
fiscal 1993 was U.S.$287 million, after pretax restructuring charges of U.S.
$320 million.
The international Roche Group is a leader in research-based healthcare
with activities in pharmaceuticals (55 percent of total sales), diagnostics,
vitamins and fine chemicals and fragrances and flavors. It has a long
tradition of innovative breakthroughs in drug development and is a pioneer in
pharmaceutical and other applications of gene technology. It has demonstrated
its commitment to this area by the acquisition of a majority stake in the
biotechnology company, Genentech, Inc., South San Francisco, and by the
purchase of exclusive rights to the polymerase chain reaction (PCR) technology,
which has a wide range of potential applications. Roche group sales in 1993
totaled 14.3 billion Swiss francs (approximately U.S.$9.7 billion, at 1993
year-average exchange rate of Sfr 1.48 to one U.S.$), an increase of 11
percent on the previous year. Net income in 1993 amounted to 2.5 billion Swiss
francs (approximately U.S.$1.7 billion) an increase of 29 percent over 1992.
Roche has operated in the United States since the beginning of this
century. The U.S. affiliate, Hoffman-La Roche Inc., based in Nutley, New
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Jersey, employs more than 17,000 people in its activities in pharmaceuticals,
vitamins and fine chemicals and diagnostics, including Roche Biomedical
Laboratories, the third largest clinical service laboratory chain in the United
States. Nutley is also one of the Roche Group's main research centers.
The Roche sub-holding, Givaudan-Roure, with its U.S. headquarters in
Clifton, New Jersey, is well-established in the United States as a major
supplier of fragrances and flavors.
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EXHIBIT 6
May 6, 1994
Dear Fellow Stockholder:
I am pleased to inform you that, on May 1, 1994, Syntex Corporation entered
into an Acquisition Agreement and Plan of Merger with Roche Capital Corporation,
an indirectly wholly owned subsidiary of Roche Holding Ltd, and Roche (Panama)
Corporation, a wholly owned subsidiary of Roche Capital, pursuant to which Roche
Capital has commenced a cash tender offer to purchase all of the outstanding
shares of Syntex common stock for $24.00 per share. Under the Agreement, the
Offer will be followed by a Merger in which any remaining shares of Syntex
common stock will be converted into the right to receive, at the election of the
holder either (i) $24.00 per share in cash or any higher price per share that
may be paid in the Offer, without interest, or (ii) subject to certain
restrictions, 0.024 shares of a new series of limited conversion preferred stock
of Roche Capital.
YOUR BOARD OF DIRECTORS, AFTER RECEIVING THE REPORT AND RECOMMENDATION OF A
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS, HAS DETERMINED BY A UNANIMOUS VOTE
OF THOSE MEMBERS PRESENT THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND
THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT ALL HOLDERS WHO WISH TO RECEIVE CASH
TENDER THEIR SHARES OF SYNTEX COMMON STOCK PURSUANT TO THE OFFER. In addition to
the benefit of this transaction to our stockholders, we believe that the
combination will benefit greatly both companies. The Board of Directors has not,
however, made any recommendation with respect to the election to receive shares
of the limited conversion preferred stock to be issued in connection with the
Merger.
In arriving at their decisions, a Special Committee of the Board of
Directors and the Board of Directors gave careful consideration to a number of
factors described in the attached Schedule 14D-9 that is being filed today with
the Securities and Exchange Commission. Among other things, the Special
Committee retained Goldman, Sachs & Co. to act as financial advisor to the
Company. The Special Committee and the Board of Directors considered the opinion
of Goldman, Sachs & Co. that the cash consideration to be received by the
holders of Syntex common stock in the Offer and the Merger is fair to such
holders.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated May 6, 1994, of Roche Capital, together
with related materials including a Letter of Transmittal to be used for
tendering your shares. These documents set forth the terms and conditions of the
Offer and the Merger and provide instructions as to how to tender your shares. I
urge you to read the enclosed material carefully.
Sincerely,
Paul E. Freiman
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT 7
Goldman, Sachs & Co. -- 85 Broad Street -- New York, New York 10004
Tel: 212-902-1000
PERSONAL AND CONFIDENTIAL
May 1, 1994
Board of Directors
Syntex Corporation
3401 Hillview Avenue
Palo Alto, CA 94304
Madame and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $1 per share (the "Shares"), of
Syntex Corporation (the "Company") of the $24 per Share in cash to be received
by such holders pursuant to the Acquisition Agreement and Plan of Merger dated
as of May 1, 1994 among Roche Capital Corporation ("Buyer") which is an
indirect, wholly-owned subsidiary of Roche Holding Ltd ("Roche"), Roche (Panama)
Corporation ("Merger Subsidiary") which is a wholly-owned subsidiary of Buyer,
and the Company (the "Agreement"). The Agreement provides for a tender offer for
all of the Shares (the "Tender Offer") pursuant to which Buyer will pay $24 per
Share in cash for each Share accepted. Pursuant to the Guaranty dated May 1,
1994, Roche has agreed to guarantee all of the covenants, agreements,
obligations, liabilities, representations and warranties of Buyer and Merger
Subsidiary under the Agreement (the "Guaranty"). The Agreement further provides
that following completion of the Tender Offer, Merger Subsidiary will be merged
with the Company (the "Merger") and each outstanding Share (other than Shares
already owned by Buyer and its subsidiaries) will be converted into the right to
receive $24 in cash or, at the election of the holder, subject to the terms of
the Agreement, will be converted into the right to receive shares of Limited
Conversion Preferred Stock (the "Preferred Stock") of Buyer.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement.
In connection with this opinion, we have reviewed, among other things,
drafts of the Agreement and the Guaranty; Annual Reports to Stockholders and
Annual Reports on Form 10-K of the Company for the five fiscal years ended July
31, 1993; certain interim reports to stockholders and Quarterly Reports on Form
10-Q of the Company; certain other communications from the Company to its
stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management. We also have held discussions with members
of the senior management of the Company regarding its past and current business
operations, financial condition and future prospects. In addition, we have
reviewed the reported price and trading activity for the Shares, compared
certain financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the pharmaceutical industry specifically, and in other industries generally, and
performed such other studies and analyses as we considered appropriate.
<PAGE> 2
Syntex Corporation
May 1, 1994
Page Two
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and we have not been furnished with any such evaluation or
appraisal. In providing our opinion, we are not expressing any view as to the
value of the Preferred Stock or as to the fairness of such stock as
consideration in the Merger.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the $24
per Share in cash to be received by the holders of Shares in the transactions
contemplated by the Agreement is fair to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
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GOLDMAN, SACHS & CO.
