EXHIBIT 2
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Dated as of July 20, 1999
Among
XXXXXXX & XXXXXXX,
ADMIRAL MERGER CORP.
And
CENTOCOR, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
The Merger
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SECTION 1.01. The Merger.................................................. 2
SECTION 1.02. Closing..................................................... 2
SECTION 1.03. Effective Time.............................................. 2
SECTION 1.04. Effects of the Merger....................................... 2
SECTION 1.05. Articles of Incorporation and Bylaws........................ 3
SECTION 1.06. Directors................................................... 3
SECTION 1.07. Officers.................................................... 3
ARTICLE II
Effect of the Merger on the Capital Stock of the
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Constituent Corporations; Exchange of Certificates
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SECTION 2.01. Effect on Capital Stock..................................... 3
SECTION 2.02. Exchange of Certificates.................................... 5
ARTICLE III
Representations and Warranties
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SECTION 3.01. Representations and Warranties of
the Company............................................ 8
SECTION 3.02. Representations and Warranties of Parent
and Sub................................................28
ARTICLE IV
Covenants Relating to Conduct of Business
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SECTION 4.01. Conduct of Business.........................................32
SECTION 4.02. No Solicitation.............................................37
ARTICLE V
Additional Agreements
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SECTION 5.01. Preparation of the Form S-4 and the Proxy
Statement; Shareholders Meeting........................39
SECTION 5.02. Letters of the Company's Accountants........................40
SECTION 5.03. Letters of Parent's Accountants.............................41
SECTION 5.04. Access to Information; Confidentiality......................41
SECTION 5.05. Reasonable Efforts..........................................42
SECTION 5.06. Stock Options...............................................43
SECTION 5.07. Indemnification, Exculpation and
Insurance..............................................45
SECTION 5.08. Fees and Expenses...........................................46
SECTION 5.09. Public Announcements........................................47
SECTION 5.10. Affiliates..................................................47
SECTION 5.11. Stock Exchange Listing......................................48
SECTION 5.12. Pooling of Interests........................................48
SECTION 5.13. Tax Treatment...............................................48
SECTION 5.14. Shareholder Litigation......................................49
SECTION 5.15. Rights Agreement............................................49
SECTION 5.16. Convertible Debentures......................................49
SECTION 5.17. Employee Matters............................................49
ARTICLE VI
Conditions Precedent
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SECTION 6.01. Conditions to Each Party's Obligation to
Effect the Merger......................................51
SECTION 6.02. Conditions to Obligations of Parent
and Sub................................................52
SECTION 6.03. Conditions to Obligation of the Company.....................54
SECTION 6.04. Frustration of Closing Conditions...........................55
ARTICLE VII
Termination, Amendment and Waiver
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SECTION 7.01. Termination.................................................55
SECTION 7.02. Effect of Termination.......................................56
SECTION 7.03. Amendment...................................................57
SECTION 7.04. Extension; Waiver...........................................57
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver....................................57
ARTICLE VIII
General Provisions
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SECTION 8.01. Nonsurvival of Representations
and Warranties.........................................58
SECTION 8.02. Notices.....................................................58
SECTION 8.03. Definitions.................................................59
SECTION 8.04. Interpretation..............................................61
SECTION 8.05. Counterparts................................................61
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries..........................................61
SECTION 8.07. Governing Law...............................................61
SECTION 8.08. Assignment..................................................62
SECTION 8.09. Enforcement.................................................62
SECTION 8.10. Severability................................................62
Annex I Index of Defined Terms
Exhibit A Form of Affiliate Letter
Exhibit B Form of Tax Representation Letter
of Centocor
Exhibit C Form of Tax Representation Letter of
Xxxxxxx & Xxxxxxx
AGREEMENT AND PLAN OF MERGER (this "Agreement")
dated as of July 20, 1999, among XXXXXXX & XXXXXXX, a New
Jersey corporation ("Parent"), ADMIRAL MERGER CORP., a
Pennsylvania corporation and a newly formed, direct, wholly
owned subsidiary of Parent ("Sub"), and CENTOCOR, INC., a
Pennsylvania corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the
Company have approved this Agreement and the merger of Sub with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
in this Agreement, whereby each issued and outstanding share of common stock,
par value $.01 per share, of the Company ("Company Common Stock"), other than
Company Common Stock owned by Parent, Sub or the Company, will be converted into
the right to receive common stock, par value $1.00 per share, of Parent ("Parent
Common Stock");
WHEREAS, immediately following the execution and delivery of this
Agreement, Parent and the Company will enter into a stock option agreement (the
"Option Agreement"), pursuant to which the Company will grant Parent the option
to purchase shares of Company Common Stock, upon the terms and subject to the
conditions set forth therein;
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agree ments in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") and that this
Agreement constitutes a plan of reorganization; and
WHEREAS, for financial accounting purposes, it is intended that the
Merger will be accounted for as a pooling of interests transaction.
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
The Merger
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SECTION 1.01. The Merger. Upon the terms and subject to the
-----------
conditions set forth in this Agreement, and in accordance with the Pennsylvania
Business Corporation Law of 1988, as amended (the "PBCL"), Sub shall be merged
with and into the Company at the Effective Time. Following the Effective Time,
the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the PBCL.
SECTION 1.02. Closing. The closing of the Merger (the "Closing")
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will take place at 10:00 a.m. on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second Business Day after
satisfaction or waiver of the conditions set forth in Article VI (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions), at the offices of
Cravath, Swaine & Xxxxx, Worldwide Plaza, 000 Xxxxxx Xxxxxx, Xxx Xxxx, X.X.
00000, unless another date or place is agreed to in writing by the parties
hereto.
SECTION 1.03. Effective Time. Subject to the provisions of this
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Agreement, as soon as practicable on or after the Closing Date, the parties
shall file articles of merger or other appropriate documents (in any such case,
the "Articles of Merger") executed in accordance with the relevant provisions of
the PBCL and shall make all other filings or recordings required under the PBCL.
The Merger shall become effective at such time as the Articles of Merger are
duly filed with the Department of State of the Commonwealth of Pennsylvania, or
at such other time as Parent and the Company shall agree should be specified in
the Articles of Merger (the time the Merger becomes effective being the
"Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the
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effects set forth in Chapter 19 of the PBCL.
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SECTION 1.05. Articles of Incorporation and Bylaws. (a) The Amended
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and Restated Articles of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub immediately prior to
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the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company immediately
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prior to the Effective Time shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
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Constituent Corporations; Exchange of Certificates
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SECTION 2.01. Effect on Capital Stock. As of the Effective Time, by
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virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
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capital stock of Sub shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. Each share
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of Company Common Stock that is owned by the Company, Parent or Sub shall
automatically be canceled and retired and shall cease to exist, and no
Parent Common Stock or other consideration shall be delivered in exchange
therefor.
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(c) Conversion of Company Common Stock. Subject to Section 2.02(e),
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each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.01(b)) shall be
converted into the right to receive that number of validly issued, fully
paid and nonassessable shares of Parent Common Stock equal to the Exchange
Ratio (the "Merger Consideration"). The "Exchange Ratio" means the
quotient obtained by dividing $61.00 by the Average Closing Price and
rounding to the nearest 1/10,000; provided, that, except as set forth in
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the following proviso, the Exchange Ratio shall not be less than 0.5823 or
greater than 0.7117; and provided, further, that in the event that the
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Average Closing Price (i) is less than $73.07, then the Exchange Ratio
shall mean the quotient obtained by dividing $52.00 by the Average Closing
Price and rounding to the nearest 1/10,000 or (ii) is greater than $118.81,
then the Exchange Ratio shall mean the quotient obtained by dividing $69.18
by the Average Closing Price and rounding to the nearest 1/10,000. The
"Average Closing Price" shall be an amount equal to the average per share
closing price of Parent Common Stock, as reported on the NYSE Composite
Transaction Tape for the 20 trading days ending with the second trading day
immediately preceding the Shareholders Meeting. As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate which immediately prior to the Effective Time
represented any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.02, without interest.
Notwithstanding the foregoing, if between the date of this Agreement and
the Effective Time the outstanding shares of Parent Common Stock shall have
been changed into a different number of shares or a different class, by
reason of the occurrence or record date of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares
or similar transaction, the Exchange Ratio shall be appropriately adjusted
to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange or similar transaction.
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SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As of
------------------------- ---------------
the Effective Time, Parent shall deposit with First Chicago Trust Company of New
York or such other bank or trust company of similar size as may be designated by
Parent (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article II, through
the Exchange Agent, certificates representing the shares of Parent Common Stock
(such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time
and any cash payments in lieu of any fractional shares of Parent Common Stock,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
--------------------
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.01(c), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in surrendering the Certificates in
exchange for certificates representing the Merger Consideration. Upon surrender
of a Certificate for cancelation to the Exchange Agent, together with such
letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II after taking into account
all the shares of Company Common Stock then held by such holder under all such
Certificates so surrendered, cash in lieu of fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.02(e) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.02(c), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a Person
other than the
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Person in whose name the Certificate so surrendered is registered, if, upon
presentation to the Exchange Agent, such Certificate shall be properly endorsed
or otherwise be in proper form for transfer and the Person requesting such
issuance shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a Person other than the registered
holder of such Certificate or establish to the reasonable satisfaction of Parent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, cash in lieu of any fractional shares of
Parent Common Stock as contemplated by Section 2.02(e) and any dividends or
other distributions to which such holder is entitled pursuant to Section
2.02(c). No interest will be paid or will accrue on any cash payable to holders
of Certificates pursuant to Sections 2.02(c) or 2.02(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends
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or other distributions with respect to Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.02(e) until the holder of record of such
Certificate shall surrender such Certificate in accordance with this Article II.
Subject to the effect of applicable escheat or similar laws, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificate representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and a payment
date subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
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of Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to Section 2.02(c) or 2.02(e)) shall be deemed to
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have been issued (and paid) in full satisfaction of all rights pertaining to the
shares of Company Common Stock previously represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay any
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dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
---------------------
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of Parent.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of Parent
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount,
less the amount of any withholding taxes which may be required thereon, equal to
such fractional part of a share of Parent Common Stock multiplied by the per
share closing price of Parent Common Stock on the Closing Date, as such price is
reported on the New York Stock Exchange, Inc. (the "NYSE") Composite
Transactions Tape (as reported by The Wall Street Journal (Northeast edition),
-----------------------
or, if not reported thereby, any other authoritative source).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
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which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for, and Parent shall remain liable for,
payment of their claim for Merger Consideration, any cash in lieu of fractional
8
shares of Parent Common Stock and any dividends or distributions with respect to
Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange
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Agent shall be liable to any Person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash in lieu of
fractional shares of Parent Common Stock or cash from the Exchange Fund, in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
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cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent.
(i) Lost Certificates. If any Certificate shall have been lost,
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stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and any cash in lieu of fractional shares,
and unpaid dividends and distributions on shares of Parent Common Stock
deliverable in respect thereof, in each case pursuant to this Agreement.
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Representations and Warranties of the Company. Except
--------------------------------- ------------
as disclosed in the Filed SEC Documents or as set forth on the disclosure
schedule delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
-------------------------------------------
and its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is
organized and has all requisite corporate power and authority to carry on
its business as now being conducted. Each of the Company and its
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Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure
to be so qualified or licensed individually or in the aggregate is not
reasonably likely to have a Material Adverse Effect. The Company has made
available to Parent prior to the execution of this Agreement complete and
correct copies of its Amended and Restated Articles of Incorporation (the
"Amended and Restated Articles of Incorporation") and Bylaws (the
"Bylaws"), and the comparable organizational documents of each of its
Subsidiaries, in each case as amended to the date hereof.
(b) Subsidiaries. Exhibit 21 to the Company's Annual Report on Form
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10-K for the fiscal year ended December 31, 1998 lists all the Subsidiaries
of the Company. All the outstanding shares of capital stock of, or other
equity interests in, each such Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by the
Company free and clear of all Liens, and free of any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests.
(c) Capital Structure. The authorized capital stock of the Company
------------------
consists of 100,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $.01 per share ("Preferred Stock"). At
the close of business on June 30, 1999, (i) 70,966,331 shares of Company
Common Stock were issued and outstanding, (ii) no shares of Company Common
Stock were held by the Company in its treasury, (iii) 7,977,199 shares of
Company Common Stock were reserved for issuance pursuant to outstanding
Company Stock Plans (of which 5,534,761 shares of Company Common Stock are
subject to outstanding Stock Options (no more than 2,173,250 of such shares
include limited stock appreciation rights)), (iv) 9,338,015 shares of
Company Common Stock were reserved for issuance upon conversion of the
Company's 4 3/4% Convertible Subordinated Debentures due 2005 (the
"Convertible Debentures"), (v) no shares of Preferred Stock were issued or
outstanding, (vi) 2,000,000 shares of Series A Preferred Stock were
reserved for issuance in connection with the Rights issued pursuant to the
Rights Agreement and (vii) 618,492 shares of Company Common Stock were
reserved for issuance under the
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Company's 1983 Restricted Common Stock Award Plan. Except as set forth
above in this Section 3.01(c), at the close of business on June 30, 1999,
no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. Except as set forth above in
this Section 3.01(c) and pursuant to the Option Agreement, there are no
outstanding stock appreciation rights or rights to receive shares of
Company Common Stock on a deferred basis granted under the Company Stock
Plans or otherwise. All outstanding shares of capital stock of the Company
are, and all shares which may be issued pursuant to the Company Stock Plans
will be, when issued in accordance with the terms thereof, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth above in this Section 3.01(c) or on the Company
Disclosure Letter or as disclosed in the Filed SEC Documents, there are no
bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which shareholders of the Company may
vote. Except as set forth above in this Section 3.01(c) or resulting from
the issuance of shares of Company Common Stock pursuant to Stock Options
outstanding as of the date hereof or the Option Agreement, (x) there are
not issued, reserved for issuance or outstanding (A) any shares of capital
stock or other voting securities of the Company, (B) any securities of the
Company convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company, (C) any warrants, calls,
options or other rights to acquire from the Company or any Company
Subsidiary, and no obligation of the Company or any Company Subsidiary to
issue, any capital stock, voting securities or securities convertible into
or exchangeable or exercisable for capital stock or voting securities of
the Company and (y) there are not any outstanding obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be
issued, delivered or sold, any such securities. The Company is not a party
to any voting agreement with respect to the voting of any such securities.
Except as set forth in this Section 3.01(c) or on the Company Disclosure
Schedule or as disclosed in the Filed SEC Documents, there are no
outstanding (A) securities of the Company or any Company Subsidiary
convertible into or exchangeable or exercisable for shares of capital stock
or other voting
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securities or ownership interests in any Company Subsidiary, (B) warrants,
calls, options or other rights to acquire from the Company or any Company
Subsidiary, and no obligation of the Company or any Company Subsidiary to
issue, any capital stock, voting securities or other ownership interests
in, or any securities convertible into or exchangeable or exercisable for
any capital stock, voting securities or ownership interests in, any Company
Subsidiary or (C) obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Company Subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities.
(d) Authority; Noncontravention. The Company has the requisite
----------------------------
corporate power and authority to enter into this Agreement and, subject to
receipt of the Shareholder Approval, to consummate the transactions
contemplated by this Agreement. The Company has all requisite corporate
power and authority to enter into the Option Agreement and to consummate
the transactions contemplated thereby. The execution and delivery of this
Agreement and the Option Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement and the
Option Agreement have been duly authorized by all necessary corporate
action on the part of the Company and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or the Option
Agreement or to consummate the transactions contemplated hereby and
thereby, subject, in the case of the Merger, to receipt of the Shareholder
Approval. This Agreement and the Option Agreement have been duly executed
and delivered by the Company and, assuming the due authorization, execution
and delivery by each of the other parties thereto, constitute legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms. Except as disclosed on the Company Disclosure
Schedule, the execution and delivery of this Agreement and the Option
Agreement do not, and the consummation of the Merger and the other
transactions contemplated by this Agreement and the Option Agreement and
compliance with the provisions of this Agreement and the Option Agreement
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancelation or acceleration of any obligation or to loss of a
benefit under, or result in the creation of any pledge, claim, lien,
charge,
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encumbrance or security interest of any kind or nature whatsoever
(collectively, "Liens") in or upon any of the properties or assets of the
Company under, (i) the Amended and Restated Articles of Incorporation or
Bylaws of the Company or the comparable organizational documents of any of
its Subsidiaries, (ii) any loan or credit agreement, bond, note, mortgage,
indenture, lease or other contract, agreement, obligation, commitment,
arrangement, understanding, instrument, permit or license applicable to the
Company or any of its Subsidiaries or their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to
in the following sentence, any (A) statute, law, ordinance, rule or
regulation or (B) judgment, order or decree, in each case applicable to the
Company or any of its Subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights or Liens that individually or in
the aggregate are not reasonably likely to have a Material Adverse Effect.
No consent, approval, order or authorization of, action by or in respect
of, or registration, declaration or filing with, any Federal, state, local
or foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental self-
regulatory agency, commission or authority (each, a "Governmental Entity")
is required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the Option
Agreement by the Company or the consummation by the Company of the Merger
or the other transactions contemplated by this Agreement or the Option
Agreement, except for (1) the filing of a premerger notification and report
form by the Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and any applicable filings and
approvals under similar foreign antitrust laws and regulations, (2) the
filing with the Securities and Exchange Commission (the "SEC") of (A) a
proxy statement relating to the adoption by the Company's shareholders of
this Agreement (as amended or supplemented from time to time, the "Proxy
Statement") and (B) such reports under Section 13(a), 13(d), 15(d) or 16(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement, the Option Agreement and
the transactions contemplated by this Agreement or the Option Agreement,
(3) the filing of the Articles of Merger with the Department of State of
the Commonwealth of Pennsylvania and appropriate documents with the
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relevant authorities of other states in which the Company is qualified to
do business and such filings with Governmental Entities to satisfy the
applicable requirements of state securities or "blue sky" laws, (4) such
filings with and approvals of The Nasdaq National Market (the "Nasdaq") to
permit the shares of Company Common Stock that are to be issued pursuant to
the Option Agreement to be traded on Nasdaq and (5) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made individually or in the
aggregate is not reasonably likely to have a Material Adverse Effect.
(e) SEC Documents. The Company has filed all reports, schedules,
--------------
forms, statements and other documents (including exhibits and other
information incorporated therein) with the SEC required to be filed by the
Company since January 1, 1998 (the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except to
the extent that information contained in any SEC Document has been revised
or superseded by a later-filed SEC Document, none of the SEC Documents
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in
the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their
14
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Except (i)
as set forth on the Company Disclosure Schedule, (ii) as set forth in the
most recent financial statements included in the Filed SEC Documents or
(iii) for liabilities incurred in connection with this Agreement or the
Option Agreement, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect.
(f) Information Supplied. None of the information to be supplied by
---------------------
the Company specifically for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of Parent Common Stock in the Merger (the
"Form S-4") will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are
made, not misleading or (ii) the Proxy Statement will, at the date it is
first mailed to the Company's shareholders and at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, except that no representation
or warranty is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent
or Sub specifically for inclusion or incorporation by reference in the
Proxy Statement.
(g) Absence of Certain Changes or Events. Except for liabilities
-------------------------------------
incurred in connection with this Agreement or the Option Agreement and
except as disclosed in the SEC Documents filed by the Company and publicly
available prior to the date of this Agreement (the "Filed SEC Documents"),
since the date of the most recent Filed SEC Document, the Company and its
Subsidiaries have conducted their business only in the ordinary course
consistent with past practice, and except as otherwise provided in the
Company Disclosure
15
Schedule, there has not been (i) any Material Adverse Change, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of
the Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (iv) (w) any granting by the
Company or any of its Subsidiaries to any current or former director,
executive officer or other key employee of the Company or any of its
Subsidiaries of any increase in compensation, bonus or other benefits,
except for normal increases in cash compensation in the ordinary course of
business consistent with past practice or as was required under employment
agreements in effect as of the date of the most recent Filed SEC Document,
(x) any granting by the Company or any of its Subsidiaries to any such
current or former director, executive officer or other key employee of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of
the most recent Filed SEC Document, (y) any entry by the Company or any of
its Subsidiaries into, or any amendment of, any employment, deferred
compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, executive officer or
key employee or (z) any amendment to, or modification of, any Stock Option,
(v) any damage, destruction or loss, whether or not covered by insurance,
that individually or in the aggregate is reasonably likely to have a
Material Adverse Effect, (vi) any change in accounting methods, principles
or practices by the Company materially affecting its assets, liabilities or
businesses, except insofar as may have been required by a change in GAAP,
or (vii) any tax election that individually or in the aggregate is
reasonably likely to have a Material Adverse Effect on the Company or any
of its tax attributes or any settlement or compromise of any material
income tax liability.
(h) Litigation. Except as disclosed in the Filed SEC Documents,
-----------
there is no suit, action or proceeding pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its
Subsidiaries that individually or in the aggregate is reasonably likely to
have a Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or
16
order of any Governmental Entity or arbitrator outstanding against, or, to
the Knowledge of the Company, investigation by any Governmental Entity
involving, the Company or any of its Subsidiaries that individually or in
the aggregate is reasonably likely to have a Material Adverse Effect.
(i) Contracts. Except as disclosed in the Filed SEC Documents, there
----------
are no contracts or agreements that are of a nature required to be filed as
an exhibit to a report or filing under the Securities Act or the Exchange
Act and the rules and regulations promulgated thereunder. Neither the
Company nor any of its Subsidiaries is in violation of or in default under
(nor does there exist any condition which upon the passage of time or the
giving of notice or both would cause such a violation of or default under)
any loan or credit agreement, bond, note, mortgage, indenture, lease or
other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit or license to which it is a party or by
which it or any of its properties or assets is bound, except for violations
or defaults that individually or in the aggregate are not reasonably likely
to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has entered into any material contract, agreement obligation,
commitment, arrangement or understanding with any Affiliate of the Company
that is currently in effect other than agreements that are disclosed in the
Filed SEC Documents. Except as set forth on the Company Disclosure
Schedule or as disclosed in the Filed SEC Documents, neither the Company
nor any of its Subsidiaries is a party to or otherwise bound by any
agreement or covenant not to compete or by any agreement or covenant
restricting in any material respect the development, marketing or
distribution of the Company's or its Subsidiaries' products or services.
(j) Compliance with Laws. (i) Each of the Company and its
---------------------
Subsidiaries is in compliance with all statutes, laws, ordinances, rules,
regulations, judgments, orders and decrees of any Governmental Entity
(collectively, "Legal Provisions") applicable to its business or
operations, except for instances of possible noncompliance that
individually or in the aggregate are not reasonably likely to have a
Material Adverse Effect. Each of the Company and its Subsidiaries has in
effect all approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights of or with all
17
Governmental Entities, including all authorizations under Environmental
Laws ("Permits"), necessary for it to own, lease or operate its properties
and assets and to carry on its business and operations as now conducted,
except for the failure to have such Permits that individually or in the
aggregate is not reasonably likely to have a Material Adverse Effect.
There has occurred no default under, or violation of, any such Permit,
except for defaults under, or violations of, Permits that individually or
in the aggregate are not reasonably likely to have a Material Adverse
Effect. The Merger, in and of itself, would not cause the revocation or
cancelation of any such Permit that individually or in the aggregate is
reasonably likely to have a Material Adverse Effect. No action, demand,
requirement or investigation by any Governmental Entity and no suit, action
or proceeding by any Person, in each case with respect to the Company or
any of its Subsidiaries or any of their respective properties, is pending
or, to the Knowledge of the Company, threatened, other than, in each case,
those the outcome of which individually or in the aggregate are not
reasonably likely to have a Material Adverse Effect.
(ii) Except for those matters disclosed in the Filed SEC Documents or
those matters that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect: (A) each of the Company and its
Subsidiaries is, and has been, in compliance with all applicable
Environmental Laws; (B) during the period of ownership or operation by the
Company or its Subsidiaries of any of its currently or previously owned,
leased or operated properties, there have been no Releases or threatened
Releases of Hazardous Material in, on, under or affecting such properties
or any surrounding site; (C) prior to the period of ownership or operation
by the Company or its Subsidiaries of any of its currently or previously
owned, leased or operated properties, to the Knowledge of the Company, no
Hazardous Material was generated, treated, stored, disposed of, used,
handled or manufactured at, or transported or disposed of at or from, such
properties, and there were no Releases of Hazardous Material in, on, under
or affecting any such property or any surrounding site; and (D) neither the
Company nor its Subsidiaries have received any written notice of, or
entered into or assumed by contract or operation of law any indemnification
obligation, order, settlement or decree relating to: (1) any violation of
any Environmental Laws or the institution or pendency of any suit, action,
claim, proceeding or investigation
18
by any Governmental Entity or any third party in connection with any
alleged violation of Environmental Laws, (2) the response to or remediation
of Hazardous Material at or arising from any of the Company's or its
Subsidiaries' properties or any other properties or (3) payment for any
response action relating to or remediation of Hazardous Material at or
arising from any of the Company's or its Subsidiaries' properties or any
other properties. The term "Environmental Laws" means any Federal, state
or local, domestic or foreign, statute, law (including common law),
ordinance, rule, regulation, Permit, consent, approval, license, judgment,
order, decree or injunction relating to pollution or the protection of the
environment or to human health or safety, including the Release (as defined
in 42 U.S.C. (S) 9601(22)), threat of Release, generation, treatment,
handling, storage, transport, disposal of or exposure to any Hazardous
Materials. The term "Hazardous Material" means any pollutant, contaminant,
hazardous, radioactive or toxic substance, material or waste (including
petroleum, crude oil and any by-products and fractions thereof, asbestos,
asbestos-containing material, medical or infectious waste) subject to
regulation under any Environmental Law.
(k) Absence of Changes in Benefit Plans; Labor Relations. Except as
------------------------------------------ ----------
set forth on the Company Disclosure Schedule or as disclosed in the Filed
SEC Documents, since the date of the most recent audited financial
statements included in the Filed SEC Documents, there has not been any
adoption or amendment in any material respect by the Company or any of its
Subsidiaries of any collective bargaining agreement or any employment,
bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical, welfare benefit or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former officer, director or employee of the Company or any of
its Subsidiaries (collectively, the "Benefit Plans"), or any material
change in any actuarial or other assumption used to calculate funding
obligations with respect to any Pension Plans, or any change in the manner
in which contributions to any Pension Plans are made or the basis on which
such contributions are determined. Except as disclosed in the Filed SEC
Documents, there exist no currently binding employment, consulting,
severance, termination or indemnification
19
agreements, arrangements or understandings between the Company or its
Subsidiaries and any current or former officer, director or employee of the
Company or its Subsidiaries. There are no collective bargaining or other
labor union agreements to which the Company or its Subsidiaries is a party
or by which it is bound. Since January 1, 1998, neither the Company nor
any of its Subsidiaries have encountered any labor union organizing
activity, nor had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts.
(l) ERISA Compliance. (i) Section 3.01(l)(i) of the Company
-----------------
Disclosure Schedule contains a list of all "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA) and all other Benefit Plans maintained, or contributed to, by the
Company, its Subsidiaries or any Person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code (a "Commonly Controlled Entity") for the benefit of any
current or former officers, directors or employees of the Company and its
Subsidiaries (including any such plans maintained for current or former
foreign employees). The Company has made available to Parent true,
complete and correct copies of (1) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof), (2) the most recent
annual report on Form 5500 required to be filed with the Internal Revenue
Service (the "IRS") with respect to each Benefit Plan (if any such report
was required), (3) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required and (4)
each trust agreement and group annuity contract relating to any Benefit
Plan. Each Benefit Plan maintained or contributed to by the Company or any
of its Subsidiaries has been administered in all material respects in
accordance with its terms. The Company, its Subsidiaries and all the
Benefit Plans maintained or contributed to by the Company or any of its
Subsidiaries are all in compliance in all material respects with the
applicable provisions of ERISA, the Code and all other applicable laws,
including laws of foreign jurisdictions.
(ii) All Pension Plans maintained or contributed to by the Company or
any of its Subsidiaries intended
20
to be tax-qualified have been the subject of determination letters from the
IRS to the effect that such Pension Plans are qualified and exempt from
United States Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been
revoked nor has any event occurred since the date of its most recent
determination letter or application therefor that would adversely affect
its qualification or materially increase its costs. All Pension Plans
maintained or contributed to by the Company or any of its Subsidiaries
required to have been approved by any foreign Governmental Entity have been
so approved and no such approval has been revoked nor has any event
occurred since the date of its most recent approval or application therefor
that would materially affect its approval or materially increase its costs.
(iii) Neither the Company nor any Commonly Controlled Entity has (1)
maintained, contributed or been obligated to contribute to any Benefit Plan
that is subject to Title IV of ERISA or (2) has any unsatisfied liability
under Title IV of ERISA.
(iv) With respect to any Benefit Plan maintained or contributed to by
the Company or any of its Subsidiaries that is an employee welfare benefit
plan, there are no understandings, agreements or undertakings, written or
oral, that would prevent any such plan (including any such plan covering
retirees or other former employees) from being amended or terminated
without material liability to the Company on or at any time after the
Effective Time.
(v) Section 3.01(l)(v) of the Company Disclosure Schedule lists all
Stock Options outstanding as of June 30, 1999, showing for each such
option: (1) the number of shares of Company Common Stock issuable, (2) the
number of vested shares, (3) the date of expiration and (4) the exercise
price.
(vi) Section 3.01(l)(vi) of the Company Disclosure Schedule lists all
benefit or compensation plans, programs or policies which provide for any
additional compensation or benefits or any acceleration of the time of
payment or vesting of any compensation or benefits under any Benefit Plan
maintained or contributed to by the Company or any of its Subsidiaries as a
result of the transactions contemplated by this Agreement or the Option
Agreement.
21
(m) Taxes. The Company and each of its Subsidiaries have timely
------
filed all tax returns and reports required to be filed by it and have
timely paid all taxes required to be paid by it, and all such returns and
reports are complete and correct in all material respects, or requests for
extensions to file such returns or reports have been timely filed, granted
and have not expired, except to the extent that such failures to file, to
pay or to have extensions granted that remain in effect individually or in
the aggregate are not reasonably likely to have a Material Adverse Effect,
and the most recent financial statements contained in the Filed SEC
Documents reflect an adequate reserve for all material taxes payable by the
Company and its Subsidiaries for all taxable periods and portions thereof
through the date of such financial statements. No deficiencies for any
material taxes have been proposed, asserted or assessed against the Company
or its Subsidiaries, and no requests for waivers of the time to assess any
such taxes are pending. The Federal income tax returns of the Company and
each of its Subsidiaries consolidated in such returns have not been
examined by the IRS. All assessments for taxes due with respect to any
concluded litigation have been fully paid or have been adequately reserved
on the Company's financial statements in accordance with GAAP. Neither the
Company nor any of its Affiliates has taken or agreed to take any action or
knows of any fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code. The Benefit Plans and other Company employee
compensation arrangements in effect as of the date of this Agreement have
been designed so that the disallowance of a deduction under Section 162(m)
of the Code for employee remuneration will not apply to any material
amounts paid or payable by the Company or any of its Subsidiaries under any
such plan or arrangement and, to the Knowledge of the Company, no fact or
circumstance exists that is reasonably likely to cause such disallowance to
apply to any such amounts. Neither the Company nor any of its Subsidiaries
has constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (x) in the two years prior to the date of this Agreement or (y)
in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of
the Code) in conjunction with the
22
Merger. As used in this Agreement, "taxes" shall include all Federal,
state and local, domestic and foreign, income, property, sales, excise and
other taxes, tariffs or governmental charges of any nature whatsoever,
including any interest, penalties or additions with respect thereto.
(n) No Excess Parachute Payments. No amount that could be received
-----------------------------
by (whether in cash or property or the vesting of property), or benefit
provided to, any officer, director or employee of the Company or any of its
Affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or
Benefit Plan currently in effect would be an "excess parachute payment" (as
such term is defined in Section 280G(b)(1) of the Code). No such Person is
entitled to receive any additional payment from the Company, the Surviving
Corporation or any other Person (a "Parachute Gross Up Payment") in the
event that the excise tax of Section 4999(a) of the Code is imposed on such
Person. The Board of Directors of the Company has not granted to any
officer, director or employee of the Company or any of its Subsidiaries any
right to receive any Parachute Gross Up Payment. Section 3.01(n) of the
Company Disclosure Schedule sets forth the "base amount" (as such term is
defined in Section 280G(b)(3) of the Code) for each disqualified individual
(defined as set forth above) whose Stock Options will vest pursuant to
their terms in connection with this Agreement or the Merger.
(o) Title to Properties. (i) Each of the Company and its
--------------------
Subsidiaries has good and marketable title to, or valid leasehold interests
in, all its material properties and assets except for such as are no longer
used or useful in the conduct of its businesses or as have been disposed of
in the ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances that individually
or in the aggregate would not materially interfere with its ability to
conduct its business as currently conducted. All such material assets and
properties, other than assets and properties in which the Company or any of
its Subsidiaries has a leasehold interest, are free and clear of all Liens,
except for Liens that individually or in the aggregate would not materially
interfere with the ability of the Company and its Subsidiaries to
23
conduct their respective businesses as currently conducted.
(ii) Each of the Company and its Subsidiaries has complied in all
material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full
force and effect, except for such noncompliance or failure to be in full
force and effect that individually or in the aggregate is not reasonably
likely to have a Material Adverse Effect. Each of the Company and its
Subsidiaries enjoys peaceful and undisturbed possession under all such
material leases, except for failures to do so that individually or in the
aggregate are not reasonably likely to have a Material Adverse Effect.
(p) Intellectual Property. Each of the Company and its Subsidiaries
----------------------
owns, or is validly licensed or otherwise has the right to use (without any
obligation to make any fixed or contingent payments, including royalty
payments) all patents, patent applications, trademarks, trademark rights,
trade names, trade name rights, service marks, service xxxx rights,
copyrights and other proprietary intellectual property rights and computer
programs (collectively, "Intellectual Property Rights") which are material
to the conduct of the business of the Company and its Subsidiaries taken as
a whole. Section 3.01(p) of the Company Disclosure Schedule sets forth, as
of the date hereof, a list of patents, trademarks and applications therefor
owned by or licensed to the Company or any of its Subsidiaries, including
all patents, trademarks and applications therefor that are material to the
conduct of the business of the Company and its Subsidiaries taken as a
whole. Except as set forth on the Company Disclosure Schedule, no claims
are pending or, to the Knowledge of the Company, threatened that the
Company or any of its Subsidiaries is infringing the rights of any Person
with regard to any Intellectual Property Right which would be reasonably
expected to have a Material Adverse Effect. To the Knowledge of the
Company, no Person is infringing the rights of the Company or any of its
Subsidiaries with respect to any Intellectual Property Right which would be
reasonably expected to have a Material Adverse Effect. Except as
previously disclosed in the Filed SEC Documents or in the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
licensed, or otherwise granted, to any third party any rights in or to any
Intellectual
24
Property Rights which would reasonably be expected to have a Material
Adverse Effect.
(q) Voting Requirements. The affirmative vote of a majority of the
--------------------
votes cast by all holders of the outstanding shares of Company Common Stock
entitled to vote thereon at the Shareholders Meeting or any adjournment or
postponement thereof to adopt this Agreement (the "Shareholder Approval")
is the only vote of the holders of any class or series of the Company's
capital stock necessary to adopt this Agreement and approve the
transactions contemplated hereby.
(r) State Takeover Statutes. The Board of Directors of the Company
------------------------
has approved the terms of this Agreement and the Option Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Option Agreement, and such approval represents all the
action necessary to render inapplicable to this Agreement, the Option
Agreement, the Merger and the other transactions contemplated by this
Agreement and the Option Agreement, the provisions of Subchapters D
(Section 2538), E, F, G, H, I and J of Chapter 25 of the PBCL to the
extent, if any, such Subchapters would otherwise be applicable to this
Agreement, the Option Agreement, the Merger and the other transactions
contemplated by this Agreement and the Option Agreement. No other state
takeover statute or similar statute or regulation applies to or purports to
apply to this Agreement, the Option Agreement, the Merger or the other
transactions contemplated by this Agreement or the Option Agreement.
(s) Brokers. No broker, investment banker, financial advisor or
--------
other Person, other than Xxxxxx Xxxxxxx & Co., Inc., the fees and expenses
of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement and the
Option Agreement based upon arrangements made by or on behalf of the
Company. The Company has delivered to Parent true and complete copies of
all agreements under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of the
Persons to whom such fees are payable.
(t) Opinion of Financial Advisor. The Company has received the
-----------------------------
opinion of Xxxxxx Xxxxxxx & Co., Inc. dated the date hereof, to the effect
that, as of such
25
date, the Merger Consideration is fair from a financial point of view to
the holders of shares of Company Common Stock, a signed copy of which
opinion has been or will promptly be delivered to Parent.
(u) Accounting Matters. Neither the Company nor any of its
-------------------
Affiliates has taken or agreed to take any action that would prevent Parent
from accounting for the business combination to be effected by the Merger
as a pooling of interests.
(v) Distribution and Manufacturing Agreements. The Company has made
------------------------------------------
available to Parent all material contracts or agreements to which the
Company or any of its Subsidiaries is a party relating to the distribution,
sale, license, marketing or manufacturing by third parties of the Company's
or its Subsidiaries' products or products licensed by the Company or its
Subsidiaries. The Company has made available to Parent true and correct
copies of all such contracts and agreements.
(w) Rights Agreement. The Company has taken all actions necessary to
-----------------
cause the Rights Agreement dated as of September 26, 1998, between the
Company and BankBoston, N.A., as rights agent (the "Rights Agreement") to
be amended to (i) render the Rights Agreement inapplicable to this
Agreement, the Option Agreement, the Merger and the other transactions
contemplated by this Agreement and the Option Agreement, (ii) ensure that
(y) none of Parent, Sub or any other Subsidiary of Parent is an Acquiring
Person (as defined in the Rights Agreement) pursuant to the Rights
Agreement solely by virtue of the execution of this Agreement and the
Option Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement and the Option Agreement and
(z) a Distribution Date, a Triggering Event or a Stock Acquisition Date (as
such terms are defined in the Rights Agreement) does not occur solely by
reason of the execution of this Agreement and the Option Agreement, the
consummation of the Merger or the consummation of the other transactions
contemplated by this Agreement and the Option Agreement and (iii) provide
that the Final Expiration Date (as defined in the Rights Agreement) shall
occur immediately prior to the Effective Time.
(x) Supply. To the Knowledge of the Company, there are no
-------
circumstances or facts concerning third party suppliers of active
ingredients, bulk product and
26
finished product to the Company or any of its Subsidiaries that would have
a Material Adverse Effect.
(y) Regulatory Compliance. (i) As to each product subject to the
----------------------
jurisdiction of the U.S. Food and Drug Administration ("FDA") under the
Federal Food, Drug and Cosmetic Act and the regulations thereunder ("FDCA")
(each such product, a "Pharmaceutical Product") that is manufactured,
tested, distributed and/or marketed by the Company or any of its
Subsidiaries, such Pharmaceutical Product is being manufactured, tested,
distributed and/or marketed in substantial compliance with all applicable
requirements under FDCA and similar Legal Provisions, including those
relating to investigational use, premarket clearance, good manufacturing
practices, labeling, advertising, record keeping, filing of reports and
security, except where the failure to be in compliance is not reasonably
likely to have a Material Adverse Effect. Except as disclosed in the Filed
SEC Documents or in the Company Disclosure Schedule, neither the Company
nor its Subsidiaries has received any notice or other communication from
the FDA or any other Governmental Entity (A) contesting the premarket
clearance or approval of, the uses of or the labeling and promotion of any
of the Company's or its Subsidiaries' products or (B) otherwise alleging
any violation of any Legal Provision by the Company or its Subsidiaries
which would reasonably be expected to have a Material Adverse Effect.
(ii) No Pharmaceutical Products have been recalled, withdrawn,
suspended or discontinued by the Company or any of its Subsidiaries in the
United States or outside the United States (whether voluntarily or
otherwise) since January 1, 1998. No proceedings in the United States and
outside of the United States of which the Company has Knowledge (whether
completed or pending) seeking the recall, withdrawal, suspension or seizure
of any Pharmaceutical Product are pending against the Company or any of its
Subsidiaries, nor have any such proceedings been pending at any time since
January 1, 1998 which would reasonably be expected to have a Material
Adverse Effect.
(iii) As to each biological or drug of the Company or its Subsidiaries
for which a biological license application, new drug application,
investigational new drug application or similar state or foreign regulatory
application has been approved, the Company and its Subsidiaries are in
substantial
27
compliance with 21 U.S.C. (S)(S) 355 or 21 C.F.R. Parts 312, 314, or 430
et seq., respectively, and similar Legal Provisions and all terms and
-- ----
conditions of such applications, except where the failure to be in
compliance is not reasonably likely to have a Material Adverse Effect. As
to each such drug, the Company and any relevant Subsidiary, and the
officers, employees or agents of the Company or such Subsidiary have
included in the application for such drug, where required, the
certification described in 21 U.S.C. (S) 335a(k)(1) or any similar Legal
Provision and the list described in 21 U.S.C. (S) 335a(k)(2) or any similar
Legal Provision, and such certification and such list was in each case true
and accurate when made and remained true and accurate thereafter, except in
the case where the failure of such application to be true and accurate
would not reasonably be expected to have a Material Adverse Effect. In
addition, the Company and its Subsidiaries are in substantial compliance
with all applicable registration and listing requirements set forth in 21
U.S.C. (S) 360 and 21 C.F.R. Part 207 and all similar Legal Provisions.
(iv) Each article of any biological or drug manufactured and/or
distributed by the Company or any of its Subsidiaries is not adulterated
within the meaning of 21 U.S.C. (S) 351 (or similar Legal Provisions) or
misbranded within the meaning of 21 U.S.C. (S) 352 (or similar Legal
Provisions), and is not a product that is in violation of 21 U.S.C. (S) 355
(or similar Legal Provisions), except where such failure in compliance with
the foregoing would not reasonably be expected to have a Material Adverse
Effect.
(v) Neither the Company, nor any Subsidiary, nor any officer, employee
or agent of either the Company or any Subsidiary has made an untrue
statement of a material fact or fraudulent statement to the FDA or other
Governmental Entity, failed to disclose a material fact required to be
disclosed to the FDA or any other Governmental Entity, or committed an act,
made a statement, or failed to make a statement that, at the time such
disclosure was made, could reasonably be expected to provide a basis for
the FDA or any other Governmental Entity to invoke its policy respecting
"Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities", set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any
similar policy. Neither the Company nor any Subsidiary, nor any officer,
employee or agent of either the Company or any Subsidiary, has been
convicted of any crime or engaged
28
in any conduct for which debarment is mandated by 21 U.S.C. (S) 335a(a) or
any similar Legal Provision or authorized by 21 U.S.C. (S) 335a(b) or any
similar Legal Provision.
(vi) Except as disclosed in the Filed SEC Documents, neither the
Company nor any Subsidiary has received any written notice that the FDA or
any other Governmental Entity has commenced, or threatened to initiate, any
action to withdraw its approval or request the recall of any product of the
Company or any Subsidiary, or commenced, or overtly threatened to initiate,
any action to enjoin production at any facility of the Company or any
Subsidiary which would reasonably be expected to have a Material Adverse
Effect.
SECTION 3.02. Representations and Warranties of Parent and Sub.
-------------------------------------------------
Except as set forth on the disclosure schedule delivered by Parent to the
Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule"), Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
-------------------------------------------
Sub is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated and has all
requisite corporate power and authority to carry on its business as now
being conducted. Each of Parent and Sub is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
individually or in the aggregate is not reasonably likely to have a
material adverse effect on Parent. Parent has made available to the
Company complete and correct copies of its Restated Certificate of
Incorporation and Bylaws and the Articles of Incorporation and Bylaws of
Sub, in each case as amended to the date hereof.
(b) Authority; Noncontravention. Each of Parent and Sub has all
----------------------------
requisite corporate power and authority to enter into this Agreement (and,
in the case of Parent, the Option Agreement), and to consummate the
transactions contemplated by this Agreement (and, in the case of Parent,
those contemplated by the Option Agreement). The execution and delivery of
this
29
Agreement (and, in the case of Parent, the Option Agreement) and the
consummation of the transactions contemplated by this Agreement (and, in
the case of Parent, those contemplated by the Option Agreement) have been
duly authorized by all necessary corporate action on the part of Parent and
Sub and no other corporate proceedings on the part of Parent or Sub are
necessary to authorize this Agreement (and, in the case of Parent, the
Option Agreement) or to consummate the transactions contemplated hereby
(or, in the case of Parent, those contemplated by the Option Agreement).
This Agreement (and, in the case of Parent, the Option Agreement) has been
duly executed and delivered by Parent and Sub, as applicable, and, assuming
the due authorization, execution and delivery by each of the other parties
thereto, constitute legal, valid and binding obligations of Parent and Sub,
as applicable, enforceable against Parent and Sub, as applicable, in
accordance with its terms. The execution and delivery of this Agreement
and the Option Agreement do not, and the consummation of the Merger and the
other transactions contemplated by this Agreement and the Option Agreement
and compliance with the provisions of this Agreement and the Option
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancelation or acceleration of any
obligation or to loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Parent or Sub under (i) the
Restated Certificate of Incorporation or Bylaws of Parent or the Articles
of Incorporation or Bylaws of Sub, (ii) any loan or credit agreement, bond,
note, mortgage, indenture, lease or other contract, agreement, obligation,
commitment, arrangement, understanding, instrument, permit or license
applicable to Parent or Sub or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any (A) statute, law, ordinance, rule or regulation
or (B) judgment, order or decree, in each case applicable to Parent or Sub
or their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate are not reasonably likely to
have a material adverse effect on Parent. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration
or filings with, any Governmental Entity is required by or with respect to
Parent or Sub in connection with the
30
execution and delivery of this Agreement by Parent and Sub (and, in the
case of Parent, the Option Agreement) or the consummation by Parent and Sub
of the Merger or the other transactions contemplated by this Agreement
(and, in the case of Parent, those contemplated by the Option Agreement),
except for (1) the filing of a premerger notification and report form under
the HSR Act and any applicable filings and approvals under similar foreign
antitrust laws and regulations, (2) the filing with the SEC of (A) the Form
S-4 and (B) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Exchange Act as may be required in connection with this Agreement or the
Option Agreement and the transactions contemplated by this Agreement or the
Option Agreement, (3) the filing of the Articles of Merger with the
Department of State of the Commonwealth of Pennsylvania and appropriate
documents with the relevant authorities of other states in which the
Company is qualified to do business and such filings with Governmental
Entities to satisfy the applicable requirements of state securities or
"blue sky" laws, (4) filings with the NYSE and (5) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made individually or in the
aggregate, is not reasonably likely to have a material adverse effect on
Parent.
(c) Parent SEC Documents. Parent has filed all reports, schedules,
---------------------
forms, statements and other documents (including exhibits and other
information incorporated therein) with the SEC required to be filed by
Parent since December 30, 1997 (the "Parent SEC Documents"). As of their
respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Documents, and none of the Parent
SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) Information Supplied. None of the information supplied or to be
---------------------
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit
31
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
are made, not misleading, or (ii) the Proxy Statement will, at the date it
is first mailed to the Company's shareholders and at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Form S-4 will comply as to
form in all material respects with the requirements of the Securities Act
and the rules and regulations thereunder, except that no representation or
warranty is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference in the
Form S-4.
(e) Accounting Matters. Neither Parent nor any of its Affiliates has
-------------------
taken or agreed to take any action that would prevent Parent from
accounting for the business combination to be effected by the Merger as a
pooling of interests.
(f) Tax Matters. Neither Parent, Sub nor any Affiliate of Parent has
------------
taken or agreed to take any action or knows of any fact or circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(g) Interim Operations of Sub. Sub was formed solely for the purpose
--------------------------
of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
(h) Parent Shareholder Approval. This Agreement and the transactions
----------------------------
contemplated hereby, including the issuance of shares of Parent Common
Stock pursuant to Article II hereof, does not require the approval of the
holders of Parent Common Stock.
(i) Parent Common Stock. All outstanding shares of Parent Common
--------------------
Stock are, and all shares of Parent Common Stock which may be issued
pursuant to this Agreement shall be when issued duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
32
(j) PBCL Section 258. Other than by reason of this Agreement or the
-----------------
transactions contemplated hereby, neither Parent nor Sub is an "interested
shareholder" (as defined in Section 258 of the PBCL) of the Company.
(k) Brokers. No broker, investment banker, financial advisor or
--------
other Person, other than X. X. Xxxxxx & Co. Inc., the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's,
financial advisors or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
ARTICLE IV
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
-------------------- --------------------------
Company. During the period from the date of this Agreement to the Effective
--------
Time, the Company shall, and shall cause its Subsidiaries to, carry on their
respective businesses in the ordinary course consistent with past practice and
in compliance with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable efforts to preserve intact its current
business organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them with the
intention that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, the Company shall
not, and shall not permit any of its Subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property), in respect of, any of
its capital stock, other than dividends or distributions by a direct or
indirect wholly owned Subsidiary of the Company to its parent, (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
33
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities (other than (x) the issuance of shares of Company Common Stock
upon the exercise of Stock Options outstanding on the date hereof and in
accordance with their terms on the date hereof or (y) the issuance of
shares of Company Common Stock pursuant to the Option Agreement), or any
"phantom" stock, "phantom" stock rights, stock appreciation rights or stock
based performance units;
(iii) amend its Amended and Restated Articles of Incorporation or
Bylaws or other comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing assets of, or by any other manner, any Person or division,
business or equity interest of any Person or (y) any assets which,
individually, are in excess of $1,000,000, except for purchases of raw
materials or supplies in the ordinary course of business consistent with
past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets (including
securitizations), except sales of inventory in the ordinary course of
business consistent with past practice;
(vi) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, guarantee any debt securities of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice or (y) make any loans, advances or capital contributions to, or
investments in, any other Person, other than in the ordinary course of
business or to or in any direct or indirect wholly owned Subsidiary of the
Company;
(vii) except for projects already approved, make or agree to make any
new capital expenditure or
34
expenditures (including leases and in-licenses), or enter into any
agreement or agreements providing for payments which, individually, are in
excess of $1,000,000;
(viii) (w) pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities disclosed,
reflected or reserved against in the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Filed SEC
Documents or incurred since the date of such financial statements in the
ordinary course of business consistent with past practice, (x) cancel any
indebtedness, (y) waive or assign any claims or rights of substantial value
or (z) waive any benefits of, or agree to modify in any respect (A) any
standstill or similar agreements to which the Company or any of its
Subsidiaries is a party or (B) other than in the ordinary course of
business, any confidentiality or similar agreements to which the Company or
any of its Subsidiaries is a party;
(ix) (A) except in the ordinary course of business consistent with
past practice, modify, amend or terminate any material contract or
agreement to which the Company or any of its Subsidiaries is a party or (B)
modify, amend or terminate the Sales and Distribution Agreement between the
Company and Xxx Xxxxx and Company dated July 15, 1992, as amended, or the
Distribution Agreement by and between the Company and Schering-Plough, Ltd.
dated as of April 3, 1998;
(x) enter into any contracts, agreements, binding arrangements or
understandings relating to the distribution, sale, license, marketing or
manufacturing by third parties of the Company's or its Subsidiaries'
products or products licensed by the Company or its Subsidiaries, other
than pursuant to any such contracts, agreements, arrangements or
understandings currently in place (that have been disclosed in writing to
Parent prior to the date hereof) in accordance with their terms as of the
date hereof;
(xi) except as otherwise contemplated by this Agreement or as required
to comply with applicable law, (A) adopt, enter into, terminate or amend in
any material respect (I) any collective bargaining
35
agreement or Benefit Plan or (II) any other agreement, plan or policy
involving the Company or its Subsidiaries, and one or more of its current
or former directors, officers or employees, (B) increase in any manner the
compensation, bonus or fringe or other benefits of, or pay any bonus to,
any current or former officer, director or employee (except for normal
increases of cash compensation or cash bonuses in the ordinary course of
business consistent with past practice that, in the aggregate, do not
materially increase benefits or compensation expenses of the Company or its
Subsidiaries), (C) pay any benefit or amount not required under any Benefit
Plan or any other benefit plan or arrangement of the Company or its
Subsidiaries as in effect on the date of this Agreement, (D) increase in
any manner the severance or termination pay of any current or former
director, officer or employee, (E) enter into or amend any employment,
deferred compensation, consulting, severance, termination or
indemnification agreement, arrangement or understanding with any current or
former employee, officer or director, (F) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Benefit
Plan (including the grant of stock options, "phantom" stock, stock
appreciation rights, "phantom" stock rights stock based or stock related
awards, performance units or restricted stock or the removal of existing
restrictions in any Benefit Plans or agreements or awards made thereunder),
(G) amend or modify any Stock Option, (H) take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Benefit Plan, (I) take any
action to accelerate the vesting of payment of any compensation or benefit
under any Benefit Plan or (J) materially change any actuarial or other
assumption used to calculate funding obligations with respect to any
Pension Plan or change the manner in which contributions to any Pension
Plan are made or the basis on which such contributions are determined;
(xii) except as otherwise contemplated by this Agreement, enter into
any agreement of a nature that would be required to be filed as an exhibit
to Form 10-K under the Exchange Act, other than contracts for the sale of
the Company's or its Subsidiaries' products in the ordinary course of
business;
(xiii) except as required by GAAP, make any change in accounting
methods, principles or practices;
36
(xiv) transfer or license to any Person or otherwise extend, amend or
modify any rights to the Intellectual Property Rights of the Company and
its Subsidiaries; or
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not
--------------
permit any of their respective Subsidiaries to, take any action that would, or
that could reasonably be expected to, result in (i) any of the representations
and warranties of such party set forth in this Agreement or the Option Agreement
that are qualified by materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Merger set forth in
Article VI not being satisfied.
(c) Advice of Changes. The Company and Parent shall promptly advise
-----------------
the other party orally and in writing of (i) any representation or warranty made
by it (and, in the case of Parent, made by Sub) contained in this Agreement or
the Option Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation of warranty that is not so
qualified becoming untrue or inaccurate in any material respect or (ii) the
failure of it (and, in the case of Parent, by Sub) to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or the Option Agreement; provided, however,
-------- -------
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement or the Option
Agreement.
(d) Certain Tax Matters. From the date hereof until the Effective
--------------------
Time, (i) the Company and its Subsidiaries will file all material tax returns
and reports ("Post-Signing Returns") required to be filed by it (after taking
into account any extensions); (ii) the Company and its Subsidiaries will timely
pay all material taxes due and payable with respect to such Post-Signing Returns
that are so filed; (iii) the Company and its Subsidiaries will make provision
for all material taxes payable by the Company or such Subsidiary for which no
Post-Signing Return is due prior to the Effective Time; (iv) the Company will
promptly notify Parent of any action, suit, proceeding, claim or audit
(collectively, "Actions") pending against or with
37
respect to the Company or its Subsidiaries in respect of any tax where there is
a reasonable possibility of a determination or decision which is reasonably
likely to have a Material Adverse Effect on the Company's tax liabilities or tax
attributes and will not settle or compromise any such Action without Parent's
prior written consent; and (v) the Company and its Subsidiaries will not make
any material tax election without Parent's prior written consent.
SECTION 4.02. No Solicitation. (a) The Company shall not, nor shall
----------------
it authorize or permit any of its Subsidiaries, any of their respective
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other advisor or representative retained by it or its
Subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
action designed to facilitate, any inquiries or the making of a proposal which
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(ii) participate in any discussions or negotiations regarding any Takeover
Proposal; provided, however, that if, at any time after 6 months from the date
-------- -------
hereof, the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that failure to do so would result in a
reasonable likelihood of a failure to discharge its fiduciary duties under
applicable law, the Company may, in response to a Superior Proposal that was
unsolicited or that did not otherwise result from a breach of this Section
4.02(a), and subject to providing prompt written notice of its decision to take
such action to Parent (the "Company Notice") and compliance with Section
4.02(c), (x) furnish information with respect to the Company to the Person
making the Superior Proposal pursuant to a customary and reasonable
confidentiality agreement and (y) participate in discussions or negotiations
regarding such Superior Proposal.
(b) Neither the Company, nor the Board of Directors of the Company
nor any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Parent or Sub, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Merger. Neither the Company, nor the Board of Directors of the
Company nor any committee thereof shall at any time prior to the date that is 6
months after the date hereof, without the prior written consent of Parent in its
sole discretion, (i) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
an "Acquisition Agreement") related to any Xxxxxxxx
00
Xxxxxxxx, (xx) approve or recommend, or propose publicly to approve or
recommend, any Takeover Proposal or (iii) (x) redeem the Rights, (y) waive or
amend any provisions of the Rights Agreement or (z) take any action with respect
to, or make any determination under, the Rights Agreement, in any such case to
permit or facilitate the consummation of a Takeover Proposal. Notwithstanding
the foregoing, at any time after 6 months from the date hereof, in response to a
Superior Proposal which was not solicited by the Company and which did not
otherwise result from a breach of Section 4.02(a), the Board of Directors of the
Company may (subject to this sentence and the definition of the term "Superior
Proposal") terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Acquisition
Agreement with respect to any Superior Proposal), but only at a time that is
after 6 months from the date hereof and is after the fifth Business Day
following Parent's receipt of written notice advising Parent that the Board of
Directors of the Company is prepared to accept a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company promptly shall advise
Parent orally and in writing of any request for information or of any Takeover
Proposal, or any inquiry with respect to or which could lead to any Takeover
Proposal, the material terms and conditions of such request, Takeover Proposal
or inquiry, and the identity of the Person making any such request, Takeover
Proposal or inquiry. The Company will keep Parent informed of the status and
details (including amendments or proposed amendments) of any such request,
Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.02 shall prohibit the Company
from (x) taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or (y) making any disclosure to
the Company's shareholders if, in the good faith judgment of the majority of the
members of the Board of Directors of the Company, after consultation with
outside counsel, failure to so disclose would constitute a violation of the
Federal securities laws or result in a reasonable likelihood that the Board of
Directors of the Company would breach its fiduciary duty to the Company under
applicable law; provided, however, that neither the Company nor its Board of
-------- -------
Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its
39
position with respect to this Agreement or the Merger or approve or recommend,
or propose publicly to approve or recommend, a Takeover Proposal (it being
understood that disclosure by the Company of its receipt of a Takeover Proposal
or its determination that a Takeover Proposal is a Superior Proposal shall not
constitute a withdrawal or modification of such position or an approval or
recommendation of such Takeover Proposal).
ARTICLE V
Additional Agreements
---------------------
SECTION 5.01. Preparation of the Form S-4 and the Proxy Statement;
----------------------------------- ----------------
Shareholders Meeting. (a) As soon as practicable following the date of this
---------------------
Agreement, the Company and Parent shall prepare and the Company shall file with
the SEC the Proxy Statement and Parent shall prepare and file with the SEC the
Form S-4, in which the Proxy Statement will be included as a prospectus. Each
of the Company and Parent shall use its reasonable efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use its reasonable efforts to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. Parent shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger and the
Company shall furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Proxy Statement. No
filing of, or amendment or supplement to, the Form S-4 will be made by Parent,
or the Proxy Statement will be made by the Company, without providing the other
party the opportunity to review and comment thereon. Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective, the issuance of any stop order, the suspension of the
qualification of Parent Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for amendment of
the Form S-4 or comments thereon and responses thereto or requests by the SEC
for additional information. The Company will advise Parent, promptly after it
receives notice thereof, of any request by the SEC for amendment of the Proxy
Statement or
40
comments thereon and responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time any information
relating to the Company or Parent, or any of their respective Affiliates,
officers or directors, should be discovered by the Company or Parent which
should be set forth in an amendment or supplement to any of the Form S-4 or the
Proxy Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the shareholders of the Company.
(b) The Company will, as soon as reasonably practicable, establish a
record date following the date of this Agreement for, duly call, give notice of,
convene and hold a meeting of its shareholders (the "Shareholders Meeting") for
the purpose of obtaining the Shareholder Approval. The Company will, through
its Board of Directors, recommend to its shareholders adoption of this
Agreement. Without limiting the generality of the foregoing, the Company agrees
that its obligations pursuant to the first and second sentences of this Section
5.01(b) shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company of any Takeover Proposal.
SECTION 5.02. Letters of the Company's Accountants. (a) The Company
-------------------------------------
shall use its reasonable efforts to cause to be delivered to Parent two letters
from KPMG LLP, the Company's independent public accountants, one dated a date
within two Business Days before the date on which the Form S-4 shall become
effective and one dated a date within two Business Days before the Closing Date,
each addressed to Parent, in form and substance reasonably satisfactory to
Parent and customary in scope and substance for comfort letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
(b) The Company shall use its reasonable efforts to cause to be
delivered to Parent a letter from KPMG LLP, addressed to Parent and the Company,
dated as of the Closing Date, stating that (i) KPMG LLP concurs with the Company
management's conclusion that, subject to customary qualifications, the Company
meets the requirements to be a party to a pooling of interests transaction for
financial
41
reporting purposes under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations and (ii) the basis for such a concurrence
is KPMG LLP's belief that the criteria for such accounting treatment have been
met.
SECTION 5.03. Letters of Parent's Accountants. (a) Parent shall use
--------------------------------
its reasonable efforts to cause to be delivered to the Company two letters from
PricewaterhouseCoopers LLP, Parent's independent public accountants, one dated a
date within two Business Days before the date on which the Form S-4 shall become
effective and one dated a date within two Business Days before the Closing Date,
each addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for comfort letters delivered
by independent public accountants in connection with registration statements
similar to the Form S-4.
(b) Parent shall use its reasonable efforts to cause to be delivered
to the Company a letter from PricewaterhouseCoopers LLP, addressed to the
Company and Parent, dated as of the Closing Date, stating that (i)
PricewaterhouseCoopers LLP concurs with Parent's management's conclusion that,
subject to customary qualifications, the Merger qualifies for pooling of
interests treatment for financial reporting purposes under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations and (ii)
the basis for such a concurrence is PricewaterhouseCoopers LLP's belief that the
criteria for such accounting treatment have been met.
SECTION 5.04. Access to Information; Confidentiality. (a) Subject
---------------------------------------
to the Confidentiality Agreement dated as of March 19, 1999, between Parent and
the Company (as it may be amended from time to time, the "Confidentiality
Agreement"), the Company shall afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisors and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time or the termination of this Agreement to all its properties,
books, contracts, commitments, personnel and records and, during such period,
the Company shall furnish promptly to Parent (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of United States Federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as Parent may reasonably request. Except as required by law, Parent
will hold, and will cause its officers, employees, accountants, counsel,
financial
42
advisors and other representatives and Affiliates to hold, any nonpublic
information received from the Company, directly or indirectly, in accordance
with the Confidentiality Agreement.
(b) Subject to the Confidentiality Agreement, Parent agrees to
provide to the Company, from time to time prior to the date on which Shareholder
Approval is obtained, such information as the Company shall reasonably request
to evaluate Parent and its business, financial condition, operations and
prospects. Except as provided by law, the Company will hold, and will cause its
officers and employees to hold, any nonpublic information received from Parent,
directly or indirectly, in accordance with the Confidentiality Agreement.
SECTION 5.05. Reasonable Efforts. Upon the terms and subject to the
-------------------
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement and the Option Agreement, including using
reasonable efforts to accomplish the following: (i) the taking of all reasonable
acts necessary to cause the conditions to Closing to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by any Governmental Entity,
(iii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iv) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the Option Agreement
or the consummation of the transactions contemplated hereby or thereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (v) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement and the
Option Agreement. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall (1) take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the Option Agreement, the Merger or any of
43
the other transactions contemplated by this Agreement and the Option Agreement
and (2) if any state takeover statute or similar statute becomes applicable to
this Agreement, the Option Agreement, the Merger or any other transactions
contemplated by this Agreement or the Option Agreement, take all action
necessary to ensure that the Merger and the other transactions contemplated by
this Agreement and the Option Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and the Option Agreement
and otherwise to minimize the effect of such statute or regulation on this
Agreement, the Option Agreement, the Merger and the other transactions
contemplated by this Agreement and the Option Agreement. Nothing in this
Agreement shall be deemed to require Parent to agree to, or proffer to, divest
or hold separate any assets or any portion of any business of Parent, the
Company or any of their respective Subsidiaries.
SECTION 5.06. Stock Options. (a) As soon as practicable following
--------------
the date of this Agreement, the Board of Directors of the Company (or, if
appropriate, any committee administering the Company Stock Plans) shall adopt
such resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding options to purchase shares of
Company Common Stock (the "Stock Options") granted under any plan or
arrangement providing for the grant of options to purchase shares of
Company Common Stock to current or former officers, directors, employees or
consultants of the Company or its Subsidiaries (the "Company Stock Plans"),
whether vested or unvested, as necessary to provide that, at the Effective
Time, each Stock Option outstanding immediately prior to the Effective Time
shall be amended and converted into an option to acquire, on the same terms
and conditions as were applicable under the Stock Option, the number of
shares of Parent Common Stock (rounded down to the nearest whole share)
determined by multiplying the number of shares of Company Common Stock
subject to such Stock Option by the Exchange Ratio, at a price per share of
Parent Common Stock equal to (A) the aggregate exercise price for the
shares of Company Common Stock otherwise purchasable pursuant to such Stock
Option divided by (B) the aggregate number of shares of Parent Common Stock
deemed purchasable pursuant to such Stock Option (each, as so adjusted, an
"Adjusted Option"); provided that such exercise price shall be rounded up
--------
to the nearest whole cent; and
44
(ii) make such other changes to the Company Stock Plans as Parent and
the Company may agree are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any Stock Options
that are "incentive stock options" as defined in Section 422 of the Code shall
be and are intended to be effected in a manner which is consistent with Section
424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the
need of any further corporate action, Parent shall assume the Company Stock
Plans, with the result that all obligations of the Company under the Company
Stock Plans, including with respect to Stock Options outstanding at the
Effective Time, shall be obligations of Parent following the Effective
Time. Prior to the Effective Time, Parent shall take all necessary actions
(including, if required to comply with Section 162(m) of the Code (and the
regulations thereunder) or applicable law or rule of the NYSE, obtaining the
approval of its shareholders at the next regularly scheduled annual meeting of
Parent following the Effective Time) for the assumption of the Company Stock
Plans, including the reservation, issuance and listing of Parent Common Stock in
a number at least equal to the number of shares of Parent Common Stock that will
be subject to the Adjusted Options.
(d) As soon as practicable following the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of Parent Common Stock equal to
the number of shares subject to the Adjusted Options. Such registration
statement shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) at least for so long as any
Adjusted Options or any unsettled awards granted under the Company Stock Plans
after the Effective Time, may remain outstanding.
(e) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Company Stock Plans and the
agreements evidencing the grants of such Stock Options and that such Stock
Options and agreements shall be assumed by Parent and shall continue in effect
on the same terms and conditions (subject to the adjustments required by this
Section 5.06 after giving effect to the Merger).
45
(f) A holder of an Adjusted Option may exercise such Adjusted Option
in whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to Parent, together with the consideration therefor
and the United States Federal withholding tax information, if any, required in
accordance with the related Company Stock Plan.
(g) Except as otherwise contemplated by this Section 5.06 and except
to the extent required under the respective terms of the Stock Options, all
restrictions or limitations on transfer and vesting with respect to Stock
Options awarded under the Company Stock Plans or any other plan, program or
arrangement of the Company or any of its Subsidiaries, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by Parent as set forth above.
SECTION 5.07. Indemnification, Exculpation and Insurance.
-------------------------------------------
(a) Parent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
now existing in favor of the current or former directors or officers of the
Company as provided in the Amended and Restated Articles of Incorporation, the
Bylaws or any indemnification agreement between such directors or officers and
the Company (in each case, as in effect on the date hereof) shall be assumed by
the Surviving Corporation in the Merger, without further action, as of the
Effective Time and shall survive the Merger and shall continue in full force and
effect in accordance with their terms.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, Parent shall
cause proper provision to be made so that the successors and assigns of the
Surviving Corporation shall expressly assume the obligations set forth in this
Section 5.07. In the event the Surviving Corporation transfers any material
portion of its assets, in a single transaction or in a series of transactions,
Parent will either guarantee the indemnification obligations referred to in
Section 5.07(a) or take such other action to insure that the ability of the
Surviving Corporation, legal and financial, to satisfy such indemnification
obligations will not be diminished in any material respect.
46
(c) For six years after the Effective Time, Parent shall maintain in
effect the Company's current officers' and directors' liability insurance in
respect of acts or omissions occurring at or prior to the Effective Time,
covering each Person currently covered by the Company's officers' and directors'
liability insurance policy (a copy of which has been heretofore delivered to
Parent), on terms with respect to such coverage and amount no less favorable
than those of such policy in effect on the date hereof; provided that Parent may
--------
substitute therefor policies of Parent containing terms with respect to coverage
and amount no less favorable to such directors and officers; provided, however,
-------- -------
that in satisfying its obligation under this Section 5.07(c) Parent shall not be
obligated to pay premiums in excess of 200% of the amount per annum paid by the
Company in its last full fiscal year; and provided further that Parent shall
-------- -------
nevertheless be obligated to provide such coverage as may be obtained for such
200% amount.
(d) The provisions of this Section 5.07 (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such Person may have by contract or otherwise.
SECTION 5.08. Fees and Expenses. (a) Except as provided below, all
------------------
fees and expenses incurred in connection with this Agreement, the Option
Agreement, the Merger and the other transactions contemplated by this Agreement
and the Option Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except that each of Parent
and the Company shall bear and pay one-half of (i) the costs and expenses
incurred in connection with filing, printing and mailing the Proxy Statement and
the Form S-4 and (ii) the filing fees for the premerger notification and report
forms under the HSR Act and any similar foreign antitrust laws.
(b) In the event that (1) a bona fide Takeover Proposal shall have
been publicly disclosed or has been made directly to the Company's shareholders
or any Person has announced an intention (whether or not conditional) to make a
bona fide Takeover Proposal and thereafter this Agreement is terminated by
either Parent or the Company pursuant to Section 7.01(b)(i) or 7.01(b)(iii) or
(2) this Agreement is terminated (x) by the Company pursuant to Section 7.01(f)
or (y) by Parent pursuant to Section 7.01(e), then the Company shall promptly,
but in no event later than the date of such
47
termination, pay Parent a fee equal to $125 million (the "Termination Fee"),
payable by wire transfer of same day funds; provided, however, that no
-------- -------
Termination Fee shall be payable to Parent pursuant to a termination by Parent
pursuant to clause (1) of this paragraph (b) unless and until within 12 months
after such termination the Company enters into any Acquisition Agreement with
respect to, or consummates, any Takeover Proposal, in which event the
Termination Fee shall be payable upon the first to occur of such events. The
Company acknowledges that the agreements contained in this Section 5.08(b) are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement.
(c) The Company acknowledges and agrees that in the event of a breach
of Section 4.02, the payment of the Termination Fee shall not constitute the
exclusive remedies available to Parent and Sub, and that Parent and Sub shall be
entitled to the remedies set forth in Section 8.09, including injunction and
specific performance, and all other remedies available at law or in equity to
which Parent or Sub are entitled.
SECTION 5.09. Public Announcements. Parent and the Company will
---------------------
consult with each other before issuing, and give each other the opportunity to
review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the Merger
and the Option Agreement, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement and the Option
Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.10. Affiliates. (a) As soon as practicable after the date
-----------
hereof, the Company shall deliver to Parent a letter identifying all Persons who
are at the time this Agreement is submitted for adoption by the shareholders of
the Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act or for purposes of qualifying the Merger for pooling of interests
accounting treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations. The Company shall use its reasonable
efforts to cause each such Person to deliver to Parent at least 30 days prior to
48
the Closing Date a written agreement substantially in the form attached as
Exhibit A hereto.
(b) Parent shall use reasonable efforts to cause all Persons who are,
in Parent's reasonable judgment, "affiliates" of Parent for purposes of
qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations to comply with the fourth paragraph of Exhibit A hereto.
SECTION 5.11. Stock Exchange Listing. To the extent Parent does not
-----------------------
issue treasury shares in the Merger which are already listed, Parent shall use
its reasonable efforts to cause the shares of Parent Common Stock to be issued
in the Merger to be approved for listing on the NYSE, subject to official notice
of issuance, prior to the Closing Date. The Company shall use its reasonable
efforts to cause the shares of Company Common Stock to be issued pursuant to the
Option Agreement to be approved for quotation on Nasdaq, as promptly as
practicable after the date hereof, and in any event prior to the earlier of (x)
the Closing Date or (y) termination of this Agreement under circumstances where
the Option issued pursuant to the Option Agreement is or may become exercisable
by Parent.
SECTION 5.12. Pooling of Interests. Each of the Company and Parent
---------------------
will use reasonable efforts to cause the Merger to be accounted for as a pooling
of interests under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations, and such accounting treatment to be accepted by each
of the Company's and Parent's independent public accountants, and by the SEC,
respectively (including the amendment of the Company Stock Plans set forth on
Section 5.12(a) of the Company Disclosure Schedule to eliminate, subject to
consummation of the Merger, any limited stock appreciation rights outstanding
thereunder and the amendment of employee severance agreements of the Company or
any of its Subsidiaries as set forth on Section 5.12(b) of the Company
Disclosure Schedule), and each of the Company and Parent agrees that it will
voluntarily take no action that would cause such accounting treatment not to be
obtained.
SECTION 5.13. Tax Treatment. Each of Parent and the Company shall
--------------
use reasonable efforts to cause the Merger to qualify as a reorganization within
the meaning of Section 368(a) of the Code and to obtain the opinion of counsel
referred to in Section 6.03(c), including by executing the letters of
representation referred to therein.
49
SECTION 5.14. Shareholder Litigation. The Company shall give Parent
-----------------------
the opportunity to participate, on an advisory basis, in the defense of any
shareholder litigation against the Company and/or its directors relating to the
transactions contemplated by this Agreement or the Option Agreement.
SECTION 5.15. Rights Agreement. The Board of Directors of the
-----------------
Company shall take all further action (in addition to that referred to in
Section 3.01(w)) requested in writing by Parent in order to render the rights
(the "Rights") issued pursuant to the Rights Agreement to purchase Series A
Preferred Stock of the Company, inapplicable to the Merger and the other
transactions contemplated by this Agreement and the Option Agreement. Except as
provided above with respect to the Merger and the other transactions
contemplated by this Agreement and the Option Agreement, the Board of Directors
of the Company shall not, without the prior written consent of Parent, (a) amend
the Rights Agreement or (b) take any action with respect to, or make any
determination under, the Rights Agreement, including a redemption of the Rights
or any action to facilitate a Takeover Proposal.
SECTION 5.16. Convertible Debentures. (a) The Company shall
-----------------------
deliver, or shall cause to be delivered, in accordance with the terms of the
Indenture dated as of February 20, 1998 (the "Indenture"), between the Company
and United States Trust Company of New York, as trustee (the "Trustee"),
relating to the Convertible Debentures, to the Trustee and to each
Debentureholder (as defined in the Indenture) as promptly as possible after the
date hereof but in no event less than 15 days prior to the Effective Time, the
notice required by Section 15.10 of the Indenture.
(b) The Company shall, as promptly as possible after the Effective
Time, execute a supplemental indenture to the Indenture, that shall give effect
to the provisions of Sections 3.5(e) and 15.6 of the Indenture. The Company
shall cause notice of the execution of such supplemental indenture to be mailed
to each Debentureholder within 20 days after the execution thereof in accordance
with the terms of Section 15.6 of the Indenture.
(c) The Company shall take all such further actions as may be
necessary to comply with all of the terms and conditions of the Indenture.
SECTION 5.17. Employee Matters. (a) For a period of no less than
-----------------
one year after the Effective Time, Parent shall provide, or cause to be
provided, employee
50
pension and welfare benefits and fringe benefits set forth on Section 5.17(a) of
the Company Disclosure Schedule to employees of the Company or its Subsidiaries
that are not materially less favorable in the aggregate than the benefits
provided to such employees by the Company and its Subsidiaries immediately
before the Effective Time.
(b) Neither the Company nor its Subsidiaries shall take any action on
or prior to the Effective Time in relation to any contract or understanding with
any European-based employees that could result in any liability for redundancy
or unfair dismissal as of the Effective Time.
(c) The Company and its Subsidiaries shall comply with all
obligations to notify and consult with recognized employee representatives in
connection with the transactions contemplated by this Agreement.
(d) Prior to the Effective Time, the Company shall take all such
steps as may be required to cause the transactions contemplated by Section 5.06
and any other dispositions of Company equity securities (including derivative
securities) in connection with this Agreement or the transactions contemplated
hereby by each individual who is a director or officer of the Company, to be
exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to be
taken in accordance with the interpretive letter dated January 12, 1999, issued
by the SEC to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP.
(e) With respect to any benefit plan for which Parent or its
Subsidiaries file a Form 5500 and with respect to Parent's vacation program,
Parent shall, and shall cause the Surviving Corporation to, recognize such
employee's service with the Company and its Subsidiaries prior to the Effective
Time for purposes of such plan; provided; however, (i) Parent shall not be
-------- -------
required to recognize such service under its short-term disability, retiree
medical and retiree life insurance benefit plans, (ii) under Parent's defined
benefit pension plan, such service shall be recognized for purposes of
eligibility and vesting but not for benefit accrual purposes, (iii) no provision
hereunder shall be construed to reduce the annual number of vacation days (as
determined under the terms of the vacation program of the Company and its
Subsidiaries immediately prior to the Effective Time) which such employee would
be eligible to receive on or after the Effective Time, and (iv) no provision
hereunder shall be construed to require Parent or any of its Subsidiaries to
provide any such benefit on or after the Effective Time.
51
(f) Except as otherwise provided in Section 5.12, Parent and Sub
agree to honor and to cause the Surviving Corporation to honor, in accordance
with their terms, and to make required payments when due under, all Benefit
Plans maintained or contributed to by the Company or any of its Subsidiaries
(including employment, incentive and severance agreements and arrangements),
that are applicable with respect to any director, officer or employee or former
director, officer or employee of the Company or any of its Subsidiaries;
provided, however, that the foregoing shall not preclude Parent or the Surviving
-------- -------
Corporation from amending or terminating any such Benefit Plan in accordance
with its terms. Parent acknowledges that consummation of the Merger shall
constitute a "Change in Control" for purposes of each Benefit Plan in which such
concept is relevant, but only to the extent disclosed on Section 5.17(f) of the
Company Disclosure Schedule.
(g) With respect to any welfare plan in which employees of the
Company and its Subsidiaries are eligible to participate after the Effective
Time, Parent shall, and shall cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to such employees
to the extent such conditions were satisfied under the welfare plans of the
Company and its Subsidiaries prior to the Effective Time, and (ii) provide each
such employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any analogous deductible or out-of-pocket
requirements to the extent applicable under any such plan.
(h) It is Parent's intention that within 30 days after the date of
this Agreement, Parent shall deliver to up to ten employees of the Company or
its Subsidiaries (as designated by the chief executive officer of the Company as
soon as practicable following the date of this Agreement), a summary description
of base salary and other compensation terms for each such employee following the
Effective Time.
ARTICLE VI
Conditions Precedent
--------------------
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligation of each party to effect the Merger is subject
-------
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
52
(a) Shareholder Approval. The Shareholder Approval shall have been
---------------------
obtained.
(b) NYSE Listing. The shares of Parent Company Stock issuable to the
-------------
Company's shareholders as contemplated by this Agreement shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(c) HSR Act. The waiting period (and any extension thereof)
--------
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(d) No Injunctions or Restraints. No temporary restraining order,
-----------------------------
preliminary or permanent injunction or other judgment or order issued by
any court of competent jurisdiction or other statute, law, rule, legal
restraint or prohibition (collectively, "Restraints") shall be in effect
(i) preventing the consummation of the Merger or (ii) which otherwise is
reasonably likely to have a Material Adverse Effect or to have a material
adverse effect on Parent; provided, however, that each of the parties that
-------- -------
have used its reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that
may be entered.
(e) Form S-4. The Form S-4 shall have become effective under the
---------
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(f) Pooling Letters. Parent and the Company shall have received
----------------
letters from KPMG LLP and PricewaterhouseCoopers LLP, dated as of the
Closing Date, in each case, addressed to Parent and the Company, stating in
substance the matters to be stated by KPMG LLP and PricewaterhouseCoopers
LLP, pursuant to Sections 5.02(b) and 5.03(b), respectively.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The
----------------------------------- --------
obligations of Parent and Sub to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of the Company contained in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and
warranties of the Company contained in this Agreement
53
that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date, in
which case as of such earlier date; provided, that if any such
--------
representations and warranties shall not be true and correct (for this
purpose excluding any qualification or limitation as to materiality or
Material Adverse Effect), then the condition contained in this Section
6.02(a) shall nevertheless be deemed satisfied if the cumulative effect of
all inaccuracies of such representations and breaches of such warranties
shall not be or have a Material Adverse Effect. Parent shall have received
a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
------------------------------------------
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
such effect.
(c) Letters from Company Affiliates. Parent shall have received from
--------------------------------
each Person named in the letter referred to in Section 5.10(a) an executed
copy of an agreement substantially in the form of Exhibit A hereto.
(d) No Governmental Litigation. There shall not be pending or
---------------------------
imminently threatened any suit, action or proceeding by any Governmental
Entity, (i) challenging the acquisition by Parent or Sub of any shares of
Company Common Stock, seeking to restrain or prohibit the consummation of
the Merger, or seeking to place limitations on the ownership of shares of
Company Common Stock (or shares of common stock of the Surviving
Corporation) by Parent or Sub or seeking to obtain from the Company, Parent
or Sub any damages that are material in relation to the Company, (ii)
seeking to prohibit or materially limit the ownership or operation by the
Company or its Subsidiaries, Parent or any of Parent's Subsidiaries of any
material portion of any business or of any assets of the Company, Parent or
any of Parent's Subsidiaries, or to compel the Company, Parent or any of
Parent's Subsidiaries to divest or
54
hold separate any material portion of any business or of any assets of the
Company, Parent or any of their respective Subsidiaries, as a result of the
Merger or (iii) seeking to prohibit Parent or any of its Subsidiaries from
effectively controlling in any material respect the business or operations
of the Company or its Subsidiaries.
SECTION 6.03. Conditions to Obligation of the Company. The
----------------------------------------
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of Parent and Sub contained in this Agreement that are qualified
as to materiality shall be true and correct, and the representations and
warranties of Parent and Sub contained in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made
on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date, in which case as of such
earlier date; provided, that if any such representations and warranties
--------
shall not be true and correct (for this purpose excluding any qualification
or limitation as to materiality or material adverse effect), then the
condition contained in this Section 6.03(a) shall nevertheless be deemed
satisfied if the cumulative effect of all inaccuracies of such
representations and breaches of such warranties shall not be or have a
material adverse effect on Parent. The Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent to
such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
---------------------------------------------
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date,
and the Company shall have received a certificate signed on behalf of
Parent by an executive officer of Parent to such effect.
(c) Tax Opinion. The Company shall have received from Skadden, Arps,
------------
Slate, Xxxxxxx & Xxxx LLP, tax counsel to the Company, on the Closing Date,
an opinion dated as of the Closing Date and stating that the Merger will be
treated for United States Federal income tax purposes as a "reorganization"
within the meaning
55
of Section 368(a) of the Code and that Parent, Sub and the Company will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code. The issuance of such opinion shall be conditioned upon the
receipt by such tax counsel of customary representation letters from each
of the Company and Parent in substantially the same form as Exhibits B and
C, respectively.
SECTION 6.04. Frustration of Closing Conditions. None of the
----------------------------------
Company, Parent or Sub may rely on the failure of any condition set forth in
Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure
was caused by such party's failure to use reasonable efforts to consummate the
Merger and the other transactions contemplated by this Agreement and the Option
Agreement, as required by and subject to Section 5.05.
ARTICLE VII
Termination, Amendment and Waiver
---------------------------------
SECTION 7.01. Termination. This Agreement may be terminated at any
------------
time prior to the Effective Time, whether before or after the Shareholder
Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by the date
that is 9 months after the date hereof for any reason; provided,
--------
however, that the right to terminate this Agreement under this Section
-------
7.01(b)(i) shall not be available to any party whose action or failure
to act has been a principal cause of or resulted in the failure of the
Merger to be consummated on or before such date;
(ii) if any Restraint having any of the effects set forth in
Section 6.01(d) shall be in effect and shall have become final and
nonappealable; provided that the party seeking to terminate this
--------
Agreement pursuant to this Section 7.01(b)(ii) shall have used
reasonable efforts to prevent the entry of and to remove such
Restraint; or
56
(iii) if the Shareholder Approval shall not have been obtained at
the Shareholders Meeting duly convened therefor or at any adjournment
or postponement thereof;
(c) by the Company, if Parent shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.03(a) or 6.03(b),
and (B) is incapable of being cured by Parent within 30 calendar days
following receipt of written notice of such breach or failure to perform
from the Company;
(d) by Parent, if the Company shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.02(a) or 6.02(b),
and (B) is incapable of being cured by the Company within 30 calendar days
following receipt of written notice of such breach or failure to perform
from Parent;
(e) by Parent, if the directors of the Company shall have (i)
withdrawn, modified or changed the approval or recommendation of the Board
of Directors of the Company or any committee thereof of this Agreement or
the Merger in a manner adverse to Parent or Sub, (ii) approved or
recommended to the shareholders of the Company a Takeover Proposal or (iii)
approved or recommended that the shareholders of the Company tender their
shares of Company Common Stock into any tender offer or exchange offer that
is a Takeover Proposal or is related thereto (it being understood that
disclosure by the Company of its receipt of a Takeover Proposal or its
determination that a Takeover Proposal constitutes a Superior Proposal as
permitted under Section 4.02(d) shall not constitute grounds for
termination of this Agreement by Parent pursuant to this Section 7.01(e));
or
(f) after six months from the date hereof, by the Company in
accordance with Section 4.02(b).
SECTION 7.02. Effect of Termination. In the event of termination of
----------------------
this Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the
57
Company, other than the provisions of Section 3.01(s), Section 4.02(a), second
and third sentences of Section 4.02(b), the last sentence of Section 5.04,
Section 5.08, this Section 7.02 and Article VIII, which provisions shall survive
such termination, and except to the extent that such termination results from
the wilful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the
----------
parties hereto at any time before or after the Shareholder Approval; provided,
--------
however, that after any such approval, there shall be made no amendment that by
-------
law requires further approval by the shareholders of the Company or the approval
of the shareholders of Parent without such approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 7.04. Extension; Waiver. At any time prior to the Effective
------------------
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso of Section 7.03, waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension or
--------------------------------------------------
Waiver. A termination of this Agreement pursuant to Section 7.01, an amendment
-------
of this Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require, in the case of Parent or
the Company, action by its Board of Directors or, with respect to any amendment
of this Agreement pursuant to Section 7.03, the duly authorized committee of its
Board of Directors to the extent permitted by law.
58
ARTICLE VIII
General Provisions
------------------
SECTION 8.01. Nonsurvival of Representations and Warranties. None of
----------------------------------------------
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.02. Notices. All notices, requests, claims, demands and
--------
other communications hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Parent or Sub, to:
Xxxxxxx & Xxxxxxx
Xxx Xxxxxxx & Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx Xxxxx
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxxx, III
if to the Company, to:
Centocor, Inc.
000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
59
with a copy to:
Xxxxxxx Xxxxxxxxxx
0000 Xxx Xxxxxxxx Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Xx.
SECTION 8.03. Definitions. For purposes of this Agreement:
------------
(a) an "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person;
(b) "Business Day" means any day other than Saturday, Sunday or any
other day on which banks are legally permitted to be closed in New York;
(c) "Knowledge" of any Person that is not an individual means, with
respect to any matter in question, the Knowledge of such person's executive
officers and other officers having primary responsibility for such matter,
in each case obtained in the conduct of their duties in the ordinary course
without special inquiry;
(d) "Material Adverse Change" or "Material Adverse Effect" means any
change, effect, event, occurrence or state of facts (or any development
that, insofar as can reasonably be foreseen, is reasonably likely to result
in any change or effect) that is materially adverse to the business,
properties, assets, liabilities (contingent or otherwise), financial
condition or results of operations of the Company and its Subsidiaries,
taken as a whole, other than any change, effect, event, occurrence, state
of facts or development (i) relating to the economy in general, (ii)
relating to the industry in which the Company operates in general and not
specifically relating to the Company or (iii) resulting from the effects of
the pendency of the transactions contemplated hereby on current or
prospective customers, suppliers, employees and business relationships of
the Company, including the rights of certain parties identified in Section
8.03(d) of the Company Disclosure Schedule;
60
(e) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(f) a "Subsidiary" of any Person means, with respect to such Person,
a "significant subsidiary" as such term is defined in Rule 1-02 of
Regulation S-X under the Exchange Act;
(g) "Superior Proposal" means any bona fide proposal made by a third
party (i) to acquire, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company, (ii)
that is otherwise on terms which the Board of Directors of the Company
determines in its good faith judgment (after receipt of advice from a
financial advisor of nationally recognized reputation) to be more favorable
to the Company than the Merger after taking into account all constituencies
(including shareholders), the terms of this Agreement and pertinent factors
permitted under the PBCL, (iii) for which financing, to the extent
required, is then committed or which, in the good faith judgment of the
Board of Directors of the Company, is reasonably capable of being obtained
by such third party and (iv) for which, in the good faith judgment of the
Board of Directors of the Company, no regulatory approvals are required,
including antitrust approvals, that could not reasonably be expected to be
obtained; and
(h) "Takeover Proposal" means any bona fide inquiry, proposal or
offer from any Person relating to any direct or indirect acquisition or
purchase of a business or assets that constitute 30% or more of the net
revenues, net income or the assets of the Company or its Subsidiaries,
taken as a whole, or 30% or more of any class of equity securities of the
Company or its Subsidiaries or any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 30% or more of
any class of equity securities of the Company or any of its Subsidiaries or
any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or
any of its Subsidiaries, other than the transactions contemplated by this
Agreement.
61
SECTION 8.04. Interpretation. When a reference is made in this
---------------
Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be
to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
SECTION 8.05. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries. This
-----------------------------------------------
Agreement, the Option Agreement and the Confidentiality Agreement (a) constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter of
this Agreement, the Option Agreement and the Confidentiality Agreement and (b)
except for the provisions of Article II, Section 5.06 and Section 5.07, are not
intended to confer upon any Person other than the parties any rights or
remedies.
SECTION 8.07. Governing Law. This Agreement shall be governed by,
--------------
and construed in accordance with, the laws of the Commonwealth of Pennsylvania,
regardless of the
62
laws that might otherwise govern under applicable principles of conflicts of
laws thereof; provided, however, that the laws of the respective states of
-------- -------
incorporation of each of the parties hereto shall govern the relative rights,
obligations, powers, duties and other internal affairs of such party and its
Board of Directors.
SECTION 8.08. Assignment. Neither this Agreement nor any of the
-----------
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned Subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.09. Enforcement. The parties agree that irreparable damage
------------
would occur and that the parties would not have any adequate remedy at law in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
Commonwealth of Pennsylvania or in any state court in the Commonwealth of
Pennsylvania, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the Commonwealth of Pennsylvania or of any state court located in the
Commonwealth of Pennsylvania in the event any dispute arises out of this
Agreement or the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or the transactions contemplated by this
Agreement in any court other than a Federal court located in the Commonwealth of
Pennsylvania or a state court located in the Commonwealth of Pennsylvania.
SECTION 8.10. Severability. If any term or other provision of this
-------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all
63
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect. Upon such determination that any term other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
64
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
XXXXXXX & XXXXXXX,
by
/s/ X. X. Xxxxxx
----------------
Name: X. X. Xxxxxx
Title: Vice Chairman
ADMIRAL MERGER CORP.,
by
/s/ X. X. Xxxxx
---------------
Name: X. X. Xxxxx
Title: Vice President
CENTOCOR, INC.,
by
/s/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
----------------------
Term Page Term Page
------------------------------- ---- ------------------------------- ----
Acquisition IRS............................... 19
Agreement....................... 37 Knowledge......................... 59
Actions........................... 36 Legal Provisions.................. 16
Adjusted Option................... 43 Liens............................. 11
Affiliate......................... 59 Material Adverse Change........... 59
Agreement......................... 1 Material Adverse Effect........... 59
Amended and Restated Articles Merger............................ 1
of Incorporation................ 9 Merger Consideration.............. 4
Articles of Merger................ 2 Nasdaq............................ 13
Average Closing Price............. 4 NYSE.............................. 7
Benefit Plans..................... 18 Option Agreement.................. 1
Business Day...................... 59 Parachute Gross Up
Bylaws............................ 9 Payment......................... 22
Certificates...................... 5 Parent............................ 1
Closing........................... 2 Parent Common Stock............... 1
Closing Date...................... 2 Parent Disclosure Schedule........ 28
Code.............................. 1 Parent SEC Documents.............. 30
Commonly Controlled Entity........ 19 PBCL.............................. 2
Company........................... 1 Pension Plans..................... 19
Company Common Stock.............. 1 Permits........................... 16
Company Disclosure Schedule....... 8 Person............................ 60
Company Notice.................... 37 Pharmaceutical Product............ 26
Company Stock Plans............... 43 Post-Signing Returns.............. 36
Confidentiality Agreement......... 41 Preferred Stock................... 9
Convertible Debentures............ 9 Proxy Statement................... 12
Effective Time.................... 2 Restraints........................ 52
Environmental Laws................ 18 Rights............................ 49
ERISA............................. 19 Rights Agreement.................. 25
Exchange Act...................... 12 SEC............................... 12
Exchange Agent.................... 5 SEC Documents..................... 13
Exchange Fund..................... 5 Securities Act.................... 13
Exchange Ratio.................... 4 Shareholder Approval.............. 24
FDA............................... 26 Shareholders Meeting.............. 40
FDCA.............................. 26 Stock Options..................... 43
Filed SEC Documents............... 14 Sub............................... 1
Form S-4.......................... 14 Subsidiary........................ 60
GAAP.............................. 13 Superior Proposal................. 60
Governmental Entity............... 12 Surviving Corporation............. 2
Hazardous Material................ 18 Takeover Proposal................. 60
HSR Act........................... 12 taxes............................. 21
Indenture......................... 49 Termination Fee................... 47
Intellectual Property Trustee........................... 49
Rights.......................... 23
EXHIBIT A
TO THE MERGER AGREEMENT
Form of Affiliate Letter
------------------------
Dear Sirs:
The undersigned, a holder of shares of common stock, par value $.01
per share ("Company Common Stock"), of Centocor, Inc., a Pennsylvania
corporation (the "Company"), acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
by the Securities and Exchange Commission (the "SEC") and may be deemed an
"affiliate" of the Company for purposes of qualifying the Merger (as defined
below) for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations, although
nothing contained herein should be construed as an admission of either such
fact. Pursuant to the terms of the Agreement and Plan of Merger dated as of
July 20, 1999, among Xxxxxxx & Xxxxxxx, a New Jersey corporation ("Parent"),
Admiral Merger Corp., a Pennsylvania corporation and a wholly owned subsidiary
of Parent ("Sub"), and the Company, Sub will be merged with and into the Company
(the "Merger"), and in connection with the Merger, the undersigned is entitled
to receive common stock, par value $1.00 per share ("Parent Common Stock"), of
Parent.
If in fact the undersigned were an affiliate under the Securities Act,
the undersigned's ability to sell, assign or transfer the Parent Common Stock
received by the undersigned in exchange for any shares of Company Common Stock
in connection with the Merger may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and the
undersigned has obtained or will obtain advice of counsel as to the nature and
conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d) promulgated
under the Securities Act. The undersigned understands that Parent will not be
required to maintain the effectiveness of any registration statement under the
Securities Act for the purposes of resale of Parent Common Stock by the
undersigned.
The undersigned hereby represents to and covenants with Parent that
the undersigned will not sell, assign or transfer any of the Parent Common Stock
received by the undersigned in exchange for shares of Company Common Stock in
connection with the Merger except (i) pursuant to an effective registration
statement under the Securities Act,
2
(ii) in conformity with the volume and other limitations of Rule 145 or (iii) in
a transaction which, in the opinion of counsel to Parent or as described in a
"no-action" or interpretive letter from the Staff of the SEC specifically issued
with respect to a transaction to be engaged in by the undersigned, is not
required to be registered under the Securities Act.
The undersigned hereby further represents to and covenants with Parent
that the undersigned has not, within the 30 days prior to the Closing Date,
sold, transferred or otherwise disposed of any shares of Company Common Stock
held by the undersigned and that the undersigned will not sell, transfer or
otherwise dispose of any Parent Common Stock received by the undersigned in
connection with the Merger until after such time as results covering at least 30
days of post-Merger combined operations of the Company and Parent have been
published by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the SEC, a report to the SEC on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes such
combined results of operations, except as would not otherwise reasonably be
expected to adversely affect the qualification of the Merger as a pooling of
interests.
In the event of a sale or other disposition by the undersigned of
Parent Common Stock pursuant to Rule 145, the undersigned will supply Parent
with evidence of compliance with such Rule, in the form of a letter in the form
of Annex I hereto and the opinion of counsel or no-action letter referred to
above. The undersigned understands that Parent may instruct its transfer agent
to withhold the transfer of any Parent Common Stock disposed of by the
undersigned, but that (provided such transfer is not prohibited by any other
provision of this letter agreement) upon receipt of such evidence of compliance,
Parent shall cause the transfer agent to effectuate the transfer of the Parent
Common Stock sold as indicated in such letter.
Parent covenants that it will take all such actions as may be
reasonably available to it to permit the sale or other disposition of Parent
Common Stock by the undersigned under Rule 145 in accordance with the terms
thereof.
The undersigned acknowledges and agrees that the legends set forth
below will be placed on certificates representing Parent Common Stock received
by the undersigned in connection with the Merger or held by a transferee
thereof, which legends will be removed by delivery of
3
substitute certificates upon receipt of an opinion in form and substance
reasonably satisfactory to Parent from counsel reasonably satisfactory to Parent
to the effect that such legends are no longer required for purposes of the
Securities Act.
There will be placed on the certificates for Parent Common Stock
issued to the undersigned in connection with the Merger, or any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is being accounted for as a pooling of
interests, in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The shares have not been acquired by the
holder with a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933. The shares may
not be sold, pledged or otherwise transferred (i) until such time as
Xxxxxxx & Xxxxxxx shall have published financial results covering at least
30 days of combined operations after the Effective Time and (ii) except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Parent
Common Stock and (ii) the receipt by Parent of this letter is an inducement to
Parent's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT A
[Name] [Date]
On , the undersigned sold the securities of Xxxxxxx
& Xxxxxxx ("Parent") described below in the space provided for that purpose (the
"Securities"). The Securities were received by the undersigned in connection
with the merger of Admiral Merger Corp., a Pennsylvania corporation, with and
into Centocor, Inc.
Based upon the most recent report or statement filed by Parent with
the Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Securities Act
or in transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities.]
EXHIBIT B
TO THE MERGER AGREEMENT
[Letterhead of the Centocor, Inc.]
, 1999
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to Section
6.03(c) of the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of July 20, 1999, among Xxxxxxx & Xxxxxxx, a New Jersey corporation ("Parent"),
Admiral Merger Corp., a Pennsylvania corporation and a wholly owned subsidiary
of Parent ("Sub"), and Centocor, Inc., a Pennsylvania corporation (the
"Company"), and in connection with the filing with the Securities and Exchange
Commission (the "SEC") of the registration statement on Form S-4 (the
"Registration Statement"), which includes the proxy statement/prospectus of
Parent and the Company, the undersigned certifies and represents on behalf of
the Company and as to the Company, after due inquiry and investigation, as
follows (any capitalized term used but not defined herein shall have the meaning
given to such term in the Merger Agreement):
1. The facts relating to the contemplated merger of Sub with and into
the Company (the "Merger") as described in the Registration Statement and the
documents described in the Registration Statement are, insofar as such facts
pertain to the Company, true, correct and complete in all material respects.
The Merger will be consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which
each issued and outstanding share of common stock, par value $.01 per share, of
the Company (the "Company Common Stock") will be converted into common shares
2
of Parent ("Parent Common Stock") is the result of arm's length bargaining.
3. Cash payments to be made to stockholders of the Company in lieu of
fractional shares of Parent Common Stock that would otherwise be issued to such
stockholders in the Merger will be made for the purpose of saving Parent the
expense and inconvenience of issuing and transferring fractional shares of
Parent Common Stock, and do not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger to
stockholders of the Company in lieu of fractional shares of Parent Common Stock
is not expected to exceed one percent of the total consideration that will be
issued in the Merger to stockholders of the Company in exchange for their shares
of Company Common Stock.
4. (i) Neither the Company nor any corporation related to the
Company has acquired or has any present plan or intention to acquire any Company
Common Stock in contemplation of the Merger, or otherwise as part of a plan of
which the Merger is a part.
(ii) For purposes of this representation letter, a corporation shall
be treated as related to the Company if such corporation is related to the
Company within the meaning of Treasury Regulation Section 1.368-1(e)(3).
5. The Company has not made and does not have any present plan or
intention to make any distributions (other than dividends made in the ordinary
course of business) prior to, in contemplation of, or otherwise in connection
with, the Merger.
6. Except as otherwise specifically contemplated under the Merger
Agreement, Parent, Sub, the Company and holders of Company Common Stock will
each pay their respective expenses, if any, incurred in connection with the
Merger. The Company has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or contingent,
of any holder of Company Common Stock. Except to the extent specifically
contemplated under the Merger Agreement, the Company has not entered into any
arrangement pursuant to which Parent or Sub has agreed to assume, directly or
indirectly, any expense or other liability, whether fixed or contingent, of the
Company or any holder of Company Common Stock.
7. Immediately following the Merger the Company will hold (i) at
least 90% of the fair market value of the net assets and at least 70% of the
fair market value of the
3
gross assets that were held by the Company immediately prior to the Merger and
(ii) at least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets that were held by Sub immediately
prior to the Merger. For purposes of this representation, amounts paid by the
Company or by Sub to stockholders who receive cash or other property (including
cash in lieu of fractional shares of Parent Common Stock) in connection with the
Merger, assets of the Company used to pay its reorganization expenses and all
redemptions and distributions made by the Company (other than dividends made in
the ordinary course of business) immediately preceding, or in contemplation of,
the Merger will be included as assets held by the Company immediately prior to
the Merger.
8. Except as provided in the Merger Agreement, immediately prior to
the time of the Merger the Company will not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to which any
person could acquire Company Common Stock.
9. In connection with the Merger, Company Common Stock will be
converted solely into Parent Common Stock (except for cash paid in lieu of
fractional shares of Parent Common Stock). For purposes of this representation,
Company Common Stock redeemed for cash or other property furnished, directly or
indirectly, by Parent will be considered as exchanged for other than Parent
Common Stock. Further, no liabilities of the Company or any of the holders of
Company Common Stock will be assumed by Parent, nor will any of the Company
Common Stock acquired by Parent in connection with the Merger be subject to any
liabilities.
10. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"Code").
11. The Company will not take, and to the best knowledge of the
management of the Company there is no present plan or intention by stockholders
of the Company to take, any position on any Federal, state or local income or
franchise tax return, or to take any other tax reporting position, that is
inconsistent with the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local tax law (and then only to the extent required by such applicable
state or local tax law).
4
12. None of the compensation received by any stockholder-employee of
the Company in respect of periods at or prior to the Effective Time represents
separate consideration for any of its Company Common Stock. None of the Parent
Common Stock that will be received by any stockholder-employee of the Company in
the Merger represents separately bargained for consideration which is allocable
to any employment agreement or arrangement. The compensation paid to any
stockholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
13. There is no intercorporate indebtedness existing between Parent
(or any of its subsidiaries, including Sub) and the Company (or any of its
subsidiaries) that was issued, acquired, or will be settled, at a discount.
14. The Company is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of the Company with respect to the Merger.
16. No assets of the Company have been sold, transferred or otherwise
disposed of which would prevent Parent from continuing the "historic business"
of the Company or from using a significant portion of the "historic business
assets" of the Company in a business following the Merger (as such terms are
defined in Treasury Regulation Section 1.368-1(d)).
17. On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which such assets are subject.
18. No holders of Company Common Stock have dissenter's rights under
the provisions of any Federal, state, local, foreign or provincial laws.
19. No shares of Company Common Stock are held by any direct or
indirect subsidiary of the Company.
20. The undersigned is authorized to make all the representations set
forth herein on behalf of the Company.
5
The undersigned acknowledges that (i) the opinion to be delivered
pursuant to Section 6.03(c) of the Merger Agreement will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) such opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinion will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinion.
Very truly yours,
CENTOCOR, INC.
by
-------------------------
Name:
Title:
EXHIBIT C
TO THE MERGER AGREEMENT
[Letterhead of Xxxxxxx & Xxxxxxx]
, 1999
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to Section
6.03(c) of the Agreement and Plan of Merger (the "Merger Agreement") dated as of
July 20, 1999, among Xxxxxxx & Xxxxxxx, a New Jersey corporation ("Parent"),
Admiral Merger Corp., a Pennsylvania corporation and a wholly owned subsidiary
of Parent ("Sub"), and Centocor, Inc., a Pennsylvania corporation (the
"Company"), and in connection with the filing with the Securities and Exchange
Commission (the "SEC") of the registration statement on Form S-4 (the
"Registration Statement"), which includes the proxy statement/prospectus of
Parent and the Company, the undersigned certifies and represents on behalf of
Parent and Sub and as to Parent and Sub, after due inquiry and investigation, as
follows (any capitalized term used but not defined herein having the meaning
given to such term in the Merger Agreement):
1. The facts relating to the contemplated merger of Sub with and into
the Company (the "Merger") as described in the Registration Statement and the
documents described in the Registration Statement are, insofar as such facts
pertain to Parent and Sub, true, correct and complete in all material respects.
The Merger will be consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which
each issued and outstanding share of common stock, par value $.01 per share, of
the Company (the "Company Common Stock") will be converted into common shares
2
of Parent ("Parent Common Stock") is the result of arm's length bargaining.
3. Cash payments to be made to stockholders of the Company in lieu of
fractional shares of Parent Common Stock that would otherwise be issued to such
stockholders in the Merger will be made for the purpose of saving Parent the
expense and inconvenience of issuing and transferring fractional shares of
Parent Common Stock, and do not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger to
stockholders of the Company in lieu of fractional shares of Parent Common Stock
is not expected to exceed one percent of the total consideration that will be
issued in the Merger to stockholders of the Company in exchange for their shares
of Company Common Stock.
4. (i) Parent has no present plan or intention, following the
Merger, to reacquire, or to cause any corporation that is related to Parent to
acquire, any Parent Common Stock, except for repurchases of Parent Common Stock
by Parent in connection with a repurchase program meeting the requirements of
Section 4.05(1)(b) of Revenue Procedure 96-30, which program was not entered
into or amended in any way in contemplation of or connection with the Merger.
No corporation that is related to Parent has a plan or intention to purchase any
of the Parent Common Stock issued in the Merger.
(ii) For purposes of this representation letter, a corporation shall
be treated as related to Parent if such corporation is related to Parent within
the meaning of Treasury Regulation Section 1.368-1(e)(3).
5. Parent has no present plan or intention to make any distributions
after the Merger to holders of Parent Common Stock (other than dividends made in
the ordinary course of business or distributions that are pro rata).
6. Neither Parent nor Sub (nor any other subsidiary of Parent) has
acquired, or, except as a result of the Merger, will acquire, or has owned in
the past five years, any Company Common Stock.
7. Prior to the Merger, Parent will own all the capital stock of Sub.
Parent has no present plan or intention to cause the Company to issue additional
shares of its stock that would result in Parent owning less than all the capital
stock of the Company after the Merger.
3
8. Parent has no present plan or intention, following the Merger, to
liquidate the Company, to merge the Company with and into another corporation,
to sell or otherwise dispose of any of the stock of the Company, to cause the
Company to distribute to Parent or any of its subsidiaries any assets of the
Company or the proceeds of any borrowings incurred by the Company, or to cause
the Company to sell or otherwise dispose of any of the assets held by the
Company at the time of the Merger, except for dispositions of such assets in the
ordinary course of business and transfers described in Section 368(a)(2)(C) of
the Internal Revenue Code of 1986, as amended (the "Code") or Treasury
Regulation Section 1.368-2(k).
9. Immediately following the Merger, the Company will hold (i) at
least 90% of the fair market value of the net assets and at least 70% of the
fair market value of the gross assets that were held by the Company immediately
prior to the Merger and (ii) at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets that were
held by Sub immediately prior to the Merger. For purposes of this
representation, amounts paid by the Company or by Sub to stockholders who
receive cash or other property (including cash in lieu of fractional shares of
Parent Common Stock) in connection with the Merger, assets of the Company used
to pay its reorganization expenses and all redemptions and distributions made by
the Company (other than dividends made in the ordinary course of business)
immediately preceding, or in contemplation of, the Merger will be included as
assets held by the Company immediately prior to the Merger.
10. Except as otherwise specifically contemplated under the Merger
Agreement, Parent, Sub, the Company and holders of Company Common Stock will
each pay their respective expenses, if any, incurred in connection with the
Merger. Except to the extent specifically contemplated under the Merger
Agreement, neither Parent nor Sub has paid, directly or indirectly, or has
agreed to assume any expense or other liability, whether fixed or contingent,
incurred or to be incurred by the Company or any holder of Company Common Stock
in connection with or as part of the Merger or any related transactions.
11. Following the Merger, Parent intends to cause the Company to
continue its "historic business" or to use a significant portion of its
"historic business assets" in a business (as such terms are defined in Treasury
Regulation Section 1.368-1(d)).
4
12. Neither Parent nor Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
13. Neither Parent nor Sub will take any position on any Federal,
state or local income or franchise tax return, or take any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in Section 1313(a)(1) of the
Code) or by applicable state or local tax law (and then only to the extent
required by such applicable state or local tax law).
14. None of the compensation received by any stockholder-employee of
the Company in respect of periods at or prior to the Effective Time represents
separate consideration for any of its Company Common Stock. None of the Parent
Common Stock that will be received by any stockholder-employee of the Company in
the Merger represents separately bargained for consideration which is allocable
to any employment agreement or arrangement. The compensation paid to any
stockholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
15. There is no intercorporate indebtedness existing between Parent
(or any of its subsidiaries, including Sub) and the Company (or any of its
subsidiaries) that was issued or acquired, or will be settled, at a discount.
16. Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
17. In connection with the Merger, Company Common Stock will be
converted solely into Parent Common Stock (except for cash paid in lieu of
fractional shares of Parent Common Stock). For purposes of this representation,
Company Common Stock redeemed for cash or other property furnished, directly or
indirectly, by Parent will be considered as exchanged for other than Parent
Common Stock. Further, no liabilities of the Company or any of the holders of
Company Common Stock will be assumed by Parent, nor will any of the Company
Common Stock acquired by Parent in connection with the Merger be subject to any
liabilities.
18. The Merger Agreement, the Registration Statement and the other
documents described in the
5
Registration Statement represent the entire understanding of Parent and Sub with
respect to the Merger.
19. Sub is a corporation newly formed for the purpose of
participating in the Merger and at no time prior to the Merger has had assets
(other than nominal assets contributed upon the formation of Sub, which assets
will be held by Sub following the Merger) or business operations.
20. The Merger is being undertaken for purposes of enhancing the
business of Parent and for other good and valid business purposes of Parent.
21. The undersigned is authorized to make all the representations set
forth herein on behalf of Parent and Sub.
The undersigned acknowledges that (i) the opinion to be delivered
pursuant to Section 6.03(c) of the Merger Agreement will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) such opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinion will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
XXXXXXX & XXXXXXX
by
-------------------------
Name:
Title:
