EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ALZA CORPORATION,
ARGYLE ACQUISITION CORP.
AND
SEQUUS PHARMACEUTICALS, INC.
DATED AS OF OCTOBER 4, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER........................................................1
1.1 The Merger........................................................1
1.2 Closing; Effective Time...........................................1
1.3 Effects of the Merger.............................................2
1.4 Certificate of Incorporation; Bylaws..............................2
1.5 Directors and Officers of the Surviving Corporation...............2
ARTICLE II CONVERSION OF SHARES..............................................2
2.1 Conversion of Stock...............................................2
2.2 SEQUUS Options and Warrants; SEQUUS Stock Purchase Plan...........4
2.3 Exchange of Stock Certificates....................................6
2.4 Lost, Stolen or Destroyed Certificates............................7
2.5 Tax Consequences..................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SEQUUS..........................7
3.1 Organization, Etc. ...............................................8
3.2 Authority Relative to This Agreement..............................9
3.3 No Violations, Etc. ..............................................9
3.4 Board Recommendation.............................................10
3.5 Fairness Opinion.................................................10
3.6 Capitalization...................................................11
3.7 SEC Filings......................................................12
3.8 Financial Statements.............................................12
3.9 Absence of Undisclosed Liabilities...............................13
3.10 Absence of Changes or Events.....................................13
3.11 Intentionally Omitted............................................15
3.12 Litigation.......................................................15
3.13 Insurance........................................................15
3.14 Contracts and Commitments........................................15
3.15 Labor Matters; Employment and Labor Contracts....................17
3.16 Compliance with Laws.............................................18
3.17 Intellectual Property Rights.....................................19
3.18 Taxes............................................................20
3.19 Employee Benefit Plans; ERISA....................................21
3.20 Environmental Matters............................................24
3.21 Officer's Certificate as to Tax Matters..........................27
3.22 Affiliates.......................................................27
3.23 Finders or Brokers...............................................27
3.24 Registration Statement; Proxy Statement/Prospectus...............28
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TABLE OF CONTENTS
(CONTINUED)
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3.25 Pooling of Interests.............................................28
3.26 Title to Property................................................28
3.27 Year 2000 Compliance.............................................29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ALZA AND MERGER SUB............29
4.1 Organization, Etc. ..............................................29
4.2 Authority Relative to This Agreement.............................30
4.3 No Violations, Etc. .............................................31
4.4 Capitalization...................................................31
4.5 Registration Statement; Proxy Statement/Prospectus...............32
4.6 SEC Filings......................................................32
4.7 Compliance with Laws.............................................32
4.8 Financial Statements.............................................33
4.9 Absence of Undisclosed Liabilities...............................33
4.10 Absence of Changes or Events.....................................33
4.11 Litigation.......................................................33
4.12 Officer's Certificate as to Tax Matters..........................34
4.13 Pooling of Interests.............................................34
4.14 Taxes............................................................34
4.15 Contracts and Commitments........................................34
4.16 Intellectual Property Rights.....................................35
4.17 FDA Matters......................................................35
ARTICLE V COVENANTS........................................................36
5.1 Conduct of Business During Interim Period........................36
5.2 No Solicitation..................................................38
5.3 Access to Information............................................40
5.4 Special Meeting; Registration Statement; Board Recommendation....41
5.5 Commercially Reasonable Efforts..................................42
5.6 Public Announcements.............................................42
5.7 Notification of Certain Matters..................................42
5.8 Indemnification..................................................43
5.9 Expenses.........................................................45
5.10 Pooling of Interests Accounting..................................45
5.11 Affiliate Agreements.............................................46
5.12 NYSE Listings....................................................46
5.13 Resignation of Directors and Officers............................46
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TABLE OF CONTENTS
(CONTINUED)
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5.14 Consents of ALZA's and SEQUUS' Accountants.......................47
5.15 Stock Options and Warrants.......................................47
5.16 Board of Directors...............................................47
5.17 Intentionally Omitted............................................47
5.18 SEC Filings......................................................47
5.19 Employee Benefit Matters.........................................48
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF EACH PARTY......................49
6.1 Registration Statement...........................................49
6.2 Shareholder Approval.............................................50
6.3 Listing of Additional Shares.....................................50
6.4 Governmental Clearances..........................................50
6.5 Tax Matters......................................................50
6.6 Statute or Decree................................................50
6.7 Pooling..........................................................51
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF SEQUUS AND ALZA.................51
7.1 Additional Conditions to the Obligation of SEQUUS................51
7.2 Additional Conditions to the Obligation of ALZA And Merger Sub...51
ARTICLE VIII TERMINATION......................................................52
8.1 Termination......................................................52
8.2 Termination by ALZA..............................................53
8.3 Termination by SEQUUS............................................54
8.4 Procedure for Termination........................................55
8.5 Effect of Termination............................................55
ARTICLE IX MISCELLANEOUS....................................................56
9.1 Amendment and Modification.......................................56
9.2 Waiver of Compliance; Consents...................................56
9.3 Survival; Investigations.........................................56
9.4 Notices..........................................................56
9.5 Assignment; Third Party Beneficiaries............................57
9.6 Governing Law....................................................58
9.7 Counterparts.....................................................58
9.8 Severability.....................................................58
9.9 Interpretation...................................................58
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TABLE OF CONTENTS
(CONTINUED)
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9.10 Entire Agreement.................................................58
9.11 Definition of Law................................................58
9.12 Rules of Construction............................................58
Exhibits
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Exhibit A - Certificate of Merger
Exhibit B - Form of SEQUUS Affiliates Agreement
Exhibit C - Form of ALZA Affiliates Agreement
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INDEX OF DEFINED TERMS
"Acquisition Proposal"............ Section 5.2(c)
"Action".......................... Section 3.12(a)
"Affiliates"...................... Section 3.22
"Antitrust Division".............. Section 5.5(a)
"ALZA"............................ Preamble
"ALZA Balance Sheet".............. Section 4.8
"ALZA Closing Value".............. Section 2.1(f)
"ALZA Common Stock"............... Recitals
"ALZA Contract"................... Section 4.15(b)
"ALZA Disclosure Statement"....... Article IV
"ALZA Exchange Options"........... Section 2.2
"ALZA Financial Statements"....... Section 4.8
"ALZA IP Rights................... Section 4.16(a)
"ALZA Material Adverse Effect".... Section 4.1
"ALZA Purchase Plan............... Section 2.2(b)
"ALZA SEC Reports"................ Section 4.6(a)
"ALZA Subsidiaries"............... Section 4.1
"Business Combination"............ Section 5.1(b)
"CERCLA".......................... Section 3.20(a)(iii)
"Certificate of Merger"........... Section 1.2
"Closing"......................... Section 1.2
"Closing Date".................... Section 1.2
"COBRA"........................... Section 3.15(b)
"Code"............................ Recitals
"Confidentiality Agreements"...... Section 5.3
"Contractor"...................... Section 3.20(a)(i)
"CSA"............................. Section 3.16(b)
"DEA"............................. Section 3.16(b)
"Delaware Law".................... Section 1.1
"Effective Time".................. Section 1.2
"Employee Benefit Plans".......... Section 3.19(a)
"Environment"..................... Section 3.20(a)(ii)
"Environmental Law"............... Section 3.20(a)(iii)
"Environmental Permit"............ Section 3.20(a)(iv)
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INDEX OF DEFINED TERMS
(CONTINUED)
"ERISA"........................... Section 3.19(a)
"ERISA Affiliate"................. Section 3.19(a)
"Exchange Act".................... Section 3.3
"Exchange Agent".................. Section 2.3(a)
"Exchange Multiple"............... Section 2.1(g)
"Exchange Quotient"............... Section 2.1(g)
"Exchange Ratio".................. Section 2.1(a)
"FDA"............................. Section 3.16(b)
"FDCA"............................ Section 3.16(b)
"Foreign Plan".................... Section 3.19(n)
"FTC"............................. Section 5.5(a)
"GAAP"............................ Section 3.8
"Government Entity"............... Section 3.3
"group health plan"............... Section 3.19(k)
"Hazardous Material".............. Section 3.20(a)(v)
"Holder".......................... Section 2.3(c)
"HSR Act"......................... Section 3.3
"Identified Products"............. Section 4.15(a)
"Identified Technology"........... Section 4.16(b)
"Indemnified Parties"............. Section 5.8(b)
"IRS"............................. Section 3.19(d)
"law"............................. Section 9.11
"Material Products"............... Section 5.1(a)(x)
"Merger".......................... Recitals
"Merger Sub"...................... Preamble
"Merger Sub Common Stock"......... Section 2.1(d)
"NYSE"............................ Section 2.1(f)
"Pension Plans"................... Section 3.19(a)
"Person".......................... Section 2.1(g)
"Potential Acquiror".............. Section 5.2(a)
"Proxy Statement/Prospectus"...... Section 3.24
"Real Property"................... Section 3.20(b)(iv)
"Reference Date".................. Section 3.8
"Registration Statement".......... Section 3.24
"SEC"............................. Section 3.7(a)
"Securities Act".................. Section 3.7(a)
"SEQUUS".......................... Preamble
"SEQUUS Balance Sheet"............ Section 3.8
"SEQUUS Certificate".............. Section 2.3(c)
"SEQUUS Common Stock"............. Recitals
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INDEX OF DEFINED TERMS
(CONTINUED)
"SEQUUS Contract"................. Section 3.14(b)
"SEQUUS Disclosure Statement"..... Article III
"SEQUUS Purchase Plan"............ Section 2.2(b)
"SEQUUS Financial Statements"..... Section 3.8
"SEQUUS IP Rights"................ Section 3.17(a)
"SEQUUS Material Adverse Effect".. Section 3.1(a)
"SEQUUS Negative Vote"............ Section 8.1(d)
"SEQUUS Options".................. Section 2.2
"SEQUUS Preferred Stock".......... Section 3.6(a)
"SEQUUS Rights"................... Section 2.1(a)
"SEQUUS Rights Plan".............. Section 2.1(a)
"SEQUUS SEC Reports".............. Section 3.7(a)
"SEQUUS Special Meeting".......... Section 5.4(a)
"SEQUUS Stock Plan"............... Section 2.2
"Stock Option Agreement".......... Section 3.2
"Subsidiary"...................... Section 2.1(g)
"Superior Proposal"............... Section 5.2(d)
"Surviving Corporation"........... Section 1.1
"Tax" or "Taxes".................. Section 3.18(a)
"Tax Return"...................... Section 3.18(a)
"Voting Agreements"............... Section 3.6(b)
"WARN"............................ Section 5.19(e)
"Welfare Plans"................... Section 3.19(a)
"Year 2000 Compliant"............. Section 3.27
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of October 4, 1998 by and among ALZA Corporation, a Delaware corporation
("ALZA"), Argyle Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of ALZA ("Merger Sub"), and SEQUUS Pharmaceuticals, Inc., a Delaware
corporation ("SEQUUS"), with respect to the following facts:
A. The respective boards of directors of ALZA, Merger Sub and SEQUUS have
approved and declared advisable the merger of Merger Sub with and into SEQUUS
(the "Merger"), upon the terms and subject to the conditions set forth herein,
and have determined that the Merger is fair to, and in the best interests of,
their respective stockholders.
B. Pursuant to the Merger, among other things, the outstanding shares of
SEQUUS Common Stock, $.0001 par value ("SEQUUS Common Stock"), will be converted
into shares of ALZA Common Stock, $.01 par value ("ALZA Common Stock"), at the
rate set forth herein.
C. For United States federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
D. For financial accounting purposes, it is intended that the Merger will
be accounted for as a pooling of interests transaction.
The parties agree as follows:
ARTICLE I
THE MERGER
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1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware General Corporation Law (the "Delaware Law"),
(i) Merger Sub shall be merged with and into SEQUUS, (ii) the separate corporate
existence of Merger Sub shall cease, and (iii) SEQUUS shall be the surviving
corporation. SEQUUS, as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 CLOSING; EFFECTIVE TIME. The closing of the Merger and the other
transactions contemplated hereby (the "Closing") will take place at 10:00 a.m.,
local time, on a date to be specified by the parties (the "Closing Date"), which
shall be no later than
the first business day after satisfaction or waiver of the conditions set forth
in Articles VI and VII, unless another time or date is agreed to by the parties
hereto. The Closing shall take place at the offices of Xxxxxx Xxxxxx White &
XxXxxxxxx, 000 Xxxxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx, or at such other
location as the parties hereto shall mutually agree. At the Closing, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger substantially in the form of Exhibit A (the "Certificate of Merger") with
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the Secretary of State of the State of Delaware, in accordance with the relevant
provisions of the Delaware Law (the time of such filing, or such later time as
may be agreed in writing by the parties and specified in the Certificate of
Merger, being the "Effective Time").
1.3 EFFECTS OF THE MERGER. The effects of the Merger shall be as
provided in this Agreement, the Certificate of Merger and the applicable
provisions of the Delaware Law. Without limiting the foregoing, at the Effective
Time all the property, rights, privileges, powers and franchises of SEQUUS and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of SEQUUS and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Subject to Section 5.8, from and after the Effective Time, the
certificate of incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation; provided, however, that at the Effective Time the certificate
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of incorporation of Merger Sub shall be amended so that the name of Surviving
Corporation shall be "SEQUUS Pharmaceuticals, Inc."
(b) Subject to Section 5.8, from and after the Effective Time, the
bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the bylaws of the Surviving Corporation.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of Merger Sub immediately prior to the Effective Time shall serve
as the directors and officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
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2.1 CONVERSION OF STOCK. Pursuant to the Merger, and without any action
on the part of the holders of any outstanding shares of capital stock or other
securities of SEQUUS or Merger Sub:
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(a) As of the Effective Time, each share of SEQUUS Common Stock,
together with the rights (the "SEQUUS Rights") associated with each such share
issued in connection with SEQUUS' Rights Agreement (the "SEQUUS Rights Plan")
dated April 17, 1997 between SEQUUS and ChaseMellon Shareholders Services,
L.L.C., issued and outstanding immediately prior to the Effective Time (other
than shares of SEQUUS Common Stock to be canceled pursuant to Section 2.1(c))
shall be automatically converted into 0.40 (the "Exchange Ratio") of a fully
paid and nonassessable share of ALZA Common Stock.
(b) As of the Effective Time, each holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of SEQUUS Common Stock shall cease to have any rights with
respect thereto, except the right to receive (i) a certificate (or direct
registration) representing the number of whole shares of ALZA Common Stock into
which such shares have been converted, and (ii) cash in lieu of fractional
shares of ALZA Common Stock in accordance with Section 2.1(f), without interest.
(c) As of the Effective Time, each share of SEQUUS Common Stock held
of record immediately prior to the Effective Time by SEQUUS, Merger Sub, ALZA or
any Subsidiary (as defined in Section 2.1(g)) of SEQUUS or of ALZA shall be
canceled and extinguished without any conversion thereof.
(d) As of the Effective Time, each share of Common Stock, $.0001 par
value, of Merger Sub (the "Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be canceled, extinguished and
automatically converted into one validly issued, fully paid and nonassessable
share of Common Stock, $.0001 par value, of the Surviving Corporation. Each
certificate evidencing ownership of a number of shares of Merger Sub Common
Stock shall be deemed to evidence ownership of the same number of shares of
Common Stock, $.0001 par value, of the Surviving Corporation.
(e) The Exchange Ratio shall be adjusted, or ALZA shall make
appropriate provision, to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into ALZA Common Stock or SEQUUS Common Stock),
extraordinary dividend or distribution, reorganization, recapitalization or
other like change with respect to ALZA Common Stock or (subject to Section 5.1)
SEQUUS Common Stock occurring or having a record date or an effective date on or
after the date hereof and prior to the Effective Time.
(f) No fraction of a share of ALZA Common Stock will be issued by
virtue of the Merger. Instead, each holder of shares of SEQUUS Common Stock who
3
would otherwise be entitled to a fraction of a share of ALZA Common Stock (after
aggregating all fractional shares of ALZA Common Stock to be received by such
holder) shall receive from ALZA an amount of cash (rounded down to the nearest
whole cent) equal to the product of (i) such fraction, multiplied by (ii) the
ALZA Closing Value. For the purposes of this Agreement, "ALZA Closing Value"
shall mean the closing price per share of ALZA Common Stock as reported on the
New York Stock Exchange ("NYSE") Composite Tape on the trading day immediately
preceding the Effective Time.
(g) For the purposes of this Agreement, the "Exchange Multiple" of
any quantity means the product obtained from multiplying such quantity by the
Exchange Ratio, and the "Exchange Quotient" of any quantity means the quotient
obtained from dividing such quantity by the Exchange Ratio. For purposes of this
Agreement, the term "Subsidiary", when used with respect to any Person, means
any corporation or other organization, whether incorporated or unincorporated,
of which (A) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person
(through ownership of securities, by contract or otherwise) or (B) such Person
or any Subsidiary of such Person is a general partner of any general partnership
or a manager of any limited liability company. For the purposes of this
Agreement, the term "Person" means any individual, organization, corporation,
partnership, joint venture, limited liability company, trust or entity of any
kind.
2.2 SEQUUS OPTIONS AND WARRANTS; SEQUUS PURCHASE PLAN.
(a) As of the Effective Time, ALZA shall, to the full extent
permitted by applicable law, assume all of the stock options of SEQUUS
outstanding immediately prior to the Effective Time under the SEQUUS Stock Plans
(as defined below) (the "SEQUUS Options"). As of the Effective Time, ALZA shall
assume in accordance with their terms, all the warrants to purchase SEQUUS
Common Stock dated May 19, 1995 (which expire on May 25, 1999) outstanding
immediately prior to the Effective Time (the "Warrants"). For purposes of this
Agreement, "SEQUUS Stock Plans" means SEQUUS' 1987 Employee Stock Option Plan,
1987 Consultant Stock Option Plan, 1990 Director Stock Option Plan and Equity
Incentive Plan (in each case, as amended prior to the date hereof). Each SEQUUS
Option, whether or not exercisable at the Effective Time, to the full extent
permitted by applicable law, shall be assumed by ALZA in such a manner that it
shall be exercisable upon the same terms and conditions as under the SEQUUS
Stock Plan pursuant to which it was granted and the applicable option agreement
issued thereunder (including, without limitation, the lapse of all rights of
repurchase with respect to such SEQUUS Options granted under the 1987 Employee
Stock Option Plan and the 1987 Consultant Stock Option Plan in accordance with
the resolutions of the SEQUUS board of directors approved on March 10, 1994, and
June 19, 1995); and each Warrant
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shall be assumed by ALZA in the manner provided for in such Warrant so that it
shall be exercisable on the terms and conditions provided in such Warrant;
provided that (i) each such option thereafter shall be exercisable for a number
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of shares of ALZA Common Stock (rounded down to the nearest whole share) equal
to the Exchange Multiple of the number of shares of SEQUUS Common Stock subject
to such option, and (ii) the price per share of ALZA Common Stock thereafter
shall equal the Exchange Quotient (rounded up to the nearest whole cent) of the
option price per share of SEQUUS Common Stock subject to such option in effect
immediately prior to the Effective Time (the "ALZA Exchange Options"); provided,
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further that (i) each such Warrant thereafter shall be exercisable for a number
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of shares of ALZA Common Stock equal to the Exchange Multiple of the number of
shares of SEQUUS Common Stock subject to such Warrant, and (ii) the price per
share of ALZA Common Stock thereafter shall equal the Exchange Quotient of the
Warrant price per share of SEQUUS Common Stock subject to such Warrant in effect
immediately prior to the Effective Time. Prior to the Effective Time, SEQUUS
shall make all adjustments provided for in the SEQUUS Stock Plans with respect
to the SEQUUS Options to facilitate the implementation of the provisions of this
Section 2.2. It is intended that SEQUUS Options assumed by ALZA shall qualify
following the Effective Time as incentive stock options, as defined in Section
422 of the Code, to the extent SEQUUS Options qualified as incentive stock
options immediately prior to the Effective Time, and the provisions of this
Section 2.2(a) shall be applied in a manner that is consistent with such intent.
(b) SEQUUS shall amend the SEQUUS Employee Stock Purchase Plan (the
"SEQUUS Purchase Plan") so that as of the Effective Time: (i) the SEQUUS
Purchase Plan shall provide that no additional purchase rights shall be issued
under it; (ii) the purchase dates of each then-outstanding purchase right
granted under the SEQUUS Purchase Plan shall conform to the purchase dates then
in effect under the ALZA Amended and Restated Employee Stock Purchase Plan (the
"ALZA Purchase Plan"); and (iii) each purchase right granted under the SEQUUS
Purchase Plan shall terminate (if it has not previously terminated by its terms)
on the purchase date under the ALZA Purchase Plan immediately preceding August
1, 1999, or if earlier, on the date that the holder thereof enrolls in the ALZA
Purchase Plan. As of the Effective Time, each then-outstanding purchase right
granted under the SEQUUS Purchase Plan shall be assumed by ALZA in such a manner
that it shall be exercisable upon the same terms and conditions (as amended as
described above) as under the SEQUUS Purchase Plan immediately before the
Effective Time; provided that each such purchase right shall thereafter be
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exercisable for whole shares of ALZA Common Stock (rounded down to the nearest
whole share) equal to the Exchange Multiple of the number of shares of SEQUUS
Common Stock for which such purchase right would otherwise have been exercisable
determined as of the relevant grant date under the SEQUUS Purchase Plan at a
purchase price per share equal to 85% of the lower of: (i) the Exchange Quotient
(rounded up to
5
the nearest whole cent) of the fair market value of a share of SEQUUS Common
Stock on the relevant grant date under the SEQUUS Purchase Plan or (ii) the fair
market value of a share of a ALZA Common Stock on the relevant purchase date.
2.3 EXCHANGE OF STOCK CERTIFICATES.
(a) At or prior to the Effective Time, ALZA shall enter into an
agreement with a bank or trust company selected by ALZA and reasonably
acceptable to SEQUUS to act as the exchange agent for the Merger (the "Exchange
Agent").
(b) At or prior to the Effective Time, ALZA shall supply or cause to
be supplied to or for the account of the Exchange Agent in trust for the benefit
of the holders of SEQUUS Common Stock, for exchange pursuant to this Section
2.3, (i) certificates (or direct registration) evidencing the shares of ALZA
Common Stock issuable pursuant to Section 2.1 to be exchanged for outstanding
shares of SEQUUS Common Stock, and (ii) cash in an aggregate amount sufficient
to make the payments in lieu of fractional shares provided for in Section
2.1(f).
(c) Promptly after the Effective Time, ALZA shall mail or shall
cause to be mailed to each Holder a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and title
to the SEQUUS Certificates shall pass, only upon proper delivery of the SEQUUS
Certificates to the Exchange Agent) and instructions for surrender of the SEQUUS
Certificates. Upon surrender to the Exchange Agent of a SEQUUS Certificate,
together with such letter of transmittal duly executed, the Holder shall be
entitled to receive in exchange therefor: (i) certificates evidencing that
number of shares of ALZA Common Stock issuable to such Holder in accordance with
this Article II; (ii) any dividends or other distributions that such Holder has
the right to receive pursuant to Section 2.3(d); and (iii) cash in respect of
fractional shares as provided in Section 2.1(f), and such SEQUUS Certificate so
surrendered shall forthwith be canceled. No certificate representing shares of
ALZA Common Stock will be issued to a Person who is not the registered owner of
a surrendered SEQUUS Certificate unless (i) the SEQUUS Certificate so
surrendered has been properly endorsed or otherwise is in proper form for
transfer, and (ii) such Person shall either (A) pay any transfer or other tax
required by reason of such issuance or (B) establish to the reasonable
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
2.3, from and after the Effective Time, each SEQUUS Certificate shall be deemed
to represent, for all purposes other than payment of dividends, the right to
receive a certificate representing the number of full shares of ALZA Common
Stock as determined in accordance with this Article II and cash in lieu of
fractional shares as provided in Section 2.1(f). For purposes of this Agreement,
"SEQUUS Certificate" means a certificate which immediately prior to the
Effective Time
6
represented shares of SEQUUS Common Stock, and "Holder" means a person who holds
one or more SEQUUS Certificates as of the Effective Time.
(d) No dividend or other distribution declared with respect to ALZA
Common Stock with a record date after the Effective Time will be paid to Holders
of unsurrendered SEQUUS Certificates until such Holders surrender their SEQUUS
Certificates. Upon the surrender of such SEQUUS Certificates, there shall be
paid to such Holders, promptly after such surrender, the amount of dividends or
other distributions, excluding interest, declared with a record date after the
Effective Time and not paid because of the failure to surrender SEQUUS
Certificates for exchange.
(e) Notwithstanding anything to the contrary in this Agreement,
neither the Exchange Agent, ALZA, the Surviving Corporation nor any party hereto
shall be liable to any holder of shares of SEQUUS Common Stock for shares of
ALZA Common Stock or cash in lieu of fractional shares properly delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.4 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any SEQUUS
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue and pay in respect of such lost, stolen or destroyed SEQUUS Certificates,
upon the making of an affidavit of that fact by the holder thereof, certificates
representing the shares of ALZA Common Stock as may be required pursuant to
Section 2.1 and cash in lieu of fractional shares, if any, as may be required
pursuant to Section 2.1(f) and any dividends or distributions payable pursuant
to Section 2.3(d); provided, however, that ALZA may, in its discretion and as a
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condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed SEQUUS Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against ALZA
or the Exchange Agent with respect to the SEQUUS Certificates alleged to have
been lost, stolen or destroyed.
2.5 TAX CONSEQUENCES. For United States federal income tax purposes, it
is intended by the parties hereto that the Merger qualify as a reorganization
within the meaning of Section 368(a) of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SEQUUS
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SEQUUS makes to ALZA and Merger Sub the representations and warranties
contained in this Article III, in each case subject to the exceptions set forth
in the disclosure statement, dated as of the date hereof, delivered by SEQUUS to
ALZA prior to the execution of this Agreement (the "SEQUUS Disclosure
Statement"). The SEQUUS Disclosure Statement shall be arranged in schedules
corresponding to the numbered
7
Sections of this Article III, and the disclosure in any Section of the SEQUUS
Disclosure Statement shall qualify only the corresponding Section of this
Article III, unless it is reasonably apparent that the disclosed contract,
event, fact, circumstance or other matter could relate to other representations
or warranties or the matters covered thereby.
3.1 ORGANIZATION, ETC.
(a) Each of SEQUUS and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of SEQUUS and its Subsidiaries is duly qualified as
a foreign Person to do business, and is in good standing, in each jurisdiction
where the character of its owned or leased properties or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified or in good standing would not, individually or in the aggregate, have
a SEQUUS Material Adverse Effect. For the purposes of this Agreement, "SEQUUS
Material Adverse Effect" means any change, event or effect that is materially
adverse to the business, prospects (as they relate to Doxil), financial
condition or results of operations of SEQUUS and its Subsidiaries taken as a
whole; provided, however, that: (i) any adverse change, event or effect arising
from or relating to general business or economic conditions which does not
affect SEQUUS in a materially disproportionate manner, shall not be deemed to
constitute, and shall not be taken into account in determining whether there has
been, a "SEQUUS Material Adverse Effect"; (ii) any adverse change, event or
effect relating to or affecting the oncological pharmaceuticals industry
generally, or relating to or affecting the sale, marketing or development of
oncological pharmaceuticals generally, which does not affect SEQUUS in a
materially disproportionate manner, shall not be deemed to constitute, and shall
not be taken into account in determining whether there has been, a "SEQUUS
Material Adverse Effect"; (iii) any adverse change, event or effect referred to
in Section 3.1 of the SEQUUS Disclosure Statement concerning the competitive
products identified therein shall not be deemed to constitute, and shall not be
taken into account in determining whether there has been, a "SEQUUS Material
Adverse Effect"; and (iv) any adverse change, event or effect arising from or
relating to the announcement or pendency of the Merger shall not be deemed to
constitute, and shall not be taken into account in determining whether there has
been, a "SEQUUS Material Adverse Effect"; provided, further, that the failure of
-------- -------
SEQUUS to meet the published estimates, expectations or projections of financial
analysts shall not by itself constitute a "SEQUUS Material Adverse Effect".
(b) Neither SEQUUS nor any of its Subsidiaries is in violation of
any provision of its certificate of incorporation, bylaws or any other charter
document. Section 3.1 of the SEQUUS Disclosure Statement sets forth (i) the
full name of each
8
Subsidiary of SEQUUS, its capitalization and the ownership interest of SEQUUS
and each other Person (if any) therein, (ii) the jurisdiction in which each such
Subsidiary is organized, (iii) each jurisdiction in which SEQUUS and each
Subsidiary of SEQUUS is qualified to do business as a foreign Person, (iv) a
brief summary of the business and material operations of each Subsidiary of
SEQUUS, and (v) the names of the current directors and officers of SEQUUS and of
each Subsidiary of SEQUUS. SEQUUS has made available to ALZA accurate and
complete copies of the certificate of incorporation, bylaws and any other
charter documents, as currently in effect, of SEQUUS and each of its
Subsidiaries.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. SEQUUS has full corporate
power and authority to (i) execute and deliver this Agreement, and (ii) assuming
the approval of the Merger by a majority of the outstanding shares of SEQUUS
Common Stock at the SEQUUS Special Meeting or any adjournment or postponement
thereof in accordance with Delaware Law, consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
by SEQUUS and the consummation by SEQUUS of the Merger and the other
transactions contemplated hereby, have been duly and validly authorized by the
unanimous vote of the board of directors of SEQUUS, and no other corporate
proceedings on the part of SEQUUS are necessary to authorize this Agreement or
to consummate the Merger and the other transactions contemplated hereby (other
than the approval of the Merger by a majority of the outstanding shares of
SEQUUS Common Stock at the SEQUUS Special Meeting or any adjournment or
postponement thereof in accordance with the Delaware Law). This Agreement has
been duly and validly executed and delivered by SEQUUS and, assuming due
authorization, execution and delivery by ALZA and by Merger Sub, constitutes a
valid and binding agreement of SEQUUS, enforceable against SEQUUS in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
3.3 NO VIOLATIONS, ETC. No filing with or notification to, and no
permit, authorization, consent or approval of, any court, administrative agency,
commission, or other governmental or regulatory body, authority or
instrumentality ("Government Entity") is necessary to be made or obtained on the
part of SEQUUS for the consummation by SEQUUS of the Merger and the other
transactions contemplated hereby, or (assuming, for this purpose, that no laws
are applicable to ALZA that are not also applicable to SEQUUS) for the exercise
by ALZA and the Surviving Corporation of full rights to own and operate the
business of SEQUUS and its Subsidiaries as presently being conducted, except (i)
for the filing of the Certificate of Merger as required by Delaware Law, (ii) as
may be required under the applicable requirements of the Securities and Exchange
Act of 1934, as amended (together with the Rules and Regulations promulgated
thereunder, the "Exchange Act"), state securities or "blue sky" laws and
9
state takeover laws, and (iii) for any filing required under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx") or any antitrust laws
of any foreign country. Neither the execution and delivery by SEQUUS of this
Agreement, nor the consummation of the Merger by SEQUUS and the other
transactions contemplated hereby, nor compliance by SEQUUS with all of the
provisions hereof, nor the exercise by ALZA and the Surviving Corporation of
full rights to own and operate the business of SEQUUS and its Subsidiaries as
presently being conducted (assuming, for this purpose, that no laws are
applicable to ALZA that are not also applicable to SEQUUS) will, subject to
obtaining the approval of this Agreement by the holders of a majority of the
outstanding shares of SEQUUS Common Stock at the SEQUUS Special Meeting or any
adjournment or postponement thereof in accordance with Delaware Law, (i)
conflict with or result in any breach of any provision of the certificate of
incorporation, bylaws or other charter document of SEQUUS or any of its
Subsidiaries, (ii) violate any material order, writ, injunction, decree,
statute, rule or regulation applicable to SEQUUS or any of its Subsidiaries, or
by which any of their properties or assets is bound, or (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under, or result in any material adverse change in, or
give rise to any right of termination, cancellation, acceleration, redemption or
repurchase under, any of the terms, conditions or provisions of any material
note, bond, mortgage, indenture, deed of trust, license, lease, contract,
agreement or other instrument or obligation to which SEQUUS or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound. Section 3.3 of the SEQUUS Disclosure Statement lists all
consents, waivers and approvals required to be obtained other than by ALZA or
any ALZA Subsidiary in connection with the consummation by SEQUUS of the
transactions contemplated hereby under any of SEQUUS' or any of its
Subsidiaries' notes, bonds, mortgages, indentures, deeds of trust, licenses,
leases, contracts, agreements or other instruments or obligations the failure to
obtain which would have a SEQUUS Material Adverse Effect.
3.4 BOARD RECOMMENDATION. The board of directors of SEQUUS has, at a
meeting of such board duly held on October 4, 1998, (i) approved this Agreement,
(ii) determined that this Agreement is fair to and in the best interests of the
stockholders of SEQUUS, (iii) resolved to recommend approval of this Agreement
to the stockholders of SEQUUS, (iv) resolved that SEQUUS take all action
necessary to exempt the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby from the
provisions of all applicable state antitakeover statutes or regulations
including but not limited to Section 203 of the Delaware Law, and (v) resolved
to render the rights issued under the SEQUUS Rights Plan inapplicable to the
Merger, this Agreement, and the other transactions contemplated hereby.
3.5 FAIRNESS OPINION. SEQUUS has received the opinion of Credit Suisse
First Boston dated the date of the approval of this Agreement by the board of
directors of
10
SEQUUS to the effect that the Exchange Ratio is fair to SEQUUS' stockholders
from a financial point of view, and will provide a copy of such opinion to ALZA.
3.6 CAPITALIZATION.
(a) The authorized capital stock of SEQUUS consists of 45,000,000
shares of SEQUUS Common Stock and 4,000,000 shares of Preferred Stock, $.01 par
value ("SEQUUS Preferred Stock"), of which 450,000 shares have been designated
Series A Preferred Stock. As of September 30, 1998, there were (i) 31,772,902
shares of SEQUUS Common Stock outstanding, (ii) no shares of SEQUUS Preferred
Stock outstanding, and (iii) no treasury shares held by SEQUUS.
(b) Except as referred to in Section 3.6(a) hereof, and except for
securities issued or outstanding or reserved for issuance under the SEQUUS Stock
Plans, SEQUUS Purchase Plan, SEQUUS Rights Plan and the warrants dated May 19,
1995, as of September 30, 1998 there were no equity securities of any class of
SEQUUS, or any securities convertible into or exercisable for any such equity
securities, issued, reserved for issuance or outstanding. Except for options
granted under the SEQUUS Stock Plans, purchase rights under the SEQUUS Purchase
Plan, SEQUUS Rights and the warrants dated May 19, 1995, there are no warrants,
options, convertible securities, calls, rights, stock appreciation rights,
preemptive rights, rights of first refusal, or agreements or commitments of any
nature obligating SEQUUS to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity interests
of SEQUUS, or obligating SEQUUS to grant, issue, extend, accelerate the vesting
of, or enter into, any such warrant, option, convertible security, call, right,
stock appreciation right, preemptive right, right of first refusal, agreement or
commitment. To the knowledge of SEQUUS as of the date of this Agreement, except
for the Voting Agreements entered into as of the date of this agreement by the
members of the board of directors of SEQUUS (the "Voting Agreements"), there are
no voting trusts, proxies or other similar agreements or understandings with
respect to the capital stock of SEQUUS.
(c) True and complete copies of each SEQUUS Stock Plan and the
SEQUUS Purchase Plan, and of the forms of all agreements and instruments
relating to or issued under each thereof, have been made available to ALZA. Such
agreements, instruments and forms have not been amended, modified or
supplemented in any significant respect, and there are no agreements to amend,
modify or supplement in any significant respect any such agreements, instruments
or forms.
(d) Section 3.6 of the SEQUUS Disclosure Statement sets forth the
following information with respect to each option to purchase SEQUUS Common
Stock outstanding as of the date of this Agreement: the aggregate number of
shares issuable thereunder, the type of option, the grant date, the expiration
date and the exercise price.
11
Each SEQUUS Option was or will be granted in accordance with the terms of the
SEQUUS Stock Plan applicable thereto. The terms of each of the SEQUUS Stock
Plans do not prohibit the assumption of the SEQUUS Options as provided in
Section 2.2(a). Consummation of the Merger will not accelerate vesting of any
options to purchase SEQUUS Common Stock outstanding as of the date of this
Agreement, except as described in Section 3.6 of the SEQUUS Disclosure
Statement.
3.7 SEC FILINGS.
(a) SEQUUS has filed with the Securities and Exchange Commission
(the "SEC") all required forms, reports, registration statements and documents
required to be filed by it with the SEC (collectively, all such forms, reports,
registration statements and documents filed since January 1, 1995 are referred
to herein as the "SEQUUS SEC Reports"). All of the SEQUUS SEC Reports complied
as to form, when filed, in all material respects with the applicable provisions
of the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act") and the Exchange Act.
Accurate and complete copies of the SEQUUS SEC Reports have been made available
to ALZA. As of their respective dates, the SEQUUS SEC Reports (when taken
together with the documents incorporated by reference therein and all exhibits
and schedules thereto) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. SEQUUS has been advised by each of its executive officers
and directors that each such person and such persons' affiliates have complied
with all filing requirements relating to SEQUUS under Section 13 and Section
16(a) of the Exchange Act except as disclosed in the SEQUUS SEC Reports.
3.8 FINANCIAL STATEMENTS. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the SEQUUS SEC
Reports (the "SEQUUS Financial Statements"), (x) was prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be permitted
by the SEC on Form 10-Q under the Exchange Act) and (y) fairly presented the
financial position of SEQUUS as at the respective dates thereof and the results
of its operations and cash flows for the periods indicated, consistent with the
books and records of SEQUUS, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which, in the case of the interim financial statements contained in SEQUUS' Form
10-Q for the quarter ended June 30, 1998, are not expected to be material in
amount. The balance sheet of SEQUUS contained in SEQUUS' Form 10-Q for the
quarter ended June 30, 1998 (the "Reference Date") is hereinafter referred to as
the "SEQUUS Balance Sheet."
12
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Neither SEQUUS nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
other than (i) liabilities included in the SEQUUS Balance Sheet and the related
notes to the financial statements, (ii) normal or recurring liabilities incurred
since the Reference Date in the ordinary course of business consistent with past
practice which, individually or in the aggregate, would not be reasonably likely
to have a SEQUUS Material Adverse Effect, and (iii) liabilities under this
Agreement.
3.10 ABSENCE OF CHANGES OR EVENTS. Except as contemplated by this
Agreement, since the Reference Date, no SEQUUS Material Adverse Effect has
occurred. In addition, between the Reference Date and the date of this
Agreement, SEQUUS and its Subsidiaries have not, directly or indirectly:
(a) purchased, otherwise acquired, or agreed to purchase or
otherwise acquire, any shares of capital stock of SEQUUS or any of its
Subsidiaries, or declared, set aside or paid any dividend or otherwise made a
distribution (whether in cash, stock or property or any combination thereof) in
respect of their capital stock (other than dividends or other distributions
payable solely to SEQUUS or a wholly owned Subsidiary of SEQUUS or repurchases
of unvested shares from employees in connection with the termination of
employment (for any reason) in accordance with agreements outstanding or
policies existing on the date hereof, or entered into thereafter in the ordinary
course of business);
(b) (i) created or incurred any indebtedness for borrowed money
exceeding $250,000 in the aggregate, or (ii) assumed, guaranteed, endorsed or
otherwise as an accommodation become responsible for the obligations of any
other individual, firm or corporation, made any loans or advances to any other
individual, firm or corporation exceeding $100,000 in the aggregate except for
travel advances and other advances made to employees in the ordinary course of
business;
(c) instituted any change in accounting methods, principles or
practices other than as required by GAAP or the rules and regulations
promulgated by the SEC and disclosed in the notes to the SEQUUS Financial
Statements;
(d) revalued any assets, including, without limitation, writing down
the value of inventory or writing off notes or accounts receivable in excess of
amounts previously reserved as reflected in the SEQUUS Balance Sheet;
(e) suffered any damage, destruction or loss, whether covered by
insurance or not, except for such as would not, individually and in the
aggregate exceed $250,000;
13
(f) (i) increased in any manner the compensation of any of its
directors, officers (including specifically that in the aggregate bonuses
payable to its officers with respect to 1998 will not exceed 30% of the
aggregate salaries of such officers for 1998) or, other than in the ordinary
course of business and consistent with past practice or pursuant to written
agreements outstanding on the date hereof, non-officer employees; (ii) granted
any severance or termination pay to any Person; (iii) entered into any oral or
written employment, consulting, indemnification or severance agreement with any
Person other than agreements involving amounts in each case not in excess of
$75,000; (iv) other than as required by law or the specific terms of its
Employee Benefit Plans, adopted, become obligated under, or amended any employee
benefit plan, program or arrangement; or (v) repriced any SEQUUS options granted
under the SEQUUS Stock Plans;
(g) sold, transferred, leased to a third party, licensed to a third
party, pledged, mortgaged, encumbered, or otherwise disposed of, or agreed to
sell, transfer, lease to a third party, license to a third party, pledge,
mortgage, encumber or otherwise dispose of, any material portion of any material
properties (including intangibles, real, personal or mixed);
(h) amended its certificate of incorporation, bylaws or any other
charter document, or effected or been a party to any merger, consolidation,
share exchange, business combination, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(i) made any capital expenditure in any calendar month which, when
added to all other capital expenditures made by or on behalf of SEQUUS and its
Subsidiaries in such calendar month resulted in such capital expenditures
exceeding $250,000 in the aggregate;
(j) paid, discharged or satisfied any material claims, liabilities
or obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liquidated claims, liabilities or
obligations when due and the payment, discharge or satisfaction of liabilities
(including accounts payable) in the ordinary course of business and consistent
with past practice, or collected, or accelerated the collection of, any material
amounts owed (including accounts receivable) other than their collection in the
ordinary course of business;
(k) waived, released, assigned, settled or compromised any material
claim or litigation, or commenced a lawsuit other than in the ordinary course of
business for the routine collection of bills; or
14
(l) offered or become obligated to do any of the things described in
the preceding clauses (a) through (k) other than as expressly contemplated or
provided for in this Agreement.
3.11 INTENTIONALLY OMITTED.
3.12 LITIGATION.
(a) There is no private or governmental action or suit (whether in
law or in equity), or governmental investigation or proceeding of any nature
("Action") pending or, to the knowledge of SEQUUS, threatened against SEQUUS or
any of its Subsidiaries, or any of their respective officers and directors (in
their capacities as such), or involving any of their assets, before any court,
governmental or regulatory authority or body, or arbitration tribunal, except
for those Actions which, individually and in the aggregate, would not have a
SEQUUS Material Adverse Effect. As of the date of this Agreement, there is no
Action pending or, to the knowledge of SEQUUS, threatened which in any manner
challenges seeks to, or is reasonably likely to prevent, enjoin, alter or delay
the transactions contemplated by this Agreement.
(b) There is no outstanding unsatisfied judgment, order, writ,
injunction or decree of any court, governmental or regulatory authority or body,
or arbitration tribunal in a proceeding to which SEQUUS, any Subsidiary of
SEQUUS, or any of their assets is or was a party or by which SEQUUS, any
Subsidiary of SEQUUS, or any of their assets is bound.
3.13 INSURANCE. Section 3.13 of the SEQUUS Disclosure Statement lists
all insurance policies in effect as of the date of this Agreement (including
without limitation workers' compensation insurance policies) covering the
business, properties or assets of SEQUUS and its Subsidiaries, the premiums and
coverages of such policies, and all claims in excess of $50,000 made against any
such policies since January 1, 1995. All such policies are in effect, and true
and complete copies of all such policies have been made available to ALZA.
SEQUUS has not received notice of the cancellation or threat of cancellation of
any of such policies.
3.14 CONTRACTS AND COMMITMENTS.
(a) As of the date of this Agreement, except as filed as an exhibit
to the SEQUUS SEC Reports, neither SEQUUS nor its Subsidiaries is a party to or
bound by any oral or written contract, obligation or commitment of any type in
any of the following categories:
(i) employment agreements, consulting agreements, agreements or
arrangements that contain severance pay, employee or consultant indemnification
15
agreements, agreements or understandings with respect to tax arrangements,
agreements or understandings with respect to expatriate benefits, or post-
employment liabilities or obligations;
(ii) agreements or plans under which benefits will be increased
or accelerated by the occurrence of any of the transactions contemplated by this
Agreement, or under which the value of the benefits will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(iii) agreements, contracts or commitments currently in force
relating to the disposition or acquisition of (i) material assets other than in
the ordinary course of business, or (ii) relating to an ownership interest in
any corporation, partnership, joint venture or other business enterprise;
(iv) material agreements, contracts or commitments for the
purchase of materials, supplies or equipment which provide for purchase prices
substantially greater than those prevailing as of the date of this Agreement for
such materials, supplies or equipment, or which are with sole or single source
suppliers;
(v) guarantees or other agreements, contracts or commitments
under which SEQUUS or any of its Subsidiaries is absolutely or contingently
liable for (A) the performance of any other person, firm or corporation (other
than SEQUUS or its Subsidiaries), or (B) the whole or any part of the
indebtedness or liabilities of any other person, firm or corporation (other than
SEQUUS or its Subsidiaries);
(vi) powers of attorney authorizing the incurrence of a material
obligation on the part of SEQUUS or its Subsidiaries;
(vii) agreements, contracts or commitments which limit or
restrict (A) the geographic territories where SEQUUS or any of its Subsidiaries
may conduct business, (B) the type or lines of business (current or future) in
which they may engage, or (C) any acquisition of assets (tangible or intangible)
by SEQUUS or any of its Subsidiaries outside of the ordinary course of business;
(viii) agreements, contracts or commitments containing any
agreement with respect to a change of control of SEQUUS or any of its
Subsidiaries;
(ix) agreements, contracts or commitments for the borrowing or
lending of money, or the availability of credit (except credit extended by
SEQUUS or any of its Subsidiaries to customers in the ordinary course of
business and consistent with past practice);
16
(x) any hedging, option, derivative or other similar
transaction and any foreign exchange position or contract for the exchange of
currency;
(xi) any joint marketing or joint development agreement, or any
license or distribution agreement relating to any SEQUUS product not cancelable
by SEQUUS upon 90 days notice; or
(xii) any agreement not otherwise disclosed in section 3.14 or
3.17 of the SEQUUS Disclosure Statement expressly obligating SEQUUS to indemnify
any other Person, including but not limited to any employee or consultant of
SEQUUS or any of its Subsidiaries, against any charge of infringement,
misappropriation or misuse of any intellectual property, other than
indemnification provisions contained in purchase orders or customer agreements
arising in the ordinary course of business.
(b) Neither SEQUUS nor any of its Subsidiaries, nor to SEQUUS'
knowledge any other party to a SEQUUS Contract (as defined below), is in breach,
violation or default under, or has received notice that it has breached,
violated or defaulted under (nor does there exist any condition under which,
with the passage of time or the giving of notice or both, could reasonably be
expected to cause such a breach, violation or default under), any material
agreement, contract or commitment to which SEQUUS or any of its Subsidiaries is
a party or by which any of them or any of their properties or assets is bound
(any such agreement, contract or commitment, a "SEQUUS Contract"), other than
any breaches, violations or defaults which individually or in the aggregate
would not have a SEQUUS Material Adverse Effect.
(c) Each SEQUUS Contract is a valid, binding and enforceable
obligation of SEQUUS and, to SEQUUS' knowledge, of the other party or parties
thereto, in accordance with its terms, and in full force and effect, except
where the failure to be valid, binding, enforceable and in full force and effect
would not have a SEQUUS Material Adverse Effect and to the extent enforcement
may be limited by applicable bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
principles of equity or by competition laws of the European Union.
(d) An accurate and complete copy of each SEQUUS Contract has been
made available to ALZA.
3.15 LABOR MATTERS; EMPLOYMENT AND LABOR CONTRACTS.
(a) None of SEQUUS or any of its Subsidiaries is a party to any
union contract or other collective bargaining agreement, nor to the knowledge of
SEQUUS or any of its Subsidiaries are there any activities or proceedings of any
labor union to organize any of its employees. Each of SEQUUS and its
Subsidiaries is in compliance
17
with all applicable (i) laws, regulations and agreements respecting employment
and employment practices, (ii) terms and conditions of employment, and (iii)
occupational health and safety requirements, except for those failures to comply
which, individually or in the aggregate, would not have a SEQUUS Material
Adverse Effect.
(b) There is no labor strike, slowdown or stoppage pending (or any
labor strike or stoppage threatened) against SEQUUS or any of its Subsidiaries.
No petition for certification has been filed and is pending before the National
Labor Relations Board with respect to any employees of SEQUUS or any of its
Subsidiaries who are not currently organized. Neither SEQUUS nor any of its
Subsidiaries has any obligations under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), with respect to any former
employees or qualifying beneficiaries thereunder, except for obligations that
would not have, individually or in the aggregate, a SEQUUS Material Adverse
Effect. There are no actions, complaints or investigations pending or, to the
knowledge of SEQUUS or any of its Subsidiaries, threatened, between SEQUUS or
any of its Subsidiaries and any of their respective employees.
3.16 COMPLIANCE WITH LAWS. (a) Neither SEQUUS nor any of its Subsidiaries
has violated or failed to comply with any statute, law, ordinance, rule or
regulation (including without limitation relating to the export or import of
goods or technology) of any foreign, federal, state or local government or any
other governmental department or agency, except where any such violations or
failures to comply would not, individually or in the aggregate, have a SEQUUS
Material Adverse Effect. SEQUUS and its Subsidiaries have all permits, licenses
and franchises from governmental agencies required to conduct their businesses
as now being conducted and SEQUUS has no knowledge of any reason that SEQUUS
will not be able to obtain the permits, licenses and franchises from any
governmental agency required to conduct its business as proposed to be
conducted, except for those, the absence of which, would not, individually or in
the aggregate, have a SEQUUS Material Adverse Effect.
(b) To SEQUUS' knowledge, as to each product subject to United
States Food and Drug Administration (the "FDA") jurisdiction under the Federal
Food, Drug and Cosmetic Act ("FDCA") and the jurisdiction of the Drug
Enforcement Agency ("DEA") under the Comprehensive Drug Abuse Prevention and
Control Act of 1970 ("CSA") that is manufactured, tested, distributed, held,
and/or marketed by SEQUUS or any Subsidiary, such product is being manufactured,
held, distributed and marketed in substantial compliance with all applicable
requirements under the FDCA and the CSA including, but not limited to, those
relating to investigational use, premarket clearance, good manufacturing
practices, labeling, advertising, record keeping, filing of reports and
security.
18
(c) SEQUUS has, prior to the execution of this Agreement, provided
to ALZA copies of or made available for ALZA's review any and all documents in
its or any Subsidiary's possession material to assessing SEQUUS' or any SEQUUS
Subsidiary's compliance with the FDCA or the CSA and implementing regulations,
including, but not limited to, copies in its possession of (i) all 483s issued
during the last three years; (ii) all audit reports performed during the last
three years, whether performed by SEQUUS, any SEQUUS Subsidiary, or an outside
consultant; (iii) any document (prepared by SEQUUS or otherwise) concerning any
material oral or written communication received from the FDA, the DEA, or the
Department of Justice during the last three years; (iv) any administrative or
judicial order, ruling or agreement issued or entered into during the last three
years in which SEQUUS, any Subsidiary of SEQUUS, or their respective predecessor
companies were a named party or were identified as an interested person; or (v)
any recall notice or order relating to any product of SEQUUS.
3.17 INTELLECTUAL PROPERTY RIGHTS.
(a) SEQUUS and its Subsidiaries own or have the right to use all
intellectual property material to the conduct of their respective businesses
(such intellectual property and such rights are collectively referred to herein
as the "SEQUUS IP Rights"). No royalties or other payments relating to the use
of intellectual property rights are payable by SEQUUS, or to its knowledge, its
licensees or distributors, to any Person with respect to commercialization of
any products presently sold or under development by SEQUUS or its Subsidiaries.
(b) The execution, delivery and performance of this Agreement by
SEQUUS and the consummation by SEQUUS of the transactions contemplated hereby
will not (i) constitute a material breach by SEQUUS or any of its Subsidiaries
of any instrument or agreement governing any SEQUUS IP Rights, (ii) cause the
modification of any terms of any licenses or agreements relating to any SEQUUS
IP Rights including but not limited to the modification of the effective rate of
any royalties or other payments provided for in any such license or agreement,
(iii) cause the forfeiture or termination of any SEQUUS IP Rights, (iv) give
rise to a right of forfeiture or termination of any SEQUUS IP Rights or (v)
materially impair the right of SEQUUS (subject to Section 5.1 of this
Agreement), the Surviving Corporation or ALZA to use, sell or license any SEQUUS
IP Rights or portion thereof.
(c) Neither the manufacture, marketing, license, sale or intended
use (as set forth in Section 3.17(c) of the SEQUUS Disclosure Statement) of any
Material Product by SEQUUS, nor the current use by SEQUUS of the Stealth
Platform Technology, (i) violates in any material respect any license or
agreement between SEQUUS or any of its Subsidiaries and any third party or (ii)
infringes in any material respect any patents or other intellectual property
rights of any other party; and there is no
19
pending or threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any SEQUUS IP Rights, or asserting
that any SEQUUS IP Rights or the proposed use, sale, license or disposition
thereof, or the manufacture, use or sale of any SEQUUS products, conflicts or
will conflict with the rights of any other party.
(d) SEQUUS has heretofore provided to ALZA a worldwide list of all
patents, trade names, registered trademarks and registered service marks, and
applications for any of the foregoing, owned or possessed by SEQUUS or any of
its Subsidiaries and true and complete copies of such materials have been made
available to ALZA.
(e) SEQUUS has provided to ALZA a true and complete copy of its
standard form of employee confidentiality agreement and taken all commercially
reasonably necessary steps to ensure that all employees have executed such an
agreement. All consultants or third parties with access to proprietary
information of SEQUUS have executed appropriate non-disclosure agreements.
(f) Neither SEQUUS nor any of its Subsidiaries is aware or has
reason to believe that any of its employees or consultants is obligated under
any contract, covenant or other agreement or commitment of any nature, or
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with the use of such employee's or consultant's best
efforts to promote the interests of SEQUUS and its Subsidiaries or that would
conflict with the business of SEQUUS as presently conducted or proposed to be
conducted. All current and former employees and consultants of SEQUUS or any of
its Subsidiaries have signed valid and enforceable written assignments to SEQUUS
or its Subsidiaries of any and all rights or claims in any intellectual property
that is used in the business of SEQUUS that any such employee or consultant has
or may have by reason of any contribution, participation or other role in the
development, conception, creation, reduction to practice or authorship of any
invention, innovation, development or work of authorship or any other
intellectual property that is used in the business of SEQUUS, and SEQUUS and its
Subsidiaries possess signed copies of all such written assignments by such
employees and consultants.
3.18 TAXES.
(a) For the purposes of this Agreement, "Tax" or "Taxes" refers to
any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities relating to taxes,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor
20
entity. For purposes of this Agreement, "Tax Return" or "Tax Returns" refers to
all federal, state and local and foreign returns, estimates, information
statements and reports relating to Taxes.
(b) SEQUUS and each of its Subsidiaries have filed all material Tax
Returns required to be filed by them, and have paid (or SEQUUS has paid on
behalf of its Subsidiaries), or have set up adequate reserves (which reserves
were established in accordance with GAAP) for the payment of, all Taxes required
to be paid as shown on such Tax Returns. The most recent financial statements
contained in the SEQUUS SEC Reports reflect an adequate reserve (which reserves
were established in accordance with GAAP) for the payment of all Taxes payable
by SEQUUS and its Subsidiaries, accrued through the date of such financial
statements. Except as would not reasonably be expected to have a SEQUUS Material
Adverse Effect, no deficiencies for any Taxes have been proposed, asserted or
assessed against SEQUUS or any of its Subsidiaries.
(c) There is no contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of SEQUUS or any of its Subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162 of the Code.
(d) None of SEQUUS and its Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by SEQUUS.
(e) None of SEQUUS and its Subsidiaries (i) is being audited by any
taxing authority; (ii) has granted any presently operative waiver of any statute
of limitations with respect to, or any extension of a period for the assessment
of, any Tax; (iii) has permitted any Tax lien to be placed on any asset of
SEQUUS or any of its Subsidiaries other than liens for Taxes not yet due and
payable; and (iv) has availed itself of any Tax amnesty or similar relief in any
taxing jurisdiction.
(f) None of SEQUUS and its Subsidiaries is aware of any reason why
the Merger will fail to qualify as a reorganization under the provisions of
Section 368(a) of the Code.
3.19 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 3.19(a) of the SEQUUS Disclosure Statement lists all
"employee pension benefit plans" as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Pension Plans"),
"welfare benefit plans" as defined in Section 3(1) of ERISA ("Welfare Plans"),
or stock bonus, stock
21
option, restricted stock, stock appreciation right, stock purchase, bonus,
incentive, deferred compensation, severance, holiday, or vacation plans, or any
other employee benefit plan, program, policy or arrangement covering employees
(or former employees) of SEQUUS employed in the United States that either is
maintained or contributed to by SEQUUS or any of its Subsidiaries or any of
their ERISA Affiliates (as hereinafter defined) or to which SEQUUS or any of its
Subsidiaries or any of their ERISA Affiliates is obligated to make payments or
otherwise may have any liability (collectively, the "Employee Benefit Plans")
with respect to employees or former employees of SEQUUS, its Subsidiaries, or
any of their ERISA Affiliates. For purposes of this Agreement, "ERISA Affiliate"
shall mean any person (as defined in Section 3(9) of ERISA) that is or has been
a member of any group of persons described in Section 414(b), (c), (m) or (o) of
the Code, including without limitation SEQUUS or a Subsidiary.
(b) SEQUUS and each of its Subsidiaries, and each of the Pension
Plans and Welfare Plans, are in compliance with the applicable provisions of
ERISA, the Code and other applicable laws, except where the failure to comply
would not, individually or in the aggregate, have a SEQUUS Material Adverse
Effect.
(c) All contributions to, and payments from, the Pension Plans which
are required to have been made in accordance with the Pension Plans have been
timely made, except where the failure to make such contributions or payments on
a timely basis would not, individually or in the aggregate, either impair
SEQUUS' ability to consummate the Merger and the other transactions contemplated
hereby or have a SEQUUS Material Adverse Effect.
(d) All of SEQUUS' Pension Plans intended to qualify under Section
401 of the Code have been determined by the Internal Revenue Service ("IRS") to
be so qualified, and no event has occurred and no condition exists with respect
to the form or operation of such Pension Plans which would cause the loss of
such qualification or the imposition of any material liability, penalty or tax
under ERISA or the Code.
(e) There are no (i) investigations pending by any governmental
entity involving the Pension Plans or Welfare Plans, or (ii) pending or
threatened claims (other than routine claims for benefits), suits or proceedings
against any Pension Plan or Welfare Plan, against the assets of any of the
trusts under any Pension Plan or Welfare Plan or against any fiduciary of any
Pension Plan or Welfare Plan with respect to the operation of such plan or
asserting any rights or claims to benefits under any Pension Plan or against the
assets of any trust under such plan, except for those which would not,
individually or in the aggregate, give rise to any liability which would have a
SEQUUS Material Adverse Effect. To the best of SEQUUS' knowledge, there are no
facts which would give rise to any liability under this Section 3.19(e) except
for those which would not, individually or in the aggregate, either impair
SEQUUS' ability to consummate the Merger and the other
22
transactions contemplated hereby or have a SEQUUS Material Adverse Effect in the
event of any such investigation, claim, suit or proceeding.
(f) None of SEQUUS, any of its Subsidiaries or any employee of the
foregoing, or any trustee, administrator, other fiduciary or any other "party in
interest" or "disqualified person" with respect to the Pension Plans or Welfare
Plans, has engaged in a "prohibited transaction" (as such term is defined in
Section 4975 of the Code or Section 406 of ERISA) other than such transactions
that would not, individually or in the aggregate, either impair SEQUUS' ability
to consummate the Merger and the other transactions contemplated hereby or have
a SEQUUS Material Adverse Effect.
(g) None of SEQUUS, any of its Subsidiaries, or any of their ERISA
Affiliates maintain or contribute to, nor have they ever maintained or
contributed to, any pension plan subject to Title IV of ERISA or Section 412 of
the Code or Section 302 of ERISA.
(h) Neither SEQUUS nor any Subsidiary of SEQUUS nor any ERISA
Affiliate has incurred any material liability under Title IV of ERISA that has
not been satisfied in full.
(i) Neither SEQUUS, any of its Subsidiaries nor any of their ERISA
Affiliates has any material liability (including any contingent liability under
Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA, covering employees (or former employees)
employed in the United States.
(j) With respect to each of the Employee Benefit Plans, true,
correct and complete copies of the following documents have been made available
to ALZA: (i) the plan document and any related trust agreement, including
amendments thereto, (ii) any current summary plan descriptions and other
material communications to participants relating to the Employee Benefit Plans,
(iii) the three most recent Forms 5500, if applicable, and (iv) the most recent
IRS determination letter, if applicable.
(k) None of the Welfare Plans maintained by SEQUUS or any of its
Subsidiaries provides for continuing benefits or coverage for any participant or
any beneficiary of a participant following termination of employment, except as
may be required under COBRA, or except at the expense of the participant or the
participant's beneficiary SEQUUS and each of its Subsidiaries which maintain a
"group health plan" within the meaning of Section 5000(b)(1) of the Code have
complied with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder except where the failure to comply would not, individually or in the
aggregate, either impair SEQUUS' ability to consummate the
23
Merger and the other transactions contemplated hereby or have a SEQUUS Material
Adverse Effect.
(l) No liability under any Pension Plan or Welfare Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which SEQUUS or any of its Subsidiaries
has received notice that such insurance company is in rehabilitation or a
comparable proceeding.
(m) The consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable to or in respect of any employee of SEQUUS or any of its
Subsidiaries.
(n) Section 3.19 of the SEQUUS Disclosure Statement lists each
Foreign Plan (as hereinafter defined). SEQUUS and each of its Subsidiaries and
each of the Foreign Plans are in compliance with applicable laws, and all
required contributions have been made to the Foreign Plans, except where the
failure to comply or make contributions would not, individually or in the
aggregate, either impair SEQUUS' ability to consummate the Merger and the other
transactions contemplated hereby or have a SEQUUS Material Adverse Effect. Each
of the Foreign Plans that is a funded defined benefit pension plan has a fair
market value of plan assets that is greater than the plan's liabilities, as
determined in accordance with applicable laws. For purposes hereof, the term
"Foreign Plan" shall mean any plan, program, policy, arrangement or agreement
maintained or contributed to by, or entered into with, SEQUUS or any Subsidiary
with respect to employees (or former employees) employed outside the United
States to the extent the benefits provided thereunder are not mandated by the
laws of the applicable foreign jurisdiction.
(o) Each of the Employee Benefit Plans and the Foreign Plans can be
terminated by SEQUUS within a period of 30 days following the Effective Time in
accordance with the terms of such Plan (and the provisions of ERISA and the
Code), without any additional contribution to such Employee Benefit Plan or
Foreign Plan or the payment of any additional compensation or amount or the
additional vesting or acceleration of any vesting provided under the Employee
Benefit Plan or Foreign Plan.
3.20 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement:
(i) "Contractor" shall mean any person or entity, including but
not limited to partners, licensors, and licensees, with which SEQUUS formerly or
presently has any agreement or arrangement (whether oral or written) under which
such
24
person or entity has or had physical possession of, and was or is obligated
to develop, test, process, manufacture or produce, any product or substance on
behalf of SEQUUS.
(ii) "Environment" shall mean any land including, without
limitation, surface land and sub-surface strata, seabed or river bed and any
water (including, without limitation, coastal and inland waters, surface waters
and ground waters and water in drains and sewers) and air (including, without
limitation, air within buildings) and other natural or manmade structures above
or below ground.
(iii) "Environmental Law" means any law or regulation, and any
applicable judicial or administrative interpretation thereof relating to public
and workers health and safety, emissions, discharges or releases of Hazardous
Materials into the Environment or otherwise relating to the manufacture,
processing, use, treatment, storage, distribution, disposal, transport or
handling of Hazardous Materials. Environmental Laws include, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended ("CERCLA"), the Resource Conservation and Recovery Act 42 USC, 6901 et
--
seq., the Hazardous Materials Transportation Act 49 USC, 6901 et seq., the Clean
--- ------
Water Act 33, 1251 et seq., the Toxic Substances Control Act 15 USC, 2601 et
------ --
seq., the Clean Air Act 42 USC, 7401 et seq., the Safe Drinking Water Act 42
--- ------
USC, 300f et seq., the Atomic Energy Act 42 USC, 2201 et seq., and the Federal
------ ------
Food Drug and Cosmetic Act 21 USC, 301 et seq., and equivalent statutes in
------
countries other than the United States of America.
(iv) "Environmental Permit" shall mean any permit, license,
consent, approval, certificate, qualification, specification, registration and
other authorization, and the filing of all notifications, reports and
assessments, required by any federal, state, local or foreign government or
regulatory entity pursuant to any Environmental Law.
(v) "Hazardous Material" shall mean any pollutant, contaminant,
or hazardous, toxic, medical, biohazardous, infectious or dangerous waste,
substance, gas, constituent or material, defined or regulated as such in, or for
purposes of, any Environmental Law, including, without limitation, any asbestos,
any petroleum, oil (including crude oil or any fraction thereof), any
radioactive substance, any polychlorinated biphenyls, any toxin, chemical,
virus, infectious disease or disease causing agent, and any other substance that
can give rise to liability under any Environmental Law.
(b) Except for such cases that, individually or in the aggregate, have not
and would not reasonably be expected to have a SEQUUS Material Adverse Effect:
25
(i) Each of SEQUUS and its Subsidiaries possesses all
Environmental Permits required under applicable Environmental Laws to conduct
its current business and to use and occupy the Real Property for its current
business. All Environmental Permits are in full force and effect and SEQUUS and
each of its Subsidiaries are in compliance with the terms and conditions of such
Environmental Permits.
(ii) There are no facts or circumstances indicating that any
Environmental Permits possessed by SEQUUS or any of its Subsidiaries are likely
to be revoked, suspended, canceled or not renewed, and all appropriate necessary
action in connection with the renewal or extension of any Environmental Permits
possessed by SEQUUS or any of its Subsidiaries relating to their current
business and the Real Property has been taken.
(iii) The execution and delivery by SEQUUS of this Agreement and
the consummation by SEQUUS of the Merger and other transactions contemplated
hereby and (assuming, for this purpose, that no law is applicable to ALZA that
is not also applicable to SEQUUS) the exercise by ALZA and the Surviving
Corporation of rights to own and operate the business of SEQUUS and its
Subsidiaries and use and occupy the Real Property and carry on its business
substantially as presently conducted will not affect the validity or require the
transfer of any Environmental Permits held by SEQUUS or any of its Subsidiaries
and will not require any notification, disclosure, registration, reporting,
filing, investigation or remediation under any Environmental Law.
(iv) SEQUUS and each of its Subsidiaries are in compliance with,
and within the period of all applicable statutes of limitation, have complied
with, all applicable Environmental Laws with respect to the real property now or
previously owned, leased or occupied by SEQUUS and its Subsidiaries (the "Real
Property"), and have not received notice of any liability under any
Environmental Law.
(v) There is no civil, criminal or administrative action, suit,
demand, claim, complaint, hearing, notice of violation, investigation, notice or
demand letter, proceeding or request for information pending or any liability
(whether actual or contingent) to make good, repair, reinstate or clean up any
of the Real Property; there is no act, omission, event or circumstance giving
rise or likely to give rise in the future to any such action, suit, demand,
claim, complaint, hearing, notice of violation, investigation, notice or demand
letter, proceeding, or request or any such liability or other liabilities.
(vi) There has not been any disposal, spill, discharge, or
release of any Hazardous Material generated, used, owned, stored, or controlled
by SEQUUS, any of its Subsidiaries, or respective predecessors in interest, on,
at, or under any property
26
presently or formerly owned, leased, or operated by SEQUUS, its Subsidiaries,
any predecessor in interest, or any Contractor, and there are no Hazardous
Materials located in, at, on, or under, or in the vicinity of, any such facility
or property, or at any other location, in either case that could reasonably be
expected to require investigation, removal, remedial, or corrective action by
SEQUUS or any of its Subsidiaries or that would reasonably likely result in
liability of, or costs in excess of, $250,000, individually or in the aggregate,
to SEQUUS or any of its Subsidiaries under any Environmental Law.
(vii) (A) Other than cleaning and office supplies normally used
in the operation of an office, Hazardous Materials are not currently generated,
used, treated, handled or stored on, or transported to or from, or released on
any Real Property that is currently used or occupied by SEQUUS or any property
adjoining any Real Property that is currently used or occupied by SEQUUS; and
(B) neither SEQUUS nor any of its Subsidiaries has transported or arranged for
the transportation of any Hazardous materials to any location that is listed or
proposed for listing on the National Priorities List under CERCLA or on the
CERCLIS or any analogous state or country list or which is the subject of any
environmental claim.
(viii) There has not been any underground or aboveground storage
tank or other underground storage receptacle or related piping, or any
impoundment or other disposal area containing Hazardous Materials located on any
Real Property owned, leased or operated by SEQUUS, any of its Subsidiaries, or
respective predecessors in interest during the period of such ownership, lease
or operation.
(ix) SEQUUS and its Subsidiaries have taken all actions
necessary under applicable requirements of Environmental Law to register any
products or materials required to be registered by SEQUUS or any of its
Subsidiaries (or any of their respective agents) thereunder.
3.21 OFFICER'S CERTIFICATE AS TO TAX MATTERS. SEQUUS knows of no reason
why it will be unable to deliver to Xxxxxx Xxxxxx White & XxXxxxxxx and Cooley
Godward LLP at the Closing an officer's certificate in form sufficient to enable
each such counsel to render the opinions required by Section 6.5.
3.22 AFFILIATES. The list that SEQUUS will deliver to ALZA in accordance
with Section 5.11(a) will identify all persons who to SEQUUS' knowledge may be
deemed to be "affiliates" of SEQUUS for purposes of Rule 145 under the
Securities Act or under applicable SEC accounting releases with respect to
pooling of interests accounting ("Affiliates").
3.23 FINDERS OR BROKERS. Except for Credit Suisse First Boston, whose fees
have been disclosed to ALZA, neither SEQUUS nor any of its Subsidiaries has
employed
27
any investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission the receipt of which is conditioned upon consummation of the Merger.
3.24 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by SEQUUS for inclusion or incorporation by reference in the
Registration Statement on Form S-4 registering the ALZA Common Stock to be
issued in the Merger (the "Registration Statement") as it relates to SEQUUS, at
the time the Registration Statement is declared effective by the SEC, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by SEQUUS for inclusion in the
proxy statement/prospectus to be sent to the stockholders of SEQUUS in
connection with the SEQUUS Special Meeting (such proxy statement/prospectus, as
amended and supplemented is referred to herein as the "Proxy
Statement/Prospectus"), at the date the Proxy Statement/Prospectus is first
mailed to stockholders and at the time of the SEQUUS Special Meeting shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.25 POOLING OF INTERESTS. SEQUUS has provided to its independent auditors
all information requested by such auditors to assess whether the Merger can
properly be accounted for as a pooling of interests, and has fully cooperated
with its independent auditors with respect to all reasonable requests made in
connection with such assessment. To the knowledge of SEQUUS, after consultation
with its independent auditors, none of SEQUUS, any of its Subsidiaries or any of
their respective directors, officers or stockholders has taken any action or
failed to take any action, which action or failure would prevent ALZA from
accounting for the Merger as a pooling of interests.
3.26 TITLE TO PROPERTY. SEQUUS and its Subsidiaries have good and valid
title to all of their respective properties, interests in properties and assets,
real and personal, reflected in the SEQUUS Balance Sheet or acquired after the
Reference Date (except for tangible personal property, inventory, cash, cash
equivalents, short term investments or trade accounts receivable disposed of in
the ordinary course of business consistent with past practice or as permitted by
this Agreement since the Reference Date), and have valid leasehold interests in
all leased properties and assets, in each case free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except (i)
liens for current taxes not yet due and payable, (ii) such imperfections of
title, liens and easements as do not and will not materially detract from or
interfere with the use of the properties subject thereto or affected thereby, or
otherwise materially impair business operations involving such properties, (iii)
liens securing debt reflected on the SEQUUS Balance Sheet, (iv) liens recorded
pursuant to any Environmental Law or (v) liens which
28
would not, individually or in the aggregate, have a SEQUUS Material Adverse
Effect. Section 3.26 of the SEQUUS Disclosure Statement identifies each parcel
of real property owned or leased by SEQUUS or any of its Subsidiaries.
3.27 YEAR 2000 COMPLIANCE. SEQUUS is Year 2000 Compliant, as that term is
defined below, and there are no foreseeable expenses or other liabilities
associated with the process of securing full Year 2000 Compliance except for any
noncompliance that would not be reasonably expected to cause a SEQUUS Material
Adverse Effect. "Year 2000 Compliant" means that such hardware or software
produced, used, or provided by SEQUUS or any of its subsidiaries or material
contractors, vendors, or manufacturers, including, but not limited to,
microcode, firmware, system and application programs, files, databases, computer
services, and microcontrollers, including those embedded in computer and non-
computer equipment (the "Computer Systems") will:
(a) process date data from at least the years 1900 through 2101
without error or interruption;
(b) maintain functionality with respect to the introduction,
processing, or output of records containing dates falling on or after January 1,
2000; and
(c) be interoperable with other software or hardware which may
deliver records to, receive records from, or interact with such Computer Systems
in the course of conducting the business of SEQUUS, including processing data
and manufacturing the products of SEQUUS.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALZA AND MERGER SUB
-----------------------------------------------------
ALZA and Merger Sub make to SEQUUS the representations and warranties
contained in this Article IV, in each case subject to the exceptions set forth
in the disclosure statement, dated as of the date hereof, delivered by ALZA to
SEQUUS prior to the execution of this Agreement (the "ALZA Disclosure
Statement"). The ALZA Disclosure Statement shall be arranged in schedules
corresponding to the numbered Sections of this Article IV, and the disclosure in
any section of the ALZA Disclosure Statement shall qualify only the
corresponding Section of this Article IV, unless it is reasonably apparent that
the disclosed contract, event, fact, circumstance or other matter could relate
to other representations or warranties or the matters covered thereby.
4.1 ORGANIZATION, ETC.
(a) Each of ALZA and its Subsidiaries (the "ALZA Subsidiaries") is a
corporation duly organized, validly existing and in good standing under the laws
of the
29
jurisdiction of its incorporation and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. ALZA and each ALZA Subsidiary are duly qualified as a foreign Person
to do business, and are each in good standing, in each jurisdiction where the
character of its owned or leased properties or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not, individually and in the aggregate, have an ALZA
Material Adverse Effect. None of ALZA nor any ALZA Subsidiary is in violation of
any provision of its certificate of incorporation, bylaws or any other charter
document. For the purposes of this Agreement, "ALZA Material Adverse Effect"
means any change, event or effect that is materially adverse to the business,
prospects, financial condition or results of operations of ALZA and the ALZA
Subsidiaries taken as a whole; provided, however, that (i) any adverse change,
-------- -------
event or effect arising from or relating to general business or economic
conditions which does not affect ALZA in a materially disproportionate manner
shall not be deemed to constitute, and shall not be taken into account in
determining whether there has been, an "ALZA Material Adverse Effect"; (ii) any
adverse change, event or effect relating to or affecting the pharmaceutical
industry generally, or relating to or affecting the sale, marketing or
development of pharmaceuticals generally, which does not affect ALZA in a
materially disproportionate manner shall not be deemed to constitute, and shall
not be taken into account in determining whether there has been an "ALZA
Material Adverse Effect"; and (iii) any adverse change, event or effect arising
from or relating to the announcement or pendency of the Merger shall not be
deemed to constitute, and shall not be taken into account in determining whether
there has been, an "ALZA Material Adverse Effect"; provided further that the
failure of ALZA to meet the published estimates, expectations or projections of
financial analysts shall not in itself constitute an "ALZA Material Adverse
Effect".
(b) Neither ALZA nor the ALZA Subsidiaries is in violation of any
provision of its certificate of incorporation, bylaws or other charter
documents.
(c) Neither ALZA nor any of the ALZA Subsidiaries owns any capital
stock or other securities of SEQUUS.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of ALZA and Merger Sub
has full corporate power and authority to execute and deliver this Agreement and
to consummate the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby have been duly and validly authorized
by the board of directors of each of ALZA and Merger Sub and no other corporate
proceedings on the part of either ALZA or Merger Sub are necessary to authorize
this Agreement or to consummate the Merger and the other transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by ALZA and Merger Sub and,
30
assuming due authorization, execution and delivery by SEQUUS, constitutes a
valid and binding agreement of each of ALZA and Merger Sub, enforceable against
each of them in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
4.3 NO VIOLATIONS, ETC. No filing with or notification to, and no
permit, authorization, consent or approval of, any Government Entity is
necessary on the part of either ALZA or Merger Sub for the consummation by ALZA
or Merger Sub of the Merger or the other transactions contemplated hereby,
except for (i) the filing of the Certificate of Merger as required by Delaware
Law, (ii) the filing with the SEC and the effectiveness of the Registration
Statement, (iii) the applicable requirements of the Exchange Act, state
securities or "blue sky" laws, state takeover laws and the listing requirements
of the NYSE and (iv) any filings required under and in compliance with the HSR
Act or any antitrust laws of any foreign country. Neither the execution and
delivery of this Agreement, nor the consummation of the Merger or the other
transactions contemplated hereby, nor compliance by ALZA and Merger Sub with all
of the provisions hereof will (i) conflict with or result in any breach of any
provision of the certificate of incorporation, bylaws or other charter documents
of ALZA or any ALZA Subsidiary, (ii) violate any material order, writ,
injunction, decree, statute, rule or regulation applicable to ALZA or any ALZA
Subsidiary, or by which any of their properties or assets may be bound, or (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default, or give rise to any right of termination,
cancellation, acceleration, redemption or repurchase under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
ALZA or any ALZA Subsidiary is a party or by which any of them or any of their
properties or assets may be bound.
4.4 CAPITALIZATION. (a) The authorized capital stock of ALZA consists of
300,000,000 shares of Common Stock, $.01 par value, of which there were
87,064,060 shares issued and outstanding as of September 30, 1998, and 100,000
shares of Preferred Stock, $.01 par value, of which no shares are issued or
outstanding. The authorized capital stock of Merger Sub consists of 10,000
shares of Common Stock, $.0001 par value, 100 of which, as of the date hereof,
are issued and outstanding and are held by ALZA. Merger Sub was formed for the
purpose of consummating the Merger and has no material assets or liabilities
except as necessary for such purpose. All outstanding shares of ALZA Common
Stock are (and the ALZA Common Stock to be issued in the Merger will, when
issued, be) duly authorized, validly issued, fully paid and nonassessable and
are not (and will not be) subject to preemptive rights created by statute, the
certificate of incorporation or bylaws of ALZA or any agreement to which ALZA is
a party or by which it is bound.
31
(b) Except as referred to in Section 4.4(a) hereof, there are no
equity securities of any class of ALZA, or any securities convertible into or
exercisable for any such equity securities, issued, reserved for issuance or
outstanding. There are no warrants, options, convertible securities, calls,
rights, stock appreciation rights, preemptive rights, rights of first refusal,
or agreements or commitments of any nature obligating ALZA to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests of ALZA, or obligating ALZA to grant, issue,
extend, accelerate the vesting of, or enter into, any such warrant, option,
convertible security, call, right, stock appreciation right, preemptive right,
right of first refusal, agreement or commitment.
4.5 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by ALZA for inclusion or incorporation by reference in the Registration
Statement as it relates to ALZA or Merger Sub, at the time the Registration
Statement is declared effective, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by ALZA for inclusion in the Proxy Statement/Prospectus, at
the date the Proxy Statement/Prospectus is first mailed to stockholders and at
the time of the SEQUUS Special Meeting shall not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event with respect to ALZA or any ALZA Subsidiary
shall occur which is required to be described in the Registration Statement or
Proxy Statement/Prospectus, such event shall be so described, and an amendment
or supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of SEQUUS.
4.6 SEC FILINGS. ALZA has filed with the SEC all required forms,
reports, registration statements and documents required to be filed by it with
the SEC (collectively, all such forms, reports, registration statements and
documents filed after January 1, 1995 are referred to herein as the "ALZA SEC
Reports"), all of which complied as to form when filed in all material respects
with the applicable provisions of the Securities Act and the Exchange Act, as
the case may be. Accurate and complete copies of the ALZA SEC reports have been
made available to SEQUUS. As of their respective dates the ALZA SEC Reports
(including documents incorporated by reference therein and all exhibits and
schedules thereto) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
4.7 COMPLIANCE WITH LAWS. Neither ALZA nor any ALZA Subsidiary has
violated or failed to comply with any statute, law, ordinance, rule or
regulation
32
(including, without limitation, relating to the export or import of goods or
technology) of any foreign, federal, state or local government or any other
governmental department or agency, except where any such violations or failures
to comply would not, individually or in the aggregate, have an ALZA Material
Adverse Effect. ALZA and Merger Sub have all permits, licenses and franchises
from governmental agencies required to conduct their businesses as now being
conducted and as proposed to be conducted, except for those the absence of which
would not, individually or in the aggregate, have an ALZA Material Adverse
Effect.
4.8 FINANCIAL STATEMENTS. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the ALZA SEC
Reports (the "ALZA Financial Statements"), (x) was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act) and (y) fairly presented the consolidated financial position of
ALZA and its Subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
consistent with the books and records of ALZA, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount. The
balance sheet of ALZA contained in ALZA's Form 10-Q for the quarter ended June
30, 1998 is hereinafter referred to as the "ALZA Balance Sheet."
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Neither ALZA nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
other than (i) liabilities included in the ALZA Balance Sheet and the related
notes to the financial statements, (ii) normal or recurring liabilities incurred
since June 30, 1998 in the ordinary course of business consistent with past
practice, which, individually or in the aggregate, are not or would not be
reasonably likely to have, an ALZA Material Adverse Effect, and (iii)
liabilities under this Agreement.
4.10 ABSENCE OF CHANGES OR EVENTS. Except as contemplated by this
Agreement, since June 30, 1998, no ALZA Material Adverse Effect has occurred.
4.11 LITIGATION.
(a) Except as set forth in the ALZA SEC Reports, there is no Action
pending or, to the knowledge of ALZA, threatened against ALZA or any of its
Subsidiaries, or any of their respective officers and directors (in their
capacities as such), or involving any of their assets, before any court, or
governmental or regulatory authority or body, or arbitration tribunal, except
for those Actions which, individually or in the aggregate, would not have an
ALZA Material Adverse Effect. As of the date of this
33
Agreement, there is no Action pending or, to the knowledge of ALZA, threatened
which in any manner challenges, seeks to, or is reasonably likely to prevent,
enjoin, alter or delay the transactions anticipated by this Agreement.
(b) There is no outstanding judgment, order, writ, injunction or
decree of any court, governmental agency or arbitration tribunal in a proceeding
to which ALZA, any Subsidiary of ALZA or any of their assets is a party, or by
which ALZA, any ALZA Subsidiary or any of their assets is bound.
4.12 OFFICER'S CERTIFICATE AS TO TAX MATTERS. ALZA knows of no reason
why it will be unable to deliver to Xxxxxx Godward LLP and Xxxxxx Xxxxxx White &
XxXxxxxxx at the Closing an Officer's Certificate in form sufficient to enable
each such counsel to render the opinions required by Section 6.5.
4.13 POOLING OF INTERESTS. ALZA has provided to its independent auditors
all information requested by such auditors to assess whether the Merger can
properly be accounted for as a pooling of interests, and has fully cooperated
with its independent auditors with respect to all reasonable requests made in
connection with such assessment. To the knowledge of ALZA, after consultation
with its independent auditors, none of ALZA, any of its Subsidiaries or any of
their respective directors, officers or stockholders has taken any action or
failed to take any action, which action or failure would prevent ALZA from
accounting for the Merger as a pooling of interests.
4.14 TAXES. None of ALZA or its Subsidiaries is aware of any reason why
the Merger will fail to qualify as a reorganization under the provisions of
Section 368(a) of the Code.
4.15 CONTRACTS AND COMMITMENTS.
(a) The agreements listed in Section 4.15(a) of the ALZA Disclosure
Statement constitute all of the material agreements relating to rights to
commercialize ALZA's DUROS leuprolide, Ethyol, Ditropan, Ditropan XL, or
Duragesic products (the "Identified Products").
(b) Neither ALZA nor any of its Subsidiaries, nor to ALZA's
knowledge any other party to any material agreement, contract or commitment to
which ALZA or any of its Subsidiaries is a party (an "ALZA Contract"), is in
beach, violation or default under, or has received notice that it has breached,
violated or defaulted under (nor does there exist any condition under which,
with the passage of time or the giving of notice or both, could reasonably be
expected to cause such a breach, violation or default under), any ALZA Contract,
other than any breaches, violations or defaults which individually or in the
aggregate would not have an ALZA Material Adverse Effect.
34
(c) Each ALZA Contract is a valid, binding and enforceable
obligation of ALZA and, to ALZA's knowledge, of the other party or parties
thereto, in accordance with its terms, and in full force and effect, except
where the failure to be valid, binding, enforceable and in full force and effect
would not have an ALZA Material Adverse Effect and to the extent enforcement may
be limited by applicable bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
principles of equity or any competition laws of the European Union.
4.16 INTELLECTUAL PROPERTY RIGHTS.
(a) ALZA and the ALZA Subsidiaries own or have the right to use all
intellectual property which is material to the conduct of their respective
businesses (such intellectual property and such rights are collectively referred
to herein as the "ALZA IP Rights").
(b) Neither the manufacture, marketing, license, sale or use by ALZA
of any Identified Product, nor the current use by ALZA or its Subsidiaries of
ALZA's XXXX, D-TRANS or DUROS Technology the ("Identified Technology"), violates
or would violate in any material respect any license or agreement between ALZA
or any of its Subsidiaries and any other Persons and there is no pending or
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any of the intellectual property rights
relating to any of the Identified Products or Identified Technology, or
asserting that the proposed use, sale, license or disposition thereof, or the
manufacture, use or sale of any Identified Products by ALZA or any of its
Subsidiaries, conflicts or will conflict with the rights of any other Person,
except as would not, individually or in the aggregate, have an ALZA Material
Adverse Effect.
4.17 FDA MATTERS.
(a) To ALZA's knowledge, the testing, manufacture, storage,
distribution, use, promotion and sale of ALZA's and ALZA's Subsidiaries'
products by ALZA and its Subsidiaries and contractors has been performed and is
performed in substantial compliance with all applicable requirements under the
FDCA and the CSA, including those relating to investigational use, premarket
clearance, good manufacturing practices, labeling, advertising, record keeping,
filing of reports, and security, except as would not, individually or in the
aggregate, have an ALZA Material Adverse Effect.
(b) With respect to the pending New Drug Application for the XXXX
oxybutynin product, ALZA has, to its knowledge, complied with all applicable
requirements in the submission of such application, is not aware of any facts,
circumstances or events that could reasonably be expected to prevent such
application from being approved, and has not been informed by the FDA that such
product would not
35
be approved within the period identified in Section 4.17 of the ALZA Disclosure
Statement.
ARTICLE V
COVENANTS
---------
5.1 CONDUCT OF BUSINESS DURING INTERIM PERIOD.
(a) Except as contemplated or required by this Agreement or as
expressly consented to in writing by ALZA, during the period from the date of
this Agreement to the Effective Time, each of SEQUUS and its Subsidiaries will
(i) conduct its operations in all material respects according to its ordinary
and usual course of business consistent with past practice, (ii) use all
commercially reasonable efforts to preserve intact its business organization, to
keep available the services of its officers and employees in each business
function and to maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it, and
(iii) not take any action which could reasonably be expected to adversely affect
its ability to consummate the Merger or the other transactions contemplated
hereby. Without limiting the generality of the foregoing, and except as
otherwise contemplated by or expressly provided in this Agreement or Section 5.1
of the SEQUUS Disclosure Statement, prior to the Effective Time neither SEQUUS
nor any of its Subsidiaries will, without the prior written consent of ALZA,
directly or indirectly, do any of the following:
(i) enter into, violate, extend, amend or otherwise modify or
waive any of the material terms of (A) any material partnership, joint venture,
license or agreement relating to the joint development or transfer of technology
or SEQUUS IP Rights or (B) except in the ordinary course of business and
consistent with past practice, any other material agreements, commitments or
contracts;
(ii) split, combine or reclassify any shares of its capital
stock;
(iii) except as permitted in Section 5.2 of this Agreement,
authorize or enter into any agreement in principle or an agreement with any
other person with respect to (A) any plan of liquidation or dissolution with
respect to SEQUUS or a SEQUUS Subsidiary, (B) any acquisition or disposition of
a material amount of assets or securities, except purchases or sales of
inventory and equipment in the ordinary course of business consistent with past
practice, or (C) any material change in capitalization other than the sale and
delivery of shares of SEQUUS Common Stock held or to be held in SEQUUS' 401(k)
Pension and Profit Sharing Plan, the issuance and delivery and/or sale of shares
of SEQUUS Common Stock pursuant to the exercise of stock options, the grant of
options to purchase up to a number of shares of SEQUUS Common Stock equal to 555
multiplied by the number of days from the date of this Agreement to the
Effective Time
36
in connection with the hiring and/or promotion of non-officer employees of
SEQUUS or any of its Subsidiaries, and the issuance of shares of SEQUUS Common
Stock issuable to participants in the SEQUUS Purchase Plan;
(iv) fail to renew any insurance policy naming it as a
beneficiary or a loss payee, or take any steps or fail to take any steps that
would permit any insurance policy naming it as a beneficiary or a loss payee to
be canceled, terminated or materially and adversely altered, except in the
ordinary course of business and consistent with past practice and following
written notice to ALZA;
(v) maintain its books and records in a manner other than in
the ordinary course of business and consistent with past practice;
(vi) enter into any hedging, option, derivative or other similar
transaction or any foreign exchange position or contract for the exchange of
currency other than in the ordinary course of business and consistent with past
practice;
(vii) institute any change in its accounting methods, principles
or practices other than as required by GAAP, or the rules and regulations
promulgated by the SEC, or revalue any assets, including without limitation,
writing down the value of inventory or writing off notes or accounts receivables
other than as required by GAAP;
(viii) in respect of any Taxes, make or change any material
election, change any accounting method, enter into any closing agreement, settle
any material claim or assessment, or consent to any extension or waiver of the
limitation period applicable to any material claim or assessment except as
required by applicable law;
(ix) take any action, or fail to take any action, which could
reasonably be expected to prevent ALZA from accounting for the Merger as a
pooling of interests;
(x) except as reasonably required due to medical or regulatory
considerations, as required by a Government Entity, or as required due to a lack
of available funds (and only after SEQUUS shall have provided ALZA with
reasonable notice of any such requirement), suspend, terminate or otherwise
discontinue any planned or ongoing material research and development activities,
programs, clinical trials or other such activities with respect to the products
listed in Section 5.1(x) of the SEQUUS Disclosure Statement (the "Material
Products");
(xi) except as required by a Government Entity, make any
material amendment to any New Drug Application with the FDA, Supplemental New
Drug Application with the FDA or their foreign equivalents; or
37
(xii) take or agree to take, any of the actions described in
Section 3.10(a), (b) and (f) through (k) above, or any action which would
reasonably be expected to result in the conditions in Section 7.2(a) and (b) not
being satisfied.
(b) During the period from the date of this Agreement to the
Effective Time, neither ALZA nor any of its Subsidiaries will (i) take any
action which could reasonably be expected to adversely affect ALZA's ability to
consummate the Merger or the other transactions contemplated hereby, (ii) take
any action which could reasonably be expected to prevent ALZA from accounting
for the Merger as a pooling of interests, (iii) take, or agree to take, any
action which could reasonably be expected to result in any of the conditions
specified in Sections 7.1(a) and (b) not being satisfied or (iv) consummate, or
agree to consummate, (A) any transaction or series of related transactions to
acquire shares representing a controlling interest in any Person pursuant to a
tender offer, exchange offer, merger, consolidation, share exchange, acquisition
of stock or other business combination or acquisition (a "Business Combination")
in which the aggregate consideration paid or payable by ALZA and its
Subsidiaries is or would be in excess of $750 million or (B) any other
transaction or series of related transactions to acquire or license assets or
rights in which the aggregate consideration paid or payable by ALZA and its
Subsidiaries is or would be in excess of $750 million, in each case, determined
as of the date of the definitive agreement relating to such Business Combination
or other transaction.
5.2 NO SOLICITATION.
(a) SEQUUS shall not, and shall cause its Subsidiaries not to, and
shall use its best efforts to cause its and its Subsidiaries' respective
officers and directors not to, and shall use commercially reasonable efforts to
cause its non-officer employees, investment bankers, attorneys or other agents
retained by or acting on behalf of SEQUUS or any of its Subsidiaries not to: (i)
initiate, solicit or knowingly encourage, directly or indirectly, any inquiries
or the making of any proposal that constitutes or is reasonably likely to lead
to any Acquisition Proposal (as defined in Section 5.2(c) hereof), (ii) engage
in negotiations or discussions (other than to advise as to the existence or
substance of the restrictions set forth in this Section 5.2) with, or furnish
any non-public information or data to, any third party relating to an
Acquisition Proposal, or (iii) enter into any agreement with a Potential
Acquiror (other than a confidentiality, standstill and nonsolicitation agreement
which satisfies the requirements set forth below) with respect to any
Acquisition Proposal or approve any Acquisition Proposal. Notwithstanding
anything to the contrary contained in this Section 5.2 or in any other provision
of this Agreement, SEQUUS and its board of directors (i) may participate in
discussions or negotiations with or furnish non-public information or data to
any third party that has made an unsolicited Acquisition Proposal (a "Potential
Acquiror") and/or (ii) subject to the provisions of Section 5.2(b), may approve
or accept an unsolicited Acquisition
38
Proposal if the board of directors of SEQUUS determines in good faith (A) after
receiving written advice from its financial advisor, that such Acquisition
Proposal is a Superior Proposal (as defined in Section 5.2(d) hereof), and (B)
following consultation with outside legal counsel, that the failure to
participate in such discussions or negotiations or to furnish such information
or approve or accept an Acquisition Proposal would violate the board's fiduciary
duties under applicable law. SEQUUS agrees that any non-public information
furnished to a Potential Acquiror will be furnished pursuant to a
confidentiality, standstill and nonsolicitation agreement containing provisions
at least as favorable to SEQUUS as the confidentiality, standstill and
nonsolicitation provisions of the Confidentiality Agreements (as defined in
Section 5.3). In the event that SEQUUS shall determine to provide any
information as described above, or shall receive any Acquisition Proposal (or
any material amendment to an Acquisition Proposal previously received), it shall
promptly, and in any event within 24 hours, inform ALZA in writing as to that
fact and shall furnish to ALZA the identity of the recipient of such information
to be provided and/or the Potential Acquiror and the terms of such Acquisition
Proposal (or material amendment).
(b) Except as provided in this Section 5.2, the board of directors
of SEQUUS shall recommend to its stockholders approval of this Agreement and the
Merger. The board of directors of SEQUUS shall not (i) withdraw or modify or
propose to withdraw or modify, in any manner adverse to ALZA, its approval and
recommendation of this Agreement and the Merger or (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal unless, in each case,
the board has (x) determined that such Acquisition Proposal is a Superior
Proposal, (y) determined in good faith, following consultation with outside
legal counsel, that the failure to take such action would violate the board's
fiduciary duties under applicable law and (z) given at least 72 hours prior
written notice to ALZA of its determination under clause (y) of this Section
5.2(b).
(c) For purposes of this Agreement, "Acquisition Proposal" shall
mean any bona fide proposal (which may be subject to a "due diligence"
condition), whether in writing or otherwise, made by a Third Party (as defined
below) for: (i) a transaction or series of related transactions pursuant to
which any Person (or any group of Persons acting in concert for the specific
purpose of allowing SEQUUS to evade the provisions of this Section 5.2) other
than ALZA, SEQUUS or Merger Sub, or any affiliate thereof (a "Third Party"),
acquires or would acquire (upon completion of such transaction or series of
related transactions) shares (or securities exercisable for or convertible into
shares) representing more than twenty percent (20%) of the outstanding shares of
SEQUUS Common Stock, pursuant to a tender offer or exchange offer or otherwise;
(ii) a merger, consolidation, share exchange or other business combination
involving SEQUUS or any of its subsidiaries if, upon consummation of such
merger, consolidation, share exchange or other business combination, such Third
Party (or its shareholders) owns or would own
39
more than twenty percent (20%) of the outstanding equity securities of SEQUUS or
any of its subsidiaries or the entity surviving such merger or business
combination or resulting from such consolidation; (iii) any other transaction or
series of related transactions pursuant to which such Third Party acquires or
would acquire (upon completion of such transaction or series of related
transactions) primary control of assets of SEQUUS or any of its subsidiaries
(including, for this purpose, SEQUUS IP Rights or SEQUUS product rights and
outstanding equity securities of subsidiaries of SEQUUS) if the aggregate dollar
value of the consideration proposed to be paid by such Third Party to SEQUUS or
its Subsidiary in such transaction exceeds $100 million; or (iv) any transaction
or series of related transactions pursuant to which such Third Party acquires or
would acquire (upon completion of such transaction or series of related
transactions) control of the board of directors of SEQUUS or by which nominees
of such Third Party are (or would be) elected or appointed to a majority of the
seats on the board of directors of SEQUUS.
(d) The term "Superior Proposal" means any Acquisition Proposal,
made in writing and not initiated, solicited or encouraged in violation of
Section 5.2(a) of this Agreement, on terms which the board of directors of
SEQUUS determines in good faith to be more favorable to SEQUUS and its
stockholders or to its stockholders than the Merger (after receiving the written
advice of SEQUUS' financial advisor that the value of the consideration provided
for in such proposal is superior to the value of the consideration provided for
in the Merger), for which financing, to the extent required, is then committed
or which, in the good faith judgment of the board of directors of SEQUUS, after
receiving written advice from its financial advisor, is reasonably capable of
being financed by the Potential Acquiror.
(e) SEQUUS shall not terminate, amend, modify or waive any provision
of any confidentiality or standstill agreement to which it or any of its
Subsidiaries is a party.
5.3 ACCESS TO INFORMATION. From the date of this Agreement until the
Effective Time, SEQUUS and ALZA will each afford to the other and their
authorized representatives (including counsel, environmental and other
consultants, accountants, auditors and agents) reasonable access during normal
business hours and upon reasonable notice to all of its facilities, personnel
and operations and to all of its and its Subsidiaries' books and records, will
permit the other and its authorized representatives to conduct inspections as
they may reasonably request and will instruct its officers and those of its
Subsidiaries to furnish such persons with such financial and operating data and
other information with respect to its business and properties as they may from
time to time reasonably request, subject to the restrictions set forth in the
Confidentiality Agreements (as defined below). ALZA and Merger Sub agree that
each of them will treat any such information in accordance with the
Confidentiality Agreement, dated as of September 17, 1998, between ALZA and
SEQUUS and the Supplemental Nondisclosure Agreement, dated as of
40
September 25, 1998 between ALZA and SEQUUS (together, the "Confidentiality
Agreements"), which Confidentiality Agreements shall remain in full force and
effect in accordance with their terms.
5.4 SPECIAL MEETING; REGISTRATION STATEMENT; BOARD RECOMMENDATION.
(a) In order to consummate the Merger, SEQUUS, acting through its
board of directors, shall duly call, give notice of, convene and hold a special
meeting of the stockholders of SEQUUS for the purpose of considering and taking
action upon this Agreement (the "SEQUUS Special Meeting"). The SEQUUS Special
Meeting shall be held as soon as practicable after the Registration Statement
has been declared effective.
(b) As promptly as practicable after the execution of this
Agreement, SEQUUS and ALZA shall mutually prepare, and SEQUUS shall file with
the SEC, a preliminary form of the Proxy Statement/Prospectus. As promptly as
practicable following receipt of SEC comments on such preliminary Proxy
Statement/Prospectus, ALZA and SEQUUS shall mutually prepare a response to such
comments. Upon resolution of all comments, ALZA shall file the Registration
Statement with the SEC. ALZA and SEQUUS shall use all commercially reasonable
efforts to have the preliminary Proxy Statement/Prospectus cleared by the SEC
and the Registration Statement declared effective by the SEC as promptly as
practicable. ALZA shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with ALZA Common
Stock to be issued in exchange for the shares of SEQUUS Common Stock. ALZA and
SEQUUS shall promptly furnish to each other all information, and take such other
actions (including without limitation using all commercially reasonable efforts
to provide any required consents of their respective independent auditors), as
may reasonably be requested in connection with any action by any of them in
connection with the preceding sentences of this Section 5.4(b). Whenever any
party learns of the occurrence of any event which is required to be set forth in
an amendment or supplement to the Proxy Statement/Prospectus, the Registration
Statement or any other filing made pursuant to this Section 5.4(b), ALZA or
SEQUUS, as the case may be, shall promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff and/or mailing to stockholders
of SEQUUS such amendment or supplement.
(c) Subject to Section 5.2, the Proxy Statement/Prospectus shall
contain the unanimous recommendation of the board of directors of SEQUUS in
favor of the approval and adoption of this Agreement.
41
5.5 COMMERCIALLY REASONABLE EFFORTS.
(a) Subject to the terms and conditions herein provided, ALZA,
Merger Sub and SEQUUS shall use commercially reasonable efforts to take, or
cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or appropriate under this Agreement, applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) promptly filing Notification
and Report Forms under the HSR Act with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and responding as promptly as practicable to any inquiries received
from the FTC or the Antitrust Division for additional information or
documentation, (ii) using commercially reasonable efforts to obtain all
necessary governmental and private party consents, approvals or waivers, and
(iii) using commercially reasonable efforts to lift any legal bar to the Merger.
ALZA shall cause Merger Sub to perform all of its obligations under this
Agreement.
(b) Notwithstanding anything to the contrary in this Agreement,
neither ALZA, nor the Surviving Corporation, nor any of their Subsidiaries shall
be required to (i) divest, hold separate or license any material business(es),
product line(s) or asset(s), (ii) take any action or accept any limitation that
could reasonably be expected to have an ALZA Material Adverse Effect or a SEQUUS
Material Adverse Effect, or (iii) agree to any of the foregoing.
5.6 PUBLIC ANNOUNCEMENTS. Before issuing any press release or otherwise
making any public statement with respect to the Merger or any of the other
transactions contemplated hereby, ALZA, Merger Sub and SEQUUS agree to consult
with each other as to its form and substance, and agree not to issue any such
press release or general communication to employees or make any public statement
prior to obtaining the consent of the other (which shall not be unreasonably
withheld or delayed), except as may be required by applicable law or by the
rules and regulations of or listing agreement with the NYSE or Nasdaq or as may
otherwise be required by the NYSE, Nasdaq or the SEC.
5.7 NOTIFICATION OF CERTAIN MATTERS.
(a) Each of SEQUUS and ALZA shall promptly notify the other party
after obtaining knowledge of the occurrence or non-occurrence of any event the
respective occurrence or non-occurrence of which would be likely to cause any
condition to the obligations of the notifying party to effect the Merger not to
be fulfilled. Each of SEQUUS and ALZA shall also give prompt notice to the other
of any communication received from any Person alleging that the consent of such
Person is or may be required in connection with the Merger or other transactions
contemplated hereby.
42
(b) SEQUUS will promptly provide ALZA with copies of any
communication that is issued, prepared or otherwise becomes available from the
date of this Agreement until the Effective Time which bears upon the regulatory
status of the Material Products or the facilities of SEQUUS or any of the
Subsidiaries of SEQUUS or the facilities of the material suppliers of SEQUUS
including but not limited to any warning letter, notice of violation, approval
letter/order, non-approval letter/order or withdrawal letter/order from a
Government Entity respecting their facilities or products.
(c) ALZA will provide SEQUUS with reasonable access to any
communications that are issued, prepared or otherwise become available from the
date of this Agreement until the Effective Time which bear upon the regulatory
status of the XXXX oxybutynin product, including but not limited to any warning
letter, notice of violation, approval letter/order, non-approval letter/order,
or withdrawal letter/order from a Government Entity respecting such product.
5.8 INDEMNIFICATION.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain, and ALZA shall cause the Surviving Corporation to
fulfill and honor, the provisions with respect to indemnification and
exculpation that are substantially identical to those set forth in the
certificate of incorporation and bylaws of SEQUUS as of the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of any of the Indemnified Parties. In
addition, ALZA shall cause the Surviving Corporation to fulfill and honor the
obligations of SEQUUS pursuant to any indemnification agreements between SEQUUS
and any of the Indemnified Parties which are listed in Section 3.14 of the
SEQUUS Disclosure Statement. "Indemnified Parties" shall include each person who
is or was a director or officer of SEQUUS or any Subsidiary of SEQUUS at any
time before the Effective Time, and each person who serves or has in the past
served at the request of SEQUUS or any subsidiary of SEQUUS as a director,
officer, trustee, partner, fiduciary, employee or agent of another corporation,
partnership, joint venture, trust, pension or other employee benefit plan or
enterprise at any time before the Effective Time.
(b) For a period of six years after the Effective Time ALZA shall
indemnify and hold harmless the Indemnified Parties against and from any costs
or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (and whether arising before or after the
Effective Time), to the extent arising out of or pertaining to any action or
omission in his or her capacity as a director or officer of SEQUUS arising out
of or pertaining to the transactions contemplated by this Agreement. In the
event of the
43
commencement or assertion of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time must be reasonably satisfactory to ALZA, (ii) after the Effective Time,
ALZA shall pay or cause to be paid the reasonable fees and expenses of such
counsel, promptly after statements therefor are received and (iii) ALZA shall
cause the Surviving Corporation to cooperate in the defense of any such matter;
provided, however, that neither ALZA nor the Surviving Corporation shall be
-----------------
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed); and provided, further, that,
-----------------
in the event that any claim or claims for indemnification are asserted or made
within such six-year period, all rights to indemnification in respect of any
such claim or claims (and the matters giving rise thereto) shall continue until
the disposition of any and all such claims (and the matters giving rise
thereto). The Indemnified Parties as a group may retain only one law firm (in
addition to local counsel) to represent them with respect to any single action
unless any Indemnified Party determines in good faith (after consultation with
legal counsel) that there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties. In the event ALZA or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates with or merges into
any other Person and shall not be 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, to the extent necessary to effectuate the purposes of this Section
5.8, proper provision shall be made so that the successors and assigns of ALZA
and the Surviving Corporation assume the obligations set forth in this Section,
and none of the actions described in clause (i) or (ii) shall be taken until
such provision is made.
(c) Without limiting any of the obligations of ALZA or the Surviving
Corporation set forth elsewhere in this Section 5.8, for a period of six years
after the Effective Time, ALZA shall cause the Surviving Corporation to maintain
in effect, to the extent available, directors' and officers' liability insurance
covering those persons who are currently covered by SEQUUS' directors' and
officers' liability insurance policy on terms comparable to those applicable
under the policy of directors' and officers' liability insurance currently
maintained by SEQUUS; provided, however, that in no event shall ALZA or the
Surviving Corporation be required to expend in excess of 150% of the annual
premium currently paid by SEQUUS for such coverage, and that if the annual
premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated instead to obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(d) ALZA shall cause the Surviving Corporation to perform its
obligations under this Section 5.8 and shall, in addition, guarantee, as co-
obligor with the
44
Surviving Corporation, the performance of such obligations by the Surviving
Corporation.
(e) Each Indemnified Party shall comply with the reasonable requests
of the Surviving Company or ALZA in defending or settling any action hereunder;
provided, however, that no proposed settlement of any such action need be
-----------------
considered by any Indemnified Party unless (A) such settlement involves no
finding or admission of any liability by any Indemnified Party, and (B) the sole
relief provided in connection with such settlement is monetary damages that are
paid in full by the Surviving Corporation or ALZA.
(f) ALZA agrees to pay, or cause the Surviving Corporation to pay,
all expenses, including reasonable attorney's fees, that may be incurred by the
Indemnified Parties in successfully enforcing the indemnity and other rights
under this Section 5.8.
5.9 EXPENSES. ALZA and Merger Sub, on the one hand, and SEQUUS, on the
other hand, shall bear their respective expenses incurred in connection with
this Agreement, and the transactions contemplated hereby, including, without
limitation, the preparation, execution and performance of this Agreement and the
consummation of the transactions contemplated hereby and all fees and expenses
of their respective investment bankers, finders, brokers, agents,
representatives, counsel and accountants, except that expenses incurred in
printing, mailing and filing (including without limitation, SEC filing fees and
stock exchange listing application fees) the Proxy Statement/Prospectus shall be
shared equally between ALZA and SEQUUS.
5.10 POOLING OF INTERESTS ACCOUNTING.
(a) Each of ALZA and SEQUUS shall use commercially reasonable
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of ALZA and SEQUUS shall use
commercially reasonable efforts to cause its Affiliates not to take any action
that would prevent ALZA from accounting for the business combination to be
effected by the Merger as a pooling of interests.
(b) SEQUUS shall use commercially reasonable efforts to cause to be
delivered to SEQUUS a letter of SEQUUS' independent accountants, dated within
two business days prior to the Effective Time, regarding SEQUUS' accountants'
concurrence with SEQUUS' management's conclusion that no conditions exist
related to SEQUUS that would preclude ALZA from accounting for the Merger as a
pooling of interests if the Merger is consummated in accordance with this
Agreement. Such letter shall be in a form reasonably satisfactory to ALZA and
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions of this type.
45
(c) ALZA shall use commercially reasonable efforts to cause to be
delivered to SEQUUS a letter of ALZA's independent accountants, dated within two
business days prior to the Effective Time, regarding ALZA's accountants'
concurrence with ALZA's management's and SEQUUS' management's conclusions,
respectively, as to the appropriateness of pooling of interests accounting for
the Merger under Accounting Principles Board Opinion No. 16 if consummated in
accordance with this Agreement.
5.11 AFFILIATE AGREEMENTS.
(a) Promptly after the execution and delivery hereof, SEQUUS shall
deliver to ALZA a list (reasonably satisfactory to counsel for ALZA) setting
forth the names of all persons who are expected to be, at the Effective Time, in
SEQUUS' reasonable judgment, Affiliates of SEQUUS. SEQUUS shall furnish such
information and documents as ALZA may reasonably request for the purpose of
reviewing such list. SEQUUS shall use commercially reasonable efforts to deliver
a written agreement in substantially the form of Exhibit B hereto (a "SEQUUS
---------
Affiliate Agreement") executed by each person identified as an Affiliate in the
list furnished pursuant to this Section 5.11(a) as soon as practicable after the
execution of this Agreement and in any case shall deliver such written
agreements within 10 days after the date of this Agreement.
(b) Promptly after the execution and delivery hereof, ALZA shall
deliver to SEQUUS a list (reasonably satisfactory to counsel for SEQUUS) setting
forth names of all persons who are expected to be, at the Effective Time, in
ALZA's reasonable judgment, affiliates of ALZA under applicable SEC accounting
releases with respect to pooling of interests accounting treatment. ALZA shall
furnish such information and documents as SEQUUS may reasonably request for the
purpose of reviewing such list. ALZA shall use commercially reasonable efforts
to deliver a written agreement in substantially the form of Exhibit C hereto (an
---------
"ALZA Affiliate Agreement") executed by each person identified as an affiliate
in the list furnished pursuant to this Section 5.11(b) as soon as practicable
after the execution of this Agreement and in any case shall deliver such written
agreements within 10 days after the date of this Agreement.
5.12 NYSE LISTING. ALZA shall use commercially reasonable efforts to list
on the NYSE, upon official notice of issuance, the shares of ALZA Common Stock
to be issued in connection with the Merger.
5.13 RESIGNATION OF DIRECTORS AND OFFICERS. Prior to the Effective Time,
SEQUUS shall deliver to ALZA at no cost the resignations of such directors and
officers of SEQUUS and its Subsidiaries as ALZA shall specify at least ten
business days prior to the Closing, effective at the Effective Time.
46
5.14 CONSENTS OF ALZA'S AND SEQUUS' ACCOUNTANTS. Each of ALZA and SEQUUS
shall use commercially reasonable efforts to cause its independent accountants
to deliver to ALZA a consent, dated the date on which the Registration Statement
shall become effective, in form reasonably satisfactory to ALZA and customary in
scope and substance for consents delivered by independent public accountants in
connection with registration statements on Form S-4 under the Securities Act.
5.15 STOCK OPTIONS AND WARRANTS.
(a) No later than 10 business days after the Effective Time, ALZA
shall file with the SEC a Registration Statement, on Form S-8 or other
appropriate form under the Securities Act, to register ALZA Common Stock
issuable upon exercise of the ALZA Exchange Options. ALZA shall use commercially
reasonable efforts to cause such Registration Statement to remain effective
until the exercise or expiration of such options.
(b) As soon as practicable after the Effective Time, ALZA shall
deliver to each person who holds an outstanding SEQUUS Option immediately before
the Effective Time a notice describing the assumption of SEQUUS Options set
forth in Section 2.2(a) hereof.
(c) In connection with ALZA's assumption of the Warrants, ALZA shall
make such assumption by written instrument delivered to, and reasonably
satisfactory to, the holders of such Warrants.
5.16 BOARD OF DIRECTORS. Effective as of the Effective Time, Dr. I. Xxxxx
Xxxxxxxxx (if willing and able to serve) shall be appointed to the board of
directors of ALZA, as a member of Class III, to serve until the election of such
class of directors at an annual meeting of its stockholders.
5.17 INTENTIONALLY OMITTED.
5.18 SEC FILINGS.
(a) SEQUUS will deliver promptly to ALZA true and complete copies of
each report, registration statement or statement mailed by it to its security
holders generally or filed by it with the SEC, in each case subsequent to the
date hereof and prior to the Effective Time.
(b) ALZA will deliver promptly to SEQUUS true and complete copies of
each report filed by it with the SEC subsequent to the date hereof and prior to
the Effective Time.
47
(c) Each party shall file a report on Form 8-K in compliance with
Rule 13a-11 under the Exchange Act with respect to this Agreement including as
exhibits to such report this Agreement and such other agreements that such party
shall reasonably determine to be appropriate.
5.19 EMPLOYEE BENEFIT MATTERS.
(a) Except as provided in Sections 5.19(b) and 5.19(c) and as
provided in Section 2.2(b) with respect to the ALZA Purchase Plan, ALZA shall
ensure that each person who is an employee of SEQUUS immediately prior to the
Effective Time (i) shall receive full service and vesting credit, under each
applicable employee benefit plan of ALZA in which such employee is eligible to
participate after the Effective Time (other than ALZA's bonus leave plan), for
his or her time of service to SEQUUS and its affiliates and predecessors, (ii)
shall be eligible to participate in all benefit plans of ALZA on the same terms
and conditions as other ALZA employees, and (iii) shall receive full credit
under the vacation, sick leave and paid time off policies of ALZA applicable to
such employee (other than ALZA's bonus leave plan) for all accrued and unused
vacation, sick leave and paid time off to which such employee is entitled under
the vacation, sick leave and paid time off policies of SEQUUS as of the
Effective Time; provided in each case such person is employed by ALZA or the
Surviving Corporation immediately after the Effective Time. ALZA shall cause to
be waived any pre-existing condition limitations, waiting periods or similar
limitations under each such employee benefit plan and shall provide each such
employee with credit for any co-payments previously made and any deductibles or
maximums previously satisfied.
(b) Subject to Sections 5.19, (c) and (d), ALZA need not make any
payments or contributions with respect to either the pre-Effective Time
service or the pre-1999 service of any employee described in Section 5.19(a)
under any of its employee benefit plans, including without limitation any
payments under its PACE bonus plan or contributions to its 401(k) plan or its
retirement plan; provided, however, that any severance benefits or health
benefits payable to any such employee who is employed by ALZA or the Surviving
Corporation immediately after the Effective Time shall be determined without
regard to this Section 5.19(b). SEQUUS shall terminate the SEQUUS
Pharmaceuticals, Inc., Profit Sharing 401(k) Plan effective immediately prior
to the Effective Time. Prior to the termination of the Profit Sharing 401(k)
Plan, SEQUUS will allocate to each participant's account a matching
contribution, in the form of SEQUUS Common Stock, in an amount not to exceed
50% of the first 5% of the compensation contributed by participating employees
to such accounts during 1998; provided, however, that the amount of such
-------- -------
matching contribution may be increased in an amount not to exceed $10,000 per
week, to account for any period in 1998 during which SEQUUS 401(k) plan
participants are not eligible to continue their participation in the SEQUUS
401(k) plan due to its termination.
48
(c) With respect to any employee described in Section 5.19(a) who
has accrued partial credit toward a paid sabbatical leave under SEQUUS'
sabbatical leave policy, ALZA shall provide the employee with the same
sabbatical leave benefit once the employee's aggregate service for SEQUUS and
ALZA would have resulted in the accrual of full credit toward such benefit under
SEQUUS' sabbatical leave policy; provided, however, that such service for ALZA
shall not be credited simultaneously under ALZA's bonus leave plan.
(d) The Surviving Corporation shall terminate its cafeteria plan
(within the meaning of Section 125 of the Code) as of the later of the
Effective Time or December 31, 1998. ALZA shall permit each employee described
in Section 5.19(a) to participate in the ALZA cafeteria plan and plans funded
through such cafeteria plan, and participants in the terminated SEQUUS
cafeteria plan shall be permitted to utilize remaining account balances in
such plan in accordance with its terms.
(e) SEQUUS shall be liable for any liability under the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. (S) 2101 et seq. ("WARN")
(or any similar foreign or domestic laws), including, but not limited to all
severance and other obligations (whether to give notice, to pay money, or to
provide benefits), with respect to the employment or termination of employment
of employees prior to the Effective Time. If requested in writing by ALZA,
SEQUUS agrees to provide notices both to employees and the necessary Government
Entities, in compliance with WARN, at least 60 days prior to the Effective Time.
SEQUUS shall deliver to ALZA a copy of the draft notices to be issued in
accordance with WARN (or any similar foreign or domestic laws), which notices
shall be subject to ALZA's review, comment and approval, which approval shall
not be unreasonably withheld.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
-------------------------------------------
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the fulfillment of each of the following conditions,
any one or more of which may be waived in writing by all the parties hereto:
6.1 REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect and no proceedings for such purpose shall
be pending before or threatened by the SEC.
49
6.2 STOCKHOLDER APPROVAL. The approval of a majority of the outstanding
shares of SEQUUS Common Stock for adoption of this Agreement shall have been
obtained at the SEQUUS Special Meeting or any adjournment or postponement
thereof.
6.3 LISTING OF ADDITIONAL SHARES. The ALZA Common Stock issuable in
connection with the Merger shall have been approved for listing subject to
official notice of issuance on the NYSE.
6.4 GOVERNMENTAL CLEARANCES. The waiting period applicable to
consummation of the Merger under the HSR Act shall have expired or been
terminated. Other than the filing of the Certificate of Merger which shall be
accomplished as provided in Section 1.2, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Government Entity the failure of which to obtain or comply with
would be reasonably likely to have a SEQUUS Material Adverse Effect or an ALZA
Material Adverse Effect shall have been obtained or filed.
6.5 TAX MATTERS. Each of ALZA and Merger Sub shall have received an
opinion of Xxxxxx Xxxxxx White & XxXxxxxxx, counsel to ALZA and Merger Sub, and
SEQUUS shall have received an opinion of Xxxxxx Godward LLP, counsel to SEQUUS,
each such opinion dated as of the Effective Time, substantially to the effect
that on the basis of the facts, representations and assumptions set forth in
such opinions, (i) the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code; (ii) each of ALZA, Merger Sub and SEQUUS
will be a party to such reorganization within the meaning of Section 368(b) of
the Code; and (iii) except with respect to cash received in lieu of fractional
share interest in ALZA Common Stock, no gain or loss will be recognized, for
United States federal income tax purposes, by a stockholder of SEQUUS as a
result of the Merger with respect to the shares of SEQUUS Common Stock converted
into ALZA Common Stock. If counsel to either ALZA or SEQUUS does not render such
opinion, this condition shall nonetheless be deemed to be satisfied with respect
to such party if counsel to the other party renders such opinion in the required
form to such party.
6.6 STATUTE OR DECREE. No writ, order, temporary restraining order,
preliminary injunction or injunction shall have been enacted, entered,
promulgated or enforced by any court or other tribunal or governmental body or
authority, which remains in effect, and prohibits the consummation of the Merger
or otherwise makes it illegal, nor shall any governmental agency have instituted
any action, suit or proceeding which remains pending and which seeks, and which
is reasonably likely, to enjoin, restrain or prohibit the consummation of the
Merger in accordance with the terms of this Agreement.
50
6.7 POOLING. The letters referred to in Sections 5.10(b) and (c) of this
Agreement shall have been received by SEQUUS and ALZA, respectively.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SEQUUS AND ALZA
------------------------------------------------
7.1 ADDITIONAL CONDITIONS TO THE OBLIGATION OF SEQUUS. The obligation
of SEQUUS to effect the Merger shall be subject to the fulfillment of each of
the following additional conditions, any one or more of which may be waived in
writing by SEQUUS:
(a) The representations and warranties of ALZA and Merger Sub
contained in this Agreement (without regard to any materiality exceptions or
provisions therein) shall be true and correct, in all material respects, as of
the Closing Date, with the same force and effect as if made at the Closing Date,
except (i) for changes specifically permitted by the terms of this Agreement
(ii) that the accuracy of the representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be determined as
of such date and (iii) where the failure of such representations and warranties
to be so true and correct does not have an ALZA Material Adverse Effect.
(b) ALZA and Merger Sub shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement
to be performed or complied with by them on or prior to the Closing Date.
(c) ALZA and Merger Sub shall have furnished a certificate or
certificates of ALZA and Merger Sub executed on behalf of ALZA and Merger Sub by
one or more of their respective officers to evidence compliance with the
conditions set forth in Sections 7.1(a) and (b) of this Agreement.
(d) Each Person identified as an affiliate pursuant to Section
5.11(b) shall have executed and delivered an ALZA Affiliate Agreement.
(e) There shall not have occurred, since the date hereof, any ALZA
Material Adverse Effect.
7.2 ADDITIONAL CONDITIONS TO THE OBLIGATION OF ALZA AND MERGER SUB. The
obligations of ALZA and Merger Sub to effect the Merger shall be subject to the
fulfillment of each of the following additional conditions, any one or more of
which may be waived in writing by ALZA:
(a) The representations and warranties of SEQUUS contained in this
Agreement (without regard to any materiality exceptions or provisions therein)
shall be true and correct, in all material respects, as of the Closing Date,
with the same force and
51
effect as if made at the Closing Date, except (i) for changes specifically
permitted by the terms of this Agreement, (ii) that the accuracy of the
representations and warranties that by their terms speak as of the date of this
Agreement or some other date will be determined as of such date and (iii) where
the failure of such representations and warranties to be so true and correct
does not have a SEQUUS Material Adverse Effect.
(b) SEQUUS shall have performed and complied in all material
respects with all agreements and obligations required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
(c) SEQUUS shall have furnished a certificate of SEQUUS executed on
behalf of SEQUUS by one of its officers to evidence compliance with the
conditions set forth in Sections 7.2(a) and (b) of this Agreement.
(d) Each person identified as an Affiliate pursuant to Section
5.11(a) shall have executed and delivered a SEQUUS Affiliate Agreement.
(e) There shall not have occurred, since the date hereof, any SEQUUS
Material Adverse Effect.
ARTICLE VIII
TERMINATION
-----------
8.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval by the stockholders of SEQUUS:
(a) by mutual written consent of the parties duly authorized by the
boards of directors of ALZA, SEQUUS and Merger Sub;
(b) by either ALZA or SEQUUS if the Merger shall not have been
consummated on or before April 1, 1999, which date may be extended by mutual
consent of the parties hereto; provided, however, that a party shall not be
-------- -------
permitted to terminate this Agreement pursuant to this Section 8.1(b) if such
party shall have breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the failure
to consummate the Merger on or before such date;
(c) by either ALZA or SEQUUS if (i) a statute, rule, regulation or
executive order shall have been enacted, entered or promulgated prohibiting the
consummation of the Merger substantially on the terms contemplated hereby or
(ii) a court of competent jurisdiction or other Government Entity shall have
issued an order, decree, ruling or injunction, or taken any other action, having
the effect of permanently
52
restraining, enjoining or otherwise prohibiting the Merger substantially on the
terms contemplated hereby, and such order, decree, ruling, injunction or other
action shall have become final and non-appealable; provided, that a party shall
--------
not be permitted to terminate this Agreement pursuant to this Section 8.1(c)
unless such party shall have used its reasonable efforts to remove such order,
decree, ruling or injunction; or
(d) by either ALZA or SEQUUS if (i) the SEQUUS Special Meeting (and
any adjournment or postponement thereof) shall have been held and completed and
SEQUUS' stockholders shall have taken a final vote on the proposal to approve
and adopt this Agreement and approve the Merger and (ii) the requisite approval
of SEQUUS' stockholders at such SEQUUS Special Meeting or any such adjournment
or postponement thereof is not obtained thereat (a "SEQUUS Negative Vote");
provided, that a party shall not be permitted to terminate this Agreement
---------
pursuant to this Section 8.1(d) if such party shall have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the failure to obtain such stockholder approval.
8.2 TERMINATION BY ALZA. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval by the stockholders of SEQUUS, by action of the board of
directors of ALZA, if:
(a) SEQUUS shall have failed to comply in any material respect with
any of the covenants or agreements contained in any Section of this Agreement to
be complied with or performed by SEQUUS at or prior to such date of termination
such that the Closing condition set forth in Section 7.2(b) would not be
satisfied; provided, however, that if such failure or failures are capable of
-------- -------
being cured prior to the Effective Time such that such condition would be
satisfied, then ALZA shall not be permitted to terminate this Agreement pursuant
to this Section 8.2(a) unless ALZA shall have delivered to SEQUUS written notice
of such failure or failures and such failure or failures shall not have been so
cured within 30 days after delivery to SEQUUS of such written notice; provided,
--------
further that ALZA shall not be permitted to terminate this Agreement pursuant
-------
to this Section 8.2(a) if ALZA shall have breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
caused such failure or failures of SEQUUS;
(b) there exists a breach or breaches of any representation or
warranty of SEQUUS contained in this Agreement such that the Closing condition
set forth in Section 7.2(a) would not be satisfied; provided, however, that if
-------- -------
such breach or breaches are capable of being cured prior to the Effective Time
such that such condition would be satisfied, then ALZA shall not be permitted to
terminate this Agreement pursuant to this Section 8.2(b) unless ALZA shall have
delivered to SEQUUS written notice of such
53
breach or breaches and such breach or breaches shall not have been so cured
within 30 days after delivery to SEQUUS of such written notice; provided,
--------
further that ALZA shall not be permitted to terminate this Agreement pursuant
-------
to this Section 8.2(b) if ALZA shall have breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
caused such breach or breaches of SEQUUS; or
(c) (i) the board of directors of SEQUUS fails to recommend the
approval of this Agreement to SEQUUS' stockholders, or withdraws, amends or
modifies in a manner adverse to ALZA its recommendation to SEQUUS' stockholders
for approval of this Agreement, (ii) a tender offer (to which Rule 14e-2(a)
applies) for at least 20% of the outstanding shares of capital stock of SEQUUS
is commenced prior to the SEQUUS Special Meeting, and within the time required
by Rule 14e-2(a) under the Exchange Act the board of directors of SEQUUS fails
to recommend against acceptance of such tender offer, or takes no position with
respect to such tender offer, or states its inability to take a position with
respect to such tender offer, (iii) an Acquisition Proposal is publicly
announced and SEQUUS or its board of directors takes any position (including
stating an inability to make a recommendation) with respect to such Acquisition
Proposal within 10 days after the public announcement of such Acquisition
Proposal other than a recommendation to reject such Acquisition Proposal, (iv)
the board of directors of SEQUUS accepts or recommends to the stockholders of
SEQUUS a Superior Proposal, or (v) the board of directors of SEQUUS resolves to
take any of the foregoing actions.
8.3 TERMINATION BY SEQUUS. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
approval by the stockholders of SEQUUS, by action of the board of directors of
SEQUUS, if:
(a) ALZA or Merger Sub shall have failed to comply in any material
respect with any of the covenants or agreements contained in any Section of this
Agreement to be complied with or performed by ALZA or Merger Sub at or prior to
such date of termination such that the Closing condition set forth in Section
7.1(b) would not be satisfied; provided, however, that if such failure or
-------- -------
failures are capable of being cured prior to the Effective Time such that such
condition would be satisfied, then SEQUUS shall not be permitted to terminate
this Agreement pursuant to this Section 8.3(a) unless SEQUUS shall have
delivered to ALZA written notice of such failure or failures and such failure or
failures shall not have been so cured within 30 days after such written notice;
provided, further, that SEQUUS shall not be permitted to terminate this
-----------------
Agreement pursuant to this Section 8.3(a) if SEQUUS shall have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately caused such failure or failures of ALZA;
54
(b) there exists a breach or breaches of any representation or
warranty of ALZA or Merger Sub contained in this Agreement such that the Closing
condition set forth in Section 7.1(a) would not be satisfied; provided, however,
-------- -------
that if such breach or breaches are capable of being cured prior to the
Effective Time such that such condition would be satisfied, then SEQUUS shall
not be permitted to terminate this Agreement pursuant to this Section 8.3(b)
unless SEQUUS shall have delivered to ALZA written notice of such breach or
breaches and such breach or breaches shall not have been so cured within 30 days
after delivery to ALZA of such written notice; provided, further, that SEQUUS
-----------------
shall not be permitted to terminate this Agreement pursuant to this Section
8.3(b) if SEQUUS shall have breached in any material respect its obligations
under this Agreement in any manner that shall have proximately caused such
breach or breaches of ALZA; or
(c) in accordance with Section 5.2 the board of directors of SEQUUS
accepts or recommends to the stockholders of SEQUUS a Superior Proposal.
8.4 PROCEDURE FOR TERMINATION. In order to terminate this Agreement
pursuant to this Article VIII, a party shall provide written notice thereof to
the other parties.
8.5 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this
Article VIII, no party hereto (or any of its directors or officers) shall have
any liability or further obligation under this Agreement to any other party,
except as provided in this Section 8.5 and except that nothing herein shall
relieve any party from liability for a willful breach of this Agreement.
(b) If this Agreement is validly terminated (i) by ALZA pursuant to
Section 8.2(c), or (ii) by SEQUUS pursuant to Section 8.3(c), and as of the time
of either such termination there shall not have occurred an ALZA Material
Adverse Effect, then within two business days after such termination SEQUUS
shall pay ALZA a termination fee equal to $25,000,000.
(c) If (i) this Agreement is validly terminated by ALZA or SEQUUS
pursuant to Section 8.1(d) as a result of a SEQUUS Negative Vote, (ii) no
payment is required by Section 8.5(b), (iii) prior to such SEQUUS Negative Vote,
there shall have been publicly announced an Acquisition Proposal which shall not
have been withdrawn, (iv) ALZA shall not have breached in any material respect
any of its obligations under this Agreement in any manner that shall have
proximately contributed to such SEQUUS Negative Vote, (v) within one year after
such valid termination of this Agreement pursuant to Section 8.1(d) as a result
of a SEQUUS Negative Vote, there shall have been consummated a transaction
satisfying the requirements of clause (i), (ii) or (iii) of Section
55
5.2(c), and (vi) as of the time of such termination there shall not have
occurred an ALZA Material Adverse Effect, then, within two business days
following the consummation of such transaction, SEQUUS shall pay ALZA a
termination fee equal to $25,000,000.
(d) SEQUUS will pay any fee payable under this Section 8.5 by wire
transfer of immediately available funds to an account specified by ALZA.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
ALZA, Merger Sub and SEQUUS at any time prior to the Effective Time; provided,
however, that after approval of this Agreement by the stockholders of SEQUUS, no
such amendment or modification shall change the amount or form of the
consideration to be received by SEQUUS' stockholders in the Merger.
9.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of ALZA or Merger Sub, on
the one hand, or SEQUUS, on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by SEQUUS (with respect to
any failure by ALZA or Merger Sub) or ALZA or Merger Sub (with respect to any
failure by SEQUUS), respectively, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
9.2.
9.3 SURVIVAL; INVESTIGATIONS. The respective representations and
warranties of ALZA, Merger Sub and SEQUUS contained herein or in any
certificates or other documents delivered prior to or at the Closing shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto and shall not survive the Effective Time.
9.4 NOTICES. All notices and other communications hereunder shall be in
writing (except any notice required under the last sentence of Section 5.2(a),
which notice shall be delivered both orally and in writing) and shall be
delivered personally by overnight courier or similar means or sent by facsimile
with written confirmation of receipt, to the parties at the addresses specified
below (or at such other address for a party as shall be specified by like
notice). Any such notice shall be effective upon receipt, if
56
personally delivered or on the next business day following transmittal if sent
by confirmed facsimile. Notices, including oral notices, shall be delivered as
follows:
(a) if to SEQUUS, to: SEQUUS Pharmaceuticals, Inc.
000 Xxxxxxxx Xx.
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
with a copy to: Xxxxxx Godward, LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx X. Xxxxx, Esq.
if to ALZA, or Merger
Sub, to: ALZA Corporation
950 Page Mill Road
X.X. Xxx 00000
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Staple, Esq.
with a copy to: Xxxxxx Xxxxxx White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. X'Xxxx, Esq.
Xxxxxxx X. Peers, Esq.
9.5 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor
any right, interest or obligation hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and
57
permitted assigns. This Agreement is not intended to confer any rights or
remedies upon any Person other than the parties hereto and, with respect only to
Section 5.8, the Indemnified Parties.
9.6 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware without reference to principles of conflicts of laws.
9.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be finally determined to be invalid, illegal or
unenforceable in any respect against a party hereto, it shall be adjusted if
possible to effect the intent of the parties. In any event, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby, and such invalidity, illegality
or unenforceability shall only apply as to such party in the specific
jurisdiction where such final determination shall have been made.
9.9 INTERPRETATION. The Article and Section headings contained in this
Agreement are solely for the purpose of reference and shall not in any way
affect the meaning or interpretation of this Agreement. The word "including"
shall be deemed to mean "including without limitation."
9.10 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreements, including the exhibits hereto and the documents and instruments
referred to herein (including the SEQUUS Disclosure Statement and the ALZA
Disclosure Statement), embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
representations, promises, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein and therein.
9.11 DEFINITION OF "LAW". When used in this Agreement "law" refers to
any applicable law (whether civil, criminal or administrative) including,
without limitation, common law, statute, statutory instrument, treaty,
regulation, directive, decision, code, order, decree, injunction, resolution or
judgment of any government, quasi-government, supranational, federal, state or
local government, statutory or regulatory body, court, or agency.
9.12 RULES OF CONSTRUCTION. Each party to this Agreement has been
represented by counsel during the preparation and execution of this Agreement,
and therefore waives any rule of construction that would construe ambiguities
against the party drafting the agreement.
58
IN WITNESS WHEREOF, ALZA, Merger Sub and SEQUUS have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
ALZA CORPORATION
By: /s/ XXXXXX XXXXX, PH.D.
----------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
ARGYLE ACQUISITION CORP.
By: /s/ XXXXX STAPLE
----------------------------------------
Title: President
-------------------------------------
SEQUUS PHARMACEUTICALS, INC.
By: /s/ I. XXXXX XXXXXXXXX, M.D.
----------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
59
EXHIBIT A
---------
CERTIFICATE OF MERGER
MERGING
ARGYLE ACQUISITION CORP.
WITH AND INTO
THE COMPANY, INC.
(Pursuant to Section 251 of the General Corporation Law of
the State of Delaware)
Argyle Acquisition Corp., a Delaware corporation ("Acquisition Corp.") and
SEQUUS Pharmaceuticals, Inc., a Delaware corporation (the "Company"), DO HEREBY
CERTIFY AS FOLLOWS:
FIRST: That Aquisition Corp. was incorporated on October 2, 1998, pursuant
to the Delaware General Corporation Law (the "Delaware Law"), and that the
Company was incorporated on February 13, 1987, pursuant to the Delaware Law.
SECOND: That an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of October 4, 1998, among Alza Corporation, a Delaware corporation,
Acquisition Corp. and the Company, setting forth the terms and conditions of the
merger of Aquisition Corp. with and into the Company (the "Merger"), has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Section 251 of the Delaware Law.
THIRD: That the name of the surviving corporation (the "Surviving
Corporation") shall be "SEQUUS Pharmaceuticals, Inc.".
FOURTH: That pursuant to the Merger Agreement, the Certificate of
Incorporation of the Surviving Corporation is amended to read in its entirety as
set forth in Exhibit A hereto.
FIFTH: That an executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
________________________________
________________________________
SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: That the Merger shall become effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, each of Aquisition Corp. and the Company has caused
this Certificate of Merger to be executed in its corporate name this ____ day of
October, 1998.
ARGYLE AQUISITION CORP.
_________________________________________
By:
Its:
SEQUUS PHARMACEUTICALS, INC.
_________________________________________
By:
Its:
EXHIBIT B
---------
FORM OF SEQUUS AFFILIATES AGREEMENT
-----------------------------------
October ___, 1998
ALZA Corporation
Ladies and Gentlemen:
The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be an "affiliate" of Sequus Pharmaceuticals, Inc., a Delaware
corporation ("Sequus"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in and for
purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission, although nothing contained herein shall be construed as an admission
by the undersigned that the undersigned is in fact an affiliate of Sequus.
Pursuant to the terms of the Agreement and Plan of Merger, dated as of October
___,1998 (the "Agreement"), among ALZA Corporation, a Delaware corporation
("ALZA"), Argyle Acquisition Corp., a Delaware corporation, and Sequus, at the
Effective Time (as defined in the Agreement) Sequus will become a wholly owned
subsidiary of ALZA.
As a result of the Merger (as defined in the Agreement), the undersigned
may receive shares of Common Stock, par value $0.01 per share, of ALZA ("ALZA
Common Stock"). The undersigned would receive such shares in exchange for
shares of Common Stock, par value $0.0001 per share, of Sequus owned by the
undersigned.
The undersigned and ALZA agree that in the event the undersigned receives
any ALZA Common Stock in the Merger:
(A) The undersigned has carefully read this letter and discussed its
requirements and other applicable limitations upon the undersigned's
ability to sell, transfer or otherwise dispose of the ALZA Common Stock
issued to the undersigned in the Merger, to the extent the undersigned has
felt it necessary, with the undersigned's counsel.
(B) The undersigned has been advised that the issuance of shares
of ALZA Common Stock to the undersigned in the Merger will be registered
under the Act by a Registration Statement on Form S-4. However, the
undersigned has also been advised that because (i) at the time of the
Merger's submission for a vote of the stockholders of Sequus the
undersigned may be deemed an affiliate of Sequus, and (ii) the re-sale or
other distribution by the undersigned of the ALZA Common Stock received
in the Merger has
not been registered under the Act, the undersigned may not sell,
transfer or otherwise dispose of ALZA Common Stock issued to the
undersigned in the Merger unless (a) such sale, transfer or other
disposition has been registered under the Act, (b) such sale, transfer or
other disposition is made in conformity with the volume and other
applicable limitations imposed by Rule 145 under the Act, (c) the volume
and other applicable limitations imposed by Rule 145 under the Act no
longer apply, or (d) in the opinion of counsel reasonably acceptable to
ALZA, such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
(C) The undersigned understands that ALZA will be under no
obligation to register the sale, transfer or other disposition of the
ALZA Common Stock by the undersigned or on the undersigned's behalf under
the Act or to take any other action necessary in order to make compliance
with an exemption from such registration available. Notwithstanding the
foregoing, ALZA shall file on a timely basis, from and after the
Effective Time (as defined in the Agreement) and as long as is necessary
in order to permit the undersigned to sell ALZA Common Stock held by the
undersigned pursuant to Rule 145, all reports required to be filed by it
pursuant to the Securities Exchange Act of 1934, as amended, and shall
otherwise make available adequate information regarding ALZA in such
manner as may be required to satisfy the requirements of Rule 144(c)
under the Act as now in effect.
(D) The undersigned understands that stop transfer instructions
will be given to ALZA's transfer agent with respect to the ALZA Common
Stock issued to the undersigned in the Merger and that there may be
placed on the certificates for the ALZA Common Stock issued to the
undersigned in the Merger, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF A LETTER AGREEMENT
DATED _________ 1998, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF ARGYLE."
(E) The undersigned also understands that unless the transfer by the
undersigned of ALZA Common Stock issued to the undersigned in the Merger
(i) has been registered under the Act or (ii) is a sale made in conformity
with the provisions of this letter, ALZA reserves the right, in its sole
discretion, to place the following legend on the certificates issued to any
transferee of shares from the undersigned:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 UNDER THE
SECURITIES ACT OF
2
1933, AS AMENDED, APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED."
It is understood and agreed that the legend set forth in paragraph D or E
above shall be removed by delivery of substitute certificates without such
legend if the undersigned or the undersigned's transferee shall have delivered
to ALZA (i) a copy of a letter from the staff of the Commission, or an opinion
of counsel, in form and substance reasonably satisfactory to ALZA, to the effect
that such legend is not required for purposes of the Act or (ii) reasonably
satisfactory evidence or representations that the shares represented by such
certificates are being or have been transferred in a transaction made in
conformity with the provisions of Rule 145 under the Act, or that the
limitations imposed by Rule 145 under the Act no longer apply.
The undersigned agrees that, until after such time as results covering at
least 30 days of post-Merger combined operations of ALZA and Sequus have been
published by ALZA within the meaning of Section 201.01 of the Commission's
Codification of Financial Reporting Policies or the termination of the
Agreement, whichever is sooner, the undersigned will not, without the prior
consent of ALZA (which consent shall not be unreasonably withheld or delayed):
(i) within the 30 days prior to the Effective Time (as defined in the
Agreement), sell, transfer or otherwise dispose of, or in any other way reduce
the undersigned's risk of ownership or investment in, or make any offer or
agreement relating to any of the foregoing with respect to any shares of the
Common Stock of Sequus held by the undersigned, except pursuant to and upon
consummation of the Merger (as defined in the Agreement); or (ii) sell, transfer
or otherwise dispose of, or in any other way reduce the undersigned's risk of
ownership or investment in, or make any offer or agreement relating to any of
the foregoing with respect to the ALZA Common Stock received by the undersigned
in the Merger.
In the event the Agreement is terminated, this letter agreement shall
terminate and shall cease to be of any force or effect.
3
Very truly yours,
Acknowledged this ___ day of __________, 1998.
ALZA CORPORATION
By: ___________________________________
Name:
4
EXHIBIT C
---------
FORM OF ALZA AFFILIATES AGREEMENT
---------------------------------
October __, 1998
Sequus Pharmaceuticals, Inc.
Ladies and Gentlemen:
The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be an "affiliate" of ALZA Corporation, a Delaware corporation
("ALZA"), as the term "affiliate" is used in and defined for purposes of
Accounting Series Releases 130 and 135, as amended, of the Securities and
Exchange Commission ("Commission"). Pursuant to the terms of the Agreement and
Plan of Merger, dated as of ___________, 1998 (the "Agreement), among ALZA,
Argyle Acquisition Corp., a Delaware corporation, and SEQUUS Pharmaceuticals,
Inc., a Delaware corporation ("SEQUUS"), at the Effective Time (as defined in
the Agreement) SEQUUS will become a wholly-owned subsidiary of ALZA.
Until after such time as results covering at least 30 days of post-merger
combined operations of ALZA and SEQUUS have been published by SEQUUS within the
meaning of Section 201.01 of the Commission's Codification of Financial
Reporting Policies or the termination of the Agreement, whichever is sooner, the
undersigned agrees that the undersigned will not, without the prior consent of
SEQUUS (which consent shall not be unreasonably withheld or delayed) within the
30 days prior to the Effective Time (as defined in the Agreement), sell,
transfer or otherwise dispose of, or in any other way reduce the undersigned's
risk of ownership or investment in, or make any offer or agreement relating to
any of the foregoing with respect to any shares of the Common Stock of SEQUUS
held by the undersigned, except pursuant to and upon consummation of the Merger
(as defined in the Agreement) and that the undersigned will not sell, transfer
or otherwise dispose, or in any other way reduce the undersigned's risk of
ownership or investment
Sequus Pharmaceuticals, Inc.
Page 2
in, or make any offer or agreement relating to any of the foregoing with respect
to the ALZA Common Stock held by the undersigned.
Very truly yours,
______________________
Director and/or Officer
Acknowledged this ___ day of __________, 1998.
SEQUUS PHARMACEUTICALS, INC.
By: _______________________________
Its:_______________________________
