Exhibit 99.1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated June 24, 1998 (the "Agreement"), by and
between Mylan Laboratories Inc., a Pennsylvania corporation ("Parent"), and
Penederm Incorporated, a Delaware corporation (the "Company").
RECITALS
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A. Concurrently with the execution and delivery of this Agreement, the
Company, Parent and MLI Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of Parent ("Subsidiary") are entering into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing
for, among other things, the merger of Subsidiary with and into the Company
(the "Merger"), with the Company as the surviving corporation in the Merger.
B. As a condition and inducement to Parent's and Subsidiary's willingness
to enter into the Merger Agreement, Parent has requested that the Company agree,
and the Company has agreed, to grant Parent an option to purchase shares of the
Company's common stock on the terms and subject to the conditions set forth
herein.
C. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein, the
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Company hereby grants to Parent an unconditional, irrevocable option (the
"Option") to purchase up to 1,717,878 (as adjusted as set forth herein) fully
paid and nonassessable shares (individually an "Option Share" and collectively
the "Option Shares") of Common Stock, par value $.01 per share of Company
("Company Common Stock"), at a purchase price of $20 (as adjusted as set forth
herein) per Option Share (the "Purchase Price") payable in cash; provided,
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however, that in no event shall the number of Option Shares for which the Option
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is exercisable together with the number of shares owned by Parent, if any,
exceed 19.9% of the Company's issued and outstanding shares of Company Common
Stock without giving effect to any shares subject or issued pursuant to the
Option. The number of Option Shares that may be received upon exercise of the
Option and the Purchase Price are each subject to adjustment as set forth in
Section 9 hereof and as otherwise provided herein.
2. Exercise of Option. (a) Subject to any applicable requirements of law,
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Parent may exercise the Option, in whole or in part, at any time or from time to
time after the occurrence of any one of the following events (a "Purchase
Event"): (A) any of the following occurs prior to the earlier of the Effective
Time or the termination of the Merger Agreement in accordance with its terms:
(i) any Person (other than Parent or any of its subsidiaries) shall have
commenced (as such term is defined in Rule 14d-2 under the Securities Exchange
Act of 1934 (the "Exchange Act")) a tender offer, or shall have filed a
registration statement under the Securities Act of 1933 (the "Securities Act")
with respect to an exchange offer, to purchase any shares of Company Common
Stock such that, upon consummation of such offer, such person or a "group" (as
such term is defined under the Exchange Act) of which such person is a member
shall have acquired beneficial ownership (as such term is defined in Rule 13d-3
of the Exchange Act), or the right to acquire beneficial ownership, of 25% or
more of the then outstanding Company Common Stock; (ii) the Company or any of
its subsidiaries shall have authorized, recommended, proposed or publicly
announced an intention to authorize, recommend or propose, or entered into, an
agreement, including without limitation, an agreement in principle, with any
person (other than Parent or any of its subsidiaries) to effect or provide for
the consummation of a Takeover Proposal; (iii) any Person (other than Parent or
any of its subsidiaries) shall solicit proxies or consents or announce a bona
fide intention to solicit proxies or consents from the Company's stockholders
(y) in opposition to the Merger, the Merger Agreement or any related
transactions or (z) relating to an Acquisition Transaction (other than
solicitations of stockholders seeking approval of the Merger, the Merger
Agreement or any related transactions), and the stockholders of the Company
shall have failed to approve the Merger; or (iv) any Person (other than Parent
or any of its subsidiaries) shall have acquired beneficial ownership (as such
term is defined in Rule 13d-3 under the Exchange Act) or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, shares of Company Common Stock (other than
trust account shares) aggregating 25% or more of the then outstanding Company
Common Stock; or (B) the termination of the Merger Agreement under circumstances
entitling Parent to payment of the Termination Fee within 2 Business Days of
such termination under any of the provisions of Section 7.1(b) of the Merger
Agreement; or (C) within twelve (12) months after the Merger Agreement is
terminated pursuant to Section 6.1(e) or (f) thereof, the Company executes a
definitive agreement to implement a Takeover Proposal with a third party who had
submitted a Takeover Proposal prior to the Termination Date (a "Proponent"); or
(D) within six (6) months after the Merger Agreement is terminated pursuant to
Section 6.1(e) or (f) thereof, the Company executes a definitive agreement to
implement a Takeover Proposal with a third party other than a Proponent provided
that the Company received a Takeover Proposal prior to the Termination Date.
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(b) Except as provided in the last sentence of this Section 2(b) and Section 15
hereof, the Option shall terminate and be of no further force and effect
upon the earliest to occur (the "Expiration Date") of (A) the Effective
Time, (B) 12 months after the first occurrence of a Purchase Event, of the
type described in subclauses (A)(i) through (iv) of Section 2(a) hereof or
subclause (B) of Section 2(a) hereof and (C) six months after the first
occurrence of a Purchase Event of the type described in subclauses (B) or
(C) of Section 2(a) hereof. Notwithstanding the termination of the Option,
Parent shall be entitled to purchase the Option Shares if it has exercised
the Option in accordance with the terms hereof prior to the termination of
the Option and the termination of the Option shall not affect any rights
hereunder which by their terms do not terminate or expire prior to or as of
such termination.
(c) In the event that Parent wishes to exercise the Option, it shall send to
the Company a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of Option Shares it
wishes to purchase pursuant to such exercise and (ii) a date not earlier
than three business days nor later than 20 business days from the Notice
Date for the closing of such purchase (the "Option Closing Date");
provided, however, that (i) if the closing of the purchase and sale
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pursuant to the Option (the "Option Closing") cannot be consummated by
reason of any applicable judgment, decree, order, law or regulation, the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which such restriction on consummation has expired
or been terminated and (ii) without limiting the foregoing, if prior
notification to or approval of any regulatory authority is required in
connection with such purchase, Parent and the Company shall promptly file
the required notice or application for approval and shall cooperate in the
expeditious filing of such notice or application, and the period of time
that otherwise would run pursuant to this sentence shall run instead from
the date on which, as the case may be, (A) any required notification period
has expired or been terminated or (B) any required approval has been
obtained, and in either event, any requisite waiting period has expired or
been terminated. Except as otherwise agreed in writing by the parties, the
place of the Option Closing shall be at the offices of Xxxxxxxx Xxxxxxxxx
Professional Corporation, One Oxford Centre, 000 Xxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxx, XX 00000-0000, and the time of the Option Closing shall be
10:00 a.m. (Eastern Time) on the Option Closing Date.
3. Payment and Delivery of Certificates. (a) At the Option Closing, Parent
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shall deliver to the Company the Purchase Price for the Option Shares so
designated and being purchased in immediately available funds by wire transfer
to a bank account designated in writing by the Company or by certified check or
bank check in an amount equal to the Purchase Price multiplied by the number of
Option Shares being purchased. At any Option Closing, Parent shall also deliver
a letter, in form and substance reasonable acceptable to the Company, agreeing
that Parent will not offer to sell or otherwise dispose of such Option Shares in
violation of applicable law or the provisions of this Agreement.
(b) At any Option Closing, simultaneously with the delivery of the Purchase
Price as provided in Section 3(a), the Company shall deliver to Parent (i)
a certificate or certificates representing the Option Shares to be
purchased at the Option Closing, which Option Shares shall be free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever
and (ii) if the Option should be exercised in part only, a new Option
evidencing the rights of the Parent to purchase the balance of the Option
Shares purchasable hereunder in the form of a Stock Option Agreement
identical to this Agreement save only the number of Option Shares subject
thereto. If at the time of issuance of the Option Shares pursuant to the
exercise of the Option hereunder, the Company shall not have redeemed any
rights issued under the Company Shareholders Rights Plan dated November 20,
1996 (the "Company Rights Plan"), or shall have issued any similar rights,
then each Option Share issued pursuant to such exercise shall also
represent a corresponding right or security or new rights with terms
substantially the
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same as and at least as favorable to Parent as are provided under the
Company Rights Plan or any similar agreement then in effect.
(c) Certificates for the Option Shares delivered at the Option Closing shall
have typed or printed thereon a restrictive legend which shall read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED JUNE 24, 1998, A COPY OF WHICH MAY BE OBTAINED FROM
THE SECRETARY OF PENEDERM INCORPORATED CORPORATION AT ITS PRINCIPAL
EXECUTIVE OFFICES."
(d) It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities
Act"), in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Parent shall have delivered to
the Company a copy of a letter from the staff of the Securities and
Exchange Commission (the "SEC"), or an opinion of counsel, in form and
substance satisfactory to the Company, to the effect that such legend is
not required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety as to
those Option Shares with respect to which the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates
shall bear any other legend as may be required by law.
4. Representations and Warranties of the Company. The Company hereby
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represents and warrants to Parent as follows:
(a) Due Authorization. The Company has all requisite corporate power and
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authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly executed
and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms.
(b) Authorized Stock. The Company's representations and warranties in Section
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3.1(a) of the Merger Agreement are incorporated herein by reference.
Without limiting the generality or effect of the foregoing, the Company has
taken all necessary corporate and other action to authorize and reserve
and, to permit it to issue, and, at all times from the date hereof
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until the obligation to deliver Option Shares upon the exercise of the
Option terminates, shall have reserved for issuance, upon exercise of the
Option, shares of Company Common Stock necessary for Parent to exercise the
Option, and the Company shall take all necessary corporate action to
authorize and reserve for issuance all additional shares of Company Common
Stock or other securities which may be issued pursuant to Section 9 upon
exercise of the Option. The shares of Company Common Stock to be issued
upon due exercise of the Option, including all additional shares of Company
Common Stock or other securities which may be issuable upon exercise of the
Option or any Substitute Option pursuant to Section 9, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including
without limitation any preemptive rights of any stockholder of the Company.
(c) No Conflicts. The execution and delivery of this Agreement does not, and
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the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement shall not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its subsidiaries under, (i)
the certificate of incorporation or by-laws of the Company or the
comparable organizational documents of any subsidiary of the Company, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to the Company or any subsidiary of the Company or their
respective properties or assets, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any subsidiary of the Company or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a Material Adverse Effect on the Company, (y)
impair the ability of the Company to perform its obligations under this
Agreement or the Merger Agreement, or (z) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
(d) State Takeover Statutes. Neither Section 203 of the Delaware General
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Corporation Act, nor any similar provision contained in the charter or by-
laws of the Company, is applicable to the acquisition of Option Shares
pursuant to this Agreement.
5. Representations and Warranties of Parent. Parent hereby represents and
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warrants to the Company that:
(a) Due Authorization. Parent has all requisite corporate power and authority
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to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Parent and the consummation by Parent of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Parent. This Agreement has been duly executed and delivered by
Parent and constitutes a legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms.
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(b) No Conflicts. The execution and delivery of this Agreement does not, and
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the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement hereby shall not, conflict
with or result in any violation of, or default (with or without notice or
lapse of time or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent under, (i) the certificate of incorporation
or by-laws of Parent or the comparable organizational documents of Parent,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or license
applicable to Parent or its properties or assets, or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Parent or its properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on Parent, (y) impair the ability of Parent to perform its
obligations under this Agreement or the Merger Agreement, or (z) prevent or
materially delay the consummation of any of the transactions contemplated
by this Agreement.
(c) Purchase Not for Distribution. Any Option Shares or other securities
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acquired by Parent upon exercise of the Option shall not be transferred or
otherwise disposed of except in a transaction registered, or exempt from
registration, under the Securities Act.
6. Repurchase of Option at Request of Parent. (a) At the request of Parent
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and in Parent's sole discretion, at any time during the period beginning upon
the first occurrence of a Repurchase Event (as defined in Section 6(c)) and
ending 6 months thereafter, the Company shall repurchase from Parent the Option
(unless the Option shall have expired or been terminated) and all shares of
Common Stock purchased by Parent upon exercise of the Option that are
beneficially owned by Parent on the date upon which Parent requests that the
Company repurchase the Option or Option Shares under this Section 6(a) (the
"Request Date"). Such repurchase shall be at an aggregate price (the "Put
Price") equal to the sum of:
(x) the aggregate Purchase Price paid by Parent for all Option Shares
previously purchased upon exercise of the Option that are beneficially
owned by Parent on the Request Date;
(y) the excess, if any, of the average of the last sales price for
Company Common Stock for the ten trading days ending on the day immediately
preceding the Put Closing Date (the "Market Price") over the Option Price
paid by Parent for each share of Company Common Stock with respect to which
the Option has been exercised that are beneficially owned by Parent on the
Request Date, multiplied by the number of such shares; and
(z) the excess, if any, of the Market Price of Company Common Stock at
the Put Closing Date over the Option Price (determined as if the Put
Closing Date were the Option Closing Date) multiplied by the number of
Option Shares with respect to which the Option has not been exercised;
provided that, in the case of Option Shares with respect to which the
Option has been exercised but the Option Closing Date has not
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occurred, the Option Closing Date shall be suspended and the Option shall
be treated, for purposes of this clause (z), as if it had not been
exercised.
(b) If Parent exercises its rights under this Section 6, the Company shall,
within 10 business days after the Request Date (the "Put Closing Date"),
pay the Put Price to Parent in immediately available funds, by wire
transfer to a bank account designated by Parent, Parent shall, against
receipt of the payment therefore, surrender to the Company the Option and
the certificates evidencing Option Shares previously purchased upon
exercise of the Option that are beneficially owned by Parent on the Request
Date; and Parent shall be deemed to have represented and warranted that it
has sole ownership of such Option Shares, free and clear of all liens,
claims, charges, and encumbrances of any kind. Notwithstanding the
foregoing, if the Company is prohibited from paying all or any portion of
the Put Price by reason of any applicable judgment, decree, order, law, or
regulation, the Company shall immediately pay that portion of the Put Price
that it is not prohibited from paying, shall from time to time thereafter
immediately pay such further portion of the Put Price that it is not then
prohibited from paying, and, in all cases, shall pay the balance of the Put
Price within 10 business days after such prohibition has expired or been
terminated. Upon receipt of a partial payment of the Put Price, Parent
shall surrender a portion of the Option and/or Option Shares, as selected
by Parent, corresponding (as closely as practicable) to the portion of the
Put Price received by Parent.
(c) As used herein, a "Repurchase Event" means any of the following: (i) a
termination of the Merger Agreement by the Board of Directors of the
Company under Section 6.1(d) of the Merger Agreement; (ii) an occurrence of
both (A) a Purchase Event of the type described in subclauses (A),or (C) of
Section 2(a) hereof other than a termination of the Merger Agreement
referred to in clause (i) of this sentence and (B) consummation of a
Takeover Proposal within twelve (12) months after termination of the Merger
Agreement; (or) (iii) an occurrence of both (A) a Purchase Event of the
type described in subclause (D) of Section 2(a) hereof and (B) consummation
of a Takeover Proposal within six (6) months after the termination of the
Merger Agreement. A Repurchase Event referred to in clause (ii) or (iii)
of the preceding sentence will occur when the last of the events referred
to in clauses (ii)(A) and (ii) (B) occurs.
7. Registration Rights. Parent may, by written notice (the "Registration
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Notice") request the Company to register under the Securities Act all or any
part of the capital stock of the Company acquired under this Agreement and
beneficially owned by Parent (the "Registrable Securities"). The Company
(and/or any Person designated by the Company) shall thereupon have the option
exercisable by written notice delivered to Parent within 10 business days after
the receipt of the Registration Notice, irrevocably to agree to purchase all or
any part of the Registrable Securities for cash at a price equal to the product
of (i) the number of Registrable Securities and (ii) the fair market value of
such shares. Any such purchase of Registrable Securities by the Company
hereunder shall take place at a closing to be held at the principal executive
offices of the Company or its counsel at any reasonable date and time designated
by the Company and/or such designee in such notice within 20 business days after
delivery of such notice. Any payment of the shares to be purchased shall be
made by delivery at the time of such closing of the purchase price for the
Registrable Securities in immediately available funds. For purposes of his
Agreement the term Registrable Securities shall not include shares of capital
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stock acquired under this Agreement that may be sold pursuant to Rule 144(k) of
the Securities Act.
If the Company does not elect to exercise its option pursuant to this
Section 7 with respect to all Registrable Securities, it shall use its best
efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities; provided, however,
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that (i) Parent shall be entitled to no more than an aggregate of two effective
registration statements hereunder and (ii) the Company will not be required to
file any such registration statement during any period of time (not to exceed 40
days after such request in the case of clause (A) below or 90 days in the case
of clauses (B) and (C) below) when (A) the Company is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the written opinion of counsel to such Company,
such information would have to be disclosed if a registration statement were
filed at that time; (B) such Company is required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) such Company determines, in its reasonable
judgment, that such registration would interfere with any financing, acquisition
or other material transaction involving the Company or any of its affiliates.
If consummation of the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 90 days after the filing with the
Securities and Exchange Commission of the registration statement becomes
effective, the provisions of this Section 7 shall again be applicable to any
proposed registration, provided, however, that neither party shall be entitled
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to request more than two registrations pursuant to this Section 7. The Company
shall use its reasonable best efforts to cause any Registrable Securities
registered pursuant to this Section 7 to be qualified for sale under the
securities or Blue Sky laws of such jurisdictions as Parent may reasonably
request and shall continue such registration or qualification in effect in such
jurisdiction; provided, however, that the Company shall not be required to
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qualify to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
The registration rights set forth in this Section 7 are subject to the
condition that Parent shall provide the Company with such information with
respect to such holder's Registrable Securities, the plans for the distribution
thereof, and such other information with respect to such holder, as, in the
reasonable judgment of counsel for the Company, is necessary to enable the
Company to include in such registration statement all material facts required to
be disclosed with respect to a registration thereunder.
A registration effected under this Section 7 shall be effected at the
Company's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to Parent, and the Company shall provide to any
underwriter such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and any underwriters in the customary manner and (ii) to enter into an
underwriting agreement in form and substance customary to transactions of this
type with any underwriters participating in such offering.
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8. Listing. If shares of Company Common Stock or any other securities to be
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acquired upon exercise of the Option are then listed on the Nasdaq National
Market (or any other national securities exchange or national securities
quotation system), the Company, upon the request of Parent, shall promptly file
an application to list the shares of Company Common Stock or other securities to
be acquired upon exercise of the Option on the Nasdaq National Market (or such
other national securities exchange or national securities quotation system) and
shall use reasonable efforts to obtain approval of such listing as promptly as
practicable.
9. Adjustment Upon Changes in Capitalization, Etc. (a) In the event of any
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change in Company Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that Parent shall receive
upon exercise of the Option the number and class of shares or other securities
or property that Parent would have received in respect of Company Common Stock
if the Option had been exercised immediately prior to such event or the record
date therefor, as applicable. Subject to Section 1, and without limiting the
parties' relative rights and obligations under the Merger Agreement, if any
additional shares of Company Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 9(a)), the number of shares of Company Common Stock subject to the
Option shall be adjusted so that, after such issuance, it equals 19.9% of the
number of shares of Company Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that the Company enters into an agreement
(i) to consolidate with or merge into any person, other than Parent or one
of its subsidiaries, and the Company shall not be the continuing or
surviving corporation in such consolidation or merger, (ii) to permit any
person, other than Subsidiary or one of Parent's other subsidiaries, to
merge into the Company and the Company shall be the continuing or surviving
corporation, but in connection with such merger, the shares of Company
Common Stock outstanding immediately prior to the consummation of such
merger shall be changed into or exchanged for stock or other securities of
the Company or any other person or cash or any other property, or the
shares of Company Common Stock outstanding immediately prior to the
consummation of such merger shall, after such merger, represent less than
50% of the outstanding voting securities of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Parent or one of its subsidiaries, then, and in each
such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Parent would have received in respect of
Company Common Stock if the Option had been exercised immediately prior to
such consolidation, merger, sale or transfer, or the record date therefor,
as applicable.
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(c) If, prior to the termination of the Option in accordance with Section 2 or
the Notice Date, the Company enters into any agreement pursuant to which
all outstanding shares of Company Common Stock are to be purchased for, or
converted into the right to receive in whole or in part (other than in
respect of fractional shares), cash (a "Transaction"), the Company
covenants that proper provision shall be made in such agreement to provide
that, if the Option shall not therefore have been exercised, then upon the
consummation of a Transaction (which in the case of a Transaction involving
a tender offer shall be when shares of Company Common Stock are accepted
for payment), Parent shall receive in exchange for the cancellation of the
Option an amount in cash equal to the Cash Consideration and if proper
provision is so made the Option shall be cancelled. For purposes of this
Agreement, the term "Cash Consideration" means the number of Option Shares
multiplied by the difference between (A) the closing market price per share
of Company Common Stock on the day immediately prior to the consummation of
a Transaction and (B) the Purchase Price.
(d) Whenever the number of Option Shares purchasable upon exercise hereof is
adjusted as provided in this Section 9, the Purchase Price shall be
adjusted by multiplying the Purchase Price by a fraction, the numerator of
which shall be equal to the number of shares of Company Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Company Common Stock purchasable after the
adjustment.
10. Exchange Loss or Mutilation. This Agreement (and the Option granted
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hereby) are exchangeable, without expense, at the option of the Parent, upon
presentation and surrender of this Agreement at the principal office of the
Company, for other agreements providing for Options of different denominations
entitling the Parent to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of Option
Shares hereunder. The terms "Stock Option Agreement" and "Option" as used
herein include any Stock Option Agreements and related options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Company shall execute and
deliver a new Agreement of like tenor and date. Any such new Agreement executed
and delivered shall constitute an additional contractual obligation on the part
of the Company, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by anyone.
11. Certain Covenants of the Company. The Company agrees: (i) that it shall
--------------------------------
at all times maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock so that the Option may be exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Company Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by the Company; (iii) promptly to take all action as may from time to
time be required (including complying with all premerger
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notification, reporting and waiting period requirements specified in 15 U.S.C.
Section 18a and regulations promulgated thereunder or to any other governmental
entity is necessary before the Option may be exercised, cooperating fully with
the Parent in preparing such applications or notices and providing such
information to each such governmental entity as they may require) in order to
permit the Parent to exercise the Option and the Company duly and effectively to
issue Option Shares pursuant hereto; and (iv) to take all action provided herein
to protect the rights of the Parent against dilution.
12. Specific Performance. The Company acknowledges that if the Company fails
--------------------
to perform any of its obligations under this Agreement immediate and irreparable
harm or injury would be caused to Parent for which money damages would not be an
adequate remedy. In such event, the Company agrees that Parent shall have the
right, in addition to any other rights it may have, to specific performance of
this Agreement.
13. Profit Limitation. (a) Notwithstanding any other provision of this
-----------------
Agreement, in no event shall Parent's Total Profit (as hereinafter defined)
exceed $24 million (the "Cap") and, if it otherwise would exceed such amount,
Parent, at its sole election, shall either (a) deliver to the Company for
cancellation Shares previously purchased by Parent (valued at the average of the
last sales price for Company Common Stock for the ten trading days ending on the
day immediately preceding such delivery), (b) pay cash to the Company or (c)
undertake any combination thereof, so that Parent's Total Profit shall not
exceed the Cap after taking into account the foregoing actions.
As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash paid or payable
by Parent pursuant to Section 7.1(b) of the Merger Agreement, (ii) (x) the
amount paid or payable by Parent pursuant to the Company's repurchase of Option
Shares pursuant to Section 7 hereof, less (y) Parent's purchase price for such
Option Shares, and (iii) (x) the net cash amounts received by Parent pursuant to
the sale of Option Shares (or any other securities into which such Option Shares
are converted or exchanged) to any unaffiliated party, less (y) Parent's
purchase price for such Option Shares.
14. Miscellaneous.
-------------
(a) Expenses. Except as otherwise provided in the Sections 6 and 7, each of
--------
the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at any
--------------------
time by the party that is entitled to the benefits of such provision, but
such waiver shall only be effective if in writing and signed by the party
entitled to the benefits of such provision. This Agreement may not be
amended, except by an instrument in writing signed on behalf of each of the
parties. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
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(c) Descriptive Headings. The descriptive headings contained herein are for
--------------------
convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
(d) Entire Agreement; No Third-Party Beneficiaries. Except as otherwise
----------------------------------------------
provided, in this Agreement, the Merger Agreement (including the documents
and instruments referred to therein), the Confidentiality Agreement by and
between the Company and Parent, dated May 27, 1998, the Supplement to the
Confidentiality Agreement by and between the Company and Parent, dated May
6, 1998 and that certain Reciprocal Confidentiality Agreement by and
between the Company and Parent (i) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement,
and (ii) not intended to confer upon any person other than the parties any
rights or remedies. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction or a federal or
state regulatory agency to be invalid, void, or unenforceable, the other
terms, provisions, covenants, and restrictions of this Agreement shall
remain in full force and effect and shall not be affected, impaired, or
invalidated. If for any reason such court or regulatory agency determines
that the Option does not permit Parent to acquire, or does not require the
Company to repurchase, the full number of Option Shares provided herein (as
adjusted pursuant to Section 9), it is the express intention of the Company
to allow Parent to acquire, or to require the Company to repurchase, such
lesser number of shares as may be permissible without any amendment or
modification hereof.
(e) GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware (regardless of the laws
that might otherwise govern under applicable Delaware principles of
conflicts of law). Each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of
this Agreement or any of the transactions contemplated hereby. THE GRANTOR
AGREES THAT, IN CONNECTION WITH ANY LEGAL SUIT OR PROCEEDING ARISING WITH
RESPECT TO THIS AGREEMENT, IT SHALL SUBMIT TO THE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND AGREES TO
VENUE IN SUCH COURTS. THE GRANTOR HEREBY APPOINTS THE SECRETARY OF THE
GRANTOR AS ITS AGENT FOR SERVICE OF PROCESS FOR PURPOSES OF THE FOREGOING
SENTENCE ONLY.
(f) Notices. All notices, requests, claims, demands and other communications
-------
under this Agreement must be in writing and shall be deemed given if
delivered personally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
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(i) if to Company, to:
Penederm Incorporated
000 Xxxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
President & Chief Executive Officer
with copies to:
Xxxxxx Xxxxxx White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxxxxx; and
(ii) if to Parent, to:
Mylan Laboratories Inc.
000 Xxxxxxxx Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx
Senior Vice President
with a copy to:
Xxxxxxxx Xxxxxxxxx Professional Corporation
One Oxford Centre
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: XxXxxxx Xxxxx/Xxxx X. Xxxxxx
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(g) Counterparts. This Agreement and any amendments hereto may be executed in
------------
two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterparts.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
----------
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party except that Parent may assign this
Agreement and its rights hereunder to any of its subsidiaries. Subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by Parent,
------------------
the Company and Parent shall execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
PENEDERM INCORPORATED
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxx
President and Chief Executive Officer
MYLAN LABORATORIES INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxxx X. Xxxxxxx
Senior Vice President
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