SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period from
to
Commission File Number 0-15597
MARSAM PHARMACEUTICALS INC. AND SUBSIDIARY
(Exact name of registrant as specified in its charter)
DELAWARE 11-2718528
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
Building 31, Olney Avenue, Cherry Hill, New Jersey 08003
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(609)424-5600
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
At June 30, 1995 (the close of the Registrant's second fiscal
quarter), there were 11,083,487 shares of the Registrant's common
stock, par value $.01 per share (the "Common Stock") outstanding.
This report contains a total of 12 pages.
MARSAM PHARMACEUTICALS INC. AND SUBSIDIARY
INDEX
to
FORM 10-Q for Quarter ended June 30, 1995
Page
Number
Part I. FINANCIAL INFORMATION 3
Item 1. Financial Statements
Consolidated Statements of Income for 3
the three and six-month periods ended
June 30, 1995 and 1994 (unaudited)
Consolidated Balance Sheets as of June 30, 1995 4
(unaudited) and December 31, 1994
Consolidated Statements of Cash Flows for the 5
six-month periods ended June 30, 1995
and 1994 (unaudited)
Notes to Consolidated Financial Statements 6
(unaudited)
Item 2. Management's Discussion and Analysis 8
of Financial Condition and Results of
Operations
Part II. OTHER INFORMATION 10
SIGNATURES 12
MARSAM PHARMACEUTICALS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
Net revenues $10,715,000 $ 8,544,800 $21,310,900 $15,619,000
Cost of goods sold 7,472,100 6,178,500 15,589,100 11,337,900
Gross profit 3,242,900 2,366,300 5,721,800 4,281,100
Operating costs and expenses:
Selling, general and 1,512,700 1,278,500 2,789,000 2,266,100
administrative
Research and development 1,036,900 535,700 1,818,100 1,079,500
Total operating expenses 2,549,600 1,814,200 4,607,100 3,345,600
Income from operations 693,300 552,100 1,114,700 935,500
Other income, net 799,500 166,500 1,587,000 304,300
Income before income taxes 1,492,800 718,600 2,701,700 1,239,800
Provision for income taxes 447,800 30,000 810,400 40,000
Net income $ 1,045,000 688,600 1,891,300 1,199,800
Net income per common and
common equivalent share $ 0.09 $ 0.06 $ 0.17 $ 0.11
Fully diluted weighted average
common & common equivalent shares
outstanding 11,462,200 11,164,700 11,454,800 11,158,200
See accompanying notes to consolidated financial statements.
MARSAM PHARMACEUTICALS INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1995 December 31, 1994
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 8,131,600 $ 10,470,300
Investments available-for
-sale, at fair market value 7,010,000 4,710,000
Accounts receivable, net of
reserves of $1,867,400 and
$1,222,400 at June 30, 1995
and December 31, 1994 5,958,800 6,147,800
Inventory 14,871,300 10,830,200
Deferred income taxes 473,800 526,400
Other current assets 2,054,000 2,111,800
Total current assets 38,499,500 34,796,500
Property and equipment, net of
accumulated depreciation of
$7,857,600 and $7,009,200 at
June 30, 1995 and December
31, 1994 20,691,700 20,042,100
Deposits for property and
equipment 431,300 250,000
Deferred income taxes 208,400 253,200
Other assets 1,482,700 1,520,100
Total assets $ 61,313,600 $ 56,861,900
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,501,300 2,012,500
Accrued compensation 508,700 346,800
Accrued liabilities 1,811,900 1,342,500
Deferred revenue - 1,175,000
Total current liabilities 6,821,900 4,876,800
Long-term liabilities:
Deferred compensation 966,600 813,800
Deferred income taxes 49,400 14,500
Total liabilities 7,837,900 5,705,100
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01
per share; authorized 1,000,000
shares - -
Common stock, par value $.01 per
share; authorized 30,000,000
shares; issued and outstanding
11,083,487 shares at June 30,
1995 and 11,047,562 shares at
December 31, 1994 110,800 110,500
Additional paid-in capital 52,166,800 51,739,500
Retained earnings (deficit) 1,198,100 (693,200)
Total stockholders' equity 53,475,700 51,156,800
Total liabilities and
stockholders' equity $ 61,313,600 $ 56,861,900
See accompanying notes to consolidated financial statements.
MARSAM PHARMACUETICALS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June 30,
1995 1994
Cash flows from operations:
Net income $ 1,891,300 $ 1,199,800
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 848,400 617,400
Deferred compensation expense 152,800 108,000
Deferred tax provision 132,300 16,000
Decrease in accounts receivable 189,000 1,533,100
(Increase) in inventory (4,041,100) (738,500)
(Increase)decrease in other assets 95,200 (807,800)
Increase in accounts payable 2,424,000 2,951,400
Increase (decrease) in accrued
expenses 631,300 181,800
(Decrease) in deferred
liabilities (1,175,000) -
Net cash provided by operating
activities 1,148,200 5,061,200
Investment activities:
Purchase of investments
available-for-sale (2,800,000) -
Sale of investments
available-for-sale 500,000 1,325,400
Purchase of property and
equipment (1,433,200) (351,500)
Deposits on property and
equipment (181,300) (1,128,400)
Net cash used in investment
activities (3,914,500) (154,500)
Financing activities:
Proceeds from issuance of common
stock 427,600 213,200
Net cash provided by financing
activities 427,600 213,200
Increase (decrease) in cash and
cash equivalents (2,338,700) 5,119,900
Cash and cash equivalents,
beginning of period 10,470,300 6,836,700
Cash and cash equivalents, end
of period $ 8,131,600 $ 11,956,600
See accompanying notes to consolidated financial statements.
MARSAM PHARMACEUTICALS INC. & SUBSIDIARY
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation:
The accompanying unaudited consolidated financial
statements of Marsam Pharmaceuticals Inc. and
Subsidiary have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the applicable
regulations of the Securities and Exchange Commission.
Accordingly, the accompanying unaudited consolidated
financial statements do not include all of the
information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all
adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation
have been included. For further information, reference
is made to the financial statements and footnotes
thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
The consolidated financial statements include the
accounts of Marsam Pharmaceuticals Inc. and Subsidiary.
All intercompany transactions are eliminated in
consolidation. Investments in corporate joint ventures
in which the Company has a 20 to 50 percent ownership
are accounted for by the equity method. Other
investments, less than 20 percent owned, are carried at
their original cost. Equity and cost investments are
included in other assets in the consolidated financial
statements.
2. Inventory:
At June 30, 1995 and December 31, 1994, inventory consisted
of the following:
June 30, 1995 December 31, 1994
Raw materials (including
components) $7,623,200 $5,954,700
Work-in-process 366,800 95,900
Finished goods 6,881,300 4,779,600
$14,871,300 $10,830,200
3. Settlement Agreement with Great Lakes Chemical
Corporation:
On July 18, 1994, the Company and Great Lakes Chemical
Corporation (GLCC) executed a comprehensive settlement
agreement which resolved the outstanding litigation
between them concerning the failure of GLCC to supply
the Company certain raw materials. Under the terms of
the settlement, GLCC paid $2.35 million to the Company
and agreed to begin supplying the Company with the
inhaled anesthetic raw material commencing upon the
availability of production quantities from its existing
facility and continuing for at least five years after
completion of a new, larger production facility. The
payment, received by the Company on July 19, 1994, was
ratably recognized as income during the period of July
1, 1994 through June 30, 1995, the period during which
the Company originally expected to launch the product.
For the three and six-month periods ended June 30,
1995, the Company recognized $587,500 and $1,175,000,
respectively, of the $2.35 million received from GLCC,
as other income.
If GLCC fails to deliver agreed quantities of product
by specified dates the Company is entitled to be
reimbursed for lost profits associated with the
inability of the Company to market the product. Such
payments can be received until January 15, 1998.
4. Income Taxes:
The provision for income tax expenses is based on an
estimated full year effective income tax rate. The
rate reflects the Company's utilization of certain
federal tax credits and its federal and state net
operating loss carryforwards during 1995. The
provision for income tax for the same periods in 1994
was insignificant due to the availability of federal
and state net operating loss carryforwards.
5. Net income per share:
Net income per share is based on fully diluted weighted
average common and common equivalent shares outstanding for the
three and six-month periods ended June 30, 1995 and 1994.
6. Subsequent Event:
On July 28, 1995, the Company entered into an Agreement
and Plan of Merger (the "Merger Agreement") with Schein
Pharmaceutical, Inc. ("Schein") and SM Acquiring Co.,
Inc. ("SM") providing, among other things, that (i) SM
would commence a cash tender offer (the "Offer") to
purchase all outstanding shares of the Company's Common
Stock, par value $.01 per share (the "Shares") at
a price of $21.00 per share net to the seller and (ii)
following completion of the Offer, SM would be merged
with and into the Company (the Merger), which would be
the surviving corporation, and each outstanding Share
would be converted into the right to receive $21.00
in cash. For further information, reference is made
to the Merger Agreement, a copy of which is included
as Exhibit 10(a) to this Form 10-Q Report.
On July 28, 1995, Schein and SM entered into a
Stockholders' Agreement with Marvin Samson, Agvar
Chemicals, Inc. and Agnes Varis and her husband (the
"Stockholders") with respect to at least 2,883,320 of
the 2,989,882 aggregate Shares owned by them, or
approximately 26% of the outstanding Shares, in which
agreement, as an inducement to Schein and SM to enter
into the Merger Agreement, the Stockholders agreed,
among other things, subject to certain limitations, to
(i) tender their Shares in response to the Offer,
(ii) vote their Shares in favor of the Merger and
(iii) grant Schein an irrevocable option to purchase
their Shares, exercisable under certain conditions,
at $21.00 per share. For further information, reference
is made to the Stockholders' Agreement, a copy of which
is included as Exhibit 10(b) to this Form 10-Q Report.
On July 28, 1995, the Company entered into an
Employment Agreement with Marvin Samson which provides,
among other things, for Mr. Samson's employment as
President and Chief Executive Officer of the Company,
and as Executive Vice President of Schein. The term of
the employment agreement will commence on the date of the
acquisition by Schein or a subsidiary of Schein, of a
majority of the outstanding shares on a fully diluted
basis and will continue for a minimum of five years.
The employment agreement, among other things, specifies
certain matters regarding the operations of the Company
following the Merger. For further information, reference
is made to the Employment Agreement, a copy of which is
filed as Exhibit 10(c) to this Form 10-Q Report.
MARSAM PHARMACEUTICALS INC. & SUBSIDIARY
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company was founded in 1985 and is engaged in the business of
developing, manufacturing, marketing and distributing generic
injectable prescription drug products. The Company markets
penicillin, cephalosporin and other injectable products to
pharmaceutical wholesalers and distributors, contract
manufacturing customers, hospitals, home infusion companies and
other medical facilities.
The Company originally sold its products through joint venture
distribution agreements and under manufacturing agreements with
other pharmaceutical companies. During the last two years, the
Company has developed its own sales force and sells its products
under the Marsam label and private labels.
Settlement Agreement with Great Lakes Chemical Corporation
On July 18, 1994, the Company and Great Lakes Chemical
Corporation (GLCC) executed a comprehensive settlement agreement
which resolved the outstanding litigation between them concerning
the failure of GLCC to supply the Company certain raw materials.
Under the terms of the settlement, GLCC paid $2.35 million to
the Company and agreed to begin supplying the Company with the
inhaled anesthetic raw material commencing upon the availability
of production quantities from its existing facility and
continuing for at least five years after completion of a new,
larger production facility. The payment, received by the Company
on July 19, 1994, was ratably recognized as income during the
period of July 1, 1994 through June 30, 1995, the period during
which the Company originally expected to launch the product. For
the three and six-month periods ended June 30, 1995, the Company
recognized $587,500 and $1,175,000, respectively, of the $2.35
million received from GLCC, as other income.
If GLCC fails to deliver agreed quantities of product by
specified dates the Company is entitled to be reimbursed for lost
profits associated with the inability of the Company to market
the product. Such payments can be received until January 15,
1998.
Results of Operations
During the three and six-month periods ended June 30, 1995, the
Company had revenues of $10,715,000 and $21,310,900,
respectively, consisting of Marsam-label sales of $9,857,600 and
$17,383,700, respectively, and contract sales of $857,400 and
$3,927,200, respectively. During the same periods in 1994, the
Company had revenues of $8,544,800 and $15,619,000, respectively,
consisting of Marsam-label product sales of $6,695,000 and
$11,805,000, respectively, and contract sales of $1,849,800 and
$3,814,000, respectively.
Revenues increased in the three and six-month periods ended June
30, 1995 compared to the same periods in 1994 due primarily to
the introduction of new products and increased market penetration
of Marsam-label products. This growth, for the three-month
period ended June 30, 1995, was partially offset by decreased
demand for contract business.
Gross profit margin increased in the three-month period ended
June 30, 1995 when compared to the same period in 1994, from 28%
to 30%. For the six-month periods ended June 30, 1995 and 1994,
the gross profit margin was 27%. The increase for the three-
month period ended June 30, 1995 is attributable mainly to
increased production in the non-penicillin, non-cephalosporin
facility and product mix.
Selling, general, and administrative costs increased during the
three and six-month periods ended June 30, 1995 compared to the
same periods in 1994 due mainly to increases of $134,900 and
$244,300, respectively, in administrative personnel and
personnel-related expenses, and $113,500 and $235,600,
respectively, in sales and marketing personnel and personnel-
related expenses.
Research and development costs increased during the three and
six-month periods ended June 30, 1995 compared to the same
periods in 1994 primarily as the result of increases in
development material expenses of $381,000 and $446,000,
respectively, and personnel and personnel-related expenses.
Other income for the three and six-month periods ended June 30,
1995 consisted of interest income of $212,000 and $412,000,
respectively, and income recognized as a result of the settlement
agreement with GLCC of $587,500 and $1,175,000, respectively.
(See Note 3 of the Notes to Consolidated Financial Statements.)
For the same periods in 1994, other income consisted entirely of
interest income of $166,500 and $304,300, respectively. Interest
income increased for the three and six-month periods ended June
30, 1995 compared to the same periods in 1994 due primarily to
higher interest rates.
The provision for income taxes for the three and six-month
periods ended June 30, 1995 was $447,800 and $810,400,
respectively, and is based on an estimated full year effective
income tax rate. The rate reflects the Company's utilization of
certain federal tax credits and its federal and state net
operating loss carryforwards during 1995. The provision for
income taxes for the same periods in 1994 was insignificant due
to the availability of federal and state net operating loss
carryforwards.
The ratio of net income to net sales increased to 9.8% and 8.9%,
respectively, for the three and six-month periods ended June 30,
1995, compared to 8.1% and 7.7%, respectively, for the same
periods in 1994.
Capital Resources and Liquidity
As of June 30, 1995, the Company had cash, cash equivalents, and
investments available-for-sale of $15,141,600, as compared to
$15,180,300 at December 31, 1994. Cash, cash equivalents, and
investments available-for-sale generated during the six-month
period ended June 30, 1995 were primarily from income from
operations, interest income and the issuance of common stock.
Cash, cash equivalents, and investments available-for-sale were
used during this same period mainly to increase inventory levels,
and to equip the Company's manufacturing and distribution
facilities. Working capital increased from $29,919,700 at
December 31, 1994 to $31,677,600 at June 30, 1995, as a result
primarily of increased inventory levels and decreased deferred
revenue related to the Great Lakes settlement.
In January 1994, the Company entered into an agreement to
purchase a property which includes a total of approximately
109,800 square feet on approximately 8.5 acres of land, in March
1997. This property is being utilized for product development
laboratories and as the Company's distribution center. The
purchase price is $5,319,000 and includes a $250,000 deposit
which was paid during the first quarter of 1994 and two
installment payments of $3,000,000 in March 1997 and $2,069,000
in October 1997.
Management believes that the Company's capital resources are
adequate to meet the Company's needs for the foreseeable future
and that, because of the Company's overall financial condition,
the Company will have access to additional capital in the form of
debt or equity.
Inflation has not had a significant impact on the Company's
revenues or retained earnings.
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) On May 25, 1995, the Company held its Annual Meeting of
Stockholders.
(c) The stockholders elected Agnes Varis and Barry Waxman as
directors. The terms of Marvin Samson, Allen Misher, Gus Blass,
II and Judith U. Arnoff as directors continued. At the Annual
Meeting, voting was as follows with respect to the matters
voted upon:
(i) In the election of directors the votes cast for Agnes
Varis and Barry Waxman were 9,238,212 and 9,237,012, respectively,
and the votes against were 247,345 and 248,545, respectively.
(ii) With respect to the approval of the Company's 1994 Employee
Stock Purchase Plan, 9,383,235 were cast for and 80,597 votes were
cast against the amendment, with 21,725 abstentions.
(iii) With respect to ratification of Coopers & Lybrand as the
Company's independent public accountants, 9,438,644 votes were
cast for and 35,713 votes were cast against, with 11,200 abstentions.
Item 5. Other Information
(a) Reference regarding the Agreement and Plan of Merger among Schein
Pharmaceutical Inc., SM Acquiring Co., Inc., and Marsam Pharmaceuticals
Inc. is made in Note 6 to the Consolidated Financial Statements.
(b) On July 31, 1995, a self-sytled class action complaint was filed by a
purported stockholder of the Company in the Delaware Chancery Court on
behalf of all holders of the Shares. The Company, Marvin Samson, Judith
U. Arnoff, Agnes Varis, Barry Waxman, Allen Misher, Gus Blass (together,
the "Directors") and the Parent were named as defendants. In the suit,
entitled Harbor Finance Partners v. Marvin Samson, et. al., Civil Suit
No. 14447, the plaintiff has alleged, among other things, that in
connection with the Directors' approval of the Merger Agreement, the
Directors breached their fiduciary duties and failed to attempt to maximize
shareholder value. The suit seeks, among other things, (i) a declaratory
judgment that the defendants have breached their fiduciary duties, or
aided and abetted breaches of such duties, (ii) an order preliminarily and
permanently enjoining the defendants from proceeding with or consummating
the transaction, (iii) in the event the transaction is consummated,
rescission thereof, (iv) an order directing defendants to account for all
profits realized, and, pending such accounting, imposition of a constructive
trust, (v) an order permitting a stockholders' committee consisting of
class members and their representatives to participate in any process
undertaken in connection with the sale of the Company, and (vi) damages,
costs and disbursements of the action. The Company believes that the
allegations are without merit and defendants intend to vigorously defend
the action.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No.
10(a) Agreement and Plan of Merger Among Schein Pharmaceutical,
Inc., SM Acquiring Co., Inc. and Marsam Pharmaceuticals Inc. dated as
of July 28, 1995.
10(b) Stockholders' Agreement dated as of July 28, 1995 among
Schein Pharmaceutical, Inc., SM Acquiring Co., Inc., Marvin Samson,
Agvar Chemicals, Inc. and Agnes Varis and her husband, Karl Leichtman.
10(c) Employment Agreement dated as of July 28, 1995 among Marsam
Pharmaceuticals Inc., Marvin Samson and Schein Pharmaceutical, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K: The Company filed no reports on Form 8-K
during the quarter for which this Form 10-Q Report is filed.
Exhibit 10(a)
AGREEMENT AND PLAN OF MERGER
AMONG
SCHEIN PHARMACEUTICAL, INC.,
SM ACQUIRING CO., INC.
AND
MARSAM PHARMACEUTICALS INC.
Dated July 28, 1995
TABLE OF CONTENTS PAGE
1. The Offer 1
1.1 The Offer 1
1.2 Company Actions 3
1.3 Stockholder Lists 4
1.4 Directors 4
2. The Merger 5
2.1 The Merger 5
2.2 Consummation of the Merger 5
2.3 Effects of the Merger 5
2.4 Certificate of Incorporation and By-laws 5
2.5 Directors and Officers 6
2.6 Conversion of Shares 6
2.7 Conversion of Common Stock of the Sub 6
2.8 Stockholders' Meeting 6
2.9 Merger Without Meeting of Stockholders 6
2.10 Withholding Taxes 7
3. Dissenting Shares; Payment For Shares; Options 7
3.1 Dissenting Shares 7
3.2 Payment for Shares 7
3.3 Closing of the Company's Transfer Books 9
3.4 Options 9
4. Representations and Warranties of the Company 9
4.1 Organization and Qualification 9
4.2 Capitalization 10
4.3 Authority for this Agreement 11
4.4 Absence of Certain Changes 12
4.5 Reports 12
4.6 Consents and Approvals; No Violation 13
4.7 Regulatory Compliance 13
4.8 Employee Benefit Matters 14
4.9 Litigation, etc 16
4.10 Tax Matters 16
4.11 Compliance with Law 18
4.12 Environmental Compliance 18
4.13 Delaware Takeover Statute Inapplicable 19
4.14 Required Vote of Company Stockholders 20
4.15 Brokers 20
5.Representations and Warranties of the Parent and Sub 20
5.1 Organization 20
5.2 Authority for this Agreement 20
5.3 Consents and Approvals; No Violation 21
5.4 Financing 21
5.5 Interim Operations of Sub 21
5.6 FDA Matters 21
5.7 Brokers 22
6. Covenants 22
6.1 Conduct of Business of the Company 22
6.2 No Solicitation 23
6.3 Access to Information 25
6.4 Reasonable Efforts 25
6.5 Indemnification; Directors' and Officers'
Insurance 26
6.6 State Takeover Statutes 27
6.7 Proxy Statement 28
6.8 Notification of Certain Matters 28
6.9 Compliance with ISRA 28
6.10 Fees and Expenses 28
6.11 Employee Benefits 28
8. Termination; Amendment; Waiver 29
8.1 Termination 29
8.2 Effect of Termination 30
8.3 Amendment 31
8.4 Extension; Waiver 31
9. Miscellaneous 31
9.1 Representations and Warranties 31
9.2 Enforcement of the Agreement 31
9.3 Validity 32
9.4 Notices 32
9.5 Governing Law 33
9.6 Headings 33
9.7 Parties in Interest 33
9.8 Counterparts 33
9.9 Certain Definitions 34
9.10 Press Releases 34
9.11 Entire Agreement 34
EXHIBIT A A-1
AGREEMENT AND PLAN OF MERGER
Dated July 28, 1995
The parties to this agreement and plan of merger
are Schein Pharmaceutical, Inc., a Delaware corporation (the
"Parent"), SM Acquiring Co., Inc., a Delaware corporation and a
wholly-owned subsidiary of the Parent (the "Sub"), and Marsam
Pharmaceuticals Inc., a Delaware corporation (the "Company").
The board of directors of each of the Parent, the
Sub and the Company has determined it is in the best interests of
its stockholders for the Parent to acquire the Company upon the
terms and subject to the conditions set forth in this
agreement. Accordingly, the parties agree as follows:
1. The Offer
1.1 The Offer.
(a) Provided this agreement shall not have been
terminated in accordance with section 8.1, promptly (but in no
event later than five business days following the public
announcement of the terms of this agreement), the Parent shall
commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934 (the "Exchange Act")), or cause the Sub to
commence, an offer to purchase all the outstanding shares of
common stock of the Company, par value $.01 per share (the
"Shares"), at a price of $21.00 per Share, net to the seller in
cash (the "Offer"). The obligation to consummate the Offer and
to accept for payment and to pay for any Shares tendered
pursuant to the Offer shall be subject only to those conditions
set forth in exhibit A. The Company agrees that no Shares held
by the Company or any of its subsidiaries shall be tendered to
the Parent or the Sub pursuant to the Offer. Neither the Parent
nor the Sub shall, without the prior written consent of the
Company, (i) decrease or change the form of the consideration payable in
the Offer, (ii) decrease the number of Shares sought pursuant to
the Offer, (iii) impose additional conditions to the Offer, (iv)
change the conditions to the Offer, except the Parent or the
Sub, as applicable, in its sole discretion may waive any
condition to the Offer, other than the condition set forth in
clause (1) of exhibit A, which may not be waived without the
Company's prior written consent, or (v) make any other change in
the terms of the Offer adverse to the holders of the Shares.
The Parent or the Sub, as applicable, agrees that, subject to
the terms and conditions of the Offer and this agreement, it
will accept for payment and pay for all Shares validly tendered
and not withdrawn pursuant to the Offer promptly after
expiration of the Offer. The Offer shall initially provide that
the Offer shall expire 20 business days after it is commenced or
on September 1, 1995, whichever is later. The Parent or the
Sub, as applicable, may extend the Offer in accordance with
applicable law, but if the conditions set forth in exhibit A are
satisfied as of the then scheduled expiration date of the Offer,
the Offer may be extended only with the prior written consent of
the Company or as required by law; provided that the Parent or
the Sub, as applicable, may, without the consent of the Company,
extend the Offer on one occasion for a period not to exceed 10
business days, if the number of Shares tendered, together with
any Shares beneficially owned by the Parent or the Sub, is less
than 90% of the Shares outstanding on the scheduled expiration
date of the Offer. If the conditions set forth in exhibit A are
not satisfied or, to the extent permitted by this agreement,
waived by the Parent or the Sub, as applicable, as of the
scheduled expiration date, the Parent or the Sub, as applicable,
shall extend the Offer from time to time until the earliest of
the consummation of the Offer, November 30, 1995 (provided, that
neither the Parent nor the Sub shall be obligated to make any
such extension, if, in the reasonable belief of the Parent or
the Sub, as applicable, all such conditions are not capable of
being satisfied by that date) or the termination of this
agreement. Any individual extension of the Offer shall be for a
period of no more than 10 business days.
(b) On the date of commencement of the Offer, the
Parent or the Sub, as applicable, shall file or cause to be
filed with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 (together with all
amendments, the "Schedule 14D-1") with respect to the Offer,
which shall contain the Offer to purchase and related letter of
transmittal and other ancillary Offer documents and instruments
pursuant to which the Offer will be made (collectively, with any
supplements or amendments, the "Offer Documents"). The Parent
or the Sub, as applicable, shall disseminate the Offer Documents
to holders of the Shares. Each of the Parent or the Sub, as
applicable, and the Company agrees promptly to correct any
information provided by it for use in the Offer Documents that
becomes false or misleading in any material respect, and the
Parent and the Sub shall take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to
be disseminated to holders of the Shares, in each case as and to
the extent required by law. The Company and its counsel shall
have a reasonable opportunity to review and comment on the Offer
Documents prior to the filing of the respective Offer Documents
with the SEC. The Parent or the Sub, as applicable, shall
provide the Company and its counsel with any comments that may
be received from the SEC or its staff with respect to the Offer
Documents promptly after receipt. The Offer Documents shall
comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations under the
Exchange Act. The Parent and the Sub agree that none of the
information in the Offer Documents or any related schedule required
to be filed with the SEC or in any related amendment
shall, on the date of filing with the SEC or on the
date first published, sent or given to stockholders of
the Company, as the case may be, contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading (but excluding statements made in any of
the foregoing documents based on information supplied by the
Company specifically for inclusion therein). The Parent and the
Sub agree that none of the information supplied by the Parent or
the Sub or any of their affiliates specifically for inclusion in
the Proxy Statement (as defined in section 1.2) or Schedule 14D-
9 (as defined in section 1.2) or any related amendment shall, at
the date of filing with the SEC, and, in the case of the Proxy
Statement, at the time the Proxy Statement is mailed and at the
time of the Special Meeting (as defined in section 2.8), contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
1.2 Company Actions. The Company consents to the Offer and
represents and warrants that, subject to the terms and
conditions set forth in this agreement, (a) its board of
directors (at a meeting duly called and held) has (i) determined
that the Offer and Merger (as defined in section 2.1) are fair
to and in the best interests of the stockholders of the Company,
(ii) resolved to recommend acceptance of the Offer and approval
and adoption of this agreement by stockholders of the Company,
(iii) taken all necessary steps to render section 203 of the
Delaware General Corporation Law (the "DGCL") inapplicable to
the Merger and (iv) resolved to elect not to be subject, to the
extent permitted by law, to any state takeover law other than
section 203 of the DGCL that may purport to be applicable to the
Offer, the Merger or the transactions contemplated by this
agreement and (b) Bear, Stearns & Co. Inc., the Company's
independent financial advisor, has advised the Company's board
of directors that, in the opinion of Bear, Stearns & Co. Inc.,
the consideration to be paid to the Company's stockholders in
the Offer and Merger is fair, from a financial point of view, to
those stockholders. As promptly as practicable after
commencement of the Offer, the Company shall, subject to the
terms and conditions set forth in this agreement, file with the
SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") containing the recommendations of its
board of directors in favor of the Offer and Merger and shall
permit the inclusion in the Offer Documents of such
recommendations, in each case subject to the fiduciary duties of
the board of directors of the Company as advised by outside
counsel. The Company, the Parent and the Sub shall promptly
correct any information provided by them for use in the Schedule
14D-9 that becomes false or misleading in any material respect,
and the Company shall take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to
be disseminated to holders of the Shares, in each case as and to
the extent required by law. The Parent and its counsel shall
have a reasonable opportunity to review and comment on the
Schedule 14D-9 prior to its filing with the SEC. The Company
agrees to provide the Parent and its counsel with any comments
that may be received from the SEC or its staff with respect to
the Schedule 14D-9 promptly after receipt. The Company agrees
that neither the Schedule 14D-9, nor any related amendments nor
any information supplied by the Company specifically for
inclusion in the Offer Documents or the Proxy Statement (but
excluding statements made in any of the foregoing documents
based on information supplied by the Parent or Sub or any of their
affiliates specifically for inclusion therein) shall, at the
respective times the Schedule 14D-9 or Offer Documents are filed
with the SEC or are first published, sent or given to
stockholders, as the case may be, contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The Schedule 14D-9 and the Proxy
Statement shall comply as to form in all material respects with
the applicable requirements of the Exchange Act and the rules
and regulations under the Exchange Act. The letter to
stockholders, notice of meeting, proxy statement and form of
proxy, or the information statement, as the case may be, that
may be distributed to stockholders in connection with the Merger
(including any supplements), and any schedules required to be
filed with the SEC in connection therewith, as from time to time
amended or supplemented, are collectively referred to as the
"Proxy Statement".
1.3 Stockholder Lists. In connection with the Offer, the
Company shall promptly furnish the Sub with mailing labels,
security position listings and any available listing or computer
file containing the names and addresses of the record holders of
the Shares as of a recent date and shall furnish the Sub with
such information and assistance as the Sub or its agents may
reasonably request in communicating the Offer to the record and
beneficial stockholders of the Company. Subject to the
requirements of applicable law and except for such steps as are
necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and Merger, the
Parent and Sub and their affiliates and associates shall hold in
confidence such listings and other information, shall use such
information only in connection with the Offer and Merger and, if
this agreement is terminated in accordance with its terms, shall
deliver to the Company all copies of all such information (and
extracts or summaries of such information) then in their or
their agents' or advisors' possession.
1.4 Directors
(a) Promptly upon the purchase by the Parent or the
Sub, as applicable, pursuant to the Offer of a number of Shares
that represents at least a majority of the outstanding Shares on
a fully-diluted basis and from time to time thereafter, the
parties shall, subject to the provisions of section 14(f) of the
Exchange Act and Rule 14f-1 under the Exchange Act, promptly use
all reasonable efforts necessary to cause the persons listed on
schedule 2.5 to comprise the entire board of directors of the
Company. The date on which such persons first comprise the
Company's board of directors is referred to as the "Control
Date".
(b) From and after the Control Date and prior to the
Effective Time and as long as there is at least one director who
is designated as a "Continuing Director" on schedule 2.5 (a
"Continuing Director" and, collectively, the "Continuing
Directors"), if requested by a majority of the Continuing
Directors, all other directors shall abstain from acting upon,
and the approval of a majority of the Continuing Directors shall
be required to authorize, any termination of this agreement by
the Company, any amendment of this agreement requiring action by
the board of directors of the Company, any extension of time for
the performance of any obligation or other act of the Parent or
the Sub under this agreement and any waiver of compliance with
any provision of this agreement for the benefit of the Company.
2. The Merger
2.1 The Merger. Upon the terms of this agreement and subject
to the provisions of the DGCL, the Parent shall transfer to the
Sub all Shares held by it, and the Sub shall be merged with and
into the Company (the "Merger") as soon as practicable following
the satisfaction or waiver, if permissible, of the conditions
set forth in section 7. The Company shall be the surviving
corporation in the Merger (the "Surviving Corporation") under
the name "[Marsam]" and shall continue its existence under the
law of Delaware. At the Effective Time, the separate corporate
existence of the Sub shall cease.
2.2 Consummation of the Merger. Subject to the provisions of
this agreement, the parties shall cause the Merger to be
consummated by filing with the secretary of state of the state
of Delaware a duly executed and verified certificate of merger,
and shall take all other action required by law to effect the
Merger. Prior to the filing referred to in this section, a closing
(the "Closing") shall be held at the offices of Proskauer Rose Goetz
& Mendelsohn LLP, 1585 Broadway, New York, New York (or such
other place as the parties may agree) for the purpose of
completing the foregoing. The time the Merger becomes effective
in accordance with applicable law is referred to as the
"Effective Time".
2.3 Effects of the Merger. The Merger shall have the effects
set forth in the DGCL and this agreement.
2.4 Certificate of Incorporation and By-laws. The
certificate of incorporation and by-laws of the Sub, as in
effect on the date of this agreement, shall be the certificate
of incorporation and by-laws, respectively, of the Surviving
Corporation; provided, however, that section 1 of the
certificate of incorporation of the Surviving Corporation shall
be amended to read in its entirety as follows: "Section 1. The
name of the Corporation is Marsam Pharmaceuticals Inc."
2.5 Directors and Officers. The persons listed on schedule
2.5 and the officers of the Company immediately prior to the
Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation, until their
respective successors are duly elected and qualified.
2.6 Conversion of Shares. Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned
by the Parent, the Sub or any subsidiary of the Parent or Sub or
held in the treasury of the Company, all of which shall be
cancelled, and other than Dissenting Shares (as defined in
section 3.1)) shall, by virtue of the Merger and without any
action on the part of the Parent, the Sub, the Company or the
holder, be converted into the right to receive in cash an amount
per Share (subject to any applicable withholding tax, as
specified in section 2.10) equal to the highest price per share
payable in the Offer, without interest (the "Merger
Consideration"), upon the surrender of the certificate
representing the Share in accordance with section 3.2.
2.7 Conversion of Common Stock of the Sub. Each share of
common stock, par value $.01, of the Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Parent, the Sub
or the Company, be converted into and become one share of common
stock of the Surviving Corporation.
2.8 Stockholders' Meeting. Unless the Merger is consummated
in accordance with section 253 of the DGCL as contemplated by
section 2.9, and subject to applicable law, the Company, acting
through its board of directors, shall, in accordance with
applicable law, duly call, give notice of, convene and hold a
special meeting (the "Special Meeting") of its stockholders as
soon as practicable following the consummation of the Offer for
the purpose of considering and taking action upon the agreement
of merger (within the meaning of section 251 of the DGCL) set
forth in this agreement; and, subject to the fiduciary duties of
its board of directors under applicable law as advised by
outside counsel, the Company shall include in the Proxy
Statement the recommendation of its board of directors that
stockholders of the Company vote in favor of the approval and
adoption of the agreement of merger set forth in this agreement.
The Parent and the Sub agree that, at the Special Meeting, all
the Shares acquired pursuant to the Offer or otherwise by the
Parent or Sub or any of their affiliates shall be voted in favor
of the approval and adoption of the agreement of merger set
forth in this agreement.
2.9 Merger Without Meeting of Stockholders. Notwithstanding
section 2.8, if the Parent, directly or indirectly through the
Sub or any other subsidiary, acquires at least 90 percent of the
outstanding Shares, each of the Parent, the Sub and the Company
shall take all necessary and appropriate action to cause the
Merger to become effective, as soon as practicable after the
consummation of the Offer, without a meeting of stockholders of
the Company, in accordance with section 253 of the DGCL.
2.10 Withholding Taxes. If so specified in the Offer
Documents, the Parent and Sub shall be entitled to deduct and
withhold from the consideration otherwise payable to a holder of
Shares or Options pursuant to the Offer or Merger such amounts
as are required under section 3406 of the Internal Revenue Code
of 1986 (the "Code"). To the extent amounts are so withheld by
the Parent or Sub, the withheld amounts shall be treated for all
purposes of this agreement as having been paid to the holder of
the Shares in respect of which the deduction and withholding was
made by the Parent or Sub, in the circumstances described in the
Offer Documents.
3. Dissenting Shares; Payment For Shares; Options
3.1 Dissenting Shares. Notwithstanding anything in this
agreement to the contrary, Shares issued and outstanding
immediately prior to the Effective Time and held by any
stockholder who did not vote in favor of the Merger and comply
with section 262 of the DGCL (the "Dissenting Shares") shall not
be converted into or be exchangeable for the right to receive
the Merger Consideration, unless and until any such stockholder
shall have failed to perfect or shall have effectively withdrawn
or lost his rights to appraisal under the DGCL. If any such
holder shall have failed to perfect or shall have effectively
withdrawn or lost that right, that holder's Shares shall
thereupon be converted into and become exchangeable for the
right to receive, as of the Effective Time, the Merger
Consideration without any interest. The Company shall give the
Parent or the Sub, as applicable, (a) prompt notice of any
written demands for appraisal of any Shares, attempted
withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal and (b) the opportunity to
direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. The Company shall not, except
with the prior written consent of the Parent or the Sub, as
applicable, voluntarily make any payment with respect to any
demands for appraisal of capital stock of the Company, offer
to settle or settle any demands or approve any withdrawal of
any such demands.
3.2 Payment for Shares
(a) Prior to the Effective Time, the Parent shall
cause the Sub to deposit with Chemical Bank (or another bank or
trust company reasonably satisfactory to the Company) (the
"Paying Agent") sufficient funds to make the payments pursuant
to section 2.6 on a timely basis to holders of Shares issued and
outstanding immediately prior to the Effective Time (such funds,
the "Payment Fund"). The Paying Agent shall, pursuant to
irrevocable instructions, make the payments provided for in the
preceding sentence out of the Payment Fund. The Payment Fund
shall not be used for any purpose, except as provided in this
agreement.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each record
holder of Shares, as of the Effective Time, a form of letter of
transmittal, the form and content of which shall be reasonably
acceptable to the Company (which shall specify that delivery
shall be effected, and risk of loss and title to the
certificates representing the Shares (the "Certificates") shall
pass, only upon proper delivery of the Certificates to the
Paying Agent), and instructions for use in effecting the
surrender of the Certificates for payment of the Merger
Consideration. Upon surrender to the Paying Agent of a
Certificate, together with the letter of transmittal duly
executed, the holder of the Certificate shall be paid cash in an
amount (subject to any applicable withholding tax, as specified
in section 2.10) equal to the product of the number of Shares
represented by the Certificate and the Merger Consideration, and
the Certificate shall be cancelled. No interest shall be paid
or accrued on the cash payable upon the surrender of a
Certificate. If payment is to be made to a person other than
the person in whose name a Certificate surrendered is
registered, it shall be a condition of payment that the
Certificate so surrendered be properly endorsed or otherwise in
proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of
the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the
Surviving Corporation that the tax has been paid or is not
applicable. From and after the Effective Time and until
surrendered in accordance with this section 3.2, each
Certificate (other than Certificates representing Shares owned
by the Parent or Sub or any of their subsidiaries, and
Dissenting Shares) shall represent for all purposes solely the
right to receive in cash an amount equal to the product of the
Merger Consideration and the number of Shares evidenced by the
Certificate, without interest.
(c) Any portion of the Payment Fund (including the
proceeds of any investments of the Payment Fund) that remains
unclaimed by the former stockholders of the Company for six
months after the Effective Time shall be repaid to the Surviving
Corporation. Any former stockholders of the Company who have
not theretofore complied with section 3.1 shall thereafter look
only to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) for payment of their
claim for the Merger Consideration per Share, without interest.
Neither the Parent, the Sub nor the Surviving Corporation shall
be liable to any holder of Shares for any monies delivered from
the Payment Fund or otherwise to a public official pursuant to
any applicable abandoned property, escheat or similar law.
3.3 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed
and no transfer of Shares shall thereafter be made. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for cash as
provided in this section 3, subject to applicable law in the
case of Dissenting Shares.
3.4 Options. Upon the consummation of the Offer, the Parent
or the Sub, as applicable, shall pay each holder of a then
outstanding option to purchase Shares under the Company's 1986
Stock Option Plan, 1993 Stock Option Plan or 1995 Stock Purchase
Plan (collectively, the "Stock Option Plans"), whether or not
then exercisable (collectively, the "Options"), in settlement of
the Options, for each Share subject to an Option, an amount
(subject to any applicable withholding tax) in cash equal to the
excess, if any, of the Merger Consideration over the per Share
exercise price of that Option (that amount, the "Option
Consideration"); provided, however, that with respect to any
person subject to section 16 of the Exchange Act, any such
amount shall be paid by the Surviving Corporation as soon as
practicable after the first date payment can be made without
liability to that person under section 16(b) of the Exchange
Act. Upon receipt of the Option Consideration, the Option shall
be cancelled. The surrender of an Option to the Company in
exchange for the Option Consideration shall be deemed a release
of all rights the holder had or may have had in respect of that
Option. Prior to the Effective Time, the Company shall use all
reasonable efforts to obtain all necessary consents or releases
from holders of Options under the Stock Option Plans and take
all other action necessary to give effect to the transactions
contemplated by this section 3.4. Except as otherwise agreed by
the parties, (a) all Stock Option Plans shall terminate as of
the Effective Time and all rights under any provision of any
other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of
the Company or any subsidiary of the Company shall be cancelled
as of the Effective Time, and (b) the Company shall take all
reasonable action to ensure that, after the Effective Time, no
person shall have any right under any Stock Option Plan (or any
option granted under any Stock Option Plan) or other plan,
program or arrangement with respect to equity securities of the
Company, the Surviving Corporation or any direct or indirect
subsidiary of either.
4. Representations and Warranties of the Company. The
Company represents and warrants to the Parent and Sub as follows:
4.1 Organization and Qualification. Each of the Company and its
subsidiaries is a duly organized and validly existing corporation
in good standing under the law of its jurisdiction of
incorporation, with the corporate power and authority to own its
properties and conduct its business as now being conducted, and is
duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the
character of the properties owned or held under lease by it or the
nature of the business transacted by it makes such qualification
necessary, except where the failure to be so qualified and in good
standing would not have a Material Adverse Effect (as defined in
section 9.9). The Company has made available to the Parent
accurate and complete copies of the certificates of incorporation
and by-laws as currently in effect of the Company and each of its
subsidiaries.
4.2 Capitalization
(a) The authorized capital stock of the Company
consists of 30,000,000 Shares and 1,000,000 shares of preferred
stock, $.01 par value (the "Preferred Stock"). As of the close
of business on July 26, 1995, 11,084,137 Shares were issued and
outstanding; no shares of Preferred Stock were issued or
outstanding; no Shares were held in the Company's treasury; and
there were outstanding Options to purchase an aggregate of
1,166,649 Shares under the Company's Stock Option Plans (copies
of which have previously been furnished to the Parent). Since
July 26, 1995, the Company (i) has not issued any Shares, other
than upon the exercise of Options then outstanding, (ii) has not
granted any options or rights to purchase Shares (under the
Company's Stock Option Plans or otherwise) and (iii) has not
split, combined or reclassified any of its shares of capital
stock. All the outstanding Shares have been duly authorized and
validly issued and are fully paid and nonassessable and are free
of preemptive rights. Except as set forth in this section 4.2
or in section 4.2(a) of the disclosure letter dated the date of
this agreement and delivered by the Company to the Parent prior
to the execution of this agreement setting forth certain matters
referred to in this agreement (the "Disclosure Letter"), there
are no outstanding (i) shares of capital stock or other voting
securities of the Company, (ii) securities of the Company
convertible into or exchangeable for shares of capital stock or
voting securities of the Company or (iii) options, warrants,
rights or other agreements or commitments to acquire from the
Company, or obligations of the Company to issue, any capital
stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the
Company, or obligations of the Company to grant, extend or enter
into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment
(the items in clauses (i), (ii) and (iii), collectively, the
"Company Securities"). Except as set forth in section 4.2(a) of
the Disclosure Letter, there are no outstanding obligations of
the Company or any subsidiary to repurchase, redeem or otherwise
acquire any Company Securities and there are no other
outstanding stock related awards. Except as set forth in
section 4.2(a) of the Disclosure Letter, there are no voting
xtrusts or other agreements or understandings to which the
Company or any of its subsidiaries is a party with respect to
the voting of capital stock of the Company or any of its
subsidiaries.
(b) Except as set forth in section 4.2(b) of the
Disclosure Letter, the Company is, directly or indirectly, the
record and beneficial owner of all the outstanding shares of
capital stock of each of its subsidiaries, free and clear of any
lien, mortgage, pledge, charge, security interest or
encumbrance, and there are no irrevocable proxies with respect
to any such shares. Except as set forth in section 4.2(b) of
the Disclosure Letter, there are no outstanding (i) securities
of the Company or any subsidiary convertible into or
exchangeable for shares of capital stock or other voting
securities or ownership interests in any subsidiary, or (ii)
options or other rights to acquire from the Company or any of
its subsidiaries, or other obligations of the Company or any of
its subsidiaries to issue, any capital stock, voting securities
or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or
ownership interests in, any of its subsidiaries, or other
obligations of the Company or any of its subsidiaries to grant,
extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement
or commitment (the items in clauses (i) and (ii), collectively,
the "Subsidiary Securities"). Except as set
forth in section 4.2(b) of the Disclosure Letter, there are no
outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
4.3 Authority for this Agreement. The Company has the
requisite corporate power and authority to execute and deliver
this agreement and to consummate the transactions contemplated
by this agreement. The execution and delivery of this agreement
by the Company and the consummation by the Company of the
transactions contemplated by this agreement have been duly and
validly authorized by the board of directors of the Company and
no other corporate proceedings on the part of the Company are
necessary to authorize this agreement or to consummate the
transactions so contemplated (other than the approval and
adoption of the agreement of merger (within the meaning of
section 251 of the DGCL) in this agreement by the holders of a
majority of the Shares prior to the consummation of the Merger,
if required by applicable law). This agreement has been duly
and validly executed and delivered by the Company and, assuming
this agreement constitutes the valid and binding obligation of
each of the Parent and Sub, constitutes a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject to general
principles of equity (whether considered in a proceeding in
equity or at law).
4.4 Absence of Certain Changes. Except as disclosed in the
SEC Reports (as defined in section 4.5) or in section 4.4 of the
Disclosure Letter, since March 31, 1995: (a) the Company and
its subsidiaries have not suffered any Material Adverse Effect,
(b) the Company and its subsidiaries have conducted their
respective businesses only in the ordinary course consistent
with past practice, except in connection with the negotiation
and execution and delivery of this agreement and the exploration
of other alternative transactions, and (c) there has not been
(i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the Shares or any repurchase,
redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other
securities in, or other ownership interests in, the Company or
any of its subsidiaries; (ii) any entry into any written
employment agreement (other than the agreements identified in
section 4.4 of the Disclosure Letter that are being entered into
contemporaneously with this agreement) with, or any increase in
the rate or terms (including, without limitation, any
acceleration of the right to receive payment pursuant to
arrangements set forth in section 4.4 of the Disclosure Letter)
of compensation payable or to become payable by the Company or
any of its subsidiaries to, their respective directors or
officers; (iii) any increase in the rate or terms (including,
without limitation, any acceleration of the right to receive
payment) of any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any
such directors, officers or key employees, except increases
occurring in the ordinary course of business or as required by
law or as necessary to maintain tax-qualified status; or (iv)
any action by the Company that, if taken after the date of this
agreement, would constitute a breach of section 6.1.
4.5 Reports
(a) The Company has filed with the SEC all forms,
reports and documents required to be filed by it pursuant to
applicable law since January 1, 1994, all of which have complied
as of their respective filing dates in all material respects
with all applicable requirements of the Exchange Act and the
rules under the Exchange Act. True and correct copies of all
filings made by the Company with the SEC since January 1, 1994
(the "SEC Reports"), whether or not required under applicable
law, rules and regulations and including any registration
statement filed by the Company under the Securities Act of 1933,
have been furnished to the Parent. None of the SEC Reports,
including, without limitation, any financial statements or
schedules included or incorporated by reference in the SEC
Reports, at the time filed, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The audited and unaudited consolidated financial
statements of the Company included (or incorporated by
reference) in the SEC Reports have been prepared in accordance
with United States generally accepted accounting principles
applied on a consistent basis (except to the extent set forth in
those financial statements, including the notes, if any) and
present fairly in all material respects the consolidated
financial position of the Company as of their respective dates,
and the consolidated results of operations and changes in
financial condition and cash flows for the periods presented,
subject, in the case of the unaudited interim financial
statements, to normal, recurring, year-end adjustments.
4.6 Consents and Approvals; No Violation. Neither the
execution and delivery of this agreement by the Company nor the
consummation of the transactions contemplated by this agreement
will, except as disclosed in section 4.6 of the Disclosure
Letter, (a) conflict with or result in a breach of any provision
of the certificate of incorporation or by-laws (or other similar
governing documents) of the Company or any of its subsidiaries;
(b) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or
regulatory authority, except (i) in connection with the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
(ii) pursuant to the Exchange Act, (iii) the filing of a
certificate of merger pursuant to the DGCL, (iv) any applicable
filings under state securities, or "Blue Sky", laws or state
anti-takeover laws, [(v) consents, approvals, authorizations or
filings under laws of jurisdictions outside the United States
(e.g., Canada),] or (vi) filings with the New Jersey Department
of Environmental Protection (the "NJDEP") pursuant to the New
Jersey Industrial Site Recovery Act ("ISRA"); (c) result in a
material default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions
or provisions of any material note, license, agreement or other
instrument or obligation to which the Company is a party or by
which the Company or any of its assets or subsidiaries may be
bound; or (d) violate in any material respect any material
order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its subsidiaries or by which
any material portion of their respective assets are bound.
4.7 Regulatory Compliance. Section 4.7 of the Disclosure
Letter lists: (a) each product manufactured, marketed, sold or
licensed by the Company (the "Pharmaceutical Products") as of
the date of this agreement; (b) (i) all Pharmaceutical Products
that have been recalled, withdrawn or suspended by the Company
(whether voluntarily or otherwise) since January 1, 1990, and
all (ii) proceedings of which the Company is aware (whether
completed or pending at any time since January 1, 1990) seeking
the recall, withdrawal, suspension or seizure of any Pharmaceutical
Product; (c) each of the Company's New Drug Applications ("NDAs"),
Investigatory New Drug Applications ("INDAs") or Abbreviated New Drug
Applications ("ANDAs"); (d) (i) all Form 483s, (ii) all EIRs,
(iii) all Notices of Adverse Findings and (iv) all warning or
other letters from the United States Food and Drug
Administration (the "FDA") or Drug Enforcement Agency (the
"DEA") in which the FDA or DEA asserted that the operations of
the Company may not be in compliance with applicable law and
regulations, in each case received by the Company from the FDA
or DEA since January 1, 1990 and the response of the Company to
each such notice from the FDA or DEA; and (e) all Adverse
Reaction Reports filed by the Company with the FDA since January
1, 1990.
4.8 Employee Benefit Matters
(a) For purposes of this agreement, the term "Plan"
refers to the following maintained by the Company, any of its
subsidiaries or any entity that would be deemed a "single
employer" with the Company under section 414(b), (c), (m) or (o)
of the Code or section 4001 of the Employee Retirement Income
Security Act of 1974 ("ERISA") (an "ERISA Affiliate") on behalf
of any employee of the Company (whether current, former or
retired) or their beneficiaries, any "employee benefit plan"
(within the meaning of section 3(3) of ERISA), or any other
plan, program, agreement or commitment, an employment,
consulting or deferred compensation agreement, or an executive
compensation, incentive bonus or other bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock
purchase, severance pay, life, health, disability or accident
insurance plan. Section 4.8(a) of the Disclosure Letter lists
each Plan.
(b) Neither the Company nor any of the ERISA
Affiliates nor any of their respective predecessors has ever
contributed to or contributes to, or otherwise participated in
or participates in any "multiemployer plan" (within the meaning
of section 4001(a)(3) of ERISA or section 414(f) of the Code),
any single employer pension plan (within the meaning of section
4001(a)(15) of ERISA) that is subject to sections 4063 and 4064
of ERISA or any plan that is subject to Title IV of ERISA or
section 412 of the Code.
(c) The Company, each ERISA Affiliate, each Plan and
each "plan sponsor" (within the meaning of section 3(16) of
ERISA) of each "welfare benefit plan" (within the meaning of
section 3(1) of ERISA) has complied in all respects with the
requirements of section 4980B of the Code and Title I, Subtitle
B, Part 6 of ERISA, except for a failure or failures to comply
that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(d) With respect to each of the Plans set forth in
section 4.08 of the Disclosure Letter:
(i) each Plan intended to qualify under section
401(a) of the Code has been qualified since its inception and
has received a determination letter from the IRS to the effect
that the Plan is qualified under section 401 of the Code and any
trust maintained pursuant thereto is exempt from federal income
taxation under section 501 of the Code and nothing has occurred
that would cause the loss of such qualification or exemption or
the imposition of any material penalty or tax liability upon the
Company or any of its subsidiaries; the Company or an ERISA
Affiliate, as the case may be, has applied, or prior to the end
of the remedial amendment period, as defined under Treasury
Regulation section 1.401(b) and as modified by Internal Revenue
Service pronouncements, will apply, for a determination letter
from the Internal Revenue Service pursuant to Revenue Procedure
93-39, for each Plan intended to qualify under section 401(a) of
the Code;
(ii) no event has occurred in connection with
which the Company, any of its subsidiaries or any ERISA
Affiliate could be subject to any material liability under
ERISA, the Code or any other law, regulation or governmental
order applicable to any Plan, including, without limitation,
section 406, 409, 502(i) or 502(l) of ERISA, or section 4975 of
the Code; and
(iii) each material Plan complies in all material
respects with the applicable requirements of ERISA and the Code.
(e) The Company has furnished the Parent, with respect
to each Plan:
(i) a copy of the annual report, if required by
ERISA to be prepared, with respect to the Plan for each of the
last two years, together with a copy of the financial statements
for each Plan for each of the last two years, if required by
ERISA to be prepared;
(ii) a copy of the most recent Summary Plan
Description, together with each Summary of Material
Modifications thereto, required under ERISA with respect to the
Plan, and, unless the Plan is embodied entirely in an insurance
policy to which the Company or any of its subsidiaries is a
party, a true and complete copy of the Plan; and
(iii) if the Plan is funded through a trust or any
third party funding vehicle (other than an insurance policy), a
copy of the trust or other funding agreement and the latest
related financial statements, if any.
(f) Except as disclosed in section 4.8(f) of the
Disclosure Letter or in the SEC Reports, neither the Company nor
any of its subsidiaries has any announced plan or commitment to
create any additional Plans or, except in the ordinary course of
business in accordance with its customary practices or as
required by law or as necessary to maintain tax-qualified
status, to amend or modify any Plan.
(g) Except as disclosed in section 4.8(g) of the
Disclosure Letter or in the SEC Reports, neither the Company nor
any of its subsidiaries is a party to any collective bargaining
agreement.
(h) Except as disclosed in section 4.8(h) of the
Disclosure Letter, the consummation of the transactions
contemplated by this agreement will not give rise to any
liability for severance pay, unemployment compensation,
termination pay or withdrawal liability, or accelerate the time
of payment or vesting or increase the amount of compensation or
benefits due to any current, former, or retired employee or
their beneficiaries solely by reason of such transactions. No
amounts payable under any Plan will fail to be deductible for
federal income tax purposes by virtue of section 280G of the
Code.
(i) Except as disclosed in section 4.8(i) of the
Disclosure Letter, neither the Company nor any ERISA Affiliate
maintains, contributes to, or in any way provides for any
benefits of any kind whatsoever (other than under section 4980B
of the Code, the Federal Social Security Act or a plan qualified
under section 401(a) of the Code) to any current or future
retiree or terminee.
4.9 Litigation, etc. Except as set forth in section 4.9 of
the Disclosure Letter or as disclosed in the SEC Reports, there
is no claim, action, proceeding or governmental investigation
pending or, to the knowledge of the Company, threatened against
the Company, any of its subsidiaries or in respect of any Plan
before any court or governmental or regulatory authority that,
individually or in the aggregate, (a) could reasonably be
expected to have a Material Adverse Effect or (b) has had or
could reasonably be expected to have a material adverse effect
on the ability of the Company to consummate the transactions
contemplated by this agreement or in any manner challenges or
seeks to prevent, enjoin or delay the Offer or Merger.
4.10 Tax Matters
(a) Except as set forth in section 4.10(a) of the
Disclosure Letter or in the SEC Reports:
(i) All returns and reports relating to income,
franchise and all material other Taxes (as defined in section
9.9) required to be filed with respect to each of the Company
and its subsidiaries or any of their income, properties or
operations have been duly filed in a timely manner (taking into
account all extensions of due dates), and, to the knowledge of
the Company, all information in such returns, declarations and
reports is true, correct and complete in all material respects.
All taxes attributable to each of the Company and its
subsidiaries that were shown to be due and payable on such
returns and reports have been paid.
(ii) Adequate provisions in accordance with United
States generally accepted accounting principles consistently
applied have been made in the consolidated financial statements
included in the SEC Reports for the payment of all material
Taxes for which any of the Company or its subsidiaries may be
liable for the periods covered by those financial statements
that were not yet due and payable as of the dates of those
financial statements, regardless of whether the liability for
those Taxes is disputed.
(iii) There is no claim or assessment pending or, to the
knowledge of the Company, threatened against the Company or any
of its subsidiaries for any alleged material deficiency in
income, franchise or other Taxes attributable to the Company or
any of its subsidiaries.
(iv) Each of the Company and its subsidiaries has
satisfied in all material respects for all periods all
applicable withholding Tax requirements (including, without
limitation, income, social security and employment tax
withholding for all types of compensation).
(v) No consent has been filed relating to the Company
or any of its subsidiaries pursuant to section 341(f) of the
Code.
(vi) There is no contract, agreement or intercompany
account system under which the Company or any of its
subsidiaries has, or may at any time in the future have, an
obligation to contribute to the payment of any portion of a Tax
(or pay any amount calculated with reference to any portion of a
Tax) of any group of corporations of which the Company or its
subsidiaries is or was a part.
(vii) The Company has furnished the Parent complete and
accurate copies of all income and franchise Tax returns, and all
related amendments, filed by or on behalf of the Company or any
of its subsidiaries or any member of a group of corporations
including the Company or any of its subsidiaries for the taxable
years 1990 through 1993.
(b) Except as set forth in section 4.10(b) of the
Disclosure Letter, there are no agreements in effect to extend
the period of limitations for the assessment or collection of
any income, franchise or material other Tax for which the
Company or any of its subsidiaries may be liable.
4.11 Compliance with Law. Except as set forth in section 4.11
of the Disclosure Letter or in the SEC Reports, to the knowledge
of the Company, neither the Company nor any of its subsidiaries
is in conflict with, or in default or violation of, any law,
rule, regulation, order, judgment or decree applicable to the
Company or any subsidiary or by which any property or asset of
the Company or any subsidiary is bound or affected, except where
such conflicts, defaults or violations, individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect.
4.12 Environmental Compliance
(a) Except as set forth in section 4.12(a) of the Disclosure
Letter or in the SEC Reports, to the knowledge of the Company:
(i) the Company and each of its subsidiaries are in
compliance with all applicable Environmental Laws, except
where non-compliance, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect;
(ii) the Company and each of its subsidiaries possess
all permits, licenses, approvals and other authorizations
("Authorizations") that are required with respect to their
businesses, properties or assets under applicable
Environmental Laws, have timely filed applications for or
complied with any applicable requirements for renewal of
all such Authorizations and are in compliance with all
terms and conditions of such Authorizations, except where
the absence of such Authorizations or the failure to comply
with any terms or conditions of such Authorizations, in the
aggregate, could not reasonably be expected to have a
Material Adverse Effect;
(iii) neither the Company nor any of its subsidiaries nor
any predecessor in interest has been adjudged to have
liability that has not been satisfied or has received
written notice of any potential material liability under
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") or under the federal
Resource Conservation and Recovery Act ("RCRA") or under
any other Environmental Law that imposes remedial response
or corrective action obligations, natural resource damages,
remedial response obligations or corrective action
obligations with respect to any property presently or
previously owned, leased or operated by the Company or any
of its subsidiaries, or with respect to any property not
presently or previously owned, leased or operated by the
Company or any of its subsidiaries at which the Company may
have disposed or arranged for disposal of Hazardous
Substances; and
(iv) neither the Company nor any of its subsidiaries
has any liability under any Environmental Law or is subject
to any pending or threatened claim, litigation or
unsatisfied judgment under any Environmental Law, except
for such liabilities that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(b) For purposes of this agreement:
(i) "Environmental Laws" means the common law and all
federal, state, local and foreign laws or regulations, and
including codes, orders, decrees, judgments or injunctions
issued, promulgated, approved or entered thereunder, now or
previously in effect, relating to pollution or protection
of human health and safety or the environment, including
laws relating to:
(1) the emission, discharge, release or
threatened release into the environment of
any Hazardous Substance;
(2) the manufacture, processing,
distribution, labeling, reporting, use,
generation, treatment, storage, re-use,
recycling, disposal, transport or handling
of Hazardous Substances;
(3) underground storage tanks and
related piping and emissions, discharges, releases
or threatened releases therefrom; or
(4) exposure of persons, including
employees, to any Hazardous Substance; and
(ii) "Hazardous Substance" means any substance subject
to the OSHA Hazard Communication Rule, or any similar
applicable state law or regulation, any substance defined as a
hazardous substance under CERCLA or any substance listed as a
hazardous waste under RCRA, and including, to the extent not
encompassed within the foregoing, polychlorinated biphenyls,
asbestos containing materials and petroleum, including crude oil
or any fraction thereof.
4.13 Delaware Takeover Statute Inapplicable. The board of
directors of the Company has approved the transactions
contemplated by this agreement and the stockholders agreement
dated this date among the Parent and certain stockholders of the
Company upon the terms specified in this agreement and in that
agreement, which will result in each of the Parent and Sub
becoming an "interested stockholder", within the meaning of
section 203(a)(1) of the DGCL.
4.14 Required Vote of Company Stockholders. Unless the
Merger is consummated in accordance with section 253 of the DGCL
as contemplated by section 2.9, the only vote of the
stockholders of the Company required to approve and adopt the
plan of merger in this agreement and approve the Merger is the
affirmative vote of the holders of not less than a majority of
the outstanding Shares. No other vote of the stockholders of
the Company is required by law, the certificate of incorporation
or the by-laws of the Company or otherwise to adopt the
agreement of merger in this agreement and approve the Merger.
4.15 Brokers. No broker, finder or other investment banker
(other than Bear, Stearns & Co. Inc.) is entitled to receive any
brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement
based upon agreements made by or on behalf of the Company.
5. Representations and Warranties of the Parent and Sub.
The Parent and Sub represent and warrant to the Company as
follows:
5.1 Organization. Each of the Parent and Sub is a duly
organized and validly existing corporation in good standing under
the law of the state of Delaware, with all requisite corporate
power and authority to own its properties and conduct its
business. All the issued and outstanding capital stock of the
Sub is owned directly by the Parent.
5.2 Authority for this Agreement. Each of the Parent and Sub
has full corporate power and authority to execute and deliver
this agreement and to consummate the transactions contemplated by
this agreement. The execution and delivery of this agreement by
the Parent and Sub and the consummation by the Parent and Sub of
the transactions contemplated by this agreement have been duly
and validly authorized by the board of directors and stockholders
of the Parent and Sub and no other corporate proceedings on the
part of the Parent or Sub are necessary to authorize this
agreement, or to commence the Offer or to consummate the
transactions contemplated by this agreement (including the
Offer). This agreement has been duly and validly executed and
delivered by the Parent and Sub and, assuming this agreement
constitutes a valid and binding obligation of the Company, this
agreement constitutes the valid and binding agreement of each of
the Parent and Sub, enforceable against each of the Parent and
Sub in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws
affecting creditors rights generally and subject to general
principles of equity (whether considered in a proceeding in
equity or at law).
5.3 Consents and Approvals; No Violation. Neither the
execution and delivery of this agreement by the Parent or Sub
nor the consummation of the transactions contemplated by this
agreement will (a) conflict with or result in a breach of any
provision of the certificate of incorporation or by-laws of the
Parent, the Sub or any of their subsidiaries; (b) require any
consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except
(i) in connection with the HSR Act, (ii) pursuant to the Exchange
Act, (iii) the filing of a certificate of merger pursuant to the
DGCL, (iv) any applicable filings under state securities, or
"Blue Sky", laws or state anti-takeover laws, (v) consents,
approvals, authorizations or filings under laws of jurisdictions
outside the United States, or (vi) filings with the NJDEP
pursuant to ISRA; (c) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, license,
agreement or other instrument or obligation to which the Parent
or Sub is a party or by which any of its assets may be bound,
except for such defaults (or rights of termination, cancellation
or acceleration) as to which requisite waivers or consents have
been obtained or that would not materially and adversely affect
the ability of the Parent or Sub to consummate the transactions
contemplated by this agreement; or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Parent, the Sub or any of their respective assets, except for
violations that would not materially adversely affect the ability
of the Parent or Sub to consummate the transactions contemplated
by this agreement.
5.4 Financing. The Parent has furnished the Company a true
and correct copy of the written commitment letter dated June 6,
1995 of Chemical Bank with respect to financing to purchase
Shares pursuant to the Offer and Merger and to pay related fees
and expenses, which agreement is in full force and effect as of
the date of this agreement. Subject to the terms and conditions
of this agreement, the Parent agrees to provide Sub access to
funds to the extent necessary to enable the Parent and Sub to
satisfy their obligations to purchase the Shares under the Offer
and Merger.
5.5 Interim Operations of Sub. The Sub was formed solely for
the purpose of engaging in the transactions contemplated by this
agreement, and has not engaged in any business activities or
conducted any operations other than in connection with the
transactions contemplated by this agreement.
5.6 FDA Matters. Neither the Parent, its subsidiaries,
affiliates nor their respective officers, employees or agents
has been convicted of any crime or engaged in any conduct for
which debarment is mandated by 21 U.S.C. Section 335a(a) or
authorized by 21 U.S.C. Section 335a(b).
5.7 Brokers. No broker, finder or other investment banker
(other than Tanner & Co., Inc.) is entitled to any brokerage,
finder's or other similar fee or commission in connection with
this agreement or the transactions contemplated by this
agreement based upon agreements made by or on behalf of the
Parent or Sub.
6. Covenants
6.1 Conduct of Business of the Company. Except as
contemplated by this agreement, from the date of this agreement
to the Control Date, the Company shall, and shall cause its
subsidiaries to, conduct its and their operations in the
ordinary course and consistent with past practice and use all
reasonable efforts to preserve intact their business
organizations and to maintain existing relationships with those
having significant business relationships with them. Without
limiting the foregoing and except as contemplated by this
agreement, during the period specified in the preceding
sentence, the Company shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of the Parent
(not to be unreasonably withheld), (a) except for issuances of
capital stock of the Company's subsidiaries to the Company or to
a wholly-owned subsidiary of the Company, issue, sell or pledge,
or authorize or propose the issuance, sale or pledge of (i)
additional shares of capital stock of any class (including the
Shares) or any other ownership interest in any of its
subsidiaries, or securities convertible into or exchangeable for
any such shares or ownership interest or any rights, warrants or
options to acquire or with respect to any such shares of capital
stock, ownership interest or other convertible or exchangeable
securities, or grant or accelerate any right to convert or
exchange any securities for any such shares (including the
Shares) or ownership interest, other than Shares issuable upon
exercise of the Options, or (ii) any other securities in respect
of, in lieu of or in substitution for Shares outstanding on the
date of this agreement; (b) otherwise acquire or redeem,
directly or indirectly, any of its outstanding securities
(including the Shares); (c) split, combine or reclassify its
capital stock or declare, set aside, make or pay any dividend or
distribution (whether in cash, stock or property) on any shares
of capital stock of the Company or any of its subsidiaries
(other than cash dividends paid to the Company by its wholly-
owned subsidiaries); (d) make any acquisition, by
means of a merger or otherwise, of assets or securities, or any
sale, lease, encumbrance or other disposition of assets or
securities, in each case other than in the ordinary course of
business and in circumstances not requiring approval of its
board of directors; (e) incur or assume any debt for borrowed
money (other than short-term debt pursuant to existing credit
facilities); (f) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person (except
wholly-owned subsidiaries of the Company), except in the
ordinary course of business; (g) make any loans, advances or
capital contributions to, or investments in, any other person
(except wholly-owned subsidiaries of the Company), in each case
other than in the ordinary course of business; (h) change any of
the accounting principles or practices used by it or any of its
subsidiaries, except as required by the SEC or by United States
generally accepted accounting principles; (i) make any tax
election not required by law or settle or compromise any
federal, state or local income tax liability, in each case that
is material to the Company and its subsidiaries taken as a
whole; (j) adopt any amendments to its certificate of
incorporation or by-laws; (k) grant any stock related or
performance awards; (l) forgive any loans to employees, officers
or directors of more than $10,000 with respect to any particular
individual; (m) enter into any new employment, severance,
consulting or salary continuation agreements with any officers,
directors or employees other than as contemplated by this
agreement; (n) adopt, amend or terminate any material employee
benefit plan, except in the ordinary course of business or as
required by law or as necessary to maintain tax qualified
status; or (o) agree in writing or otherwise to take any of the
foregoing actions or any action that would make any
representation or warranty in this agreement untrue or incorrect
in any material respect as of the date when made or as of a
future date or otherwise would result in any of the conditions
set forth in exhibit A not being satisfied.
6.2 No Solicitation
(a) Until the termination of this agreement, the
Company shall not, and shall not permit any of its subsidiaries,
or any of its or their officers, directors, employees,
representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries), to,
directly or indirectly, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information or
assistance), or take any other action knowingly to facilitate,
any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, an Acquisition Proposal
(as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain an Acquisition
Proposal or agree to or endorse any Acquisition Proposal, or
authorize or permit any of its or their officers, directors or
employees or any of its subsidiaries or any investment banker,
financial advisor, attorney, accountant or other representative
retained by it or any of its subsidiaries to take any such
action; provided, however, that nothing in this agreement shall
prohibit the board of directors of the Company from furnishing
information to, or entering into, maintaining or continuing
discussions or negotiations with, any person or entity that (a)
has made inquiries or proposals prior to the date of this
agreement regarding an Acquisition Proposal or (b) makes an
unsolicited Acquisition Proposal, if the board of directors of
the Company, after consultation with and based upon the advice
of independent legal counsel (who may be the Company's regularly
engaged independent legal counsel), determines in good faith that such
action is necessary for the board of directors of the Company to
comply with its fiduciary duties to stockholders under
applicable law and, prior to taking such action, the Company (i)
provides reasonable notice to the Parent to the effect that it
is taking such action (unless the board of directors of the
Company determines in good faith after consultation with and
based upon the advice of independent legal counsel that giving
such notice would breach the fiduciary duties of the board in
connection with an Acquisition Proposal that is more favorable
to the stockholders of the Company than the Offer and the Merger
(a "Superior Proposal")) and (ii) receives from such person or
entity an executed confidentiality agreement in reasonably
customary form. The Company shall use reasonable efforts to
keep the Parent informed of the status of any such Acquisition
Proposal (unless the board of directors of the Company
determines in good faith after consultation with and based upon
the advice of independent legal counsel that keeping the Parent
so informed would breach the fiduciary duties of the board in
connection with a Superior Proposal). For purposes of this
agreement, "Acquisition Proposal" means an inquiry, offer or
proposal regarding any of the following (other than the
transactions contemplated by this agreement with the Parent or
Sub) involving the Company or any of its subsidiaries: (w) any
merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (x) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition
of all or substantially all the assets of the Company and its
subsidiaries, taken as a whole, in a single transaction or
series of related transactions; (y) any tender offer or exchange
offer for 20 percent or more of the outstanding shares of
capital stock of the Company or the filing of a registration
statement under the Securities Act of 1933 in connection
therewith; or (z) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage
in any of the foregoing.
(b) Except as set forth in this section 6.2(b), the
board of directors of the Company shall not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to
the Parent or the Sub, the approval or recommendation by the
board of directors of the Offer, this agreement or the Merger,
(ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal or (iii) cause the Company to enter
into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that prior to the
time of acceptance for payment of Shares in the Offer the board
of directors of the Company determines in good faith, after
consultation with and based upon the advice of independent legal
counsel, that it is necessary to do so in order to comply with
its fiduciary duties to the Company's stockholders under
applicable law, the board of directors of the Company may
withdraw or modify its approval or recommendation of the Offer,
this agreement and the Merger, approve or recommend a Superior
Proposal or cause the Company to enter into an agreement with
respect to a Superior Proposal. The Company shall provide
reasonable notice to the Parent or the Sub to the effect that it
is taking such action. If the Company proposes to enter into an
agreement with respect to any Superior Proposal, it shall
concurrently with proposing such an agreement pay, or cause to
be paid, to the Parent the fee provided for in section 6.10.
6.3 Access to Information
(a) Subject to any limitations imposed by applicable
law, between the date of this agreement and the Control Date,
the Company shall (i) give the Parent and Sub and their
authorized representatives all reasonable access (during regular business
hours upon reasonable notice) to all employees, plants, offices,
warehouses and other facilities and to all books and records
(including, without limitation, tax returns) of the Company and
its subsidiaries and cause the Company's and its subsidiaries'
independent accountants to provide access to their work papers
and such other information as the Parent or Sub may reasonably
request, (ii) permit the Parent and Sub to make such inspections
as they may reasonably require and (iii) cause its officers and
those of its subsidiaries to furnish the Parent and Sub with
such financial and operating data and other information with
respect to the business, properties and personnel of the Company
and its subsidiaries as the Parent or Sub may from time to time
reasonably request.
(b) All information obtained by the Parent or Sub
pursuant to this section 6.3 shall constitute Evaluation
Material and shall be subject to the provisions of the letter
agreement dated May 15, 1995 between the Parent and the Company
(the "Confidentiality Agreement") relating to the confidential
treatment of Evaluation Material (as defined in the
Confidentiality Agreement).
6.4 Reasonable Efforts. Subject to the terms of this
agreement and the fiduciary duties of the board of directors of
the Company under applicable law as advised by independent legal
counsel, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or
advisable under applicable law to consummate and make effective,
in the most expeditious manner practicable, the transactions
contemplated by this agreement. Without limiting the foregoing,
(a) the Company and its board of directors shall use all
reasonable efforts promptly to make any required submissions
under the HSR Act that the Company and Parent determine should
be made, in each case with respect to the Offer, the Merger and
the transactions contemplated by this agreement, and (b) the
parties shall cooperate with one another (i) in promptly
determining whether any filings are required to be or should be
made or consents, approvals, permits or authorizations are
required to be or should be obtained under any other federal,
state or foreign law or regulation or whether any consents,
approvals or waivers are required to be or should be obtained
from other parties to loan agreements or other contracts or
instruments material to the Company's business in connection
with the consummation of the Offer, the Merger and the
transactions contemplated by this agreement, and (ii) in
promptly making any such filings, furnishing information
required in connection with such filings and seeking to obtain
timely any such consents, permits, authorizations, approvals or
waivers.
6.5 Indemnification; Directors' and Officers' Insurance
(a) The Parent and Sub agree that all rights to
indemnification or exculpation now existing in favor of the
directors, officers, employees and agents of the Company and its
subsidiaries as provided in their respective charters or by-laws
or otherwise in effect as of the date of this agreement with
respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect.
To the maximum extent permitted by the DGCL, such
indemnification shall be mandatory rather than permissive and
the Surviving Corporation shall advance expenses in connection
with such indemnification. The by-laws of the Surviving
Corporation shall contain provisions substantially similar to
the provisions with respect to indemnification and insurance set
forth in Article ELEVENTH of the Company's restated certificate
of incorporation, as amended, which provisions shall not be
amended in any manner that would adversely affect the rights
under those by-laws of the Company's employees, agents,
directors or officers for acts or omissions on or prior to the
Effective Time, except if such amendment is required by law.
(b) In addition to the rights provided for in section
6.5(a), and not in limitation of those rights, the Parent shall
cause the Surviving Corporation to indemnify, defend and hold
harmless each present and former director and officer, employee
and agent of the Company and its subsidiaries ("Indemnified
Parties") to the fullest extent permitted by law for all claims,
losses, damages, liabilities, costs, judgments and amounts paid
in settlement, including advancement of expenses (including
attorneys' fees) as incurred in respect of any threatened,
pending or contemplated claim, action, suit or proceeding,
whether criminal, civil, administrative or investigative,
including, without limitation, any action by or on behalf of any
or all security holders of the Company or by or in the right of
the Company or the Surviving Corporation, or investigation
relating to any action or omission by such party in its capacity
as such (including service to any other entity, plan, trust or
the like at the Company's request) occurring on or prior to the
Effective Time (including, without limitation, any that arise
out of or relate to the transactions contemplated by this
agreement).
(c) The Parent shall cause the Surviving Corporation
to maintain in effect for not fewer than six years from the
Effective Time the policies of directors' and officers'
liability insurance most recently maintained by the Company
(provided that the Surviving Corporation may substitute therefor
policies with reputable and financially sound carriers of at
least the same coverage and containing terms and conditions no
less advantageous, as long as such substitution does not result
in gaps or lapses in coverage) with respect to claims arising
from or related to matters occurring prior to the Effective
Time; provided, however, that in no event shall the Surviving
Corporation be required to expend more than an amount per year
equal to 200% of the current annual premiums paid by the Company
(the "Premium Amount") to maintain or procure insurance coverage
pursuant to this section 6.5(c); and further provided that, if
the Surviving Corporation is unable to obtain the insurance
called for by this section 6.5(c), the Surviving Corporation
shall obtain as much comparable insurance as is available for
the Premium Amount per year. The Parent shall cause the
Surviving Corporation to pay all expenses (including reasonable
attorneys' fees) that may reasonably be incurred by the
Indemnified Party in successfully enforcing the rights to which
the Indemnified Party is entitled under this agreement or the
Surviving Corporation's by-laws or is otherwise entitled. The
Parent agrees that, should the Surviving Corporation fail to
comply with the foregoing obligations, the Parent shall be
responsible for those obligations.
(d) In the event the Surviving Corporation or Parent
or any of their 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 all or substantially all of its properties and
assets to any person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of
the Surviving Corporation or Parent shall assume its obligations
set forth in this section 6.5.
(e) The provisions of this section 6.5 are intended to
be for the benefit of, and shall be enforceable by, each
Indemnified Party, his or her heirs and his or her personal
representatives.
6.6 State Takeover Statutes. The Company shall, upon the
request and at the expense of the Parent, take all reasonable
steps to assist in any challenge by the Parent or the Sub to the
validity, or applicability to the Offer or Merger, of any state
takeover law.
6.7 Proxy Statement. Unless the Merger is consummated in
accordance with section 253 of the DGCL as contemplated by
section 2.9, the Company shall prepare and file with the SEC,
and in consultation with the Parent and Sub, as soon as
practicable after the consummation of the Offer, a preliminary
proxy or information statement (the "Preliminary Proxy
Statement") relating to the Merger in accordance with the
Exchange Act and the rules and regulations under the Exchange
Act, with respect to the transactions contemplated by this
agreement. The Company, the Parent and the Sub shall cooperate
with each other in the preparation of the Preliminary Proxy
Statement. The Company shall use all reasonable efforts to
respond promptly to any comments made by the SEC with respect to
the Preliminary Proxy Statement, and to cause the Proxy
Statement to be mailed to the Company's stockholders at the
earliest practicable date.
6.8 Notification of Certain Matters. The Company shall give
prompt notice to the Parent and Sub, and the Parent or Sub, as
the case may be, shall give prompt notice to the Company, of (a)
the occurrence or non-occurrence of any event the occurrence, or
non-occurrence of which is likely to cause any representation or
warranty of that party in this agreement to be untrue or
inaccurate in any material respect at or prior to the Effective
Time and (b) any failure of that party to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it under this agreement; provided, however, that
the delivery of any notice pursuant to this section 6.8 shall
not limit or otherwise affect the remedies available under this
agreement to any of the parties receiving such notice.
6.9 Compliance with ISRA. The Company has complied or shall
comply with all obligations imposed by the New Jersey Industrial
Site Recovery Act ("ISRA"), all regulations promulgated under
ISRA and all directives, orders and requirements of the New
Jersey Department of Environmental Protection ("NJDEP") issued
under ISRA and resulting from this agreement.
6.10 Fees and Expenses
(a) Whether or not the Merger is consummated and
except as otherwise provided in this section 6.10, all costs and
expenses incurred in connection with this agreement and the
transactions contemplated by this agreement shall be paid by the
party incurring the expense.
(b) The Company agrees to pay the Parent a fee in
immediately available funds equal to $6,000,000 upon the
termination of this agreement by the Parent pursuant to Section
8.1(f) or by the Company pursuant to Section 8.1(g).
6.11 Employee Benefits. The Parent and Sub agree that, for a
period of at least two years following the Effective Time, the
Surviving Corporation shall maintain benefit plans for the
employees of the Company and its subsidiaries with terms that,
in the aggregate, are substantially equivalent or better than those
in the benefit plans now in place for such employees, to the
extent permitted under laws and regulations in force from time
to time; to the extent appropriate to carry out the foregoing,
the Parent agrees that, following the Effective Time, employees
of the Surviving Corporation shall be eligible to participate in
the Parent's various compensation plans on a basis comparable to
that of similarly situated employees of the Parent and its
subsidiaries.
7. Conditions to Consummation of the Merger. The obligation
of each party to effect the Merger is subject to the satisfaction or
waiver, where permissible, prior to the proposed Effective Time, of
the following conditions:
(a) unless the Merger is consummated pursuant to
section 253 of the DGCL as contemplated by section 2.9, the
agreement of merger in this agreement shall have been approved
and adopted by the affirmative vote of the stockholders of the
Company required by and in accordance with applicable law;
(b) all necessary waiting periods under the HSR Act
applicable to the Merger shall have expired or been terminated;
(c) no statute, rule, regulation, executive order,
decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority
against the Parent, the Sub or the Company and be in effect that
prohibits or restricts the consummation of the Merger or makes
such consummation illegal (each party agreeing to use all
reasonable efforts to have such prohibition lifted); and
(d) the Parent or the Sub, as applicable, shall have
accepted for purchase and paid for the Shares tendered and not
withdrawn pursuant to the Offer; provided, however, that this
condition shall be deemed satisfied with respect to the Parent
and Sub, if the Parent or the Sub, as applicable, shall have
failed to purchase Shares pursuant to the Offer in violation of
this agreement or the terms of the Offer.
8. Termination; Amendment; Waiver
8.1 Termination. This agreement may be terminated and the
Merger abandoned at any time, notwithstanding approval of the
Merger by the stockholders of the Company, but prior to the
Effective Time:
(a) by mutual written consent of the boards of
directors of the Company and Parent, subject, in the case of the
Company, to section 1.4(b);
(b) by the Parent or Company, if, without any material
breach by such terminating party of its obligations under this
agreement, the purchase of Shares pursuant to the Offer shall
not have occurred on or before November 30, 1995;
(c) by the Parent or the Company, if the Offer expires
or is terminated or withdrawn pursuant to its terms without any
Shares being purchased in accordance with section 1.1(b);
provided, however, that the Parent may not terminate this
agreement pursuant to this section 8.1(c), if the Parent's
termination of, or its or the Sub's failure to accept for
payment or pay for any Shares tendered pursuant to, the Offer
does not follow the occurrence, or failure to occur, as the case
may be, of any condition set forth in exhibit A or is otherwise in
violation of the terms of the Offer or this agreement;
(d) by the Parent or the Company, if any court of
competent jurisdiction shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the
purchase of Shares pursuant to the Offer or the Merger;
provided, however, that the party seeking to terminate this
agreement shall have used its reasonable best efforts, subject
to section 6.4, to remove or lift such order, decree or ruling;;
(e) by the Company, if the Offer has not been timely
commenced in accordance with section 1.1;
(f) by the Parent, if the board of directors of the
Company shall withdraw, modify or change its recommendation or
approval in respect of this agreement or the Offer in a manner
adverse to the Parent or the board of directors of the Company
shall have approved or recommended any proposal other than by
the Parent or Sub in respect of an Acquisition Proposal;
(g) assuming the Company shall not have contravened
section 6.2, by the Company, to allow the Company to enter into
an agreement in respect of an Acquisition Proposal; and
(h) prior to the consummation of the Offer, by the
Company, if any of the representations or warranties of the
Parent or Sub in this agreement were untrue or incorrect in any
material respect when made or have since become, and at the time
of termination remain, untrue or incorrect in any material
respect, or the Parent or Sub shall have breached or failed to
comply in any material respect with any of its obligations under
this agreement, or any other events or circumstances have
occurred that render the conditions set forth in section 7, as
applicable to the Company's obligation to effect the Merger, not
able to be satisfied on or before November 30, 1995.
8.2 Effect of Termination. If this agreement is terminated
and the Merger abandoned pursuant to section 8.1, this
agreement, except for sections 6.3(b) and 6.10 and (to the extent
applicable to the foregoing sections), section 9, shall forthwith
become void and have no effect, without any liability on the part
of any party or its directors, officers or stockholders. Nothing
in this section 8.2 shall relieve any party of liability for
breach of this agreement.
8.3 Amendment. To the extent permitted by applicable law, this
agreement may be amended by action by or on behalf of the boards
of directors of the Company, the Parent and the Sub, subject, in
the case of the Company, to section 1.4(b), at any time before or
after adoption of this agreement by the stockholders of the
Company, but, after any such stockholder approval, no amendment
shall be made that decreases the Merger Consideration or
adversely affects the rights of the Company's stockholders under
this agreement, without the approval of the stockholders of the
Company. This agreement may not be amended, except by an
instrument in writing signed on behalf of all the parties.
8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties, by action by or on behalf of the boards of
directors of the Company, the Parent and the Sub, subject, in
the case of the Company, to section 1.4(b), may (a) extend the
time for the performance of any of the obligations or other acts
of the other parties in this agreement, (b) waive any
inaccuracies in the representations and warranties by any other
party or in any document, certificate or writing delivered
pursuant to this agreement by any other party or (c) waive
compliance with any of the agreements or conditions in this
agreement. Any agreement by any party to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed on behalf of that party.
9. Miscellaneous
9.1 Representations and Warranties. The representations and
warranties in sections 4 and 5 shall not survive beyond the
Effective Time.
9.2 Enforcement of the Agreement. The parties agree that
irreparable damage would occur in the event that any of the
provisions of this agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction to prevent breaches of this agreement and to enforce
specifically the terms and provisions of this agreement in any
federal or state court located in the state of Delaware (as to
which the parties agree to submit to jurisdiction for the
purposes of such action), this being in addition to any other
remedy to which they are entitled at law or in equity.
9.3 Validity. The invalidity or unenforceability of any
provision of this agreement shall not affect the validity or
enforceability of any other provision of this agreement, which
shall remain in full force and effect, unless the invalidity or
unenforceability of such provision would (a) result in such a
material change to this agreement as to be unreasonable, or (b)
materially or adversely frustrate the obligations of the parties
in this agreement as originally written.
9.4 Notices. All notices, requests, claims, demands and other
communications under this agreement shall be in writing and
shall be deemed to have been duly given when delivered in
person, by facsimile transmission with confirmation of receipt,
or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
if to the Parent or Sub:
Schein Pharmaceutical, Inc.
100 Campus Drive
Florham Park, New Jersey 07932
Telecopier: (201) 593-5820
Attention: Mr. Martin Sperber, Chairman
and Chief Executive Officer
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Telecopier: (212) 969-2900
Attention: Richard L. Goldberg, Esq.
if to the Company:
Marsam Pharmaceuticals Inc.
Building 31
Olney Avenue
Cherry Hill, New Jersey 08003
Telecopier: (609) 751-8784
Attention: President
with copies to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10006
Telecopier: (212) 310-8774
Attention: Dennis J. Block, Esq.
and
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, Pennsylvania 19103-7396 Telecopier:
(215) 979-1213 Attention: Frederick W. Dreher, Esq.
or to such other address as the person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above (provided that notice of any change of
address shall be effective only upon receipt of notice of the
change).
9.5 Governing Law. This agreement shall be governed by and
construed in accordance with the law of the state of Delaware,
regardless of the law that might otherwise govern under
principles of conflicts of laws applicable thereto.
9.6 Headings. The headings in this agreement are for
convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this
agreement.
9.7 Parties in Interest. This agreement shall be binding
upon and inure solely to the benefit of each party to this
agreement, and nothing in this agreement, express or implied,
is intended to confer upon any other person any rights or
remedies of any nature under or by reason of this agreement,
except for section 6.5 (which is intended to be for the benefit
of the persons referred to in that section, and may be enforced
by such persons).
9.8 Counterparts. This agreement may be executed in
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
9.9 Certain Definitions.
(a) "Material Adverse Effect" means any adverse change
in the business or financial condition of the Company or its
subsidiaries that is material to the Company and its
subsidiaries taken as a whole.
(b) A "subsidiary" of any entity is another entity a
majority of the outstanding voting securities of which are
beneficially owned by the first entity.
(c) "Tax" means all taxes or similar governmental
charges, duties, imposts or levies (including, without
limitation, income taxes, franchise taxes, gross receipt taxes,
occupation taxes, real and personal property taxes, transfer
taxes or fees, stamp taxes, sales taxes, use taxes, excise
taxes, ad valorem taxes, withholding taxes, employee withholding
taxes, worker's compensation, payroll taxes, unemployment
insurance, social security, minimum taxes, customs duties or
windfall profits taxes), together with any related liabilities,
penalties, fines, additions to tax or interest, imposed by any
country, any state, county, provincial or local government or
any subdivision or agency of any of the foregoing.
9.10 Press Releases. The Parent, the Sub and the Company
shall consult with each other before issuing any press release
or otherwise making any public statement with respect to the
transactions contemplated by this agreement, and shall not issue
any such press release or make any such public statement prior
to such consultation, except as may be required by law or by
obligations pursuant to any agreement with NASDAQ/NMS.
9.11 Entire Agreement. Except for the Confidentiality
Agreement and the Disclosure Letter, this agreement constitutes
the entire agreement among the parties with respect to its
subject matter and supersedes all other prior agreements and
understandings, both written and oral, among the parties with
respect to that subject matter.
SCHEIN PHARMACEUTICAL, INC.
By: /s/ Martin Sperber
Name: Martin Sperber
Title: Chairman & CEO
SM ACQUIRING CO., INC.
By: /s/ Martin Sperber
Name: Martin Sperber
Title: Chairman & CEO
MARSAM PHARMACEUTICALS INC.
By: /s/ Marvin Samson
Name: Marvin Samson
Title: Director and Principal
Executive Officer
EXHIBIT A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the
Offer, the Sub shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act, to pay for any Shares tendered,
and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered,
and, subject to the provisions of the Merger Agreement, may
terminate the Offer (whether or not any Shares have theretofore
been purchased or paid for), if, (1) there have not been validly
tendered and not withdrawn prior to the time the Offer shall
otherwise expire a number of Shares that constitutes a majority
of the Shares outstanding on a fully-diluted basis on the date
of purchase ("on a fully-diluted basis" meaning, as of any date,
the number of Shares outstanding, together with Shares the Company
is then required to issue pursuant to obligations outstanding at
that date under employee stock option or other benefit plans or
otherwise), (2) any applicable waiting periods under the HSR Act
shall not have expired or been terminated prior to the
expiration of the Offer or (3) at any time before acceptance for
payment of, or payment for, such Shares, any of the following
events shall occur or be deemed to have occurred:
(A). there shall be pending by any governmental entity
any suit, action or proceeding (1) challenging the
acquisition by the Parent or Sub of any Shares under the
Offer or seeking to restrain or prohibit the making or
consummation of the Offer or Merger, (2) seeking to
prohibit or materially limit the ownership or operation by
the Company, the Parent or any of their respective
subsidiaries of a material portion of the business or
assets of the Company and its subsidiaries, taken as a
whole, or the Parent and its subsidiaries, taken as a
whole, or to compel the Company or the Parent to dispose of
or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a
whole, or the Parent and its subsidiaries, taken as a
whole, as a result of the Offer or any of the other
transactions contemplated by this agreement, (3) seeking to
impose material limitations on the ability of the Parent or
Sub to acquire or hold, or exercise full rights of
ownership of, any Shares accepted for payment pursuant to
the Offer, including, without limitation, the right to vote
such Shares on all matters properly presented to the
stockholders of the Company, or (4) seeking to prohibit the
Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of
the business or operations of the Company and its
subsidiaries; or
(B). any governmental entity or federal or state court of
competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other
order that is in effect and that (1) materially restricts,
prevents or prohibits consummation of the Offer, the Merger
or any material transaction contemplated by the Merger
Agreement, (2) prohibits or limits materially the ownership
or operation by the Company, the Parent or any of their
subsidiaries of all or any material portion of the business
or assets of the Company and its subsidiaries taken as a
whole, or compels the Company, the Parent or any of their
subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of the Company
and its subsidiaries taken as a whole, (3) imposes material
limitations on the ability of the Parent or any of its
subsidiaries to exercise effectively full rights of
ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by the Sub pursuant to
the Offer or otherwise on all matters properly presented to
the Company's stockholders, including, without limitation,
the approval and adoption of the Merger Agreement and the
transactions contemplated by the Merger Agreement, or (4)
requires divestitures by the Parent, the Sub or any other
affiliate of the Parent of any Shares; provided that the
Parent shall have used all reasonable efforts to cause any
such decree, judgment, injunction or other order to be
vacated or lifted; or
(c). the representations and warranties of the Company in the
Merger Agreement were untrue or incorrect in any
material respect when made or (except for those that address
matters as of a specific date and except for changes
specifically permitted by the Merger Agreement) thereafter
become and remain untrue or incorrect in any material respect;
or
(D). the Company shall have breached or failed to
comply in any material respect with any of its obligations under
the Merger Agreement and, with respect to any such breach or
failure that can be remedied, the breach or failure is not
remedied within 10 business days after the Parent has furnished
the Company written notice of such breach or failure; or
(E). the Merger Agreement shall have been terminated in
accordance with its terms; or
(F). the board of directors of the Company shall have
withdrawn or materially modified or changed (including by
amendment of the Schedule 14D-9) in a manner adverse to the Sub
its recommendation of the Offer, the Merger Agreement or the
Merger, or the board of directors of the Company shall have
approved or recommended an Acquisition Proposal; or
(G). it shall have been publicly disclosed or the Sub shall
have otherwise learned that, except as contemplated by the
stockholders agreement dated July 28, 1995 among the Parent and
certain stockholders of the Company, any person or "group" (as
defined in section 13(d)(3) of the Exchange Act), other than the
Parent or its affiliates or any group of which any of them is a
member, shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 under the Exchange Act) of more than 25
percent of the Shares, through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted an
option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 25 percent of the Shares; or
(H). there shall have occurred and continued for at least
three business days (1) any general suspension of, or limitation
on prices for, trading in securities on any national securities
exchange or in the over-the-counter market in the United States,
(2) the declaration of any banking moratorium or any suspension
of payments in respect of banks, or any limitation (whether or
not mandatory) by any governmental entity on, or other event
materially adversely affecting, the extension of credit by
lending institutions in the United States or (3) in the case of
any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof; or
(I). for each real property owned or operated by the Company
or any of its subsidiaries located in the state of New Jersey,
the Company shall not have complied with the obligations imposed
by ISRA by either: (1) securing and providing a copy to the
Parent and Sub of a letter of nonapplicability, (2) securing and
providing a copy to the Parent and Sub of a written approval by
NJDEP of a negative declaration submitted by the Company, (3)
securing and providing a copy to the Parent and Sub of a no
further action letter from NJDEP, (4) filing a De Minimus
Quantity Exemption Affidavit and providing the Parent and Sub
with a copy evidencing the filing, (5) securing and providing a
copy to the Parent and Sub of a letter of authorization from
NJDEP for the transfer of ownership or (6) securing written
approval by NJDEP of a Remediation Agreement and providing a
copy to the Parent and Sub; which, in the judgment of the
Parent in any such case, and regardless of the circumstances
(including any action or omission by the Parent or Sub) giving
rise to any such condition, makes it inadvisable to proceed with
such acceptance for payment or payments.
The foregoing conditions are for the sole
benefit of the Parent, the Sub and their affiliates and may be
asserted by the Parent or Sub regardless of the circumstances
(including, without limitation, any action or inaction by the
Parent, the Sub or any of their affiliates) giving rise to any
such condition or may be waived by the Parent or Sub, in whole
or in part, from time to time in its sole discretion, except as otherwise
provided in the Merger Agreement. The failure by the Parent or
Sub at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right
shall be deemed an ongoing right and may be asserted at any time
and from time to time. Unless otherwise defined in this exhibit
A, capitalized terms used in this exhibit A have the meanings
ascribed to them in the Merger Agreement among the Parent, the
Sub and the Company to which this exhibit A is attached (the
"Merger Agreement").
Exhibit 10(b)
STOCKHOLDERS AGREEMENT
Dated July 28, 1995
The parties to this agreement are Schein
Pharmaceutical, Inc., a Delaware corporation (the "Parent"), SM
Acquiring Co., Inc., a Delaware corporation and a subsidiary of
the Parent (the "Sub"), and the other parties to this agreement
(each, a "Stockholder", and, collectively, the "Stockholders").
Simultaneously with the execution and delivery
of this agreement and in reliance on the parties entering into
this agreement, the Parent, the Sub and Marsam Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), are entering into an
agreement and plan of merger (the "Merger Agreement"), pursuant
to which the Sub will merge into the Company (the "Merger").
Under the Merger Agreement, the Parent or Sub will commence a
cash tender offer to purchase all the outstanding shares of
common stock of the Company (the "Shares").
The parties agree as follows:
1. Tender of Shares. Each Stockholder shall validly
tender (and not withdraw) pursuant to and in accordance with the
Offer (as defined in the Merger Agreement), not later than the
tenth business day after commencement of the Offer pursuant to
section 1.1 of the Merger Agreement, the number of shares of
common stock of the Company set forth opposite that
Stockholder's name on schedule 1 (the "Existing Shares")
beneficially owned by the Stockholder. Each Stockholder agrees
that the Parent's obligation to accept for payment and pay for
Shares in the Offer is subject to the terms and conditions of
the Offer. The Parent and Sub agree that Shares (as such term
is defined in the Merger Agreement) may not be accepted for
payment in the Offer in violation of the terms of the Merger
Agreement. The Stockholders shall have no obligation under this
section 1 after the earliest of (a) the termination, expiration,
abandonment or withdrawal of the Offer, (b) December 30, 1995
and (c) the termination of the Merger Agreement in accordance
with clause (a), (b), (c), (d), (e) or (h) of section 8.1 of the
Merger Agreement. In addition, no Stockholder shall have any
obligation under this section 1 in the event that the Parent has
taken any action with respect to or in connection with the Offer
that, pursuant to the provisions of section 1.1(a) of the Merger
Agreement, the Parent is prohibited from taking without the
prior written consent of the Company, unless such Stockholder
has given its written consent to such action.
2. Voting of Shares. At any meeting of stockholders
of the Company or in connection with any written consent of
stockholders of the Company, each Stockholder shall vote (or
cause to be voted) all the Shares beneficially owned by that
Stockholder as of the applicable record date (other than Shares
that are not outstanding) (a) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement
and the approval of the terms of the Merger Agreement; (b)
against any action or agreement that would result in a breach of
any agreement of the Company under the Merger Agreement; and (c)
against any other action that could reasonably be expected to
interfere with, delay or otherwise adversely affect the Merger
and the transactions contemplated by the Merger Agreement. The
Stockholders shall have no obligation under this section 2 or
under section 8 after the earlier of (a) December 30, 1995 and
(b) the termination of the Merger Agreement in accordance with
its terms. In addition, no Stockholder shall have any
obligation under this section 2 or under section 8 following any
decrease in, or change in the form of, the consideration payable
to stockholders of the Company in the Merger, unless that
Stockholder shall have given its consent to the decrease or
change.
3. Options
(a) Each Stockholder grants the Parent an
irrevocable option (collectively, the "Stock Options") to
purchase the number of Shares set forth opposite that
Stockholder's name on schedule 1 (the "Option Shares") at a
purchase price per Share equal to the price per Share payable in
the Offer (the "Purchase Price"). If (a) the Offer is
terminated, abandoned or withdrawn by the Parent or Sub due to
the failure of the condition to the Offer set forth in clause
(1) or in sub-clause (C), (D), (F) or (G) of clause (3) of
exhibit A to the Merger Agreement, (b) the Offer is terminated,
abandoned or withdrawn by the Parent or Sub in a circumstance
referred to in section 8.1(d) of the Merger Agreement that
involves a suit, action or proceeding by a party that has made
an Acquisition Proposal (as defined in the Merger Agreement) or
(c) the Offer is consummated but the Sub has not accepted for
payment and paid for the aggregate number of Shares set forth
opposite each Stockholder's name on schedule 1 and such non-
acceptance and nonpayment is not in contravention of the
Parent's or Sub's obligations under the Merger Agreement or the
Offer, the Stock Options shall, in each case, become
exercisable, in whole but not in part, upon the first to occur
of any such event and remain exercisable in whole but not in
part until 30 days after the date of the occurrence of that
event, as long as: (y) all waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
required for the purchase of the Option Shares upon such
exercise shall have expired or been waived, and (z) there shall
not be in effect any injunction or other order issued by any
court or governmental, administrative or regulatory agency or
authority prohibiting the exercise of the Stock Options. If the
Parent wishes to exercise the Stock Options, the Parent shall
send a written notice to the Stockholders identifying the place
and date (not fewer than two nor more than 10 business days from
the date of the notice) for the closing of the purchase.
Notwithstanding the foregoing, if the Parent exercises the Stock
Options, (i) the Parent shall, within 30 calendar days after the
date of exercise, offer to all other stockholders of the Company
the opportunity to sell their shares of common stock of the
Company to the Parent on the same terms provided in this section
3 with respect to the purchase of Shares upon the exercise of
Stock Options, subject only to the conditions set forth in
clauses (y) and (z) in this section 3 and in clause (3)(I) of
exhibit A to the Merger Agreement, and (ii) if the amount of
cash or fair value of consideration per share paid in that
tender offer or otherwise (including, without limitation, in a
merger) for the acquisition of Shares by the Parent or any of
its affiliates (as defined in section 3(b)) at any time within
183 days after the purchase of Shares pursuant to the Stock
Options exceeds the amount per Share paid upon the purchase of
Shares pursuant to the Stock Options, the Parent shall promptly
pay each Stockholder an amount equal to the product of that
excess and the number of Shares sold by that Stockholder
pursuant to the Stock Options. Anything in this agreement to
the contrary notwithstanding, (i) no Stockholder shall have any
obligation under this section 3(a) if the Stock Options have not
been exercised in accordance with this section 3(a) on or prior
to December 30, 1995, and (ii) no Stock Option
may be exercised in respect of the Option Shares of any
Stockholder on or after the date, if any, on which such
Stockholder has no obligation under section 1 of this agreement
by reason of the provisions of the last sentence of section 1 of
this agreement.
(b) If the Parent purchases Shares pursuant to the
Stock Options, and, at any time(s) within 183 days after the
consummation of the purchase, the Parent or any of its
affiliates (as such term is defined in Rule 405 under the
Securities Act of 1933) sells, exchanges or otherwise disposes
of any of those Shares, or agrees to sell, exchange or otherwise
dispose of any of those Shares, voluntarily or otherwise
(including, without limitation, pursuant to a merger), and if
the cash or fair value of the consideration per Share received
in exchange exceeds the Purchase Price, then the Parent shall
promptly pay or deliver an aggregate of 60% of that excess to
the respective Stockholders pro rata in relation to the number
of Shares sold by them pursuant to the Stock Options.
(c) The Parent shall not offer, sell or otherwise
dispose of any Shares purchased pursuant to the Stock Options in
violation of applicable federal or state securities laws.
4. Representations and Warranties of the
Stockholders. Each Stockholder represents and warrants to the
Parent as follows:
(a) Ownership of Shares. That Stockholder is the beneficial
owner of not fewer than the number of Shares set forth opposite
that Stockholder's name on schedule 1. That Stockholder has
sole voting power and sole power to issue instructions with
respect to the matters set forth in sections 1 and 2, sole power
of disposition, sole power to demand appraisal rights and sole
power to agree to all the matters set forth in this agreement,
in each case with respect to all the Existing Shares set forth
opposite that Stockholder's name on schedule 1. That
Stockholder's Existing Shares are held by that Stockholder, or
by a nominee or custodian for the benefit of that Stockholder,
free and clear of all liens, claims, security interests and
other encumbrances, except for encumbrances arising under this
agreement.
(b) Power; Binding Agreement. That Stockholder has
the legal capacity to enter into and perform all of that
Stockholder's obligations under this agreement. The execution,
delivery and performance of this agreement by that Stockholder
will not violate any other agreement to which that Stockholder
is a party, including, without limitation, any voting agreement,
stockholders agreement or voting trust. This agreement has been
duly and validly executed and delivered by that Stockholder and
constitutes a valid and binding obligation of that Stockholder,
enforceable against that Stockholder in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject to general principles of equity.
There is no other person or entity whose consent is required for
the execution and delivery of this agreement by that Stockholder
or the consummation by that Stockholder of the transactions
contemplated by this agreement. If that Stockholder is married
and that Stockholder's Shares constitute community property,
this agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding obligation of, that
Stockholder's spouse, enforceable against that spouse in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject to general
principles of equity.
(c) Consents and Approvals; No Violation. Assuming
the compliance by the Parent with section 3(c), neither the
execution and delivery of this agreement by that Stockholder nor
the consummation by that Stockholder of the transactions
contemplated by this agreement will: (i) require any consent,
approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority,
except in connection with the HSR Act or pursuant to the
Securities Exchange Act of 1934; (ii) result in a default (or
give rise to a right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions
of any note, license, agreement or other instrument or
obligation to which that Stockholder is a party or by which that
Stockholder or any of that Stockholder's assets may be bound; or
(iii) violate any order, writ injunction, decree, statute, rule
or regulation applicable to that Stockholder or by which any of
that Stockholder's assets are bound.
(d) Brokers. No broker, finder or other investment
banker (with the possible exception of Bear, Stearns & Co. Inc.)
is entitled to any broker's, finder's or other similar fee or
commission in connection with this agreement or the sale of that
Stockholder's Option Shares pursuant to this agreement based
upon agreements made by or on behalf of that Stockholder.
5. Representations and Warranties of the Parent. The
Parent represents and warrants to the Stockholders as follows:
(a) Power; Binding Agreement. The Parent has the
corporate power and authority to enter into and perform all its
obligations under this agreement. The execution, delivery and
performance of this agreement by the Parent will not violate any
other agreement to which the Parent is a party. This agreement
has been duly and validly authorized, executed and delivered by
the Parent and constitutes a valid and binding obligation of the
Parent, enforceable against the Parent in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject to general principles of equity.
There is no other person or entity whose consent is required for
the execution and delivery of this agreement by the Parent or
the consummation by the Parent of the transactions contemplated
by this agreement.
(b) Consents and Approvals; No Violation. Neither the
execution and delivery of this agreement by the Parent nor the
consummation by the Parent of the transactions contemplated by
this agreement will: (i) require any consent, approval,
authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, except in connection
with the HSR Act or pursuant to the Securities Exchange Act of
1934; (ii) result in a default (or give rise to a right of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, license, agreement
or other instrument or obligation to which the Parent is a party
or by which the Parent or any of its assets may be bound; or
(iii) violate any order, writ injunction, decree, statute, rule
or regulation applicable to the Parent or by which any of its
assets are bound.
(c) Brokers. No broker, finder or other investment
banker (other than Tanner & Co., Inc.) is entitled to any
broker's, finder's or other similar fee or commission in
connection with this agreement or the transactions contemplated
by this agreement based upon agreements made by or on behalf of
the Parent.
6. No Solicitation. Prior to December 31, 1995, no
Stockholder shall, in that Stockholder's capacity as such,
directly or indirectly, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information or
assistance), or take any other action knowingly to facilitate,
any inquiries or the making of any proposal that constitutes, or
reasonably may be expected to lead to, an Acquisition Proposal
(as defined in the Merger Agreement), or enter into or maintain
or continue discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain an Acquisition
Proposal, or agree to or endorse an Acquisition Proposal, or
authorize or permit any person or entity acting on behalf of
that Stockholder to do any of the foregoing. If any Stockholder
receives any inquiry or proposal regarding any Acquisition
Proposal, that Stockholder shall promptly inform the Parent of
that inquiry or proposal. Anything in this agreement to the
contrary notwithstanding, the sole and exclusive remedy for any
nonperformance or breach by any Stockholder or Stockholders of
the provisions of this section 6 shall be an injunction or
injunctions to prevent the breach of this section 6 and/or to
enforce specifically the terms and provisions of this section 6.
Without limiting the generality of the preceding sentence, it
is expressly understood and agreed that monetary damages shall
not be awarded for any nonperformance or breach of this section
6.
7. Restrictions on Transfer, Etc. Except as provided
in this agreement, prior to the earliest of (a) December 31,
1995, (b) the termination, abandonment, withdrawal or
consummation of the Offer under circumstances other than those
referred to in clause (a), (b) or (c) of the second sentence of
section 3(a) of this agreement or (c) the 30th day after the
termination of the Merger Agreement in accordance with its
terms, no Stockholder shall, directly or indirectly: (i) except for
transfers to that Stockholder's family or trusts for the benefit
of that Stockholder's family (provided that the transferee of
the Shares agrees in writing, in form reasonably satisfactory to
the Parent, to be bound by the terms of this agreement), offer
for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any agreement, arrangement
or understanding with respect to, or consent to the offer for
sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of that Stockholder's Existing Shares
or any interest in those Shares; or (ii) take any action
(including the grant of any proxies or powers of attorney with
respect to any Shares, the deposit of any Shares into a voting
trust or the entry into a voting agreement with respect to any
Shares) that would make any representation or warranty of that
Stockholder in this agreement untrue in any material respect or
have the effect of preventing or disabling that Stockholder from
performing that Stockholder's obligations under this agreement.
8. Waiver of Appraisal Rights. Each Stockholder
waives any rights of appraisal or rights to dissent from the
Merger that Stockholder may have.
9. Stockholder Capacity. No person executing this
agreement who is or becomes during the term of this agreement a
director of the Company makes any agreement in his or her
capacity as a director. Each Stockholder is executing and
delivering this agreement solely in that Stockholder's capacity
as the record and beneficial owner of, or the trustee of a trust
whose beneficiaries are the beneficial owners of, that
Stockholders' Shares. Notwithstanding anything to the contrary
in this agreement, no action or inaction by a Stockholder in
his capacity as a director of the Company shall be deemed to
contravene section 6, as long as the action or inaction does
not contravene section 6.2 of the Merger Agreement.
10. Miscellaneous
(a) Definition. The terms "beneficially own" and
"beneficial ownership" with respect to any securities shall
have the same meaning as in, and shall be determined in
accordance with, Rule 13d-3 under the Securities Exchange Act
of 1934.
(b) Liability After Transfer. Each Stockholder agrees
that, notwithstanding any transfer of that Stockholder's
Existing Shares in accordance with section 7, that Stockholder
shall remain liable for his or her performance of all
obligations under this agreement.
(c) Amendments, Waivers, Etc. This agreement may not
be amended, changed, supplemented, waived or otherwise modified
or, except as otherwise provided in this agreement, terminated
with respect to any party, except upon the execution and
delivery of a written agreement executed by the party to be
charged (it being understood, however, that schedule 1 may be
supplemented unilaterally by the Parent adding the name and
other relevant information concerning any stockholder of the
Company who agrees to be bound by this agreement, and thereafter
the added stockholder shall be treated as a "Stockholder" for
all purposes of this agreement).
(d) Notices. All notices, requests, claims, demands
and other communications in this agreement shall be in writing
and shall be deemed to have been duly given when delivered in
person, by facsimile transmission with confirmation of receipt
or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
If to a Stockholder: At the address set forth on schedule 1
If to the Parent or Sub: Schein Pharmaceutical, Inc.
100 Campus Drive
Florham Park, New Jersey 07932
Telecopier: (201) 593-5590
Attention: Mr. Martin Sperber
Chairman and Chief
Executive Officer
copy to: Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Telecopier: (212) 969-2900
Attention: Richard L. Goldberg, Esq.
or to such other address as the person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above (provided that notice of any change of
address shall be effective only upon receipt of notice of the
change).
(e) Severability. If any provision of this agreement
is invalid, illegal or unenforceable, the invalidity,
illegality or unenforceability shall not affect any other
provision.
(f) Specific Performance. Each party agrees that
irreparable damage would occur in the event that any of the
provisions of this agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this agreement
and to enforce specifically the terms and provisions of this
agreement, this being (except as provided in section 6) in
addition to any other remedy to which they are entitled at law
or in equity.
(g) No Waiver. The failure of any party to exercise
any right, power or remedy under this agreement or otherwise
available in respect of this agreement at law or in equity, or
to insist upon compliance by any other party with that party's
obligations under this agreement, shall not constitute a waiver
of any right to exercise any such or other right, power or
remedy or to demand such compliance.
(h) Governing Law. This agreement shall be governed
and construed in accordance with the law of the state of
Delaware, regardless of the law that might otherwise govern
under principles of conflicts of laws applicable thereto.
(i) Headings. The headings in this agreement are for
convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this agreement
(j) Counterparts. This agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same agreement.
(k) Entire Agreement. This agreement constitutes the
entire agreement among the parties with respect to its subject
matter and supersedes all other prior agreements and
understandings, both written and oral, among the parties with
respect to that subject matter.
SCHEIN PHARMACEUTICAL, INC.
By: /s/ Martin Sperber
Name: Martin Sperber
Title: Chairman & CEO
SM ACQUIRING CO., INC.
By: /s/ Martin Sperber
Name: Martin Sperber
Title: Chairman & CEO
STOCKHOLDERS:
By: /s/ Agnes Varis, President
Name: Agvar Chemicals Inc.
By: /s/ Agnes Varis /s/ Karl Leichtman
Name: Agnes Varis Karl Leichtman (jointly)
By: /s/ Agnes Varis
Name: Agnes Varis
By: /s/ Marvin Samson
Name: Marvin Samson
SCHEDULE 1
Name of Stockholder Address for Notices Number of Shares
Agvar Chemicals Inc. Agvar Chemicals Inc. 1,322,566
96 Route 23
Little Falls, NJ 07424
ATTN: Agnes Varis
Tel: (201) 256-3232
Fax: (201) 256-6526
Agnes Varis and Agvar Chemicals Inc. 92,500
Karl Leichtman 96 Route 23
(jointly) Little Falls, NJ 07424
ATTN: Agnes Varis
Tel: (201) 256-3232
Fax: (201) 256-6526
Agnes Varis Agvar Chemicals Inc. 5,625
96 Route 23 plus any
Little Falls, NJ 07424 shares issued
ATTN: Agnes Varis upon exercise
Tel: (201) 256-3232 of options
Fax: (201) 256-6526
For all three above,
with a copy to:
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
ATTN: Martin Balsam, Esq.
Tel: (212) 715-9100
Fax: (212) 715-8000
Marvin Samson Marsam Pharmaceuticals Inc. 1,450,441
24 Olney Avenue, Bldg. 31 plus any
Cherry Hill, NJ 08034 shares issued
Tel: (609) 424-5600 upon exercise
Fax: (609) 751-8784 of options
with a copy to:
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, Pennsylvania
19103-7396
ATTN: Frederick W. Dreher, Esq.
Fax: (215) 979-1213
Exhibit 10(c)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 28, 1995 by and between MARSAM
PHARMACEUTICALS INC., a Delaware corporation having its principal
office at Building 31, Olney Avenue, Cherry Hill, New Jersey (the
"Company"), and Marvin S. Samson, residing at 1905 Owl Court,
Cherry Hill, New Jersey 08003 (the "Executive").
The parties are entering into this Agreement to set forth
and confirm their respective rights and obligations with respect
to Executive's employment by the Company.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the parties hereto mutually agree as
follows:
1. Employment and Term. (a) The Company hereby
employs the Executive as president, chief executive officer and
chief operating officer of the Company and, as of the Acquisition
Date, the Executive shall be appointed an Executive Vice
President of Schein Pharmaceutical, Inc., a Delaware corporation
("SPI") (collectively, the "Position"). The Executive agrees to
serve in the employ of the Company in the Position for a term
(the "Initial Term") which shall commence on the date of the
acquisition by SPI or a subsidiary of SPI of more than a majority
of the outstanding shares of the common stock of the Company on a
fully-diluted basis (the "Acquisition Date"), and, subject to
paragraphs 1(b) and 1(c) hereof, shall terminate on the fifth
anniversary of the Acquisition Date.
(b) Unless written notice terminating the term of
employment is given by either the Company or the Executive not
less than one hundred eighty (180) days in advance of the
termination date of this Agreement, this Agreement shall be
automatically extended, on all of the terms and conditions
hereof, for additional periods of one-year.
(c) The Company shall have the right to terminate
the Executive's employment hereunder prior to the fifth
anniversary of the Acquisition Date, but only for cause. For
purposes of this Agreement, "cause" means (i) the Executive's
willful and continued failure substantially to perform his duties
with the Company or SPI, (ii) fraud, misappropriation or
intentional material damage to the property or business of the
Company or SPI or (iii) the Executive's admission or conviction
of, or plea of nolo contendere to, any felony that, in the
judgment of the Board of Directors of the Company (the "Board"),
adversely affects the Company's reputation or the Executive's
ability to carry out his obligations under this Agreement. The
Executive shall not be entitled to any compensation under this
Agreement for any period after such termination pursuant to this
paragraph 1(c) except to the extent the Executive is entitled to
receive benefits under the Plans (as defined herein) following
such termination.
(d) The Executive shall have the right to
terminate his employment hereunder at any time prior to the fifth
anniversary of the Acquisition Date.
(e) Anything in this Agreement to the contrary
notwithstanding, the Company, at its option, may retain the
Executive as a consultant for a period (the "advisory period") of
one year after (i) the Initial Term (or any extension under
paragraph 1(b) hereof) or (ii) a termination by the Executive
pursuant to paragraph 1(d) hereof, all on the terms and
conditions hereinafter provided, in which event, the Executive
shall continue to be bound by the restrictions of paragraph 7(b)
hereof during the advisory period, as if he were an employee for
such period. During the advisory period, the Executive will
provide such advisory services concerning the business, affairs
and management of the Company as may be from time to time
requested by the Company, but the Executive shall not be required
to devote more than five (5) days (up to an aggregate of forty
(40) hours) each month to such services, which shall be performed
at a time mutually convenient to both parties. The Company, at
its option, may terminate the advisory period upon not less than
thirty (30) days' prior written notice; provided, that upon
termination of the advisory period, the Executive shall no longer
be bound by the restrictions of paragraph 7(b) hereof. The
Executive may, subject to the restrictions set out in paragraph
7(b) hereof, engage in other employment during the advisory
period, and his advisory services hereunder shall be required
only at times and places consistent with his other employment and
his private activities. During the advisory period, the Company
shall pay the Executive a consulting fee in an amount equal to
the Executive's base salary immediately prior to the termination
of employment, payments of such fee to be made in accordance with
the Company's standard payroll policies in effect from time to
time, and provide the Executive and his eligible dependents with
health insurance coverage and disability insurance coverage for
the Executive comparable to coverage while he was an employee
hereunder or, at the Company's option, reimburse the Executive in
an amount equal to not more than 125% of the cost to the Company
thereof while an employee during the previous year; provided,
however, that, should the Executive engage in other employment,
such consulting fee shall be reduced, on a dollar-for-dollar,
basis, by an amount equal to the compensation received by the
Executive for such other employment; and the consulting fee shall
be reduced, on a dollar-for-dollar basis, by compensation paid to
the Executive by the Company under paragraph 3(d) hereof for the
same period of time. Without limiting the application of any
other provision of this Agreement during the advisory period, the
Company expressly confirms that the provisions of paragraph 4
hereof shall apply during the advisory period.
2. Duties. (a) Subject to the ultimate control and discretion
of the Board, the Executive shall serve in the Position and
perform all duties and services of an executive nature
commensurate with the Position which the Board may from time to
time reasonably assign to him. Except for travel normally
incidental and reasonably necessary to the business of the
Company and the duties of the Executive hereunder, the duties of
the Executive shall be performed in the Cherry Hill, New Jersey
area. SPI shall also make available to the Executive an office
for his use in its corporate headquarters.
(b) The Executive shall, consistent with his
position as president and chief executive officer of the Company
and executive vice president of SPI, be responsible for the
management of the Company and its organizational structure,
subject to the Board and to the provisions of this Agreement, his
authority to include, without limitation, supplier relationships
and salary, perquisites and, with respect to stock options,
(subject additionally to SPI's Board of Directors) stock options
for SPI common stock for the Company's employees.
(c) The Executive shall, consistent with his
position as president and chief executive officer of the Company
and executive vice president of SPI, be responsible for, and
shall co-ordinate, all product development activities for SPI's
and the Company's parenteral products.
(d) The Executive shall, consistent with his
position as president and chief executive officer of the Company
and executive vice president of SPI, be responsible for and shall
co-ordinate, all sales and marketing activities for SPI's and the
Company's hospital and home care accounts.
(e) The Executive shall devote all of the
Executive's time and attention during regular business hours to
the performance of the Executive's duties hereunder and, during
the term of his employment hereunder, shall not engage in any
other business enterprise which requires the Executive's personal
time or attention, unless granted the prior permission of the
Board. The foregoing shall not prevent the Executive's purchase,
ownership or sale of any interest in, or the Executive's engaging
(but not to exceed an average of five hours per week) in, any
business which does not compete with the business of the Company
or SPI or any subsidiary of the Company or SPI or the Executive's
involvement in charitable or community activities, provided, that
the time and attention which the Executive devotes to such
business and activities does not materially interfere with the
performance of his duties hereunder.
(e) The Executive shall be entitled to such
personal vacations with full compensation, and to be taken at
such time or times, as the Executive and the Company shall
mutually determine.
3. Compensation. (a) For all services to be rendered
by the Executive hereunder, the Company shall pay the Executive
an annual salary at a rate of not less than Four Hundred Thousand
Dollars ($400,000) per year, plus such other compensation as may,
from time to time, be determined by the Company. Such salary and
other compensation shall be payable in accordance with the
Company's normal payroll practices as in effect from time to
time. At the end of each fiscal year, the Company shall review
the Executive's salary level, and shall increase such level for
the following year to such amount as the Board may determine.
(b) The compensation provided for in paragraph
3(a) above shall be in addition to such rights as the Executive
may have, during the Executive's employment hereunder or
thereafter, to participate in and receive benefits from or under
any bonus, stock option, pension, profit-sharing, insurance or
other employee benefit plan or plans of the Company which may
exist now or hereafter (collectively, the "Plans"). During the
period ending on the first anniversary of the Acquisition Date,
the Executive shall have the right, on a basis reasonably
acceptable to the Company and SPI (such acceptance not to be
unreasonably withheld), to elect to participate (with credit to
the greatest extent possible for prior years of service with the
Company), to the extent he is eligible, and subject to applicable
law, in one or more SPI benefit plans in which senior executives
of SPI participate, in lieu of one or more Company benefit plans
relating to the same type of benefit.
(c) If the Company terminates the Executive's
employment hereunder, other than in accordance with paragraph
1(c) above, the Company shall continue to pay the Executive the
salary provided in paragraph 3(a) above, in accordance with the
Company's normal payroll practices in effect from time to time,
and provide the Executive and his eligible dependents with health
insurance coverage and disability insurance coverage comparable
to coverage while he was an employee hereunder or, at the
Company's option, reimburse the Executive in an amount equal to
not more than 125% of the cost to the Company thereof while an
employee during the previous year, all for the remainder of the
Initial Term or any extension thereof; and the Executive shall
have no further or other rights, and the Company no further or
other liabilities or obligations, under this Agreement.
(d) If the Executive terminates his employment
hereunder prior to the end of the Initial Term under paragraph
1(d) above, the Company shall continue to pay the Executive 50%
of the salary provided for in paragraph 3(a) above, in accordance
with the Company's normal practices in effect from time to time,
and provide the Executive and his eligible dependents with health
insurance coverage and disability insurance coverage comparable
to coverage while he was an employee hereunder or, at the
Company's option, reimburse the Executive in an amount equal to
not more than 125% of the cost to the Company thereof while an
employee during the previous year, all for a period beginning on
the date of such termination and ending on the earlier of the
third anniversary of the termination or the fifth anniversary of
the Acquisition Date; and the Executive shall have no further or
other rights, and the Company no further or other liabilities or
obligations, under this Agreement.
(e) During any period in which the Company is
obligated to pay salary to the Executive under this paragraph 3
or a consulting fee under paragraph 1(e) of this Agreement, the
Company shall provide the Executive with an automobile or, at the
Company's option, an automobile allowance, in accordance with the
Company's policies in effect from time to time.
4. Expenses. The Company shall promptly reimburse the
Executive, or cause the Executive promptly to be reimbursed, for
all reasonable expenses paid or incurred by the Executive in
connection with the performance of the Executive's duties and
responsibilities hereunder, upon presentation of expense vouchers
or other appropriate documentation therefor.
5. Additional Covenants. During the Executive's
employment under this Agreement, except as otherwise consented to
or approved by the Executive and SPI:
(a) (1) the Board will be comprised of seven
members, three to be designated by the Executive, three to be
designated by SPI (the "SPI directors") and one, who shall be an
employee of Bayer Corporation or any of its affiliates (other
than SPI and its subsidiaries), to be designated by SPI, subject to
the approval thereof by the Executive, which approval shall not be
unreasonably withheld (the "Bayer director");
(2) the consent or approval of at least
one of the SPI directors shall be required prior to the Company
taking any extraordinary corporate actions, which, for purposes
of this Agreement, shall include, without limitation,
financings; purchases or sales of assets not in the ordinary
course of business; issuances of securities; providing
compensation, perquisites or benefits beyond levels customary in
the multisource industry; actions with respect to the
certificate of incorporation or by-laws; reorganizations,
recapitalizations and business combinations; encumbering of
assets; and actions that could result in a violation of
agreements relating to indebtedness of SPI or (with the
additional consent or approval of the Bayer director) agreements
between SPI (or any of its affiliates) and Bayer Corporation
(or any of its affiliates);
(3) after consultation with theother directors,
the SPI directors shall be entitled to authorize and approve, as
actions of the Board, corporate actions not inconsistent with the
provisions of this paragraph 5, including, without limitation,
financings; issuances of securities; and encumbering of assets;
(b) the Executive, having been elected a
director of SPI effective upon the Acquisition Date, shall be included in the
slate of SPI's management nominees for re-election as a director;
(c) neither the Company's name nor logo shall be
modified in any way, and the Company may continue to use its name
and logo on product labelling and the like;
(d) the headquarters of the Company shall remain
in Cherry Hill, New Jersey;
(e) the Company shall not be required to sell
products to or manufacture products for SPI or any SPI affiliate
on terms less favorable to the Company than those the Company
provides to unaffiliated customers for similar purchase
quantities; and
(f) the Company shall have funds made
available to it to the extent of "Available Cash", which shall equal: cash
on hand at the Company at the Acquisition Date, plus out-ofpocket
transaction costs of the Company paid in connection with the
acquisition referred to in paragraph 1(a), plus 50% of Operating
Cash Flow (i.e., net income (after taxes, calculated on a stand-
alone basis) plus depreciation plus amortization plus/less working
capital decreases/increases less capital expenditures), plus
interest income (at 30-day LIBOR), less interest expense (at SPI's
cost of funds), but only in respect of borrowings outstanding when
Available Cash is negative, less 50% of negative Operating Cash
Flow, to the extent of Available Cash, and thereafter 100% of
negative Operating Cash Flow.
6. Indemnification. The Company shall indemnify the
Executive, to the fullest extent permitted by law, for any and
all liabilities to which the Executive may be subject as a
result of, in connection with or arising out of his employment
by the Company hereunder, as well as the costs and expenses
(including attorneys' fees) of any legal action brought or
threatened to be brought against him or the Company as a result
of, in connection with or arising out of such employment. The
Executive shall be entitled to the full protection of any
insurance policies which the Company may elect to maintain
generally for the benefit of its directors and officers.
7. Confidentiality and Non-competition. (a) The
Executive shall not use or disclose at any time during the
Executive's employment with the Company, or at any time
thereafter, any trade secret or proprietary or confidential
information of the Company or any of its affiliates.
(b) During the Executive's employment with the
Company; during the advisory period, if any; during the period
the Company continues to make payments under paragraph 3(c) or
3(d) above; and, in the case of termination of employment under
paragraph 1(c) above, until the earlier of the sixth
anniversary of the Acquisition Date and the fourth anniversary
of such termination, the Executive shall not be engaged as an
officer, director, or employee of, or in any way be associated in a
management or ownership capacity with, any corporation,
partnership or other enterprise or venture which conducts a
business which is in competition with the business of the
Company or SPI or their subsidiaries as at the time of such
termination or expiration, provided, however, that the Executive
may own not more than three percent (3%) of the outstanding
securities, or equivalent equity interests, of any class of any
corporation or firm which is in competition with the business of
the Company or SPI or their subsidiaries, which securities are
listed on a national securities exchange or traded in the over-
the-counter market. The provisions of this paragraph shall
survive the termination or expiration of this Agreement.
8. Representation and Warranty of the Executive. The
Executive represents and warrants that he is not under any
obligation, contractual or otherwise, to any other firm or
corporation, which would prevent his entry into the employ of
the Company or his performance of the terms of this Agreement.
9. Entire Agreement; Amendment. This Agreement, the
Compensation Continuation Agreement dated October 19, 1991 (as
currently in effect) and the Split Dollar Insurance Agreement
dated March 25, 1991 (as currently in effect) (which
Compensation Continuation Agreement and Split Dollar Insurance
Agreement shall continue in effect in accordance with their
terms unless surrendered by the Executive under the last
sentence of paragraph 3(b) hereof) contain the entire agreement
between the Company and the Executive with respect to the
subject matter hereof, and may not be amended, waived, changed,
modified or discharged except by an instrument in writing
executed by the parties hereto and SPI.
10. Assignability. The services of the Executive
hereunder are personal in nature, and neither this Agreement nor
the rights or obligations of the Company hereunder may be
assigned by the Company, whether by operation of law or
otherwise, without the Executive's prior written consent. This
Agreement shall be binding upon, and inure to the benefit of,
the Company and its permitted successors and assigns hereunder.
This Agreement shall not be assignable by the Executive, but
shall inure to the benefit of the Executive's heirs, executors,
administrators and legal representatives.
11. Notice. Any notice which may be given hereunder
shall be in writing and be deemed given when hand delivered and
acknowledged or, if mailed, one day after mailing by registered
or certified mail, return receipt requested, to either party
hereto at their respective addresses stated above, or at such
other address as either party may be similar notice designate.
12. Specific Performance. The parties agree that
irreparable damage would occur in the event that any of the
provisions of paragraph 5 or 7 above were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of paragraph 5
or 7 above and to enforce specifically the terms and provisions
of paragraph 5 or 7 above, this being in addition to any other
remedy to which they are entitled at law or in equity.
13. No Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended to confer upon any
person or entity other than the parties (and the Executive's
heirs, executors, administrators and legal representatives as
provided in paragraph 10 hereof) and SPI any rights or remedies
of any nature under or by reason of this Agreement.
14. Construction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State
of New Jersey, without giving effect to principles of conflict
of laws. All headings in this Agreement have been inserted
solely for convenience of reference only, are not to be
considered a part of this Agreement and shall not affect the
interpretation of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first written above.
MARSAM PHARMACEUTICALS INC.
By________________________
Authorized Signatory
__________________________
Marvin S. Samson
Schein Pharmaceutical, Inc. hereby agrees, commencing
on the Acquisition Date, to be bound by the provisions of
Paragraphs 1(a), 2(a), 2(b), 2(c), 2(d), 3(b), 5(a), 5(b), 5(c),
5(d), 5(e) and 5(f), to the extent they refer to SPI, of the
foregoing Employment Agreement and to cause the Company to perform
the obligations of the Company under the foregoing Employment
Agreement.
SCHEIN PHARMACEUTICAL, INC.
By________________________
Authorized Signatory
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Marsam Pharmaceuticals Inc.
Date: August 4, 1995 By: /S/ Marvin Samson
Marvin Samson
President, Treasurer and Chief
Executive Officer
Date: August 4, 1995 By: /S/ Richard Baron
Richard Baron
Vice President, Finance and
Chief Financial Officer