DEFINITIVE PROXY STATEMENT
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SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SYNTEX CORPORATION
(Name of Registrant as Specified In Its Charter)
SYNTEX CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Price per unit or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[X] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$1,061,444.34
__________________________________________________
(2) Form, Schedule or Registration Statement No.:
Schedule 14D-1
__________________________________________________
(3) Filing Party:
Roche Capital Corporation
__________________________________________________
(4) Date Filed:
May 6, 1994
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SYNTEX CORPORATION
3401 Hillview Avenue
Palo Alto, California 94303
[Syntex logo]
October 7, 1994
TO OUR STOCKHOLDERS:
A Special Meeting of Stockholders of Syntex Corporation will be held at
Syntex's office at Edificio Plaza Bancomer, Calle 50, Panama City, Republic of
Panama on Friday, October 28, 1994, at ten o'clock A.M., Local Time. At the
Special Meeting, stockholders will be asked to approve a proposed merger of
Syntex with Roche (Panama) Corporation, a holding company and subsidiary of
Roche Capital Corporation.
The Board of Directors of Syntex has, by a unanimous vote of those
members present, approved the Merger Agreement and the transactions
contemplated thereby and has recommended that stockholders vote for the
approval and adoption of the Merger Agreement. Neither the Board of Directors
of Syntex nor its financial advisors, however, has expressed any view with
respect to the fairness of the limited conversion preferred stock which
stockholders may choose to receive in lieu of cash as consideration in the
Merger.
As of September 8, 1994 Roche Capital Corporation was the beneficial
owner of an aggregate of 206,809,298 (approximately 93.4%) of the shares of
Syntex Common Stock and has informed Syntex that it intends to vote all its
shares in favor of the approval and adoption of the Merger Agreement. Under
applicable Panamanian corporate law, the affirmative vote of the holders of
the majority of shares of the voting stock of a corporation is required for
approval of a merger; the vote of Roche Capital Corporation is therefore
sufficient to ensure approval of the Merger.
Following this letter are the formal notice of the Special Meeting and a
combined Proxy Statement/Prospectus of Syntex and Roche Capital Corporation.
A Proxy card is in the special pocket on the inside of the front of the
envelope for this letter. You are requested to execute and sign the Proxy and
mail it in the enclosed addressed envelope, which requires no postage.
We cordially invite you to attend the Special Meeting, and we look
forward to seeing you. Whether or not you attend in person, the prompt return
of the enclosed Proxy, duly signed, will make certain that your shares will be
represented at the meeting.
If you are present at the meeting, you may, of course, withdraw your
Proxy and vote your shares in person.
Very truly yours,
/s/ Paul E. Freiman
By: ___________________________________
Paul E. Freiman
Chairman of the Board and
Chief Executive Officer
SYNTEX CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 28, 1994
[Syntex Logo]
TO OUR STOCKHOLDERS:
A Special Meeting of the Stockholders of Syntex Corporation ("Syntex")
will be held at Syntex's office at Edificio Plaza Bancomer, Calle 50, Panama
City, Republic of Panama on Friday, October 28, 1994, at ten o'clock A.M.,
Local Time, for the following purposes:
1. To approve and adopt the Acquisition Agreement and Plan of Merger,
dated as of May 1, 1994, by and among Roche Capital Corporation, Roche
(Panama) Corporation and Syntex pursuant to which Roche (Panama)
Corporation will be merged with and into Syntex and Syntex will become a
wholly owned subsidiary of Roche Capital Corporation.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Friday, October
7, 1994, as the record date for the determination of stockholders entitled to
notice of and to vote at the Special Meeting.
If you cannot attend the meeting in person, you are requested to sign the
enclosed form of Proxy and mail it in the enclosed addressed envelope.
By Order of the Board of Directors
/s/ Carol J. Gillespie
By: ___________________________________
Carol J. Gillespie
Vice President and Secretary
Palo Alto, California
October 7, 1994
PROXY STATEMENT/PROSPECTUS
Syntex Corporation
Proxy Statement
_______________
Roche Capital Corporation
Prospectus
650,000 Shares of Limited Conversion Preferred Stock
_______________
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of Roche (Panama) Corporation, a Delaware corporation ("Roche
(Panama)") and a wholly-owned subsidiary of Roche Capital Corporation, a
Panama corporation ("Roche Capital"), with and into Syntex Corporation, a
Panama corporation ("Syntex"), pursuant to the Acquisition Agreement and Plan
of Merger dated as of May 1, 1994 (the "Merger Agreement") among Roche
Capital, Roche (Panama) and Syntex. If the proposed merger is consummated,
the outstanding common shares, par value $1.00 per share, of Syntex ("Common
Stock" or the "Shares"), other than Common Stock held by Roche Capital, will
be converted into the right to receive either (i) cash in the amount of $24.00
per share or (ii) at the election of the holder, subject to certain
restrictions, shares of Limited Conversion Preferred Stock ("LCPS") of Roche
Capital. The transaction is subject to various conditions, including approval
by the stockholders of Syntex at their Special Meeting, described herein. This
Proxy Statement/Prospectus is being furnished to stockholders of Syntex in
connection with the solicitation of proxies to be used at the Special Meeting
of Syntex to be held for the purposes described below.
This Proxy Statement/Prospectus also constitutes a prospectus of Roche
Capital with respect to up to 650,000 shares of LCPS which may be issued to
Syntex stockholders in the Merger or one or more Alternative Exchanges (as
described more fully herein). There are no shares of LCPS currently
outstanding. The LCPS will not be listed on any securities exchange. LCPS
are securities of Roche Capital with limited voting rights, significant
transfer restrictions and limited exchange rights. The LCPS, the securities
for which the LCPS are exchangeable, and their respective issuers, are not now
subject, and are not expected to become subject, to the registration or
reporting requirements of the Securities Exchange Act of 1934, as amended. For
a description of the LCPS, see "Description of Roche Capital Limited
Conversion Preferred Stock" and "General Comparison of Rights of Holders of
Syntex Common Stock and Roche Capital Limited Conversion Preferred Stock".
Stockholders are urged to read the information set forth under "Risk Factors"
relating to the risks associated with LCPS.
All information concerning Roche Capital and Roche (Panama) contained in
this Proxy Statement/Prospectus has been furnished by Roche Capital, and all
information herein concerning Syntex has been furnished by Syntex. Roche
Capital has represented and warranted to Syntex, and Syntex has represented
and warranted to Roche Capital, that the particular information so furnished
is true and complete.
This Proxy Statement/Prospectus, the accompanying forms of proxy and the
other enclosed documents are first being mailed to stockholders of Syntex on
or about October 7, 1994.
_______________
THE SHARES OF LCPS TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________
The date of this Proxy Statement/Prospectus is October 7, 1994.
AVAILABLE INFORMATION
Roche Capital is not subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and
therefore has never filed any reports, proxy statements or other information
with the Securities and Exchange Commission (the "Commission"). Roche
Capital does not have any securities listed on any national securities
exchange, and therefore no reports regarding Roche Capital have been filed
with any securities exchange. After the consummation of the Merger, Roche
Capital will provide to its stockholders such reports as it may be required to
provide pursuant to the rules under the Exchange Act. However, Roche Capital
intends to suspend filing reports pursuant to the Exchange Act, as permitted
thereby, at the end of its current fiscal year.
Syntex is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission. The reports, proxy statements and other
information filed by Syntex with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington D.C. 20549 and should be available at the
Commission's Regional Offices in New York (7 World Trade Center, 13th Floor,
New York, New York 10048), Los Angeles (Suite 500 East, Tishman Building, 5757
Wilshire Boulevard, Los Angeles, California 90036) and Chicago (500 West
Madison Avenue, Suite 1400, Chicago, Illinois 60661.). Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, material filed by Syntex can be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
Roche Capital has filed with the Commission a Registration Statement on
Form F-4 (together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the shares of the limited conversion preferred stock of Roche Capital
offered hereby. This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto
filed by Roche Capital, certain portions of which have been omitted pursuant
to the rules and regulations of the Commission and to which portions reference
is hereby made for further information with respect to Roche Capital, Syntex
and the securities offered hereby. The Registration Statement and the
exhibits thereto may be inspected without charge at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may
be obtained from the Commission at prescribed rates.
_______________
Roche Capital is a corporation organized under the laws of the Republic
of Panama. None of the directors and executive officers of Roche Capital are
citizens or residents of the United States. All or substantially all of the
assets of such persons and of Roche Capital are located outside the United
States of America. As a result, it may not be possible for investors to
effect service of process within the United States upon such persons or Roche
Capital or to enforce against them judgments of United States courts
predicated upon civil liabilities under United States federal securities laws.
There is doubt as to the enforceability, in original actions in Panamanian
courts, of judgments of liabilities predicated solely on the United States
federal securities laws and as to the enforceability in Panamanian courts of
judgments of United States courts obtained in actions predicated upon the
civil liability provisions of the United States federal securities laws.
_______________
This Proxy Statement/Prospectus does not constitute an offer of Roche
Capital Corporation with respect to shares of LCPS to holders of shares of
Common Stock of Syntex in any jurisdiction in which the making of such an
offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction.
TABLE OF CONTENTS
Page
----
Available Information ii
Incorporation of Certain Documents By Reference
Summary 1
Risk Factors 11
Risks Associated With an Investment in Roche Capital 11
Risk Associated With the LCPS 11
Introduction 13
The Companies
Roche Capital Corporation 13
Syntex Corporation 14
The Special Meeting
Record Date and Voting Rights 15
Voting and Revocation of Proxies 15
The Merger
Background of and Reasons for the Merger --
Roche Capital 16
Background of and Reasons for the Merger --
Syntex 17
Opinion of Financial Advisor to the Syntex Board 20
Interests of Certain Persons in the Merger 21
Terms of the Merger 22
Consideration 22
Consideration to be Paid in the Merger 22
Stock Election Procedure 23
Allocation of LCPS in the Event of
Oversubscription 24
Conversion of Syntex Shares 24
Fractional Shares 25
Certain Other Provisions of the Merger Agreement
Board Representation 26
Representations and Warranties 27
Agreement with Respect to the Conduct
of the Business Pending the Merger 27
Other Offers 27
Conditions to the Merger 28
Termination 29
Agreement with Respect to Employee Matters 29
Agreement with Respect to Director and Officer
Indemnification and Insurance 30
Fees and Expenses 30
Amendment and Waivers 31
Certain Federal Income Tax Consequences 31
Anticipated Accounting Treatment 32
Resales By Affiliates 32
Appraisal and Dissenters' Rights 32
Pro Forma Condensed Combined Financial
Statements (Unaudited) 33
Description of Syntex Common Stock
Dividends 40
Liquidation 40
Voting and Pre-emptive Rights 40
Description of Roche Capital Limited Conversion
Preferred Stock 40
Dividends 40
Voting Rights 41
Transfer Restrictions 41
Liquidation 41
Redemption 42
Exchange 42
Post-Exchange Transfer Restrictions 45
Exchange Termination 45
Rank 45
Effect of Corporate Combination or
Sale of Assets 45
Reacquired Shares 45
General Comparison of Rights of Holders of Syntex
Common Stock and Roche Capital Limited
Conversion Preferred Stock 46
Transfer of Shares and Relevant Restrictions 46
Voting Rights 46
Dividends 46
Liquidation 47
Redemption 47
Exchange 47
Information Available to Stockholders 47
Certain Related Agreements 48
Guaranty 48
Keepwell Agreement 48
Share Trading Agreement 48
Management After the Merger 49
Directors and Executive Officers of Roche
Capital 49
Compensation of Directors of Roche Capital 49
Executive Officers of Syntex 49
Executive Compensation of Syntex and
Certain Other Benefits 52
Summary Compensation Table 52
Stock Option Grants in Fiscal 1994 53
Aggregated Option Exercises in Fiscal 1994
and Fiscal Year-End Option Values 53
Long Term Incentive Plan -- Awards in Last
Fiscal Year 53
Pension Plan 53
Severance Agreements 54
Compensation Committee Interlocks and
Insider Participation 55
Certain Transactions 55
Certain Regulatory Considerations 56
General 56
Panama Takeover Law 56
State Takeover Statutes 57
Antitrust 57
Exon-Florio 59
Experts 59
Financial Statements of
Roche Capital Corporation F-1 to F-3
APPENDICES:
Appendix A -- Agreement and Plan of Merger
Appendix B -- Opinion of Goldman, Sachs & Co.
Appendix C -- Annual Report on Form 10-K for the fiscal year ended July
31, 1993 of Syntex Corporation
Appendix D -- Quarterly Report on Form 10-Q for the quarter ended October
31, 1993 of Syntex Corporation
Appendix E -- Quarterly Report on Form 10-Q for the quarter ended January
31, 1994 of Syntex Corporation
Appendix F -- Quarterly Report on Form 10-Q for the quarter ended April
30, 1994 of Syntex Corporation
Appendix G -- Report on Form 8-K dated May 1, 1994 of Syntex Corporation
Appendix H -- Report on Form 8-K dated September 1, 1994 of Syntex
Corporation
SUMMARY
The following is a summary of certain information in this Proxy
Statement/Prospectus. It is qualified in its entirety by reference to the
more detailed information contained elsewhere in this Proxy
Statement/Prospectus or incorporated by reference herein, in the accompanying
appendices and in the documents referred to herein. Stockholders are urged
to read this Proxy Statement/Prospectus in its entirety.
THE COMPANIES
Syntex Syntex Corporation ("Syntex"), a Panama
corporation, is an organization engaged
primarily in the business of discovery,
development, manufacture and sale of
pharmaceutical products and medical diagnostics
systems. Syntex's principal executive offices
are located at 3401 Hillview Avenue, Palo Alto,
California 94304, and its phone number is
415-855-5050.
Roche Capital Roche Capital Corporation ("Roche Capital"), a
Panama corporation, is a wholly owned subsidiary
of Sapac Corporation Limited ("Sapac"), which,
in turn, is a wholly owned subsidiary of Roche
Holding Ltd ("Roche"). Roche Capital has never
carried on any independent business activities
other than those incident to its formation, the
execution and delivery of the Merger Agreement
(as hereinafter defined) and the purchase of
shares of common stock, par value $1.00 per
share, of Syntex ("Common Stock" or the
"Shares") pursuant to its recently completed
tender offer (the "Tender Offer"). After the
consummation of the proposed merger, Roche
Capital intends to continue as a holding company
for Syntex. Roche Capital's principal
executive offices are located at Durling &
Durling, Edificio Vallarino, Ultimo Piso, Calle
52 y Elvira Mendez, Panama, Republic of Panama.
THE SPECIAL MEETING
Time, Date and Place A special meeting of Syntex stockholders will be
held on Friday, October 28, 1994 at Syntex's
office at Edificio Plaza Bancomer, Calle 50,
Panama City, Republic of Panama.
Purpose of the Special
Meeting Holders of shares of Syntex Common Stock will
consider and vote upon a proposal to approve and
adopt the Acquisition Agreement and Plan of
Merger, dated as of May 1, 1994, by and among
Roche Capital, Roche (Panama) Corporation
("Roche (Panama)") and Syntex (the "Merger
Agreement") pursuant to which Roche (Panama)
will be merged with and into Syntex (the
"Merger") (the Merger and the Tender Offer
collectively, the "Transaction"). Syntex
stockholders will also consider and vote upon
such other matters as may properly be brought
before the Special Meeting or any adjournments
or postponements thereof.
Record Date, Quorum, Required
Vote The close of business on Friday, October 7, 1994
(the "Record Date") has been fixed as the record
date for determining holders of shares of Syntex
Common Stock entitled to vote at the Special
Meeting. As of September 27, 1994, 221,424,609
shares of Syntex Common Stock were outstanding
and held of record by approximately 6,300
holders. The presence, in person or by proxy,
of the holders of a majority of the outstanding
shares of Syntex Common Stock entitled to vote
at the Special Meeting is necessary to
constitute a quorum for the transaction of
business at the Special Meeting. The
affirmative vote of the holders of a majority of
the outstanding shares of Syntex Common Stock is
required to approve the Merger Agreement. As of
September 8, 1994, Roche Capital was the
beneficial owner of an aggregate of 206,809,298
(approximately 93.4%) of the outstanding shares
of Syntex Common Stock. Roche Capital intends
to vote its shares of Syntex Common Stock in
favor of the approval of the Merger Agreement.
As of September 27, 1994, directors and
executive officers of Syntex and their
affiliates did not own any shares of Syntex
Common Stock; as of such date, they did own an
aggregate of 2,153,142 currently exercisable
stock options and options exercisable within
sixty days of September 27, 1994 of which
1,714,442 have an exercise price of less than
$24.00 per share. The directors and executive
officers of Syntex have indicated that they
intend to vote any shares of Syntex Common Stock
they may own as of the Record Date in favor of
the approval of the Merger Agreement. The
affirmative vote of Roche Capital is sufficient
to ensure approval and adoption of the Merger
Agreement.
THE MERGER
Interests of Certain Persons
in the Merger In considering the recommendation of Syntex's
Board of Directors, stockholders should be aware
that certain directors and officers of Syntex
have interests in the Merger that are in
addition to the interests of Syntex's
stockholders generally. See "The Special
Meeting -- Record Date, Quorum, Required Vote";
"Terms of the Merger"; "Management after the
Merger"; "Executive Compensation of Syntex and
Certain Other Documents."
The Merger The Merger Agreement provides that Roche
(Panama) will be merged with and into Syntex and
Syntex will be the surviving corporation. As a
result of the Merger, Syntex will become a
wholly owned subsidiary of Roche Capital.
Consideration Each share of Syntex Common Stock outstanding
immediately prior to the effective time (the
"Effective Time") of the Merger (other than
shares held by Syntex as treasury shares or
owned by Roche Capital or any affiliate of Roche
Capital) will be converted into the right to
receive (i) $24.00 in cash (the "Cash
Consideration"), or (ii) at the election of the
stockholder, subject to certain restrictions,
0.024 shares of Limited Conversion Preferred
Stock ("LCPS") issued by Roche Capital ("Stock
Consideration"). No fractional shares of LCPS
will be issued in the Merger. All fractional
shares of LCPS that a holder of Syntex Common
Stock would otherwise be entitled to receive as
a result of the Merger will be aggregated and if
a fractional share results from such
aggregation, such holder will be entitled to
receive, in lieu thereof, an amount in cash
determined by multiplying the stated value of
the LCPS by the fraction of a share of LCPS to
which such holder would otherwise have been
entitled.
STOCKHOLDERS ARE URGED TO READ CAREFULLY THE
INFORMATION DISCLOSED UNDER "RISK FACTORS" AND
"DESCRIPTION OF ROCHE CAPITAL LIMITED CONVERSION
PREFERRED STOCK" PRIOR TO MAKING A DECISION TO
ELECT THE STOCK CONSIDERATION.
RISK FACTORS
Risks Associated With An
Investment in Roche Capital The voting stock of Roche Capital is owned, in
its entirety, indirectly by Roche Holding
Ltd, which consequently is in a position to
control the affairs of Roche Capital. After
the Merger, Roche Capital intends to cease
filing periodic and other reports with the
Commission as soon as permissible under
Commission rules. Roche Holding Ltd is not
currently subject to any periodic reporting
obligations of the Commission; Roche Holding
Ltd does, however, submit to the Commission
certain limited information pursuant to Rule
12g3-2(b) of the Securities Exchange Act of
1934, as amended (the ``Exchange Act''). As
a result, no or only very limited information
with respect to Roche Capital and Roche
Holding Ltd is and is expected to be
available in the United States. Similarly,
no or very limited information with respect
to the LCPS is expected to be publicly
available. Moreover, Roche Capital is
incorporated under the laws of the Republic
of Panama. In view of past instability of
the Panamanian government, there can be no
assurance that the operations of Roche
Capital would not be adversely affected in
the event of any future political crisis in
Panama.
Risks Associated With
the LCPS The ability of holders of shares of LCPS to
transfer such shares is limited by the terms of
the LCPS. Shares of LCPS are subject to
redemption by Roche Capital, in its sole
discretion, under certain circumstances. Roche
Capital is not, however, under any obligation to
redeem the LCPS until the tenth anniversary of
their issuance. Redemption would terminate the
opportunity of a holder to exchange LCPS for
securities of Roche Holding Ltd and would be a
taxable event for United States federal income
tax purposes with respect to such holder.
Shares of LCPS may be exchanged for securities
of Roche Holding Ltd at specified intervals and
at a specified exchange ratio, provided that
Roche Capital shall have determined, in advance
of any exchange, that an exemption from
registration under applicable securities laws is
available for such exchange. There can be no
assurance that any such exchange will be exempt
from registration under applicable securities
laws, and therefore, no assurance that any such
exchange can be effected.
The LCPS and the securities for which the LCPS
are exchangeable are not now subject to, and are
not expected to become subject to, the
registration or reporting requirements of the
Commission.
There is no public market for the LCPS and no
expectation that an active public market will
develop. There can be no assurance that the
value of the LCPS at the time of issuance will
equal the value of the Cash Consideration
offered by Roche Capital in the Merger.
Furthermore, there can be no assurance that the
value of the LCPS will increase after the
Merger.
STOCKHOLDERS ARE URGED TO READ CAREFULLY THE
INFORMATION SET FORTH UNDER "RISK FACTORS" PRIOR
TO MAKING A DECISION TO ELECT THE STOCK
CONSIDERATION.
Stock Election Procedure ANY STOCKHOLDER WHO WOULD LIKE TO RECEIVE SHARES
OF LCPS INSTEAD OF THE CASH CONSIDERATION
MUST REQUEST AN ELECTION FORM. The Exchange
Agent will mail an Election Form (and a
letter of transmittal for use in exchanging
certificates representing Shares) to each
holder of Shares who requests such an
Election Form. A request for an Election
Form must be received by the Exchange Agent
no later than 5 p.m. New York City time on
Tuesday, October 18, 1994. Requests for an
Election Form must be made in writing to
Wachovia Bank of North Carolina, N.A.,
Corporate Trust Department, P.O. Box 3001,
Wachovia East Building, 2nd Floor, 301 N.
Church Street, Room 226, Winston-Salem, N.C.
27101, facsimile no. (910) 770-4832 (the
"Exchange Agent").
Each holder of Shares will have the right to
specify in the Election Form the number of
Shares owned by such holder that such holder
desires to have converted into the right to
receive cash in the Merger (a "Cash Election")
and the number of Shares owned by such holder
that such holder desires to have converted into
the right to receive shares of LCPS in the
Merger (a "Stock Election"). A STOCK ELECTION
MUST BE MADE WITH RESPECT TO AT LEAST ONE
HUNDRED SHARES OF SYNTEX COMMON STOCK TO BE A
VALID STOCK ELECTION. A Stock Election will be
effective only if the Exchange Agent shall have
received no later than 5:00 p.m. New York City
time on Tuesday, October 25, 1994 (the "Election
Deadline") (i) an Election Form covering the
Shares to which such Stock Election applies,
executed and completed in accordance with the
instructions set forth in such Election Form and
(ii) the certificate or certificates
representing such Shares, in such form and with
such endorsements, stock powers and signature
guarantees as may be required by such Election
Form. A Stock Election may be revoked or
changed only by delivering to the Exchange
Agent, prior to the Election Deadline, a written
notice of revocation or, in the case of a
change, a properly completed revised Election
Form that identifies the share certificates to
which such revised Election Form applies.
Delivery to the Exchange Agent prior to the
Election Deadline of a revised Election Form
with respect to any certificate representing
Shares will result in the revocation of all
prior Election Forms with respect to all Shares
evidenced by such certificate. For purposes of
this Proxy Statement/Prospectus, "Non- Electing
Shares" means all Shares (other than Shares that
are to be canceled in the Merger) as to which an
effective Stock Election has not been made as of
the Election Deadline. All Non-Electing Shares
will be deemed to have made the Cash Election.
ANY HOLDER OF SYNTEX SHARES WHO DOES NOT REQUEST
AN ELECTION FORM, AND ANY HOLDER WHO DOES NOT
SUBMIT A VALID ELECTION FORM, WILL RECEIVE THE
CASH CONSIDERATION. INSTRUCTIONS FOR
PROCEDURES RELATING TO PAYMENT OF CASH
CONSIDERATION WILL BE SENT TO HOLDERS FOLLOWING
THE SPECIAL MEETING.
As explained below, no assurance can be given
that a Stock Election by any given stockholder
can be accommodated.
Allocation of LCPS In The
Event of Oversubscription Roche Capital is not obligated to accept Stock
Elections with respect to more than 15% of the
shares of Syntex Common Stock that were
outstanding as of May 1, 1994. Roche Capital is
obligated to issue shares of LCPS only to the
extent that the LCPS would be "held of
record" (as such term is defined in the
Exchange Act and Rule 12g5-1 thereunder) by
not more than 299 stockholders. If the
issuance of shares of LCPS in respect of all
Shares as to which valid Stock Elections are
made would result in the LCPS being "held of
record" by more than 299 stockholders,
subject to the terms of the Merger Agreement,
Roche Capital will issue LCPS to the maximum
number of persons who have made a valid Stock
Election such that, after giving effect to
such issuance, the LCPS are held of record by
299 stockholders. In the event more than 299
holders of Shares make a valid Stock
Election, Roche Capital and the Special
Committee of the Board of Directors of Syntex
will jointly agree, in their discretion, the
method for selecting the holders who will be
entitled to receive shares of LCPS in the
Stock Election; such method may consist of a
lottery, selection by lot or the aggregate
number of Shares as to which a holder makes a
valid Stock Election, or any other method.
In the event Roche Capital and the Special
Committee of the Board of Directors of Syntex
are unable to agree on such a method, holders
who made a Stock Election will be deemed to
have made a Cash Election.
In the event that more than 299 holders of
Shares make otherwise valid Stock Elections, but
Roche Capital and the Special Committee of the
Board of Directors of Syntex are unable jointly
to agree the method for selecting holders who
will be entitled to receive LCPS pursuant to
otherwise valid Stock Elections, the Merger
Agreement provides that Roche Capital may, in
its sole discretion, agree with Syntex
stockholders to exchange such stockholders'
Shares for LCPS (an "Alternative Exchange"), so
long as all such Alternative Exchanges, if any,
are effected on the same terms. Roche Capital
will not, however, be required to agree to make
an Alternative Exchange with any Syntex
stockholder and may, in its sole discretion,
determine to effect an Alternative Exchange with
one or more, but fewer than all, stockholders
who may have made a Stock Election or otherwise
desire to effect an Alternative Exchange. Any
determination by Roche Capital to effect or not
effect an Alternative Exchange with any
stockholder will be made in the sole discretion
of Roche Capital. There can be no assurance
that any Alternative Exchanges will be effected,
nor any assurance that if more than one such
Alternative Exchange is effected, that all such
Alternative Exchanges will be effected in the
same manner, at the same time or with the same
effects on stockholders with whom Roche Capital
effects Alternative Exchanges. The time and
manner of any Alternative Exchange will be
determined by Roche Capital in its sole
discretion, subject only to any restrictions in
the Merger Agreement.
Terms of the LCPS The LCPS will be issued by Roche Capital and
will be subject to mandatory redemption at the
end of its ten-year term. Holders of LCPS will
be entitled to receive cumulative dividends at a
rate of 3% per annum on the liquidation value of
each share; such dividends to be payable
annually. Holders of the LCPS will have no
voting rights except (i) as required under
Panama law and (ii) that the approval of at
least a majority of the outstanding shares of
LCPS will be required to change the terms and
provisions of the LCPS in a manner that affects
adversely the rights and preference of such
holders.
Roche Capital may redeem outstanding shares of
LCPS (i) with the consent of the holder if to
be so redeemed, (ii) if such redemption, in the
reasonable judgment of Roche Capital, is
necessary to terminate reporting and
registration requirements of Roche Capital under
the Exchange Act or (iii) such redemption, in
the reasonable judgment of Roche Capital, is
necessary to avoid application of registration
or reporting obligations under applicable
securities laws to Roche Capital, any affiliate
thereof, or securities issuable upon exchange of
the LCPS. If Roche Capital were to redeem less
than all outstanding shares of LCPS for the
purposes described in clauses (ii) or (iii) of
the preceding sentence, shares would be redeemed
in the inverse order of size of the aggregate
number of shares held of record (within the
meaning of Rule 12g5-1 under the Exchange Act)
of each holder or in such other reasonable
manner as may be selected by Roche Capital in
its sole discretion. Shares of LCPS may not be
transferred except, (i) in the case of LCPS held
by an individual, to the estate or a member of
the immediate family of such individual, or to
an entity all of the owners of which are members
of the immediate family of such individual, (ii)
in the case of a corporation or a partnership,
to a wholly owned subsidiary of such corporation
or partnership or (iii) in either case, to an
institution qualified as tax exempt under
Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code").
Shares of LCPS may be exchanged, beginning on
the second anniversary of the issuance of such
shares and on each anniversary thereafter prior
to the mandatory redemption date, for
Genussscheine of Roche ("Non-voting Equity
Securities"). Each share of LCPS is only
exchangeable annually for a number of Non-voting
Equity Securities equal to the stated value
thereof divided by $7,143.86, subject to certain
adjustments. See "Description of Roche Capital
Limited Conversion Preferred Stock -- Exchange."
No fractional Non-voting Equity Securities will
be issued. Prior to effecting any exchange,
Roche Capital must have received from each
exchanging holder a certification of such
information as Roche Capital may deem necessary
to determine the availability of an exemption
from registration under applicable securities
laws of such exchange and an opinion of counsel
to Roche Capital that such exchanges are exempt
from registration. There can be no assurance
that any such exchange will be exempt from
registration and the availability of such an
exemption may depend on factors unrelated to and
beyond the control of the holder desiring to
make such exchange. See "Description of Roche
Capital Limited Conversion Preferred Stock --
Exchange." The rights of holders to exchange
shares of LCPS will terminate upon the
occurrence of certain events. Each holder's
right to exchange shares of LCPS will be
exercisable only against Roche Capital.
Recommendation of the
Syntex Board of Directors The Board of Directors of Syntex believes the
Merger is fair to and in the best interests of
Syntex and its stockholders and has recommended
that the stockholders vote in favor of approval
and adoption of the Merger Agreement. The Board
of Directors of Syntex has, however, made no
recommendation with respect to the election to
receive LCPS which may be issued by Roche
Capital in connection with the Merger.
Opinion of Financial Advisor
to the Syntex Board Goldman, Sachs & Co. ("Goldman, Sachs"),
Syntex's financial advisor, has delivered its
written opinion, dated May 1, 1994, to the Board
of Directors of Syntex stating that as of the
date of such opinion the $24.00 per Share cash
consideration to be received by the holders of
the Shares in the transactions contemplated by
the Merger Agreement is fair to such holders.
Goldman, Sachs expressed no view as to the value
of the LCPS or as to the fairness of the LCPS as
consideration in the Merger. A copy of the
Goldman, Sachs opinion is attached hereto as
Appendix B. Stockholders are urged to read the
opinion carefully in its entirety. See "The
Merger -- Opinion of Financial Advisor" and
Appendix B.
Conditions to the Merger The respective obligations of Syntex, Roche
Capital and Roche (Panama) to consummate the
Merger are subject to the satisfaction or waiver
at or prior to the Effective Time of certain
conditions, including, among others: (i) the
Merger Agreement shall have been adopted by the
affirmative vote of the stockholders of Syntex
in accordance with Panama law and (ii) any
applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of
1976 ("HSR Waiting Period") relating to the
Merger shall have expired. Roche and Syntex
entered into an agreement with the Staff of the
Federal Trade Commission on August 17, 1994,
which was provisionally accepted by the Federal
Trade Commission on August 29, 1994, to resolve
certain antitrust concerns raised by the
Transaction, and the applicable HSR Waiting
Period has expired. See "The Merger -- Certain
Other Provisions of the Merger Agreement --
Conditions to the Merger" and "Certain
Regulatory Considerations."
Regulatory Approvals Roche Capital is not aware of any license or
regulatory permit that appears to be material to
Syntex's business that might be adversely
affected by the consummation of the Merger, or
of any approval or other action by any
government or governmental authority or agency,
domestic or foreign, that would be required for
the consummation of the Merger, other than those
set forth under "Certain Regulatory
Considerations."
Certain Federal Income Tax
Consequences Stockholders who receive solely cash in exchange
for their Shares pursuant to the Merger will
generally recognize taxable gain or loss for
U.S. federal income tax purposes equal to the
difference between the amount of cash received
in exchange for such shares and the tax basis in
such Shares. Such gain or loss will be capital
gain or loss if the Shares are a capital asset
in the hands of the stockholder. Gain or loss
must be calculated separately for each block
(shares acquired at the same time and price) of
Shares exchanged.
In the opinion of Skadden, Arps, Slate, Meagher
& Flom, the exchange of shares for LCPS will
qualify as tax-free exchange under Section 351
of the Code. Holders should note that opinions
of counsel are not binding on the Internal
Revenue Service or the courts. If the exchange
so qualifies, the tax consequences will be as
follows. Stockholders who receive only LCPS in
exchange for their Shares pursuant to the Merger
(and who did not tender Shares in the Tender
Offer preceding the Merger) will generally not
recognize gain or loss on the exchange, except
for cash received in lieu of fractional Shares.
Stockholders who receive a combination of LCPS
and cash consideration in exchange for their
Shares pursuant to the Merger (or the Merger and
the preceding Tender Offer) will generally
recognize gain (but not loss) to the extent of
the cash received. For a more detailed
description of tax consequences, see "Tax
Consequences to Holders Exchanging Shares for
LCPS."
The foregoing discussion may not apply to
stockholders who acquire their Shares pursuant
to the exercise of stock options or other
compensation arrangements with Syntex or who are
not citizens or residents of the United States
or who are otherwise subject to special tax
treatment under the Code. See "The Merger --
Certain Federal Income Tax Consequences."
Appraisal and Dissenters'
Rights Holders of Syntex Common Stock will not be
entitled to any dissenters' or appraisal rights
as a result of matters to be voted upon at the
Special Meeting. See "The Merger -- Appraisal
and Dissenters' Rights".
Anticipated Accounting
Treatment
It is anticipated that the Merger will be
accounted for by Roche Capital under the
"purchase" method of accounting in accordance
with International Accounting Standards.
Selected Consolidated Financial
Data, Condensed Pro Forma
Combined Financial Data and
Other Data
Set forth on the following pages are certain
selected consolidated historical financial data,
condensed pro forma financial data and other
data relating to Syntex, Roche Capital and the
Merger.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL
DATA OF SYNTEX CORPORATION
The following table sets forth selected consolidated historical
financial data of Syntex and should be read in conjunction with the audited
consolidated financial statements of Syntex for each of the five years ended
July 31, 1993. See "Available Information" and Appendices C-F.
Nine Months
Ended
April 30
(unaudited) Fiscal Year Ended July 31,
--------------- ------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
----- ---- ---- ---- ---- ---- ----
(Millions of U.S. dollars, except per share amounts)
Income:
Net Sales $1,403.5 $1,582.0 $2,123.0 $2,057.5 $1,794.0 $1,502.3 $1,333.0
Income (Loss) Before Taxation
and Cumulative Effect
of Accounting Changes 250.1 (6.2)(Note 1) 132.7(Note 1) 542.9 476.2 379.4 336.9
Net Income 244.5 153.8(Note 2) 287.2(Note 2) 472.3 423.8 341.5 303.2
Ratio of earnings to fixed
charges 12.5x ** 5.3x 21.2x 12.6x 9.7x 9.0x
Dividends declared per
common share $ .78 $ .78 $1.04 $ .98 $ .86 $ .78 $ .70
Net Income Per
Share of Common
Stock $1.10 $ .69 $1.29 $2.10 $1.89 $1.53 $1.33
Financial Position:
Total Assets $2,998.0 $2,820.5 $2,960.7 $2,809.1 $2,272.8 $1,786.5 $1,440.2
Short-term Debt 142.6 295.7 82.4 530.3 310.5 259.8 158.7
Long-term Debt 591.2 352.8 590.8 231.2 273.1 225.0 219.6
_____________
** Earnings were inadequate to cover fixed charges by approximately
$9.3 million.
Note 1 -- Includes pre-tax restructuring charge of $320 million.
Note 2 -- Includes a one-time benefit of $102.5 million from the
reduction of certain tax reserves and a $.9 million charge for
cumulative effect of accounting changes, consisting of a $64.6
million after tax charge from the adoption of Financial
Accounting Standard No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and a $63.7 million
benefit from the adoption of Financial Accounting Standard No.
109, "Accounting for Income Taxes".
ROCHE CAPITAL CORPORATION
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth selected unaudited pro forma combined
financial data giving effect to the Transaction under the purchase method of
accounting and reflecting certain other assumptions on the basis described in
the notes accompanying the unaudited Pro Forma Combined Financial Statements.
The selected pro forma combined financial data set forth below should be read
in conjunction with the unaudited Pro Forma Condensed Combined Financial
Statements, including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus. See "Pro Forma Condensed Combined Financial Statements
(Unaudited)." The information presented below does not purport to be
indicative of the results which actually would have been obtained if the
Merger had been consummated as of the first day of the earliest period
presented, and should not be construed as representative of future operating
results or financial position of Roche Capital.
For the Nine
Months For the Year
Ended April 30, Ended July 31,
1994 1993
-------------- -------------
(Millions of U.S.dollars
except for share data)
Operating Results
Net Sales $1,253 $1,911
Loss Before Taxation (49) (262)
Net Income 35 13(Note 1)
Net Income Per Share of Common Stock (Note 2) ***(Note 1)
Ratio of earnings to combined fixed
charges and preferred dividends (Note 3) (Note 3)
As of April 30,
1994
---------------
Financial Position:
Total Assets $6,175
Short-term Debt 3,543
Long-term Debt 591
- --------------
*** Amounts round to less than $0.01 per share.
Note 1 -- Amounts related to the cumulative effect of accounting changes
in the historical financial statements of Syntex for the year
ended July 31, 1993 were excluded from the pro forma condensed
combined statement of income for the year ended July 31, 1993.
Note 2 -- Roche Capital has 500 common shares outstanding which result in
net income per share of Common Stock of $54,000. Roche Capital,
however, may issue additional shares of common stock in the
future.
Note 3 -- Pro forma earnings were inadequate to cover fixed charges and
preferred dividends by approximately $57 million and $273
million for the nine months ended April 30, 1994 and the twelve
months ended July 31, 1993.
RISK FACTORS
Prior to making a Stock Election, prospective investors should carefully
consider, along with other matters referred to in this Proxy
Statement/Prospectus, the specific factors set forth below.
Risks Associated With an Investment in Roche Capital
Control by Roche. The voting stock of Roche Capital is wholly owned by
Sapac Corporation Limited, which, in turn, is wholly owned by Roche Holding
Ltd. As a result of its indirect ownership interest in Roche Capital, Roche
Holding Ltd is in a position to elect all the directors and to control the
affairs of Roche Capital, and, upon consummation of the Merger, Roche Capital
will be able to elect all the directors and control the affairs of Syntex. In
addition, Roche will have the ability to cause certain reorganizations or
other business combinations involving Roche Capital and its subsidiaries
(without any vote of the holders of the LCPS), the effect of which may be
adverse to holders of the LCPS.
Absence of Publicly Available Information. Roche Capital, upon the
consummation of the Merger, intends to cease filing periodic and other
reports with the Commission as soon as permissible under Commission rules,
but in no event later than the end of its current fiscal year. As a
result, publicly available information with respect to Roche Capital may
thereafter be limited. Moreover, Roche Holding Ltd is not currently
subject to the periodic reporting obligations of the Exchange Act; Roche
Holding Ltd does submit to the Commission certain limited information
pursuant to Rule 12g3-2(b) of the Securities Exchange Act of 1934, as
amended. Roche Holding Ltd does not now, and does not intend in the future
to, file periodic reports with the Commission. As a result, no or only
very limited information with respect to Roche Holding Ltd is publicly
available in the United States. Similarly, the LCPS, and the securities
for which they are exchangeable, are not subject to, and are not expected
to become subject to, any registration or reporting requirements under the
Exchange Act. Therefore, no or only very limited information with respect
to the LCPS is expected to be publicly available.
Recent Political Events in Panama. Roche Capital is incorporated under
the laws of the Republic of Panama. Panama was under military controlled
governments for an extended period of time until 1989. In the last two years
of the Noriega military government, relations between the United States and
Panama deteriorated significantly. Sanctions were imposed by the United
States on the Panamanian Government in 1988, which affected adversely the
economic environment in Panama. In 1989, following an invasion by the armed
forces of the United States, a democratic system of government was restored in
Panama. The country has experienced a significant economic recovery since its
return to democracy. According to the United States Agency for International
Development, Panama's Gross Domestic Product ("GDP") grew in 1993 by 5.9%.
The government of Panama is a republican and presidential system with a
legislative body and an independent judiciary. Should any significant
political crisis occur in Panama in the future, there can be no assurance that
the operations of Roche Capital would not be adversely affected.
Risk Associated With the LCPS
Transfer Restrictions. The ability of holders of the LCPS to sell or
otherwise transfer their shares of LCPS will be limited. Shares of LCPS may
not be transferred except, (i) in the case of LCPS held by an individual, to
the estate or a member of the immediate family of such individual or to an
entity all of the owners of which are members of the immediate family of such
individual, or (ii) in the case of a corporation or partnership, to a
wholly-owned subsidiary of such corporation or partnership, or (iii) in either
case, to an institution qualified as tax exempt under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended. In the event one or more
transfers of shares of LCPS by any holder or holders thereof should cause
the number of holders of the LCPS to exceed 299, Roche Capital may redeem
all or less than all of the outstanding shares of LCPS, as described more
fully under "Description of Roche Capital Limited Conversion Preferred
Stock -- Redemption." See also "Description of Roche Capital Limited
Conversion Preferred Stock -- Transfer Restrictions."
Redemption. Shares of LCPS are subject to redemption by Roche Capital,
in its sole discretion, under certain circumstances. Roche Capital may redeem
less than all outstanding shares of LCPS; shares of LCPS may be redeemed in
the inverse order of size of the aggregate number of shares held of record of
each holder or in such other reasonable manner as may be selected by Roche
Capital in its sole discretion. Roche Capital, however, is not under any
obligation to redeem any shares of LCPS until the date of the tenth
anniversary of their issuance. In the event of a redemption by Roche Capital
of all shares of LCPS of any holder thereof, such holder's opportunity to
exchange LCPS for securities of Roche Holding Ltd, and consequently, such
holder's ability to benefit from any appreciation of such securities, will be
terminated. In addition, such redemption would be a taxable event for United
States federal income tax purposes with respect to such holder. See
"Description of Roche Capital Limited Conversion Preferred Stock --
Redemption."
Limitations on Exchange of LCPS; Requirement for Exemption for Exchange.
Shares of LCPS may be exchanged, at specified intervals, for Genussscheine
of Roche Holding Ltd, at a specified exchange ratio, which is subject to
adjustment. Prior to effecting any exchange, an exchanging holder shall
have delivered to Roche Capital a certification of such information as
Roche Capital deems necessary to determine the availability of an exemption
from registration under applicable securities laws with respect to such
exchanging holder, and Roche Capital shall have received an opinion of
counsel that such exchange is exempt from registration under applicable
securities laws. There can be no assurance that any such exchange will be
exempt from registration under United States securities laws, and the
availability of such an exemption may depend on factors unrelated to and
beyond the control of a holder desiring to make such an exchange. There is
therefore no assurance that any given exchange can be effected. Any
stockholder who may wish to receive shares of LCPS in the Merger is urged
to consult his or her legal and financial advisors as to the potential
availability of an exemption from registration for such holder in
connection with any exchange.
Absence of a Public Market; Market Value. There are no shares of LCPS
currently outstanding. Prior to the Effective Time of the Merger, there will
be no public market for the LCPS. Roche Capital does not intend to register
the LCPS on any stock exchange. Under the terms of the LCPS, the number of
holders of LCPS may be reduced by Roche Capital in its sole discretion, under
certain circumstances, by means of a redemption of all, or a portion, of the
outstanding LCPS. It is therefore not expected that an active public market
for the LCPS will develop. Because no public market for the LCPS exists
currently, and because the ability of the holder of the LCPS to transfer
shares of the LCPS will be limited once such shares are issued, there can be
no assurance that the value of the LCPS at the time of issuance will equal the
value of the Cash Consideration offered by Roche Capital. Furthermore, there
can be no assurance that the value of the LCPS will increase after the
Effective Time of the Merger.
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to stockholders of
Syntex Corporation, a Panama corporation ("Syntex"), in connection with the
solicitation of proxies by the Syntex Board of Directors for use at the
Special Meeting of Stockholders of Syntex (the "Syntex Special Meeting") to be
held at Syntex's office at Edificio Plaza Bancomer, Calle 50, Panama City,
Republic of Panama on October 28, 1994 at ten o'clock A.M., Local Time, and at
any adjournment or postponement thereof.
At the Syntex Special Meeting, stockholders of Syntex will be asked to
approve and adopt the Acquisition Agreement and Plan of Merger dated as of May
1, 1994 (the "Merger Agreement"), among Syntex, Roche (Panama) Corporation, a
Delaware corporation ("Roche (Panama)") and wholly owned subsidiary of Roche
Capital Corporation, a Panama corporation ("Roche Capital") and Roche Capital,
pursuant to which Roche (Panama) will be merged with and into Syntex (the
"Merger").
This Proxy Statement/Prospectus also constitutes a prospectus of Roche
Capital with respect to up to 650,000 shares of Limited Conversion Preferred
Stock which may be issued to Syntex stockholders in the Merger pursuant to the
Merger Agreement (or, in certain circumstances, pursuant to one or more
Alternative Exchanges, as described under "The Merger -- Terms of the Merger
- -- Consideration -- Allocation of LCPS in the Event of Oversubscription").
THE COMPANIES
Roche Capital Corporation
Roche Capital was incorporated under the laws of Panama on December 4,
1990 and has never carried on any independent business activities other than
those incident to its formation, the Merger and the purchase of approximately
93.4% of the outstanding shares of Syntex Common Stock, par value $1.00 per
share ("Common Stock" or the "Shares"), in its recently completed tender offer
(the "Tender Offer") (the Tender Offer and the Merger, collectively, the
"Transaction"). After the Effective Time of the Merger, Roche Capital
intends to continue as a holding company for Syntex. As such, it does not
currently intend to cause any changes in the nature of Syntex's business,
other than the disposition of the Syva Business (as hereinafter defined), as
required by the terms of the Agreement Containing Consent Order entered into
among Roche, Syntex and the Staff of the Federal Trade Commission (the "FTC")
on August 17, 1994, and provisionally accepted by the FTC on August 29,1994,
to resolve certain antitrust concerns. For a more detailed description of the
business to be divested and the terms of the Agreement Containing Consent
Order, see "Certain Regulatory Considerations -- Antitrust."
Roche Capital is a wholly owned subsidiary of Sapac Corporation Limited
("Sapac"), which, in turn, is a wholly owned subsidiary of Roche Holding Ltd
("Roche"). Sapac, incorporated as a non-resident corporation under the laws
of the Province of New Brunswick, Canada on April 13, 1962, has its principal
executive offices at Cerrito 461, Montevideo, Uruguay. Sapac is the holding
company for Roche's operating subsidiaries principally in Canada, Mexico,
Central and South America as well as in various countries in South East Asia,
Africa and Australia.
Roche is the parent company of an international health care concern
operating in more than 100 countries and employing more than 56,000 people
worldwide. Roche was incorporated in 1896 in Basel, Switzerland under the
name F. Hoffmann-La Roche and Co. Roche assumed its present name in June 1989
following a capital and corporate restructuring which established Roche solely
as a holding company and transferred operating businesses and related assets
and liabilities to a newly established operating subsidiary, F. Hoffmann-La
Roche Ltd.
Roche, including its subsidiaries (collectively, the "Roche Group"),
engages primarily in the development and manufacture of pharmaceuticals,
vitamins and fine chemicals, diagnostics, flavors and fragrances and in the
business of analytical laboratory services. The Roche Group is one of the
world's leading research-based health care groups active in the discovery,
development, manufacture and marketing of pharmaceuticals and diagnostic
systems. The Roche Group is also one of the world's largest producers of
vitamins and carotenoids and of fragrances and flavors. The principal
executive offices of Roche are located in Basel, Switzerland.
Since Roche Capital has never carried on any business of any kind other
than activities incident to the Merger, little meaningful financial data is
available with respect to Roche Capital. It owns no physical properties,
other than all outstanding shares of common stock of its wholly owned
subsidiary, Roche (Panama), (and of one other wholly-owned subsidiary, which
has never carried on any business transactions) and approximately 93.4% of the
outstanding Common Stock of Syntex. There are no pending legal proceedings to
which Roche Capital or its subsidiary, Roche (Panama), is a party or which
relate to the property of Roche Capital or Roche (Panama).
Syntex Corporation
Syntex is a Panamanian corporation with its principal administrative
offices located at 3401 Hillview Avenue, Palo Alto, California 94304. The
company currently has more than 9,000 employees and has research centers in
Palo Alto, California, Scotland, England, Mexico and Japan. Syntex is
principally engaged in the discovery, development, manufacture and sale of
pharmaceutical products and medical diagnostic systems. The pharmaceuticals
business segment consists of human pharmaceuticals and animal health products.
Human pharmaceuticals are primarily ethical pharmaceuticals that are generally
provided to the medical profession and require a prescription. The
diagnostics business segment consists primarily of systems to measure levels
of commonly abused drugs, therapeutic drugs and naturally occurring substances
in blood and urine and tests to detect sexually transmitted and other
infectious diseases.
Syntex files periodic reports with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The description of Syntex in this Proxy Statement/Prospectus is
qualified in its entirety by reference to Syntex's Annual Report on Form 10-K
for the fiscal year ended July 31, 1993 (attached hereto as Appendix C), its
Quarterly Reports on Form 10-Q for the quarters ended October 31, 1993,
January 31, 1994 and April 30, 1994 (attached hereto as Appendices D, E and F,
respectively), and its Reports on Form 8-K dated May 1, 1994 and September 1,
1994 (attached hereto as Appendices G and H, respectively) and the information
set forth in such reports is incorporated herein by reference.
Syntex's leading prescription pharmaceutical products are NAPROSYN
[Registered] (naproxen), a non-steroidal anti-inflammatory drug to treat
inflammation and pain, and TORADOL [Registered] (ketorolac), a non-steroidal
anti-inflammatory drug for the short-term management of pain. Syntex's
additional main products include oral contraceptives, medicines to treat
allergies, cardiovascular and cerebrovascular disease and dermatological
products.
In October, 1993, Syntex launched its own generic version of naproxen in
the United States. An over-the-counter formulation of naproxen sodium, which
is marketed under the trademark "ALEVE [Registered]" by Syntex's United States
joint venture with Procter & Gamble Company, was launched in June 1994. In
August 1994, American Home Products, the producer of a competing product,
filed a complaint in the United States District Court for the District of New
Jersey alleging, among other things, false advertising and unfair competition
in the marketing of ALEVE [Registered] and seeking injunctive relief and
compensatory damages in an unspecified amount. Syntex and Procter & Gamble
Company each believes that it has valid defenses to the action and intends to
oppose it vigorously.
Syntex currently has in clinical trials compounds being studied for the
prevention and treatment of organ transplant rejection, and for the treatment
of amyotrophic lateral sclerosis (Lou Gehrig's disease), osteoporosis and
peripheral arterial disease, among others. Results recently received from
clinical trials of the transplant rejection compound for the prevention of
acute rejection of kidney transplants were favorable, as were results from
clinical trials of an oral form of CYTOVENE [Registered] (ganciclover sodium),
an anti-viral compound, for maintenance treatment of cytomegalovirus retinitis
in immunocompromised patients. Syntex has submitted a new drug application
for the oral formulation of CYTOVENE [Registered], and expects to submit new
drug applications for the transplant-related compound later this calendar
year.
THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to the holders of
Syntex Common Stock in connection with the solicitation of proxies by the
Board of Directors of Syntex for use at its Special Meeting and at any
adjournment thereof. The purpose of the Special Meeting is to consider and
vote on the Merger Agreement and the Merger contemplated thereby. Holders of
Syntex Common Stock entitled to vote will also consider and vote upon any
other matter that may properly come before the Special Meeting. The Special
Meeting will be held on October 28, 1994, at Syntex's office at Edificio Plaza
Bancomer, Calle 50, Panama City, Republic of Panama, commencing at ten o'clock
A.M., Local Time.
THE BOARD OF DIRECTORS OF SYNTEX HAS, BY A UNANIMOUS VOTE OF THOSE
MEMBERS PRESENT, APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AND HAS RECOMMENDED THAT STOCKHOLDERS VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE BOARD OF DIRECTORS OF
SYNTEX HAS, HOWEVER, MADE NO RECOMMENDATION WITH RESPECT TO THE ELECTION TO
RECEIVE SHARES OF THE NEW ISSUE OF A LIMITED CONVERSION PREFERRED STOCK TO BE
ISSUED BY ROCHE CAPITAL IN CONNECTION WITH THE MERGER.
Record Date and Voting Rights. The Board of Directors of Syntex has
fixed the close of business on Friday, October 7, 1994 (the "Record Date") as
the record date for the determination of stockholders entitled to notice of
and to vote at the Special Meeting. As of September 27, 1994, there were
outstanding and entitled to vote 221,424,609 shares of Syntex Common Stock.
Panamanian corporate law requires approval of the Merger Agreement by the
holders of a majority of the shares of Syntex Common Stock entitled to vote.
Each share of Syntex Common Stock is entitled to one vote.
As of September 8, 1994, Roche Capital was the beneficial owner of an
aggregate of 206,809,298 (approximately 93.4%) of the outstanding shares of
Syntex Common Stock. Roche Capital intends to vote its shares of Syntex
Common Stock in favor of the approval of the Merger Agreement. The
affirmative vote of Roche Capital is sufficient to ensure approval and
adoption of the Merger Agreement.
As of September 27, 1994, directors and executive officers of Syntex and
their affiliates did not own any shares of Syntex Common Stock; as of such
date, they did own an aggregate of 2,153,142 currently exercisable stock
options and options exercisable within sixty days of September 27, 1994, of
which 1,714,442 have an exercise price of less than $24.00 per share. The
directors and executive officers of Syntex have indicated that they intend to
vote any shares of Syntex Common Stock they may own in favor of the approval
and adoption of the Merger Agreement.
Voting and Revocation of Proxies. Proxies for use at the Special Meeting
accompany this Proxy Statement/Prospectus. A stockholder may use his or her
proxy if he or she is unable to attend the meeting in person or wishes to have
his or her shares voted by proxy even if he or she attends the meeting. A
proxy may be revoked by the person giving it at any time before it is
exercised by providing written notice of such revocation to the Secretary of
Syntex, by submitting a proxy having a later date, or by that person appearing
at the meeting and electing to vote in person. Any proxy validly submitted
and not revoked will be voted in the manner specified therein by the
stockholder. If no specification is made, shares of Syntex Common Stock
represented by proxy will be voted FOR approval of the Merger Agreement.
Because a majority of all of the outstanding Syntex Common Stock must be voted
in favor of the Merger, abstentions and broker nonvotes will have the effect
of a vote against approval of the Merger. All votes will be tabulated by the
two inspectors of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes
(i.e., votes withheld by nominee recordholders because they do not receive
instructions from the beneficial owner and are not permitted by the rules of
the New York Stock Exchange to vote without instructions on a particular
proposal). The Syntex Board of Directors does not know of any other matter
that will be presented for action at the Special Meeting; if, however, any
other matter properly comes before the Special Meeting, the persons named in
the proxy or their substitutes will vote thereon in accordance with their
judgment.
In addition to mailing this material to Syntex stockholders, Syntex has
asked banks and brokers to forward copies to persons for whom they hold stock
of Syntex and to request authority for execution of the proxies. Syntex will
reimburse banks and brokers for their reasonable out-of-pocket expenses in
doing so. Officers and regular employees of Syntex may, without being
additionally compensated, solicit proxies by mail, telephone, telegram or
personal contact. All proxy soliciting expenses will be paid by Syntex in
connection with the solicitation of votes for the Special Meeting. Syntex
does not currently intend to employ any other party to assist in the
solicitation process.
THE MERGER
Background of and Reasons for the Merger -- Roche Capital
The Roche Group is a leader in research-based healthcare. It has a long
tradition of innovative breakthroughs in drug development and is a pioneer in
pharmaceutical and other applications. Roche already has a substantial
presence in the United States through its U.S. affiliate and subsidiary,
Hoffmann-La Roche Inc., which is based in Nutley, New Jersey. Roche and its
affiliates employ more than 17,000 people in its activities in
pharmaceuticals, vitamins and fine chemicals and diagnostics in the United
States.
In late 1993, Roche communicated to representatives of Syntex its
interest in exploring opportunities for collaboration, strategic alliance or
some form of combination between Roche and Syntex. In December 1993, Roche
communicated to Syntex Roche's possible interest in pursuing an acquisition of
Syntex for cash at a price of between $21 and $27 per Share. Roche was
thereafter informed by representatives of and counsel for Syntex that the
Board of Directors of Syntex had formed a special committee to consider all
alternatives that might be available to Syntex and that, if Syntex were to
pursue the possibility of an acquisition or other business combination, Syntex
might contact Roche to explore such a transaction with Roche. In late February
1994, representatives of Syntex informed representatives of Roche that Syntex
intended to explore several other possible transactions with other parties and
wished to explore an acquisition or combination transaction with Roche.
Thereafter, Roche and Syntex entered into a confidentiality agreement, and
Syntex provided certain financial and other information concerning Syntex and
its business to Roche. During the week beginning March 8, 1994, Roche
communicated, to representatives of Syntex, Roche's interest in acquiring
Syntex for cash. Discussions and negotiations between Roche and Syntex
followed, and on April 28, 1994, Roche Capital offered to acquire Syntex for a
price of $24.00 in cash per Share. On May 1, 1994, Roche Capital, Roche
(Panama) and Syntex executed the Merger Agreement.
Roche believes the acquisition of Syntex will favorably complement
Roche's U.S. operations and its pharmaceuticals portfolio. Syntex has built
up a pharmaceutical product pipeline which offers the chance to enter into
indications with a high market potential. Syntex currently has in clinical
trial compounds being studied for the prevention and treatment of organ
transplant rejection, and for the treatment of amyotrophic lateral sclerosis,
osteoporosis and peripheral arterial disease, among others. Also, seventy
percent of Syntex's 1993 worldwide sales of $2.1 billion were in the United
States.
Background of and Reasons for the Merger -- Syntex
During the first part of 1994, the Syntex Board of Directors and its
senior management actively studied the changing healthcare environment,
evaluated the increasingly competitive pharmaceutical industry and analyzed
Syntex's current and future prescription pharmaceutical product line to
determine how it might fit into the changing environment. Syntex was aware
that many other companies were considering or had entered into a variety of
strategic transactions to strengthen their positions for the future,
recognizing the uncertainties surrounding the future of the pharmaceutical
industry and the rapid pace of change in the industry. Such transactions
included joint ventures, joint marketing arrangements, acquisitions of new
product lines, acquisitions of other companies in related fields or
consolidations with other companies. In addition, Syntex took into account
the fact that its United States patent on naproxen, one of Syntex's most
significant products, expired in December 1993. This expiration caused
Syntex's revenues and profits from this product to decline sharply.
In recent years, Syntex and Roche have from time to time explored
opportunities for collaboration, strategic alliance or some form of
combination. In December 1993, Roche communicated to Syntex Roche's possible
interest in pursuing an acquisition of Syntex at a price per Share between $21
and $27.
In December 1993, the Syntex Board of Directors created the Special
Committee to review the strategic options facing Syntex without any
preconceived notions as to what would best serve Syntex's stockholders,
employees and customers in the near and long term and to consider and make
recommendations with respect to the available means to maximize stockholder
value. The initial members of the Special Committee were Anthony Solomon
(Chairman), Julius R. Krevans and Robert S. Miller, Jr. Following its
creation the Special Committee undertook, with the assistance of Wilkerson
Group (a financial consulting firm), Goldman, Sachs & Co. ("Goldman, Sachs"),
legal advisors and members of Syntex's management, a review of Syntex's
financial condition and prospects, including the effect on Syntex of the
expiration of its United States patent on naproxen, the status of Syntex's
research and development pipeline and the potential for realizations of values
therefrom, the impact of managed healthcare on the pharmaceutical industry as
a whole and Syntex in particular, and the changing healthcare environment. In
addition, the Special Committee reviewed the impact on Syntex and the possible
values for Shares attributable to different strategic alternatives, including
the implementation of a restructuring plan to reduce Syntex's costs during a
period of lower revenues, certain alliances and business combinations with
companies of smaller or similar size in the pharmaceutical or biotech
industries and the possible sale of Syntex.
In February 1994, the Special Committee entered into a written engagement
letter with Goldman, Sachs to serve as independent financial advisor in
connection with various strategic alternatives which Syntex was considering.
Beginning in February 1994, the Special Committee and the Board of Directors
determined to approach a number of companies which might be interested in
engaging in a strategic alliance, business combination or acquisition
transaction with Syntex. The Special Committee was expanded at this time to
include Paul E. Freiman and Dr. George Rosenkranz. At the same time, Syntex
continued to develop plans with respect to additional restructuring efforts
that it could undertake in the event that a satisfactory result from available
alternatives was not achieved. One of the parties so approached was Roche,
and on February 28, 1994, Syntex and Roche entered into a confidentiality and
standstill agreement which governed the conditions of disclosure of certain
financial and other information by Syntex.
Following its review of certain financial and other information regarding
Syntex, during the week of March 8, 1994, Roche communicated to
representatives of Syntex its interest in acquiring Syntex for $20 per share.
After being advised that the Special Committee was not prepared to recommend
such a transaction, and following additional discussions with Syntex's
representatives, Roche indicated a willingness to consider a transaction in
which it would pay $20 per share together with a participation right based on
the sales of one of Syntex's new products (in the clinical testing stage) or,
alternatively, $23 per share. After consideration, the Special Committee
indicated to Roche and the Board of Directors that it was unable to recommend
any such transaction.
Throughout the remainder of March and April 1994, representatives of
Syntex continued to approach a number of parties who might be interested in a
transaction with Syntex and, as a result of those efforts, Syntex entered into
confidentiality and standstill agreements with three of such parties. In
connection therewith, during the week of April 18, 1994, representatives of
Syntex indicated to Roche and other parties that, although no determination
had been made to recommend a sale of Syntex, the Special Committee was
interested in receiving proposals to acquire or otherwise engage in a
strategic alliance or business combination with Syntex in order to determine
which alternative would best serve the interests of Company's stockholders.
The Special Committee set a preliminary deadline of the end of the week of May
9, 1994, for receipt of any such proposals.
After initial discussions concerning Roche's participation in the process
outlined by the Special Committee, Roche indicated that it might consider
unilaterally submitting a proposal to Syntex at a time other than that
proposed by the Special Committee in connection with such process.
Immediately prior to Syntex's regularly scheduled Board of Directors meeting
on April 28, 1994, Roche submitted a written proposal to Syntex which by its
terms expired on May 1, 1994. The terms of Roche's proposal were
substantially similar to the transactions contemplated by the Merger
Agreement. After reviewing the terms of Roche's proposal together with their
financial and legal advisors, the Special Committee and the Board of Directors
determined to allow their advisors and representatives to proceed with
negotiating definitive agreements with respect to Roche's proposal provided
that the other parties that had entered into confidentiality and standstill
agreements with Syntex would continue to be afforded the opportunity to review
financial and other information provided by Syntex and to submit proposals
under the process previously outlined by the Special Committee. Negotiations
with respect to Roche's proposal then ensued.
At a meeting held on May 1, 1994, the Special Committee reconvened and,
after reviewing matters with the legal and financial advisors, determined by a
unanimous vote of those members who were present that the transactions
contemplated by the Merger Agreement are fair to and in the best interests of
the stockholders of Syntex, and recommended that the Board of Directors
approve the Merger Agreement and the transactions contemplated thereby. In so
doing, however, the Special Committee made no recommendation with respect to
the election by stockholders to receive shares of Limited Conversion Preferred
Stock to be issued by Roche Capital in connection with the Merger. After
hearing the report of the Special Committee, the Board of Directors approved
the Merger Agreement and the transactions contemplated thereby. With respect
to the Merger, the Board of Directors, by a unanimous vote of those members
present, recommended that the stockholders of Syntex vote in favor of approval
and adoption of the Merger Agreement and the Merger, but made no
recommendation with respect to the election to receive shares of the new issue
of a Limited Conversion Preferred Stock to be issued by Roche Capital in
connection with the Merger.
In determining to recommend the approval of the Merger Agreement and the
transactions contemplated thereby to the full Board of Directors, and in
approving the Merger Agreement and the transactions contemplated thereby, the
Special Committee and the Board of Directors, respectively, considered a
number of factors. The material factors considered were:
(i) the knowledge of the Special Committee and the Board of Directors
of the competitive uncertainties that could result from changes in the
pharmaceutical and healthcare industries and the belief of the Special
Committee and the Board of Directors as to the risks associated with such
changes with respect to Syntex;
(ii) presentations by the management of Syntex, and its consulting
and financial advisors, regarding the financial condition, results of
operations, businesses and prospects of Syntex, including the status of
Syntex's research and development pipeline, the impact of the expiration
of the United States naproxen patent on Syntex and the competitive
uncertainty that could result from major changes in the pharmaceutical,
medical diagnostic and healthcare industries;
(iii) that the $24.00 per Share price to be paid to holders of Syntex
Common Stock represented (A) a premium of approximately 57% over the
closing sales price for the Shares on the New York Stock Exchange (the
"NYSE") on April 29, 1994, the last trading day prior to the public
announcement of the execution of the Merger Agreement; (B) a premium of
approximately 88% over the closing sales price for the Shares on the NYSE
one week prior to April 29, 1994; and (C) a premium of approximately 73%
over the closing sales price for the Shares on the NYSE four weeks prior
to April 29, 1994;
(iv) that the trading price of the Shares had not exceeded the $24.00
per Share price since December 14, 1992, and that since May 6, 1992, the
Share price was on a downward trend from a high of $461/4 to a low of
$123/4 on April 22, 1994;
(v) the written opinion of Goldman, Sachs, dated May 1, 1994, to the
effect that as of the date of the opinion the $24.00 per Share cash
consideration to be received by the holders of the Shares in the
transactions contemplated by the Merger Agreement is fair to such holders
(the "Opinion"). A copy of the Opinion of Goldman, Sachs is attached
hereto and filed as Appendix B, and is incorporated herein by reference.
(vi) that the Merger Agreement is structured so as not to be
contingent upon the outcome of Syntex's ongoing clinical testing;
(vii) that the Merger Agreement is structured so as to permit Syntex
to continue the process established by the Special Committee such that, on
or before May 14, 1994, Syntex could receive acquisition and other
proposals from third parties that were bound by a standstill agreement
with Syntex on the date on which the Merger Agreement was executed, and
could engage in negotiations with, or disclosed nonpublic information or
afford access to, any such party;
(viii) that the Merger Agreement is structured to permit the Board of
Directors of Syntex, in the exercise of its fiduciary duties, to engage in
negotiations with, or disclose nonpublic information or afford access to,
any third party that may have been considering making, or had made, an
Acquisition Proposal (as defined in the Merger Agreement), or waive any
standstill or similar agreements entered into by Syntex;
(ix) the terms and conditions of the Merger Agreement, including that
Roche Capital could be entitled to fees and expenses of $35,000,000, upon
termination of the Merger Agreement in certain circumstances, including
without limitation the modification or withdrawal of the Board of
Directors' recommendation with respect the Merger, or if any person or
group were to acquire beneficial ownership of more than 50% of any class
or series of Syntex's capital stock;
(x) the ability of Roche Capital to consummate the Merger without
conditioning the Tender Offer which preceded the Merger on obtaining any
specific financing commitments; and
(xi) a review of the terms of the LCPS of Roche Capital (including
the dividend rate, the exchange ratio, the redemption provisions, the
restrictions on transferability and the right to exchange, the uncertainty
regarding the optional redemption or exchange of such stock and other
provisions) and, after consultation with Goldman, Sachs, the determination
of the Board of Directors that the LCPS would be expected to trade, if it
were not restricted from trading by its terms, at a discount to the $24.00
cash price offered in the Tender Offer and the Merger, and the knowledge
of the Special Committee and the Board of Directors that, despite such
terms, Syntex's long-term stockholders who have a low tax basis in their
Shares might desire to have the opportunity to receive consideration for
their Shares in a tax-free manner.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the
totality of the information presented to and considered by it.
Opinion of Financial Advisor to the Syntex Board
Goldman, Sachs acted as financial advisor to Syntex in connection with
the Merger. At the meeting of the Board of Directors on May 1, 1994, Goldman,
Sachs advised the Board and delivered its written opinion, dated May 1, 1994,
to the Board of Directors of Syntex to the effect that as of the date of the
Opinion the $24.00 per Share cash consideration to be received by the holders
of the Shares in the transactions contemplated by the Merger Agreement is fair
to such holders. Goldman, Sachs expressed no view as to the value of the LCPS
or as to the fairness of the LCPS as consideration in the Merger.
The full text of the Opinion, which sets forth assumptions made, matters
considered and limits on the review undertaken, is attached hereto as Appendix
B and is incorporated herein by reference. Syntex stockholders are urged to
read the Opinion carefully in its entirety. The following summary of the
Opinion is qualified in its entirety by reference to the full text of the
Opinion. Goldman, Sachs' opinion, which was addressed to the Board of
Directors of Syntex, was directed only to the fairness of the cash
consideration to be received by the holders of the Shares in the transactions
contemplated by the Merger Agreement. Goldman, Sachs made and makes no
recommendation to any Syntex stockholder as to how such stockholder should
vote at the Special Meeting, as to the value or fairness of the LCPS as
consideration in the Merger or as to any other matter.
In rendering the Opinion, Goldman, Sachs reviewed, among other things,
(i) drafts of the Merger Agreement and the Guaranty; (ii) Annual Reports to
Stockholders and Annual Reports on Form 10-K of Syntex for the fiscal year
ended July 31, 1993; (iii) certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of Syntex; (iv) certain other communications
from Syntex to its stockholders; and (v) certain internal financial analyses
and forecasts for Syntex prepared by its management. Goldman, Sachs also held
discussions with members of the senior management of Syntex regarding its past
and current business operations, financial condition and future prospects. In
addition, Goldman, Sachs reviewed the reported price and trading activity for
the Shares, compared certain financial and stock market information for Syntex
with similar information for certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain recent business
combinations in the pharmaceutical industry specifically, and in other
industries generally, and performed such other studies and analyses as it
considered appropriate.
Goldman, Sachs relied without independent verification upon the accuracy
and completeness of all of the financial and other information reviewed by it
for purposes of its Opinion. Goldman, Sachs did not make an independent
evaluation or appraisal of the assets or liabilities of Syntex nor was it
furnished with any such evaluation or appraisal. In providing its Opinion,
Goldman, Sachs did not express any view as to the value of the LCPS or as to
the fairness of the LCPS as consideration in the Merger.
Goldman, Sachs, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distribution of listed and non-listed
securities, private placements and valuations for estate, corporate and other
purposes. Syntex selected Goldman, Sachs as its financial advisor on the
basis of Goldman, Sachs' experience and expertise in transactions similar to
the transactions contemplated by the Merger Agreement.
Goldman, Sachs was retained by the Special Committee of Syntex to act as
independent financial advisor to Syntex with respect to the recently completed
Tender Offer, the Merger and matters arising in connection therewith.
Pursuant to a letter agreement dated March 1, 1994, which replaced a February
1994 letter agreement among the parties, if the Tender Offer and the Merger
are consummated, Syntex will pay Goldman, Sachs, for its services in
connection with the foregoing matters, a fee of approximately $10,750,000,
which amount includes minimum fees of $600,000 that were payable to Goldman,
Sachs at the start of the engagement. Syntex has also agreed to reimburse
Goldman, Sachs for its reasonable out-of-pocket expenses, including the fees
and expenses of its counsel, and to indemnify Goldman, Sachs against certain
liabilities, including liabilities arising under the federal securities laws.
Goldman, Sachs has provided certain investment banking services to Syntex
from time to time for which its has received customary compensation. In the
ordinary course of its business, Goldman, Sachs actively trades the debt and
equity securities of Syntex for its own account and for the accounts of
customers and Goldman, Sachs may, therefore, at any time hold a long or short
position in such securities.
Syntex has also agreed to pay to the investment banking firm of Allen &
Company Incorporated a fee of $2,500,000 for the services it has rendered in
participating in originating the Tender Offer and assisting in negotiating the
Merger. Allen & Company Incorporated has provided investment banking services
to Syntex on a wide variety of matters for a number of years.
Interests of Certain Persons in the Merger
Syntex Board of Directors and Management
Certain directors and officers of Syntex may be deemed to have interests
in the Merger that are in addition to their interests, if any, as holders of
shares of Syntex Common Stock and the interests of Syntex's stockholders
generally.
Officers. The Merger Agreement provides that the current Syntex officers
will be the officers of the Surviving Corporation until such time as
successors may be appointed. See "Terms of the Merger."
Ownership of Syntex Common Stock. As of September 27, 1994, directors
and executive officers of Syntex did not own any shares of Syntex Common
Stock; as of that date, they did own an aggregate of 2,153,142 currently
exercisable stock options and options exercisable within sixty days of
September 27, 1994, of which 1,714,442 have an exercise price of less than
$24.00 per share. More detailed information regarding stock ownership is
provided in "Management after the Merger."
Merger Compensation. The law firm of Holtzmann, Wise & Shepard, of which
Mr. Howard M. Holtzmann, a director, is a partner, rendered general legal
services to Syntex and its subsidiaries for the fiscal year ended July 31,
1994 for which fees of $858,434 have been approved. Additional fees of
$1,500,000 have been approved for services of the firm in connection with the
Transaction.
Severance Plans. Syntex has entered into severance agreements with
certain Syntex executives, which provide certain benefits if following a
change of control Syntex terminates the executive's employment for any reason
other than disability or for cause, or so alters his or her terms and
conditions of employment as to afford good reason for the executive to
terminate his or her employment. A more detailed description of these
agreements is provided in "Management after the Merger -- Executive
Compensation and Benefit Plans."
Exercise of Stock Options. On May 26, 1994, the Board of Directors of
Syntex adopted resolutions amending, and took certain other actions with
respect to, Syntex's 1984 Stock Option and Stock Appreciation Rights Plan,
1991 Stock Option Plan for Non-Employee Directors, and Call-to-Action
Incentive Plan to permit those officers and directors of Syntex who are
subject to Section 16 of the Exchange Act to exercise their stock options with
a non-interest bearing full recourse note on the date immediately prior to the
Effective Time (as defined in the Merger Agreement). The option shares
will be pledged to Syntex to secure payment of the notes, and Syntex will
withhold from the merger consideration payable with respect to the option
shares an amount sufficient to pay off the notes in full. The Board took
such action in order to facilitate the disposition of securities held by
such officers and directors in full compliance with the requirements of
Section 16 of the Exchange Act. The net consideration payable to such
directors and officers with respect to their outstanding options will not
be increased as a result of permitting them to exercise their options in
this manner.
Director and Officer Indemnification and Insurance. The Merger Agreement
provides that Roche Capital will cause the Surviving Corporation to indemnify
and hold harmless the present and former officers and directors of Syntex in
respect of acts or omissions occurring prior to the Effective Time to the
maximum extent permitted under Syntex's articles of incorporation and bylaws
in effect on the date of the Merger Agreement. See "Certain Other Provisions
of the Merger Agreement -- Agreement with Respect to Director and Officer
Indemnification and Insurance."
Roche Capital Corporation
As of September 8, 1994, Roche Capital beneficially owned an aggregate of
206,809,298 of Syntex Common Stock (or approximately 93.4% of the then
outstanding shares of Syntex Common Stock.) Under applicable Panamanian
corporate law, approval of the holders of the majority of shares of the voting
stock of a corporation are required for approval of a merger; the vote of
Roche Capital is therefore sufficient to ensure approval of the Merger. See
"The Special Meeting -- Record Date and Voting Rights."
Terms of the Merger
The summary of the principal terms of the Merger set forth below is
subject to and qualified in its entirety by reference to the Merger Agreement,
a copy of which is attached to this Proxy Statement/Prospectus as Appendix A,
and is incorporated herein by reference.
The Merger Agreement provides that, as a first step in the transaction,
Roche Capital would offer to purchase all outstanding shares of Syntex Common
Stock at $24.00 per Share, net to seller in cash. Roche Capital commenced its
Tender Offer on May 6, 1994. The Tender Offer expired on August 31, 1994.
Roche Capital purchased 206,809,298 Shares (approximately 93.4% of the Shares
outstanding as of September 8, 1994) in the Tender Offer.
The Merger Agreement provides further that, unless the Merger Agreement
is terminated (see "Termination" below), provided all the conditions to the
Merger have been satisfied or, to the extent permitted under the Merger
Agreement, waived at the Effective Time (as defined in the Merger Agreement),
Roche (Panama) will be merged with and into Syntex, whereupon the separate
existence of Roche (Panama) will cease and Syntex will be the surviving
corporation ("Surviving Corporation"). The articles of incorporation and
bylaws of Roche (Panama) in effect at the Effective Time will become the
articles of incorporation, and bylaws, respectively, of the Surviving
Corporation. From and after the Effective Time until successors are duly
elected or appointed in accordance with applicable law, (i) the directors of
Roche (Panama) at the Effective Time will be the directors of the Surviving
Corporation, and (ii) the officers of Syntex at the Effective Time will be the
officers of the Surviving Corporation.
Consideration
Consideration To Be Paid In The Merger. In the Merger, each share of
Syntex Common Stock outstanding immediately prior to the Effective Time and
not held by Syntex as treasury stock or owned by Roche Capital or any
affiliate of Roche Capital immediately prior to the Effective Time, will be
converted into the right to receive (i) $24.00 in cash ("Cash Consideration")
or, (ii) at the election of the holder subject to certain restrictions, 0.024
shares of LCPS, each full share of which will have a stated value and
liquidation value of $1,000 ("Stock Consideration") (the Stock Consideration
and Cash Consideration referred to herein collectively as the "Merger
Consideration"). The terms, preferences, rights and privileges of the LCPS
are described in detail below. See "Description of Roche Capital Limited
Conversion Preferred Stock". Shares held by Syntex as treasury stock or owned
by Roche Capital or any subsidiary of Roche Capital immediately prior to the
Effective Time will be canceled, and no payment will be made with respect
thereto.
STOCKHOLDERS ARE URGED TO READ CAREFULLY THE INFORMATION DISCLOSED UNDER
"RISK FACTORS" AND "DESCRIPTION OF ROCHE CAPITAL LIMITED CONVERSION PREFERRED
STOCK" PRIOR TO MAKING A DECISION TO ELECT THE STOCK CONSIDERATION. NEITHER
THE SYNTEX BOARD OF DIRECTORS NOR ITS FINANCIAL ADVISORS HAVE EXPRESSED ANY
VIEW AS TO THE FAIRNESS TO STOCKHOLDERS OF THE STOCK CONSIDERATION.
Stock Election Procedure. ANY STOCKHOLDER WHO WOULD LIKE TO RECEIVE
SHARES OF LCPS INSTEAD OF THE CASH CONSIDERATION MUST REQUEST AN ELECTION
FORM. The Exchange Agent will mail an Election Form (and a letter of
transmittal for use in exchanging certificates representing Shares) to each
holder of Shares who requests such an Election Form. A request for an
Election Form must be received by the Exchange Agent no later than 5 p.m.
New York City time on Tuesday, October 18, 1994. Requests for an Election
Form must be made in writing to Wachovia Bank of North Carolina, N.A.,
Corporate Trust Department, P.O. Box 3001, Wachovia East Building, 2nd
Floor, 301 N. Church Street, Room 226, Winston-Salem, N.C. 27101,
facsimile no. (910) 770-4832. (the "Exchange Agent").
ANY HOLDER OF SYNTEX SHARES WHO DOES NOT REQUEST AN ELECTION FORM, AND
ANY HOLDER WHO DOES NOT SUBMIT A VALID ELECTION FORM, WILL RECEIVE THE CASH
CONSIDERATION. INSTRUCTIONS FOR PROCEDURES RELATING TO PAYMENT OF CASH
CONSIDERATION WILL BE SENT TO HOLDERS FOLLOWING THE SPECIAL MEETING.
ANY HOLDER WHO WISHES TO RECEIVE ONLY CASH NEED NOT REQUEST AN ELECTION
FORM.
Each holder of Shares will have the right to specify in the Election Form
the number of Shares owned by such holder that such holder desires to have
converted into the right to receive cash in the Merger (a "Cash Election") and
the number of Shares owned by such holder that such holder desires to have
converted into the right to receive shares of LCPS in the Merger (a "Stock
Election"). A STOCK ELECTION MUST BE MADE WITH RESPECT TO AT LEAST ONE
HUNDRED SHARES OF SYNTEX COMMON STOCK TO BE A VALID STOCK ELECTION. A Stock
Election will be effective only if the Exchange Agent shall have received no
later than 5:00 p.m. New York City time on Tuesday, October 25, 1994 (the
"Election Deadline") (i) an Election Form covering the Shares to which such
Stock Election applies, executed and completed in accordance with the
instructions set forth in such Election Form and (ii) the certificate or
certificates representing such Shares, in such form and with such
endorsements, stock powers and signature guarantees as may be required by such
Election Form. A Stock Election may be revoked or changed only by delivering
to the Exchange Agent, prior to the Election Deadline, a written notice of
revocation or, in the case of a change, a properly completed revised Election
Form that identifies the share certificates to which such revised Election
Form applies. Delivery to the Exchange Agent prior to the Election Deadline
of a revised Election Form with respect to any certificate representing Shares
will result in the revocation of all prior Election Forms with respect to all
Shares evidenced by such certificate. In the event the Merger Agreement is
terminated in accordance with Article X thereof, all Election Forms delivered
to the Exchange Agent on or prior to the date of such termination shall be
deemed revoked. If an Election Form is revoked (either by delivery of a
written notice of revocation or by delivery of a revised Election Form), the
Shares of Common Stock, represented by such Election Form will become Shares
for which no election is made and the holder of such Shares will receive cash
in accordance with the instructions provided by the holder in such Election
Form, unless such person otherwise instructs the Exchange Agent. For purposes
of this Proxy Statement/Prospectus, "Non-Electing Shares" means all Shares
(other than Shares that are to be canceled in the Merger) as to which an
effective Stock Election has not been made as of the Election Deadline. All
Non-Electing Shares will be deemed to have made the Cash Election.
No assurance can be given that a Stock Election by any given Stockholder
can be accommodated. See "Allocation of LCPS in the Event of
Oversubscription".
The determination of the validity and effectiveness of Election Forms,
revocations thereof and the date and time such Election Forms or revocations
were received will be made by the Exchange Agent and will be binding.
Allocation Of LCPS In The Event Of Oversubscription. Roche Capital is
not obligated to accept Stock Elections with respect to more than 15% of the
shares of Syntex Common Stock that were outstanding as of May 1, 1994. Roche
Capital is obligated to issue shares of LCPS only to the extent that the LCPS
would be "held of record" (as such term is defined in the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 12g5-1 thereunder) by
not more than 299 persons. If the issuance of shares of LCPS in respect of
all Shares as to which valid Stock Elections are made would result in the LCPS
being "held of record" by more than 299 persons, subject to the terms of the
Merger Agreement, Roche Capital will issue LCPS to the maximum number of
persons who have made a valid Stock Election such that, after giving effect to
such issuance, the LCPS are held of record by 299 persons. In the event more
than 299 holders of Shares make a valid Stock Election, Roche Capital and the
Special Committee of the Board of Directors of Syntex will jointly agree, in
their discretion, the method for selecting the holders who will be entitled to
receive shares of LCPS in the Stock Election; such method may consist of a
lottery, selection by lot or the aggregate number of Shares as to which a
holder makes a valid Stock Election, or any other method. In the event Roche
Capital and the Special Committee of the Board of Directors of Syntex are
unable to agree on such a method, holders who made a Stock Election will be
deemed to have made a Cash Election.
NO ASSURANCE CAN BE GIVEN THAT A STOCK ELECTION BY ANY GIVEN STOCKHOLDER
CAN BE ACCOMMODATED.
In the event that more than 299 holders of Shares make otherwise valid
Stock Elections, but Roche Capital and the Special Committee of the Board of
Directors of Syntex are unable jointly to agree the method for selecting
holders who will be entitled to receive LCPS pursuant to otherwise valid Stock
Elections, the Merger Agreement provides that Roche Capital may, in its sole
discretion, agree with Syntex stockholders to exchange such stockholders'
Shares for LCPS (an "Alternative Exchange"), so long as all such Alternative
Exchanges, if any, are effected on the same terms. Roche Capital will not,
however, be required to agree to make an Alternative Exchange with any Syntex
stockholder and may, in its sole discretion, determine to effect an
Alternative Exchange with one or more, but fewer than all, stockholders who
may have made a Stock Election or otherwise desire to effect an Alternative
Exchange. Any determination by Roche Capital to effect or not effect an
Alternative Exchange with any stockholder will be made in the sole discretion
of Roche Capital. There can be no assurance that any Alternative Exchange
will be effected, nor any assurance that if more than one such Alternative
Exchange is effected, that all such Alternative Exchanges will be effected in
the same manner, at the same time or with the same effects on stockholders
with whom Roche Capital effects Alternative Exchanges. The time and manner of
any Alternative Exchange will be determined by Roche Capital in its sole
discretion, subject only to any restrictions in the Merger Agreement.
Conversion Of Syntex Shares. The conversion of shares of Syntex Common
Stock, with respect to which a valid Stock Election has not been made, into
the right to receive the Cash Consideration will occur at the Effective Time
of the Merger. As soon as practicable as of or after the Effective Time of
the Merger, the Exchange Agent will send a transmittal form to each holder of
Syntex Common Stock (other than holders of Syntex Common Stock who have
properly submitted effective Stock Election Forms to the Exchange Agent and
whom Roche Capital has determined will receive shares of LCPS for all of the
Syntex Common Stock with respect to which such Stock Election was made). The
transmittal form will contain instructions with respect to the surrender of
certificates representing Syntex Common Stock in exchange for the amount of
Cash Consideration represented by the certificates so surrendered.
EXCEPT FOR SYNTEX STOCK CERTIFICATES SURRENDERED WITH THE SUBMISSION OF A
STOCK ELECTION FORM AS DESCRIBED ABOVE UNDER "STOCK ELECTION PROCEDURE",
SYNTEX STOCKHOLDERS SHOULD NOT FORWARD SYNTEX STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS.
As soon as practicable after the Effective Time, each holder of Shares
that have been converted into a right to receive the Cash Consideration, upon
surrender to the Exchange Agent of a certificate or certificates, together
with a properly completed transmittal form covering the Shares formerly
represented by such certificate or certificates, will be entitled to receive
the Cash Consideration payable in respect of such Shares. Until so
surrendered, each such certificate will, after the Effective Time, represent
for all purposes, only the right to receive such Cash Consideration. The
Exchange Agent will accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices.
If any portion of the Merger Consideration is to be paid to a person
other than the registered holder of the Shares represented by the certificate
or certificates surrendered in exchange therefor, it will be a condition to
such payment that the certificate or certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required as a result of such payment to a person other than the
registered holder of such certificates or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
After the Effective Time, there will be no further registration of
transfers of Shares. If, after the Effective Time, valid certificates
representing Shares are presented to Syntex, they will be canceled and
exchanged for the Cash Consideration in accordance with the procedures set
forth herein.
Any amounts remaining unclaimed by holders of Shares three years after
the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any governmental
entity) will, to the extent permitted by applicable law, become the property
of Roche Capital free and clear of any claims or interest of any person
previously entitled thereto.
Fractional Shares. No fractional shares of LCPS will be issued in the
Merger. All fractional shares of LCPS that a holder of Syntex Common Stock
would otherwise be entitled to receive as a result of the Merger will be
aggregated and if a fractional share results from such aggregation, such
holder will be entitled to receive, in lieu thereof, an amount in cash
determined by multiplying the stated value of the LCPS by the fraction of a
share of LCPS to which such holder would otherwise have been entitled.
Stock Options. In accordance with the terms of the Merger Agreement, the
Board of Directors of Syntex has adopted resolutions and taken such other
actions as were required to adjust, effective immediately prior to the
Effective Time, the terms of all outstanding employee and director stock
options to purchase Shares ("Stock Options") and all outstanding stock
appreciation rights ("SARs"), whether or not presently exercisable, granted
under any stock option or stock appreciation rights plan, program or
arrangement of Syntex or its Subsidiaries (as defined in the Merger Agreement)
(collectively, the "Stock Plans") to provide that (i) each Stock Option
together with any SAR related thereto or granted in tandem therewith and (ii)
each SAR granted independent of, and not related to, any Stock Option (a
"Free-standing SAR"), in each case outstanding immediately prior to the
Effective Time shall be converted into the right of the holder of such Stock
Option or Free-standing SAR, as the case may be, to receive a cash payment at
that time from Syntex of an amount determined by multiplying (x) the excess,
if any, of the Cash Consideration over the applicable exercise price per Share
of such Stock Option or strike price per Share of such Free-standing SAR, as
the case may be, by (y) with respect to each Stock Option and related SAR, the
number of Shares the holder of the Stock Option could have purchased (assuming
full vesting of all Stock Options) had such holder exercised such Stock Option
in full immediately prior to the Effective Time or, with respect to each
Free-standing SAR, the number of Shares with respect to which the
Free-standing SAR was granted (assuming full vesting of all Free-standing
SARs). All amounts payable pursuant to this paragraph are subject to any
required withholding of taxes and will be paid without interest.
Moreover, the Board of Directors of Syntex has adopted such resolutions
and taken such other actions as were required to provide that the Stock Plans
would terminate as of Midnight, August 30, 1994, except with respect to Stock
Options and SARs that were outstanding as of Midnight, August 30, 1994 which
Stock Options and SARs shall be adjusted immediately prior to the Effective
Time as described in the preceding paragraph, and to provide that the
provisions in any other Employee Plan or Benefit Arrangement (as defined in
the Merger Agreement) providing for the issuance, transfer or grant of
capital stock of Syntex were deleted as of Midnight, August 30, 1994, and
except as noted above, Syntex will take all necessary actions to provide that
following the Effective Time, no holder of a Stock Option or SAR or any
participant in any Stock Plan or other Employee Plan or Benefit Arrangement
will have any right thereunder to acquire any capital stock of Syntex or the
Surviving Corporation.
Exercise of Stock Options. On May 26, 1994, the Board of Directors of
Syntex adopted resolutions amending, and took certain other actions with
respect to, Syntex's 1984 Stock Option and Stock Appreciation Rights Plan,
1991 Stock Option Plan for Non-Employee Directors, and Call-to-Action
Incentive Plan to permit those officers and directors of Syntex who are
subject to Section 16 of the Exchange Act to exercise their stock options with
a non-interest bearing full recourse note on the date immediately prior to the
Effective Time. The option shares will be pledged to Syntex to secure
payment of the notes, and Syntex will withhold from the merger
consideration payable with respect to the option shares an amount
sufficient to pay off the notes in full. The Board took such action in
order to facilitate the disposition of securities held by such officers and
directors in full compliance with the requirements of Section 16 of the
Exchange Act. The net consideration payable to such directors and officers
with respect to their outstanding options will not be increased as a result
of permitting them to exercise their options in this manner.
Certain Other Provisions of the Merger Agreement
Board Representation. The Merger Agreement provides that promptly upon
the purchase by Roche Capital of a majority of the outstanding Shares on a
fully diluted basis, Roche Capital would be, and Roche Capital therefore now
is, entitled to designate that number of directors, rounded up to the next
whole number, on the Board of Directors of Syntex that equals the product of
(i) the total number of directors on the Board of Directors (giving effect to
the election of any additional directors pursuant to the terms of the Merger
Agreement) and (ii) the percentage that the number of Shares owned by Roche
Capital and its affiliates bears to the total number of Shares outstanding,
and Syntex will upon request by Roche Capital, at Syntex's election, either
increase the number of directors or seek and accept resignations of incumbent
directors. Syntex will use its best efforts to cause individuals designated
by Roche Capital to constitute the same percentage as such individuals
represent on the Board of Directors of (x) each committee of the Board (other
than any committee of the Board established to take action under the Merger
Agreement), (y) each board of directors of each subsidiary of Syntex and (z)
each committee of each such board; however, no current member of the Special
Committee (as defined in the Merger Agreement) of the Board of Directors will
be required to resign from the Board of Directors. Subject to the foregoing,
Syntex is to use its best efforts to ensure that all of the members of the
Board of Directors and such boards and committees as of the date of the Merger
Agreement shall remain members of the Board of Directors and such boards and
committees until the Effective Time.
Syntex's obligations to appoint Roche Capital's designees to the Board of
Directors will be subject to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder.
The Syntex Board of Directors met on September 12, 1994. At that
meeting, the Board of Directors accepted the resignations of eight directors
(Mr. James N. Wilson, Mr. Dana G. Leavitt, Dr. Miriam Stoppard, Mr. Leonard
Marks, Jr., Mr. Marvyn Carton, Dr. John H. Fried, Hon. Howard M. Holtzmann
and Mr. Charles A. Lynch) and elected three new members designated by Roche
Capital to the Board (Dr. Armin Kessler, Mr. Peter Simon and Dr. Kenneth
Taylor). The Board accepted the resignation of Mr. James N. Wilson and
elected Dr. Kenneth Taylor as President and Chief Operating Officer. The
Board also adopted certain changes to the bylaws of Syntex. The changes to
the bylaws of Syntex adopted at the meeting provide that as long as Roche
Capital owns a majority of the outstanding shares of the Common Stock of
Syntex, at such times as directors of the Syntex Board designated by Roche
Capital constitute less than a majority of the directors present at any
regular or special meeting of the Syntex Board of Directors, the Board shall,
upon request of any director designated by Roche Capital, elect additional
Roche Capital designees to fill vacancies existing on the Board of Directors,
or shall create additional positions on the Board and elect Roche Capital
designees to fill such positions, so that following said election, the number
of directors designated by Roche Capital shall equal the number of directors
that Roche Capital would be entitled to designate pursuant to the Merger
Agreement. If any director designated by Roche Capital were to exercise such
right, the board meeting would be immediately adjourned, and no further
business would be transacted nor any action taken at such meeting. Second,
the bylaws of Syntex were amended to eliminate the Finance Committee,
Compensation and Benefits Committee, Committee on Science at Syntex, the Trust
Review Committee and Nominating Committee and to establish an Executive
Committee to consist of at least three members, the majority of whom will be
designated by Roche Capital. At the meeting, Dr. Armin Kessler, Mr. Paul
Freiman, Mr. Peter Simon and Dr. Kenneth Taylor were designated as members of
the Executive Committee. The Executive Committee will exercise all powers,
functions and duties of the Board of Directors with certain exceptions and
subject to the restrictions set forth in the Merger Agreement.
Representations and Warranties. The Merger Agreement contains a number
of representations and warranties by Syntex, including representations with
respect to its corporate existence and power, corporate authorizations,
governmental authorizations, capitalization, subsidiaries, Securities and
Exchange Commission filings, financial statements, material liabilities,
litigation, taxes, employee benefits, compliance with laws, finders' fees, and
environmental matters.
Agreement with Respect to the Conduct of Business Pending the Merger.
The Merger Agreement provides that between the date of the Merger Agreement
and the Effective Time, unless Roche Capital shall have consented in writing,
the business of Syntex and its subsidiaries will be conducted in the ordinary
course of business consistent with past practice; each of Syntex and its
subsidiaries will use its best efforts to preserve intact its business
organization and to keep available the services of its present officers and
key employees, subject to the terms of the Merger Agreement. Among other
things, subject to certain exceptions, neither Syntex nor any of its
subsidiaries will (a) adopt or propose any change in its articles of
incorporation or bylaws; (b) merge or consolidate with any other person or
acquire a material amount of assets of any other person; (c) sell, lease,
license or otherwise surrender, relinquish or dispose of any assets or
property which are material to Syntex and its subsidiaries as a whole except
(i) pursuant to existing contracts or commitments, (ii) in the ordinary course
consistent with past practice or (iii) as Roche Capital may agree in writing;
(d) agree or commit to do any of the foregoing; or (e) (i) take, or agree or
commit to take, any action that would make any representation and warranty of
Syntex thereunder inaccurate in any respect at, or as of any time prior to,
the Effective Time or (ii) omit, or agree or commit to omit, to take any
action necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time, provided however, that Syntex may
take or omit to take such action the effect of which can be cured at or prior
to the Effective Time.
The Merger Agreement also contains provisions relating to (i) the
parties' obligations to use their best efforts, (ii) certain filings and
consents, and (iii) coordination of public announcements.
Other Offers. The Merger Agreement provides that from the date of the
execution of the Merger Agreement until the termination thereof, Syntex and
its subsidiaries will not, and will use their best efforts to cause their
respective officers, directors, employees or other agents not to, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal (as hereinafter defined), (ii) subject to the fiduciary
duties of the Board of Directors under applicable law as advised by counsel,
waive any provision of any standstill or similar agreements entered into by
Syntex or (iii) subject to the fiduciary duties of the Board of Directors
under applicable law as advised by counsel to Syntex, engage in negotiations
with, or disclose any nonpublic information relating to Syntex or any
subsidiary or afford access to the properties, books or records of Syntex or
any subsidiary to, any person that may be considering making, or has made, an
Acquisition Proposal. The Merger Agreement does not, however, prohibit Syntex
and its Board of Directors from (i) taking and disclosing a position with
respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act, and (ii) making such disclosures
to Syntex's stockholders which, in the judgment of and subject to the
fiduciary duties of the Board of Directors with the advice of counsel, may be
required under applicable law.
Syntex has agreed that it will (i) promptly notify Roche Capital after
receipt of any Acquisition Proposal or any inquiries indicating that any
person is considering making or wishes to make an Acquisition Proposal, (ii)
promptly notify Roche Capital after receipt of any request for nonpublic
information relating to Syntex or any subsidiary or for access to the
properties, books or records of Syntex or any subsidiary by any person that
may be considering making, or has made, an Acquisition Proposal and (iii)
subject to the fiduciary duties of the Board of Directors under applicable law
as advised by counsel to Syntex, keep Roche Capital advised of the status and
principal financial terms of any such Acquisition Proposal, indication or
request. The term "Acquisition Proposal" as used in the Merger Agreement
means any offer or proposal for, or any indication of interest in, a merger or
other business combination involving Syntex or any subsidiary or the
acquisition of any equity interest in, or a substantial portion of the assets
of, Syntex or any subsidiary, other than the transactions contemplated by the
Merger Agreement.
Conditions to the Merger. The respective obligations of Syntex, Roche
Capital and Roche (Panama) to consummate the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions: (i) the Merger Agreement shall have been adopted by the
affirmative vote of the stockholders of Syntex in accordance with Panama law;
(ii) any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") relating to the Merger shall have
expired; (iii) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Merger; provided that, neither party may assert this condition unless it has
used its best efforts to oppose such judgment, injunction, order or decree and
to avail itself of all rights of appeal or it has determined, in its
reasonable judgment, that such efforts would not have a substantial likelihood
of success; (iv) all actions by or in respect of or filings with any
governmental body, agency, official, or authority required to permit the
consummation of the Merger, including, without limitation, filing articles of
merger or other appropriate documents for registration in the Mercantile
Registry of the Republic of Panama and pursuant to the Delaware General
Corporation Law, shall have been obtained or made (other than those actions or
filings which, if not obtained or made prior to the consummation of the
Merger, would not individually or in the aggregate reasonably be expected to
have a material adverse effect); and (v) the registration statement required
to be filed in connection with the issuance of the LCPS shall have been
declared effective and no stop order suspending the effectiveness of such
registration statement shall be in effect and no proceedings for such purpose
shall be pending before or threatened by the Securities and Exchange
Commission.
The obligations of Roche Capital and Roche (Panama) to consummate the
Merger are subject to the satisfaction of the following further conditions:
(i) either (A) the Committee on Foreign Investment in the United States
("CFIUS") shall have determined not to investigate the Offer and the Merger
under Section 721 of the Defense Production Act of 1950, as amended
("Exon-Florio") (either by action or nonaction) or (B) if CFIUS shall have
determined to make such an investigation, such investigation shall have been
completed and the President shall have determined (either by action or
nonaction) not to take any action under Exon-Florio with respect to the
transactions contemplated by the Merger Agreement; (ii) Syntex shall have
performed in all material respects all of its obligations under the Merger
Agreement required to be performed by it at or prior to the Effective Time
pursuant to the terms thereof; and (iii) the representations and warranties of
Syntex contained in the Merger Agreement and in any certificate or other
writing delivered by Syntex pursuant thereto shall be true at and as of the
Effective Time as if made at and as of such time.
The obligation of Syntex to effect the Merger is further subject to the
satisfaction or waiver at or prior to the Effective Time of the condition that
Roche Capital and Roche (Panama) shall have performed in all material respects
each of their obligations under the Merger Agreement required to be performed
by them at or prior to the Effective Time pursuant to the terms thereof and
the representations and warranties of Roche Capital and Roche (Panama)
contained in the Merger Agreement and in any certificate or other writing
delivered by Roche Capital or Roche (Panama) pursuant thereto shall be true at
and as of the Effective Time as if made at and as of such time.
Certain conditions to the Merger have already been satisfied. See
"Certain Regulatory Considerations".
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, notwithstanding any approval of the Merger Agreement by
the stockholders of Syntex, (i) by mutual written consent of Syntex and Roche
Capital; (ii) by Roche Capital or Syntex if prior to the Effective Time, the
Board of Directors shall have withdrawn or materially modified its approval or
recommendation of the Merger or the Merger Agreement, recommended another
Acquisition Proposal or entered into a definitive agreement or agreement in
principle with respect to another Acquisition Proposal, or resolved to do any
of the foregoing; (iii) by either Syntex or Roche Capital, if there shall be
any law or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree enjoining
Roche Capital or Syntex from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final and nonappealable;
(iv) by either Roche Capital or Syntex, if the meeting of stockholders of
Syntex held for the purpose of voting on the approval and adoption of the
Merger Agreement and the Merger shall have been held and the stockholders of
Syntex shall have failed to approve and adopt the Merger Agreement and the
Merger at such meeting; and (vi) by Roche Capital, if Roche Capital shall
have received any communication from the Department of Justice or Federal
Trade Commission (each an "HSR Authority") (which communication shall be
confirmed to the other parties by the HSR Authority) that causes such party to
reasonably believe that any HSR Authority has authorized the institution of
litigation challenging the transactions contemplated by the Merger Agreement
under the U.S. antitrust laws, which litigation will include a motion seeking
an order or injunction prohibiting the consummation of any of the transactions
contemplated by the Merger Agreement.
Agreement With Respect to Employee Matters. The Merger Agreement
provides that for a period of at least one year after the Effective Time,
Roche Capital shall cause Syntex to continue to maintain Syntex's existing
compensation, severance, welfare and pension benefit plans, programs and
arrangements (other than any stock based plans, programs and arrangements) for
the benefit of current and former employees and directors of Syntex and its
Subsidiaries (subject to such modification as may be required by applicable
law or to maintain the tax exempt status of any such plan which is intended to
be qualified under Section 401(a) of the Code), provided that (i) nothing in
the Merger Agreement shall prohibit Roche Capital from replacing any such
existing plan or plans, program(s) or arrangement(s) with a plan or plans,
program(s) or arrangement(s) which provide such employees and directors with
benefits which are not less favorable in the aggregate than the benefits that
would have been provided under Syntex's existing plan(s), program(s) or
arrangement(s) to the extent such replacement is permitted under the terms of
the applicable plan, program or arrangement and (ii) nothing in the Merger
Agreement shall obligate Roche Capital to provide such employees and directors
with any stock based compensation (including, without limitation, stock
options or stock appreciation rights) after the Effective Time.
In the light of Roche Capital's desire that Syntex provide appropriate
employee incentives in the future, Roche Capital has agreed promptly to
develop, and Syntex and Roche Capital will promptly cooperate in developing, a
new performance based incentive compensation plan for the benefit of employees
of Syntex and its subsidiaries as an appropriate substitute for the current
Stock Plans.
Syntex has agreed not to, and to cause its subsidiaries not to, amend or
modify any existing Employee Plan or Benefit Arrangement, nor enter into or
otherwise establish, adopt or maintain any new employee plans, programs,
agreements or arrangements, or grant any additional Free-standing SARs or
other awards based upon the value of Syntex's equity securities prior to and
including the Effective Time without the prior written consent of Roche
Capital.
It is Roche Capital's current intention to maintain Syntex's headquarters
at its present location in Palo Alto, California.
From and after the Effective Time, for purposes of determining
eligibility, vesting and benefit accrual under any replacement compensation,
severance, welfare, pension benefit or savings plan of Roche Capital or any of
its affiliates in which employees of Syntex and its subsidiaries become
eligible to participate, service with Syntex or any of its subsidiaries will
be credited as if such services were rendered to Roche Capital or any of its
affiliates; provided that (i) Roche Capital will not be obligated to permit
employees of Syntex and its subsidiaries to participate in nor, upon
participation, to receive such credited service, with respect to, any plan
maintained by Roche Capital or its affiliates which is not intended to
constitute a replacement plan for any existing plan, program or arrangement of
Syntex and its subsidiaries and (ii) Roche Capital will not be required to
give any such employee credit for such prior service with Syntex or any of its
subsidiaries for purposes of any plan which is a "defined benefit plan" within
the meaning of Section 3(35) of Employee Retirement Income Security Act of
1974, as amended ("ERISA"), other than the Syntex U.S. Employees Pension Plan
or any successor plan to the assets and liabilities thereof.
No provision of the Merger Agreement with respect to employee matters
creates any third party beneficiary rights in any current or former employee
or director of Syntex or its subsidiaries (including any beneficiary thereof)
under the Merger Agreement or in respect of continued or resumed employment or
in respect of any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement.
Agreement With Respect to Director and Officer Indemnification and
Insurance. The Merger Agreement provides that Roche Capital will cause the
Surviving Corporation to indemnify and hold harmless the present and former
officers and directors of Syntex in respect of acts or omissions occurring
prior to the Effective Time to the maximum extent permitted under Syntex's
articles of incorporation and bylaws in effect on the date of the Merger
Agreement; provided that such indemnification shall (to the maximum extent
permitted by law) be mandatory rather than permissive except in instances
involving willful misconduct or bad faith and that the Surviving Corporation
shall advance expenses, including attorneys' fees, promptly on demand and
delivery of any required undertaking. For three years after the Effective
Time, Roche Capital will cause to be maintained the policies of officers' and
directors' liability insurance in effect as of the date of the Merger
Agreement in respect of acts or omissions occurring prior to the Effective
Time covering each such person covered by Syntex's officers' and directors'
liability insurance policy on the date of the Merger Agreement; provided that
the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which in all material respects
are no less advantageous for so long as such substitution does not result in
gaps or lapses in coverage; and provided further that in satisfying these
obligations, Roche Capital will not be obligated to cause the Surviving
Corporation to pay premiums in excess of the amount per annum Syntex paid in
its last full fiscal year, which amount has been disclosed to Roche Capital.
Roche Capital will cause the Surviving Corporation to pay all expenses
(including attorneys' fees) that may be incurred by any indemnified party in
enforcing the indemnity and other obligations provided for in the Merger
Agreement with respect thereto. Roche Capital has agreed that should the
Surviving Corporation fail to comply with the foregoing obligations, Roche
Capital shall be responsible therefor.
Fees and Expenses. The Merger Agreement provides that Syntex will pay
Roche Capital, in immediately available funds, so long as Roche Capital shall
not have materially breached its obligations under the Merger Agreement,
promptly, but in no event later than two business days, (i) after the
termination of the Merger Agreement by Roche Capital or Syntex if prior to the
Effective Time, the Board of Directors of Syntex shall have withdrawn or
materially modified its approval or recommendation of the Offer, the Merger or
the Merger Agreement, recommended another Acquisition Proposal or entered into
a definitive agreement or agreement in principle with respect to another
Acquisition Proposal, or resolved to do any of the foregoing or (ii) if any
person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other
than Roche Capital or its affiliates (as defined in the Merger Agreement) or
any group of which any of them is a member, shall have acquired beneficial
ownership of more than 50% of any class or series of capital stock of Syntex
(including the Shares), through acquisition of stock, the formation of a group
or otherwise, or shall have been granted any option, right, or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 50% of
any class or series of capital stock of Syntex (including the Shares) hereof,
a fee for reimbursement of costs and expenses of $35,000,000. Subject to the
foregoing, the Merger Agreement provides that all costs and expenses incurred
in connection with the Merger Agreement shall be paid by the party incurring
such cost or expense.
Amendment and Waivers. Any provision of the Merger Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by Syntex,
Roche Capital and Roche (Panama) or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that after the adoption
of the Merger Agreement by the stockholders of Syntex, no such amendment or
waiver will, without the further approval of such stockholders, alter or
change (i) the amount or kind of consideration to be received in exchange for
any shares of capital stock of Syntex, (ii) any term of the articles of
incorporation of the Surviving Corporation or (iii) any of the terms or
conditions of the Merger Agreement if such alteration or change would
adversely affect the holders of the Shares. No failure or delay by any party
in exercising any right, power or privilege under the Merger Agreement will
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in the Merger
Agreement shall be cumulative and not exclusive of any rights or remedies
provided by law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Stockholders who receive solely cash in exchange for their Shares
pursuant to the Merger will generally recognize taxable gain or loss for U.S.
federal income tax purposes equal to the difference between the amount of cash
received in exchange for such Shares and the tax basis in such Shares. Such
gain or loss will be capital gain or loss if the Shares are capital assets in
the hands of the stockholder at the time of the Merger and will be long-term
gain or loss if the Shares have been held for more than one year at the time
of the Merger. Gain or loss must be calculated separately for each block
(shares acquired at the same time and price) of Shares exchanged.
The foregoing discussion may not apply to stockholders who acquired their
Shares pursuant to the exercise of stock options or other compensation
arrangements with the Company or who are not citizens or residents of the
United States or who are otherwise subject to special tax treatment under the
Internal Revenue Code of 1986, as amended (the "Code").
Tax Consequences to Holders Exchanging Shares for LCPS. In the opinion
of Skadden, Arps, Slate, Meagher & Flom, the exchange of Shares for LCPS will
qualify as a tax-free exchange under Section 351 of the Code. Holders should
note that opinions of counsel are not binding on the Internal Revenue Service
or the courts. If the exchange so qualifies, the tax consequences will be as
follows.
Holders of Shares who participate in such an exchange will generally
recognize no gain or loss on the receipt solely of LCPS in exchange for Shares
and will take as the tax basis of the LCPS received in the exchange the tax
basis of the Shares exchanged therefor. If the Shares are held as capital
assets at the time of the Merger, the holding period for the LCPS received in
the exchange will include the holding period of the Shares exchanged therefor.
A holder of Shares who receives cash in lieu of fractional shares of LCPS
will be treated as first having received such fractional shares of LCPS
pursuant to the exchange, and then as having exchanged such fractional shares
for cash in a redemption by Roche Capital. Such holder will generally
recognize capital gain or loss on the receipt of cash in lieu of fractional
shares of LCPS in an amount equal to the difference between (i) the cash
received in lieu of such fractional shares of LCPS and (ii) the ratable
portion of the basis of the Shares surrendered in the exchange that is
allocated to such fractional shares of LCPS.
A holder who (i) either elects to exchange only a portion of its Shares
for LCPS or is subject to the provisions governing allocation of LCPS due to
oversubscription and (ii) receives cash in the preceding Tender Offer and LCPS
in the Merger should be considered as transferring his or her Shares in part
for LCPS and in part for cash. Such holder will generally not recognize any
loss on the exchange, but will recognize gain to the extent of the amount of
cash received in the Merger. Such gain will generally be capital gain if the
Shares are held as capital assets and will be capital gain if the Shares have
been held more than one year at the time of the Merger. The basis of the LCPS
received in such an exchange will be equal to the basis of the Shares
transferred, decreased by the amount of any cash received, and increased by
the amount of any gain recognized on the exchange.
The U.S. federal income tax discussion set forth above is included for
general information only and due to the individual nature of tax consequences
may not apply to all holders of Shares in Syntex. Stockholders are urged to
consult their tax advisors as to the specific tax consequences to them of the
Merger, including the consequences of an election to receive LCPS in the
Merger and the effects of applicable state, local and other tax laws.
Stockholders who may wish to consider the possible election of LCPS in the
Merger should also consult their tax and financial advisors in light of the
characteristics of the LCPS, including, among other things, transfer and
exchange restrictions which may apply to the LCPS.
ANTICIPATED ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for by Roche Capital
under the "purchase" method of accounting in accordance with International
Accounting Standards. Therefore, the aggregate consideration paid by Roche
Capital in connection with the Merger will be allocated to the assets and
liabilities of Syntex based on their fair values, and the results of
operations of Syntex will be included in the results of operations of Roche
Capital only for the periods subsequent to completion of the Merger.
RESALE OF ROCHE CAPITAL STOCK
Shares of Limited Conversion Preferred Stock issued pursuant to the
Merger or Alternative Exchanges will be transferable only in compliance with
the transfer restrictions described below. See "Description of Roche
Capital Limited Conversion Preferred Stock--Transfer Restrictions". In
addition, any shares of LCPS issued to any Syntex stockholder who may be
deemed to be an "affiliate" ((as defined under the Securities Act), and
generally including, without limitation, directors, certain executive officers
and beneficial owners of 10% or more of a class of capital stock) of Syntex
for purposes of Rule 145 under the Securities Act shall not be transferable
except in compliance with the Securities Act. This Proxy Statement/Prospectus
does not cover resales of Limited Conversion Preferred Stock received by any
person who may be deemed to be an affiliate of Syntex.
APPRAISAL AND DISSENTERS' RIGHTS
Under Panama law, under which Syntex is incorporated, holders of shares
of Syntex Common Stock who do not vote in favor of the Merger have no special
rights as dissenters nor rights to an appraisal.
ROCHE CAPITAL CORPORATION
PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED)
The following unaudited pro forma condensed combined financial
statements have been prepared to illustrate the effect of the Transaction and
include an unaudited pro forma condensed combined balance sheet as of April
30, 1994 ("Pro Forma Condensed Combined Balance Sheet") and unaudited pro
forma condensed combined statements of income for the nine months ended April
30, 1994 and for the year ended July 31, 1993, respectively (each, a "Pro
Forma Condensed Combined Statement of Income") (the Pro Forma Condensed
Combined Balance Sheet and Statements of Income, collectively, the "Pro Forma
Financial Statements"). The Pro Forma Financial Statements are based on the
historical consolidated balance sheet of Roche Capital and historical
consolidated financial statements of Syntex and the assumptions and estimates
set forth below and in the notes accompanying the Pro Forma Financial
Statements. The Pro Forma Financial Statements have been prepared in
accordance with generally accepted accounting principles in the United States.
The Transaction is accounted for under the purchase method of accounting. For
a description of the terms and conditions of the Merger, consideration to be
paid, and the terms of the LCPS, see "The Merger -- Terms of the Merger" and
"Description of Roche Capital Limited Conversion Preferred Stock".
The Pro Forma Condensed Combined Balance Sheet combines the consolidated
balance sheets of Roche Capital as of July 31, 1994 and Syntex as of April 30,
1994. The Pro Forma Condensed Combined Statements of Income for the nine
months ended April 30, 1994 and for the fiscal year ended July 31, 1993 assume
that the Merger had been consummated as of the first day of the earliest
period presented. As Roche Capital has not carried on any business activities
other than those incident to its formation, the Tender Offer and the Merger,
no financial information with respect to Roche Capital has been provided in
the Pro Forma Condensed Combined Statements of Income.
Roche Capital purchased Syntex Common Stock in the Tender Offer, and will
pay those Syntex stockholders who will receive the Cash Consideration in the
Merger, using general corporate funds and the proceeds of a loan from a group
of commercial banks (the "Loan"). Roche Capital expects that the aggregate
principal amount of the Loan will be approximately $3.4 billion, maturing in
installments of $3.0 billion and $400 million on December 31, 1994 and June
30, 1995, respectively. The Pro Forma Condensed Combined Balance Sheet
assumes the proceeds of the Loan are used to pay the Cash Consideration to
stockholders in the Tender Offer and the Merger and further assumes the
incurrence of direct costs of the Transaction of $30 million. The ultimate
principal amount of the Loan is dependent upon the outcome of the Stock
Election and final allocation of LCPS, which cannot be determined until the
Effective Time of the Merger.
For purposes of reflecting the issuance of LCPS on the Pro Forma
Condensed Combined Balance Sheet, it is assumed that not more than 299 holders
of approximately 7% of the Syntex Common Stock will be issued LCPS as a result
of valid Stock Elections representing approximately 350,000 shares of LCPS.
The precise number of LCPS which may be issued cannot be determined until the
Effective Time of the Merger. See "Allocation of LCPS in the Event of
Oversubscription." Each full share of LCPS will have a stated and liquidation
value of $1,000 per share. Holders of LCPS will be entitled to receive
cumulative dividends at a rate of 3% per annum on the liquidation value of
each share; such dividends will be paid annually.
The Pro Forma Condensed Combined Statements of Income do not reflect the
write-off at the Effective Time of the Merger of the fair value of acquired in
process research and development in the amount of $1.715 billion as this
acquisition charge is non-recurring. Any future financial costs and benefits
of non-recurring restructuring activities which may be undertaken cannot be
reasonably determined at this time and are not included in the Pro Forma
Condensed Combined Statements of Income or reflected as liabilities in the Pro
Forma Condensed Combined Balance Sheet.
In response to certain antitrust concerns raised by the FTC, Roche
Capital has agreed to divest the Syva Business (as hereinafter defined). The
historical financial information of Syntex in the pro forma condensed combined
financial statements has been adjusted to exclude the Syva Business. A
description of the agreement with the FTC is set forth under "Certain
Regulatory Considerations -- Antitrust".
The pro forma adjustments reflected in the Pro Forma Financial Statements
are based on preliminary estimates, which are derived from available
information and certain assumptions. Although Roche Capital believes, based
on available information, that the fair values and allocation of the Merger
Consideration included in the Pro Forma Financial Statements are reasonable
estimates, final purchase accounting adjustments will be made on the basis of
evaluations and estimates made after the Effective Time of the Merger. As a
result, the final allocation of costs related to the Transaction may differ
significantly from that presented herein.
The Pro Forma Financial Statements set forth herein do not purport to be
indicative of the results Roche Capital would have obtained had the
Transaction and related events occurred as of the first day of the earliest
period presented, as assumed, and should not be construed as representative of
future operating results or the financial position of Roche Capital. The Pro
Forma Financial Statements should be read in conjunction with both Roche
Capital's and Syntex's historical consolidated financial statements and notes
thereto included elsewhere in this Proxy Statement/Prospectus.
ROCHE CAPITAL CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
APRIL 30, 1994
(Millions of U.S. dollars)
Historical Pro Forma
----------------------------------------------------- ----------------------------
Syntex
Roche Capital Corporation
Corporation Syntex Excluding
July 31, 1994 Corporation Syva Syva Adjustments
(Note 1) April 30, 1994 Business Business (Note 2) Combined
------------- -------------- ------- ------- ----------- --------
Assets
Cash and short-term securities.............. *** $ 703 $ (4) $ 699 $1,740 (a) $ 889
(1,550)(b)
Net assets of business to be divested....... 128 (g) 128
Other current assets........................ 762 (83) 679 679
Property, plant and equipment, net.......... 1,089 (51) 1,038 1,038
Other assets, including
identifiable intangibles.................. 444 (33) 411 1,970 (d) 2,381
Goodwill.................................... 1,060 (f) 1,060
------ ----- ------ ------ ------
Total Assets................................ *** $2,998 $(171) $2,827 $3,348 $6,175
====== ===== ====== ====== ======
Liabilities and Stockholders' Equity
Current liabilities......................... $ 560 $ (31) $ 529 $ 30 (b) $ 559
Short-term debt............................. 143 143 3,400 (b) 3,543
Long-term debt.............................. 591 591 591
Other noncurrent liabilities................ 429 (12) 417 690 (d) 1,107
------ ----- ------ ------ ------
Total Liabilities........................... 1,723 (43) 1,680 4,120 5,800
------ ----- ------ ------ ------
Limited Conversion Preferred Stock.......... 350 (b) 350
------ ------
Common stock and other stockholders'
equity
Common stock:
Roche Capital Corporation............... *** 1,740 (a) 1,740
Syntex Corporation...................... 241 241 (241)(c)
Other stockholders' equity.............. (506) (506) 506 (c)
Retained earnings (deficit)............... 1,540 (128) 1,412 128 (g) (1,715)
(1,540)(c)
(1,715)(e)
------ ----- ------ ------ ------
Total Stockholders' Equity.................. *** 1,275 (128) 1,147 (1,122) 25
------ ----- ------ ------ ------
Total Liabilities, Common Stock and
Other Stockholders' Equity................ *** $2,998 $(171) $2,827 $3,348 $6,175
====== ===== ====== ====== ======
<FN>
*** Amounts round to less than $1 million. Reference should be made to
the historical consolidated financial statements of Roche Capital
included elsewhere in this Proxy Statement/Prospectus.
The accompanying notes are an integral part of this Pro Forma Financial
Statement
NOTES TO THE PRO FORMA CONDENSED COMBINED
BALANCE SHEET (UNAUDITED)
NOTE 1 -- Roche Capital has not carried on any business
activities other than those incident to its formation, the
purchase of approximately 93.4% of Syntex Common Stock in
the Tender Offer and the Merger. It owns no physical
properties, other than all the outstanding shares of common
stock of its wholly-owned subsidiary, Roche (Panama) and of
one other subsidiary.
NOTE 2 -- The Pro Forma Condensed Combined Balance Sheet has
been prepared to illustrate the acquisition of Syntex by
Roche Capital for an aggregate purchase price of $5.3
billion. Pro forma adjustments are made to reflect:
(a) Purchase by Sapac (parent company of Roche Capital, and a wholly-owned
subsidiary of Roche Holding Ltd) of $1.74 billion of additional common
stock of Roche Capital.
(b) The use of $1.550 billion of cash, the incurrence of $3.4 billion in
5.25% notes payable to banks, and the issuance of $350 million of
Limited Conversion Preferred Stock necessary to complete the
Transaction; and the recording of direct costs of the Transaction of
$30 million.
(c) The elimination of the stockholders' equity accounts of Syntex.
(d) The estimated fair value of the identifiable intangibles of Syntex and
the related deferred income taxes thereon. Such identified intangible
assets represent primarily intellectual property rights related to
Syntex products currently being marketed which are expected to produce
future economic net benefits and are protected legally or through de
facto rights.
(e) The write-off at the Effective Time of the fair value of acquired
in-process research and development. The adjustment is excluded from
the Pro Forma Condensed Combined Statements of Income as it is
non-recurring.
(f) The excess of purchase price over the fair value of identifiable net
assets acquired, including deferred income taxes related to the
identifiable intangibles, as goodwill.
(g) The net assets of the Syva Business to be divested.
ROCHE CAPITAL CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994
(Millions of U.S. dollars except for share data)
Historical Pro Forma
---------------------------------------------- -------------------------
Syntex
Corporation
Roche Capital Excluding
Corporation Syntex Syva Syva Adjustments
(Note 1) Corporation Business Business (Note 2) Combined
--------------------------- ------- ------- ----------- --------
Net Sales.............................. *** $1,404 $(151) $1,253 $ -- $ 1,253
Cost of goods sold..................... 344 (56) 288 288
Selling, general and administrative.... 508 (56) 452 109 (a) 561
Research and development............... 299 (23) 276 276
Goodwill amortisation.................. 40 (e) 40
Other expense, net..................... 3 3 134 (b) 137
------ ------ ----- -------
Income (loss) before taxation.......... 250 (16) 234 (283) (49)
Income tax expense (benefit)........... 6 5 1 (85)(c) (84)
------ ----- ------ ----- -------
Net income............................. 244 (11) 233 (198) 35
Dividends on LCPS...................... (8)(d) (8)
------ ----- ------ ----- -------
Net income available to common
stockholders......................... $244 $ (11) $ 233 $(206) $ 27
====== ===== ====== ======= =======
Net income per share of Common Stock... $1.10
======
Weighted average number of
common stock outstanding............. *** 221.0*
======
- ------------------
<FN>
* Millions of shares.
*** Amounts round to less than $1 million. Reference should be made to the
historical consolidated financial statements of Roche Capital included
elsewhere in this Proxy Statement/Prospectus.
The accompanying notes are an integral part of this Pro Forma Financial
Statement
NOTES TO THE PRO FORMA CONDENSED COMBINED STATEMENT OF
INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED APRIL 30, 1994
NOTE 1 -- Roche Capital has not carried on any business activities other than
those incident to its formation, the purchase of approximately 93.4% to of
Syntex Common Stock in the Tender Offer and the Merger. As a result, no
financial information has been provided for the Pro Forma Condensed Combined
Statement of Income.
NOTE 2 -- The Condensed Combined Statement of Income gives effect to the
following pro forma adjustments necessary to reflect the Transaction outlined
in Note 2 to the Pro Forma Condensed Combined Balance Sheet.
(a) Additional nine-months amortisation resulting from acquired
identifiable intangibles based on estimated remaining lives, principally
thirteen years.
(b) Nine-months interest charges on $3.4 billion of 5.25% notes payable to
banks incurred in connection with the Transaction.
(c) Income tax benefits of $85 million relating to the foregoing
adjustments using the United States statutory income tax rate.
(d) Nine-months dividend requirements related to the $350 million of
Limited Conversion Preferred Stock.
(e) Nine-months amortisation of goodwill on a straight-line basis over
twenty years.
NOTE 3 -- Roche Capital has 500 common shares outstanding which results in net
income per share of Common Stock of $54,000. Roche Capital, however, may issue
additional shares of Common Stock, in the future.
ROCHE CAPITAL CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED JULY 31, 1993
(Millions of U.S. dollars except for share data)
Historical Pro Forma
---------------------------------------------- ------------------------
Syntex
Corporation
Roche Capital Excluding
Corporation Syntex Syva Syva Adjustments
(Note 1) Corporation Business Business (Note 2) Combined
------------- ----------- -------- ----------- ----------- --------
Net Sales *** $2,123 $(212) $1,911 $ -- $1,911
Cost of goods sold 439 (75) 364 364
Selling, general and administrative 761 (79) 682 145 (a) 827
Research and development 404 (36) 368 368
Restructuring charge 320 (3) 317 317
Goodwill amortisation 53 (e) 53
Other expense, net 66 (1) 65 179 (b) 244
--- ----- ------ ------ ------
Income (loss) before taxation 133 (18) 115 (377) (262)
Income tax expense (benefit) (155) (7) (162) (113)(c) (275)
--- ----- ------ ------ ------
Income before cumulative effects
of accounting changes (Note 3) 288 (11) 277 (264) 13
Dividends on LCPS (11)(d) (11)
--- ----- ------ ------ ------
Income before cumulative effects
of accounting changes available
to common stockholders $288 $ (11) $277 $ (275) $ 2
==== ===== ==== ====== ======
Income before cumulative effects
of accounting changes per share
of common stock $1.29
=====
Weighted average number of common
shares outstanding *** 222.4*
=====
<FN>
- ------------------
* Millions of shares.
*** Amounts round to less than $1 million. Reference should be made to the
historical consolidated financial statements of Roche Capital included
elsewhere in this Proxy Statement/Prospectus.
The accompanying notes are an integral part of this Pro Forma Financial Statement
NOTES TO THE PRO FORMA CONDENSED COMBINED STATEMENT
OF INCOME (UNAUDITED) FOR THE YEAR ENDED JULY 31, 1993
NOTE 1 -- Roche Capital has not carried on any business activities other than
those incident to its formation, the purchase of approximately 93.4% of Syntex
Common Stock in the Tender Offer and the Merger. As a result no financial
information has been provided for the Pro Forma Condensed Combined Statement
of Income.
NOTE 2 -- The Condensed Combined Statement of Income gives effect to the
following pro forma adjustments necessary to reflect the Transaction outlined
in Note 2 to the Pro Forma Condensed Combined Balance Sheet.
(a) Additional annual amortisation resulting from acquired identifiable
intangibles based on estimated remaining lives, principally thirteen
years.
(b) Annual interest charges on $3.4 billion of 5.25% notes payable to banks
incurred in connection with the Transaction.
(c) Income tax benefits of $113 million relating to the foregoing
adjustments using the United States statutory income tax rate.
(d) Annual dividend requirements related to the $350
million of Limited Conversion Preferred Stock.
(e) Annual amortisation of goodwill on a straight-line basis over twenty
years.
NOTE 3 -- Amounts related to the cumulative effect of accounting changes in
the historical financial statements of Syntex for the year ended July 31, 1993
have been excluded from the Pro Forma Condensed Combined Statement of Income.
DESCRIPTION OF SYNTEX COMMON STOCK
Syntex has authorized the issuance of 600,000,000 shares of Common
Stock, par value $1.00 per share. Syntex currently has no other classes of
stock outstanding. As of September 27, 1994, there were 221,424,609 shares of
Common Stock outstanding and approximately 11,965,337 shares subject to
issuance pursuant to Syntex's stock option and incentive plans. Syntex Common
Stock is listed on the New York Stock Exchange (Symbol: SYN). The transfer
agent, registrar and dividend disbursing agent for shares of Common Stock is
Wachovia Bank of North Carolina, N.A., Corporate Trust Department, Post Office
Box 3001, Winston-Salem, N.C. 27102-3001.
Dividends. Holders of Syntex Common Stock may receive dividends as and
when declared by the Board of Directors of Syntex out of any funds legally
available for the payment of dividends. A dividend of $0.26 per share was
paid on June 8, 1994; it is not expected that any further dividend will be
paid prior to the Effective Time of the Merger.
Liquidation. Upon any liquidation or dissolution of Syntex, whether
voluntary or involuntary, Panama law makes the Directors trustees to settle
the affairs of the business, collect any debts owed to it, and sell its
assets. After the Directors have paid the debts of Syntex, they must divide
the moneys and property of Syntex among the holders of Syntex Common Stock. A
merger or consolidation is not considered a liquidation or dissolution for
this purpose.
Voting and Pre-emptive Rights. Holders of Syntex Common Stock are
entitled to one vote per share for the election of directors and upon all
matters on which stockholders are entitled to vote. Holders of Syntex Common
Stock are not entitled to preemptive rights for the purchase of additional
shares of Syntex Common Stock.
DESCRIPTION OF ROCHE CAPITAL
LIMITED CONVERSION PREFERRED STOCK
Roche Capital has authorized the issuance of 650,000 shares of Limited
Conversion Preferred Stock. The stated value of each share of LCPS is $1000.00
("Stated Value"). Shares of LCPS will have a ten year term. Currently no
shares of LCPS are issued and outstanding. The LCPS will not be listed on any
securities exchange.
Stockholders are urged to read carefully the information set forth under
"Risk Factors".
Dividends. Holders of the LCPS, in preference to the rights of the
holders of Roche Capital common stock, will be entitled to receive, subject to
the restrictions set forth below, when and as declared by the Board of
Directors of Roche Capital cumulative dividends at a rate of 3% per annum
(computed on the basis of a 360-day year) on the liquidation value of each
share of LCPS on and as of the most recent Dividend Payment Date (as defined
below) out of funds legally available for the payment of dividends. Such
dividends will be payable annually in arrears each year on the date of the
anniversary of the issuance of the LCPS (each such date being referred to
herein as a "Dividend Payment Date"), commencing on the first Dividend Payment
Date after the issuance of such share. Accrued and unpaid dividends on
outstanding shares of LCPS, if any, will be added to the Liquidation Value (as
defined below) of such shares on and as of the Dividend Payment Date on which
such dividends were originally scheduled to be paid and shall thereupon cease
to be accrued and unpaid dividends.
Dividends will begin to accrue (whether or not declared) and be
cumulative on outstanding shares of the LCPS from the date of issue of each
such share of LCPS. Accrued but unpaid dividends will not bear interest.
Dividends paid on shares of the LCPS in an amount less than the total amount
of such dividends at the time accrued and payable on such shares will be
allocated pro rata on a share-by-share basis among all shares of LCPS at the
time outstanding. The Board of Directors of Roche Capital may fix a record
date for the determination of holders entitled to receive payment of any
dividend declared thereon, which record date will not be more than 60 days
prior to the date fixed for any such payment.
In no event will any dividend in cash be paid or set apart for payment on
shares of stock ranking pari passu (either as to dividends or upon
liquidation, dissolution, or winding up) with the LCPS unless,
contemporaneously therewith, a like ratable dividend in cash is declared by
the Board of Directors of Roche Capital, paid or set aside for payment on or
in respect of the shares of LCPS outstanding at the time.
Whenever dividends payable on the LCPS are in arrears, thereafter and
until all accrued and unpaid dividends, whether or not declared, on
outstanding shares of the LCPS shall have been paid as provided above, Roche
Capital may not (i) declare or pay dividends on, or make any other
distributions on, any shares of common stock or any stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
LCPS; (ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the LCPS, except like dividends
paid ratably (according to respective aggregate Liquidation Values) on shares
of the LCPS and all other stock ranking on a parity therewith on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or (iii) redeem,
purchase or otherwise acquire for value any shares of common stock or stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the LCPS; provided that Roche Capital may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of Roche Capital ranking junior (as to dividends and upon
liquidation, dissolution and winding up) to the LCPS.
Roche Capital will not permit any subsidiary of Roche Capital to purchase
or otherwise acquire for value any shares of the capital stock of Roche
Capital unless Roche Capital could, under provisions of the preceding
paragraph, purchase or otherwise acquire such shares at such time and in such
manner.
Voting Rights. Holders of the LCPS will have no voting rights except (i)
as required under Panama law and (ii) that the approval of at least a majority
of the outstanding shares of LCPS will be required to change the terms and
provisions of the LCPS (whether by amendment to the Certificate of
Incorporation of Roche Capital or otherwise) in a manner that affects
adversely the rights and preference of such holders.
Transfer Restrictions. Shares of the LCPS may not be transferred except
(i) in the case of the LCPS held by an individual, to the estate or a member
of the immediate family of such individual as that term is defined in Rule
16a-1(e) under the Exchange Act or to an entity all of the owners of which are
members of the immediate family of such individual, (ii) in the case of a
corporation or a partnership, to a wholly owned subsidiary of such corporation
or partnership or (iii) in either case, to an institution qualified as tax
exempt under Section 501(c)(3) of the Code.
Liquidation. Upon any liquidation, dissolution or winding up of Roche
Capital, a holder of shares of the LCPS will be entitled to a payment in an
amount equal to the Liquidation Value of such share, together with any accrued
and unpaid dividends thereon, at the time fixed for such liquidation,
dissolution or winding up, before any payment will be made or any assets
distributed to the holders of the common stock or any other stock of Roche
Capital ranking junior (as to dividends and upon distribution, liquidation or
winding up) to the LCPS. Roche Capital will give each holder of the LCPS
notice of any such liquidation, dissolution or winding up at least 60 days
prior to consummation thereof. "Liquidation Value" means, with respect to any
share of the LCPS, (i) at any time on or prior to the first Dividend Payment
Date with respect to such share, the Stated Value thereof (the "Initial
Liquidation Value") and (ii) thereafter, the sum of the Initial Liquidation
Value and the aggregate of all accrued and unpaid dividends on such share on
and as of the immediately preceding Dividend Payment Date without regard to
whether any such dividends have been added to the Liquidation Value of such
share. If the assets of Roche Capital, or the proceeds thereof, are not
sufficient to pay in full the aggregate Liquidation Value payable to the
holders of outstanding shares of the LCPS and all shares of any stock ranking
pari passu therewith (either as to dividends or upon dissolution, liquidation
or winding up), if any, then the holders of all such shares will share ratably
(according to respective aggregate Liquidation Values) in such distribution of
assets, or the proceeds thereof, in accordance with the amount which would be
payable on such distribution if the amounts to which the holders of all
outstanding shares of the LCPS and the holders of all outstanding shares of
such parity stock are entitled were paid in full. Except as described in this
paragraph, holders of the LCPS will not be entitled to any distribution in
respect of the LCPS in the event of liquidation, dissolution or winding up of
the affairs of Roche Capital.
Neither the voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially
all the property or assets of Roche Capital nor the consolidation or merger
(or similar combination) of Roche Capital with or into one or more other
corporations will, without further corporate action, be deemed to be a
liquidation, dissolution or winding up of Roche Capital, voluntary or
involuntary.
Redemption. Roche Capital may redeem outstanding shares, at any time in
whole or from time to time in part at a redemption price ("Redemption Price")
equal to the aggregate Liquidation Value of such shares on and as of the
redemption date ("Redemption Date") on which such redemption is to occur,
together with accrued and unpaid dividends thereon to but not including the
date fixed for such redemption, and to the extent Roche Capital shall have
funds legally available for such payment (i) with the consent of the holder to
be so redeemed, (ii) if such redemption, in the reasonable judgment of Roche
Capital, is necessary to terminate reporting and registration requirements of
Roche Capital under the Exchange Act or (iii) if such redemption, in the
reasonable judgment of Roche Capital, is necessary to avoid application of
registration or reporting obligations under applicable securities laws to
Roche Capital, any affiliate thereof, or securities issuable upon exchange of
the LCPS. If Roche Capital were to redeem less than all outstanding shares of
the LCPS for the purposes described in clauses (ii) or (iii) of the preceding
sentence, shares would be redeemed in the inverse order of size of the
aggregate number of shares held of record (within the meaning of Rule 12g5-1
under the Exchange Act) of each holder or in such other reasonable manner as
may be selected by Roche Capital in its sole discretion from time to time.
The LCPS will be subject to mandatory redemption at the end of its
ten-year term.
Exchange. Shares of the LCPS may be exchanged, beginning on the second
anniversary of the issuance of such shares (or earlier, upon adoption by Roche
Capital of a plan of liquidation, dissolution or winding up of Roche Capital)
("Liquidation") and on each anniversary thereafter prior to the mandatory
redemption date (the "Exchange Date"), for Genussscheine of Roche ("Non-voting
Equity Securities" or "NESs") (the "Exchange"). The Exchange right is
exercisable against Roche Capital. Provided a holder complies with certain
conditions, described below, such holder of outstanding shares of LCPS will be
entitled to receive in exchange for each share of LCPS to be exchanged by such
holder a number of NESs equal to the Stated Value divided by $7,143.86,
representing the April 29, 1994 U.S. Dollar equivalent of 150% of the closing
price on April 29, 1994 of Roche's NESs (the "Exchange Ratio"), subject to
certain adjustments, as described below. No fractional NESs will be issued on
exchange of shares of LCPS. A holder who, in the absence of the preceding
sentence, would otherwise be entitled to a fractional NES will receive cash in
U.S. dollars equal to the value of such fractional NESs based upon the Sale
Price (as defined below) of a single NES on the Trading Day (as defined
below) immediately preceding the Exchange Date. At the time of any exchange
hereunder, the rights of the holders of LCPS so exchanged as shareholders of
Roche Capital (with respect to such exchanged LCPS shares) will cease, and the
person or persons entitled to receive the NESs issuable upon exchange will be
treated for all purposes as the registered holder or holders of such NESs as
of the Exchange Date.
"Sale Price" means the closing sale price per Non-voting Equity Security in
Swiss Francs (or, if no closing sale price is reported, the mean of the
closing bid and closing asked prices) on the Zurich Stock Exchange on such
Trading Day. The equivalent price in U.S. dollars will be based on the Noon
Buying Rate on such Trading Day, or if such Trading Day is a Saturday or
Sunday or other day on which commercial banks in The City of New York are
obligated or authorized to close, will be based on the Noon Buying Rate on the
preceding day for which a Noon Buying Rate is available. "Trading Day" means
each day on which the Zurich Stock Exchange is open for trading, other than
day a day on which such exchange is scheduled to close prior to its regular
weekday closing time. The "Noon Buying Rate" as of any date means the noon
buying rate in The City of New York for cable transfers in Swiss francs (to
purchase U.S. dollars and sell Swiss francs) as certified for customs
purposes by the Federal Reserve Bank of New York in effect on such date.
Prior to effecting an Exchange, (i) each exchanging holder shall have
delivered to Roche Capital, not later than 20 days prior to the Exchange Date,
a certification in a form to be provided by Roche Capital of such information
as Roche Capital deems necessary in order to determine the availability of an
exemption from registration under applicable securities laws with respect to
such exchanging holder, and (ii) Roche Capital shall have received an opinion
of counsel to Roche Capital that such Exchange (together with all other
relevant Exchanges) is exempt from registration under applicable securities
laws (the "Exchange Conditions"). There can be no assurance that any Exchange
will be exempt from registration under United States securities laws, and the
availability of such an exemption may depend on factors unrelated to and
beyond the control of a holder desiring to make such an exchange. There is
therefore no assurance that any Exchange can be effected. Any stockholder who
may wish to receive LCPS in the Merger is urged to consult his or her legal
and financial advisors as to the potential availability of an exemption from
registration for such holder in connection with any Exchange.
The Exchange Ratio will be adjusted if any of the following events occur:
(i) Rights Issues
If Roche shall by way of Subscription Rights (as defined below)
(otherwise than in lieu of a cash dividend), offer new Shares, Non-voting
Equity Securities, new participation certificates and other new securities
forming part of the capital of Roche for subscription to the holders of
existing Non-voting Equity Securities (a "Rights Issue"), then the
Exchange Ratio will be adjusted by multiplying the Exchange Ratio in
effect immediately prior to the issuance of the Subscription Rights by a
fraction, the numerator of which will be the Value of a Non-voting Equity
Security for the period ending on the date immediately preceding the date
on which the Non-voting Equity Securities are traded ex such Subscription
Rights and the denominator of which is (x) such Value of a Non-voting
Equity Security for such period less (y) the Value of the Subscription
Right offered for each Non-voting Equity Security for the period
commencing on the date the Subscription Rights are first traded on the
Zurich Stock Exchange.
"Subscription Rights" means the entitlement or right, as the case may
be, attached to each existing Non-voting Equity Security to subscribe or
acquire, directly or indirectly, new Shares of Roche, Non-voting Equity
Securities or participation certificates of Roche (as the case may be)
(including, for the avoidance of doubt, any issues of convertible bonds,
exchangeable bonds or bonds with warrants) pursuant to a Rights Issue by
Roche (whether by the exercise of one Subscription Right, a part of a
Subscription Right or an aggregate number of Subscription Rights).
"Value" means the average of the daily closing prices (the "Price")
of the Non-voting Equity Securities or the Subscription Rights, as the
case may be, on the Zurich Stock Exchange during the relevant ten Trading
Day period (or in the case of Subscription Rights, such shorter period as
the Subscription Rights may be traded) rounded to the nearest whole Swiss
franc, provided that if the Subscription Right is not traded on the Zurich
Stock Exchange, the Price will be the price published by the Zurich Stock
Exchange in respect of such Subscription Rights.
(ii) Bonus Issues
If Roche shall make an issue of Shares, Non-voting Equity Securities
or participation certificates of Roche credited as fully paid to the
holders of Non-voting Equity Securities by way of capitalization of
profits or reserves (a "Bonus Issue") (otherwise than in lieu of a cash
dividend and without any payment or other consideration being made or
given by such holders), then the Exchange Ratio will be adjusted by
multiplying the Exchange Ratio in effect immediately prior to such Bonus
Issue by a fraction, the numerator of which is the Value of a Non-voting
Equity Security for the period ending on the date immediately preceding
the date on which the Non-voting Equity Securities are traded ex such
Bonus Issue and the denominator of which is the Value of a Non-voting
Equity Security for the period commencing on such ex-date.
(iii) Non-voting Equity Security Splits
If Roche shall subdivide the Non-voting Equity Securities into a
greater number of Non-voting Equity Securities, then the Exchange Ratio
will be multiplied by the number of subdivided Non-voting Equity
Securities replacing one former Non-voting Equity Security.
(iv) Non-Voting Equity Security Consolidations
If Roche shall consolidate its Non-voting Equity Securities into a
smaller number of Non-voting Equity Securities, then the Exchange Ratio
will be divided by the number of former Non-voting Equity Securities which
corresponds to one consolidated Non-voting Equity Security.
(v) Extraordinary Distributions
If Roche shall, by dividend or otherwise, distribute securities,
assets, or rights thereto, to holders of Non-voting Equity Securities (but
excluding any dividend, whether in cash or property, that is distributed
in the ordinary course, and any rights or issues referred to above in
subparagraph 9(F)(i) or 9(F)(ii)), then the Exchange Ratio will be
adjusted by multiplying the Exchange Ratio in effect immediately prior to
such distribution by a fraction, the numerator of which is the closing
Sale Price of a Non-voting Equity Security in Swiss francs (or, if no
closing Sale Price is reported, the mean of the bid and asked prices) on
the Zurich Stock Exchange on the day immediately preceding the date on
which the Non-voting Equity Security is traded ex such distribution and
the denominator of which is the closing Sale Price of a Non-voting Equity
Security in Swiss francs (or, if no closing Sale Price is reported, the
mean of the bid and asked prices) on the Zurich Stock Exchange on such
ex-date.
(vi) Exchange and Liquidation
If the holders of Non-voting Equity Securities shall be required to
exchange Non-voting Equity Securities for one or more Shares or
participation certificates, other securities, cash and/or property or if
on a liquidation of Roche the Non-voting Equity Securities shall receive a
return of capital, whether in the form of securities, cash and/or
property, then the holder of the shares of LCPS will be entitled to
receive on exchange the kind and amount of securities, cash and/or
property that the holder would have received if the holder had exchanged
such holder's shares of LCPS immediately prior to the effective date of
the transaction.
(vii) Other Adjustments
Adjustments will not be made in any other circumstances; subject to
the right of Roche Capital (after consultation with Roche) to make such
adjustments as it believes appropriate in circumstances where an event or
events occur which it believes should give rise to such adjustment
provided that any such adjustments will only be made for the benefit of
the holders of the shares of LCPS generally (without considering the
circumstances of any individual holder or the tax or other consequences of
such adjustments in any particular jurisdiction).
The adjustments described in (i), (ii) and (v) will be made only if
the Non-voting Equity Securities trade ex such Rights Issue, Bonus Issue
or extraordinary distribution on or prior to the effective date of the
transaction.
If Roche is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, the
right to exchange a share of LCPS for NESs will be converted into a right
to exchange such share of LCPS into the kind and amount of securities,
cash or other assets that the holder would have received if the holder had
exchanged such holder's shares of LCPS immediately prior to the effective
date of the transaction.
Post-Exchange Transfer Restrictions. The Non-voting Equity Securities
have not been and will not be registered under the Securities Act. Therefore,
the Non-voting Equity Securities may not be offered or sold in the United
States or to, or for the account or benefit of, U.S. persons (as defined in
Regulation S under the Securities Act), except to qualified institutional
buyers (as defined in Rule 144A) in reliance on Rule 144A or to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under
the Securities Act) in transactions exempt from the registration requirements
of the Securities Act. Upon exchange of LCPSs for NESs, the exchanging
holder shall agree with Roche in the certification required by the terms of
the LCPS to the foregoing.
Exchange Termination. The rights of holders to exchange shares of LCPS
in accordance with the terms thereof will terminate at the election of Roche
Capital if, at any time, Roche is required under United States Securities laws
to (i) become a reporting company subject to the requirements of Section 12 of
the Exchange Act or (ii) provide to the Commission financial or other
information with respect to Roche not then published elsewhere by Roche.
In the event the rights of holders of the LCPS to exchange shares of LCPS
are terminated by Roche Capital pursuant to the terms described in this
paragraph, holders whose rights are so terminated will have the right to
require Roche Capital to redeem such holders' shares of LCPS at a redemption
price equal to the aggregate Stated Value, plus any accrued and unpaid
dividends, as of the date such holder requests redemption.
Rank. The Limited Conversion Preferred Stock will rank senior to the
common stock of Roche Capital with respect to dividend payments, liquidation
preference and redemption.
Effect of Corporate Combination or Sale of Assets. Roche Capital will
not be a party to any consolidation, merger or binding share exchange or a
transfer of all or substantially all of its assets in a transaction in which
the LCPS are changed into or mandatorily exchanged for other securities or
property unless the holders of the LCPS shall receive securities in such
transaction which are exchangeable for NESs and unless Roche Capital has
received an opinion of Davis Polk & Wardwell (or other counsel satisfactory to
the holders of a majority of the outstanding shares of LCPS at the time of
such transaction) to the effect that receipt of such securities or other
property shall not subject the holders of such LCPS to U.S. federal income
tax.
Reacquired Shares. Any shares of LCPS purchased or otherwise acquired by
Roche Capital in any manner whatsoever (including by redemption or
reclassification) may, in the sole discretion of Roche Capital, be retired and
canceled promptly after the acquisition thereof. All such shares will upon
their retirement and upon the filing of any required certificate pursuant to
the Panama law, become authorized but unissued shares of preferred stock
without designation as to series and may be reissued as part of a new series
of preferred stock to be created by resolution or resolutions of the Board of
Directors of Roche Capital or as otherwise permitted under Panama law.
GENERAL COMPARISON OF
RIGHTS OF HOLDERS OF SYNTEX
COMMON STOCK AND ROCHE CAPITAL
LIMITED CONVERSION PREFERRED STOCK
If the stockholders of Syntex approve the Merger Agreement and the
Merger is consummated, some stockholders of Syntex may become stockholders of
Roche Capital. Both Syntex and Roche Capital are organized under and subject
to the General Corporate Law of Panama ("Panama Law"). The rights of Syntex
stockholders who become holders of LCPS of Roche Capital will be governed by
the Panama Law and Roche Capital's Certificate of Incorporation and Bylaws.
The following is a summary of the material differences of the rights of
holders of Syntex Common Stock under Panama Law and Syntex's articles of
incorporation and bylaws, on the one hand, and the rights of holders of LCPS
under Panama Law and Roche Capital's certificate of incorporation and bylaws,
on the other hand. THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE A COMPLETE
DISCUSSION OF, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO PANAMA LAW,
THE SYNTEX ARTICLES OF INCORPORATION AND BYLAWS AND THE ROCHE CAPITAL
CERTIFICATE OF INCORPORATION AND BYLAWS.
Transfer of Shares and Restrictions. Shares of Syntex Common Stock are
not subject to any restrictions on alienation. Syntex Common Stock is
currently traded on the NYSE. After the Effective Time of the Merger, Syntex
Common Stock will no longer be traded on the NYSE, and there will be no
further registration of transfer of shares.
Shares of LCPS will not be listed on any securities exchange. Moreover,
shares of the LCPS may not be transferred except, (i) in the case of the LCPS
held by an individual, to the estate or a member of the immediate family of
such individual or to an entity all of the owners of which are members of the
immediate family of such individual, (ii) in the case of a corporation or a
partnership, to a wholly owned subsidiary of such corporation or partnership
or (iii) in either case, to an institution qualified as tax exempt under
Section 501(c)(3) of the Code.
Voting Rights. Holders of Syntex Common Stock are entitled to one vote
per share for the election of directors and upon all matters on which
stockholders are entitled to vote. Under Panama Law, the vote of the holders
of a majority of the voting securities of a corporation is necessary to effect
a sale of substantially all assets or a corporate combination.
Holders of Roche Capital LCPS will have no voting rights except (i) as
required by Panama Law and (ii) that the approval of at least a majority of
the outstanding shares of the LCPS will be required to change the terms and
provisions of the LCPS in a manner that affects adversely the rights and
preferences of such holders. The holders of the LCPS will have no right to
vote on any decision by Roche Capital to sell substantially all its assets or
to effect any merger or other business combination.
Dividends. Holders of Syntex Common Stock may receive dividends, subject
to the rights of holders of preferred stock, if any, as and when declared by
the Board of Directors of Syntex out of funds legally available for the
payment of dividends. It is not anticipated that further dividends with
respect to Syntex Common Stock will be paid prior to the Effective Time.
Holders of the LCPS, in preference to the rights of the holders of Roche
Capital common stock, shall be entitled to receive cumulative dividends at a
rate of 3% per annum on the liquidation value of each share out of funds
legally available for the payment of dividends, when and as declared by the
Board of Directors of Roche Capital; such dividends will be payable annually.
Liquidation. Upon any liquidation or dissolution of Syntex, whether
voluntary or involuntary, Panama law makes the Directors trustees to settle
the affairs of the business, collect any debts owed to it, and sell its
assets. After the Directors have paid the debts of Syntex, they must
divide the moneys and property of Syntex among the holders of Syntex Common
Stock. A merger or consolidation is not considered a liquidation or
dissolution for this purpose.
Upon any liquidation, dissolution or winding up of Roche Capital, a
holder of shares of the LCPS shall be entitled to a payment in an amount
equal to the Liquidation Value of such share, together with any accrued and
unpaid dividends thereon, at the time fixed for such liquidation,
dissolution or winding up, before any payment shall be made or any assets
distributed to the holders of the common stock or any other stock of Roche
Capital ranking junior (as to dividends and upon distribution, liquidation
or winding up) to the LCPS. If the assets of Roche Capital, or the
proceeds thereof, are not sufficient to pay in full the aggregate
Liquidation Value payable to the holders of outstanding shares of the LCPS
and all shares of any stock ranking pari passu therewith (either as to
dividends or upon dissolution, liquidation or winding up), if any, then the
holders of all such shares will share ratably (according to respective
aggregate Liquidation Values) in such distribution of assets, or the
proceeds thereof, in accordance with the amount which would be payable on
such distribution if the amounts to which the holders of all outstanding
shares of the LCPS and the holders of all outstanding shares of such parity
stock are entitled were paid in full.
Redemption. Holders of Shares of Syntex Common Stock have no stated
rights to redemption. The LCPS will be subject to mandatory redemption at
the end of its ten-year term.
Roche Capital may redeem outstanding shares of the LCPS (i) with the
consent of the holder if to be so redeemed, (ii) if such redemption, in the
reasonable judgment of Roche Capital, is necessary to terminate reporting
and registration requirements of Roche Capital under the Exchange Act or
(iii) such redemption, in the reasonable judgment of the Roche Capital, is
necessary to avoid application of registration or reporting obligations
under applicable securities laws to Roche Capital, any affiliate thereof,
or securities issuable upon exchange of the LCPS. If Roche Capital were to
redeem less than all outstanding shares of the LCPS for the purposes
described in clauses (ii) or (iii) of the preceding sentence, shares would
be redeemed in the inverse order of size of the aggregate number of shares
held of record (within the meaning of Rule 12g5-1 under the Exchange Act)
of each holder or in such other reasonable manner as may be selected by
Roche Capital in its sole discretion. See "Description of Limited
Conversion Preferred Stock -- Redemption".
Exchange. Shares of Syntex Common Stock are not convertible or
exchangeable for any other security.
Shares of the LCPS may be exchanged, beginning on the second anniversary
of the issuance of such shares (or earlier, upon adoption by Roche Capital of
a plan of liquidation, dissolution or winding up of Roche Capital) and on each
anniversary thereafter prior to the mandatory redemption date, for Non-voting
Equity Securities of Roche. Each share of the LCPS is only exchangeable
annually for a number of Non-voting Equity Securities equal to the stated
value thereof divided by $7,143.86, subject to certain adjustments. No
fractional Non-voting Equity Securities will be issued. Prior to effecting
any exchange, the exchanging holder must comply with the Exchange Condition.
The rights of holders to exchange shares of LCPS will terminate at the
election of Roche Capital if, at any time, Roche is required under the United
States securities laws to (i) become a reporting company subject to the
requirements of Section 12 of the Exchange Act or (ii) provide to the
Commission financial or other information with respect to Roche Capital not
then published elsewhere by Roche Capital. In the event the rights of holders
of the LCPS to exchange shares of the LCPS are terminated by Roche Capital as
described in the preceding sentence, holders whose rights are so terminated
will have the right to require Roche Capital to redeem such holders' LCPS at a
redemption price equal to the aggregate stated value, plus any accrued and
unpaid dividends, as of the date such holder requests redemption. See
"Description of Limited Conversion Preferred Stock -- Exchange".
Information Available to Stockholders. Syntex is subject to the
informational requirements of the Exchange Act, and as such, holders of Syntex
Common Stock receive annual reports; Syntex annual reports on Forms 10-K and
quarterly reports on Form 10-Q are publicly available. Syntex will no longer
be required to file such reports after the Effective Time of the Merger.
Roche Capital will not register the LCPS under Section 12(b) of the
Exchange Act. Roche Capital currently intends to suspend filing reports
pursuant to the Exchange Act, which it may be required to file under
reporting obligations to which it may be subject as a successor to Syntex
at the end of its current fiscal year, as permitted by Commission rules.
Thereafter, publicly available information with respect to Roche Capital
(and therefore, information with respect to Syntex) will be limited.
CERTAIN RELATED AGREEMENTS
Each of the agreements described in this section has been filed with the
Commission as exhibits to the Registration Statement of Roche Capital on Form
F-4.
Guaranty. The following summary of the Guaranty is qualified in its
entirety by reference to the Guaranty.
Roche has agreed, by means of a separate Guaranty dated as of May 1, 1994
(the "Guaranty") to guarantee to Syntex the prompt and full performance and
discharge by Roche Capital and Roche (Panama) (together, for purposes of this
section, the "Obligors") of all of the covenants, agreements, obligations,
liabilities, representations and warranties of the Obligors under the Merger
Agreement (collectively, the "Obligations"), including, without limitation,
the due and punctual payment of all amounts which may become due and payable
to Syntex. If the Obligors shall default in the due and punctual performance
of any of the Obligations or in the full and timely payment of any amounts
owed pursuant to the Obligations, Roche will promptly cause to be performed
such Obligations and will promptly cause full payment to be made of any amount
due with respect thereto at its sole cost and expense.
Roche has further guaranteed to those officers and directors of Syntex
whom Roche Capital has agreed to indemnify and hold harmless pursuant to
Section 7.03 of the Merger Agreement the full and complete performance by the
Obligors of each and all of the obligations set forth in said Section 7.03,
including, without limitation, the amounts due and payable to such officers
and directors.
Keepwell Agreement. The following summary of the Keepwell Agreement is
qualified in its entirety by reference to the Keepwell Agreement.
Roche has agreed, by means of a Keepwell Agreement between Roche Capital
and Roche dated as of May 1, 1994 (the "Keepwell Agreement"), for the term of
the Keepwell Agreement to directly or indirectly own or hold the entire legal
title to and beneficial interest in all the outstanding shares of stock of
Roche Capital, or its successor, having the right to vote for the election of
members of the Board of Directors of Roche Capital, or its successor, as
applicable. Roche has further agreed to cause Roche Capital, at such time or
times as Roche Capital is obligated under the terms of the LCPS to make
payments or distributions to holders of LCPS or to redeem the LCPS, to have a
consolidated net worth at least equal to the amount necessary to enable Roche
Capital to make such distributions, payments or redemptions. Finally, under
the terms of the LCPS, holders thereof have certain rights to exchange shares
of LCPS for Non-Voting Equity Securities of Roche. See "Description of Roche
Capital Limited Conversion Preferred Stock -- Exchange". Pursuant to the
Keepwell Agreement, Roche has agreed to make available sufficient Non-voting
Equity Securities to enable Roche Capital to meet its exchange obligations
under the terms of the LCPS.
The Keepwell Agreement is not a guaranty by Roche and does not confer
upon any person other than Roche Capital any right or claim against Roche.
The terms of the Keepwell Agreement do not prevent Roche from causing certain
reorganizations or other business combinations involving Roche Capital to
occur (without any vote of the holders of LCPS), the effect of which may be
adverse to the holders of LCPS.
Share Trading Agreement. The following summary of the Share Trading
Agreement is qualified in its entirety by reference to the Share Trading
Agreement.
Roche has agreed, by means of a Share Trading Agreement dated as of May
1, 1994 between Roche and Roche Capital (the "Share Trading Agreement"), to
use its best efforts to cause the Non-voting Equity Securities which may be
issued in exchange for LCPS to be eligible for trading in the securities
market in which the Non-voting Equity Securities are then principally traded.
The Share Trading Agreement shall terminate at such time as no LCPS are
outstanding and all obligations of Roche Capital to exchange LCPS for
Non-voting Equity Securities have been satisfied.
MANAGEMENT AFTER THE MERGER
From and after the Effective Time of the Merger until successors are
duly elected or appointed in accordance with applicable law, the directors of
Roche (Panama) at the Effective Time will be the directors of the Surviving
Corporation and the officers of Syntex at the Effective Time of the Merger
will be the officers of the Surviving Corporation.
Directors and Executive Officers of Roche Capital. Listed below are
the names of the directors and executive officers of Roche Capital. The
directors and executive officers of Roche Capital are also the directors
and executive officers of Roche (Panama). There are no arrangements or
understandings between any of the directors and executive officers of Roche
Capital and Roche (Panama) and any other person pursuant to which any such
director or officer was selected to be a director or executive officer of
Roche Capital or Roche (Panama), respectively. None of the directors and
officers of Roche Capital owns any shares of Roche Capital, Roche (Panama)
or Syntex.
Fritz Gerber. Elected to the Board of Directors of Roche Capital on April
29, 1994 and will continue as a Director until such time that a successor
is duly elected. President of Roche Capital since April 29, 1994.
Henri B. Meier. Elected to the Board of Directors of Roche Capital on
April 29, 1994 and will continue as a Director until such time that a
successor is duly elected. Vice President and Treasurer of Roche Capital
since April 29, 1994.
Lambertus H. M. Van Wilgenburg. Elected by the Board of Directors of
Roche Capital on April 29, 1994 and will continue as a Director until such
time that a successor is duly elected. Secretary of Roche Capital since
April 29, 1994.
Compensation of Directors of Roche Capital. The directors of Roche
Capital receive no compensation for services provided in their capacities
as directors of Roche Capital.
Executive Officers of Syntex. Listed below are the executive officers
of Syntex. Pursuant to the Merger Agreement, the officers of Syntex at the
Effective Time of the Merger will serve as the officers of the Surviving
Corporation. There are no arrangements or understandings between any of
the executive officers of Syntex and any other person pursuant to which
such officer was selected to be an executive officer of Syntex. There are
no family relationships between any of the executive officers of Syntex.
Melvin D. Booth. Mr. Booth has been the President of Syntex
Laboratories since 1993 and Vice President of Syntex since 1992. From 1992
to 1993 he served as the President of Syntex Pharmaceuticals Pacific. From
1991 to 1992 he served as an Area Vice President of Syntex, Inc. From 1988
to 1991 he served as the President of Syntex, Inc., Canada. Mr. Booth is
49 years of age. As of September 16, 1994, Mr. Booth beneficially owned
167,000 shares (less than 1%) of Syntex Common Stock, all of which were
shares issuable under currently exercisable stock options and options
exercisable within sixty days of September 16, 1994, of which 128,200 have
an exercise price of less than $24 per share.
Robert H. Ells. Mr. Ells has been the Group Vice President,
Pharmaceutical and Chemical Operations and Services since 1993. From 1988
to 1993 he served as Vice President, Chemical Operations and Engineering
Services of Syntex. Mr. Ells is 57 years of age. As of September 16,
1994, Mr. Ells beneficially owned 108,500 shares (less than 1%) of Syntex
Common Stock, all of which were shares issuable under currently exercisable
stock options and options exercisable within sixty days of September 16,
1994, of which 88,600 have an exercise price of less than $24 per share.
Neil Flanzraich. Mr. Flanzraich has been the Senior Vice President
and General Counsel of Syntex since 1992. From 1988 to 1992 he served as
Senior Vice President and Co-General Counsel. Mr. Flanzraich is 51 years
of age. As of September 16, 1994, Mr. Flanzraich beneficially owned
198,400 shares (less than 1%) of Syntex Common Stock, all of which were
shares issuable under currently exercisable stock options and options
exercisable within sixty days of September 16, 1994, of which 156,400 have
an exercise price of less than $24 per share.
Paul E. Freiman. Mr. Freiman has been a director of Syntex since 1985
and is a member of the Finance Committee, the Nominating Committee, the Board
Committee on Science at Syntex and the Special Committee. Mr. Freiman was
elected President and Chief Operating Officer of Syntex in January 1987; since
August 1989, he has served as Chief Executive Officer of Syntex, and was
elected Chairman of the Board of Directors in July 1990. Mr. Freiman is 60
years of age. As of September 16, 1994, Mr. Freiman beneficially owned 654,000
shares (less than 1%) of Syntex Common Stock, all of which were shares
issuable under currently exercisable stock options and options exercisable
within sixty days of September 16, 1994, of which 535,000 have an exercise
price of less than $24 per share.
Darlene Friedman. Mrs. Friedman has been the Senior Vice President,
Human Resources of Syntex since 1993. From 1992 to 1993 she served as the
Vice President, Human Resources, Syntex (U.S.A.) Inc. During 1992 she served
as Executive Director, Human Resources for Syntex. From 1991 to 1992 she
served as Corporate Director, Human Resources. From 1988 to 1991 she served
as Director of Human Resources. Mrs. Friedman is 51 years of age. As of
September 16, 1994, Mrs. Friedman beneficially owned 137,700 shares (less than
1%) of Syntex Common Stock, all of which were shares issuable under currently
exercisable stock options and options exercisable within sixty days of
September 16, 1994, of which 113,700 have an exercise price of less than $24
per share.
Thomas L. Gutshall. Mr. Gutshall has been an Executive Vice President of
Syntex since 1986. Mr. Gutshall is 56 years of age. As of September 16,
1994, Mr. Gutshall beneficially owned 213,400 shares (less than 1%) of Syntex
Common Stock, all of which were shares issuable under currently exercisable
stock options and options exercisable within sixty days of September 16, 1994,
of which 165,400 have an exercise price of less than $24 per share.
George Holder. Mr. Holder has been President of Syntex Agribusiness,
Inc. since 1988. Mr. Holder is 58 years of age. As of September 16, 1994,
Mr. Holder beneficially owned 67,400 shares (less than 1%) of Syntex Common
Stock, all of which were shares issuable under currently exercisable stock
options and options exercisable within sixty days of September 16, 1994, of
which 55,400 have an exercise price of less than $24 per share.
Robert A. Lewis. Dr. Lewis has been the President, Discovery Research
since 1992. From 1989 to 1992 he served as Executive Vice President and
Director, Basic Research and Drug Evaluation, Syntex Research. From 1988 to
1989, he served as the Senior Vice President and Director, Basic Research,
Syntex Research. Dr. Lewis is 49 years of age. As of September 16, 1994, Dr.
Lewis beneficially owned 172,042 shares (less than 1%) of Syntex Common Stock,
all of which were shares issuable under currently exercisable stock options
and options exercisable within sixty days of September 16, 1994, of which
126,042 have an exercise price of less than $24 per share.
Richard P. Powers. Mr. Powers has been the Senior Vice President and
Chief Financial Officer of Syntex since 1986. Mr. Powers is 53 years of age.
As of September 16, 1994, Mr. Powers beneficially owned 161,200 shares (less
than 1%) of Syntex Common Stock, all of which were shares issuable under
currently exercisable stock options and options exercisable within sixty days
of September 16, 1994, of which 126,200 have an exercise price of less than
$24 per share.
Robert L. Roe. Dr. Roe has been the President, Developmental Research
since 1992. From 1989 to 1992 he served as the Executive Vice President and
Director, Medical Research and Pharmaceutical Development, Syntex Research.
From 1988 through 1989, Dr. Roe served as the Senior Vice President and
Director, Medical Research, Syntex Research. Dr. Roe is 53 years of age. As
of September 16, 1994, Dr. Roe beneficially owned 185,500 shares (less than
1%) of Syntex Common Stock, all of which were shares issuable under currently
exercisable stock options and options exercisable within sixty days of
September 16, 1994, of which 139,500 have an exercise price of less than $24
per share.
Kenneth Taylor. Dr. Taylor was elected a director of Syntex on September
12, 1994 and assumed the office of President and Chief Operating Officer on
September 13, 1994. Until the end of October, 1994, he will also continue to
serve as a Managing Director of Roche Products Ltd at Welwyn Garden City, U.K.
As of September 16, 1994, Dr. Taylor beneficially owned no shares of Syntex
Common Stock.
Jean-Charles Tschudin. Mr. Tschudin joined Syntex on March 28, 1994 as
Vice President and succeeded Dr. von Mutzenbecher as President, Syntex
Pharmaceuticals, Europe, when Dr. von Mutzenbecher retired on July 31, 1994.
From 1985 until 1994, Mr. Tschudin was with Johnson & Johnson International,
serving most recently as a European sector Vice President. Mr. Tschudin is 51
years of age. As of September 16, 1994, Mr. Tschudin beneficially owned
75,000 shares (less than 1%) of Syntex Common Stock, all of which were shares
issuable under currently exercisable stock options and options exercisable
within sixty days of September 16, 1994, and all of which have an exercise
price of less than $24 per share.
EXECUTIVE COMPENSATION OF SYNTEX AND CERTAIN OTHER BENEFITS
Summary Compensation Table
The following table summarizes, for each of the three fiscal years ended
July 31, 1994, 1993 and 1992, the compensation awarded to, paid to or earned
by the Chief Executive Officer (the "CEO") of Syntex and the other five most
highly compensated executive officers of Syntex (the "Named Executive
Officers").
Long-Term
Compensation
Number of
Annual Compensation Other Annua Securities All Other
_________________________ Compensation Underlying Compensation
Name and Principal Position Year Salary($) Bonus($)(1) ($)(2) l Options/SARs ($)(3)
___________________________ ____ ________ ___________ ____________ ____________ ____________
Paul E. Freiman 1994 680,000 374,000 0 44,028
Chairman of the Board; 1993 676,670 252,000 425,000 36,834
Chief Executive Officer 1992 633,333 350,000 50,000
James N. Wilson* 1994 450,000 200,000 0 35,482
President and Chief 1993 446,252 145,000 275,000 26,276
Operating Officer 1992 400,000 201,500 20,000
Gerhard von Mutzenbecher 1994 348,432 135,000 0 5,777
Vice President** 1993 348,090 99,800 89,000 2,400
1992 312,826 145,500 18,500
Thomas L. Gutshall 1994 325,000 120,000 0 26,296
Executive Vice President 1993 323,434 109,300 49,991 99,000 18,219
1992 302,417 160,400 15,000
Robert L. Roe 1994 320,000 130,000 0 22,479
Senior Vice President 1993 318,333 109,300 104,000 17,837
1992 263,000 153,200 25,000
Robert A. Lewis 1994 320,000 130,000 0 13,469
Senior Vice President 1993 318,333 109,300 104,000 11,798
1992 248,667 144,800 25,000
<FN>
_____________________
(1) Bonuses paid to all Named Executive Officers except Mr. Freiman for
fiscal year 1992 were awarded pursuant to Syntex's Management Incentive
Compensation Plan, and bonuses for the 1993 and 1994 fiscal years were
awarded pursuant to Syntex's Short-term Compensation Plan. Mr.
Freiman's bonus for each year was recommended by the Compensation and
Benefits Committee and approved by the Board of Directors.
(2) The only type of Other Annual Compensation for each of the Named
Executive Officers was in the form of perquisites. In the case of Mr.
Gutshall, the total amount indicated for fiscal year 1993 includes the
incremental cost to Syntex of his personal use of the corporate
aircraft, which was $30,852, the personal use portion of his Syntex
provided car, which was $15,492, and his home security system. In the
case of the other Named Executive Officers, the total amount of such
perquisites was less than the level required for reporting in fiscal
years 1993 and 1994.
(3) Includes amounts contributed by Syntex to the Syntex U.S. Employees
Retirement Savings Plan in the following amounts in fiscal years 1993
and 1994, respectively: Mr. Freiman, $8,994.00, $7,500.02; Mr. Wilson,
$8,994.00, $9,000.00; Mr. Gutshall, $8,994.00; $8,999.99; Dr. Roe,
$9,596.99, $9,000.00; Dr. Lewis, $9,878.24, $9,000.00. Also includes
amounts contributed by Syntex to the Supplemental Employee Retirement
Savings Plan for the account of each executive officer in the following
amounts in fiscal years 1993 and 1994, respectively: Mr. Freiman,
$24,839.50, $26,500.06; Mr. Wilson, $14,581.98, $18,375.00; Mr.
Gutshall, $7,274.66, $10,500.01; Dr. Roe, $6,319.68, $8,133.36; Dr.
Lewis, $0, $1,100.00. The remainder represents the value contributed
for the executive officer's life insurance premium, except that the
amount indicated for Dr. von Mutzenbecher represents the amount of
premiums paid by Syntex for his coverage under Syntex's Umbrella Medical
and Life Insurance Plan, whose participants include certain
management-level employees located outside of the United States.
- --------------------
* Mr. Wilson was elected a director of Syntex in 1990 and assumed the office
of President and Chief Operating Officer of Syntex on January 1, 1991. He
resigned as Director, President and Chief Operating Officer and as a member
of the Finance Committee effective as of September 12, 1994. From 1988 until
1990, Mr. Wilson was Chairman and Chief Executive Officer of Neurex
Corporation, a company engaged in pharmaceutical research. Mr. Wilson is 50
years of age. As of September 16, 1994, Mr. Wilson beneficially owned
357,600 shares (less than 1%) of Syntex Common Stock, all of which were
shares issuable under currently exercisable stock options and options
exercisable within sixty days of September 16, 1994, of which 275,000 have
an exercise price of less than $24 per share.
** Dr. von Mutzenbecher retired from Syntex effective as of the end of the
fiscal year ended July 31, 1994. Dr. von Mutzenbecher was the President,
Syntex Pharmaceuticals, Europe and Vice President, Syntex Corporation from
1992 until 1994. From 1987 to 1992 he served as the Regional Vice
President, Europe and Mexico, Syntex Pharmaceuticals International
Limited. Dr. von Mutzenbecher is 59 years of age. As of September 16,
1994, Dr. von Mutzenbecher beneficially owned 165,400 shares (less than
1%) of Syntex Common Stock, all of which were shares issuable under
currently exercisable stock options and options exercisable within sixty
days of September 16, 1994, of which 129,100 have an exercise price of
less than $24 per share.
Stock Option Grants in Fiscal 1994
No stock options were granted to any of the Named Executive Officers in
fiscal 1994. Effective as of the closing of the Tender Offer, all of Syntex's
stock-based compensation plans for employees and directors have been
terminated.
Aggregated Option Exercises in Fiscal 1994
and Fiscal Year-End Option Values
The following table sets forth the aggregated option exercises for the
Named Executive Officers in fiscal 1994 and the difference between the market
value of the Shares at fiscal year-end and the exercise price of exercisable
and unexercisable options.
Number of Securities Underlying Value of Unexercised In-
Unexercised Options at the-Money Options at
Number of July 31, 1994 July 31, 1994(1)
Shares Acquired Value -------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
Paul E. Freiman 0 $ 0 207,750 446,250 $1,064,176 $1,390,625
James N. Wilson 0 0 63,200 294,400 25,000 903,125
Gerhard von Mutzenbecher 10,800 96,947 66,150 99,250 304,447 293,250
Thomas L. Gutshall 15,600 155,953 105,650 107,750 579,378 323,250
Robert L. Roe . 7,600 79,344 71,250 114,250 281,088 338,250
Robert A. Lewis 0 0 57,792 114,250 92,193 338,250
<FN>
- --------------------
(1) On July 29, 1994 (the last business day of Syntex's fiscal year), the
average of the high and low prices of the Shares on the New York Stock
Exchange was $23.315. Pursuant to the terms of the plans under which the
options were awarded, all such options became fully vested and
exercisable upon the change of control of Syntex that occurred as of the
closing of the Tender Offer. Pursuant to the Merger Agreement, all such
options outstanding immediately prior to the Effective Time will be
converted into the right to receive from Syntex an amount equal to the
excess, if any, of $24.00 (or any other higher price per Share paid in
the Tender Offer) over the applicable exercise price per Share of such
stock option, multiplied by the number of Shares subject to such stock
option. On May 26, 1994, the Board of Directors of Syntex adopted
resolutions amending, and took certain other actions with respect to,
Syntex's 1984 Stock Option and Stock Appreciation Rights Plan, 1991
Stock Option Plan for Non-Employee Directors, and Call-to-Action
Incentive Plan to permit those officers and directors of Syntex who are
subject to Section 16 of the Exchange Act to exercise their stock
options with a non-interest bearing full recourse note on the date
immediately prior to the Effective Time. The option shares will be
pledged to Syntex to secure payment of the notes, and Syntex will
withhold from the merger consideration payable with respect to the
option shares an amount sufficient to pay off the notes in full. The
Board took such action in order to facilitate the disposition of
securities held by such officers and directors in full compliance
with the requirements of Section 16 of the Exchange Act. The net
consideration payable to such directors and officers with respect to
their outstanding options will not be increased as a result of
permitting them to exercise their options in this manner.
Long-Term Incentive Plans -- Awards in Last Fiscal Year
Syntex did not make any long-term incentive awards to any of the Named
Executive Officers in fiscal 1994. However, the closing of the Tender Offer
did constitute a change in control for purposes of the Call-to-Action
Incentive Plan, whereupon deferred cash incentives became due and payable to
the Named Executive Officers in the following amounts: Paul E. Freiman
$594,000, James N. Wilson $395,820, Gerhard von Mutzenbecher $135,000, Thomas
L. Gutshall $135,000, Robert L. Roe $135,000, and Robert A. Lewis $135,000.
Pension Plan
The Syntex U.S. Employees Pension Plan (the "Pension Plan") is a
non-contributory, defined benefit plan that covers United States employees of
Syntex and its subsidiaries (other than bargaining unit employees). The
Pension Plan provides for normal retirement at age 65 with a benefit based
upon both years of service and the employee's highest average annual
compensation in five consecutive calendar years during his or her last ten
years of employment. Annual benefits are calculated as 1.5 percent of final
average compensation multiplied by the employee's number of years of credited
service. The Syntex U.S. Employees Amended Supplemental Pension Plan (the
"Supplemental Pension Plan") provides for payment of additional benefits (1)
corresponding to the reductions in benefit levels resulting from changes in
the Pension Plan made in 1989, (2) in excess of the maximum limitation on
benefits payable, or attributable to compensation in excess of the maximum
amount countable, under the Pension Plan as imposed by the Code.
The following table presents the annual pension benefits payable in
specified compensation and years of service classifications under the Pension
Plan and the Supplemental Pension Plan. The amounts shown in this table are
subject to reduction for the primary Social Security benefit that an
individual would receive at his Social Security retirement date. Benefits
under the Pension Plan and the Supplemental Pension Plan are computed as a
straight-life annuity.
Pension Plan Table
Years of Service(2)
-----------------------------------------------------
Renumeration (1) 15 20 25 30 35
- ---------------- -------- -------- -------- -------- --------
$ 200,000 $ 55,000 $ 73,400 $ 91,600 $110,000 $128,000
300,000 82,500 110,000 137,500 165,000 192,500
500,000 137,500 183,300 229,200 275,000 320,800
700,000 192,500 256,700 320,800 385,000 449,200
900,000 247,500 330,000 412,500 495,000 577,500
1,100,000 302,500 403,300 504,200 605,000 705,800
1,300,000 357,500 476,700 595,800 715,000 834,200
- --------------
(1) Compensation for purposes of the Pension Plan means total salary or
wages, including shift differentials, vacation and sick leave pay,
overtime, salary reduction contributions made pursuant to the Syntex
U.S. Employees Retirement Savings Plan, commissions and bonuses.
Neither Mr. Freiman's covered compensation nor that of any other Named
Executive Officer differs substantially (by more than 10%) from the
salary and bonus information set forth in the Summary Compensation
Table.
(2) As of August 15, 1994, the following are the approximate years of
Credited Service under the Pension Plan for the Named Executive
Officers: Mr. Freiman, 32; Mr. Wilson, 17; Mr. Gutshall, 13; Dr. Roe,
18; and Dr. Lewis, 8. Dr. von Mutzenbecher participates in a separate
pension plan for certain employees located outside the United States,
which provides benefits comparable to those provided under the Pension
Plan and Supplemental Pension Plan. Dr. von Mutzenbecher has 31 years
of credited service under the applicable plan. Pursuant to the terms
of certain severance agreements between Syntex and the Named Executive
Officers, these stated years of Credited Service will be increased for
certain purposes in the computation of benefits in the event the
executive's employment is terminated following a "change of control" of
Syntex. See "Severance Agreements" below. The closing of the Tender
Offer constitutes a change in control of Syntex for purposes of these
severance agreements.
Severance Agreements
Syntex has entered into agreements with Messrs. Freiman, Wilson, von
Mutzenbecher, Gutshall, Lewis and Roe, and with certain other key executives,
which provide certain benefits if, following a change in control (as defined
in the agreements) of Syntex, Syntex terminates the executive's employment for
any reason other than disability or for cause, or so alters his or her terms
and conditions of employment as to afford the executive good reason to
terminate his or her employment. In the event of such termination, the
executive will be entitled to a termination payment equal to the sum of his or
her annual base salary at the time of the change of control and the average of
his or her last three bonus awards prior to the change in control multiplied
by three if such termination occurs within the first year after the change in
control, or multiplied by two if the termination occurs during the second or
third year after the change in control, minus any amount the executive
receives under Syntex's enhanced severance plan, and the executive will also
receive the same number of years' worth of additional service and other
credits for purposes of the Pension Plan and Supplemental Pension Plan and
continued welfare benefits for the same period. In addition, Syntex will
provide the executives with a tax "gross-up" payment in the event of the
imposition of an excise tax upon the executive pursuant to Section 4999 of the
Code. These executive officers also participate in Syntex's enhanced
severance plan, under which employees are generally entitled to severance
payments of 12 weeks' salary plus an additional two weeks' salary for each
year of service with Syntex up to 13 years of service, for a maximum severance
entitlement of 38 weeks' salary, which benefits are offset against the amount
of any severance payment the executive is entitled to receive pursuant to his
or her individual severance agreement. The Named Executive Officers are
participants in Syntex's Call-to-Action Incentive Plan. Upon the change in
control of Syntex that occurred when the Tender Offer closed, all stock
options granted under the plan became fully exercisable and a pro rata portion
of the deferred cash incentive awards was paid to the executives. Options and
stock appreciation rights issued under Syntex's 1984 Stock Option and Stock
Appreciation Rights Plan also become immediately exercisable upon the change
in control of Syntex.
Compensation Committee Interlocks and Insider Participation
Dr. Miriam Stoppard, a non-employee director who served on the
Compensation and Benefits Committee during the 1994 fiscal year, was Managing
Director of Syntex Pharmaceuticals Ltd. from 1976 until 1980.
Certain Transactions
Dr. Rosenkranz entered into an agreement with Syntex pursuant to which he
acted as a consultant to Syntex for a four-year period commencing October 1,
1987. This agreement was renewed for additional two-year periods commencing
October 1, 1991, and October 1, 1993, at an annual fee of $57,750.
Mr. Solomon entered into an agreement with Syntex pursuant to which he
acted as a consultant to Syntex for a two-year period commencing February 1,
1989, at an annual fee of $50,000. The agreement was renewed for additional
two-year periods commencing February 1, 1991 and February 1, 1993, and it is
automatically renewable for additional two- year terms unless terminated by
either party upon written notice given at least 90 days prior to the
anniversary date of the agreement.
During the fiscal year ended July 31, 1994, the law firm of Holtzmann,
Wise & Shepard, of which Mr. Holtzmann, a director of Syntex, is a partner,
rendered general legal services to Syntex and its subsidiaries for which fees
of $858,434 have been approved. An additional fee of $1,500,000 has been
approved for the services of the firm in connection with the the Transaction.
In March 1992, Syntex entered into a loan agreement with Mr. Booth, an
executive officer of Syntex, pursuant to which Syntex loaned Mr. Booth
$200,000 to be used toward the purchase of a principal residence in
California. This loan was made in connection with Mr. Booth's relocation,
and no interest is charged thereon. One fifth of the principal amount of the
loan will be forgiven for each full year that Mr. Booth remains an active
employee of Syntex, and any remaining balance must be repaid within one year
from the date of any termination of employment, except a termination following
a change in control (as defined in the agreement) of Syntex. The amount of
the loan that remained outstanding as of July 31, 1994, was $120,000. The
closing of the Tender Offer constituted a change in control for purposes of
the agreement.
In November 1992 and June 1993, Syntex made loans to Dr. Roe, an
executive officer of Syntex, in the amounts of $50,000 and $100,000
respectively, under promissory notes bearing interest at the rate of 6 percent
per year. Dr. Roe repaid the $100,000 loan, together with accrued interest,
in July 1993, and the amount of the loan that remained outstanding as of July
31, 1994, was $50,000.
Between August 1993 and April 1994, Syntex made loans to Richard P.
Powers, an executive officer of Syntex, in the aggregate amount of $155,000,
under promissory notes bearing simple interest at the rate of 6 percent per
year. As of July 31, 1994, the aggregate amount of these loans that remained
outstanding was $155,000.
On April 28, 1994, the Board of Directors, based upon the recommendation
of the Compensation and Benefits Committee, approved a resolution providing
that any amendment to Syntex's Retiree Health Care Plans shall affect all
retirees covered by and eligible to receive benefits thereunder as of the date
of such amendment in the same manner and may not discriminate in favor of or
against any such single retiree or group of retirees.
On April 28, 1994, the Board of Directors, based upon the recommendation
of the Trust Review Committee, approved a resolution providing that the assets
held in trust for the benefit of the participants and beneficiaries of the
Syntex Umbrella Pension Plan (which provides pension benefits for certain
employees located outside the United States) may not be used for any purpose
other than providing benefits to participants and beneficiaries of such plan,
prior to the satisfaction of all liabilities under such plan.
As of May 26, 1994, the Board of Directors had approved the payment of
compensation to the members of the Special Committee as follows: to Anthony
Solomon (Chairman), a total of $300,000, and to each of Julius R. Krevans and
Robert S. Miller, Jr., a total of $125,000.
On June 23, 1994, the Board of Directors approved an agreement to pay Mr.
Freiman's former spouse a supplemental pension benefit equal to one half of
the difference between the early retirement benefit that she would have
received had Mr. Freiman retired on May 1, 1994 and the amount that she was
entitled to receive commencing on that date without Mr. Freiman retiring. The
amount of the supplemental payments initially is approximately $3,600 per
month, which amount will be reduced if and when Mr. Freiman retires prior to
reaching age 65. The supplemental payments will continue for the lifetime of
Mr. Freiman's former spouse.
In the opinion of Syntex, there were no material or significant
transactions in which directors or officers were interested, other than those
set forth herein.
CERTAIN REGULATORY CONSIDERATIONS
General. Roche Capital is not aware of any license or regulatory permit
that appears to be material to Syntex's business that might be adversely
affected by the consummation of the Merger or, except as set forth below, of
any approval or other action by any government or governmental authority or
agency, domestic or foreign, that would be required for the consummation of
the Merger. Should any such approval or other action be required, Roche
Capital currently contemplates that, except as described below under "State
Takeover Statutes", such approval or other action will be sought. Roche
Capital is unable to predict whether it may determine that it is required to
delay the consummation of the Merger pending the outcome of any such matter.
There is, however, no current intent to delay the consummation of the Merger
pending the outcome of any such matter. There can be no assurance that any
such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that if such approvals were not
obtained or such other actions were not taken adverse consequences might not
result to Syntex's business or certain parts of Syntex's business might not
have to be disposed of, any of which could cause Roche Capital to elect to
terminate the Merger Agreement. Roche Capital's obligation under the Merger
Agreement to consummate the Merger is subject to certain conditions. See
"Certain Other Provisions of the Merger Agreement -- Conditions to the
Merger".
Panama Takeover Law. Pursuant to Panama law, Roche Capital is required
to deliver a Declaration, meeting certain disclosure requirements set out in
Executive Decree No. 45 of December 5, 1977, as amended (the "Decree"),
promulgated by the Republic of Panama, to the Board of Directors of Syntex in
connection with the making of the Offer. The Decree requires the Board of
Directors to determine whether the Declaration provides the requisite
disclosure and, if so, in its absolute discretion, to decide whether to submit
the Declaration to the National Securities Commission of the Republic of
Panama for hearing and investigation or to the stockholders for their
consideration or to permit Roche Capital to consummate the Offer without any
further delay or consideration.
Roche Capital has submitted the Declaration to the Board of Directors in
compliance with the Decree, and the Board of Directors has accepted the
Declaration and determined not to deliver the Declaration to the National
Securities Commission of the Republic of Panama nor to submit the Declaration
to a meeting of stockholders for their consideration.
State Takeover Statutes. A number of states have adopted laws which
purport, to varying degrees, to apply to attempts to acquire corporations that
are incorporated in, or which have substantial assets, stockholders, principal
executive offices or principal places of business or whose business operations
otherwise have substantial economic effects in, such states. Syntex, directly
or through subsidiaries, conducts business in a number of states throughout
the United States, some of which have enacted such laws. Except as described
herein, Roche Capital does not know whether any of these laws will, by their
terms, apply to the Merger and Syntex and has not complied with any such laws.
To the extent that certain provisions of these laws purport to apply to the
Merger or other business combination, Roche Capital believes that there are
reasonable bases for contesting such laws.
In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Statute
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in 1987 in CTS Corp.
v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana
could, as a matter of corporate law, constitutionally disqualify a potential
acquiror from voting shares of a target corporation without the prior approval
of the remaining stockholders where, among other things, the corporation is
incorporated in, and has a substantial number of stockholders in, the state.
If any government official or third party should seek to apply any state
takeover law to the Merger, Roche Capital will take such action as then
appears desirable, which action may include challenging the applicability or
validity of such statute in appropriate court proceedings. In the event it
is asserted that one or more state takeover statutes is applicable to the
Merger and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Merger, Roche Capital might be required to file
certain information with, or to receive approvals from, the relevant state
authorities or holders of Shares, and Roche Capital might be delayed in
consummating the Merger. In such case, Roche Capital may not be obligated to
consummate the Merger.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The purchase of Shares pursuant to the Offer was subject to
such requirements.
Pursuant to the requirements of the HSR Act, Roche and Syntex each filed
a Notification and Report Form with respect to the Tender Offer with the
Antitrust Division and the FTC on May 20, 1994. The FTC requested additional
information and documentary material relevant to the Tender Offer from Roche
Capital and Syntex on June 3, 1994 and extended the waiting period. Roche
Capital certified its compliance with the FTC request for information on
August 19, 1994; the applicable waiting period expired on August 29, 1994.
On August 17, 1994, Roche and Syntex entered into an Agreement Containing
Consent Order with the Staff of the FTC (the "Consent Agreement") to resolve
certain antitrust concerns raised by the FTC. Under the terms of the Consent
Agreement, Roche has agreed to divest, within twelve months of the date on
which the Consent Agreement becomes a final order of the FTC, all of Syntex's
United States right, title and interest in and to (i) drugs of abuse reagent
products, including but not limited to EMIT [Registered], EMIT [Registered]
II, and all patents, production technology and know-how related to the
manufacture and sale of drugs of abuse reagent products in the United States
and (ii) all assets, properties, business and goodwill, tangible and
intangible, of the Syva Company, an indirect wholly-owned subsidiary of Syntex
("Syva"), in and relating to the development, manufacture, sale, distribution
and marketing of drugs of abuse reagent products in the United States; and,
unless not requested by the acquiror, (iii) all assets, properties, business
and goodwill, tangible and intangible, of Syva in and relating primarily to
the development, manufacture, sale, distribution and marketing of any in vitro
diagnostic product other then drugs of abuse reagent products/inventory and
storage capacity, and certain real property assets of Syva (collectively, the
"Syva Business"). Roche is required to divest the Syva Business only to an
acquiror that receives prior approval of the FTC and that has provided any
necessary notice to or obtained any necessary approval from the United States
Food and Drug Administration to manufacture and sell all of the Syva drugs of
abuse reagent products, and only in a manner that has received the prior
approval of the FTC. If Roche has not divested the Syva Business as required
within the twelve-month period referred to above, the FTC may appoint a
trustee to divest the Syva Business. The Consent Agreement further provides
that for a period of ten years from the date the Consent Agreement becomes
final, Roche may not, without prior approval of the FTC, (i) acquire more than
1% of the stock, share capital, equity or other interest in any concern which
has been within two years of, or is, at the time of such acquisition, engaged
in, the manufacture or production of drugs of abuse reagent products in the
United States, or (ii) acquire certain types of assets used or previously used
(and still suitable for use) in the manufacture and production of drugs of
abuse reagent products in the United States to which sales of $3 million or
more of drugs of abuse reagent products were attributable in the year
preceding such acquisition.
Until such time as Roche has divested the Syva Business, Roche is
required to hold the Syva Business separate and to operate it independently of
Roche and Syntex, pursuant to the terms of an Agreement to Hold Separate (the
"Hold Separate Agreement"), which forms a part of the Consent Agreement.
Under the terms of the Hold Separate Agreement, Roche is not permitted to
exercise direction or control over, or influence directly or indirectly, the
Syva Business. In addition, earnings and profits of the Syva Business must be
retained separately by the Syva Business. During the time that the Hold
Separate Agreement remains in effect, the Syva Business will be managed by a
new board of directors in accordance with the terms of the Hold Separate
Agreement.
The Consent Agreement does not constitute an admission by Roche or Syntex
that any law has been violated.
The FTC has given its provisional approval to the Consent Agreement. On
September 12, 1994, the Consent Agreement was placed on the public record for
a period of sixty days, during which the FTC will accept comments on the
Consent Agreement. The FTC has directed that all comments be submitted by
Monday, November 14. The FTC thereafter may either withdraw its acceptance of
the Consent Agreement or issue its final approval thereof. Should the FTC
withdraw its provisional acceptance of the Consent Agreement, it may
thereafter take any such action as it may consider appropriate.
Since the applicable waiting period under the HSR Act has expired, Roche
and Syntex are permitted to consummate the Merger. Notwithstanding the
foregoing, at any time after the consummation of any transactions, the
Antitrust Division or the FTC could take such action under the antitrust laws
as deemed necessary or desirable in the public interest, including seeking
divestiture of the Shares acquired in the Merger or divestiture of substantial
assets of Roche Capital or Syntex. Private parties (including individual
states) may also bring legal actions under the antitrust laws. Roche Capital
does not believe that the consummation of the Merger will result in a
violation of any applicable antitrust laws. However, there can be no
assurance that a challenge to the Merger on antitrust grounds will not be
made, or if such a challenge is made, what the result will be. See "Certain
Other Provisions of the Merger Agreement -- Conditions to the Merger" for
certain conditions to the Merger, including conditions with respect to
litigation and certain governmental actions and `' -- Termination" for certain
termination rights in connection with antitrust suits.
Exon-Florio. Under Exon-Florio, the President of the United States is
authorized to prohibit or suspend acquisitions, mergers or takeovers by
foreign persons of persons engaged in interstate commerce in the United States
if the President determines, after investigation, that such foreign persons in
exercising control of such acquired persons might take action that threatens
to impair the national security of the United States and that other provisions
of existing law do not provide adequate authority to protect national
security. Pursuant to Exon-Florio, notice of an acquisition by a foreign
person may be made to CFIUS either voluntarily by the parties to such proposed
acquisition, merger or takeover or by any member of CFIUS. On May 16, 1994
Roche Capital and Syntex filed with CFIUS a joint notice of the transactions
contemplated by the Merger Agreement. On June 16, 1994, CFIUS informed Roche
Capital that CFIUS had determined not to conduct an investigation in
connection with the transactions contemplated by the Merger Agreement.
EC Merger Regulation. The European Community Merger Regulation ("EC
Merger Regulation") requires that notices of concentrations with a "community
dimension" be provided to the EC Commission for review and approval prior to
being put into effect.
Under the EC Merger Regulation, a concentration that meets certain
guidelines requires the filing of a notice in a prescribed form with the EC
Commission. Roche Capital filed the required notice under the EC Merger
Regulation on May 16, 1994. The EC Commission confirmed on May 26, 1994 that
the notified concentration had a "community dimension", and that the EC
Commission had jurisdiction to review the transaction. On June 20, 1994, the
EC Commission informed Roche Capital that the EC Commission would not oppose
the transactions contemplated by the Merger Agreement and had declared the
transactions compatible with the common market.
EXPERTS
The consolidated financial statements of Syntex as of July 31, 1993 and
July 31, 1992 and for each of the three years in the period ended July 31,
1993, incorporated by reference in Syntex's Annual Report Form on 10-K for the
year ended July 31, 1993 have been audited by Deloitte & Touche LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements
and report of Deloitte & Touche LLP are included in the Appendices attached
hereto and are incorporated herein by reference in reliance upon such report
given upon the authority of said firm as experts in accounting and auditing.
The Consolidated Balance Sheet of Roche Capital at July 31, 1994
appearing in this Proxy Statement/Prospectus has been included in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholder of Roche Capital
Corporation
In our opinion, the accompanying consolidated balance sheet presents fairly,
in all material respects, the financial position of Roche Capital Corporation
(a Panama Corporation) and its subsidiaries at July 31, 1994, in conformity
with generally accepted accounting principles. This financial statement is
the responsibility of management; our responsibility is to express an opinion
on this financial statement based on our audit. We conducted our audit of
this statement in accordance with generally accepted auditing standards which
require that we plan and perform an audit to obtain reasonable assurance about
whether the balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the balance sheet, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
As explained in Notes 2 and 3 to the consolidated balance sheet, Roche Capital
Corporation has entered into an agreement dated May 1, 1994 for the
acquisition of Syntex Corporation for an aggregate purchase price of US$5,300
million.
Price Waterhouse LLP
San Jose, California
August 19, 1994
ROCHE CAPITAL CORPORATION
(A Panama Corporation)
CONSOLIDATED BALANCE SHEET
JULY 31, 1994
(Notes 2 and 3)
Assets
Cash U.S. $500
---------
Total assets $500
====
Liabilities and Shareholders' Equity
Commitments (Note 3)
Common stock, no par value,
500 shares authorized, issued and outstanding $500
----
Total liabilities and shareholders' equity $500
====
ROCHE CAPITAL CORPORATION
(A Panama Corporation)
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1 -ORGANIZATION:
Roche Capital Corporation ("Roche Capital") was incorporated under the
laws of Panama and is a wholly owned subsidiary of Sapac Corporation Limited
("Sapac") which in turn is a wholly owned subsidiary of Roche Holding Ltd
("Roche") of Basel, Switzerland. Roche is the parent company of an
international health care group which is engaged primarily in the development
and manufacture of pharmaceuticals, vitamins and fine chemicals, diagnostics,
flavors and fragrances and in the business of providing analytical laboratory
services.
NOTE 2 -BASIS OF PRESENTATION:
Basis of presentation
Roche Capital owns no physical properties other than all the outstanding
shares of common stock of its wholly owned subsidiaries Roche (Panama)
Corporation incorporated in Delaware ("Roche Panama") and Roche (Panama)
Corporation incorporated in Panama. Roche Capital and its subsidiaries have
never carried on any independent business activities other than those incident
to their formation, the entering into the Acquisition Agreement and Plan of
Merger (the "Merger Agreement") dated as of May 1, 1994 with Syntex
Corporation ("Syntex") and the transactions contemplated thereby, as more
fully described in Note 3 below. The consolidated balance sheet has been
prepared in accordance with generally accepted accounting principles in the
United States.
Principles of consolidation
The consolidated balance sheet includes the accounts of Roche Capital and
its wholly owned subsidiaries.
NOTE 3 -ACQUISITION OF SYNTEX CORPORATION:
On May 1, 1994, Roche Capital, Roche Panama and Syntex entered into the
Merger Agreement. On May 6, 1994 Roche Capital commenced a tender offer for
all shares of Syntex's outstanding common stock ("Common Stock") for $24.00 in
cash per share (the "Offer"). Roche Capital expects to purchase the Syntex
Common Stock using general corporate funds provided by Sapac purchasing
additional common stock of Roche Capital and the proceeds of a loan from a
group of commercial banks. Completion of the Offer remains subject to certain
conditions, including the tender of a least a majority of the shares of Common
Stock and the receipt of certain regulatory approvals. The Merger Agreement
also provides that Roche Panama will be merged with and into Syntex (the
"Merger") with Syntex becoming the surviving corporation and a wholly owned
subsidiary of Roche Capital. Consummation of the Merger is subject to certain
conditions including stockholder approval and receipt of certain regulatory
approvals. Syntex is engaged primarily in the research, development,
manufacture and sale of pharmaceutical products and medical diagnostic
systems.
Each share of Syntex Common Stock outstanding immediately prior to the
Merger (other than shares held by Syntex as treasury shares or owned by Roche
Capital or any affiliate of Roche Capital) will be converted into the right to
receive $24.00 in cash per share of Common Stock, or at the election of each
shareholder subject to certain restrictions, .024 shares of a limited
conversion preferred stock ("LCPS") to be issued by Roche Capital. Roche
Capital is not obligated to accept the stock elections with respect to more
than 15% of the shares of Syntex Common Stock outstanding as of May 1, 1994.
Also, Roche Capital is obligated to issue shares of LCPS only to the extent
that the LCPS would be held of record by not more than 299 shareholders.
The LCPS will be subject to mandatory redemption at the end of its
ten-year term. Each full share of LCPS will have a stated and liquidation
value of $1,000 per share. Holders of LCPS will be entitled to receive
cumulative dividends at a rate of 3% per annum on the liquidation value of
each share; such dividends will be payable annually. Roche Capital may redeem
outstanding LCPS at any time in whole or from time to time in part at the
stated value plus the aggregate of accrued and unpaid dividends as of the
redemption date. Shares of LCPS may be exchanged, subject to certain
restrictions, beginning the second anniversary of the issuance of such shares
and on each anniversary thereafter prior to the mandatory redemption date, for
Genussscheine of Roche ("Non-voting Equity Securities"). Shares of LCPS will
have only limited voting rights and will not be listed on any securities
exchange.
Roche has agreed as of May 1, 1994 to guarantee to Syntex the prompt and
full performance and discharge by Roche Capital and Roche Panama of all of the
covenants, agreements, obligations, liabilities, representations and
warranties of Roche Capital and Roche Panama under the Merger Agreement. In
addition, Roche has agreed by means of a keepwell agreement with Roche Capital
to make available sufficient Non-voting Equity Securities to enable Roche
Capital to meet its exchange obligations under terms of the LCPS.
It is anticipated that the acquisition of Syntex for an aggregate
purchase price of $5,300 million will be accounted for by Roche Capital under
the purchase method of accounting and the results of operations of Syntex will
be included in the results of operations of Roche Capital for the periods
subsequent to the completion of the Merger.
Costs incidental to the Offer and Merger have been and will continue to
be incurred by Sapac and Roche on behalf of Roche Capital. Such costs will be
reimbursed to the appropriate company by Roche Capital on completion of the
Merger and will ultimately form an element of the final purchase price.
APPENDIX A
CONFORMED COPY
ACQUISITION AGREEMENT AND PLAN OF MERGER
dated as of
May 1, 1994
among
Syntex Corporation,
Roche Capital Corporation
and
Roche (Panama) Corporation
TABLE OF CONTENTS
ARTICLE I
THE OFFER
SECTION 1.01. The Offer . . . . . . . . . . . . . 1
SECTION 1.02. Company Action . . . . . . . . . . 2
SECTION 1.03. Directors . . . . . . . . . . . . . 4
ARTICLE II
THE MERGER
SECTION 2.01. The Merger . . . . . . . . . . . . 6
SECTION 2.02. Conversion of Shares . . . . . . . 7
SECTION 2.03. Surrender and Payment . . . . . . . 9
SECTION 2.04. Stock Options . . . . . . . . . . . 11
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.01. Articles of Incorporation . . . . . 13
SECTION 3.02. Bylaws . . . . . . . . . . . . . . 13
SECTION 3.03. Directors and Officers . . . . . . 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 4.01. Corporate Existence and Power . . . 13
SECTION 4.02. Corporate Authorization . . . . . . 14
SECTION 4.03. Governmental Authorization . . . . 14
SECTION 4.04. Non-Contravention . . . . . . . . . 14
SECTION 4.05. Capitalization . . . . . . . . . . 15
SECTION 4.06. Subsidiaries . . . . . . . . . . . 16
SECTION 4.07. SEC Filings . . . . . . . . . . . . 16
SECTION 4.08. Financial Statements . . . . . . . 17
SECTION 4.09. Disclosure Documents . . . . . . . 17
SECTION 4.10. Absence of Certain Changes . . . . 18
SECTION 4.11. No Undisclosed Material
Liabilities . . . . . . . . . . 20
SECTION 4.12. Litigation . . . . . . . . . . . . 20
SECTION 4.13. Taxes . . . . . . . . . . . . . . . 20
SECTION 4.15. Compliance with Laws . . . . . . . 25
SECTION 4.16. Finders' Fees . . . . . . . . . . . 25
SECTION 4.17. Environmental Matters . . . . . . . 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
SECTION 5.01. Corporate Existence and Power . . . 26
SECTION 5.02. Corporate Authorization . . . . . . 27
SECTION 5.03. Governmental Authorization. . . . . 27
SECTION 5.04. Non-Contravention . . . . . . . . . 27
SECTION 5.05. Disclosure Documents . . . . . . . 28
SECTION 5.06. Finders' Fees . . . . . . . . . . . 29
SECTION 5.07. Financing . . . . . . . . . . . . . 29
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company . . . . . . 30
SECTION 6.02. Stockholder Meeting; Proxy
Material . . . . . . . . . . . . 30
SECTION 6.03. Access to Information . . . . . . . 31
SECTION 6.04. Other Offers . . . . . . . . . . . 32
SECTION 6.05. Notice of Certain Events . . . . . 33
ARTICLE VII
COVENANTS OF BUYER
SECTION 7.01. Obligations of Merger Subsidiary . 34
SECTION 7.02. Voting of Shares . . . . . . . . . 34
SECTION 7.03. Director and Officer Liability . . 34
SECTION 7.04. Employee Matters . . . . . . . . . 35
ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
SECTION 8.01. Best Efforts . . . . . . . . . . . 37
SECTION 8.02. Certain Filings . . . . . . . . . . 37
SECTION 8.03. Public Announcements . . . . . . . 38
SECTION 8.04. Further Assurances . . . . . . . . 38
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of
Each Party . . . . . . . . . . . 38
SECTION 9.02. Conditions to the Obligations of
Buyer and Merger Subsidiary . . 39
SECTION 9.03. Conditions to the Obligation of the
Company to Effect the Merger . . 40
ARTICLE X
TERMINATION
SECTION 10.01. Termination . . . . . . . . . . . 40
SECTION 10.02. Effect of Termination . . . . . . 41
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices . . . . . . . . . . . . . 42
SECTION 11.02. Survival of Representations and
Warranties . . . . . . . . . . . 43
SECTION 11.03. Amendments; No Waivers . . . . . . 43
SECTION 11.04. Expenses . . . . . . . . . . . . . 43
SECTION 11.05. Successors and Assigns . . . . . . 44
SECTION 11.06. Governing Law . . . . . . . . . . 44
SECTION 11.07. Counterparts; Effectiveness . . . 44
SECTION 11.08. Validity . . . . . . . . . . . . . 44
SECTION 11.09. Entire Agreement . . . . . . . . . 45
SECTION 11.10. Definition . . . . . . . . . . . . 45
ACQUISITION AGREEMENT AND PLAN OF MERGER
ACQUISITION AGREEMENT AND PLAN OF MERGER dated as
of May 1, 1994 among Syntex Corporation, a Panama
corporation (the "Company"), Roche Capital Corporation, a
Panama corporation ("Buyer") and an indirectly, wholly owned
subsidiary of Roche Holding Ltd, a Swiss corporation
("Parent"), and Roche (Panama) Corporation, a Delaware
corporation and wholly owned subsidiary of Buyer ("Merger
Subsidiary").
The parties hereto agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that none
of the conditions set forth in Annex I hereto shall have
been occurred, Buyer shall, as promptly as practicable after
the date hereof, but in no event later than five business
days following the public announcement of the terms of this
Agreement, commence an offer (the "Offer") to purchase all
of the outstanding shares of common stock, $1.00 par value
(the "Shares"), of the Company at a price of $24.00 per
Share, net to the seller in cash (the "Offer Price"). The
Offer shall be subject to the condition that there shall be
validly tendered in accordance with the terms of the Offer
prior to the expiration date of the Offer and not withdrawn
a number of Shares which, together with the Shares then
owned by Buyer, represents at least a majority of the Shares
outstanding on a fully diluted basis (the "Minimum
Condition") and to the other conditions set forth in Annex I
hereto. Buyer expressly reserves the right to waive the
Minimum Condition (but not below 77,400,000 shares) or any
of the other conditions to the Offer and to make any change
in the terms or conditions of the Offer; provided that no
change may be made which changes the form of consideration
to be paid or decreases the price per Share or the number of
Shares sought in the Offer or which imposes conditions to
the Offer in addition to those set forth in Annex I or makes
any other change in the terms or conditions of the Offer
which is materially adverse to the holders of Shares.
Subject to the terms and conditions of the Offer, Buyer
shall pay for Shares which have been validly tendered and
not withdrawn pursuant to the Offer at the earliest such
time following expiration of the Offer that all conditions
to the Offer shall have been satisfied or waived by Buyer.
Buyer covenants and agrees that, subject to the terms and
conditions of this Agreement, including but not limited to
the conditions of the Offer set forth in Annex I hereto, it
will accept for payment and pay for Shares validly tendered
and not withdrawn pursuant to the Offer as soon as it is
permitted to do so under applicable law.
(b) As soon as practicable on the date of
commencement of the Offer, Buyer shall file with the SEC (as
defined in Section 4.07) a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain
the offer to purchase and form of the related letter of
transmittal (together with any supplements or amendments
thereto, collectively the "Offer Documents"). Buyer and the
Company each agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the
extent that it shall have become false or misleading in any
material respect. Buyer agrees to take all steps necessary
to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to holders of Shares, in
each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall
be given a reasonable opportunity to review and comment on
the Offer Documents prior to their being filed with the SEC.
Buyer and Merger Subsidiary agree to provide the Company and
its counsel in writing with any comments Buyer, Merger
Subsidiary or their counsel may receive from the SEC or its
Staff with respect to the Offer Documents promptly after the
receipt of such comments.
SECTION 1.02. Company Action. (a) The Company
hereby consents to the Offer and represents as of the date
hereof that its Board of Directors, at a meeting duly called
and held, has by a unanimous vote of those directors who
were present and voting (i) determined that this Agreement
and the transactions contemplated hereby, including the
Offer and the Merger (as defined in Section 2.01), are fair
to and in the best interest of the Company's stockholders,
(ii) approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger,
which approval satisfies the relevant requirements of the
General Corporation Law of the Republic of Panama (the
"Panama Law"), and (iii) (A) accepted the Declaration dated
May 1, 1994 setting forth information regarding the Buyer
and the Buyer's future plans regarding the Company (the
"Declaration") as satisfying Panama Law and all Executive
Decrees relating to declarations, including but not limited
to Executive Decree No. 45 of December 5, 1977, as amended
by Executive Decree No. 51 of July 12, 1985 (the "Decree")
and (B) determined not to deliver the Declaration to the
National Securities Commission of the Republic of Panama as
permitted by Article 5 of the Decree nor to submit the
Declaration to a meeting of Shareholders of the Corporation
for their consideration, as permitted by Article 5-A of the
Decree. The Company represents that its Board of Directors
unanimously recommends acceptance of the Offer and approval
and adoption of this Agreement and the Merger by its
stockholders; provided, however, that subject to Section
11.04, any such recommendation may be withdrawn or modified
to the extent that the Board of Directors deems it necessary
to do so in the exercise of their fiduciary duties under
applicable law as advised by counsel to the Company.
The Company further represents that Arias, Fabrega
y Fabrega has advised the Company's Board of Directors of
its opinion to the effect that the Declaration was delivered
in substantially proper form and content to the Company
pursuant to the Decree, that the Declaration contains
substantially all the information and documentation required
by the Decree to be delivered for proper appraisal and
recommendation of a purchase offer for securities of a
company under the Decree, and that the Declaration provides
sufficient disclosure under Panamanian law for the making
and consummation of the Offer. In so advising the Company's
Board of Directors, Arias, Fabrega y Fabrega shall have
relied on the representation of the Buyer that (i) there
were no audited financial statements for the Buyer for the
fiscal year ending December 31, 1993 available on the date
thereof, (ii) the audited financial statements for the Buyer
for the fiscal year ending December 31, 1993 will be ready
and released on or about May 10th, 1994, (iii) the financial
position of Buyer as of not more than ninety days prior to
the date thereof, was, in all material respects, no worse
than the financial position of the Buyer as of December 31,
1992 and (iv) the Declaration is true in all material
respects and that the statements included in the Declaration
do not omit any material information necessary to make such
statements not misleading in any material respect under the
circumstances in which such statements were made.
The Company further represents that Goldman
Sachs & Co. has delivered to the Company's Board of
Directors its written opinion to the effect that, as of the
date of said opinion, the cash consideration to be received
by the holders of Shares in the transactions contemplated by
this Agreement is fair to such holders. To the knowledge of
the Company, all of its directors and members of the
operating committee intend either to tender their Shares
pursuant to the Offer or to vote, as shareholders, in favor
of the Merger and adoption of this Agreement.
In connection with the Offer, the Company will
promptly furnish Buyer with a list of its stockholders,
mailing labels and any available listing or computer file
containing the names and addresses of all record holders of
Shares and lists of securities positions of Shares held in
stock depositories, in each case to the best knowledge of
the Company true and correct as of the most recent
practicable date, and will provide to Buyer such additional
information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities
positions) and such other assistance as Buyer may reasonably
request in connection with the Offer. Subject to the
requirements of applicable law, and except for such steps as
are necessary to disseminate the Offer Documents and any
other documents necessary to consummate the Merger, Buyer
and its affiliates and associates shall hold in confidence
the information contained in any such labels, listings and
files, will use such information only in connection with the
Offer and the Merger, and, if this Agreement shall be
terminated, will deliver to the Company all copies of, and
any extracts and summaries from, such information then in
their possession.
(b) As soon as practicable on the day that the
Offer is commenced the Company will file with the SEC (as
defined in Section 5.07) a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") which
shall reflect the recommendations of the Company's Board of
Directors referred to above. The Company and Buyer each
agree promptly to correct any information provided by it for
use in the Schedule 14D-9 if and to the extent that it shall
have become false or misleading in any material respect.
The Company agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and
to be disseminated to holders of Shares, in each case as and
to the extent required by applicable United States federal
securities laws. Buyer and its counsel shall be given an
opportunity to review and comment on the Schedule 14D-9
prior to its being filed with the SEC and shall be provided
with any comments the Company and its counsel may receive
from the SEC or its Staff with respect to the Schedule 14D-9
promptly after receipt of such comments. Notwithstanding
anything contained in this Section 1.02, if the Board of
Directors determines in the exercise of their fiduciary
duties to withdraw, modify or amend the recommendation of
the Board of Directors referred to above, such withdrawal,
modification or amendment shall not constitute a breach of
this Agreement.
SECTION 1.03. Directors. (a) Promptly upon the
purchase by Buyer of a majority of the outstanding Shares on
a fully diluted basis (including Shares purchased pursuant
to the Offer), and subject to the last sentence of this
Section 1.03(a), Buyer shall be entitled to designate the
number of directors, rounded up to the next whole number, on
the Company's Board of Directors that equals the product of
(i) the total number of directors on the Company's Board of
Directors (giving effect to the election of any additional
directors pursuant to this Section) and (ii) the percentage
that the number of Shares owned by Buyer and its affiliates
(including Shares so purchased) bears to the total number of
Shares outstanding, and the Company shall upon request by
Buyer, at the Company's election, either increase the number
of directors or seek and accept resignations of incumbent
directors. At such times, and subject to the last sentence
of this Section 1.03(a) the Company will use its best
efforts to cause individuals designated by Buyer to
constitute the same percentage as such individuals represent
on the Company's Board of Directors of (x) each committee of
the Board (other than any committee of the Board established
to take action under this Agreement), (y) each board of
directors of each Subsidiary (as defined in Section 5.06)
and (z) each committee of each such board. Notwithstanding
the foregoing, nothing contained in this Section shall
require any current member of the Special Committee of the
Board of Directors to resign from the Board of Directors.
Subject to the foregoing, the Company shall use its best
efforts to ensure that all of the members of the Board of
Directors and such boards and committees as of the date
hereof shall remain members of the Board of Directors and
such boards and committees until the Effective Time (as
defined in Section 2.01).
(b) The Company's obligations to appoint
designees to the Board of Directors shall be subject to
Section 14(f) of the 1934 Act (as defined in Section 4.03)
and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under
this Section and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1
to fulfill its obligations under this Section 1.03. Buyer
will supply to the Company in writing and be solely
responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by
Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of
Buyer's designees pursuant to this Section 1.03 and prior to
the Effective Time, except as provided in Section 2.02(g),
any amendment of this Agreement or the articles of
incorporation or by-laws of the Company, any termination or
amendment of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the
obligations or other acts of Buyer or Merger subsidiary or
any exercise or waiver of any of the Company's rights
hereunder, will require the concurrence of a majority of the
directors of the Company then in office who are neither
designated by Buyer, employees of the Company or any of its
subsidiaries nor otherwise affiliated with Buyer, and who,
if serving on the Board currently, were disinterested
directors in connection with the Board's consideration of
this Agreement.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. (a) Upon the terms
and subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 2.01(b)), Merger
Subsidiary shall be merged with and into the Company (the
"Merger"), whereupon the separate existence of Merger
Subsidiary shall cease, and the Company shall be the
surviving corporation (the "Surviving Corporation").
(b) As soon as practicable after satisfaction or,
to the extent permitted hereunder, waiver of all conditions
to the Merger in Article X hereof, the Company and Merger
Subsidiary will file articles of merger or other appropriate
documents for registration in the Mercantile Registry of the
Republic of Panama and make all other filings or recordings
required by Panama Law and the General Corporations Law of
the State of Delaware ("Delaware GCL") in connection with
the Merger. The Merger shall become effective at such time
as articles of merger or other appropriate documents are
duly filed in the Mercantile Registry of the Republic of
Panama (the "Effective Time").
(c) From and after the Effective Time, the
Surviving Corporation shall possess all the rights,
privileges, powers and franchises and be subject to all of
the restrictions, disabilities and duties of the Company and
Merger Subsidiary, all as provided under Panama Law and the
Delaware GCL.
SECTION 2.02. Conversion of Shares. At the
Effective Time, by virtue of the Merger and without any
action on the part of Buyer, Merger Subsidiary, the Company
or the holder of any of the following securities:
(a) each Share held by the Company as treasury
stock or owned by Buyer or any subsidiary of Buyer
immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect
thereto;
(b) each share of common stock of Merger
Subsidiary outstanding immediately prior to the
Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with
the same rights, powers and privileges as the shares so
converted and shall constitute the only outstanding
shares of capital stock of the Surviving Corporation;
and
(c) each Share outstanding immediately prior to
the Effective Time shall, except as otherwise provided
in Section 2.02(a), be converted into the right to
receive, at the election of the holders of Shares,
either (i) subject to the restrictions set forth in
Section 2.02(g), 0.024 shares of Limited Conversion
Preferred Stock of Buyer, which Limited Conversion
Preferred Stock shall have terms substantially as set
forth in Exhibit A and shall have a stated value and
liquidation value of $1,000 (or proportionately
increased for any higher price per Share paid in the
Offer) (the "LCPS") or (ii) $24.00 in cash, or any
higher price per Share paid in the Offer, payable to
the holder thereof, without interest ("Cash
Consideration").
(d) Prior to the date of the Company Stockholder
Meeting contemplated by Section 6.02, Buyer and the
Company shall prepare a form (an "Election Form")
pursuant to which a holder of Shares may specify the
number of Shares owned by such holder that such holder
desires to be converted into a right to receive cash in
the Merger and the number of Shares owned by such
holder that such holder desires to be converted into a
right to receive shares of LCPS in the Merger. The
Company shall cause an Election Form (and a letter of
transmittal for use in exchanging certificates
representing Shares for the consideration set forth in
Section 2.02(c) (the "Merger Consideration")) mailed to
each holder of Shares who shall request such an
Election Form.
(e) Each holder of Shares (other than holders of
Shares which, in accordance with subsection (a) above,
are to be canceled in the Merger) shall have the right
to specify in an Election Form the number of Shares
owned by such holder that such holder desires to have
converted into the right to receive cash in the Merger
(a "Cash Election") and the number of Shares owned by
such holder that such holder desires to have converted
into the right to receive shares of LCPS in the Merger
(a "Stock Election"). A Cash Election or a Stock
Election shall be effective only if the Exchange Agent
appointed by Buyer pursuant to Section 2.03 shall have
received no later than 5:00 p.m. New York City time on
the date three business days prior to the date of the
Company Stockholder Meeting (the "Election Deadline")
(i) an Election Form covering the Shares to which such
Cash Election and/or Stock Election applies, executed
and completed in accordance with the instructions set
forth in such Election Form and (ii) the certificate or
certificates representing such Shares, in such form and
with such endorsements, stock powers and signature
guarantees as may be required by such Election Form. A
Cash Election or Stock Election may be revoked or
changed only by delivering to the Exchange Agent, prior
to the Election Deadline, a written notice of
revocation or, in the case of a change, a properly
completed revised Election Form that identifies the
share certificates to which such revised Election Form
applies. Delivery to the Exchange Agent prior to the
Election Deadline of a revised Election Form with
respect to any certificate representing Shares shall
result in the revocation of all prior Election Forms
with respect to all Shares evidenced by such
certificate. Any termination of this Agreement in
accordance with Article X shall result in the
revocation of all Election Forms delivered to the
Exchange Agent on or prior to the date of such
termination. If an Election Form is revoked (either by
delivery of a written notice of revocation or by
delivery of a revised Election Form), the share
certificates to which such Election Form applies, if
previously delivered to the Exchange Agent, shall be
returned to the person revoking such Election Form
unless such person otherwise instructs the Exchange
Agent. For purposes of this Agreement, "Non-Electing
Shares" means all Shares (other than Shares that are to
be canceled in the Merger) as to which neither an
effective Cash Election nor an effective Stock Election
has been made as of the Election Deadline. All Non-
Electing Shares shall be deemed to have made the Cash
Election.
(f) Buyer and the Company shall have the right to
make rules, not inconsistent with the terms of this
Agreement, governing the validity and effectiveness of
Election Forms, the manner and extent to which Cash
Elections and Stock Elections are to be taken into
account in making the determinations required by this
Section and the payment of the Merger Consideration.
(g) Notwithstanding any other provision of this
Agreement to the contrary, Buyer shall be obligated to
issue shares of LCPS only to the extent that the LCPS
would be "held of record" (as such term is defined in
the 1934 Act and Rule 12g-5 thereunder) by not more
than 299 Persons. If the issuance of shares of LCPS in
respect of all Shares as to which effective Stock
Elections are made would result in the LCPS being "held
of record" by more than 299 Persons, subject to the
terms of this Agreement, Buyer shall issue LCPS to the
maximum number of Persons who have made a valid Stock
Election such that, after giving effect to such
issuance, the LCPS are held of record by 299 Persons.
In the event more than 299 holders of Shares make a
valid Stock Election, Buyer and the Special Committee
of the Board of Directors of the Company shall jointly
agree, in their discretion, as to the method for
selecting the holders who shall be entitled to receive
shares of LCPS in the Stock Election; such method may
consist of a lottery, selection by lot or the aggregate
number of Shares as to which a holder makes a valid
Stock Election, or any other method. In the event
Buyer and the Special Committee of the Board of
Directors are unable to agree on such a method, holders
who made a Stock Election shall be deemed to have made
a Cash Election.
(h) A Stock Election must be made with respect to
at least one hundred Shares to be a valid Stock
Election.
(i) Notwithstanding any provision of this
Agreement, Buyer shall not be obligated to accept
Stock Elections with respect to more than 15% of the
Shares outstanding as of the date hereof.
SECTION 2.03. Surrender and Payment. (a) Prior
to the record date for the Company Stockholder Meeting,
Buyer shall appoint an agent (the "Exchange Agent") for the
purposes of receiving the Election Forms, determining (in
accordance with Section 2.02) the form of the Merger
Consideration to be received by each holder of Shares and
exchanging certificates (the "Certificates") that prior to
the Effective Time represented Shares for the Merger
Consideration. Buyer will make available to the Exchange
Agent, as needed, the Merger Consideration to be paid in
respect of the Shares.
(b) Each holder of Shares that have been
converted into a right to receive the Merger Consideration,
upon surrender to the Exchange Agent of a Certificate or
Certificates, together with a properly completed letter of
transmittal covering the Shares formerly represented by such
Certificate or Certificates, will be entitled to receive the
Merger Consideration payable in respect of such Shares.
Until so surrendered, each such Certificate shall, after the
Effective Time, represent for all purposes, only the right
to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is
to be paid to a person other than the registered holder of
the Shares represented by the Certificate or Certificates
surrendered in exchange therefor, it shall be a condition to
such payment that the Certificate or Certificates so
surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such
payment shall pay to the Exchange Agent any transfer or
other taxes required as a result of such payment to a person
other than the registered holder of such Certificates or
establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable. For purposes of
this Agreement, "Person" means an individual, a corporation,
a partnership, an association, a trust or any other entity
or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no
further registration of transfers of Shares. If, after the
Effective Time, Certificates representing Shares are
presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for,
and in accordance with the procedures set forth, in this
Article II.
(e) Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 2.03(a)
that remains unclaimed by the holders of Shares six months
after the Effective Time shall be returned to Buyer, upon
demand, and any such holder who has not exchanged his Shares
for the Merger Consideration in accordance with this Section
prior to that time shall thereafter look only to Buyer for
payment of the Merger Consideration in respect of his
Shares. Buyer shall indemnify the Surviving Corporation for
any payment of the Merger Consideration it may be required
to make to a holder of Shares after the Merger Consideration
has been returned to Buyer. Notwithstanding the foregoing
none of Buyer, the Company or the Surviving Corporation
shall be liable to any holder of Shares for any amount paid
to a public official pursuant to applicable abandoned
property laws. Any amounts remaining unclaimed by holders
of Shares three years after the Effective Time (or such
earlier date immediately prior to such time as such amounts
would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by
applicable law, become the property of Buyer free and clear
of any claims or interest of any person previously entitled
thereto.
(f) No dividends, interest or other distributions
with respect to securities of Buyer constituting part of the
Merger Consideration shall be paid to the holder of any
unsurrendered certificates representing Shares until such
certificates are surrendered as provided in this Section.
Upon such surrender, there shall be paid, without interest,
to the person in whose name the certificates representing
the securities of Buyer into which such Shares were
converted are registered, all dividends, interest and other
distributions payable in respect of such securities on a
date subsequent to, and in respect of a record date after,
the Effective Time.
SECTION 2.04. Stock Options. (a) Prior to the
purchase of Shares pursuant to the Offer, the Board of
Directors of the Company (or, if appropriate, any committee
administering the Stock Plans (as defined below)) shall
adopt such resolutions or take such other actions as are
required to adjust, effective immediately prior to the
Effective Time, the terms of all outstanding employee and
director stock options to purchase Shares ("Stock Options")
and all outstanding stock appreciation rights ("SARs"),
whether or not presently exercisable, heretofore granted
under any stock option or stock appreciation rights plan,
program or arrangement of the Company or its Subsidiaries
(collectively, the "Stock Plans") to provide that (i) each
Stock Option together with any SAR related thereto or
granted in tandem therewith and (ii) each SAR granted
independent of, and not related to, any Stock Option (a
"Free-standing SAR"), in each case outstanding immediately
prior to the Effective Time shall be converted into the
right of the holder of such Stock Option or Free-standing
SAR, as the case may be, to receive a cash payment at that
time from the Company of an amount determined by multiplying
(x) the excess, if any, of the Cash Consideration over the
applicable exercise price per Share of such Stock Option or
strike price per Share of such Free-standing SAR, as the
case may be by (y) with respect to each Stock Option and
related SAR, the number of Shares the holder of the Stock
Option could have purchased (assuming full vesting of all
Stock Options) had such holder exercised such Stock Option
in full immediately prior to the Effective Time or, with
respect to each free-standing SAR, the number of Shares with
respect to which the Free-Standing SAR was granted (assuming
full vesting of all free-standing SARs). All amounts
payable pursuant to this Section 2.04(a) shall be subject to
any required withholding of taxes and shall be paid without
interest.
(b) Prior to the purchase of Shares pursuant to
the Offer, the Board of Directors of the Company (or, if
appropriate, any committee administering the Stock Plans)
shall adopt such resolutions or take such other actions as
are required to provide that the Stock Plans shall terminate
as of a date prior to the occurrence of a "Change in
Control" as defined in the Syntex Security of Employment
Plan (the "Stock Plan Termination Date"), except with
respect to Stock Options and SARs that are outstanding as of
the Stock Plan Termination Date which Stock Options and SARs
shall be adjusted immediately prior to the Effective Time as
contemplated by Section 2.04(a), and to provide that the
provisions in any other Employee Plan or Benefit Arrangement
(each as defined in Section 4.14) providing for the
issuance, transfer or grant of capital stock of the Company
shall be deleted as of the Stock Plan Termination Date, and
the Company shall take all necessary actions to provide that
following the Effective Time, no holder of a Stock Option or
SAR or any participant in any Stock Plan or other Employee
Plan or Benefit Arrangement shall have any right thereunder
to acquire any capital stock of the Company or the Surviving
Corporation.
SECTION 2.05. Adjustments. If at any time during
the period between the date of this Agreement and the
Effective Time, any change in the outstanding shares of
capital stock of Buyer shall occur, including by reason of
any reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, or any
stock dividend thereon with a record date during such
period, the number of shares of LCPS constituting all or
part of the Merger Consideration shall be appropriately
adjusted.
SECTION 2.06. Fractional Shares. No fractional
shares of LCPS shall be issued in the Merger. All
fractional shares of LCPS that a holder of Shares would
otherwise be entitled to receive as a result of the Merger
shall be aggregated and if a fractional share results from
such aggregation, such holder shall be entitled to receive,
in lieu thereof, an amount in cash determined by multiplying
the stated value of the LCPS by the fraction of a share of
LCPS to which such holder would otherwise have been
entitled.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.01. Articles of Incorporation. The
articles of incorporation of Merger Subsidiary in effect at
the Effective Time shall be the articles of incorporation of
the Surviving Corporation until amended in accordance with
applicable law, except that the name of the Surviving
Corporation shall be that of the Company at the date hereof.
SECTION 3.02. Bylaws. The bylaws of Merger
Subsidiary in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.03. Directors and Officers. From and
after the Effective Time, until successors are duly elected
or appointed and qualified in accordance with applicable
law, (i) the directors of Merger Subsidiary at the Effective
Time shall be the directors of the Surviving Corporation,
and (ii) the officers of the Company at the Effective Time
shall be the officers of the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer that:
SECTION 4.01. Corporate Existence and Power. The
Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the Republic of
Panama, and has the requisite corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted. The Company is duly qualified to do business as
a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions
where the failure to be so qualified would not, individually
or in the aggregate, have a material adverse effect on the
business, assets, financial condition or results of
operations of the Company and the Subsidiaries (as defined
in Section 4.06), taken as a whole (a "Material Adverse
Effect") or would not reasonably be expected to result in a
Material Adverse Effect. The Company has heretofore
delivered to Buyer true and complete copies of the Company's
articles of incorporation and bylaws as currently in effect.
SECTION 4.02. Corporate Authorization. The
execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Company's
corporate powers and, except for any required approval by
the Company's stockholders in connection with the
consummation of the Merger, have been duly authorized by all
necessary corporate action. This Agreement has been duly
and validly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company.
SECTION 4.03. Governmental Authorization. The
execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger by the Company
require no action by or in respect of, or filing by the
Company with, any governmental body, agency, official or
authority other than (i) the filing of articles of merger or
other appropriate documents for registration in the
Mercantile Registry of the Republic of Panama in accordance
with Panama Law and the Delaware GCL; (ii) compliance with
any applicable requirements of the HSR Act; and (iii)
compliance with any applicable requirements of the United
States Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "1934
Act"); and (iv) such filings or registration with, or
authorizations, consents or approvals of governmental
bodies, agencies, officials or authorities, the failure of
which to make or obtain, individually or in the aggregate,
would not result in or could not reasonably be expected to
result in a Material Adverse Effect or materially affect the
consummation of the transactions contemplated by this
Agreement.
SECTION 4.04. Non-Contravention. The execution,
delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) contravene or
conflict with the articles of incorporation or bylaws of the
Company, (ii) assuming compliance with the matters referred
to in Sections 4.03 and 5.03, contravene or conflict with or
constitute a violation of any provision of any material law,
regulation, judgment, injunction, order or decree binding
upon or applicable to the Company or any Subsidiary,
(iii) except as disclosed in writing to Buyer prior to the
date hereof, to the knowledge of the Company, require any
consent, approval or notice under and will not conflict
with, or result in the breach or termination of any
provision of or constitute a default (with or without the
giving of notice or the lapse of time or both) under, or
give rise to any right of termination, cancellation, or loss
of any benefit to which the Company or any Subsidiary is
entitled under any provision of any material agreement,
contract, license or other instrument binding on the Company
or any Subsidiary, or allow the acceleration of the
performance of, any material obligation of the Company or
any of its subsidiaries under any material indenture,
mortgage, deed of trust, lease, license, contract,
instrument or other agreement to which the Company or any of
its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective assets or
properties is subject or bound or (iv) result in the
creation or imposition of any Lien on any material asset of
the Company or any Subsidiary. For purposes of this
Agreement, "Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
SECTION 4.05. Capitalization. The authorized
capital stock of the Company consists of 600,000,000 Shares.
As of April 27, 1994, there were outstanding 221,134,238
Shares and employee stock options to purchase an aggregate
of 11,562,042 Shares (of which, options to purchase an
aggregate of 5,578,520 Shares were exercisable), in addition
to options granted to substantially all employees of the
Company in 1992 and 1993 with respect to an aggregate amount
of approximately 1,000,000 Shares, none of which were
exercisable. All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as set forth in this
Section and except for changes since April 27, 1994
resulting from the exercise of employee stock options
outstanding on such date, there are outstanding (i) no
shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or any Subsidiary
convertible into or exchangeable for shares of capital stock
or voting securities of the Company, and (iii) no options or
other rights to acquire from the Company or any Subsidiary,
and no obligation of the Company or any Subsidiary to issue,
any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i), (ii)
and (iii) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise
acquire any Company Securities.
SECTION 4.06. Subsidiaries. (a) Each Subsidiary
is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of
incorporation, has the requisite corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted
and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or
the nature of its activities make such qualification
necessary, except for those jurisdictions where failure to
be so qualified would not, individually or in the aggregate,
have or could not reasonably be expected to have a Material
Adverse Effect. For purposes of this Agreement,
"Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons
performing similar functions are directly or indirectly
owned by the Company. Except as disclosed in writing to
Buyer prior to the date hereof, all Subsidiaries and their
respective jurisdictions of incorporation are identified in
the Company's annual report on Form 10-K for the fiscal year
ended July 31, 1993 (the "Company 10-K").
(b) All of the outstanding capital stock of, or
other ownership interests in, each Subsidiary, is owned by
the Company, directly or indirectly, free and clear of any
Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership
interests). There are no outstanding (i) securities of the
Company or any Subsidiary convertible into or exchangeable
for shares of capital stock or other voting securities or
ownership interests in any Subsidiary, and (ii) options or
other rights to acquire from the Company or any Subsidiary,
and no other obligation of the Company or any Subsidiary to
issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or
ownership interests in, any Subsidiary (the items in clauses
(i) and (ii) being referred to collectively as the
"Subsidiary Securities"). There are no outstanding
obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any outstanding Subsidiary
Securities.
SECTION 4.07. SEC Filings. (a) The Company has
delivered to Buyer (i) the annual reports on Form 10-K for
its fiscal years ended July 31, 1991, 1992 and 1993, (ii)
its quarterly reports on Form 10-Q for its fiscal quarters
ended October 31, 1993 and January 31, 1994 (the latter
referred to herein as the "Company 10-Q"), (iii) its proxy
or information statements relating to meetings of, or
actions taken without a meeting by, the stockholders of the
Company held since December 7, 1992, and (iv) all of its
other reports, statements, schedules and registration
statements filed with the United States Securities and
Exchange Commission (the "SEC") since December 7, 1992
(collectively, the "SEC Filings").
(b) As of its filing date, each of the SEC
Filings, complied as to form in all material respects and
did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make
the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.08. Financial Statements. The audited
consolidated financial statements and unaudited consolidated
interim financial statements of the Company included in its
annual reports on Form 10-K and the quarterly reports on
Form 10-Q referred to in Section 4.07 fairly present, in
conformity with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in
the notes thereto), the consolidated financial position of
the Company and its consolidated Subsidiaries as of the
dates thereof and their consolidated results of operations
and changes in financial position for the periods then ended
(subject to normal year-end adjustments in the case of any
unaudited interim financial statements). For purposes of
this Agreement, "Balance Sheet" means the consolidated
Balance Sheet of the Company as of July 31, 1993 and
"Balance Sheet Date" means July 31, 1993.
SECTION 4.09. Disclosure Documents. (a) Each
document required to be filed by the Company with the SEC in
connection with the transactions contemplated by this
Agreement (the "Company Disclosure Documents"), including,
without limitation, the Schedule 14D-9, the proxy or
information statement of the Company (the "Company Proxy
Statement"), if any, to be filed with the SEC in connection
with the Merger, and any amendments or supplements thereto
will, when filed, comply as to form in all material respects
with the applicable requirements of the 1934 Act.
(b) At the time the Company Proxy Statement or
any amendment or supplement thereto is first mailed to
stockholders of the Company, at the time such stockholders
vote on adoption of this Agreement and at the Effective
Time, the Company Proxy Statement, as supplemented or
amended, if applicable, will not contain any untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were
made, not misleading. At the time of the filing of any
Company Disclosure Document other than the Company Proxy
Statement and at the time of any distribution thereof to the
Company's stockholders, such Company Disclosure Document
will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) The representations and warranties contained
in this Section 4.09 will not apply to statements included
in or omissions from the Company Disclosure Documents based
upon information furnished to the Company in writing by
Buyer specifically for use therein.
(d) The information with respect to the Company
or any Subsidiary that the Company furnishes to Buyer in
writing specifically for use in the Offer Documents will
not, at the time of the filing thereof, at the time first
published, sent or given to the holders of Shares and
immediately prior to the time Buyer accepts any Shares for
payment, contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they
were made, not misleading.
(e) The information with respect to the Company
or any Subsidiary that the Company furnishes to Buyer in
writing specifically for use in the Registration Statement
(as defined in Section 5.05(c)) will not contain at the time
the Registration Statement becomes effective or at the
Effective Time, any untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein,
not misleading.
SECTION 4.10. Absence of Certain Changes. Except
as disclosed in writing to Buyer prior to the date hereof,
since the Balance Sheet Date, the Company and Subsidiaries
have in all material respects conducted their business in
the ordinary course consistent with past practice and there
has not been:
(a) any material adverse change in the business,
assets, financial condition or results of operations of
the Company and the Subsidiaries taken as a whole or
any event, occurrence or development of a state of
circumstances or facts which would reasonably be
expected to result in such a material adverse change (a
"Material Adverse Change");
(b) any declaration, setting aside or payment of
any dividend or other distribution with respect to any
shares of capital stock of the Company (other than
quarterly cash dividends on the Shares not in excess of
$.26 per Share per quarter and having customary record
and payment dates), or any repurchase, redemption or
other acquisition by the Company or any Subsidiary of
any outstanding shares of capital stock or other
securities of, or other ownership interests in, the
Company or any Subsidiary;
(c) any amendment of any material term of any
outstanding security of the Company or of any
Subsidiary;
(d) any incurrence, assumption or guarantee by
the Company or any Subsidiary of any material
indebtedness for borrowed money or any creation or
assumption by the Company or any Subsidiary of any Lien
on any material asset other than in the ordinary course
of business consistent with past practices;
(e) any making of any loan, advance or capital
contributions to or investment in any person other than
loans, advances or capital contributions to or
investments in wholly-owned Subsidiaries made in the
ordinary course of business consistent with past
practices;
(f) any change in any method of accounting or
accounting practice by the Company or any Subsidiary,
except for any such change required by reason of a
concurrent change in generally accepted accounting
principles; or
(g) any (i) grant of any severance or termination
pay to any director, officer or employee of the Company
or any Subsidiary, (ii) entering into of any
employment, deferred compensation or other similar
agreement (or any amendment to any such existing
agreement) with any director, officer or employee of
the Company or any Subsidiary, (iii) any increase in
benefits payable under any existing severance or
termination pay policies or employment agreements, or
(iv) any increase in compensation, bonus or other
benefits payable to directors, officers or employees of
the Company or any Subsidiary, other than in the
ordinary course of business consistent with past
practice other than fees payable to the Special
Committee of the Board of Directors not exceeding the
amounts disclosed in writing to Buyer.
SECTION 4.11. No Undisclosed Material
Liabilities. Except as previously disclosed to Buyer in
writing, there are no liabilities of the Company or any
Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result
in such a liability, other than:
(i) liabilities disclosed or provided for in the
Balance Sheet or in the Company 10-Q;
(ii) liabilities which in the aggregate are not
material to the Company and the Subsidiaries, taken as
a whole; and
(iii) liabilities under this Agreement and fees and
expenses related thereto previously disclosed in
writing to Buyer.
SECTION 4.12. Litigation. Except as set forth in
the Company 10-K, the Company 10-Q or disclosed in writing
to Buyer prior to the date hereof, there is no action, suit,
investigation or proceeding (or, to the knowledge of the
Company, any basis for any Person to assert any claim likely
to result in liability or any other adverse determination)
pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any
Subsidiary or any of their respective properties before any
court or arbitrator or any governmental body, agency or
official which, if determined or resolved adversely to the
Company or any Subsidiary in accordance with the plaintiff's
demands, would individually or in the aggregate reasonably
be expected to have a Material Adverse Effect or which in
any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Offer or the Merger or any of the other
transactions contemplated hereby.
SECTION 4.13. Taxes. Except as set forth in the
Company 10-K or 10-Q, to the knowledge of the Company,
(a) the Company and the Subsidiaries have filed, been
included in or sent, all material returns, declarations and
reports and information returns and statements required to
be filed or sent by or relating to any of them relating to
any Taxes (as defined below) with respect to any material
income, properties or operations of the Company or any
Subsidiary prior to the Effective Time (collectively,
"Returns"); (b) as of the time of filing, the Returns
correctly reflected in all material respects the facts
regarding the income, business, assets, operations,
activities and status of the Company and the Subsidiaries
and any other information required to be shown therein; (c)
the Company and the Subsidiaries have timely paid or made
provision for all material Taxes that have been shown as due
and payable on the Returns that have been filed; (d) the
Company and the Subsidiaries have made or will make
provision for all material Taxes payable for any periods
that end before the Effective Time for which no Returns have
yet been filed and for any periods that begin before the
Effective Time and end after the Effective Time to the
extent such Taxes are attributable to the portion of any
such period ending at the Effective Time; (e) the charges,
accruals and reserves for taxes reflected on the books of
the Company and the Subsidiaries are adequate to cover the
Tax liabilities accruing or payable by the Company and the
Subsidiaries in respect of periods prior to the date hereof;
(f) neither the Company nor any Subsidiary is delinquent in
the payment of any material Taxes or has requested any
extension of time within which to file or send any material
Return, which Return has not since been filed or sent; (g)
no material deficiency for any Taxes has been proposed,
asserted or assessed in writing against the Company or any
Subsidiary (or any member of any affiliated or combined
group of which the Company or any Subsidiary is or has been
a member for which either the Company or any Subsidiary
could be liable) other than those Taxes being contested in
good faith; (h) neither the Company nor any Subsidiary has
granted any extension of the limitation period applicable to
any material Tax claims other than those Taxes being
contested in good faith; and (i) neither the Company nor any
Subsidiary is or has been a party to any material tax
sharing agreement with any corporation which, as of the
Effective Time, is not a member of the affiliated group of
which the Company is a member.
"Tax" means with respect to any person (i) any net
income, gross income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium,
property, value-added or windfall profit tax, custom duty
or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest
and any penalty, addition to tax or additional amount
imposed by any taxing authority (domestic or foreign) on
such person and (ii) any liability of the Company or any
Subsidiary for the payment of any amount of the type
described in clause (i) as a result of being a member of an
affiliated or combined group.
SECTION 4.14. Employee Benefits. (a) The Company
has provided Buyer with complete age, salary, bonus, service
and related data as of a date no earlier than March 31, 1994
for employees and former employees of the Company and its
Subsidiaries or, to the extent not so provided shall provide
Buyer with such data as is maintained by the Company or its
Subsidiaries or reasonably obtainable as soon as practicable
after the date hereof.
(b) Section I of Schedule 4.14 identifies each
"employee benefit plan", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
which (i) is subject to any provision of ERISA and (ii) is
maintained, administered or contributed to by the Company or
any of its ERISA Affiliates (as defined below) and covers
any current or former employee or director of the Company or
any Subsidiary or under which the Company or any of its
ERISA Affiliates has any liability (collectively, the
"Employee Plans"). Copies of each Employee Plan (and, if
applicable, related trust agreements) and all amendments
thereto and written interpretations thereof have been
furnished to Buyer or, to the extent not so furnished, shall
be furnished as soon as practicable after the date hereof,
in either case together with (x) the most recent annual
report (Form 5500 including, if applicable, Schedule B
thereto) prepared in connection with any such Employee Plan
and (y) the most recent actuarial valuation report prepared
in connection with any such plan. For purposes of this
Section 4.14, "ERISA Affiliate" of any person means any
other person which, together with such person, would be
treated as a single employer under Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code").
(c) To the knowledge of the Company, no condition
exists and no event has occurred that could constitute
grounds for termination of any Employee Plan subject to
Title IV of ERISA (a "Title IV Plan") or, with respect to
any Employee Plan which is a multiemployer plan as defined
in Section 3(37) of ERISA (a "Multiemployer Plan"), presents
a material risk of a complete or partial withdrawal under
Title IV of ERISA. To the knowledge of the Company, if a
"complete withdrawal" by the Company and all of its ERISA
Affiliates were to occur as of the Effective Time with
respect to all Employee Plans which are Multiemployer Plans,
neither the Company nor any of its ERISA Affiliates would
incur any material withdrawal liability under Title IV of
ERISA.
(d) Each Employee Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified
and has been so qualified during the period from its
adoption to date (after giving effect to any timely
effective remedial amendments that may have been necessary
to maintain such Employee Plans qualified status), and each
trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code; provided however, that in order
to maintain such qualified and tax exempt status, certain of
such Employee Plans may be required to be amended during the
currently pending remedial amendment period to conform to
the Tax Reform Act of 1986 and subsequent legislation in a
manner that is consistent with the manner in which such
Employee Plan has operated. The Company has furnished to
the Buyer copies of the most recent Internal Revenue Service
determination letters with respect to each such Plan. Each
Employee Plan has been maintained in compliance in all
material respects with its terms and with the requirements
prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the
Code, which are applicable to such Employee Plan.
(e) Except to the extent specifically set forth
and quantified in Section II of Schedule 4.14, there is no
contract, agreement, plan or arrangement covering any
employee or former employee of the Company or any Subsidiary
that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant
to the terms of Section 280G of the Code.
(f) Section III of Schedule 4.14 identifies each
employment, severance or other similar contract, arrangement
or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation
or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an
Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by the Company or any of
its Subsidiaries and (iii) covers any current or former
employee or director of the Company or any of its
Subsidiaries. Such contracts, plans and arrangements as are
described above, copies or descriptions of all of which have
been furnished previously to Buyer, or, to the extent not so
furnished, shall be furnished as soon as practicable after
the date hereof, are referred to collectively herein as the
"Benefit Arrangements". Each Benefit Arrangement has been
maintained in compliance in all material respects with its
terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable
to such Benefit Arrangement.
(g) Except as disclosed in writing to Buyer prior
to the date hereof, there has been no amendment to, written
interpretation or announcement (whether or not written) by
the Company or any of its Subsidiaries relating to, or
change in employee participation or coverage under, any
Employee Plan or Benefit Arrangement which would increase
materially the expense of maintaining such Employee Plan or
Benefit Arrangement above the level of the expense incurred
in respect thereof for the fiscal year ended on the Balance
Sheet Date.
(h) (i) As of the Balance Sheet Date, the fair
market value of the assets of each Title IV Plan (excluding
for these purposes any accrued but unpaid contributions)
exceeded the present value of all benefits accrued under
such Title IV Plan determined using the assumptions and
methods set forth in the most recent actuarial valuation
report delivered by the Company's independent auditors with
respect to such Plan.
(ii) As of the Balance Sheet Date, the aggregate
unfunded liability of the Company and its ERISA Affiliates
in respect to all Employee Plans described under
Sections 4(b)(5) or 401(a)(1) of ERISA, computed using
reasonable actuarial assumptions consistent with GAAP and
determined as if all benefits under such plans were vested
as of such date, did not exceed $14,000,000.
(iii) With respect to each Benefit Arrangement
which is maintained for the benefit of non United States
employees of the Company or its Subsidiaries, as of the
Balance Sheet Date, according to the actuarial assumptions
and valuations most recently used for the purpose of funding
each such Benefit Arrangement (or, if the same has no such
assumptions and valuations or is unfunded, according to
reasonable actuarial assumptions and valuations consistent
with GAAP), the total amount or value of the funds available
under such Benefit Arrangement to pay benefits accrued
thereunder, together with any reserve or accrual with
respect thereto, exceeded the present value of all benefits
(actual or contingent) accrued as of the Balance Sheet Date
of all participants and past participants therein who are
employees or former employees of the Company or its
Subsidiaries.
(iv) Except for (x) the accelerated payment of
Deferred Cash Incentive Awards under the Company's Call-To-
Action Incentive Plan which will result in an aggregate
payment of not more than $2,000,000, and (y) the
acceleration of vesting of stock options and stock
appreciation rights which are to be adjusted pursuant to
Section 2.04, no employee or former employee of the Company
or any Subsidiary will become entitled to any compensation,
bonus, retirement, severance, job security or similar
benefit or enhanced such benefit solely as a result of the
transactions contemplated hereby, without regard to any
events that may occur after the Effective Time.
Immediately after giving effect to the transactions
contemplated hereby, the aggregate maximum contingent
liability of the Surviving Corporation and its subsidiaries
in respect of cash termination and severance benefits under
the Employee Plans and Benefit Arrangements will not exceed
$355,000,000.
SECTION 4.15. Compliance with Laws. Except as
previously disclosed to Buyer in writing, to the knowledge
of the Company, neither the Company nor any Subsidiary is in
violation of, or has violated, any applicable provisions of
any laws, statutes, ordinances or regulations which would,
individually or in the aggregate, result in or could
reasonably be expected to result in a Material Adverse
Effect.
SECTION 4.16. Finders' Fees. Except for Goldman,
Sachs & Co., whose fees have been disclosed in writing to
Buyer and will be paid by the Company, there is no
investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on
behalf, of the Company or any Subsidiary who might be
entitled to any fee or commission from Buyer or any of its
Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.17. Environmental Matters. (a) To the
knowledge of the Company, except as previously disclosed to
Buyer in writing, there are no Environmental Liabilities of
the Company or any Subsidiary other than:
(i) Environmental Liabilities disclosed or
provided for in the Company 10-K or the Company 10-Q;
(ii) Environmental Liabilities that individually
or in the aggregate are not material to the Company and
the Subsidiaries, taken as a whole; and
(iii) Environmental Liabilities that individually
or in the aggregate have not had and are not reasonably
expected to have a Material Adverse Effect.
(b) The following terms as used in this Section
shall have the following meanings:
"Environmental Liabilities" means any and all
liabilities of the Company or any Subsidiary (including any
entity which is a predecessor of the Company or any
Subsidiary), whether accrued, contingent, absolute,
determined, determinable, vested, potential, known or
otherwise, and any existing condition, situation or set of
circumstances which could reasonably be expected to result
in such a liability, which (i) arise under or relate to
matters covered by Environmental Laws and (ii) relate to
actions occurring or conditions existing on or prior to the
Effective Time.
"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees,
codes, and governmental restrictions, now in effect or in
effect at the Effective Time, relating to human health, the
environment or to emissions, discharges or releases of
pollutants, contaminants or other hazardous substances or
wastes into the environment, including without limitation
ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants or other hazardous
substances or wastes or the clean-up or other remediation
thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to the Company that:
SECTION 5.01. Corporate Existence and Power.
Each of Buyer and Merger Subsidiary is a corporation duly
incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on
its business as now conducted. Since the date of its
incorporation, Merger Subsidiary has not engaged in any
activities other than in connection with or as contemplated
by this Agreement or in connection with arranging any
financing required to consummate the transactions
contemplated hereby.
SECTION 5.02. Corporate Authorization. The
execution, delivery and performance by Buyer and Merger
Subsidiary of this Agreement and the consummation by Buyer
and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Buyer and Merger
Subsidiary and have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly
executed and delivered by each of Buyer and Merger
Subsidiary and constitutes a valid and binding agreement of
Buyer and Merger Subsidiary.
SECTION 5.03. Governmental Authorization. The
execution, delivery and performance by Buyer and Merger
Subsidiary of this Agreement and the consummation by Buyer
and Merger Subsidiary of the transactions contemplated by
this Agreement, to the knowledge of Buyer and Merger
Subsidiary, require no action by or in respect of, or filing
with, any governmental body, agency, official or authority
other than (i) the filing of the articles of merger or other
appropriate documents in accordance with Panama Law and the
Delaware GCL, (ii) compliance with any applicable
requirements of the HSR Act, (iii) compliance with any
applicable requirements of the 1934 Act, (iv) the filing of
a notice pursuant to Section 721 of the Defense Production
Act of 1950, as amended ("Exon-Florio") and (v) compliance
with the applicable requirements of the Securities Act of
1933 (the "1933 Act"), and (vi) compliance with any
applicable foreign or state securities or Blue Sky laws.
SECTION 5.04. Non-Contravention. The execution,
delivery and performance by Buyer and Merger Subsidiary of
this Agreement and the consummation by Buyer and Merger
Subsidiary of the transactions contemplated hereby do not
and will not (i) contravene or conflict with the certificate
or articles of incorporation or bylaws of Buyer or Merger
Subsidiary, (ii) assuming compliance with the matters
referred to in Section 5.03, contravene or conflict with any
provision of law, regulation, judgment, order or decree
binding upon Buyer or Merger Subsidiary or (iii) constitute
a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of
Buyer or Merger Subsidiary or to a loss of any benefit to
which Buyer or Merger Subsidiary is entitled under any
agreement, contract or other instrument binding upon Buyer
or Merger Subsidiary.
SECTION 5.05. Disclosure Documents. (a) The
information with respect to Buyer and its subsidiaries
(including without limitation Merger Subsidiary), Parent and
their respective Affiliates that Buyer furnishes to the
Company in writing specifically for use in any Company
Disclosure Document will not contain any untrue statement of
a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light
of the circumstances under which they were made, not
misleading (i) in the case of the Company Proxy Statement,
at the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the
Company, at the time the stockholders vote on adoption of
this Agreement and at the Effective Time and (ii) in the
case of any Company Disclosure Document other than the
Company Proxy Statement, at the time of the filing thereof
and at the time of any distribution thereof to the Company's
stockholders.
(b) The Offer Documents, when filed, will comply
as to form in all material respects with the applicable
requirements of the 1934 Act and will not at the time of the
filing thereof, at the time first published, sent or given
to the holders of Shares and at the time of consummation of
the Offer, contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they
were made, not misleading, provided, that this
representation and warranty will not apply to statements
included in or omissions from the Offer Documents based upon
information furnished to Buyer or Merger Subsidiary in
writing by the Company specifically for use therein.
(c) The Registration Statement to be filed by
Buyer with the SEC with respect to the offering of the LCPS
in connection with the Merger (the "Registration Statement")
and any amendments or supplements thereto will, at the time
the Registration Statement becomes effective or at the
Effective Time, comply as to form in all material respects
with the requirements of the 1933 Act and will not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements contained therein, not
misleading; provided that the foregoing representation shall
not apply to statements or omissions in the Registration
Statement based upon information furnished to Buyer or
Merger Subsidiary in writing by the Company specifically for
use therein.
(d) Buyer agrees to cause the Surviving
Corporation to satisfy any claims or liabilities arising
directly or indirectly as a result of Section 2.04(b) or the
actions required thereby.
SECTION 5.06. Finders' Fees. Except for J.P.
Morgan Securities Inc., whose fees will be paid by Buyer,
there is no investment banker, broker, finder or other
intermediary who might be entitled to any fee or commission
from the Buyer or any of its Affiliates upon consummation of
the transactions contemplated by this Agreement.
SECTION 5.07. Financing. Buyer has or will have,
prior to the expiration of the Offer and the Effective Date
of the Merger, sufficient funds available to purchase all of
the Shares outstanding on a fully diluted basis in the Offer
and the Merger and to pay all related fees and expenses
pursuant to the Offer and the Merger.
SECTION 5.08. Capitalization. The authorized
capital stock of Buyer consists of 500 shares of Common
Stock. As of April 28, 1994, there were outstanding 500
shares of Common Stock. All outstanding shares of capital
stock of Buyer have been duly authorized and validly issued
and are fully paid and nonassessable. The shares of LCPS to
be issued as part of the Merger Consideration have been duly
authorized and when issued and delivered in accordance with
the terms of this Agreement, will have been validly issued
and will be fully paid and nonassessable and the issuance
thereof is not subject to any preemptive or other similar
right. The non-voting securities issuable upon exchange of
LCPS will, at the time of exchange be validly issued and
will be fully paid and non-assessable.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Conduct of the Company. From the
date hereof until the Effective Time, the Company and the
Subsidiaries shall conduct their business in the ordinary
course consistent with past practice and shall use their
best efforts to preserve intact their business organizations
and relationships with third parties and to keep available
the services of their present officers and key employees,
subject to the terms of this Agreement. Without limiting
the generality of the foregoing, and except as otherwise
provided in this Agreement, from the date hereof until the
Effective Time without the consent of Buyer:
(a) the Company will not adopt or propose any
change in its articles of incorporation or bylaws;
(b) the Company will not, and will not permit any
Subsidiary to, merge or consolidate with any other Person or
acquire a material amount of assets of any other Person;
(c) the Company will not, and will not permit any
Subsidiary to, sell, lease, license or otherwise surrender,
relinquish or dispose of any assets or property which are
material to the Company and its Subsidiaries as a whole
except (i) pursuant to existing contracts or commitments,
(ii) in the ordinary course consistent with past practice;
or (iii) as Buyer may agree in writing;
(d) the Company will not, and will not permit any
Subsidiary to, agree or commit to do any of the foregoing;
and
(e) the Company will not, and will not permit any
Subsidiary to (i) take, or agree or commit to take, any
action that would make any representation and warranty of
the Company hereunder inaccurate in any respect at, or as of
any time prior to, the Effective Time or (ii) omit, or agree
or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate in
any respect at any such time, provided however that the
Company shall be permitted to take or omit to take such
action which can (without any uncertainty) be cured at or
prior to the Effective Time or a date on which Shares can be
purchased pursuant to the Offer.
SECTION 6.02. Stockholder Meeting; Proxy
Material. The Company shall cause a meeting of its
stockholders (the "Company Stockholder Meeting") to be duly
called and held as soon as reasonably practicable for the
purpose of voting on the approval and adoption of this
Agreement and the Merger. The Board of Directors of the
Company shall, subject to their fiduciary duties as advised
by counsel, recommend approval and adoption of this
Agreement and the Merger by the Company's stockholders. In
connection with such meeting, the Company (i) will promptly
prepare and file with the SEC, will use all reasonable
efforts to have cleared by the SEC and will thereafter mail
to its stockholders as promptly as practicable a proxy
statement and all other proxy materials for such meeting,
(ii) will, subject to the fiduciary duties of its Board of
Directors, use all reasonable efforts to obtain the
necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby and (iii) will
otherwise comply with all legal requirements applicable to
such meeting.
SECTION 6.03. Access to Information. From the
date hereof until the Effective Time, the Company will give
Buyer, its counsel, financial advisors, auditors and other
authorized representatives reasonable access during normal
business hours to the offices, properties, books and records
of the Company and the Subsidiaries, will furnish to Buyer,
its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data
and other information as such persons may reasonably request
and will instruct the Company's employees, counsel and
financial advisors to cooperate with Buyer in its
investigation of the business of the Company and the
Subsidiaries; provided that no investigation pursuant to
this Section shall affect any representation or warranty
given by the Company to Buyer hereunder; and provided,
further, that the foregoing shall not require the Company to
permit any inspection, or to disclose any information, which
in the reasonable judgment of the Company would result in
the disclosure of any trade secrets of third parties or
violate any obligation of the Company with respect to
confidentiality if the Company shall have used reasonable
efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made
pursuant to this Section shall be directed to an executive
officer of the Company or such person as may be designated
by any such officer.
(b) Each of Buyer and Merger Subsidiary agrees to
be bound by the letter agreement dated February 28, 1994,
between Parent and the Company as if the references to
Parent therein were to Buyer and Merger Subsidiary, except
that Buyer and Merger Subsidiary may (i) enter into this
Agreement, (ii) acquire Shares pursuant to the Offer and the
Merger so long as this Agreement shall not have been
breached by Buyer or Merger Subsidiary or terminated in
accordance with its terms and (iii) in the event described
in the last sentence of Section 2.02(g), agree with any
shareholder of the Company to exchange such shareholder's
Shares for a security having terms no more favorable to such
shareholder than the terms of the LCPS (so long as all such
exchanges are effected on the same terms) and (iv) Buyer and
its subsidiaries may make such disclosures in the Offer
Documents as Buyer may determine in its reasonable
discretion is required by applicable law.
SECTION 6.04. Other Offers. (a) From the date
hereof until the termination hereof, the Company and the
Subsidiaries will not, and will use their best efforts to
cause their respective officers, directors, employees or
other agents not to, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Acquisition
Proposal (as hereinafter defined), (ii) subject to the
fiduciary duties of the Board of Directors under applicable
law as advised by counsel, waive any provision of any
standstill or similar agreements entered into by the Company
or (iii) subject to the fiduciary duties of the Board of
Directors under applicable law as advised by counsel to the
Company, engage in negotiations with, or disclose any
nonpublic information relating to the Company or any
Subsidiary or afford access to the properties, books or
records of the Company or any Subsidiary to, any Person that
may be considering making, or has made, an Acquisition
Proposal; provided that, on or prior to May 14, 1994 the
provisions of this sentence shall not apply to any party
that is bound by a standstill or similar agreement with the
Company on the date hereof (an "Existing Bidder"). Nothing
contained in this Section 6.04 shall prohibit the Company
and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
1934 Act, and (ii) making such disclosures to the Company's
stockholders which, in the judgment of and subject to the
fiduciary duties of the Board of Directors with the advice
of counsel, may be required under applicable law.
(b) The Company will (i) promptly notify Buyer
after receipt of any Acquisition Proposal or any inquiries
indicating that any person is considering making or wishes
to make an Acquisition Proposal, (ii) promptly notify Buyer
after receipt of any request for nonpublic information
relating to the Company or any Subsidiary or for access to
the properties, books or records of the Company or any
Subsidiary by any Person that may be considering making, or
has made, an Acquisition Proposal and (iii) subject to the
fiduciary duties of the Board of Directors under applicable
law as advised by counsel to the Company, keep Buyer advised
of the status and principal financial terms of any such
Acquisition Proposal, indication or request. The term
"Acquisition Proposal" as used herein means any offer or
proposal for, or any indication of interest in, a merger or
other business combination involving the Company or any
Subsidiary or the acquisition of any equity interest in, or
a substantial portion of the assets of, the Company or any
Subsidiary, other than the transactions contemplated by this
Agreement.
SECTION 6.05. Notice of Certain Events. The
Company shall notify Buyer, and Buyer shall notify the
Company, as promptly as practicable following its receipt
of:
(i) any notice or other communication from any
Person alleging that the consent of such Person is or
may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any
governmental or regulatory agency or authority in
connection with the transactions contemplated by this
Agreement; and
(iii) notice that any actions, suits, claims,
investigations or proceedings have been commenced or,
to the knowledge threatened against, or involving the
Company or any Subsidiary, or Buyer, as applicable,
which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to
Section 4.12 or which relate to the consummation of the
transactions contemplated by this Agreement.
SECTION 6.06. Rule 145 Affiliates. Prior to the
Effective Time, the Company shall cause to be delivered to
Buyer an opinion of Skadden, Arps, Slate, Meagher & Flom or
Holtzmann, Wise & Shepard in form and substance satisfactory
to counsel to Buyer, identifying all persons who might, in
the opinion of counsel to the Company, at the time of the
meeting of the Company Stockholder Meeting, be deemed to be
"affiliates" of the Company for purposes of Rule 145 under
the 1933 Act (the "1933 Act Affiliates"). The Company shall
use its best efforts to cause each person who is identified
as a possible 1933 Act Affiliate to enter into prior to the
Effective Time an agreement in form and substance reasonably
acceptable to Buyer pursuant to which each such person
acknowledges his responsibilities as such an "affiliate".
ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
SECTION 7.01. Obligations of Merger Subsidiary.
Buyer will take all action necessary to cause Merger
Subsidiary to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 7.02. Voting of Shares. Buyer agrees to
vote all Shares beneficially owned by it in favor of
adoption of this Agreement and the Merger at the Company
Stockholder Meeting.
SECTION 7.03. Director and Officer Liability.
Buyer will cause the Surviving Corporation to indemnify and
hold harmless the present and former officers and directors
of the Company in respect of acts or omissions occurring
prior to the Effective Time to the maximum extent permitted
under the Company's articles of incorporation and bylaws in
effect on the date hereof; provided that, such
indemnification shall (to the maximum extent permitted by
law) be mandatory rather than permissive except in instances
involving willful misconduct or bad faith and that the
Surviving Corporation shall advance expenses, including
attorneys' fees promptly on demand and delivery of any
required undertaking. For three years after the Effective
Time, Buyer will cause to be maintained the current policies
of officers' and directors' liability insurance in respect
of acts or omissions occurring prior to the Effective Time
covering each such person currently covered by the Company's
officers' and directors' liability insurance policy;
provided that the Surviving Corporation may substitute
therefore policies of at least the same coverage containing
terms and conditions which in all material respects are no
less advantageous for so long as such substitution does not
result in gaps or lapses in coverage; and provided further
that in satisfying its obligation under this Section, Buyer
shall not be obligated to cause the Surviving Corporation to
pay premiums in excess of the amount per annum the Company
paid in its last full fiscal year, which amount has been
disclosed to Buyer. Buyer shall cause the Surviving
Corporation to pay all expenses (including attorneys' fees)
that may be incurred by any indemnified party in enforcing
the indemnity and other obligations provided for in this
Section 7.03. Buyer agrees that should the Surviving
Corporation fail to comply with the foregoing obligations,
Buyer shall be responsible therefor. The obligations of
Buyer under this Section 7.03 shall not be terminated or
modified in such manner as to adversely affect directors and
officers to whom this Section 7.03 applies without the
consent of such director or officer. Directors and officers
to whom this Section 7.03 applies shall be third party
beneficiaries of this Section.
SECTION 7.04. Employee Matters.
(a) For a period of at least one year after the
Effective Time, Buyer shall cause the Company to continue to
maintain the Company's existing compensation, severance,
welfare and pension benefit plans, programs and arrangements
(other than any stock based plans, programs and
arrangements) for the benefit of current and former
employees and directors of the Company and its Subsidiaries
(subject to such modification as may be required by
applicable law or to maintain the tax exempt status of any
such plan which is intended to be qualified under Section
401(a) of the Code), provided that (i) nothing herein shall
prohibit Buyer from replacing any such existing plan or
plans, program(s) or arrangement(s) with a plan or plans,
program(s) or arrangement(s) which provide such employees
and directors with benefits which are not less favorable in
the aggregate than the benefits that would have been
provided under the Company's existing plan(s), program(s) or
arrangement(s) to the extent such replacement is permitted
under the terms of the applicable plan, program or
arrangement and (ii) nothing herein shall obligate the Buyer
to provide such employees and directors with any stock based
compensation (including, without limitation, stock options
or stock appreciation rights) after the Effective Time.
In the light of Buyer's desire that the Company
provide appropriate employee incentives in the future, the
Buyer agrees promptly to develop, and the Company and Buyer
shall promptly cooperate in developing, a new performance
based incentive compensation plan for the benefit of
employees of the Company and its Subsidiaries as an
appropriate substitute for the current Stock Plans.
(b) The Company hereby agrees not to, and to
cause its Subsidiaries not to, amend or modify any existing
Employee Plan or Benefit Arrangement, nor enter into or
otherwise establish, adopt or maintain any new employee
plans, programs, agreements or arrangements, or grant any
additional Free-standing SARs or other awards based upon the
value of the Company's equity securities prior to and
including the Effective Time without the prior written
consent of the Buyer.
(c) It is the Buyer's current intention to
maintain the Company's headquarters at its present location
in Palo Alto, California.
(d) From and after the Effective Time, for
purposes of determining eligibility, vesting and benefit
accrual under any replacement compensation, severance,
welfare, pension benefit or savings plan of Buyer or any of
its affiliates in which employees of the Company and its
Subsidiaries become eligible to participate, service with
the Company or any of its Subsidiaries shall be credited as
if such services were rendered to Buyer or any of its
affiliates; provided that (i) Buyer shall not be obligated
to permit employees of the Company and its Subsidiaries to
participate in nor, upon participation, to receive such
credited service, with respect to, any plan maintained by
Buyer or its affiliates which is not intended to constitute
a replacement plan for any existing plan, program or
arrangement of the Company and its Subsidiaries and
(ii) Buyer shall not be required to give any such employee
credit for such prior service with the Company or any of its
Subsidiaries for purposes of any plan which is a "defined
benefit plan" within the meaning of Section 3(35) of ERISA,
other than the Syntex U.S. Employees Pension Plan or any
successor plan to the assets and liabilities thereof.
(e) No provision of this Section 7.04 shall
create any third party beneficiary rights in any current or
former employee or director of the Company or its
Subsidiaries (including any beneficiary thereof) hereunder
or in respect of continued or resumed employment or in
respect of any benefits that may be provided, directly or
indirectly, under any employee benefit plan or arrangement.
SECTION 7.05. Registration Statement. Buyer
shall promptly prepare and file with the SEC under the 1933
Act the Registration Statement and shall use its best
efforts to cause the Registration Statement to be declared
effective by the SEC as promptly as practicable. Buyer
shall promptly take any action required to be taken under
state securities or Blue Sky laws in connect with the
issuance of LCPS in the Merger. Notwithstanding the
foregoing, this Section 7.05 shall not require Buyer, Merger
Subsidiary or Parent to furnish, other than for Buyer and
its Subsidiaries, financial statements prepared in
accordance with United States generally accepted accounting
principles or any reconciliation of financial statements
with generally accepted accounting principles.
ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
The parties hereto agree that:
SECTION 8.01. Best Efforts. (a) Subject to the
terms and conditions of this Agreement, each party will use
its best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement;
provided that Buyer and its Affiliates shall not be required
to agree to any consent decree or order in connection with
the objections of any HSR Authority to the transactions
contemplated by this Agreement; and provided further that
the foregoing shall not require Parent or Buyer to furnish,
other than for Buyer and its United States subsidiaries,
financial statements prepared in accordance with United
States generally accepted accounting principles or any
reconciliation of financial statements with United States
generally accepted accounting principles.
(b) The Company will use its best efforts to
take, or cause to be taken, all actions and to do, or cause
to be done all things reasonably necessary, proper or
advisable to permit Buyer to make the determination provided
for in paragraph (f) of Annex I to this Agreement as soon as
practicable after the date of this Agreement.
SECTION 8.02. Certain Filings. The Company and
Buyer and Merger Subsidiary shall cooperate with one another
(a) in connection with the preparation of the Company
Disclosure Documents and the Offer Documents, (b) in
determining whether any action by or in respect of, or
filing with, any governmental body, agency or official, or
authority, including the filing or notification required
under the Merger Control Regulation of the European
Community, or by the competition authorities of its Member
States or any other jurisdiction is required, proper or
advisable or any actions, consents, approvals or waivers are
required to be obtained from parties to any material
contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (c) in
seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information so required,
proper or advisable in connection with the transactions
contemplated hereby or with the Company Disclosure Documents
or the Offer Documents and seeking timely to obtain any such
actions, consents, approvals or waivers.
SECTION 8.03. Public Announcements. Buyer and
the Company will consult with each other before issuing any
press release or making any public statement or any filing
with any governmental body, agency, official or authority
with respect to this Agreement and the transactions
contemplated hereby and, except as may be required by
applicable law or any listing agreement with any national
securities exchange, will use all reasonable efforts not to
issue any such press release or make any such public
statement or such filing prior to such consultation.
SECTION 8.04. Further Assurances. At and after
the Effective Time, the officers and directors of the
Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or
assurances and to take and do, in the name and on behalf of
the Company or Merger Subsidiary, any other actions and
things to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with,
the Merger.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of
Each Party. The respective obligations of the Company,
Buyer and Merger Subsidiary to consummate the Merger are
subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
(i) this Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company in
accordance with Panama Law;
(ii) any applicable waiting period under the HSR
Act relating to the Merger shall have expired;
(iii) no provision of any applicable law or
regulation and no judgment, injunction, order or decree
shall prohibit the consummation of the Merger; provided
that neither party may assert this condition unless it
has used its best efforts to oppose such judgment,
injunction, order or decree and to avail itself of all
rights of appeal or it has determined, in its
reasonable judgment, that such efforts would not have a
substantial likelihood of success;
(iv) all actions by or in respect of or filings
with any governmental body, agency, official, or
authority required to permit the consummation of the
Merger, including, without limitation, filing articles
of merger or other appropriate documents for
registration in the Mercantile Registry of the Republic
of Panama and pursuant to the Delaware GCL shall have
been obtained or made (other than those actions or
filings which, if not obtained or made prior to the
consummation of the Merger, would not individually or
in the aggregate reasonably be expected to have a
Material Adverse Effect); and
(v) the Registration Statement shall have been
declared effective and no stop order suspending the
effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose shall be
pending before or threatened by the SEC.
SECTION 9.02. Conditions to the Obligations of
Buyer and Merger Subsidiary. The obligations of Buyer and
Merger Subsidiary to consummate the Merger are subject to
the satisfaction of the following further conditions:
(a)(i) either (A) the Committee on Foreign
Investment in the United States shall have determined
not to investigate the Offer and the Merger under
Exon-Florio (either by action or nonaction) or (B) if such
Committee shall have determined to make such an
investigation, such investigation shall have been
completed and the President shall have determined
(either by action or nonaction) not to take any action
under Exon-Florio with respect to the transactions
contemplated by this Agreement;
(ii) the Company shall have performed in all
material respects all of its obligations hereunder
required to be performed by it at or prior to the
Effective Time pursuant to the terms hereof; and
(iii) the representations and warranties of the
Company contained in this Agreement and in any
certificate or other writing delivered by the Company
pursuant hereto shall be true at and as of the
Effective Time as if made at and as of such time.
(b) In the event Buyer has not acquired Shares in
the Offer, each of the conditions set forth in Annex I
hereto shall have been satisfied or waived prior to the
Effective Time, provided that for the purpose of this
Section 9.02(b), the reference in clause (d)(i) of
Annex I to "25%" shall be deemed to read "50%" and the
phrase "or proposed to acquire" shall be deleted.
SECTION 9.03. Conditions to the Obligation of the
Company to Effect the Merger. The obligation of the Company
to effect the Merger is further subject to the satisfaction
or waiver at or prior to the Effective Time of the condition
that Buyer and Merger Subsidiary shall have performed in all
material respects each of their obligations under this
Agreement required to be performed by them at or prior to
the Effective Time pursuant to the terms hereof and the
representations and warranties of Buyer and Merger
Subsidiary contained in this Agreement and in any
certificate or other writing delivered by Buyer or Merger
Subsidiary pursuant hereto shall be true at and as of the
Effective Time as if made at and as of such time.
ARTICLE X
TERMINATION
SECTION 10.01. Termination. This Agreement may
be terminated and the Merger may be abandoned at any time
prior to the Effective Time (notwithstanding any approval of
this Agreement by the stockholders of the Company):
(i) by mutual written consent of the Company and
Buyer;
(ii) by either the Company or Buyer if (x) either
Buyer shall have failed to commence the Offer within 15
days following the date of this Agreement or (y) Buyer
shall not have purchased any Shares pursuant to the
Offer prior to December 31, 1994; provided, however,
that the passage of the period referred to in clause
(y) shall be tolled for any part thereof during which
any party shall be subject to a nonfinal order, decree
or ruling or action restraining, enjoining or otherwise
prohibiting the purchase of Shares pursuant to the
Offer or the consummation of the Merger; and provided
further that the right to terminate this Agreement
under this clause (ii) shall not be available to any
party whose failure to fulfill any obligation under
this Agreement has been the cause of or resulted in any
of the circumstances described in clauses (x) or (y);
(iii) by Buyer or the Company if prior to the
purchase of Shares pursuant to the Offer or the
Effective Time, the Board of Directors of the Company
shall have withdrawn or materially modified its
approval or recommendation of the Offer, the Merger or
this Agreement, recommended another Acquisition
Proposal or entered into a definitive agreement or
agreement in principle with respect to another
Acquisition Proposal, or resolved to do any of the
foregoing;
(iv) by either the Company or Buyer, if there
shall be any law or regulation that makes consummation
of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining Buyer
or the Company from consummating the Merger is entered
and such judgment, injunction, order or decree shall
become final and nonappealable;
(v) by either Buyer or the Company, if the
Company Stockholder Meeting shall have been held and
the stockholders of the Company shall have failed to
approve and adopt this Agreement and the Merger at such
meeting; and
(vi) by Buyer, if Buyer shall have received any
communication from the Department of Justice or Federal
Trade Commission (each an "HSR Authority") (which
communication shall be confirmed to the other parties
by the HSR Authority) that causes such party to
reasonably believe that any HSR Authority has
authorized the institution of litigation challenging
the transactions contemplated by this Agreement under
the U.S. antitrust laws, which litigation will include
a motion seeking an order or injunction prohibiting the
consummation of any of the transactions contemplated by
this Agreement.
SECTION 10.02. Effect of Termination. If this
Agreement is terminated pursuant to Section 10.01, this
Agreement shall become void and of no effect with no
liability on the part of any party hereto, except for fraud
and for willful breach of a material obligation contained
herein and except that the agreements contained in Section
11.04 shall survive the termination hereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests
and other communications to any party hereunder shall be in
writing (including telecopy, telex or similar writing) and
shall be given,
if to Buyer or Merger Subsidiary, to:
Dr. Felix Amrein
Roche Capital Corporation
Grenzacherstrasse 124
CH - 4002 Basel
Telecopier: 011-41-61-688-1396
with a copy to: Peter R. Douglas
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: (212) 450-4800;
and
if to the Company, to:
Syntex Corporation
3401 Hillview Avenue
Palo Alto, California 94304
Telecopier: (415) 852-1144
Attention: Neil Flanzraich
with a copy to: Holtzmann, Wise & Shepard
1271 Avenue of the Americas
New York, New York 10020
Telecopier: (212) 554-8181
Attention: Harvey Goldschmid
and a copy to: Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Telecopier: (212) 735-2000
Attention: Joseph H. Flom
or such other address or telex number as such party may
hereafter specify for the purpose by notice to the other
parties hereto. Each such notice, request or other
communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in
this Section and the appropriate answerback is received or
(ii) if given by any other means, when delivered at the
address specified in this Section.
SECTION 11.02. Survival of Representations and
Warranties. The representations and warranties and
agreements contained herein and in any certificate or other
writing delivered pursuant hereto (other than the Guaranty
of Roche Holding Ltd, dated May 1, 1994) shall not survive
the Effective Time except for the provisions of Article II
and Sections 7.03, 7.04 and 8.04 hereof.
SECTION 11.03. Amendments; No Waivers. (a)
Subject to the provisions of Section 1.03 hereof, any
provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an
amendment, by the Company, Buyer and Merger Subsidiary or in
the case of a waiver, by the party against whom the waiver
is to be effective; provided that after the adoption of this
Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of
such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of
capital stock of the Company, (ii) any term of the articles
of incorporation of the Surviving Corporation or (iii) any
of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of
any shares of capital stock of the Company.
(b) No failure or delay by any party in
exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.04. Expenses. (a) The Company will
pay Buyer, in immediately available funds, so long as Buyer
shall not have materially breached its obligations under
this Agreement, promptly, but in no event later than two
business days, after the termination of this Agreement
pursuant to clause (iii) of Section 10.01 or if any Person
or "group" (as defined in Section 13(d)(3) of the Exchange
Act), other than Buyer or its Affiliates or any group of
which any of them is a member, shall have acquired
beneficial ownership of more than 50% of any class or series
of capital stock of the Company (including the Shares),
through acquisition of stock, the formation of a group or
otherwise, or shall have been granted any option, right, or
warrant, conditional or otherwise, to acquire beneficial
ownership of more than 50% of any class or series of capital
stock of the Company (including the Shares) hereof a fee for
reimbursement of costs and expenses of (x) $20,000,000, if
such event occurs on or before May 14, 1994, or (y)
$35,000,000, if such event occurs after May 14, 1994.
(b) Subject to Section 11.04(a), all costs and
expenses incurred in connection with this Agreement shall be
paid by the party incurring such cost or expense.
SECTION 11.05. Successors and Assigns. The
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the
other parties hereto except that Buyer may transfer or
assign, in whole or from time to time in part, to one or
more of its direct or indirect wholly owned subsidiaries of
its ultimate parent entity, the right to purchase shares
pursuant to the Offer, but any such transfer or assignment
will not relieve Buyer of its obligations under the Offer or
prejudice the rights of tendering stockholders to receive
payment for Shares validly tendered and accepted for payment
pursuant to the Offer.
SECTION 11.06. Governing Law. This Agreement
shall be construed in accordance with and governed by the
law of the State of Delaware, without regard to the
principles of conflicts of laws.
SECTION 11.07. Counterparts; Effectiveness. This
Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed
by all of the other parties hereto.
SECTION 11.08. Validity. If any provision of
this Agreement, or the application thereof to any person or
circumstance, is held invalid or unenforceable, the
remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be
affected thereby, and to such end, the provisions of this
Agreement are agreed to be severable.
SECTION 11.09. Entire Agreement. This Agreement,
the Guaranty of Roche Holding Ltd. dated May 1, 1994
including the documents and instruments referred to herein,
together with the letter agreement, dated February 28, 1994,
between Parent and the Company, constitutes the entire
agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties or
any of them, with respect to the subject matter hereof.
SECTION 11.10. Definition. For purposes of this
Agreement the phrases "to the knowledge of the Company" or
"known to the Company" mean (i) known to any senior manager
of the Company or any material Subsidiary or (ii) could
reasonably be expected to be known by any of such persons.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the day and year first above
written.
SYNTEX CORPORATION
By: /s/ Paul E. Freiman
--------------------------------
Name: Paul E. Freiman
Title: Chief Executive Officer
ROCHE CAPITAL CORPORATION
By: /s/ Henri B. Meier
--------------------------------
Name: Henri B. Meier
Title: Vice President
ROCHE (PANAMA) CORPORATION
By: /s/ Henri B. Meier
--------------------------------
Name: Henri B. Meier
Title: Vice President
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer
pursuant to the Acquisition Agreement and Plan of Merger
(the "Agreement") dated as of May 1, 1994 among Syntex
Corporation (the "Company"), Roche Capital Corporation
("Buyer") and Roche (Panama) Corporation (the "Merger
Subsidiary"), Buyer shall not be required to accept for
payment or pay for any Shares, and may terminate the Offer,
unless (i) a majority of the outstanding Shares on a fully
diluted basis has been tendered pursuant to the Offer by the
expiration of the Offer and not withdrawn; (ii) the
applicable waiting period under the HSR Act shall have
expired or been terminated; (iii) either (A) the Committee
on Foreign Investment in the United States shall have
determined not to investigate the Offer and the Merger under
Exon-Florio (either by action or nonaction) or (B) if such
Committee shall have determined to make such an
investigation, such investigation shall have been completed
and the President shall have determined (either by action or
nonaction) not to take any action under Exon-Florio with
respect to the transactions contemplated by this Agreement;
provided, however, that prior to December 31, 1994, Buyer
shall not terminate the Offer by reason of the
nonsatisfaction of either of the conditions set forth in
clauses (ii) or (iii) above and shall extend the Offer (it
being understood that this provision shall not prohibit
Buyer from terminating the Offer or failing to extend the
Offer by reason of the nonsatisfaction of any other
condition of the offer); or if prior to the acceptance for
payment of Shares, any of the following conditions exist:
(a) there shall be instituted or pending any
action or proceeding by any government or governmental
authority or agency, domestic or foreign, or by any
other person, domestic or foreign, before any court or
governmental authority or agency, domestic or foreign,
that has a substantial likelihood of success, (i)
challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to
restrain or prohibit the making of the Offer, the
acceptance for payment of or payment for some of or all
the Shares by Buyer or the consummation by Buyer of the
Merger, seeking to obtain material damages or otherwise
directly or indirectly relating to the transactions
contemplated by the Offer or the Merger, (ii) seeking
to restrain or prohibit Buyer's ownership or operation
(or that of its subsidiaries or Affiliates) of all or
any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of
Buyer and its subsidiaries or Affiliates, taken as a
whole, or to compel Buyer or any of its subsidiaries or
Affiliates to dispose of or hold separate all or any
material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of
Buyer and its subsidiaries or Affiliates, taken as a
whole, (iii) seeking to impose or confirm material
limitations on the ability of Buyer or any of its
subsidiaries or Affiliates effectively to exercise full
rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or
owned by Buyer or any of its subsidiaries or Affiliates
on all matters properly presented to the Company's
stockholders, (iv) seeking to require divestiture by
Buyer or any of its subsidiaries or Affiliates of any
Shares, or (v) that otherwise, in the reasonable
judgment of Buyer, is likely to materially adversely
affect the Company and its subsidiaries, taken as a
whole, or Buyer and its subsidiaries or Affiliates,
taken as a whole;
(b) there shall be any action taken, or any
statute, rule, regulation, injunction, order or decree
proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency,
domestic or foreign, other than the application of the
waiting period provisions of the HSR Act or Exon-Florio
to the Offer or the Merger, that has a substantial
likelihood of resulting in any of the consequences
referred to in clauses (i) through (v) of paragraph (a)
above;
(c) any material adverse change in the business,
assets, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole,
shall have occurred other than as disclosed to Buyer in
writing or there shall be any event, occurrence or
development of a state of circumstances or facts which
individually or in the aggregate would reasonably be
expected to result in such a material adverse change;
(d) (i) it shall have been publicly disclosed or
Buyer shall have otherwise learned that any person or
"group" (as defined in Section 13(d)(3) of the Exchange
Act), other than Buyer or its Affiliates or any group
of which any of them is a member, shall have acquired
or proposed to acquire beneficial ownership of more
than 25% of any class or series of capital stock of the
Company (including the Shares), through the acquisition
of stock, the formation of a group or otherwise, or
shall have been granted any option, right or warrant,
conditional or otherwise, to acquire beneficial
ownership of more than 25% of any class or series of
capital stock of the Company (including the Shares);
(ii) any person or group shall have entered into a
definitive agreement or an agreement in principle with
the Company with respect to a merger, consolidation or
other business combination with the Company; or (iii)
the Board of Directors of the Company (or any duly
authorized committee thereof) shall have withdrawn or
materially modified its approval or recommendation of
the Offer or the Merger;
(e) the Company shall have breached or failed to
perform in any material respect any of its covenants or
agreements under this Agreement, or any of the
representations and warranties of the Company set forth
in this Agreement shall not be true when made or at and
as of such time as if made at and as of such time;
(f) Buyer, acting in good faith, shall not have
satisfied itself that there exists no potential
environmental liability of the Company or any
Subsidiary that has a reasonable prospect individually
or in the aggregate of resulting in a Material Adverse
Effect which liability (i) relates to any site in
Missouri or Illinois and is not specifically disclosed
in the footnotes to the financial statements in the
Company 10-K or Company 10-Q; or (ii) arises or may
arise from (x) any site in Missouri or Illinois
identified or referred to in any writing delivered by
the Company to Buyer prior to the date hereof or (y)
any circumstance or condition identified in any such
writing; or
(g) the Agreement shall have been terminated in
accordance with its terms;
which, in the judgment of Buyer in any such case, and
regardless of the circumstances (including any action or
omission by Buyer) giving rise to any such condition, makes
it inadvisable to proceed with such acceptance for payment
or payment.
For purposes of this Annex I, the term "foreign"
shall mean any jurisdiction other than the United States, in
which either the Company and its Subsidiaries or Buyer and
its Affiliates has any material assets or operations. Each
other term used herein that is defined in the Agreement
shall have the meaning assigned to such term in the
Agreement.
EXHIBIT A TO THE ACQUISITION
AGREEMENT AND PLAN OF MERGER
CERTIFICATE OF DESIGNATION OF
LIMITED CONVERSION PREFERRED STOCK
OF
ROCHE CAPITAL CORPORATION
We, _____________________, President, and
________________, Secretary, of Roche Capital Corporation
(the "Corporation"), a corporation organized and existing
under the Laws of the Republic of Panama (the "Panama
Corporate Law" or "PCL"), in accordance with the provisions
of Section ____ thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the
Corporation, the Board of Directors on ____________ __, 1994
adopted a resolution creating a series of preferred stock of
the Corporation titled Limited Conversion Preferred Stock
the designation and amount thereof and the relative powers,
preferences, rights, qualifications, limitations and
restrictions of the shares of such series are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated "Limited
Conversion Preferred Stock" (the "Limited Conversion
Preferred Stock" or "LCPS"), and the authorized number of
shares constituting such series shall be ____________. The
stated value of each share of Limited Conversion Preferred
Stock shall be $1000.00 ("Stated Value"). No fractional
shares of LCPS shall be issuable.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) The Holders of shares of the Limited
Conversion Preferred Stock ("Holders"), in preference to the
holders of the Corporation's common stock (the "Common
Stock"), shall be entitled to receive, subject to paragraphs
B and C below, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of
dividends, cumulative dividends in cash at the rate of 3%
per annum (computed on the basis of a 360-day year) on the
Liquidation Value of each share of Limited Conversion
Preferred Stock on and as of the most recent Dividend
Payment Date (as defined below). Such dividends shall be
payable annually in arrears each year on the date of the
anniversary of the issuance of the LCPS (each such date
being referred to herein as a "Dividend Payment Date"),
commencing on the first Dividend Payment Date after the
issuance of such share. Accrued and unpaid dividends on
outstanding shares of Limited Conversion Preferred Stock, if
any, shall be added to the Liquidation Value (as defined in
Section 6) of such shares on and as of the Dividend Payment
Date on which such dividends were originally scheduled to be
paid and shall thereupon cease to be accrued and unpaid
dividends.
(B) Dividends shall begin to accrue (whether or
not declared) and be cumulative on outstanding shares of the
Limited Conversion Preferred Stock from the date of issue of
each such share of Limited Conversion Preferred Stock.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on shares of the Limited Conversion Preferred
Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among
all shares of Limited Conversion Preferred Stock at the time
outstanding. The Board of Directors may fix a record date
for the determination of Holders entitled to receive payment
of any dividend declared thereon, which record date shall
not be more than 60 days prior to the date fixed for any
such payment.
(C) In no event shall any dividend in cash be
paid or set apart for payment on shares of stock ranking
pari passu (either as to dividends or upon liquidation,
dissolution, or winding up) with the Limited Conversion
Preferred Stock unless, contemporaneously therewith, a like
ratable dividend in cash is declared by the Board of
Directors, paid or set aside for payment on or in respect of
the shares of Limited Conversion Preferred Stock outstanding
at the time.
SECTION 3. VOTING RIGHTS. Except as otherwise
provided under applicable law, the Holders shall have no
voting rights, except that the approval of Holders of at
least a majority of the outstanding shares of Limited
Conversion Preferred Stock shall be required to change the
terms and provisions of the Limited Conversion Preferred
Stock (whether by amendment to the Corporation's Certificate
of Incorporation or otherwise) in a manner which affects
adversely the rights and preferences of the Holders of the
Limited Conversion Preferred Stock.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever dividends payable on the Limited
Conversion Preferred Stock as provided in Section 2 hereof
are in arrears, thereafter and until all accrued and unpaid
dividends, whether or not declared, on outstanding shares of
the Limited Conversion Preferred Stock shall have been paid
in full as provided in Section 2, the Corporation shall not:
(i) declare or pay dividends on, or make any
other distributions on, any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Limited Conversion
Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Limited Conversion
Preferred Stock, except like dividends paid ratably
(according to respective aggregate Liquidation Values)
on shares of the Limited Conversion Preferred Stock and
all other stock ranking on a parity therewith on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled; or
(iii) redeem, purchase or otherwise acquire for
value any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding
up) to the Limited Conversion Preferred Stock; provided
that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation
ranking junior (as to dividends and upon liquidation,
dissolution and winding up) to the Limited Conversion
Preferred Stock.
(B) The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise
acquire for value any shares of the capital stock of the
Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
(C) The Corporation shall not be a party to any
consolidation, merger or binding share exchange or a
transfer of all or substantially all of its assets in a
transaction in which LCPSs are changed into or mandatorily
exchanged for other securities or property unless the
Holders of the LCPSs shall receive securities in such
transaction which are exchangeable for NESs (as defined in
Section 9(A) hereof) and unless the Corporation has received
an opinion of Davis Polk & Wardwell (or other counsel
satisfactory to the Holders of a majority of the outstanding
shares of LCPS at the time of such transaction) to the
effect that receipt of such securities or other property
shall be tax free to the holders of such LCPSs for U.S.
federal income tax purposes.
SECTION 5. REACQUIRED SHARES. Any shares of
Limited Conversion Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever
(including by redemption or reclassification) may, in the
sole discretion of the Corporation, be retired and canceled
promptly after the acquisition thereof. All such shares
shall upon their retirement and upon the filing of any
required certificate pursuant to the PCL, become authorized
but unissued shares of preferred stock without designation
as to series and may be reissued as part of a new series of
preferred stock to be created by resolution or resolutions
of the Board of Directors or as otherwise permitted under
the PCL.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING
UP.
(A) Upon any liquidation, dissolution or winding
up of the Corporation, the Holder of each share of Limited
Conversion Preferred Stock shall be entitled to a payment in
an amount equal to the Liquidation Value of such share,
together with any accrued and unpaid dividends thereon, at
the time fixed for such liquidation, dissolution or winding
up, before any payment shall be made or any assets
distributed to the Holders of the Common Stock or any other
stock of the Corporation ranking junior (as to dividends and
upon distribution, liquidation or winding up) to the Limited
Conversion Preferred Stock. The Corporation shall give each
Holder of LCPS notice of any such liquidation, dissolution
or winding up at least 60 days prior to consummation
thereof. "Liquidation Value" means, with respect to any
share of Limited Conversion Preferred Stock, (i) at any time
on or prior to the first Dividend Payment Date with respect
to such share, the Stated Value thereof (the "Initial
Liquidation Value") and (ii) thereafter, the sum of the
Initial Liquidation Value and the aggregate of all accrued
and unpaid dividends on such share on and as of the
immediately preceding Dividend Payment Date without regard
to whether any such dividends have been added to the
Liquidation Value of such share. If the assets of the
Corporation, or the proceeds thereof, are not sufficient to
pay in full the aggregate Liquidation Value payable to the
Holders of outstanding shares of Limited Conversion
Preferred Stock and all shares of any stock ranking pari
passu therewith (either as to dividends or upon dissolution,
liquidation or winding up), if any, then the Holders of all
such shares shall share ratably (according to respective
aggregate Liquidation Values) in such distribution of
assets, or the proceeds thereof, in accordance with the
amount which would be payable on such distribution if the
amounts to which the Holders of all outstanding shares of
Limited Conversion Preferred Stock and the holders of all
outstanding shares of such parity stock are entitled were
paid in full. Except as provided in this Section 6, Holders
of Limited Conversion Preferred Stock shall not be entitled
to any distribution in respect of the Limited Conversion
Preferred Stock in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.
(B) For the purposes of this Certificate of
Designation, neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all the
property or assets of the Corporation nor the consolidation
or merger (or similar combination) of the Corporation with
or into one or more other corporations shall, without
further corporate action, be deemed to be a liquidation,
dissolution or winding up of the Corporation, voluntary or
involuntary.
SECTION 7. REDEMPTION.
(A) Optional Redemption. The Corporation may
redeem outstanding shares of Limited Conversion Preferred
Stock, at any time in whole or from time to time in part, at
a redemption price (the "Redemption Price") equal to the
aggregate Liquidation Value of such shares on and as of the
date (the "Redemption Date") on which such redemption is to
occur, together with accrued and unpaid dividends thereon to
but not including the date fixed for redemption if, and to
the extent, the Corporation shall have funds legally
available for such payment (i) with the consent of the
Holder of the Limited Conversion Preferred Stock to be so
redeemed, (ii) such redemption, in the reasonable judgment
of the Corporation, shall be necessary to terminate
reporting and registration requirements of the Corporation
under the Exchange Act of 1934, as amended ("Exchange Act")
or (iii) such redemption, in the reasonable judgment of the
Corporation, shall be necessary to avoid application of
registration or reporting obligations under applicable
securities laws to the Corporation, any affiliate of the
Corporation or securities issuable upon exchange of the
Limited Conversion Preferred Stock. In the event the
Corporation shall redeem less than all outstanding shares of
the Limited Conversion Preferred Stock for the purposes set
forth in clauses (ii) or (iii) of the preceding sentence,
shares will be redeemed in the inverse order of size of the
aggregate number of shares held of record (within the
meaning of Rule 12g5-1 under the Exchange Act, as amended
from time to time) of each Holder or in such other
reasonable manner as may be selected by the Corporation in
its sole discretion from time to time.
(B) Mandatory Redemption. The Corporation shall,
on the date of the tenth anniversary of the issuance of the
shares, redeem all outstanding shares of Limited Conversion
Preferred Stock at the aggregate Liquidation Value.
(C) In the event the Corporation shall redeem any
or all shares of Limited Conversion Preferred Stock, notice
of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 10 days nor more than
60 days prior to the Redemption Date, to each Holder of
record of the shares to be redeemed at such Holder's address
as the same appears on the stock register of the
Corporation; provided, however, that no failure to give such
notice nor any defect therein shall affect the validity of
the proceedings for the redemption of any share of Limited
Conversion Preferred Stock to be redeemed except in respect
of the Holder to whom the Corporation has failed to give
said notice or except as to the Holder whose notice was
defective. Each such notice shall state: (1) the
Redemption Date; (2) the number of shares of Limited
Conversion Preferred Stock to be redeemed (the "Redeemed
Shares") on such Redemption Date and, if less than all the
shares held by such Holder are to be redeemed from such
Holder, the number of Redeemed Shares to be redeemed from
such Holder; (3) the Redemption Price; (4) the place or
places where certificates for the Redeemed Shares are to be
surrendered for payment of the Redemption Price; and
(5) that dividends on the Redeemed Shares will cease to
accrue on and as of the Redemption Date.
(D) Notice having been mailed as aforesaid, on
and as of the Redemption Date (unless the Corporation shall
have defaulted in the payment of the Redemption Price for
the Redeemed Shares), dividends on the Redeemed Shares shall
cease to accrue, such shares shall no longer be deemed to be
outstanding, and all rights of the Holders thereof as
stockholders of the Corporation (except the right to receive
from the Corporation the Redemption Price with respect
thereto) shall cease. In case fewer than all the shares of
Limited Conversion Preferred Stock represented by any
certificate representing such shares are redeemed, a new
certificate shall be issued representing the number of
unredeemed shares without cost to the Holder thereof.
SECTION 8. RESTRICTIONS ON TRANSFER. Shares of
Limited Conversion Preferred Stock shall not be transferable
except (i) in the case of shares held by an individual, to
the estate or the immediate family of such individual (as
that term is defined in Rule 16a-1(e) under the Exchange
Act, as amended from time to time) or to an entity all of
the owners of which are members of the immediate family of
such individual, (ii) in the case of shares held by a
corporation or partnership, to a wholly-owned subsidiary of
such corporation or partnership, or (iii) in either case, to
an institution qualified as tax-exempt under
Section 501(c)(3) of the Internal Revenue Code of 1986.
SECTION 9. EXCHANGE.
(A)
Description of the Exchange
. Subject to the
provisions of Section 10(A) hereof, on the second
anniversary of the date the Shares are first issued (or, if
earlier, adoption by the Corporation of a plan of
liquidation, dissolution or winding-up of the Corporation
("Liquidation"), and on each anniversary thereafter prior to
the Mandatory Redemption Date (or, in the event of a
Liquidation, the date 30 days prior to consummation of such
Liquidation) (the "Exchange Date"), Holders of the Limited
Conversion Preferred Stock may exchange their Shares for
Genussscheine of Roche Holding Ltd, a Swiss corporation
("Roche") ("Non-voting Equity Securities" or "NESs") (the
"Exchange"). The Exchange right is exercisable against the
Corporation.
(B) Provided a Holder complies with the Exchange
Conditions, such Holder of outstanding shares of Limited
Conversion Preferred Stock will be entitled to receive in
exchange for each share of LCPS to be exchanged by such
Holder a number of NESs equal to the Stated Value divided by
$[ ] [150% of U.S. $ equivalent of NES price based on
the closing Zurich NES price, and Noon Buying Rate, on April
29, 1994] (the "Exchange Ratio"). No fractional NESs will
be issued on exchange of shares of LCPS. A Holder who, in
the absence of the preceding sentence, would otherwise be
entitled to a fractional NES will receive cash in U.S.
dollars equal to the value of such fractional NESs based
upon the Sale Price (as defined below) of a single NES on
the Trading Day (as defined below) immediately preceding the
Exchange Date. At the time of any exchange hereunder, the
rights of the holders of LCPS so exchanged as shareholders
of the Corporation (with respect to such exchanged LCPS
shares) shall cease, and the person or persons entitled to
receive the NESs issuable upon exchange shall be treated for
all purposes as the registered holder or holders of such
NESs as of the Exchange Date.
"Sale Price" means the closing sale price per Non-
voting Equity Security in Swiss Francs (or, if no closing
sale price is reported, the mean of the closing bid and
closing asked prices) on the Zurich Stock Exchange on such
Trading Day. The equivalent price in U.S. dollars shall be
based on the Noon Buying Rate on such Trading Day, or if
such Trading Day is a Saturday or Sunday or other day on
which commercial banks in The City of New York are obligated
or authorized to close, shall be based on the Noon Buying
Rate on the preceding day for which a Noon Buying Rate is
available. "Trading Day" means each day on which the Zurich
Stock Exchange is open for trading, other than day a day on
which such exchange is scheduled to close prior to its
regular weekday closing time. The "Noon Buying Rate" as of
any date means the noon buying rate in The City of New York
for cable transfers in Swiss francs (to purchase U.S.
dollars and sell Swiss francs) as certified for customs
purposes by the Federal Reserve Bank of New York in effect
on such date.
(C) Exchange Conditions. Prior to effecting an
Exchange, (i) each exchanging Holder shall have delivered to
the Corporation, not later than 20 days prior to the
Exchange Date, a certification in a form to be provided by
the Corporation of such information as the Corporation deems
necessary in order to determine the availability of an
exemption from registration under applicable securities laws
with respect to such exchanging holder, and (ii) the
Corporation shall have received an opinion of counsel to the
Corporation that such Exchange (together with all other
relevant Exchanges) is exempt from registration under
applicable securities laws.
(D) Exchange Notice. The Corporation shall give
notice of each Exchange Date by first class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days
prior to the Exchange Date, to each Holder of record of the
shares at such Holder's address as the same appears on the
stock register of the Corporation (the "Exchange Notice");
provided, however, that no failure to give such notice nor
any defect therein shall affect the validity of the
proceedings for the exchange of any share of Limited
Conversion Preferred Stock to be exchanged. Each such
notice shall state: (1) the Exchange Date and the date by
which an Exchanging Holder must deliver the certification
required by Section 9(C); (2) the form of such
certification; (3) the name and address of the Exchange
Agent (as defined in Section 9(E) hereof); and (4)
instructions for completion of the Exchange.
(E) Method for Exchange. To exchange shares of
LCPS, a Holder must (i) complete and manually sign the
Notice of Intent to Exchange on the back of the LCPS
certificate (or complete and manually sign a facsimile
thereof) and deliver such notice to the agent acting on
behalf of the Corporation designated in the Exchange Notice
("Exchange Agent"), (ii) surrender the LCPS certificate to
the Exchange Agent, (iii) if required, furnish appropriate
endorsements and transfer documents and (iv) if required,
pay all transfer or similar taxes. Such Notice of Intent to
Exchange shall include, if required, an agreement to abide
by the Post-Exchange Transfer Restrictions.
(F) Adjustment of Exchange Ratio. The Exchange
Ratio will be adjusted if any of the following events occur:
(i) Rights Issues
If Roche shall by way of Subscription Rights (as
defined below) (otherwise than in lieu of a cash
dividend), offer new Shares, Non-voting Equity
Securities, new participation certificates and other
new securities forming part of the capital of Roche for
subscription to the holders of existing Non-voting
Equity Securities (a "Rights Issue"), then the Exchange
Ratio shall be adjusted by multiplying the Exchange
Ratio in effect immediately prior to the issuance of
the Subscription Rights by a fraction, the numerator of
which shall be the Value of a Non-voting Equity
Security for the period ending on the date immediately
preceding the date on which the Non-voting Equity
Securities are traded ex such Subscription Rights and
the denominator of which is (x) such Value of a Non-
voting Equity Security for such period less (y) the
Value of the Subscription Right offered for each Non-
voting Equity Security for the period commencing on the
date the Subscription Rights are first traded on the
Zurich Stock Exchange.
"Subscription Rights" means the entitlement or
right, as the case may be, attached to each existing
Non-voting Equity Security to subscribe or acquire,
directly or indirectly, new Shares of Roche, Non-voting
Equity Securities or participation certificates of
Roche (as the case may be) (including, for the
avoidance of doubt, any issues of convertible bonds,
exchangeable bonds or bonds with warrants) pursuant to
a Rights Issue by Roche (whether by the exercise of one
Subscription Right, a part of a Subscription Right or
an aggregate number of Subscription Rights).
"Value" means the average of the daily closing
prices (the "Price") of the Non-voting Equity
Securities or the Subscription Rights, as the case may
be, on the Zurich Stock Exchange during the relevant
ten Trading Day period (or in the case of Subscription
Rights, such shorter period as the Subscription Rights
may be traded) rounded to the nearest whole Swiss
franc, provided that if the Subscription Right is not
traded on the Zurich Stock Exchange, the Price shall be
the price published by the Zurich Stock Exchange in
respect of such Subscription Rights.
(ii) Bonus Issues
If Roche shall make an issue of Shares, Non-voting
Equity Securities or participation certificates of
Roche credited as fully paid to the holders of Non-
voting Equity Securities by way of capitalization of
profits or reserves (a "Bonus Issue") (otherwise than
in lieu of a cash dividend and without any payment or
other consideration being made or given by such
holders), then the Exchange Ratio shall be adjusted by
multiplying the Exchange Ratio in effect immediately
prior to such Bonus Issue by a fraction, the numerator
of which is the Value of a Non-voting Equity Security
for the period ending on the date immediately preceding
the date on which the Non-voting Equity Securities are
traded ex such Bonus Issue and the denominator of which
is the Value of a Non-voting Equity Security for the
period commencing on such ex-date.
(iii) Non-voting Equity Security Splits
If Roche shall subdivide the Non-voting Equity
Securities into a greater number of Non-voting Equity
Securities, then the Exchange Ratio shall be multiplied
by the number of subdivided Non-voting Equity
Securities replacing one former Non-voting Equity
Security.
(iv) Non-Voting Equity Security Consolidations
If Roche shall consolidate its Non-voting Equity
Securities into a smaller number of Non-voting Equity
Securities, then the Exchange Ratio shall be divided by
the number of former Non-voting Equity Securities which
corresponds to one consolidated Non-voting Equity
Security.
(v) Extraordinary Distributions
If Roche shall, by dividend or otherwise,
distribute securities, assets, or rights thereto, to
holders of Non-voting Equity Securities (but excluding
any dividend, whether in cash or property, that is
distributed in the ordinary course, and any rights or
issues referred to above in subparagraph 9(F)(i) or
9(F)(ii)), then the Exchange Ratio shall be adjusted by
multiplying the Exchange Ratio in effect immediately
prior to such distribution by a fraction, the numerator
of which is the closing Sale Price of a Non-voting
Equity Security in Swiss francs (or, if no closing Sale
Price is reported, the mean of the bid and asked
prices) on the Zurich Stock Exchange on the day
immediately preceding the date on which the Non-voting
Equity Security is traded ex such distribution and the
denominator of which is the closing Sale Price of a
Non-voting Equity Security in Swiss francs (or, if no
closing Sale Price is reported, the mean of the bid and
asked prices) on the Zurich Stock Exchange on such
ex-date.
(vi) Exchange and Liquidation
If the holders of Non-voting Equity Securities
shall be required to exchange Non-voting Equity
Securities for one or more Shares or participation
certificates, other securities, cash and/or property or
if on a liquidation of Roche the Non-voting Equity
Securities shall receive a return of capital, whether
in the form of securities, cash and/or property, then
the holder of the shares of Limited Conversion
Preferred Stock shall be entitled to receive on
exchange the kind and amount of securities, cash and/or
property that the Holder would have received if the
Holder had exchanged such Holder's shares of Limited
Conversion Preferred Stock immediately prior to the
effective date of the transaction.
(vii) Other Adjustments
Adjustments will not be made in any other
circumstances; subject to the right of the Corporation
(after consultation with Roche) to make such
adjustments as it believes appropriate in circumstances
where an event or events occur which it believes should
give rise to such adjustment provided that any such
adjustments shall only be made for the benefit of the
Holders of the shares of LCPS generally (without
considering the circumstances of any individual Holder
or the tax or other consequences of such adjustments in
any particular jurisdiction).
The adjustments described in (i), (ii) and (v)
shall be made only if the Non-voting Equity Securities
trade ex such Rights Issue, Bonus Issue or
extraordinary distribution on or prior to the effective
date of the transaction.
If Roche is a party to a consolidation, merger or
binding share exchange or a transfer of all or
substantially all of its assets, the right to exchange
a share of LCPS for NESs shall be converted into a
right to exchange such share of LCPS into the kind and
amount of securities, cash or other assets that the
Holder would have received if the Holder had exchanged
such Holder's shares of LCPS immediately prior to the
effective date of the transaction.
(G) Post-Exchange Transfer Restrictions. The
Non-voting Equity Securities have not been and will not be
registered under the Securities Act. Therefore, the Non-
voting Equity Securities may not be offered or sold in the
United States or to, or for the account or benefit of, U.S.
persons (as defined in Regulation S under the Securities
Act), except to qualified institutional buyers (as defined
in Rule 144A) in reliance on Rule 144A or to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2),
(3) and (7) under the Securities Act) in transactions exempt
from the registration requirements of the Securities Act.
Upon exchange of LCPSs for NESs, the exchanging Holder shall
agree with Roche in the certification required by
Section 9(C) hereof to the foregoing.
SECTION 10. EXCHANGE TERMINATION. (A) The rights
of Holders to exchange shares of LCPS in accordance with the
terms of Section 9 hereof shall terminate at the election of
the Corporation if, at any time, the Securities and Exchange
Commission ("SEC") requires that Roche
(i) become a reporting company subject to the
requirements of Section 12 of the Exchange Act or
(ii) provide to the SEC financial or other
information with respect to Roche not then published
elsewhere by Roche.
(B) In the event the rights of Holders of the
LCPS to exchange shares of LCPS are terminated by the
Corporation pursuant to Section 10(A) hereof, Holders whose
rights are so terminated shall have the right to require the
Corporation to redeem such Holders' shares of LCPS at a
redemption price equal to the aggregate Stated Value, plus
any accrued and unpaid dividends, as of the date such Holder
requests redemption. The last sentence of Section 7(A)
shall not apply to any redemption of shares requested by
Holders under this Section 10(B).
SECTION 11. RANK. The Limited Conversion
Preferred Stock shall rank senior to the Common Stock with
respect to dividend payments, liquidation preference and
redemption.
IN WITNESS WHEREOF, this Certificate of
Designation has been duly executed on behalf of the
Corporation by its President and attested by its Secretary
on this __th day of ____________, 1994.
ROCHE CAPITAL CORPORATION
By:
---------------------------
Name:
Title: President
ATTEST:
Name:
---------------------------
Title: Secretary
APPENDIX B
May 1, 1994
Personal and Confidential
Board of Directors
Syntex Corporation
3401 Hillview Avenue
Palo Alto, CA 94304
Madame and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $1 per share (the "Shares"),
of Syntex Corporation (the "Company") of the $24 per Share in cash to be
received by such holders pursuant to the Acquisition Agreement and Plan of
Merger dated as of May 1, 1994 among Roche Capital Corporation ("Buyer")
which is an indirect, wholly-owned subsidiary of Roche Holding Ltd.
("Roche"), Roche (Panama) Corporation ("Merger Subsidiary") which is a
wholly-owned subsidiary of Buyer, and the Company (the "Agreement"). The
Agreement provides for a tender offer for all of the Shares (the "Tender
Offer") pursuant to which Buyer will pay $24 per Share in cash for each
Share accepted. Pursuant to the Guaranty dated May 1, 1994, Roche has
agreed to guarantee all of the covenants, agreements, obligations,
liabilities, representations and warranties of Buyer and Merger Subsidiary
under the Agreement (the "Guaranty"). The Agreement further provides that
following completion of the Tender Offer, Merger Subsidiary will be merged
with the Company (the "Merger") and each outstanding Share (other than
Shares already owned by Buyer and its subsidiaries) will be converted into
the right to receive $24 in cash or, at the election of the holder, subject
to the terms of the Agreement, will be converted into the right to receive
shares of Limited Conversion Preferred Stock (the "Preferred Stock") of
Buyer.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with the Company having acted as its
financial advisor in connection with, and having participated in certain of
the negotiations leading to, the Agreement.
In connection with this opinion, we have reviewed, among other things,
drafts of the Agreement and the Guaranty; Annual Reports to Stockholders
and Annual Reports on Form 10-K of the Company for the five fiscal years
ended July 31, 1993; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company; certain other communications from the
Company to its stockholders; and certain internal financial analyses and
forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding
its past and current business operations, financial condition and future
prospects. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market
information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the
pharmaceutical industry specifically, and in other industries generally,
and performed such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us
for purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any
of its subsidiaries and we have not been furnished with any such evaluation
or appraisal. In providing our opinion, we are not expressing any view as
to the value of the Preferred Stock or as to the fairness of such stock as
consideration in the Merger.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
$24 per Share in cash to be received by the holders of Shares in the
transactions contemplated by the Agreement is fair to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
------------------------------
GOLDMAN, SACHS & CO.
APPENDIX C
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended July 31, 1993 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NO. 1-4269
SYNTEX CORPORATION
(Exact name of Registrant as specified in its charter)
REPUBLIC OF PANAMA 94-1566146
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3401 HILLVIEW AVENUE, PALO ALTO, CA 94304
(Address of principal executive office)
Registrant's telephone number, including area code: (415) 855-5050
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- -------------------
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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
----- -----
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of September 30, 1993 was approximately $3,815,185,343.
Shares of Common Stock held by directors have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As of September 30, 1993, Registrant had 218,010,591 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference to
Parts I, II, III and IV of this Form 10-K Report: (1) Registrant's Annual
Report to Shareholders for the fiscal year ended July 31, 1993 (Parts I, II and
IV), and (2) Proxy Statement for Registrant's 1993 Annual Meeting of
Shareholders (Part III).
PART I
ITEM 1. BUSINESS
Syntex Corporation was incorporated under the laws of the Republic of Panama on
June 25, 1957, to carry on a business that was founded in 1944. Syntex
Corporation and its subsidiaries (the company) are engaged in the research,
development, manufacture and sale of pharmaceutical products and medical
diagnostic systems.
Syntex Corporation's head office is located in Panama, Republic of Panama. Its
principal office in the United States is located at 3401 Hillview Avenue, Palo
Alto, California 94304 and the telephone number is (415) 855-5050.
As used herein, the term "company" refers to Syntex Corporation or to Syntex
Corporation and its consolidated subsidiaries, as the context requires.
BUSINESS SEGMENT INFORMATION
The company's business activities are divided into the following two business
segments:
Pharmaceuticals consist of human pharmaceuticals and animal health
products. Human pharmaceuticals are primarily ethical
pharmaceuticals that are generally promoted to the medical profession and
require a prescription.
Diagnostics consist primarily of systems to measure levels of commonly abused
drugs, therapeutic drugs and naturally occurring substances in blood and urine;
and tests to detect sexually transmissible and other infectious diseases.
Information with respect to the company's operations in different business
segments and geographic areas for the three years ended July 31, 1993, is
contained in Note 16 to the consolidated financial statements on page 28 of the
company's Annual Report to Shareholders for the year ended July 31, 1993, which
is incorporated herein by reference.
Information with respect to the status of any product that would require or has
required the investment of a material amount of assets of the company or that
otherwise is material is contained on pages 1 to 10 of the company's Annual
Report to Shareholders for the year ended July 31, 1993, which is incorporated
herein by reference.
- 1 -
PHARMACEUTICALS
The company's principal human pharmaceutical products are a nonsteroidal
anti-inflammatory agent for the treatment of arthritic diseases and a related
analgesic agent used in the treatment of such pain-related conditions as
dysmenorrhea and soft tissue injuries; a non-narcotic analgesic for the
short-term management of pain; topical corticosteroids and a nasal steroid for
the treatment of inflammatory diseases; and oral contraceptives and other
products in the field of reproductive physiology. Together, these three
classes of products have accounted for 69% or more of the company's
consolidated net sales in each of the three years ended July 31, 1993, and are
the only classes of products that have accounted for 5% or more of the
consolidated net sales in any of these three years. The following tabulation
sets forth the approximate percentage of consolidated net sales attributable to
each of the aforesaid three classes of products for the three years ended July
31, 1993.
1993 1992 1991
---- ---- ----
Pain and Inflammation 59% 57% 54%
Steroids for the treatment of
inflammatory diseases 7% 8% 8%
Oral contraceptives and other products in
the field of reproductive physiology 5% 7% 7%
NAPROSYN (R) (naproxen), the company's nonsteroidal anti-inflammatory
agent for the relief of the pain and inflammation associated with arthritic
diseases, is currently marketed in the United States and 95 other countries
throughout the world. Naproxen is currently the largest selling brand in its
class (prescription nonsteroidal anti-inflammatory drugs) in the United States,
Norway and Sweden and ranks among the top three in Australia, Finland, Belgium,
the United Kingdom, Mexico, the Netherlands, Spain and New Zealand according to
published data. Naproxen sodium, a related compound, is marketed in the United
States under the trademark ANAPROX(R). Naproxen sodium is also marketed in 48
other countries including Canada, the United Kingdom, Spain, Belgium,
Switzerland, Mexico, South Korea, Germany, France, Italy, the Netherlands,
Brazil and Australia. Naproxen and naproxen sodium face generic competition in
all key markets outside the United States and will face generic competition in
the United States after patents expire in December 1993.
TORADOL(R) (ketorolac tromethamine) IM (intramuscular), a non-narcotic
injectable analgesic for the short-term management of pain, was introduced in
the United States in May 1990. It is also marketed in 29 other countries
including Italy, Sweden, Mexico, the United Kingdom and Canada.
TORADOL(R) (ketorolac tromethamine) oral, a non-narcotic analgesic for the
short-term management of pain, was introduced in the United States in March
1992. It is also marketed in 11 other countries including Italy and Canada.
The company's principal steroid products for the treatment of inflammatory
diseases are the topical corticosteroids SYNALAR(R) (fluocinolone acetonide)
and LIDEX(R) (fluocinonide). These products, which are available in several
formulations, are prescribed for a wide variety of skin diseases, including
psoriasis. These products have generic competition. The company also markets
NASALIDE(R) (flunisolide), a nasal steroid used in the treatment of hay fever
and perennial allergic rhinitis.
Oral contraceptive products include TRI-NORINYL(R), NORINYL 1+35(R), NORINYL
1+50(R), BREVICON(R), GENORA 1+35(R) and GENORA 1+50(R), all of which contain
various combinations of norethindrone, a progestational agent, and mestranol or
ethinyl estradiol, estrogens; and NOR-Q.D.(R), which contains norethindrone but
no estrogen.
- 2 -
SYNAREL(R) (nafarelin acetate) was introduced in the United States in March
1990 for the management of endometriosis. The company also markets SYNAREL(R)
in 17 additional countries.
CARDENE(R) (nicardipine), which belongs to the class of drugs known as calcium
channel blockers, was introduced in the United States in January 1989. CARDENE
is marketed by the company in ten additional countries for the treatment of
angina and hypertension. This product is marketed in Spain for the treatment
of cerebrovascular insufficiency as well as hypertension. Nicardipine is sold
by the company under a license from an unaffiliated company.
CYTOVENE(R) (ganciclovir sodium) was introduced in the United States in July
1989 for the treatment of sight-threatening cytomegalovirus retinitis in
immunocompromised individuals, including those with AIDS. The company also
markets ganciclovir sodium in 44 additional countries, including the United
Kingdom, France, Spain and Germany.
TICLID(R) (ticlopidine hydrochloride), a platelet aggregation inhibitor
prescribed to reduce the risk of stroke, was introduced in the United States in
December 1991. The company also markets ticlopidine hydrochloride in Canada,
Mexico, and Australia. TICLID is sold by the company under a license from an
unaffiliated company.
The company's principal pharmaceutical products are sold through its
subsidiaries and by distributors who promote and market the products under
trademarks owned by the company. The company markets other pharmaceutical
products not mentioned above. In fiscal 1993 one wholesale distributor
accounted for approximately 13% of the company's consolidated sales, compared
with 11% in fiscal 1992 and 12% in fiscal 1991. The loss of this wholesale
distributor would not have a material adverse effect on the company.
The active ingredients contained in the company's principal pharmaceutical
products are produced in company-owned facilities in Boulder, Colorado;
Freeport, Bahamas; Clarecastle, Ireland; and Cuernavaca, Mexico. Chemical
intermediates used in the production of certain of these active ingredients are
produced in company-owned facilities in Boulder, Colorado, and Springfield,
Missouri. The production of certain steroid products includes fermentation for
which the company has no facilities and, in such cases, the company has an
arrangement with an unaffiliated company to perform the necessary fermentation
steps. The active ingredients are usually sold in bulk form to the company's
pharmaceutical subsidiaries and distributors which process such bulk material
into finished dosage form. Certain of the company's pharmaceutical
subsidiaries do not have facilities for processing the bulk material into
dosage form and this step is performed for them by unaffiliated companies.
Raw materials and supplies required for the production of the company's human
pharmaceutical products are generally available in quantities adequate to meet
the company's needs.
In the United States, the company distributes its human pharmaceutical products
principally through 249 wholesale distributing outlets. These products are
promoted in the United States by 1002 trained professional medical
representatives who call on physicians, wholesalers, hospitals, health
maintenance organizations, government agencies and retail pharmacies, and
through advertising in medical and pharmacy journals, distribution of
literature and samples to physicians, and medical meeting exhibits. Outside
the United States, human pharmaceutical products are sold by 908 sales
representatives. In addition, certain of the company's distributors maintain
separate sales forces that promote only the company's products. While
distribution patterns vary from country to country, the methods of promoting
these products are somewhat similar to those used in the United States.
- 3 -
All of the company's human pharmaceutical products are sold in highly
competitive markets both within and outside the United States. The principal
competitors are well established pharmaceutical firms that conduct extensive
research programs and maintain substantial organizations to market their
products. Other competitors include manufacturers of generic prescription
pharmaceutical products. The company believes that its methods of distribution
and promotion of human pharmaceutical products are substantially similar to
those used by its competitors. The principal competitive factors in this
segment are patents, scientific and technological advances, product quality,
price, service and the effective communication of product information to
physicians, pharmacists, and those who make pharmaceutical purchasing
decisions.
The company's principal animal health products are SYNANTHIC(R) (oxfendazole),
an anthelmintic drug used to treat cattle, sheep and horses for a broad
spectrum of internal parasites, and SYNOVEX(R), an implant used to stimulate
weight gain and improve feed conversion in heifers, steers and calves. The
company's principal nutritional product for the animal feed industry is choline
chloride, a compound of the vitamin B family which is sold to feed mills,
poultry producers and premix manufacturers for incorporation into animal feeds.
Raw materials essential to the production of the company's animal health and
nutritional products are generally available in adequate quantities from a
number of potential suppliers.
The company employs a sales force of 33 sales representatives to market its
animal health products in the United States, although sales are made primarily
to agents. Outside the United States, these products are marketed by a sales
force of approximately 23 sales representatives and through distributors
appointed by the company.
The market for animal health products is highly competitive and several of the
major competitors have larger operations. Important competitive factors
include price, product characteristics and reliability, customer service,
patents and the development of new products. Sale of the company's animal
health products are affected by economic conditions in the livestock industry
and by climatic conditions.
- 4 -
DIAGNOSTICS
The company develops, manufactures and markets medical diagnostic systems under
the trademarks EMIT, MicroTrak, Vista, and others. Diagnostic systems are
comprised of instrumentation, software and associated reagents. EMIT
diagnostic assay systems are utilized for monitoring therapeutic drug treatment
in the anti-epileptic, cardioactive, anti-cancer, anti-asthmatic,
anti-microbial, anti-depressant and immunosuppressant areas of therapy;
screening for drugs of abuse; and for thyroid testing.
MicroTrak products are diagnostic tests for the sexually transmissible diseases
such as chlamydia, herpes simplex viruses I and II, and gonorrhea. Tests are
also available for the detection of hepatitis, AIDS antibody, toxoplasma,
cytomegalovirus, and rubella.
The Vista diagnostic assay system is a bench top analyzer capable of performing
tests in the hormone, cancer, anemia, and infectious disease categories in an
automated and random access manner. It was launched in fiscal 1993. It
employs a proprietary enzyme immunoassay technique using a fluorescent signal
and a magnetic particle based separation method.
Sales of diagnostic products in the United States are primarily to hospitals
and commercial clinical laboratories and supported by a direct sales force of
86 sales representatives. Diagnostic assay systems are sold outside the United
States through wholly-owned subsidiaries and distributors.
Raw materials essential to this business segment are available in adequate
quantities from a number of potential suppliers.
The company has numerous competitors and many of these competitors are larger
than the company. In general, competitors market assay systems which utilize
technologies different from those used in the company's assays and systems.
The principal competitive factors in the marketing of diagnostic assay systems
are accuracy, turn-around time, automation and ease of operation, convenience
to the customer and price. Sales of the company's diagnostic products are
affected by economic conditions.
- 5 -
RESEARCH AND DEVELOPMENT
The company has an international reputation as an important research
organization. An extensive program of research is directed toward the
discovery and development of new products in pharmaceuticals and diagnostics.
Laboratory and clinical research related to human and animal health is directed
toward the development of new medicines or other products in areas such as
inflammatory diseases, analgesic drugs, immunology, infectious diseases,
nervous system disorders, cardiovascular diseases, and cattle growth promotion.
Approximately 2,600 men and women are employed in the company's research
activities worldwide. The company's expenditures for research programs were
$404.4 million in fiscal 1993, $374.4 million in fiscal 1992 and $315.6 million
fiscal 1991. During fiscal 1993, approximately 91 percent of such expenditures
was for activities applicable to the company's pharmaceutical products and 9
percent for diagnostic products. The company's research facilities are located
in the United States, Mexico, France, the United Kingdom and Japan.
United States government regulations and similar regulations of most other
countries require the demonstration of safety and efficacy for new therapeutic
agents by studies in animals and by controlled clinical testing in human
beings. Data must be obtained prior to marketing and lengthy studies are
required to establish safety and efficacy of an investigational drug to the
satisfaction of the company and regulatory agencies. There can be no assurance
that any particular research program will lead to a marketable product and, if
a marketable product is developed, there is no assurance as to the extent of
the market or the profitability of the product.
PATENTS AND TRADEMARKS
The patents and patent applications owned by the company and its subsidiaries
cover a variety of products and chemical processes. In addition, the company
has a number of patent licenses from others. The company believes that, in the
aggregate, its patent rights under such patents and licenses are of material
importance to the operation of the company.
The company has a series of patents on naproxen and naproxen sodium. The final
United States patent that substantially protects these products will expire in
December 1993. The United States patent covering ketorolac tromethamine, will
expire in May 1997. Patents for this product in major European countries will
expire substantially later than the United States patent. The company has an
exclusive license under the United States patent covering nicardipine
hydrochloride, which will expire in October 1995, and an exclusive license
under the United States patent covering ticlopidine hydrochloride, which will
expire in September 1996.
All of the company's important products are sold under trademarks that are
widely registered throughout the world. Trademarks are considered to be of
material importance. SYNTEX, NAPROSYN, ANAPROX, SYNALAR, LIDEX, NASALIDE,
TRI-NORINYL, NORINYL, BREVICON, NOR-Q.D., EXELDERM, FEMSTAT, GENORA, CARDENE,
CYTOVENE, SYNAREL, TORADOL, SYNANTHIC, SYNOVEX, VISTA, EMIT, MICROTRAK, ETS,
QST, and ACCULEVEL are trademarks registered in the United States Patent and
Trademark Office. TICLID is used by the company under license from Elf-Sanofi.
- 6 -
GOVERNMENT REGULATION
The pharmaceutical industry is subject to stringent regulation with respect to
product safety and efficacy by various federal and state authorities in the
United States and most other countries in which the company's pharmaceutical
products are marketed.
The United States Food, Drug and Cosmetics Act and regulations issued
thereunder provide for government control over research and development,
manufacturing, quality control, labeling, advertising of drugs and rigorous
procedures for government approval of new drugs for both human and veterinary
use. The amount of clinical testing and documentation required for clearance
of new drug applications in the United States is substantial and usually
requires many years. Compliance with these government procedures requires
significant expenditures for developing and introducing new drugs.
Regulations similar to the standards of the United States Food and Drug
Administration with respect to the approval of new drugs are in force in
countries that are members of the European Economic Community and in Australia,
Canada, Japan, Sweden and other developed countries.
Similar laws and regulations covering diagnostic and medical devices have been
enacted in the United States and some other countries.
The overall cost of human health care has been, and continues to be, a subject
of review by government agencies and legislative bodies in the United States
and other countries. The company is unable to predict what effect, if any,
these reviews or any other pending or future legislation, regulations, or
government actions may have on its business.
EMPLOYEES
At July 31, 1993, the company had approximately 10,300 employees worldwide, of
which approximately 5,700 were employed in the United States. The company's
relations with its employees have been good. During fiscal 1993, the company
announced as part of a cost reduction program, a reduction in the number of its
employees from 11,700 in July 1992 to a targeted level of 9,500 by July 1995.
ENVIRONMENT
The company must comply with current standards regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment. Compliance with these increasingly stringent environmental
regulations usually results in both capital and operating expenditures.
Capital expenditures for environmental control facilities were not material in
fiscal 1993 and are not expected to be material in fiscal 1994.
Further discussion of environmental issues is contained in Note 12 and Note 13
to the consolidated financial statements on pages 26 and 27 of the company's
Annual Report to Shareholders for the year ended July 31, 1993, which is
incorporated herein by reference.
- 7 -
ITEM 2. PROPERTIES
The principal facilities of the company and its subsidiaries are listed below:
Location Principal Uses
-------- --------------
Palo Alto, California Administration, research and
pharmaceutical production (1)
Palo Alto, California Administration and research (2)
San Jose, California Administration and research
Boulder, Colorado Chemical manufacturing
Springfield, Missouri Chemical manufacturing
Verona, Missouri Production of animal nutrition
products
Cupertino, California Production of diagnostic assay
systems (2)
Mountain View, California Administration, research and
production of diagnostic products (2)
Humacao, Puerto Rico Pharmaceutical production
Mississauga, Ontario, Administration and
Canada pharmaceutical production
Cuernavaca, Mexico Chemical manufacturing
Mexico City, Mexico Administration, research and
pharmaceutical production
Freeport, Bahamas Chemical manufacturing (1)
Leganes, Spain Pharmaceutical production
Leuville, France Research and pharmaceutical production
Clarecastle, Ireland Chemical manufacturing
Edinburgh, Scotland Research (1)
Iver, Buckinghamshire,
England Pharmaceutical production (2)
Maidenhead, England Administration (2)
Umsong, Korea Pharmaceutical production
(1) Facilities located on leased land
(2) Leased facilities
In addition to the properties listed above, the company and its subsidiaries
own or lease lesser amounts of office, manufacturing and warehouse space in the
United States, Panama, Canada, England, France, Spain, Switzerland, Japan,
Korea and other countries.
The principal facilities described above are considered by the company to be
suitable for the purposes for which they are used and are maintained in good
condition. The company's facilities provide adequate productive capacity, and
are utilized at normal levels. As part of the restructuring plan announced in
fiscal 1993, the company has decided to close pharmaceutical manufacturing
plants in Palo Alto, France, and England, and the research facility in France.
- 8 -
ITEM 3. LEGAL PROCEEDINGS
In 1989, the company received a notice from the State of Colorado that the
State intended to seek civil penalties concerning alleged violations of the
Colorado Hazardous Waste Act. The alleged violations related to disposal of
sludge from the company's waste water treatment plant at the nonhazardous waste
landfill. The State has not specified the amount of penalties it may
ultimately seek, but the Act authorizes the State to seek penalties as high as
$2.25 million if it can prove the alleged violations. The company believes
that no violations have occurred and has had discussions with the State
regarding the alleged violations.
Other pending litigation is described in Note 13 on pages 26 and 27 of the
company's Annual Report to Shareholders for the year ended July 31, 1993, which
is incorporated herein by reference.
Although the outcome cannot be predicted with certainty, it is the opinion of
the management, based upon the advice of various counsel and other
considerations, that all claims, legal actions, complaints and proceedings
discussed above are adequately covered by insurance or by reserves, or are
without merit, or will not have a material effect on the company's consolidated
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the executive officers of the company showing their
ages, present positions and offices with the company and their business
experience during the past five years. Officers are elected by the Board of
Directors and serve until the next annual Organizational Meeting of the Board.
Officers may be removed by the Board at will. There are no family
relationships among any of the named individuals, and no individual was
selected as an officer pursuant to any arrangement or understanding with any
other person.
Name Present Corporate Positions Age
---- --------------------------- ---
Paul E. Freiman Chairman of the Board 59
Chief Executive Officer and
Director
Business Experience: 1988 - President and Chief Operating Officer;
August 1989 - President and Chief Executive Officer; July 1990 - Chairman
of the Board, President and Chief Executive Officer. January 1991 -
Chairman and Chief Executive Officer.
- 9 -
Name Present Corporate Positions Age
---- --------------------------- ---
James N. Wilson President and Chief Operating 49
Officer and Director
Business Experience: 1988 - Chairman and Chief Executive Officer of
Neurex, a company engaged in pharmaceutical research; January 1991 -
President and Chief Operating Officer
Thomas L. Gutshall Executive Vice President 55
Business Experience: 1988 - Executive Vice President
Neil Flanzraich Senior Vice President and 50
General Counsel
Business Experience: 1988 - Senior Vice President and Co-General
Counsel; January 1992 - Senior Vice President and General Counsel.
Robert A. Lewis, M.D. Senior Vice President and 48
President, Discovery Research
Business Experience: 1988 - Senior Vice President and Director, Basic
Research, Syntex Research; August 1989 - Executive Vice President and
Director, Basic Research and Drug Evaluation, Syntex Research; April 1992 -
President, Discovery Research.
Richard P. Powers Senior Vice President and Chief 52
Financial Officer
Business Experience: 1988 - Senior Vice President and Chief Financial Officer.
Robert L. Roe, M.D. Senior Vice President and 52
President, Development Research
Business Experience: 1988 - Senior Vice President, Director Medical
Research, Syntex Research; August 1989 - Executive Vice President,
Director Medical Research and Pharmaceutical Development, Syntex
Research; April 1992 - President, Development Research.
- 10 -
Name Present Corporate Position Age
---- -------------------------- ---
Melvin D. Booth Vice President and 48
President, Syntex Laboratories
Business Experience: 1988 - President, Syntex Inc., Mississauga, Ontario,
Canada; 1991 - Area Vice President, Canada & South America and
President, Syntex Inc., Mississauga, Ontario, Canada; 1992 - President
Syntex Pharmaceuticals Pacific, Vice President, Syntex Corporation;
August 1993 - President, Syntex Laboratories.
Robert H. Ells Vice President 56
Business Experience: 1988 - Vice President, Chemical Operations and
Engineering Services; August 1993 - Group Vice President,
Pharmaceutical and Chemical Operations and Services
Darlene Friedman Vice President 50
Business Experience: 1988 - Director Human Resources, COTS, Syntex
Corporation; March 1991 - Corporate Director Human Resources, Syntex
Corporation; February 1992 - Executive Director, Human Resources,
Syntex Corporation; October 1992 - Vice President, Human Resources
Syntex (U.S.A.) Inc.; April 1993 - Vice President, Human Resources,
Syntex Corporation.
George Holder Vice President 55
Business Experience: 1988 - Vice President and President of
Syntex Agribusiness, Inc.
Gerhard von Mutzenbecher Vice President 58
Business Experience: 1988 - Regional Vice President, Europe and Mexico,
Syntex Pharmaceuticals International Limited; 1992 - President, Syntex
Pharmaceuticals, Europe; Vice President, Syntex Corporation.
- 11 -
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
The principal exchange on which the company's common stock is traded is the New
York Stock Exchange. At September 30, 1993, there were approximately 36,292
shareholders of record. Information on stock prices and dividends for the last
two years can be found under the caption "Supplementary Information on
Quarterly Data (unaudited)" on page 15 in the company's Annual Report to
Shareholders for the year ended July 31, 1993, which is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is contained under the caption
"Consolidated Financial Summary " on pages 30 and 31 of the company's Annual
Report to Shareholders for the year ended July 31, 1993, which is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
The information required by this item is contained under the caption
"Management's Discussion and Analysis of Operations and Financial Condition" on
pages 11 to 15 of the company's Annual Report to Shareholders for the year
ended July 31, 1993, which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained on pages 16 to 29 of the
company's Annual Report to Shareholders for the year ended July 31, 1993, which
is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
- 12 -
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors - Information with respect to the directors of the company is
contained in the definitive Proxy Statement involving the election of directors
which the company will file with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days from the close of its fiscal year
ended July 31, 1993. Such information is incorporated herein by reference.
Executive Officers - See Part I above "Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
Information relating to management remuneration is contained in the Proxy
Statement referred to in Item 10 above and such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners and
management is contained in the Proxy Statement referred to in Item 10 above and
such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions is
contained in the Proxy Statement referred to in Item 10 above and such
information is incorporated herein by reference.
- 13 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements are included in the
company's Annual Report to Shareholders for the year ended July 31,
1993, which is incorporated herein by reference pursuant to Item 8:
Financial Statements:
Consolidated Statement of Income for the Years
Ended July 31, 1993, 1992 and 1991
Consolidated Statement of Retained Earnings
for the Years Ended July 31, 1993, 1992 and 1991
Consolidated Balance Sheet as of July 31, 1993, 1992 and 1991
Consolidated Statement of Cash Flows
for the Years Ended July 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Report by Management
Independent Auditors' Report
- 14 -
2. Financial Statement Schedules
The following financial statement schedules are filed as part of this
report:
Independent Auditors' Report on Schedules
Supplementary Financial Statement Schedules:
I - Marketable Securities - other
investments
II - Amounts Receivable from Related
Parties and Underwriters, Promoters,
and Employees Other Than Related Parties
V - Property, Plant and Equipment
VI - Accumulated Depreciation and
Amortization of Property, Plant and
Equipment
VIII - Valuation and Qualifying Accounts
IX - Short-Term Borrowings
X - Supplementary Income Statement
Information
Schedules other than those listed above are omitted because the
required information is included in the financial statements or the
notes thereto or because of the absence of conditions under which
they are required.
3. Exhibits
3(a) Articles of Incorporation and Articles of
Amendment of Syntex Corporation, as last
amended December 13, 1991 (incorporated by
reference to the registrant's Form 10-K for
the year ended July 31, 1992)
(b) By-Laws of Syntex Corporation, as last amended
October 24, 1991 (incorporated by reference to
the registrant's Form 10-K for the year ended
July 31, 1992)
10(a) 1974 Stock Option Plan, as last amended July 26,
1990 (incorporated by reference to the registrant's
Form 10-K for the year ended July 31, 1992)
(b) Stock Appreciation Rights Plan, as last amended
December 12, 1980 (incorporated by reference to
the registrant's Form S-8 Registration Statement
No. 2-71206)
- 15 -
(c) Syntex Short-term Incentive Plan, approved
September 22, 1993
(d) Agreement dated as of October 1, 1993, between
the company and Dr. George Rosenkranz
(e) 1984 Stock Option and Stock Appreciation Rights
Plan, as last amended July 26, 1990 (incorporated
by reference to the registrant's Form 10-K for
the year ended July 31, 1992)
(f) Form of termination agreements dated as of
November 1, 1984, between the company and certain
key executives of the company and its subsidiaries
(incorporated by reference to the registrant's
Form 10-K for the year ended July 31, 1985)
(g) Agreement dated as of February 1, 1989, between
the company and Mr. Anthony M. Solomon
(incorporated by reference to the registrant's
Form 10-K for the year ended July 31, 1989)
(h) Syntex U.S. Employees Amended Supplemental Pension
Benefits Plan, as last amended August 1, 1991
(incorporated by reference to the registrant's
Form 10-K for the year ended July 31, 1992)
(i) Syntex U.S. Employees Supplemental Retirement
Savings Plan, as last amended March 23, 1989
(incorporated by reference to the registrant's
Form 10-K for the year ended July 31, 1989)
(j) Syntex Corporation Board of Directors Pension
Plan, as last amended October 1, 1990 (incorporated
by reference to the registrant's Form 10-K for the
year ended July 31, 1992)
(k) Syntex Corporation 1991 Stock Option Plan for
Non-Employee Directors (incorporated by reference
to the registrant's Form 10-K for the year ended
July 31, 1992)
(l) Syntex Corporation Call-to-Action Incentive Plan,
adopted July 29, 1993, subject to stockholder approval
- 16 -
11 Computation of net earnings per common share
12 Calculation of ratio of earnings to fixed charges
13 Annual Report to Shareholders for the year ended July 31, 1993
22 Subsidiaries of the registrant
24 Consent of Independent Auditors
(b) Reports on Form 8-K
Current report on Form 8-K, June 10, 1993, Item 5.
- 17 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SYNTEX CORPORATION
(Registrant)
Date: October 26, 1993 By: /s/ Paul E. Freiman
-------------------------------------
Paul E. Freiman
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Paul E. Freiman Chairman, Chief Executive Officer
- -------------------------------- and Director October 26, 1993
(Paul E. Freiman)
/s/ James N. Wilson President, Chief Operating Officer
- -------------------------------- and Director October 26, 1993
(James N. Wilson)
/s/ Richard P. Powers Senior Vice President
- -------------------------------- (Principal Financial Officer) October 26, 1993
(Richard P. Powers)
/s / Marvyn Carton Director October 26, 1993
- --------------------------------
(Marvyn Carton)
/s/ John H. Fried Director October 26, 1993
- --------------------------------
(John H. Fried)
Director
- --------------------------------
(Howard M. Holtzmann)
- 18 -
Signature Title Date
--------- ----- ----
/s/ Julius R. Krevans Director October 26, 1993
- --------------------------------
(Julius R. Krevans)
/s/ Dana G. Leavitt Director October 26, 1993
- --------------------------------
(Dana G. Leavitt)
/s/ Charles A. Lynch Director October 26, 1993
- --------------------------------
(Charles A. Lynch)
/s/ Leonard Marks, Jr. Director October 26, 1993
- --------------------------------
(Leonard Marks, Jr.)
/s/ Robert S. Miller, Jr. Director October 26, 1993
- --------------------------------
(Robert S. Miller, Jr.)
/s/ George Rosenkranz Director October 26, 1993
- --------------------------------
(George Rosenkranz)
/s/ Anthony M. Solomon Director October 26, 1993
- --------------------------------
(Anthony M. Solomon)
/s/ Miriam Stoppard Director October 26, 1993
- --------------------------------
(Miriam Stoppard)
/s/ Hans A. Wolf Director October 26, 1993
- --------------------------------
(Hans A. Wolf)
- 19 -
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
Syntex Corporation:
We have audited the consolidated financial statements of Syntex Corporation (a
Panama corporation) and subsidiary companies as of July 31, 1993, 1992 and
1991, and for each of the years then ended and have issued our report thereon
dated September 21, 1993; such financial statements and report are included in
your Annual Report to Shareholders for the year ended July 31, 1993 and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedules of Syntex Corporation listed in Item 14(a)2.
These financial statement schedules are the responsibility of the company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
Deloitte & Touche
San Francisco, California
September 21, 1993
- 20 -
SCHEDULE I
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
AS OF JULY 31, 1993
(dollars in millions)
Principal Reported Market
Name of Issuer or Amount of Value of Value of
Title of Each Group(a) Investments Investments Investments
- ------------------- ----------- ----------- -----------
Short-Term Investments:
U.S. Treasury Obligations $ 68.0 $ 68.1 $ 68.1
Other Marketable Securities 144.5 145.0 145.0
------ ------ ------
Subtotal 212.5 213.1 213.1
Time Deposits 68.6 68.6 68.6
------ ------ ------
Total Short-Term Investments $281.1 $281.7 $281.7
====== ====== ======
Long-Term Investments:
U.S. Treasury Obligations $103.1 $104.3 $104.3
Other Marketable Securities 74.5 76.6 76.6
------ ------ ------
Total Long-Term Investments $177.6 $180.9 $180.9
====== ====== ======
(a) Securities of any individual issuer, other than the U.S. Government, do not
exceed 2% of total assets.
- 21 -
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
Balance at Deductions Balance at End of Period
Beginning Amounts Amounts Not
Name of Debtor of Period Additions Collected Written Off Current Current
- -------------- --------- --------- --------- ----------- ------- -------
YEAR ENDED JULY 31, 1993:
Dr. Gordon Ringold (1) $150,811 $150,811
Michael Perry (1) $150,000 $150,000
Mark Totoritus (1) $150,000 $150,000
Charles Wells (1) $150,000 $150,000
Mel Booth (2) $200,000 $40,000 $160,000
Harold Van Wart (1) $150,000 $150,000
YEAR ENDED JULY 31, 1992:
Dr. Gordon Ringold (1) $150,487 8,923 8,599 $150,811
Michael Perry (1) $150,000 $150,000
Mark Totoritus (1) $150,000 $150,000
Charles Wells (1) $150,000 $150,000
Mel Booth (2) $200,000 $200,000
YEAR ENDED JULY 31, 1991:
Dr. Gordon Ringold (1) $150,000 487 $150,487
(1) The note receivable is collateralized by a second deed of trust on the
debtor's residence. Repayment of the unpaid principal balance and deferred
interest is due upon the occurrence of one of various events including sale
of the collateral (payment due upon sale) or employee termination (payment
due within one year of termination). Deferred interest accrues at the
lesser of the equity participation percentage of the capital gain on the
sale of the collateral or at the Federal National Mortgage Association rate
compounded monthly.
(2) The note receivable is a non-collateralized forgivable relocation loan.
The loan is forgiven at a rate of 20% per year on the March 9 anniversary
of the execution of the agreement. The loan will be forgiven in total as
of March 9, 1997, providing Mr. Booth continues to be an active employee of
the company on a continuous basis and with acceptable job performance.
- 22 -
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
(dollars in millions)
BALANCE AT BALANCE AT
BEGINNING ADDITIONS TRANSLATION (2) END
CLASSIFICATION OF YEAR AT COST RETIREMENTS ADJUSTMENTS OTHER OF YEAR
- --------------- ---------- --------- ----------- ----------- ------ ----------
YEAR ENDED JULY 31, 1993:
Land and improvements $ 34.4 $ 15.2 $ (0.1) $ 2.6 $ -- $ 52.1
Buildings and improvements 490.3 102.8 (16.1) (5.9) -- 571.1
Machinery, equip. & furniture 706.5 152.6 (42.9) (18.3) -- 797.9
Leasehold improvements 44.6 4.7 (1.0) (0.4) -- 47.9
Construction in progress (1) 254.1 (77.4) -- (2.2) -- 174.5
-------- ------ ------ ------ ---- --------
TOTAL $1,529.9 $197.9 $(60.1) $(24.2) $ -- $1,643.5
======== ====== ====== ====== ==== ========
YEAR ENDED JULY 31, 1992:
Land and improvements $ 31.3 $ 2.8 $ (0.2) $ 0.5 $ -- $ 34.4
Buildings and improvements 373.8 115.1 (2.6) 4.0 -- 490.3
Machinery, equip. & furniture 600.2 131.7 (35.6) 10.2 -- 706.5
Leasehold improvements 36.2 8.8 (0.6) 0.2 -- 44.6
Construction in progress (1) 167.3 82.4 -- 4.4 -- 254.1
-------- ------ ------ ------ ---- --------
$1,208.8 $340.8 $(39.0) $ 19.3 $ -- $1,529.9
======== ====== ====== ====== ==== ========
YEAR ENDED JULY 31, 1991:
Land and improvements $ 24.9 $ 6.6 $ (0.7) $ (0.1) $ .6 $ 31.3
Buildings and improvements 348.1 31.7 (3.5) (2.5) -- 373.8
Machinery, equip. & furniture 511.7 116.0 (25.8) (5.8) 4.1 600.2
Leasehold improvements 36.3 1.7 (1.8) -- -- 36.2
Construction in progress (1) 77.5 91.7 (0.4) (1.5) -- 167.3
-------- ------ ------ ------ ---- --------
$ 998.5 $247.7 $(32.2) $ (9.9) $4.7 $1,208.8
======== ====== ====== ====== ==== ========
(1) Additions, at cost, to construction in progress are net of transfers to
other property, plant and equipment classifications for those construction
projects completed during the fiscal year.
(2) Non cash additions resulting from the purchase of the remaining interest in
certain joint venture investments.
- 23 -
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
(dollars in millions)
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND TRANSLATION (1) END
CLASSIFICATION OF YEAR EXPENSES RETIREMENTS ADJUSTMENTS OTHER OF YEAR
- -------------- -------- --------- ----------- ----------- ------- -------
YEAR ENDED JULY 31, 1993:
Land improvements $ 5.2 $ 1.2 $ -- $ (0.1) $ -- $ 6.3
Buildings & improvements 111.1 17.5 (6.7) (2.3) -- 119.6
Machinery, equipment &
furniture 365.0 87.5 (26.3) (11.5) -- 414.7
Leasehold improvements 15.4 3.3 (0.7) (0.3) -- 17.7
-------- -------- -------- --------- ------- -------
TOTAL $ 496.7 $ 109.5 $ (33.7) $ (14.2) $ -- $ 558.3
======== ======== ======== ========= ======= =======
YEAR ENDED JULY 31, 1992:
Land improvements $ 4.8 $ 0.5 $ (0.1) $ -- $ -- $ 5.2
Buildings & improvement 94.8 15.5 (0.6) 1.4 -- 111.1
Machinery, equipment &
furniture 310.5 75.4 (26.9) 6.0 -- 365.0
Leasehold improvements 13.7 2.2 (0.6) 0.1 -- 15.4
-------- -------- -------- --------- ------- ------
TOTAL $ 423.8 $ 93.6 $ (28.2) $ 7.5 $ -- $ 496.7
======== ======== ======== ========= ======= =======
YEAR ENDED JULY 31, 1991:
Land improvements $ 4.5 $ 0.3 $ -- $ -- $ -- $ 4.8
Buildings & improvements 84.2 13.3 (1.9) (0.8) -- 94.8
Machinery, equipment &
furniture 270.5 61.7 (20.2) (3.8) 2.3 310.5
Leasehold improvements 13.7 1.6 (1.6) -- 13.7
-------- -------- -------- --------- ------- -------
TOTAL $ 372.9 $ 76.9 $ (23.7) $ (4.6) $ 2.3 $ 423.8
======== ======== ======== ======== ======= =======
(1) Non cash additions resulting from the purchase of the remaining interest in
certain joint venture investments.
- 24 -
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
(dollars in millions)
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND CURRENCY AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(1) ADJUSTMENTS OF YEAR
- ----------- --------- ---------- ------------- ----------- -------
YEAR ENDED JULY 31, 1993:
Reserve deducted from asset
to which it applies:
Allowance for doubtful
accounts $6.8 $2.3 $(1.1) $(0.5) $7.5
==== ==== ===== ===== ====
YEAR ENDED JULY 31, 1992:
Reserve deducted from asset
to which it applies:
Allowance for doubtful
accounts $6.1 $1.1 $(0.7) $0.3 $6.8
==== ==== ===== ==== ====
YEAR ENDED JULY 31, 1991:
Reserve deducted from asset
to which it applies:
Allowance for doubtful
accounts $5.0 $2.3 $(1.0) $(0.2) $6.1
==== ==== ===== ===== ====
(1) Accounts receivable written off to reserve.
- 25 -
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE IX
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
(dollars in millions)
WEIGHTED WEIGHTED
AVERAGE MAXIMUM AMOUNT AVERAGE AMOUNT AVERAGE
CATEGORY OF AGGREGATE BALANCE AT INTEREST RATE OUTSTANDING OUTSTANDING INTEREST RATE
SHORT-TERM BORROWINGS END OF YEAR AT END OF YEAR DURING THE YEAR(1) DURING THE YEAR(2) DURING THE YEAR(3)
- --------------------- ----------- -------------- ------------------ ------------------ ------------------
YEAR ENDED JULY 31, 1993:
U.S. bank loans $ 20.0 3.1% $ 117.0 $ 17.8 3.1%
Non-U.S. bank loans 58.0 9.3 64.5 50.9 10.2
--------
TOTAL $ 78.0
========
YEAR ENDED JULY 31, 1992:
Non-U.S. bank loans $ 43.2 9.8% $ 55.2 $ 49.3 10.9%(4)
Medium Term Notes 25.0 3.4 25.0 20.4 4.2
Commercial paper 362.1 3.4 394.0 300.4 4.5
--------
TOTAL $ 430.3
========
YEAR ENDED JULY 31, 1991:
Non-U.S. bank loans $ 36.4 11.3% $ 73.1 $ 49.1 11.7%(4)
Commercial paper 274.1 5.9 327.3 228.6 6.7
--------
TOTAL $ 310.5
========
(1) At the end of any quarter for non-U.S. bank loans and at the end of any
day for U.S. bank loans and commercial paper.
(2) Represents the average quarter-end balance for non-U.S. bank loans or the
average of daily balances for U.S. bank loans and commercial paper.
(3) Calculated by relating appropriate interest expense to average aggregate
borrowings.
(4) Includes Brazilian cruzado and Mexico peso loans at interest rates that
reflect the significant inflation in those countries.
- 26 -
SCHEDULE X
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
(dollars in millions)
CHARGED TO COSTS
AND EXPENSES
ITEM 1993 1992 1991
---- ---- ---- ----
ADVERTISING COSTS $88.0 $105.6 $94.5
MAINTENANCE AND REPAIRS 29.3 28.4 27.2
Depreciation and amortization of intangible assets; taxes, other than payroll
and income taxes; and royalties are not set forth because such items do not
exceed one percent of total sales as shown in the related consolidated
statements of income.
- 27 -
Exhibit 11
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(in millions except per share amounts)
YEAR ENDED JULY 31
1993 1992 1991
---- ---- ----
Net Earnings Applicable to Common Stock:
- ----------------------------------------
Net earnings applicable to
common stock $287.2 $472.3 $423.8
====== ====== ======
Earnings per Common Share (as reported):
- ---------------------------------------
Weighted average shares outstanding 222.4 225.4 224.7
====== ===== =====
Net earnings per common share $ 1.29 $2.10 $1.89
====== ===== =====
Earnings per Common Share
- -------------------------
(assuming full dilution):
- ------------------------
Weighted average shares outstanding 222.4 225.4 224.7
Shares contingently issuable for:
Stock option plans 2.7 1.5 2.5
------ ----- -----
Average shares and share
equivalents outstanding 225.1 226.9 227.2
====== ===== =====
Earnings Per Common Share $ 1.28 $2.08 $1.87
====== ===== =====
- 28 -
Exhibit 12
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEAR ENDED JULY 31, 1993
(dollars in millions)
Income Before Taxes on Income $132.8
Adjustments:
- -----------
Fixed Charges:
Interest Expense 30.4
Add:
Amortization of Capitalized Interest 0.4
Less:
Capitalized Interest (3.9)
-------
Total Adjusted Income $ 159.7
Divided by Fixed Charges $ 30.4
-------
Ratio of Earnings to Fixed Charges 5.3
=======
- 29 -
Exhibit 22
SUBSIDIARIES OF THE REGISTRANT
The following list of subsidiaries of the registrant does not include the names
of certain subsidiaries which, when considered in the aggregate, do not
constitute a significant subsidiary.
Country
or State
of Incor- Percentage
Name poration Owned
- ---- -------- ----------
Syntex Australia Limited Australia 100
Laroche Navarron Belgium, S.A. Belgium 100
Hamilton Pharmaceuticals Limited Bermuda 100
HKIB/Syntex Limited Bermuda 50
Syntex International Laboratories, Ltd. Bermuda 100
Syntex Pharmaceuticals International Limited Bermuda 100
Syntex (Bermuda) Limited Bermuda 100
Syntex Comercio e Participacoes Ltda. Brazil 100
Syntex Communications, Inc. California 100
Syntex Inc. Canada 100
Agribusiness Technologies, Inc. Delaware 100
Child Care Facilities, Inc. Delaware 100
Syntex (U.S.A.) Inc. Delaware 100
Syntex Agribusiness, Inc. Delaware 100
Syntex Animal Health, Inc. Delaware 100
Syntex Beauty Care, Inc. Delaware 100
Syntex Chemicals, Inc. Delaware 100
Syntex Health Products, Inc. Delaware 100
Syntex International Ltd. Delaware 100
Syntex Laboratories, Inc. Delaware 100
Syntex Real Estate Holdings, Inc. Delaware 100
Syva Company Delaware 100
Syntex (F.P.) Inc. Delaware 100
Syva Diagnostika ApS Denmark 100
Syntex Pharmaceuticals Limited England 100
Recherche Syntex France S.A. France 100
Laboratoires Syntex, S.A. France 100
Syntex GmbH Germany 100
Syntex Pharma Netherlands B.V. Netherlands 100
Syntex Ireland Limited Ireland 100
Nippon Syntex K.K. Japan 100
Syntex S.A. de C.V. Mexico 100
Syntex Investigacion de Mexico, S.A. Mexico 100
Syntex Quimica S.A. Mexico 100
Diamond Laboratories de Mexico S.A. de C.V. Mexico 100
- 30 -
Exhibit 22
SUBSIDIARIES OF THE REGISTRANT
(Continued)
Country
or State
of Incor- Percentage
Name poration Owned
- ---- -------- ----------
Syntex N.V. Netherlands
Antilles 100
Syntex Laboratories (N.Z.) Limited New Zealand 100
Syva Norge A/S Norway 100
Syntex Puerto Rico, Inc. Panama 100
Syntex Latino, S.A. Spain 100
Eclon, S.A. Spain 100
Syva Scandinavia Syntex Diagnostics A.B. Sweden 100
Syntex Pharm A.G. Switzerland 100
Syntex Korea Ltd. Korea 100
Syva-Belgium S.P.R.L. Belgium 100
Syva-France S.N.C. France 100
Syntex Nordica AB Sweden 100
Syntex A.S. Norway 100
Syntex AS Denmark 100
Syntex Arzneimittel GmbH Germany 100
Syncare Pharmaceutical, Inc. Canada 100
Hamilton Pharma, Inc. Delaware 100
Syntex S.A.-N.V. Belgium 65
Sarva-Syntex Nederland B.V. Netherlands 65
Tanabe Syntex Co., Ltd. Japan 50
- 31 -
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
2-96917, in Post-Effective Amendment No. 2 to Registration Statement No.
2-71206, in Post-Effective Amendment No. 6 to Registration Statement No.
2-61792, and in Post-Effective Amendment No. 10 to Registration Statement No.
2-52436, on Form S-8 of our reports dated September 21, 1993 appearing in and
incorporated by reference in the Annual Report on Form 10-K of Syntex
Corporation for the year ended July 31, 1993.
Deloitte & Touche
San Francisco, California
October 26, 1993
- 32 -
Exhibit 10(c)
1993
SYNTEX CORPORATION
SHORT-TERM COMPENSATION
PLAN
Table of Contents
ARTICLE Page
- ------- ----
ARTICLE I Introduction ........................ 1
ARTICLE II Definitions ........................ 1
ARTICLE III Eligibility ....................... 3
ARTICLE IV STC Awards .......................... 4
4.1. Award Cycle ........................... 4
4.2. STC Pool .............................. 4
4.3. Determination of STC Awards ........... 5
4.4. Payment of STC Awards ................. 7
ARTICLE V Plan Administration ................. 7
5.1. Powers of the STC Committee ........... 7
5.2. No Liability .......................... 7
5.3. Records, Reports and Annual Statements. 7
5.4. Expenses of Administration ............ 8
ARTICLE VI Miscellaneous ....................... 8
6.1. Term and Amendment of the Plan ........ 8
6.2. Tax Withholding and Reporting ......... 8
6.3. Inalienability of Interests ........... 8
6.4. No Right to Employment ................ 8
6.5. Governing Law ......................... 9
1993
Syntex Corporation
Short-term Compensation Plan
ARTICLE I
Introduction
The purpose of the 1993 Syntex Corporation Short-term Compensation Plan (the
"Plan") is to provide management employees of Syntex Corporation and its
Subsidiaries ("Syntex") with significant financial incentives by motivating and
rewarding excellent performance and contributions to the success of Syntex.
The Plan supersedes and replaces the predecessor Syntex Management Incentive
Compensation Plan, and all plans, agreements, and other documents that refer to
the Syntex Management Incentive Compensation Plan are hereby deemed amended to
refer instead to the Plan.
ARTICLE II
Definitions
2.1. "Award Date" means the date the Compensation and Benefits Committee
approves STC Awards pursuant to Section 4.3(e).
2.2. "Board" means the Board of Directors of Syntex Corporation.
2.3. "Career Bands A through E" means the highest five levels of career
bands under the Syntex career banding system in effect as of August 1, 1992.
2.4. "Compensation and Benefits Committee" means the Compensation and
Benefits Committee of the Board.
2.5. "Contribution Modifier" means a multiplier that is assigned by each
Participant's manager to determine the Participant's share of the Unit Pool as
set forth in Section 4.3.
2.6. "Corporation" means Syntex Corporation and its successors and
assigns and any corporation which shall acquire substantially all of its assets.
2.7. "Fiscal Year" means the fiscal year of Syntex ending July 31.
2.8. "Participant" means any employee who is eligible to participate in
the Plan pursuant to Article III of the Plan.
2.9. "Plan" means the 1993 Syntex Short-term Compensation Plan, as
amended from time to time.
2.10. "STC Award" for a Participant with respect to any Fiscal Year
means the amount, if any, of the cash bonus awarded to the Participant for the
Fiscal Year.
2.11. "STC Committee" means the committee composed of a group of senior
Syntex executives appointed by the Board to administer the Plan. The Committee
will be chaired by the Chief Executive Officer of the Corporation.
2.12. "STC Pool" means the amount, if any, approved by the Compensation
and Benefits Committee as available for distribution to Participants pursuant to
the Plan for a Fiscal Year, subject to the conditions set forth in Section 4.2.
The STC Pool for any Fiscal Year shall be discrete to that Fiscal Year, and any
amount of the STC Pool remaining after the Fiscal Year shall not be available
for awards for subsequent Fiscal Years.
2.13. "Retire" means termination of employment with Syntex under
circumstances in which the Participant is eligible for and has elected to
receive periodic payment of retirement benefits commencing upon cessation of
employment pursuant to a pension plan to which the Corporation or any Subsidiary
makes contributions.
2.14. "Subsidiary" means any corporation in which the Corporation owns,
directly or indirectly, stock possessing fifty percent (50%) or more of the
total combined voting power.
2.15. "Syntex" means Syntex Corporation and its Subsidiaries.
2.16. "Unit" means business group, sector, division or staff unit of one of
the major organizations of Syntex.
2.17. "Unit Pool" with respect to any Unit means the portion of the STC Pool
available for awards to Participants in the Unit for a Fiscal Year, as
determined by the STC Committee pursuant to Section 4.3(a).
2.18. "30 Month Call To Action" means the strategic plan issued to all
Syntex employees in March 1993 and covering the period from March 1993 to
August 1995.
ARTICLE III
Eligibility
Employees of Syntex, other than the Chairman of the Board of the Corporation
and the Chief Executive Officer of the Corporation, who are in Career Bands A
through E and who have been employed by Syntex in one or more such career bands
for at least six months as of the end of a Fiscal Year and are still employed
at the end of the Fiscal Year; employees of Syntex who Retire, die, or become
totally disabled at any time during the Fiscal Year while in a position in
Career Bands A through E; and other employees who are in Career Bands A through
E for a portion of the Fiscal Year and are designated by the STC Committee,
are eligible to participate in the Plan for the Fiscal Year.
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ARTICLE IV
STC Awards
4.1. Award Cycle. STC Awards shall be determined annually on the basis of
performance during a Fiscal Year.
4.2. STC Pool. Following the end of each Fiscal Year, the Compensation and
Benefits Committee shall determine the amount of the STC Pool for the Fiscal
Year, after reviewing management's analysis of the overall performance of
Syntex for the Fiscal Year. In making this determination, the Compensation and
Benefits Committee shall consider (a) the financial results of Syntex compared
to the financial goals of Syntex for the Fiscal Year and compared to the
financial results of Syntex for prior Fiscal Years, (b) the total amount of
bonuses that would be paid to all Participants in relationship to total
compensation of all Participants, compared to similar data of competitors, and
(c) the performance of management in making progress during the Fiscal Year
toward Syntex's long-term goals, as well as progress toward Syntex's "30 Month
Call to Action." Under no circumstances, however, shall the STC Pool for any
Fiscal Year exceed five percent (5%) of the net income of Syntex before STC
Awards, income taxes and any items deemed by the Compensation and Benefits
Committee to be unusual or extraordinary, as determined on the basis of the
audited consolidated financial statements of Syntex for the Fiscal Year.
4.3. Determination of STC Awards.
(a) After determination of the STC Pool by the Compensation and Benefits
Committee, the STC Committee shall divide the STC Pool into Unit Pools. In
making this determination, the STC Committee shall consider, among other
factors, (i) the relative performance of the Units
for the Fiscal Year in terms of each Unit's success in achieving annual Unit
goals, including financial goals, and key operating and strategic goals; (ii)
the Units' relative progress against long-term goals, as well as the "30 Month
Call to Action"; (iii) the number of Participants in each Unit; (iv) the
Participants' respective salaries; and (v) the Units' relative contributions to
overall corporate performance.
(b) Participants, as individuals, will share in the applicable Unit Pool.
Each Participant's STC Award will be based on the following: the total STC
Pool, the Unit Pool of the Participant's Unit, the performance and
contributions of any team to which the Participant was assigned during the
Fiscal Year, and the Participant's own individual performance and contribution.
(c) Each Participant's manager will evaluate the Participant's performance
for the Fiscal Year in terms of the Participant's success in achieving annual
goals and the Participant's contribution to the continuous improvement of
individual, team, and organizational performance by application and promotion
of the Syntex key principles, i.e., high performance standards, sense of
urgency, empowerment and accountability, innovation and learning, and high
ethical standards.
(d) Based on the foregoing evaluation, and on the Participant's level of
responsibilities relative to others in the respective career band, each
Participant's manager will choose the Participant's Contribution Modifier from
the table attached hereto as Exhibit A, subject to the approval of the next
higher level of management. To determine a Participant's proportionate share
of the Unit Pool, the Participant's approved Contribution Modifier will be
multiplied by his or her annual base salary, and this number will be divided by
the sum of the products of the individual annual base salaries times the
Contribution Modifiers of all Participants in his or her
Unit. The Participant's recommended STC Award will be the resulting fraction
times the Unit Pool. If a Participant is employed in an eligible position, as
defined in Article III hereof, for less than twelve months of the Fiscal Year,
his or her recommended STC Award will be pro-rated for the portion of the
Fiscal Year that he or she was employed in an eligible position.
(e) The Compensation and Benefits Committee may delegate to the STC
Committee the final approval authority for STC awards to such Participants as
it may designate. All other recommended STC Awards will be submitted to the
Compensation and Benefits Committee, which may approve, disapprove, or modify
any or all of the awards for any reason. The determination of the Compensation
and Benefits Committee as to the amount of any individual STC Award, and the
determination of the STC Committee as to STC Awards that it approves, shall be
in the applicable committee's discretion and shall be final, provided that the
total amount of the individual STC Awards approved by the Compensation and
Benefits Committee and the STC Committee shall not exceed the STC Pool. The
date on which the Compensation and Benefits Committee approves the STC Awards
submitted to it shall be the Award Date.
4.4. Payment of STC Awards. STC Awards will be paid in cash following the
Award Date. If a Participant Retires, dies or becomes totally disabled during
a Fiscal Year, the Participant will receive a STC Award, pro-rated for the
percentage of the Fiscal Year worked. If a Participant leaves Syntex for any
other reason prior to the end of the Fiscal Year, no STC Award will be paid,
unless specifically authorized by the STC Committee in each instance. If a
Participant leaves Syntex after the Fiscal Year ends, but prior to the STC
Award distribution, the Participant will be eligible to receive the STC Award
at the normal distribution time.
6
ARTICLE V
Plan Administration
5.1. Powers of the STC Committee. Subject to the terms of the Plan, the STC
Committee shall have the authority to interpret the Plan, to establish, amend
and rescind the rules and guidelines for administering the Plan and to make all
determinations necessary or advisable for the administration of the Plan.
Determinations of the STC Committee regarding the interpretation of the Plan
shall be conclusive, subject only to review by the Compensation and Benefits
Committee.
5.2. No Liability. No member of the STC Committee or the Compensation and
Benefits Committee shall be liable for any action or determination made in good
faith with respect to the Plan or the rights of any person under the Plan.
5.3. Records, Reports and Annual Statements. The STC Committee shall
maintain records showing awards and accounts under the Plan and shall keep in
convenient form the data necessary for the effective operation of the Plan.
5.4. Expenses of Administration. The Corporation shall pay all expenses of
administration of the Plan.
ARTICLE VI
Miscellaneous
6.1. Term and Amendment of the Plan. The Plan shall be effective with
respect to the Fiscal Year ending July 31, 1993, and to all subsequent Fiscal
Years until terminated. The Board or the Compensation and Benefits Committee
may terminate or amend the Plan in any respect
at any time; provided that without a Participant's consent no termination or
amendment may alter the terms of any awards under the Plan that were made prior
to the effective date of the termination or amendment.
6.2. Tax Withholding and Reporting. All awards and payments under the Plan
shall be subject to all applicable tax withholding and reporting requirements.
6.3. Inalienability of Interests. A Participant's interests under the Plan
shall not be subject to alienation, assignment, garnishment, execution or levy
of any kind, and any attempt to cause any benefits to be so subjected shall not
be recognized. A Participant shall have only the rights of a general creditor
of Syntex with respect to any vested interest under the Plan.
6.4. No Right to Employment. Neither the establishment of the Plan nor
participation in the Plan shall give a Participant the right to remain in the
employ of Syntex.
6.5. Governing Law. All questions pertaining to the construction, validity
and effect of the Plan, or to the rights of any person under the Plan, shall be
determined in accordance with the laws of the State of California.
Adopted by the Board of Directors
on September 22, 1993
1993stc.pln
93.1011
Exhibit 10(d)
POLITICAL AND ECONOMIC
CONSULTING AGREEMENT
AGREEMENT effective as of this first day of October, 1993 by and between
SYNTEX CORPORATION, a corporation organized and existing under the laws of
Panama and having a place of business at 3401 Hillview Avenue, Palo Alto,
California 94304 (hereinafter referred to as "Syntex"), and DR. GEORGE
ROSENKRANZ, residing at Parque via Reforma 1730, Lomas de Chapultepec, Mexico
10, D.F. (hereinafter referred to as "Consultant").
WITNESSETH:
1. Syntex hereby retains Consultant, and Consultant accepts this retainer as
a consultant to Syntex for the period commencing October 1, 1993, and
terminating September 30, 1995. Pursuant to such retainer, Consultant agrees
to advise Syntex and its affiliated companies regarding political and economic
conditions that may affect one or more of Syntex' businesses in Mexico, and any
likely trends or changes in such conditions.
2. In consideration of the consultation of Consultant, Syntex agrees to pay
Consultant the sum of four thousand eight hundred thirteen U.S. dollars
($4,813) per month during the term hereof. Except for reimbursement of
reasonable travel expenses incurred by Consultant in rendering services
hereunder, the aforesaid sum represents the total fee payable on account of the
services provided hereunder by Consultant to Syntex and its affiliated
companies during the term hereof.
3. Any notice required or permitted by the terms of this Agreement shall be
given by registered mail, prepaid and properly addressed, or delivered by hand
to Syntex or Consultant at the respective addresses first given above or at
such other address as either party hereto may designate by notice pursuant
hereto. If mailed, any such notice shall be deemed to have been given when
mailed; and if delivered by hand, when received.
4. Notwithstanding anything herein to the contrary, Consultant's status with
Syntex shall be, at all times during the term of this Agreement, that of an
independent contractor.
IN WITNESS WHEREOF, the parties hereto have entered into the above Agreement
as of the day and year first above written.
SYNTEX CORPORATION
/s/_George Rosenkranz /s/ Paul E. Freiman
_____________________________ By________________________________________
Dr. George Rosenkranz Title: Chairman and Chief Executive Officer
__________________________________________
Date 9/23/93 Date 9/28/93
GR93-95.AGT
Exhibit 10(L)
SYNTEX CORPORATION
CALL-TO-ACTION INCENTIVE PLAN
ARTICLE I - INTRODUCTORY PROVISIONS
1. Purpose of the Plan. The purpose of the Syntex Corporation
Call-to-Action Incentive Plan (the "Plan") is to enhance the focus of employees
of Syntex Corporation (the "Corporation") and its Subsidiaries on specific
actions and objectives necessary to ensure the Corporation's future success and
the creation of shareholder value. Performance measures and objectives
associated with grants and awards under the Plan are based on the Corporation's
30-Month Call-to-Action Plan issued in February 1993, which covers the period
ending with the completion of the Corporation's 1995 fiscal year. By providing
a means for employees to benefit from the Corporation's financial success
during this period, both through Options and, in some instances, through a
Deferred Cash Incentive, the Plan will stimulate employees' efforts on the
Corporation's behalf, maintain and strengthen their desire to remain with the
Corporation and its Subsidiaries, and encourage them to acquire a greater
interest in the Corporation through investments in Common Stock.
2. Definitions. Certain capitalized terms used in this Plan
have the meanings indicated in Appendix A hereto.
3. Eligibility. All persons employed by the Corporation and
its Subsidiaries, as determined by the Committee, on the Date of Grant of an
Option, will be eligible to participate in the grant of Options under the Plan;
provided, however, that no person who owns more than five percent (5%) of the
Common Stock of the Corporation, or any other class of equity securities of the
Corporation registered pursuant to Section 12 of the Exchange
Act, will be granted an Option under this Plan. The Committee in its
discretion will designate those persons who are eligible to participate in the
Senior Executive Level of the Plan, and those so designated will be the only
Participants to receive Deferred Cash Incentives. Potential Participants will
be recommended for participation by the Chief Executive Officer and the
President of the Corporation and designated as Participants by the Committee
4. Call-to-Action Goals. Upon commencement of the Plan Period,
the Committee will adopt a statement of goals and measurements to be used in
assessing performance for purposes of the Plan (the "Call-to-Action Goals").
The Committee may make such revisions to the Call- to-Action Goals from time to
time during the Plan Period as it deems reasonable. At the end of each fiscal
quarter of the Corporation during the Plan Period, the Committee will review
the Corporation's performance for the Plan Period to date against the
Call-to-Action Goals and will assign a rating according to the following scale:
Outstanding; Exceeds Expectations; Meets Expectations; and Fails to Meet
Expectations. Within sixty (60) days following the completion of the Plan
Period, the Committee will determine the Corporation's final performance rating
against the Call-to-Action Goals, which rating will reflect the Committee's
assessment of the Corporation's cumulative performance over the Plan Period
(the "Final Rating").
ARTICLE II - STOCK OPTIONS
5. Shares Subject to Plan. Subject to adjustment under the
provisions of Section 13 hereof, the number of shares of the Common Stock that
may be subject to Options granted under the Plan will not exceed four million
five hundred thousand (4,500,000) shares. Such shares may be either authorized
and unissued shares or shares issued and thereafter acquired by the
Corporation. If Options granted under the Plan terminate prior to expiration
of the Plan Period without being wholly exercised, any shares of stock subject
to such Options will again be available for the grant of Options under the
Plan. Any shares that are reserved for issuance hereunder but are not subject
to Options on July 31, 1995, and any shares that are subject to Options that
expire or terminate after that date without being wholly exercised, will be
included in the shares reserved for issuance under the Corporation's 1984 Stock
Option and Stock Appreciation Rights Plan and will become available for
issuance pursuant to the provisions of that plan. The Corporation will not,
upon the exercise of any option, be required to issue or deliver any shares of
stock prior to (a) the admission of such shares to listing on any stock
exchange on which the Common Stock is then listed and (b) the completion of
such registration or other qualification of such shares under any state or
federal law, rule or regulation as the Corporation determines to be necessary
or advisable.
6. Types of Options and Senior Executive Share Limitations.
All Options granted under this Plan shall be nonstatutory options for purposes
of the Code. Subject to adjustment under the provisions of Section 13 hereof,
the maximum number of shares with respect to which options can be granted to
any Participant in the Senior Executive Level during the life of the Plan shall
be as follows: Mr. Paul E. Freiman, 370,000 shares; Mr. James N. Wilson,
250,000 shares; all other Participants in the Senior Executive Level, 84,000
shares each.
7. Price. The purchase price under each Option granted to
Participants in the Senior Executive Level will be equal to one hundred ten
percent (110%) of the Fair Market Value of the Common Stock on the Option's
Date of Grant, rounded to the nearest whole dollar, and the purchase price
under each Option granted to all other Participants will be equal to one
hundred percent (100%) of the Fair Market Value of the Common Stock on the
Option's Date of Grant; provided, however, that in no event shall the purchase
price be less than the par value of the Common Stock.
8. Period of Options and Rights to Exercise. Each Option
granted to a Participant will terminate immediately upon the Participant's
Employment Termination Date, if such Employment Termination Date occurs within
two (2) years following the Date of Grant of such Option, unless such Option
becomes vested prior to such Employment Termination Date pursuant to Section
14. Except as provided in Section 14, a Participant may not exercise any
Option, or any part thereof, prior to the later of (1) August 1, 1995, or (2)
six months after its Date of Grant. After such date, and subject to the
provisions of this Section 8 and Section 14 below, Options will become
exercisable as follows:
a. If the Final Rating is "Meets Expectations" or
above, all Options will become exercisable upon conclusion of the
Plan Period.
b. If the Final Rating is "Fails to Meet
Expectations," each Option will become exercisable with respect to
twenty percent (20%) of the shares subject thereto on the date the
Committee approves the Final Rating, and thereafter will become
exercisable with respect to an additional twenty percent (20%) of
such shares on each anniversary of the Date of Grant of such Option
until it becomes fully exercisable; provided, however, that options
granted for one hundred (100) shares or less will not become
exercisable to any extent until July 31, 1996, on which date they
will become fully exercisable.
Subject to the provisions of this Section 8 and Sections 9 and 10 below, the
right to exercise an Option will expire upon the date that is ten (10) years
after its Date of Grant. Once each installment of an Option has become
exercisable, such installment may be exercised in whole at any time or in part
from time to time until the expiration of the Option, whether or not any Option
granted previously to the Participant remains outstanding at the time of such
exercise. To the extent that an Option has become exercisable, it is sometimes
herein referred to as being "vested."
9. Procedure for Exercise. In order to exercise an Option, the
Participant shall deliver to the Corporation notice of exercise in such form as
may be specified by the Stock Option Administrator, accompanied by payment as
hereinafter stated. The shares to be purchased upon each exercise of any
Option shall be paid for in full at the time of such exercise, such payment to
be made in cash, in Common Stock owned by the Participant and having a Fair
Market Value on the date of exercise equal to the aggregate purchase price of
the shares of Common Stock to be purchased upon such exercise, or in a
combination of Common Stock owned by the Participant and cash. Prior to
issuance of any shares upon exercise of an Option, the Participant shall pay to
the Corporation the amount of any and all applicable federal, state, and local
withholding obligations imposed upon the Corporation with respect to the
exercise of such Option.
10. Termination of Employment. Except as expressly provided in
this Section 10, no Option granted to a Participant may be exercised after
ninety (90) days following the Participant's Employment Termination Date. If a
Participant's Employment Termination Date occurs more than two years after the
Date of Grant of an Option, but prior to the expiration of the Option or the
exercise of the Option in full:
a. For any reason other than Disability, Retirement
or death, any shares as to which an Option held by the Participant is
exercisable as of the Employment Termination Date may be exercised
within ninety (90) days following the Employment Termination Date,
and the unexercised portion of any Option held by the Participant,
whether vested or not, will terminate ninety (90) days after his or
her Employment Termination Date, unless the Committee determines that
good reason exists to extend the exercisability of the vested portion
of such Option for a period not extending beyond the expiration date
of the Option.
b. Because of death or Disability, the Participant or
the personal representative of his or her estate may, but only prior
to the date that is twelve months after his or her Employment
Termination Date, or prior to February 1, 1996, whichever is later,
exercise his or her Option up to the following maximum number of
shares: the number of shares for which such Option may be exercised
will be the greater of (i) twenty percent (20%) of the original
number of shares subject to such Option multiplied by the number of
full years elapsed (up to a maximum of five (5) years) from the Date
of Grant to the Employment Termination Date, or (ii) the number of
shares that are exercisable under such Option on the Employment
Termination Date; from which number will be subtracted the number of
shares for which the Option has been exercised prior to the
Employment Termination Date.
c. Solely because of his or her Retirement, the
Options granted to the Participant will continue to vest, and he or
she may exercise each Option if and to the extent he or she would
have been entitled to do so had he or she remained an employee until
the Option expiration date.
11. Non-Transferability of Options. No Option shall be
transferable by the Participant otherwise than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code, and such Option will be exercisable, during the
Participant's lifetime, only by him or her.
12. Registration Under the Securities Act of 1933. The
Corporation contemplates having an effective registration statement under the
United States Securities Act of 1933 at such time as Options are exercised. The
Corporation will use its best efforts to keep such registration statement
effective at all times necessary to permit the holders of Options to exercise
them. The Corporation will also use its best efforts to keep a registration
statement effective, if necessary, for resales of shares received upon exercise
of Options, but only if such registration statement can be filed on Form S-8 or
a similar form.
13. Adjustments in Shares Subject to Plan. If the Corporation
at any time changes the number of issued shares of Common Stock without new
consideration to the Corporation (such as by stock dividend or stock split),
the total number of shares available under the Plan, and the number and price
of shares of Common Stock subject to outstanding Options, will be adjusted so
that the aggregate consideration payable to the Corporation and the value of
each Option will not be changed. If, during the term of any Option granted
under this Plan, the Common Stock is changed into another kind of stock or into
securities of another corporation, whether as a result of a reorganization,
recapitalization, sale, merger, consolidation, or other similar transaction, or
if additional rights are offered with respect to the Common Stock, the
Committee will cause adequate provision to be made so that the Participants
will thereafter be entitled to receive, upon the due exercise of any
outstanding Options, the securities or rights that the Participants would have
been entitled to receive had they owned the Common Stock acquired on the
exercise of such Options on the effective date of any such transaction.
Subject to the provisions of Section 14, the Committee shall have the right to
substitute other options for the Options in connection with mergers,
reorganizations, or other transactions to which Section 424(a) of the Code
applies, provided such substitutions satisfy the requirements of Section 424(a)
of the Code and the regulations promulgated thereunder. In the event of such
substitution, the number of shares reserved pursuant to this Section will be
increased by the net increase in the number of shares subject to Options before
and after the substitution.
14. Acceleration of Vesting upon Change of Control.
The provisions of Section 8 notwithstanding, in the event a Change in Control
occurs, each Option that is then outstanding will thereupon immediately vest
and automatically become one hundred percent (100%) exercisable without action
by the Committee. Any Option, vested or unvested, may be exercised on a
conditional basis in the event of an announcement of a Change of Control
transaction, provided no provision is made in such Change of Control
transaction for the exercise, exchange, or surrender of Options, or other
procedure whereby the Participant may realize in cash the difference between
the exercise price and the fair market value of the per share consideration to
be received by holders of the Common Stock. A conditional exercise may be made
by giving a written notice of exercise to the Stock Option Administrator of the
Corporation. Any Deferred Cash Incentive that would be accelerated under
Section 18 will also be available on a conditional basis and may be applied
towards the satisfaction of the exercise price and the withholding obligations
with respect to any such Options. If the Change of Control transaction is
canceled or revoked, or otherwise does not occur, or does not actually result
in a Change of Control, the conditional exercise of unvested Options will be
rescinded. The Participant may also rescind the conditional exercise of any
vested Options.
ARTICLE III - DEFERRED CASH INCENTIVES
15. Target Awards. At the time that it designates a Participant
to participate in the Senior Executive Level of the Plan, the Committee will
assign the Participant a target deferred cash incentive opportunity. Such
target will not be subject to modification during the Plan Period, and only one
target will be assigned to a Participant under the Plan. The designation of a
target deferred cash incentive opportunity for a Participant shall be deemed to
be the grant of a Deferred Cash Incentive for purposes of this Plan, and the
date on which the Committee designates such target shall be the Date of Grant
of a Deferred Cash Incentive.
16. Determination of Deferred Cash Incentive. The actual amount
of the Deferred Cash Incentive payment will be a percentage of the target
established under Section 15 and will be based on the Final Rating assigned by
the Committee. The percentages of the target award to be paid for each level
of Final Rating are as follows:
FINAL RATING PERCENT OF TARGET
------------ -----------------
Fails to Meet Expectations 0%
Meets Expectations 75%
Exceeds Expectations 100%
Outstanding 150%
In its discretion, the Committee also may interpolate the percentages in the
above table if it determines that the Corporation's performance merits a
percentage between two ratings. (For example, if the Final Rating were "Meets
Expectations" but the Committee felt that the Corporation's performance was
between this level and "Exceeds Expectations," it could approve Deferred Cash
Incentive payments equal to ninety percent (90%) of the target.) However, in
no event will a Deferred Cash Incentive be paid if the Final Rating is below
"Meets Expectations," and the applicable percentage will not be less than
seventy-five percent (75%). The same percentage of target will be used to
determine the Deferred Cash Incentive payments to all Participants in the
Senior Executive Level of the Plan; provided, however, that no Participant will
receive a Deferred Cash Incentive payment unless his or her individual
performance over the Plan Period is judged by the Chief Executive Officer and
the Committee to be at least satisfactory as of the date of assigning the Final
Rating.
17. Termination of Employment. Except in the event of the
Participant's death, Disability or Retirement, he or she will not receive a
Deferred Cash Incentive if his or her Employment Termination Date occurs prior
to the end of the Plan Period. In the event of a Participant's death,
Disability or Retirement prior to the end of the Plan Period, the Deferred Cash
Incentive payment that he or she would otherwise have received will be prorated
based on a ratio determined by dividing (a) the number of full months elapsed
from the Date of Grant of the Deferred Cash Incentive to the Participant's
Employment Termination Date by (b) the number of full months from July 29, 1993
to the end of the Plan Period. Prorated Deferred Cash Incentive payments
resulting from death, Disability or Retirement will be made at the same time as
other Deferred Cash Incentive payments.
18. Payment of Deferred Cash Incentives. Deferred Cash
Incentives will be paid in cash, less applicable withholding taxes, no later
than forty-five (45) days following the Committee's determination of the Final
Rating. In the event that a Change of Control occurs prior to the
determination of the Final Rating, Participants in the Senior Executive Level
will be paid a portion of the Deferred Cash Incentive, determined as follows:
The Final Rating will be deemed to be "Meets Expectations," or, if the average
of the performance ratings assigned by the Committee for the last two fiscal
quarters for which interim ratings were given was above "Meets Expectations,"
such average performance rating will be deemed to be the Final Rating. If the
Change of Control becomes effective prior to the end of the Plan Period,
Deferred Cash Incentive payments will be prorated based on a ratio determined
by dividing (a) the number of full months elapsed from July 29, 1993 to the
effective date of the Change of Control by (b) the number of full months from
July 29, 1993 to the end of the Plan Period. Prorated Deferred Cash Incentive
payments resulting from a Change of Control will be paid prior to the effective
date of the Change of Control and will be available for the conditional
exercise of Options, as provided in Section 14.
19. Freeze on Salaries and Stock Options. Participants in the
Senior Executive Level will not be granted stock options under any other stock
option plan of the Corporation from July 29, 1993 until the end of the Plan
Period, unless such grants are to reward a promotion involving a meaningful
increase in responsibility. The base salaries of Participants in the Senior
Executive Level will not be increased from July 31, 1993 to the end of the Plan
Period unless (a) an increase is necessary to correct an inequity relative to
the external market, (b) an increase is necessary to adjust for an unexpected,
significant increase in the rate of inflation, or (c) an increase is justified
by a promotion involving a meaningful increase in responsibility. Any stock
option grants or increases in base salary granted under the above exceptions
shall be subject to approval by the Committee.
ARTICLE IV - GENERAL PROVISIONS
20. Effective Date of the Plan. The Plan shall become effective
July 29, 1993, provided that no Option granted under the Plan on or after such
date may be exercised unless and until the Plan has been approved by the
holders of a majority of the shares of Common Stock of the Corporation present
or represented and entitled to vote at a stockholders' meeting.
21. Period, Expiration and Termination of the Plan. The Plan
will expire at the end of the Plan Period, but will remain in effect as to the
determination and payment of Deferred Cash Incentives and as to Options then
outstanding thereunder, which Options will remain in effect in accordance with
their terms until they have been exercised or have expired.
22. Administration. The Plan will be administered by the
Committee. The Committee will at all times be comprised of not less than two
(2) directors. Each member of the Committee will be a "disinterested person"
(as that term is defined in Rule 16b-3(c)(2) promulgated by the Securities and
Exchange Commission pursuant to its authority under the Exchange Act, and any
modification to or replacement for such rule). Subject to the provisions of
the Plan, the Committee will have the authority, in its discretion: (a) to
interpret the Plan; (b) to prescribe, amend, and rescind rules and regulations
relating to the Plan; (c) to determine the Participants to whom, and the time
or times at which, Options and Deferred Cash Incentives will be granted and the
number of shares of Common Stock to be represented by each Option; (d) to
determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, to modify or amend each
Option; (e) to determine performance requirements and performance measures that
determine the amount of Deferred Cash Incentive awards and acceleration of
Option vesting, and to revise such requirements and measures from time to time,
with the consent of a majority of the Participants in the Senior Executive
Level; (f) to make periodic assessments of performance against the aforesaid
requirements and measures and to make a final assessment upon the conclusion of
the Plan Period; (g) to accelerate or defer the exercise date of any Option,
with the consent of the holder thereof; (h) to determine the Participants who
will receive Deferred Cash Incentives and to determine target opportunities for
Deferred Cash Incentives; (i) to make exceptions to the provisions of the Plan
in good faith and for the benefit of the Corporation; and (j) to make all other
determinations deemed necessary or advisable for the administration of the
Plan. The Committee may delegate some or all of its power and authority
hereunder to the Chief Executive Officer of the Corporation or such other
senior members of management as the Committee deems appropriate; provided,
however, that the Committee may not delegate its authority with regard to any
matter or action affecting an officer subject to Section 16 of the Exchange
Act. All decisions, determinations, and interpretations of the Committee
will, unless otherwise determined by the Board, be final and conclusive on
all persons having any interest in the Plan or in any Option or any
Deferred Cash Incentive granted thereunder.
23. Amendment of the Plan. The Board from time to time may make
such changes in and additions to the Plan as it may deem proper and in the best
interests of the Corporation or any Subsidiary, without action on the part of
the stockholders of the Corporation; provided, however, that (subject to the
provisions of Section 13 hereof) no such change or addition by the Board shall
(a) impair, without the consent of the Participant, any Option theretofore
granted to such individual under the Plan or deprive any such individual of any
shares of Common Stock which he may have acquired through or as a result of the
Plan, (b) materially increase the benefits accruing to Participants under the
Plan, (c) materially increase the total number of shares that may be purchased
under the Plan, or (d) materially modify the requirements as to eligibility for
participation in the Plan; and provided further that no amendment shall be
adopted that would result in the Plan losing its status as an exempt plan under
Rule 16b-3.
24. No Guaranteed Employment; Grants Discretionary. Nothing in
this Plan or any modification thereof, and no grant of an Option or Deferred
Cash Incentive, or any term thereof, shall be deemed an agreement or condition
guaranteeing to any Participant any particular term of employment or limiting
the right of the Corporation, its Subsidiaries, or the Participant to terminate
the employment relationship at any time, with or without cause. The granting
of any Option or Deferred Cash Incentive pursuant to this Plan will be entirely
in the discretion of the Committee, and nothing herein contained shall be
construed to give any person any right to participate under this Plan or to
receive any Option or Deferred Cash Incentive under it.
25. Participation Agreements. Options and Deferred Cash
Incentives granted under the Plan will be evidenced by a written participation
agreement between the Corporation and the Participant that describes the terms
and conditions associated with the grant; provided, however, that the Committee
may, in its discretion, establish the terms of Options that are granted to a
large number of employees for the same number of shares and on the same terms
and conditions and communicate these terms to the grantees without the
necessity of individual agreements.
26. Headings of Sections and Paragraphs. Headings of Sections
in this Plan are for convenience of reference only, and shall not be used in
the construction or interpretation of the P1an.
27. Number and Gender. Whenever appropriate, words used herein
in the singular may include the plural, or the plural may be read as the
singular, and the masculine may include the feminine.
28. Binding on Successors. The rights and obligations under the
Plan and any related Options shall inure to the benefit of, and shall be
binding upon the Corporation, its successors and assigns, and the Participants
and their beneficiaries, heirs, successors and assigns.
29. Governing Law. The Plan and any related Options shall be
governed in accordance with the laws of the State of California, regardless of
its, or any other jurisdiction's, choice of law principles.
30. Participants in Foreign Countries. The Committee shall have
the authority to adopt such modifications, procedures, and subplans as may be
necessary or desirable to comply with provisions of the laws of foreign
countries in which the Corporation or its Subsidiaries may operate to assure
the viability of the benefits from Options granted to Participants employed in
such countries and to meet the objectives of the Plan.
APPENDIX A
DEFINITIONS
a. "Board" means the Board of Directors of the Corporation.
b. "Call-to-Action Goals" means the statement of goals and measurements
to be used in assessing performance for purposes of the Plan, to be
approved by the Committee pursuant to Section 4.
c. "Change in Control" means the acquisition by any "person" of
"beneficial ownership", directly or indirectly, of securities of
Syntex Corporation representing more than fifty percent (50%) of the
combined voting power of Syntex Corporation's then outstanding
securities; provided in any event that a reorganization or
reincorporation shall not be considered a "Change in Control" as long
as the persons holding the right to exercise actual control of Syntex
Corporation are substantially the same immediately after the
reorganization or reincorporation as before the reorganization or
reincorporation. "Person" and "beneficial ownership" have special
meanings under Sections 13(d) and 14(d) of the Exchange Act and Rule
13d-3 adopted under the Exchange Act, and those meanings are
incorporated into this Plan.
d. "Code" means United States Internal Revenue Code of 1986, as amended
from time to time, and any successor legislation thereto.
e. "Committee" means the Compensation and Benefits Committee of the
Board.
f. "Common Stock" means common stock of the Corporation of the par value
of $1.00 per share.
g. "Corporation" means Syntex Corporation.
h. "Date of Grant" means the date on which an Option or Deferred Cash
Incentive is granted to a Participant by the Committee.
i. "Deferred Cash Incentive" means the cash payment to be determined in
accordance with Section 16.
j. 'Disability' means a physical or mental condition that prevents or
is expected to prevent a Participant from performing his or her
normal duties of employment with the Corporation and its Subsidiaries
for a period of more than twelve (12) months. If a Participant makes
application for or is otherwise eligible for disability benefits
under the Corporation's long-term disability program and qualifies
for such benefits, the Participant shall be presumed to have a
"Disability" for purposes of the Plan. In the absence of an
applicable Corporation-sponsored long-term disability program, a
Participant shall be presumed to have a "Disability" for purposes of
the Plan if the Committee so determines upon review of one or more
medical opinions acceptable to the Committee.
k. "Employment Termination Date" means the last day for which a
Participant is compensated as an employee under a regular payroll of
the Corporation or one of its Subsidiaries.
l. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
m. "Fair Market Value" means, with respect to Common Stock, the mean
between the high and low selling prices of the Common Stock as
reported on the consolidated transaction reporting system of the
principal national securities exchange upon which the Common Stock is
listed, on the date of grant of a stock option, or, if no sale of the
Common Stock was made on such exchange on such date, then on the next
preceding day on which such a sale was made.
n. "Final Rating" means the rating assigned by the Committee after the
end of the Plan Period pursuant to Section 4.
o. "Option" means a stock option granted pursuant to the Plan.
p. "Participant" means any employee of the Corporation or any of its
Subsidiaries recommended by the Chief Executive Officer of the
Corporation and designated by the Committee to participate in the
Plan.
q. "Plan" means the Syntex Corporation Call-to-Action Incentive Plan as
set forth herein, and as the same may be amended from time to time.
r. "Plan Period" means the period beginning with the effective date of
this Plan and ending on July 31, 1995.
s. "Retirement" means a cessation of employment after attaining the
earliest retirement age specified in a retirement plan to which the
Corporation or any of its Subsidiaries makes contributions and under
which the Participant is eligible for and has elected to receive
retirement benefits commencing upon such cessation of employment.
t. "Senior Executive Level" means the provisions of the Plan applicable
only to a group of senior executives of the Corporation to be
designated by the Committee pursuant to Section 3.
u. "Stock Option Administrator" means the person or organization
designated by the Committee to maintain records of Option grants,
process Option exercises, and handle similar functions as assigned by
the Committee with respect to the stock option portion of the Plan.
v. "Subsidiary" means any of the Corporation's present or future
subsidiaries that is a "subsidiary corporation" as defined in Section
424(f) of the Code.
CTA.PLN
93.0914
SYNTEX CORPORATION
[LOGO]
1 9 9 3 A N N U A L R E P O R T
[PHOTOGRAPH]
FINANCIAL HIGHLIGHTS
Syntex Corporation and Subsidiary Companies
FOR THE YEARS ENDED JULY 31
-----------------------------------------
($ AND SHARES IN MILLIONS, PERCENT
EXCEPT PER-SHARE AMOUNTS) 1993 1992 CHANGE
---- ---- -------
OPERATING RESULTS:
Net sales $2,123.0 $2,057.5 3 %
Restructuring charge $ 320.0 -- N/A
Operating income $ 198.3 $ 518.5 (62)%
Net income $ 287.2 $ 472.3 (39)%
Earnings per common share $ 1.29 $ 2.10 (39)%
------- ------- -----
FINANCIAL CONDITION AND
FINANCIAL RATIOS:
Total assets $2,960.7 $2,809.1 5 %
Shareholders' equity $1,199.4 $1,283.7 (7)%
Return on average shareholders' equity 23.1% 41.3%
Return on total investment 16.0% 26.9%
-------- -------- ---
OTHER DATA:
Research and development expenses $ 404.4 $ 374.4 8 %
Cash dividends paid $ 231.9 $ 214.1 8 %
Cash dividends paid per common share $ 1.04 $ .95 9 %
Average number of shares outstanding 222.4 225.4
Number of employees 10,300 11,700 (12)%
======= ======= =====
CORPORATE PROFILE
Founded nearly 50 years ago, in 1944, Syntex Corporation is an international
healthcare company of 10,300 men and women involved in the research,
development, manufacturing and marketing of human and animal pharmaceutical
products and medical diagnostic systems. At Syntex, we are committed to using
our scientific expertise and manufacturing and marketing capabilities to
provide safe, effective and cost-effective products that enhance the quality of
life for people throughout the world. (o) Syntex's roots reach--quite
literally--to the jungles of southwest Mexico and the root of a native yam
plant. The root was an important raw material in a process Syntex scientists
developed to synthesize, inexpensively, large quantities of steroid hormones.
This led to the development of topical corticosteriods to treat serious skin
diseases and of oral contraceptives. (o) Syntex has grown from a small research
institute dedicated to the discovery and production of steroid hormones into a
leading healthcare company with operations worldwide. We have facilities in
more than 25 countries and sell our products in virtually every country around
the world. (o) Today, Syntex's prescription pharmaceutical products include
medicines to treat arthritis, pain, inflammation and allergies; cardiovascular,
cerebrovascular, gynecological, viral and skin diseases; and oral
contraceptives. We also produce animal health products administered primarily
to food-producing animals. (o) Our medical diagnostics business includes
products for drugs-of-abuse testing, therapeutic-drug monitoring,
infectious-disease diagnosis, and measurement of endocrine concentrations. (o)
The goal of Syntex's research and development program is to provide important
new medicines to treat serious health problems and conditions of an aging
population, including immunological, inflammatory, neurological and
cardiovascular diseases and chronic disease.
TO OUR SHAREHOLDERS, EMPLOYEES AND CUSTOMERS
Syntex Corporation and Subsidiary Companies
Fiscal 1993 was the year we took significant steps to reshape our company to
meet changing conditions, to reduce costs and to prepare ourselves to meet
future challenges.
We expect that these actions will enable us to be more flexible by
managing with fewer employees and fewer facilities; to be more strategic and
selective regarding the compounds we develop; to get products to market more
quickly; and to achieve savings by being more centralized.
Why take these actions now? It's no secret that the pharmaceutical
industry faces major new problems and that Syntex has additional challenges.
Country after country around the world is changing the way it delivers and pays
for healthcare, including pharmaceutical products. Some of these changes aren't
new, but they are accelerating. They mean, quite simply, that we have to
change, too. For example, we voluntarily adopted a policy limiting annualized
price increases for prescription medicines in the United States to the
cumulative, forecasted rate of inflation as measured by the Consumer Price
Index. We plan to continue this policy as long as market conditions remain
stable and the U.S. government continues to encourage investments in research
and development.
At Syntex, we face the expiration of the United States patent for
Naprosyn(R) (naproxen) and Anaprox(R) (naproxen sodium) in December 1993.
Sales of these products in the U.S. accounted for 32 percent of our worldwide
sales in fiscal 1993. Based on what has happened to other branded, prescription
medicines when their patents expired, we can expect a rapid decline in sales of
these products once they face competition from generic forms of naproxen. The
good news is that one of those generic products will be our own--and we have
additional plans to help somewhat reduce the impact of the expected significant
decline in sales of one of our most profitable products (see pages 3 and 4).
We are focusing on key strategies over the next two years to help us
meet these challenges. In fact, we have formalized our strategies in what we
call our "30-Month Call to Action," a plan that we shared with all employees
and to which we are holding ourselves accountable. The plan calls for us to
reduce costs, maximize sales opportunities, advance the research and
development pipeline, and increase our attention to cash flow. We made good
progress
[CHART] [CHART]
Net sales Earnings Per Share
1
in each of these areas in fiscal 1993.
Before further defining these strategies, we'd like to comment on
fiscal 1993 as a whole. Sales reached record levels, up 3 percent from the
prior year, to $2.123 billion. Net income and earnings per share decreased,
however, primarily due to a restructuring charge of $320 million. Net income
was $287.2 million. Earnings per share were $1.29 in fiscal 1993, compared with
$2.10 per share in fiscal 1992. Restructuring charges resulted in an after-tax
reduction of $249 million in net income and $1.12 in earnings per share in
fiscal 1993.
RESTRUCTURING TO REDUCE COSTS AND BE MORE COMPETITIVE
Certainly the most painful of the steps we took in fiscal 1993 was the adoption
of a worldwide restructuring program, designed not only to reduce costs, but
also to make us more efficient, more flexible and more responsive to our
customers' needs. This caused us to lay off a large number of our colleagues,
but we firmly believe that Syntex will be a better company for having done so.
When all the elements of the cost-reduction program are fully implemented in
fiscal 1996, we expect to achieve ongoing savings of approximately $180 million
per year.
To be specific, we reduced our workforce from 11,700 people at the end
of fiscal 1992 to 10,300 employees by the end of fiscal 1993, and we will move
to approximately 9,500 employees by the end of fiscal 1995. This 19-percent
drop in the number of employees will bring us to the size of company we believe
we should be to compete successfully in the new environment. The largest
reduction in employee count will be in the selling, general and administrative
(SG&A) areas, followed by reductions in manufacturing and, to a lesser extent,
in research. We are confident that we can achieve these carefully-defined
employee levels without jeopardizing our ability to successfully and profitably
discover, develop, manufacture and market innovative prescription drugs and
medical diagnostics systems. The severance costs necessary to reach the
9,500-employee target were included in the restructuring charges taken in
fiscal 1993.
Our actions to date are reflected in reduced SG&A expenses which
declined to 35.8 percent of sales in fiscal 1993 from 37.5 percent of sales in
fiscal 1992. Actual SG&A spending in fiscal 1993 was $761.0 million, 1 percent
lower than in the prior year, despite inflation of approximately 3 percent in
the United States. We expect that SG&A expenses will be even lower in fiscal
1994.
We have targeted other areas of potential savings. For example, we
expect to increase pharmaceutical manufacturing plant utilization by as much as
75 percent by reducing excess plant capacity, and to reduce the amount of
inventories we carry by 50 percent or more by implementing a global-sourcing
process.
Over the next two years, we will close pharmaceutical manufacturing
plants in France, the U.K. and the United States. We are consolidating
production from those facilities into existing plants in Spain, Canada, Mexico,
Puerto Rico and South Korea. In addition, we are
WORLDWIDE WORKFORCE SELLING, GENERAL & ADMINISTRATIVE SPENDING
[GRAPH] [GRAPH]
1992: 11,700 First Quarter $203.1 million
1993: 10,300 Second Quarter $187.6 million
Third Quarter $189.9 million
1995: 9,500 (target)
Fourth Quarter $180.4 million
2
closing two relatively small research facilities in France and Canada.
These restructuring steps weren't without a price. The restructuring
charge in the first quarter of fiscal 1993 caused us to report the first
quarterly loss in more than 100 consecutive quarters. Although securities
analysts generally applauded our decisions, investors continued to worry about
the changing healthcare environment and the potential impact of the naproxen
patent expiration in the United states, and our stock price declined further.
MAXIMIZE SALES OPPORTUNITIES
We are making progress in implementing our four-part U.S. patent expiration
strategy for Naprosyn. The strategy calls for us to continue to market the
Naprosyn brand prescription product to treat the signs and symptoms of
arthritis; to market generic prescription-strength naproxen; to sell bulk
naproxen to other generic manufacturers; and to market an over-the-counter
(OTC), nonprescription formulation of naproxen sodium, once we have received
clearance to market the product.
Marketing branded, prescription Naprosyn and Anaprox remains an
important part of our strategy. We introduced a new, proprietary
formulation--enteric-coated Naprosyn--in Canada in fiscal 1993. As approved in
Canada, this formulation has a special coating allowing absorption in the
intestines thus reducing irritation in the stomach. We are continuing to
discuss a New Drug Application (NDA) for enteric-coated Naprosyn with the FDA.
In addition, we licensed a once-daily formulation of naproxen from
Elan Corporation plc, for marketing in a number of countries including the U.K.
and Sweden where the product has already been introduced. In early October,
Syntex exercised its right to terminate its license to market the Elan
formulation in the United States.
We are also entering the generic market with our own generic naproxen
and naproxen sodium tablets, which have been approved for
[PHOTOGRAPH]
(o) Employees discuss company and industry issues
with members of Syntex senior management--including
Paul Freiman (standing, left) and Jim Wilson
(right)--at informal, open meetings held every week.
Senior management also makes formal presentations to
employees on the state of the business each quarter.
3
[PHOTOGRAPH]
(o) Syntex's worldwide naproxen product line includes a
broad variety of formulations and strengths. Shown
here are Naprosyn and Anaprox as marketed in the U.S.
Also shown are naproxen generic, currently being
introduced in the U.S. by Hamilton Pharma, Inc., and
the enteric-coated formulation, marketed as Naprosyn
E in Canada and Naprosyn EC in the U.K. Syntex also
markets Naprosyn S/R, a once-daily formulation, in
the U.K. In Australia, the company markets
Naprogesic(R), an over-the-counter formulation of
naproxen sodium.
marketing for use under a physician's prescription. A new Syntex subsidiary,
Hamilton Pharma, Inc., is marketing our generic naproxen, assisted by HMS Sales
and Marketing, Inc., an independent company which is an experienced distributor
of products of this type. In addition, we are selling bulk naproxen to other
makers of generic prescription drugs.
The FDA is currently reviewing our NDA for a nonprescription
pain-reliever containing naproxen in a fast-acting formulation that optimizes
absorption into the body. At a meeting in September 1993, the FDA updated its
Advisory Committees on steps that we have taken to address issues voiced by
committee members when they considered the NDA for the OTC product in June; at
that time they voted against recommending approval. The NDA contains data on
more than 7,000 patients in 34 clinical trials. If the product is cleared for
marketing, we will introduce it nationwide with The Procter & Gamble Company.
Due to heavy initial investments required to introduce this product, we do not
expect Syntex to realize profits from this venture for the first few years.
However, we believe that a nonprescription formulation of naproxen has the
potential to contribute profitably to Syntex for many years into the future.
In fiscal 1993, worldwide sales of naproxen and naproxen sodium
declined 6 percent to $927.5 million, from $986.0 million in fiscal 1992,
primarily due to competition from new products in the United States.
TORADOL Toradol(R) (ketorolac tromethamine), a nonopioid analgesic prescribed
for the short-term management of pain, is our second largest-selling product
line worldwide. Total Toradol sales increased 66 percent to $322.4 million in
fiscal 1993. United States sales of Toradol were $259.4 million; non-United
States sales were $63.0 million in fiscal 1993.
WORLDWIDE SALES OF TORADOL
[GRAPH]
1990: $ 7.9 million
1991: $ 73.8 million
1992: $194.7 million
1993: $322.4 million
4
Toradol is available in various countries as oral tablets, intramuscular
injections (IM) and intravenous (IV) formulations. It is the only injectable
nonsteroidal anti-inflammatory drug available in the United States.
Over the course of the past year, regulatory authorities in some
countries have expressed concerns about the safe use of Toradol. Based on their
review of data, some countries have revised recommended prescribing
instructions. Germany has suspended our license to market the product, pending
final review of results of post-marketing epidemiological study expected in
December. Sales of the product in Germany were $3 million in the first nine
months of fiscal 1993.
We have kept the FDA and regulatory authorities worldwide fully
informed of data available to us associated with the use of Toradol. This
includes having provided them with interim results from ongoing epidemiological
studies.
Based on available data, we believe that when Toradol is used
according to prescribing instructions, it provides an important clinical
benefit to physicians and patients.
CYTOVENE, TICLID Cytovene(R) (ganciclovir sodium) sales increased 26 percent
in fiscal 1993. Cytovene is prescribed to treat cytomegalovirus (CMV)
infections in patients with suppressed immune systems, including people with
AIDS and patients whose immune systems are purposely suppressed due to organ
transplantations. If left untreated, CMV infections can lead to blindness in
AIDS patients. Currently, Cytovene is administered as an intravenous infusion;
we are also studying an oral formulation (see pages 7 and 8).
Sales of Ticlid(R) (ticlopidine hydrochloride) in fiscal 1993 were
$45.3 million--more than three times higher than a year ago. Our marketing
efforts are primarily directed toward neurologists who treat patients at risk
of an initial or subsequent stroke and are therefore appropriate candidates for
Ticlid.
Unfortunately, fiscal 1993 sales of our oral contraceptives declined
due to competition from both new and generic products while sales of
dermatological products declined due to competition from generic products.
Sales of Cardene(R) (nicardipine hydrochloride) and Synarel(R) (nafarelin
acetate) also declined due to competition from other products. For detailed
product sales data, see page 12.
DIAGNOSTICS Sales of Syva Company, our medical diagnostics division, were
$211.9 million in fiscal 1993, about the same as the division's record sales a
year earlier. Revenues increased
Cytovene
[PHOTOGRAPH]
Fiscal 1993 sales of Cytovene, administered as an intravenous
infusion, were $85.5 million. Syntex expects to file an NDA in
calendar 1994 for approval to market an oral formulation.
Ticlid
[PHOTOGRAPH]
Clinical studies in patients who had experienced a stroke
precursor event have shown that Ticlid reduced the risk of an
initial stroke by 48 percent more than aspirin during the
first year following the precursor event.
5
[PHOTOGRAPH]
(o) Syntex decides which compounds to advance in its R&D pipeline according
to an innovative prioritization process explained by Dr. Alan Dunton
(center) and Lee Rauch.
in Europe in fiscal 1993; however U.S. sales declined due to new competition, a
decline in pre-employment drugs-of-abuse testing resulting from a lack of
hiring in the U.S., and maturation of the market for tests to measure the
presence of therapeutic drugs. In fiscal 1993, Syva introduced two new
highly-automated systems: the Vista(R) analyzer with thyroid function tests
and the MicroTrak(R) XL, the first system to fully automate hepatitis and AIDS
testing.
ANIMAL HEALTH Although sales in our animal health division increased just 2
percent in fiscal 1993, we see growth opportunities ahead for two exciting new
products. We have a New Animal Drug Application (NADA) under review at the FDA
for Cattlyst(R) (laidlomycin propionate), a feed additive that improves both
growth rate and feed conversion in beef cattle. We expect to submit an NADA for
another cattle growth-promoting product, Synovex(R) PLUS(TM), before the
close of calendar 1993.
HUMAN PHARMACEUTICAL COMPOUNDS IN CLINICAL DEVELOPMENT
COMPOUND RS 25259 RS 15385
CLASS 5HT-3 antagonist. Alpha-2 adrenoceptor
antagonist.
New Drug Applications POSSIBLE Preventions and treatment Male erectile dysfunction.
have been submitted INDICATIONS of nausea and vomiting in
to the U.S. FDA for com- cancer chemotherapy and
pounds including intra- post-operative patients.
venous Toradol and an
aqueous formulation of
Nasalide(R) (flunisolide).
PATIENT NEEDS/ Approximately 7 million An estimated 20 million
POTENTIAL MARKET chemotherapy treatments men in U.S., Canada
per year worldwide; an and Europe.
estimated 15 million sur-
geries performed each
year may result in emesis.
POSSIBLE BENEFITS May completely control No effective orally-admin-
nausea and vomiting with istered therapy currently
a single dose. available; therapies avail-
able include vacuum and
constriction devices, direct
penile injection and
surgical implantation.
Phase II: Safety, tolerance,
initial efficacy and dose-
ranging studies in patients.
Phase III: Pivotal STATUS In Phase II clinical studies. In Phase II/III clinical
safety and efficacy studies.
studies in large patient
populations.
6
ADVANCING THE R&D PIPELINE
Our highest priority is to discover and develop innovative, cost-effective
prescription medicines and to get them through clinical studies and into key
markets in half the time it took us in past years. Even though we are reducing
non-research spending company-wide, our investment to support our R&D goals
will be maintained at approximately $400 million annually, about the same level
as in fiscal 1993. This is our most important investment in Syntex's future.
Our focus is on the therapeutic areas of immunology, inflammation and pain,
cardiology and neurology.
To help us better meet the needs of our customers and to focus our
resources on the highest quality potential products from among our many
compounds, we established new criteria in fiscal 1993 for evaluating and
prioritizing drugs in development. We now rate each compound on its ability to
meet serious and unmet medical needs,
R&D SPENDING
[GRAPH]
1989: $245.2 million
1990: $270.8 million
1991: $315.6 million
1992: $374.4 million
1993: $404.4 million
[PHOTOGRAPH]
Crystals of a drug discovery protein target.
COMPOUND RANOLAZINE CILIARY NEUROTROPHIC FACTOR MYCOPHENOLATE MOFETIL
(CNTF)*
CLASS Metabolic modulator. Protein-based nerve Purine biosynthesis
repair factor. inhibitor.
POSSIBLE Angina, with possible Amyotrophic lateral Prevention of organ
INDICATIONS special utility in patients sclerosis (Lou Gehrig's transplant
for whom other therapies disease). rejection.
are not effective or
appropriate; severe lower
leg pain (intermittent
claudication) experienced
by patients with peripheral
arterial disease when walking.
PATIENT Approximately 1.4 million More than 50,000 patients Approximately 30,000 organ
NEEDS/ angina patients in U.S. and in U.S., Canada, Western transplants are performed
POTENTIAL Western Europe are not Europe and Japan. worldwide each year; 50
MARKET effectively treated by percent of kidney
current therapies; transplant patients
approximately 5 million experience acute rejection
people suffer from on current therapy.
intermittent claudication
in U.S. and Western Europe.
POSSIBLE In angina patients, may May reduce the rate of May reduce need for use of
BENEFITS delay or eliminate need for progression of the disease. other, more-toxic anti-
costly surgical procedures rejection compounds; may
and may have additive reduce the incidence of
benefit when used with acute rejection episodes and
currently-available reverse ongoing rejection of
therapies; in patients with transplanted kidneys, livers
intermittent claudication, and hearts; may prevent
no effective treatment is costly treatment with other
currently available. medications and/or
retransplantation of another
organ.
STATUS In Phase III clinical In Phase II/III clinical In Phase III clinical
studies. studies. studies. NDA submission for
prevention of kidney
*Developed through joint transplant rejection planned
venture with Synergen, Inc. in calendar 1994.
7
COMPOUND GANCICLOVIR ORAL
CLASS Anti-viral; nucleoside
analog.
POSSIBLE Maintenance treatment of
INDICATIONS cytomegalovirus (CMV)
retinitis after initial
induction treatment with
intravenous (IV) ganciclovir
and the prevention of CMV
disease in AIDS patients.
PATIENT The estimated AIDS patient
NEEDS/ population in the U.S. and
POTENTIAL Western Europe is 120,000;
MARKET 25 to 30 percent of AIDS
patients develop CMV
retinitis. The risk of
developing the disease
increases as patients
become more
immunocompromised.
POSSIBLE Oral form is more convenient
BENEFITS to administer than IV; oral
dosing eliminates costs and
reduces risk of infection
associated with
administration by IV.
STATUS In Phase III clinical
studies. NDA submission for
treatment of CMV disease
planned in calendar 1994.
The preceding discussion of Syntex's research and development pipeline
does not include all compounds under study, nor does it address
side-effects or all possible indications. Syntex cannot be certain
that the studies will be successful nor that the compounds mentioned
will be submited for regulatory approval or approved for marketing.
[PHOTOGRAPH]
(o) In discovery research, Dr. Michelle Browner utilizes X-ray crystallography
technology to examine the structure of a target protein molecule.
its potential impact on earnings and its strategic importance to the company.
We weigh the compound's economic potential versus clinical, regulatory and
technical feasibility. After applying these rigorous criteria, we have greater
confidence that each compound we select to develop has a high likelihood of
regulatory approval and marketing success.
We are very enthusiastic about our two most advanced compounds in
Phase III clinical studies--mycophenolate mofetil and an oral formulation of
Cytovene. They epitomize our commitment to develop cost-effective prescription
drugs that reduce overall healthcare costs when measured against the cost of
alternative treatments.
Myophenolate mofetil is a highly-selective immune system suppressant,
which we are studying in the U.S., Europe and Asia for the prevention of both
acute and chronic rejection of transplanted organs. As part of our clinical
studies, we are gathering data to determine the extent to which mycophenolate
mofetil may reduce the incidence of rejection episodes that require
hospitalization and expensive drug therapies, and the extent to which it may
reduce the need for retransplantation. These events are not only
life-threatening, but are extremely costly. We also intend to study
mycophenolate mofetil for its safety, effectiveness and cost-effectiveness in
treating asthma and graft-versus-host disease (which may occur when
transplanted tissues or organs mount an immune response against cells in the
host's body) and in preventing coronary artery restenosis.
The oral form of Cytovene, in Phase III trials, may add a new
dimension in treating CMV disease. Current therapies require intravenous
administration, and thus require patients to have costly and inconvenient daily
infusions of one hour or more. We are also studying the oral formulation of
Cytovene for the prevention
8
of CMV disease in AIDS patients.
We plan to submit NDAs to the FDA in calendar 1994 for mycophenolate
mofetil for kidney transplantation and for the oral formulation of Cytovene.
We have four additional, potentially-exciting new compounds in Phase II
and III clinical development. The first, ranolazine, has a unique mechanism of
action which allows the same amount of energy to be produced when less oxygen
is available to muscle cells, as is the case in conditions such as angina and
peripheral arterial disease. We are studying its utility in both. Another
compound, RS 15385, is an orally-administered compound under study to determine
its effectiveness in treating male erectile dysfunction (impotence). If
effective, it would compete with currently-available therapies which include
direct penile injection or surgical implantation. In addition, we are studying
RS 25259 for its safety and ability to prevent nausea and vomiting (emesis) in
cancer chemotherapy patients and post-operative patients. Finally, through our
neurosciences joint venture with Synergen, Inc., we are in Phase II/III
clinical studies with ciliary neurotrophic factor as a treatment for
amyotrophic lateral sclerosis (Lou Gehrig's disease).
Some of our most interesting preclinical work includes studies on
compounds that may have utility in treating asthma, Alzheimer's disease,
congestive heart failure and osteoporosis.
In addition to these compounds, we're proud of the comprehensive and
sophisticated discovery research capabilities that exist within Syntex. Our
scientists draw from our extensive screening libraries of synthesized
compounds, natural compounds and fermentation broths sourced from throughout
the world, including from the People's Republic of China. We have internal
biotechnical capabilities for cloning and expressing target enzymes and
receptors; and we use technologies involving computer-aided drug design, X-ray
crystallography and multidimensional nuclear magnetic resonance that enable
rational drug design.
As we do more and more cutting-edge research, we find a greater need to
collaborate with other firms to find adjuncts to our own capabilities. We
recently entered into two alliances with leading biotechnology firms--Agouron
Pharmaceuticals, Inc., and Chiron Corporation--to discover, develop and market
novel drugs for the treatment of arthritic and other inflammatory diseases as
well as invasive malignant tumors.
MANAGING CASH FLOW
In this era of healthcare reform, pharmaceutical companies are challenged to
manage cash flow more aggressively. We are doing just that. We reduced capital
spending in fiscal 1993 to $197.9 million. We expect capital spending in fiscal
1994 to be approximately $200 million. We continue to have tight controls on
operating expenses throughout the corporation.
As we manage cash flow, we are mindful of the importance of the
dividend. Syntex has paid dividends for 27 consecutive years. Based
[GRAPH]
CAPITAL
EXPENDITURES
1989: $143.1 million
1990: $144.0 million
1991: $247.7 million
1992: $340.8 million
1993: $197.9 million
[GRAPH]
ANNUAL DIVIDEND RATE
1989: $ .75 per common share
1990: $ .80 per common share
1991: $ .92 per common share
1992: $1.04 per common share
1993: $1.04 per common share
9
on our assessment of the company's financial condition and future outlook,
including anticipated revenues, we are not currently contemplating any changes
in the dividend on Syntex common stock which is $.26 per-share, per-quarter, or
$1.04 on an annualized basis.
BOARD AND MANAGEMENT CHANGES
The Board lost a distinguished member in the past year. With great fondness, we
remember Jerome Farmer, a director for 16 years, who died in the summer. We
will miss his perspective, his vision and his deep commitment to Syntex.
We recently welcomed Robert S. Miller, Jr., formerly vice chairman and
chief financial officer of Chrysler Corporation, to our Board of Directors.
We are pleased that world-renowned scientist J. Michael Bishop, M.D.,
joined our Board Committee on Science, bringing expertise in molecular and cell
biology and biochemistry. A professor at the University of California, San
Francisco, Dr. Bishop was honored with the Nobel Prize in Physiology and
Medicine in 1989.
We appointed Melvin D. Booth as president of Syntex Laboratories,
Inc., our U.S. human pharmaceutical business, succeeding Virgil Thompson, who
retired at the close of fiscal 1993. In addition, we named Darlene J. Friedman
as vice president, Human Resources, following the retirement of Leo L. Contois.
William M. Gomez, vice president of Business Development, and Hans. A. Wolf,
formerly chief administrative officer, also retired in the past fiscal year.
Hans remains a member of the Board of Directors, serving a term that expires
in December.
As we enter Syntex's 50th year, we are working aggressively to
position the company to meet the challenges ahead. We are becoming a
more-efficient, better-focused company, and one with the flexibility to
capitalize on future opportunities on behalf of you, our shareholders,
employees and customers.
50TH YEAR
[LOGO]
[PHOTOGRAPH]
Sincerely,
Paul E. Freiman
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
October 11, 1993
[PHOTOGRAPH]
James N. Wilson
PRESIDENT AND
CHIEF OPERATING OFFICER
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Syntex Corpration and Subsidiary Companies
SUMMARY
Earnings per share for Syntex Corporation and its subsidiary companies (the
company) decreased 39 percent to $1.29 in fiscal 1993, compared with an
11-percent increase to $2.10 in the previous fiscal year. Restructuring charges
in fiscal 1993 reduced earnings per share by $1.12.
RESULTS OF OPERATIONS
SALES
Sales in fiscal 1993 increased 3 percent to $2.1 billion. This increase was
primarily due to an increase in worldwide sales of Toradol and Ticlid partially
offset by a decrease in sales of Naprosyn and Anaprox in the United States.
Factors leading to the 15-percent increase in sales in fiscal 1992 over 1991
were increased worldwide sales of Toradol, volume growth of Naprosyn and Anaprox
in the United States and higher worldwide sales of three more-recently
introduced products: Cytovene, Ticlid and Cardene.
SALES BY BUSINESS SEGMENT
FISCAL FISCAL FISCAL
($ IN MILLIONS) 1993 1992 1991
------ ------ ------
Pharmaceuticals $1,911.1 $1,845.6 $1,598.6
Diagnostics 211.9 211.9 195.4
------- ------- -------
Total $2,123.0 $2,057.5 $1,794.0
======= ======= =======
PHARMACEUTICALS
The company's pharmaceuticals segment includes human pharmaceutical products
that are primarily prescription drugs. Also included are animal health
products that are primarily growth-promoting agents for food-producing animals.
PHARMACEUTICAL SALES
FISCAL FISCAL FISCAL
($ IN MILLIONS) 1993 1992 1991
------ ------ ------
U.S. sales $1,334.3 $1,292.2 $1,085.2
Non-U.S. sales 576.8 553.4 513.4
------- ------- -------
Total $1,911.1 $1,845.6 $1,598.6
======= ======= =======
Pharmaceutical sales increased 4 percent in fiscal 1993, largely due to higher
worldwide sales of Toradol and Ticlid partially offset by decreased sales of
Naprosyn, Anaprox and dermatological products in the United States and oral
contraceptives worldwide.
Worldwide sales of Toradol increased 66 percent to $322.4 million in
fiscal 1993. Toradol IM, an intramuscular, nonopioid injectable analgesic for
the short-term management of pain, is now marketed in 30 countries. Toradol
oral tablets for limited-duration use in managing pain were introduced in the
United States in March 1992 and are marketed in 12 additional countries. (See
pages 4 and 5 for a further discussion of Toradol.) Ticlid sales more than
tripled during fiscal 1993 to $45.3 million. Ticlid is prescribed to reduce the
risk of stroke and is marketed in four countries by the company. United States
sales of Naprosyn, Anaprox and oral contraceptives decreased primarily due to
competition from new products and generic products during fiscal 1993.
Dermatological product sales in the United States also decreased during fiscal
1993 due to competition from generic products.
In fiscal 1992, worldwide pharmaceutical sales increased 15 percent
largely due to higher sales of newer human pharmaceutical products and
increased sales of Naprosyn and Anaprox in the United States.
NAPROXEN/NAPROXEN SODIUM SALES
FISCAL FISCAL FISCAL
($ IN MILLIONS) 1993 1992 1991
------ ------ ------
U.S. sales $680.8 $744.8 $652.5
Non-U.S. sales 246.7 241.2 243.8
----- ----- -----
Total $927.5 $986.0 $896.3
===== ===== =====
Sales of naproxen and naproxen sodium in the United States decreased 9 percent
in fiscal 1993 primarily due to competition from new products and generic
products, and higher Medicaid rebates. The share of new prescriptions for
Naprosyn in the United States for nonsteroidal anti-inflammatory drugs to treat
the signs and symptoms of arthritis was 17.2 percent for the quarter ended July
1993, compared with 18.0 percent in the year-earlier period, according to
independent audit data. Sales outside the United States increased due to volume
growth partially offset by the negative impact of currency fluctuations.
Naproxen and naproxen sodium sales increased 10 percent in fiscal 1992
compared with fiscal 1991, primarily due to volume growth in the United States.
Anaprox showed strong sales growth due to higher sales of the double-strength,
550-milligram tablet. The share of new prescriptions for Naprosyn in the United
States for nonsteroidal anti-inflammatory drugs to treat the signs and symptoms
of arthritis was 18.0 percent for the quarter ended July 1992, compared with
19.3 percent in the year-earlier period, according to independent audit data.
This decline in market share reflected the launch of two new competing products.
11
WORLDWIDE PRODUCT SALES
FISCAL FISCAL PERCENT FISCAL PERCENT
($ IN MILLIONS) 1993 1992 CHANGE 1991 CHANGE
1993 VS. 1992 1992 VS. 1991
------ ------ ------------- ------ -------------
PHARMACEUTICALS:
Pain and Inflammation:
Naprosyn/Anaprox (naproxen/naproxen sodium)
U.S. sales $ 680.8 $ 744.8 (9) $ 652.5 14
Non-U.S. sales 246.7 241.2 2 243.8 (1)
------- ------- ------- ------- --------
Total Naprosyn/Anaprox 927.5 986.0 (6) 896.3 10
------- ------- ------- ------- --------
Toradol (ketorolac tromethamine)
U.S. sales:
Oral 131.0 41.7 100+ - 100+
Intramuscular 128.4 104.5 23 57.0 83
Non-U.S. sales 63.0 48.5 30 16.8 100+
------- ------ ------- ------- -------
Total Toradol 322.4 194.7 66 73.8 100+
------- ------ ------- ------- -------
Total Pain and Inflammation 1,249.9 1,180.7 6 970.1 22
------- ------- ------- ------- -------
Reproductive and Endocrinology:
Oral contraceptives 83.2 102.3 (19) 102.8 -
Synarel (nafarelin acetate) 22.1 26.3 (16) 32.4 (19)
Other 11.4 12.3 (7) 13.3 (8)
------- ------- ------- ------- --------
Total Reproductive and Endocrinology 116.7 140.9 (17) 148.5 (5)
------- ------- ------- ------- --------
Cardio- and Cerebrovascular:
Cardene (nicardipine hydrochloride) 77.9 91.5 (15) 78.6 16
Ticlid (ticlopidine hydrochloride) 45.3 14.2 100+ .3 100+
------- ------- ------- ------- -------
Total Cardio- and Cerebrovascular 123.2 105.7 17 78.9 34
------- ------- ------- ------- --------
Dermatological 87.4 106.2 (18) 110.8 (4)
Cytovene (ganciclovir sodium) 85.5 67.9 26 52.9 28
Other Human Pharmaceuticals 175.3 172.6 2 163.7 5
Animal Health 73.1 71.6 2 73.7 (3)
------- ------- ------- ------- --------
Total Pharmaceuticals 1,911.1 1,845.6 4 1,598.6 15
------- ------- ------- ------- --------
DIAGNOSTICS 211.9 211.9 -- 195.4 8
------- ------- ------- ------- --------
Total $2,123.0 $2,057.5 3 $1,794.0 15
======== ======== ======= ======== ========
DIAGNOSTICS
Sales of the company's diagnostics products were $211.9 million in fiscal 1993,
flat compared to the prior year. Diagnostic product sales growth continued to be
restrained by a decline in pre-employment drugs-of-abuse testing related to the
recession in the United States. The company introduced the Syva Vista
immunoassay system and the Micro Trak XL automated system for infectious-disease
diagnostics in fiscal 1993.
Diagnostic product sales in fiscal 1992 inreased 8 percent to $211.9
million versus fiscal 1991 sales.
OPERATING COSTS AND EXPENSES
FISCAL FISCAL FISCAL
($ IN MILLIONS) 1993 1992 1991
- --------------- ------ ------ ------
Cost of goods sold $ 439.3 $ 393.8 $ 341.4
% of net sales 20.7% 19.1% 19.0%
SG&A $ 761.0 $ 770.8 $ 650.1
% of net sales 35.8% 37.5% 36.2%
Research and development $ 404.4 $ 374.4 $ 315.6
% of net sales 19.1% 18.2% 17.6%
Restructuring charge $ 320.0 -- --
% of net sales 15.1% -- --
------- ------- -------
Total operating costs
and expenses $1,924.7 $1,539.0 $1,307.1
% of net sales 90.7% 74.8% 72.8%
======== ======== ========
12
OPERATING COSTS AND EXPENSES (CONTINUED)
The company's gross margin percentage was 79.3 percent in fiscal 1993, compared
with 80.9 and 81.0 percent in fiscal 1992 and 1991, respectively. The decrease
in the fiscal 1993 gross margin percentage was largely due to certain inventory
write-offs and changes in the product and geographic mix.
Selling, general and administrative (SG&A) expenses decreased 1 percent
in fiscal 1993 primarily due to the implementation of the company's
cost-reduction program. During fiscal 1992, SG&A expenses increased mainly due
to higher marketing expenses to introduce and promote new products in the
United States.
Research and development expenditures increased 8 percent to a record
$404.4 million in fiscal 1993, following a 19-percent increase in the previous
year. Strong research and development expenditures reflect a continuing
commitment to discover and develop innovative and cost-effective
pharmaceutical and diagnostic products.
Included in operating expenses for fiscal 1993 is a restructuring
charge of $320.0 million. This charge represents estimated costs resulting from
a decision to completely or partially close several of the company's chemical
and pharmaceutical manufacturing plants and two small research facilities as
well as estimated severance costs related to a reduction in the company's
workforce. The restructuring charge, net of the related tax benefits, resulted
in a reduction of $249.0 million in net income ($1.12 per share) in fiscal 1993.
When the cost-reduction program is fully implemented in fiscal 1996, the
company expects to save approximately $180.0 million in annual operating
expenses.
OPERATING INCOME
Operating income in fiscal 1993 was $198.3 million, a 62-percent decrease from
fiscal 1992. Restructuring charges resulted in a reduction of $320.0 million
in operating income in fiscal 1993. In fiscal 1992, operating income was
$518.5 million, representing a 6-percent increase from fiscal 1991.
Changes in currency exchange rates did not have a significant impact on
operating income in fiscal 1993, 1992 or 1991.
OPERATING INCOME BY BUSINESS SEGMENT*
FISCAL FISCAL FISCAL
1993 1992 1991
------ ------ ------
Pharmaceuticals $293.0 $559.7 $518.0
Diagnostics 13.0 16.3 26.5
====== ====== ======
* Before corporate expenses and nonoperating items; after applicable
restructuring charge.
Pharmaceutical operating income decreased 48 percent to $293.0 million in
fiscal 1993, due to the company's restructuring charge. This follows an
8-percent increase in operating income in fiscal 1992, resulting from higher
sales partially offset by increased marketing expenses to introduce and promote
newer products in the United States. The diagnostics business segment operating
income decreased 20 percent to $13.0 million in fiscal 1993. This decrease is
mainly due to restructuring charges during fiscal 1993. During fiscal 1992,
diagnostic operating income decreased 38 percent to $16.3 million from fiscal
1991. This decrease reflected higher research spending relating to the
development of assay products for use on the Syva Vista immunoassay system and
increased marketing expense for the MicroTrak XL system.
NONOPERATING ITEMS
Net interest income was $12.8 million in fiscal 1993, compared with $33.3
million in the previous fiscal year. This decrease reflects a reduction in the
company's net cash position, lower interest rates and the reversal during
fiscal 1992 of previously-accrued interest expense of $8.7 million arising from
the resolution of tax issues.
Nonoperating expense in fiscal 1993 included a provision of $44.1
million related to environmental matters, compared with provisions of $11.5
million and $32.0 million in fiscal 1992 and 1991, respectively. Nonoperating
items in fiscal 1993 also included charges of $10.0 million for reserves
related to other contingencies, $8.4 million for write-downs and losses
associated with certain investments and $7.7 million related to fixed asset
write-offs.
Additional information concerning environmental matters is contained
in Note 13 to the Consolidated Financial Statements, "Contingencies" (pages 26
and 27).
INCOME TAXES
The company recorded a benefit of $155.4 million for taxes on income during
fiscal 1993. This resulted principally from tax benefits of $71.0 million, of
which $63.1 million is included in deferred taxes, derived from the
restructuring charge and a one-time benefit of $102.5 million due to the
reduction of certain tax reserves associated with changes in accounting
estimates based on a study by an outside advisor which supports the company's
intercompany pricing.
Excluding the effect of the tax benefits referred to above, the
company's effective income tax rate was 4 percent in fiscal 1993, compared with
13 and 11 percent in fiscal 1992 and 1991, respectively. The lower tax rate for
fiscal 1993 is due to a reduction of income in the United States and other tax
paying jurisdictions.
13
FINANCIAL CONDITION
At July 31, 1993, the company had $609.6 million in cash and cash equivalents
and short-term investments which provide it with ample capacity to
satisfy its cash requirements.
Capital expenditures in fiscal 1993 totaled $197.9 million, compared
with $340.8 million in fiscal 1992. The company plans to fund capital
spending of approximately $200.0 million in fiscal 1994 through cash generated
by operations and borrowings. The major capital projects for fiscal 1994
include additions and modifications to production facilities in Mexico, Puerto
Rico, Canada and Spain relating to the company's decision to consolidate its
chemical and pharmaceutical manufacturing plants.
Cash dividends paid on common shares amounted to $231.9 million in
fiscal 1993, an increase of 8 percent over fiscal 1992. The current dividend
rate paid on an annualized basis is $1.04 per share.
Under authorization by the Board of Directors, the company repurchased
5.1 million shares for $124.7 million during fiscal 1993; those shares are
included in treasury stock. The share repurchase program is currently inactive
and had no material effect on earnings per share for fiscal 1993.
Management believes the company has sufficient borrowing capacity to
meet its needs. The company has an A1+ and P1 rating for its commercial paper
and an AA- and Aa3 bond rating from Standard and Poor's and Moody's,
respectively. At July 31, 1993, commercial paper borrowings of $74.9 million
were outstanding. The company has unused bank lines of credit totaling $449.4
million, of which $380.0 million is available for the support of certain
commercial paper borrowings. During fiscal 1993, the company issued $415.0
million of medium-term notes. These notes are subject to interest rate swaps
which effectively convert the notes to floating-rate debt. The company's ratio
of earnings to fixed charges for fiscal 1993 was 5.3.
PROSPECTIVE INFORMATION
The company has a series of patents on naproxen and naproxen sodium. The
principal United States patent that substantially protects these products will
expire on December 21, 1993. United States sales of these products in fiscal
1993, 1992 and 1991 were $680.8 million, $744.8 million and $652.5 million,
respectively. After patent expiration, these products will face generic
competition and, as a result, sales and profitability of Naprosyn and Anaprox
in the United States are expected to decrease substantially.
Syntex has submitted an NDA for an over-the-counter formulation of
naproxen sodium in the United States. In conjunction with The Procter & Gamble
Company, Syntex plans to introduce this nonprescription, fast-acting
formulation of naproxen after receipt of marketing clearance. The company is
currently discussing labeling for the product with the FDA. Given the heavy
initial marketing investments related to the introduction of the OTC product,
Syntex does not expect to realize profits form this venture for the first few
years. Nevertheless, the company believes that this OTC product will have the
potential to generate profits for years into the future.
Syntex has entered into agreements with companies that manufacture
generic drugs to supply them with bulk naproxen after the patent expiration, as
it is currently doing outside the United States. The company is also marketing
its own generic naproxen and naproxen sodium tablets through Hamilton Pharma,
Inc., a new Syntex subsidiary, assisted by HMS Sales and Marketing, Inc., an
independent distributor of similar products. These products will be shipped to
customers starting in October prior to the patent expiration. The company also
intends to continue marketing its current prescription-strength formulations of
Naprosyn and Anaprox. To support anticipated production requirements, the
company has increased its manufacturing capacity for bulk naproxen for the
United States over the past three years. The anticipated sales of the OTC
product, the generic prescription-strength products and bulk naproxen are
expected to generate substantially lower gross margins than the branded,
prescription-strength products.
ACCOUNTING CHANGES
Effective August 1, 1992, the company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which requires the asset and
liability method of accounting for income taxes. The company recorded a benefit
of $63.7 million in fiscal 1993 as the cumulative effect on prior years of the
accounting change, principally relating to tax credits which were not recorded
under the prior accounting standard.
Effective August 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires accrual of postretirement
benefits during the years of employee service. In prior years the expense
was recognized when claims were paid. The cumulative effect of the
accounting change was a charge of $64.6 million ($93.7 million pre-tax) in
fiscal 1993, representing the discounted present value of the expected cost
of future healthcare benefits attributed to employees' service rendered
prior to August 1, 1992.
ENVIRONMENTAL MATTERS
The company must comply with current standards regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment. Compliance with these increasingly stringent environmental
regulations usually results in both capital and operating expenditures. The
company has made, and intends to continue to make, the necessary expenditures
to comply with these environmental regulations.
See Note 13 to the Consolidated Financial Statements, "Contingencies,"
(pages 26 and 27) for additional information relating to environmental matters.
EARNINGS PER SHARE AND DIVIDEND GROWTH
The following table represents earnings per common share, cash dividends paid
per common share and cash dividends paid:
FISCAL FISCAL FISCAL
1993 1992 1991
------ ------ ------
Earnings per common share $ 1.29* $ 2.10 $ 1.89
Cash dividends paid per
common share $ 1.04 $ .95 $ .83
Cash dividends paid
(in millions) $231.9 $214.1 $ 186.4
===== ===== =====
* Restructuring charges in fiscal 1993 reduced earnings per share by $1.12.
IMPACT OF INFLATION
Inflation continued to increase cost of goods and services purchased by the
company in fiscal 1993. Competitive and regulatory conditions in many markets
restrict the company's ability to recover fully through price increases the
higher costs of goods and services. However, the company has implemented
cost-control programs and continues to improve productivity through
technological advances. This has reduced the negative impact of cost increases.
SUPPLEMENTARY INFORMATION ON QUARTERLY DATA (UNAUDITED)
Syntex Corporation and Subsidiary Companies
QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED
OCTOBER 31 JANUARY 31 APRIL 30 JULY 31
--------------- --------------- -------------- ---------------
($ IN MILLIONS EXCEPT EARNINGS PER SHARE,
DIVIDENDS AND STOCK PRICES) 1992 1991 1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ---- ---- ----
Net sales (a) $492.2 $501.7 $505.5 $ 523.6 $584.3 $521.0 $541.0 $511.2
Gross profit (a) 388.1 410.2 409.3 424.2 451.8 425.4 434.5 403.9
Net income (loss) $ (6.1)(b) $132.3 $119.1 $ 121.6 $ 40.8(c) $125.9 $133.4 $ 92.5
------- ------ ------ ------- ------ ------ ------ ------
Shares of common stock 225.3 225.1 222.3 225.3 220.9 225.5 220.9 225.7
Earnings (loss) per common share $ (.03)(b) $ .59 $ .54 $ .54 $.18 (c) $ .56 $ .60 $ .41
------- ------ ------ ------- ------- ------ ------ ------
Dividends paid per common share $ .26 $ .23 $ .26 $ .23 $ .26 $ .23 $ .26 $ .26
------ ------ ------ ------- ------ ------ ------ ------
Common stock prices
High $34.13 $47.75 $26.00 $ 54.13 $20.63 $50.63 $21.00 $45.63
Low $23.25 $40.25 $20.25 $ 38.25 $17.63 $42.00 $17.50 $31.63
====== ====== ====== ====== ====== ====== ====== ======
(a) The fiscal 1992 data were restated to reflect the classification of cash
discounts as a reduction of net sales rather than as selling, general and
administrative expense.
(b) Includes a $180.0 million restructuring charge, a provision of $42.1
million for estimated environmental cleanup costs, and a one-time
benefit of $102.5 million from the reduction of certain tax reserves.
(c) Includes a $140.0 million restructuring charge.
15
CONSOLIDATED STATEMENT OF INCOME
Syntex Corporation and Subsidiary Companies
FOR THE YEARS ENDED JULY 31
-------------------------------------------
($ IN MILLIONS EXCEPT PER-SHARE AMOUNTS) 1993 1992 1991
---- ---- ----
NET SALES $2,123.0 $2,057.5 $1,794.0
------- ------- -------
Costs and expenses:
Cost of goods sold 439.3 393.8 341.4
Selling, general and administrative 761.0 770.8 650.1
Research and development 404.4 374.4 315.6
Restructuring charge 320.0 -- --
------- ------- -------
Total 1,924.7 1,539.0 1,307.1
------- ------- -------
OPERATING INCOME 198.3 518.5 486.9
------- ------- -------
Nonoperating income(expense):
Interest income 39.3 52.8 56.6
Interest expense (26.5) (19.5) (35.6)
Other--net (78.4) (8.9) (31.7)
------- ------- -------
Total (65.6) 24.4 (10.7)
------- ------- -------
Income before taxes on income and cumulative
effect of accounting changes 132.7 542.9 476.2
Provision (benefit) for taxes on income (155.4) 70.6 52.4
------- ------- -------
Income before cumulative effect of accounting changes 288.1 472.3 423.8
Cumulative effect of accounting changes, net of tax (.9) -- --
------- ------- -------
NET INCOME $ 287.2 $ 472.3 $ 423.8
======= ======= =======
EARNINGS PER COMMON SHARE $ 1.29 $ 2.10 $ 1.89
======= ======= =======
See accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Syntex Corporation and Subsidiary Companies
FOR THE YEARS ENDED JULY 31
-------------------------------------------
($ IN MILLIONS) 1993 1992 1991
---- ---- ----
Balance at beginning of year $1,419.7 $1,168.5 $1,050.4
Net income 287.2 472.3 423.8
Common stock dividends (230.5) (221.1) (193.3)
Two-for-one common stock split -- -- (112.4)
Other (4.9) -- --
------- ------- -------
Balance at year-end $1,471.5 $1,419.7 $1,168.5
======= ======= =======
See accompanying Notes to Consolidated Financial Statements
16
CONSOLIDATED BALANCE SHEET
Syntex Corporation and Subsidiary Companies
JULY 31
--------------------------------
($ AND SHARES IN MILLIONS) 1993 1992 1991
- -------------------------- ---- ---- ----
ASSETS:
Current Assets:
Cash and cash equivalents $ 327.9 $ 296.3 $ 293.1
Short-term investments 281.7 405.4 429.6
Trade receivables, net 264.2 278.0 212.0
Inventories, net 362.1 351.6 257.0
Other 153.8 133.9 102.2
------- ------- -------
Total current assets 1,389.7 1,465.2 1,293.9
------- ------- -------
Long-term investments 180.9 241.2 135.9
Property, plant and equipment -- net 1,085.2 1,033.2 785.0
Other assets 304.9 69.5 58.0
------- ------- -------
Total $2,960.7 $2,809.1 $2,272.8
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 82.4 $ 530.3 $ 310.5
Accounts payable and accrued expenses 231.8 246.9 196.6
Income and other taxes 87.1 200.1 182.8
Accrued compensation 97.4 106.1 98.1
Other 293.8 93.6 86.7
------- ------- -------
Total current liabilities 792.5 1,177.0 874.7
------- ------- -------
Noncurrent liabilities 378.0 117.2 120.5
Long-term debt 590.8 231.2 273.1
------- ------- -------
Total liabilities 1,761.3 1,525.4 1,268.3
------- ------- -------
Contingencies (Note 13)
Shareholders' Equity:
Common stock (shares issued -- 240.9) 240.9 240.9 240.9
Capital in excess of par value -- .1 4.8
Retained earnings 1,471.5 1,419.7 1,168.5
Cumulative translation adjustments (16.9) 3.4 (14.2)
Common stock in treasury -- at cost (shares in
treasury 1993 -- 19.9; 1992 -- 15.2; 1991 -- 15.8) (496.1) (380.4) (395.5)
------- ------- -------
Total shareholders' equity 1,199.4 1,283.7 1,004.5
------- ------- -------
Total $2,960.7 $2,809.1 $2,272.8
======= ======= =======
See accompanying Notes to Consolidated Financial Statements
17
CONSOLIDATED STATEMENT OF CASH FLOWS
Syntex Corporation and Subsidiary Companies
FOR THE YEARS ENDED JULY 31
---------------------------
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
CASH PROVIDED (USED) IN OPERATING ACTIVITIES:
Net Income $287.2 $472.3 $423.8
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 118.7 100.5 80.9
Restructuring reserve 262.0 -- --
Tax reserve reversal (102.5) -- --
Cumulative effect of accounting changes, net of tax .9 -- --
Net effect of changes in:
Trade receivables .2 (58.6) (18.7)
Inventories (25.5) (87.0) (57.9)
Accounts payable (23.8) 37.1 15.7
Accrued liabilities (including noncurrent) 34.0 (2.1) 110.0
Other (45.6) 1.3 (12.0)
----- ----- -----
Net Cash Provided From Operating Activities 505.6 463.5 541.8
----- ----- -----
CASH PROVIDED (USED) IN INVESTING ACTIVITIES:
Capital expenditures (197.9) (340.8) (247.7)
Purchase of short-term investments (288.5) (590.1) (343.2)
Proceeds from short-term investments 487.8 692.9 267.6
Purchase of long-term investments (21.8) (180.6) (112.8)
Other investing activities (29.4) (14.6) (16.7)
------ ------ ------
Net Cash Used in Investing Activities (49.8) (433.2) (452.8)
------ ------ ------
CASH PROVIDED (USED) IN FINANCING ACTIVITIES:
Net change in short-term debt (370.5) 117.9 52.5
Proceeds from issuance of long-term debt 415.1 57.1 67.0
Repayment of long-term debt (124.0) -- (20.9)
Payment of dividends (231.9) (214.1) (186.4)
Common shares repurchased (124.7) -- --
Other financing activities 5.4 7.5 6.7
----- ----- -----
Net Cash used in Financing Activities (430.6) (31.6) (81.1)
------ ----- -----
Effect of exchange rate changes on cash 6.4 4.5 2.9
----- ----- -----
NET CHANGE IN CASH AND CASH EQUIVALENTS 31.6 3.2 10.8
----- ----- -----
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 296.3 293.1 282.3
----- ----- -----
CASH AND CASH EQUIVALENTS AT YEAR-END $327.9 $296.3 $293.1
====== ====== ======
See accompanying Notes to Consolidated Financial Statements
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Syntex Corporation and Subsidiary Companies
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation The consolidated financial statements include
Syntex Corporation (a Panama corporation) and its subsidiary companies (the
company). All significant intercompany balances and transactions are eliminated
in consolidation.
Inventories Inventories are stated generally at the lower of standard cost,
which approximates average cost, or market.
Long-Term Investments Long-term investments include U.S. government
securities, corporate notes, and marketable Eurodollar bonds. These
investments, which are carried at cost, had fair values of $186.2 million at
July 31, 1993. Fair values of investments are primarily based on quoted market
prices. An interest rate swap agreement on the Eurodollar bonds results in a
variable rate of interest for the term of the investments.
Interest Rate Swaps The differential to be paid or received is accrued as
interest rates change and is recognized over the life of the agreements.
Foreign Exchange Contracts The company enters into foreign exchange contracts
with various major financial institutions as a hedge against foreign currency
exposures. Foreign currency exchange gains and losses are included in
nonoperating income (expense).
Property, Plant and Equipment and Related Depreciation and Amortization
Property, plant and equipment is stated at cost and depreciated using the
straight-line method based on estimated useful lives of three to 40 years.
Leasehold improvements are amortized over the lives of the related leases or
their estimated useful lives, whichever is shorter.
Liability Insurance The company is self-insured for certain events,
principally product liability, workers compensation, health insurance and
environmental matters. Provisions are made for probable losses that are not
covered by insurance.
Prior to fiscal 1993, the majority of probable insurance recoveries for
product liability and environmental claims were classified as assets in the
balance sheet. Effective fiscal 1993, the remainder of probable insurance
recoveries has also been classified as other current and noncurrent assets
instead of being offset against the related liability.
Foreign Currency Translation Substantially all assets and liabilities of the
company's non-United States operations are translated into United States
dollars at fiscal year-end exchange rates, and the resulting translation
adjustments are recorded as cumulative translation adjustments in shareholders'
equity. Also recorded as cumulative translation adjustments are exchange gains
and losses on intercompany balances of a long-term investment nature.
Taxes on Income Effective fiscal 1993, deferred income taxes reflect the tax
consequences on future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts. Prior to fiscal 1993,
provisions were made for deferred income taxes for timing differences when the
company's accounting policies differed for financial accounting and tax
reporting. Such timing differences related primarily to depreciation.
Earnings Per Common Share Per-share amounts are computed on the basis of the
weighted average number of common shares outstanding during each period.
Common stock equivalents are not significant.
Reclassifications Cash discounts have been reclassified in prior-year
presentations to conform to the current year presentation.
Accounting Changes Effective August 1, 1992, the company adopted new
accounting standards related to income taxes (see Note 7) and postretirement
benefits other than pensions (see Note 9).
19
NOTE 2: INVENTORIES
Inventories consist of the following:
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ----- ----
Finished goods $ 85.4 $ 94.6 $ 63.5
In process 198.9 148.6 108.2
Raw materials and supplies 77.8 108.4 85.3
------ ------ ------
Total $362.1 $351.6 $257.0
====== ====== ======
NOTE 3: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Land and improvements $ 52.1 $ 34.4 $ 31.3
Buildings and improvements 571.1 490.3 373.8
Machinery, equipment and
furniture 797.9 706.5 600.2
leasehold improvements 47.9 44.6 36.2
Construction in progress 174.5 254.1 167.3
-------- -------- --------
Total 1,643.5 1,529.9 1,208.8
Less accumulated depreciation
and amortization (558.3) (496.7) (423.8)
--------- --------- ---------
Property, plant and
equipment--net $1,085.2 $1,033.2 $ 785.0
======== ======== ========
NOTE 4: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
To reduce its exposure to fluctuations in interest rates and foreign
currencies, the company is party to financial instruments with
off-balance-sheet risk, including interest rate and currency swaps, forward
interest rate agreements and foreign exchange contracts. The company controls
credit risks associated with these financial instruments through credit
approvals, limits and monitoring procedures.
The counterparties to these arrangements are major financial institutions.
Since the company does not require collateral or other security to support
these financial instruments, the company may be exposed to credit loss in the
event of nonperformance by the counterparties. As of July 31, 1993, 1992 and
1991, the contract amounts of these arrangements were as follows:
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Foreign exchange contracts $165.0 $122.2 $104.0
Interest rate swaps on
investments 7.0 13.4 100.0
Interest and currency rate
swaps on debt 425.8 135.8 110.0
Forward interest rate
agreements -- -- 50.0
====== ====== ======
Foreign exchange contracts are all short-term. Net unrealized gains/losses
from hedging anticipated transactions and interest and currency rate swaps,
based upon dealer-quoted prices, were not material at July 31, 1993.
NOTE 5: LIABILITIES
An analysis of certain current liabilities follows:
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Commercial paper borrowings $ -- $362.1 $274.1
Other short-term debt
including current portion
of long-term debt 82.4 168.2 36.4
------ ------ ------
Short-term debt $ 82.4 $530.3 $310.5
====== ====== ======
Accounts payable $ 97.0 $125.3 $ 83.5
Accrued expenses 134.8 121.6 113.1
------ ------ ------
Accounts payable and
accrued expenses $231.8 $246.9 $196.6
====== ====== ======
Income taxes $ 80.8 $192.7 $175.0
Other taxes 6.3 7.4 7.8
------ ------ ------
Income and other taxes $ 87.1 $200.1 $182.8
====== ====== ======
Dividends $ 57.4 $ 58.8 $51.8
Restructuring reserve 175.2 -- --
Other 61.2 34.8 34.9
------ ------ ------
Other current liabilities $293.8 $ 93.6 $ 86.7
====== ====== ======
At July 31, 1993, the company had unused short-term bank lines of credit of
$349.4 million, of which $280.0 million is available for the support of
short-term commercial paper borrowings.
The carrying value of accounts payable and short-term debt at July 31,
1993, approximates fair value. Fair value of short-term debt is based on
interest rates that are currently available to the company for issuance of
debt with similar terms.
An analysis of certain noncurrent liabilities follows:
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Environmental cleanup and
product liability $163.8 $ 89.8 $ 88.6
Restructuring reserve 86.8 -- --
Postretirement benefits other
than pensions 101.0 -- --
Other 26.4 27.4 31.9
------ ------ ------
Noncurrent liabilities $378.0 $117.2 $120.5
====== ====== ======
20
NOTE 6: LONG-TERM DEBT
In fiscal 1993, the company repaid 6.625 percent fixed-rate Euroyen notes in
the amount of 20 billion yen. Principal and interest payments were covered by
currency exchange agreements that fixed the exchange rate and effectively
resulted in a $100.0 million liability. Related interest rate swap agreements
effectively converted fixed interest rates to variable rates of interest for
the term of the notes.
During fiscal 1993, the company issued $415.0 million of medium-term
notes. Interest rate swap agreements effectively convert fixed interest rates
to variable rates of interest for the term of the notes.
Certain commercial paper borrowings are classified as long-term because
the company expects to maintain such indebtedness on a long-term basis. At
July 31, 1993, the company had unused long-term bank lines of credit of $100.0
million, expiring in fiscal 1995, which is available for the support of
long-term commercial paper borrowings.
Long-term debt consists of the following:
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Euroyen notes, variable rates
bases on LIBOR (3.3% at
July 31, 1992, and 6.0% at
July 31, 1991), matured in
1993 $ -- $100.0 $100.0
Medium-term notes, variable
rates (3.5% at July 31,
1993), maturing 1996
through 2001 415.0 -- --
Commercial paper borrowings
(3.1% at July 31, 1993,
3.4% at July 31, 1992, and
5.9% at July 31, 1991) 74.9 100.0 100.0
Other 105.3 131.2 73.1
------ ------ ------
Total long-term debt 595.2 331.2 273.1
Less current portion (4.4) (100.0) --
------ ------ ----
Noncurrent portion $590.8 $231.2 $273.1
===== ===== =====
Aggregate annual principal payments on long-term debt for the five
fiscal years following 1993 are (dollars in millions): 1994, $4.4; 1995,
$75.8; 1996, $33.0; 1997, $21.0; and 1998, $221.0.
The carrying value of long-term debt at July 31, 1993, approximates
fair value, based on interest rates that are currently available to the
company for debt with similar terms.
NOTE 7: TAXES ON INCOME
Syntex Corporation is incorporated in Panama. The company operates in
countries that have differing tax laws and rates. Income from sources outside
Panama is not subject to income tax in Panama. Consequently, the effective tax
rate may vary from year to year according to the source of earnings by country.
The company has subsidiaries in the Bahamas and Bermuda where, at present,
there are no taxes on income. The company has statutory protection under
Bermuda law against the imposition of income tax until 2016. Earnings from
subsidiaries in Puerto Rico are substantially exempt from income taxes under
grants of Industrial Tax Exemption expiring in 2003.
Effective August 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires the
asset and liability method of accounting for income taxes. The company
recorded a benefit of $63.7 million in fiscal 1993 as the cumulative effect on
prior years of the accounting change, principally relating to tax credits which
were not recorded under the prior accounting standard.
Income before taxes on income consists of the following:
FOR THE YEARS ENDED JULY 31
---------------------------
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Domestic (Panama) $ 4.2 $ 12.8 $ 4.5
Foreign 128.5 530.1 471.7
----- ----- -----
Total $132.7 $542.9 $476.2
===== ===== =====
The provisions (benefits) for taxes on income consists of the following:
FOR THE YEARS ENDED JULY 31
---------------------------
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Current:
United States $ 16.6 $ 65.6 $35.1
Other (88.3) 27.9 13.6
Deferred (83.7) (22.9) 3.7
------ ----- -----
Total $(155.4) $ 70.6 $52.4
====== ===== ====
21
The company recorded a benefit of $155.4 million for taxes on income during
fiscal 1993. This benefit resulted principally from the tax benefits of $71.0
million, of which $63.1 million is included in deferred taxes, derived from the
restructuring charge and a one-time benefit of $102.5 million from the
reduction of certain tax reserves. The change in the accounting estimate
relating to certain tax reserves was based upon a study by an outside advisor
which supports the company's intercompany pricing.
The difference between the consolidated income tax expense (benefit) and
that as calculated using the statutory Panama corporate tax rates of 43.3
percent in fiscal 1993, 46 percent in fiscal 1992, and 50 percent in fiscal
1991 is reconciled as follows:
FOR THE YEARS ENDED JULY 31
----------------------------
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Panama corporate statutory rate $ 57.4 $249.9 $238.1
Income not subject to tax in
Panama, Bermuda and Bahamas (120.9) (171.3) (166.7)
Savings from statutory tax benefits
in Puerto Rico and Ireland (38.4) (20.3) (27.5)
Subsidiary losses--no related
tax benefit 43.1 19.8 4.6
Reduction of tax reserves (102.5) -- --
Other 5.9 (7.5) 3.9
------- ------ ------
Total $(155.4) $ 70.6 $ 52.4
======= ====== ======
Excluding the effects of restructuring charges and reserve reversal, the
effective tax rate is 4 percent in fiscal 1993, compared with 13 and 11 percent
in fiscal 1992 and 1991, respectively.
Provisions for taxes on income are also made for undistributed earnings of
foreign subsidiaries, except for $107.3 million at July 31, 1993, which is
indefinitely reinvested.
Temporary differences and carryforwards, which gave rise to deferred
income tax assets and liabilities at July 31, 1993, were as follows:
ITEMS RESULTING IN TEMPORARY DEFERRED DEFERRED
DIFFERENCES AND CARRYFORWARDS TAX TAX
($ IN MILLIONS) ASSETS LIABILITIES
- ----------------------------- -------- -----------
Current:
Restructuring reserve $ 35.8
Inventory $ (5.1)
Foreign tax credit 6.5
Employee benefit plans 16.4
Intercompany profit 4.7
Other charges 4.6
Noncurrent:
Restructuring reserve 27.3
Postretirement benefits other
than pensions 29.0
Depreciation/amortization (2.5)
Research credit 24.1
Environmental cleanup and
product liability reserves 44.8
Other charges 1.6 (7.1)
------ ------
Total deferred taxes $194.8 $(14.7)
====== ======
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of assets and liabilities. At
July 31, 1992, the company had a net accumulated deferred tax asset of
$15.2 million which is included in other current assets. The deferred tax
liability at July 31, 1991, of $8.2 million is included in accrued liabilities.
As of July 31, 1993, the company's United States subsidiaries had research
and development tax credit carryforwards of approximately $24.1 million
expiring from fiscal 2003 through fiscal 2007.
As of July 31, 1993, the company's non-United States subsidiaries had net
operating loss carryforwards of approximately $131.9 million, and the related
deferred tax assets are substantially offset by valuation allowances as they
are unlikely to be available in future years. Immaterial amounts of non-United
States net operating loss carryforwards were utilized in fiscal 1993, 1992 and
1991.
In 1992, the company agreed to settle with the United States Internal
Revenue Service federal income tax liabilities for all fiscal years through
1990. As a result of the settlement, net operating loss carryforwards of
approximately $129.4 million of the company's United States subsidiaries were
utilized, $21.6 million of tax credit carryovers were absorbed and the company
paid $29.8 million in additional income taxes and interest for the six years
ended fiscal 1991.
22
NOTE 8: RETIREMENT PLANS
The company's pension plans cover a majority of its employees. Pension costs
for fiscal 1993, 1992 and 1991 were $29.2 million, $24.3 million and $18.6
million, respectively. Benefits are based on compensation earned during the
years of service immediately preceding retirement. The company's actuarial cost
method for its major plan in the United States is the projected unit credit
method, and its funding policy for retirement plans is consistent with the
relevant government and tax regulations.
Plans' assets consist primarily of stocks, bonds and pooled funds.
Pension cost for the company's benefit plans includes the following
components.
FOR THE YEARS ENDED JULY 31
---------------------------
($ IN MILLIONS) 1993 1992 1991
- --------------- ---- ---- ----
Significant Plan:
Service cost -- benefits
earned during the year $25.8 $22.0 $18.8
Interest cost on projected
benefit obligations 29.5 25.4 20.4
Net increase in fair value
of plans' assets (40.3) (31.5) (32.6)
Net amortization and deferral 11.3 5.4 9.2
----- ----- -----
Net pension cost 26.3 21.3 15.8
Other plans 2.9 3.0 2.8
----- ----- -----
Total net pension costs $29.2 $24.3 $18.6
===== ===== =====
For fiscal 1993, 1992, and 1991, the weighted-average discount rate used in
determining the projected benefit obligations (PBO) was approximately 8.5
percent; the rate of increase in future compensation levels used in determining
the PBO was approximately 7.5 percent; and the weighted-average expected
long-term rate of return on the plans' assets was approximately 8.5 percent.
Management of the company believes the plans are appropriately funded based on
actuarial calculations which include projections of future compensation.
Under its Employees Retirement Savings Plan for U.S. subsidiaries, the
company matches employee contributions up to a maximum of 5 percent of the
employee's individual earnings. Employees become eligible to participate after
completing one year of service. The company's contributions (net of
forfeitures) for fiscal 1993, 1992 and 1991 were $11.5 million, $11.2 million
and $9.6 million, respectively.
The status of the company's significant plans at July 31, 1993, 1992, and
1991, was as follows:
PLANS IN WHICH PLANS IN WHICH
ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFIT
BENEFIT OBLIGATIONS OBLIGATIONS EXCEED ASSETS
----------------------------- -------------------------------
($ IN MILLIONS) 1993 1992 1991 1993 1992 1991
- --------------- ---- ---- ---- ---- ---- ----
Vested benefits $217.7 $191.3 $161.2 $ 13.5 $ 12.7 $ 10.3
Nonvested benefits 20.5 19.6 18.9 .5 .4 .2
------ ------ ------ ------ ------ ------
Accumulated benefit obligations(a) 238.2 210.9 180.1 14.0 13.1 10.5
Plan assets at fair value 381.7 336.6 282.6 -- -- --
------ ------ ------ ------ ------ ------
Plan assets in excess of (less than) accumulated
benefit obligations $143.5 $125.7 $102.5 $(14.0) $(13.1) $(10.5)
====== ====== ====== ====== ====== ======
Total projected benefit obligations(b) $357.4 $328.7 $282.7 $ 24.8 $ 25.0 $ 15.4
Plan assets at fair value 381.7 336.6 282.6 -- -- --
------ ------ ------ ------ ------ ------
Projected benefit obligations (in excess of) less
than plan assets 24.3 7.9 (.1) (24.8) (25.0) (15.4)
Add (deduct):
Unrecognized prior service cost 9.0 8.5 9.1 2.5 2.9 3.2
Unrecognized net (gain) loss (1.5) 16.6 17.4 3.9 7.5 (.6)
Adjustment to recognize minimum liability -- -- -- -- (1.1) (.6)
Unamortized net transition (asset) obligation (15.4) (18.1) (19.1) 2.4 2.6 2.9
------ ------ ------ ------ ------ ------
Net asset (liability) $ 16.4 $ 14.9 $ 7.3 $(16.0) $(13.1) $(10.5)
====== ====== ====== ====== ====== ======
(a) Excludes the effect of projected future salary increases.
(b) Includes the effect of projected future salary increases.
23
NOTE 9: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides certain postretirement healthcare and life insurance
benefits for substantially all employees in the United States and certain
other countries.
Effective August 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires accrual of postretirement
benefits during the years of employee service. In prior years the expense was
recognized when claims were paid. The cumulative effect of the accounting
change was a charge of $64.6 million ($93.7 million pre-tax) in fiscal 1993,
representing the discounted present value of the expected cost of future
healthcare benefits attributed to employees' service rendered prior to August
1, 1992. The company's funding policy is to fund these benefits as claims
are paid.
Postretirement benefit cost includes the following components:
FOR THE YEAR ENDED JULY 31
--------------------------
($ IN MILLIONS) 1993
----
Service cost-benefits
earned during the year $ 4.3
Interest cost on accumulated
postretirement benefit obligation 7.8
-----
Net postretirement benefit cost $12.1
=====
The status of the plans at July 31, 1993, was as follows:
($ IN MILLIONS) 1993
----
Accumulated postretirement benefit
obligation:
Retirees $ (34.0)
Fully eligible active plan participants (16.2)
Other active plan participants (39.2)
Unrecognized net gain (14.1)
-----
Accrued postretirement benefit obligation $(103.5)
=======
The discount rate used in determining the accumulated benefit obligation
was 8.5 percent. The healthcare cost trend rate in the United States in fiscal
1993 was 14 percent, declining to 6 percent over a four-year period. The effect
of increasing the healthcare cost trend rate by one percentage point in each
year would increase the accumulated postretirement benefit obligation at July
31, 1993, by $13.0 million and the total service and interest cost components
of the fiscal 1993 postretirement benefit cost by $2.2 million.
NOTE 10: SHAREHOLDERS' EQUITY
In December 1991, the shareholders approved an increase in authorized common
shares to 600.0 million.
In April 1991, the company issued 112.4 million shares of common stock in
connection with a two-for-one stock split in the form of a stock dividend.
Accordingly, $112.4 million was transferred from retained earnings to common
stock.
A summary of common stock information follows:
FOR THE YEARS ENDED JULY 31
---------------------------
(SHARES IN MILLIONS) 1993 1992 1991
- -------------------- ---- ---- ----
Authorized shares 600.0 600.0 300.0
Shares outstanding at year-end 221.0 225.7 225.1
Average shares outstanding 222.4 225.4 224.7
===== ===== =====
A summary of common stock issued, common stock in treasury, and capital in
excess of par value for fiscal 1993, 1992 and 1991 follows:
COMMON CAPITAL
STOCK IN COMMON STOCK
ISSUED EXCESS IN TREASURY
($1 PAR OF PAR ----------------
($ AND SHARES IN MILLIONS) VALUE) VALUE SHARES COST
- ------------------------- ------- ------- ------ ----
Balance July 31, 1990 $128.5 $8.5 16.4 $(406.4)
Shares issued under stock
option plans--net -- (3.7) (.5) 10.7
Two for one common
stock split 112.4 -- -- --
Other -- -- (.1) .2
---- ---- ---- -------
Balance July 31, 1991 240.9 4.8 15.8 (395.5)
Shares issued under stock
option plans--net -- (6.8) (.6) 14.5
Other 2.1 -- .6
---- ---- -------
Balance July 31, 1992 240.9 .1 15.2 (380.4)
Shares issued under stock
option plans--net -- (.1) (.4) 9.0
Shares repurchased -- -- 5.1 (124.7)
------ ---- ---- -------
BALANCE JULY 31, 1993 $240.9 $ -- 19.9 $(496.1)
====== ==== ==== =======
24
In fiscal 1993, the company purchased 5.1 million shares of the
company's common stock for $124.7 million based on the Board of Directors'
authorization to purchase up to 7.0 million shares.
The company's 1984 Stock Option Plan (1984 Plan) provides that
nonqualified and incentive stock options may be granted to officers and key
employees of the company at prices not less than the fair market value at the
date of grant. A maximum of 12.0 million shares of common stock may be issued
under the 1984 Plan.
The company's 1991 Stock Option Plan for Non-Employee Directors (1991
Plan) provides for a maximum of 250,000 shares to be issued under nonqualified
stock options. These options are granted to non-employee directors at prices
not less than fair market value at the date of grant.
Options granted under the company's plans as discussed above become
exercisable in annual installments of 25 percent beginning one year after the
date of grant and expire 10 years from the date of grant. Stock options
exercisable under the 1974 and 1984 plans were approximately 4.3 million shares
at July 31, 1993; 3.4 million shares at July 31, 1992; and 3.1 million shares
at July 31, 1991.
In fiscal 1992, the company granted options to all employees to
purchase 100 shares of stock. Options for a total of approximately 1.2 million
shares were granted with an exercise price of $43.625, the fair market value at
the date of grant. The options are exercisable beginning four years after the
date of grant and expire 10 years from the date of grant.
Included in fiscal 1993 options granted are 3.9 million options which
are contingent upon shareholder approval in December 1993 of a new long-term
incentive plan. Such options are comprised of 1.4 million granted to executive
officers with an exercise price of $20.00, 110 percent of the fair market value
on the date of grant, and 2.5 million options granted to all other employees
with an exercise price of $18.13, the fair market value at the date of grant.
The options become exercisable 100 percent on August 1, 1995, if the company
meets pre-established goals as determined by the Compensation and Benefits
Committee of the Board of Directors. Otherwise, the options become exercisable
at a rate of 20 percent per year beginning August 1, 1995, except that options
for no more than 100 shares become fully exercisable on July 31, 1996.
A summary of stock option transactions for fiscal 1993, 1992 and 1991
follows:
AVERAGE
STOCK PRICE PER
(OPTIONS IN MILLIONS) OPTIONS SHARE
------- ---------
Outstanding July 31, 1990 5.5 $16.96
Granted 1.3 39.39
Exercised (.9) 12.49
Canceled (.1) 25.43
---- -----
Outstanding July 31, 1991 5.8 22.46
Granted 3.3 43.27
Exercised (.6) 14.12
Canceled (.1) 28.99
---- -----
Outstanding July 31, 1992 8.4 31.16
Granted 5.9 19.00
Exercised (.4) 10.59
Canceled (.3) 38.86
---- -----
OUTSTANDING JULY 31, 1993 13.6 $26.28
==== ======
Stock options available for grant at July 31, 1993, were 0.6 million.
NOTE 11: COMMITMENTS
The company leases land, buildings, office equipment and automobiles under
noncancelable operating leases. Total rental expense for all operating leases
was $33.0 million in fiscal 1993, $33.8 million in fiscal 1992, and $31.4
million in fiscal 1991. Minimum rental commitments under noncancelable
operating leases as of July 31, 1993, total $99.8 million and range from $18.0
million in fiscal 1994 to $6.9 million in fiscal 1998, with aggregate minimum
lease obligations of $41.5 million thereafter.
Commitments primarily for constructions-in-progress as of July 31, 1993, are
$132.4 million in fiscal 1994 and $69.8 million thereafter.
25
NOTE 12: OTHER MATTERS
Other nonoperating expense in fiscal 1993 includes a provision of $44.1 million
for estimated costs related to environmental matters, $10.0 million for
reserves related to other contingencies, $8.4 million for write-downs and
losses associated with certain investments, and $7.7 million related to fixed
asset write-offs. Other nonoperating expense in fiscal 1992 and 1991 includes
provisions of $11.5 million and $32.0 million, respectively, for estimated
costs related to environmental matters. For further discussion of
environmental matters, see Note 13.
NOTE 13: CONTINGENCIES
Various product liability claims and suits are pending against the company and
its subsidiaries. These actions seek compensatory damages for personal
injuries and, in some cases, punitive damages.
Various environmental claims and suits have been pending against the company
related to the disposal of dioxin in Missouri. All of the government suits and
almost all of the private suits related to the contamination have been resolved
through litigation or settlement. The December 1990 settlement with the United
States Environmental Protection Agency (EPA) and the State of Missouri resulted
in the company assuming certain responsibilities regarding the remediation of
dioxin contamination. The company expects that the remediation will continue
for at least the next four years, although that time could be extended by
various factors affecting the method and timing of remediation. Although the
company's insurance carriers have expressed coverage and other reservations
with respect to dioxin litigation in Missouri, several have made significant
partial payments and the company is seeking reimbursement from the carriers for
the remainder fo the cost of litigating and settling the lawsuits, including
the costs of remediation of dioxin contamination. Legal actions concerning
insurance coverage for these matters continue in the Superior Court in San
Francisco.
In May 1993, the U.S. District Court in Colorado approved settlement of a
lawsuit assigning the company a share of the cost of cleaning up the Lowry
Landfill site near Denver, Colorado. The EPA has published its proposed plan
for remediation of the site and has announced its intention to make a final
decision regarding the remedy by the end of calendar year 1993. Pursuant to
the settlement, the company has paid into a trust fund established by
plaintiffs its share of the estimated cost for design, construction and initial
operation of the remedy for the site. The company expects to make additional
payments for its share of ongoing operating costs over 30 years or longer. The
settlement did not necessitate any adjustment to reserves previously
established for this matter, but future adjustments may be necessary for the
company's share of costs if total remediation costs significantly exceed
current cost estimates.
Certain other claims, legal actions, complaints and proceedings are pending
against the company. Among these are actions brought by the EPA and similar
agencies in various states, where the company has been identified as a
potentially responsible party for cleanup costs at approximately 20 sites in
the United States. At severals of these sites, the company is one of many
potentially responsible parties that have been identified, but under the laws
governing these sites each responsible party may be jointly and severally
liable for the entire amount of the cleanup. At other sites, the company has
been identified as the primary party potentially responsible for cleanup costs.
The aggregate costs of remediation at these sites by all potentially
responsible parties has been subject to various estimates by the EPA and
others; the estimates range widely and could total as much as several hundred
million dollars. The range in estimates is largely due to uncertainties as to
the nature and extent of the site conditions and the methods that may have to
be employed for their remediation.
The company has established reserves for probable losses resulting from
claims and environmental actions as discussed in the above. These reserves,
which are adjusted periodically to reflect current developments, consider such
things as available information regarding the nature and extent of site
conditions, potential methods of remediation, estimated costs, the company's
share of estimated costs including the extent to which contribution will be
available from other parties, the duration of payments the company will be
required to make, and the cost of litigation. The company also records
receivables for insurance coverage and recoveries which it believes, based
on advice of legal counsel, are probable. It is reasonably possible that
additional losses may be incurred and that additional insurance recoveries
may be received, but such amounts, if any, are not expected to be material
to the company's financial position.
Although the outcome cannot be predicted with certainty, it is the opinion
of management, based upon the advice of various counsel and other
considerations, that all claims, legal actions, complaints and proceedings
discussed above are adequately covered by insurance or by reserves, or are
without merit, or will not have a material adverse effect on the company's
consolidated financial position.
In the late summer and fall of 1992, the company, several of its principal
officers, a former principal officer and current director, an outside director
and an investment banking firm were named as defendants in 11 separate
complaints filed in the federal District Court for the Northern District of
California by certain shareholders who claim to represent a class of
shareholders that purchased shares of the company's common stock between
November 25, 1991, and May 26, 1992. The complaints were consolidated into one
action. This action was based on provisions of federal securities laws and
sought equitable relief and unspecified damages for losses allegedly resulting
from, among other things, improper disclosure.
In December 1992, the company, believing the securities litigation lacked
merit, filed a motion to dismiss the entire action. This motion was granted by
the District Court on September 1, 1993. The Court granted the motion, in part,
because the company's shareholders had available to them all of the allegedly
material information that the plaintiffs claimed was withheld. The plaintiffs
were given leave to file an amended complaint. If an amended complant is filed,
the company intends to contest it vigorously. Although the company will have to
review an amended complaint if one is filed, and the outcome of the renewed
litigation cannot be predicted with certainty, it is the opinion of
management, based upon the advice of counsel and other considerations, that any
renewal of plaintiffs' class's claims will not have a material adverse effect
on the company's consolidated financial position.
NOTE 14: RESTRUCTURING CHARGE
Included in operating expense for fiscal 1993 is a restructuring charge of
$320.0 million, which covers estimated costs resulting from the decision to
completely or partially close several of the company's chemical and
pharmaceutical manufacturing plants and two small research facilities and
estimated severance costs associated with a reduction in the company's
workforce. The restructuring charge, net of the related tax benefit, resulted
in a reduction of $249.0 million ($1.12 per share) in net income for fiscal
1993.
NOTE 15: STATEMENT OF CASH FLOWS
Investments purchased with a maturity of three months or less are cash
equivalents. Investments with a maturity period of greater than three months
but less than one year are classified as short-term investments and are stated
at cost, which approximates fair value. The change in short-term debt in the
Consolidated Statement of Cash Flows includes commercial paper repayments with
a maturity period of greater than three months.
Additional information regarding cash payments of interest, income
taxes and commercial paper repayment follows:
FOR THE YEARS ENDED JULY 31
-------------------------
($ IN MILLIONS) 1993 1992 1991
---- ---- ----
Interest $30.9 $40.2 $41.3
Income taxes 31.2 70.8 17.5
Commercial paper -- 2.0 6.4
==== ==== ====
27
NOTE 16: BUSINESS SEGMENT AND GEOGRAPHIC AREA DATA
($ IN MILLIONS) FOR THE YEARS ENDED JULY 31
---------------------------
BUSINESS SEGMENTS 1993 1992 1991
---- ---- ----
NET SALES
Pharmaceuticals $1,911.1 $1,845.6 $1,598.6
Diagnostics 211.9 211.9 195.4
------- ------- -------
$2,123.0 $2,057.5 $1,794.0
======= ======= =======
OPERATING PROFIT
Pharmaceuticals $ 293.0 $ 559.7 $ 518.0
Diagnostics 13.0 16.3 26.5
------- ------- -------
306.0 576.0 544.5
======= ======= =======
Corporate expenses and
nonoperating items (173.3) (33.1) (68.3)
------- ------- -------
Income before taxes on income $ 132.7 $ 542.9 $ 476.2
======= ======= =======
ASSETS
Pharmaceuticals $1,798.0 $1,634.6 $1,206.2
Diagnostics 261.8 242.3 232.5
Corporate 900.9 932.2 834.1
------- ------- -------
$2,960.7 $2,809.1 $2,272.8
======= ======= =======
CAPITAL EXPENDITURES
Pharmaceuticals $ 171.8 $ 312.8 $ 163.7
Diagnostics 21.8 24.4 81.8
Corporate 4.3 3.6 2.2
------- ------- -------
$ 197.9 $ 340.8 $ 247.7
======= ======= =======
DEPRECIATION AND AMORTIZATION
Pharmaceuticals $ 88.1 $ 79.5 $ 61.0
Diagnostics 27.3 18.3 17.3
Corporate 3.3 2.7 2.6
------- ------- -------
$ 118.7 $ 100.5 $ 80.9
======= ======= =======
The pharmaceuticals segment consists of human pharmaceuticals and animal health
products. Human pharmaceuticals are primarily ethical pharmaceuticals available
to patients only upon prescription by a physician. Sales of human
pharmaceuticals to a major wholesale distributor were approximately 13 percent
of the company's consolidated sales in fiscal 1993, 11 percent in fiscal 1992,
and 12 percent in fiscal 1991.
The diagnostics segment consists primarily of systems to measure levels of
therapeutic drugs, commonly-abused substances and naturally-occurring substances
in blood and urine, and tests to detect sexually-transmissible and other
infectious diseases.
Assets are identifiable with the operations of each business segment and in
each geographic area. Corporate assets are principally cash and cash
equivalents, short-term investments, long-term investments, buildings and land.
($ IN MILLIONS) FOR THE YEARS ENDED JULY 31
---------------------------
GEOGRAPHIC AREAS 1993 1992 1991
---- ---- ----
NET SALES
United States/Puerto Rico $1,480.7 $1,443.1 $1,235.4
Europe 285.7 288.6 272.3
Canada/Latin America 189.1 174.3 142.4
Other 167.5 151.5 143.9
------- ------- -------
$2,130.0 $2,057.5 $1,794.0
======= ======= =======
INTERAREA SALES
United States/Puerto Rico $ 101.8 $ 105.9 $ 85.1
Europe 74.5 93.3 65.4
Canada/Latin America 16.0 17.0 11.3
Other 505.4 498.4 487.6
Eliminations (697.7) (714.6) (649.4)
------- ------- -------
$ -- $ -- $ --
======= ======= =======
OPERATING PROFIT (LOSS)
United States/Puerto Rico $ 112.6 $ 222.2 $ 205.1
Europe (158.1) (50.0) (24.9)
Canada/Latin America (8.9) 7.9 17.0
Other 380.0 396.9 414.5
Eliminations (19.6) (1.0) (67.2)
------- ------- -------
306.0 576.0 544.5
------- ------- -------
Corporate expenses and
nonoperating items (173.3) (33.1) (68.3)
------- ------- -------
Income before taxes on income $ 132.7 $ 542.9 $ 476.2
======= ======= =======
ASSETS
United States/Puerto Rico $1,468.2 $1,252.0 $1,075.8
Europe 361.0 398.6 275.6
Canada/Latin America 174.0 155.1 121.1
Other 359.1 310.7 212.9
Corporate 900.9 932.2 833.8
Eliminations (302.5) (239.5) (246.4)
------- ------- -------
$2,960.7 $2,809.1 $2,272.8
======= ======= =======
Other includes the Bahamas, Pacific area including Japan, and other countries.
For interarea sales, transfers between geographic areas are made at fair market
value.
Net assets located outside the United States and its possessions as of July 31,
1993, 1992 and 1991, were $1,114 million, $1,165 million and $932 million,
respectively. Net sales to customers located outside the United States and its
possessions were $643 million, $617 million and $570 million for fiscal 1993,
1992 and 1991, respectively.
28
REPORT BY MANAGEMENT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF SYNTEX CORPORATION:
The accompanying consolidated financial statements, including notes thereto,
have been prepared in accordance with accounting principles generally accepted
in the United States of America and include amounts based on judgments and
estimates by management as required by the accounting process. The other
financial information in this annual report is consistent with that in the
consolidated financial statements.
Systems of internal accounting controls applied by operating and financial
managers are designed to provide reasonable, but not absolute, assurance that
assets are safeguarded, that transactions are executed and recorded in
accordance with management's established policies and procedures, and that
accounting records are adequate for preparation of financial statements and
other financial information. The design, monitoring and revision of internal
accounting control systems involve, among other things, management's judgment
with respect to the relative cost and expected benefits of specific control
measures.
Syntex has a staff of internal auditors to review accounting records,
financial controls and practices on a planned, rotational and surprise basis,
and to determine compliance with corporate policies. The consolidated financial
statements have been audited by Deloitte & Touche, independent auditors
appointed by the Board of Directors. Their responsibility is to audit the
company's consolidated financial statements in accordance with auditing
standards generally accepted in the United States of America and to express
their opinion with respect to the statements being presented fairly in
conformity with accounting principles generally accepted in the United States
of America.
The members of the Audit Committee of the Board of Directors meet with and
review the activities of corporate financial management, internal auditors, and
independent auditors to ascertain that each is properly discharging its
responsibility. The independent auditors, the internal auditors and managment
have unrestricted access to the Audit Committee. The Audit Committee held
seven meetings during fiscal 1993.
Richard P. Powers Fred Kurland
Senior Vice President and Vice President and
Chief Financial Officer Controller
September 21, 1993
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF SYNTEX CORPORATION:
We have audited the accompanying consolidated balance sheet of Syntex
Corporation (a Panama corporation) and subsidiary companies as of July 31,
1993, 1992 and 1991, and the related consolidated statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Syntex Corporation and subsidiary
companies at July 31, 1993, 1992 and 1991, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Notes 7 and 9 to the consolidated financial statements, in
fiscal 1993 the company changed its methods of accounting for income taxes and
for postretirement benefits other than pensions to conform with new
accounting standards promulgated by the Financial Accounting Standards Board.
Deloitte & Touche
San Francisco, California
September 21, 1993
29
CONSOLIDATED FINANCIAL SUMMARY
Syntex Corporation and Subsidiary Companies
SEE LETTER TO SHAREHOLDERS, EMPLOYEES AND CUSTOMERS, AND MANAGEMENT'S
DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE YEARS ENDED JULY 31
---------------------------------
($ IN MILLIONS) 1993 1992 1991
---- ---- ----
OPERATING RESULTS:
Net sales $2,123.0 $2,057.5 $1,794.0
Restructuring charge 320.0 -- --
Operating income 198.3 518.5 486.9
Income from continuing operations -- before taxes 132.7 542.9 476.2
Income from continuing operations -- after taxes 288.1 472.3 423.8
Net income $ 287.2 $ 472.3 $ 423.8
Shares used in computing earnings per common share 222.4 225.4 224.7
Earnings from continuing operations per common share $ 1.29 $ 2.10 $ 1.89
Earnings per common share $ 1.29 $ 2.10 $ 1.89
------- -------- -------
FINANCIAL CONDITION:
Working capital $ 597.2 $ 288.2 $ 419.2
Property, plant and equipment -- net 1,085.2 1,033.2 785.0
Total assets 2,960.7 2,809.1 2,272.8
Long-term debt 590.8 231.2 273.1
Redeemable preferred stock -- -- --
Shareholder's equity $1,199.4 $1,283.7 $1,004.5
Common shares outstanding at year-end 221.0 225.7 225.1
Shareholders' equity per common share (book value) $ 5.43 $ 5.69 $ 4.46
------- ------- -------
FINANCIAL RATIOS:
Current ratio 1.8 1.2 1.5
Research and development as a percent of sales 19.0% 18.2% 17.6%
Operating income as a percent of sales 9.3% 25.2% 27.1%
Net income as a percent of sales 13.5% 23.0% 23.6%
Return on total investment 16.0% 26.9% 32.0%
Return on average shareholders' equity 23.1% 41.3% 47.7%
------- ------- -------
OTHER DATA:
Research and development expense $ 404.4 $ 374.4 $ 315.6
Capital expenditures 197.9 340.8 247.7
Depreciation and amotization $ 118.7 $ 100.5 $ 80.9
Shareholders of record at year-end 36,700 26,400 19,500
Employees at year-end 10,300 11,700 10,900
Cash dividends paid per common share $ 1.04 $ .95 $ .83
======= ======= =======
The above data (o) were restated for discontinued operations
(o) were restated to reflect the reclassification of cash
discounts as a reduction of net sales rather than as
selling, general and administrative expense.
(o) reflect two-for-one stock splits effective April 1991,
June 1987 and December 1985.
In 1990, the company reclassified certain current liabilities in prior years to
noncurrent; amounts for 1985 through 1983 have not been revised.
Effective August 1, 1992, the company adopted new accounting standards related
to income taxes and postretirement benefits other than pensions.
Return on total investment is computed as net income plus after-tax interest
expense divided by the average of total shareholders' equity plus redeemable
preferred stock and debt.
Return on average shareholders' equity is computed as net income less preferred
dividends divided by average shareholders' equity.
30
FOR THE YEAR ENDED JULY 31
--------------------------------------------------
($ IN MILLIONS) 1990 1989 1988 1987
---- ---- ---- ----
OPERATING RESULTS:
Net sales $ 1,502.3 $ 1,333.0 $ 1,256.6 $ 1,116.3
Restructuring charge -- -- -- --
Operating income 391.9 336.0 337.0 295.6
Income from continuing operations -- before taxes 379.4 336.9 340.9 290.9
Income from continuing operations -- after taxes 341.5 303.2 296.6 248.8
Net income $ 341.5 $ 303.2 $ 296.6 $ 248.8
Shares used in computing earnings per common share 223.8 227.4 236.8 240.4
Earnings from continuing operations per common share $ 1.53 $ 1.33 $ 1.25 $ 1.03
Earnings per common share $ 1.53 $ 1.33 $ 1.25 $ 1.03
--------- --------- --------- --------
FINANCIAL CONDITION:
Working capital $ 331.1 $ 209.3 $ 366.1 $ 281.2
Property, plant and equipment -- net 625.6 545.4 457.7 391.4
Total assets 1,786.5 1,440.2 1,443.7 1,144.6
Long-term debt 225.0 219.6 131.7 129.5
Redeemable preferred stock -- -- .3 .4
Shareholder's equity $ 771.7 $ 587.2 $ 753.5 $ 604.4
Common shares outstanding at year-end 224.3 223.4 236.2 236.6
Shareholders' equity per common share (book value) $ 3.44 $ 2.63 $ 3.19 $ 2.55
--------- --------- --------- --------
FINANCIAL RATIOS:
Current ratio 1.5 1.4 1.7 1.8
Research and development as a percent of sales 18.0% 18.4% 17.3% 15.7%
Operating income as a percent of sales 26.1% 25.2% 26.8% 26.5%
Net income as a percent of sales 22.7% 22.7% 23.6% 22.3%
Return on total investment 34.0% 33.8% 35.8% 31.7%
Return on average shareholders' equity 50.3% 45.2% 43.7% 37.2%
--------- --------- --------- --------
OTHER DATA:
Research and development expense $ 270.8 $ 245.2 $ 217.9 $ 175.1
Capital expenditures 144.0 143.1 111.5 84.3
Depreciation and amotization $ 65.8 $ 53.5 $ 48.6 $ 47.3
Shareholders of record at year-end 17,300 18,300 18,200 16,700
Employees at year-end 10,300 10,000 9,600 9,300
Cash dividends paid per common share $ .763 $ .675 $ .538 $ .43
========== ========= ========= ========
FOR THE YEAR ENDED JULY 31
--------------------------------------------------
($ IN MILLIONS) 1986 1985 1984 1983
---- ---- ---- ----
OPERATING RESULTS:
Net sales $ 968.4 $ 839.9 $ 790.6 $ 750.3
Restructuring charge -- -- -- --
Operating income 229.8 176.6 157.6 170.0
Income from continuing operations -- before taxes 242.8 183.8 155.3 173.6
Income from continuing operations -- after taxes 207.6 157.0 131.3 142.6
Net income $ 198.6 $ 150.0 $ 134.6 $ 149.3
Shares used in computing earnings per common share 257.8 256.8 262.0 276.0
Earnings from continuing operations per common share $ .81 $ .61 $ .50 $ .52
Earnings per common share $ .77 $ .58 $ .51 $ .54
--------- --------- --------- ---------
FINANCIAL CONDITION:
Working capital $ 436.9 $ 500.8 $ 350.9 $ 325.5
Property, plant and equipment -- net 350.5 340.6 348.6 328.4
Total assets 1,255.8 1,208.5 1,073.6 984.4
Long-term debt 138.9 174.1 167.0 109.9
Redeemable preferred stock 5.6 7.3 9.0 9.6
Shareholder's equity $ 730.6 $ 697.8 $ 602.2 $ 611.9
Common shares outstanding at year-end 253.0 257.4 256.2 270.4
Shareholders' equity per common share (book value) $ 2.89 $ 2.71 $ 2.35 $ 2.26
--------- --------- --------- ---------
FINANCIAL RATIOS:
Current ratio 2.3 2.5 2.3 2.4
Research and development as a percent of sales 14.8% 14.6% 14.1% 12.5%
Operating income as a percent of sales 23.7% 21.0% 19.9% 22.7%
Net income as a percent of sales 20.5% 17.9% 17.0% 19.9%
Return on total investment 23.7% 19.4% 19.6% 23.5%
Return on average shareholders' equity 27.7% 22.9% 22.0% 24.7%
--------- --------- --------- ---------
OTHER DATA:
Research and development expense $ 143.0 $ 122.5 $ 111.7 $ 93.7
Capital expenditures 57.1 50.7 74.3 76.6
Depreciation and amotization $ 44.7 $ 42.1 $ 38.9 $ 30.6
Shareholders of record at year-end 15,300 13,800 14,800 15,100
Employees at year-end 9,200 9,000 9,000 8,900
Cash dividends paid per common share $ .29 $ .22 $ .19 $ .16
========= ========= ========= =========
31
CORPORATE INFORMATION
Syntex Corporation
BOARD OF DIRECTORS Mr. James N. Wilson Mr. Stephen W. Corless
President and Vice President, Taxes
Mr. Paul E. Freiman Chief Operating Officer,
Chairman of the Board and Syntex Corporation (F)* Mr. Robert H. Ells
Chief Executive Officer, Vice President,
Syntex Corporation (F,N,S)* Mr. Hans A. Wolf Pharmaceutical and Chemical
Former Vice Chairman and Operations and Services
Mr. Marvyn Carton Chief Administrative Officer,
Director, Syntex Corporation (F)* Mr. Neil W. Flanzraich
Allen & Company Incorporated Senior Vice President and
Investment Bankers (F(o),T(o))* General Counsel
DIRECTOR EMERITUS
Dr. John Fried Dr. Daniel F. Senac Mrs. Darlene J. Friedman
President, Advisor on European Vice President,
Fried and Company, Inc. Pharmaceutical Affairs (S)* Human Resources
Health Technology Ventures (F,S)*
Mrs. Kathleen N. Gary
Hon. Howard M. Holtzmann *Committees of the Board of Vice President,
Partner, Directors Public Affairs and
Holtzmann, Wise & Shepard A -- Audit Committee Communications
Attorneys C -- Compensation and Benefits
Committee Ms. Carol J. Gillespie
Julius R. Krevans, M.D. F -- Finance Committee Vice President and Secretary
Chancellor Emeritus, N -- Nominating Committee
University of California, T -- Trust Review Committee Mr. Thomas L. Gutshall
San Francisco (C,F,S)* S -- Committee on Science Executive Vice President
at Syntex
Mr. Dana G. Leavitt o -- Chairman Mr. George H. Holder
President, Vice President and President,
Leavitt Management Co. Also serving on the Committee on Syntex Agribusiness, Inc.
Management Consulting Firm Science at Syntex Corporation are:
(A,C)* J. Michael Bishop, M.D., Professor Mr. Fred Kurland
of Microbiology and Immunology, Vice President and Controller
Mr. Charles A. Lynch Biochemistry and Biophysics,
Chairman, University of California, San Robert A. Lewis, M.D.
Market Value Partners Francisco; Dr. E. J. Corey, Sheldon Senior Vice President and
Company (C)* Emery Professor of Chemistry, President,
Harvard University; Kenneth Syntex Discovery Research
Mr. Leonard Marks Jr. Melmon, M.D., Department of
Financial and Management Medicine, Stanford University; Mr. Richard P. Powers
Consultant (A, C(o), F. T.)* Robert A. Lewis, M.D., Senior Vice Senior Vice President and
President, Syntex Corporation, and Chief Financial Officer
Mr. Robert S. Miller, Jr. President, Syntex Discovery
Former Vice Chairman Research; and Robert L. Roe, M.D., Robert L. Roe, M.D.
of the Board, Senior Vice President, Syntex Senior Vice President and
Chrysler Corporation (A(o), F)* Corporation, and President, Syntex President,
Development Research. Syntex Development Research
Dr. George Rosenkranz
Founding Chairman of the Board, Holtzmann, Wise & Shepard is Mr. Alan B. Stevenson
Syntex Corporation (F, N, S(o))* Outside Counsel to Syntex Vice President, Taxes
Corporation. and Treasurer
Mr. Anthony M. Solomon
Former President of the Federal CORPORATE OFFICERS Dr. Gerhard von Mutzenbecher
Reserve Bank of New York Vice President and President,
(A, F, N(o), T)* Mr. Paul E.Freiman Syntex Pharmaceuticals--Europe
Chairman of the Board and
Miriam Stoppard, M.D. Chief Executive Officer
Author and International Health
Commentator (C, S)* Mr. James N. Wilson
President and
Chief Operating Officer
Mr. Melvin D. Booth
Vice President and President,
Syntex Laboratories, Inc.
Mr. Burleigh D. Cook
Vice President,
Corporate Information Services
OPERATING
MANAGEMENT
Mr. Vic Ackermann
Vice President,
International Marketing and
New Product Planning
Dr. Gwynn C. Akin
Vice President,
Public Policy
Mr. F. Michael Ball
Senior Vice President,
Syntex Laboratories, Inc.
Dr. Richard Bastiani
President, Syva Company
Mr. Erich Bostelmann
President,
Syntex Pharmaceuticals
International Limited
Ms. Elizabeth H. Davila
Vice President,
Quality and Reengineering
Mr. Alan Jarrett
Area Vice President--European
and Southeast Asian Distributors,
Syntex Pharmaceuticals
International Limited
Dr. Alan M. Krubiner
Vice President,
Intellectual Property Law, and
Associate General Counsel
Dr. Calum B. Macfarlane
Senior Vice President and
Director,
European Discovery Research,
Syntex Discovery Research
Dr. Boyd J. Poulsen
Senior Vice President,
Pharmaceutical Research,
Syntex Development Research
Dr. Josephine H. Shen
Vice President,
Corporate Pharmaceutical
Technology and Services
Dr. Roger L. Whiting
Senior Vice President and
Director,
Basic Research--North America,
Syntex Discovery Research
32
SHAREHOLDER INFORMATION
STOCK LISTING
The common stock of Syntex Corporation, symbol SYN, is listed on the New York
Stock Exchange and is also traded on various regional exchanges.
FORM 10-K
Syntex Corporation will furnish to any shareholder, without charge, a copy of
its most recent annual report on Form 10-K, as filed with the United States
Securities and Exchange Commission. Please direct written requests to:
Syntex Corporation
Investor Relations Department
3401 Hillview Avenue, A1-195
Palo Alto, California 94304-1397
SHAREHOLDER INQUIRIES
Please direct your inquiries regarding stock certificates, dividend checks,
address changes, or related matters regarding Syntex common stock to the
company's Transfer Agent and Registrar:
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
Post Office Box 3001
Winston-Salem, North Carolina 27102-3001
Telephone: (800) 633-4236
DUPLICATE MAILINGS
When shareholders own shares in more than one account or when several
shareholders live at the same address, they may receive multiple copies of the
annual and quarterly reports. For information on how to eliminate multiple
mailings, contact the Wachovia Bank of North Carolina, N.A., Syntex's Transfer
Agent and Registrar, at the address or phone number listed above.
GENERAL INFORMATION
For general information or questions regarding the company's activities, please
write to Syntex Corporation Investor Relations or call (415) 855-5049.
CHANGE IN DISTRIBUTION OF QUARTERLY REPORTS
Effective the first quarter of fiscal 1994, shareholders whose shares are held
in the name of a bank, broker or nominee ("street name") may receive quarterly
reports directly from Syntex. The company will no longer distribute quarterly
reports via banks, brokers and nominees to these street-name holders. To be
included on the company's quarterly report mailing list, street-name holders
may contact Syntex Corporation Investor Relations at the address and phone
number listed above.
Shareholders whose shares are held in their own name will continue to receive
quarterly reports directly from the company's Transfer Agent.
TRADEMARKS
The following are trademarks of Syntex Corporation or one of its subsidiary
companies:
HUMAN AND ANIMAL HEALTH PHARMACEUTICALS
Anaprox(R)/Apranax(R)/Apronax(R)/Flanax(R)/Miranax(R)/Synflex(R)/
Antalgin(R)/Naprogesic(R)/Febrax(R) (naproxen sodium)
Cardene(R)/Rydene(R)/Rycarden(R)/Vasonase(R)/Ridene(R)
(nicardipine hydrochloride)
Cattlyst(R) (laidlomycin propionate) (animal health)
Cloradryn(R)/Novacort(R)/Syntestan(R) (cloprednol)
Cytovene(R)/Cymevene(R)/Denosine(R)/Cymevan(R)/Cymeven(R)
(ganciclovir sodium)
Exelderm(R)/MYK-1(R) (sulconazole nitrate)
Femstat(R)/Femstal(R)/Gynomyk(R) (butoconazole nitrate)
Gardrin(R)/Gardrine(R) (enprostil)
Lidex(R)/Topsyn(R)/Topsym(R)/Topsyne(R)/Metosyn(R)/Lidemol(R)
(fluocinonide)
Naprosyn(R)/Naprosyne(R)/Naxen(R)/Proxen(R) (naproxen)
Nasalide(R)/Bronalide(R)/Syntaris(R)/Rhinalar(R)/Flunase(R)/
Synaclyn(R) (flunisolide)
Norinyl(R)/Brevicon(R)/Noriday(R)/Brevinor(R)/Utovlan(R)
(norethindrone)
Synalar(R)/Synandone(R)/Synamol(R)/Localyn(R)
(fluocinolone acetonide)
Synanthic(R)/Benzelmin(R) (oxfendazole) (animal health)
Synarel(R)/Synarela(R)/Synrelina(R)/Nacenyl(R) (nafarelin acetate)
Synchrocept(R) B/Bovilene(R) (fenprostalene) (animal health)
Synovex(R) growth-promoting agents (animal health)
Topilar(R)/Topicon(R) (flucloronide)
Toradol(R)/Tora-Dol(R)/Toratex(R)/Tarasyn(R)/Dolac(R)/Acular(R)
(ketorolac tromethamine)
Tri-Norinyl(R)/Synphase(R)/Synphasic(R) (norethindronelethinyl
estradiol)
DIAGNOSTICS
AccuLevel(R) non-instrumented enzyme immunochromatography tests
EMIT(R) enzyme immunoassay reagent tests
ETS(R) automated urine toxicology analyzer
MicroTrak(R) culture confirmation tests
MicroTrak(R) direct-specimen tests
MicroTrak(R) XL automated system for infectious-disease diagnostics
Solaris(R) immunoassay analyzer
Vista(R) immunoassay system
Ticlid(R) (ticlopidine hydrochloride) is a trademark of Sanofi Pharma. Syntex
has an exclusive license to use Ticlid in the United States and in a limited
number of other countries.
All descriptions of Syntex products are intended solely to inform shareholders
of the general nature of the company's activities and are not intended to
indicate the advisability of administering any product in any particular
instance.
All descriptions of market share of Syntex products in the United States are
according to independent published audit data.
[LOGO]
OFFICES OF THE CORPORATION
Syntex Corporation
Panama City
Republic of Panama
UNITED STATES ADMINISTRATIVE
HEADQUARTERS
Syntex Corporation
3401 Hillview Avenue
Palo Alto
California 94304-1397
[LOGO]
APPENDIX D
1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 Quarter Ended October 31, 1993
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 NO. 1-4269
SYNTEX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
REPUBLIC OF PANAMA 94-1566146
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3401 HILLVIEW AVENUE, PALO ALTO, CA 94304
(Address of principal executive office)
Registrant's telephone number, including area code: (415) 855-5050
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
The number of shares of the Registrant's Common Stock outstanding as of
November 30, 1993: 221,014,050.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
PART I -- FINANCIAL INFORMATION
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ AND SHARES IN MILLIONS)
ASSETS
OCTOBER JULY
31, 31,
1993 1993
--------- -------
(UNAUDITED)
Current Assets:
Cash and cash equivalents........................................... $ 321.5 $ 327.9
Short-term investments.............................................. 334.8 281.7
Trade receivables, net.............................................. 307.4 264.2
Inventories, net.................................................... 355.4 362.1
Other............................................................... 158.4 153.8
--------- -------
Total current assets........................................ 1,477.5 1,389.7
--------- -------
Long-term investments................................................. 145.5 180.9
Property, plant and equipment, net.................................... 1,072.3 1,085.2
Other assets.......................................................... 314.9 304.9
--------- -------
Total....................................................... $3,010.2 $2,960.7
========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt..................................................... $ 149.4 $ 82.4
Accounts payable and accrued expenses............................... 195.2 231.8
Income and other taxes.............................................. 91.4 87.1
Accrued compensation................................................ 76.7 97.4
Other............................................................... 307.2 293.8
--------- -------
Total current liabilities................................... 819.9 792.5
--------- -------
Noncurrent liabilities................................................ 333.2 378.0
Long-term debt........................................................ 590.7 590.8
--------- -------
Total Liabilities........................................... 1,743.8 1,761.3
--------- -------
Contingencies (see notes)
Shareholders' Equity:
Common stock (shares issued -- 240.9)............................... 240.9 240.9
Retained earnings................................................... 1,539.8 1,471.5
Cumulative translation adjustments.................................. (19.1) (16.9)
Common stock in treasury -- at cost (shares in treasury fiscal 1994
and fiscal 1993 -- 19.9)......................................... (495.2) (496.1)
--------- -------
Total shareholders' equity.................................. 1,266.4 1,199.4
--------- -------
Total....................................................... $3,010.2 $2,960.7
========= =======
See accompanying notes to condensed consolidated financial statements.
3
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN MILLIONS EXCEPT PER-SHARE AMOUNTS)
THREE MONTHS
ENDED
OCTOBER 31
-----------------
1993 1992
------ ------
Net Sales................................................................ $512.3 $492.2
------ ------
Costs and expenses:
Cost of goods sold..................................................... 110.7 104.1
Selling, general and administrative.................................... 176.3 203.1
Research and development............................................... 97.0 97.4
Restructuring charge................................................... -- 180.0
------ ------
Total.......................................................... 384.0 584.6
------ ------
Operating income (loss).................................................. 128.3 (92.4)
------ ------
Nonoperating income (expense):
Interest income........................................................ 8.6 11.6
Interest expense....................................................... (6.3) (6.3)
Other -- net........................................................... (6.2) (56.0)
------ ------
Total.......................................................... (3.9) (50.7)
------ ------
Income (loss) before taxes on income and cumulative effect of accounting 124.4 (143.1)
changes................................................................
Provision (benefit) for taxes on income.................................. (1.9) (137.9)
------ ------
Income (loss) before cumulative effect of accounting changes............. 126.3 (5.2)
Cumulative effect of accounting changes, net of tax...................... -- (.9)
------ ------
Net income (loss).............................................. $126.3 $ (6.1)
====== ======
Shares used in computing earnings (loss) per common share (see Exhibit 221.0 225.3
11)....................................................................
====== ======
Earnings (loss) per common share......................................... $ .57 $ (.03)
====== ======
Dividends per common share............................................... $ .26 $ .26
====== ======
See accompanying notes to condensed consolidated financial statements.
4
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
($ IN MILLIONS)
THREE MONTHS
ENDED
OCTOBER 31,
-----------------
1993 1992
------ ------
Net Cash Provided from Operating Activities.............................. $ 32.3 $ 53.6
------ ------
Cash Provided (Used) in Investing Activities:
Capital expenditures................................................... (26.4) (56.8)
Purchase of short-term investments..................................... (86.1) (92.6)
Proceeds from short-term investments................................... 74.1 147.0
Purchase of long-term investments...................................... (5.7) (12.3)
Other investing activities............................................. (3.2) .7
------ ------
Net Cash (Used) in Investing Activities........................ (47.3) (14.0)
------ ------
Cash Provided (Used) in Financing Activities:
Net change in short-term debt.......................................... 66.8 72.5
Repayment of long-term debt............................................ (.1) (3.7)
Proceeds from issuance of long-term debt............................... .7 --
------ ------
Payment of dividends................................................... (57.5) (58.7)
Common shares repurchased.............................................. -- (34.8)
Other financing activities............................................. .3 1.0
------ ------
Net Cash Provided (Used) in Financing Activities............... 10.2 (23.7)
------ ------
Effect of exchange rate changes on cash.................................. (1.6) (.2)
Increase (Decrease) in Cash and Cash Equivalents......................... (6.4) 15.7
Cash and Cash Equivalents at Beginning of Period......................... 327.9 296.3
------ ------
Cash and Cash Equivalents at End of Period............................... $321.5 $312.0
====== ======
See accompanying notes to condensed consolidated financial statements.
5
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
SALES BY LOCATION AND BUSINESS SEGMENT
(UNAUDITED)
($ IN MILLIONS)
THREE MONTHS
ENDED
OCTOBER 31,
----------------- PERCENT
1993 1992 CHANGE
------ ------ ------
LOCATION
U.S. sales.................................................... $354.9 $328.2 8
Non-U.S. sales................................................ 157.4 164.0 (4)
------ ------
Total............................................... $512.3 $492.2 4
====== ======
BUSINESS SEGMENT
Pharmaceuticals:
Pain and inflammation:
Naproxen/Naproxen Sodium
U.S. sales............................................. $177.0 $147.0 20
Non-U.S. sales......................................... 56.9 65.3 (13)
------ ------
Total Naproxen/Naproxen Sodium...................... 233.9 212.3 10
------ ------
Ketorolac
U.S. sales
Oral................................................ 32.5 24.2 34
Intramuscular....................................... 29.3 28.2 4
Non-U.S. sales......................................... 17.3 15.4 12
------ ------
Total Ketorolac..................................... 79.1 67.8 17
------ ------
Subtotal.......................................... 313.0 280.1 12
------ ------
Reproductive and endocrinology:
Oral contraceptives...................................... 19.8 20.5 (3)
Nafarelin................................................ 3.1 6.6 (53)
Other.................................................... 2.2 2.5 (12)
------ ------
Subtotal.......................................... 25.1 29.6 (15)
------ ------
Cardio and cerebrovascular:
Nicardipine.............................................. 14.7 15.9 (8)
Ticlopidine.............................................. 13.5 8.1 67
------ ------
Subtotal.......................................... 28.2 24.0 18
------ ------
Dermatological.............................................. 18.0 22.6 (20)
Ganciclovir................................................. 19.8 19.1 4
Other human pharmaceuticals................................. 40.2 39.6 2
Animal Health............................................... 17.6 22.5 (22)
------ ------
Total Pharmaceuticals............................... 461.9 437.5 6
------ ------
Diagnostics................................................... 50.4 54.7 (8)
------ ------
Total............................................... $512.3 $492.2 4
====== ======
WORLDWIDE HUMAN PHARMACEUTICAL SALES
U.S. sales.................................................... $309.8 $275.2 13
Non-U.S. sales................................................ 134.5 139.8 (4)
------ ------
Total............................................... $444.3 $415.0 7
====== ======
6
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain information and footnotes required
by generally accepted accounting principles for complete financial statements
have been omitted. These interim statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
company's 1993 annual report to shareholders for the fiscal year ended July 31,
1993.
The information contained herein reflects all adjustments (all of which are
normal and recurring) which are, in the opinion of management, necessary to a
fair statement of the results of operations, financial condition and cash flows
for the interim periods.
2. Note 13 to the consolidated financial statements in the 1993 annual
report to shareholders provides information concerning contingencies related to
certain pending or possible claims, legal actions, and proceedings against the
company and its subsidiaries. No significant changes or developments have
occurred regarding these contingencies.
3. Inventories consist of the following ($ in millions):
OCTOBER 31, JULY 31,
1993 1993
----------- -----------
Finished goods................................... $ 92.9 $ 85.4
In process....................................... 194.8 198.9
Raw materials and supplies....................... 67.7 77.8
----------- -----------
Total.................................. $ 355.4 $ 362.1
========== ==========
4. Property, plant and equipment consist of the following ($ in millions):
OCTOBER 31, JULY 31,
1993 1993
----------- -----------
Property, plant and equipment -- at cost......... $1,655.9 $1,643.5
Less accumulated depreciation and amortization... (583.6) (558.3)
----------- -----------
Property, plant and equipment -- net............. $1,072.3 $1,085.2
========== ==========
5. Included in operating expenses for the first quarter of fiscal 1993 is
a restructuring charge of $180.0 million resulting principally from a decision
to consolidate several of the company's chemical and pharmaceutical
manufacturing plants and to reduce the worldwide workforce. The restructuring
charge resulted in a reduction of $143.1 million in net income in the first
quarter of fiscal 1993.
6. The company recorded a net benefit for taxes on income of $1.9 million
during the first quarter of fiscal 1994, which included a credit of $9.4 million
resulting from changes in the U.S. tax law enacted in August 1993. The company
also recorded a net benefit for taxes on income of $137.9 million during the
first quarter of fiscal 1993, resulting principally from the tax benefits of
$36.9 million derived from the restructuring charge and a one-time benefit of
$102.5 million from the reduction of certain tax reserves. Excluding the effect
of the benefit, the fiscal 1994 first quarter tax rate was 6 percent, which is
the company's expected effective tax rate for the remainder of fiscal 1994. The
tax rate for the fiscal 1993 first quarter and full year was 4 percent,
excluding the previously-mentioned tax benefits.
7. Effective August 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" and Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." During the first quarter of fiscal 1993, the
company recorded a charge of $64.6 million ($93.7 million pre-tax) representing
the discounted present value of the expected cost of future healthcare benefits
attributed to employees' service rendered prior to August 1, 1992. This charge
represents the cumulative effect on prior years of the accounting change. The
7
company also recorded a benefit of $63.7 million during the first quarter
of fiscal 1993 as the cumulative effect on prior years of the change in
accounting for income taxes, principally relating to tax credits which were
not recorded under the prior accounting standard.
8. Other nonoperating expense in the first quarter of fiscal 1994 included
$3.1 million of additions to reserves relating to environmental matters. Other
nonoperating expense in the first quarter of fiscal 1993 included $42.1 million
of additions to reserves related to environmental matters and a charge of $10.0
million for reserves related to other contingencies.
9. There were no repayments of commercial paper with a maturity period of
greater than three months during either the first quarter of fiscal 1994 or
fiscal 1993.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Earnings per share in the fiscal 1994 first quarter were $.57 compared with
a loss of $(.03) in the first quarter a year ago. Net sales increased 4 percent
to $512.3 million, up from $492.2 million in the first quarter of fiscal 1993.
FIRST QUARTER RESULTS
($ in millions, except per share data)
1Q 1Q PERCENT
FY94 FY93 CHANGE
------ ------ ------
Net Sales.................................. $512.3 $492.2 4
Operating Expenses, excluding restructuring
charge................................... 384.0 404.6 (5)
Restructuring Charge....................... -- 180.0 N/A
Operating Income (Loss).................... 128.3 (92.4 ) N/A
Net Income (Loss).......................... 126.3 (6.1 ) N/A
Earnings (Loss) Per Share.................. $ .57 $(.03 ) N/A
The increase in worldwide sales in the first quarter of fiscal 1994 was due
to higher sales of human pharmaceutical products in the United States.
WORLDWIDE HUMAN PHARMACEUTICAL SALES
($ in millions)
1Q 1Q PERCENT
FY94 FY93 CHANGE
------ ------ ------
U.S. Sales................................. $309.8 $275.2 13
Non-U.S. Sales............................. 134.5 139.8 (4)
------ ------
Total............................ $444.3 $415.0 7
======== ========
The increase in human pharmaceutical sales in the fiscal 1994 first
quarter, compared with the fiscal 1993 first quarter, was due to the initial
shipment of Syntex's generic naproxen and naproxen sodium in the United States,
increased U.S. sales of bulk naproxen and naproxen sodium, and increased sales
of Toradol(R) (ketorolac tromethamine) and Ticlid(R) (ticlopidine hydrochloride)
worldwide. However, sales of branded naproxen and naproxen sodium, reproductive
products, dermatological products and Cardene(R) (nicardipine hydrochloride)
were lower in the fiscal 1994 first quarter compared with the year-ago quarter.
Worldwide human pharmaceutical sales in the fiscal 1994 first quarter were 6
percent lower than sales in the fiscal 1993 fourth quarter.
In the fiscal 1994 first quarter, non-United States pharmaceutical sales
were $14.4 million lower than they would have been had currency exchange rates
that were in effect in the first quarter of fiscal 1993 remained constant.
Without this currency effect, non-U.S. pharmaceutical sales in the fiscal 1994
first quarter would have increased $9.1 million over the prior-year first
quarter.
NAPROXEN/NAPROXEN SODIUM SALES
($ in millions)
1Q 1Q PERCENT
FY94 FY93 CHANGE
------ ------ ------
U.S. Sales................................. $177.0 $147.0 20
Non-U.S. Sales............................. 56.9 65.3 (13)
------ ------
Total............................ $233.9 $212.3 10
======== ========
United States sales of naproxen and naproxen sodium include sales of
branded Naprosyn(R) and Anaprox(R), sales of generic naproxen and naproxen
sodium by Syntex subsidiary Hamilton Pharma, Inc., and sales of the bulk
chemicals naproxen and naproxen sodium to other generic manufacturers. Sales of
the Naprosyn and Anaprox branded products declined in the fiscal 1994 first
quarter compared with sales in the fiscal 1993 first quarter. This decline
9
was more than offset by the initial shipments of generic naproxen and
naproxen sodium and increased sales of the bulk chemicals, naproxen and
naproxen sodium. When compared with sales in the fiscal 1993 fourth
quarter, U.S. sales of branded Naprosyn and Anaprox were lower in the
fiscal 1994 first quarter.
Sales of diagnostic products decreased 8 percent to $50.4 million in the
first quarter of fiscal 1994, compared with sales of $54.7 million in the year
earlier period, largely due to decreased sales of products to detect
drugs-of-abuse.
The company's gross margin percentage was 78.4 percent in the first quarter
of fiscal 1994, compared with 78.9 percent in the first quarter of fiscal 1993.
The decrease was primarily due to shifts in product demand from branded to bulk
and generic naproxen and naproxen sodium products and to excess production
capacity. The full benefit of consolidating manufacturing capacity worldwide
will not be realized until fiscal 1996.
Cost reduction efforts resulted in a decrease of selling, general and
administrative (SG&A) expense to $176.3 million in the fiscal 1994 first
quarter, compared with $203.1 million in the fiscal 1993 first quarter and
$180.4 million in the fiscal 1993 fourth quarter. The company expects SG&A
expense for fiscal 1994 to be lower than fiscal 1993 spending of $761.0 million.
Research and development expense was $97.0 million in the first quarter of
fiscal 1994, compared with $97.4 million in the fiscal 1993 first quarter,
evidencing the company's continued commitment to investment in research and
development to support both the development of compounds currently in clinical
studies and the discovery of new compounds for future development.
Operating expenses for the first quarter of fiscal 1993 included a
restructuring charge of $180.0 million resulting principally from a decision to
consolidate several of the company's chemical and pharmaceutical manufacturing
plants and to reduce the company's worldwide workforce. The restructuring charge
resulted in a reduction of $143.1 million in net income in the first quarter of
fiscal 1993.
Other nonoperating expense in the first quarter of fiscal 1994 included
$3.1 million for additions to reserves related to environmental matters.
Nonoperating items in the first quarter of fiscal 1993 included $42.1 million of
additions to reserves related to environmental matters and a charge of $10.0
million for reserves related to other contingencies.
The company recorded a net benefit for taxes on income of $1.9 million
during the first quarter of fiscal 1994, which included a credit of $9.4 million
resulting from changes in the U.S. tax law enacted in August 1993. The company
also recorded a net benefit for taxes on income of $137.9 million during the
first quarter of fiscal 1993, resulting principally from the tax benefits of
$36.9 million derived from the restructuring charge and a one-time benefit of
$102.5 million from the reduction of certain tax reserves. Excluding the effect
of the benefit, the fiscal 1994 first quarter tax rate was 6 percent, which is
the company's expected effective tax rate for the remainder of fiscal 1994. The
tax rate for the fiscal 1993 first quarter and full year was 4 percent,
excluding the previously-mentioned tax benefits.
The first quarter of fiscal 1993 included a $.9 million charge from the
cumulative effect on prior years of the adoption of two new accounting
standards. The adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," resulted in a benefit of $63.7 million. This was
more than offset by an after-tax charge of $64.6 million ($93.7 million pre-tax)
related to the adoption of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", for
post-retirement healthcare benefits.
PATENTS
The patents and patent applications owned by the company and its
subsidiaries cover a variety of products and chemical processes. In addition,
the company has a number of patent licenses from others.
The company has a series of patents on naproxen and naproxen sodium. The
principal United States patent that substantially protects these products will
expire in December 1993.
FINANCIAL CONDITION
The company continues to maintain a strong financial position and a highly
liquid balance sheet. At October 31, 1993, the company had $656.3 million in
cash and cash equivalents and short-term investments, which provide it with
10
ample capacity to satisfy its cash requirements. In the first quarter of
fiscal 1994, net cash of $32.3 million was provided from operating
activities.
Capital expenditures in the first quarter of 1994, primarily in the
pharmaceuticals business segment, totaled $26.4 million compared with $56.8
million in the first quarter of fiscal 1993. The company plans to fund capital
spending of approximately $200.0 million in fiscal 1994 through cash generated
by operations and borrowings.
Dividends paid on common shares amounted to $57.5 million in the first
quarter of fiscal 1994, a decrease of 2 percent from the first quarter of fiscal
1993, as a result of the share repurchase program undertaken in fiscal 1993. The
current dividend rate paid on an annualized basis is $1.04 per share.
Management believes the company has sufficient borrowing capacity to meet
its needs. The company has an A1+ and P1 rating for its commercial paper and an
AA-and Aa3 bond rating from Standard and Poor's and Moody's, respectively. At
October 31, 1993, commercial paper borrowings of $160.9 million were
outstanding. The company has unused bank lines of credit totaling $471.7
million, of which $100 million is available for the support of commercial paper
borrowings classified as long-term debt. The company's earnings for the first
three months of fiscal 1994 were sufficient to cover fixed charges.
11
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See notes 2 and 8 to the Condensed Consolidated Financial Statements
appearing on pages 6 and 7 of this report on Form 10-Q for a discussion of
certain matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit
11. Statement re computation of earnings per common share
12. Calculation of ratio of earnings to fixed charges
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNTEX CORPORATION
(Registrant)
By /s/ Richard P. Powers
Richard P. Powers
Senior Vice President and
Chief Financial Officer
and Duly Authorized Officer
of the Registrant
DATE: December 14, 1993
13
EXHIBIT 11
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(UNAUDITED)
($ IN MILLIONS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS
ENDED
OCTOBER 31,
-----------------
1993 1992
------ ------
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK:
Net Income (Loss)...................................................... $126.3 $ (6.1)
------ ------
Earnings applicable to common stock.................................... $126.3 $ (6.1)
------ ------
EARNINGS (LOSS) PER COMMON SHARE (AS REPORTED):
Weighted average shares outstanding.................................... 221.0 225.3
------ ------
Earnings (loss) per common share....................................... $ .57 $ (.03)
------ ------
EARNINGS (LOSS) PER COMMON SHARE (ASSUMING FULL DILUTION):*
Weighted average shares outstanding.................................... 221.0 225.3
------ ------
Shares contingently issuable for Stock Option Plans.................... .4 1.3
------ ------
Average shares and share equivalents outstanding....................... 221.4 226.6
------ ------
Earnings (loss) per common share....................................... $ .57 $ (.03)
------ ------
- ------------
* This calculation is submitted in accordance with Regulation S-K item 601(b)11
although not required by footnote 2 to paragraph 14 of APB Opinion No. 15
because it results in dilution of less than 3%.
14
EXHIBIT 12
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
($ IN MILLIONS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
OCTOBER 31,
------------------
1993 1992
------ -------
Income (Loss) Before Taxes on Income.................................... $124.4 $(143.1)
Adjustments:
Fixed Charges:
Interest Expense...................................................... 6.9 7.7
Add:
Amortization of Capitalized Interest.................................. .1 .1
Less:
Capitalized Interest.................................................. (.6) (1.5)
------ -------
Total Adjusted Income (Loss)............................................ $130.8 $(136.8)
Divided by Fixed Charges................................................ 6.9 7.7
------ -------
Ratio of Earnings to Fixed Charges...................................... 19.0 N/A
====== =======
13
APPENDIX E
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended January 31, 1994
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________to___________
COMMISSION FILE NO. 1-4269
SYNTEX CORPORATION
(Exact name of Registrant as specified in its charter)
Republic of Panama 94-1566146
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3401 HILLVIEW AVENUE, PALO ALTO, CA 94304
(Address of principal executive office)
Registrant's telephone number, including area code: (415) 855-5050
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
The number of shares of the Registrant's Common Stock outstanding as of
February 28, 1994: 221,083,080.
PART I -- FINANCIAL INFORMATION
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in millions)
(Unaudited)
January 31 July 31
1994 1993
----------- --------
ASSETS
Current Assets:
Cash and cash equivalents $396.7 $327.9
Short-term investments 314.9 281.7
Trade receivables, net 226.7 264.2
Inventories, net 349.6 362.1
Other 193.7 153.8
-------- --------
Total current assets 1,481.6 1,389.7
Long-term investments 159.7 180.9
Property, plant and equipment, net 1,078.9 1,085.2
Other assets 273.3 304.9
-------- --------
Total $2,993.5 $2,960.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $104.4 $82.4
Accounts payable and accrued
expenses 206.6 231.8
Income and other taxes 89.3 87.1
Accrued compensation 75.4 97.4
Other 197.5 293.8
-------- --------
Total current liabilities 673.2 792.5
Noncurrent liabilities 425.4 378.0
Long-term debt 590.7 590.8
-------- --------
Total Liabilities 1,689.3 1,761.3
-------- --------
Contingencies (see notes)
Shareholders' Equity:
Common stock (shares issued
--240.9) 240.9 240.9
Retained earnings 1,577.2 1,471.5
Cumulative translation
adjustments (19.8) (16.9)
Common stock in treasury
--at cost (shares in
treasury 1994 and 1993--19.9) (494.1) (496.1)
-------- --------
Total shareholders' equity 1,304.2 1,199.4
-------- --------
Total $2,993.5 $2,960.7
======== ========
See accompanying notes to condensed consolidated financial statements.
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in millions except per-share amounts)
Three Months Ended Six Months Ended
January 31 January 31
----------------- --------------------
1994 1993 1994 1993
------ ------ -------- ------
Net Sales $489.1 $505.5 $1,001.4 $997.7
------ ------ -------- ------
Costs and expenses:
Costs of goods sold 118.5 96.2 229.2 200.3
Selling, general and administrative 170.0 187.6 346.3 390.7
Research and development 99.1 100.1 196.1 197.5
Restructuring charge -- -- -- 180.0
------ ------ -------- ------
Total 387.6 383.9 771.6 968.5
------ ------ -------- ------
Operating income 101.5 121.6 229.8 29.2
------ ------ -------- ------
Nonoperating income (expense):
Interest income 8.8 9.9 17.4 21.5
Interest expense (6.9) (7.4) (13.2) (13.7)
Other -- net (1.5) -- (7.7) (56.0)
------ ------ -------- ------
Total 0.4 2.5 (3.5) (48.2)
------ ------ -------- ------
Income (loss) before taxes on income and
cumulative effect of accounting changes 101.9 124.1 226.3 (19.0)
Provision (benefit) for taxes on income 6.1 5.0 4.2 (132.9)
------ ------ -------- ------
Income before cumulative effect of accounting
changes 95.8 119.1 222.1 113.9
Cumulative effect of accounting changes, net
of tax -- -- -- (0.9)
------ ------ -------- ------
Net income $95.8 $119.1 $222.1 $113.0
====== ====== ======== ======
Shares used in computing earnings per
common share (see Exhibit 11) 221.0 222.3 221.0 223.7
====== ====== ======== ======
Earnings per common share $0.43 $0.54 $1.00 $0.51
====== ====== ======== ======
Dividends per common share $0.26 $0.26 $0.52 $0.52
====== ====== ======== ======
See accompanying notes to condensed consolidated financial statements.
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
($ in millions)
Six Months Ended
January 31
-----------------
1994 1993
------ ------
Net Cash Provided from Operating Activities $264.2 $135.4
------ ------
Cash Provided (Used) in Investing Activities:
Capital expenditures (65.3) (100.6)
Purchase of short-term investments (146.0) (148.6)
Proceeds from short-term investments 181.0 306.7
Purchase of long-term investments (47.1) (16.7)
Other investing activities (24.6) 0.0
------ ------
Net Cash Provided (Used) in Investing Activities (102.0) 40.8
------ ------
Cash Provided (Used) in Financing Activities:
Net change in short-term debt 22.3 (93.2)
Repayment of long-term debt (0.1) (103.7)
Proceeds from issuance of long-term debt 0.7 100.8
Payment of dividends (114.9) (117.0)
Common shares repurchased -- (124.7)
Other financing activities 0.6 4.6
------ ------
Net Cash Used in Financing Activities (91.4) (333.2)
------ ------
Effect of exchange rate changes on cash (2.0) (1.5)
------ ------
Increase (Decrease) in Cash and Cash Equivalents 68.8 (158.5)
Cash and Cash Equivalents at Beginning of Period 327.9 296.3
------ ------
Cash and Cash Equivalents at End of Period $396.7 $137.8
====== ======
See accompanying notes to condensed consolidated financial statements.
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
SALES BY LOCATION AND BUSINESS SEGMENT
(Unaudited)
($ in millions)
Three Months Six Months
Ended January 31 Ended January 31
---------------- Percent ------------------- Percent
1994 1993 Change 1994 1993 Change
------ ------ ------- -------- ------ ------
LOCATION
U.S. sales $327.9 $348.4 (6) $682.8 $676.6 1
Non-U.S. sales 161.2 157.1 3 318.6 321.1 (1)
------ ------ -------- ------
Total $489.1 $505.5 (3) $1,001.4 $997.7 --
====== ====== ======== ======
BUSINESS SEGMENT
Pharmaceuticals:
Pain and inflammation:
Naproxen/Naproxen Sodium
U.S. sales $126.7 $156.3 (19) $303.7 $303.3 --
Non-U.S. sales 60.6 61.4 (1) 117.5 126.7 (7)
------ ------ -------- ------
Total Naproxen/Naproxen Sodium 187.3 217.7 (14) 421.2 430.0 (2)
------ ------ -------- ------
Ketorolac
U.S. sales
Oral 34.4 31.6 9 66.9 55.8 20
Intramuscular 30.9 31.1 (1) 60.2 59.3 1
Non-U.S. sales 15.0 15.5 (4) 32.3 30.9 4
------ ------ -------- ------
Total Ketorolac 80.3 78.2 3 159.4 146.0 9
------ ------ -------- ------
Subtotal 267.6 295.9 (10) 580.6 576.0 1
------ ------ -------- ------
Reproductivity and endocrinology:
Oral contraceptives 17.7 20.6 (14) 37.5 41.1 (9)
Nafarelin 3.9 5.6 (30) 7.0 12.2 (42)
Other 2.6 2.8 (7) 4.8 5.3 (9)
------ ------ -------- ------
Subtotal 24.2 29.0 (17) 49.3 58.6 (16)
------ ------ -------- ------
Cardio and cerebrovascular:
Nicardipine 20.5 17.8 15 35.2 33.7 5
Ticlopidine 17.7 10.4 70 31.2 18.5 68
------ ------ -------- ------
Subtotal 38.2 28.2 35 66.4 52.2 27
------ ------ -------- ------
Dermatological 18.7 21.7 (14) 36.7 44.3 (17)
Ganciclovir 24.3 19.6 24 44.1 38.7 14
Other human pharmaceuticals 47.6 41.9 14 87.8 81.5 8
Animal Health 18.0 18.2 (1) 35.6 40.7 (13)
------ ------ -------- ------
Total Pharmaceuticals 438.6 454.5 (4) 900.5 892.0 1
------ ------ -------- ------
Diagnostics 50.5 51.0 (1) 100.9 105.7 (5)
------ ------ -------- ------
Total $489.1 $505.5 (3) $1,001.4 $997.7 --
====== ====== ======== ======
WORLDWIDE HUMAN PHARMACEUTICAL SALES
U.S. sales $281.8 $300.9 (6) $591.6 $576.1 3
Non-U.S. sales 138.8 135.4 3 273.3 275.2 (1)
------ ------ -------- ------
Total $420.6 $436.3 (3) $864.9 $851.3 2
====== ====== ======== ======
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles for complete
financial statements have been omitted. These interim statements should
be read in conjunction with the consolidated financial statements and
notes thereto included in the company's 1993 annual report to
shareholders for the fiscal year ended July 31, 1993.
The information contained herein reflects all adjustments (all of which
are normal and recurring) which are, in the opinion of management,
necessary to a fair statement of the results of operations, financial
condition and cash flows for the interim periods.
2. Note 13 to the consolidated financial statements in the 1993 annual report
to shareholders provides information concerning contingencies related to
certain pending or possible claims, legal actions, and proceedings against
the company and its subsidiaries. No significant changes or developments
have occurred regarding these contingencies.
3. Inventories consist of the following ($ in millions):
January 31 July 31
1994 1993
---------- -------
Finished goods $85.9 $85.4
In process 193.8 198.9
Raw materials and supplies 69.9 77.8
------ ------
Total $349.6 $362.1
====== ======
4. Property, plant and equipment consist of the following ($ in millions):
January 31 July 31
1994 1993
---------- --------
Property, plant and equipment - at cost $1,686.5 $1,643.5
Less accumulated depreciation
and amortization (607.6) (558.3)
-------- --------
Property, plant and equipment - net $1,078.9 $1,085.2
======== ========
5. Included in operating expenses for the first half of fiscal 1993 is a
first quarter restructuring charge of $180.0 million resulting principally
from a decision to consolidate several of the company's chemical and
pharmaceutical manufacturing plants and to reduce the worldwide workforce.
The restructuring charge resulted in a reduction of $143.1 million in net
income in the first half of fiscal 1993.
6. The company recorded a net provision of $4.2 million for taxes on income
during the first half of fiscal 1994, which included a first quarter
credit of $9.4 million resulting from changes in the U.S. tax law enacted
in August 1993. The company also recorded a net benefit of $132.9 million
for taxes on income during the first half of fiscal 1993, resulting
principally from the first quarter tax benefits of $36.9 million derived
from the restructuring charge and a one-time benefit of $102.5 million
from the reduction of certain tax reserves. Excluding the effect of the
benefit, the effective income tax rate for the second quarter and first
half of fiscal 1994 was 6 percent, which is the company's expected
effective tax rate for the remainder of fiscal 1994. The income tax rate
for the fiscal 1993 second quarter and full year was 4 percent, excluding
the previously-mentioned tax benefits.
7. Effective August 1, 1992, the company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." During the first quarter
of fiscal 1993, the company recorded a charge of $64.6 million ($93.7
million pre-tax) representing the discounted present value of the expected
cost of future healthcare benefits attributed to employees' service
rendered prior to August 1, 1992. This charge represents the cumulative
effect on prior years of the accounting change. The company also recorded
a benefit of $63.7 million during the first quarter of fiscal 1993 as the
cumulative effect on prior years of the change in accounting for income
taxes, principally relating to tax credits which were not recorded under
the prior accounting standard.
8. Other nonoperating expense in the first quarter and half of fiscal 1994
included $3.1 million of additions to reserves relating to environmental
matters. Other nonoperating expense in the first half of fiscal 1993
included $42.4 million of additions to reserves related to environmental
matters, of which $42.1 million was recorded in the first quarter. Other
nonoperating expense in the first quarter and half of fiscal 1993 also
included a charge of $10.0 million for reserves related to other
contingencies.
9. There were no repayments of commercial paper with a maturity period of
greater than three months during the first half of either fiscal 1994 or
fiscal 1993.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 1994,
COMPARED WITH THE SAME PERIOD IN FISCAL 1993
Earnings per share in the second quarter of the company's 1994 fiscal year were
$.43 compared with $.54 in the second quarter a year ago. Net sales decreased
3 percent to $489.1 million, down from $505.5 million in the second quarter of
fiscal 1993.
SECOND QUARTER RESULTS
($ in millions, except per share data)
Three Months Ended
January 31
----------------- Percent
1994 1993 Change
------ ------ -------
Net Sales $489.1 $505.5 (3)
Operating Expenses 387.6 383.9 1
Operating Income 101.5 121.6 (17)
Net Income 95.8 119.1 (20)
Earnings Per Share $0.43 $0.54 (20)
The decline in earnings in the second quarter of fiscal 1994 compared with the
second quarter a year ago was due primarily to the loss of U.S. market share
of Naprosyn(R) (naproxen) and Anaprox(R) (naproxen sodium) branded products to
lower-priced generic naproxen and naproxen sodium products, including those
sold by Hamilton Pharma, Inc., a Syntex subsidiary.
The last principal U.S. patent for Naprosyn and Anaprox, the company's leading
products, expired during the fiscal 1994 second quarter on December 21, 1993.
The patents elsewhere in the world expired a number of years ago.
Earnings declined at a greater rate than sales in the fiscal 1994 second
quarter compared with the prior-year quarter due to a shift in product demand
from the higher-margin branded products to the lower-margin generic and bulk
naproxen and naproxen sodium products and to excess production capacity in the
company's chemical and pharmaceutical manufacturing plants. In the fiscal 1994
second quarter, the company's gross profit margin was 75.8 percent, down from
81.0 percent in the second quarter of fiscal 1993.
WORLDWIDE HUMAN PHARMACEUTICAL SALES
($ in millions)
Three Months Ended
January 31
----------------- Percent
1994 1993 Change
------ ------ -------
U.S. Sales $281.8 $300.9 (6)
Non-U.S. Sales 138.8 135.4 3
------ ------
Total $420.6 $436.3 (3)
====== ======
Worldwide human pharmaceutical sales decreased 3 percent in the second quarter
of fiscal 1994 compared to the prior-year second quarter due primarily to the
decline of Naprosyn and Anaprox sales in the United States. In the fiscal 1994
second quarter, non-United States pharmaceutical sales were $8.3 million lower
than they would have been had currency exchange rates that were in effect in
the second quarter of fiscal 1993 remained constant.
NAPROXEN/NAPROXEN SODIUM SALES
($ in millions)
Three Months Ended
January 31
----------------- Percent
1994 1993 Change
------ ------ -------
U.S. Sales $126.7 $156.3 (19)
Non-U.S. Sales 60.6 61.4 (1)
------ ------
Total $187.3 $217.7 (14)
====== ======
United States sales of naproxen and naproxen sodium include sales of branded
Naprosyn and Anaprox, sales of generic naproxen and naproxen sodium by Hamilton
Pharma, Inc., and sales of the bulk chemicals naproxen and naproxen sodium to
non-related generic manufacturers. Hamilton Pharma, Inc., began selling generic
naproxen and naproxen sodium in October 1993.
January 1994 is the first full month in which non-Syntex generic competition
for naproxen and naproxen sodium occurred in the United States following patent
expiration in the United States in December 1993.
Independent audit data for the United States indicate that the share of new
prescriptions for all forms of naproxen in the prescription, nonsteroidal
anti-inflammatory anti-arthritis market for the month of January 1994 was 17.4
percent; in December 1993, the share was 17.2 percent; and in January 1993,
before any generic products were available, the share was 17.6 percent. Of the
new prescriptions filled for the naproxen molecule in January 1994, 64 percent
were filled with generic naproxen sold by Hamilton Pharma, Inc., 31 percent
were filled with branded Naprosyn and 5 percent were filled with generic
naproxen sold by non-related companies.
The rate of shift from brand to generic in the case of Naprosyn is more rapid
than any previous prescription product after patent expiration as far as the
company is aware. The company believes that changes in the healthcare
environment are contributing to this shift.
Following the expiration of the U.S. patent for Naprosyn and Anaprox, the
company now faces competition from approximately 10 companies marketing generic
naproxen and/or naproxen sodium. This competition has resulted in a shift from
branded to generic products and in a fast and steep decline in the price of
generic naproxen and naproxen sodium, including the price of the products sold
by the company's Hamilton subsidiary.
With the advent of so many companies now supplying naproxen and naproxen
sodium, customer inventories for those products in the United States appear to
be at levels higher than the current market demand. Most of the companies
marketing generic forms of naproxen and naproxen sodium in the United States
are purchasing bulk chemicals from Syntex.
Given the negative impact of the Naprosyn/Anaprox patent expiration, which was
not fully reflected in the fiscal 1994 second quarter because the patent
expired mid-quarter but which is expected to continue, the company expects that
the next two years will be difficult years. Syntex and The Procter &
Gamble Company received clearance from the United States Food and Drug
Administration in January 1994 to market ALEVE(R), a new over-the-counter
(OTC) pain reliever with naproxen sodium as its key ingredient, in the
United States.
ALEVE has three years of marketing exclusivity from the date of approval.
Heavy up-front marketing expenses will prevent the company from realizing
profits on ALEVE for the first few years, but the company believes that once
established in the marketplace, OTC products have the potential to be
profitable for decades. The U.S. market for OTC analgesics is estimated at $2.7
billion in annual sales.
KETOROLAC
Worldwide sales of Toradol(R) (ketorolac tromethamine) in the second quarter of
fiscal 1994 increased 3 percent over the 1993 second quarter.
In 1993, regulatory authorities in Germany and France suspended the product
license pending further review of available worldwide ketorolac usage data, and
in the case of France, pending further deliberations of the European Committee
for Proprietary Medicinal Products (CPMP). Final results of a U.S. epidemiology
study of 10,000 hospitalized patients treated with intramuscular injectable
ketorolac compared with 10,000 patients treated with injectable opioid
analgesics have been submitted to regulatory agencies and the CPMP. The CPMP
is expected to discuss the worldwide safety data as well as the results of the
epidemiology study data at a meeting in March.
The company believes that the data from controlled clinical trials, from
worldwide post-marketing reports and from the large retrospective U.S.
epidemiological study offer strong evidence that ketorolac has a favorable
risk/benefit profile when prescribed for properly selected patients and used
according to the product label.
OTHER PRODUCTS
Sales of Cytovene(R) (ganciclovir sodium), Cardene(R) (nicardipine
hydrochloride) and Ticlid(R) (ticlopidine hydrochloride) increased in the
fiscal 1994 second quarter over the prior-year second quarter. However, second
quarter fiscal 1994 sales of oral contraceptives, dermatological products and
Synarel(R) (nafarelin acetate) declined from sales levels in the second quarter
last year.
EXPENSES
Selling, general and administrative (SG&A) expense decreased 9 percent to
$170.0 million in the fiscal 1994 second quarter from $187.6 million in the
second quarter a year ago. As a result of efforts to reduce costs, second
quarter fiscal 1994 SG&A spending was at the lowest level since the second
quarter of fiscal 1991.
Research and development expense decreased 1 percent to $99.1 million in the
fiscal 1994 second quarter, compared with $100.1 million in the fiscal 1993
second quarter.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, 1994,
COMPARED WITH THE SAME PERIOD IN FISCAL 1993
Earnings per share for the first six months of fiscal 1994 increased 96 percent
to $1.00 compared with $0.51 for the same period a year ago. Sales increased
slightly to $1,001.4 million, up from $997.7 million in the fiscal 1993 period.
SIX MONTH RESULTS
($ in millions, except per share data)
Six Months Ended
January 31
------------------- Percent
1994 1993 Change
-------- ------ -------
Net Sales $1,001.4 $997.7 --
Operating Expenses
excluding restructuring charge 771.6 788.5 (2)
Restructuring Charge -- 180.2 (100+)
Operating Income 229.8 29.2 100+
Net Income 222.1 113.0 97
Earnings Per Share $1.00 $0.51 96
The increase in worldwide sales in the first half of fiscal 1994 was primarily
due to higher sales of human pharmaceutical products in the United States,
partially offset by lower sales outside the United States. United States sales
of naproxen and naproxen sodium were $303.7 million in the first half of fiscal
1994 compared with $303.3 million in the first half of fiscal 1993. However,
the last patent on these products expired in the United States on December 21,
1993, and sales during the second fiscal quarter of fiscal 1994 were lower than
fiscal 1993. (See previous discussion.) Sales of ketorolac intramuscular
injectable and oral tablets, nicardipine, ticlopidine, and ganciclovir
increased in the first half of fiscal 1994 compared with the prior year period.
However, sales of dermatologic, reproductive and endocrinology products
declined in the first half of fiscal 1994 as compared with the prior year
period.
WORLDWIDE HUMAN PHARMACEUTICAL SALES
($ in millions)
Six Month Ended
January 31
----------------- Percent
1994 1993 Change
------ ------ -------
U.S. Sales $591.6 $576.1 3
Non-U.S. Sales 273.3 275.2 (1)
------ ------
Total $864.9 $851.3 2
====== ======
NAPROXEN/NAPROXEN SODIUM SALES
($ in millions)
Six Month Ended
January 31
----------------- Percent
1994 1993 Change
------ ------ -------
U.S. Sales $303.7 $303.3 --
Non-U.S. Sales 117.5 126.7 (7)
------ ------
Total $421.2 $430.0 (2)
====== ======
Sales of diagnostic products decreased 5 percent to $100.9 million in the first
half of fiscal 1994 compared with sales of $105.7 million in the year earlier
period.
The company's gross margin percentage was 77.1 percent in the first half of
fiscal 1994, compared with 79.9 percent in the first half of fiscal 1993. As
discussed under Second Quarter Results, the decrease is primarily due to a
shift in product demand from the higher-margin branded products to the
lower-margin generic and bulk naproxen and naproxen sodium products and to
excess capacity in the company's chemical and pharmaceutical manufacturing
plants.
Operating expenses for the first half of fiscal 1993 included a restructuring
charge of $180.0 million resulting principally from a decision to consolidate
several of the company's chemical and pharmaceutical manufacturing plants and
to reduce the company's worldwide workforce. The restructuring charge resulted
in a reduction of $143.1 million in net income in the first half of fiscal
1993.
Other nonoperating expense in the first half of fiscal 1994 included $3.1
million for additions to reserves related to environmental matters.
Nonoperating items in the first half of fiscal 1993 included $42.4 million of
additions to reserves related to environmental matters and a charge of $10.0
million for reserves related to other contingencies.
The company recorded a net provision for taxes on income of $4.2 million during
the first half of fiscal 1994, which included a first quarter credit of $9.4
million resulting from changes in the U.S. tax law enacted in August 1993. The
company also recorded a net benefit for taxes on income of $132.9 million
during the first half of fiscal 1993, resulting principally from the first
quarter tax benefits of $36.9 million derived from the restructuring charge and
a one-time benefit of $102.5 million from the reduction of certain tax
reserves. Excluding the effect of the benefit, the fiscal 1994 first half tax
rate was 6 percent, which is the company's expected effective tax rate for the
remainder of fiscal 1994. The tax rate for the fiscal 1993 first half and full
year was 4 percent, excluding the previously-mentioned tax benefits.
The first half of fiscal 1993 included a $0.9 million charge from the
cumulative effect on prior years of the adoption of two new accounting
standards. The adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," resulted in a benefit of $63.7 million.
This was more than offset by an after-tax charge of $64.6 million ($93.7
million pre-tax) related to the adoption of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions", for post-retirement healthcare benefits.
PATENTS
The patents and patent applications owned by the company and its subsidiaries
cover a variety of products and chemical processes. In addition, the company
has a number of patent licenses from others.
The last principal United States patent on naproxen and naproxen sodium expired
in December 1993.
FINANCIAL CONDITION
The company continues to maintain a strong financial position and a highly
liquid balance sheet. At January 31, 1994, the company had $711.6 million in
cash and cash equivalents and short-term investments, which provide it with
ample capacity to satisfy its cash requirements. In the first half of fiscal
1994, net cash of $264.2 million was provided from operating activities.
Capital expenditures in the first half of fiscal 1994, primarily in the
pharmaceuticals business segment, totaled $65.3 million compared with $100.6
million in the first half of fiscal 1993. The company plans to fund capital
spending of approximately $175.0 million in fiscal 1994 through cash generated
by operations and borrowings.
Dividends paid on common shares amounted to $114.9 million in the first half of
fiscal 1994, a decrease of 2 percent from the first half of fiscal 1993, as a
result of the share repurchase program undertaken in fiscal 1993. The current
dividend rate paid on an annualized basis is $1.04 per share.
Management believes the company has sufficient borrowing capacity to meet its
needs. The company has an A1+ rating for its commercial paper and an AA- bond
rating from Standard and Poor's. The company has a P1 rating for its
commercial paper from Moody's. As of March 9, 1994, Moody's revised the
company's bond rating to A2.
At January 31, 1994, commercial paper borrowings of $114.5 million were
outstanding. The company has unused bank lines of credit totaling $461.0
million, of which $100 million is available for the support of commercial paper
borrowings classified as long-term debt. The company's earnings for the first
six months of fiscal 1994 were sufficient to cover fixed charges.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See notes 2 and 8 to the Condensed Consolidated Financial Statements
appearing on pages 6 and 7 of this report on Form 10-Q for a discussion of
certain matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following votes were cast for and withheld from the nominees for
director at the annual meeting of shareholders held on December 6, 1993:
Shares Voted
Nominee For Withheld
- ------- ------------ ---------
Dana G. Leavitt 179,980,951 4,410,852
Robert S. Miller, Jr. 179,747,902 4,643,903
Miriam Stoppard 179,657,476 4,734,329
James N. Wilson 180,093,207 4,298,598
Two proposals were submitted to the shareholders at the annual
meeting. The first proposal, to amend the Syntex Corporation 1984 Stock Option
and Stock Appreciation Rights Plan, was approved by a vote of 168,134,142
shares in favor, 14,104,662 shares opposed, and 2,153,001 shares abstaining.
The second proposal, to adopt the Syntex Corporation Call-to-Action Incentive
Plan, was approved by a vote of 168,324,169 shares in favor, 13,937,068 shares
opposed, and 2,130,568 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit
3. Articles and By-Laws
By-Laws of Syntex Corporation, as last amended December 6, 1993,
10. Material Contracts
a) Syntex Corporation 1984 Stock Option and Stock Appreciation Rights
Plan (As Amended July 29, 1993)
b) Amendment to Syntex US Employee Supplemental Retirement Savings
Plan (Effective as of January 1, 1994)
11. Statement re computation of earnings per common share
12. Calculation of ratio of earnings to fixed charges
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the 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.
SYNTEX CORPORATION
(Registrant)
By /s/ Richard P. Powers
-------------------------------
Richard P. Powers
Senior Vice President and
Chief Financial Officer
and Duly Authorized Officer
of the Registrant
DATE: March 11, 1994
-15-
EXHIBIT 3
AS OF 12-06-93
______________________________________________________________________________
______________________________________________________________________________
BY-LAWS
OF
SYNTEX CORPORATION
___________________
Adopted July 22, 1957
As Amended to December 6, 1993
______________________________________________________________________________
______________________________________________________________________________
BY-LAWS
OF
SYNTEX CORPORATION
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meeting. The Annual Meeting of the stockholders of
the Corporation shall be held at 11:00 o'clock in the forenoon, local time, on
the second Friday in December, or on such other date as the Board of Directors
may from time to time determine, for the purpose of electing Directors and for
the transaction of such other business as may be properly brought before the
meeting.
SECTION 2. Special Meetings. Special meetings of the stockholders may
be called at any time by the Board of Directors, the Chairman of the Board, or
the President for the transaction of such business as may be properly brought
before the meeting.
SECTION 3. Place of Meeting. Every annual meeting of the stockholders
and every other meeting of the stockholders shall be held at such location as
the Board of Directors from time to time by resolution may determine.
SECTION 4. Notice of Meeting. Whenever an annual or special meeting
of the stockholders is to be held, the Chairman of the Board or a Vice Chairman
of the Board or the President or a Vice President or the Secretary or an
Assistant Secretary shall sign a written notice thereof. Such notice shall
state the purpose or purposes for which the meeting is called and the time
when and the place where it is to be held, and a copy thereof shall be
served either personally or by mail upon each stockholder of record
entitled to vote at such meeting not less than ten or more than sixty days
before the meeting. If mailed, it shall be directed to a stockholder at
his address as it appears on the Stock Register unless he shall have filed
with the Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which case it shall be
mailed to the address designated in such request. Stockholders shall be
given at least thirty (30) days notice of any annual or special meeting of
stockholders unless the Board of Directors, the Chairman of the Board, any
Vice Chairman of the Board, or the President prescribes otherwise.
SECTION 5. Quorum. At any meeting of the stockholders, the holders of
a majority in number of the shares of stock of the Corporation, issued and
outstanding and entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum of the stockholders for all
purposes, unless the representation of a larger number of shares shall be
required by law, by the Articles of Incorporation or by these By-Laws and in
that case the representation of the number of shares so required shall
constitute a quorum.
If the holders of the number of shares of stock necessary to
constitute a quorum shall fail to attend in person or by proxy at the time and
place fixed, the holders of a majority in number of the shares of stock of the
Corporation present in person or by proxy may adjourn the meeting from time to
time without notice other than by announcement at the meeting, until holders of
the amount of stock requisite to constitute a quorum shall be present, and at
any such adjourned meeting at which a quorum shall be present, any business may
be transacted at the meeting as originally noticed.
SECTION 6. Organization. The Chairman of the Board, or in his
absence, any Vice Chairman of the Board, or in his absence, the President or,
in his absence, any Vice President, shall call meetings of the stockholders to
order, and shall act as Chairman of such meetings. In the absence of the
Chairman of the Board, all Vice Chairmen of the Board, the President and all
Vice Presidents, the stockholders present in person or by proxy shall elect a
Chairman.
The Secretary of the Corporation, or, in his absence, an Assistant
Secretary, shall act as Secretary of all meetings of the stockholders; but in
the absence of the Secretary and of all Assistant Secretaries at any meeting of
the stockholders, the Chairman may appoint any person to act as Secretary of
the meeting.
SECTION 7. Qualification of Voters. The Board of Directors may
prescribe a period, not exceeding forty days prior to the date of meetings of
the stockholders during which no transfer of stock on the books of the
Corporation may be made; or in lieu of prohibiting the transfer of stock may
fix a time not more than forty days prior to the date of any meeting of
stockholders as the time as of which stockholders entitled to notice of and to
vote at such meeting shall be determined, and all persons who were holders of
record of voting stock at such time and no others shall be entitled to notice
of and to vote at such meeting.
SECTION 8. Voting. Unless otherwise provided in the Articles of
Incorporation or other certificates filed pursuant to law, every stockholder of
record shall be entitled at every meeting of the Corporation to one vote in
person or by proxy for every share standing in his name on the books of the
Corporation. No vote shall be given upon any stock while owned by the
Corporation or that is acquired in violation of applicable law, nor shall any
stock so owned be counted in determining if a quorum is present at any
meeting. The votes for Directors, and, upon the demand of any stockholder,
the votes upon any question before the meeting, shall be by ballot.
SECTION 9. Inspectors. The Board of Directors shall appoint at least
two Inspectors of Election to serve at any election of Directors by
stockholders or in any other case in which Inspectors may act. If Inspectors
of Election are not so appointed and a stockholder present and entitled to vote
at such meeting requests that Inspectors be appointed, or if any Inspector so
appointed shall be absent or fail to act, or if his office becomes vacant, such
Inspector or Inspectors shall be appointed by the person presiding at the
meeting, provided, however, that if any stockholder shall demand an election,
such Inspector or Inspectors shall be elected by the votes cast in person or by
proxy by the holders of record of a plurality of the shares voted at the
meeting, and the person presiding at the meeting shall conduct such election.
The Inspectors appointed to act at any meeting of the stockholders, before
entering upon the discharge of their duties, shall be sworn faithfully to
execute the duties of Inspectors at such meeting with strict impartiality, and
according to the best of their ability, and the oath so taken shall be
subscribed by them.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number and Term of Office. The business of the
Corporation shall be managed by a Board of thirteen Directors, who need not
be stockholders of the Corporation or residents or citizens of the Republic
of Panama. The Directors shall, except as hereinafter otherwise provided
for filling vacancies, be elected by ballot at the annual meeting of the
stockholders (at which a quorum is present) by a plurality of the votes
cast at such election, and shall continue in office until their respective
successors shall have been elected and shall qualify. If pursuant to a
change in these By-Laws, the number of Directors be increased, the
additional Directors may be elected by a majority of the Directors in
office at the time of the increase, or, if not so elected prior to the next
annual meeting of stockholders, they shall be elected by vote of the
stockholders.
SECTION 2. Vacancies. Any vacancy occurring in the Board of
Directors, between terms, by reason of death, resignation, disqualification or
otherwise may be filled by the affirmative vote of a majority of the Directors
in office when such vote is taken. Any Directors elected to fill a vacancy
shall hold office for the unexpired term of the Director whose place shall be
so vacated and until the successor of the Director so elected shall have been
elected and shall qualify.
SECTION 3. Place of Meeting. The Board of Directors may hold their
meetings and may have an office and keep the books of the Corporation (except
as may be otherwise provided by law) in such place or places as the Board from
time to time by resolution may determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time as the Board of Directors may from
time to time by resolution determine. No notice shall be required for any
such regular meeting of the Board of Directors; but a copy of every
resolution fixing or changing the time or place of such meetings shall be
mailed to every Director at least five days before the first meeting held
in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, or any Vice Chairman of the Board, or the President, or by one-third or
more of the Directors for the time being in office. The Secretary or an
Assistant Secretary shall give notice of the time and place of holding each
special meeting by mailing the same at least two days before the meeting or by
telegraphing the same at least one day before the meeting, to each Director,
but such notice may be waived by any Director. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at any special
meeting. At any meeting at which every Director shall be present, even though
without any notice, any business may be transacted.
SECTION 6. Quorum. At all meetings of the Board of Directors four
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting of the Board of Directors
at which a quorum is present shall be the act of the Board of Directors. If at
any meeting of said Board there be less than a quorum present, a majority of
those present may adjourn the meeting from time to time.
SECTION 7. Finance Committee. The Board of Directors may by
resolution designate from among its own members a Finance Committee to consist
of at least three members. The Finance Committee shall designate from
among its own members a Chairman of said Committee. The Finance Committee
shall hold its meetings on such notice and at such time and place as the
Chairman thereof may designate, and a majority shall constitute a quorum
for the transaction of business. The Finance Committee shall have such
powers, functions and duties as may be determined from time to time by the
Board of Directors.
SECTION 8. Compensation and Benefits Committee. The Board of
Directors may by resolution designate from among its own members a Compensation
and Benefits Committee to consist of at least three members, none of whom shall
be officers or employees of the Corporation or any of its subsidiaries. The
Compensation and Benefits Committee shall designate from among its own members
a Chairman of said Committee. The Compensation and Benefits Committee shall
hold its meetings on such notice and at such time and place as the Chairman
thereof may designate, and a majority shall constitute a quorum for the
transaction of business. The Compensation and Benefits Committee shall have
such powers, functions and duties as may be determined from time to time by the
Board of Directors.
SECTION 9. Audit Committee. The Board of Directors may by resolution
designate from among its own members an Audit Committee to consist of at least
three, and no more than five, members, all of whom shall be independent of
management and free from any relationship that in the opinion of the Board of
Directors, would interfere with the exercise of independent judgement as Audit
Committee members. The Audit Committee shall designate from among its own
members a Chairman of said Committee. The Audit Committee shall hold its
meetings on such notice and at such time and place as the Chairman thereof may
designate, and two members shall constitute a quorum for the transaction of
business. The Audit Committee shall have such powers, functions and duties as
may be determined from time to time by the Board of Directors.
SECTION 10. Nominating Committee. The Board of Directors may by
resolution designate from among its own members a Nominating Committee to
consist of at least three members. The Nominating Committee shall designate
from among its own members a Chairman of said Committee. The Nominating
Committee shall hold its meetings on such notice and at such time and place as
the Chairman thereof may designate, and a majority shall constitute a quorum
for the transaction of business. The Nominating Committee shall have such
powers, functions and duties as may be determined from time to time by the
Board of Directors.
SECTION 11. Directors Emeritus. The Board of Directors may from
time to time appoint a retired Director or retired Directors to the honorary
position of Director Emeritus, to act in an advisory capacity to the Board in
such matters as the Chairman may request. Directors Emeritus shall not be
elected by the stockholders and shall not be entitled to vote on matters
presented to the Board. Directors Emeritus shall not have the duties or
responsibilities of Directors but rather of advisors to the Corporation and
shall not be personally liable to the Corporation or its stockholders for
monetary damages on account of their acts or omissions as Directors Emeritus
other than acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law. Directors Emeritus shall not be
counted in establishing a quorum for the transaction of business.
ARTICLE III
OFFICERS
SECTION 1. Officers. The officers of the Corporation shall be a
Chairman of the Board, one or more Vice Chairmen of the Board, a President, one
or more Vice Presidents, a Treasurer and a Secretary. At the discretion of the
Board of Directors, the Corporation may have one or more Assistant Secretaries,
one or more Assistant Treasurers and such other officers as the Board of
Directors may deem advisable. All such officers shall be elected by the Board
of Directors at the first meeting of the Board following each annual meeting of
the stockholders. The Chairman of the Board, all Vice Chairmen of the Board,
and the President shall be members of the Board of Directors; the other
officers may but need not be Directors. The officers of the Corporation (in
addition to their powers and duties as set forth in these By-Laws) shall
respectively have such authority and perform such duties, subject to the
control of the Board of Directors, as from time to time may be prescribed by
the Board of Directors. All officers, agents and employees shall be subject to
removal at any time by a majority vote of the Board of Directors, and all
agents and employees other than officers elected or appointed by the Board of
Directors shall also be subject to removal at any time by the officer
appointing them.
SECTION 2. Powers and Duties of the Chairman of the Board. The
Chairman of the Board, subject to the control of the Board of Directors, shall
be the chief executive officer of the Corporation and shall have general charge
and control of all of its business and affairs. He shall preside at all
meetings of the stockholders and of the Board of Directors. He shall
from time to time secure information concerning the business and affairs of the
Corporation and shall promptly lay such information before the Board of
Directors. He shall communicate to the said Board all matters presented by any
officer of the Corporation for its consideration, and shall from time to time
communicate to the officers such action of the Board of Directors as may in his
judgment affect the performance of their official duties.
The Chairman of the Board may sign certificates for shares of stock
with the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, and may sign and execute contracts in the name of the Corporation
when authorized so to do by the Board of Directors.
SECTION 3. Powers and Duties of the Vice Chairmen of the Board. A
Vice Chairman of the Board, in the absence of the Chairman of the Board, shall
preside at all meetings of the stockholders and of the Board of Directors.
Each Vice Chairman of the Board may sign and execute contracts in the name of
the Corporation when authorized to do so by the Board of Directors and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe. A Vice Chairman of the Board may be
designated to be the chief administrative officer of the Corporation with such
duties as the Board of Directors may from time to time determine.
SECTION 4. Powers and Duties of the President. The President, subject
to the direction of the Board of Directors and the Chairman of the Board, shall
be the chief operating officer of the Corporation and shall exercise
supervision of such areas of business of the
Corporation (including subsidiaries) as the Board of Directors shall from time
to time determine.
The President may sign certificates for shares of stock with the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
and may sign and execute contracts in the name of the Corporation when
authorized so to do by the Board of Directors.
SECTION 5. Powers and Duties of the Vice Presidents. Each Vice
President may sign certificates for shares of stock with the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, and shall have
such other powers and perform such other duties as may from time to time be
assigned to him by these By-Laws or by the Board of Directors. At the
discretion of the Board of Directors, one or more of the Vice Presidents may be
designated as Executive Vice President, Senior Vice President or Group Vice
President or may be given other designations.
SECTION 6. Powers and Duties of the Treasurer. The Treasurer shall
have custody of all the funds and securities of the Corporation which may have
come into his hands; he may endorse on behalf of the Corporation for collection
checks, notes and other obligations and shall deposit the same to the credit of
the Corporation in such bank or banks or depositary or depositaries as the
Board of Directors may designate; he shall sign receipts and vouchers for
payments made to the Corporation; he may sign with the President or a Vice
President certificates for shares of stock; he shall enter regularly in the
books of the Corporation to be kept by him for the purpose a full and accurate
account of all moneys received and paid by him on account of the Corporation;
he shall, at all reasonable times, exhibit his books and
accounts to any Director of the Corporation upon application at the office of
the Corporation during business hours; and he shall perform all acts incident
to the position of Treasurer, subject to the control of the Board of Directors.
SECTION 7. Powers and Duties of the Secretary. The Secretary shall
keep in books provided for that purpose the minutes of all meetings of the
Board of Directors and the minutes of all meetings of the stockholders; he
shall attend to the giving or serving of all notices of the Corporation; he may
sign with the President or a Vice President certificates for shares of stock,
and, in the name of the Corporation, all contracts authorized by the Board of
Directors; when authorized, he shall affix the seal of the Corporation; he
shall have charge of the Stock Register, transfer books and stock ledgers and
such other books and papers as the Board of Directors shall direct, all of
which shall, at all reasonable times, be open to the examination of any
Director upon application at the office of the Corporation during business
hours; and he shall in general perform all the duties incident to the office of
the Secretary, subject to the control of the Board of Directors.
SECTION 8. Powers and Duties of Additional Officers. The Board of
Directors may from time to time by resolution delegate to any Comptroller,
Assistant Comptroller or Assistant Comptrollers and/or any Assistant Treasurer
or Assistant Treasurers appointed by the Board, any of the powers and duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries appointed by the Board any of the powers and
duties herein assigned to the Secretary.
SECTION 9. Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish
bonds to the Corporation for the faithful performance of their duties with such
penalties, conditions and security as the Board may require.
ARTICLE IV
CAPITAL STOCK-SEAL-FISCAL YEAR
SECTION 1. Certificates for Shares. The certificates for shares of
stock of the Corporation shall be in such form not inconsistent with the
Articles of Incorporation as shall be approved by the Board of Directors. The
certificates shall be signed by the Chairman of the Board, the President or a
Vice President and the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary (except that no person shall sign in more than one
capacity) and sealed with the seal of the Corporation, and (except as
hereinafter provided) shall not be valid unless so signed and sealed. In the
event that the Corporation has appointed a Transfer Agent, the signatures and
seal may be facsimiles. All certificates shall be consecutively numbered. The
name of the person owning the shares represented thereby with the number of
such shares and the date of issue thereof shall be entered on the Corporation's
books.
All certificates surrendered to the Corporation shall be cancelled and
no new certificates shall be issued until former certificates for the same
number of shares of the same class shall have been surrendered and cancelled,
subject, however, to such provision not inconsistent with law as the Board
of Directors in its discretion may make for the issue of new certificates
in lieu of certificates alleged to have been lost, stolen or destroyed.
SECTION 2. Transfer of Shares. A transfer book, known as the Stock
Register, shall be kept by the Corporation, or by a Transfer Agent, in which
the shares of stock of the Corporation shall be registered and transferred.
The Stock Register shall contain the names alphabetically arranged of all
persons who are stockholders of the Corporation, showing their place of
residence, the number of shares held by them respectively, the time when they
respectively became the owners thereof and the amount paid thereon or that they
are fully paid and non-assessable. Shares of stock of the Corporation shall be
transferred on the books of the Corporation (or a Transfer Agent) by the holder
thereof in person or by his attorney duly authorized in writing, upon surrender
and cancellation of certificates for a like number of shares.
SECTION 3. Regulations. The Board of Directors shall have power and
authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 4. Determination of Stockholders of Record for Certain
Purposes. The Board of Directors may fix a time, not exceeding forty days
preceding the date fixed for the payment of any dividend or the making of any
distribution, or for the delivery of evidences of rights or evidences of
interest arising out of any change, conversion or exchange of capital stock, as
a record time for the determination of the stockholders entitled to receive any
such dividend, distribution, rights or interests, and in such case only
stockholders of record at the time so fixed shall be entitled to receive
such dividend, distribution, rights or interests. The Board of Directors
at its option, in lieu of so fixing a record time, may prescribe a period
not exceeding forty days prior to the date for such payment, distribution
or delivery during which no transfer of stock on the books of the
Corporation may be made.
SECTION 5. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be in
charge of the Secretary. A duplicate of the seal may be kept and be used by
the Treasurer or by any Assistant Secretary or Assistant Treasurer.
SECTION 6. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of August and terminate on the 31st day of July in each
year.
ARTICLE V
MISCELLANEOUS
SECTION 1. Checks, etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money
shall be signed by such officers of the Corporation and/or other persons as the
Board of Directors may from time to time by resolution designate. Except as
may be otherwise expressly provided by resolution of the Board of Directors,
endorsements for or on behalf of the Corporation upon checks, drafts, bills
of exchange, acceptances, notes, obligations or orders for the payment of money
deposited with a duly authorized depositary of the Corporation for deposit or
collection may be written or stamped endorsements of the Corporation without
any designation of the party making such endorsements. All endorsements other
than endorsements for deposit or collection shall be signed by such officers of
the Corporation or other persons as the Board of Directors may from time to
time by resolution designate.
SECTION 2. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the Chairman of the Board, any Vice Chairman of the Board and the
President, acting singly, shall have full power and authority in behalf of the
Corporation to attend and to act and to vote, or in the name of the Corporation
to execute proxies to vote, at any meetings of the stockholders of any
corporation in which the Corporation may hold stock, and at any such meeting
shall possess and may exercise in person or by proxy any and all rights, powers
and privileges incident to the ownership of such stock, and which as the owner
thereof the Corporation might have possessed and exercised if present. The
Board of Directors by resolution from time to time may confer like powers upon
any other person or persons.
SECTION 3. Waivers of Notice. Whenever under the provisions of any
corporate law or under the provisions of the Articles of Incorporation or
By-Laws of the Corporation, the Corporation or the Board of Directors or any
committee thereof is authorized to take any action after notice to its members
or after the lapse of a prescribed period of time, such action may be taken
without notice and without the lapse of any period of time, if at any time
before or after such action be completed such requirements be waived in writing
by the person or persons entitled to said notice or entitled to participate
in the action to be taken or, in the case of a stockholder, by his attorney
thereunto authorized.
ARTICLE VI
AMENDMENTS
These By-Laws and any amendments thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors by the
affirmative vote of a majority of the members of the Board then in office at
any regular or special meeting at which a quorum is present provided that,
unless all Directors are present, the notice of such meeting must have stated
the amendment of the By-Laws as one of the purposes of the meeting.
EXHIBIT 10A
SYNTEX CORPORATION
1984 STOCK OPTION AND
STOCK APPRECIATION RIGHTS PLAN
(AS AMENDED JULY 29, 1993)
1. Purpose of the Plan. The Plan authorizes:
a. the grant to key employees of the Corporation or
any Subsidiary of options to purchase shares of Common
Stock; and
b. the grant of stock appreciation rights
to such key employees who hold senior management positions
with the Corporation.
The objectives of such grants and awards are:
a. to attract and retain outstanding individuals as
key employees;
b. to provide additional incentive to the recipients
of such grants to achieve improved long-term performance;
c. to give such individuals a greater personal
interest in the long-term success of the Corporation; and
d. by assisting and encouraging such individuals to
become owners of Common Stock, to align their interests more
closely with the interests of the Corporation's stockholders
generally.
Section I
General Provisions
2. Definitions.
a. "Board" means the Board of Directors of the Corporation.
b. "Change in Control" means the acquisition by any "person" of
"beneficial ownership", directly or indirectly, of securities of
Syntex Corporation representing more than fifty percent (50%) of the
combined voting power of Syntex Corporation's then outstanding
securities; provided in any event that a reorganization or re-
incorporation shall not be considered a "Change in Control" as long
as the persons holding the right to exercise actual control of Syntex
Corporation are substantially the same immediately after the re-
organization or reincorporation as before the reorganization or
reincorporation. "Person" and "beneficial ownership" have special
meanings under Sections 13(d) and 14(d) of the United States Securi-
ties Exchange Act of 1934 (the "Exchange Act") and Rule 13d-3 adopted
under the Exchange Act, and those meanings are incorporated into this
Plan.
c. "Code" means United States Internal Revenue Code of 1986, as
amended from time to time, and any successor legislation thereto.
d. "Committee" means the committee appointed from time to time
by the Board to administer the Plan.
e. "Common Stock" means Common Stock of the Corporation.
f. "Corporation" means Syntex Corporation.
g. "Fair Market Value" means, with respect to
Common Stock: (1) for purposes of determining such value on the date
of grant of an option or SAR, the mean between the high and low sell-
ing prices of the Common Stock as reported on the consolidated trans-
action reporting system of the principal national securities exchange
upon which the Common Stock is listed, on such date, or, if no sale
of the Common Stock was made on such exchange on such date, then on
the next preceding day on which such a sale was made; and (2) for
purposes of determining such value on the date of a Grantee's exer-
cise of an SAR, the average of the mean between the high and low
selling prices of the Common Stock, as reported on the consolidated
transaction reporting system of the principal national securities ex-
change upon which the Common Stock is listed, on each of the
business days on which a sale of the Common Stock was made on such
exchange and which fall within the period beginning on the third
business day following the release of the statements of the Corpora-
tion's quarterly or annual financial results and ending on the
twelfth business day following such date. If no such sale was made
on any business day within such a period, "Fair Market Value" shall
be the mean between the high and low selling prices of the Common
Stock on the day next preceding the beginning of such period and on
which a sale of the Common Stock was made on such exchange.
h. "Grantee" means a key employee of the Corporation or any
Subsidiary who has been granted an SAR.
i. "Plan" means the Syntex Corporation 1984 Stock Option and
Stock Appreciation Rights Plan as set forth herein, and as the same
may be amended from time to time.
j. "SAR" means the right to receive an amount, payable as
provided in paragraph 24, equal to the excess of the Fair Market
Value of one share of Common Stock on the date of the Grantee's
exercise of such right over the Fair Market Value of such a share on
the date of grant of such right.
k. "Subsidiary" means any of the Corporation's present or
future subsidiaries which is a "subsidiary corporation" as defined
in Section 425(f) of the Code.
3. Administration. The Plan shall be administered by the
Committee and shall consist of not less than three of the then members of the
Board. No member of the Committee shall be eligible to participate in the
Plan. The Corporation shall effect the grant of options and SARs under the
Plan in accordance with determinations made by the Committee pursuant to the
provisions of the Plan and by execution of instruments in writing in form
approved by the Committee. The Committee shall select one of its members as
its Chairman and shall hold its meetings at such times and places as it shall
deem advisable. A majority of its members shall constitute a quorum and all
determinations of the Committee shall be made by a majority of its members.
Any decision or determination reduced to writing and signed by a majority of
the members shall be fully as effective as if made by a majority vote at a
meeting duly called and held. The Committee may appoint a Secretary, shall
keep minutes of its meetings and shall have full power to make and amend such
rules and regulations for the conduct of its business and for the
administration of the Plan as it shall deem appropriate. The interpretation
and construction by the Committee of any provision of the Plan and of the
options and SARs granted thereunder shall, unless otherwise determined by the
Board, be final and conclusive on all persons having any interest thereunder.
4. Shares and SARs Subject to Plan. Subject to adjustment
under the provisions of paragraph 6 hereof, the number of shares of the
Corporation's Common Stock of the par value of $1.00 per share
which may be issued and sold under the Plan will not exceed the number of
shares that were subject to options granted under the Plan on or before July
31, 1993, and an additional 6,500,000 shares, together with any shares
authorized for issuance under the Corporation's Call-to- Action Incentive Plan
that are not subject to options as of July 31, 1995, or that are subject to
options as of July 31, 1995, that terminate or expire without being wholly
exercised, to the extent of the number of shares to which such termination or
expiration relates. Such shares may be either authorized and unissued shares
or shares issued and thereafter acquired by the Corporation, and such shares
will not be offered to the Corporation's stockholders prior to their issuance
under the Plan. If options granted under the Plan after July 31, 1993, shall
terminate or expire without being wholly exercised, or shall be surrendered
pursuant to paragraph 16(e) upon the exercise of SARs, new options may be
granted under the Plan covering the number of shares to which such termination,
expiration or surrender relates; provided, however, that no new options may be
granted with respect to shares subject to options granted under the Plan on or
before July 31, 1993 that shall terminate or expire without being wholly
exercised, or that shall be surrendered pursuant to paragraph 16(e) upon the
exercise of SARs. The Corporation shall not, upon the exercise of any option,
be required to issue or deliver any shares of stock prior to (a) the admission
of such shares to listing on any stock exchange on which the Corporation's
Common Stock is then listed and (b) the completion of such registration or
other qualification of such shares under any state or federal law, rule or
regulation as the Corporation shall determine to be necessary or advisable.
The maximum number of SARs which may be granted under the Plan shall
be 300,000; provided that, except as provided in paragraph 28 below, if SARs
granted under the Plan shall terminate or expire without having been exercised,
new SARs may be granted under the Plan equal to the number of SARs which have
so terminated or expired.
5. Registration Under the Securities Act of 1933. The
Corporation contemplates having an effective Registration Statement under the
United States Securities Act of 1933 at such time as options or SARs granted
under the Plan are exercised. The Corporation will use its best efforts to
keep such Registration Statement effective at all times necessary to permit the
holders of options or SARs to exercise them. The Corporation will also use its
best efforts to keep a Registration Statement effective, if necessary, for
resales of shares received upon exercise of options or SARs, but only if such
Registration Statement can be filed on Form S-8 or a similar form.
6. Adjustments in Shares Subject to Plan. Options and SARs
granted under the Plan shall contain such provisions as the Committee may
determine with respect to adjustments to be made in the number of SARs, in the
number and kind of shares covered by such options and in the option price, in
the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering or any other
change in the corporate structure or shares of the Corporation; and in the
event of any such change, the maximum number of SARs which may be granted under
the Plan, the aggregate number and kind of shares available under the Plan and
the maximum number of shares as to which options may be granted, shall be
appropriately adjusted.
7. Period, Expiration and Termination of the Plan. Options and SARs
may be granted under the Plan at any time prior to July 29, 2003, on which date
the Plan will expire except as to options and SARs then outstanding thereunder,
which options and SARs shall remain in effect in accordance with their
respective terms until they have been exercised or have expired; provided,
however, that the term of an option or SAR which is outstanding on the
expiration date of the Plan may be extended after the Plan expires as provided
in paragraph 16(b) hereof. The Plan may be abandoned or terminated at any time
by the Corporation's Board of Directors except with respect to any options and
SARs then outstanding under the Plan.
8. Amendment of the Plan. The Board from time to time may
make such changes in and additions to the Plan as it may deem proper and in the
best interests of the Corporation or any Subsidiary, without action on the part
of the stockholders of the Corporation, provided, however, that (subject to the
provisions of paragraph 6 hereof) no such change or addition by the Board shall
(a) impair, without the consent of the optionee or Grantee, any option or SAR
theretofore granted to such individual under the Plan or deprive any such
individual of any shares of Common Stock which he may have acquired through or
as a result of the Plan, (b) increase the total number of shares which may be
purchased, or the total number of SARs which may be granted, under the Plan,
(c) change the minimum purchase price, (d) change the basis for valuation of
SARs, (e) except as permitted by paragraph 16(b) hereof, extend the period
during which any option or SAR may be granted or exercised, (f) withdraw the
administration of the Plan from a Committee of Directors of the Corporation
none of whose members is eligible to receive an option or SAR under the Plan,
or (g) change the provisions of the Plan relating to eligibility.
9. Employment Rights. Nothing in this Plan,or any modification
thereof, and no grant of an option or SAR, or any term thereof, shall be deemed
an agreement or condition of employment limiting the right of the Corporation
or any Subsidiary to terminate the employment of, or to alter the terms of
employment, services, responsibilities, duties or authority of any employee, or
giving any employee a right to continue in the employ of the Corporation or any
Subsidiary in order to become eligible for or entitled to exercise any option
or SAR, in whole or in part, or for any other reason.
10. Headings of Sections and Paragraphs. Headings of Sections
and Paragraphs in this Plan are for convenience of reference only, and shall
not be used in the construction or interpretation of the Plan.
11. Number and Gender. Whenever appropriate, words used herein
in the singular may include the plural, or the plural may be read as the
singular, and the masculine may include the feminine.
12. Effective Date of the Plan. The Plan shall become
effective October 16, 1984, provided that no option or SAR granted under the
Plan on or after such date may be exercised unless and until the Plan has been
approved by the holders of a majority of the shares of Common Stock of the
Corporation outstanding and entitled to vote at a stockholders' meeting.
Section II
Option Program
13. Eligibility. Options may be granted only to key employees of
the Corporation or any Subsidiary.
Subject to the foregoing, the Committee shall have full and final
authority to determine the persons who are to be granted options under the
Plan and the number of shares to be subject to each option; provided,
however, that anything contained herein to the contrary notwithstanding,
no employee of the Corporation or any Subsidiary who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Corporation or any parent or Subsidiary shall be granted an option
under this Plan.
14. Types of Options: Incentive and Non-Qualified. An option
granted under this Plan shall, as determined by the Committee, be either an
incentive stock option conforming to the provisions of Section 422A of the
Code or a non-qualified option.
To the extent that the aggregate Fair Market Value (determined at
the time the option is granted) of Stock with respect to which incentive
stock options are exercisable for the first time by an optionee during any
calendar year (under all stock option plans of the Corporation and its
Subsidiaries) exceeds the maximum amount permitted by Section 422A of the
Code (presently $100,000), such options shall be treated as options which
are not incentive stock options.
15. Price. The purchase price under each option will be
determined by the Committee but will not be less than 100% of the Fair Market
Value of the Stock at the time of the grant of the option. In no event
shall the purchase price be less than the par
value of the stock.
16. Period of Option and Rights to Exercise. Each optionee must
remain in the continuous employ of the Corporation and/or its Subsidiaries for
one year from the date his option is granted before he can exercise any part
thereof. Thereafter, subject to the provisions of this paragraph 16 and
paragraphs 18 and 19 below, options granted under the Plan will be exercisable
as follows:
(a) Each option will be exercisable 25% after one year
from grant, 50% after two years from grant, 75% after three years from grant
and 100% after four years from grant, except that the Committee may, when in
its judgment circumstances warrant, authorize in writing the earlier exercise
of options granted previously to the employee under the Plan. Any such earlier
exercise shall be permitted only to the extent provided by and in accordance
with the Committee's written authorization thereof, and in no event prior to
one year from the date of grant. The preceding provisions of this subparagraph
(a) notwithstanding, in the event a Change in Control shall occur, each option
which is then outstanding shall thereupon automatically become 100%
exercisable.
(b) The right to exercise an option will expire upon
the expiration date of the option as determined by the Committee at the time
the option was granted, which date shall in no event be more than ten years
from the date the option was granted; provided, however, that if an option is
by its terms due to expire while the optionee is on an assignment which the
Committee, in its sole discretion, determines to be "foreign service," the
Committee, if it deems it proper and in the interest of the Corporation, and if
the optionee agrees, may extend the term of the option to such date as the
Committee shall determine, but not more than two years after the optionee's
foreign service assignment ends.
(c) The right to purchase the shares included in each
installment is cumulative; i.e., once such right has become exercisable it
may be exercised in whole at any time or in part from time to time until
the expiration of the option, whether or not any option previously granted
to the optionee remains outstanding at the time of such exercise.
(d) The shares to be purchased upon each exercise of
any option shall be paid for in full at the time of such exercise, such payment
to be made in cash, in Common Stock of the Corporation owned by the optionee
and having a Fair Market Value on the date of exercise equal to the aggregate
purchase price of the shares of Common Stock to be purchased upon such
exercise, or in a combination of Common Stock owned by the optionee and cash.
When payment is made in whole or in part with shares of Common Stock owned by
the optionee, such shares as are surrendered by the optionee shall be exchanged
share for share for an equal number of the shares being issued upon the
exercise of the option, but the aggregate Fair Market Value of such surrendered
shares shall be credited against the aggregate purchase price of all of the
shares with respect to which the option is then being exercised.
(e) If an optionee who has been granted SARs shall
exercise one or more of such SARs, the options related to such SARs shall
become non-exercisable and shall be surrendered to the Corporation.
Except as provided in paragraphs 18 and 19, no option may be
exercised unless the optionee is then in the employ of the Corporation or any
Subsidiary and shall have been continuously employed by one or more of the
Corporation and its Subsidiaries since the grant of his option. Absence on
leave approved by an officer of the Corporation or of any Subsidiary authorized
to give such approval shall not be considered an interruption of employment for
any purpose of the Plan.
17. Non-Transferability of Option. No option granted under the
Plan to an employee shall be transferable by him otherwise than by will or by
the laws of descent and distribution, and such option shall be exercisable,
during his lifetime, only by him.
18. Termination of Employment. If an optionee shall have remained
in the continuous employ of the Corporation and/or its Subsidiaries for one
year from the date his option was granted and thereafter shall cease to be so
employed:
(a) For any reason (other than disability or
retirement, as defined or described below, or death) he may, but only within
the period of three months next succeeding such cessation of employment,
exercise his option if and to the extent that he would have been entitled to
exercise it had he remained in the employ of the Corporation or any Subsidiary
during said three-month period.
(b) Because of his disability, as determined by the
Committee in its sole discretion, he may, but only within the period of twelve
months next succeeding such cessation of employment, exercise his option if and
to the extent he would have been entitled to exercise it had he remained in the
employ of the Corporation or any Subsidiary during said twelve-month period.
(c) Solely because of his retirement pursuant to a
retirement plan to which the Corporation or any Subsidiary makes contributions
and under which he is eligible for and has elected to receive retirement
benefits commencing upon such cessation of employment, he may exercise his
option if and to the extent he would have been entitled to do so had he
remained in the employ of the Corporation or any Subsidiary until the option
expiration date as last determined by the Committee. Notwithstanding the
foregoing, if the option is an incentive stock option granted prior to July 26,
1990, the optionee may exercise his option only during the "permitted period"
and only if and to the extent he would have been entitled to do so had he
remained in the employ of the Corporation or any Subsidiary for three months
following such cessation of employment. The "permitted period" shall commence
with the day following his cessation of employment and shall end on the first
to occur of the following:
(i) The option expiration date as last
determined by the Committee; or
(ii) The date which is five years following
such cessation of employment.
19. Death of Optionee. In the event of the death of an optionee
while in the employ of the Corporation or any Subsidiary,
or within the period after cessation of employment during which the optionee
may exercise his option in accordance with paragraph 18, the option theretofore
granted to him shall continue to be exercisable for a period of up to one year
following his death, but only if and to the extent that the optionee would have
been entitled to exercise it if he had lived during said one-year period.
20. Substitution or Assumption of Options. Notwithstanding any
other provision of the Plan to the contrary, by action of the Board, the
Corporation or any of its Subsidiaries may as an incident to or by reason of
any corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, substitute new options on stock of
the Corporation for options granted by another employer to its employee on
stock of such employer or may assume options granted by another employer to its
employees, at such purchase prices and under such conditions as may be
permitted by Section 425(a) of the Code, and the Committee is hereby expressly
authorized to take such action as may be required to effectuate any such
issuance or assumption. Shares of the Corporation subject to any option so
issued or assumed shall be charged against the total number of shares available
for issuance under the Plan.
Section III
SAR Program
21. Eligibility. SARs may be granted only to key employees who
hold senior management positions with the Corporation or any Subsidiary
(including officers who are also directors of the Corporation or any
Subsidiary) and who are responsible for the management, operation and
development of the enterprise. Subject to the foregoing, the Committee shall
have full and final authority to determine the persons who are to be granted
SARs and the number of SARs to be granted to each such person.
22. Grant of SARs. SARs shall be granted by the Committee
only in connection with and at the same time as non-qualified stock options
granted pursuant to the Plan. Each SAR shall relate to a non- qualified option
on one share of Common Stock which was granted under the Plan at the same time
as the SAR (the related option) and shall expire at the earlier of the
expiration date of the related option or the termination of employment for any
reason other than death. The grant of an SAR shall be evidenced by a written
agreement between the Corporation and the Grantee which shall contain the terms
and conditions required by this Plan and such other terms and conditions not
inconsistent therewith as the Committee may deem appropriate in each case.
23. Exercise of SARs. Each Grantee must remain in the
continuous employ of the Corporation or any Subsidiary for one year from the
date his SARs are granted before he can exercise any part thereof. Thereafter,
subject to the provisions of this paragraph and paragraph 27 below, the SARs
will be exercisable as follows:
(a) SARs granted to an employee will be 25%
exercisable after one year from grant, 50% after two years from grant, 75%
after three years from grant, and 100% after four years from grant; provided,
however, that notwithstanding the foregoing, in the event a Change in Control
shall occur, all SARs which are then outstanding shall thereupon automatically
become 100% exercisable.
(b) SARs which are exercisable pursuant to
subparagraph (a) above may be exercised only during the period beginning on the
third business day following the date of release of the statements of the
Corporation's quarterly or annual financial results and ending on the twelfth
business day following such date.
(c) The right to exercise SARs included in each
installment is cumulative; i.e., once such right has become exercisable, it may
be exercised, subject to subparagraph (b) above, in whole at any time or in
part from time to time until the expiration of the SARs.
(d) Except as provided in paragraph 27 below, no SAR
may be exercised unless the grantee is then in the employ of the Corporation or
any Subsidiary and shall have been continuously so employed since the grant of
his SAR. Absence on leave approved by an officer of the Corporation authorized
to give such approval shall not be considered an interruption of employment for
any purpose of the Plan.
24. Payment of SARs. Payments under the Plan shall be made (net
of any applicable withholding taxes) wholly in cash or wholly in shares of
Common Stock or partly in cash and partly in shares of Common Stock in such
proportions as the Committee in its sole discretion shall determine. When
payment is to be made wholly or partly in shares of Common Stock, such shares
shall be valued for such purpose at their Fair Market Value on the date of the
Grantee's exercise of the SAR; provided that in no instance shall a share of
Common Stock be valued for payment purposes at less than the par value of such
a share.
25. Non-Transferability of SARs. No SARs granted under the Plan
to an employee shall be transferable by him otherwise than by will or the laws
of descent and distribution, and such SARs shall be exercisable, during his
lifetime, only by him.
26. Surrender of SAR. If a Grantee shall exercise a related
option, the SAR to which such option related shall be automatically cancelled
as of the date of such exercise, and such cancelled SAR shall not be available
for issuance to the same or any other Grantee thereafter.
27. Death. In the event of the death of a Grantee while in the
employ of the Corporation, the SARs theretofore granted to him shall be
exercisable within, but only within, the period of one year next succeeding his
death, and in no event after the expiration of the related options, and then
only if and to the extent that the Grantee would have been entitled to exercise
the SARs if he had lived during said one-year period.
Section IV
Arrangements for Granting Options to Employees
Working in the United Kingdom of Great Britain
and Northern Ireland
28. Notwithstanding any other provisions of the Plan, options
may be granted under the Plan in accordance with the provisions of the Syntex
1987 U.K. Stock Option Scheme which forms part of the Plan and is set out in
the appendix hereto.
EXHIBIT 10B
AMENDMENT TO
SYNTEX U.S. EMPLOYEES
SUPPLEMENTAL RETIREMENT SAVINGS PLAN
(Effective as of January 1, 1994)
Section 2.1(k) of the Plan is hereby amended to read as follows:
(k) "Eligible Employee" means for any Plan Year (i) an Employee who
on the Entry Date for such Plan Year is a participant in the
ERSP, and who on such Entry Date the Company anticipates will
have Covered Compensation in excess of the ERSP Compensation
Limit for the Plan Year commencing on such Entry Date; (ii) an
Employee who on the Entry Date for such Plan Year is not a
participant in the ERSP, but who on such Entry Date is scheduled
to have an ERSP Entry Date within such Plan Year and who the
Company anticipates will have Covered Compensation in excess of
the ERSP Compensation Limit during the portion of the Plan Year
commencing on such ERSP Entry Date; and (iii) a former Employee
who is not an Employee on the Entry Date for such Plan Year, but
who becomes an Employee again during such Plan Year and who at
the time of such reemployment is scheduled to have an ERSP Entry
Date within such Plan Year and who the Company anticipates will
have Covered Compensation in excess of the ERSP Compensation
Limit during the portion of the Plan Year commencing on such
ERSP Entry Date.
Section 2.1(o) of the Plan is hereby deleted and replaced by the following:
(o) "ERSP Compensation Limit" means for each Plan Year the maximum
amount of Covered Compensation permitted to be taken into
account under Section 401(a)(17) of the Code for purposes of
making contributions to the ERSP for any Participant for such
Plan Year. For 1994, the ERSP Contribution Limit is $150,000.
Section 2.1(p) of the Plan is hereby deleted and replaced by the following:
(p) "ERSP Entry Date" means the date during a Plan Year on which an
Employee first becomes eligible to participate or to resume
participation in the ERSP.
Section 2.1(r) of the Plan is hereby amended to read as follows:
(r) "Participant" means for any Plan Year an Eligible Employee who
on or before the Entry Date for such Plan Year executes and
delivers to the Company a Salary Reduction Agreement for such
Plan Year pursuant to Section 4.2, or, if such Eligible Employee
is a former Employee on such Entry Date, who on or before his
ERSP Entry Date during such Plan Year executes and delivers to
the Company a Salary Reduction Agreement for such Plan Year
pursuant to Section 4.2.
Section 3.1 of the Plan is hereby amended to read as follows:
3.1 Start of Participation. An Employee who is an Eligible Employee
for a Plan Year shall become a Participant in the Plan on the Entry Date for
such Plan Year, and a former Employee who becomes an Eligible Employee during a
Plan Year shall become a Participant on his ERSP Entry Date during such Plan
Year; provided that the Eligible Employee executes and delivers to the Company
a Salary Reduction Agreement pursuant to Section 4.2 on or before such Entry
Date or, if applicable, such ERSP Entry Date.
Section 4.1 of the Plan is hereby amended to read as follows:
4.1 Salary Reduction Amounts. Each Eligible Employee may elect to
have the Company credit his Participant's Account under the Plan for any Plan
Year any whole percentage, up to fifteen percent (15%) (or such lower
percentage as the Company may establish from time to time as the maximum salary
reduction percentage under the ERSP) of the excess of his Covered Compensation
for such Plan Year (excluding any Covered Compensation received prior to his
ERSP Entry Date during such Plan Year if the individual is not a participant in
the ERSP on the Entry Date for such Plan Year) over the ERSP Compensation Limit
for such Plan Year. Each such election shall be made by execution and delivery
of a Salary Reduction Agreement pursuant to Section 4.2 in accordance with such
rules and procedures as the Company may from time to time prescribe.
Section 4.2 of the Plan is hereby amended to read as follows:
4.2 Salary Reduction Agreements. Each Eligible Employee who makes
an election described in Section 4.1 for any Plan Year shall enter into a
Salary Reduction Agreement with the Company on or before the Entry Date for
such Plan Year, or, if the Eligible Employee is a former Employee on such Entry
Date who is subsequently reemployed, on or before his ERSP Entry Date during
such Plan Year, under which the Participant shall agree to have his Covered
Compensation for such Plan Year reduced by an amount equal to his Salary
Reduction Amount for such Plan Year.
Section 5.1 of the Plan is hereby amended to read as follows:
5.1 Company Matching Amounts. Each Participant for whom a Salary
Reduction Amount is credited for a pay period shall be entitled to be credited
with a Company Matching Amount on the last day of such pay period. The first
five percent (5%) of Covered Compensation in excess of the ERSP Compensation
Limit for each Plan Year that is credited as a Salary Reduction Amount on
behalf of each Participant hereunder will be matched in accordance with the
schedule set forth below:
Percentage of Salary
Years of Service Reduction Amount Matched
---------------- ------------------------
1 but less than 2 50%
2 but less than 4 75%
4 or more 100%
This Amendment is adopted by the chief administrative officer of the Company on
February 23, 1994, pursuant to Section 11.1 of the Plan.
SYNTEX CORPORATION
By PAUL E. FREIMAN
________________________________________
Paul E. Freiman, Chief Executive Officer
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(Unaudited)
($ in millions except per share amounts)
EXHIBIT 11
Three Months Six Months
Ended Ended
January 31 January 31
1994 1993 1994 1993
------ ------ ------ ------
EARNINGS APPLICABLE TO COMMON STOCK:
Net Income $95.8 $119.1 $222.1 $113.0
===== ====== ====== ======
EARNINGS PER COMMON SHARE (AS REPORTED):
Weighted average shares outstanding 221.0 222.3 221.0 223.7
----- ----- ----- -----
Earnings per common share $0.43 $0.54 $1.00 $0.51
===== ===== ===== =====
EARNINGS PER COMMON SHARE (ASSUMING FULL DILUTION):*
Weighted average shares outstanding 221.0 222.3 221.0 223.7
Shares continentally issuable for Stock Option Plans 0.4 0.4 0.3 1.7
----- ----- ----- -----
Average shares and share equivalents outstanding 221.4 222.7 221.3 225.4
----- ----- ----- -----
Earnings per common share $0.43 $0.53 $1.00 $0.50
===== ===== ===== =====
* This calculation is submitted in accordance with Regulation S-K item
601(b)11 although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
($ in millions except per share amounts)
EXHIBIT 12
Six Months
Ended
January 31, 1994
----------------
Income Before Taxes on Income $226.3
Adjustments:
Fixed Charges:
Interest Expense 14.1
Add:
Amortization of Capitalized Interest 0.2
Less:
Capitalized Interest (0.9)
------
Total Adjusted Income $239.7
Divided by Fixed Charges 14.1
------
Ratio of Earnings to Fixed Charges 17.0
======
APPENDIX F
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended April 30, 1994
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________to___________
COMMISSION FILE NO. 1-4269
SYNTEX CORPORATION
(Exact name of Registrant as specified in its charter)
REPUBLIC OF PANAMA 94-1566146
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3401 HILLVIEW AVENUE, PALO ALTO, CA 94304
(Address of principal executive office)
Registrant's telephone number, including area code: (415) 855-5050
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_____
The number of shares of the Registrant's Common Stock outstanding as of May
31, 1994: 221,312,398.
2
PART I -- FINANCIAL INFORMATION
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in millions)
(Unaudited)
April 30 July 31
1994 1993
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 364.1 $ 327.9
Short-term investments 339.1 281.7
Trade receivables, net 226.1 264.2
Inventories, net 345.1 362.1
Other 190.7 153.8
-------- --------
Total current assets 1,465.1 1,389.7
Long-term investments 148.0 180.9
Property, plant and equipment, net 1,089.3 1,085.2
Other assets 295.6 304.9
-------- --------
Total $2,998.0 $2,960.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 142.6 $ 82.4
Accounts payable and accrued expenses 220.5 231.8
Income and other taxes 87.0 87.1
Accrued compensation 79.7 97.4
Other 173.1 293.8
------ -----
Total current liabilities 702.9 792.5
Noncurrent liabilities 429.0 378.0
Long-term debt 591.2 590.8
----- -----
Total Liabilities 1,723.1 1,761.3
------- -------
Contingencies (see notes)
Shareholders' Equity:
Common stock (shares issued--240.9) 240.9 240.9
Retained earnings 1,539.9 1,471.5
Cumulative translation adjustments (14.6) (16.9)
Common stock in treasury--at cost (shares in
treasury 1994--19.7; 1993--19.9) (491.3) (496.1)
-------- --------
Total shareholders' equity 1,274.9 1,199.4
-------- --------
Total $2,998.0 $2,960.7
======== ========
See accompanying notes to condensed consolidated financial statements.
3
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in millions except per-share amounts)
Three Months Ended Nine Months Ended
April 30 April 30
-------- --------
1994 1993 1994 1993
---- ---- ---- ----
Net Sales $402.1 $584.3 $1,403.5 $1,582.0
------ ------ -------- -------
Costs and expenses:
Costs of goods sold 114 .6 132.5 343.8 332.8
Selling, general and administrative 161.5 189.9 507.8 580.6
Research and development 102 .4 103.1 298.5 300.6
Restructuring charge -- 140.0 -- 320.0
------ ------ -------- -------
Total 378 .5 565.5 1,150.1 1,534.0
------ ------ -------- -------
Operating income 23.6 18.8 253.4 48.0
------ ------ -------- -------
Nonoperating income (expense):
Interest income 9 .2 9.3 26.6 30.8
Interest expense (7.2) (6.9) (20.4) (20.6)
Other -- net (1.8) (8.4) (9.5) (64.4)
------ ------ -------- -------
Total 0.2 (6.0) (3.3) (54.2)
------ ------ -------- -------
Income (loss) before taxes on income and
cumulative effect of accounting changes 23.8 12.8 250.1 (6.2)
Provision (benefit) for taxes on income 1.4 (28.0) 5.6 (160.9)
------ ------ -------- -------
Income before cumulative effect of accounting
changes 22.4 40.8 244.5 154.7
Cumulative effect of accounting changes, net
of tax -- -- -- (0.9)
------ ------ -------- -------
Net income $22.4 $40.8 $ 244.5 $153.8
====== ====== ======== =======
Shares used in computing earnings per
common share (see Exhibit 11) 221.1 220.9 221.0 222.9
====== ====== ======== =======
Earnings per common share $ 0.10 $ 0.18 $1.10 $0.69
====== ====== ======== =======
Dividends per common share $ 0.26 $ 0.26 $ 0.78 $ 0.78
====== ====== ======== =======
See accompanying notes to condensed consolidated financial statements.
4
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
($ in millions)
Nine Months Ended
April 30
--------
1994 1993
---- ----
Net Cash Provided from Operating Activities $ 298.2 $ 290.3
------- -------
Cash Provided (Used) in Investing Activities:
Capital expenditures (104.7) (141.1)
Purchase of short-term investments (195.7) (225.3)
Proceeds from short-term investments 228.4 434.4
Purchase of long-term investments (57.3) (16.3)
Other investing activities (19.7) (10.5)
------- -------
Net Cash Provided (Used) in Investing Activities (149.0) 41.2
------- -------
Cash Provided (Used) in Financing Activities:
Net change in short-term debt 59.7 (133.0)
Repayment of long-term debt (0.8) (118.8)
Proceeds from issuance of long-term debt 1.1 145.5
Payment of dividends (172.4) (174.4)
Common shares repurchased -- (124.7)
Other financing activities 1.2 5.0
------- -------
Net Cash Used in Financing Activities (111.2) (400.4)
------- -------
Effect of Exchange Rate Changes on Cash (1.8) 4.3
------- -------
Increase (Decrease) in Cash and Cash Equivalents 36.2 (64.6)
Cash and Cash Equivalents at Beginning of Period 327.9 296.3
------- -------
Cash and Cash Equivalents at End of Period $ 364.1 $ 231.7
======= =======
See accompanying notes to condensed consolidated financial statements.
5
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles for complete financial
statements have been omitted. These interim statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the company's 1993 annual report to shareholders for the fiscal
year ended July 31, 1993.
The information contained herein reflects all adjustments (all of which are
normal and recurring) which are, in the opinion of management, necessary to
a fair statement of the results of operations, financial condition and cash
flows for the interim periods.
2. Note 13 to the consolidated financial statements in the 1993 annual report
to shareholders provides information concerning contingencies related to
certain pending or possible claims, legal actions, and proceedings against
Syntex Corporation (the "Company") and its subsidiaries. No significant
changes or developments have occurred regarding these contingencies, except
as discussed in the following paragraph.
In November 1993, an amended complaint was filed against the Company,
several of its principal officers, former principal officers, a current
director and an outside director. The complaint was filed in the federal
District Court for the Northern District of California by certain
shareholders who claim to represent a class of shareholders that purchased
shares of the Company's common stock between November 25, 1991 and August
6, 1992. The amended complaint was based on provisions of federal
securities laws and sought equitable relief and unspecified damages for
losses allegedly resulting from, among other things, improper disclosure.
In January 1994, the Company, as well as the individually named officers
and directors, filed motions to dismiss the amended complaint. On May 27,
1994, the court granted the motions to dismiss with prejudice. The Court
granted the motions, in part, because the Company's shareholders had
available to them all of the allegedly material information that the
plaintiffs claimed was withheld. Plaintiffs have filed a notice of appeal.
3. Inventories consist of the following ($ in millions):
April 30 July 31
1994 1993
---- ----
Finished goods $ 92.8 $ 85.4
In process 193.0 198.9
Raw materials and supplies 59.3 77.8
------ ------
Total $345.1 $362.1
====== ======
6
4. Property, plant and equipment consist of the following ($ in millions):
April 30 July 31
1994 1993
---- ----
Property, plant and equipment - at cost $ 1,723.7 $ 1,643.5
Less accumulated depreciation
and amortization (634.4) (558.3)
--------- ---------
Property, plant and equipment - net $ 1,089.3 $ 1,085.2
========= =========
5. Included in operating expenses are restructuring charges of $140.0 million
and $320.0 million for the third quarter and first nine months of fiscal
1993, respectively, resulting principally from a decision to consolidate
several of the Company's chemical and pharmaceutical manufacturing plants
and to reduce the worldwide workforce. The restructuring charges, net of
the income tax effects, resulted in a reduction of $105.9 million and
$249.0 million in net income for the third quarter and first nine months of
fiscal 1993, respectively.
As of April 30, 1994, cumulative charges to the restructuring reserve
totaled approximately $122.2 million, including approximately $21.8 million
of non-cash charges. Charges to the restructuring reserve have consisted
primarily of severance costs and asset write-offs. The remaining reserve
consists primarily of asset write-offs and severance costs related to
anticipated plant closures.
6. The Company recorded a net provision of $5.6 million for taxes on income
during the first nine months of fiscal 1994, which included a first
quarter credit of $9.4 million resulting from changes in the U.S. tax law
enacted in August 1993. The Company also recorded a net benefit of $160.9
million for taxes on income during the first nine months of fiscal 1993,
resulting principally from the tax benefits of $71.0 million derived from
restructuring charges and a one-time benefit of $102.5 million from the
reduction of certain tax reserves in the first quarter. Excluding the
effect of the first quarter credit, the effective income tax rate for the
third quarter and first nine months of fiscal 1994 was 6 percent, which is
the Company's expected effective tax rate for the remainder of fiscal 1994.
The income tax rate for the fiscal 1993 third quarter and full year was 4
percent, excluding the previously-mentioned tax benefits.
7. Effective August 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." During the first quarter
of fiscal 1993, the Company recorded a charge of $64.6 million ($93.7
million pre-tax) representing the discounted present value of the expected
cost of future healthcare benefits attributed to employees' service
rendered prior to August 1, 1992. This charge represents the cumulative
effect on prior years of the accounting change. The Company also recorded
a benefit of $63.7 million during the first quarter of fiscal 1993 as the
cumulative effect on prior years of the change in accounting for income
taxes, principally relating to tax credits which were not recorded under
the prior accounting standard.
7
8. Other nonoperating expense in the third quarter and first nine months
of fiscal 1994 included $2.0 million and $5.1 million, respectively, of
additions to reserves relating to environmental matters. Other
nonoperating expense in the first nine months of fiscal 1993 included $43.3
million of additions to reserves related to environmental matters, of which
$42.1 million was recorded in the first quarter. Other nonoperating
expense in the first nine months of fiscal 1993 also included a charge of
$10.0 million for reserves related to other contingencies and $7.7 million
related to fixed asset write-offs.
9. The Company has entered into an Acquisition Agreement and Plan of Merger
(the "Agreement"), dated as of May 1, 1994, with Roche Capital Corporation
("Roche Capital"), an indirect wholly owned subsidiary of Roche Holding Ltd
("Roche"), and with Roche (Panama) Corporation ("Roche Panama"), a wholly
owned subsidiary of Roche Capital. Roche has guaranteed the obligations of
Roche Capital and Roche Panama under the Agreement. In connection with the
Agreement, on May 6, 1994, Roche Capital commenced a tender offer for all
of the Company's outstanding common stock, in which the tendering
shareholders will receive $24.00 in cash per share of common stock (the
"Offer"). On June 6, 1994, the Company and Roche announced that the U.S.
Federal Trade Commission ("FTC") requested additional information under the
Hart-Scott-Rodino Antitrust Improvements Act, extending the waiting period
under such Act until 10 days following substantial compliance by Roche with
such request unless sooner terminated. In connection therewith, Roche
Capital extended the expiration date for its tender offer until midnight,
EDT, on July 1, 1994. Consummation of the Offer remains subject to
certain conditions, including the tender of at least a majority of the
shares of common stock and the receipt of certain regulatory approvals. It
may be necessary to extend the Offer further to allow sufficient time for
compliance with the FTC's request.
The Agreement provides, among other things, for the making of the Offer
and, following consummation of the Offer, the merger of Roche Panama into
the Company (the "Merger"), in which shareholders of the Company whose
shares of common stock are not purchased in the Offer will receive $24.00
in cash or, at their election, subject to certain restrictions, shares of a
limited conversion redeemable preferred stock of Roche Capital.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger by the shareholders of the Company and receipt of
certain regulatory approvals.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
TENDER OFFER
See Note 9 to the Condensed Consolidated Financial Statements appearing on page
7 of this report on Form 10-Q.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 1994,
COMPARED WITH THE SAME PERIOD IN FISCAL 1993
Operating income in the third quarter of the Company's 1994 fiscal year was
$23.6 million, an increase of 26 percent compared to $18.8 million in the
fiscal 1993 third quarter, which had included a $140.0 million restructuring
charge. Net income in the fiscal 1994 third quarter was $22.4 million versus
$40.8 million in the third quarter of fiscal 1993. Earnings per share in the
fiscal 1994 third quarter decreased by 44 percent to $.10 per share compared
with earnings per share of $.18 in the fiscal 1993 third quarter. The fiscal
1993 third quarter restructuring charge reduced net earnings by $.48 per share.
Sales in the fiscal 1994 third quarter decreased 31 percent to $402.1 million,
compared with sales of $584.3 million in the third quarter a year ago.
THIRD QUARTER RESULTS
($ in millions. except per share data)
Three Months Ended
April 30
-------- Percent
1994 1993 Change
---- ---- ------
Net Sales $ 402.1 $ 584.3 (31)
Operating Income Before Restructuring Charge $ 23.6 $ 158.8 (85)
Restructuring Charge -- 140.0 --
Operating Income After Restructuring Charge 23.6 18.8 26
Net Income $ 22.4 $ 40.8 (45)
Earnings Per Share $ 0.10 $ 0.18 (44)
The decline in sales and earnings in the fiscal 1994 third quarter compared
with the third quarter a year ago was due primarily to the expiration of the
U.S. patent for Naprosyn(R) (naproxen) and Anaprox(R) (naproxen sodium), and the
shift in sales from those branded products to lower-priced generic naproxen and
naproxen sodium products. The fiscal 1994 third quarter is the first full
quarter in which non-Syntex generic competition for Naprosyn and Anaprox
occurred following the December 1993 expiration of the U.S. patent for these
products.
The gross margin declined to 71.5 percent in the fiscal 1994 third quarter, due
to significantly reduced sales of the higher-margin Naprosyn and Anaprox
branded products in the U.S. and to excess production capacity in the Company's
chemical and pharmaceutical manufacturing plants. In the fiscal 1993 third
quarter, the gross margin was 77.3 percent.
9
WORLDWIDE HUMAN PHARMACEUTICAL SALES
($ in millions)
Three Months Ended
April 30 Percent
--------
1994 1993 Change
---- ---- ------
U.S. Sales $ 187.5 $ 371.0 (49)
Non-U.S. Sales 144.1 141.2 2
---------- ----------
Total $ 331.6 $ 512.2 (35)
========== ==========
NAPROXEN/NAPROXEN SODIUM SALES
($ in millions)
Three Months Ended
April 30 Percent
--------
1994 1993 Change
---- ---- ------
U.S. Sales $ 36.1 $ 200.0 (82)
Non-U.S. Sales 58.3 61.6 (5)
---------- ----------
Total $ 94.4 $ 261.6 (64)
========== ==========
Worldwide sales of Toradol(R) (ketorolac tromethamine) in the fiscal 1994 third
quarter decreased 15 percent to $81.1 million from $95.0 million in the
prior-year third quarter due primarily to high sales volume in the fiscal 1993
third quarter, which resulted principally from special terms offered to
wholesalers. The Company is currently in discussions with the United States
Food and Drug Administration ("FDA") concerning revisions to the Toradol label
that would include more prominent precautions and would be more restrictive
than the present U.S. labeling. The Company has advised the FDA of its
willingness to take additional measures to help insure that the product is used
appropriately and in accordance with its labeling.
The Company and The Procter & Gamble Company expect to begin marketing
ALEVE(R), a new, over-the-counter pain reliever with naproxen sodium as its key
ingredient, in the United States in the fiscal 1994 fourth quarter.
EXPENSES
Selling, general and administrative (SG&A) expenses in the fiscal 1994 third
quarter decreased 15 percent to $161.5 million from $189.9 million in the third
quarter a year ago. The Company has significantly reduced quarterly SG&A
expenses since it initiated restructuring activities in November 1992.
Research and development expense in the third quarter of fiscal 1994 was $102.4
million, a 1 percent decrease from the third quarter a year ago.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 1994,
COMPARED WITH THE SAME PERIOD IN FISCAL 1993
Operating income in the first nine months of the Company's 1994 fiscal year was
$253.4 million compared with $48.0 million in the first nine months of fiscal
1993, which had included a $320.0 million restructuring charge. Net income in
the first nine months of fiscal 1994 was $244.5 million compared with
10
$153.8 million for the same period in fiscal 1993. Earnings per share for the
first nine months of fiscal 1994 increased 59 percent to $1.10 compared with
$.69 for the same period a year ago. Sales decreased 11 percent to $1,403.5
million, down from $1,582.0 million in the fiscal 1993 period.
NINE MONTH RESULTS
($ in millions, except per share data)
Nine Months Ended
April 30
-------- Percent
1994 1993 Change
---- ---- ------
Net Sales $ 1,403.5 $ 1,582.0 (11)
Operating Income Before Restructuring Charge $ 253.4 $ 368.0 (31)
Restructuring Charge -- 320.0 --
Operating Income After Restructuring Charge 253.4 48.0 100+
Net Income $ 244.5 $ 153.8 59
Earnings Per Share $ 1.10 $ 0.69 59
The decline in sales in the first nine months of fiscal 1994 is due primarily
to the expiration of the U.S. patent for Naprosyn and Anaprox in December 1993,
and the shift in sales from those branded products to lower-priced generic
naproxen and naproxen sodium products.
WORLDWIDE HUMAN PHARMACEUTICAL SALES
($ in millions)
Nine Months Ended
April 30
-------- Percent
1994 1993 Change
---- ---- ------
U.S. Sales $ 779.1 $ 947.1 (18)
Non-U.S. Sales 417.4 416.4 --
--------- ---------
Total $ 1,196.5 $ 1,363.5 (12)
========= =========
NAPROXEN/NAPROXEN SODIUM SALES
($ in millions)
Nine Months Ended
April 30
-------- Percent
1994 1993 Change
---- ---- ------
U.S. Sales $ 339.8 $ 503.3 (32)
Non-U.S. Sales 175.8 188.3 (7)
--------- ---------
Total $ 515.6 $ 691.6 (25)
========= =========
The Company's gross margin percentage was 75.5 percent in the first nine months
of fiscal 1994, compared with 79.0 percent in the same period in fiscal 1993.
The decrease is due primarily to a shift in product demand from higher-margin
branded products to lower-margin generic and bulk naproxen and naproxen sodium
products, and to excess capacity in the Company's chemical and pharmaceutical
manufacturing plants.
Operating expenses for the first nine months of fiscal 1993 included
restructuring charges totalling $320.0 million resulting principally from a
decision to consolidate several of the Company's chemical and
11
pharmaceutical manufacturing plants and to reduce the Company's worldwide
workforce. The restructuring charges, net of the income tax effects, resulted
in a reduction of $249.0 million in net income in the first nine months of
fiscal 1993.
Selling, general and administrative expenses decreased 13 percent to $507.8
million in the first nine months of fiscal 1994, from $580.6 million in the
comparable period in fiscal 1993. The Company has significantly reduced SG&A
expenses since it initiated restructuring activities in November 1992.
Other nonoperating expense in the first nine months of fiscal 1994 included
$5.1 million for additions to reserves related to environmental matters.
Nonoperating items in the first nine months of fiscal 1993 included $43.3
million of additions to reserves related to environmental matters, and charges
of $10.0 million for reserves related to other contingencies and $7.7 million
related to the write-off of fixed assets.
The Company recorded a net provision for taxes on income of $5.6 million during
the first nine months of fiscal 1994, which included a first quarter credit of
$9.4 million resulting from changes in the U.S. tax law enacted in August 1993.
The Company also recorded a net benefit for taxes on income of $160.9 million
during the first nine months of fiscal 1993, resulting principally from the tax
benefits of $71.0 million derived from the restructuring charges and a one-time
benefit of $102.5 million from the reduction of certain tax reserves.
Excluding the effect of the first quarter credit, the effective income tax rate
for the fiscal 1994 first nine months was 6 percent, which is the Company's
expected effective tax rate for the remainder of fiscal 1994. The income tax
rate for the fiscal 1993 first nine months and full year was 4 percent,
excluding the previously-mentioned tax benefits.
The first nine months of fiscal 1993 included a $0.9 million charge from the
cumulative effect on prior years of the adoption of two new accounting
standards. The adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," resulted in a benefit of $63.7 million.
This was more than offset by an after-tax charge of $64.6 million ($93.7
million pre-tax) related to the adoption of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions", for post-retirement healthcare benefits.
PATENTS
The patents and patent applications owned by the Company and its subsidiaries
cover a variety of products and chemical processes. In addition, the Company
has a number of patent licenses from others.
The last principal United States patent on naproxen and naproxen sodium expired
in December 1993.
FINANCIAL CONDITION
The Company continues to maintain a strong financial position and a highly
liquid balance sheet. At April 30, 1994, the Company had $703.2 million in
cash and cash equivalents and short-term investments, which provide it with
ample capacity to satisfy its cash requirements. In the first nine months of
fiscal 1994, net cash of $298.2 million was provided from operating activities.
Capital expenditures in the first nine months of fiscal 1994, primarily in the
pharmaceuticals business segment, totaled $104.7 million compared with $141.1
million in the first nine months of fiscal 1993. The Company plans to fund
capital spending totalling approximately $150.0 million in fiscal 1994 through
cash generated by operations and borrowings.
12
Dividends paid on common shares amounted to $172.4 million in the first nine
months of fiscal 1994, a decrease of 1 percent from the first nine months of
fiscal 1993, as a result of the share repurchase program undertaken in fiscal
1993. The current dividend rate paid on an annualized basis is $1.04 per
share.
Management believes the Company has sufficient borrowing capacity to meet its
needs. The Company has an A1+ and P1 rating for its commercial paper and an
AA- and A2 bond rating from Standard and Poor's and Moody's, respectively.
At April 30, 1994, commercial paper borrowings of $157.0 million were
outstanding. The Company has unused bank lines of credit totaling $463.4
million, of which $100 million is available for the support of commercial paper
borrowings classified as long-term debt. The Company's earnings for the first
nine months of fiscal 1994 were sufficient to cover fixed charges.
13
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Notes 2 and 8 to the Condensed Consolidated Financial Statements
appearing on pages 5 and 7 of this report on Form 10-Q for a
discussion of certain matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit
11. Statement re computation of earnings per common share
12. Calculation of ratio of earnings to fixed charges
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed. However, on May 3, 1994, the Company filed
a report on Form 8-K regarding the Acquisition Agreement and Plan
of Merger discussed in Note 9 to the Condensed Consolidated
Financial Statements appearing on page 7 of this report on Form
10-Q.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNTEX CORPORATION
(Registrant)
By /s/ Richard P. Powers
---------------------
Richard P. Powers
Senior Vice President and
Chief Financial Officer
and Duly Authorized Officer
of the Registrant
DATE: June 14, 1994
1
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(Unaudited)
($ in millions except per share amounts)
EXHIBIT 11
Three Months Nine Months
Ended Ended
April 30 April 30
-------- --------
1994 1993 1994 1993
---- ---- ---- ----
EARNINGS APPLICABLE TO COMMON STOCK:
Net Income $ 22.4 $ 40.8 $ 244.5 $ 153.8
========= ======== ======== =========
EARNINGS PER COMMON SHARE (AS REPORTED):
Weighted average shares outstanding 221.1 220.9 221.0 222.9
--------- -------- -------- ---------
Earnings per common share $ 0 .10 $ 0.18 $ 1.10 $ 0.69
========= ======== ======== =========
EARNINGS PER COMMON SHARE (ASSUMING FULL DILUTION):*
Weighted average shares outstanding 221.1 220.9 221.0 222.9
Shares contingently issuable for Stock Option Plans 0.2 0.5 0.3 2.2
--------- -------- -------- ---------
Average shares and share equivalents outstanding 221.3 221.4 221.3 225.1
--------- -------- -------- ---------
Earnings per common share $ 0 .10 $ 0.18 $ 1.10 $ 0.68
========= ======== ======== =========
* This calculation is submitted in accordance with Regulation S- K
item 601(b)11 although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
1
SYNTEX CORPORATION AND SUBSIDIARY COMPANIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
($ in millions except per share amounts)
EXHIBIT 12
Nine Months
Ended
April 30, 1994
--------------
Income Before Taxes on Income $ 250.1
Adjustments:
- ------------
Fixed Charges:
Interest Expense 21.7
Add:
Amortization of Capitalized Interest 0.3
Less:
Capitalized Interest (1.3)
-----------
Total Adjusted Income $ 270.8
Divided by Fixed Charges $ 21.7
-----------
Ratio of Earnings to Fixed Charges 12.5
===========
APPENDIX G
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 1, 1994
SYNTEX CORPORATION
(Exact Name of Registrant as specified in the charter)
Republic of Panama
(State or other Jurisdiction of Incorporation)
Commission File No. 1-4269 I.R.S Employer Identification
NO. 94-1566146
3401 Hillview Avenue, Palo Alto, CA 94204
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:
(415)855-5050
ITEM 5. Other Events.
(b) On May 2, 1994, Syntex Corporation, a Panama corporation (the
"Registrant"), and Roche Holding Ltd, a Swiss corporation ("Roche"), announced
that Syntex had entered into an Acquisition Agreement and Plan of Merger (the
"Agreement"), dated as of May 1, 1994, with Roche Capital Corporation ("Roche
Capital"), a Panama corporation and an indirect wholly owned subsidiary of
Roche, and Roche (Panama) Corporation ("Roche (Panama)"), a Delaware
corporation and a wholly owned subsidiary of Roche Capital. The Agreement
generally provides for the acquisition of the Registrant by Roche in a
transaction in which Syntex stockholders will receive $24.00 in cash per share
of Syntex common stock, par value $1.00 per share (the "Common Stock"). Roche
has guaranteed the obligations of Roche Capital and Roche (Panama) under the
Agreement.
The transaction will be effected by means of a first-step cash tender
offer for all of the shares of the Registrant's outstanding Common Stock (the
"Tender Offer"). The Tender Offer is expected to commence on or before May 9,
1994, and to remain open for at least 20 business days. The Tender Offer is
subject to certain conditions, including the tender of at least a majority of
the shares of Common Stock and receipt of certain regulatory approvals.
The Tender Offer will be followed by a merger of Roche (Panama) with
and into the Registrant (the "Merger"), in which stockholders of the Registrant
whose shares of Common Stock are not purchased in the Tender Offer will receive
$24.00 per share in cash or, at their election, subject to certain
restrictions, shares of a limited conversion preferred stock (the "Preferred
Stock") of Roche Capital. The Preferred Stock will pay dividends annually at a
rate of 3% of the liquidation value thereof, and will be subject to mandatory
redemption ten years after issuance. The Preferred Stock will be
non-transferable, subject to limited exceptions, and will be exchangeable, on
a limited basis, for non-voting equity securities ("NES") of Roche at a
premium of 50 percent over the NES closing price on Friday, April 29, 1994.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger by the stockholders of the Registrant and receipt of
certain regulatory approvals.
In addition, the Agreement requires the Registrant to pay certain
amounts to Roche Capital under certain conditions such as terminations of the
Agreement under certain circumstances, including upon modification or
withdrawal of the recommendation by the Board of Directors of the Registrant,
and in certain other circumstances.
The foregoing description of the Agreement and the transactions
contemplated thereby does not purport to be complete and is qualified in its
entirety by reference to the Agreement, the Guaranty of Roche dated as of May
1, 1994, and the Certificate of Designation of Limited Conversion Preferred
Stock of Roche Capital, copies of each of which are attached hereto as Exhibits
2.1, 99.1 and 99.2, respectively, and incorporated by reference herein. A copy
of the joint press release, dated May 2, 1994, relating to the above-described
transaction is attached hereto as Exhibit 99.3.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
2.1 Aquisition Agreement and Plan of Merger, dated as of May 1, 1994, among
Syntex Corporation, Roche Capital Corporation and Roche (Panama)
Corporation
99.1 Guaranty dated as of May 1, 1994, of Roche Holdings Ltd
99.2 Form of Certificate of Designation of Limited Conversion Preferred
Stock of Roche Capital Corporation
99.3 Joint Press Release by Roche Holding Ltd and Syntex Corporation, dated
May 2, 1994
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf by the
undersigned hereunto duly authorized.
SYNTEX CORPORATION
(Registrant)
Date: May 3, 1994 By: Carol J. Gillespie
------------------
Carol J. Gillespie
Vice President and Secretary
EXHIBIT INDEX
--------------
Exhibit
No. Exhibit
- ------- ---------
2.1 Aquisition Agreement and Plan of Merger, dated as of May 1, 1994,
among Syntex Corporation, Roche Capital Corporation and Roche
(Panama) Corporation
99.1 Guaranty dated as of May 1, 1994, of Roche Holdings Ltd
99.2 Form of Certificate of Designation of Limited Conversion Preferred
Stock of Roche Capital Corporation
99.3 Joint Press Release by Roche Holding Ltd and Syntex Corporation,
dated May 2, 1994
EXHIBIT 2.1
Acquisition Agreement and Plan of Merger
dated as of May 1, 1994 among Syntex Corporation,
Roche Capital Corporation and Roche (Panama) Corporation;
see Appendix A to Proxy Statement/Prospectus enclosed herein.
EXHIBIT 99.1
Guaranty by Roche Holding Ltd dated as of May 1, 1994;
see Exhibit No. 10.1 to this F-4 Registration Statement.
EXHIBIT 99.2
Form of Certificate of Designation of Limited
Conversion Preferred Stock of Roche Capital Corporation
see Exhibit No. 4 to this F-4 Registration Statement.
EXHIBIT 99.3
5/1 10 pm PDT draft
CONFIDENTIAL
CONTACT;
Kathleen Gary - Syntex Max Gurtner - Roche
(415) 855-5924 41-61-688-5554
Linda Thomas - Syntex
(415) 852-1321
FOR IMMEDIATE RELEASE:
ROCHE TO ACQUIRE SYNTEX;
SYNTEX BOARD UNANIMOUSLY RECOMMENDS CASH OFFER
PALO ALTO, Calif., and BASEL, Switzerland, May 2, 1994/PR
Newswire--Syntex Corporation (NYSE:SYN) and Roche Holding Ltd, Basel announced
today that they have entered into a definitive agreement for the acquisition of
Syntex by a subsidiary of Roche in a transaction in which Syntex shareholders
would receive $24.00 in cash per Syntex common share. The transaction values
Syntex at approximately $5.3 billion in total.
The $24.00 cash price represents a premium of approximately 57 percent
over last Friday's closing price of Syntex stock on the New York Stock
Exchange.
The transaction will be effected by means of a first-step cash tender
offer for all of Syntex's outstanding common stock. The tender offer is
expected to commence on or before May 9 and to remain open for at least 20
business days. The tender offer will be followed by a merger in which
shareholders whose shares are not purchased in the tender offer will receive
$24.00 per share in cash or, at their election, subject to certain
restrictions, shares of a limited conversion preferred stock of a new
Syntex holding company. The new preferred stock will pay dividends
annually at a three percent rate and will be subject to mandatory
redemption ten years after issuance. The preferred stock will be
nontransferable, subject to limited exceptions, and will be exchangeable,
on a limited basis, for non-voting equity securities (NESs) of Roche at a
premium of 50 percent over Roche NES closing price on Friday, April 29.
The tender offer is subject to certain conditions, including that at
least a majority of Syntex shares are tendered and certain regulatory approvals
are obtained.
After receiving the recommendation of a Special Committee of
directors, the Board of Directors of Syntex has approved the merger agreement
and has recommended that stockholders tender their shares in the offer and vote
in favor of the merger. The Board's approval was based on a number of factors,
including the opinion of Goldman, Sachs & Co. that the $24.00 per share in cash
to be received by the holders of Syntex shares in the transactions contemplated
by the agreement is fair.
Mr. Paul Freiman, Syntex Chairman and Chief Executive Officer, said,
"We have spent many months intensively studying the healthcare environment,
evaluating the increasingly competitive marketplace, and analyzing our current
and future prescription pharmaceutical product line. Given the speed of
changes in the industry and a radically different competitive situation, we
ultimately felt the need to align with a strong global partner. We now
strongly believe that the sale of Syntex to Roche would be in the best
interests of our shareholders, our customers and our employees.
"Roche is truly a global company, with strong operations in major
parts of the world where Syntex has little or no presence, such as South
America, Japan and the Middle East. Roche has a far greater ability to fully
commercialize the compounds in our pipeline that we do. Roche and Syntex have
already successfully cooperated in the U.S., where we have co-promoted
Toradol(R) (ketorolac) since 1990. The proposed combination of our companies
would help us see that patients everywhere have access to the new drugs we have
discovered and are developing," Mr. Freiman said.
Roche Chairman and Chief Executive Officer Mr. Fritz Gerber said,
"Innovative products and critical mass in development, marketing and sales are
key to success in today's competitive environment. Syntex's substantial
ethical business and its leadership in the indication area of pain and
inflammation would ideally complement the pharma portfolio of Roche and add a
further center of excellence to the Roche group."
With Syntex's market share, Roche would move to position six in the
U.S. pharma market and in the world pharma market, it would become number four
in terms of sales.
Syntex is a multinational healthcare company, incorporated in Panama,
that discovers, develops, manufactures and markets prescription pharmaceutical
products, animal health products and medical diagnostic systems. The company
currently has more than 9,000 employees. There are research subsidiaries in
Palo Alto, Calif., Scotland, Mexico, and Japan. Syntex's leading prescription
pharmaceutical products are Naprosyn(R) (naproxen), a nonsteroidal
anti-inflammatory drug to treat inflammation and pain, and Toradol, a
nonsteroidal anti-inflammatory drug for the short-term management of pain.
Syntex's main products also include medicines to treat allergies,
cardiovascular and cerebrovascular diseases. In December 1993,
Syntex launched its own generic version of naproxen. On the basis of R&D
spending of 19 percent sales, Syntex has built up a pharma pipeline which
offers the chance to enter into indications with a high market potential. The
company currently has in clinical trials compounds being studied for the
prevention and treatment of organ transplant rejection, and for the treatment
of Alzheimer's disease, osteoporosis, and peripheral artery disease, among
others. Total worldwide sales in fiscal 1993 were U.S.$2.1 billion, of which
70 percent were in the United States. Pharmaceutical sales accounted for
approximately 85 percent of Syntex's worldwide sales. Syntex's net income in
fiscal 1993 was U.S.$287 million, after pretax restructuring charges of U.S.
$320 million.
The international Roche Group is a leader in research-based healthcare
with activities in pharmaceuticals (55 percent of total sales), diagnostics,
vitamins and fine chemicals and fragrances and flavors. It has a long
tradition of innovative breakthroughs in drug development and is a pioneer in
pharmaceutical and other applications of gene technology. It has demonstrated
its commitment to this area by the acquisition of a majority stake in the
biotechnology company, Genentech, Inc., South San Francisco, and by the
purchase of exclusive rights to the polymerase chain reaction (PCR) technology,
which has a wide range of potential applications. Roche group sales in 1993
totaled 14.3 billion Swiss francs (approximately U.S.$9.7 billion, at 1993
year-average exchange rate of Sfr 1.48 to one U.S.$), an increase of 11
percent on the previous year. Net income in 1993 amounted to 2.5 billion Swiss
francs (approximately U.S.$1.7 billion) an increase of 29 percent over 1992.
Roche has operated in the United States since the beginning of this
century. The U.S. affiliate, Hoffman-La Roche Inc., based in Nutley, New
Jersey, employs more than 17,000 people in its activities in pharmaceuticals,
vitamins and fine chemicals and diagnostics, including Roche Biomedical
Laboratories, the third largest clinical service laboratory chain in the United
States. Nutley is also one of the Roche Group's main research centers.
The Roche sub-holding, Givaudan-Roure, with its U.S. headquarters in
Clifton, New Jersey, is well-established in the United States as a major
supplier of fragrances and flavors.
-0-
APPENDIX H
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 1, 1994
Syntex Corporation
(Exact name of registrant as specified in its charter)
Republic of Panama 1-4269 94-1566146
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
3401 Hillview Avenue, Palo Alto, California 94204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 855-5050
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On September 1, 1994, Roche Holding Ltd, a
corporation organized under the laws of Switzerland
("Roche"), announced that the offer (the "Offer") by Roche
Capital Corporation, a corporation organized under the
laws of Panama and a wholly owned indirect subsidiary of
Roche ("Roche Capital"), to purchase all outstanding
shares of common stock, par value $1.00 per share (the
"Shares"), of Syntex Corporation (the "Registrant") for
$24 per share in cash expired at midnight, New York City
time, on Wednesday, August 31, 1994. Roche Capital
accepted for purchase all Shares validly tendered and not
withdrawn prior to expiration of the Offer.
As of September 8, 1994, a total of 206,809,298
Shares (or approximately 93.4% of the 221.4 million Shares
outstanding), including Shares for which certificates were
delivered to the depositary pursuant to the Offer's
guaranteed delivery procedure, had been validly tendered
and not withdrawn. Roche Capital has accepted for
purchase all such Shares.
The foregoing information is based entirely on
information contained in Amendment No. 11, dated September
1, 1994, and the Final Amendment, dated September 8, 1994,
to the Tender Offer Statement on Schedule 14D-1 dated May
6, 1994 ("Schedule 14D-1") each filed by Roche Capital.
The Offer was made pursuant to the Acquisition
Agreement and Plan of Merger dated as of May 1, 1994 (the
"Agreement") among the Registrant, Roche Capital and Roche
(Panama) Corporation, a Delaware corporation ("Roche
(Panama)"). Roche guaranteed the obligations of Roche
Capital and Roche (Panama) under the Agreement. The Offer
will be followed by a merger (the "Merger") of Roche
(Panama) with and into the Registrant, in which
stockholders of the Registrant whose Shares were not
purchased in the Offer will receive $24 per Share in cash
or, at their election, subject to certain restrictions,
shares of a limited conversion preferred stock of Roche
Capital. Consummation of the Merger is subject to certain
conditions, including approval of the Merger by the
stockholders of the Registrant. A special meeting of the
stockholders of the Registrant will be called to approve
and adopt the Agreement after a review of proxy materials
for the meeting by the Securities and Exchange Commission.
The affirmative vote by Roche Capital of the Shares
beneficially owned by it is sufficient to ensure approval
and adoption of the Agreement.
The foregoing description of the Agreement and
the transactions contemplated thereby does not purport to
be complete and is qualified in its entirety by reference
to the Agreement, the Guaranty of Roche dated as of May 1,
1994, and the Certificate of Designation of Limited
Conversion Preferred Stock of Roche Capital attached as
Exhibit A to the Agreement.
The total amount of funds required by Roche
Capital to consummate the Offer and to pay related fees
and expenses was approximately $5.35 billion. Roche
Capital disclosed in Amendment No. 8 to the Schedule 14D-1
("Amendment No. 8") that it expected to purchase the
Shares using general corporate funds and, possibly, the
proceeds of a loan from a group of commercial banks. In
the Amendment No. 8, Roche Capital stated that while it
had not yet reached definitive decision or agreement with
respect to the terms of such a loan facility, Roche
Capital expected that the terms on which it would borrow
any such funds would include the following: (i) the
aggregate maximum amount of the loan would be
approximately $5,000,000,000; (ii) the loan would be
repayable in two installments, with final maturity on June
30, 1995; and (iii) the loan would bear interest at a rate
per annum equal to approximately 0.06% above the London
Interbank Offered Rate.
The foregoing description of the source of funds
required by Roche Capital is based entirely on information
contained in the Amendment No. 8.
Pursuant to the Agreement, on September 12,
1994, the Registrant's Board of Directors, under the
chairmanship of Mr. Paul Freiman, announced the election
of three new members appointed by the Roche Group, Dr.
Armin Kessler, Mr. Peter Simon and Dr. Kenneth Taylor.
Resigning from the Registrant's Board of Directors were
James N. Wilson, Dana G. Leavitt, Miriam Stoppard, Leonard
Marks, Jr., Marvyn Carton, John H. Fried, Howard M.
Holtzmann and Charles A. Lynch. The Registrant's Board of
Directors elected Dr. Kenneth Taylor as President of the
Registrant, succeeding Mr. James N. Wilson. A copy of the
press release dated September 12, 1994, issued by
Registrant relating to the election of new members of
Registrant's Board of Directors is attached hereto as
Exhibit 99.3.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(c) Exhibits
2.1 Acquisition Agreement and Plan of Merger, dated
as of May 1, 1994, among Syntex Corporation,
Roche Capital Corporation and Roche (Panama)
Corporation (incorporated herein by reference to
Exhibit 1 to the Solicitation/Recommendation
Statement on Schedule 14D-9 of Syntex
Corporation, dated May 6, 1994)
99.1 Guaranty dated as of May 1, 1994, of Roche
Holding Ltd (incorporated herein by reference to
Exhibit 3 to the Solicitation/Recommendation
Statement on Schedule 14D-9 of Syntex
Corporation, dated May 6, 1994)
99.2 Press Release by Syntex Corporation, dated
September 12, 1994
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
SYNTEX CORPORATION
By: /s/ Carol J. Gillespie
Carol J. Gillespie
Vice President and
Secretary
Date: September 15, 1994
EXHIBIT INDEX
Exhibit
Number Exhibit
2.1 Acquisition Agreement and Plan of
Merger, dated as of May 1, 1994,
among Syntex Corporation, Roche
Capital Corporation and Roche
(Panama) Corporation (incorporated
herein by reference to Exhibit 1 to
the Solicitation/Recommendation
Statement on Schedule 14D-9 of
Syntex Corporation, dated May 6,
1994)
99.1 Guaranty dated as of May 1, 1994,
of Roche Holding Ltd (incorporated
herein by reference to Exhibit 3 to
the Solicitation/Recommendation
Statement on Schedule 14D-9 of
Syntex Corporation, dated May 6,
1994)
99.2 Press Release by Syntex
Corporation, dated September 12,
1994
Exhibit 99.2
SYNTEX
PRESS INFORMATION
CONTACT: Kathleen Gary
415-855-5924
FOR IMMEDIATE RELEASE:
NEW SYNTEX BOARD AND MANAGEMENT APPOINTMENTS
PAVE THE WAY FOR INTEGRATION WITH ROCHE
Palo Alto, California, September 12, 1994/PR
Newswire -- The Syntex Board of Directors, under the
chairmanship of Mr. Paul Freiman, has announced the
election of three new members appointed by the Roche
Group. The Roche appointees are Roche Group COO and Head
of the Pharmaceuticals Division, Dr. Armin Kessler, Mr.
Peter Simon, Head of Roche Group Pharma Operations and
Dr. Kenneth Taylor, currently President and Managing
Director of Roche Products Ltd. in the U.K.
Resigning from the Board, were James N. Wilson, Dana
G. Leavitt, Miriam Stoppard, Leonard Marks, Jr., Marvyn
Carton, John H. Fried, Howard M. Holtzmann and Charles A.
Lynch.
The Syntex Board elected Dr. Kenneth Taylor as
President of Syntex. He succeeds Mr. James N. Wilson.
Dr. Taylor's successor in the Roche U.K.
organization will be Mr. Nic Holladay, the present
Managing Director of Syntex's U.K. and Ireland operation.
A special meeting of Syntex shareholders will be
called to approve and adopt the proposed merger between
Syntex and the Roche subsidiary, Roche Capital
Corporation, after a review of proxy materials for the
meeting by the Securities and Exchange Commission.
These actions follow the completion of a tender
offer, through which Roche acquired over 96 percent of
the outstanding common stock of Syntex.