As filed with the Securities and Exchange Commission on November 13, 2000
Registration No. 333-49248
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMGEN INC.
(Exact name of registrant as specified in its charter)
Delaware 2836 95-3540776
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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One Amgen Center Drive
Thousand Oaks, California 91320-1799
(805) 447-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
STEVEN M. ODRE, ESQ.
Senior Vice President, General Counsel and Secretary
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
(805) 447-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
GARY OLSON, ESQ.
Latham & Watkins
633 West 5th Street
Los Angeles, California 90017
(213) 485-1234
Approximate date of commencement of proposed sale to the public: Upon
consummation of the merger referred to herein.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [_]
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this proxy statement/prospectus is not complete and may be
changed. We may not offer these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This proxy
statement/prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, dated November 13, 2000
KINETIX PHARMACEUTICALS, INC.
200 Boston Avenue, Suite 3500
Medford, Massachusetts 02155
A MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
The board of directors of Kinetix Pharmaceuticals, Inc. has approved a
merger agreement with Amgen Inc.
We will hold a special stockholders' meeting on December 4, 2000 at 9:00
a.m. local time at the offices of Kinetix Pharmaceuticals, Inc., 200 Boston
Avenue, Suite 3500, Medford, Massachusetts, at which time we will ask you to
consider and vote upon:
(1) a proposal to adopt the merger agreement among Kinetix, Amgen Inc. and
a wholly owned subsidiary of Amgen; and
(2) a proposal to approve
. the acceleration of the vesting of the unvested portions of
restricted stock grants that have been made to four Kinetix
officers and one Kinetix employee, and
. the grants of additional restricted stock to two Kinetix officers
and one Kinetix employee,
so as to avoid "parachute payment" treatment under Section 280G of the
Internal Revenue Code of 1986, as amended.
If the merger agreement is adopted and the 280G proposal is approved:
. Kinetix will become a wholly-owned subsidiary of Amgen; and
. You will receive a fraction of a share of Amgen common stock, subject
to proration and adjustment as described in this proxy statement/
prospectus, in exchange for each of your shares of Kinetix common
stock.
Amgen common stock is quoted on The Nasdaq National Market under the
trading symbol "AMGN," and on November 10, 2000, its closing price was $64.56
per share.
After careful consideration, your board of directors unanimously approved
the merger and the merger agreement and deemed it advisable. Your board of
directors unanimously recommends that you vote "FOR" the adoption of the merger
agreement and "FOR" the 280G Proposal.
Please consider carefully all of the information in the enclosed proxy
statement/prospectus about Amgen, Kinetix and the proposed merger, including in
particular, the discussion in the section entitled "Risk Factors" beginning on
page 13.
Whether or not you plan to attend the special meeting, please complete,
sign, date and return your proxy in the enclosed envelope. Your vote is very
important.
Sincerely,
Nicholas Lydon, Ph.D.
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved the merger described in the proxy
statement/prospectus or the Amgen common stock to be issued in connection with
the merger, or determined if the proxy statement/prospectus is accurate or
adequate. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated November 13, 2000
and is first being mailed to stockholders on or about November 14, 2000.
KINETIX PHARMACEUTICALS, INC.
200 Boston Avenue, Suite 3500
Medford, Massachusetts 02155
Notice of Special Meeting of Stockholders
To the Stockholders of Kinetix Pharmaceuticals, Inc.:
We will hold a special meeting of the stockholders of Kinetix
Pharmaceuticals, Inc. on December 4, 2000, at 9:00 a.m., local time, at the
offices of Kinetix Pharmaceuticals, Inc., located at 200 Boston Avenue, Suite
3500, Medford, Massachusetts, for the following purposes:
1) To consider and vote upon a proposal to adopt the merger agreement
among Kinetix, Amgen Inc. and a wholly owned subsidiary of Amgen.
2) To consider and vote upon a proposal to approve
. the acceleration of the vesting of the unvested portions of
restricted stock grants that have been made to four Kinetix
officers and one Kinetix employee, and
. the grants of additional restricted stock to two Kinetix officers
and one Kinetix employee,
so as to avoid "parachute payment" treatment under Section 280G of the
Internal Revenue Code.
3) To transact any other business which properly comes before the special
meeting or any adjournment of it by the Kinetix board of directors.
Only stockholders of record at the close of business on November 13, 2000,
will receive notice of, and are entitled to vote at, the special meeting and any
adjournment or postponement of it.
The enclosed proxy statement/prospectus describes the merger agreement, the
proposed merger and the actions to be taken in connection with the merger. We
cannot complete the merger unless the holders of a majority of the outstanding
shares of our common stock and preferred stock voting together, and the holders
of not less than 66% of the outstanding shares of each of our Series A
convertible preferred stock and Series B convertible preferred stock vote to
adopt the merger agreement. In order to avoid "parachute payment" treatment for
the accelerated vesting of the unvested portion of previously granted restricted
stock and the additional grants of restricted stock to certain Kinetix officers
and an employee, holders of more than 75% of the common stock and preferred
stock (other than the intended recipients) voting together as a single class
must vote to approve the 280G proposal. In addition, the merger agreement
requires, as a condition to the closing of the merger, that 90.1% of all shares
of capital stock of Kinetix vote in favor of approval of the merger agreement
and the transaction contemplated thereby.
Under Delaware law, holders of Kinetix common stock are entitled to
dissenters' rights of appraisal if the merger agreement is adopted. Any holder
of Kinetix common stock who:
. files with Kinetix, before the vote is taken to adopt the merger
agreement, a written objection to the merger stating that he or she
intends to demand payment for his or her shares if the merger is
effected, and
. does not vote in favor of the merger or for adoption of the merger
agreement,
has the right to demand in writing from Kinetix, within 20 days after receiving
notice from Kinetix that the merger has become effective, payment for his or her
shares and appraisal of their value. Dissenting stockholders must follow the
procedures regarding appraisal elements contained in Section 262 of the Delaware
General Corporation Law, a copy of which is attached as Annex D to this proxy
statement/prospectus.
For more information about the merger and the 280G proposal, please review
the accompanying proxy statement/prospectus and the merger agreement attached
thereto as Annex A.
By Order of the Board of Directors,
Nicholas Lydon, Ph.D.
President and Chief Executive Officer
Medford, Massachusetts
November 14, 2000
TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS ABOUT THE MERGER, THE 280G PROPOSAL AND THE SPECIAL MEETING ..................... 1
SUMMARY ............................................................................................... 4
RISKS RELATED TO THE MERGER ........................................................................... 13
RISKS RELATED TO THE OWNERSHIP OF AMGEN COMMON STOCK .................................................. 14
RISKS RELATED TO THE OWNERSHIP OF KINETIX CAPITAL STOCK ............................................... 17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ..................................................... 22
THE COMPANIES ......................................................................................... 23
Amgen ........................................................................................ 23
Kinetix ...................................................................................... 23
Kinetix Management's Discussion and Analysis of Financial Condition and Results of Operations. 25
Security Ownership of Directors and Executive Officers and Certain Beneficial Owners ......... 27
THE KINETIX SPECIAL MEETING ........................................................................... 29
Date, Time and Place ......................................................................... 29
Purpose of Special Meeting ................................................................... 29
Record Date; Stock Entitled to Vote; Quorum .................................................. 29
Vote Required ................................................................................ 30
Voting of Proxies ............................................................................ 30
Revocability of Proxies ...................................................................... 30
Solicitation of Proxies ...................................................................... 31
Appraisal Rights ............................................................................. 31
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT ......................................................... 33
THE MERGER AND THE MERGER AGREEMENT ................................................................... 33
Form of the Merger ........................................................................... 33
Merger Consideration ......................................................................... 33
Merger Consideration for Common Stock ........................................................ 33
Merger Consideration for Common Stock Options ................................................ 34
Treatment of Restricted Stock in the Merger .................................................. 34
Variation in Sale Price of Amgen Common Stock ................................................ 34
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares ............. 34
Effective Time of the Merger ................................................................. 35
Background of the Merger ..................................................................... 35
Amgen's Reasons for the Merger ............................................................... 38
Kinetix's Reasons for the Merger ............................................................. 38
Recommendation of the Kinetix Board of Directors ............................................. 40
Interests of Certain Persons in the Merger ................................................... 40
Accounting Treatment ......................................................................... 42
Trading of Amgen Common Stock ................................................................ 42
Certain United States Federal Income Tax Consequences of the Merger .......................... 42
Resale of Amgen Common Stock ................................................................. 44
Conditions to Consummation of the Merger ..................................................... 45
No Solicitation .............................................................................. 46
Termination .................................................................................. 47
Termination Fee .............................................................................. 47
Conduct of Business Pending the Merger ....................................................... 48
Amendment; Extension and Waiver .............................................................. 49
Expenses ..................................................................................... 49
Representations and Warranties ............................................................... 49
Indemnification .............................................................................. 50
Amendments to Kinetix's Certificate of Incorporation ......................................... 52
Amendments to the Kinetix By-Laws ............................................................ 52
OTHER AGREEMENTS ...................................................................................... 53
i
Page
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Voting and Support Agreement ................................................................ 53
Support Agreement ........................................................................... 53
Loan Agreement .............................................................................. 53
Employment Agreements ....................................................................... 53
Non-Competition Agreements .................................................................. 54
Mutual Agreements to Arbitrate .............................................................. 54
Proprietary Information and Inventions Agreements ........................................... 55
PROPOSAL 2: APPROVAL OF VESTING OF RESTRICTED STOCK ................................................. 56
AND ADDITIONAL GRANTS OF RESTRICTED STOCK ............................................................ 56
AMGEN INC. AND KINETIX PHARMACEUTICALS, INC .......................................................... 61
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS ......................................... 61
Pro Forma Condensed Combining Statement of Operations For the Year Ended December 31, 1999 .. 63
Pro Forma Condensed Combining Statement of Operations For the Six Months Ended June 30, 2000. 64
Pro Forma Condensed Combining Balance Sheet as of June 30, 2000 ............................. 65
MARKET PRICE INFORMATION AND DIVIDENDS ............................................................... 66
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF AMGEN AND COMMON STOCKHOLDERS OF KINETIX .............. 67
LEGAL MATTERS ........................................................................................ 70
EXPERTS .............................................................................................. 70
OTHER MATTERS ........................................................................................ 71
REFERENCES TO ADDITIONAL INFORMATION ................................................................. 71
WHERE YOU CAN FIND MORE INFORMATION .................................................................. 71
Annexes
Annex A Agreement and Plan of Merger among Kinetix Pharmaceuticals, Inc., Amgen
Acquisition Corp. II and Amgen Inc.
Annex B Voting and Support Agreement executed by Affiliates of Kinetix
Annex C Support Agreement
Annex D Appraisal Rights under Section 262 of the Delaware General Corporation Law
ii
QUESTIONS AND ANSWERS ABOUT THE MERGER, THE 280G PROPOSAL
AND THE SPECIAL MEETING
Q: What is the proposed transaction?
A: A merger in which Kinetix will become a wholly-owned subsidiary of Amgen.
Q: What is the 280G proposal?
A: In connection with the merger you are also being asked to approve (i)
accelerated vesting of the unvested portions of the restricted stock owned
by certain officers and employees of Kinetix and (ii) grants of additional
restricted stock to certain officers and employees of Kinetix.
Q: What will I receive in the merger?
A: As a result of the merger, each share of Kinetix common stock outstanding
immediately prior to the closing of the merger, other than shares as to
which appraisal rights have been exercised, will be converted into the
right to receive a fraction of a share of Amgen common stock.
The fraction of a share of Amgen common stock into which each share of
Kinetix common stock will be converted, or the exchange ratio, will be
determined the trading day immediately prior to the closing of the merger
by dividing (i) the aggregate value of the Amgen common stock to be
received by Kinetix stockholders as merger consideration, which will equal
$170,000,000, plus $1,200,000 if a Kinetix convertible promissory note is
----
converted into shares of Kinetix common stock prior to the closing of the
merger, less any amounts loaned by Amgen to Kinetix prior to the closing of
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the merger, by (ii) the closing sale price of a share of Amgen common stock
as reported on The Nasdaq Stock Market on the trading day immediately prior
to the closing of the merger.
Q: Will I be able to trade the Amgen stock that I receive in the merger?
A: Yes, except in limited circumstances. The Amgen common stock is listed on
The Nasdaq Stock Market under the symbol "AMGN." Your ability to trade the
Amgen common stock you receive in the merger may be restricted (i) under the
rules and regulations of the Securities Act of 1933, as amended, if you are
deemed to be an "affiliate" of Kinetix or (ii) if you receive restricted
shares of Amgen common stock in exchange for any unvested restricted shares
of Kinetix common stock you own prior to the merger which were not vested.
Q: What if the merger is not completed?
A: If the merger is not completed, Kinetix will continue to operate as an
independent company. None of Amgen, Kinetix or any third party is under any
obligation to make or consider any alternative proposals regarding the
purchase of your shares of Kinetix stock. Kinetix may be required to pay
Amgen a termination fee under the merger agreement if the merger is not
completed for specified reasons.
Q: What does the Kinetix board of directors recommend?
A: The Kinetix board of directors unanimously recommends that you vote "FOR"
adoption of the merger and "FOR" the 280G proposal.
Q: Who may vote at the special meeting?
A: All stockholders of record of Kinetix as of the close of business on
November 13, 2000 may vote.
1
Q: What vote is required to approve the merger?
A: Holders of shares of Kinetix common stock on the record date will be
entitled to one vote for each share of common stock held on each matter
submitted to a vote at the special meeting. Holders of shares of either
class of Kinetix preferred stock on the record date will have the right to
vote (i) together with holders of Kinetix common stock (on an "as converted"
basis) with respect to the adoption of the merger agreement and (ii) as a
separate class with respect to the adoption of the merger agreement.
In the first case, the affirmative votes of holders of a majority of the
combined voting power of the shares of Kinetix common stock and preferred
stock outstanding and entitled to vote, voting together as a single class
with each share entitled to one vote, is required for the adoption of the
merger agreement. In the second case, at least 66% of the shares of each
class of Kinetix preferred stock outstanding and entitled to vote, each
voting separately as a class, is required to adopt the merger agreement.
Q: What vote is required to approve the 280G proposal?
A: The accelerated vesting of the unvested portion of restricted stock grants
that have been made previously to four officers and one employee of Kinetix
and the grants of additional restricted stock to two officers and one
employee of Kinetix must be approved by the affirmative vote of Kinetix
stockholders that in the aggregate own more than 75% of the voting power of
all outstanding capital stock of Kinetix as of the record date, disregarding
stock owned by the interested officers and employee.
Q: How do I vote?
A: You may attend the special meeting and vote your shares in person or you may
vote by proxy. Even if you plan to attend the special meeting, we ask that
you vote by proxy now to ensure that your shares are represented at the
special meeting. To vote by proxy, after carefully reading and considering
the information contained in this proxy statement/prospectus, you should
complete and sign your proxy and return it in the enclosed return envelope
as soon as possible so that your shares may be represented at the special
meeting. If you sign and send in your proxy and do not indicate how you want
to vote, we will count your proxy as a vote in favor of approval of both
proposals. If you abstain from voting or do not vote on the proposal, your
abstention or failure to vote will have the same effect as a vote against
both proposals.
The special meeting will take place at the offices of Kinetix at 200 Boston
Avenue, Suite 3500, Medford, Massachusetts, at 9:00 a.m., local time, on
December 4, 2000. Even if you have voted by proxy, you may attend the
special meeting and vote your shares in person.
Q: May I change my vote after I have mailed my signed proxy?
A: Yes. You can change your vote in one of the following three ways at any
time before your proxy is voted at the special meeting. First, you can send
a written notice stating that you would like to revoke your proxy. Second,
you can complete and submit a new, later dated proxy. If you choose either
of these two methods, you must submit your notice of revocation or your new
proxy to the Corporate Secretary of Kinetix at 200 Boston Avenue, Suite
3500, Medford, Massachusetts 02155. Third, you can attend the special
meeting and vote in person.
Q: Should I send in my stock certificates now?
A: No. Prior to the closing of the merger you will receive written instructions
explaining how to exchange your Kinetix stock certificates for Amgen stock
certificates. Please do not send in your stock certificates with your proxy.
2
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger during the fourth calendar quarter of 2000.
Q: What are the tax consequences of the merger to me?
A: Amgen and Kinetix each expect that the merger will qualify as a
reorganization within the meaning of the Internal Revenue Code of 1986, as
amended. If the merger so qualifies, Kinetix stockholders will not recognize
gain or loss for United States federal income tax purposes with respect to
the Amgen common stock received in the merger, except with respect to any
cash received in lieu of fractional shares of Amgen common stock. If the
merger were to fail to qualify as a reorganization, Kinetix stockholders'
receipt of Amgen common stock would be a taxable event.
Q: Am I entitled to appraisal rights?
A: Yes. Holders of Kinetix common stock and preferred stock are entitled to
exercise appraisal rights in connection with the merger, subject to
compliance with applicable procedures described in this proxy
statement/prospectus. However, Amgen has the right to terminate the merger
agreement if appraisal rights are exercised by holders of more than 9.9% of
the total number of shares of Kinetix capital stock outstanding immediately
prior to the merger.
Q: Will my rights as a Kinetix stockholder change as a result of the merger?
A: Yes. You will become an Amgen stockholder as a result of the merger. In
addition, with each share of Amgen common stock that you receive as part of
the merger consideration you will receive a preferred share purchase right
under Amgen's rights plan. This rights plan is often referred to as a
"poison pill" and may make a takeover of Amgen more difficult. There is a
summary comparison of the rights of stockholders of Kinetix and Amgen
starting on page 67 of this proxy statement/prospectus.
Q: Is everyone treated equally in the merger?
A: No. A number of directors and officers of Kinetix may have interests in the
merger agreement and the merger that are different from those of
stockholders who are not also directors or officers. In addition, certain
stockholders have different rights and obligations from other stockholders
under the merger agreement, including certain employee stockholders who may
be employed by Amgen following the merger. These differences are explained
in more detail starting on page 40 of this proxy statement/prospectus.
Q: Who can help answer my questions?
A: If you have any questions about the merger or the special meeting or if you
need additional copies of this proxy statement/prospectus or the enclosed
proxy, you should contact Dr. Jeffrey Hsi, Assistant Corporate Secretary of
Kinetix. You may e-mail him at hsi@kinetixpharm.com. You may call him at
--------------------
(781) 391-7577. You may write him at 200 Boston Avenue, Suite 3500, Medford,
Massachusetts 02155.
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SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and does not contain all the information that is important
to you. For a more complete understanding of the merger, you should carefully
read this entire proxy statement/prospectus and the other documents to which we
refer you. In addition, we incorporate by reference important business and
financial information about Amgen into this proxy statement/prospectus. You may
obtain the information incorporated by reference without charge by following the
instructions in the section "Where You Can Find More Information" on page 71. We
have included page references parenthetically to direct you to a more complete
description in the proxy statement/prospectus of the topics presented in this
summary.
The Companies (page 23)
Kinetix Pharmaceuticals, Inc.
200 Boston Avenue, Suite 3500
Medford, Massachusetts 02155
(781) 391-7577
Kinetix is an emerging biopharmaceutical company that focuses on the
discovery, chemical optimization and development of orally active, small
molecule drugs that inhibit protein kinases, a key class of biological
regulators. It concentrates its research in the areas of oncology/angiogenesis,
immunological disorders and immunosuppression, asthma/allergy and inflammation.
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
(805) 447-1000
Amgen is a global biotechnology company that discovers, develops,
manufactures and markets human therapeutics based on advances in cellular and
molecular biology.
Amgen Acquisition Corp. II is a wholly-owned subsidiary of Amgen and was
formed solely for the purpose of the proposed merger. In the merger, Amgen
Acquisition Corp. II will be merged with and into Kinetix and Amgen Acquisition
Corp. II will no longer have a corporate existence.
The Merger
Summary of the Merger
The merger agreement is attached as Annex A to this proxy
statement/prospectus. We encourage you to read the entire merger agreement
carefully. It is the principal document governing the merger.
In the merger, Amgen Acquisition Corp. II will merge with and into Kinetix.
Kinetix will continue as the surviving corporation and will become a
wholly-owned subsidiary of Amgen. Stockholders of Kinetix (other than
any/stockholdaer who exercises appraisal rights) will receive common stock of
Amgen in exchange for any common stock of Kinetix they hold immediately prior
to the closing of merger.
Immediately prior to the closing of the merger, Kinetix will cause each
outstanding share of Kinetix Series A convertible preferred stock and each
outstanding share of Kinetix Series B convertible preferred stock to be
converted into Kinetix common stock, all options to purchase Kinetix common
stock issued under the Kinetix stock option plan will be fully vested and if not
exercised for shares of Kinetix common stock, cancelled, and all unvested
restricted stock, other than restricted stock awarded to employees in connection
with the merger, will be vested, subject to stockholder approval of the 280G
proposal, so that such stock will be free of all encumbrances and restrictions.
Currently, each share of Kinetix Series A convertible preferred stock may be
converted into one share of Kinetix common stock and each share of Kinetix
Series B convertible preferred stock may be converted into one share of Kinetix
common stock.
4
Any stockholder who exercises appraisal rights will receive a cash payment.
The amount of this payment will be an agreed or judicially determined fair value
of the Kinetix shares held by that stockholder immediately prior to the merger.
Each share of Amgen outstanding common stock will remain outstanding and will be
unaffected by the merger.
What You Will Receive in the Merger (page 33)
If you own Kinetix common stock, or will own common stock immediately prior
to the closing of the merger following (i) the conversion of your preferred
stock, (ii) the exercise of your stock options or (iii) the grant of additional
restricted stock prior to the merger, and you do not exercise appraisal rights,
you will be entitled to receive your proportionate share of the shares of Amgen
common stock issued as merger consideration based on the number of shares of
Kinetix common stock you own immediately prior to the merger. However, if you
are granted additional shares of restricted Kinetix common stock in connection
with the merger that are not vested prior to the merger, and you do not exercise
appraisal rights, the shares of Amgen common stock you will be entitled to
receive will be subject to substantially similar terms and conditions as those
shares of restricted Kinetix common stock. In addition, Amgen will maintain
custody of those restricted shares until the restrictions lapse.
The number of Amgen shares you are entitled to receive will be calculated
on the trading day immediately prior to the closing date of the merger by
dividing (x) the number of shares of common stock of Kinetix you own immediately
prior to the merger by (y) the total number of shares of Kinetix common stock
outstanding immediately prior to the merger and then multiplying this number by
(z) (i) the aggregate value of the merger consideration to be issued by Amgen
($170,000,000, plus $1,200,000 if a Kinetix convertible promissory note is
----
converted by Kinetix into shares of Kinetix common stock prior to the closing of
the merger, less any amounts loaned by Amgen to Kinetix outstanding at the
----
closing of the merger) divided by (ii) the closing sale price of Amgen common
stock as reported on The Nasdaq Stock Market on the trading day immediately
prior to the closing date of the merger. This product will be rounded down to
the nearest whole number of shares. You will receive cash in lieu of a
certificate representing a fractional share of Amgen common stock.
Ownership of Amgen Following the Merger
Because the number of Amgen shares that will be issued as merger
consideration will not be calculated until the trading day immediately prior to
the closing date of the merger, the aggregate ownership percentage of former
Kinetix stockholders in Amgen following the merger will not be determined until
that time. As of November 10, 2000, the last trading day before the record date,
the closing sale price of Amgen common stock was $64.56 per share as reported on
The Nasdaq Stock Market. Based on this closing sale price the Kinetix
stockholders as of the record date would own less than one percent of the
aggregate outstanding common stock of Amgen.
Recommendation of the Kinetix Board of Directors (page 40)
The Kinetix board of directors believes that the terms of the merger and
the merger agreement are fair to and in the best interests of Kinetix and its
stockholders and unanimously recommends that stockholders vote "FOR" the
adoption of the merger agreement. Additionally, in connection with the merger,
the Kinetix board of directors unanimously recommends that the stockholders vote
"FOR" the 280G proposal.
To review the background and reasons for the merger in greater detail, as
well as certain risks related to the merger, see pages 35 to 40 and 13 to 21.
Interests of Kinetix Directors and Management in the Merger (page 40)
You should note that a number of directors and officers of Kinetix have
interests in the merger as directors or officers that are different from, or in
addition to, the interests of a Kinetix stockholder. If the merger is
completed:
. Dr. Lydon, President, Chief Executive Officer and a director of Kinetix
and Dr. Armistead, Chief Scientific Officer of Kinetix and a director of
Kinetix, will be retained as employees of Kinetix, will receive
substantial compensation in connection with their continued employment
after the merger and will receive accelerated vesting of unvested
restricted Kinetix common stock;
5
. options to purchase 12,307.75 shares of common stock held by Chris Adams,
director of Kinetix, will become fully vested and exercisable; and
. 123,077 shares of Kinetix common stock held by Salkilld Holdings Limited
(of which Jason Loveridge, a director of Kinetix, is a majority owner)
subject to a restricted stock purchase agreement will become fully
vested.
Certain United States Federal Income Tax Consequences of the Merger (page 42)
The merger is intended to qualify as a reorganization within the meaning of
the Internal Revenue Code of 1986, as amended. If the merger qualifies as a
reorganization, you generally will not recognize gain or loss for United States
federal income tax purposes as a result of your exchange of your Kinetix common
stock for Amgen common stock in the merger, except for any cash received in lieu
of a fractional share of Amgen common stock. If the merger fails to qualify as
a reorganization, you would recognize gain or loss for United States federal
income tax purposes as a result of your exchange of your Kinetix common stock
for Amgen common stock in the merger, measured by the difference between the
fair market value of that Amgen common stock and your tax basis in your Kinetix
capital stock.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your own
tax advisor for a full understanding of the tax consequences of the merger to
you.
Accounting Treatment (page 42)
The merger will be accounted for under the "purchase" method of accounting
in accordance with accounting principles generally accepted in the United
States. Under this accounting method, the tangible and identifiable intangible
assets and liabilities will be recorded at their fair values, and any amount of
Amgen's purchase price in excess of these amounts will be accounted for as
goodwill by Amgen.
Appraisal Rights (page 31)
Under the law of Delaware, where Kinetix is incorporated, holders of
Kinetix common stock who comply with the applicable requirements of Delaware law
will have the right to receive an appraisal of the value of their shares in
connection with the merger. We have included a copy of Section 262 of the
Delaware General Corporation Law--Appraisal Rights as Annex D to this proxy
statement/prospectus.
The Special Meeting
Date, Time and Place (page 29)
The special meeting of Kinetix stockholders will be held at the offices of
Kinetix at 200 Boston Avenue, Suite 3500, Medford, Massachusetts, at 9:00 a.m.,
local time, on December 4, 2000.
Record Date; Voting Power
Kinetix stockholders are entitled to vote at the special meeting if they
owned shares of Kinetix as of the close of business on November 13, 2000, the
record date.
On the record date, there were 8,093,619 shares of Kinetix common stock,
16,000,000 shares of Kinetix Series A convertible preferred stock and 10,352,939
shares of Kinetix Series B convertible preferred stock entitled to vote at the
special meeting.
Vote Required
Proposal 1: The affirmative vote of (i) holders of a majority of the
shares of Kinetix common stock and preferred stock outstanding and entitled to
vote on the record date, voting together as a single class and (ii) holders of
at least sixty-six percent (66%) of the shares of each of Kinetix Series A
convertible preferred stock and Series B
6
convertible preferred stock outstanding and entitled to vote on the record date,
voting as separate classes, is required to adopt the merger agreement.
Proposal 2: As a condition to the accelerated vesting of outstanding
restricted stock issued to four officers and one employee of Kinetix and the
issuance of additional restricted stock to two officers and one employee of
Kinetix the affirmative vote of Kinetix stockholders that in the aggregate own
more than seventy-five percent (75%) of all outstanding capital stock of Kinetix
entitled to vote on the record date, voting as a single class, but disregarding
stock owned by these officers and this employee, is required to approve the 280G
proposal.
On October 16, 2000, the date the merger agreement was signed, affiliates
of Kinetix entered into voting and support agreements with Amgen, Kinetix and
Amgen Acquisition Corp. II, pursuant to which, among other things, they have
agreed to vote their Kinetix common stock, Kinetix Series A convertible
preferred stock and Series B convertible preferred stock "FOR" adoption of the
merger agreement. The voting and support agreement is described in more detail
on page 53. The form of voting and support agreement is attached as Annex B.
These affiliates have also granted irrevocable proxies and powers of attorney to
Amgen and Amgen representatives to vote their shares of Kinetix common stock
"FOR" adoption of the merger agreement. Amgen currently holds proxies with
respect to a number of shares sufficient to adopt the merger agreement.
If you abstain from voting or do not vote, either in person or by proxy, it
will have the effect of a vote against the proposals for which you do not cast a
vote.
The Merger Agreement
Conditions to the Merger (page 45)
Amgen and Kinetix will complete the merger only if they satisfy or, in some
cases, waive several conditions, including but not limited to the following:
. holders of a majority of the outstanding shares of Kinetix common stock,
Kinetix Series A convertible preferred stock, and Kinetix Series B
convertible preferred stock, voting together as a class, and sixty-six
percent (66%) of the Kinetix Series A convertible preferred stock and
sixty-six percent (66%) of the Kinetix Series B convertible preferred
stock, voting as separate classes, must vote to adopt the merger
agreement;
. the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, must have become effective under the
Securities Act and must not be the subject of any stop order or
proceedings seeking a stop order;
. the Amgen common stock to be issued to Kinetix stockholders pursuant to
the merger must be authorized for inclusion on The Nasdaq Stock Market.
No Solicitation (page 46)
The merger agreement provides that Kinetix will not, and will not authorize
or permit any of its officers, directors, employees or other representatives to
solicit any takeover proposal or participate in any discussion or negotiation
regarding any takeover proposal, any sale of all or a material portion of
Kinetix's assets, any license, joint venture, collaboration or similar
arrangement involving Kinetix, or any offering of shares of capital stock of
Kinetix.
Termination of the Merger Agreement (page 47)
Under specified circumstances, either Amgen or Kinetix may terminate the
merger agreement at any time prior to the effective time of the merger, whether
before or after the adoption of the merger agreement by the Kinetix
stockholders. If the merger agreement is terminated under specified
circumstances, Kinetix must pay Amgen a termination fee consisting of Amgen's
costs and expenses associated with the merger. In addition, Kinetix must pay
Amgen an additional termination fee of $20,000,000 if the merger agreement is
terminated and, within twelve months of such termination, Kinetix enters into an
alternative transaction specified in the merger agreement.
7
Market Price and Dividend Information (page 66)
Shares of Amgen common stock are traded on The Nasdaq Stock Market. The
following table presents as of October 16, 2000, the last full trading day prior
to the public announcement of the proposed merger, and as of November 10, 2000,
the last day for which information in the table could be calculated prior to the
date of this proxy statement/prospectus, the high and low sale prices per share
of Amgen common stock, as reported on The Nasdaq Stock Market. There is no
public trading market for Kinetix's common or preferred stock.
Amgen
Common
Date Stock
- ----
High Low
--------------- ---------------
October 16, 2000...................... $ 66.13 $ 61.81
November 10, 2000..................... $ 65.81 $ 61.06
--------------- ---------------
Amgen has never paid cash dividends on its common stock, and currently intends
to utilize any earnings for development of its business and for repurchases of
its common stock. The payment of dividends by Amgen in the future, if any, will
depend on business conditions, its financial position, earnings and other
factors.
Expenses (page 49)
Amgen and Kinetix will each pay its own expenses incidental to the
preparation of the merger agreement, the carrying out of the provisions of the
merger agreement and the completion of the merger, provided that all legal fees,
costs and expenses in excess of $150,000 and all accounting fees, costs and
expenses in excess of $30,000 incurred by Kinetix in connection with the merger
and merger agreement will be paid by the Kinetix stockholders.
Other Agreements
Loan Agreement (page 53)
Under specified circumstances, if the merger agreement is terminated or the
merger is not consummated by a certain date, Amgen will loan to Kinetix up to
Two Million Four Hundred Thousand Dollars ($2,400,000). Any loan amounts
outstanding at the closing date of the merger will reduce the aggregate purchase
price Amgen will pay to the stockholders of Kinetix. If the merger agreement is
terminated prior to the closing of the merger, any amounts outstanding will be
repaid by Kinetix to Amgen in accordance with the terms of the loan agreement
that governs those loaned amounts.
Employment and Related Agreements (page 53)
As a condition to the merger, at least 80% of the scientists at Kinetix and
two of the officers and directors of Kinetix, Dr. Nicholas Lydon and Dr. David
Armistead, will enter into employment agreements, arbitration agreements and
proprietary information agreements. The employment agreements generally have a
term of three years, provide for annual base salaries, signing and retention
bonuses, stock option grants and standard benefits provisions. The employment
agreements with Dr. Lydon and Dr. Armistead contain some additional provisions
which are described on page 40. The arbitration agreements generally require
the employees to arbitrate all disputes they have with Amgen or Kinetix. The
proprietary information agreements, among other things, require the employees to
maintain the confidentiality of Amgen's and Kinetix's proprietary information.
Non-Competition Agreements (page 54)
As a condition to the merger, at least 80% of the scientists at Kinetix and
Dr. Nicholas Lydon and Dr. David Armistead must enter into non-competition
agreements. Under these agreements, each of these employees agrees with Amgen
and Kinetix that, among other things, throughout his or her employment by
Kinetix or Amgen and for a period thereafter (in no event more than three years
from the closing of the merger in the aggregate), he or she will not (i) compete
with Amgen or Kinetix, (ii) divert business from Amgen or Kinetix, or (iii)
attempt to recruit or hire any employees away from Amgen or Kinetix.
8
Selected Historical Financial Data--Amgen
We are providing financial data to assist you in analyzing the financial
aspects of the merger. The following selected financial data was derived from
Amgen's audited consolidated financial statements for each of the fiscal years
in the five year period ended December 31, 1999. The table also contains
selected financial data derived from Amgen's unaudited interim consolidated
financial statements for the six months ended June 30, 1999 and 2000. All
adjustments, consisting of only normal recurring accruals, which Amgen's
management considers necessary have been included for a fair presentation of the
financial position and results of operations of Amgen for the six month periods
ended June 30, 1999 and 2000. However, interim period results are not
necessarily indicative of results for a full fiscal year. You should read this
selected financial data together with the consolidated financial statements of
Amgen and the notes thereto and other financial information contained in the
most recent annual and quarterly reports of Amgen, which have been incorporated
into this proxy statement/prospectus by reference. See "Where You Can Find More
Information" on page 71.
(In thousands, except per share data)
Six Months Ended
Years Ended December 31, June 30,
---------------------------------------------------------------- -----------------------
1999 1998 1997 1996 1995 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated Statement of
Operations Data:
Revenues:
Product sales (1).................. $3,042,825 $2,514,364 $2,219,755 $2,088,250 $1,818,542 $1,504,428 $1,426,199
Other revenues..................... 297,254 203,799 181,221 151,584 121,344 224,041 139,827
Total revenues (1)................ 3,340,079 2,718,163 2,400,976 2,239,834 1,939,886 1,728,469 1,566,026
Research and development expenses... 822,791 663,354 630,788 528,362 451,673 392,614 382,146
Selling, general and administrative
expenses........................... 654,307 515,341 483,788 470,576 418,363 374,785 290,104
Legal (award) assessment (2)........ (49,000) (23,000) 157,000 -- -- -- --
Net income.......................... 1,096,356 863,170 644,308 679,836 537,720 568,809 514,783
Diluted earnings per share (1)(2)... 1.02 0.82 0.59 0.61 0.48 0.52 0.48
Cash dividends per share............ -- -- -- -- -- -- --
At December 31,
---------------------------------------------------------------- At June 30,
1999 1998 1997 1996 1995 2000
---------- ---------- ---------- ---------- ---------- -----------
Consolidated Balance Sheet Data:
Total assets........................ $4,077,655 $3,672,213 $3,110,231 $2,765,602 $2,432,754 $4,543,241
Long-term debt...................... 223,000 223,000 229,000 59,000 177,200 223,000
Stockholders' equity................ 3,023,527 2,562,166 2,139,262 1,906,284 1,671,800 3,484,263
____________________
(1) Due to Year 2000 contingency planning in the fourth quarter of 1999, Amgen
offered extended payment terms on limited shipments of EPOGEN(R) and
NEUPOGEN(R) to certain wholesalers. These Year 2000 related sales totaled
$45 million, or $0.02 per share. Amgen believes sales in the first quarter
of 2000 were reduced by approximately the same amount. If these Year 2000
related sales and the reduction in the potential spillover liabilities in
1999 (see Note 2 below) had not occurred, diluted earnings per share in 1999
would have been $0.05 less than the reported amount.
(2) Includes spillover liability reductions of $49 million, or $0.03 per share,
and $23 million, or $0.01 per share, related to reduced uncertainty for
potential spillover liabilities to Johnson & Johnson in 1999 and 1998,
respectively, and a legal assessment of $157 million, or $0.09 per share,
related to the arbitration proceedings with Johnson & Johnson in 1997 (see
Note 4 to the Consolidated Financial Statements in Amgen's Annual Report on
Form 10-K for the year ended December 31, 1999).
9
Selected Historical Financial Data--Kinetix
We are providing financial data to assist you in analyzing the financial
aspects of the merger. The following selected financial data was derived from
Kinetix's audited financial statements for each of the fiscal years in the three
year period ended December 31, 1999. The table also contains selected financial
data derived from Kinetix's unaudited interim financial statements for the six
months ended June 30, 2000 and 1999. All adjustments, consisting of only normal
recurring accruals, which Kinetix's management considers necessary have been
included for a fair presentation of the financial position and results of
operations of Kinetix for the six month periods ended June 30, 2000 and 1999.
However, interim period results are not necessarily indicative of results for a
full fiscal year. You should read this selected financial data together with
the financial statements of Kinetix and the notes thereto and "Kinetix
Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this proxy statement/prospectus. See page 25.
(In thousands)
Years Ended December 31, Six Months Ended June 30,
------------------------------ -------------------------
1999 1998 1997 2000 1999
-------- ------- ------- ---------- ----------
Statement of Operations Data:
Research and development expenses.......... $ 4,498 $ 3,038 $ 1,131 $ 2,655 $ 2,209
General and administrative expenses........ 977 821 610 684 501
Net loss................................... (5,181) (3,571) (1,305) (3,215) (2,593)
At December 31,
------------------------------ At June 30,
1999 1998 1997 2000
-------- ------- ------- -----------
Balance Sheet Data:
Total assets............................... $ 9,520 $ 6,594 $ 9,021 $ 6,350
Long-term obligations and redeemable
preferred stock............................ 20,533 10,683 10,000 21,483
Total stockholders' deficit................ (11,914) (4,802) (1,256) (16,019)
10
Summary Unaudited Pro Forma Condensed Combining Financial Data
The table below presents selected data from the Amgen and Kinetix unaudited
pro forma condensed combining statements of operations for the year ended
December 31, 1999 and for the six months ended June 30, 2000 and from the
unaudited pro forma condensed combining balance sheet as of June 30, 2000. This
table should be read in conjunction with the Amgen Inc. and Kinetix
Pharmaceuticals, Inc. Unaudited Pro Forma Condensed Combining Financial
Statements beginning on page 61.
(In thousands, except per share data)
Pro Forma Pro Forma
Year Ended Six Months Ended
December 31, 1999 June 30, 2000
----------------- -----------------
Statement of Operations Data:
Net income.............................. $1,083,457 $ 561,981
Weighted average shares outstanding:
Basic................................. 1,024,224 1,027,904
Diluted............................... 1,080,980 1,087,228
Earnings per share:
Basic................................. $ 1.06 $ 0.55
Diluted............................... $ 1.00 $ 0.52
Pro Forma
As of
June 30, 2000
-----------------
Balance Sheet Data:
Total assets.................................................. $4,679,571
Long-term debt and lease obligations.......................... 223,584
Total stockholders' equity.................................... 3,619,123
11
Comparative Per Share Information
Summarized below is per share information for Amgen on an historical basis
and for Kinetix and the combined companies on an unaudited pro forma basis. The
combined pro forma data gives effect to the merger under the purchase method of
accounting. This information is only a summary and should be read in
conjunction with the selected historical financial data of Amgen and Kinetix,
the Amgen Inc. and Kinetix Pharmaceuticals, Inc. Unaudited Pro Forma Condensed
Combining Financial Statements, and the separate historical financial statements
of Kinetix and related notes included in this proxy statement/prospectus.
Year Ended Six Months Ended
and at and at
December 31, 1999 June 30, 2000
----------------- ----------------
Historical - Amgen:
Earnings per share:
Basic................................... $ 1.07 $ 0.55
Diluted................................. 1.02 0.52
Cash dividends per share.................. -- --
Book value per share...................... 2.97 3.39
Pro Forma - Kinetix:
Loss per share - basic and diluted (1).... (2.05) (1.27)
Book value per share (1).................. 3.15 1.93
Pro Forma Combined - Amgen and Kinetix:
Earnings per share:
Basic................................... 1.06 0.55
Diluted................................. 1.00 0.52
Cash dividends per share.................. -- --
Book value per share...................... N/A 3.51
(1) The pro forma loss per share and pro forma book value per share information
for Kinetix assumes the issuance of 2,525,000 shares of Amgen unrestricted
common stock in connection with the merger.
The information in this section is only a summary and should be read along
with Amgen's and Kinetix's historical financial statements and accompanying
notes incorporated by reference in this proxy statement/prospectus. See "Where
You Can Find More Information" on page 71.
12
RISK FACTORS
In addition to the other information included and incorporated by reference
in this proxy statement/prospectus, you should consider carefully the risk
factors described below in deciding how to vote on the merger proposal.
RISKS RELATED TO THE MERGER
Because the market price of Amgen common stock fluctuates, Kinetix stockholders
cannot be sure of the market price of the Amgen common stock they will receive
in the merger.
At the time the merger is completed, each share of Kinetix common stock
will be exchanged for a fraction of a share of Amgen common stock. Under the
terms of the merger agreement, the exchange ratio will be based on the closing
sale price of Amgen common stock as reported on The Nasdaq Stock Market on the
trading day immediately prior to the day of the closing of the merger.
Accordingly, the market price per share of the Amgen common stock received by
Kinetix stockholders at the closing of the merger may be higher or lower than
the market price of the Amgen common stock at the time you vote on the adoption
of the merger agreement. As a result, if the closing sale price of Amgen common
stock on the trading day immediately prior to the day of the closing of the
merger is higher than the closing sale price at the time you vote to adopt the
merger agreement, you will receive fewer shares of Amgen common stock at the
closing than you would have received had the merger closed on the day of your
vote.
The price of Amgen common stock may be affected by factors different from
those affecting the value of Kinetix stock.
Upon completion of the merger, holders of Kinetix common stock will become
holders of Amgen common stock. Amgen's business differs from that of Kinetix,
and Amgen's results of operations, as well as the price of Amgen common stock,
may be affected by factors different from those affecting Kinetix's results of
operations and the value of Kinetix stock. For a discussion of Amgen's business
and certain factors to consider in connection with its business, see Amgen's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Amgen's
Form 10-Q for the three months ended March 31, 2000, Amgen's Form 10-Q for the
three months ended June 30, 2000, Amgen's Current Report on Form 8-K filed on
November 3, 2000, and Amgen's Current Report on Form 8-K filed on November 13,
2000, which are incorporated by reference in this proxy statement/prospectus and
"Risk Factors - Risks Related to the Ownership of Amgen Common Stock" in this
proxy statement/prospectus.
The ability of Amgen and Kinetix to integrate successfully their businesses is
uncertain.
After the merger, Amgen will have to integrate the operations of Kinetix
with Amgen's existing operations. The integration will require significant
efforts from each company, including coordination of their research and
development efforts. Amgen may find it difficult to integrate the operations of
Kinetix. Kinetix personnel may leave Kinetix because of the merger. Kinetix
licensees, distributors or suppliers may terminate their arrangements with
Kinetix, or demand amended terms to these arrangements. Amgen management may
have their attention diverted while trying to integrate the two companies. Such
diversion of management's attention or difficulties in the transition process
could have an adverse impact on Amgen. If Amgen is not able to successfully
integrate the operations of Kinetix, Amgen's expectations of its future results
of operations may not be met.
The officers and directors of Kinetix have interests different from yours as a
Kinetix stockholder.
The directors and officers of Kinetix have certain interests in the merger
and participate in certain arrangements that are different from, or are in
addition to, those of Kinetix stockholders generally.
These interests and arrangements include:
. the officers and directors of Kinetix are beneficiaries of a release of
all claims against Kinetix and its officers, directors, and stockholders,
and their respective successors and assigns, that arose or could
13
have arisen prior to the closing of the merger and will benefit from the
extension of their coverage under Kinetix's existing directors' and
officers' insurance policy;
. Dr. Nicholas Lydon and Dr. David Armistead will execute employment
agreements that provide for, among other things, different levels of
compensation from the standard employment agreements (including
guaranteed bonuses), and also permit these persons to resign for "good
reason";
. the vesting of options to purchase 12,307.75 shares of Kinetix common
stock held by Chris Adams, a director, will be accumulated and those
options will become fully vested and exercisable pursuant to the merger
agreement; and
. if the 280G proposal is approved, Dr. Lydon, Dr. Armistead, Dr. Jeffrey
Hsi and Ms. Nancy Stuart will have their unvested restricted stock, other
than restricted stock awarded in connection with the merger for retention
purposes, vested so that such restricted stock will be free of all
encumbrances and restrictions.
As a result, these directors and officers could be more likely to approve
and adopt the merger agreement and the merger than if they did not hold these
interests.
RISKS RELATED TO THE OWNERSHIP OF AMGEN COMMON STOCK
Product development
Amgen intends to continue an aggressive product development program.
Successful product development in the biotechnology industry is highly
uncertain, and very few research and development projects produce a commercial
product. Product candidates that appear promising in the early phases of
development, such as in early human clinical trials, may fail to reach the
market for a number of reasons, such as:
. the product candidate did not demonstrate acceptable clinical trial
results even though it demonstrated positive preclinical trial results;
. the product candidate was not effective in treating a specified condition
or illness;
. the product candidate had harmful side effects on humans;
. the necessary regulatory bodies (such as the United States Food and Drug
Administration ("FDA")) did not approve Amgen's product candidate for an
indicated use;
. the product candidate was not economical for Amgen to manufacture it;
. other companies or people have or may have proprietary rights to Amgen's
product candidate (e.g., patent rights) and will not let Amgen sell it on
reasonable terms, or at all; and
. the product candidate is not cost effective in light of existing
therapeutics.
Several product candidates have failed at various stages in the product
development process, including Brain-Derived Neurotrophic Factor (BDNF),
Megakaryocyte Growth and Development Factor (MGDF) and Glial cell line-Derived
Neurotrophic Factor (GDNF). For example, in 1997, Amgen announced the failure
of BDNF (for the treatment of Amyotrophic Lateral Sclerosis (ALS) by
subcutaneous injection administration route), because the product candidate, as
administered, did not produce acceptable clinical results in a specific
indication after a phase 3 trial, even though BDNF had progressed successfully
through preclinical and earlier clinical trials. Of course, there may be other
factors that prevent Amgen from marketing a product. Amgen cannot guarantee it
will be able to produce commercially successful products. Further, clinical
trial results are frequently susceptible to varying interpretations by
scientists, medical personnel, regulatory personnel, statisticians and others
which may delay, limit or prevent further clinical development or regulatory
approvals of a product candidate. Also, the length of time that it takes for
Amgen to complete clinical trials and obtain regulatory approval for product
marketing has in the past varied by product and by the indicated use of a
product. Amgen expects that this will likely be the case with future product
candidates and it cannot predict the length of time to complete necessary
clinical trials and obtain regulatory approval. See "Regulatory matters."
14
Regulatory matters
Amgen's research, preclinical testing, clinical trials, facilities,
manufacturing, pricing and sales and marketing are subject to extensive
regulation by numerous state and federal governmental authorities in the U.S.,
such as the FDA and the Health Care Financing Administration, as well as by
foreign countries and the European Union. Currently, Amgen is required in the
U.S. and in foreign countries to obtain approval from those countries'
regulatory authorities before it can market and sell its products in those
countries. The success of Amgen's current and future products will depend in
part upon obtaining and maintaining regulatory approval to market products in
approved indications in the U.S. and foreign markets. In Amgen's experience, the
regulatory approval process is a lengthy and complex process, both in the U.S.
and in foreign countries, including countries in the European Union. Even if
Amgen obtains regulatory approval, both its manufacturing processes and its
marketed products are subject to continued review. Later discovery of previously
unknown problems with Amgen's products or manufacturing processes may result in
restrictions on such products or manufacturing processes, including withdrawal
of the products from the market. Amgen's failure to obtain necessary approvals,
or the restriction, suspension or revocation of any approvals, or its failure to
comply with regulatory requirements could prevent it from manufacturing or
selling its products which could have a material adverse effect on Amgen and its
results of operations.
Reimbursement; third party payors
In both domestic and foreign markets, sales of Amgen's products are
dependent, in part, on the availability of reimbursement from third party payors
such as state and federal governments (for example, under Medicare and Medicaid
programs in the U.S.) and private insurance plans. In certain foreign markets,
the pricing and profitability of Amgen's products generally are subject to
government controls. In the U.S., there have been, and Amgen expects there will
continue to be, a number of state and federal proposals that limit the amount
that state or federal governments will pay to reimburse the cost of drugs. In
addition, Amgen believes the increasing emphasis on managed care in the U.S. has
and will continue to put pressure on the price and usage of its products, which
may impact product sales. Further, when a new therapeutic is approved, the
reimbursement status and rate of such a product is uncertain. In addition,
current reimbursement policies for existing products may change at any time.
Changes in reimbursement or Amgen's failure to obtain reimbursement for its
products may reduce the demand for, or the price of, Amgen's products, which
could result in lower product sales or revenues which could have a material
adverse effect on Amgen and its results of operations. For example, in the U.S.
the use of EPOGEN(R) in connection with treatment for end stage renal disease is
funded primarily by the U.S. federal government. Therefore, as in the past,
EPOGEN(R) sales could be affected by future changes in reimbursement rates or
the basis for reimbursement by the federal government. For example, in early
1997, the Health Care Financing Administration instituted a reimbursement change
for EPOGEN(R) which adversely affected Amgen's EPOGEN(R) sales, until the
policies were revised.
Guidelines
Government agencies promulgate regulations and guidelines directly
applicable to Amgen and to its products. However, professional societies,
practice management groups, private health/science foundations and organizations
involved in various diseases may also publish, from time to time, guidelines or
recommendations to the health care and patient communities. These organizations
may make recommendations that affect a patient's usage of certain therapies,
drugs or procedures, including Amgen's products. Recommendations of government
agencies or these other groups/organizations may relate to such matters as
usage, dosage, route of administration and use of concomitant therapies.
Recommendations or guidelines that are followed by patients and health care
providers could result in, among other things, decreased use of Amgen's products
which could have a material adverse effect on its results of operations. In
addition, the perception by the investment community or stockholders that such
recommendations or guidelines will be followed could adversely affect prevailing
market prices for Amgen's common stock.
Intellectual property and legal matters
The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and often involve complex legal, scientific and factual
questions. To date, there has emerged no consistent policy regarding breadth of
claims allowed in such companies' patents. Accordingly, the patents and patent
applications relating to
15
Amgen's products, product candidates and technologies may be challenged,
invalidated or circumvented by third parties and might not protect Amgen against
competitors with similar products or technology. For certain of Amgen's product
candidates, there are third parties who have patents or pending patents that
they may claim prevent Amgen from commercializing these product candidates in
certain territories. Patent disputes are frequent and can preclude
commercialization of products. Amgen is currently, and in the future may be,
involved in patent litigation. The results of such litigation could subject
Amgen to competition and/or significant liabilities, could require it to enter
into third party licenses or could cause it to cease using the technology or
product in dispute. In addition, Amgen cannot guarantee that such licenses will
be available on terms acceptable to Amgen.
Amgen is currently involved in arbitration proceedings with Ortho
Pharmaceutical Corporation (which has assigned its rights under the Product
License Agreement to Ortho Biotech Products, L.P.), a subsidiary of Johnson &
Johnson, relating to a license granted by Amgen to Johnson & Johnson for sales
of Epoetin alfa in the U.S. for all human therapeutic uses except dialysis.
Competition
Amgen operates in a highly competitive environment. Its principal
competitors are pharmaceutical and biotechnology companies. Some of Amgen's
competitors, mainly large pharmaceutical corporations, have greater clinical,
research, regulatory and marketing resources than it does. In addition, some of
Amgen's competitors may have technical or competitive advantages over it for the
development of technologies and processes and may acquire technology from
academic institutions, government agencies and other private and public research
organizations. Amgen cannot guarantee that it will be able to produce or
acquire rights to products that have commercial potential. Even if Amgen
achieves successful product commercialization, it cannot guarantee that one or
more of its competitors will not achieve product commercialization earlier than
Amgen does, obtain patent protection that dominates or adversely affects Amgen's
activities, or have significantly greater marketing capabilities.
Fluctuations in operating results
Amgen's operating results may fluctuate from period to period for a number
of reasons. In budgeting its operating expenses, some of which are fixed in the
short term, Amgen assumes that revenues will continue to grow. Accordingly,
even a relatively small revenue shortfall may cause a period's results to be
below Amgen's expectations. A revenue shortfall could arise from any number of
factors, such as:
. lower than expected demand for Amgen's products;
. changes in the government's or private payor's reimbursement policies for
Amgen's products;
. changes in wholesaler buying patterns;
. increased competition from new or existing products;
. fluctuations in foreign currency exchange rates; and
. changes in Amgen's product pricing strategies.
Of course, there may be other factors that affect Amgen's revenues in any given
period.
Rapid growth
Amgen has an aggressive growth plan that includes substantial and
increasing investments in research and development and facilities. Amgen's plan
has a number of risks, such as:
. the need to generate higher revenues to cover a higher level of operating
expenses;
. the need to attract and assimilate a large number of new employees;
. the need to manage complexities associated with a larger and faster
growing organization; and
16
. the need to accurately anticipate demand for the products Amgen
manufactures and maintain adequate manufacturing capacity.
Of course, there may be other risks and Amgen cannot guarantee that it will
be able to manage successfully these or other risks.
Stock price volatility
Amgen's stock price, like that of other biotechnology companies, is highly
volatile. Amgen's stock price may be affected by, among other things, clinical
trial results and other product-development announcements by Amgen or its
competitors, regulatory matters, announcements in the scientific and research
community, intellectual property and legal matters, changes in reimbursement
policies or medical practices or broader industry and market trends unrelated to
Amgen's performance. In addition, if Amgen's revenues or earnings in any period
fail to meet the investment community's expectations, there could be an
immediate adverse impact on Amgen's stock price.
RISKS RELATED TO THE OWNERSHIP OF KINETIX CAPITAL STOCK
Kinetix is an early stage biopharmaceutical company and has no commercial
products or product candidates in clinical trials and may never have any
commercial products.
All of its compounds are in research or early development stages. Kinetix
cannot guarantee that any of its research and development efforts will result in
commercial products. Compounds selected for further study will require
significant additional development, preclinical studies and clinical trials,
regulatory clearance and additional investment prior to its development into a
pharmaceutical product and commercialization. Even if a product is developed
that is capable of being commercialized, Kinetix may not be able to produce
commercial quantities of the product at reasonable cost and the product once
introduced may not achieve market acceptance.
Kinetix has not generated any revenues from its operations and may never
generate any revenues.
Kinetix has incurred significant operating losses since its inception in
1996. As of June 30, 2000, Kinetix had an accumulated deficit of approximately
$16.2 million. Kinetix expects to continue to incur significant additional
operating losses over the next several years and expects cumulative losses to
increase substantially as it expands its research and development efforts and,
possibly, enters preclinical and clinical trials. Kinetix's may never be
profitable if it is unable to complete successfully the development of its
selected compounds, obtain the required regulatory clearances and manufacture
and market its proposed products. Kinetix cannot be certain that it will ever
achieve and sustain profitability.
Kinetix expects to incur substantial operating losses over the next several
years to fund its research and development activities and there is no guarantee
that it will be able to obtain additional funding.
Kinetix's future capital requirements will depend on many factors,
including, among others:
. continued scientific progress of its research and development programs;
. the ability of Kinetix to establish collaborative arrangements;
. the expenses of preclinical studies and clinical trials;
. the time and costs involved in obtaining regulatory clearance; and
. the costs related to establishing and maintaining patent protection.
Kinetix estimates that its existing capital resources will be sufficient to
fund its planned operations through the end of January 2001. Kinetix does not
know and cannot guarantee that the underlying assumed levels of expense will
prove accurate. If the merger does not occur, Kinetix intends to seek
additional funding through collaborative arrangements and private equity
financings. However, Kinetix may be unable to obtain additional financing on
acceptable terms, or at all. If additional funds are raised by issuing equity
securities, further dilution to
17
stockholders will result. In addition, if additional funds are obtained through
arrangements with collaborative partners or other partners, those arrangements
may require Kinetix to relinquish rights to certain of its technologies, product
candidates or products that it would otherwise seek to develop or commercialize
itself. If Kinetix cannot obtain sufficient amounts of funding, it may be
required to delay, reduce the scope of or eliminate one or more of its research
or development programs.
Kinetix's success will depend in part on its ability to obtain and maintain
patents, maintain trade secrets and operate without infringing on the
proprietary rights of others, both in the United States and in other countries.
Patent matters in biotechnology are highly uncertain and involve complex
legal and factual questions. Accordingly, the availability of and breadth of
claims allowed in biotechnology and pharmaceutical patents cannot be predicted.
As of October 19, 2000, Kinetix had 13 United States provisional patent
applications, 3 United States nonprovisional patent applications, and 2 Patent
Cooperation Treaty, international patent applications pending on various
compound classes and methods of use. As of October 19, 2000, Kinetix had 1
United States provisional patent application, 2 United States nonprovisional
patent applications, and 1 international patent application pending on
components of its discovery platform technology, including kinase enzyme crystal
structures and methods of use. Kinetix does not know whether any patents will
issue from any of its pending applications or that patents granted, if any, will
be sufficient to protect Kinetix's technology. Additionally, Kinetix cannot
predict that its patents, if issued, will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide any meaningful
protection or competitive advantages to Kinetix. Furthermore, if patents are
issued to other companies which contain competitive or conflicting claims, and
such claims are ultimately determined to be valid, Kinetix may have to obtain
licenses to these patents. If any licenses are required, Kinetix does not know
that it will be able to obtain any such license on commercially favorable terms,
if at all. If these licenses are not obtained, Kinetix might be prevented from
pursuing the development of certain of its potential products. Kinetix attempts
to protect its proprietary technology and processes in part by confidentiality
agreements with its employees, consultants and certain contractors. Kinetix
cannot guarantee that these agreements will not be breached, and Kinetix may not
have adequate remedies if any of these agreements are breached. In addition,
Kinetix's trade secrets may otherwise become known or be independently
discovered by competitors. To the extent that Kinetix or its consultants or
research collaborators use intellectual property owned by others in their work
for Kinetix, disputes may also arise as to the rights in related or resulting
know-how and inventions.
Possible litigation regarding patents and other proprietary rights could have a
material adverse effect on Kinetix.
Kinetix in the past has been, and from time to time in the future may be,
notified of claims that Kinetix may be infringing patents or other intellectual
property rights owned by third parties. Litigation may also be necessary to
enforce any patents licensed or issued to Kinetix or to determine the scope and
validity of third-party proprietary rights. This litigation could be expensive
and even if Kinetix wins, the cost of such litigation and the diversion of
Kinetix's management resources during such litigation could have a material
adverse effect on Kinetix. An adverse outcome in such a litigation could
subject Kinetix to significant liabilities to third parties, require disputed
rights to be licensed from third parties or require Kinetix to cease using such
technology, any of which could have a material adverse effect on Kinetix.
Competitors could acquire or develop technologies that would render
Kinetix's technology obsolete or noncompetitive.
The pharmaceutical research field is characterized by rapid technological
progress and intense competition. Further, Kinetix believes that interest in
the application of structure-based drug design and related technologies may
continue and may accelerate as the technologies become more widely understood.
Businesses, academic institutions, governmental agencies and other public and
private research organizations are conducting research to develop technologies
that may compete with those Kinetix uses. Many of these entities have
significantly greater financial resources and expertise in research and
development, manufacturing, conducting preclinical studies and clinical trials,
obtaining regulatory approvals and marketing than Kinetix. Kinetix cannot be
certain that it will be able to access the same technologies at an acceptable
price, or at all. Kinetix does not know if its competitors will develop more
effective or more affordable products, compete more effectively for corporate
partnerships or employees, or achieve earlier patent protection or product
commercialization than Kinetix.
18
Kinetix is highly dependent on key members of its scientific and management
staff, the loss of whose services might significantly delay or prevent the
achievement of research, development or business objectives.
In addition, Kinetix relies on consultants and advisors, including the
members of its Scientific Advisory Board, to assist it in formulating its
research and development strategy. To be successful, Kinetix must attract and
retain qualified personnel, consultants and advisors. In order to pursue its
product development and marketing plans, Kinetix will need to hire additional
qualified scientific personnel to perform research and development, as well as
personnel with expertise in conducting clinical trials, government regulation,
manufacturing and marketing. Kinetix faces intense competition for qualified
individuals from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. Kinetix does not know whether it
will be able to attract and retain such individuals on acceptable terms, if at
all, and the failure to do so would have a material adverse effect on Kinetix.
Uncertainties related to clinical trials and product development could affect
Kinetix's ability to commercialize products.
Before obtaining regulatory clearance for the commercial sale of any of its
products under development, Kinetix must demonstrate through preclinical studies
and clinical trials that the potential product is safe and effective for use in
humans for each particular use. Kinetix currently has no clinical trials in
progress. Kinetix does not know:
. if regulatory authorities will permit Kinetix to undertake clinical
trials for any of its product candidates;
. if permitted, that Kinetix will be able to complete the clinical trials
successfully, or at all;
. that the product candidates entering clinical trials, if any, will
successfully complete such trials;
. that Kinetix will be able to demonstrate the safety and efficacy
necessary to obtain the requisite regulatory approvals of such product
candidates; or
. that the product candidates will result in marketable products.
The results of initial preclinical studies of the compounds under
development by Kinetix are not necessarily indicative of results that will be
obtained from subsequent or more extensive preclinical studies and clinical
testing.
Kinetix does not know if it will receive regulatory approval for any product
candidates it develops. Moreover, even if approval is granted, that approval may
limit the indicated uses for which Kinetix may market that compound.
The FDA and comparable agencies in foreign countries impose substantial and
rigorous requirements on the introduction of therapeutic pharmaceutical products
through lengthy and detailed laboratory and clinical testing procedures,
sampling activities and other costly and time-consuming procedures.
Satisfaction of these requirements typically takes several years or longer and
may vary substantially based upon the type, complexity and novelty of the
pharmaceutical product. Data obtained from preclinical and clinical activities
are susceptible to varying interpretations, which could delay, limit or prevent
regulatory approval. In addition, delays or rejections may be encountered based
on changes in, or additions to, regulatory policies for drug approval during the
period of product development and regulatory review. The effect of government
regulation may be to:
. delay or prevent the commencement of clinical trials or marketing of
Kinetix's products, if any are developed and submitted for approval, for
a considerable period of time;
. impose costly procedures upon Kinetix's activities; and
. provide competitive advantages to companies more experienced in
regulatory affairs that compete with Kinetix.
19
Kinetix has no experience in manufacturing pharmaceutical or other products, and
does not know whether it will be able to develop such capabilities.
In order to conduct clinical trials and to commercialize potential products
Kinetix will need to manufacture products on a large scale at a competitive cost
and in accordance with FDA and other regulatory requirements. Kinetix currently
does not have manufacturing capabilities, and depends on third party
manufacturers or collaborative partners to make its compounds for its research
programs. If Kinetix is not able to obtain contract manufacturing on
commercially reasonable terms, it may not be able to conduct or complete
clinical trials or commercialize its products as planned.
If Kinetix products are not accepted by the market, Kinetix may never become
profitable.
Kinetix cannot guarantee that physicians, patients, payors or the medical
community in general will accept or use any products that may be developed by
Kinetix. The degree of market acceptance will depend upon a number of factors,
including:
. the receipt of regulatory approvals;
. the establishment and demonstration in the medical community of the
clinical efficacy and safety of Kinetix's product candidates;
. potential advantages over existing treatment methods; and
. pricing and reimbursement policies of government and third-party payors.
The success of Kinetix's products, if any are developed, in the United States
and other significant markets will depend, in part, upon the extent to which a
consumer will be able to obtain reimbursement for the cost of such products from
government health administration authorities, third-party payers and other
organizations.
Kinetix may not be able to determine in advance what the reimbursement
status of any product developed by it will be. Even if a product is approved
for marketing, Kinetix cannot be sure that adequate reimbursement will be
available. Also, future legislation or regulation relating to the health care
industry or third-party coverage and reimbursement may adversely affect
Kinetix's business. In particular, legislation or regulation limiting
consumers' reimbursement rights could adversely effect demand for and sales of
Kinetix's products which could have a material adverse effect on Kinetix.
Kinetix has no sales and marketing experience and may be unable to develop its
own sales and marketing force or may be unable to have third parties effectively
market and sell its products, if any, in the future
Kinetix must either develop a marketing and sales force or enter into
arrangements with third parties to market and sell any of its product candidates
which are approved by the FDA. Kinetix may not be able to successfully develop
a sales and marketing force. Further, Kinetix may not be able to enter into
marketing and sales agreements with others on acceptable terms, if at all. If
Kinetix develops its own marketing and sales capability, it will be competing
with other companies that currently have experienced and well-funded marketing
and sales operations. To the extent that any future collaborative partners have
commercial rights to Kinetix's products, any revenues Kinetix receives from
those products will depend on the sales and marketing efforts of others, and
those efforts may not be successful.
Kinetix's business will expose it to potential product liability risks that
arise from the testing, manufacturing and sales of pharmaceutical products.
In addition to direct expenditures for damages, settlement and defense
costs, there is the possibility of adverse publicity as a result of product
liability claims. These risks will increase if Kinetix products receive
regulatory approval and are commercialized. Kinetix does not know if it will be
able to maintain its existing levels of product liability insurance or be able
to obtain or maintain any additional insurance necessary for future operations
on acceptable terms. In addition, Kinetix cannot be certain that its existing
insurance or any such
20
additional insurance will provide adequate coverage against potential
liabilities. A successful product liability claim or series of claims against
Kinetix could have a material adverse effect on Kinetix.
If Kinetix does not receive additional funding or obtain a waiver from the
holders of at least 66% of the then outstanding shares of the Series B
convertible preferred stock, the conversion price of the Series B convertible
preferred stock will be reduced.
Kinetix's certificate of incorporation provides that the conversion price
for Kinetix's Series B convertible preferred stock will be reduced from $0.85 to
$0.65 per share if Kinetix fails to receive a binding, unconditional commitment
from one or more third parties to provide Kinetix funding in the amount of $6
million by December 31, 2000. If the merger with Amgen is not consummated, it
is extremely unlikely that Kinetix will obtain funding in the required amounts
by that date. The effect of the conversion reduction will be to increase the
number of shares of common stock issued upon conversion of the Series B
convertible preferred stock and dilute the equity ownership of the other Kinetix
stockholders.
Currently, there is no public market for Kinetix's securities.
Moreover, Kinetix does not know if there will ever be a public market for
its securities. If an active public market does develop, Kinetix cannot assure
you that it will be maintained. Until the time that a public market develops
for Kinetix's securities, there will be significant limitations on the value and
transferability of Kinetix's stock.
21
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for stock of
Amgen and Kinetix and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. These
forward-looking statements, including, without limitation, those relating to the
future business prospects, revenues and income, in each case relating to Amgen
and Kinetix, wherever they occur in this proxy statement/prospectus, are
necessarily estimates reflecting the best judgment of the respective management
of Amgen and Kinetix and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the forward-
looking statements. These forward-looking statements should, therefore, be
considered in light of various important factors, including those set forth in
this proxy statement/prospectus. Important factors that could cause actual
results to differ materially from estimates or projections contained in the
forward-looking statements include without limitation:
. the ability to integrate the operations of Amgen and Kinetix, including
their respective product lines and technology;
. the effects of vigorous competition in the markets in which Amgen and
Kinetix operate;
. successful product development and market acceptance of developed
products;
. regulatory approvals and restrictions;
. reimbursement from third party payors;
. guidelines and recommendations in the health care and patient
communities;
. intellectual property position and litigation;
. competition in pharmaceutical and biotechnology industries;
. fluctuations in operating results;
. management of rapid growth; and
. stock price volatility.
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
December 31, 1999 of Amgen, including any amendments, Amgen's Form 10-Q for the
three months ended March 31, 2000, Amgen's Form 10-Q for the three months ended
June 30, 2000, Amgen's Current Report on Form 8-K filed on November 3, 2000, and
Amgen's Current Report on Form 8-K filed on November 13, 2000. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this proxy statement/prospectus, or in the case of
documents incorporated by reference, as of the date of such documents. Neither
Amgen nor Kinetix undertakes any obligation to publicly update or release any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this proxy statement/prospectus or to reflect the occurrence
of unanticipated events.
22
THE COMPANIES
Amgen
Amgen is a global biotechnology company that discovers, develops,
manufactures and markets human therapeutics based on advances in cellular and
molecular biology.
Amgen manufactures and markets four human therapeutic products, EPOGEN(R)
(Epoetin alfa), NEUPOGEN(R) (Filgrastim), INFERGEN(R) (Interferon alfacon-1) and
STEMGEN(R) (Ancestim). EPOGEN(R) stimulates the production of red blood cells
and is marketed by Amgen in the United States for the treatment of anemia
associated with chronic renal failure in patients on dialysis. NEUPOGEN(R)
selectively stimulates the production of neutrophils, one type of white blood
cell. Amgen markets NEUPOGEN(R) in the United States, countries of the European
Union, Canada and Australia for use in decreasing the incidence of infection in
patients undergoing myelosuppressive chemotherapy. In addition, NEUPOGEN(R) is
marketed in most of these countries for use in reducing the duration of
neutropenia for patients undergoing myeloablative therapy followed by bone
marrow transplantation, for reducing symptoms in patients with severe chronic
neutropenia, for supporting peripheral blood progenitor cell transplants and for
reducing the recovery time of neutrophils and the duration of fever following
chemotherapy treatment in patients being treated for acute myelogenous leukemia.
NEUPOGEN(R) is also marketed in the European Union, Canada and Australia for use
in treating neutropenia in patients infected with the human immunodeficiency
virus receiving antiviral and/or other myelosuppressive medications.
INFERGEN(R) is a non- naturally occurring type-1 interferon which stimulates the
immune system to fight viral infections and is indicated for the treatment of
chronic hepatitis C viral infection. Amgen markets INFERGEN(R) in the United
States and Canada. STEMGEN(R) stimulates the production, mobilization and
maturation of progenitor cells and is indicated for use in support of stem cell
transplantation. Amgen markets STEMGEN(R) in Canada, Australia and New Zealand.
Amgen focuses its research efforts on secreted protein and small molecule
human therapeutics, with particular emphasis on cancer, inflammation and
neurobiology. It concentrates its development efforts on human therapeutics in
the areas of hematology and oncology, bone and inflammatory disorders, and
neuroendocrine and neurodegenerative diseases. Amgen has research facilities in
the United States and Canada and has clinical development staff in the United
States, the European Union, Canada, Australia, Japan and the People's Republic
of China. In addition to internal research and development efforts, Amgen has
acquired certain product and technology rights and has established research and
development collaborations.
Amgen operates commercial manufacturing facilities located in the United
States, Puerto Rico and The Netherlands. A sales and marketing force is
maintained in the United States, Europe, Canada, Australia, New Zealand and the
People's Republic of China. In addition, Amgen has entered into licensing and
co-promotion agreements to market EPOGEN(R), NEUPOGEN(R) and INFERGEN(R) in
certain geographic areas.
Amgen was incorporated in California in 1980 and was merged into a Delaware
corporation in 1987. Amgen's principal executive offices are located at One
Amgen Center Drive, Thousand Oaks, California 91320-1799. Additional
information regarding Amgen is contained in Amgen's filings with the Securities
and Exchange Commission. See "Where You Can Find More Information" on page 71.
Kinetix
Kinetix is an emerging biopharmaceutical company that focuses on the
discovery, chemical optimization and development of orally active, small
molecule drugs that inhibit protein kinases, a key class of biological
regulators. It concentrates its research in the areas of oncology/angiogenesis,
immunological disorders and immunosuppression, asthma/allergy and inflammation.
Protein kinases may represent the largest gene family in the human genome.
These enzymes act as "on/off" switches in signal transduction pathways, by
relaying messages from outside a cell to defined destinations within a cell.
Protein kinases regulate normal biological processes, however, when they
function improperly, these enzymes may also contribute to a wide range of human
diseases including diseases in the research areas targeted by Kinetix.
23
Kinetix's Approach to Drug Discovery
Kinetix uses a multidisciplinary, highly integrated approach to drug
discovery that capitalizes on the core structural similarities common to all
protein kinases. By combining several technologies including virtual screening,
structure-based drug design and a high-throughput "kinase array" screen, Kinetix
is able to accelerate the identification and optimization of novel lead
compounds that block selected protein kinases. The key elements of its drug
discovery approach are described below.
Virtual Screening of Diverse Chemical Libraries. In order to increase the
chances of identifying potential kinase inhibitors, Kinetix has developed novel
computer based methods to virtually screen millions of compounds. This process
allows Kinetix to rapidly select a meaningful subset of compounds for "wet" or
benchtop, biochemical analysis in its Kinase Assay Array. To date, the Kinetix
approach has yielded a diverse, kinase inhibitor library consisting of thousands
of compounds.
Kinase Assay Array. Kinetix's Kinase Assay Array represents what Kinetix
believes to be one of the largest single collections of protein kinase assays in
the pharmaceutical industry today. This assay array allows Kinetix to
simultaneously screen multiple classes of compounds, which have the potential to
be drug candidates, against a panel of kinase targets. Once a lead molecule is
identified, Kinetix will use structure-based drug design to build and optimize
selective inhibitors of the desired target.
Computational Chemistry and Structure-Based Drug Design. Kinetix
scientists generate novel structures and models of kinase targets for structure
based lead optimization, virtual screening, de novo drug design, and
interpretation of structure-activity relationship (SAR) data. Kinetix has
established an X-ray crystallography infrastructure, which includes protein
production and purification, X-ray data collection and modeling to enable "real
time" structure based drug design.
Molecular Pharmacology. Kinetix has established a panel of cellular assays
for each therapeutic area being explored to confirm leads identified in the
Kinase Assay Array. These cellular assays are designed to determine compound
potency and selectivity. An important aspect of Kinetix's discovery strategy is
the early analysis of lead research compounds in animal pharmacokinetic,
efficacy and toxicity models. Kinetix believes that early selection of
technically feasible leads with a wide therapeutic index should significantly
reduce development risk.
Medicinal/Combinatorial Chemistry. Kinetix has assembled an experienced
medicinal chemistry team trained in the latest methods in synthetic and parallel
synthesis chemistries to rapidly optimize lead molecules into drug candidates.
Kinetix's Patent Portfolio
Kinetix has established a growing intellectual property portfolio covering
compounds in identified kinase inhibitor classes, methods relating to those
compounds, and other discovery technologies. As of October 19, 2000, Kinetix
had 13 U.S. provisional patent applications, 3 U.S. nonprovisional patent
applications, and 2 Patent Cooperation Treaty international patent applications
pending on various compound classes and methods of use. As of October 19, 2000,
Kinetix had 1 U.S. provisional patent application, 2 U.S. nonprovisional patent
applications and 1 Patent Cooperation Treaty international patent application
pending on components of its discovery platform technology, including kinase
enzyme crystal structures and methods of use.
Kinetix's Management and Research and Development Team
Kinetix has assembled a well-qualified and productive research and
management team with expertise in structure-based technologies, small molecule
drug discovery and protein kinase inhibition. In addition, its management team
has extensive experience in planning, managing and executing small molecule
preclinical and clinical development activities, which Kinetix believes will
enable it to move efficiently from its current focus on discovery and design of
new kinase inhibitors to the development of drug candidates.
Kinetix was incorporated in Delaware in 1996. Its principal executive
offices and laboratories are located at 200 Boston Avenue, Medford,
Massachusetts 02155. These facilities include laboratories for medicinal
chemistry and biology, as well as X-ray crystallography and molecular modeling.
24
Kinetix Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read with "Selected
Historical Financial Data--Kinetix" and the Kinetix financial statements and
notes included elsewhere in this proxy statement/prospectus. Kinetix was
organized as a Delaware corporation in 1996 and began its operations in February
1997. Kinetix is engaged in the discovery and development of small molecular
weight inhibitors of the protein kinase family of enzymes.
Since its inception, Kinetix has incurred significant losses and, as of
June 30, 2000, had a deficit accumulated during the development stage of $16.2
million. Substantially all of Kinetix's expenditures to date have been for
research and development activities and general and administrative expenses.
Research and development expenses represent costs incurred on scientific
research and drug discovery. Kinetix outsources some research and development
activities to independent organizations to maximize efficiency and minimize its
internal overhead. Kinetix expenses its research and development costs as they
are incurred. General and administrative expenses primarily consist of salaries
and related expenses and general corporate activities.
Kinetix expects to continue to incur operating losses during fiscal 2000
and for the foreseeable future due to research and development activities
attributable to new and existing drug discoveries. To date, Kinetix has had no
revenues from any product sales and Kinetix has not achieved profitability on a
quarterly or annual basis. Kinetix will need to generate significant revenues
to achieve and maintain profitability.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Research and development expenses increased 20% from $2.21 million in the
first six months of fiscal 1999 to $2.66 million in the first six months of
fiscal 2000. The increase of $.45 million was due to increased expenses
associated with the hiring of five additional research scientists and increased
research and subcontracting costs during the first half of 2000.
General and administrative expenses increased 37% from $501,000 in the
first six months of fiscal 1999 to $684,000 in the first six months of fiscal
2000. The increase was primarily due to higher corporate development expenses,
including increased legal and financial services fees and increased expenditures
associated with business development activities.
Interest income increased 4% from $166,000 in the first six months of
fiscal 1999 to $172,000 in the first six months of fiscal 2000 due to a higher
level of cash and marketable securities available for investment during the
first six months of fiscal 2000 as compared to the same period in the prior
year. Interest expense decreased to $46,000 in the first six months of fiscal
2000 from $48,000 for the first six months of fiscal 1999 due to repayment of
outstanding lease obligations.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Research and development expenses increased 48% from $3.04 million in 1998
to $4.50 million in 1999. The increase of $1.46 million was due to increased
expenses associated with the hiring of seven additional research scientists in
1999 and increased expenses associated with purchases for laboratory
infrastructure.
General and administrative expenses increased 19% from $821,000 in 1998 to
$977,000 in 1999. The increase of $156,000 was primarily due to the increase in
corporate development expenses including increased expenditures associated with
business development related travel and meetings.
Interest income increased 14% from $342,000 in 1998 to $391,000 in 1999 due
to a higher level of cash and marketable securities available for investment
during 1999 as compared to 1998. Interest expense increased by 78% from $54,000
in 1998 to $97,000 in 1999 due to an increase in obligations on laboratory
equipment leases.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Research and development expenses increased 168% from $1.13 million in 1997
to $3.04 million in 1998. The increase of $1.91 million was due to increased
expenses associated with the hiring of an additional ten research scientists and
expenditures associated with laboratory equipment and supplies in 1998.
25
General and administrative expenses increased 35% from $610,000 in 1997 to
$821,000 in 1998. The increase of $211,000 was primarily due to an increase in
corporate development and finance activities including increased legal fees paid
in connection with corporate activities.
Interest income decreased 22% from $437,000 in 1997 to $342,000 in 1998 due
to a lower level of cash and marketable securities available for investment
during 1998 as compared to 1997.
Liquidity and Capital Resources
Kinetix has financed its operations from inception primarily through
private placement of equity. As of June 30, 2000, Kinetix had received net
proceeds of $18.0 million from the sale and issuance of equity securities,
primarily from its sales of Series A convertible preferred stock and its Series
B convertible preferred stock.
As of June 30, 2000, Kinetix had $4.4 million in cash and cash equivalents,
as compared to $4.6 million as of December 31, 1998 and $7.2 million as of
December 31, 1999.
Since inception, Kinetix's principal uses of cash were funding research and
development expenses, investments in laboratory equipment and working capital
requirements. For the six months ended June 30, 2000, Kinetix expended $2.8
million for operating activities. Kinetix used $151,000 principally related to
the purchase of laboratory equipment. Kinetix netted $31,000 from financing
activities relating to $188,000 in funds received from lease equipment financing
and $27,000 from the sale of its common stock, offset by $184,000 in payments on
capital lease obligations.
Kinetix expects to devote substantial resources to continue its research
and development efforts. Kinetix's funding requirements will depend on numerous
factors, including:
. the progress, and magnitude of its research and development programs;
. the cost, timing and outcomes of regulatory reviews;
. the establishment, continuation or termination of third party
manufacturing or sales and marketing arrangements;
. the cost and effectiveness of its sales and marketing programs;
. the status of competitive products, and Kinetix's ability to defend and
enforce its intellectual property rights; and
. the establishment of additional strategic or licensing arrangements with
other companies or acquisitions.
Kinetix believes that its current cash and cash equivalents as of June 30,
2000 will be sufficient to fund its operations through January 31, 2001. If its
existing resources are insufficient to satisfy its liquidity requirements, or if
Kinetix acquires additional product candidates for research, it may need to sell
additional equity or debt securities. The sale of additional equity and debt
securities will result in additional dilution to Kinetix stockholders, and
Kinetix cannot be certain that additional financing will be available in amounts
or on acceptable terms, if at all.
On October 16, 2000 Kinetix entered into an agreement to be acquired by
Amgen. Pursuant to this merger agreement, Kinetix may request a loan from Amgen
for specfied amounts if the merger agreement is terminated on or after November
1, 2000, or if the effective time of the merger does not occur by January 1,
2001. See page 53 for a description of this loan agreement.
Market Risk
Kinetix's exposure to market risk is confined to its cash and cash
equivalents. Kinetix places its investments in high-quality financial
instruments, primarily money market funds with maturities of less than one year,
which Kinetix believes are subject to limited credit risk. Kinetix currently
does not hedge interest rate exposure. Due to the short-term nature of its
investments, Kinetix does not believe that it has any material exposure to
interest rate risk arising from its investments.
26
Most of Kinetix's transactions are conducted in U.S. dollars. Kinetix has
some research and supply agreements with vendors located outside the United
States. Transactions under certain of these agreements are conducted in U.S.
dollars, subject to adjustment based on significant fluctuations in currency
exchange rates. Transactions under certain other of these agreements are
conducted in the local foreign currency. If the exchange rates undergo a change
of 10% or less, Kinetix does not believe that such change would have a material
impact on its results of operations or cash flows. If the exchange rates
undergo changes of greater than 10%, those changes could have an adverse effect
on Kinetix.
Security Ownership of Kinetix's Directors and Executive Officers and
Certain Beneficial Owners
The following table sets forth certain information regarding the
beneficial ownership of Kinetix's common stock, Series A convertible preferred
stock and Series B convertible preferred stock as of November 1, 2000 and the
percentage which such ownership bears to the total number of outstanding shares
of each class and all classes as of that date by: (i) each director; (ii)
Kinetix's Chief Executive Officer and each of its other three most highly
compensated executive officers (collectively the "Named Executive Officers");
(iii) each person who, to the knowledge of the Company, beneficially owned more
than 5% of any class of Kinetix's stock, and (iv) all directors and Named
Executive Officers of the Company as a group.
Shares Beneficially Owned (1)
-----------------------------
Series A Series B
Convertible Convertible
Common Stock Preferred Stock Preferred Stock Percent
Name and Address of Beneficial Owner (% of Class) (% of Class) (% of Class) of Total(2)
- ------------------------------------ ------------ --------------- --------------- -----------
Nicholas Lydon (3) (4)........................... 3,126,153 1,403,443 400,268 14.31%
(38.62%) (8.77%) (3.87%)
David Armistead (5) (6).......................... 1,723,077 773,551 220,621 7.89%
(21.29%) (4.83%) (2.13%)
Nancy Stuart (7)................................. 257,417 0 0 *%
(3.18%)
Jeffrey Hsi (8).................................. 123,846 0 0 *%
(1.53%)
Georges Haas..................................... 49,231 0 0 *%
(*%)
Chris Adams(9)................................... 49,231 0 0 *%
(*%)
Jason Loveridge(10).............................. 172,308 0 0 *%
(2.13%)
Paul Kelly....................................... 0 0 0 0%
Hingge Hsu....................................... 0 0 0 0%
Novartis International AG (11)
Novartis International Inc..................... 0 3,320,400 1,317,761 13.46%
CH-4002 Basel, Switzerland (20.75%) (12.73%)
Schroder Ventures International
Life Sciences Fund LP1.......................... 0 0 2,974,390 8.63%
22 Church Street (28.73%)
Hamilton, HM FX, Bermuda
Zero Stage Capital V Limited Partnership (12).... 0 3,501,303 1,069,888 13.27%
101 Main Street, 17th Floor (21.88%) (10.33%)
Kendall Square
Cambridge, MA 02142
Zero Stage Capital VI Limited Partnership (13)... 0 1,001,303 1,462,048 7.15%
101 Main Street, 17th floor, (6.26%) (14.12%)
Kendall Square
Cambridge, MA 02142
JAFCO Associated Finance Co. Ltd. (14)........... 0 6,000,000 1,176,471 20.83%
Tekko Building, 1-8-2 (37.5%) (11.36%)
Marunouchi, Chiyoda-ku
Tokyo 100, Japan
All directors and Named Executive Officers
as a group (10 persons)........................ 5,501,263 2,176,994 620,889 24.09%
27
(67.97%) (13.61%) (6.00%)
- -----------------------------
* Indicates beneficial ownership of less than one percent.
** The address of the directors and executive officers is 200 Boston Avenue,
Medford, MA 02155.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes shares as to which an
individual exercises voting or investment power.
(2) The "Percent of Total" column above is based on the combined total number
of shares of Kinetix's common stock, Series A convertible preferred stock
and Series B convertible preferred stock. The common stock, Series A
convertible preferred stock and Series B convertible preferred stock vote
together as a single class except as required by law or under Kinetix's
Certificate of Incorporation. In this table, we treat shares of common
stock subject to options that are currently exercisable or exercisable
within 60 days after November 1, 2000 to be outstanding and to be
beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of the person, but we do not treat the
shares as outstanding for the purpose of computing the percentage ownership
of any other stockholder. All unvested shares of common stock issued under
restricted stock purchase agreements or subject to repurchase rights of
Kinetix under certain circumstances, including in connection with the
termination of such person's employment with Kinetix, are treated as being
owned by that stockholder.
(3) Includes 234,461 shares of common stock subject to a restricted stock
purchase agreement between Kinetix and Dr. Lydon which will vest upon the
approval of the stockholders of Kinetix who own more than 75% of the voting
power of all of the Kinetix stock outstanding immediately before the
merger.
(4) Includes 1,403,443 shares of Series A convertible preferred stock and
400,268 shares of Series B convertible preferred stock purchased by Dr.
Lydon from Lombard, Odier & Cie. on October 16, 2000.
(5) Includes 344,615.4 shares of common stock subject to a restricted stock
purchase agreement between Kinetix and Dr. Armistead which will vest upon
the approval of the stockholders of Kinetix who own more than 75% of the
voting power of all of the Kinetix stock outstanding immediately before the
merger.
(6) Includes 773,551 shares of Series A convertible preferred stock and 220,621
shares of Series B convertible preferred stock purchased by Dr. Armistead
from Lombard, Odier & Cie. on October 16, 2000.
(7) Includes 205,934 shares of common stock subject to restricted stock
purchase agreements between Kinetix and Ms. Stuart which will vest upon the
approval of the stockholders of Kinetix who own more than 75% of the voting
power of all of the Kinetix stock outstanding immediately before the
merger.
(8) Includes 94,307 shares of common stock subject to restricted stock purchase
agreements between Kinetix and Dr. Hsi which will vest upon the approval of
the stockholders of Kinetix who own more than 75% of the voting power of
all of the Kinetix stock outstanding immediately before the merger.
(9) Includes 49,231 shares of common stock issuable to Mr. Adams upon exercise
of outstanding options which will become vested and exercisable in
connection with the merger.
(10) Includes 172,308 shares of common stock held by Salkilld Holdings Limited,
(123,077 of such shares are subject to a restricted stock purchase
agreement between Kinetix and Salkilld Holdings Limited and will vest as a
result of the merger). As the majority owner of Salkilld Holdings Limited,
Mr. Loveridge may be deemed to have voting and investment power as to all
of these shares, and therefore may be deemed to be a beneficial owner of
such shares.
(11) Includes 1,320,400 shares of Series A convertible preferred stock and
376,584 shares of Series B convertible preferred stock purchased by
Novartis International AG from Lombard, Odier & Cie. on October 16, 2000.
(12) Includes 1,001,303 shares of Series A convertible preferred stock and
285,577 shares of Series B convertible preferred stock purchased by Zero
Stage Capital V Limited Partnership from Lombard, Odier & Cie. on October
16, 2000.
(13) Includes 1,001,303 shares of Series A convertible preferred stock and
285,577 shares of Series B convertible preferred stock purchased by Zero
Stage Capital VI Limited Partnership from Lombard, Odier & Cie. on October
16, 2000.
(14) Includes 1,303,640 shares held by JAFCO R-2 Investment Enterprise
Partnership, 1,248,700 shares held by JAFCO R-3 Investment Enterprise
Partnership, 1,123,830 shares held by JAFCO G-6(A) Investment Enterprise
Partnership, 1,123,830 shares held by JAFCO G-6(B) Investment Enterprise
Partnership, 470,588 shares held by JAFCO G-7(A) Investment
28
Enterprise Partnership, and 470,588 shares held by JAFCO G-7(B) Investment
Enterprise Partnership. JAFCO Co., Ltd., is the executive partner of each
of these entities, and as such, may be deemed to have voting and investment
power as to all of these shares, and therefore may be deemed to be a
beneficial owner of such shares.
THE KINETIX SPECIAL MEETING
We are furnishing this proxy statement/prospectus to Kinetix stockholders
as part of the solicitation of proxies by the Kinetix board of directors for use
at the special meeting.
Date, Time and Place
The special meeting will be held at the offices of Kinetix, located at 200
Boston Avenue, Suite 3500, Medford, Massachusetts, at 9:00 a.m., local time, on
December 4, 2000. This proxy statement/prospectus and the accompanying proxy
card are first being mailed to Kinetix stockholders on or about November 14,
2000.
Purpose of Special Meeting
At the special meeting, holders of Kinetix common stock, Kinetix Series A
convertible preferred stock and Kinetix Series B convertible preferred stock
will be asked to vote upon:
. a proposal to adopt the merger agreement, and
. a proposal to approve the accelerated vesting of the unvested portion of
restricted stock grants that have previously been made to four Kinetix
officers and one Kinetix employee and the granting of additional
restricted stock to two Kinetix officers and one Kinetix employee (the
280G proposal).
The Kinetix board of directors has determined that the merger and merger
agreement are fair to, and in the best interests of, Kinetix stockholders and
deemed it advisable and has unanimously approved the merger and the merger
agreement. The Kinetix board of directors unanimously recommends that Kinetix
stockholders vote "FOR" the adoption of the merger agreement and "FOR" the 280G
proposal.
Record Date; Stock Entitled to Vote; Quorum
Only holders of record of Kinetix common stock, Kinetix Series A
convertible preferred stock and Kinetix Series B convertible preferred stock at
the close of business on November 13, 2000, the record date, are entitled to
notice of and to vote at the special meeting. On the record date, 8,093,619
shares of Kinetix common stock were issued and outstanding and held by 53
holders of record, 16,000,000 shares of Kinetix Series A convertible preferred
stock were issued and outstanding and held by 16 holders of record and
10,352,939 shares of Kinetix Series B convertible preferred stock were issued
and outstanding and held by ten holders of record. A quorum is present at the
special meeting for purposes of the vote of the holders of Kinetix common stock
if a majority of the shares of Kinetix common stock, Kinetix Series A
convertible preferred stock and Kinetix Series B convertible preferred stock
which are issued and outstanding and entitled to vote on the record date are
represented in person or by proxy. Shares of Kinetix common and preferred stock
represented at the special meeting but not voting, including abstentions, will
be treated as present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all business. If a quorum
is not present at the special meeting, it is expected that the meeting will be
adjourned or postponed to solicit additional proxies.
Holders of shares of Kinetix common stock on the record date will be
entitled to one vote for each share of common stock held on each matter
submitted to a vote at the special meeting. Holders of shares of either class
of Kinetix preferred stock on the record date will have the right to vote (i)
together with holders of Kinetix common stock (on an "as converted" basis) with
respect to the adoption of the merger agreement, and (ii) also as a separate
class with respect to the adoption of the merger agreement. For the purposes of
the vote to be taken together with the holders of Kinetix common stock, holders
of Series A convertible preferred stock will be entitled to one vote per share
of Kinetix Series A convertible preferred stock owned on the record date and
holders of Series B convertible preferred stock holder will be entitled to one
vote per share of Kinetix Series B convertible preferred stock owned on the
record date.
29
Vote Required
Proposal 1: The affirmative vote of (i) holders of a majority of the shares
of Kinetix common stock and preferred stock outstanding and entitled to vote on
the record date, voting together as a single class, and (ii) holders of at least
sixty-six percent (66%) of the shares of each of Kinetix Series A convertible
preferred stock and Series B convertible preferred stock outstanding and
entitled to vote on the record date, voting as separate classes, is required to
adopt the merger agreement.
Proposal 2: The affirmative vote of the holders of more than seventy-five
percent (75%) of all outstanding capital stock of Kinetix entitled to vote on
the record date, voting as a class, but disregarding shares of stock owned by
the following interested persons, is required to approve the accelerated vesting
of the unrestricted stock grants previously made to Dr. Nicholas Lydon, Dr.
David Armistead, Nancy Stuart, Dr. Jeffrey Hsi and Dr. David Stover and to
approve the grants of additional restricted stock to Ms. Stuart, Dr. Hsi and Dr.
Stover.
If you abstain from voting or do not vote, either in person or by proxy, it
will have the effect of a vote against the proposals for which you do not cast a
vote.
Voting of Proxies
All shares represented by properly executed proxies received in time for
the special meeting will be voted at the special meeting in the manner specified
by the holders. Properly executed proxies that do not contain voting
instructions be voted "FOR" adoption of the merger agreement and "FOR" the 280G
proposal.
Only shares voted for adoption of the merger agreement, and the 280G
proposal, including properly executed proxies that do not contain voting
instructions, will be counted as favorable votes for the merger agreement and
the 280G proposal. If a Kinetix stockholder abstains from voting or does not
vote, either in person or by proxy, it will count as a vote against the adoption
of the merger agreement and against the 280G proposal.
Kinetix does not expect that any matter other than the proposals to adopt
the merger agreement and approve the 280G proposal will be brought before the
special meeting. If, however, the Kinetix board of directors properly presents
other matters, the persons named as proxies will vote on those other matters in
accordance with their judgment. In addition, the persons named as proxies may
propose and vote for one or more adjournments of the special meeting, including
adjournments to permit further solicitation of proxies. No proxy voted against
the proposals to adopt the merger agreement or to approve the 280G proposal will
be voted in favor of any adjournment or postponement.
Revocability of Proxies
The grant of a proxy on the enclosed form of proxy does not preclude you
from voting in person at the special meeting. You may revoke a proxy at any time
prior to its exercise by:
. filing with the Secretary of Kinetix, before the proxy is voted at the
special meeting, a duly executed written notice of revocation of proxy
bearing a later date than the proxy;
. submitting a duly executed proxy to the Secretary of Kinetix bearing a
later date before the proxy is voted at the special meeting; or
. voting in person at the special meeting, although attendance at the
special meeting will not itself constitute revocation of a proxy.
Any written notice of revocation or subsequent proxy should be sent to
Kinetix Pharmaceuticals, Inc., 200 Boston Avenue, Suite 3500, Medford,
Massachusetts, Attention: Dr. Jeffrey Hsi, or hand delivered to the Secretary of
Kinetix at or before the taking of the vote at the special meeting.
Kinetix stockholders that are affiliates of Kinetix have entered into
voting and support agreements with Amgen. Pursuant to these agreements these
stockholders have granted irrevocable proxies and powers of attorney to Amgen to
vote their shares of Kinetix common stock "FOR" adoption of the merger
agreement. Kinetix is not seeking a proxy relating to the adoption of the merger
agreement from these stockholders.
30
Solicitation of Proxies
Kinetix will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Kinetix and its subsidiaries may solicit proxies from stockholders
by telephone or other electronic means or in person.
Please do not send stock certificates with your proxy. Prior to the closing
of the merger you will receive a form with instructions for the surrender of
Kinetix common stock certificates for Amgen common stock certificates following
the closing of the merger, assuming that the merger is approved and consummated.
Appraisal Rights
Delaware law entitles the holders of record of shares of Kinetix stock who
follow the procedures specified in Section 262 of the Delaware General
Corporation Law to have their shares appraised by the Delaware Court of Chancery
and to receive the "fair value" of those shares as of the effective time of the
merger as determined by the court in place of the consideration that the holder
would otherwise receive in the merger. In order to exercise appraisal rights, a
stockholder must demand and perfect the rights in accordance with Section 262 of
the Delaware General Corporation Law. The following is a summary of Section 262
and is qualified in its entirety by reference to Section 262, a copy of which is
attached hereto as Annex D. Kinetix stockholders should carefully review Section
262 of the Delaware General Corporation Law as well as information discussed
below to evaluate and, if they wish, perfect their rights to appraisal.
If a holder of Kinetix common stock elects to exercise the right to an
appraisal under Section 262 of the Delaware General Corporation Law, such
stockholder must:
. file with Kinetix at its main office at 200 Boston Avenue, Suite 3500,
in Medford, Massachusetts 02155, a written demand for appraisal of the
shares of Kinetix common stock held (which demand must identify the
stockholder and expressly request an appraisal) before the vote is
taken on the merger agreement at the special meeting;
. continuously hold such shares through the effective time of the
merger;
. not vote in favor of the merger or to adopt the merger agreement; and
. comply with all other terms of Section 262.
All written demands for appraisal should be addressed to: Dr. Jeffrey Hsi,
Kinetix Pharmaceuticals, Inc., 200 Boston Avenue, Suite 3500, Medford,
Massachusetts 02155, before the vote is taken on the merger agreement at the
Kinetix special meeting, and should be executed by, or on behalf of, the holder
of record. Such demand reasonably must inform Kinetix of the identity of the
stockholder and that such stockholder is thereby demanding appraisal of such
stockholder's shares.
Within 10 days after the effective time of the merger, Kinetix (the
surviving company in the merger) will give written notice of the effective time
to each holder of Kinetix common stock who has satisfied the requirements of
Section 262 of the Delaware General Corporation Law. A person who elects to
exercise appraisal rights under Section 262 is called a "dissenting
stockholder." Within 120 days after the effective time, Kinetix or any
dissenting stockholder may file a petition in the court demanding a
determination of the fair value of the shares of Kinetix common stock of all
dissenting stockholders. Any dissenting stockholder desiring the filing of such
petition is advised to file such petition on a timely basis unless the
dissenting stockholder receives notice that such a petition has been filed by
Kinetix or another dissenting stockholder.
If a petition for appraisal is timely filed, the court will determine which
stockholders are entitled to appraisal rights and thereafter will determine the
fair value of the shares of Kinetix common stock held by dissenting
stockholders, exclusive of any element of value arising from the accomplishment
or expectation of the merger, but together with a fair rate of interest, if any,
to be paid on the amount determined to be fair value. In determining such fair
value, the court shall take into account all relevant factors. The court may
determine such fair value to be more than, less than or equal to the
consideration that such dissenting stockholder would otherwise be entitled to
receive
31
pursuant to the merger agreement. If a petition for appraisal is not timely
filed, then the right to an appraisal terminates.
The costs of the appraisal proceeding shall be determined by the court and
taxed against the parties as the court determines to be equitable under the
circumstances. Upon the application of any dissenting stockholder, the court may
determine the amount of interest, if any, to be paid upon the value of the stock
of dissenting stockholders entitled thereto. Upon application of a dissenting
stockholder, the court may order all or a portion of the expenses incurred by
any dissenting stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares
entitled to appraisal.
After the effective time of the merger, no dissenting stockholder shall
have any rights of a Kinetix stockholder with respect to such holder's shares
for any purpose, except to receive payment to which Kinetix stockholders of
record as of a date prior to the effective time are entitled, if any. If a
dissenting stockholder delivers to Kinetix a written withdrawal of the demand
for an appraisal within 60 days after the effective time of the merger or
thereafter with the written approval of Kinetix, or if no petition for appraisal
is filed within 120 days after the effective time, then the right of such
dissenting stockholder to an appraisal will cease and such dissenting
stockholder will be entitled to receive only the shares of common stock of Amgen
as provided in the merger agreement.
The foregoing is only a summary of Section 262 of the Delaware General
Corporation Law and is qualified in its entirety by reference to the full text
of Section 262, which is included in Annex D.
32
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
The following discussion summarizes the material terms of the merger and
the merger agreement. While we believe that the description covers the material
terms, this summary may not contain all of the information that is important to
you. We urge you to read carefully the merger agreement which is attached as
Annex A to this proxy statement/prospectus.
THE MERGER
Form of the Merger
At the effective time of the merger, Amgen Acquisition Corp. II, a
wholly-owned subsidiary of Amgen, will be merged with and into Kinetix. Kinetix
will survive the merger and the separate corporate existence of Amgen
Acquisition Corp. II will cease. After the merger, Kinetix will continue its
operations as a wholly-owned subsidiary of Amgen and will continue under the
name "Kinetix Pharmaceuticals, Inc." Each outstanding share of Amgen common
stock will remain outstanding and will be unaffected by the merger.
Prior to the closing of the merger, all shares of Kinetix preferred stock
will be converted into shares of Kinetix common stock. Currently, each share of
Kinetix Series A convertible preferred stock may be converted into one share of
Kinetix common stock and each share of Kinetix Series B convertible preferred
stock may be converted into one share of Kinetix common stock.
Merger Consideration
Pursuant to the terms of the merger agreement, the aggregate merger
consideration that Amgen will pay to acquire all of the outstanding common stock
of Kinetix at the effective time of the merger will be equal to the number of
shares of Amgen common stock equal to (a) $170,000,000.00, plus $1,200,000 if a
----
Kinetix convertible promissory note is converted by Kinetix into shares of
Kinetix common stock prior to the closing of the merger, less any amounts loaned
----
by Amgen to Kinetix that are outstanding at the closing of the merger, divided
by (b) the closing sale price of Amgen common stock as reported on The Nasdaq
Stock Market for the trading day immediately prior to the closing date of the
merger, rounded down to the nearest whole number. Therefore, the number of Amgen
shares you will be entitled to receive in exchange for each share of Kinetix
common stock you own immediately prior to the effective time of the merger will
not be calculable until the trading day immediately prior to the closing date of
the merger.
The value of your portion of the merger consideration will depend on the
closing sale price of Amgen common stock as reported on The Nasdaq Stock Market
for the trading day immediately prior to the closing date of the merger.
Merger Consideration for Common Stock
If you own Kinetix common stock, or immediately prior to the closing of the
merger, will own Kinetix common stock following the conversion of your preferred
stock or upon exercise of any options, you will be entitled to receive shares of
Amgen common stock issued as merger consideration based on a number of factors
including the number of shares of Kinetix common stock you own immediately prior
to the closing of the merger, the number of shares of Kinetix common stock
outstanding immediately prior to the closing of the merger and the closing sale
price of a share of Amgen common stock on The Nasdaq Stock Market on the trading
day immediately prior to the closing date of the merger. Each share of Kinetix
common stock will be converted into the right to receive that number of shares
of Amgen common stock equal to the number determined by dividing (i) the number
of shares Amgen common stock equal to the number obtained by dividing (a)
$170,000,000, plus $1,200,000 if a Kinetix convertible promissory note is
----
converted by Kinetix into shares of Kinetix common stock prior to the closing of
the merger, less any amounts loaned by Amgen to Kinetix that are outstanding at
----
the closing of the merger by (b) the closing sale price of Amgen common stock as
reported on The Nasdaq Stock Market on the trading day immediately prior to the
closing date of the merger by (ii) the number of shares of Kinetix common stock
outstanding immediately prior to the closing of the merger.
33
Merger Consideration for Common Stock Options
If you own outstanding options to purchase Kinetix common stock issued
under the Kinetix 1997 Equity Incentive Plan, each of your options will be
vested, to the extent not already vested. You may exercise those options and
purchase shares of Kinetix common stock prior to the closing date of the merger.
If you do not exercise your options, they will be cancelled. If you choose to
exercise your options, the number of shares of Amgen common stock you receive
for each share of Kinetix common stock you own following exercise will be
computed in the same manner as for common stock.
Treatment of Restricted Stock in the Merger
If you own shares of restricted Kinetix common stock that were issued under
the Kinetix 1997 Equity Incentive Plan, the repurchase rights in favor of
Kinetix will be terminated and such stock will be fully vested so that such
stock will be free of all encumbrances and restrictions. Following the vesting
of your restricted stock, the number of shares of Amgen common stock you receive
for each share of Kinetix common stock you own will be computed in the same
manner as for common stock.
Shares of restricted Kinetix common stock that will be issued to you under
the Kinetix 1997 Equity Incentive Plan and which are contingent upon the
consummation of the merger will remain unvested and be subject to repurchase
rights which will lapse over a three (3) year period from the date of issuance.
These shares will be converted into the right to receive the per share purchase
price paid by Amgen for shares of Kinetix common stock, and any shares of Amgen
common stock issued in exchange for such restricted Kinetix shares will be
subject to substantially similar terms and conditions to the restricted Kinetix
shares (including repurchase rights which will lapse over an identical period to
the restricted Kinetix shares), and Amgen will be entitled to maintain custody
of the restricted shares until the repurchase rights lapse.
Variation in Sale Price of Amgen Common Stock
While the aggregate value of the shares of Amgen common stock will equal
$170,000,000, plus $1,200,000 if a Kinetix convertible promissory note is
----
converted by Kinetix into shares of Kinetix common stock prior to the closing of
the merger, less any amounts loaned by Amgen to Kinetix that are outstanding at
----
the closing of the merger, the number of shares that Amgen will be issuing as
merger consideration in exchange for all of the outstanding capital stock of
Kinetix will not be determined until the trading day immediately prior to the
closing date of the merger. The higher the closing sale price of Amgen common
stock on that date, the fewer the number of shares of Amgen common stock that
will be issued as merger consideration. The lower the closing sale price of
Amgen common stock on that date, the greater the number of shares of Amgen
common stock that will be issued as merger consideration.
By way of example only, if, the closing sale price of a share of Amgen
common stock equaled $75.00 on the day immediately prior to the closing date,
then, based on an aggregate value of $171,200,000 (assuming the conversion of
the note and no loans outstanding owed by Kinetix to Amgen) Amgen would issue
approximately 2,282,667 shares of Amgen common stock to the holders of Kinetix
common stock in exchange for those shares. If the closing sale price of a share
of Amgen common stock equaled $100.00 on the day immediately prior to the
closing date, Amgen would issue approximately 1,712,000 shares of Amgen common
stock. In the second scenario, with fewer overall shares being issued, the
number of shares you would receive in exchange for the shares of common stock
that you own, or will own upon conversion of your preferred stock or upon
exercise of your Kinetix options, would be comparatively less than in the first
scenario.
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares
The conversion of Kinetix common stock into the right to receive Amgen
common stock will occur automatically at the effective time of the merger. Prior
to the closing of the merger, each Kinetix stockholder will receive a letter.
The letter will contain instructions for obtaining shares of Amgen common stock
in exchange for shares of Kinetix common stock, including the shares of Kinetix
common stock issuable upon the conversion of the Kinetix preferred stock and
shares of Kinetix common stock issued upon exercise of options. Please do not
send stock certificates with the enclosed proxy.
34
All shares of Amgen common stock issued upon conversion of shares of
Kinetix stock, including any cash paid for any fractional share of Amgen common
stock, will be issued in full satisfaction of all rights relating to those
shares of Kinetix stock.
No fractional share of Amgen common stock will be issued to any Kinetix
stockholder upon surrender for exchange of certificates previously representing
Kinetix stock. In lieu of a certificate representing a fractional share, the
stockholder will receive cash equal to the product obtained by multiplying (1)
the closing sale price of Amgen common stock as reported on The Nasdaq Stock
Market on the trading day immediately prior to the closing date of the merger by
(2) the fractional share to which the stockholder would otherwise be entitled.
Effective Time of the Merger
The merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware, or at such later time as
stated in the certificate of merger or agreed upon by Amgen and Kinetix. The
filing of the certificate of merger will occur at the time of the closing of the
merger.
Background of the Merger
In 1999, Kinetix identified Amgen as a potential collaboration partner
because the companies share a therapeutic focus in oncology and inflammation.
Further, Kinetix's focus on the discovery and optimization of small molecules
complemented Amgen's desire to accelerate its small molecule drug discovery
program.
On July 7, 1999, Dr. Nicholas Lydon, President and CEO, Dr. David
Armistead, Vice President of Research and Development and Chief Scientific
Officer, and Nancy Stuart, Vice President of Business Development, met with
Amgen representatives and gave a presentation highlighting the Kinetix programs
and technology.
On September 24, 1999, Amgen informed Kinetix that Amgen could not enter
into a collaboration arrangement with Kinetix in 1999 but that Amgen would
consider entering into a collaboration arrangement with Kinetix in 2000. Amgen
expected to review and have further discussions with Kinetix following the
completion of additional work by Kinetix on its programs.
On January 14, 2000, Kinetix contacted Amgen and summarized the progress
Kinetix had made in its programs since last meeting with Amgen on July 7, 1999.
Amgen requested more detailed information, which Kinetix provided on February 1,
2000. Based on the information provided, a meeting between representatives of
Kinetix and Amgen was scheduled for March 16, 2000.
On March 16, 2000, Kinetix representatives made presentations to Amgen's
oncology and inflammation groups. This commenced a due diligence process that
extended to the signing of the merger agreement.
On March 28, 2000, Amgen notified Kinetix that Amgen had significant
interest in moving forward with partnering discussions with Kinetix.
Between March 29, 2000 and May 8, 2000, representatives of Amgen and
Kinetix communicated often to discuss Kinetix's technology and programs.
On May 9, 2000, Amgen first raised with Kinetix the possibility of Amgen
acquiring Kinetix as an alternative business structure. Kinetix stated that it
has not been seeking to be acquired, but would consider such a proposal.
On May 18, 2000, members of Kinetix's senior management, including David
Armistead, and Amgen representatives, including Scott Foraker, Vice President of
Licensing, of Amgen, held a conference call to discuss alternative business
structures for a strategic collaboration between the companies. During this
call, Amgen proposed a number of potential business structures, including, once
again, an acquisition of Kinetix.
On May 22, 2000, members of Kinetix's senior management, including David
Armistead, and Amgen representatives held a conference call to further discuss
business and partnering strategies, Amgen's evaluation of
35
Kinetix lead molecules and the review process for the Kinetix intellectual
property. During this call, Amgen reiterated its interest in the possibility of
acquiring Kinetix.
On June 2, 2000, representatives from Amgen, including Scott Foraker, met
with Kinetix's senior management, including Nicholas Lydon and David Armistead,
at Kinetix's offices in Medford, Massachusetts to further discuss Kinetix's
programs and technology and possible business structures, including the
possibility of Amgen acquiring Kinetix.
On June 8, 2000, Nicholas Lydon and David Armistead met at Amgen's offices
in Thousand Oaks, California with members of Amgen's management team to, among
other things, discuss the possibility of an acquisition of Kinetix by Amgen.
On June 19, 2000, Amgen's executive committee discussed the proposed
acquisition of Kinetix and decided that it should be presented to Amgen's Board
of Directors.
On June 21, 2000, two members of Amgen's executive management, Kevin
Sharer, President and Chief Executive Officer, and George Vandeman, then Senior
Vice President Corporate Development, led a discussion of the proposed
acquisition with William Johnson and William Bowes, members of the Executive
Committee of Amgen's Board of Directors. At this meeting it was determined that
the opportunity should be presented to Amgen's full Board of Directors.
On June 21, 2000, Scott Foraker called Nicholas Lydon and told him that
Amgen's executive committee had approved presenting the proposed Kinetix
acquisition to Amgen's Board of Directors. They discussed a schedule for
presenting the proposed acquisition to the Amgen Board of Directors and
thereafter a proposal to the Kinetix Board of Directors at their next regularly
scheduled Board meeting on July 13, 2000.
On June 21, 2000, as part of the due diligence process, Kinetix and Amgen
signed a Material Transfer Agreement under which Amgen would test Kinetix
molecules in agreed upon assays. This agreement was subsequently amended to
provide for testing of other compounds and using other assays.
On June 22, 2000, Dennis Fenton, Executive Vice President of Amgen,
discussed the proposed acquisition with another member of Amgen's Board of
Directors, Dr. David Baltimore, a recognized expert in the field of protein
kinase inhibitors. Dr. Baltimore supported a discussion of this opportunity with
the full Amgen Board of Directors.
On June 23, 2000 and June 26, 2000, Jason Loveridge, Chairman of the Board
of Directors of Kinetix, provided Scott Foraker with certain financial and other
information regarding Kinetix.
On June 27, 2000, at a meeting of Amgen's Board of Directors, Amgen's
management presented to the Amgen Board an overview of Kinetix. Amgen management
also reported on their discussions with Kinetix and presented alternatives to
the proposed transaction. At that meeting, the Amgen Board approved the concept
of the Kinetix acquisition and continuation of the discussions with Kinetix. The
Amgen Board also authorized Kevin Sharer or his designees to negotiate a
transaction with Kinetix and delegated to the Executive Committee of the Amgen
Board the authority to review and approve the final terms of a negotiated
agreement and completion of due diligence.
On June 27, 2000, Scott Foraker called Nicholas Lydon and Jason Loveridge
and informed them of the outcome of the Amgen Board meeting and that Amgen would
be preparing and sending to them a non-binding indication of interest for the
proposed acquisition.
On June 29, 2000, Scott Foraker sent to Nicholas Lydon and Jason
Loveridge a non-binding indication of interest proposing that Amgen acquire
Kinetix. Upon receipt of this letter, Nicholas Lydon informed Scott Foraker that
he would present the letter to the Kinetix Board.
On July 5, 2000, Nicholas Lydon telephoned members of the Kinetix board of
directors to discuss the indication of interest from Amgen and to determine
whether members of the board would be receptive to an acquisition of Kinetix by
Amgen.
36
On July 5, 2000, Nicholas Lydon, David Armistead and Nancy Stuart called
Scott Foraker to inform him of the consensus of the members of the Kinetix board
of directors and asked him to prepare a non-binding letter of intent that could
be presented to the Kinetix board of directors at its next scheduled meeting on
July 13, 2000.
Between July 6, 2000 and July 10, 2000, several telephonic discussions were
held involving Nicholas Lydon, Jason Loveridge and Scott Foraker regarding the
terms of a proposed acquisition.
On July 11, 2000, a non-binding letter of intent was sent by Scott Foraker
to Nicholas Lydon and Jason Loveridge. Later that day, Nicholas Lydon and Jason
Loveridge informed Scott Foraker that they were prepared to recommend to the
Kinetix Board approval of the proposed acquisition under the terms of the
non-binding letter of intent.
On July 13, 2000, the Kinetix Board of Directors met to discuss Amgen's
offer to acquire Kinetix. At this meeting, the Board discussed, among other
things, the offer, Kinetix's long term strategy, the results of Kinetix's
efforts to acquire collaboration partners, and the advantages and disadvantages
of pursuing its business on a stand-alone basis. The directors also discussed
the proposed valuation of Kinetix in the merger with the aid of a financial
advisor that Kinetix had previously retained in connection with a possible
alternative financing transaction. At the conclusion of the meeting, the Board
of Directors agreed unanimously that Nicholas Lydon should sign the non-binding
letter of intent and proceed with the due diligence process and negotiation of
the merger agreement.
On July 13, 2000, Nicholas Lydon, Jason Loveridge, Michael Lytton (Palmer &
Dodge, outside counsel for Kinetix) called Scott Foraker and informed him of the
outcome of the Board meeting. The non-binding letter of intent outlining the
major terms of a potential acquisition transaction was executed by Amgen and
Kinetix on July 13, 2000.
During the period of July 13, 2000 through August 29, 2000, representatives
of both companies and their respective advisors continued their due diligence
reviews. At the same time, members of management of Amgen and Kinetix, including
Drs. Lydon and Armistead and Mr. Foraker, with their respective legal advisors,
agreed on the structure of the transaction and negotiated the terms of the
proposed merger agreement and the ancillary agreements and related issues.
On August 30, 2000, the Kinetix Board met by teleconference to discuss the
status of the negotiations with Amgen and the provisions of the proposed merger
agreement, including restrictions on Kinetix's ability to pursue alternative
transactions, representations and warranties, covenants, termination provisions
and conditions to closing of the merger. At this meeting, the Board once again
considered Kinetix's long-term strategy and the advantages and disadvantages of
continuing as a stand-alone company versus completing the proposed merger
agreement. At the conclusion of the meeting, the Board authorized and directed
Nicholas Lydon and Jason Loveridge to continue negotiating the terms of the
proposed merger agreement with Amgen.
Between August 30, 2000 and September 28, 2000, representatives of Kinetix
and Amgen and their respective legal advisors continued to review and discuss
the terms of the merger and drafts of the merger agreement and ancillary
documents.
On September 28, 2000, the Kinetix Board of Directors met at Kinetix's
offices to consider the terms of the proposed acquisition of Kinetix by Amgen.
At this meeting, members of Kinetix management discussed the results of the
negotiations with Amgen and the terms of the proposed merger, including the
status and timing of the transaction, pricing and valuation of the proposed
merger, strategic and business opportunities with Amgen, pros and cons of the
merger, and Kinetix's financial performance and prospects. Representatives of
Kinetix's legal advisors outlined the terms of the proposed merger agreement,
including restrictions on Kinetix's ability to pursue alternative transactions,
closing conditions and termination provisions and indemnification provisions,
the Voting and Support Agreements, including the consequences of executing the
irrevocable proxies in favor of Amgen, and other related documents. Following
these presentations and the related discussions by the Kinetix Board, the entire
Kinetix Board unanimously concluded that the merger was in the best interests of
Kinetix and Kinetix's stockholders, declared the merger advisable, unanimously
approved the proposed terms of the merger and the merger agreement in
substantially the form presented, and authorized Kinetix's officers to complete
the negotiation and execution of the merger agreement and resolved to recommend
that Kinetix's stockholders vote to adopt the merger agreement.
37
As of October 16, 2000, the Executive Committee of the Board of Directors
of Amgen approved the terms of the proposed merger and the merger agreement and
ancillary agreements in the form presented to them and approved other necessary
actions to consummate the merger.
On October 16, 2000, Kinetix and Amgen entered into the merger agreement.
In addition, each of the members of the Board of Directors of Kinetix, its
executive officers and certain significant stockholders of Kinetix entered into
the Voting and Support Agreements, including the execution of irrevocable
proxies in favor of Amgen and affiliate letters, with Amgen.
On October 16, 2000, Amgen and Kinetix issued a joint press release
announcing the execution of the merger agreement.
Amgen's Reasons for the Merger
Amgen's Board of Directors and management believe that the acquisition of
Kinetix will be beneficial to Amgen because:
. The acquisition is expected to provide an important building block in
Amgen's small molecule drug discovery program. The acquisition will
add significant management experience to Amgen's small molecule drug
discovery program, as well as approximately 40 highly qualified
employees, many of who have significant experience in small molecule
drug research and development.
. The acquisition is expected to bolster Amgen's capabilities in the
discovery of protein kinase inhibitors, an exciting new class of small
molecule drugs. Protein kinases may represent the largest gene family
in the human genome, and as such, represent an area with significant
potential.
. Amgen has established a comprehensive internal genomics program and
building Amgen's capabilities in small molecule drugs is expected to
help Amgen capitalize on this program.
. The acquisition of Kinetix is expected to complement Amgen's strengths
in discovery biology, pre-clinical development and clinical
development, and integrate both companies' strong programs in cancer
and inflammation. Kinetix's lead programs are in two of Amgen's core
therapeutic areas, cancer and inflammation.
Kinetix's Reasons for the Merger
Kinetix's board of directors considered potential benefits of the merger
that they believe may result from merging with Amgen, including the following:
. combining with Amgen will provide Kinetix with the opportunity to
expand its research and development activities due to Amgen's superior
financial position;
. combining with Amgen will provide Kinetix with Amgen's expertise in
the areas of product development, conduct of preclinical and clinical
trials, regulatory applications, and manufacture and marketing of
pharmaceutical products;
. combining with Amgen will relieve Kinetix of the need to regularly
seek financing to continue its operations and the uncertainties
associated with a lack of committed, continuing financing;
. the amount of the merger consideration to be received by the Kinetix
stockholders represents a significant return on investment;
. Kinetix's stockholders will receive Amgen common stock, which is
publicly traded, in exchange for their shares of Kinetix common stock,
which is not publicly traded and has significant limitations on its
transferability;
. the Amgen common stock to be received by Kinetix stockholders has
historically enjoyed a great deal of liquidity and has been the
subject of a large volume of published investment research and
analysis, and
38
. Kinetix may find it easier to hire and retain employees because
employees receiving options to acquire Amgen common stock may view
them as more desirable than receiving restricted stock in a non-public
company as an element of their compensation.
In the course of deliberations, the Kinetix board reviewed with Kinetix
management a number of additional factors relevant to the merger, including:
. the strategic fit between Kinetix and Amgen, particularly in terms of
their respective discovery and development expertise and the
complementary nature of the therapeutic focus of the companies in
oncology and inflammation;
. the belief of the financial advisor retained by Kinetix in connection
with its proposed offering of Series C preferred stock in the fourth
quarter of 2000 that the valuation of Kinetix in connection with the
merger:
. represents a significant increase over the valuation of Kinetix
proposed to be used in connection with the anticipated offering
of Series C convertible preferred stock;
. represents a significant increase over the valuation of Kinetix
obtained in connection with the sale of its Series B preferred
stock in the first half of 1999;
. represents a close approximation of the valuation that Kinetix
believes it could obtain in connection with an initial public
offering of its common stock in 2002 or 2003 based on a review of
similar companies that had recently completed initial public
offerings; and
. represents an attractive and appropriate valuation of Kinetix in
light of its stage of development and product pipeline based on a
comparable transaction completed earlier this year;
. the timing and certainty of the merger versus uncertainty related to
the possibility of a strategic sale or initial public offering of
Kinetix's common stock at some future time at a valuation that might
not be significantly higher than the one implied by the merger;
. the fact that Amgen is building a research facility in Cambridge,
Massachusetts, which reduces the likelihood that any employee will be
required to relocate to another state, and possibly resign from
Kinetix rather than relocate, and accordingly increases the likelihood
that the Kinetix research and development team will remain intact
after the merger;
. publicly available historical information concerning Amgen's business,
financial performance and condition, operations, technologies,
management and competitive position, including public reports
concerning results of operations during the most recent fiscal year
and fiscal quarter filed with the Securities and Exchange Commission;
. Kinetix management's view as to the financial condition, results of
operations and businesses of Amgen and Kinetix, before and after
giving effect to the merger, based on management's due diligence;
. the belief that the terms of the merger agreement, including the
representations, warranties and covenants, and the conditions to each
of Amgen's and Kinetix's respective obligations, are reasonable; and
. Kinetix management's review of Kinetix's financial performance and
prospects as an independent company.
Kinetix's board of directors also considered the terms of the merger
agreement regarding Kinetix's rights and limits on its ability to consider and
negotiate other strategic transaction proposals, as well as the possible effects
of the provisions regarding termination fees and the execution of the
irrevocable proxies by the members of the
39
board of directors, the executive officers and certain stockholders of Kinetix.
In addition, Kinetix's board of directors noted that the merger is expected to
be a tax-free transaction (except as to cash paid for fractional shares).
Kinetix's board of directors also considered various alternatives to the merger,
including the possibility of combining with companies other than Amgen or
remaining as an independent company.
Kinetix's board of directors also identified and considered a variety of
potentially negative factors in its deliberations concerning the execution of
the merger agreement and the proposed merger, including, but not limited to:
. the risk that the potential benefits sought in the merger might not be
fully realized;
. the deal protection requirements and limitations on Kinetix and its
directors and stockholders relating to their ability to pursue
alternative transactions;
. the risk that Kinetix would be required to pay substantial termination
fees if the merger agreement is terminated in certain circumstances;
. the risk that relationships with prospective collaboration partners
would be disrupted and perhaps permanently damaged;
. the risk that despite the efforts of Kinetix and Amgen after the
merger, key scientific personnel might not remain employed; and
. the other risks described under "Risk Factors" beginning on page 13.
After due consideration and discussion, Kinetix's board of directors
decided that these risks were outweighed by the potential benefits of the
merger.
The foregoing discussion is not exhaustive of all of the factors considered
by Kinetix's board of directors. Each member of Kinetix's board may have
considered different factors, and Kinetix's board did not quantify or otherwise
assign relative weights to factors considered.
Recommendation of the Kinetix Board of Directors
After careful consideration, the Kinetix board of directors unanimously
determined that the terms of the merger and the merger agreement are fair to,
and in the best interests of, Kinetix and its stockholders and has unanimously
approved the merger and the merger agreement and deemed it advisable. The
Kinetix board of directors unanimously recommends that the Kinetix stockholders
vote "FOR" the adoption of the merger agreement.
Interests of Certain Persons in the Merger
In considering the recommendation of the Kinetix board of directors with
respect to adoption of the merger agreement, you should be aware that certain
directors and officers of Kinetix have interests in the merger that are
different from, or in addition to, the interests of Kinetix stockholders. These
interests relate to or arise from, among other things:
. the officers and directors of Kinetix are beneficiaries of a release
of all claims against Kinetix and its officers, directors, and
stockholders, and their respective successors and assigns, that arose
or could have arisen prior to the closing of the merger and will
benefit from the extension of their coverage under Kinetix's existing
directors' and officers' insurance policy;
. Dr. Lydon, a director and the President and Chief Executive Officer of
Kinetix, and Dr. Armistead, a director and Chief Scientific Officer of
Kinetix, will sign employment agreements after the closing that
provide for, among other things, different levels of compensation from
the standard employment agreements (including guaranteed bonuses) and
also permit them to resign for "good reason";
40
. the vesting of stock options to acquire 12,307.75 shares of Kinetix
common stock held by Mr. Adams, a director of Kinetix, will be
accelerated and those options will become fully vested and exercisable
pursuant to the merger agreement;
. Dr. Lydon, Dr. Armistead, Ms. Stuart, and Dr. Hsi, all of whom are
officers of Kinetix, will have their unvested restricted stock of
Kinetix, other than the restricted stock awarded to Ms. Stuart and Dr.
Hsi in connection with the merger for retention purposes, vested so
that such restricted stock will be free of all encumbrances and
restrictions; and
. the vesting of 123,077 shares of Kinetix common stock subject to a
restricted stock purchase agreement between Kinetix and Salkilld
Holdings Limited (of which Jason Loveridge, a director of Kinetix, is
a majority owner) will become accelerated and become fully vested
pursuant to the merger agreement.
These interests are described in more detail below, and, except as
described below, those persons have, to the knowledge of Kinetix, no material
interest in the merger apart from those of stockholders generally. The Kinetix
board of directors was aware of, and considered the interests of, its directors
and officers in approving the merger agreement and the merger.
Release and Insurance
Under the voting and support agreements and the support agreements, each
signing stockholder fully, finally and forever, releases and discharges Kinetix
and its past, present and future officers and directors, among others, from any
and all commitments, indebtedness, actions, suits, proceedings, investigations,
charges, complaints, claims, demands, obligations and liabilities of every kind
and nature, which the signing stockholder and/or his or its heirs, executors,
administrators, successors or assigns ever had, now has or, to the extent
arising from or in connection with any act, omission or state of facts taken or
existing on or prior to the closing of the merger, may have after the date
hereof, against any officer or director of Kinetix, whether asserted,
unasserted, absolute, contingent, known or unknown.
Under the merger agreement, Kinetix and Amgen agree to extend the period in
which claims may be made under Kinetix's existing directors' and officers'
liability insurance policy for a period of two (2) years following the closing
of the merger.
Employment Agreements
Nicholas Lydon, Ph.D.
---------------------
Dr. Lydon has been employed as President and Chief Executive Officer of
Kinetix since June 1997. Following the merger, and after completion of the
subsequent merger of Kinetix with and into Amgen, it is anticipated that Dr.
Lydon will be employed by Amgen as Vice President, Small Molecule Drug
Discovery, under an employment agreement providing for (i) a starting bonus of
$75,000, of which $25,000 will be paid within 30 days of the closing date of the
merger and $50,000 will be paid on the first anniversary of the closing date of
the merger, (ii) a base salary at an annual rate of $240,000, and (iii) an
option to purchase 90,000 shares of Amgen common stock at their fair market
value on the date of grant, vesting over a three-year period beginning after the
second year and ending at the end of the fifth year after the closing date of
the merger. The term of Dr. Lydon's employment with Amgen pursuant to this
employment agreement shall begin at the closing of the merger and will end on
the third anniversary of the merger closing, unless such employment is
terminated earlier pursuant to the employment agreement, including, but not
limited to, Dr. Lydon's resignation for "good reason," as that term is defined
in the employment agreement.
David Armistead, Ph.D.
----------------------
Dr. Armistead has been employed as Vice President of Research and
Development and Chief Scientific Officer of Kinetix since August 1997. Following
the merger, and after completion of the subsequent merger of Kinetix with and
into Amgen, it is anticipated that Dr. Armistead will be employed by Amgen as
Vice President, Chemistry, under an employment agreement providing for (i) a
starting bonus of $70,000, of which $30,000 will be
41
paid within 30 days of the closing date of the merger and $40,000 on the first
anniversary of the closing date of the merger, (ii) a base salary at an annual
rate of $210,000, and (iii) an option to purchase 50,000 shares of Amgen common
stock at their fair market value on the date of grant, vesting over five years
after the closing date of the merger. The term of Dr. Armistead's employment
with Amgen pursuant to this employment agreement shall begin at the closing of
the merger and will end on the third anniversary of the merger closing, unless
such employment is terminated earlier pursuant to the employment agreement,
including, but not limited to, Dr. Armistead's resignation for "good reason," as
that term is defined in the employment agreement.
Except as explicitly provided in the merger agreement and the employment
agreements being entered into at the time of the merger agreement, neither Amgen
nor Kinetix will have any responsibility for continuing any individual in the
employ (or retaining any person as a consultant) of Amgen or Kinetix from and
after the closing of the merger or have any liability for any severance payments
or other benefit payments to or similar arrangements with any such person who
will cease to be an employee of Kinetix at or prior to the closing of the merger
or as a result of consummating the transactions contemplated by the merger
agreement.
Stock Option Vesting
The merger agreement provides that all outstanding stock options will be
fully vested and must be either exercised or will be canceled prior to the
effective time of the merger. Chris Adams, one of Kinetix's directors, owns
12,307.75 options issued in February 1997 to purchase shares of Kinetix common
stock that are unvested. These unvested options will be vested in connection
with the merger and Mr. Adams will be able to purchase shares of Kinetix common
stock for $0.05 per share, the exercise price of those options.
Cancellation of Repurchase Rights and Vesting of Restricted Stock and
Additional Grants of Restricted Stock
The merger agreement provides that all repurchase rights governing
restricted stock awards, other than the repurchase rights governing restricted
stock awarded in connection with the merger for retention purposes, will be
terminated and such stock fully vested so that such stock will be free of all
encumbrances and restrictions. As more fully explained in "Proposal 2--Approval
of Vesting of Restricted Stock and Additional Grants of Restricted Stock,"
Dr. Lydon, President and Chief Executive Officer of Kinetix, Dr. Armistead, Vice
President of Research and Development and Chief Scientific Officer at Kinetix,
Nancy Stuart, Vice President of Business Development, and Dr. Jeffrey Hsi,
Assistant Secretary and Patent Counsel will have the unvested restricted stock
that they own vested in connection with the merger and Ms. Stuart and Dr. Hsi
will be granted additional shares of restricted stock for retention purposes
that will not be vested in connection with the merger.
Accounting Treatment
The merger will be accounted for under the "purchase" method of accounting
in accordance with accounting principles generally accepted in the United
States. Under this accounting method, the tangible and identifiable intangible
assets and liabilities will be recorded at their fair values, and any excess of
Amgen's purchase price will be accounted for as goodwill by Amgen.
Trading of Amgen Common Stock
It is a condition to the completion of the merger that Amgen common stock
issued to Kinetix stockholders in the merger be authorized for trading on The
Nasdaq Stock Market.
Certain United States Federal Income Tax ConsequenceS of the Merger
The following summary of certain United States federal income tax
consequences of the merger to the holders of Kinetix common stock who hold their
Kinetix common stock as a capital asset is based upon current provisions of the
Internal Revenue Code of 1986, as amended, currently applicable Treasury
Regulations and judicial and administrative rulings and decisions as of the date
hereof. The following summary is not binding on the Internal Revenue Service and
no rulings have been or will be sought from the Internal Revenue Service
regarding any matters relating to the merger. In addition, legislative, judicial
or administrative changes may be forthcoming that could alter or modify the
statements set forth herein, possibly on a retroactive basis. The summary does
not
42
purport to deal with all aspects of federal income taxation that may be relevant
to particular holders of Kinetix common stock in light of their individual
circumstances, nor with certain types of holders who are subject to special
treatment under the federal income tax laws. Examples of these holders include,
without limitation: tax-exempt organizations; insurance companies; financial
institutions; broker-dealers; persons who hold such stock as part of a hedge,
appreciated financial position, straddle or conversion transaction; holders
whose functional currency is not the United States dollar; holders who acquired
their stock pursuant to the exercise of employee stock options or otherwise as
compensation; and holders who are neither citizens nor residents of the United
States, or that are foreign corporations, foreign partnerships or foreign
estates or trusts for United States federal income tax purposes. Finally, no
foreign, state or local tax considerations are addressed herein. Consequently,
we urge each holder of Kinetix common stock to consult his or her own tax
advisor regarding the tax consequences of the merger in light of each such
holder's particular circumstances, including the applicability and effect of
federal, state, local, foreign income and other tax laws.
Amgen and Kinetix intend that the merger will qualify as a reorganization
for tax purposes, whether viewed as a separate transaction or viewed as an
integrated transaction with a subsequent upstream merger of Kinetix into Amgen
as contemplated in the merger agreement. The merger agreement states that Amgen
and Kinetix shall use their best efforts to cause the merger to qualify as a
reorganization and will not (both before and after the merger) take any actions
to prevent the merger from so qualifying. Amgen has further agreed that the
upstream merger will be effected in a manner that will not prevent the merger
from qualifying as a reorganization for tax purposes.
Amgen's obligation to complete the merger is conditioned upon, among other
things, the receipt by Amgen of a tax opinion of Latham & Watkins, counsel to
Amgen, dated as of the closing date of the merger and addressed to Amgen, and to
the effect that the merger will qualify for United States federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. This opinion, unless waived by Amgen, will be based on
customary assumptions and representations made by Kinetix, Amgen Acquisition
Corp. II, and Amgen. An opinion of counsel represents counsel's best legal
judgment and is not binding on the Internal Revenue Service or any court.
Amgen's tax opinion may not be relied upon by Kinetix or its stockholders and
the delivery of a tax opinion is not a condition to the obligation of Kinetix or
its stockholders to complete the merger. Moreover, Amgen may waive the condition
that it receive a tax opinion and thus cause the merger to be completed without
the delivery of any tax opinion.
Consequences if the Merger Qualifies as a Reorganization
Based on the above assumptions and qualifications, if the merger qualifies
as a reorganization under Section 368(a) of the Internal Revenue Code, the
merger will generally result in the following federal income tax consequences:
. no gain or loss will be recognized by Kinetix or Amgen solely as a
result of the merger;
. no gain or loss will be recognized by Kinetix's stockholders who
exchange their Kinetix common stock solely for Amgen common stock
(except to the extent of cash received in lieu of fractional shares);
. the holding period of Amgen common stock received will include the
holding period of shares of Kinetix common stock surrendered in the
merger;
. the aggregate tax basis of Amgen common stock received by Kinetix
stockholders who exchange all of their Kinetix common stock for Amgen
common stock in the merger will be the same as the aggregate tax basis
of Kinetix common stock surrendered in the merger (reduced by any
portion of such tax basis allocable to a fractional share of Amgen
common stock for which cash is received); and
. cash payments received by Kinetix stockholders in lieu of a fractional
share of Amgen common stock will be treated as capital gain or loss
measured by the difference, if any, between the cash payment received
and the portion of the tax basis in the shares of Kinetix common stock
allocable to the fractional share; this gain or loss will be long-term
capital gain or loss if the holder's holding period in the Kinetix
common stock exchanged for the fractional share of Amgen common stock
is more than one year at the time the merger is completed.
43
Consequences if the Merger Fails to Qualify as a Reorganization
If the merger fails to qualify as a reorganization under Section 368(a) of
the Internal Revenue Code, the receipt of Amgen common stock and cash instead of
fractional shares of Amgen common stock pursuant to the merger will be a fully
taxable transaction for federal income tax purposes. In general, if the merger
failed to qualify as a reorganization, you would recognize capital gain or loss
equal to the difference between (i) the sum of (A) the value of Amgen common
stock and (B) cash received instead of fractional shares of Amgen common stock,
if any, received in the merger and (ii) your tax basis in the Kinetix common
stock exchanged in the merger. Your tax basis in the Amgen common stock will be
equal to the fair market value of such stock on the date of the merger. Your
holding period for the Amgen common stock will begin on the day after the
closing date of the merger.
Backup Withholding
Backup withholding at the rate of thirty-one percent (31%) may apply with
respect to certain cash payments received by a Kinetix stockholder in connection
with the merger unless:
. the recipient is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact; or
. the recipient provides a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and
otherwise complies with applicable requirements of the backup
withholding rules.
A Kinetix stockholder who does not provide Amgen with his or her or its
correct taxpayer identification number may be subject to penalties imposed by
the Internal Revenue Service. Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against the holder's federal income
tax liability, provided that the required information is furnished to the
Internal Revenue Service.
Kinetix Stockholders Exercising Dissenters' Rights
A Kinetix stockholder who exercises dissenters' rights and receives cash in
exchange for its Kinetix common stock will generally recognize capital gain or
loss equal to the difference between the cash received and the stockholder's tax
basis in the Kinetix common stock exchanged therefor.
Capital Gains
Capital gains of non-corporate stockholders are generally taxable at a
maximum United States federal income tax rate of twenty percent (20%) if the
stockholder's holding period in his or her or its stock is more than one year at
the time of the completion of the merger. Capital gains of corporate
stockholders are generally taxable at the regular tax rates applicable to
corporations.
Resale of Amgen Common Stock
Amgen common stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares that have not yet vested and except for shares issued to any Kinetix
stockholder who may be deemed to be an "affiliate" of Kinetix for purposes of
paragraphs (c) and (d) of Rule 145 under the Securities Act. An affiliate of
Kinetix is any individual or entity that directly or indirectly through one or
more intermediaries controls, is controlled by or is under common control with,
Kinetix. Each affiliate of Kinetix has agreed not to sell, transfer or otherwise
dispose of any Amgen common stock received in the merger unless (1) such sale,
transfer or other disposition is made in conformity with the conditions of Rule
145 under the Securities Act, (2) such sale, transfer or other disposition has
been registered under the Securities Act, or (3) in the opinion of counsel
reasonably acceptable to Amgen, the sale, transfer or other disposition is
otherwise exempt from registration under the Securities Act. This proxy
statement/prospectus does not cover resales of Amgen common stock received by
any person upon completion of the merger, and no person is authorized to make
any use of this proxy statement/prospectus in connection with any resale.
44
THE MERGER AGREEMENT
Conditions to Consummation of the Merger
Each of Amgen's and Kinetix's obligation to consummate the merger and the
transactions to be performed by each in connection with the closing, is subject
to satisfaction of the following conditions:
. the representations and warranties of Amgen, Kinetix and Kinetix's
stockholders contained in the merger agreement must be true and
correct in all material respects at and as of the closing date of the
merger;
. Amgen, Kinetix, their respective officers, directors and stockholders,
as the case may be, must have performed and complied with all of their
covenants set forth in the merger agreement in all respects through
the effective time;
. Amgen's registration statement on Form S-4 must have become effective
under the Securities Act and must not be the subject of any stop order
or proceedings seeking a stop order; and
. the shares of common stock of Amgen to be issued by Amgen in
connection with the merger must have been listed and approved for
trading on The Nasdaq Stock Market.
Amgen's obligation to consummate the merger and the related transactions in
connection with the closing of the merger is subject to satisfaction or waiver
of various conditions which include, in addition to other customary closing
conditions, the following:
. the merger and the merger agreement will have been approved and
adopted by the requisite vote of the Kinetix stockholders, and no more
than 9.9% of the shares of capital stock of Kinetix will have
exercised appraisal rights;
. no action or proceeding will be pending or threatened before any court
or quasi-judicial or administrative agency or before any arbitrator
wherein an unfavorable ruling or charge would (A) prevent consummation
of any of the transactions contemplated by the merger agreement, (B)
cause any of the transactions contemplated by the merger agreement to
be rescinded following consummation, (C) have the effect of making any
of the transactions contemplated by the merger agreement illegal, (D)
affect adversely the right of Amgen to own the shares of capital stock
of Kinetix and to control Kinetix, or (E) affect adversely the right
of Kinetix to own its assets and to operate its business;
. Kinetix will have either (i) repaid in full the outstanding principal
balance of $1,200,000 on its note made in favor of Novartis or (ii)
amended the note to provide for its automatic conversion into shares
of Kinetix common stock prior to the closing of the merger, and caused
the note to be so converted;
. Nicholas Lydon, David Armistead and not less than eighty percent (80%)
of the scientific employees of Kinetix employed by Kinetix on October
16, 2000 will have entered into employment agreements, noncompetition
agreements, mutual agreements to arbitrate and proprietary information
and inventions agreements;
. Amgen will have received from counsel to Kinetix and from counsel to
each of the major Kinetix stockholders opinions relating to certain
corporate matters, addressed to and in a form acceptable to Amgen and
Amgen Acquisition Corp. II, and dated as of the closing date of the
merger;
. Amgen will have received from counsel to Amgen an opinion that the
merger will constitute a reorganization within the meaning of
ss.368(a) of the Internal Revenue Code;
. no present or future agreement, arrangement or other obligation will
exist between Kinetix or any of its stockholders and any person with
respect to an alternative acquisition proposal;
. Kinetix and its stockholders will have obtained all consents, orders,
assignments, waivers or authorizations, that are required as a result
of the merger;
45
. there will not have occurred since the execution of the merger
agreement any material adverse change, circumstance or effect that
would prevent Kinetix from performing its obligations under the merger
agreement;
. all of the outstanding shares of Kinetix Series A convertible
preferred stock and Series B convertible preferred stock will have
been duly and validly converted into shares of Kinetix common stock,
and all options to acquire capital stock will have been exercised or
terminated and substantially all repurchase rights governing
restricted stock awards will have been cancelled;
. Kinetix's board of directors will not have withheld, withdrawn or
modified in a manner adverse to Kinetix, its authorization, approval
and recommendation of the merger agreement, the merger and the
transactions contemplated hereby;
. the voting and support agreements, the affiliate letters, the
irrevocable proxies, the support agreements, the employment
agreements, the noncompetition agreements, the arbitration agreements,
the proprietary information and inventions agreements, the executive
employment agreements with Dr. Lydon and Dr. Armistead and the
executive noncompetition agreements with Dr. Lydon and Dr. Armistead
shall be signed and in full force and effect;
. prior to the closing date, Kinetix will cause the termination of (i)
all existing employment agreements with employees of Kinetix, (ii) all
agreements with third party consultants to Kinetix, and (iii) certain
other stockholder agreements; and
. prior to the closing date, Kinetix will cause to be delivered to Amgen
support agreements signed by the holders of at least 90.1% of the
Kinetix common stock issued and outstanding immediately prior to the
closing of the merger.
No Solicitation
The merger agreement provides that Kinetix, its officers, directors, and
stockholders will not, and will cause their respective representatives
(including, without limitation, investment bankers, attorneys and accountants)
not to, directly or indirectly, through any officer, director, agent or
otherwise enter into, solicit, initiate, conduct or continue any discussions or
negotiations with, or encourage or respond to any inquiries or proposals by, or
provide any information to, or otherwise cooperate in any other way with any
entity or group, other than Amgen, concerning:
. any sale of all or any material portion of the assets of or the
business of, or any material number of shares of capital stock of or
other securities in, Kinetix, or any merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction
involving Kinetix;
. any license, joint venture, collaboration or similar arrangement
involving Kinetix; or
. a public or private offering of shares of the capital stock of
Kinetix.
None of the Kinetix stockholders may vote any of their respective shares of
the capital stock of Kinetix in favor of any such alternative proposal.
In the event that Kinetix or any of its stockholders receives any
alternative proposals, Kinetix or such stockholder will:
. promptly notify Amgen if any offer is made to it, any negotiations are
sought to be initiated with it, any inquiry or contact is made or any
information is requested from it with respect to any alternative
proposal;
. promptly notify Amgen of the terms of any such alternative proposal
and the identity of the prospective purchaser;
. promptly provide Amgen with a copy of any such offer; and
46
. promptly inform Amgen of any material changes to the terms of any
alternative proposal of which it is aware.
Termination
The merger agreement may be terminated at any time prior to the effective
time of the merger:
. by mutual written consent of Amgen and Kinetix;
. by either Kinetix or Amgen if any governmental entity issues an order,
decree or ruling or takes any other action permanently restraining or
otherwise prohibiting the transactions contemplated by the merger
agreement, and such order or other action becomes final and
nonappealable;
. by Amgen, if Kinetix or any its stockholders breaches any of its
covenants or agreements or if any representation or warranty of
Kinetix or any of its stockholders becomes untrue in any material
respect and this breach is not cured within 15 days after Amgen gives
notice;
. by Kinetix, if Amgen breaches any of its covenants or agreements, or
if any of Amgen's representations or warranties becomes untrue in any
material respect and this breach is not cured within 15 days after
Kinetix gives notice;
. by Amgen, if the requisite vote of the stockholders of Kinetix to
adopt the merger is not obtained;
. by Amgen, if the board of directors of Kinetix withholds or modifies
its approval of the merger and the merger agreement in a manner
adverse to Amgen; or
. by Amgen or Kinetix if the effective time of the merger has not
occurred on or before January 31, 2001, however, the right of each of
Amgen and Kinetix to terminate the merger agreement under this
provision is not available to a party if that party has failed to
fulfill, or breached, any obligation under the merger agreement and
this failure or breach has been the cause of, or resulted in, the
failure of the merger to occur on or before January 31, 2001.
Termination Fee
If Amgen terminates the merger agreement as a result of any of the
following:
. Kinetix or any its stockholders has breached any of their respective
covenants or agreements or if any of their respective representations
or warranties becomes untrue (other than specified breaches not within
the control of Kinetix or its stockholders) and these breaches are not
cured within 15 days after Amgen gives notice;
. the requisite vote of the stockholders of Kinetix to adopt the merger
agreement is not obtained;
. the board of directors of Kinetix withholds or modifies its approval
of the merger and the merger agreement in a manner adverse to Amgen;
or
. the effective time of the merger has not occurred on or before January
31, 2001, and the failure of the merger to occur by this date was not
the result of Amgen's failure to fulfill, or Amgen's breach of, any
obligation under the merger agreement;
then, in addition to any other rights or remedies available to Amgen, Kinetix
must pay Amgen's costs associated with the merger, including reasonable
attorneys' and accountants' fees. In addition, if Kinetix engages in a
transaction prohibited by the no solicitation clause within twelve (12) months
of such termination, then Kinetix must pay Amgen a termination fee of Twenty
Million Dollars ($20,000,000). The termination of the merger agreement will not
be effective until Amgen receives these amounts from Kinetix.
47
Conduct of Business Pending the Merger
Pursuant to the merger agreement Amgen and Kinetix agreed as follows with
respect to the period from the date of the execution of the merger agreement,
October 16, 2000, and continuing until the effective time of the merger:
. Kinetix will carry on its business in the usual, regular and ordinary
course in all material respects, will not enter into any contracts or
arrangements other than in the ordinary course of business;
. Kinetix will not, and will not propose to, (i) declare or pay any
dividends on or make other distributions in respect of any of its
capital stock, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of
its capital stock, or (iii) repurchase, redeem or otherwise acquire
any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock;
. Except for certain excepted restricted common stock, Kinetix will not
issue, grant, deliver or sell, or authorize or propose the issuance,
grant, delivery or sale of, any shares of its capital stock of any
class or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares;
. Kinetix and its stockholders will cause all outstanding shares of
Kinetix Series A convertible preferred stock and Kinetix Series B
convertible preferred stock to be converted into Kinetix common stock;
. Kinetix and its stockholders will cause all options to acquire capital
stock to be exercised or terminated and substantially all repurchase
rights governing restricted stock awards to be cancelled;
. No party to any voting and support agreement, any affiliate letter,
any irrevocable proxy, any support agreement, any employment
agreement, any noncompetition agreement, any agreement to arbitrate,
any proprietary information and inventions agreement, any executive
employment agreement, or any executive noncompetition agreement will
have revoked, terminated or amended such agreement;
. Kinetix may not amend or propose to amend its certificate of
incorporation or by-laws;
. Kinetix may not incur any indebtedness for borrowed money or guarantee
any such indebtedness, make any loans, advances or capital
contributions to, or investments in, any other person, or pay,
discharge or satisfy any claims, liabilities or obligations other than
in the ordinary course of business;
. Kinetix may not (i) increase the compensation for any of its executive
officers or employees, (ii) take any action with respect to the grant
of any severance or termination pay, or stay, bonus or other incentive
arrangement, (iii) adopt any new employee benefit plan, (iv)
restructure or refinance its existing indebtedness or (v) amend or
modify any employee benefit plan, except as required by law or as
otherwise contemplated by the merger agreement;
. Kinetix may not sell, lease, license, mortgage or otherwise encumber
or subject to any security interest or otherwise dispose of any
property or assets of Kinetix outside of the ordinary course of
business;
. Kinetix may not terminate, amend, breach or otherwise default under
any of its material agreements. Kinetix will also refrain from
becoming a party to any contract or commitment other than in the
ordinary course of business. Kinetix will meet all of its contractual
obligations in accordance with their respective terms;
. Kinetix may not make or agree to make any new capital expenditure or
expenditures that, in the aggregate, are in excess of $50,000;
. Kinetix may not (i) make any amendment to its stock plan or any stock
agreement as a result of the merger agreement or in contemplation of
the merger, (ii) except as otherwise contemplated by the merger
agreement, grant or issue or agree to grant or issue stock awards
under its stock plan, or (iii) except as the parties have otherwise
agreed in the merger agreement, accelerate the vesting of any stock
awards under its stock plan;
48
. Kinetix may not cancel, compromise, release or discharge any claim of
Kinetix upon or against any person or waive any right of Kinetix of
material value;
. Kinetix may not institute, settle or agree to settle any claim, suit,
proceeding, inquiry, investigation or action before any governmental
entity;
. Kinetix may not take any action, nor fail to take any action, that
could reasonably be expected to result in any of the representations
or warranties of Kinetix set forth in the merger agreement becoming
untrue, or any of the conditions to the merger not being satisfied;
. Except as otherwise contemplated by the merger agreement, Kinetix may
not enter into any agreement, arrangement or transaction with any
officer, director, employee, consultant, scientific advisory board
member, stockholder or affiliate of Kinetix;
. Kinetix will report to Amgen on a regular and frequent basis on
operational matters and each of Kinetix and Amgen will promptly advise
the other of (x) any representation or warranty made by it contained
in the merger agreement becoming untrue or inaccurate in any respect,
(y) the failure by it to comply with or satisfy in any respect any
covenant, condition or agreement required to be complied with or
satisfied by it under the merger agreement or (z) any change, event or
circumstance that has had or could reasonably be expected to have a
material adverse effect on such party or materially adversely affect
its ability to consummate the merger in a timely manner; and
. Kinetix may not, without Amgen's written consent, change any of its
tax or accounting methods or policies or make any reclassification of
assets or liabilities (except as required by law or GAAP).
Amendment; Extension and Waiver
At any time prior to the effective time of the merger, Amgen, Amgen
Acquisition Corp. II and Kinetix, by action taken or authorized by their
respective boards of directors, may, to the extent legally allowed:
. extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
. waive any inaccuracies in the representations and warranties contained
in the merger agreement or in any document delivered pursuant to the
merger agreement; and
. waive compliance with any of the agreements or conditions contained in
the merger agreement.
Any agreement on the part of Amgen, Amgen Acquisition Corp. II and Kinetix
to any such extension or waiver will be valid only if set forth in a written
instrument signed on behalf of Amgen, Amgen Acquisition Corp. II and Kinetix.
Expenses
All fees and expenses incurred in connection with the merger, the merger
agreement will be paid by the party incurring those fees or expenses, provided,
--------
however, that all legal fees, costs and expenses in excess of $150,000 and all
- -------
accounting fees, costs and expenses in excess of $30,000 will be paid by the
Kinetix stockholders and not become obligations of the surviving corporation.
Provisions for the payment of these expenses reasonably acceptable to Amgen will
be made prior to closing of the merger.
Representations and Warranties
The merger agreement contains customary representations and warranties
relating to, among other things:
. corporate organization and similar corporate matters of Amgen and
Kinetix;
. the capital structure of Amgen and Kinetix;
49
. authorization, execution, delivery, performance and enforceability of,
and required consents, approvals, orders and authorizations of
governmental authorities relating to, the merger agreement and related
matters of Amgen and Kinetix;
. absence of material changes or events concerning Kinetix;
. compliance with applicable laws by Kinetix;
. matters relating to the certain employment and benefit plans matters
of Kinetix;
. matters relating to Kinetix's compliance with the Employee Retirement
Income Security Act of 1974, as amended (ERISA);
. filing of tax returns and payment of taxes by Kinetix;
. required stockholder vote of Kinetix adoption of the merger agreement;
. absence of actions by Kinetix that would prevent the merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code;
. proprietary information and materials of Kinetix;
. outstanding and pending material litigation of Kinetix;
. certain leases and contracts entered into by Kinetix and absence of
default by Kinetix under those leases and contracts;
. absence of transactions between Kinetix and its affiliates;
. liability of Kinetix under environmental, health and safety laws; and
. no required Hart-Scott-Rodino filing in connection with the merger.
Indemnification
Remedies for Breaches of Agreement
All of the representations and warranties of the parties contained in the
merger agreement will survive the closing and continue in full force and effect
for a period of at least eighteen months thereafter. Representations and
warranties of Kinetix, regarding:
. tax matters and the covenants and agreements of Kinetix contained in
the merger agreement will continue in full force and effect
indefinitely after the closing (subject to applicable statutes of
limitation); and
. intellectual property, environmental and litigation matters will
continue in full force and effect for a period of five years after the
closing.
In addition, the representations and warranties of the Kinetix stockholders
concerning share ownership and their ability to enter into the merger agreement
will continue in full force and effect indefinitely after the closing.
Indemnification Provisions for Benefit of Kinetix Stockholders
Amgen will indemnify Kinetix stockholders against the entirety of any and
all adverse consequences incurred in connection with any breach by Amgen of its
representations and warranties contained in the merger agreement or of any of
its covenants or agreements contained in the merger agreement.
Indemnification Provisions for Benefit of Amgen
Each Kinetix stockholder will severally indemnify Amgen, Amgen Acquisition
Corp. II and each of their respective directors, officers, employees,
affiliates, successors, transferors, assignees and their respective
50
representatives against any adverse consequences resulting relating to any
breach of any representation or warranty made by such Kinetix stockholder.
Kinetix stockholders will indemnify Amgen and Amgen Acquisition Corp. II for
certain tax matters.
Each major Kinetix stockholder, defined to include Kinetix officers and
directors and certain investors, will jointly indemnify Amgen, Amgen Acquisition
Corp. II and each of their respective directors, officers, employees,
affiliates, successors, transferors, assignees and their respective
representatives against any adverse consequences relating to (1) any breach of
any representation or warranty made by Kinetix and (2) any breach of, or default
under, any covenant or agreement made by Kinetix or any Kinetix stockholders in
or pursuant to the merger agreement.
Limitations on Stockholder Indemnity
The maximum aggregate amount for which any Kinetix stockholder will be
severally liable to Amgen for indemnity claims that are based on a breach of any
representation or warranty made by such stockholder as to itself under the
merger agreement is such Kinetix stockholder's pro rata share of the aggregate
merger consideration.
The maximum aggregate amount for which the major Kinetix stockholders will
be jointly liable to Amgen for indemnity claims that are based on a breach of
any representation or warranty made by such major Kinetix stockholder as to
Kinetix will be no less than $41,000,000; provided, that for breaches of the tax
--------------
and litigation (other than intellectual property or environmental litigation)
representations and warranties, the maximum aggregate amount will be no less
than $136,000,000. In no event will the liability of any major Kinetix
stockholder to Amgen under this indemnity provision exceed such major Kinetix
stockholder's pro rata share of the merger consideration.
The maximum aggregate amount for which the major Kinetix stockholders will
be jointly liable to Amgen for indemnity claims based on breaches of, or
defaults under, any covenants or agreements made by Kinetix or Kinetix
stockholders in connection with the merger will be no less than $136,000,000. In
no event will the liability of any major Kinetix stockholder to Amgen under this
indemnity provision exceed such major Kinetix stockholder's pro rata share of
the merger consideration.
Amgen will not be entitled to indemnification from the major Kinetix
stockholders for breaches of representations and warranties except to the extent
the aggregate amount of Amgen indemnity claims exceeds a $5,000,000 deductible.
This deductible will not apply to indemnification related to breaches of tax
related representations or warranties. Additionally, this deductible will not
apply to indemnification related to breaches of representations and warranties
made by Kinetix stockholders or covenants or agreements of Kinetix or Kinetix
stockholders.
Interim Period Claims
If at any time during the period between the execution of the merger
agreement and the closing of the merger, Kinetix shall be in breach of specified
representations and warranties of the merger agreement, including
representations and warranties relating to proprietary information, contracts,
litigation and employee matters, and such breach was not the result of any
action or inaction on the part of Kinetix or its stockholders, then any adverse
consequences associated with the applicable breach shall be paid as follows:
. If the adverse consequences associated with the applicable breach are
settled prior to the closing of the merger Kinetix is entitled to use
up to $2,000,000 of its available cash to pay any expenses and fees
that are actually incurred to defend against any adverse consequences
associated with the applicable breach.
. If Amgen and Kinetix mutually agree that the adverse consequences
associated with the applicable breach will not be fully resolved prior
to the closing of the merger, then specified major Kinetix
stockholders will deposit into an escrow account an amount equal to
$2,000,000 (which amount may be satisfied with shares of Amgen common
stock received in the merger) and Kinetix shall cause all cash on hand
of Kinetix at the closing of the merger (provided, however, that such
amount shall in no event exceed the difference between $2,000,000 and
the aggregate amount of previous payments made prior to the closing of
the merger) to be deposited into the escrow account. After the closing
date of the merger, post-closing payments on adverse consequences
associated with any interim period claim shall be paid from the escrow
account (1) fifty percent from the escrowing stockholder contribution
and (2) fifty percent from the Kinetix cash contribution.
51
The right to seek reimbursement of post-closing payments from the cash
contribution shall terminate on the earlier of (A) the date on which no amounts
from the cash contribution remain in the escrow account and (B) the date of the
final resolution of all claims. On that date, all the remaining cash
contribution amounts shall be distributed to Amgen.
Amendments to Kinetix's Certificate of Incorporation
The certificate of incorporation of Kinetix will be amended and restated at
and as of the closing of the merger to read as did the certificate of
incorporation of Amgen Acquisition Corp. II immediately prior to the closing of
the merger (except that the name of Kinetix will remain unchanged).
Amendments to the Kinetix By-Laws
The bylaws of Kinetix will be amended and restated at and as of the closing
of the merger to read as did the bylaws of Amgen Acquisition Corp. II
immediately prior to the closing of the merger (except that the name of the
Kinetix will remain unchanged).
52
OTHER AGREEMENTS
Voting and Support Agreement
On October 16, 2000, affiliates of Kinetix entered into a voting and
support agreement with Amgen and Amgen Acquisition Corp. II, pursuant to which,
among other things, they have agreed:
. to vote their Kinetix common stock and Kinetix Series A convertible
preferred stock and Series B convertible preferred stock "FOR"
adoption of the merger agreement;
. to convert any shares of Kinetix preferred stock that they own into
Kinetix common stock prior to the merger;
. to be bound by the terms and conditions of the merger agreement; and
. to release all claims against Kinetix and its officers, directors and
stockholders, and their respective successors and assigns, that arose
or could have arisen prior to the closing of the merger.
The form of voting and support agreement is attached as Annex B. These
affiliates have also granted irrevocable proxies and powers of attorney to Amgen
representatives to vote their shares of Kinetix common stock "FOR" adoption of
the merger agreement, and have signed affiliate letters in which they agree to
be bound by Rule 145 under the Securities Act with respect to the resale of the
shares of Amgen common stock they receive in the merger. Those affiliates who
have entered into voting and support agreements hold or control in the aggregate
approximately 67% of the common stock (when the common stock and the preferred
stock vote together), 100% of the Series A preferred stock and 100% of the
Series B preferred stock of Kinetix. When all of the holdings of these
affiliates are aggregated, they collectively hold approximately 92% of the
combined voting power of the Kinetix common stock, Series A preferred stock and
Series B preferred stock.
Support Agreement
In connection with the merger, each Kinetix stockholder (other than those
who have already executed a voting and support agreement) will be asked to
execute a support agreement with Amgen and Amgen Acquisition Corp. II pursuant
to which, among other things, the stockholder will agree to:
. be bound by the terms and conditions of the merger agreement; and
. release all claims against Kinetix and its officers, directors and
stockholders, and their respective successors and assigns, that arose
or could have arisen prior to the closing of the merger.
Loan Agreement
If the merger agreement is terminated (other than by Amgen in certain
circumstances) on or after November 1, 2000, or the effective time of the merger
does not occur by January 1, 2001, then, at Kinetix's option, Amgen will loan to
Kinetix an amount equal to:
. $1,200,000 (if the termination occurs between November 1, 2000 and
November 30, 2000);
. $1,800,000 (if the termination occurs between December 1, 2000 and
December 31, 2000); or
. $2,400,000 (if the effective time of the merger has not occurred by
January 1, 2001).
Any loan amounts outstanding at the closing date of the merger will reduce
the aggregate purchase price Amgen will pay to the stockholders of Kinetix. In
the event of the termination of the merger agreement prior to the closing of the
merger, any amounts outstanding will be repaid by Kinetix to Amgen in accordance
with the terms of the loan agreement that governs these loaned amounts.
Employment Agreements
As a condition to the merger, eighty percent (80%) of Kinetix scientific
employees are required to enter into employment agreements with Amgen and
Kinetix. These employment agreements will generally will be for three year terms
and provide for:
53
. base annual salaries;
. cash signing and retention bonuses;
. two stock option grants, one that will vest over four or five years
and one that will vest on the third anniversary of the date of grant;
and
. severance upon termination in specified circumstances.
In addition, Dr. Nicholas Lydon and Dr. David Armistead must enter into
employment agreements as a condition to the merger. The terms of these
employment agreement are described in "Interests of Certain Persons in the
Merger."
Non-Competition Agreements
As a condition to Amgen's obligation to consummate the merger, eighty
percent (80%) of Kinetix scientific employees and Dr. Lydon and Dr. Armistead
must enter into non-competition agreements. Pursuant to these agreements, each
such employee agrees that, until the earlier of three years after the closing
date of the merger or for two years after the cessation of such employee's
employment, he or she will not, without prior written consent, directly or
indirectly, be involved with programs or processes (including, without
limitation, developing products or providing services) in the areas of
inhibitors of protein kinases that were or are being pursued by Amgen or Kinetix
at any time during such employee's employment, or assist others to do such
prohibited things.
The non-competition agreements further provide that for the same period
of time such employees will not, directly or indirectly:
. solicit, divert or take away, or attempt to divert or take away, the
business or patronage of any of the clients, customers or accounts, or
prospective clients, customers or accounts of Amgen or Kinetix with
whom such employee has dealt and about whom such employee gained
proprietary information;
. recruit, solicit or hire any person who is, or within the 6 months
preceding the employee's termination or cessation of employment was,
an officer, director, employee, consultant, agent or representative of
Amgen or Kinetix, or assist others to do so; or
. induce or attempt to induce any officer, director, employee,
consultant, agent or representative of Amgen or Kinetix to discontinue
his or her or its relationship with Amgen or Kinetix or to commit any
act that, if committed, would constitute a breach of the
non-competition agreement.
The noncompetition agreements for Dr. Lydon and Dr. Armistead are
substantially similar to those to be entered into by the Kinetix scientists with
the exception that Dr. Lydon and Dr. Armistead also may not participate in a
field involving targets that Amgen is pursuing.
Mutual Agreements to Arbitrate
In connection with the merger, and in consideration of their continued
employment following the merger, eighty percent (80%) of Kinetix scientific
employees are each required to enter into mutual agreements to arbitrate. Under
this agreement, Amgen, Kinetix and the employee mutually consent to the
resolution by arbitration of all claims or controversies, whether or not arising
out of the employee's employment (or its termination), that Amgen or Kinetix may
have against the employee or that the employee may have against Amgen or Kinetix
or against their officers, directors, employees, or agents in their capacity as
such or otherwise.
Claims not covered by the arbitration agreements include:
. Claims for workers' compensation or unemployment compensation benefits
are not covered by this agreement;
. claims by Amgen or Kinetix or by the employee for temporary
restraining orders or preliminary injunctions ("temporary equitable
relief") in cases in which such temporary equitable relief would be
otherwise authorized by law; and
. claims by Amgen or Kinetix or by the employee made pursuant to or in
accordance with the indemnification provisions (Sections 9(c) or 9(g))
of the merger agreement.
54
Proprietary Information and Inventions Agreements
In connection with the merger, and in consideration of their continued
employment following the merger, eighty percent (80%) of Kinetix scientific
employees are each required to enter into proprietary information and inventions
agreements. Under these agreements, where "proprietary information" is used to
mean trade secrets, research, inventions, confidential knowledge, data or any
other information or materials that Amgen or Kinetix treats or considers as
proprietary, each employee, among other things:
. agrees to hold Amgen's and Kinetix's proprietary information in the
strictest confidence and not, except with the written permission of an
officer of Amgen, disclose any proprietary information to anyone other
than Amgen or Kinetix personnel who need such information in
connection with their work for Amgen or Kinetix;
. acknowledges that the proprietary information is solely the property
of Amgen and Kinetix and agrees not to challenge or question the
validity of Amgen's and Kinetix's rights in any proprietary
information;
. assigns to Amgen and Kinetix all right, title and interest to all
inventions that the employee makes during or after employee's term of
employment, whether developed in whole or in part using Amgen's or
Kinetix's equipment or trade secret information; and
. acknowledges that Amgen and Kinetix forbid the employee (i) from the
use or disclosure of any information that is proprietary to any
competitor of Amgen and Kinetix and (ii) from the use of any
confidential information, if any, of any former employer or any other
person to whom the employee has an obligation of confidentiality.
55
PROPOSAL 2: APPROVAL OF VESTING OF RESTRICTED STOCK
AND ADDITIONAL GRANTS OF RESTRICTED STOCK
Actions Requiring Approval
Prior to but contingent on the merger, Kinetix intends to take the
following actions:
(1) Kinetix will amend the Kinetix Pharmaceuticals, Inc. 1997 Equity
Incentive Plan to provide that, in the event of a change in control of Kinetix,
the time during which grants of restricted stock and options under the plan
become vested shall automatically be accelerated so that the unvested portions
of all such grants will be vested prior to the change in control, provided,
--------
however, that the automatic vesting of any unvested portion of grants of
- -------
restricted stock that have been made to Dr. Nicholas Lydon, Dr. David Armistead,
Nancy Stuart, Dr. Jeffrey Hsi, and Dr. David Stover will be subject to
stockholder approval in accordance with the requirements of Section
280G(b)(5)(B) of the Internal Revenue Code of 1986, as amended; and
(2) Kinetix will make additional grants to all employees except Dr. Lydon
and Dr. Armistead of additional shares of restricted stock which will be
converted in the merger into Amgen common stock subject to the same
restrictions, provided, however, that the grants of such restricted stock to Ms.
-------- -------
Stuart, Dr. Hsi, and Dr. Stover will be subject to stockholder approval in
accordance with the requirements of Section 280G(b)(5)(B) of the Code.
As discussed more fully below, the merger-related compensation to be
received by Dr. Lydon, Dr. Armistead, Ms. Stuart, Dr. Hsi and Dr. Stover
resulting from the actions described above could have adverse tax consequences
to them and to Amgen under Sections 280G and 4999 of the Internal Revenue Code
(the "Code"). There will be no such adverse tax consequences, however, if the
merger-related compensation to be paid to these individuals is first approved by
a separate vote of the stockholders of Kinetix who own more than 75% of the
voting power of all of the Kinetix stock outstanding immediately before the
merger.
Accordingly, Kinetix stockholders are being asked to consider and vote upon
a proposal to approve:
(1) the automatic acceleration of vesting of the unvested portion of
restricted stock grants that have previously been made to Dr. Lydon, Dr.
Armistead, Ms. Stuart, Dr. Hsi, and Dr. Stover; and
(2) the grants of additional restricted stock to Ms. Stuart, Dr. Hsi, and
Dr. Stover,
both as described above. Each of Dr. Lydon, Dr. Armistead, Ms. Stuart, Dr. Hsi,
and Dr. Stover have signed agreements pursuant to which they have waived any
rights they may otherwise have to the automatic vesting of their shares if the
requisite stockholder approval of such vesting has not been obtained.
Potential Adverse Tax Consequences of the Merger-Related Compensation
In general, when there is a change in the ownership or effective control of
a corporation and an employee or other individual who performs services for the
corporation and who is an officer, highly-compensated individual or significant
shareholder (defined as a "disqualified individual") receives compensatory
payments that are contingent upon that change in ownership or control, those
payments may constitute "parachute" payments under Section 280G of the Code. The
payments generally will be considered to be parachute payments if the aggregate
value of those payments equals or exceeds three times an amount known as the
individual's "base amount." The individual's base amount is equal to the
individual's average annual taxable compensation from the corporation for the
five calendar years preceding the year in which the change in ownership or
control occurs. If the payments are considered to be parachute payments, then
the portion of each payment that is an excess parachute payment (defined as an
amount equal to the excess of the parachute payment over the individual's base
amount allocated to that payment) is subject to the following tax treatment:
. the payor is denied a tax deduction for the excess parachute payment
under Section 280G; and
. the recipient is subject to a nondeductible twenty percent (20%)
excise tax on the excess parachute payment under Section 4999.
56
Any payment that is in the nature of compensation and that is contingent on
a change in ownership or control may constitute a parachute payment, including
not only payments of cash or other property but also the present value of the
accelerated vesting of restricted stock awards. Payments made under an agreement
entered into in connection with a change in ownership or control are presumed to
be contingent on the change in control and thus may be considered to be
parachute payments.
Stockholder Approval Exception
Under an exemption from the definition of the term parachute payment,
compensatory payments to a disqualified individual with respect to a corporation
undergoing a change in ownership or control will not be parachute payments if
(i) immediately before the change in control, the stock of the corporation was
not readily tradable, (ii) the payments are approved by a separate vote of the
holders of stock possessing more than 75% of the voting power of all outstanding
stock of the corporation, disregarding stock owned, actually or constructively,
by the intended recipients of the payments, and (iii) there was adequate
disclosure of all material facts concerning such payments to all stockholders
entitled to vote. In addition, the stockholder vote must determine the right of
the disqualified individuals to receive the payments.
Merger-Related Compensation for Which Stockholder Approval Is Being Sought
Listed below are the employees who are likely to be disqualified
individuals with respect to Kinetix at the time of the merger and whose
merger-related compensation could result in excess parachute payments under the
rules described above. To ensure that the merger-related compensation to these
individuals will be exempt from treatment as parachute payments, Kinetix is
seeking stockholder approval of that compensation.
Nicholas Lydon, Ph.D.
---------------------
Dr. Lydon has been employed as President and Chief Executive Officer of
Kinetix since June 1997. Following the merger, it is anticipated that Dr. Lydon
will be employed by Amgen as Vice President, Small Molecule Drug Discovery,
under an employment agreement providing for (i) a new hire bonus of $75,000, of
which $25,000 will be paid within 30 days of the closing date of the merger and
$50,000 will be paid on the first anniversary of the closing date of the merger,
(ii) a base salary at an annual rate of $240,000 and (iii) an option to purchase
90,000 shares of Amgen common stock at their fair market value on the date of
grant, vesting over a three-year period beginning after the second year and
ending at the end of the fifth year after the closing date of the merger.
In 1997, Dr. Lydon purchased 3,126,153 shares of Kinetix common stock at a
per share purchase price of $.001, pursuant to a restricted stock purchase
agreement providing that the shares will vest over a four-year period and that
unvested shares will be subject to repurchase by Kinetix at the $.001 share
purchase price upon termination of his employment. Of the shares purchased in
1997, 2,891,692 are vested and 234,461 remain unvested. If Dr. Lydon's unvested
shares become vested in connection with the merger, it is possible that this
accelerated vesting could result in a parachute payment and the imposition of a
20% excise tax on Dr. Lydon. Dr. Lydon has signed an agreement pursuant to which
he has waived any right to the automatic vesting of his unvested shares if the
requisite stockholder approval of such vesting has not been obtained.
David Armistead, Ph.D.
----------------------
Dr. Armistead has been employed as Vice President of Research and
Development and Chief Scientific Officer of Kinetix since August 1997. Following
the merger, it is anticipated that Dr. Armistead will be employed by Amgen as
Vice President, Chemistry, under an employment agreement providing for (i) a
starting bonus of $70,000, of which $30,000 will be paid within 30 days of the
closing date of the merger and $40,000 on the first anniversary of the closing
date, (ii) a base salary at an annual rate of $210,000, and (iii) an option to
purchase 50,000 shares of Amgen common stock at their fair market value on the
date of grant, vesting over 5 years after the closing date of the merger.
In 1997, Dr. Armistead purchased 1,723,077 shares of Kinetix common stock
at a per share purchase price of $.01, pursuant to a restricted stock purchase
agreement providing that the shares will vest over a four-year period and that
unvested shares will be subject to repurchase by Kinetix at the $.01 share
purchase price upon termination
57
of his employment. Of the shares purchased in 1997, 1,378,461.6 are vested and
344,615.4 remain unvested. If Dr. Armistead's unvested shares become vested in
connection with the merger, it is possible that this accelerated vesting could
result in a parachute payment and the imposition of a 20% excise tax on Dr.
Armistead. Dr. Armistead has signed an agreement pursuant to which he has waived
any right to the automatic vesting of his unvested shares if the requisite
stockholder approval of such vesting has not been obtained.
Nancy Stuart
------------
Ms. Stuart has been employed as Vice President of Business Development of
Kinetix since February 1998. During that period, Ms. Stuart has purchased a
total of 134,342 shares of Kinetix common stock at a per share purchase price of
$.01, pursuant to restricted stock purchase agreements providing that the shares
will vest annually over a five year period and that unvested shares will be
subject to repurchase by Kinetix at the $.01 share purchase price upon
termination of her employment. The dates of these share purchases and the number
of vested and unvested shares with respect to each purchase are set forth below.
Date of Purchase Vested Shares Unvested Shares
---------------- ------------- ---------------
February 2, 1998 49,230 73,845
January 29, 1999 2,253 9,014
On June 15, 2000, Ms. Stuart purchased 123,075 shares of Kinetix common
stock pursuant to a restricted stock purchase agreement providing that (i) the
shares will begin to vest upon approval of the Board following the signing by
Kinetix of a corporate collaboration agreement or an agreement that would result
in a change in control of Kinetix and will thereafter vest annually over a five
year period beginning January 1, 2000 and (ii) unvested shares will be subject
to repurchase by Kinetix at the $.01 share purchase price upon termination of
her employment.
If Ms. Stuart's unvested shares become vested in connection with the
merger, this vesting may result in a parachute payment and the imposition of a
20% excise tax on Ms. Stuart. Ms. Stuart has signed an agreement pursuant to
which she has waived any right to the automatic vesting of her unvested shares
if the requisite stockholder approval of such vesting has not been obtained.
Prior to and contingent upon the merger, Ms. Stuart will be awarded the
right to purchase an additional 70,268 shares of Kinetix common stock at a per
share purchase price of $.01, pursuant to a restricted stock purchase agreement
providing that the shares will vest over three years and that unvested shares
will be subject to repurchase by Kinetix at the $.01 share purchase price upon
termination of her employment. Pursuant to the merger agreement, these
additional shares will be converted in the merger into Amgen shares subject to
the same terms. As the shares vest, the excess of their fair market value over
their share purchase price (approximately $326,750 in the aggregate as of the
closing date of the merger) will be taxable compensation income to Ms. Stuart.
The grant of these shares may be treated as a parachute payment, resulting in
the imposition of a 20% excise tax on Ms. Stuart and the loss of a tax deduction
by Amgen.
Jeffrey Hsi, Ph.D., J.D.
------------------------
Dr. Hsi has been employed as Patent Counsel of Kinetix since September
1998. During that period, Dr. Hsi has purchased a total of 123,846 shares of
Kinetix common stock at a per share purchase price of $.01, pursuant to
restricted stock purchase agreements providing that the shares will vest over a
five-year period and that unvested shares will be subject to repurchase by
Kinetix at the $.01 share purchase price upon termination of his employment. The
dates of Dr. Hsi's share purchases and the number of vested and unvested shares
with respect to each purchase are set forth below.
58
Date of Purchase Vested Shares Unvested Shares
---------------- ------------- ---------------
October 14, 1998 29,539 44,307
March 3, 2000 0 50,000
If Dr. Hsi's unvested shares become vested in connection with the merger,
this accelerated vesting in combination with the other merger-related
compensation to him may result in a parachute payment and the imposition of a
20% excise tax on Dr. Hsi. Dr. Hsi has signed an agreement pursuant to which he
has waived any right to the automatic vesting of his unvested shares if the
requisite stockholder approval of such vesting has not been obtained.
Prior to and contingent upon the merger, Dr. Hsi will be awarded the right
to purchase an additional 70,268 shares of Kinetix common stock at a per share
purchase price of $.01, pursuant to a restricted stock purchase agreement
providing that the shares will vest over three years and that unvested shares
will be subject to repurchase by Kinetix at the $.01 share purchase price upon
termination of employment. Pursuant to the merger agreement, these shares will
be converted in the merger into Amgen shares subject to the same terms. As the
shares vest, the excess of their fair market value over their share purchase
price (approximately $326,750 in the aggregate as of the closing date of the
merger) will be taxable compensation income to Dr. Hsi. The grant of these
shares may be treated as a parachute payment, resulting in the imposition of a
20% excise tax on Dr. Hsi and the loss of a tax deduction by Amgen.
David Stover, Ph.D.
-------------------
Dr. Stover has been employed as Director of Biochemistry of Kinetix since
May 1997. During that period, Dr. Stover has purchased a total of 279,203 shares
of Kinetix common stock at a per share purchase price of $.01, pursuant to
restricted stock purchase agreements providing that the shares will vest over
periods of from three to five years and that unvested shares will be subject to
repurchase by Kinetix at the $.01 share purchase price upon termination of
employment. The dates of Dr. Stover's share purchases and the number of vested
and unvested shares with respect to each purchase are set forth below.
Date of Purchase Vested Shares Unvested Shares
---------------- ------------- ---------------
May 5, 1997 152,193 93,962
January 29, 1999 4,109.6 16,438.4
January 31, 2000 0 12,500
If Dr. Stover's unvested shares become vested in connection with the
merger, this accelerated vesting may result in a parachute payment and the
imposition of a 20% excise tax on Dr. Stover. Dr. Stover has signed an agreement
pursuant to which he has waived any right to the automatic vesting of his
unvested shares if the requisite stockholder approval of such vesting has not
been obtained.
Prior to and contingent upon the merger, Dr. Stover will be awarded the
right to purchase an additional 70,268 shares of Kinetix common stock at a per
share purchase price of $.01, pursuant to a restricted stock purchase agreement
providing that the shares will vest over three years and that unvested shares
will be subject to repurchase by Kinetix at the $.01 share purchase price upon
termination of employment. Pursuant to the merger agreement, these shares will
be converted in the merger into Amgen shares subject to the same terms. As the
shares vest, the excess of their fair market value over their share purchase
price (approximately $326,750 in the aggregate as of the closing date of the
merger) will be taxable compensation income to Dr. Stover. The grant of these
shares may be treated as a parachute payment, resulting in the imposition of a
20% excise tax on Dr. Stover and the loss of a tax deduction by Amgen.
59
Effect of Stockholder Vote
To ensure that the merger related compensation to be received by Dr. Lydon,
Dr. Armistead, Ms. Stuart, Dr. Hsi and Dr. Stover will not be treated as
parachute payments, it is necessary to obtain the affirmative vote of more than
75% of all stockholders of Kinetix (excluding Dr. Lydon, Dr. Armistead, Ms.
Stuart, Dr. Hsi and Dr. Stover) approving the automatic acceleration of vesting
of the unvested restricted stock held by these individuals and the grants of
additional restricted stock to Ms. Stuart, Dr. Hsi and Dr. Stover. In addition,
that vote must determine the right of Dr. Lydon, Dr. Armistead, Ms. Stuart, Dr.
Hsi and Dr. Stover to receive the merger-related compensation. Accordingly, the
merger agreement provides that the merger-related compensation to be received by
these individuals will not be made unless the requisite stockholder approval has
been obtained. In addition, each of Dr. Lydon, Dr. Armistead, Ms. Stuart, Dr.
Hsi and Dr. Stover have signed agreements pursuant to which they have waived any
right to automatic acceleration of vesting of their shares if the requisite
stockholder approval of such automatic acceleration of vesting of their shares
has not been obtained.
Recommendation of the Kinetix Board of Directors
The Kinetix board of directors unanimously recommends that the Kinetix
stockholders vote "FOR" the 280G proposal.
60
AMGEN INC. AND KINETIX PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following unaudited pro forma condensed combining balance sheet as of
June 30, 2000 and the unaudited pro forma condensed combining statements of
operations for the year ended December 31, 1999 and the six months ended June
30, 2000 have been prepared to illustrate the effect of the merger as though the
merger had occurred on June 30, 2000 in the pro forma balance sheet and as of
January 1, 1999 in the pro forma statements of operations. The pro forma
information is based upon the historical consolidated financial statements of
Amgen and the historical financial statements of Kinetix, giving effect to the
merger under the purchase method of accounting and the assumptions and
adjustments described below. All interim financial data used to develop the
Amgen and Kinetix unaudited pro forma condensed combining balance sheet and
statement of operations are unaudited, but in the opinion of Amgen management
and Kinetix management, respectively, reflect all adjustments necessary
(consisting only of normal recurring accruals) for a fair presentation thereof.
However, results for interim periods may not be indicative of results that may
be achieved in a full fiscal year.
The unaudited pro forma condensed combining financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the consolidated financial position or consolidated results of operations that
would have been reported had the merger occurred on the dates indicated, nor do
they represent a forecast of the consolidated financial position at any future
date or the consolidated results of operations for any future period.
Furthermore, no effect has been given in the unaudited pro forma condensed
combining statements of operations for synergistic benefits that may be realized
through the combination of the two companies or costs that may be incurred in
integrating their operations. The unaudited pro forma condensed combining
financial statements should be read in conjunction with the historical
consolidated financial statements of Amgen and Kinetix covering those periods.
For purposes of the unaudited pro forma condensed combining financial
statements, Amgen acquired all the outstanding shares of Kinetix in a tax free
exchange for a total purchase price of $172,030,000, which includes estimated
merger related costs of $830,000. The purchase price assumes the Kinetix
$1,200,000 convertible promissory note was converted into Kinetix common stock
prior to the merger, thereby increasing the aggregate value of Amgen common
stock received by Kinetix stockholders as merger consideration. The unaudited
pro forma condensed combining financial statements assume the acquisition of all
35,237,264 shares of Kinetix common stock in exchange for approximately
2,525,000 shares of unrestricted Amgen common stock and the acquisition of all
1,517,786 shares of Kinetix restricted common stock in exchange for
approximately 109,000 shares of restricted Amgen common stock. (A price of $65
per share for Amgen common stock was used to calculate the number of Amgen
shares assumed to be issued. See "The Merger--Merger Consideration" (page 33)
for a discussion of how the actual share exchange ratio is calculated.) The
value assigned to the Amgen restricted common stock ($7,070,000) is presented as
unearned compensation in the unaudited pro forma condensed combining balance
sheet, and a portion of this amount is expensed in the unaudited pro forma
condensed combining statements of operations based upon the periods the
restrictions lapse.
The purchase price is allocated to identifiable tangible and intangible
assets and liabilities of Kinetix pursuant to the purchase method of accounting.
The allocated amounts reflected in the accompanying pro forma financial
statements are preliminary and based upon analysis of the fair values of those
assets and liabilities derived from information currently available. The excess
of the purchase price over the fair values of assets and liabilities acquired is
allocated to goodwill. The amount assigned to goodwill in the unaudited pro
forma condensed combining balance sheet amounted to $100,944,000 and will be
amortized over a 15 year period.
The fair values of assets acquired include $30,100,000 allocated to
acquired in-process research and development. This value was determined by Amgen
management's analysis of data concerning four substantive in-process research
projects. The values of these research projects were determined based on
analyses using cash flows to be generated by the products that result from the
in-process projects. These cash flows were estimated by forecasting total
revenues expected from these products and then deducting appropriate operating
expenses, cash flow adjustments and contributory asset returns to establish a
forecast of net returns on the in-process technology. These net returns were
substantially reduced to take into account the time value of money and the risks
associated with the inherent difficulties and uncertainties in developing
specific molecules into viable human therapeutics
61
given the projected stage of development of these projects at the date of the
merger. Finally, these net returns were multiplied by the estimated percentage
completed of each project, based upon an analysis of three factors--time, cost
and complexity. The above analysis resulted in approximately $30,100,000 of
value assigned to acquired in-process research and development, which, under
generally accepted accounting principles, will be expensed upon completion of
the merger. A discounted, risk-adjusted cash flow analysis was also performed to
value the technology platform of Kinetix that is expected to generate future
molecules that may be developed into human therapeutics. This analysis resulted
in valuing the acquired base technology at $36,600,000, which will be
capitalized and amortized over a 15 year period. Amgen management believes the
assumptions used in valuing acquired in-process research and development and
base technology are reasonable, but are inherently uncertain, and no assurance
can be given that the assumptions made will occur.
The unaudited pro forma condensed combining statements of operations for
the year ended December 31, 1999 and for the six months ended June 30, 2000 do
not include the $30,100,000 write-off of acquired in-process technology as it is
a material non-recurring charge. It will be included in the actual consolidated
statement of operations of Amgen in the period the transaction is consummated.
Shares used in calculating pro forma basic earnings per share for the year
ended December 31, 1999 and for the six months ended June 30, 2000 are based
upon the historical number of Amgen shares used to calculate basic earnings per
share during these periods, adjusted to reflect the issuance of 2,525,000 shares
of Amgen unrestricted common stock to acquire all the unrestricted shares of
Kinetix common stock. Shares used in calculating pro forma diluted earnings per
share for the year ended December 31, 1999 and for the six months ended June 30,
2000 are based upon the historical number of Amgen shares used to calculate
diluted earnings per share during these periods, adjusted to reflect the
issuance of 2,525,000 shares of Amgen unrestricted common stock and 109,000
shares of Amgen restricted common stock to acquire all the unrestricted and
restricted shares of Kinetix common stock.
62
Pro Forma Condensed Combining Statement of Operations
For the Year Ended December 31, 1999
(In thousands, except per share data)
(Unaudited)
Pro Forma Pro Forma
Amgen Kinetix Adjustments Combined
----------- --------- ----------- ----------
Revenues:
Product sales $3,042,825 $ - $ - $3,042,825
Corporate partner revenues 161,396 - - 161,396
Royalty income 135,858 - - 135,858
---------- -------- -------- ----------
Total revenues 3,340,079 - - 3,340,079
---------- -------- -------- ----------
Operating expenses:
Cost of sales 402,143 - - 402,143
Research and development 822,791 4,498 4,982 (1) 832,271
Selling, general and administrative 654,307 977 6,730 (2) 662,014
Loss of affiliates, net 16,808 - - 16,808
Legal award (49,000) - - (49,000)
---------- -------- -------- ----------
Total operating expenses 1,847,049 5,475 11,712 1,864,236
---------- -------- -------- ----------
Operating income (loss) 1,493,030 (5,475) (11,712) 1,475,843
Other income/(expense):
Interest and other income, net 88,360 391 - 88,751
Interest expense, net (15,234) (97) - (15,331)
---------- -------- -------- ----------
Total other income 73,126 294 - 73,420
---------- -------- -------- ----------
Income (loss) before income taxes 1,566,156 (5,181) (11,712) 1,549,263
Provision (benefit) for income taxes 469,800 - (3,994) (3) 465,806
---------- -------- -------- ----------
Net income (loss) $1,096,356 $ (5,181) $ (7,718) $1,083,457
========== ======== ======== ==========
Earnings per share:
Basic $1.07 $1.06
Diluted $1.02 $1.00
Shares used in calculation of
earnings per share:
Basic 1,021,699 2,525 (4) 1,024,224
Diluted 1,078,346 2,634 (5) 1,080,980
(1) Reflects amortization of identifiable intangible assets based on the fair
values assigned to these assets at the date of acquisition. The amount also
reflects the recognition of compensation expense related to restricted
common stock issued in connection with the acquisition of Kinetix.
(2) Reflects the amortization of goodwill arising from the excess of the
purchase price over the fair values of assets and liabilities acquired.
(3) Reflects the tax effects of amortization of identifiable intangible assets,
recognition of restricted common stock compensation expense and benefit of
current period losses of Kinetix.
(4) Reflects the issuance of shares of unrestricted Amgen common stock to
acquire the unrestricted shares of Kinetix common stock.
(5) Reflects the issuance of shares of unrestricted and restricted Amgen common
stock to acquire all the unrestricted and restricted shares of Kinetix
common stock.
63
Pro Forma Condensed Combining Statement of Operations
For the Six Months Ended June 30, 2000
(In thousands, except per share data)
(Unaudited)
Pro Forma Pro Forma
Amgen Kinetix Adjustments Combined
----------- --------- ----------- ----------
Revenues:
Product sales $1,504,428 $ - $ - $1,504,428
Corporate partner revenues 135,286 - - 135,286
Royalty income 88,755 - - 88,755
---------- -------- -------- ----------
Total revenues 1,728,469 - - 1,728,469
---------- -------- -------- ----------
Operating expenses:
Cost of sales 187,343 - - 187,343
Research and development 392,614 2,656 2,491 (1) 397,761
Selling, general and administrative 374,785 684 3,365 (2) 378,834
Loss of affiliates, net 21,332 - - 21,332
---------- -------- -------- ----------
Total operating expenses 976,074 3,340 5,856 985,270
---------- -------- -------- ----------
Operating income (loss) 752,395 (3,340) (5,856) 743,199
Other income/(expense):
Interest and other income, net 79,568 172 - 79,740
Interest expense, net (7,602) (47) - (7,649)
---------- -------- -------- ----------
Total other income 71,966 125 - 72,091
---------- -------- -------- ----------
Income (loss) before income taxes 824,361 (3,215) (5,856) 815,290
Provision (benefit) for income taxes 255,552 - (2,243) (3) 253,309
---------- -------- -------- ----------
Net income (loss) $ 568,809 $ (3,215) $ (3,613) $ 561,981
========== ======== ======== ==========
Earnings per share:
Basic $0.55 $0.55
Diluted $0.52 $0.52
Shares used in calculation of
earnings per share:
Basic 1,025,379 2,525 (4) 1,027,904
Diluted 1,084,594 2,634 (5) 1,087,228
(1) Reflects amortization of identifiable intangible assets based on the fair
values assigned to these assets at the date of acquisition. The amount also
reflects the recognition of compensation expense related to restricted
common stock issued in connection with the acquisition of Kinetix.
(2) Reflects the amortization of goodwill arising from the excess of the
purchase price over the fair values of assets and liabilities acquired.
(3) Reflects the tax effects of amortization of identifiable intangible assets,
recognition of restricted common stock compensation expense and benefit of
current period losses of Kinetix.
(4) Reflects the issuance of shares of unrestricted Amgen common stock to
acquire the unrestricted shares of Kinetix common stock.
(5) Reflects the issuance of shares of unrestricted and restricted Amgen common
stock to acquire all the unrestricted and restricted shares of Kinetix
common stock.
64
Pro Forma Condensed Combining Balance Sheet as of June 30, 2000
(In thousands)
(Unaudited)
Pro Forma Pro Forma
Amgen Kinetix Adjustments Combined
----------- --------- ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 136,193 $ 4,361 $ - $ 140,554
Marketable securities 1,484,871 - - 1,484,871
Trade receivables 312,323 - - 312,323
Inventories 272,596 - - 272,596
Other current assets 176,609 98 4,767 (1) 181,474
---------- -------- -------- ----------
Total current assets 2,382,592 4,459 4,767 2,391,818
Property, Plant and equipment at cost-net 1,638,551 1,804 - 1,640,355
Investment in affiliated companies 120,908 - - 120,908
Other equity investments 238,425 - - 238,425
Other assets 162,765 87 36,600 (1) 187,121
(12,331) (1)
Acquired in-process research and development - - 30,100 (1) -
(30,100) (2)
Goodwill - - 100,944 (1) 100,944
---------- -------- -------- ----------
$4,543,241 $ 6,350 $129,980 $4,679,571
========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 120,140 $ 375 $ - $ 120,515
Accrued liabilities 616,115 77 - 616,192
Commercial paper 99,723 - - 99,723
Current portion of long-term debt and
lease obligations - 434 - 434
---------- -------- -------- ----------
Total current liabilities 835,978 886 - 836,864
Long-term debt and lease obligations 223,000 584 - 223,584
Redeemable, convertible preferred stock - 20,899 (20,899) (1) -
Stockholders' equity (deficit):
Common stock 102 8 (8) (1) 102
Additional paid-in capital 2,408,892 798 (798) (1) 2,580,922
172,030 (1)(3)
Retained earnings (deficit) 1,049,737 (16,160) 16,160 (1) 1,019,637
(30,100) (2)
Accumulated other comprehensive income 25,532 - - 25,532
Unearned compensation - (665) 665 (1) (7,070)
(7,070) (3)
---------- -------- -------- ----------
Total stockholders' equity (deficit) 3,484,263 (16,019) 150,879 3,619,123
---------- -------- -------- ----------
$4,543,241 $ 6,350 $129,980 $4,679,571
========== ======== ======== ==========
(1) Reflects the purchase of Kinetix and the allocation of the purchase price,
based on estimated fair values, of assets and liabilities acquired. Also
reflects the recognition of deferred income taxes arising from the
differences between the bases of assets for financial statement and income
tax purposes and from acquired net operating losses and tax credits.
(2) Reflects the one-time write-off of $30,100 of acquired in-process research
and development.
(3) Reflects the value of Amgen unvested restricted common stock issued to
employees of Kinetix in exchange for their shares of Kinetix restricted
common stock.
65
MARKET PRICE INFORMATION AND DIVIDENDS
Amgen common stock trades on The Nasdaq Stock Market under the symbol
"AMGN." As of November 9, 2000, there were approximately 14,500 holders of
record of Amgen's common stock. No cash dividends have been paid on the common
stock to date, and Amgen currently intends to utilize any earnings for
development of Amgen's business and for repurchases of its common stock. There
is no public trading market for Kinetix's capital stock.
The following table sets forth, for the fiscal periods indicated, the range
of high and low closing sale prices of Amgen's common stock as quoted on The
Nasdaq Stock Market for the quarterly periods indicated.
High Low
------ ------
1998
First Quarter................ $15.41 $11.78
Second Quarter............... 16.69 13.95
Third Quarter................ 19.91 15.22
Fourth Quarter............... 26.22 17.27
1999
First Quarter................ $39.53 $26.14
Second Quarter............... 40.00 26.16
Third Quarter................ 43.78 29.50
Fourth Quarter............... 64.88 37.84
2000
First Quarter................ $74.69 $52.25
Second Quarter............... 70.38 51.31
Third Quarter................ 78.00 64.94
Fourth Quarter (through
November 10, 2000)......... 71.38 54.13
The following table sets forth the high and low sales prices per share of
Amgen common stock on The Nasdaq Stock Market on October 16, 2000, the last
trading day before the public announcement of the merger agreement, and on
November 10, 2000, the last trading day before the date of this proxy
statement/prospectus:
Amgen
Common Stock
----------------
High Low
------ ------
October 16, 2000............. $66.13 $61.81
November 10, 2000............ 65.81 61.06
66
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF AMGEN AND COMMON STOCKHOLDERS OF KINETIX
The rights of Amgen and Kinetix stockholders are currently governed by the
Delaware General Corporation Law, and the respective certificates of
incorporation and by-laws of Amgen and Kinetix. Upon completion of the merger,
the rights of Kinetix stockholders who become stockholders of Amgen in the
merger will continue to be governed by the Delaware General Corporation Law,
Amgen's restated certificate of incorporation, as amended, Amgen's amended and
restated by-laws and Amgen's rights agreement.
The following description summarizes the material differences that may
affect the rights of Amgen and Kinetix stockholders but is not a complete
statement of all those differences, or a complete description of the specific
provisions referred to in this summary. The identification of specific
differences is not intended to indicate that other equally or more significant
differences do not exist. Stockholders should read carefully the relevant
provisions of the Delaware General Corporation Law, Amgen's restated certificate
of incorporation, as amended, and amended and restated by-laws and Kinetix's
certificate of incorporation and by-laws. Upon consummation of the merger, the
stockholders of Kinetix will become the stockholders of Amgen.
Amgen Kinetix
Authorized Capital Stock The total authorized shares of capital stock The total authorized shares of capital
of Amgen consists of (1) 2,750,000,000 shares stock of Kinetix consists of (1)
of common stock and (2) 5,000,000 shares of 40,682,942 shares of common stock and (2)
preferred stock, 2,275,000 of which is 26,352,939 shares of preferred stock,
designated as Series A preferred stock, all 16,000,000 of which is designated as
with a par value of $.0001. Series A preferred stock and 10,352,939
The Amgen board of directors may issue from of which is designated as Series B
time to time on one or more series of preferred stock, all with a par value of
preferred stock, and is authorized to fix, $.001.
state and express the powers, rights, The Kinetix board of directors may, by
designations, preferences, qualifications, majority vote, provide for the issue of
limitations and restrictions thereof. the undesignated preferred stock in one
or more classes or series, each with such
designations, preferences, voting powers,
dividends, qualifications, special or
relative rights or privileges as shall be
stated by the board in creating such
class or series. The board does not have
the right to create a class of preferred
stock having preferences or privileges
superior to the Series A or Series B
preferred stock.
Board of Directors
Size of Board The current board consists of eleven (11) Kinetix currently has seven directors.
directors. The by-laws provide that the number of
directors shall be fixed by resolution of
the board of directors.
Classification of Board The board is divided into three classes and No staggered board.
the directors are elected to staggered three
year terms.
Election of Directors Directors are elected at Amgen's annual The holders of preferred stock in Kinetix
meeting, or as soon thereafter as convenient have the right to nominate and elect four
at a special meeting of the stockholders (4) members of the board of directors.
called for that purpose.
67
Removal of Directors At a special meeting called for the purpose, Any director may be removed, with or
the board of directors, or any individual without cause by a majority vote of the
director may be removed, with cause, and any stockholders.
one or more new directors may be elected, by
the vote of stockholders holding a majority
of the outstanding shares entitled to vote at
an election of directors.
Vacancies on the Board Newly created directorships resulting from Unless and until filled by the
any vacancies shall be filled by the stockholders, vacancies may be filled by
affirmative vote of the majority of directors a vote of a majority of the directors
remaining in office. The board of directors then in office, or by the sole remaining
shall apportion the newly created director. Vacancies caused by the
directorships among the three classes so as removal or resignation of a director
to maintain such classes as nearly equal in elected by a specific preferred
number as possible. Any director so elected stockholder are filled only by such
shall hold office for the remainder of the preferred stockholder.
full term of the class of directors in which
the new directorship was created.
Stockholders
Special Meetings Special meetings may be called at any time by Special meetings of stockholders may be
the president, the chairman of the board, the called at any time by the president, the
chief executive officer or the board of chairman of the board or the board of
directors. directors, or by the secretary or any
other officer upon the written request of
one or more stockholders who hold at
least a majority of the outstanding
shares of stock of Kinetix entitled to
vote at such meeting.
Voting Rights Common stock holders have one vote for each Common stock holders have one vote for
share of common stock held. each share of common stock held.
Certain business combinations with interested
stockholders require the affirmative vote of
the holders of a least sixty- six and
two-thirds percent (66-2/3%) of the voting
power of the then outstanding shares of
capital stock of Amgen entitled to vote
generally in the election of directors not
then held by the interested stockholder.
Record Date The board of directors may fix in advance a The board of directors may fix in advance
record date for the determination of the a record date for the determination of
stockholders or to express consent to the stockholders or to consent to
corporate action in writing without a corporate action in writing without a
meeting. Such record date shall not be more meeting. Such record date shall not be
than 60 nor less than 10 days before the date more than 60 nor less than 10 days before
of such meeting, nor more than 60 days prior the date of such meeting, nor more than
to any other action to which such record date 60 days prior to any other action to
releases. If no record date is fixed the which such record date relates.
record date for determining stockholders
entitled to notice shall be at the close of
business on the day next preceding the day on
which notice
68
is given or at the close of
business on the day on which the board of
directors adopts the resolution relating to
the purpose of the meeting.
Action by Written Any action required or permitted to be taken Any action to be taken at any annual or
Consent by the stockholders of Amgen must be effected special meeting of stockholders of
at a duly called annual or special meeting of Kinetix may be taken by written consent
such holders and may not be effected by any signed by the holders of outstanding
consent in writing by such holders. stock having not less than the minimum
number of votes that would be necessary
to authorize or take such action at a
meeting at which all shares entitled to
vote on such action were present and
voted.
Amendments to Organizational Documents
Certificate of The certificate of incorporation cannot be Subject to certain preferred stock
Incorporation amended in any manner adverse to the holders approval rights, Kinetix reserves the
of Series A preferred stock without the right to amend, alter change or repeal
affirmative vote of at least two-thirds of any provision of the certificate of
the outstanding shares of Series A preferred incorporation.
stock.
Bylaws May be repealed, altered or amended by the Subject to certain preferred stock
affirmative vote of not less than sixty-six approval rights, the by-laws may be
and two-thirds percent (66-2/3%) of the altered, amended or repealed by a
outstanding shares of stock entitled to vote majority vote of the directors present at
upon the election of directors. any regular or special meeting of the
board of directors at which a quorum is
present or may be altered, amended or
repealed by the affirmative vote of a
majority of the shares of the capital
stock of the corporation issued and
outstanding and entitled to vote at any
regular meeting of stockholders, or at
any special meeting of stockholders
provided notice of such change shall have
been stated in the notice of such special
meeting.
Exculpation and Indemnification
Exculpation Amgen's certificate of incorporation provides Kinetix's certificate of incorporation
that a director shall not be personally provides that a director shall not be
liable to Amgen or its stockholders for personally liable to Kinetix or its
monetary damages for breach of fiduciary duty stockholders for monetary damages for
as a director except for liability (i) for breach of fiduciary duty as a director,
any breach of the director's duty of loyalty, except to the extent that the elimination
(ii) for acts and omissions not in good faith or limitation of liability is not
or which involve intentional misconduct (iii) permitted under the Delaware General
under section 174 of the Delaware General Corporation Law.
Corporation Law, or (iv) for any transaction
from which the director derived an improper
personal benefit.
69
Indemnification Amgen shall indemnify its directors and Kinetix's certificate of incorporation
officers, and shall have the power to provides that Kinetix shall indemnify
indemnify its other employees and agents, to each party who was or is a party, or is
the full extent permitted by the Delaware threatened to be made a party to any
General Corporation Law. Provided however, threatened, pending or completed suit or
under certain circumstances, Amgen shall not proceeding, whether civil, criminal,
be required to provide administrative or investigative, by
indemnification to directors and officers in reason of the fact that he is or was, or
connection with a proceeding initiated by has agreed to become, a director or
such person against Amgen or its directors, officer of the corporation, or is
officers, employees or other agents. The serving, or has agreed to serve, at the
corporation shall advance expenses to each request of the corporation, as a
such party who was or is a party, or is director, officer or trustee of, or in a
threatened to be made a party to any similar capacity with, another
threatened, pending or completed suit or corporation, partnership, joint venture,
proceeding, whether civil, criminal, trust or other enterprise.
administrative or investigative, by reason of
the fact that he is or was, or has agreed to
become, a director or officer of the
corporation, or is serving, or has agreed to
serve, at the request of the corporation, as
a director, officer or trustee of, or in a
similar capacity with, another corporation,
partnership, joint venture, trust or other
enterprise; provided however, no advance
shall be made if the disinterested member of
the board, or independent legal counsel,
determines that such person acted in bad
faith or in a manner that such person did not
reasonably believe to be in or not opposed to
the best interests of Amgen.
Stockholder Rights Plan Amgen entered into a Preferred Share Rights None.
Agreement, dated as of February 18, 1997,
pursuant to which it has issued rights to
purchase Amgen preferred stock.
LEGAL MATTERS
The legality of Amgen common stock offered by this proxy
statement/prospectus and certain United States federal income tax consequences
of the merger will be passed upon for Amgen by its counsel, Latham & Watkins.
EXPERTS
The consolidated financial statements and schedule of Amgen Inc. included
in the Amgen Inc. Annual Report (Form 10-K) for the year ended December 31,
1999, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The financial statements of Kinetix Pharmaceuticals, Inc. (A Development-
Stage Company), at December 31, 1999 and 1998, and for each of the three years
in the period ended December 31, 1999, contained herein have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report appearing
elsewhere herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
70
Representatives of Ernst & Young LLP are not expected to be present at the
special meeting.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Kinetix board of
directors knows of no matters that will be presented for consideration at the
special meeting of stockholders other than as described in this proxy
statement/prospectus.
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Amgen from documents that are not included in or
delivered with this proxy statement/prospectus. This information is available
to you without charge upon your written or oral request. You can obtain
documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from Amgen at the following addresses
and telephone numbers:
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
(805) 447-1000
Attn.: Corporate Secretary
If you would like to request documents, please do so by November 27, 2000
in order to receive them before the Kinetix special meeting.
See "Where You Can Find More Information" (page 71).
WHERE YOU CAN FIND MORE INFORMATION
Amgen files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information that Amgen files with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference rooms at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Amgen's Securities and
Exchange Commission filings are also available to the public from commercial
document retrieval services and at the Internet world wide web site maintained
by the Securities and Exchange Commission at "http://www.sec.gov."
Amgen filed a registration statement on Form S-4 on November 3, 2000 to
register with the Securities and Exchange Commission the Amgen common stock to
be issued to Kinetix stockholders in the merger. This proxy
statement/prospectus is a part of that registration statement. As allowed by
Securities and Exchange Commission rules, this proxy statement/prospectus does
not contain all the information you can find in Amgen's registration statement
or the exhibits to the registration statement.
The Securities and Exchange Commission allows Amgen to "incorporate by
reference" information into this proxy statement/prospectus, which means that
the companies can disclose important information to you by referring you to
other documents filed separately with the Securities and Exchange Commission.
The information incorporated by reference is considered part of this proxy
statement/prospectus, except for any information
71
superseded by information contained directly in this proxy statement/prospectus
or in later filed documents incorporated by reference in this proxy
statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Amgen previously filed with the Securities and Exchange
Commission. These documents contain important business and financial
information about Amgen that is not included in or delivered with this proxy
statement/prospectus.
Amgen Filings
(File No. 000-12477) Period
- ------------------------------------------------- ------------------------------------------------------------
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2000 and June 30,
2000.
Proxy Statement on Schedule 14A filed April 4, 2000.
Description of the Company's Common Stock, filed on September 7, 1983 and April 1, 1993, and on
Contractual contingent payment rights and February 28, 1997, respectively.
preferred share rights plan contained in the
two Registration Statements on Form 8-A and the
Form 8-K
Current Report on Form 8-K filed November 3, 2000.
Current Report on Form 8-K filed November 13, 2000.
Amgen also incorporates by reference additional documents that may be filed
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act between the date of this proxy statement/prospectus
and the date of the special meeting. These include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as well as proxy statements.
Amgen has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Amgen. All information contained
in this proxy statement/prospectus relating to or concerning Kinetix has been
supplied or furnished by Kinetix.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them from Amgen, the
Securities and Exchange Commission or the Securities and Exchange Commission's
Internet web site as described above. Documents incorporated by reference are
available from Amgen without charge, excluding all exhibits, except that if
Amgen has specifically incorporated by reference an exhibit in this proxy
statement/prospectus, the exhibit will also be provided without charge.
Stockholders may obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from Amgen at
the following address:
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
(805) 447-1000
Attn: Corporate Secretary
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. Neither Amgen nor Kinetix has
authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/prospectus
is dated November 13, 2000. You should not assume that the information contained
in this proxy statement/prospectus is accurate as of any date other than that
date. Neither the mailing of this proxy statement/prospectus to stockholders nor
the issuance of Amgen common stock in the merger creates any implication to the
contrary.
72
KINETIX PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young LLP, Independent Auditors................................. F-2
Balance Sheets as of December 31, 1998 and 1999 and June 30, 2000 (unaudited)..... F-3
Statements of Operations for the years ended 1997, 1998 and 1999, for the
period from November 26, 1996 (date of inception) to December 31, 1999, for
the six months ended June 30, 1999 and 2000 (unaudited) and for the period
from November 26, 1996 (date of inception) to June 30, 2000 (unaudited).......... F-4
Statements of Redeemable, Convertible Preferred Stock and Stockholders' Deficit
for the period from November 26, 1996 (date of inception) to
June 30, 2000 (unaudited)........................................................ F-5
Statements of Cash Flows for the years ended 1997, 1998 and 1999, for the
period from November 26, 1996 (date of inception) to December 31, 1999, for
the six months ended June 30, 1999 and 2000 (unaudited) and for the period
from November 26, 1996 (date of inception) to June 30, 2000 (unaudited).......... F-7
Notes to Financial Statements...................................................... F-9
F-1
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Stockholders
Kinetix Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Kinetix Pharmaceuticals,
Inc. (a Development-Stage Company) (the Company) as of December 31, 1998 and
1999, and the related statements of operations, redeemable, convertible
preferred stock and stockholders' deficit, and cash flows for each of the three
years in the period ended December 31, 1999 and the statements of operations,
redeemable, convertible preferred stock and stockholders' deficit, and cash
flows for the period from November 26, 1996 (date of inception) to December 31,
1999. 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. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Kinetix Pharmaceuticals,
Inc. at December 31, 1998 and 1999, and the results of its operations and its
cash flows for each of the three years ended December 31, 1999, and for the
period from November 26, 1996 (date of inception) to December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 14, 2000, except with respect to
Note 5, as to which the date is April 26, 2000
F-2
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Balance Sheets
December 31 June 30
1998 1999 2000
----------- ------------ ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 4,571,847 $ 7,232,363 $ 4,360,767
Prepaid expenses 16,694 28,807 25,919
Due from employee 16,000 17,193 11,601
Other current assets - 10,000 60,631
----------- ------------ ------------
Total current assets 4,604,541 7,288,363 4,458,918
Property and equipment:
Laboratory equipment 1,016,747 1,687,958 1,704,024
Furniture and fixtures 70,675 86,201 88,735
Computer software and equipment 612,773 1,055,197 1,187,850
Leasehold improvements 541,183 664,928 664,928
----------- ------------ ------------
2,241,378 3,494,284 3,645,537
Less accumulated depreciation and amortization (486,488) (1,349,644) (1,840,814)
----------- ------------ ------------
1,754,890 2,144,640 1,804,723
Note receivable from officer 150,962 - -
Other assets 83,700 86,713 86,713
----------- ------------ ------------
Total assets $ 6,594,093 $ 9,519,716 $ 6,350,354
=========== ============ ============
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 376,926 $ 453,719 $ 375,028
Accrued expenses 92,832 90,700 76,642
Current portion of capital lease obligations 243,467 356,231 434,449
----------- ------------ ------------
Total current liabilities 713,225 900,650 886,119
Capital lease obligations, net of current portion 683,119 658,598 583,950
Redeemable, convertible preferred stock:
Series A redeemable, convertible preferred stock
$.001 par value; 16,000,000 shares authorized,
issued and outstanding 8,000,000 9,400,000 10,100,000
Series B redeemable, convertible preferred stock
$.001 par value; 10,352,939 shares authorized,
issued and outstanding - 9,274,234 9,598,832
Series B preferred stock subscription 2,000,000 - -
Series C preferred stock subscription - 1,200,000 1,200,000
Stockholders' deficit:
Common stock, $.001 par value; 40,682,942 shares
authorized; 6,624,097 and 6,966,344 issued and
outstanding in 1998 and 1999, respectively and
8,053,619 at June 30, 2000 6,624 6,966 8,054
Additional paid-in capital 67,125 85 798,069
Unearned compensation - - (664,729)
Deficit accumulated during the development stage (4,876,000) (11,920,817) (16,159,941)
----------- ------------ ------------
Total stockholders' deficit (4,802,251) (11,913,766) (16,018,547)
----------- ------------ ------------
Total liabilities and stockholders' deficit $ 6,594,093 $ 9,519,716 $ 6,350,354
=========== ============ ============
See accompanying notes.
F-3
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Statements of Operations
Period from Period from
November 26, November 26,
1996 (date of 1996 (date of
inception) to Six months inception) to
Year ended December 31 December 31, ended June 30 June 30,
1997 1998 1999 1999 1999 2000 2000
------------ ----------- ------------ ------------ ----------- ----------- ------------
(Unaudited) (Unaudited)
Operating expenses:
Research and development $ 1,131,443 $ 3,037,759 $ 4,498,300 $ 8,667,502 $ 2,209,236 $ 2,655,409 $ 11,322,911
General and administrative 609,937 821,197 976,848 2,407,982 501,109 684,221 3,092,203
----------- ----------- ----------- ------------ ----------- ----------- ------------
Total operating expenses 1,741,380 3,858,956 5,475,148 11,075,484 2,710,345 3,339,630 14,415,114
Other income (expense):
Interest income 436,961 341,966 390,800 1,169,727 165,609 171,583 1,341,310
Interest expense (118) (54,473) (97,035) (151,626) (48,306) (46,479) (198,105)
----------- ----------- ----------- ------------ ----------- ----------- ------------
436,843 287,493 293,765 1,018,101 117,303 125,104 1,143,205
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net loss $(1,304,537) $(3,571,463) $(5,181,383) $(10,057,383) $(2,593,042) $(3,214,526) $(13,271,909)
============ =========== ============ ============ =========== =========== ============
See accompanying notes.
F-4
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Statements of Redeemable, Convertible Preferred Stock and
Stockholders' Deficit
Period from November 26, 1996 (date of inception) to June 30, 2000
Series A Series B
Redeemable, Redeemable,
Convertible Convertible
Preferred Stock Preferred Stock
----------------------- -----------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
Issuance of Series A redeemable,
convertible preferred stock for cash 16,000,000 $8,000,000 - -
Issuances of common stock for cash and
receivable from stockholder - - - -
Purchase of treasury stock - - - -
Retirement of treasury stock - - - -
Stock compensation expense - - - -
Series B preferred stock subscription - - - -
Net loss - - - -
---------- ----------- ---------- -----------
Balance at December 31, 1997 16,000,000 8,000,000 - -
Purchase of treasury stock - - - -
Retirement of treasury stock - - - -
Payment of amount due from stockholder - - - -
Issuances of restricted common stock
for cash - - - -
Payable to stockholder - - - -
Net loss - - - -
---------- ----------- ---------- -----------
Balance at December 31, 1998 16,000,000 8,000,000 - -
Issuance of Series B redeemable,
convertible preferred stock for cash, net of
issuance costs of $59,998 and accretion - - 9,411,763 $7,999,998
Issuance of Series B redeemable,
convertible preferred stock for stock
subscription - - 941,176 800,000
Accretion of Series A preferred stock dividends
to redemption value - 1,400,000 - -
Accretion of Series B preferred stock dividends
to redemption value - - - 474,236
Series C preferred stock subscription - - - -
Issuances of restricted common stock for cash - - - -
Net loss - - - -
---------- ----------- ---------- -----------
Balance at December 31, 1999 16,000,000 9,400,000 10,352,939 9,274,234
Accretion of Series A preferred stock dividends to
redemption value (unaudited) - 700,000 - -
Accretion of Series B preferred stock dividends
to redemption value (unaudited) - - - 324,598
Issuances of restricted common stock for cash
(unaudited) - - - -
Amortization of unearned compensation
(unaudited) - - - -
Net loss (unaudited) - - - -
---------- ----------- ---------- -----------
Balance at June 30, 2000 (unaudited) 16,000,000 $10,100,000 10,352,939 $9,598,832
========== =========== ========== ===========
Series B Series C
Preferred Preferred
Stock Stock
Subscription Subscription
------------ ------------
Issuance of Series A redeemable,
convertible preferred stock for cash - -
Issuances of common stock for cash and
receivable from stockholder - -
Purchase of treasury stock - -
Retirement of treasury stock - -
Stock compensation expense - -
Series B preferred stock subscription $ 2,000,000 -
Net loss - -
------------ ------------
Balance at December 31, 1997 2,000,000 -
Purchase of treasury stock - -
Retirement of treasury stock - -
Payment of amount due from stockholder - -
Issuances of restricted common stock
for cash - -
Payable to stockholder - -
Net loss - -
------------ ------------
Balance at December 31, 1998 2,000,000 -
Issuance of Series B redeemable,
convertible preferred stock for cash, net of
issuance costs of $59,998 and accretion - -
Issuance of Series B redeemable,
convertible preferred stock for stock
subscription (800,000) -
Accretion of Series A preferred stock dividends
to redemption value - -
Accretion of Series B preferred stock dividends
to redemption value - -
Series C preferred stock subscription (1,200,000) $ 1,200,000
Issuances of restricted common stock for cash - -
Net loss - -
------------ ------------
Balance at December 31, 1999 - 1,200,000
Accretion of Series A preferred stock dividends to
redemption value (unaudited) - -
Accretion of Series B preferred stock dividends
to redemption value (unaudited) - -
Issuances of restricted common stock for cash
(unaudited) - -
Amortization of unearned compensation
(unaudited) - -
Net loss (unaudited) - -
------------ ------------
Balance at June 30, 2000 (unaudited) $ - $ 1,200,000
============ ============
See accompanying notes.
F-5
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Statements of Redeemable, Convertible Preferred Stock and
Stockholders' Deficit (continued)
Period from November 26, 1996 (date of inception) to June 30, 2000
Deficit
Accumulated Amounts
Additional During the Due to
Common Stock Paid-in Development Treasury (From)
Shares Amount Capital Stage Stock Stockholder
------------ ------- ---------- ------------ -------- -----------
Issuance of Series A redeemable,
convertible preferred stock for cash - - - - - -
Issuances of common stock for cash and
receivable from stockholder 6,818,462 $6,818 $ 15,508 - - $ (17,231)
Purchase of treasury stock - - - - $(246) -
Retirement of treasury stock (246,153) (246) - - 246 -
Stock compensation expense - - 43,643 - - -
Series B preferred stock subscription - - - - - -
Net loss - - - $ (1,304,537) - -
------------ ------- ---------- ------------- -------- -----------
Balance at December 31, 1997 6,572,309 6,572 59,151 (1,304,537) - (17,231)
Purchase of treasury stock - - - - (935) -
Retirement of treasury stock (935,288) (935) - - 935 -
Payment of amount due from stockholder - - - - - 17,231
Issuances of restricted common stock
for cash 987,076 987 8,077 - - (103)
Payable to stockholder - - (103) - - 103
Net loss - - - (3,571,463) - -
------------ ------- ---------- ------------ -------- -----------
Balance at December 31, 1998 6,624,097 6,624 67,125 (4,876,000) - -
Issuance of Series B redeemable,
convertible preferred stock for cash, net
of issuance costs of $59,998 and accretion - - (59,998) - - -
Issuance of Series B redeemable,
convertible preferred stock for stock
subscription - - - - - -
Accretion of Series A preferred stock
dividends to redemption value - - - (1,400,000) - -
Accretion of Series B preferred stock
dividends to redemption value - - (10,802) (463,434) - -
Series C preferred stock subscription - - - - - -
Issuances of restricted common stock
for cash 342,247 342 3,760 - - -
Net loss - - - (5,181,383) - -
------------ ------- ---------- ------------ -------- -----------
Balance at December 31, 1999 6,966,344 6,966 85 (11,920,817) - -
Accretion of Series A preferred stock
dividends to redemption value (unaudited) - - - (700,000) - -
Accretion of Series B preferred stock
dividends to redemption value (unaudited) - - - (324,598) - -
Issuances of restricted common stock
for cash (unaudited) 1,087,275 1,088 797,984 - - -
Amortization of unearned compensation
(unaudited) - - - - - -
Net loss (unaudited) - - - (3,214,526) - -
------------ ------- ---------- ------------ -------- -----------
Balance at June 30, 2000 (unaudited) 8,053,619 $8,054 $798,069 $(16,159,941) $ - $ -
============ ======= ========== ============ ======== ===========
Unearned Stockholders'
Compensation Deficit
------------ -------------
Issuance of Series A redeemable,
convertible preferred stock for cash - -
Issuances of common stock for cash and
receivable from stockholder - $ 5,095
Purchase of treasury stock - (246)
Retirement of treasury stock - -
Stock compensation expense - 43,643
Series B preferred stock subscription - -
Net loss - (1,304,537)
--------- ------------
Balance at December 31, 1997 - (1,256,045)
Purchase of treasury stock - (935)
Retirement of treasury stock - -
Payment of amount due from stockholder - 17,231
Issuances of restricted common stock
for cash - 8,961
Payable to stockholder - -
Net loss - (3,571,463)
--------- ------------
Balance at December 31, 1998 - (4,802,251)
Issuance of Series B redeemable,
convertible preferred stock for cash, net
of issuance costs of $59,998 and accretion - (59,998)
Issuance of Series B redeemable,
convertible preferred stock for stock
subscription - -
Accretion of Series A preferred stock
dividends to redemption value - (1,400,000)
Accretion of Series B preferred stock
dividends to redemption value - (474,236)
Series C preferred stock subscription - -
Issuances of restricted common stock
for cash - 4,102
Net loss - (5,181,383)
--------- ------------
Balance at December 31, 1999 - (11,913,766)
Accretion of Series A preferred stock
dividends to redemption value (unaudited) - (700,000)
Accretion of Series B preferred stock
dividends to redemption value (unaudited) - (324,598)
Issuances of restricted common stock
for cash (unaudited) $(672,284) 126,788
Amortization of unearned compensation
(unaudited) 7,555 7,555
Net loss (unaudited) - (3,214,526)
--------- ------------
Balance at June 30, 2000 (unaudited) $(664,729) $(16,018,547)
========= ============
See accompanying notes.
F-6
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Statements of Cash Flows
Period from Period from
November 26, November 26,
1996 (date of 1996 (date of
inception) to Six months inception) to
Year ended December 31 December 31, ended June 30 June 30,
1997 1998 1999 1999 1999 2000 2000
----------- ----------- ----------- ------------ ----------- ----------- ------------
(Unaudited) (Unaudited)
Operating activities
Net loss $(1,304,537) $(3,571,463) $(5,181,383) $(10,057,383) $(2,593,042) $(3,214,526) $(13,271,909)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 75,029 425,990 863,156 1,364,175 343,183 491,170 1,855,345
Stock compensation
expense 43,643 - - 43,643 - 107,316 150,959
Changes in operating
assets and
liabilities:
Prepaid expenses (29,616) 12,922 (12,113) (28,807) (56,442) 2,888 (25,919)
Due from employee - (16,000) (1,193) (17,193) - 5,592 (11,601)
Other current assets - - (10,000) (10,000) - (50,631) (60,631)
Note receivable from
officer - (150,962) 150,962 - 150,962 - -
Other assets (44,200) (39,500) (3,013) (86,713) (3,013) - (86,713)
Accounts payable 175,931 200,995 76,793 453,719 250,699 (78,691) 375,028
Accrued expenses 101,075 (8,243) (2,132) 90,700 75,403 (14,058) 76,642
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net cash used in operating
activities (982,675) (3,146,261) (4,118,923) (8,247,859) (1,832,250) (2,750,940) (10,998,799)
Investing activity
Purchases of property and
equipment (1,019,046) (1,236,863) (1,252,906) (3,508,815) (978,010) (151,253) (3,660,068)
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net cash used in investing
activity (1,019,046) (1,236,863) (1,252,906) (3,508,815) (978,010) (151,253) (3,660,068)
----------- ----------- ----------- ------------ ----------- ----------- ------------
F-7
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Statements of Cash Flows (continued)
Period from Period from
November 26, November 26,
1996 (date 1996 (date
of inception) of inception)
to Six months to
Year ended December 31 December 31, ended June 30 June 30,
1997 1998 1999 1999 1999 2000 2000
----------- ----------- ---------- ----------- ---------- ----------- -----------
(Unaudited) (Unaudited)
Financing activities
Proceeds from lease credit facility $ - $ 1,062,405 $ 388,048 $ 1,450,453 $ 388,004 $ 187,822 $ 1,638,275
Payments on capital lease
obligations - (135,819) (299,805) (435,624) (138,306) (184,252) (619,876)
Proceeds from amounts due from
stockholder - 17,231 - 17,231 - - 17,231
Sales of common stock 5,095 8,961 4,102 18,158 3,853 27,027 45,185
Purchase of treasury stock (246) (935) - (1,181) - - (1,181)
Sale of Series A redeemable,
convertible preferred stock 8,000,000 - - 8,000,000 - - 8,000,000
Proceeds from Series B preferred
stock subscription 2,000,000 - - 2,000,000 - - 2,000,000
Sale of Series B redeemable,
convertible preferred stock, net
of issuance costs - - 7,940,000 7,940,000 7,940,000 - 7,940,000
----------- ----------- ---------- ----------- ---------- ----------- -----------
Net cash provided by financing
activities 10,004,849 951,843 8,032,345 18,989,037 8,193,551 30,597 19,019,634
----------- ----------- ---------- ----------- ---------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 8,003,128 (3,431,281) 2,660,516 7,232,363 5,383,291 (2,871,596) 4,360,767
Cash and cash equivalents at
beginning of period - 8,003,128 4,571,847 - 4,571,847 7,232,363 -
----------- ----------- ---------- ----------- ---------- ----------- -----------
Cash and cash equivalents at end
of period $ 8,003,128 $ 4,571,847 $7,232,363 $ 7,232,363 $9,955,138 $ 4,360,767 $ 4,360,767
=========== =========== ========== =========== ========== =========== ===========
See accompanying notes.
F-8
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Notes to Financial Statements
December 31, 1999
1. Nature of Business and Basis of Presentation
Kinetix Pharmaceuticals, Inc. (the Company) is engaged in the discovery and
development of small molecular weight inhibitors of the protein kinase family of
enzymes. The Company was founded in November 1996 and began operations in
February 1997. Since inception, the Company has devoted substantially all of its
efforts to research and development, business planning, raising capital and
recruiting personnel. To date, no revenues have been derived from operations.
Accordingly, the financial statements are presented in accordance with Statement
of Financial Accounting Standards No. 7, Accounting and Reporting by
Development-Stage Enterprises.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires the Company's
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Risks and Uncertainties
The Company is subject to risks common to companies in the life sciences
industry including, but not limited to, uncertainties related to regulatory
approvals, protection of proprietary rights and dependence on key employees.
Cash Equivalents
The Company considers all highly liquid investment instruments with
maturities when purchased of three months or less to be cash equivalents. At
December 31, 1999, cash equivalents consist principally of money market funds.
These securities are considered as available-for-sale at December 31, 1999. The
estimated fair value is equal to the cost of the securities and, due to the
short-term nature of these securities, there are no unrealized gains or losses
at the balance sheet date.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents.
The Company invests cash and cash equivalents with well-known and established
financial institutions.
Property and Equipment
Property and equipment are stated at cost and are being depreciated using
the straight-line method over the estimated useful lives of three to seven
years. Leasehold improvements and assets under capital leases are stated at cost
and are being amortized over the lesser of the lease term or the estimated
useful life of the asset.
Income Taxes
The Company provides for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No.
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Stock-Based Compensation
The Company grants stock options, including restricted common stock, for a
fixed number of shares to employees at an exercise price or purchase price not
less than the fair value of the shares at the date of the grant. The Company
accounts for stock option and stock grants to employees and directors in
accordance with Accounting Principles Board Opinion No. 25 (APB 25), Accounting
for Stock Issued to Employees, which is based on the intrinsic value method of
measuring stock-based compensation. The Company has adopted the disclosure-only
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, which is
based on
F-9
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Notes to Financial Statements (continued)
the fair-value method of measuring stock-based compensation. Under APB 25, when
the exercise price of options granted to employees or directors equals the fair
value of the underlying shares on the date of grant, no compensation expense is
required.
Reclassifications
Certain 1997 and 1998 amounts have been reclassified to permit comparison
with 1999.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 101, Revenue Recognition in Financial Statements (SAB 101),
which provides guidance related to revenue recognition based on interpretations
and practices followed by the SEC. SAB 101, as amended, is effective beginning
the fourth quarter of calendar years beginning after December 15, 1999 and
requires companies to report any changes in revenue recognition as a cumulative
change in accounting principle at the time of implementation. Adoption of SAB
101 is not expected to have a material impact on the Company's financial
position or results of operations, since the Company has no revenues to date.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The effective date
of this statement was deferred to fiscal years beginning after June 15, 2000 by
SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of SFAS No. 133. The adoption of this
new standard is not expected to have a material impact on the Company's
financial condition or results of operations.
Unaudited Interim Financial Statements
The financial statements as of June 30, 2000 and for the six months ended
June 30, 1999 and 2000 and the period November 26, 1996 (date of inception) to
June 30, 2000 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, considered necessary for a fair presentation
of the results of these interim periods have been included. The results of
operations for the six months ended June 30, 2000 are not necessarily indicative
of the results that may be expected for the full year.
3. Related-Party Transactions
In September 1998, the Company received a promissory note from an employee
of the Company in the amount of $16,000. The note matures and is fully payable
in January 2000, with interest compounding annually on the outstanding principal
balance at a rate of 5.7%. The note is secured by restricted common stock
previously purchased by the employee.
During 1997, equipment was contributed to the Company by a stockholder with
no consideration due in return. Due to the Company's inability to objectively
value the equipment, no value was assigned to it.
In April 1998, the Company received a promissory note from an officer of
the Company totaling $145,346. The note was paid in full, including accrued
interest of $7,040, in March 2000.
4. Leases
During 1998, the Company entered into an agreement to obtain a $1,500,000
lease credit facility to acquire various laboratory equipment, computers,
software and fixtures. As of December 31, 1999, the Company has utilized
approximately $1,450,000 under the lease line.
The Company leases various laboratory equipment, computers, software and
fixtures under noncancelable capital leases. Amortization expense is included
with depreciation expense. The net book value of assets held under capital
leases at December 31, 1998 and 1999 was $907,546 and $972,614, respectively.
The Company leases its facilities under an operating lease that expires in
the year 2003.
F-10
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Notes to Financial Statements (continued)
Future minimum annual lease payments under noncancelable leases as of
December 31, 1999 are as follows:
Capital Operating
----------- -----------
Year ending December 31:
2000 ......................................... $ 434,266 $ 392,400
2001 ......................................... 434,266 392,400
2002 ......................................... 243,973 392,400
2003 ......................................... 37,341 392,400
----------- -----------
Total minimum lease payments ...................... 1,149,846 $ 1,569,600
Less amounts representing interest ................ (135,017) ===========
-----------
1,014,829
Less amounts currently due ........................ (356,231)
-----------
Capital lease obligations, net of current portion.. $ 658,598
===========
Rent expense of approximately $86,000, $147,000, $371,000 and $604,000 was
incurred during the years ended December 31, 1997, 1998 and 1999 and the period
from November 26, 1996 (date of inception) to December 31, 1999, respectively.
5. Series A and Series B Redeemable, Convertible Preferred Stock
On March 26, 1999, the Company sold 10,352,939 shares of its Redeemable,
Convertible Series B preferred stock (Series B stock) at $.85 per share. As part
of the Series B stock agreement, the terms of the Series A redeemable,
convertible preferred stock (Series A stock) were amended (see below). The
Company plans to use the proceeds from the sale of the Series B stock for
product research and development and other working capital purposes.
In connection with the Series B stock sale, the Company amended its Series
B preferred stock subscription with a certain investor (see Series B and Series
C Preferred Stock Subscriptions below). In accordance with the amendment, the
Company issued 941,176 shares at $.85 per share in Series B stock to this
investor. The remaining Series B subscription amount ($1,200,000) has been
restructured as a convertible promissory note, which will automatically convert
into capital stock of the Company in the next round of equity financing that
raises at least an additional $1,000,000 in capital.
Upon demand of at least 66% of the holders of the Company's Series A stock
or the Company's Series B stock, the Company is required to redeem 50% of the
outstanding Series A or Series B stock if requested by the respective series
prior to January 10, 2003 and 100% of the outstanding Series A or Series B stock
if requested prior to January 10, 2004 by the respective series. The redemption
price equals the greater of the Series A or Series B liquidation preference
amount (purchase price plus all cumulative or accrued and unpaid dividends) or
the respective fair market value, as determined by an independent appraisal, of
the Series A stock or the Series B stock. At December 31, 1999, in the absence
of performing an independent appraisal, the Company estimated the fair market
value of the Series A stock to be $.85 per share based on the selling price of
the Series B stock. Therefore, the Company recorded a $1,400,000 dividend to
accrete the value of the Series A stock toward its estimated redemption price.
The Company believes that the fair market value of the Series A stock or Series
B stock may significantly differ from $.85 per share when independently
appraised.
Each share of Series A and Series B stock is convertible to common stock at
the option of the holder. Each share of Series A and Series B stock will
automatically be converted upon (1) the closing of the sale of common stock at a
price per share that exceeds 300% of the effective conversion price in a firm
commitment underwritten public offering resulting in gross proceeds greater than
$15,000,000 or (2) the vote of the holders of not less than 66% of the
outstanding shares of Series A and Series B stock, each voting separately as a
series. Each share of Series A and Series B stock is convertible into one share
of common stock as of December 31, 1999. The number of shares of common stock,
however, into which each share of Series A and Series B stock is convertible may
be adjusted upon the occurrence of certain dilutive events as set forth in the
Company's Articles of Incorporation.
Each Series A and Series B stockholder is entitled to vote on all matters
and is entitled to the number of votes equal to the respective number of shares
of common stock into which the Series A stock and Series B stock can be
converted. In addition, holders of all series of redeemable preferred stock are
entitled to nominate and elect at least four members of the Board of Directors
of the Company, but not less than 51% of the total number of directors that
constitute the Board. In the event of a liquidation of the
F-11
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Notes to Financial Statements (continued)
Company, the Series A and Series B stockholders would be entitled to receive an
amount equal to $.50 and $.85 per share, respectively, plus all cumulative or
accrued and unpaid dividends (the Series A and Series B liquidation preference
amounts).
The holders of Series A stock are entitled to receive, whether or not
declared by the Board of Directors, out of funds available, cumulative cash
dividends at an annual rate of 10% of the Series A preference amount commencing
on March 1, 2002. The holders of Series B stock are entitled to receive, whether
or not declared by the Board of Directors, out of the funds available,
cumulative cash dividends at an annual rate of 7% of the Series B preference
amount commencing on March 25, 1999. Both Series A and Series B dividends are
payable in the event of a liquidation, dissolution or winding up of the Company
or upon redemption of the respective preferred stock series. In addition, the
Series A and Series B preferred shareholders are entitled to receive a dividend
equal to any dividends paid on common stock determined on the basis of the
number of shares of common stock into which a share of Series A and Series B
stock is convertible.
Adjustment to the Series B Conversion Price for Additional Financing
The terms of the Series B preferred stock provide that the Company shall
obtain, no later than December 31, 1999, a binding, unconditional commitment in
the amount of $6,000,000 to fund its product licensing and research and
development (the Funding Commitment). In the event the Company is unable to
obtain the funding by December 31, 1999, the conversion price of the Series B
shares shall be adjusted from $.85 to $.65. The reduction in the conversion
price would require the Company to issue an additional 3,185,519 shares to the
holders of Series B stock. However, the Board of Directors may decide on or
before December 31, 1999, subject to the consent of the holders and sixty six
percent of Series B stock then outstanding, that it is in the best interest of
the Company to delay or reject a funding commitment.
On December 2, 1999, the Board of Directors voted to delay the Funding
Commitment until February 18, 2000 and received the consent of the holders of at
least sixty six percent of the Series B stockholders.
On April 26, 2000, the Board of Directors voted that it was in the best
interest of the Company to further delay the requirement of receiving a Funding
Commitment from December 31, 1999 until December 31, 2000, subject to actual
receipt of such Funding by December 31, 2000. Consent of the holders of at least
sixty-six percent of the Series B Stock was received on April 26, 2000. As such,
no adjustment has been made to the conversion price of the Series B Stock at
December 31, 1999.
Series B and Series C Preferred Stock Subscriptions
In February 1997, the Company received $2,000,000 from an investor to be
used to purchase shares in the next round of Series B preferred stock financing
that raises at least an additional $1,000,000 in capital. The amount was
recorded as the Series B preferred stock subscription. In March 1999, the Series
B preferred stock financing was completed and the Company issued 941,176 shares
of Series B preferred stock for $800,000 relating to the Series B preferred
stock subscription.
As a result of the completion of the Series B preferred stock financing,
$1,200,000 remains unused from the Series B preferred stock subscription. The
remaining Series B stock subscription was restructured as a convertible
promissory note to be used to purchase shares in the next round of Series C
preferred stock financing (as previously discussed). The amount has been
recorded as the Series C preferred stock subscription. The remaining unpaid
balance of $1,200,000 has been classified in the same manner as the Series B
convertible preferred stock as the balance would only be repaid by the Company
to the investor upon liquidation or other dissolution of the Company.
6. Stockholders' Deficit
In connection with the formation of the Company in 1996, 5,095,384
restricted common shares were issued to founders below fair market value.
Accordingly, the Company recorded compensation expense of $43,643.
In August 1997 and February 1998, the Company repurchased 246,153 and
935,286 shares, respectively, of the Company's restricted common stock from an
officer, at the original purchase price of $.001 per share, upon the amendment
of the original issuance and the officer's termination of employment with the
Company.
F-12
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Notes to Financial Statements (continued)
Equity Incentive Plan
In February 1997, the Company established an Equity Incentive Plan (the
Plan) for employees, officers and external members of the Board of Directors.
The Plan provides for the issuance of incentive and nonstatutory common stock
options and restricted stock awards. The exercise price of Incentive Stock
Options shall not be less than 100% of the fair market value of the common stock
on the date of award. Nonstatutory options may be granted at a price determined
by the Board of Directors. Options granted under the Plan generally vest ratably
over a five-year period, beginning on the first anniversary from the date of
grant. As of December 31, 1999, the Company has reserved 10,144,483 shares of
common stock for issuance under the Plan.
The Plan also provides for the issuance of shares of restricted common
stock as determined by the Board of Directors. The Board determines the duration
period and conditions under which the restricted shares may be forfeited. Shares
of the restricted stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as permitted by the Board. During 1998, the Company
offered eligible employees the option to purchase restricted stock in lieu of
holding options to purchase common stock. All eligible employees accepted the
offer and purchased the restricted stock at a purchase price of $0.01 per share.
The price of these shares was set by the Board of Directors and was intended to
approximate the fair market value of these shares on the date of grant. Shares
of the restricted stock purchased, vest according to the same schedule as
provided for by the surrendered and canceled options. A total of 657,155 shares
of restricted stock were purchased as a result of the option cancellation.
During 1998, the Company sold an additional 329,921 shares of restricted
stock at a purchase price of $.01 per share. At December 31, 1998, a total of
879,845 restricted shares were nonvested.
During 1999, the Company sold an additional 345,247 shares of restricted
stock and canceled 3,000 shares of restricted stock at a purchase price of $.01
per share, respectively. At December 31, 1999, a total of 925,932 restricted
shares were nonvested.
The following table presents stock option activity of the Plan for the
years ended December 31:
(Unaudited)
Six months ended
1997 1998 1999 June 30, 2000
-------------------- -------------------- -------------------- --------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Exercise Exercise Exercise
Options Price Options Price Options Price Options Price
--------- -------- --------- -------- --------- -------- --------- --------
Outstanding options at
beginning of year ....... -- $ -- 1,668,465 $ .05 1,132,310 $ .05 1,046,156 $ .05
Granted ................ 1,668,465 .05 133,000 .05 -- -- 20,000 .05
Surrendered and canceled -- -- (657,155) .05 -- -- (49,231) .05
Exercised .............. -- -- -- -- -- -- (483,847) .05
Terminated ............. -- -- (12,000) .05 (86,154) .05 -- --
--------- ------ --------- ------- --------- ------- --------- -------
Outstanding options at end
of year ................. 1,668,465 $ .05 1,132,310 $ .05 1,046,156 $ .05 533,078 $ .05
========= ====== ========= ======= ========= ======= ========= =======
Exercisable at end
of year ................. 3,000 $ .05 278,154 $ .05 513,232 $ .05 293,078 $ .05
========= ====== ========= ======= ========= ======= ========= =======
Available for grant at end
of year ................. 1,895,133 -- 1,358,978 -- 2,131,982 -- 1,557,786 --
========= ====== ========= ======= ========= ======= ========= =======
Weighted-average fair value
per share of options
granted during
the year ................ $ .01 $ .01 --
====== ======= =======
F-13
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Notes to Financial Statements (continued)
The following table represents weighted-average price and life information
about significant option groups outstanding at December 31, 1999:
Options Outstanding Options Exercisable
- --------------------------------------- ------------------------------------
Weighted-
Average Weighted- Weighted-
Option Remaining Average Average
Grant Number Contractual Exercise Number Exercise
Date Outstanding Life (Yrs.) Price Exercisable Price
- ---------- ----------- ------------ ---------- ----------- ---------
1997 1,046,156 7 $.05 513,232 $.05
--------- -------
1,046,156 513,232
========= =======
The pro forma net loss, as if compensation cost for the Plan had been
determined based on the fair value at the grant date in accordance with the
provisions of SFAS No. 123, is not materially different from the actual reported
net loss for the periods ended December 31, 1997, 1998 and 1999 and the period
from November 26, 1996 (date of inception) to December 31, 1999.
The fair value of options at the date of grant were estimated using the
minimum value model with an estimated weighted-average life of four years from
the date of grant, assuming a weighted-average, risk-free interest rate of
approximately 6.00%. The Company does not intend to declare dividends on its
common stock in the foreseeable future.
The effects on 1997, 1998 and 1999 pro forma net loss of expensing the
estimated fair value of stock options are not necessarily representative of the
effects on reporting the results of operations for future years as the periods
presented include only one, two and three years of option grants under the Plan.
7. 401(k) Plan
In September 1997, the Company established the Kinetix Pharmaceuticals,
Inc. 401(k) Plan (the Plan). The Company does not make contributions to the
Plan. The Plan is maintained in accordance with the provisions of section 401(k)
of the Internal Revenue Code (the Code) and allows all employees who have
attained the age 21 to make annual tax-deferred voluntary contributions of up to
the maximum percentage allowable under the Code.
8. Income Taxes
As of December 31, 1999, the Company has net operating loss carryforwards
and research tax credit carryforwards of approximately $9,870,000 and $638,000,
respectively, available to offset future federal and state taxable income to the
extent permitted under the Internal Revenue Code (IRC), expiring in varying
amounts through 2014. The net operating loss and research credit carryforwards
may be subject to the limitations provided in IRC sections 382 and 383.
The Company has deferred tax assets at December 31, 1997, 1998 and 1999 of
approximately $578,000, $2,244,000 and $4,586,000, respectively, attributable
primarily to net operating loss and research tax credit carryforwards for which
a valuation allowance has been recorded due to the uncertainty of realizing the
future benefit of this asset. The valuation allowance increased by approximately
$1,666,000 during 1998 to $2,244,000 at December 31, 1998 and by approximately,
$2,342,000 during 1999 to $4,586,000 at December 31, 1999.
9. Subsequent Event (unaudited)
The Company entered into a merger agreement on October 16, 2000 to be
acquired by Amgen Inc. (Amgen) for approximately $170 million in Amgen common
stock. Pursuant to the merger agreement, all Kinetix preferred stock will be
converted to Kinetix common stock, all options to purchase Kinetix common stock
will be fully-vested and exercised (or cancelled if not exercised) for shares of
Kinetix common stock, and all unvested shares of Kinetix restricted stock (other
than restricted stock awarded in connection with the merger) will be vested so
that such stock is free of encumbrances and restrictions. All shares of Kinetix
unrestricted common stock will then be exchanged for shares of Amgen
unrestricted common stock, and shares of Kinetix restricted common stock issued
in connection with the merger will be exchanged for shares of Amgen common stock
subject to substantially similar terms and conditions. The merger is expected to
be completed by December 31, 2000.
F-14
Kinetix Pharmaceuticals, Inc.
(A Development-Stage Company)
Notes to Financial Statements (continued)
Pursuant to the merger agreement, the $1,200,000 convertible promissory
note to be used in the next round of preferred stock financing (the Series C
preferred stock subscription) was amended. The amendment allows the note to be
converted into Kinetix common stock and subsequently exchanged for Amgen common
stock. If the conversion to Kinetix common stock occurs, the aggregate
consideration paid to Kinetix in Amgen common stock will increase by $1,200,000.
F-15
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
KINETIX PHARMACEUTICALS, INC.,
AMGEN ACQUISITION CORP. II
AND
AMGEN INC.
October 16, 2000
A-1
TABLE OF CONTENTS
-----------------
1. Definitions.................................................... A-6
2. The Merger..................................................... A-15
(a) The Merger............................................... A-15
(b) Closing; Effective Time.................................. A-15
(c) Deliveries at the Closing................................ A-15
(d) Effects of the Merger.................................... A-15
(e) Certificate of Incorporation; Bylaws..................... A-16
(f) Directors and Officers of the Surviving Corporation...... A-16
3. Effect of the Merger........................................... A-16
(a) Effect on Capital Stock.................................. A-16
(b) Conveyance of Parent Common Stock to Target Stockholders. A-17
(c) Lost, Stolen or Destroyed Certificates................... A-17
(d) Appraisal Rights; Dissenting Shares...................... A-18
(e) No Further Ownership Rights in Target Capital Stock...... A-18
(f) No Fractional Shares; Liability.......................... A-18
(g) Target Stockholder Representative........................ A-19
4. Representations and Warranties Concerning the Transaction...... A-20
(a) Representations and Warranties of Target and the Target
Stockholders............................................ A-20
(b) Representations and Warranties Concerning the Parent
and Merger Sub.......................................... A-21
5. Representations and Warranties Concerning the Target........... A-22
(a) Organization, Qualification, and Corporate Power......... A-22
(b) Capitalization........................................... A-23
(c) Authority; Noncontravention.............................. A-24
(d) Brokers' Fees............................................ A-25
(e) Title to Assets.......................................... A-25
(f) Subsidiaries............................................. A-25
(g) Financial Statements..................................... A-25
(h) Events Subsequent to Most Recent Fiscal Year End......... A-25
(i) Undisclosed Liabilities.................................. A-27
(j) Legal Compliance......................................... A-27
(k) Tax Matters.............................................. A-28
(l) Real Property............................................ A-29
(m) Proprietary Information and Materials.................... A-30
(n) Tangible Assets.......................................... A-33
(o) Contracts................................................ A-33
(p) Affiliated Transactions.................................. A-34
(q) Notes and Accounts Receivable............................ A-34
(r) Insurance................................................ A-35
(s) Litigation............................................... A-35
A-2
(t) Product Warranty..................................... A-35
(u) Product Liability.................................... A-35
(v) Employees and Labor Matters.......................... A-36
(w) Employee Benefits.................................... A-37
(x) Guaranties........................................... A-39
(y) Environmental, Health, and Safety.................... A-39
(z) Certain Business Relationships with the Target....... A-40
(aa) Vote Required........................................ A-40
(bb) Year 2000............................................ A-40
(cc) Hart-Scott-Rodino.................................... A-40
(dd) Disclosure........................................... A-41
(ee) Registration Statement............................... A-41
6. Pre-Closing Covenants...................................... A-41
(a) Target............................................... A-41
(b) The Parent and the Merger Sub........................ A-46
(c) Further Assurances................................... A-47
(d) Stockholder Approval; Proxy Statement/Prospectus..... A-47
(e) Target Retention Shares.............................. A-48
(f) Unapproved 280G Shares............................... A-48
(g) Press Releases and Public Announcements.............. A-48
(h) Novartis Note........................................ A-49
(i) Market Manipulation.................................. A-49
7. Post-Closing Covenants..................................... A-49
(a) General.............................................. A-49
(b) Litigation Support................................... A-49
(c) Transition........................................... A-49
(d) Confidentiality...................................... A-49
(e) Director and Officer Insurance....................... A-50
8. Conditions to Obligation to Close.......................... A-50
(a) Conditions to Obligation of the Parent and
Merger Sub.......................................... A-50
(b) Conditions to Obligation of the Target............... A-54
9. Remedies for Breaches of Agreement; Indemnification........ A-54
(a) Survival of Representations and Warranties........... A-54
(b) Indemnification Provisions for Benefit of the Parent. A-55
(c) Indemnification Provisions for Benefit of the Target
Stockholders........................................ A-55
(d) Tax Indemnification.................................. A-56
(e) Matters Involving Third Parties...................... A-56
(f) Satisfaction of Claims............................... A-58
(g) Other Indemnification Provisions..................... A-58
(h) Limitations on Indemnity............................. A-59
(i) Interim Period Claims................................ A-60
A-3
10. Tax Matters.................................................... A-61
(a) Cooperation on Tax Matters............................... A-61
(b) Certain Taxes............................................ A-61
11. Termination.................................................... A-62
(a) Termination.............................................. A-62
(b) Effect of Termination.................................... A-63
12. Miscellaneous.................................................. A-64
(a) Parent Loan.............................................. A-64
(b) Further Action/Tax Treatment............................. A-64
(c) Entire Agreement......................................... A-64
(d) No Third-Party Beneficiaries; Succession and Assignment.. A-64
(e) Counterparts............................................. A-65
(f) Headings................................................. A-65
(g) Notices.................................................. A-65
(h) Governing Law............................................ A-66
(i) Amendments, Extensions and Waivers....................... A-66
(j) Severability............................................. A-66
(k) Expenses................................................. A-66
(l) Construction............................................. A-67
(m) Incorporation of Exhibits and Disclosure Schedule........ A-67
(n) Specific Performance..................................... A-67
(o) Submission to Jurisdiction............................... A-67
A-4
Exhibit A -- Certificate of Merger
Exhibit B -- Historical Financial Statements
Exhibit C-1 -- Form of Voting and Support Agreement
Exhibit C-2 -- Form of Affiliate Letter
Exhibit C-3 -- Form of Employment Agreement
Exhibit C-4 -- Form of Noncompetition Agreement
Exhibit C-5 -- Form of Arbitration Agreement
Exhibit C-6 -- Form of Inventions Agreement
Exhibit C-7 -- Lydon Employment Agreement
Exhibit C-8 -- Lydon Noncompetition Agreement
Exhibit C-9 -- Armistead Employment Agreement
Exhibit C-10 -- Armistead Noncompetition Agreement
Exhibit C-11 -- Form of Support Agreement
Exhibit D-1 -- Form of Opinion of Counsel to Target
Exhibit D-2 -- Form of Opinion of Counsel to the Target
Stockholders
Exhibit E -- Loan Agreement
Disclosure -- Exceptions to Representations and Warranties
Schedule Concerning the Target and Its Schedule Subsidiaries
A-5
This AGREEMENT AND PLAN OF MERGER, dated as of October 16, 2000 (this
"Agreement"), by and among Amgen Inc., a Delaware corporation ("Parent"), Amgen
--------- ------
Acquisition Corp. II, a Delaware corporation and wholly-owned subsidiary of
Parent ("Merger Sub"), and Kinetix Pharmaceuticals, Inc., a Delaware corporation
----------
(the "Target").
------
R E C I T A L S
---------------
A. The respective Boards of Directors of Parent, Merger Sub and the Target
have each determined that the Merger (as defined below) is in the best interests
of their respective stockholders and have approved the Merger upon the terms and
subject to the conditions set forth in this Agreement, whereby, after giving
effect to the conversion of all preferred stock of the Target into common stock
of the Target, and to the vesting and exercise or termination of all outstanding
options and the cancellation of all repurchase rights governing restricted stock
purchase awards (except with respect to the Target Retention Shares and any
Unapproved 280G Shares, as described below) so that all Target common stock
underlying such options and awards will have been issued or terminated, and
subsequently thereto each issued and outstanding share of common stock, par
value $.001 per share, of the Target ("Target Common Stock"), will be converted
-------------------
into the right to receive the Per Share Purchase Price (as defined below);
B. In order to effectuate the foregoing, Merger Sub, upon the terms and
subject to the conditions of this Agreement and, in accordance with the Delaware
General Corporation Law (the "DGCL"), will merge with and into the Target (the
----
"Merger");
------
C. Parent and Target intend to merge Target with and into Parent (the
"Upstream Merger") as soon as feasible following the Merger, it being the intent
---------------
of the parties to this Agreement that the Merger qualify as a reorganization
within the meaning of (S)368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations promulgated thereunder (the "Treasury
---- --------
Regulations"), if viewed as a separate transaction or if viewed as an integrated
- -----------
transaction with the Upstream Merger; and
D. Parent, Merger Sub, the Target and all the Target Stockholders desire
to make certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
other valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, and intending to be legally bound hereby, the parties to this
Agreement (each, a "Party" and collectively, the "Parties") hereto agree as
----- -------
follows:
1. Definitions.
-----------
"Actual Aggregate Consideration" means an amount equal to (a) the sum of
------------------------------
(i) One Hundred Seventy Million Dollars ($170,000,000) plus (ii) if the Novartis
Note has been converted into shares of Target Common Stock in accordance with
(S)8(a)(v)(B) below, One Million Two Hundred Thousand Dollars ($1,200,000) less
(b) any amounts outstanding under the Loan Agreement as of the Closing Date.
A-6
"Adverse Consequences" means all actions, suits, proceedings, hearings,
--------------------
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affidavit" has the meaning set forth in (S)3(c) below.
---------
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
---------
promulgated under the Securities Exchange Act.
"Affiliate Letter" means the form of letter agreement attached hereto as
----------------
Exhibit C-2.
- -----------
"Affiliated Group" means any affiliated group within the meaning of Code
----------------
(S)1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Agreement" has the meaning set forth in the preface above.
---------
"Ancillary Agreements" means the Voting and Support Agreements, the
--------------------
Affiliate Letters, the Support Agreements, the Employment Agreements, the
Noncompetition Agreements, the Arbitration Agreements, the Inventions
Agreements, the Executive Employment Agreements, the Executive Noncompetition
Agreements, and all exhibits thereto, and any and all other agreements to which
the Target Stockholders are parties relating to the Merger.
"Arbitration Agreement" has the meaning set forth in (S)8(a)(vi) below.
---------------------
"Armistead Employment Agreement" has the meaning set forth in (S)8(a)(vi)
------------------------------
below.
"Armistead Noncompetition Agreement" has the meaning set forth in
----------------------------------
(S)8(a)(vi) below.
"Basis" means any past or present fact, situation, circumstance, status,
-----
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Board of Directors" means the Board of Directors of any specified Person
------------------
and any properly serving and acting committees thereof.
"Cash Contribution" has the meaning set forth in (S)9(i) below.
-----------------
"Certificate" means a share certificate which immediately prior to the
-----------
Effective Time represented outstanding shares of Target Common Stock, other than
shares to be canceled or retired in accordance with (S)3(a)(ii).
"Certificate of Merger" has the meaning set forth in (S)2(b) below.
---------------------
"Closing" has the meaning set forth in (S)2(b) below.
-------
"Closing Date" has the meaning set forth in (S)2(b) below.
------------
"Code" has the meaning set forth in the recitals above.
----
A-7
"Confidential Information" means any information concerning the business
------------------------
and affairs of the Target that is not already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth in Code
--------------------------------
(S)1563.
"Deferred Intercompany Transaction" has the meaning set forth in Treasury
---------------------------------
Regulations (S)1.1502-13.
"Disclosure Schedule" has the meaning set forth in (S)5 below.
-------------------
"Dissenting Shares" has the meaning set forth in (S)3(d) below.
-----------------
"Dissenting Stockholder" has the meaning set forth in (S)3(d) below.
----------------------
"Effective Time" has the meaning set forth in (S)2(b) below.
--------------
"Eligible Interim Breach" means a breach of any of the representations and
-----------------------
warranties contained in (S)(S)5(h)(iii), 5(h)(xiv), 5(h)(xxi), 5(i), 5(j),
5(l)(iii), 5(l)(iv), 5(l)(vi), 5(m)(ii), 5(m)(iv), 5(m)(vi)-(x), 5(n), 5(o),
5(q), 5(r), 5(s), 5(u), 5(v)(i), 5(v)(iv)-(vii), 5(w)(i)(D), 5(w)(ii)(B),
5(y)(ii), 5(y)(iv)-(vii), and 5(bb) that would cause the Target to be unable to
satisfy (S)8(a)(i) solely as a result of such breach; provided that in order to
-------- ----
qualify as an Eligible Interim Breach hereunder, such breach shall not be
arising out of, resulting from, relating or incident to, or due to any direct or
indirect action or inaction by or on behalf of the Target, any Target
Stockholder or any director or officer of Target.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
---------------------
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)3(2).
-----------------------------
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)3(1).
-----------------------------
"Employment Agreement" has the meaning set forth in (S)8(a)(vi) below.
--------------------
"Environmental, Health, and Safety Laws" means the Comprehensive
--------------------------------------
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Hazardous Materials Transportation
Act, the Solid Waste Disposal Act, and the Occupational Safety and Health Act of
1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the
A-8
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes (including, without limitation,
radioactive materials).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Escrow Account" has the meaning set forth in (S)9(i) below.
--------------
"Escrow Agreement" has the meaning set forth in (S)9(i) below.
----------------
"Escrowing Stockholders" means the Major Target Stockholders other than
----------------------
Georges Haas, Christopher Adams, Nancy Stuart and Jeffrey Hsi.
"Escrowing Stockholder Contribution" has the meaning set forth in (S)9(i)
----------------------------------
below.
"Excess Loss Account" has the meaning set forth in Treasury Regulations
-------------------
(S)1.1502-19.
"Executive Employment Agreement" has the meaning set forth in (S)8(a)(vi)
------------------------------
below.
"Executive Noncompetition Agreement" has the meaning set forth in
----------------------------------
(S)8(a)(vi) below.
"Extremely Hazardous Substance" has the meaning set forth in (S)302 of the
-----------------------------
Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA (S)3(21).
---------
"Financial Statements" has the meaning set forth in (S)5(g) below.
--------------------
"FIRPTA Certificate" has the meaning set forth in (S)8(a)(xxii) below.
------------------
"Form" has the meaning set forth in (S)5(cc) below.
----
"GAAP" means United States generally accepted accounting principles as in
----
effect from time to time.
"Governmental Entity" means any supranational, national, state, municipal
-------------------
or local government, any instrumentality, subdivision, court, administrative
agency or commission or other authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, or other governmental or quasi-
governmental authority.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
---------------------
Act of 1976, as amended, and regulations promulgated thereunder.
"Indemnified Party" has the meaning set forth in (S)9(e) below.
-----------------
"Indemnifying Party" has the meaning set forth in (S)9(e) below.
------------------
"Interim Period" has the meaning set forth in (S)9(i) below.
--------------
A-9
"Interim Period Claim" has the meaning set forth in (S)9(i) below.
--------------------
"Interim Period Payments" has the meaning set forth in (S)9(i) below.
-----------------------
"Inventions Agreement" has the meaning set forth in (S)8(a)(vi) below.
--------------------
"Key Target Stockholders" means Nicholas Lydon, David Armistead, Nancy
-----------------------
Stuart and Jeffrey Hsi.
"Knowledge" means the state of actual knowledge which would exist after
---------
investigation sufficient to express an informed view, including, without
limitation, with respect to any entity, diligent inquiries of officers,
directors and employees of such entity.
"Knowledge of the Target" means the Knowledge of the Major Target
-----------------------
Stockholders, and the directors and officers of the Target.
"Liability" or "Liabilities" means any liability (whether known or unknown,
--------- -----------
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Loan Agreement" has the meaning set forth in (S)12(a) below.
--------------
"Lydon Employment Agreement" has the meaning set forth in (S)8(a)(vi)
--------------------------
below.
"Lydon Noncompetition Agreement" has the meaning set forth in (S)8(a)(vi)
------------------------------
below.
"Major Target Stockholders" means the Key Target Stockholders, Christopher
-------------------------
Adams, Georges Haas, Salkilld Holdings Limited, Schroder Ventures International
Life Sciences Fund LP1, Schroder Ventures International Life Sciences Fund LP2,
Schroder Ventures International Life Sciences Fund Trust, Schroder Ventures
International Life Sciences Fund Co. Investment Scheme, JAFCO Co., Ltd., JAFCO
R-2 Investment Enterprise Partnership, JAFCO R-3 Investment Enterprise
Partnership, JAFCO G-6(A) Investment Enterprise Partnership, JAFCO G-6(B)
Investment Enterprise Partnership, JAFCO G-7(A) Investment Enterprise
Partnership, JAFCO G-7(B) Investment Enterprise Partnership, Zero Stage Capital
V Limited Partnership, Zero Stage Capital VI Limited Partnership, and Novartis
International AG.
"Major Target Stockholder Percentage" has the meaning set forth in
-----------------------------------
(S)9(h)(ii) below.
"Material Adverse Effect" means, with respect to any entity, any adverse
-----------------------
change, circumstance or effect (not proximately caused by the public
announcement of the proposed Merger) that, individually or in the aggregate with
all other adverse changes, circumstances and effects, is or is reasonably likely
to be materially adverse to the business, operations, assets, liabilities,
financial condition, prospects or results of operations of such entity and its
Subsidiaries taken as a whole or would prevent the Target or Parent (as the case
may be) from performing its obligations under this Agreement.
"Merger" has the meaning set forth in (S)2(a) below.
------
A-10
"Merger Sub" has the meaning set forth in the preface above.
----------
"Most Recent Balance Sheet" means the balance sheet contained within the
-------------------------
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S)5(g)
--------------------------------
below.
"Most Recent Fiscal Month End" has the meaning set forth in (S)5(g) below.
----------------------------
"Most Recent Fiscal Year End" has the meaning set forth in (S)5(g) below.
---------------------------
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
------------------
"Nasdaq NMS" means the National Association of Securities Dealers Automated
----------
Quotation National Market System.
"Noncompetition Agreement" has the meaning set forth in (S)8(a)(vi) below.
------------------------
"Novartis Note" means the Convertible Promissory Note in the principal
-------------
amount of $1,200,000 issued March 25, 1999 by Target in favor of Novartis
International AG, as such Note may be amended in accordance with (S)8(a)(v)
below.
"Ordinary Course of Business" means the ordinary course of business
---------------------------
consistent with past custom and practice (including with respect to quantity and
frequency).
"Organization Documents" means, with respect to any entity, the Certificate
----------------------
or Articles of Incorporation, Bylaws, together with any amendments thereto or
restatements thereof, or other governing documents of such entity.
"Owned Proprietary Information" has the meaning set forth in (S)5(m)(i)
-----------------------------
below.
"Parent" has the meaning set forth in the preface above.
------
"Parent Common Stock" means the common stock, par value $.0001 per share,
-------------------
of Parent.
"Parent Indemnitees" has the meaning set forth in (S)9(b) below.
------------------
"Parent Indemnity Claims" has the meaning set forth in (S)9(f) below.
-----------------------
"Party" and "Parties" have the meanings set forth in the preface above.
----- -------
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Per Share Purchase Price" means the number of shares of Parent Common
------------------------
Stock equal to the number determined by dividing the Purchase Price by the
number of shares of the Target Common Stock outstanding immediately prior to the
Closing (after taking into account all actions to be taken pursuant to (S)3(a)).
A-11
"Person" means an individual, a partnership, a corporation, an association,
------
a limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Post-Closing Payments" has the meaning set forth in (S)9(i) below.
---------------------
"Pre-Closing Partial Period" has the meaning set forth in (S)9(d) below.
--------------------------
"Prohibited Transaction" has the meaning set forth in ERISA (S)406 and Code
----------------------
(S)4975.
"Proprietary Information and Materials" means, with respect to any Person:
-------------------------------------
(a) all United States and foreign patents that have issued or in the future
issue (including utility, model and design patents, supplementary protection
certificates, certificates of invention and the like), all patent applications
(including applications for utility, model and design patents, supplementary
protection certificates, certificates of invention and the like), and all
divisionals, continuations, continuations-in-part, reissues, renewals,
extensions or additions to any such patents and patent applications, heretofore
or hereafter filed or having legal force in any country of the world; (b) all
know-how, including, but not limited to, trade secrets, formulae, ideas,
inventions, discoveries, innovations, improvements, results, reports,
information and data (including, but not limited to, all business and technical
information and data, information and data relating to research, development,
chemicals, biological material, biological activity, crystal structure data,
chemical activity modeling information and data, assays, pharmacology,
toxicology, analytical methods, processes, formulations, compositions, research
summary data, research raw data, laboratory notebooks, procedures, proprietary
technology and information, manufacturing and production processes and
techniques, designs, drawings, specifications, customer lists, supplier lists,
pricing, costs, business and marketing research, plans and proposals, and the
like); (c) all materials including, but not limited to, chemical compounds,
reagents, substrates, proteins, peptides, crystals, nucleic acids, vectors,
promoters, host cells, recombinant cell lines, and the like; (d) all trademarks,
service marks, trade dress, trade names, logos, commercial symbols, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (e) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith; (f) all computer programs (including source
code and object code) and computer software (including data and related
documentation); (g) all Internet domain names, URLs and applications therefor;
(h) all industrial designs and applications for registration for such industrial
designs; (i) all other proprietary rights; and (j) all copies and tangible
embodiments of the foregoing (in whatever form or medium, including, but not
limited to, electronic media).
"Proxy Statement" means the proxy statement/prospectus relating to the
---------------
meeting of the stockholders of Target to be held in connection with the Merger.
"Purchase Price" means a number rounded down to the nearest whole number of
--------------
shares of Parent Common Stock equal to the number obtained by dividing (a) the
Actual Aggregate Consideration by (b) the closing sale price of the Parent
Common Stock as reported on Nasdaq NMS on the trading day immediately prior to
the Closing Date rounded to the nearest hundredth of a dollar.
A-12
"Registration Statement" means a registration statement on Form S-4 or
----------------------
other appropriate registration form to be filed with the SEC by Parent in
connection with the offer and issuance of the Parent Common Stock in or as a
result of the Merger.
"Replacement Employees" has the meaning set forth in (S)6(a)(xii) below.
---------------------
"Reportable Event" has the meaning set forth in ERISA (S)4043.
----------------
"Retained Target Employees" has the meaning set forth in (S)6(e) below.
-------------------------
"Scientific Advisory Board" means the Scientific Advisory Board of the
-------------------------
Target.
"SEC" means the U.S. Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
-----------------
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, and (c)
purchase money liens and liens securing rental payments under capital lease
arrangements.
"Subsidiary" means any corporation with respect to which a specified Person
----------
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Support Agreement" means the form of agreement attached hereto as Exhibit
----------------- -------
C-11.
- ----
"Surviving Corporation" has the meaning set forth in (S)2(a) below.
---------------------
"Target" has the meaning set forth in the preface above.
------
"Target Affiliate" means each Person who may be deemed to be an affiliate
----------------
of Target within the meaning of Rule 145 promulgated under the Securities Act.
"Target Common Stock" has the meaning set forth in the Recitals above.
-------------------
"Target Employees" has the meaning set forth in (S)5(v)(ii) below.
----------------
"Target Licenses" has the meaning set forth in (S)5(m)(i) below.
---------------
"Target Permits" has the meaning set forth in (S)5(j) below
--------------
"Target Preferred Stock" means the preferred stock of the Target, including
----------------------
the Target Series A Preferred Stock and the Target Series B Preferred Stock.
A-13
"Target Proprietary Information and Materials" means all Proprietary
--------------------------------------------
Information and Materials held or used in the business of the Target as
currently being conducted.
"Target Retention Shares" shall mean the shares of Target Common Stock to
-----------------------
be issued in accordance with (S)6(e) below.
"Target Series A Preferred Stock" means the Series A convertible preferred
-------------------------------
stock of the Target, par value $.001 per share.
"Target Series B Preferred Stock" means the Series B convertible preferred
-------------------------------
stock of the Target, par value $.001 per share.
"Target Stockholder" means each Person who immediately prior to the Closing
------------------
holds shares of Target Common Stock (after taking into account all actions to be
taken pursuant to (S)3(a)).
"Target Stockholder Expenses" has the meaning set forth in (S)12(k) below.
---------------------------
"Target Stockholder Indemnity Claims" has the meaning set forth in (S)9(f)
-----------------------------------
below.
"Target Stockholder Representative" has the meaning set forth in (S)3(g)
---------------------------------
below.
"Target Stock Plan" means the Target 1997 Equity Incentive Plan.
-----------------
"Target Voting Debt" has the meaning set forth in (S)5(b) below.
------------------
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
--- -----
receipts, recapture, license, payroll, employment, excise, severance, lease,
stamp, business, occupation, premium, windfall profits, environmental (including
taxes under Code (S)59A), customs duties, capital stock, franchise, profits, net
worth, withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, duty, registration, value
added, ad valorem, alternative or add-on minimum, estimated, escheat, or other
tax, levy, assessment or government charge of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
----------
information return or statement required to be supplied to any Tax authority or
agency having jurisdiction over tax matters, including any schedule or
attachment thereto, and including any amendment thereof.
"Terminating Parent Breach" has the meaning set forth in (S)11(a)(iv)
-------------------------
below.
"Terminating Target Breach" has the meaning set forth in (S)11(a)(iii)
-------------------------
below.
"Third Party Claim" has the meaning set forth in (S)9(e) below.
-----------------
"Third Party Licenses" has the meaning set forth in (S)5(m)(i) below.
--------------------
A-14
"Transaction" has the meaning set forth in (S)6(a)(xxiv) below.
-----------
"Treasury Regulations" has the meaning set forth in the recitals above.
--------------------
"Voting and Support Agreement" means the form of agreement attached hereto
----------------------------
as Exhibit C-1 (including the irrevocable proxy in favor of Parent and certain
-----------
officers of Parent contained therein).
"Unapproved 280G Shares" has the meaning set forth in (S)3(a) below.
----------------------
"Upstream Merger" has the meaning set forth in the recitals above.
---------------
2. The Merger
----------
(a) The Merger. At the Effective Time (as defined in (S)2(b)) and subject
-----------
to and upon the terms and conditions of this Agreement and the applicable
provisions of the DGCL, (i) the Merger Sub shall be merged with and into the
Target, (ii) the separate corporate existence of the Merger Sub shall cease, and
(iii) the Target shall be the surviving corporation (collectively, the
"Merger"). The Target as the surviving corporation after the Merger is
------
hereinafter sometimes referred to as the "Surviving Corporation."
---------------------
(b) Closing; Effective Time. The closing of the Merger and the other
-----------------------
transactions contemplated hereby (the "Closing") will take place at the dates
-------
specified by the Parties, but in no event more than two (2) business days later
than satisfaction of all conditions set forth herein (the "Closing Date"). The
------------
Closing shall take place at the offices of Latham & Watkins, 633 W. 5th Street,
Ste. 4000, Los Angeles, California, or at such other location as the Parties
shall mutually agree. At the Closing, the Parties shall cause the Merger to be
consummated by filing a certificate of merger substantially in the form of
Exhibit A (the "Certificate of Merger") with the Secretary of State of the State
- --------- ---------------------
of Delaware, in accordance with the relevant provisions of the DGCL (the time of
such filing, or such later time as may be agreed in writing by the parties and
specified in the Certificate of Merger, being the "Effective Time").
--------------
(c) Deliveries at the Closing. At the Closing, (i) the Target will deliver
-------------------------
to the Parent the various certificates, instruments, and documents referred to
in (S)8(a) below, (ii) other than with respect to Dissenting Shares, each of the
Target Stockholders will deliver to the Parent (A) stock certificates
representing all of his or its shares of Target Common Stock, endorsed in blank
or accompanied by duly executed assignment documents, or (B) the Affidavit and
any other documents specified under (S)3(c) below and (iii) upon receipt of the
Certificates and/or Affidavits representing all outstanding shares of Target
Common Stock (other than the Dissenting Shares) the Parent will deliver to each
of the Target Stockholders the consideration specified in (S)3(a) below.
(d) Effects of the Merger. The effects of the Merger shall be as provided
---------------------
in this Agreement, the Certificate of Merger and the applicable provisions of
the DGCL. Without limiting the foregoing, at the Effective Time all the
property, rights, privileges, powers and franchises of the Merger Sub and the
Target shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Merger Sub and the Target shall become the debts, liabilities
A-15
and duties of the Surviving Corporation. The Surviving Corporation may, at any
time after the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either the Target or the
Merger Sub in order to carry out and effectuate the Merger.
(e) Certificate of Incorporation; Bylaws.
------------------------------------
(i) The certificate of incorporation of the Surviving Corporation
shall be amended and restated at and as of the Effective Time to read as
did the certificate of incorporation of the Merger Sub immediately prior to
the Effective Time (except that the name of the Surviving Corporation will
remain unchanged).
(ii) The bylaws of the Surviving Corporation shall be amended and
restated at and as of the Effective Time to read as did the bylaws of the
Merger Sub immediately prior to the Effective Time (except that the name of
the Surviving Corporation will remain unchanged).
(f) Directors and Officers of the Surviving Corporation. The directors and
---------------------------------------------------
officers of the Merger Sub immediately prior to the Effective Time shall serve
as the directors and officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified.
3. Effect of the Merger.
--------------------
(a) Effect on Capital Stock. Prior to the Effective Time, the Target and
-----------------------
the Target Stockholders shall cause all outstanding shares of Target Series A
Preferred Stock and Target Series B Preferred Stock to be converted into the
number of shares of Target Common Stock set forth on (S)6(a)(iv) of the
Disclosure Schedule so that, immediately prior to the Effective Time, no shares
of Target Series A Preferred Stock or Target Series B Preferred Stock shall
remain outstanding. Prior to the Effective Time, the Target and Target
Stockholders shall cause the vesting and exercise or termination of all
outstanding options and the cancellation of all repurchase rights governing
restricted stock awards issued pursuant to the Target Stock Plan so that,
immediately prior to the Effective Time, the number of shares of Target Common
Stock underlying such options and awards set forth on (S)6(a)(iv) of the
Disclosure Schedule will have been terminated or issued and held free of
encumbrances or restrictions; provided, however, that: (i) the repurchase rights
-------- -------
governing the Target Retention Shares shall not be cancelled, accelerated or
otherwise modified but shall remain in full force and effect in accordance with
(S)6(e) below; and (ii) unless and until the cancellation of the repurchase
rights governing the restricted stock awards to the Target Employees listed on
(S)3(a) of the Disclosure Schedule attached hereto is approved by the Target
Stockholders in accordance with the provisions of Code (S)(S)280G(b)(5)(A)(ii)
and 280G(b)(5)(B), such repurchase rights shall not be cancelled but shall
remain in full force and effect and any shares of Parent Common Stock issued in
exchange for the shares of Target Common Stock subject to such repurchase rights
(the "Unapproved 280G Shares") shall be subject to repurchase rights with
----------------------
substantially similar terms and conditions and lapsing over an identical period.
As of the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares of capital stock of the Target or any shares of
capital stock of Merger Sub:
A-16
(i) Capital Stock of Merger Sub. Each issued and outstanding share
---------------------------
of capital stock of Merger Sub shall be converted into and become one fully
paid and nonassessable share of common stock, par value $.001 per share, of
the Surviving Corporation.
(ii) Cancellation of Treasury Stock and Parent-Owned Stock. Each
-----------------------------------------------------
share of Target Common Stock that is owned by the Target and each share of
Target Common Stock that is owned by Parent, Merger Sub or any other wholly
owned subsidiary of Parent shall automatically be canceled and retired and
shall cease to exist, and no Parent Common Stock or other consideration
shall be delivered in exchange therefor.
(iii) Conversion of Target Common Stock. Each share of Target Common
---------------------------------
Stock (other than those shares set forth in (S)3(a)(ii) and Dissenting
Shares) shall be converted into the right to receive the Per Share Purchase
Price. As of the Effective Time, all shares of Target Common Stock shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of any shares of Target Common
Stock shall cease to have any rights with respect thereto, except the right
to receive upon the surrender of such shares, certificates representing the
shares of Parent Common Stock, and cash in lieu of fractional shares of
Parent Common Stock upon surrender of such shares in accordance with
(S)3(f) of this Agreement, without interest.
(b) Conveyance of Parent Common Stock to Target Stockholders. Except as
--------------------------------------------------------
set forth in (S)3(c) and subject to the terms and conditions of this Agreement,
in exchange for Certificates and/or Affidavits representing all of the
outstanding Target Common Stock (other than Dissenting Shares) delivered at the
Closing, and after receipt of all information concerning the Target Stockholder
necessary for the issuance of certificates of Parent Common Stock (consisting of
such Target Stockholder's full name, tax identification number or social
security number and address), Parent shall deliver certificates representing
shares of Parent Common Stock comprising 100% of the Purchase Price to be
delivered to Target Stockholders as soon as practicable after the Closing Date,
but in no event later than ten (10) days after the Closing Date, together with
100% of the cash payable in respect of fractional shares as provided in (S)3(f)
hereof. Parent shall be entitled to retain possession of any shares of Parent
Common Stock issued in exchange for Target Retention Shares and any Unapproved
280G Shares until repurchase rights governing such shares have terminated or
have been cancelled in accordance with their respective terms.
(c) Lost, Stolen or Destroyed Certificates. Subject to (S)3(a) and
--------------------------------------
(S)3(b), in the event that any Certificates shall have been lost, stolen or
destroyed, in respect of such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Parent will issue
in exchange for such affidavit (and bond, if applicable as provided in the
proviso below) (an "Affidavit"), the Per Share Purchase Price multiplied by the
---------
number of shares represented by such Certificate, and any cash in lieu of
fractional shares and any unpaid dividends; provided, however, that the Parent
-------- -------
may, in its discretion and as a condition precedent to the payment thereof,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as the Parent may reasonably direct as indemnity against any
claim that may be made against the Parent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
A-17
(d) Appraisal Rights; Dissenting Shares. Subject to (S)8(a)(iii) hereof,
-----------------------------------
any issued and outstanding shares of Target Common Stock held by a person who
has properly demanded an appraisal and perfected the right to dissent under the
DGCL and who has not effectively withdrawn or lost such rights as of the
Effective Time (the "Dissenting Shares") shall not be converted into or
-----------------
represent the right to receive the Per Share Purchase Price, and the holders
thereof shall be entitled only to such rights as are granted by the DGCL in
accordance with the terms of the DGCL. Target shall give the Parent prompt
notice upon receipt by the Target of any such written demands for payment of the
fair value of such shares of Target Common Stock and of withdrawals of such
demands and any other instruments provided pursuant to DGCL (any stockholder
duly making such demands being hereafter called a "Dissenting Stockholder").
----------------------
Any payments made in respect of Dissenting Shares shall be made by the Parent.
If any Dissenting Stockholder shall effectively withdraw or lose (through
failure to perfect or otherwise) his or its right to such payment at or prior to
the Effective Time, each of such holder's shares of Target Common Stock shall be
converted into a right to receive the Per Share Purchase Price in accordance
with the applicable provisions of this Agreement.
(e) No Further Ownership Rights in Target Capital Stock. All shares of
---------------------------------------------------
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Agreement (including any cash paid pursuant to
(S)3(f)) shall be deemed to have been issued (and paid) in full satisfaction of
all rights pertaining to the shares of capital stock of the Target theretofore
represented by such Certificates, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of capital stock of the Target which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this (S)3, except as otherwise provided by law.
(f) No Fractional Shares; Liability.
-------------------------------
(i) No certificate representing fractional shares of Parent Common
Stock shall be issued upon the surrender for exchange of Certificates, and
such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate issued and outstanding at the
Effective Time who would otherwise be entitled to receive a fractional
share of Parent Common Stock upon surrender of such Certificate for
exchange pursuant to this (S)3 (after taking into account all shares of
capital stock of the Target then held by such holder) shall receive, in
lieu thereof, cash in an amount equal to the value of such fractional share
rounded to the nearest hundredth of a dollar, which shall be equal to the
fraction of a share of Parent Common Stock that would otherwise be issued
multiplied by the Per Share Purchase Price.
(iii) None of Parent, Merger Sub or the Target shall be liable to any
Person in respect of any shares of Parent Common Stock (or dividends or
distributions with respect thereto) or cash to be distributed in lieu of
fractional shares delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
A-18
(g) Target Stockholder Representative.
---------------------------------
(i) Jason Loveridge is hereby appointed as and constitutes the
Target Stockholder Representative and as such shall serve as and have all
powers as agent and attorney-in-fact of each Target Stockholder, for and on
behalf of such Target Stockholders: to give and receive notices and
communications; to have authority to agree to, negotiate, enter into
settlements and compromises of, and comply with orders of courts with
respect to any disputes involving any claims for indemnification made by
the Parent; to sign receipts, consents, or other documents and to effect
the transactions contemplated hereby; and to take all actions necessary or
appropriate in the judgment of the Target Stockholder Representative for
the accomplishment of the foregoing. If the Target Stockholder
Representative ceases to act as a Target Stockholder Representative for any
reason, such Target Stockholder Representative or his agent shall notify
the Parent of such Target Stockholder Representative's intent to resign as
Target Stockholder Representative, and the remaining Target Stockholders
shall, by written notice to the Parent, appoint a successor Target
Stockholder Representative within thirty (30) days. Notice or
communications to or from any Target Stockholder Representative shall
constitute notice to or from each of the Target Stockholders.
(ii) The Target Stockholder Representative shall not be liable for
any action taken or not taken as a Target Stockholder Representative in the
absence of such Target Stockholder Representative's negligence or willful
misconduct.
(iii) A decision, act, consent or instruction of the Target
Stockholder Representative shall constitute a decision of all the Target
Stockholders, and shall be final, binding and conclusive upon each of the
Target Stockholders, and the Parent, Merger Sub and the Target may rely
upon any decision, act, consent or instruction of the Target Stockholder
Representative as being the decision, act, consent or instruction of each
and all of the Target Stockholders. Parent, Merger Sub and the Target are
relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction.
(iv) The Target Stockholders shall share, on a pro rata basis in
relation to their holdings of Target Common Stock, the cost of any
attorney, accountant or other advisors retained by the Target Stockholder
Representative in connection with any action taken or not taken as a Target
Stockholder Representative.
(v) The Target Stockholders agree to take any and all action as may
be reasonably required by the Target Stockholder Representative (including,
without limitation, the execution of certificates, transfer documents,
receipts, instruments, consents or similar documents) to effectuate the
purposes of this Agreement.
4. Representations and Warranties Concerning the Transaction.
---------------------------------------------------------
(a) Representations and Warranties of Target and the Target Stockholders.
--------------------------------------------------------------------
Target and each of the Target Stockholders represents and warrants to the Parent
and the Merger Sub that the statements contained in this (S)4(a) are correct and
complete as of the date of this
A-19
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this (S)4). Notwithstanding the foregoing, each such Target
Stockholder represents and warrants as to itself only and not with respect to
any other Target Stockholder.
(i) Organization of Certain Target Stockholders. If the Target
-------------------------------------------
Stockholder is a corporation, limited partnership or limited liability
company, the Target Stockholder is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its formation.
(ii) Authorization of Transaction. The Target Stockholder has full
----------------------------
power and authority to execute and deliver this Agreement and each of the
Ancillary Agreements to which he or it is a party and to perform his or its
obligations hereunder and thereunder. This Agreement and each of the
Ancillary Agreements to which the Target Stockholder is a party constitutes
the valid and legally binding obligation of the Target Stockholder,
enforceable in accordance with its terms and conditions, except that such
enforceability may be subject to (A) bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B) by
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law). The Target Stockholder need not give
any notice to, make any filing with, or obtain any authorization, consent,
or approval of any third party, including, without limitation, any
Governmental Entity, in order to consummate the transactions contemplated
by this Agreement or the Ancillary Agreements.
(iii) Noncontravention. Neither the execution and the delivery of
----------------
this Agreement and the Ancillary Agreements to which the Target Stockholder
is a party, nor the consummation of the transactions contemplated hereby or
thereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any Governmental Entity, or court to which the Target Stockholder is
subject or, if the Target Stockholder is a corporation, any provision of
its charter or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any material agreement, contract, lease, license, instrument,
or other arrangement to which the Target Stockholder is a party or by which
he or it is bound or to which any of his or its assets is subject. Each of
the Major Target Stockholders has delivered to Parent a duly executed,
valid and enforceable Voting and Support Agreement, and each Target
Affiliate has delivered to Parent a duly executed, valid and enforceable
Affiliate Letter.
(iv) Brokers' Fees. The Target Stockholder has no Liability or
-------------
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement or the
Ancillary Agreements for which the Parent could become liable or obligated.
(v) Target Shares. The Target Stockholder holds of record and owns
-------------
beneficially (A) as of the date of this Agreement, the number of shares of
Target Common Stock and Target Preferred Stock set forth next to his or its
name in (S)4(a)(v) of
A-20
the Disclosure Schedule and (B) as of the Closing Date, the number of
shares of Target Common Stock set forth next to his or its name in
(S)4(a)(v) of the Disclosure Schedule, in each case, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. The Target Stockholder is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the
Target Stockholder to sell, transfer, or otherwise dispose of any capital
stock of the Target (other than this Agreement). The Target Stockholder is
not a party to any voting trust, proxy, or other agreement or understanding
with respect to the voting of any capital stock of the Target (except the
Voting and Support Agreement as applicable).
(b) Representations and Warranties Concerning the Parent and Merger Sub.
-------------------------------------------------------------------
The Parent represents and warrants to the Target Stockholders and the Target
that the statements contained in this (S)4(b) are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this (S)4).
(i) Organization of the Parent and Merger Sub. Each of the Parent and
-----------------------------------------
Merger Sub is a corporation duly incorporated, validly existing, and in
good standing under the laws of the State of Delaware. Each of Parent and
Merger Sub has the full corporate power and authority to carry on the
businesses in which it is engaged and in which it presently proposes to
engage. Each of the Parent and Merger Sub is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business requires such qualification, except to the extent that the
failure to be so qualified would not have a Material Adverse Effect on the
Parent and its Subsidiaries taken as a whole.
(ii) Authorization of Transaction. Each of the Parent and Merger Sub
----------------------------
has full corporate power and authority to execute and deliver this
Agreement and each of the Ancillary Agreements to which it is a party and
to perform its obligations hereunder and thereunder. No Parent stockholder
approval is required under the DGCL or the Parent's Organization Documents
to approve the Merger. This Agreement and each of the Ancillary Agreements
to which Parent or Merger Sub is a party constitutes the valid and legally
binding obligation of each of the Parent and Merger Sub, enforceable in
accordance with its terms and conditions, except that such enforceability
may be subject to (A) bankruptcy, insolvency, reorganization, moratorium,
or other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law). Except for the filing and effectiveness of the Registration
Statement under the Securities Act, the filing with and approval of Nasdaq
NMS and the filing and acceptance of the Certificate of Merger as
contemplated herein, neither the Parent nor the Merger Sub need give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Entity in order to consummate the transactions
contemplated by this Agreement.
A-21
(iii) Noncontravention. Neither the execution and the delivery of
----------------
this Agreement and the Ancillary Agreements to which the Parent or the
Merger Sub is a party, nor the consummation of the transactions
contemplated hereby or thereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any Governmental Entity, or court to which the Parent
or Merger Sub is subject, except where any such violation would not have a
Material Adverse Effect on Parent, or any provision of its Organization
Document.
(iv) Capitalization. As of the Closing Date, the shares of Parent
--------------
Common Stock to be issued pursuant to this Agreement will be duly
authorized and when issued and paid for as provided in this Agreement,
validly issued, fully paid and non-assessable and issued free of preemptive
rights. All of the shares of capital stock of Merger Sub are as of the
date of this Agreement, and will be at the Closing Date, owned of record
and beneficially by Parent.
(v) Brokers' Fees. Neither the Parent nor the Merger Sub has any
-------------
Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement or the Ancillary Agreements for which any Target Stockholder
could become liable or obligated.
(vi) Investment. The Parent is not acquiring the Target Common Stock
----------
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
5. Representations and Warranties Concerning the Target. The Target represents
----------------------------------------------------
and warrants to the Parent that the statements contained in this (S)5 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this (S)5),
except as set forth in the disclosure schedule delivered by the Target to the
Parent on the date hereof and initialed by the Parties (the "Disclosure
----------
Schedule"). Nothing in the Disclosure Schedule shall be deemed adequate to
- --------
disclose an exception to a representation or warranty made herein, however,
unless the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this (S)5.
(a) Organization, Qualification, and Corporate Power. The Target is a
------------------------------------------------
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware. The Target is duly qualified to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except for jurisdictions in which the failure to be
so qualified would not have a Material Adverse Effect on the Target. The Target
has full corporate power and authority and all material licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
in which it presently proposes to engage and to own and use the properties owned
and used by it. (S)5(a) of the Disclosure Schedule lists the
A-22
directors and officers of the Target. The minute books (containing the records
of meetings of the stockholders, the incorporator, the board of directors, and
any committees of the board of directors), the stock certificate books, and the
stock record books of the Target are correct and complete. The Target is not in
default under or in violation of any provision of its Organization Documents.
The copies of the Organization Documents of the Target which were previously
furnished to Parent are true, complete and correct copies of such documents as
in effect on the date of this Agreement.
(b) Capitalization. The entire authorized capital stock of the Target
--------------
consists of 40,682,942 shares of Target Common Stock and 26,352,939 shares of
Target Preferred Stock, of which 16,000,000 shares have been designated Target
Series A Preferred Stock and 10,352,939 shares have been designated Target
Series B Preferred Stock. As of the date of this Agreement there are 8,093,619
shares of Target Common Stock, 16,000,000 shares of Target Series A Preferred
Stock and 10,352,989 shares of Target Series B Preferred Stock issued and
outstanding. As of the Closing Date, 36,497,422 shares of Target Common Stock
will be issued and outstanding (assuming the issuance of all the Target
Retention Shares and the exercise of all outstanding options to purchase Target
Common Stock and exclusive of any shares of Target Common Stock that may be
issued upon conversion of the Novartis Note) and no shares of Target Preferred
Stock will be issued or outstanding. All of the issued and outstanding shares of
Target capital stock have been duly authorized, are validly issued, fully paid,
and nonassessable and free from any preemptive rights, and are held of record by
each of the respective Target Stockholders as set forth in (S)4(a)(v) of the
Disclosure Schedule. Except as set forth on (S)5(b) of the Disclosure Schedule,
there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Target to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Target. There are no securities of Target (except for
the Target Series A Preferred Stock, the Target Series B Preferred Stock and the
Novartis Note) convertible into or exchangeable for shares of capital stock or
voting securities of Target outstanding. There are no voting trusts (except for
the Voting and Support Agreements), proxies (except for the irrevocable proxies
entered into by the Major Target Stockholders in connection with the Voting and
Support Agreements), or other agreements or understandings with respect to the
voting of the capital stock of the Target. Except as set forth on (S)5(b) of the
Disclosure Schedule, the Target is not a party to any employment or other
agreements, and has not made any offers for employment, that contemplate or
obligate the Target to grant after the date of this Agreement any options or
issue any stock or other instruments convertible into stock. No bonds,
debentures, notes or other indebtedness of the Target having the right to vote
on any matters on which stockholders may vote ("Target Voting Debt") are issued
------------------
or outstanding. There are no outstanding obligations of the Target to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Target.
(c) Authority; Noncontravention.
---------------------------
(i) The Target has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, subject only to the required Target Stockholder approval as
provided in (S)5(aa) below. The Board of Directors of the Target has
approved this Agreement and the transactions contemplated
A-23
by this Agreement and has duly resolved to recommend to the Target
Stockholders that they approve this Agreement and the consummation of the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
the Target, subject only to the required Target Stockholder approval as
provided in (S)5(aa) below. This Agreement has been duly executed and
delivered by the Target and constitutes a valid and binding agreement of
the Target, enforceable against the Target in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors' rights generally and by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law). Target Stockholders representing in excess of the total votes of each
class of stock required to approve the Merger (and the other transactions
contemplated in this Agreement) as set forth in (S)5(aa) below each have
entered into a valid and enforceable Voting and Support Agreement
obligating such stockholders to vote in favor of the Merger, this Agreement
and other transactions contemplated by this Agreement. Target has caused to
be delivered a duly executed Affiliate Letter from each Target Affiliate.
The parties to the Voting and Support Agreements and the Target Affiliates
are each listed on (S)5(c)(i) of the Disclosure Schedule together with the
percentage of capital stock of each class held by each such Person. As of
the Closing, the Target will have obtained all required stockholder
approval to consummate the Merger and other transactions contemplated by
this Agreement. Target acknowledges and agrees that Parent will be entitled
to place appropriate legends on the certificate evidencing any Parent
Common Stock to be received by a Target Affiliate pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the terms of
the Affiliate Letter.
(ii) Neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (A) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental Entity, or
court to which the Target is subject, except where any such violation would
not have a Material Adverse Effect on Target, or any provision of the
Organization Documents of the Target or (B) except as set forth on
(S)5(c)(ii) of the Disclosure Schedule, conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
otherwise adversely affect the contractual or other legal rights or
privileges of the Target or require any notice under any material
agreement, contract, lease, license, instrument, or other arrangement to
which the Target is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest
upon any of its assets).
(iii) Except as set forth on (S)5(c)(iii) of the Disclosure Schedule,
no consent, approval, order or authorization of, or registration,
declaration or filing with any third party, including, without limitation,
any Governmental Entity, is required by or with respect to the Target in
connection with the execution and delivery of this Agreement by the Target
or the consummation by the Target of the transactions contemplated hereby,
A-24
except for the DGCL with respect to the filing and recordation of
appropriate merger or other documents.
(d) Brokers' Fees. None of the Target or any Affiliate thereof has any
-------------
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(e) Title to Assets. Except as set forth on (S)5(e) of the Disclosure
---------------
Schedule, the Target has good and marketable title to, or a valid leasehold
interest in, the properties and assets used by it, located on its premises, or
shown on the Most Recent Balance Sheet or acquired after the date thereof, free
and clear of all Security Interests, except for properties and assets disposed
of in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet.
(f) Subsidiaries. The Target has no Subsidiaries. The Target does not
------------
control, directly or indirectly, or have any direct or indirect equity or other
ownership interest in any Person.
(g) Financial Statements. Attached hereto as Exhibit B are the following
-------------------- ---------
financial statements (collectively the "Financial Statements"): (i) audited
--------------------
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1997,
December 31, 1998, and December 31, 1999 (the "Most Recent Fiscal Year End") for
---------------------------
the Target, and for the period from November 26, 1996 to the Most Recent Fiscal
Year End; and (ii) unaudited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flow (the "Most Recent
-----------
Financial Statements") as of and for the seven months ended July 31, 2000 (the
- --------------------
"Most Recent Fiscal Month End") for the Target. The Financial Statements
----------------------------
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Target as of such dates and the results of operations
of the Target for such periods, are correct and complete in all material
respects, and are consistent with the books and records of the Target (which
books and records are correct and complete in all material respects) and
represent only actual, bona fide transactions.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
------------------------------------------------
Recent Fiscal Year End, there has not been any adverse change in the business,
financial condition, operations, results of operations, or future prospects of
any of the Target. Without limiting the generality of the foregoing, since that
date, except as set forth on (S)5(h) of the Disclosure Schedule:
(i) the Target has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than in the Ordinary Course of
Business;
(ii) the Target has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $50,000 or outside the Ordinary Course
of Business;
(iii) no party (including the Target) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or
series of related agreements,
A-25
contracts, leases, and licenses) involving more than $50,000 to which the
Target is a party or by which it is bound;
(iv) the Target has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) the Target has not made any capital expenditure (or series of
related capital expenditures) either involving more than $50,000 or outside
the Ordinary Course of Business;
(vi) the Target has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $25,000 or outside the Ordinary Course of Business;
(vii) the Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$25,000 singly or $50,000 in the aggregate;
(viii) the Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Target has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) either
involving more than $25,000 or outside the Ordinary Course of Business;
(x) the Target has not granted any license or sublicense of any
rights under or with respect to any Target Proprietary Information and
Materials;
(xi) there has been no change made or authorized in the Organization
Documents of the Target;
(xii) the Target has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock;
(xiii) the Target has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash
or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiv) the Target has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(xv) the Target has not made any loan to, or entered into any other
transaction with, any of its directors, officers, Affiliates, stockholders
and employees outside the Ordinary Course of Business;
A-26
(xvi) the Target has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(xvii) the Target has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) the Target has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, employees
and consultants (or taken any such action with respect to any other
Employee Benefit Plan);
(xix) the Target has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) the Target has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Target; and
(xxii) the Target has not committed to any of the foregoing.
(i) Undisclosed Liabilities. Except as set forth in (S)5(i) of the
-----------------------
Disclosure Schedule, the Target does not have any material Liability, except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
(j) Legal Compliance. Each of the Target and its predecessors and
----------------
Affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of Governmental Entities, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failures to so comply, except for any
failures that would not have a Material Adverse Effect on the Target. The Target
has made all required registrations and filings with and submissions to all
applicable Governmental Entities relating to its operations as currently
conducted and as proposed to be conducted, except for any failures that would
not have a Material Adverse Effect on the Target. The Target holds all permits,
licenses, certificates, franchises, registrations, variances, exemptions, orders
and approvals of all Governmental Entities which are material to the operation
of its business (the "Target Permits"). The Target is in compliance in all
--------------
material respects with the terms of the Target Permits. Except as set forth on
(S)5(j) of the Disclosure Schedule, the Target has not received any notice or
other written communication from or on behalf of any Governmental Entity
alleging, and, to the Knowledge of the Target, there is no basis for, (i) any
violation of any Target Permit or (ii) that the Target requires any Target
Permit required for its business that is not currently held by it.
A-27
(k) Tax Matters.
-----------
(i) The Target has duly and timely filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Target (whether or not shown on
any Tax Return) have been paid. The Target currently is not the beneficiary
of any extension of time within which to file any Tax Return. No claim
either (A) in writing or (B) as to which the Target has Knowledge has ever
been made by an authority in a jurisdiction where the Target does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of any of the Target
that arose in connection with any failure (or alleged failure) to pay any
Tax.
(ii) The Target has withheld and timely paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party and has complied with all applicable laws and regulations relating to
the withholding and payment of such Taxes.
(iii) Neither the Target nor any Key Target Stockholder, officer or
employee responsible for Tax matters of the Target expects any Tax
authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of the Target that has been claimed or raised by any Tax
authority either (A) in writing or (B) as to which the Target has
Knowledge, and no disputes or claims regarding any Tax Liability of Target
have otherwise been claimed or raised. (S)5(k)(iii) of the Disclosure
Schedule lists all federal, state, local, and foreign income Tax Returns
filed with respect to the Target for taxable periods ended on or after
December 31, 1996, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit. The
Target has delivered to the Parent correct and complete copies of all
federal income Tax Returns, notices, examination reports, and statements of
deficiencies assessed against or agreed to by the Target since December 31,
1996.
(iv) The Target has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Target has not filed a consent, or has entered or will enter
into any agreement under Code (S)341(f) (or any analogous state law
provision) concerning collapsible corporations. The Target has not made
any payments, is not obligated to make any payments, and is not a party to
any agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code (S)280G (or any
analogous state law provision). The Target has not been a United States
real property holding corporation within the meaning of Code (S)897(c)(2)
during the applicable period specified in Code (S)897(c)(1)(A)(ii). The
Target has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Code (S)6662. The Target is not a party to
any Tax allocation or sharing agreement. The Target (A) has not been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the
A-28
common parent of which was the Target) or (B) does not have any Liability
for the Taxes of any Person (other than the Target) under Treasury
Regulations (S)1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(vi) (S)5(k)(vi) of the Disclosure Schedule sets forth the following
information with respect to the Target as of the Most Recent Fiscal Year
End (as well as on an estimated pro forma basis as of October 31, 2000
giving effect to the consummation of the transactions contemplated hereby):
(A) the amount of any net operating loss; and (B) the amount of any Code
(S)382 limitations. If the Closing occurs on or after December 1, 2000,
(S)5(k)(vi) of the Disclosure Schedule will as of the Closing Date set
forth the information described in (A) and (B) of the previous sentence as
on an estimated pro forma basis as of the month end prior to the Closing.
(vii) The unpaid Taxes of the Target (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Target in filing its
Tax Returns.
(viii) No written power of attorney that has been granted by the
Target (other than to the Target) currently is in force with respect to any
matter relating to Taxes.
(ix) The Target has not (A) agreed to make, and is not required to
make, any adjustment under (S)481(a) of the Code: (B) issued or assumed any
obligations described in (S)279(a) or (S)163(i) of the Code, or (C) issued
any registration required obligation, within the meaning of (S)163(f)(2) of
the Code, that is not in registered form.
(l) Real Property.
-------------
The Target does not own any real property. (S)5(l) of the Disclosure
Schedule lists and describes briefly all real property leased or subleased to
the Target. The Target has delivered to the Parent correct and complete copies
of the leases and subleases listed in (S)5(l) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in (S)5(l) of
the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, enforceable, and
in full force and effect;
(ii) the lease or sublease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(iii) the Target is not, and to the Knowledge of the Target, no other
party to the lease or sublease is in breach or default, and to the
Knowledge of the Target, no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
A-29
(iv) no party to the lease or sublease has repudiated any provision
thereof;
(v) there are no disputes, oral agreements, or forbearance programs
in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vii) the Target has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have received
all approvals of Governmental Entities (including licenses and permits)
required in connection with the operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and regulations,
except where any failure to receive any such approval would not have a
Material Adverse Effect on the Target; and
(ix) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said
facilities.
(m) Proprietary Information and Materials.
-------------------------------------
(i) Set forth in (S)5(m)(i) of the Disclosure Schedule is a complete
list as of the date hereof and as of the Closing Date of each of the
following items: (A) all United States and foreign patents (including
utility, model and design patents, supplementary protection certificates,
certificates of invention and the like), patent applications (including
applications for utility, model and design patents, supplementary
protection certificates, certificates of invention and the like), and all
divisionals, continuations, continuations-in-part, reissues, renewals,
extensions or additions to any such patents and patent applications,
registrations of trademarks (including service marks), trade names,
Internet domain names, URLs and applications therefor, business names and
registrations therefor, and registrations of copyrights and applications
therefor that are owned by the Target or licensed on an exclusive basis to
the Target (collectively, the "Owned Proprietary Information"); (B) all
-----------------------------
licenses, sublicenses, agreements, contracts, waivers, permissions,
documents and other arrangements (whether written or oral) pursuant to
which the Target is entitled to use any Proprietary Information and
Materials owned by any third party (the "Third Party Licenses"); and (C)
--------------------
all licenses, sublicenses, agreements, contracts, waivers, permissions,
documents and other arrangements (whether written or oral) under which the
Target has granted any Person the right to use any Target Proprietary
Information and Materials, including any material transfer agreements (the
"Target Licenses"). The Target has delivered to Parent true and correct
---------------
copies of each of the items required to be set forth in (S)5(m)(i) of the
Disclosure Schedule.
(ii) The Target is the sole legal and beneficial owner of, and
possesses legally enforceable rights in, all Owned Proprietary Information.
The Target is licensed to use the Third Party Licenses. Except as set
forth in (S)5(m)(ii)(A) of the Disclosure Schedule, to the Knowledge of
Target, the Target possesses legally enforceable rights in, or
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otherwise has the right to use, all Target Proprietary Information and
Materials (other than the Owned Proprietary Information and the Third Party
Licenses). Except as set forth in (S)5(m)(ii)(B) of the Disclosure
Schedule, the Target has not developed jointly with any other Person any
Target Proprietary Information and Materials with respect to which such
other Person has any rights. To the Knowledge of Target, each item of Owned
Proprietary Information, each item subject to any Third Party License and,
except as set forth in (S)5(m)(ii)(A) of the Disclosure Schedule, each
other item of Target Proprietary Information and Materials is valid,
enforceable, unexpired and subsisting. To the Knowledge of the Target, the
Target Proprietary Information and Materials constitute all of the
intellectual property and other technology necessary to enable the Target
to conduct its business as heretofore and as currently being conducted.
(iii) Except as set forth in (S)5(m)(iii) of the Disclosure Schedule,
the Target has not entered into any agreements or licenses or created any
Security Interests, leases, equities, claims, options, restrictions, rights
of first refusal, title retention agreements or other exceptions to title
which affect the Target Proprietary Information and Materials. Except as
set forth in (S)5(m)(iii) of the Disclosure Schedule, the Target has not
granted any licenses, immunities, options or other rights to the Target
Proprietary Information and Materials which would provide a third party
with a defense to patent infringement proceedings, either domestic or
foreign.
(iv) The Target and, to the Knowledge of the Target, all third
parties are in compliance in all respects with the Third Party Licenses and
the Target Licenses. To the Knowledge of the Target, no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification or acceleration under a material Third
Party License or Target License.
(v) Except as set forth on (S)5(m)(v) of the Disclosure Schedule,
Target is not, and will not be as a result of the execution, delivery or
performance of this Agreement or the consummation of the Merger or the
other transactions contemplated hereby, in material breach, violation or
default of any Third Party Licenses or Target Licenses. Except where
Target fails to obtain a consent to the transfers of any Third Party
Licenses and Target Licenses listed in (S)5(c)(ii) of the Disclosure
Schedule, the rights of the Target or the Surviving Corporation to the
Target Proprietary Information and Materials will not be affected by the
execution, delivery or performance of this Agreement or the consummation of
the Merger or the other transactions contemplated hereby.
(vi) All registrations and filings related to the Owned Proprietary
Information are in good standing. All maintenance and renewal fees
necessary to preserve the rights of the Target in respect of the Owned
Proprietary Information have been paid. The registrations and filings
relating to the Owned Proprietary Information are proceeding and, to the
Knowledge of the Target, there are no material facts which could (A)
significantly undermine those registrations or filings (including any facts
which could cause the invalidity or unenforceability of, or reduce to a
significant extent the scope of protection of, any patents arising from
such applications) or (B) otherwise restrict the Target's or the Surviving
Corporation's quiet enjoyment of the Owned Proprietary Information.
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(vii) Except as set forth on (S)5(m)(vii) of the Disclosure Schedule,
there are no allegations, claims or proceedings instituted or pending which
challenge the rights possessed by the Target to use the Target Proprietary
Information and Materials, including without limitation any interferences,
oppositions, cancellations or other contested proceedings, nor, to the
Knowledge of the Target, is there any valid Basis for the same.
(viii) There are no outstanding claims or proceedings instituted or
pending by any third party challenging the ownership, priority, scope or
validity or effectiveness of any Target Proprietary Information and
Materials.
(ix) Except as set forth in (S)5(m)(ix)(A) of the Disclosure
Schedule, to the Knowledge of the Target, none of the Target's present
practices of any technologies could serve as the Basis for any claim by a
third party for infringement of such third party's Proprietary Information
and Materials. Except as set forth in (S)5(m)(ix)(B) of the Disclosure
Schedule, to the Knowledge of the Target, none of the Target's past
practices of any technologies could serve as the Basis for any claim by a
third party for infringement of such third party's Proprietary Information
and Materials. Neither the Target nor, to the Knowledge of the Target, any
current or former employee, officer, director or stockholder of the Target,
nor any current or former consultant or other independent contractor to the
Target, has misappropriated or is misappropriating or has made or is making
unlawful use of any Proprietary Information and Materials or any other
confidential or proprietary information, materials or other property of any
Person for the benefit of Target. Every current and former employee of the
Target has executed and delivered a non-competition agreement substantially
in the form previously approved by the Target and provided to Parent. To
the Knowledge of Target, the activities of the Target's employees on behalf
of the Target do not violate any agreements or arrangements known to the
Target which any such employees have with former employers or any other
Person. Without limiting the generality of the foregoing, the copy of the
letter dated January 31, 1997, from Novartis Produckte AG (the legal
successor of Ciba-Geigy AG), waiving all of its non-competition rights
against Dr. Nicholas Lydon pursuant to his employment agreement with
Novartis Produckte AG, which letter has been furnished by the Target to the
Parent, is accurate and complete and in full force and effect.
(x) All commercially reasonable measures have been taken to
maintain the confidentiality of the Target Proprietary Information and
Materials, and of all other information the value of which to the Target is
contingent upon maintenance of the confidentiality thereof. Without
limiting the generality of the foregoing, except as set forth in (S)5(m)(x)
of the Disclosure Schedule, each current and former employee, officer and
director of the Target, and each former and current consultant and each
other independent contractor to the Target who has had access to
proprietary information with respect to the Target, has entered into an
agreement suitable to vest ownership rights to any inventions, discoveries,
innovations, improvements, creations, developments, results and works in
the Target and has entered into an agreement for maintaining the
confidential information of the Target. All of the foregoing agreements are
in full force and effect in accordance with their respective terms. To the
Knowledge of the Target,
A-32
there is no unauthorized use, infringement or misappropriation of the
Target Proprietary Information and Materials by any current or former
employee, officer, director or stockholder, nor by any current or former
consultant or independent contractor to the Target.
(n) Tangible Assets. Except as set forth on (S)5(n) of the Disclosure
---------------
Schedule, the Target owns or leases all buildings, machinery, equipment, and
other tangible assets necessary for the conduct of its business as presently
conducted. Except as set forth on (S)5(n) of the Disclosure Schedule, each such
tangible asset has been maintained in accordance with normal industry practice
and is in good operating condition and repair (subject to normal wear and tear).
(o) Contracts. (S)5(o) of the Disclosure Schedule lists the following
---------
contracts and other agreements to which the Target is a party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a material loss to the Target, or involve consideration in excess
of $50,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $25,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Target Stockholders or their
Affiliates (other than the Target);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing annual compensation
in excess of $10,000 or providing severance benefits;
A-33
(x) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, consultants, Scientific Advisory Board
members, employees, Affiliates and stockholders outside the Ordinary Course
of Business;
(xi) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Target;
(xii) all agreements, together with any modification thereof or
subsequent agreement related thereto, pursuant to which the Target has
licensed from, or to, a third party any Target Proprietary Information and
Materials; or
(xiii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $50,000.
The Target has delivered to the Parent a correct and complete copy of each
written agreement listed in (S)5(o) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in (S)5(o) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) no consent, notice or approval of any third
party is required thereunder to consummate the transactions contemplated by this
Agreement, (C) except as set forth on (S)5(c)(iii) of the Disclosure Schedule,
the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the Merger, the Upstream
Merger and the consummation of the transactions contemplated hereby and thereby;
(D) the Target is not, and to the Knowledge of the Target, no other party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement, or a basis of force majeure or other claim of
excusable delay under the agreement; and (E) no party has repudiated any
provision of the agreement.
(p) Affiliated Transactions. Except as set forth in (S)5(p) of the
-----------------------
Disclosure Schedule, the Target does not, directly or indirectly, have any
agreement, arrangement or understanding with or commitment or obligation to or
from any of its stockholders, officers, directors, consultants, Scientific
Advisory Board members, or employees (or any of their respective Affiliates),
whether written or oral. Without limiting the generality of the foregoing, no
stockholder, officer, director or employee of the Target (or any of their
respective Affiliates) is, directly or indirectly, a joint investor or co-
venturer with, or owner, lessor, lessee, licensor or licensee of any property,
real or personal, tangible or intangible, owner or used, by the Target and no
such person is, directly or indirectly, a lender to or debtor of the Target.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
-----------------------------
the Target are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, and are current and
collectible.
(r) Insurance. (S)5(r) of the Disclosure Schedule sets forth the following
---------
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which the Target has
A-34
been a party, a named insured, or otherwise the beneficiary of coverage at any
time since the incorporation of the Target:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Target nor, to the Knowledge of Target, any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, except where
any such breach or default would not have a Material Adverse Effect on the
Target, or permit termination, modification, or acceleration, under the policy;
and (D) no party to the policy has repudiated any provision thereof. The Target
has been covered since the Target's incorporation by insurance in scope and
amount customary and reasonable for the business in which it has engaged during
the aforementioned period. (S)5(r) of the Disclosure Schedule describes any
self-insurance arrangements affecting the Target.
(s) Litigation. The Target (i) is not subject to any outstanding
----------
injunction, judgment, order, decree, ruling, or charge and (ii) is not a party
and, to the Knowledge of the Target, except as set forth on (S)5(s) of the
Disclosure Schedule, is not threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(t) Product Warranty. Neither the Target nor any of its Affiliates has
----------------
manufactured, sold, leased, or delivered any product in the Ordinary Course of
Business or otherwise.
(u) Product Liability. None of the Target nor any of its Affiliates has
-----------------
any material Liability (and, to the Knowledge of the Target, there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
material Liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by any of the Target or any of its Affiliates.
A-35
(v) Employees and Labor Matters.
---------------------------
(i) To the Knowledge of the Target, no executive, key employee, or
group of employees has any plans to terminate employment with the Target.
(ii) (S)5(v)(ii) of the Disclosure Schedule contains a list of (A)
all full, part-time and hourly employees of the Target as of the date of
this Agreement (the "Target Employees"), (B) all consultants and other
----------------
independent contractors to the Target who have rendered services to the
Target within the last twelve (12) months and (C) the directors, executive
officers and Scientific Advisory Board members of the Target, including an
organizational chart. (S)5(v)(ii) of the Disclosure Schedule sets forth
for each Target Employee the following information as of the date hereof:
(v) title, (w) supervisor, (x) base or hourly compensation, (y) accrued and
unused vacation and sick pay and (z) bonuses paid or accrued with respect
to the current fiscal year.
(iii) Except as contemplated by (S)6(e) and (S)8(a)(vi) hereof,
neither Parent nor the Target will have any responsibility for continuing
any individual in the employ (or retaining any Person as a consultant) of
Parent or the Target from and after the Closing or have any liability for
any severance payments or other benefit payments to or similar arrangements
with any such Person.
(iv) Since the Target's incorporation, the Target has not experienced
any work stoppage, slow-down, picket, strike, lock-out or other labor
disturbance, nor is any such work stoppage, slow-down, picket, strike,
lock-out or other labor disturbance presently occurring or, to the
Knowledge of the Target, threatened. To the Knowledge of the Target, (A)
there are no organizational efforts presently being made or threatened by
or on behalf of any labor union with respect to any Target Employees, and
(B) during the last five (5) years, no union or other labor organization
has attempted to organize any of current or former employees of the Target.
(v) There are no claims, controversies, labor disturbances,
investigations, proceedings or complaints pending or, to the Knowledge of
the Target, threatened, by any Governmental Entity or any Target Employees
or any party or parties representing any of such Target Employees or any
former employer of any current Target Employees, against the Target before
any court, arbitrator or other tribunal. There are no unfair labor
practice charges, charges of discrimination, wrongful termination or other
similar complaints pending against the Target involving employees now or
previously employed by the Target which could have a Material Adverse
Effect on the Target, nor, to the Knowledge of the Target, except as set
forth on (S)5(v)(v) of the Disclosure Schedule, do any facts or
circumstances exist that could provide a Basis for the same.
(vi) The Target has complied with all applicable laws, regulations
and rules relating to employees, the employment of labor, and the safety
and health of employees, including without limitation, all laws,
regulations and rules relating to occupational health and safety,
discrimination, unemployment, wages, hours, the Family and Medical Leave
Act of 1993, collective bargaining, and the collection and payment of
withholding Taxes and similar Taxes except to the extent that non-
compliance with any such laws,
A-36
regulations and rules has not had and could not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect. To the
Knowledge of the Target, no facts or circumstances exist that could provide
a reasonable Basis for a claim of wrongful termination by a current or
former employee of the Target.
(vii) To the Knowledge of the Target, no member of the existing or
prior work force of the Target has been subjected to any occupational
health or safety hazard as a result of its service to the Target that,
individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect.
(w) Employee Benefits.
-----------------
(i) (S)5(w) of the Disclosure Schedule lists each Employee Benefit
Plan that the Target maintains or to which the Target contributes.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and
other applicable laws.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part 6
of Subtitle B of Title I of ERISA and of Code (S)4980B have been met
with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid
to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of the Target. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with
respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code
(S)401(a) and has received, within the last two years, a favorable
determination letter from the Internal Revenue Service. No event has
occurred and no facts or circumstances exist which may cause or result
in the loss or revocation of such determination.
(E) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with
PBGC methods, factors, and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for determination.
A-37
(F) The Target has delivered to the Parent correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that any of the Target
and the Controlled Group of Corporations which includes the Target
maintains or ever has maintained or to which any of them contributes, ever
has contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely
or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted or, to
the Knowledge of the Target, threatened.
(B) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of the Target,
threatened. To the Knowledge of the Target there is no Basis for any
such action, suit, proceeding, hearing, or investigation.
(C) The Target has not incurred, and none of the Key Target
Stockholders and the directors and officers (and employees with
responsibility for employee benefits matters) of the Target has any
reason to expect that the Target will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) None of the Target and the other members of the Controlled
Group of Corporations that includes the Target contributes to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
(iv) The Target does not maintain and has never maintained or does
not contribute, never has contributed, or never has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health,
or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents (other
than in accordance with Code (S)4980B or applicable state law).
A-38
(x) Guaranties. The Target is not a guarantor or otherwise is liable for
----------
any Liability or obligation (including indebtedness) of any other Person.
(y) Environmental, Health, and Safety.
---------------------------------
(i) Each of the Target and its predecessors and Affiliates has
complied with and is in compliance with all Environmental, Health, and
Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against any of them alleging any failure so to comply. Without limiting
the generality of the preceding sentence, each of the Target and its
predecessors and Affiliates has obtained and, except as set forth on
(S)5(y)(i) of the Disclosure Schedule, has been in compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws. A list of such permits, licenses
and other authorizations is set forth in (S)5(y)(i) of the Disclosure
Schedule.
(ii) The Target has no material Liability (and none of the Target,
its predecessors and Affiliates has handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any property
or facility in any manner that could form the Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Target giving rise to any material Liability,
or assumed or undertaken any material Liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, including any material
Liability for response costs, corrective action costs, personal injury,
property damages, natural resources damages or attorneys' fees, or for any
reason under any Environmental, Health, and Safety Law.
(iii) Except as set forth on (S)5(y)(iii) of the Disclosure Schedule,
all properties and equipment used in the business of the Target, its
predecessors and Affiliates have been maintained by the Target free of
asbestos, PCB's, methylene chloride, trichloroethylene, 1,2-trans-
dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances.
(iv) Except as set forth on (S)5(y)(iv) of the Disclosure Schedule,
neither the Target, nor its predecessors or Affiliates has received any
written or oral notice, report or other information regarding any actual or
alleged violation of Environmental, Health, and Safety Laws, or any
liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to any of them or its
facilities arising under Environmental, Health, and Safety Laws.
(v) To the Knowledge of the Target, none of the following exists at
any property or facility operated by the Target as a result of the business
activities of Target:
A-39
(1) underground storage tanks, (2) materials or equipment containing
polychlorinated biphenyls, or (3) landfills, surface impoundments, or
disposal areas.
(vi) Neither this Agreement nor the consummation of the transactions
contemplated by this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called "transaction-
triggered" or "responsible property transfer" Environmental, Health, and
Safety Laws.
(vii) No facts, events or conditions relating to the past or present
facilities, properties or operations of the Target, or its predecessors or
Affiliates will prevent, hinder or limit continued compliance with
Environmental, Health, and Safety Laws, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental, Health, and
Safety Laws, or give rise to any other material Liabilities pursuant to
Environmental, Health, and Safety Laws, including without limitation any
relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or
natural resources damage.
(z) Certain Business Relationships with the Target. Except as set forth on
----------------------------------------------
(S)5(z) of the Disclosure Schedule, the Target has not been involved in any
business arrangement or relationship with any of the Target Stockholders or
their Affiliates within the past twelve (12) months, and none of the Target
Stockholders and their Affiliates owns any asset, tangible or intangible, which
is used in the business of the Target.
(aa) Vote Required. The affirmative vote of (i) the holders of a majority
-------------
of the outstanding shares of Target Common Stock and the Target Preferred Stock,
(ii) the holders of 66% of the outstanding shares of Target Series A Preferred
Stock and (iii) the holders of 66% of the outstanding shares of Target Series B
Preferred Stock, is the only vote of the holders of any class or series of the
capital stock of the Target, or any other securities entitled to vote, necessary
to approve this Agreement, the Merger and the transactions contemplated hereby.
(bb) Year 2000. The occurrence, recording, processing or use of any date
---------
or time in the year 2000 has not adversely affected the Target's business or
operations, as presently conducted, as a result of any failure or error by any
hardware or software (whether or not in the control of the Target) to properly
or accurately recognize, record, process or use such date or time.
(cc) Hart-Scott-Rodino. Without limiting the representations and
-----------------
warranties set forth in (S)5(c) and (S)5(g) above, (i) the Target is its own
Ultimate Parent Entity as that term is defined in the Hart-Scott-Rodino Act,
(ii) the Target does not produce or derive, directly or indirectly, annual sales
or revenues in excess of $1,000,000 from products within industries 2000-3999 as
coded in the Standard Industrial Classification Manual (1972 edition) published
by the Executive Office of the President, Office of Management and Budget, and
(iii) as reflected in the Target's Most Recent Financial Statements, the Target
has total assets lower than the minimum levels required for a filing of a
Notification and Report Form for Certain Mergers and Acquisitions (the "Form")
----
under the Hart-Scott-Rodino Act. Accordingly, the Target is not required to
file the Form in connection with this Agreement, the Merger or the transactions
contemplated hereby.
A-40
(dd) Disclosure. To the Knowledge of the Target, neither this Agreement,
----------
nor any of the Schedules and Exhibits attached hereto, contains any untrue
statement of a material fact, and none of this Agreement, the Schedules and
Exhibits attached hereto, omits to state a material fact necessary in order to
make the statements contained herein or therein not misleading.
(ee) Registration Statement. The Registration Statement, at the time it
----------------------
becomes effective, and as supplemented or amended, if applicable, will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and the Proxy Statement included therein will not contain, and as
supplemented or amended, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that this representation and warranty shall apply
only to statements or omissions in the Registration Statement or Proxy Statement
based upon information concerning the Target or furnished by or on behalf of the
Target expressly for use therein. Target makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub that is
contained in any of the foregoing documents.
6. Pre-Closing Covenants
---------------------
(a) Target. During the period from the date of this Agreement and
------
continuing until the Effective Time:
(i) Ordinary Course. Without limiting anything else in this
---------------
Agreement, the Target shall carry on its business in the usual, regular and
ordinary course in all material respects, shall not enter into any
contracts or arrangements other than in the Ordinary Course of Business
(except that the Target shall be permitted to enter into a lease agreement
for an extension of its existing lease space on terms and conditions
acceptable to the Target and approved by the Parent), and shall use all
reasonable efforts to preserve intact its present business organizations
and preserve its relationships with customers, suppliers and others having
business dealings with it.
(ii) Dividends; Changes in Share Capital. The Target shall not, and
-----------------------------------
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, or (iii) repurchase, redeem
or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock.
(iii) Issuance of Securities. Except as contemplated by (S)6(a)(iv)
----------------------
and except for the Target Retention Shares and the shares that may be
granted to Replacement Employees hereunder, the Target shall not issue,
grant, deliver or sell, or authorize or propose the issuance, grant,
delivery or sale of, any shares of its capital stock of any class, any
Target Voting Debt or any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any such shares or Target
Voting Debt, or enter into any agreement with respect to any of the
foregoing.
A-41
(iv) Conversion. The Target and the Target Stockholders shall cause
----------
all outstanding shares of Target Series A Preferred Stock and Target Series
B Preferred Stock to be converted into that number of shares of Target
Common Stock set forth on (S)6(a)(iv) of the Disclosure Schedule. The
Target and the Target Stockholders shall cause all options to acquire
capital stock to be exercised or terminated and all repurchase rights
governing restricted stock awards to be cancelled, except for the Target
Retention Shares and any Unapproved 280G Shares, as set forth on
(S)6(a)(iv) of the Disclosure Schedule.
(v) Ancillary Agreements. No party to any Ancillary Agreement
--------------------
shall revoke, terminate or amend such agreement.
(vi) Organization Documents. Except to the extent required to
----------------------
comply with their respective obligations hereunder or required by law, the
Target shall not amend or propose to amend its Organization Documents.
(vii) Indebtedness. The Target shall not (i) incur any indebtedness
------------
for borrowed money or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any debt securities of the
Target or guarantee any debt securities of other Persons, (ii) make any
loans, advances or capital contributions to, or investments in, any other
Person, (iii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) other than in the Ordinary Course of Business, and except as
required by (S)8(a)(v) and (S)8(a)(xx) hereof, (iv) restructure or
refinance its existing indebtedness (except as required by (S)8(a)(v)(B))
or (v) enter into any derivative contracts, investments in marketable
securities, payments, discharges or satisfactions.
(viii) Benefit Plans. Other than adjustments in compensation in the
-------------
Ordinary Course of Business, the Target shall not (i) increase the
compensation payable or to become payable to any of its executive officers
or employees, (ii) take any action with respect to the grant of any
severance or termination pay, or stay, bonus or other incentive
arrangement, (iii) adopt any new Employee Benefit Plan, (iv) restructure or
refinance its existing indebtedness, or (v) amend or modify any Employee
Benefit Plan, except as required by law or as contemplated by (S)6(e) below
with respect to the Target Retention Shares and any Unapproved 280G Shares.
(ix) Acquisitions. The Target shall not acquire or agree to acquire
------------
(i) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof or (ii) any
assets that are material, individually or in the aggregate, to the Target.
(x) Liquidation. The Target shall not liquidate or dissolve or
-----------
obligate itself to do so.
(xi) Sales; Liens and Encumbrances. The Target shall not sell,
-----------------------------
lease, license, mortgage or otherwise encumber or subject to any Security
Interest or otherwise dispose
A-42
of any property or assets of the Target other than encumbrances and
security interest that are incurred in the Ordinary Course of Business
consistent with past practice.
(xii) Material Agreements; New Agreements. The Target shall not
-----------------------------------
terminate or amend, or cause or suffer to be committed any act that would
result in a breach or violation of any material term of or (with or without
notice or the passage of time or both) constitute a default under or
otherwise give any Person a basis for non-performance under, any agreement
listed in (S)5(o) of the Disclosure Schedule. The Target shall refrain
from becoming a party to any contract or commitment other than in the
Ordinary Course of Business, except for employment contracts with any
individual who commences employment prior to the Closing and is hired
specifically to replace a Target Employee who has terminated his employment
with the Target subsequent to the date of this Agreement, and except for
employment agreements entered into as a result of the acceptance of offers
of employment with any individual who commences employment prior to the
Closing Date (all such employees, collectively, the "Replacement
-----------
Employees"), provided that (i) the total number of Target Employees upon
---------
Closing does not exceed forty-one (41) unless otherwise mutually agreed to
in writing by Target and Parent and (ii) Parent consents to the hiring,
proposed compensation, and all other terms and conditions of each proposed
new Target Employee. The Target shall meet all of its contractual
obligations in accordance with their respective terms.
(xiii) Capital Expenditures. The Target shall not make or agree to
--------------------
make any new capital expenditure or expenditures that, in the aggregate,
are in excess of $50,000; provided, however, that Parent's consent to
-------- -------
capital expenditures in excess of such amount shall not be unreasonably
withheld.
(xiv) Stock Plans. The Target shall not (i) make any amendment to
-----------
the Target Stock Plan or any stock agreement as a result of this Agreement
or in contemplation of the Merger, (ii) grant or issue or agree to grant or
issue stock awards under the Target Stock Plan, except for the issuance of
(x) the Target Retention Shares or (y) shares to Replacement Employees in
such amounts and with such terms as are consistent with past practice, or
(iii) except as expressly permitted in (S)3(a), accelerate the vesting of
any stock awards under the Target Stock Plan.
(xv) Compliance with Legal Requirements. The Target shall comply
----------------------------------
promptly with all requirements that applicable laws, rules and regulations
may impose upon it and its operations and with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and
furnish information to, Parent in connection with any such requirements
imposed upon Parent, or upon any of its Affiliates, in connection therewith
or herewith.
(xvi) Consents. The Target shall use its best efforts to obtain any
--------
consent, authorization or approval of, or exemption by, any Person required
to be obtained or made by any party hereto in connection with the
transactions contemplated hereby or the taking of any action in connection
with the consummation thereof. Without limiting the foregoing, the Target
and the Key Target Stockholders shall use its and their respective
reasonable best efforts to obtain the consent of each of the third parties
set forth in
A-43
(S)5(c)(iii) to (A) the assignment to the Surviving Corporation of the
Target's rights under each of their respective agreements with the Target
in connection with the Merger and/or (B) the assignment to Parent of the
Surviving Corporation's rights under each of their respective agreements
with the Target in connection with the Upstream Merger.
(xvii) Maintain Insurance. The Target shall maintain its insurance
------------------
policies set forth in (S)5(r) of the Disclosure Schedule in full force and
effect and shall not do, permit or willingly allow to be done any act by
which any of such policies may be suspended, impaired or cancelled.
(xviii) Discharge. The Target shall not cancel, compromise, release
---------
or discharge any claim of the Target upon or against any Person or waive
any right of the Target of material value, and not discharge any lien upon
any asset of the Target or compromise any debt or other obligation of the
Target to any Person other than liens, debts or obligations with respect to
current liabilities of the Target.
(xix) Actions. The Target shall not institute, settle or agree to
-------
settle any claim, suit, proceeding, inquiry, investigation or action before
any Governmental Entity.
(xx) Permits. The Target shall maintain in full force and effect,
-------
and comply with, all Target Permits.
(xxi) Tax Assessments and Audits. The Target shall furnish promptly
--------------------------
to Purchaser a copy of all notices of proposed assessment or similar
notices or reports that are received from any taxing authority and which
relate to the Target's operations for periods ending on or prior to the
Closing Date. The Target Stockholders shall cause the Target to promptly
inform Parent, and permit the participation in and control by Parent, of
any investigation, audit or other proceeding by a Governmental Entity in
connection with any Taxes, assessment, governmental charge or duty and
shall not consent to any settlement or final determination in any
proceeding without the prior written consent of Parent.
(xxii) Other Actions. The Target shall not take any action, nor fail
-------------
to take any action, that could reasonably be expected to result in (A) any
of the representations or warranties of the Target set forth in this
Agreement becoming untrue, or (B) any of the conditions to the Merger set
forth in (S)8(a) not being satisfied.
(xxiii) Related Party Transactions. Except for the issuance of the
--------------------------
Target Retention Shares, the Target shall not enter into any agreement,
arrangement or transaction with any officer, director, employee,
consultant, Scientific Advisory Board member, securityholder or Affiliate
of the Target.
(xxiv) No Solicitation. The Target, its officers and directors, and
---------------
the Target Stockholders shall not, and shall cause their respective
representatives (including, without limitation, investment bankers,
attorneys and accountants) not to, directly or indirectly, through any
officer, director, agent or otherwise, enter into, solicit, initiate,
conduct or continue any discussions or negotiations with, or encourage or
respond to any inquiries or proposals by, or provide any information to, or
otherwise cooperate in any other way
A-44
with, any corporation, partnership, person or other entity or group, other
than Parent, concerning any sale of all or any material portion of the
assets of or the business of, or any material number of shares of capital
stock of or other securities in, the Target, or any merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving
the Target or any license, joint venture, partnership, collaboration or
similar arrangement directly or indirectly involving the Target, or engage
in a public or private offering of shares of its capital stock (any of the
foregoing transactions, a "Transaction"). Each of the Target Stockholders,
-----------
and the Target hereby represents that it is not now engaged in discussions
or negotiations with any party other than the Parent with respect to any
Transaction. None of the Major Target Stockholders will vote any of their
respective shares of the capital stock of the Target in favor of any
Transaction, except for the Merger. Each Target Stockholder, the Target and
its officers and directors shall (A) promptly notify Parent (orally and in
writing) if any offer is made to it, any discussions or negotiations are
sought to be initiated with it, any inquiry, proposal or contact is made or
any information is requested from it with respect to any Transaction, (B)
promptly notify Parent of the terms of any proposal that it may receive in
respect of any Transaction, and the identity of the prospective purchaser,
(C) promptly provide Parent with a copy of any such offer, if written, or a
written summary of such offer, if not in writing, and (D) promptly inform
Parent of any material changes to the terms of any Transaction of which it
is aware.
(xxv) Intention. The Target shall not authorize, commit to, agree
---------
to or enter into any agreement, commitment, arrangement, or obligation to
take any action prohibited by this (S)6(a).
(xxvi) Notice of Developments. The Target shall report to Parent on
----------------------
operational matters. Each Party shall (A) confer on a regular and frequent
basis with the other, and (B) promptly advise the other orally and in
writing of (x) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any respect, (y) the failure by
it to comply with or satisfy in any respect any covenant, condition or
agreement required to be complied with or satisfied by it under this
Agreement or (z) any change, event or circumstance that has had or could
reasonably be expected to have a Material Adverse Effect on such Party or
materially adversely affect its ability to consummate the Merger in a
timely manner; provided, however, that no such notification shall affect
-------- -------
the representations, warranties, covenants or agreements of the parties or
the conditions to the obligations of the parties under this Agreement.
Each Party agrees that, to the extent practicable, it will consult with the
other Party with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each Party will keep the other Party apprised of the status
of matters relating to completion of the transactions contemplated hereby.
No disclosure by any Party pursuant to this (S)6(a)(xxvi) shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
(xxvii) Access to Financial and Operation Information. Subject to
---------------------------------------------
compliance with applicable law, upon reasonable notice, Target will give
Parent, its directors,
A-45
officers, counsel, financial advisors, auditors and other authorized
representatives or employees reasonable access during normal business hours
to the offices, properties, books and records of Target and will furnish to
the foregoing persons and entities such financial, operating data and
scientific data as such persons and entities may reasonably request and
will instruct Target's employees, counsel, auditors and financial advisors
to cooperate with Parent in its investigation of the business of Target and
in the planning for the combination of the operations of Target and Parent
following the consummation of the Merger, provided, that, no investigation
-------- ----
pursuant to this (S)6(a)(xxvii) shall affect any representation or warranty
given by Target or the Target Stockholders hereunder. Parent acknowledges
and agrees that its receipt and use of such information shall be subject to
the terms and conditions set forth in each of the Non-Disclosure Agreement
dated July 27, 2000, as amended August 21, 2000, the Non-Disclosure
Agreement dated August 4, 2000, and the Material Transfer Agreement dated
June 21, 2000, each by and between the Target and Parent.
(xxviii) Change in Tax or Accounting Methods or Policies. The Target
-----------------------------------------------
shall not, without Parent's written consent, change any of its tax or
accounting methods or policies or make any reclassification of assets or
liabilities (except as required by law or GAAP) or change or make any new
Tax elections, file any amended Tax Return or settle or compromise any
federal, state, local or foreign Tax Liability.
(xxix) Director and Officer Insurance. Target shall have obtained
------------------------------
an endorsement extending the period in which claims may be made under its
existing directors' and officers' liability insurance policy for a period
of two (2) years following the Effective Time.
(b) The Parent and the Merger Sub. During the period from the date of this
-----------------------------
Agreement and continuing until the Effective Time:
(i) Organizational Documents. Except to the extent required to
------------------------
comply with their respective obligations hereunder, required by law or
required by the rules and regulations of any applicable Governmental
Entity, Parent and Merger Sub shall not amend or propose to amend their
respective Organization Documents.
(ii) Other Actions. Parent shall not, and shall not permit any of
-------------
its Subsidiaries to, take any action that could reasonably be expected to
result in any of the conditions to the Merger set forth in (S)8(b) not
being satisfied.
(c) Further Assurances. Each of the Parties and each of the Major Target
------------------
Stockholders shall use its reasonable best efforts, to take all actions and to
do all things necessary, proper or advisable to consummate the Merger and the
transactions contemplated by this Agreement, including without limitation using
its reasonable best efforts to ensure that the conditions to the obligations of
the other Parties and the Target Stockholders to consummate the Merger are
satisfied. Each Party and each Major Target Stockholder shall use its
reasonable best efforts to obtain, at its expense, all waivers, permits,
consents, approvals or other authorizations from Governmental Entities and to
effect all registrations, filings and notices with or to Governmental Entities,
as may be required for such Person to consummate the transactions
A-46
contemplated by this Agreement and the otherwise comply with all applicable laws
and regulations in connection with the consummation of the transactions
contemplated by this Agreement. The Target and the Major Target Stockholders
shall use its and their reasonable best efforts to obtain, at its expense, (i)
all such waivers, consents or approvals from third parties, and to give all such
notices to third parties, as are required to be obtained to satisfy the
conditions set forth in (S)8(a), and (ii) one hundred percent (100%) of the
Support Agreements. Parent shall file the application for and pay the requisite
listing fee for listing on Nasdaq NMS of the shares of Parent Common Stock to be
issued in the Merger.
(d) Stockholder Approval; Proxy Statement/Prospectus. As promptly as
------------------------------------------------
practicable after the execution of this Agreement, Parent and the Target shall
prepare and Parent shall file with the SEC the Registration Statement, in which
the Proxy Statement will be included as a prospectus. Parent and Target shall
use all commercially reasonable efforts to cause the Registration Statement to
become effective as promptly after such filing as practicable. Parent and
Target shall make all necessary filings with respect to the Merger under the
Securities Act, the Securities Exchange Act, applicable state blue sky laws and
the rules and regulations thereunder. Parent and Target shall mail the Proxy
Statement to the Target Stockholders as promptly as practicable after the
Registration Statement is declared effective, but in any event within twenty
(20) days of the date on which the Registration Statement is declared effective.
Target will cooperate with all reasonable requests of Parent in connection with
the preparation, filing and response to comments on the Registration Statement
and Proxy Statement. Management and the Board of Directors of Target shall
recommend to the Target Stockholders approval of this Agreement, the Ancillary
Agreements, the Merger and the transactions contemplated hereby and thereby,
together with any matters incident thereto, and shall oppose any third party
proposal or other action that is inconsistent with this Agreement, the Merger or
the consummation of the transactions contemplated hereby. The Proxy Statement
will include the recommendation of the Board of Directors of Target for the
approval of this Agreement and the Merger. Target will promptly advise Parent,
and Parent will promptly advise Target, in writing if at any time prior to the
Effective Time either Target or Parent shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the Registration
Statement or Proxy Statement in order to make the statements contained or
incorporated by reference therein not misleading or to comply with applicable
law. Target shall use its reasonable best efforts to obtain, as promptly as
practicable, all approvals of the holders of outstanding capital stock of Target
necessary under applicable law or the Organization Documents of Target at a
special meeting of stockholders held by Target in accordance with the applicable
requirements of the DGCL. The Target agrees that it will not take any action or
enter into any transaction prior to the meeting of stockholders referred to
above that would be reasonably likely to cause a delay in the effectiveness of
the Registration Statement or require a recirculation of the Proxy Statement
following its initial mailing to the Target Stockholders.
(e) Target Retention Shares. Subject to the terms and conditions of this
-----------------------
(S)6(e), and to Target Stockholder approval in accordance with the provisions of
Code (S)280G if such approval is necessary in order to exempt a payment under
this (S)6(e) from the definition of parachute payment under Code (S)280G,
Target, by action of the Board of Directors and Target Stockholders, if
applicable, shall be permitted to issue restricted stock awards of up to
1,517,786 shares of Target Common Stock to Target Employees (including
Replacement Employees) under the Target Stock Plan (the "Target Retention
----------------
Shares"). As a condition to receiving the Target
- ------
A-47
Retention Shares, each Target Employee selected to receive Target Retention
Shares (each, a "Retained Target Employee" and collectively, the "Retained
------------------------ --------
Target Employees") shall sign each of the Employment Agreement (or a standard
- ----------------
Parent offer letter), the Noncompetition Agreement, the Arbitration Agreement
and the Inventions Agreement and an agreement containing the terms and
conditions of the Target Retention Shares. The Target Retention Shares shall be
subject to repurchase rights which will lapse over a three (3) year period from
the date of issuance, shall be converted into the right to receive the Per Share
Purchase Price in accordance with (S)3(a)(iii) above, and shall have such other
terms and conditions as Target and Parent shall mutually agree, all of which
will be evidenced by written agreements executed by the Retained Target
Employees in form and substance reasonably satisfactory to Parent, and such
agreement and the restrictions contained therein shall be assignable to Parent
from and after the Closing Date. Any shares of Parent Common Stock issued in
exchange for such Target Retention Shares shall be subject to substantially
similar restrictions, terms and conditions to the Target Retention Shares
(including repurchase rights which will lapse over an identical period to the
Target Retention Shares), and Parent shall be entitled to maintain custody of
the Target Retention Shares until the repurchase rights lapse. Target hereby
agrees to amend the Target Stock Plan as necessary or desirable to effectuate
the purposes of this (S)6(e). Target further agrees to require recipients of the
Target Retention Shares, as a condition to their receipt of the Target Retention
Shares, to refrain from making any Code (S)83(b) elections.
(f) Unapproved 280G Shares. Any shares of Parent Common Stock issued in
----------------------
exchange for any Unapproved 280G Shares shall be subject to substantially
similar terms and conditions to the Unapproved 280G Shares (including repurchase
rights which will lapse over an identical period to the Target Retention
Shares), and Parent shall be entitled to maintain custody of the Unapproved 280G
Shares until the repurchase rights lapse. Target hereby agrees to amend the
Target Stock Plan and any outstanding restricted stock purchase agreements in
respect of the Unapproved 280G Shares as necessary or desirable to effectuate
the purposes of this (S)6(f).
(g) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Parent and the Target
Stockholder Representative; provided, however, that Parent may make any public
-------- -------
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities without
obtaining such approval (in which case Parent will use its reasonable best
efforts to advise Target Stockholder Representative and provide Target
Stockholder Representative with the opportunity to review such disclosure prior
to making the disclosure, provided that the failure to do so shall not
constitute a breach of this Agreement by Parent).
(h) Novartis Note. Prior to the Closing, Target shall take or cause to be
-------------
taken all action necessary to cause either of the conditions in (S)8(a)(v) to be
satisfied as contemplated thereby.
(i) Market Manipulation. Target and each of the Major Target Stockholders
-------------------
covenants and agrees that neither it nor any of its Affiliates will:
(i) for the period between the tenth (10th) trading day prior to
the Closing Date and the Closing Date, acquire or sell, or agree, offer, seek or
propose to acquire or sell, or
A-48
cause to be acquired or effected or sold, ownership (including, but not limited
to, beneficial ownership as defined in Rule 13d-3 under the Securities Exchange
Act) of any securities of Parent, or any rights or options to acquire any such
ownership (including from a third party); or
(ii) for the period between the date of this Agreement and the
Closing Date, engage in any scheme, device or other activity in violation of the
federal securities laws or regulations, including Rule 10b-5 or Regulation M
under the Securities Exchange Act, or any state securities laws or regulations,
with respect to any securities of Parent; or
(iii) advise, assist or encourage any other Person in connection with
any of the foregoing.
7. Post-Closing Covenants. The Target Stockholders and the Parent agree as
----------------------
follows with respect to the period following the Closing.
(a) General. In case at any time after the Closing any further action is
-------
necessary or desirable to carry out the purposes of this Agreement, each of the
Target Stockholders and the Parent will take such further action (including the
execution and delivery of such further instruments and documents) as any of the
Target Stockholder Representative or Parent reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under (S)9 below). The Target Stockholders
acknowledge and agree that from and after the Closing the Parent will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Target generated by
or on behalf of Target or in the possession of Target or any of the Target
Employees, and the Key Target Stockholders agree to provide the Parent with
possession of all such items as promptly as practicable after the Closing.
(b) Litigation Support. In the event and for so long as Parent is
------------------
actively or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Target, the Target Stockholders will cooperate with Parent and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
Parent (unless the Parent is entitled to indemnification therefor under (S)9
below).
(c) Transition. None of the Target Stockholders or any of their
----------
Affiliates will take any action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier, or other business
associate of the Target from maintaining the same business relationships with
the Target after the Closing as it maintained with the Target prior to the
Closing. Each of the Target Stockholders or any of their Affiliates will refer
all inquiries relating to the businesses of the Target to the Parent from and
after the Closing.
(d) Confidentiality. Each of the Target Stockholders will treat and hold
---------------
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Parent or destroy, at the request and option of the Parent, all
tangible embodiments (and all copies) of the Confidential Information
A-49
which are in his or its possession. In the event that any of the Target
Stockholders is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Target Stockholder will notify the Parent promptly of the
request or requirement so that the Parent may seek an appropriate protective
order or waive compliance with the provisions of this (S)7(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, any of the
Target Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, that
Target Stockholder may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Target Stockholder shall use his or its
- -------- -------
reasonable best efforts to obtain, at the reasonable request of the Parent, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Parent
shall designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(e) Director and Officer Insurance. For a period of two (2) years after
------------------------------
the Effective Time, Parent shall cause the Surviving Corporation or Parent, as
the case may be, to pay premiums under the directors' and officers' insurance
policy described in (S)6(a)(xxix).
8. Conditions to Obligation to Close.
---------------------------------
(a) Conditions to Obligation of the Parent and Merger Sub. The obligation
-----------------------------------------------------
of the Parent and Merger Sub to consummate the Merger and the transactions to be
performed by either one in connection with the Closing is subject to
satisfaction of the following conditions:
(i) each of the representations and warranties set forth in (S)4(a)
and (S)5 above that is qualified as to materiality shall have been true and
correct when made and shall be true and correct on and as of the Closing
Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be
true and correct as of such certain date), and each of the representations
and warranties set forth in (S)4(a) and (S)5 above that is not so qualified
shall have been true and correct in all material respects when made and
shall be true and correct in all material respects on and as of the Closing
Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be
true and correct in all material respects as of such certain date);
(ii) the Target, its officers and directors and Target Stockholders,
as the case may be, shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) this Agreement shall have been approved and adopted, and the
Merger shall have been approved and adopted, by the requisite vote, as set
forth in (S)5(aa) and under the DGCL and all other applicable law, by the
Target Stockholders, and no more than 9.9% of the shares of capital stock
of the Target shall be Dissenting Shares;
A-50
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) have the effect of making any
of the transactions contemplated by this Agreement illegal, (D) affect
adversely the right of the Parent to own the shares of capital stock of the
Target and to control the Target, or (E) affect adversely the right of the
Target to own its assets and to operate its business (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(v) the Target shall have either (A) repaid in full the Novartis
Note solely out of the working capital of the Target (and without giving
effect to any proceeds of the Parent Loan or any other funds from Parent),
and such working capital shall remain positive following such payment and
in an amount sufficient to pay all Liabilities of Target that accrue on or
before the Closing Date, and without directly or indirectly using any
proceeds of the Parent Loan (or any other funds from Parent) or (B) (I)
amended the Novartis Note to provide for (x) automatic conversion thereof
into Target Common Stock immediately prior to the Closing and (y) the
subsequent conversion of such Target Common Stock into Parent Common Stock
at the Closing in accordance with (S)3(a)(iii) above (and such amendment
shall be legally binding and enforceable against the Target and the holder
of the Novartis Note and such amendment shall be reasonably acceptable to
Parent) and (II) immediately prior to the Closing, caused the Novartis Note
to be duly and validly converted into the number of shares of Target Common
Stock provided for in the Novartis Note as so amended;
(vi) eighty percent (80%) of the Target Employees listed on
(S)8(a)(vi) of the Disclosure Schedule (which list shall comprise all of
the scientists of the Target employed by the Target on the date of this
Agreement) shall have executed, delivered and entered into: (A) an
employment agreement substantially in the form of Exhibit C-3 hereto (each
-----------
an "Employment Agreement"); (B) a noncompetition agreement substantially in
--------------------
the form of Exhibit C-4 hereto (each a "Noncompetition Agreement"); (C) a
----------- ------------------------
mutual agreement to arbitrate substantially in the form of Exhibit C-5
---
hereto (each an "Arbitration Agreement"); and (D) a proprietary information
---------------------
and inventions agreement individually in the form of Exhibit C-6 hereto
-----------
(each an "Inventions Agreement"). Nicholas Lydon shall have entered into:
--------------------
an employment agreement substantially in the form of Exhibit C-7 hereto
-----------
(the "Lydon Employment Agreement"); a noncompetition agreement
--------------------------
substantially in the form of Exhibit C-8 hereto (the "Lydon Noncompetition
----------- --------------------
Agreement"); an Arbitration Agreement; and an Inventions Agreement. David
---------
Armistead shall have entered into: an employment agreement substantially in
the form of Exhibit C-9 hereto (the "Armistead Employment Agreement" and
----------- ------------------------------
together with the Lydon Employment Agreement, the "Executive Employment
--------------------
Agreements"); a noncompetition agreement substantially in the form of
----------
Exhibit C-10 hereto (the "Armistead Noncompetition Agreement" and together
------------ ----------------------------------
with the Lydon Noncompetition Agreement, the "Executive Noncompetition
------------------------
Agreements"); an Arbitration Agreement; and an Inventions Agreement. The
----------
Employment Agreements, the Noncompetition Agreements, the Arbitration
Agreements, the Inventions Agreements, the Executive
A-51
Employment Agreements, and the Executive Noncompetition Agreements shall be
in full force and effect as of the Closing Date.
(vii) the Parent shall have received from counsel to Target an
opinion in form and substance as set forth in Exhibit D-1 attached hereto,
-----------
addressed to the Parent and Merger Sub, and dated as of the Closing Date,
and the Parent shall have received from counsel to the Major Target
Stockholders an opinion in form and substance as set forth in Exhibit D-2
-----------
attached hereto, addressed to the Parent and Merger Sub, and dated as of
the Closing Date;
(viii) counsel to the Parent shall have rendered an opinion to Parent
to the effect that the Merger will constitute a reorganization within the
meaning of Code (S)368(a). In rendering such opinion, counsel to Parent
shall be entitled to rely upon, among other things, reasonable assumptions
as well as representations of Target, Parent and Merger Sub as requested to
be made by counsel to Parent as such counsel deems necessary;
(ix) no present or future commitment, agreement, arrangement,
contract or other obligation shall exist between the Target or any of the
Target Stockholders and any Person with respect to a Transaction;
(x) the Target and Target Stockholders shall have obtained and each
shall be in effect, all consents, orders, assignments, waivers or
authorizations, that are required as a result of the Merger, including,
without limitation, those referred to in (S)4(a)(ii), (S)4(b)(ii), and
(S)5(c) above, except those for which failure to obtain such consents,
assignments, waivers or authorizations would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or the Surviving
Corporation, or upon the consummation of the Merger and of the transactions
contemplated hereby;
(xi) the Registration Statement shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order;
(xii) listing and approval on Nasdaq NMS of shares of Parent Common
Stock to be issued in the Merger shall have been completed;
(xiii) there shall not have occurred since the date of this Agreement
any Material Adverse Effect on the Target;
(xiv) all of the outstanding shares of Target Series A Preferred
Stock and Target Series B Preferred Stock shall have been duly and validly
converted into that number of shares of Company Common Stock set forth on
(S)6(a)(iv) of the Disclosure Schedule, and all options to acquire capital
stock shall have been exercised or terminated and all repurchase rights
governing restricted stock awards shall have been cancelled as set forth on
(S)6(a)(iv) of the Disclosure Schedule (except with respect to the Target
Retention Shares and any Unapproved 280G Shares);
A-52
(xv) the certificates and/or Affidavits (including all stock
powers) representing all the outstanding shares of capital stock of the
Target, including the Certificates (other than Dissenting Shares), shall
have been delivered to Parent;
(xvi) Parent shall have received the written resignation of each of
the officers and directors of the Target;
(xvii) the Ancillary Agreements shall be in full force and effect;
(xviii) prior to the Closing Date, the Target shall cause to be
delivered to the Parent and the Merger Sub Support Agreements signed by the
holders of at least 90.1% of the Target Common Stock issued and outstanding
immediately prior to the Closing; provided, that, such 90.1% shall include
-------- ----
the Major Target Stockholders; and provided further, that, the execution by
-------- ------- ----
a Target Stockholder of a Voting and Support Agreement shall be deemed to
satisfy the requirement that such Target Stockholder sign a Support
Agreement;
(xix) prior to the Closing Date, the Target shall have (i) given
Parent written notice and written evidence of the termination in accordance
with their respective terms of (A) all existing employment agreements with
employees of the Target, (B) all agreements with third party consultants to
the Target, (C) all agreements with Scientific Advisory Board members, (D)
the Management Rights Letter with Schroder Ventures International dated as
of March 25, 1999, (E) the Amended and Restated Stockholders' Agreement
dated as of March 25, 1999, and (F) the Investors' Rights Agreement dated
as of March 25, 1999, and (ii) forgiven the loan to Leticia Toledo-Sherman
and received payment in full of all amounts outstanding under loans payable
by the Target Stockholders to the Target and provided Parent with written
evidence of same;
(xx) Target shall have delivered to Parent a properly executed and
acknowledged certification (a "FIRPTA Certificate"), in form and substance
------------------
reasonably acceptable to Parent, which states that shares of capital stock
of Target do not constitute "United States real property interests" under
Section 897(c) of the Code and otherwise satisfies the requirements of
Treasury Regulations Section 1.1445-2(c)(3) to exempt the transactions
contemplated hereunder from withholding pursuant to the provisions of the
Foreign Investment in Real Property Tax Act. In addition, simultaneously
with delivery of such FIRPTA Certificate, Target shall have provided to
Parent, as agent for Target, a form of notice to the Internal Revenue
Service in accordance with the requirements of Treasury Regulation Sections
1.897-2(h)(2) and in form and substance reasonably acceptable to Parent
along with written authorization for Parent to deliver such notice form to
the Internal Revenue Service on behalf of Target upon the Closing of the
Merger;
(xxi) all actions to be taken by the Target or the Target
Stockholders in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Parent and Merger Sub
and their counsel; and
A-53
(xxii) the President of the Target shall have delivered to the Parent
a certificate to the effect that each of the conditions specified above in
(S)8(a)(i)-(xxi) is satisfied in all respects.
The Parent may waive any condition specified in this (S)8(a) (other than the
condition in (S)8(a)(v)) if it executes a writing so stating at or prior to the
Closing.
(b) Conditions to Obligation of the Target. The obligation of the Target
--------------------------------------
to consummate the Merger and the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) each of the representations and warranties set forth in
(S)4(b) above that is qualified as to materiality shall have been true and
correct when made and shall be true and correct on and as of the Closing
Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be
true and correct as of such certain date), and each of the representations
and warranties set forth in (S)4(b) above that is not so qualified shall
have been true and correct in all material respects when made and shall be
true and correct in all material respects on and as of the Closing Date as
if made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date);
(ii) the Parent shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Registration Statement shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order;
(iv) listing and approval on Nasdaq NMS of shares of Parent Common
Stock to be issued in the Merger shall have been completed;
(v) an officer of the Parent shall have delivered to the Target a
certificate to the effect that each of the conditions specified above in
(S)8(b)(i)-(iv) is satisfied in all respects.
The Target may waive any condition specified in this (S)8(b) if the Target
Stockholder Representative executes a writing so stating at or prior to the
Closing.
9. Remedies for Breaches of Agreement; Indemnification.
---------------------------------------------------
(a) Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of representation and warranty at the
time of Closing) and continue in full force and effect for a period of eighteen
(18) months thereafter. Notwithstanding the foregoing, (i) the representations
and warranties contained in (S)(S)4(a) and 5(k) and the covenants and agreements
of the Target and the Target Stockholders contained herein shall survive the
Closing (even if the Parent knew or
A-54
had reason to know of any misrepresentation or breach of representation and
warranty or covenant or agreement at the time of the Closing) and continue in
full force and effect indefinitely thereafter (subject to any applicable
statutes of limitations, provided that for the representations and warranties
contained in (S)5(k), such representations and warranties shall survive for the
applicable statutes of limitations and for a period of sixty (60) days
thereafter solely to permit notice within such 60 day period of claims that
arise within the applicable statutes of limitations), and (ii) the
representations and warranties contained in (S)(S)5(m), 5(s) and 5(y) shall
survive the Closing (even if the Parent knew or had reason to know of any
misrepresentation or breach of representation and warranty at the time of the
Closing) and continue in full force and effect for a period of five (5) years
thereafter.
(b) Indemnification Provisions for Benefit of the Parent.
----------------------------------------------------
(i) Each Target Stockholder shall severally indemnify, save and
hold the Parent, Merger Sub and each of their respective directors,
officers, employees, Affiliates (including the Surviving Corporation),
successors, transferees and assignees, and their respective representatives
(collectively, the "Parent Indemnitees") harmless from and against the
------------------
entirety of any and all Adverse Consequences incurred or suffered in
connection with, arising out of, resulting from or relating or incident to
any untruth, inaccuracy or incorrectness of, or other breach of, any
representation or warranty made by such Target Stockholder in (S)4(a).
(ii) The Major Target Stockholders shall jointly indemnify, save and
hold the Parent Indemnitees harmless from and against the entirety of any
and all Adverse Consequences incurred or suffered in connection with,
arising out of, resulting from or relating or incident to any untruth,
inaccuracy or incorrectness of, or other breach of, any representation or
warranty in (S)5.
(iii) The Major Target Stockholders shall jointly indemnify, save and
hold the Parent Indemnitees harmless from and against the entirety of any
and all Adverse Consequences incurred or suffered in connection with,
arising out of, resulting from or relating or incident to the
nonfulfillment, nonperformance, nonobservance or other breach or violation
of, or default under, any covenant or agreement made by the Target or the
Target Stockholders in or pursuant to this Agreement.
(iv) Subject to the proviso contained in this sentence, for purposes
of this (S)9, whether there has occurred a breach of any representation or
warranty which is qualified as to Knowledge, materiality or both, shall be
determined as if such representation or warranty were made without any such
qualification; provided, however, that solely with respect to a breach of
any representation or warranty contained in (S)5(m) (and with respect to a
breach of any representation or warranty contained in (S)5(i) or (S)5(s) to
the extent any such breach is also a breach of (S)5(m)) which is qualified
as to Knowledge, such determination shall be made after giving effect to
the Knowledge qualification contained in such representation or warranty.
(c) Indemnification Provisions for Benefit of the Target Stockholders. The
-----------------------------------------------------------------
Parent shall indemnify, save and hold each of the Target Stockholders and their
respective directors,
A-55
officers, employees, Affiliates, successors, transferees and assignees, and
their respective representatives harmless from and against the entirety of any
and all Adverse Consequences incurred or suffered in connection with, arising
out of, resulting from or relating or incident to: (i) any untruth, inaccuracy
or incorrectness of, or other breach of, any representation or warranty in
(S)4(b) and/or (ii) the nonfulfillment, nonperformance, nonobservance or other
breach or violation of, or default under, any covenant or agreement made by the
Parent in or pursuant to this Agreement. For purposes of this (S)9, whether
there has occurred a breach of any representation or warranty which is qualified
as to Knowledge, materiality or both, shall be determined as if such
representation or warranty were made without any such qualification.
(d) Tax Indemnification. Target Stockholders shall be responsible for and
-------------------
pay and shall indemnify, save and hold harmless the Parent and Merger Sub (and
each of their respective Affiliates, successors and assigns) from and against:
(a) all Taxes (to the extent not already paid by Target as of the Closing Date
as contemplated by the terms and conditions of this Agreement) imposed on the
Target or for which the Target is liable with respect to (i) all periods ending
on or prior to the Closing Date, (ii) any Taxes resulting from any (S)83(b)
elections made with respect to the Target Retention Shares, or (iii) any period
beginning before the Closing Date and ending after the Closing Date, but only
with respect to the portion of such period up to and including the Closing Date
(such portion, a "Pre-Closing Partial Period") to the extent such Taxes exceed
--------------------------
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Most Recent Balance Sheet, as adjusted for the passage of time
through the Closing Date for Taxes incurred in the Ordinary Course of Business;
and (b) any costs or expenses with respect to the Taxes indemnified hereunder.
For purposes of this (S)9(d), Taxes shall include the amount of Taxes which
would have been paid but for the application of any credit or net operating or
capital loss deduction attributable to any period (or portion thereof) ending
after the Closing Date, but shall not include (i) amounts which would have been
paid but for the application of any credit or net operating or capital loss
deductions attributable to any period (or portion thereof) ending on or before
the Closing Date and (ii) Taxes (other than Taxes covered by (S)10(b) of this
Agreement) imposed on Target or for which Target is liable by reason of the
Merger, unless such Taxes result from or are related to the breach or inaccuracy
of any representation, warranty or covenant made by Target or the Target
Stockholders in connection with or pursuant to this Agreement.
(e) Matters Involving Third Parties.
-------------------------------
(i) If any third party shall notify any Party (the "Indemnified
-----------
Party") with respect to any matter (a "Third Party Claim") which may give
----- -----------------
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this (S)9(e), then the Indemnified Party shall
-------------------
promptly notify each Indemnifying Party thereof in writing; provided,
--------
however, that no delay on the part of the Indemnified Party in notifying
-------
any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is materially prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as:
A-56
(A) the Indemnifying Party notifies the Indemnified Party in
writing within fifteen (15) days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third
Party Claim;
(B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder. In making such determination, the Indemnified Party shall
take into account any funds remaining in the Escrow Account and the
availability of any insurance proceeds to the Indemnifying Party;
(C) the Third Party Claim does not seek injunctive or other
equitable relief that could affect an ongoing research or development
program of Parent or any of its Subsidiaries (including the Surviving
Corporation); and
(D) the Indemnifying Party conducts the defense of the Third
Party Claim in a reasonably active and diligent manner.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with (S)9(e)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
(iv) In the event any of the conditions in (S)9(e)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and (subject to the last sentence of this (S)9(e)(iv)) consent to the entry
of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Party
will reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying Party will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim to the fullest extent provided in this (S)9.
Notwithstanding the foregoing, the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with respect to the
Third Party Claim where such judgment or settlement involves the payment of
monetary damages without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably).
A-57
(v) Each Party acknowledges and agrees that it shall not be
entitled to seek indemnification from any other Party (or otherwise seek to
reduce the amount available under the Indemnity Basket) for any Third Party
Claim without: (A) for any non-litigation matter, giving notice of such
Third Party Claim to such other Party in accordance with (S)9(e)(i) above
(including the proviso contained therein); or (B) for a litigation matter,
(x) giving notice of such Third Party Claim to such other Party in
accordance with (S)9(e)(i) above (including the proviso contained therein)
and (y) giving such other Party the opportunity to defend against such
Third Party Claim in accordance with (S)9(e)(ii) above. Parent may, in its
sole discretion and without providing any notice, defend, handle and
dispose of as it sees fit any Third Party Claim so long as it does not seek
indemnification (or otherwise seek to reduce the amount available under the
Indemnity Basket) with respect to such Third Party Claim. In addition,
Parent may, in its sole discretion, assume the defense of, and handle and
dispose of as it sees fit any Third Party Claim for which it has previously
sought indemnification (or sought to reduce the amount available under the
Indemnity Basket) by providing notice of its intention to so defend, handle
and dispose of such Third Party Claim and that it no longer shall seek
indemnity (or reduction of the amount available under the Indemnity Basket)
with respect to such Third Party Claim (except for any amounts accrued and
unpaid by the Target Stockholders, or accrued and not used to reduce the
amount available under the Indemnity Basket, prior to the date of such
notice from Parent). In the event that Parent provides such notice, the
Target Stockholders shall promptly and reasonably cooperate with Parent in
transferring the defense of such Third Party Claim.
(f) Satisfaction of Claims. The claims for indemnification pursuant to
----------------------
(S)9(b) are referred to as "Parent Indemnity Claims." Notwithstanding the
-----------------------
foregoing, Parent Indemnity Claims shall include claims for indemnity by Parent
or Merger Sub pursuant to (S)9(d) and (S)9(e). Parent Indemnity Claims that are
not in dispute by the Parties shall be satisfied (i) first by payment of cash or
other immediately available funds from the Target Stockholders, and (ii)
thereafter by return of Parent Common Stock valued at the then current fair
market value, in each case within ten (10) calendar days of delivery of notice
by Parent or Merger Sub of the nature and amount of the Parent Indemnity Claim.
The claims for indemnification pursuant to (S)9(c) are referred to as "Target
------
Stockholder Indemnity Claims." Target Stockholder Indemnity Claims that are not
- ----------------------------
in dispute by the Parties shall be satisfied by payment of cash or other
immediately available funds from the Parent within ten (10) calendar days of
delivery of notice by Target Stockholders of the nature and amount of the Target
Stockholder Indemnity Claim.
(g) Other Indemnification Provisions. From and after the date of this
--------------------------------
Agreement and before the Closing, the indemnification provisions contained in
this (S)9, the termination provisions set forth in (S)11 hereof and the rights
set forth in the third sentence in this (S)9(g) shall be the sole and exclusive
remedies of each of the Parties for breach of any representation, warranty,
covenant or agreement herein. From and after the Closing, the indemnification
provisions contained in this (S)9 and the rights set forth in the third sentence
in this (S)9(g) shall be the sole and exclusive remedy of each of the Parties
for breach of any representation, warranty, covenant or agreement herein. The
foregoing indemnification provisions are in addition to, and not in derogation
of, any equitable remedy, any remedy for fraud, or any remedy under the
Securities Act or the rules and regulations promulgated thereunder which any
Party may have against another Party. Notwithstanding the foregoing, Parent
shall have no liability to Target,
A-58
any Affiliate of Target or any Target Stockholder with respect to any violation
of the Securities Act or the rules and regulations promulgated thereunder to the
extent such liability is based upon information concerning the Target or
furnished by or on behalf of the Target. Each of the Target Stockholders hereby
agrees that with respect to any action, suit, proceeding, complaint, claim, or
demand brought by the Parent or the Merger Sub against such Target Stockholder
(whether such action, suit, proceeding, complaint, claim, or demand is pursuant
to a direct claim or Third Party Claim or pursuant to this Agreement, applicable
law, or otherwise) he or it will not make any claim for indemnification against
Target by reason of the fact that he or it was a director, officer, employee, or
agent of Target or was serving at the request of Target as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise).
(h) Limitations on Indemnity.
------------------------
(i) The maximum amount for which each Target Stockholder shall be
severally liable for Adverse Consequences relating to Parent Indemnity
Claims pursuant to (S)9(b)(i) hereof shall be an amount no greater than
such Target Stockholder's pro rata share of the Actual Aggregate
Consideration (as determined by multiplying such Target Stockholder's
percentage ownership of the outstanding shares of Target Common Stock
immediately prior to the Closing (after taking into account all actions to
be taken pursuant to (S)3(a) above) times the Actual Aggregate
Consideration), and no less than such Target Stockholder's pro rata share
(calculated as described above) of One Hundred Sixty-Five Million Dollars
($165,000,000). The aggregate amount of liability of all Target
Stockholders hereunder shall not be not less than One Hundred Sixty-Five
Million Dollars ($165,000,000).
(ii) The maximum aggregate amount for which the Major Target
Stockholders shall be jointly liable for Adverse Consequences relating to
Parent Indemnity Claims pursuant to (S)9(b)(ii) hereof shall be an amount
no greater than an amount equal to the product of (x) thirty percent (30%)
multiplied by (y) the Actual Aggregate Consideration multiplied by (z) the
percentage obtained by dividing (I) the total number of shares of Target
Common Stock held by all Major Target Stockholders immediately prior to the
Closing (after taking into account all actions to be taken pursuant to
(S)3(a) above) by (II) the total number of shares of Target Common Stock
outstanding immediately prior to the Closing (after taking into account all
actions to be taken pursuant to (S)3(a) above) (such amount described in
this subsection (z), the "Major Target Stockholder Percentage"), and no
-----------------------------------
less than Forty-One Million Dollars ($41,000,000); provided that for
-------- ----
breaches of representations and warranties set forth in (S)5(k) and (S)5(s)
(other than litigation involving a breach of any representation or warranty
set forth in (S)5(m) or (S)5(y)), the maximum aggregate amount shall be an
amount no greater than an amount equal to the product of (aa) the Major
Target Stockholder Percentage multiplied by (bb) the Actual Aggregate
Consideration, and no less than One Hundred Thirty-Six Million Dollars
($136,000,000). In no event shall the liability of any Major Target
Stockholder pursuant to this (S)9(h)(ii) exceed such Major Target
Stockholder's pro rata share of the Actual Aggregate Consideration.
A-59
(iii) The maximum aggregate amount for which the Major Target
Stockholders shall be jointly liable for Parent Indemnity Claims pursuant
to (S)9(b)(iii) hereof shall be an amount no greater than an amount equal
to the product of (x) the Actual Aggregate Consideration multiplied by (y)
the Major Target Stockholder Percentage, and no less than One Hundred
Thirty-Six Million Dollars ($136,000,000). In no event shall the liability
of any Major Target Stockholder pursuant to this (S)9(h)(iii) exceed such
Major Target Stockholder's pro rata share of the Actual Aggregate
Consideration.
(iv) Except as otherwise provided in the immediately following
sentence, Parent shall not seek, or be entitled to, indemnification from
the Major Target Stockholders pursuant to (S)9(b)(ii) hereof until the
aggregate amount of Adverse Consequences relating to Parent Indemnity
Claims incurred or suffered by Parent Indemnitees exceeds Five Million
Dollars ($5,000,000) (the "Indemnity Basket"), and once the Parent
----------------
Indemnitees have incurred or suffered aggregate Adverse Consequences
relating to Parent Indemnity Claims exceeding the Indemnity Basket, the
Parent shall be entitled to indemnification for the amount of all Adverse
Consequences relating to Parent Indemnity Claims in excess of the Indemnity
Basket. The Indemnity Basket shall not be applicable to indemnification
pursuant to (S)9(b)(ii) hereof to the extent such indemnification relates
to Adverse Consequences relating to Parent Indemnity Claims incurred or
suffered by any Parent Indemnitees in connection with, arising out of,
resulting from, or relating or incident to any untruth, inaccuracy or
incorrectness of, or other breach of, any representation or warranty in
(S)5(k) hereof. The Indemnity Basket shall not be applicable to
indemnification pursuant to (S)9(b)(i) or (S)9(b)(iii) hereof.
(i) Interim Period Claims. In the event that at any time during the period
---------------------
between the date of this Agreement and the Closing Date (the "Interim Period"),
--------------
there shall exist an Eligible Interim Breach, then any Adverse Consequences
associated with any Eligible Interim Breach (an "Interim Period Claim"), shall
--------------------
be paid in accordance with this (S)9(i); provided that, Parent has not otherwise
-------- ----
terminated this Agreement in accordance with (S)11 of this Agreement.
(i) During the Interim Period the Target shall be entitled to
utilize its available cash to pay Adverse Consequences that are actually
incurred to defend against such Interim Period Claim, which amounts shall
in no event exceed Two Million Dollars ($2,000,000) (any amount paid under
this (S)9(i)(i) hereafter being referred to as an "Interim Period
--------------
Payment").
--------
(ii) If Parent and Target mutually agree that the Interim Period
Claim will not be fully resolved prior to the Closing, then on the
Closing Date, the Escrowing Stockholders will deposit into an escrow
account to be established by the Target Stockholder Representative and
which is reasonably satisfactory to Parent (the "Escrow Account") an amount
--------------
equal to Two Million Dollars ($2,000,000) (Parent acknowledges that the
Escrowing Stockholders may contribute shares of Parent Common Stock
acquired in the Merger (valued at the Per Share Purchase Price) to satisfy
this obligation) (the "Escrowing Stockholder Contribution"), and the
----------------------------------
Parties shall cause all cash on hand of the Target at the Closing
(provided, however, that such amount shall in no event exceed the
difference between Two Million Dollars ($2,000,000) and the aggregate
amount of Interim Period Payments made) to be deposited into the Escrow
Account (the
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"Cash Contribution"). The Cash Contribution may only be used to satisfy
-----------------
Post-Closing Payments. The Parent and the Escrowing Stockholders agree that
the Target Stockholder Representative initially shall serve as a
representative of Target to resolve any Interim Period Claim (in accordance
with the terms and conditions of (S)9(e)), until such time as Parent and
the Escrowing Stockholders shall agree otherwise. The Escrow Account shall
be operated in accordance with the terms of an escrow agreement mutually
agreed to by the Target Stockholder Representative and Parent (the "Escrow
------
Agreement").
---------
(iii) After the Closing Date, the Target Stockholder Representative
shall be responsible for paying Adverse Consequences associated with any
Interim Period Claim (any amounts paid under this (S)9(i)(iii) hereafter
being referred to as "Post-Closing Payments"). The Target Stockholder
---------------------
Representative shall be entitled to seek reimbursement from the Escrow
Account of (w) fifty percent (50%) of the Post-Closing Payments from the
Escrowing Stockholder Contribution (by liquidating the Parent Common Stock
held therein, if applicable) and (x) fifty percent (50%) of the Post-
Closing Payments from the Cash Contribution. The right to seek
reimbursement of Post-Closing Payments from the Cash Contribution under
this (S)9(i) shall terminate on the earlier of (A) the date on which no
amounts from the Cash Contribution remain in the Escrow Account and (B) the
date of the final resolution of the Interim Period Claim. On such date,
all the remaining Cash Contribution amounts shall be distributed promptly
to Parent. Upon payment of all amounts from the Escrow Account, all
further Post-Closing Payments shall be made in accordance with, and subject
to, the other provisions of this (S)9.
(iv) The Escrowing Stockholders shall jointly and severally
indemnify, save and hold the Parent, Merger Sub and each of their
respective directors, officers, employees, successors, transferees and
assignees, and their respective representatives harmless from and against
the entirety of any and all Adverse Consequences incurred or suffered in
connection with, arising out of, resulting from or relating or incident to
the Escrowing Stockholder Contribution.
10. Tax Matters. The following provisions shall govern the allocation of
-----------
responsibility as between Parent and Target Stockholders for certain tax matters
following the Closing Date:
(a) Cooperation on Tax Matters.
---------------------------
(i) Parent and Target Stockholders agree, upon request, to use
their best efforts to obtain any certificate or other document from any
Governmental Entity or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(ii) Parent and Target Stockholders further agree, upon request, to
provide the other party with all information that either party may be
required to report pursuant to (S)6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
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(b) Certain Taxes. All transfer, documentary, sales, use, stamp,
-------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the Merger, shall be
paid by Target Stockholders when due, and Target Stockholders will, at their own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, Parent will, and will cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation.
11. Termination.
-----------
(a) Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time:
(i) by mutual written consent of Parent and the Target, by action of
their respective Boards of Directors;
(ii) by either the Target or Parent if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties shall have used their
reasonable best efforts to resist, resolve or lift, as applicable),
permanently restraining, enjoining or otherwise prohibiting the Merger or
any other transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable;
(iii) by Parent, upon a breach of any covenant or agreement on the
part of the Target or any Target Stockholder set forth in this Agreement or
if any representation or warranty of the Target or any Target Stockholder
in this Agreement shall have become untrue, in each case such that the
conditions set forth in (S)8(a)(i) or (S)8(a)(ii) would not be satisfied or
if any of the Voting and Support Agreements shall have been terminated (a
"Terminating Target Breach"); provided, however, that, if such Terminating
-------------------------- -------- -------
Target Breach is capable of being cured by the Target or such Target
Stockholder prior to the Effective Time through the exercise of their
reasonable best efforts, Parent shall promptly give notice of such
Terminating Target Breach to the Target or the Target Stockholder
Representative and if such Terminating Target Breach is cured within
fifteen (15) days after giving notice to the Target or the Target
Stockholder Representative of such breach, Parent may not terminate this
Agreement under this (S)11(a); further provided, however, that
------- -------- -------
notwithstanding the foregoing, neither the Target nor any of the Target
Stockholders shall have any right to cure any breach of (S)6(a)(xxiv);
(iv) by the Target, upon a breach of any covenant or agreement on the
part of Parent set forth in this Agreement, or if any representation or
warranty of Parent shall have become untrue, in each case such that the
conditions set forth in (S)8(b)(i) and (S)8(b)(ii) would not be satisfied
(a "Terminating Parent Breach"); provided, however, that, if such
------------------------- -------- -------
Terminating Parent Breach is capable of being cured by Parent prior to the
Effective Time through the exercise of its reasonable best efforts, the
Target shall promptly give notice of such Terminating Parent Breach to
Parent and if such Terminating Parent Breach is cured within fifteen (15)
days after giving written notice to Parent of such breach, the Target may
not terminate this Agreement under this (S)11(a);
A-62
(v) by Parent if, at a meeting of the stockholders of the Target
(including adjournment or postponement thereof), the requisite vote of the
stockholders of Target shall not have been obtained as provided in
(S)8(a)(iii);
(vi) by Parent, if the Board of Directors of Target shall have
withheld, withdrawn or modified in a manner adverse to Parent its
authorization, approval and recommendation in favor of the Merger and this
Agreement; or
(vii) by Parent or Target if the Effective Time shall not have
occurred on or before January 31, 2001; provided, however, that the right
-------- -------
to terminate this Agreement pursuant to this (S)11(a)(vii) shall not be
available to any Party whose failure to fulfill, or breach of, any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date.
(b) Effect of Termination.
----------------------
(i) In the event of termination of this Agreement by either the
Target or Parent as provided in (S)11(a), this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Parent or the Target or their respective officers or directors except (A)
with respect to this (S)11 and (S)12(a) and (B) with respect to any Adverse
Consequences incurred or suffered by a party as a result of the willful
breach by the other party of any of its covenants or other agreements set
forth in this Agreement.
(ii) Notwithstanding the foregoing, in the event that this Agreement
is terminated by Parent pursuant to (S)11(a)(iii) (except where the
Terminating Target Breach giving rise to such termination constitutes an
Eligible Interim Breach), (S)11(a)(v), (S)11(a)(vi) or (S)11(a)(vii)
(except where such termination is due to a failure of a condition to
Closing that is not caused by Target or any of the Target Stockholders),
then, in addition to any other rights or remedies that may be available,
Target shall promptly (and in any event, within five (5) business days of
receipt by Target of written notice from Parent) pay to Parent (by wire
transfer of immediately available funds to an account designated by Parent)
an amount equal to the amount of costs and expenses of Parent incurred in
connection with the Merger, this Agreement and the Ancillary Agreements,
and seeking to consummate the transactions contemplated hereby and thereby,
including reasonable attorneys' and accountants' fees. The termination of
this Agreement shall not be effective until receipt by Parent of such
amounts. In the event that this Agreement is terminated by Parent pursuant
to (S)11(a)(iii) (except where the Terminating Target Breach giving rise to
such termination constitutes an Eligible Interim Breach), (S)11(a)(v),
(S)11(a)(vi) or (S)11(a)(vii) (except where such termination is due to a
failure of a condition to Closing that is not caused by Target or any of
the Target Stockholders), then, in addition to any amounts paid for
Parent's costs and expenses as set forth above, the Target shall pay Parent
a cash fee of Twenty Million Dollars ($20,000,000), which amount shall be
payable by wire transfer of immediately available funds, if the Target
enters into a Transaction (or an agreement for a Transaction) within twelve
(12) months of such termination, such payment to be made on the date of any
such event. The Target acknowledges that the agreements contained in this
(S)11(b)(ii) are an integral part of the
A-63
transactions contemplated in this Agreement, and that, without these
agreements, the Parent and Merger Sub would not enter into this Agreement.
12. Miscellaneous.
-------------
(a) Parent Loan. If this Agreement is terminated for any reason (other
-----------
than by Parent pursuant to (S)11(a)(iii) (except where such termination is due
to an Eligible Interim Breach), (S)11(a)(v), or (S)11(a)(vi)) on or after
November 1, 2000, or the Effective Time shall not have occurred by January 1,
2001, then, at the Target's option and upon five (5) business days prior written
notice to Parent, Parent shall loan to the Target an amount (the "Loan") equal
----
to (i) One Million Two Hundred Thousand Dollars ($1,200,000) (if the termination
occurs between November 1, 2000 and November 30, 2000 inclusive), (ii) One
Million Eight Hundred Thousand Dollars ($1,800,000) (if the termination occurs
between December 1, 2000 and December 31, 2000 inclusive) or (iii) Two Million
Four Hundred Thousand Dollars ($2,400,000) (if the Effective Time shall not have
occurred by January 1, 2001), upon the terms and subject to the conditions set
forth in the loan agreement attached hereto as Exhibit E (the "Loan Agreement").
--------- --------------
Target agrees that the due execution and delivery by the Target of the Loan
Agreement is a condition to the Loan. Any amounts outstanding under the Loan
Agreement at the Closing Date shall reduce the Purchase Price as contemplated in
the definition of "Actual Aggregate Consideration" in (S)1 above. In the event
------------------------------
of the termination of this Agreement prior to the Closing, any amounts
outstanding under the Loan Agreement shall be repaid by Target to Parent in
accordance with the terms of the Loan Agreement.
(b) Further Action/Tax Treatment. Parent, Target and Target Stockholders
----------------------------
shall use their best efforts to cause the Merger to qualify, and will not (both
before and after consummation of the Merger) take any actions to prevent the
Merger from qualifying as a reorganization within the meaning of (S)368(a) of
the Code. Parent agrees that the Upstream Merger will be effected in a manner
that will not prevent the Merger from qualifying for reorganization treatment
under (S)368(a) of the Code. Parent, Target and Target Stockholders agree to
cooperate to ensure that no payments made by Parent and Target, either
individually or in combination, pursuant to the Merger will be deemed to be an
excess parachute payment under Code (S)280G. Cooperation under this Section
shall be defined to include sharing of calculations and data used to perform
Code (S)280G analysis and approval by both Parent and Target of the disclosures
that are made in connection with the vote of the Target Stockholders to be used
in order to qualify for the exemption under Code (S)280G(b)(5)(A)(ii).
(c) Entire Agreement. This Agreement (including the Exhibits and
----------------
Disclosure Schedule and documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof; provided, however, that the
-------- -------
provisions of each of the Non-Disclosure Agreement dated July 27, 2000, as
amended August 21, 2000, the Non-Disclosure Agreement dated August 4, 2000, and
the Material Transfer Agreement dated June 21, 2000, each by and between the
Target and Parent, and the letter dated July 21, 2000 from Parent to the Target
with respect to non-solicitation of Target Employees, shall survive the
execution of this Agreement in accordance with their respective provisions until
the Effective Time, whereupon each of such agreements and the letter shall
terminate and be of no further force and effect.
A-64
(d) No Third-Party Beneficiaries; Succession and Assignment. This
-------------------------------------------------------
Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns. This Agreement
shall be binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may assign either
this Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the Parent and the Target Stockholder
Representative; provided, however, that from and after the Effective Time (i)
-------- -------
the Parent may (A) assign any or all of its rights and interests hereunder to
one or more of its Affiliates and (B) designate one or more of its Affiliates to
perform its obligations hereunder and (ii) the Surviving Corporation may assign
this Agreement and all of its rights and obligations hereunder to Parent in
connection with the Upstream Merger.
(e) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if delivered in
person, by facsimile, cable, telegram or telex if (and then two business days
after) it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Target Stockholders: Jason Loveridge
BioPharma Advisers Limited
100 Pall Mall
London SW1Y 5HP
United Kingdom
Facsimile No.: (011) 44-207-321-3790
Copy to: Palmer & Dodge LLP
-------
One Beacon Street
Boston, MA 02108
Attn: Michael Lytton, Esq.
Facsimile No.: (617) 227-4420
If to the Parent: Amgen Inc.
----------------
One Amgen Center Drive
Thousand Oaks, CA 91320-1799
Attn: Corporate Secretary
Facsimile No.: (805) 499-8011
A-65
Copy to: Latham & Watkins
-------
633 W. 5/th/ Street
Los Angeles, CA 90017
Attn: Gary Olson, Esq.
Facsimile No.: (213) 891-8763
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
facsimile, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(i) Amendments, Extensions and Waivers. No amendment of any provision of
----------------------------------
this Agreement shall be valid unless the same shall be in writing and signed by
the Parties hereto. At any time prior to the Effective Time, the Parties hereto,
by action taken or authorized by their respective Boards of Directors, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other Parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a Party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such Party. No delay on the part of any
Party hereto in exercising, or failure to assert, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any Party hereto of any right, power or privilege hereunder operate as a waiver
of any other right, power or privilege hereunder, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence. Unless otherwise
provided, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the Parties hereto may otherwise have
at law or in equity.
(j) Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
A-66
(k) Expenses. Each of the Parties will bear his or its own costs and
--------
expenses (including, without limitation, legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Target Stockholders agree that the Target has not borne or will bear any of the
Target Stockholders' costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby and neither the Parent nor the Merger Sub shall be obligated
to do so either; provided, however, that all legal fees, costs and expenses of
-------- -------
Target set forth in this (S)12(k) in excess of One Hundred Fifty Thousand
Dollars ($150,000), and all accounting fees, costs and expenses set forth in
this (S)12(k) in excess of Thirty Thousand Dollars ($30,000) incurred in
connection with this Agreement and the transactions contemplated hereby shall be
deemed to be expenses of the Target Stockholders and shall be borne by the
Target Stockholders and not become obligations of the Surviving Corporation (the
"Target Stockholder Expenses"). Provisions for the payment of the Target
---------------------------
Stockholders Expenses reasonably acceptable to Parent shall be made prior to
Closing.
(l) Construction. The Parties have participated jointly in the negotiation
------------
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) Incorporation of Exhibits and Disclosure Schedule. The Exhibits and
-------------------------------------------------
Disclosure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees that
-------------------
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in (S)12(o) below),
in addition to any other remedy to which they may be entitled, at law or in
equity.
(o) Submission to Jurisdiction. Each of the Parties submits to the
--------------------------
exclusive jurisdiction of any state or federal court sitting in Los Angeles,
California, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each Party also agrees not
A-67
to bring any action or proceeding arising out of or relating to this Agreement
in any other court. Each of the Parties waives any defense of inconvenient forum
to the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with respect
thereto. Nothing in this (S)12(o), however, shall affect the right of any Party
to serve legal process in any other manner permitted by law or at equity. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
*****
A-68
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
AMGEN INC.
By:__________________________________
Title:_______________________________
AMGEN ACQUISITION CORP. II
By:__________________________________
Title:_______________________________
KINETIX PHARMACEUTICALS, INC.
By:__________________________________
Title:_______________________________
A-69
ANNEX B
VOTING AND SUPPORT AGREEMENT
This Voting and Support Agreement (this "Agreement") is made and
---------
entered into as of October 16, 2000, between Amgen Inc., a Delaware corporation
("Parent"), and the undersigned stockholder ("Stockholder") of Kinetix
------ -----------
Pharmaceuticals, Inc., a Delaware corporation (the "Target").
------
RECITALS
A. Concurrently with the execution of this Agreement, Parent, the
Target and Amgen Acquisition Corp. II, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), are entering into an Agreement and Plan of
----------
Merger in the form attached hereto as Exhibit A (the "Merger Agreement"), which,
--------- ----------------
among other things, provides for the merger of the Merger Sub with and into the
Target (the "Merger"), subject to the terms and conditions set forth therein.
------
Pursuant to the Merger, all shares of Target Common Stock will be converted into
Parent Common Stock on the basis described in the Merger Agreement.
B. Stockholder is the record holder and beneficial owner of such
number of shares of the outstanding capital stock of the Target as is indicated
on the signature page of this Agreement (the "Shares").
------
C. As a material inducement to enter into the Merger Agreement,
Parent desires Stockholder to agree, and Stockholder is willing to agree, (i) to
vote the Shares, and any other such shares of capital stock of the Target
hereafter acquired by Stockholder, in favor of the Merger and to take certain
other actions so as to facilitate consummation of the Merger, (ii) to adopt and
agree to be bound by the terms and conditions of the Merger Agreement, (iii) to
not engage in certain solicitation activities, (iv) to release the Target,
Parent and Merger Sub from certain claims and liabilities, (v) to waive certain
rights under certain stockholder agreements to which Stockholder is a party and
(vi) certain other matters related to the foregoing.
D. Capitalized terms used herein and not otherwise defined shall have
the meaning ascribed to them in the Merger Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Agreement to Vote Shares: Additional Purchases.
----------------------------------------------
1.1 Agreement to Vote Shares. At every meeting of the stockholders
------------------------
of the Target, and at every adjournment thereof, and on every action or approval
by written consent of the stockholders of the Target, Stockholder shall vote the
Shares and any New Shares (as hereinafter defined) in favor of (x) adoption of
the Merger Agreement and approval of the Merger, (y) the conversion of all
shares of Target Preferred Stock into shares of Target Common Stock immediately
prior to, and contingent upon, the Closing and (z) any other matter reasonably
related to the Merger or that could reasonably be expected to facilitate the
Merger, including but not limited to the termination of (i) the Investors'
Rights Agreement dated as of March 25, 1999,
B-1
by and among the Target and the other parties thereto (the "Investors' Rights
-----------------
Agreement"), (ii) the Amended and Restated Stockholders' Agreement dated as of
- ---------
March 25, 1999, by and among the Target and the other parties thereto (the
"Stockholders' Agreement"), and (iii) any other stockholder agreements to which
-----------------------
the Stockholder is a party other than this Agreement.
1.2 Additional Share Purchases. Stockholder agrees that any shares
--------------------------
of capital stock of the Target that Stockholder purchases or with respect to
which Stockholder otherwise acquires beneficial ownership after the execution of
this Agreement and prior to the Expiration Date (as hereinafter defined) ("New
---
Shares") shall be subject to the terms and conditions of this Agreement to the
- ------
same extent as if they constituted Shares.
2. Irrevocable Proxy. Simultaneously with the execution of this
-----------------
Agreement, Stockholder agrees to deliver to Parent a proxy in the form attached
hereto as Exhibit B (the "Proxy"), which shall be irrevocable, with the true and
--------- -----
correct total number of shares of capital stock of the Target beneficially owned
by Stockholder set forth therein. The parties agree that by reason of the Merger
Agreement the Proxy is a proxy coupled with an interest. At Parent's request,
Stockholder shall perform such further acts and execute such further documents
as may be required to vest in Parent or its representatives the sole power to
vote the Shares during the term of the proxy granted herein in accordance with
the terms of the proxy granted herein.
3. Affiliate Letter. Simultaneously with the execution of this Agreement,
----------------
Stockholder agrees to deliver to Parent the Affiliate Letter in the form
attached hereto as Exhibit C.
---------
4. Agreement to be Bound. Stockholder hereby approves, and covenants and
---------------------
agrees to be bound by, the terms and conditions of the Merger Agreement as if
Stockholder were a signatory thereto. Without limiting the generality of the
foregoing, Stockholder hereby covenants and agrees as follows:
(a) Pursuant to (S)3(g) of the Merger Agreement, Stockholder hereby
acknowledges and consents to the appointment of Jason Loveridge as Target
Stockholder Representative;
(b) Stockholder hereby represents and warrants that the statements
contained in (S)4(a) of the Merger Agreement that are applicable to such
Stockholder are correct and complete as of the date hereof and will be
correct and complete as of the Closing Date;
(c) Stockholder hereby undertakes to comply with all covenants
contained in (S)6 of the Merger Agreement prior to the Closing that are
applicable to such Stockholder and to comply with all covenants contained
in (S)(S) 7 and 10 thereof after the Closing;
(d) Stockholder hereby agrees to be bound by each of the agreements
and covenants set forth in (S)9 of the Merger Agreement regarding
Stockholder's obligations to indemnify, save and hold each of the Parent
Indemnitees harmless as set forth in (S)9 of the Merger Agreement
(including, without limitation, any indemnification obligations with
respect to breaches of representations and warranties in (S)5 of the Merger
Agreement as
B-2
though the Stockholder had made such representations and warranties;
provided, however, that nothing in this sentence shall be
-------- -------
deemed to amend the scope of such representations and warranties).
5. Additional Documents. Stockholder hereby covenants and agrees to
--------------------
execute and deliver any additional documents and agreements necessary or
desirable, in the reasonable opinion of Parent or its counsel, as the case may
be, to carry out the intent of this Agreement.
6. General Release of Claims and Liabilities. Upon the closing of the
-----------------------------------------
Merger, and without any further action on the part of any party to this
Agreement or the Merger Agreement, Stockholder, on behalf of itself, its
officers, directors, stockholders, partners, members, Affiliates, predecessors
and their respective successors and assigns (collectively in this Section 6 the
"Releasors"), fully, finally and forever settles, waives, relinquishes, releases
---------
and discharges the Target, Parent, Merger Sub, and their respective past,
present and future officers, directors, stockholders, partners, members,
employees, agents, representatives, consultants, attorneys, Affiliates,
predecessors and their respective successors and assigns (collectively in this
Section 6 the "Releasees"), of and from any and all commitments, indebtedness,
---------
actions, suits, proceedings, investigations, charges, complaints, claims,
demands, obligations and liabilities, contingent or otherwise, of every kind and
nature, including claims and causes of action both in law and in equity, which
the undersigned and/or his or its heirs, executors, administrators, successors
or assigns ever had, now has or, to the extent arising from or in connection
with any act, omission or state of facts taken or existing on or prior to the
Closing Date, may have after the date hereof, against any Releasee, whether
asserted, unasserted, absolute, contingent, known or unknown. Stockholder hereby
represents and warrants to the Releasees that (i) he or it has not assigned any
claim or possible claim against any Releasee, (ii) he or it fully intends to
release all claims of the type described in this Section 6 against the
Releasees, including without limitation unknown and contingent claims, and (iii)
he or it has consulted with counsel with respect to the execution and delivery
of the general release contained in this Section 6 and has been fully apprised
of the consequences hereof. Notwithstanding the foregoing, this Section 6 shall
not release any claim that Stockholder has pursuant to (S)9(c) of the Merger
Agreement or permitted by (S)9(g) of the Merger Agreement (the "Unreleased
----------
Claims").
- ------
7. Taxpayer Identification Number and Address of Stockholder. If the
---------------------------------------------------------
Stockholder is subject to United States taxes, the taxpayer identification
number on the signature page hereto is the true and correct taxpayer
identification number of Stockholder. The address on the signature page hereto
is the true and correct address of Stockholder.
8. No Solicitation. Stockholder shall not, and shall cause its
---------------
representatives (including, without limitation, investment bankers, attorneys
and accountants) not to, directly or indirectly, through any officer, director,
agent or otherwise, enter into, solicit, initiate, conduct or continue any
discussions or negotiations with, or encourage or respond to any inquiries or
proposals by, or provide any information to, or otherwise cooperate in any other
way with, any corporation, partnership, person or other entity or group, other
than Parent, concerning any sale of all or any material portion of the assets of
or the business of, or any material number of shares of capital stock of or
other securities in, the Target, or any merger, consolidation,
B-3
recapitalization, liquidation, dissolution or similar transaction involving the
Target or any license, joint venture, partnership, collaboration or similar
arrangement directly or indirectly involving the Target, or engage in a public
or private offering of its capital stock (any of the foregoing transactions, a
"Transaction"). Stockholder hereby represents that he or it is not now engaged
-----------
in discussions or negotiations with any party other than the Parent with respect
to any Transaction. Stockholder will not vote any of its shares of the capital
stock of the Target in favor of any Transaction, except for the Merger.
Stockholder shall (A) promptly notify Parent (orally and in writing) if any
offer is made to it, any discussions or negotiations are sought to be initiated
with him or it, any inquiry, proposal or contact is made or any information is
requested from him or it with respect to any Transaction, (B) promptly notify
Parent of the terms of any proposal that he or it may receive in respect of any
Transaction, and the identity of the prospective purchaser, (C) promptly provide
Parent with a copy of any such offer, if written, or a written summary of such
offer, if not in writing, and (D) promptly inform Parent of any material changes
to the terms of any Transaction of which he or it is aware.
9. Waiver of Co-Sale Rights and Rights of First Refusal. Stockholder
----------------------------------------------------
hereby waives his or its co-sale rights pursuant to Section 5 of the Investors'
Rights Agreement which would otherwise be applicable to any transfers of capital
stock of Target by the other Target Stockholders in connection with the Merger.
Stockholder hereby waives his or its rights of first refusal pursuant to Section
1 of the Stockholders' Agreement which would otherwise be applicable to any
transfers of capital stock of Target by the other Target Stockholders in
connection with the Merger.
10. No Proxies for or Encumbrances on Stockholder Shares. Except as
----------------------------------------------------
provided in this Agreement, Stockholder shall not, during the term of this
Agreement, without the prior written consent of Parent, directly or indirectly,
(i) grant any proxies or enter into any voting trusts or other agreement or
arrangement with respect to the voting of any Shares or (ii) sell, assign,
transfer, encumber or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to the direct or indirect
sale, assignment, transfer, encumbrance or other disposition of, any Shares.
Stockholder shall not seek or solicit any such sale, assignment, transfer,
encumbrance or other disposition of any such contract, option or other
arrangement or understanding and agrees to notify Parent promptly, and to
provide reasonable details requested by Parent, if Stockholder shall be
approached or solicited, directly or indirectly, by any Person with respect to
the foregoing.
11. Conduct of Stockholder. Stockholder will not (i) take, agree or commit
----------------------
to take any action that would make any representation and warranty of such
Stockholder hereunder inaccurate in any material respect as of any time prior to
the termination of this Agreement 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 material respect at any time.
12. Public Disclosure. Stockholder shall not issue any press release or
-----------------
make any public announcement relating to the subject matter of this Agreement or
the Merger Agreement or the transactions contemplated hereby or thereby without
the prior written approval of Parent.
B-4
Parent may make any public disclosure of this Agreement or the Merger Agreement
or the transactions contemplated hereby or thereby.
13. Term and Termination. In the event that the Merger Agreement is
--------------------
terminated prior to the Closing Date in accordance with its terms (such date of
termination being referred to herein as the "Expiration Date"), this Agreement
---------------
(other than Sections 7 and 14 hereof and this Section 13, which shall survive
indefinitely) shall terminate and shall have no further force or effect.
Termination of this Agreement for any reason shall be without prejudice to any
rights which shall have accrued to the benefit of any party to this Agreement
prior to the Expiration Date. In the event that the Merger is consummated, this
Agreement shall survive the Closing Date and continue in full force and effect
thereafter in accordance with its terms.
14. Miscellaneous.
-------------
14.1 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
14.2 Binding Effect and Assignment. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other; provided, however,
-------- -------
that from and after the Effective Time (i) the Parent may (A) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (B)
designate one or more of its Affiliates to perform its obligations hereunder and
(ii) the Surviving Corporation may assign this Agreement and all of its rights
and obligations hereunder to Parent in connection with the Upstream Merger.
14.3 Amendments and Modification. This Agreement may not be modified,
---------------------------
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
14.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
14.5 Submission to Jurisdiction. Each of the parties submits to the
--------------------------
exclusive jurisdiction of any state or federal court sitting in Los Angeles,
California, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court.
B-5
Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other party with respect
thereto. Nothing in this Section 14.5, however, shall affect the right of any
party to serve legal process in any other manner permitted by law or at equity.
Each party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
14.6 Waiver of Jury Trial. EACH OF STOCKHOLDER AND PARENT, TO THE
--------------------
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RESTATEMENTS, AMENDMENTS AND RESTATEMENTS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND/OR THE MERGER AGREEMENT. A COPY OF THIS
SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE
RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT. NOTWITHSTANDING THE
FOREGOING, NO WAIVER CONTAINED IN THIS SECTION 14.6 SHALL BE DEEMED A WAIVER OF
EITHER OF STOCKHOLDER'S OR PARENT'S RIGHT TO TRIAL BY JURY IN CONNECTION WITH
ANY UNRELEASED CLAIMS.
14.7 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and sufficient if delivered in
person, by facsimile, cable, telegram or telex, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight courier
(prepaid) to the respective parties as follows:
If to Parent: Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Facsimile No.: (805) 499-8011
Attn: Corporate Secretary
With a copy to:
Latham & Watkins
633 W. 6/th/ Street
Los Angeles, California 90017
Facsimile No.: (213) 891-8763
Attn: Gary Olson, Esq.
B-6
If to Stockholder: To the address for notice set forth on the last
page hereof.
With a copy to:
Facsimile No.: ()
Attn:
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
14.8 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the internal laws of the State of
Delaware (without regard to the principles of conflict of laws thereof or of any
other jurisdiction).
14.9 Merger Agreement. Stockholder acknowledges that he or it will
----------------
receive the shares of Parent Common Stock that he or it will obtain in
connection with the Merger subject to the terms and conditions of the Merger
Agreement.
14.10 Entire Agreement. This Agreement (including all Exhibits
----------------
hereto) contains the entire understanding of the parties in respect of the
subject matter hereof, and supersedes all prior negotiations and understandings
between the parties with respect to such subject matter.
14.11 Legal Counsel. Stockholder acknowledges that he or it has been
-------------
advised to, and has had the opportunity to consult with his or its personal
attorney prior to entering into this Agreement.
14.12 Agreement Negotiated. The form of this Agreement has been
--------------------
negotiated by or on behalf of Parent and the Stockholder, each of which was
represented by attorneys who have carefully negotiated the provisions hereof. As
a consequence, Parent and Stockholder do not believe that any laws or rules
relating to the interpretation of contracts against the drafter of any
particular clause should be applied in this case and therefore waive its
effects.
14.13 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
14.14 Effect of Headings. The section headings herein are for
------------------
convenience only and shall not affect the construction or interpretation of this
Agreement.
14.15 Legends. Any stock certificates representing the Shares or the
-------
New Shares shall be legended at the request of Parent to reflect the
restrictions on transfer, the support agreement and irrevocable proxy granted by
this Agreement; provided, however, that nothing
-------- -------
B-7
herein shall be deemed to permit any shares of Parent Common Stock received by
the Stockholder in exchange for the Shares or the New Shares to be so legended.
B-8
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date and year first above written.
STOCKHOLDER
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
Address of Stockholder
____________________________________
____________________________________
____________________________________
U.S. Taxpayer Identification Number
____________________________________
Number of Shares of Beneficially Held by
Stockholder:
Common Stock:_____________________________________
[Series A Preferred Stock:________________________
Series B Preferred Stock:________________________]
***VOTING AND SUPPORT AGREEMENT***
B-9
ACKNOWLEDGED AND AGREED:
AMGEN INC.
By:__________________________
Name:________________________
Title:_______________________
AMGEN ACQUISITION CORP. II
By:___________________________
Name:_________________________
Title:________________________
KINETIX PHARMACEUTICALS, INC.
By:___________________________
Name:_________________________
Title:________________________
***VOTING AND SUPPORT AGREEMENT***
B-10
EXHIBIT A
---------
MERGER AGREEMENT
Exhibit A
EXHIBIT B
---------
IRREVOCABLE PROXY
The undersigned, a stockholder of Kinetix Pharmaceuticals, Inc., a
Delaware corporation (the "Target"), hereby irrevocably appoints Amgen Inc., a
------
Delaware corporation ("Parent") and Kevin W. Sharer, Dennis M. Fenton and
------
Kathryn E. Falberg, respectively, of Parent, and each of them, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to the full extent of the undersigned's rights
with respect to the shares of capital stock of the Target beneficially owned by
the undersigned, which shares are listed on the final page of this Proxy (the
"Shares"), and any and all other shares or securities issued or issuable in
------
respect thereof on or after the date hereof, with respect to the matters set
forth in the second sentence of the next paragraph, until such time as that
certain Agreement and Plan of Merger, dated as of October 16, 2000 (the "Merger
------
Agreement"), among Parent, Amgen Acquisition Corp. II, a Delaware corporation
- ---------
and a wholly-owned subsidiary of Parent ("Merger Sub"), and the Target, shall be
----------
terminated in accordance with its terms or the Merger (as defined in the Merger
Agreement) is effective. Upon the execution hereof, all prior proxies given by
the undersigned with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof are
hereby revoked and no subsequent proxies will be given.
This proxy is irrevocable, is coupled with an interest, is granted
pursuant to the Voting and Support Agreement dated as of October 16, 2000
between Parent and the undersigned Stockholder, and is granted in consideration
of Parent entering into the Merger Agreement, and relates to the matters set
forth in the next sentence of this paragraph. The attorneys and proxies named
above will be empowered at any time prior to termination of the Merger Agreement
to exercise all voting and other rights (including, without limitation, the
power to execute and deliver written consents with respect to the Shares) of the
undersigned at every annual, special or adjourned meeting of the stockholders of
the Target, and in every written consent in lieu of such a meeting, or
otherwise, in favor of (x) adoption of the Merger Agreement and approval of the
Merger, (y) the conversion of all shares of Target Preferred Stock into shares
of Target Common Stock immediately prior to, and contingent upon, the Closing
and (z) any other matter reasonably related to the Merger or that could
reasonably be expected to facilitate the Merger (other than any votes to approve
payments to disqualified individuals with respect to Target in accordance with
the provisions of Code (S)(S)280G(b)(5)(A)(ii) and 280G(b)(5)(B), as to which
Stockholder retains sole voting power), including but not limited to the
termination of (i) the Investors' Rights Agreement dated as of March 25, 1999,
by and among the Target and the other parties thereto (the "Investors' Rights
-----------------
Agreement"), (ii) the Amended and Restated Stockholders' Agreement dated as of
- ---------
March 25, 1999, by and among the Target and the other parties thereto (the
"Stockholders' Agreement"), and (iii) any other stockholder agreements to which
- ------------------------
the Stockholder is a party other than this Agreement.
The attorneys and proxies named above may only exercise this proxy to
vote or give written consent with respect to the Shares subject hereto at any
time prior to termination of the Merger Agreement at every annual, special or
adjourned meeting of the Target Stockholders and in every written consent in
lieu of such meeting, in favor of the matters set forth in
Exhibit B
subsections (x) through (z) of the immediately preceding paragraph. The
undersigned Stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned. THIS PROXY IS IRREVOCABLE.
Dated:________, 2000
Signature of Stockholder:________________________
Print Name of Stockholder:_______________________
_____ Shares of Common Stock Beneficially Owned
_____ Shares of Series A Preferred Stock Beneficially Owned
_____ Shares of Series B Preferred Stock Beneficially Owned
**PROXY**
Exhibit B, Page 2
EXHIBIT C
---------
FORM OF AFFILIATE LETTER
October 16, 2000
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Kinetix Pharmaceuticals, Inc.
200 Boston Avenue
Medford, Massachusetts 02155
Ladies and Gentlemen:
I have been advised that, as of the date of this letter, I may be deemed to
be an "affiliate" of Kinetix Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 ("Rule 145") of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of
the Agreement and Plan of Merger dated as of October 16, 2000 (the "Merger
Agreement"), by and among Amgen Inc., a Delaware corporation ("Parent"), Amgen
Acquisition Corp. II, a Delaware corporation ("Merger Sub"), and the Company,
Merger Sub will be merged with and into the Company and the Company will become
a wholly-owned subsidiary of Parent (the "Merger").
Pursuant to the Merger Agreement, I am entitled to receive shares
("Shares") of common stock, par value $.0001 per share, of Parent, including the
corresponding pro rata right to purchase shares of preferred stock, par value
$.0001 per share, pursuant to the Rights Agreement dated as of February 18,
1997, between Parent and the American Stock Transfer & Trust Company, as Rights
Agent, in exchange for the shares of Company common stock owned by me at the
closing date of the Merger as determined by and in accordance with the terms of
the Merger Agreement.
I represent, warrant and covenant to Parent that when and to the extent I
hold or own Shares:
1. I shall not make any sale, transfer or other disposition of any Shares in
violation of the Act or the Rules and Regulations.
2. I have been advised that the issuance of Shares to me pursuant to the
Merger Agreement will be registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have also been advised that,
because at the time the Merger is
Exhibit C
submitted for a vote of the stockholders of the Company, (a) I may be
deemed to be an affiliate of the Company and (b) the sale, transfer or
other disposition by me of any Shares has not been registered under
the Act, I may not sell, transfer or otherwise dispose of any Shares
unless (i) such sale, transfer or other disposition is made in
conformity with the conditions of Rule 145, (ii) such sale, transfer
or other disposition has been registered under the Act (it being
understood that Parent has no obligation to register any of the Shares
for such sale, transfer or other disposition) or (iii) in the opinion
of counsel reasonably acceptable to Parent, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
3. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of the Shares by me or on my behalf, or to
take any other action necessary in order to make compliance with an
exemption from registration available, other than as set forth in the
Merger Agreement and the agreements referred to therein.
4. In the event of a sale, transfer or other disposition pursuant to Rule
145, I will supply Parent with a letter in the form of Exhibit A
hereto evidencing compliance with such Rule. I understand that Parent
may instruct its transfer agent to withhold the transfer of any Shares
disposed of by me, but that upon receipt of such letter and other
documents reasonably requested by Parent the transfer agent shall
effectuate the transfer of Shares indicated as sold, transferred or
otherwise disposed of in the letter.
5. I acknowledge and agree that appropriate legends will be placed on
certificates representing Shares received by me in the Merger or held
by a transferee thereof.
6. I acknowledge that (a) I have carefully read this letter and
understand the requirements hereof and the limitations imposed upon my
distribution, sale, transfer or other disposition of any Shares and
(b) the receipt by Parent of this letter is an inducement and a
condition to Parent's obligations to consummate the Merger.
Very truly yours,
STOCKHOLDER
_________________________________
Name:
Title:
Exhibit C, Page 2
This Affiliate Letter is agreed and accepted this ___ day
of ___________________, 2000:
AMGEN INC.
By _______________________________
Name:
Title:
Exhibit C, Page 3
EXHIBIT A
, 2000
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Attn: General Counsel
Ladies and Gentlemen:
On , I sold shares of common stock ("Shares") of Amgen Inc.
("Amgen") received by me in connection with the merger of Amgen Acquisition
Corp. II ("Merger Sub"), a subsidiary of the Company, with and into Kinetix
Pharmaceuticals, Inc. (the "Company") pursuant to the Agreement and Plan of
Merger dated as of _______________, 2000 (the "Merger Agreement") by and among
Amgen, Merger Sub and the Company.
Based upon the most recent report or statement filed by Amgen with the
Securities and Exchange Commission, the Shares sold by me were within the
prescribed limitations set forth in paragraph (e) of Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Act").
I hereby represent that the above-described Shares were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Act or in transactions
directly with a "market maker" as the term is defined in Section (3)(a)(38) of
the Securities Exchange Act of 1934, as amended. I further represent that I have
not solicited or arranged for the solicitation of orders to buy the above-
described Shares, and that I have not made any payment in connection with the
offer or sale of such Shares to any person other than to the broker who executed
the order in respect of such sale.
Very truly yours,
STOCKHOLDER
________________________________
Name:
Title:
Exhibit A of Exhibit C
ANNEX C
SUPPORT AGREEMENT
This Support Agreement (this "Agreement") is made and entered into as
---------
of ______________, 2000, between Amgen Inc., a Delaware corporation ("Parent"),
------
and the undersigned stockholder ("Stockholder") of Kinetix Pharmaceuticals,
-----------
Inc., a Delaware corporation (the "Target").
------
RECITALS
A. Concurrently with the execution of this Agreement, Parent, the
Target and Amgen Acquisition Corp. II, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), intend to consummate the transactions
----------
contemplated by the Agreement and Plan of Merger in the form attached hereto as
Exhibit A (the "Merger Agreement"), which, among other things, provides for the
- --------- ----------------
merger of the Merger Sub with and into the Target (the "Merger"), subject to the
------
terms and conditions set forth therein. Pursuant to the Merger, all shares of
Target Common Stock will be converted into Parent Common Stock on the basis
described in the Merger Agreement.
B. Stockholder is the record holder and beneficial owner of such
number of shares of the outstanding capital stock of the Target as is indicated
on the signature page of this Agreement (the "Shares").
------
C. As a material inducement to enter into the Merger Agreement,
Parent desires Stockholder to agree, and Stockholder is willing to agree, (i) to
adopt and be bound by the terms and conditions of the Merger Agreement, (ii) to
release the Target, Parent and Merger Sub from certain claims and liabilities,
(iii) to waive certain rights under certain stockholder agreements to which
Stockholder is a party and (iv) certain other matters related to the foregoing.
D. Capitalized terms used herein and not otherwise defined shall have
the meaning ascribed to them in the Merger Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Stockholder Vote; Agreement to be Bound. Stockholder represents and
---------------------------------------
warrants to Parent that it has voted all of the Shares in favor of the adoption
of the Merger Agreement and the approval of the Merger. Stockholder covenants
and agrees to be bound by the terms and conditions of the Merger Agreement as if
Stockholder were a signatory thereto. Without limiting the generality of the
foregoing, Stockholder hereby covenants and agrees as follows:
(a) Pursuant to (S)3(g) of the Merger Agreement, Stockholder hereby
acknowledges and consents to the appointment of Jason Loveridge as Target
Stockholder Representative;
C-1
(b) Stockholder hereby represents and warrants that the statements
contained in (S)4(a) of the Merger Agreement that are applicable to such
Stockholder are correct and complete as of the date hereof and will be
correct and complete as of the Closing Date;
(c) Stockholder hereby undertakes to comply with all covenants
contained in (S)(S)7 and 10 of the Merger Agreement after the Closing;
(d) Stockholder hereby agrees to be bound by each of the agreements
and covenants set forth in (S)9 of the Merger Agreement regarding
Stockholder's obligations to indemnify, save and hold each of the Parent
Indemnitees harmless as set forth in (S)9 of the Merger Agreement.
2. Additional Documents. Stockholder hereby covenants and agrees to
--------------------
execute and deliver any additional documents and agreements necessary or
desirable, in the reasonable opinion of Parent or its counsel, as the case may
be, to carry out the intent of this Agreement.
3. General Release of Claims and Liabilities. Upon the closing of the
-----------------------------------------
Merger, and without any further action on the part of any party to this
Agreement or the Merger Agreement, Stockholder, on behalf of itself, its
officers, directors, stockholders, partners, members, Affiliates, predecessors
and their respective successors and assigns (collectively in this Section 3 the
"Releasors"), fully, finally and forever settles, waives, relinquishes, releases
---------
and discharges the Target, Parent, Merger Sub, and their respective past,
present and future officers, directors, stockholders, partners, members,
employees, agents, representatives, consultants, attorneys, Affiliates,
predecessors and their respective successors and assigns (collectively in this
Section 3 the "Releasees"), of and from any and all commitments, indebtedness,
---------
actions, suits, proceedings, investigations, charges, complaints, claims,
demands, obligations and liabilities, contingent or otherwise, of every kind and
nature, including claims and causes of action both in law and in equity, which
the undersigned and/or his or its heirs, executors, administrators, successors
or assigns ever had, now has or, to the extent arising from or in connection
with any act, omission or state of facts taken or existing on or prior to the
Closing Date, may have after the date hereof, against any Releasee, whether
asserted, unasserted, absolute, contingent, known or unknown. Stockholder hereby
represents and warrants to the Releasees that (i) he or it has not assigned any
claim or possible claim against any Releasee, (ii) he or it fully intends to
release all claims of the type described in this Section 3 against the
Releasees, including without limitation unknown and contingent claims, and (iii)
he or it has consulted with counsel with respect to the execution and delivery
of the general release contained in this Section 3 and has been fully apprised
of the consequences hereof. Notwithstanding the foregoing, this Section 3 shall
not release any claim that Stockholder has pursuant to (S)9(c) of the Merger
Agreement or permitted by (S)9(g) of the Merger Agreement (the "Unreleased
----------
Claims").
- ------
4. Taxpayer Identification Number and Address of Stockholder. If the
---------------------------------------------------------
Stockholder is subject to United States taxes, the taxpayer identification
number on the signature page hereto is the true and correct taxpayer
identification number of Stockholder. The address on the signature page hereto
is the true and correct address of Stockholder.
C-2
5. Waiver of Rights of First Refusal. Stockholder hereby waives his or
---------------------------------
its rights of first refusal pursuant to Section 1 of the Stockholders' Agreement
which would otherwise be applicable to any transfers of capital stock of Target
by the other Target Stockholders in connection with the Merger.
6. Conduct of Stockholder. Stockholder will not (i) take, agree or
----------------------
commit to take any action that would make any representation and warranty of
such Stockholder hereunder inaccurate in any material respect as of any time
prior to the termination of this Agreement 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 material respect at any time.
7. Public Disclosure. Stockholder shall not issue any press release or
-----------------
make any public announcement relating to the subject matter of this Agreement or
the Merger Agreement or the transactions contemplated hereby or thereby without
the prior written approval of Parent. Parent may make any public disclosure of
this Agreement or the Merger Agreement or the transactions contemplated hereby
or thereby.
8. Term and Termination. In the event that the Merger Agreement is
--------------------
terminated prior to the Closing Date in accordance with its terms (such date of
termination being referred to herein as the "Expiration Date"), this Agreement
---------------
(other than Sections 3 and 9 hereof and this Section 8, which shall survive
indefinitely) shall terminate and shall have no further force or effect.
Termination of this Agreement for any reason shall be without prejudice to any
rights which shall have accrued to the benefit of any party to this Agreement
prior to the Expiration Date. In the event that the Merger is consummated, this
Agreement shall survive the Closing Date and continue in full force and effect
thereafter in accordance with its terms.
9. Miscellaneous.
-------------
9.1 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other; provided, however,
-------- -------
that from and after the Effective Time (i) the Parent may (A) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (B)
designate one or more of its Affiliates to perform its obligations hereunder and
(ii) the Surviving Corporation may assign this Agreement and all of its rights
and obligations hereunder to Parent in connection with the Upstream Merger.
C-3
9.3 Amendments and Modification. This Agreement may not be modified,
---------------------------
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
9.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
9.5 Submission to Jurisdiction. Each of the parties submits to the
--------------------------
exclusive jurisdiction of any state or federal court sitting in Los Angeles,
California, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other party with respect
thereto. Nothing in this Section 9.5, however, shall affect the right of any
party to serve legal process in any other manner permitted by law or at equity.
Each party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
9.6 Waiver of Jury Trial. EACH OF STOCKHOLDER AND PARENT, TO THE
--------------------
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RESTATEMENTS, AMENDMENTS AND RESTATEMENTS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND/OR THE MERGER AGREEMENT. A COPY OF THIS
SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE
RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT. NOTWITHSTANDING THE
FOREGOING, NO WAIVER CONTAINED IN THIS SECTION 9.6 SHALL BE DEEMED A WAIVER OF
EITHER OF STOCKHOLDER'S OR PARENT'S RIGHT TO TRIAL BY JURY IN CONNECTION WITH
ANY UNRELEASED CLAIMS.
9.7 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and sufficient if delivered in
person, by facsimile, cable, telegram or telex, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight courier
(prepaid) to the respective parties as follows:
C-4
If to Parent: Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Facsimile No.: (805) 499-8011
Attn: Corporate Secretary
With a copy to:
Latham & Watkins
633 W. 6th St.
Los Angeles, California 90017
Facsimile No.: (213) 891-8763
Attn: Gary Olson, Esq.
If to Stockholder: To the address for notice set forth on the last
page hereof.
With a copy to:
Facsimile No.: ()
Attn:
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
9.8 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the internal laws of the State of
Delaware (without regard to the principles of conflict of laws thereof or of any
other jurisdiction).
9.9 Merger Agreement. Stockholder acknowledges that he or it will
----------------
receive the shares of Parent Common Stock that he or it will obtain in
connection with the Merger subject to the terms and conditions of the Merger
Agreement.
9.10 Entire Agreement. This Agreement (including all Exhibits
----------------
hereto) contains the entire understanding of the parties in respect of the
subject matter hereof, and supersedes all prior negotiations and understandings
between the parties with respect to such subject matter.
9.11 Legal Counsel. Stockholder acknowledges that he or it has been
-------------
advised to, and has had the opportunity to consult with his or its personal
attorney prior to entering into this Agreement.
9.12 Agreement Negotiated. The form of this Agreement has been
--------------------
negotiated by or on behalf of Parent and the Stockholder, each of which was
represented by attorneys who have carefully negotiated the provisions hereof. As
a consequence, Parent and Stockholder do
C-5
not believe that any laws or rules relating to the interpretation of contracts
against the drafter of any particular clause should be applied in this case and
therefore waive its effects.
9.13 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.14 Effect of Headings. The section headings herein are for
------------------
convenience only and shall not affect the construction or interpretation of this
Agreement.
9.15 Legends. Any stock certificates representing the Shares or the
-------
New Shares shall be legended at the request of Parent to reflect the support
agreement and, if applicable, irrevocable proxy granted by this Agreement;
provided, however, that nothing herein shall be deemed to permit any shares of
- -------- -------
Parent Common Stock received by the Stockholder in exchange for the Shares to be
so legended.
[Signature Page Follows]
C-6
IN WITNESS WHEREOF, the parties have caused this Support Agreement to
be duly executed on the date and year first above written.
STOCKHOLDER
By:_________________________________
Name:_______________________________
Title:______________________________
Address of Stockholder
____________________________________
____________________________________
____________________________________
U.S. Taxpayer Identification Number
____________________________________
Number of Shares of Beneficially Held by
Stockholder:
Common Stock:_______________________
[Series A Preferred Stock:__________
Series B Preferred Stock:___________]
***SUPPORT AGREEMENT***
C-7
ACKNOWLEDGED AND AGREED:
AMGEN INC.
By:__________________________
Name:________________________
Title:_______________________
AMGEN ACQUISITION CORP. II
By:__________________________
Name:________________________
Title:_______________________
KINETIX PHARMACEUTICALS, INC.
By:__________________________
Name:________________________
Title:_______________________
***SUPPORT AGREEMENT***
C-8
EXHIBIT A
---------
MERGER AGREEMENT
Exhibit A
Annex D
DELAWARE GENERAL CORPORATION LAW
SECTION 262 - APPRAISAL RIGHTS
(S)262. Appraisal rights. (a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to (S)228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to (S)(S)251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a and b of this paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a, b and c of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
D-1
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall notify
each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the merger
or consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date
D-2
of the merger or consolidation, any stockholder shall have the right to withdraw
such stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without
D-3
limitation, reasonable attorney's fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to an
appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, the Restated
Certificate of Incorporation, as amended, and the Amended and Restated Bylaws of
the registrant contain provisions covering indemnification of corporate
directors and officers against certain liabilities and expenses incurred as a
result of proceedings involving such persons in their capacities as directors
and officers, including proceedings under the Securities Act of 1933, as amended
(the "Securities Act") and the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
The registrant has authorized the entering into of indemnity contracts and
provides indemnity insurance pursuant to which officers and directors are
indemnified or insured against liability or loss under certain circumstances
which may include liability or related loss under the Securities Act and the
Exchange Act.
Item 21. Exhibits and Financial Statement Schedules
(a) See Exhibit Index.
(b) Not applicable.
(c) Not applicable.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c) under
the Securities Act, the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form; and
(c) The registrant undertakes that every prospectus (i) that is filed
pursuant to sub-paragraph (b) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415 under the
Securities Act, will be filed as a part of an amendment to this Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act, each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or
II-1
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 13, 2000.
AMGEN INC.
(Registrant)
By: /s/ KATHRYN E.FALBERG
----------------------
Name: Kathryn E. Falberg
Title: Senior Vice President, Finance and
Corporate Development, and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
/s/ KEVIN W. SHARER/*/ 11/13/2000 /s/ JERRY D. CHOATE/*/ 11/13/2000
- ------------------------------------- --------------------------------------
Kevin W. Sharer Jerry D. Choate
Chief Executive Officer, President Director
and Director
/s/ GORDON M. BINDER/*/ 11/13/2000 /s/ FREDERICK W. GLUCK/*/ 11/13/2000
- ------------------------------------- --------------------------------------
Gordon M. Binder Frederick W. Gluck
Chairman of the Board and Director Director
/s/ KATHRYN E. FALBERG 11/13/2000 /s/ FRANKLIN P. JOHNSON, JR./*/ 11/13/2000
- ------------------------------------- --------------------------------------
Kathryn E. Falberg Franklin P. Johnson, Jr.
Senior Vice President, Finance and Director
Corporate Development, and Chief
Financial Officer
/s/ BARRY D. SCHEHR/*/ 11/13/2000 /s/ STEVEN LAZARUS/*/ 11/13/2000
- ------------------------------------- --------------------------------------
Barry D. Schehr Steven Lazarus
Vice President, Financial Director
Operations, and Chief Accounting
Officer
/s/ GILBERT S. OMENN/*/ 11/13/2000
- ------------------------------------- --------------------------------------
David Baltimore Gilbert S. Omenn
Director Director
/s/ JUDITH C. PELHAM/*/ 11/13/2000
- ------------------------------------- --------------------------------------
William K. Bowes, Jr. Judith C. Pelham
Director Director
/s/ DONALD B. RICE 11/13/2000
--------------------------------------
Donald B. Rice
Director
* By: /s/ KATHRYN E. FALBERG
________________________________
Kathryn E. Falberg
Attorney-in-Fact
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Restated Certificate of Incorporation as amended. (14)
3.2 Amended and Restated Bylaws. (22)
3.3 Certificate of Amendment of Restated Certificate of Incorporation.
(25)
3.4 Certificate of Amendment of Certificate of Designations of Series A
Junior Participating Preferred Stock. (25)
4.1 Indenture dated January 1, 1992 between the Company and Citibank
N.A., as trustee. (6)
4.2 First Supplement to Indenture, dated February 26, 1997 between the
Company and Citibank N.A., as trustee. (11)
4.3 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, as supplemented, establishing a series of securities
"8-1/8% Debentures due April 1, 2097." (13)
4.4 8-1/8% Debentures due April 1, 2097. (13)
4.5 Form of stock certificate for the common stock, par value $.0001 of
the Company. (14)
4.6 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, dated as of January 1, 1992, as supplemented by the First
supplemental Indenture, dated as of February 26, 1997, each between
the Company and Citibank, N.A., as Trustee, establishing a series of
securities entitled "6.50% Notes Due December 1, 2007". (16)
4.7 6.50% Notes Due December 1, 2007 described in Exhibit 4.6. (16)
4.8 Corporate Commercial Paper - Master Note between and among Amgen
Inc., as Issuer, Cede & Co., as nominee of The Depository Trust
Company and Citibank, N.A. as Paying Agent. (19)
5.1* Opinion of Latham & Watkins as to certain matters relating to the
issuance of the registrant's common stock.
8.1* Opinion of Latham & Watkins as to certain United States federal
income tax consequences of the merger.
10.1 Company's Amended and Restated 1991 Equity Incentive Plan. (22)
10.2 Sixth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated April 1, 1996. (21)
10.3 Shareholder's Agreement of Kirin-Amgen, Inc., dated May 11, 1984,
between the Company and Kirin Brewery Company, Limited (with certain
confidential information deleted therefrom). (1)
10.4 Amendment Nos. 1, 2, and 3, dated March 19, 1985, July 29, 1985 and
December 19, 1985, respectively, to the Shareholder's Agreement of
Kirin-Amgen, Inc., dated May 11, 1984. (25)
10.5 Product License Agreement, dated September 30, 1985, and Technology
License Agreement, dated, September 30, 1985 between the Company and
Ortho Pharmaceutical Corporation. (25)
10.6 Product License Agreement, dated September 30, 1985, and Technology
License Agreement, dated September 30, 1985 between Kirin-Amgen, Inc.
and Ortho Pharmaceutical Corporation. (25)
10.7 Company's Amended and Restated Employee Stock Purchase Plan. (25)
10.8 Research, Development Technology Disclosure and License Agreement
PPO, dated January 20, 1986, by and between the Company and Kirin
Brewery Co., Ltd. (2)
10.9 Amendment Nos. 4 and 5, dated October 16, 1986 (effective July 1,
1986) and December 6, 1986 (effective July 1, 1986), respectively, to
the Shareholders Agreement of Kirin-Amgen, Inc. dated May 11, 1984
(with certain confidential information deleted therefrom). (3)
10.10 Assignment and License Agreement, dated October 16, 1986, between the
Company and Kirin-Amgen, Inc. (with certain confidential information
deleted therefrom). (3)
10.11 G-CSF European License Agreement, dated December 30, 1986, between
Kirin-Amgen, Inc. and the Company (with certain confidential
information deleted therefrom). (3)
10.12 Research and Development Technology Disclosure and License Agreement:
GM-CSF, dated March 31, 1987, between Kirin Brewery Company, Limited
and the Company (with certain confidential information deleted
therefrom). (3)
10.13 Company's Amended and Restated 1988 Stock Option Plan. (9)
10.14 Company's Amended and Restated Retirement and Savings Plan. (9)
10.15 Amendment, dated June 30, 1988, to Research, Development, Technology
Disclosure and License Agreement: GM-CSF dated March 31, 1987,
between Kirin Brewery Company, Limited and the Company. (4)
10.16 Agreement on G-CSF in Certain European Countries, dated January 1,
1989, between Amgen Inc. and F. Hoffmann-La Roche & Co. Limited
Company (with certain confidential information deleted therefrom).
(5)
10.17 Partnership Purchase Agreement, dated March 12, 1993, between the
Company, Amgen Clinical Partners, L.P., Amgen Development
Corporation, the Class A limited partners and the Class B limited
partner. (7)
10.18 Amgen Inc. Supplemental Retirement Plan (As Amended and Restated
Effective November 1, 1999). (23)
10.19 First Amendment to Amgen Inc. Change of Control Severance Plan. (25)
10.20 Amended and Restated Amgen Performance Based Management Incentive
Plan. (22)
10.21 Credit Agreement, dated as of May 28, 1998, among Amgen Inc., the
Borrowing Subsidiaries named therein, the Banks named therein,
Citibank, N.A., as Issuing Bank, and Citicorp USA, Inc., as
Administrative Agent. 20)
10.22 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995.
(8)
10.23 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995.
(8)
10.24 Agreement between Amgen Inc. and Dr. N. Kirby Alton, dated October
11, 1999. (23)
10.25 Amendment No. 1 to the Company's Amended and Restated Retirement and
Savings Plan. (9)
10.26 Seventh Amendment to the Amgen Retirement and Savings Plan as Amended
and Restated effective April 1, 1996. (22)
10.27 Amendment Number 2 to the Company's Amended and Restated Retirement
and Savings Plan dated April 1, 1996. (12)
10.28 Amgen Inc. Change of Control Severance Plan effective as of October
20, 1998. (21)
10.29 Preferred Share Rights Agreement, dated February 18, 1997, between
Amgen Inc. and American Stock Transfer and Trust Company, Rights
Agent. (10)
10.30 First Amendment, effective January 1, 1998, to the Company's Amended
and Restated Employee Stock Purchase Plan. (15)
10.31 Third Amendment, effective January 1, 1997, to the Company's Amended
and Restated Retirement and Savings Plan dated April 1, 1996. (15)
10.32 Agreement between Amgen Inc. and Dr. Fabrizio Bonanni, dated March 3,
1999. (23)
10.33 Promissory Note of Ms. Kathryn E. Falberg, dated April 7, 1995. (17)
10.34 Promissory Note of Mr. Edward F. Garnett, dated July 18, 1997. (17)
10.35 Fourth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated effective April 1, 1996. (17)
10.36 Fifth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated effective April 1, 1996. (17)
10.37 Company's Amended and Restated 1987 Directors' Stock Option Plan. (1)
10.38 Amended and Restated Agreement on G-CSF in the EU between Amgen Inc.
and F. Hoffmann-La Roche Ltd (with certain confidential information
deleted therefrom). (19)
10.39 Collaboration and License Agreement, dated December 15, 1997, between
the Company, GPI NIL Holdings, Inc. and Guilford Pharmaceuticals Inc.
(with certain confidential information deleted therefrom). (18)
10.40 Promissory Note of Dr. Fabrizio Bonanni, dated August 7, 1999. (23)
10.41 Promissory Note of Dr. Fabrizio Bonanni, dated October 29, 1999. (23)
10.42 Agreement between Amgen Inc. and Dr. Lawrence M. Souza, Ph.D., dated
March 6, 2000. (24)
10.43 Agreement between Amgen Inc. and Mr. Gordon M. Binder, dated May 10,
2000. (25)
23.1* Consent of Latham & Watkins (included as part of Exhibit 5.1 to this
registration statement).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Ernst & Young LLP, Independent Auditors.
23.4* Consent of Latham & Watkins (included as part of Exhibit 8.1 to this
registration statement).
24.1* Powers of Attorney (included on signature page to the Registration
Statement).
99.1 Form of Proxy to be mailed to holders of Kinetix stock.
- ------------------------------
* Previously filed with the initial Registration Statement on Form S-4 on
November 3, 2000.
(1) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
March 31, 1984 on June 26, 1984 and incorporated herein by reference.
(2) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration Statement
(Registration No. 33-3069) on March 11, 1986 and incorporated herein by
reference.
(3) Filed as an exhibit to the Form 10-K Annual Report for the year ended March
31, 1987 on May 18, 1987 and incorporated herein by reference.
(4) Filed as an exhibit to Form 8 amending the Quarterly Report on Form 10-Q
for the quarter ended June 30, 1988 on August 25, 1988 and incorporated
herein by reference.
(5) Filed as an exhibit to the Form 8 dated November 8, 1989, amending the
Annual Report on Form 10-K for the year ended March 31, 1989 on June 28,
1989 and incorporated herein by reference.
(6) Filed as an exhibit to Form S-3 Registration Statement dated December 19,
1991 and incorporated herein by reference.
(7) Filed as an exhibit to the Form 8-A dated March 31, 1993 and incorporated
herein by reference.
(8) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1995 on March 29, 1996 and incorporated herein by reference.
(9) Filed as an exhibit to the Form 10-Q for the quarter ended September 30,
1996 on November 5, 1996 and incorporated herein by reference.
(10) Filed as an exhibit to the Form 8-K Current Report dated February 18, 1997
on February 28, 1997 and incorporated herein by reference.
(11) Filed as an exhibit to the Form 8-K Current Report dated March 14, 1997 on
March 14, 1997 and incorporated herein by reference.
(12) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1996 on March 24, 1997 and incorporated herein by reference.
(13) Filed as an exhibit to the Form 8-K Current Report dated April 8, 1997
onApril 8, 1997 and incorporated herein by reference.
(14) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1997
on May 13, 1997 and incorporated herein by reference.
(15) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1997 on
August 12, 1997 and incorporated herein by reference.
(16) Filed as an exhibit to the Form 8-K Current Report dated and filed on
December 5, 1997 and incorporated herein by reference.
(17) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1997 on March 24, 1998 and incorporated herein by reference.
(18) Filed as Exhibit 10.40 to the Guilford Pharmaceuticals Inc. Form 10-K for
the year ended December 31, 1997 on March 27, 1998 and incorporated herein
by reference.
(19) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1998
on May 13, 1998 and incorporated herein by reference.
(20) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1998 on
August 14, 1998 and incorporated herein by reference.
(21) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1998 on March 16, 1999 and incorporated herein by reference.
(22) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1999 on
August 3, 1999 and incorporated herein by reference.
(23) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1999 on March 7, 2000 and incorporated herein by reference.
(24) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 2000
on April 27, 2000 and incorporated herein by reference.
(25) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 2000 on
August 1, 2000 and incorporated herein by reference.