OPTION AGREEMENT
OPTION AGREEMENT (this "Agreement"), dated as of July 26, 1999 by and
between Xxxxxxx Pharmaceutical Corporation, a New Jersey corporation
("Xxxxxxx"), and Shire Pharmaceuticals Group plc, a public limited company
organized under the laws of England and Wales ("Shire").
WHEREAS, concurrently herewith, Shire, Xxxxxxx and Xxxx Acquisition
Sub, a New Jersey corporation ("Acquisition Sub"), are entering into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement"),
pursuant to which Acquisition Sub will merge with and into Xxxxxxx (the
"Merger"); and
WHEREAS, as a condition and inducement to Shire and Acquisition Sub to
enter into the Merger Agreement, Shire has required that Xxxxxxx agree, and
Xxxxxxx has agreed, to grant to Shire an option to purchase certain newly issued
shares of common stock, par value $.01 per share (the "Common Stock") of
Xxxxxxx, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, and intending to be
legally bound hereby, it is agreed as follows:
1. Option to Purchase.
1.1 Grant of Option. Xxxxxxx hereby grants to Shire an irrevocable
option (the "Option") to purchase up to 6,345,926 shares of Common Stock (the
"Shares") on the terms and subject to the conditions set forth herein. The
Option is exercisable upon the occurrence of any event causing the payment set
forth in Section 9.2(b) of the Merger Agreement to become due and payable.
1.2 Exercise of Option. Subject to Section 1.1, at any time prior to
the termination of this Agreement, Shire may exercise the Option, in whole or in
part, by sending a written notice of such exercise (the "Exercise Notice") to
Xxxxxxx specifying the number of Shares to be purchased and a date (not less
than two business days nor more than ten days from the later of (i) the date
such Exercise Notice is given and (ii) the expiration or termination of any
waiting period, and any extensions thereof, under the HSR Act (as hereinafter
defined))
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(the "Option Closing Date") for the closing of such purchase (the "Closing").
The Option may only be exercised on one occasion. The Closing shall take place
at the offices of Xxxxxx Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
at 11:00 a.m., local time, on the day specified in such notice or at such other
place, and at such other time or date, as the parties hereto may agree. At the
Closing, Xxxxxxx shall deliver to Shire certificates in definitive form
representing the number of Shares specified in the Exercise Notice registered in
the name of Shire or its designee, against payment therefor as specified in
Section 1.3. All applicable transfer and documentary taxes and other fees shall
be paid by Xxxxxxx.
1.3 Purchase Price. The purchase and sale of the shares of Common Stock
pursuant to Section 1.1 of this Agreement shall be at a purchase price per share
equal to $30.00 in cash (the "Purchase Price"). At the Closing, Shire shall pay
to Xxxxxxx in immediately available funds by wire transfer payable to the order
of Xxxxxxx an amount equal to the product of the Purchase Price multiplied by
the number of Shares sold pursuant to this Section 1.
1.4 Adjustments. If at any time the outstanding shares of Common Stock
are changed into a different number of shares or a different class by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment or if a stock dividend thereon is declared with a record
date prior to the termination of this Agreement, then the number of shares of
Common Stock subject to the Option and the applicable per share consideration to
be paid by Shire upon exercise of the Option (but not the total purchase price)
shall be appropriately and equitably adjusted so that Shire shall receive upon
exercise of the Option the number and class of shares or other securities or
property that Shire would have received in respect of the Shares that Shire
would have been entitled to purchase upon exercise of the Option if the Option
had been exercised immediately prior to such event. The rights of Shire under
this Section 1.4 shall be in addition to, and shall in no way limit, its rights
against Xxxxxxx for breach by Xxxxxxx of the Merger Agreement.
1.5 Aggregate Limits. (a) Notwithstanding any other provision of this
Agreement or the Merger Agreement, in no event shall Shire's Total Profit (as
hereinafter defined) exceed in the aggregate $32.0 million and, if it otherwise
would exceed such amount Shire, in its sole discretion, shall either (i) reduce
the number of shares of Common Stock subject to the Option, (ii) pay cash to
Xxxxxxx, (iii) reduce the fee
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set forth in Section 9.2(b) of the Merger Agreement or (iv) any combination
thereof, so that Shire's actually realized Total Profit shall not exceed in the
aggregate $32.0 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of Shares as would, as of the date the
Exercise Notice is given, result in a Notional Total Profit (as defined below)
of more than $32.0 million and, if exercise of the Option otherwise would exceed
such amount, Shire, at its discretion, may increase the Purchase Price for that
number of Shares set forth in the Exercise Notice so that the Notional Total
Profit shall not exceed $32.0 million.
(c) As used herein, the term "Total Profit" shall mean the sum of
(i)(x) the amount (before taxes but net of reasonable and customary commissions
paid or payable in connection with such transaction) received by Shire pursuant
to the sale or other disposition of the Shares less (y) the exercise price for
such Shares, (ii) any amounts (before taxes but net of reasonable and customary
commissions paid or payable in connection with such transaction) received by
Shire on the transfer of the Option (or any portion thereof) to any unaffiliated
Person(s) (if permitted hereunder) or to Xxxxxxx and (iii) the amount received
by Shire pursuant to Section 9.2(b) of the Merger Agreement.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Shire may propose to exercise this Option shall
be the Total Profit determined as of the date the Exercise Notice is given
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Shares, were sold for cash at the closing market price
for the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
2. Representations and Warranties of Xxxxxxx. Xxxxxxx represents and
warrants to Shire as follows:
2.1 Shares of Common Stock. Xxxxxxx has taken all action necessary to
authorize and reserve for issuance and to permit it to issue, upon exercise of
the Option, and at all times from the date hereof through the expiration of the
Option will have reserved, that number of unissued Shares that are subject to
the Option, all of which, upon their issuance and
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delivery in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable. Upon delivery of the Shares to Shire upon the
exercise of the Option, Shire will acquire the Shares, free of all liens,
encumbrances, restrictions and claims of every kind other than restrictions on
transfer under applicable Federal and State securities laws.
2.2 Authority; Binding Agreement. Xxxxxxx has the full legal right,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution and delivery of this Agreement by Xxxxxxx will not
violate its Certificate of Incorporation or By-laws. This Agreement has been
duly executed and delivered by Xxxxxxx and constitutes a legal, valid and
binding agreement of Xxxxxxx, enforceable in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws, now or hereafter in effect
affecting creditors' rights and remedies generally or general principles of
equity. Neither the execution and delivery of this Agreement nor the
consummation by Xxxxxxx of the transactions contemplated hereby will (i)
violate, or require any consent, approval or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to Xxxxxxx
or the Shares, except for the filings required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or (ii)
constitute a violation of, conflict with or constitute a default under, any
material contract, commitment, agreement, understanding, arrangement or other
restriction of any kind to which Xxxxxxx and its subsidiaries are a party or by
which any of them are bound.
2.3 No Consent. The execution and delivery of this Agreement by Xxxxxxx
does not, and the performance of this Agreement by Xxxxxxx will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any non-governmental entity or other third party.
2.4 Reliance on Agreement. Xxxxxxx understands and acknowledges that
Shire is entering into the Merger Agreement in reliance upon Xxxxxxx' execution
and delivery of this Agreement. Xxxxxxx acknowledges that the irrevocable stock
option set forth in Section 1 is granted in consideration for the execution and
delivery of the Merger Agreement by Shire.
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3. Representations and Warranties of Shire. Shire represents and warrants to
Xxxxxxx as follows:
3.1 Authority; Binding Agreement. Shire has full legal right, power and
authority to enter into and perform all of its obligations under this Agreement.
This Agreement has been duly executed and delivered by Shire and constitutes a
legal, valid and binding agreement of Shire, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws, now or hereafter in
effect, affecting creditors rights and remedies generally or general principles
of equity. Neither the execution and delivery of this Agreement nor the
consummation by Shire of the transactions contemplated hereby will (i) violate,
or require any consent, approval or notice under, any provision of any judgment,
order, decree, statute, law, rule or regulation applicable to Shire or the
Shares, except for the filings under the HSR Act or (ii) constitute a violation
of, conflict with or constitute a default under, any contract, commitment,
agreement, understanding, arrangement or other restriction of any kind to which
Shire is a party or by which it is bound.
3.2 Private Purchase. Shire is acquiring the Option and will acquire
the shares of Common Stock upon the exercise of the Option for its own account
and not with a view to the distribution or resale thereof in any manner not in
accordance with applicable law.
4. Certain Covenants of Xxxxxxx.
4.1 HSR Act. If prior notification to or approval of any regulatory or
antitrust agency is required in connection with the acquisition of the Shares by
Shire hereunder, Xxxxxxx shall promptly make any required filing, and shall
expeditiously respond to any requests and make any subsequent filings necessary
to obtain clearance to consummate the purchase of the Shares by Shire.
Notwithstanding Section 1, the time periods specified therein shall run instead
from the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting period
or periods shall have passed.
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5. Certain Covenants of Shire.
5.1 Voting. Subject to payment by Xxxxxxx of all amounts due Shire
under Section 9.2(b) of the Merger Agreement (subject to the limitations
contained in Section 1.5 hereof), Shire will vote any Shares then held by it in
favor of the first Xxxxxxx Acquisition Transaction (as defined in the Merger
Agreement) recommended by Xxxxxxx' Board of Directors subsequent to Shire's
exercise of the Option, provided that such, recommendation has not been
withdrawn, amended or modified. Shire will be present in person or represented
by proxy at each shareholder meeting of which it receives notice, provided such
notice is given in compliance with Xxxxxxx' Certificate of Incorporation and
By-Laws and New Jersey law or Shire waives such notice.
5.2 Standstill.
Shire agrees that for a period of two years from the date of the first
exercise of the Option, neither it nor any of its affiliates will, without the
prior written consent of Xxxxxxx or its Board of Directors:
(a) acquire, offer to acquire, or agree to acquire, by purchase or
otherwise, voting securities or direct or indirect rights to
acquire any voting securities of Xxxxxxx, or of any successor to
or person in control of Xxxxxxx representing in excess of 20% of
the then outstanding voting equity of such entity, or any
material portion of the assets of Xxxxxxx or any subsidiary or
division thereof or of any such successor or controlling person;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in
the rules of the Securities and Exchange Commission), or seek to
advise or influence any person with respect to the voting of any
voting securities of the Xxxxxxx which Shire does not then own;
(c) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any
Xxxxxxx Acquisition Transaction; or
(d) form, join or in any way participate in a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"),
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or enter into discussions with any person other than Xxxxxxx,
in connection with any of the foregoing.
Notwithstanding the foregoing, paragraphs (a) through (d) above shall
not be binding on Shire if, without the appraisal of the Xxxxxxx board of
directors, (A) any person or group of person (other than any person specified in
Rule 13d-1(b)(1)(i) and (ii) under the Exchange Act or Shire and its affiliates)
acquires beneficial ownership of Common Stock, or any securities convertible
into or exchangeable for any Common Stock (or any combination of Common Stock
and such securities), representing 10% or more of the then total outstanding
shares of Common Stock; or (B) it has been publicly announced or otherwise
publicly disclosed that any person or group of persons, other than Shire or any
of its affiliates, proposes to effect or has effected (1) a merger,
consolidation or other business combination transaction with Xxxxxxx, (2) any
sale, lease, exchange, transfer or other disposition of all or substantially all
of the assets of Xxxxxxx and its subsidiaries, taken as a whole, (3) a tender
offer or exchange offer for more than 10% of the outstanding shares of Common
Stock, or (4) any solicitation of proxies with respect to shares of Common Stock
by any person or group of persons (other than Shire or any of its affiliates)
with respect to either the election of the directors or relating to any
transaction of the kind referred to in this paragraph.
5.3 Transfer Restrictions. For so long as Shire owns Shares
representing at least 5% of the outstanding shares of Common Stock, Shire agrees
that it will not sell, transfer any beneficial interest in, pledge, hypothecate
or otherwise dispose of any Shares at any time except as follows:
(i) pursuant to a Xxxxxxx Acquisition Transaction approved by the
board of directors of Xxxxxxx; or
(ii) in compliance with Rule 144 (or any successor provision) under
the Securities Act of 1933, as amended.
6. Termination. This Agreement, to the extent an Exercise Notice has not
previously been given after the occurrence of the event described in Section 1.1
hereof, shall terminate on the earlier of (i) the Effective Time (as defined in
the Merger Agreement) or (ii) the termination of the Merger Agreement in
accordance with its terms unless a fee is payable or could be payable under
Section 9.2(b) of the Merger Agreement (in which
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case this Agreement shall terminate one business day after any amount due under
such Section 9.2(b) has been received by Shire or a fee could no longer be
payable under the terms of such Section 9.2(b)).
7. Restrictive Legends. Each certificate representing Shares issued to Shire
hereunder shall, to the extent applicable, include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THESE SECURITIES ARE SUBJECT TO CERTAIN
RESTRICTIONS CONTAINED IN AN OPTION AGREEMENT DATED AS OF JULY 23, 1999.
8. Conditions to Closing. The obligations of the parties to close hereunder
shall be subject to the conditions that (i) there shall be no preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction in effect which prohibits the issuance of the Shares and (ii) all
applicable waiting periods, and any extensions thereof, under the HSR Act shall
have expired or been terminated. Xxxxxxx agrees not to seek any such injunction
or order and agrees that it will oppose and will seek the immediate lifting of
any such injunction or order.
9. Miscellaneous.
9.1 Survival of Representations and Warranties. All representations,
warranties, covenants and agreements made by Xxxxxxx and Shire in this Agreement
shall survive any Closing hereunder and any investigation at any time made by or
on behalf of any party.
9.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally or by next-day courier or telecopied with confirmation of receipt, to
the parties at the addresses specified below (or at such other address for a
party as shall be specified by like notice; provided that notices of a change of
address shall be effective only upon receipt thereof). Any such notice shall be
effective upon receipt, if
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personally delivered or telecopied or one day after delivery to a courier for
next-day delivery.
If to Shire:
Shire Pharmaceuticals Group plc
Xxxx Xxxxx
Xxxxxxx, Xxxxx XX 00 0XX
Xxxxxx Xxxxxxx
Telecopy: 011 44 1 264 334 658
Attention: Xxxx Xxxxxx, Chief Executive Officer
with copies to:
Xxxx X. Xxxxxxxx, Esq.
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Xxxxxxx:
Xxxxxxx Pharmaceutical Corporation
Xxxx Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
with a copy to:
Xxxxxxxx Xxxxxxxx, Esq.
Milbank, Tweed, Xxxxxx & XxXxxx LLP
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
9.3 Entire Agreement. This Agreement, together with the documents
expressly referred to herein, constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, between the
parties, with respect to the subject matter contained herein.
9.4 Amendments. 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.
9.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns and
personal representatives, but neither this Agreement nor any of the rights,
interests or
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obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other party.
9.6 Expenses. Each party hereto will pay all of its expenses in
connection with the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of its counsel and other advisers.
9.7 Governing Law. This Agreement, and all matters relating hereto,
shall be governed by, and construed in accordance with the laws of the State of
New York without giving effect to the principles of conflicts of laws thereof.
9.8 Injunctive Relief; Jurisdiction. Xxxxxxx agrees that irreparable
damage would occur and that Shire would not have any adequate remedy at law in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Shire shall be entitled to an injunction or injunctions
to prevent breaches by Xxxxxxx of this Agreement and to enforce specifically the
terms and provisions of this Agreement in any court of the United States located
in the State of New York, Borough of Manhattan, or in New York state court
located in the Borough of Manhattan, this being in addition to any other remedy
to which they are entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of any
Federal court located in the State of New York, Borough of Manhattan or in New
York State Court located in the Borough of Manhattan in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby,
(ii) agrees that such party will not attempt to deny or defeat such party to the
personal jurisdiction by motion or other request for leave from any such court
and (iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court other than
a Federal or state court sitting in the State of New York, located in the
Borough of Manhattan.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same document.
9.10 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
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9.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
9.12 Further Assurances. Each party hereto shall execute and deliver
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
9.13 Third-Party Beneficiaries. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy or claim under or by reason of this Agreement
or any provision contained herein.
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IN WITNESS WHEREOF, Shire and Xxxxxxx have caused this Agreement to be
executed by their duly authorized officers, as of the date and year first above
written.
SHIRE PHARMACEUTICALS GROUP PLC
By: /s/ Xxxx Xxxxxx
-----------------------------------------
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
XXXXXXX PHARMACEUTICAL CORPORATION
By: /s/ Xxxx X. Xxxxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: President-Chief Executive Officer
