-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, USrkHF7FSPfiYDVNBJLItmNL/24VaielVYC+fvsyWPJqQYjYQDRSd8sMFzcpkfzL CN9J9nd6qgGTl7dqWINfbQ== 0000950157-03-000324.txt : 20030429 0000950157-03-000324.hdr.sgml : 20030429 20030429165738 ACCESSION NUMBER: 0000950157-03-000324 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCIOS INC CENTRAL INDEX KEY: 0000726512 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 953701481 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 333-99641 FILM NUMBER: 03670118 BUSINESS ADDRESS: STREET 1: 820 W MAUDE AVE CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4086168200 MAIL ADDRESS: STREET 1: 820 W MAUDE AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94085 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA BIOTECHNOLOGY INC DATE OF NAME CHANGE: 19920302 FORMER COMPANY: FORMER CONFORMED NAME: SCIOS NOVA INC DATE OF NAME CHANGE: 19930423 POS AM 1 pos-am.txt POST-EFFECTIVE AMENDMENT NO. 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 2003 REGISTRATION NO. 333- REGISTRATION NO. 333-99641 =================================================================================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------------------------------------------------------------------- FORM S-3 REGISTRATION STATEMENT AND POST-EFFECTIVE AMENDMENT NO. 1 UNDER THE SECURITIES ACT OF 1933 ---------------------------------------------------------------------------------------------- JOHNSON & JOHNSON SCIOS INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW JERSEY DELAWARE (STATE OF OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (STATE OF OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 22-1024240 95-3701481 (I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.) ONE JOHNSON & JOHNSON PLAZA 820 WEST MAUDE AVENUE NEW BRUNSWICK, NEW JERSEY 08933 SUNNYVALE, CALIFORNIA 94085 (732) 524-0400 (408) 616-8200 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------------------------------------------------------------------------------------- JOHN T. CRISAN, ESQ. JOHNSON & JOHNSON ONE JOHNSON & JOHNSON PLAZA NEW BRUNSWICK, NEW JERSEY 08933 TELEPHONE: (732) 524-0400 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ---------------------------------------------------------------------------------------------- COPIES TO: ROBERT I. TOWNSEND, III, ESQ. CRAVATH, SWAINE & MOORE LLP WORLDWIDE PLAZA 825 EIGHTH AVENUE NEW YORK, NEW YORK 10019 (212) 474-1000 ---------------------------------------------------------------------------------------------- Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. |X| If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE =================================================================================================================================== PROPOSED AMOUNT PROPOSED MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE - ----------------------------------------------------------------------------------------------------------------------------------- 5.5% Convertible Subordinated Notes Due 2009 of Scios Inc...................................... N/A N/A N/A N/A(1) Guarantees by Johnson & Johnson................... N/A N/A N/A N/A(2) =================================================================================================================================== (1) A registration fee of $13,800.00 was paid in connection with the original filing by Scios Inc. of the Registration Statement on Form S-3 (Registration No. 333-99641) filed on September 17, 2002. (2) In connection with the merger of Saturn Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Johnson & Johnson, with and into Scios Inc., a Delaware corporation, Scios, Johnson & Johnson and Wells Fargo Bank, National Association, as trustee, under the Indenture dated as of August 5, 2002 pursuant to which Scios's 5.50% Convertible Subordinated Notes Due 2009 (the "notes") were issued, entered into a supplemental indenture pursuant to which, among other things, each $1,000 principal amount of the notes became convertible only into the right to receive $1,145.04 in cash, without interest, and Johnson & Johnson unconditionally and irrevocably guaranteed, on a subordinated basis, the notes. No consideration was received by Johnson & Johnson from holders of the notes or otherwise in connection with Johnson & Johnson's issuance of its subordinated guarantees of the notes (which guarantees are embodied in the supplemental indenture). ---------------------------------------------------------------------------------------------- Pursuant to Rule 429 under the Securities Act, the prospectus included in this registration statement is a combined prospectus and relates to this registration statement and Registration No. 333-99641, pursuant to which the notes with an aggregate principal amount of $150,000,000 were registered. This registration statement also constitutes Post-Effective Amendment No. 1 to the notes registration statement. 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 THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ===================================================================================================================================
EXPLANATORY STATEMENT This registration statement is being filed under the Securities Act of 1933 jointly by Johnson & Johnson, a New Jersey corporation, referred to in this registration statement as Johnson & Johnson, and Scios Inc., a Delaware corporation, referred to in this registration statement as Scios. On September 17, 2002, Scios filed a registration statement, Registration No. 333-99641, referred to in this registration statement as the notes registration statement, registering $150,000,000 principal amount of its 5.50% convertible subordinated notes due 2009, referred to in this registration statement as the notes, and common stock of Scios then issuable upon conversion of the notes. The notes registration statement became effective on January 10, 2003. On April 29, 2003, Scios became a wholly owned subsidiary of Johnson & Johnson through the merger of Saturn Merger Sub, Inc., a wholly owned subsidiary of Johnson & Johnson, with and into Scios. In connection with the merger, each $1,000 principal amount of the notes became convertible into the right to receive $1,145.04 in cash without interest, and Johnson & Johnson issued its subordinated guarantee of the notes. This registration statement registers the resale of the guarantee by Johnson & Johnson of the obligations of Scios pursuant to the notes. This post-effective amendment No. 1 to the notes registration statement revises the notes registration statement to reflect that the notes are guaranteed on a subordinated basis by Johnson & Johnson, are convertible only into the right to receive $1,145.04 in cash without interest and to explain other changes to the notes related to the merger. PROSPECTUS SUBJECT TO COMPLETION DATED APRIL 29, 2003 $150,000,000 SCIOS INC. 5.50% CONVERTIBLE SUBORDINATED NOTES DUE 2009 JOHNSON & JOHNSON GUARANTEES In August 2002, Scios issued and sold $150,000,000 aggregate principal amount of its 5.50% convertible subordinated notes due 2009 in a private offering. On April 29, 2003, Scios became a wholly owned subsidiary of Johnson & Johnson through the merger of Saturn Merger Sub, Inc., a wholly owned subsidiary of Johnson & Johnson, with and into Scios. In connection with the merger, each $1,000 principal amount of the notes became convertible into the right to receive $1,145.04 in cash without interest, and Johnson & Johnson issued its subordinated guarantee of the notes. This prospectus relates to the resale of the notes and the associated Johnson & Johnson guarantees. The notes may be sold from time to time by or on behalf of the selling securityholders named in this prospectus or in supplements to this prospectus. The Johnson & Johnson guarantees are embodied in the first supplemental indenture to the indenture governing the notes and may be sold together with the associated notes from time to time by or on behalf of the selling securityholders named in this prospectus or in supplements to this prospectus. Scios will pay interest on the notes each February 15 and August 15 to the holders of record on each February 1 and August 1. The first interest payment was made on February 15, 2003. Scios may redeem some or all of the notes on or after August 19, 2005 at the redemption prices listed in this prospectus, plus accrued interest. Scios has pledged a portfolio of U.S. government securities as security for the first six scheduled interest payments due on the notes. The notes are not listed on any national securities exchange. Neither Johnson & Johnson nor Scios will receive any proceeds from the sale by the selling securityholders of the notes or associated Johnson & Johnson guarantees offered by this prospectus or in any prospectus supplement. Other than selling commissions and fees and transfer taxes, Scios and Johnson & Johnson will pay all expenses of the registration and sale of the notes and the associated guarantees. Investing in the notes and associated Johnson & Johnson guarantees involves risk. See "Risk Factors" beginning on page 5 of this prospectus. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2003. TABLE OF CONTENTS Page Additional Information......................................................i Special Note Regarding Forward-Looking Statements...........................1 Johnson & Johnson...........................................................2 Risk Factors................................................................5 Ratio of Earnings to Fixed Charges..........................................6 Use of Proceeds.............................................................7 Description of Notes........................................................8 Description of Johnson & Johnson Guarantees.................................20 Selling Securityholders.....................................................20 Plan of Distribution........................................................21 Material United States Federal Income Tax Consequences......................24 Legal Matters...............................................................28 Experts.....................................................................28 Where You Can Find More Information.........................................28 ---------------------------------- ADDITIONAL INFORMATION This prospectus incorporates important business and financial information about Johnson & Johnson and Scios that is not included in or delivered with this prospectus. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone from Johnson & Johnson at the following address and telephone number: JOHNSON & JOHNSON One Johnson & Johnson Plaza New Brunswick, NJ 08933 Attention: Corporate Secretary's Office Telephone: (732) 524-2455 Scios and Johnson & Johnson have not authorized anyone to provide you with different information. You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than the date of this prospectus. Scios and Johnson & Johnson are not making an offer of securities in any state where the offer is not permitted. See "Where You Can Find More Information" on page 28. i SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements. These statements relate to future events or future financial performance. When used in this prospectus, any prospectus supplement and the documents incorporated in this prospectus by reference, words such as "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "should," or "will" or the negative of these terms or other comparable terminology are intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks and uncertainties outlined under "Risk Factors," that may cause Johnson & Johnson's or Scios's or their respective industries' actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Johnson & Johnson and Scios assume no obligation to update these forward-looking statements. Although Johnson & Johnson and Scios believe that the expectations reflected in these statements are reasonable, they cannot guarantee future results, levels of activity, performance or achievements. 1 JOHNSON & JOHNSON Johnson & Johnson, with approximately 108,300 employees, is one of the world's largest manufacturers of health care products, as well as a provider of related services, for the consumer, pharmaceutical and medical devices and diagnostics markets. Johnson & Johnson has more than 200 operating companies in 54 countries around the world, selling products in more than 175 countries. Johnson & Johnson's worldwide business is divided into three segments: consumer, pharmaceutical and medical devices and diagnostics. The consumer segment's principal products are personal care and hygienic products, including nonprescription drugs, adult skin and hair care products, baby care products, oral care products, first aid products and sanitary protection products. These products are marketed principally to the general public and distributed both to wholesalers and directly to independent and chain retail outlets. The pharmaceutical segment's principal worldwide franchises are in the antifungal, anti-infective, cardiovascular, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, psychotropic, urology and women's health fields. These products are distributed both directly and through wholesalers for use by health care professionals and the general public. The medical devices and diagnostics segment includes a broad range of products used by or under the direction of health care professionals, including, suture and mechanical wound closure products, surgical equipment and devices, wound management and infection prevention products, interventional and diagnostic cardiology products, diagnostic equipment and supplies, joint replacements and disposable contact lenses. These products are used principally in the professional fields by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. Distribution to these markets is done both directly and through surgical supply and other dealers. Johnson & Johnson was organized in the State of New Jersey in 1887. The address of its principal executive offices is One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933, and the telephone number at that address is (732) 524-0400. RECENT DEVELOPMENTS On April 29, 2003, Scios became a wholly owned subsidiary of Johnson & Johnson through the merger of Saturn Merger Sub, Inc., a wholly owned subsidiary of Johnson & Johnson, with and into Scios. In connection with the merger, each $1,000 principal amount of the notes became convertible into the right to receive $1,145.04 in cash without interest, and Johnson & Johnson issued its subordinated guarantee of the notes. 2 THE NOTES ISSUER Scios Inc. SECURITIES OFFERED $150,000,000 aggregate principal amount of 5.50% convertible subordinated notes due 2009. INTEREST 5.50% per annum on the principal amount, payable semiannually in arrears in cash on February 15 and August 15 of each year, commencing February 15, 2003. MATURITY DATE August 15, 2009. GUARANTEE Johnson & Johnson has unconditionally and irrevocably guaranteed the notes on a subordinated basis. See "Description of Johnson & Johnson Guarantees." CONVERSION RIGHTS The notes are convertible at the option of the holder at any time prior to redemption or maturity only into $1,145.04 in cash without interest per $1,000 in principal amount of notes. See "Description of Notes--Conversion of the Notes." SECURITY Scios has purchased and pledged to the trustee under the indenture, as security for the benefit of the trustee under the indenture and the ratable benefit of the holders of the notes, approximately $24.0 million of U.S. government securities, which will be sufficient upon receipt of scheduled principal and interest payments thereon, to provide for the payment in full of the first six scheduled interest payments due on the notes. The notes are not otherwise secured. See "Description of Notes--Security." RANKING The notes (other than with respect to payments made toward the first six scheduled interest payments due on the notes, as described above under "Security") are subordinated in right of payment to all existing and future senior indebtedness of Scios Inc. and are structurally subordinated to any indebtedness and other liabilities (including trade and other payables) of Scios's subsidiaries. As of December 31, 2002, Scios had approximately $35.2 million of indebtedness that constituted senior indebtedness, no indebtedness that ranked equal in right of payment to the notes and no indebtedness of subsidiaries that would have been structurally senior to the notes. The indenture governing the notes does not limit the amount of indebtedness, including senior indebtedness, that Scios or its subsidiaries may incur. See "Description of Notes--Subordination of the notes." OPTIONAL REDEMPTION At any time on or after August 19, 2005, Scios may redeem some or all of the notes at the declining redemption prices listed herein, plus accrued interest. See "Description of Notes--Optional redemption 3 by Scios." SINKING FUND None. USE Neither Johnson & Johnson nor Scios will receive any OF PROCEEDS proceeds from any sale of securities under this prospectus. TRADING The notes and the associated Johnson & Johnson guarantees are not listed on any national securities exchange. 4 RISK FACTORS You should consider the risk factors below as well as the other information set forth or incorporated by reference in this prospectus. See "Where You Can Find More Information" on page 28. If any of the following risks actually occur, Johnson & Johnson's or Scios's business, financial condition or results of operations could be materially and adversely affected. In such case, Johnson & Johnson's or Scios's ability to make payments on the notes or the associated Johnson & Johnson guarantees could be impaired, the trading prices of the notes could decline, and you could lose all or part of your investment. Please read "Special Note Regarding Forward-Looking Statements." RISKS RELATED TO JOHNSON & JOHNSON AND SCIOS In addition to the risk factors set forth below, you should consider carefully the various factors, risks, uncertainties and assumptions that could materially affect the actual results of Johnson & Johnson and Scios contained in: o Exhibit 99(b) to Johnson & Johnson's Annual Report on Form 10-K for the fiscal year ended December 29, 2002, and o the "Risk Factors" section in Scios's Annual Report on Form 10-K for the fiscal year ended December 31, 2002. RISKS RELATED TO THIS OFFERING The notes and guarantees are subordinated, and holders of any senior indebtedness will be paid before holders of the notes are paid. Except as described below in the section entitled "Description of Notes--Security," the notes are unsecured and subordinated in right of payment to any existing and future senior indebtedness. As of December 31, 2002, Scios had approximately $35.2 million of indebtedness that constituted senior indebtedness. In addition, Scios may incur new indebtedness, which may be senior to the indebtedness represented by the notes. Scios is not prohibited from incurring debt, including indebtedness secured by its assets, under the indenture governing the notes. In the event of Scios's bankruptcy, liquidation or reorganization or upon acceleration of the notes due to an event of default under the indenture and in certain other events, Scios's assets, other than the U.S. government securities pledged to secure the first six interest payments on the notes, will be available to pay obligations on the notes only after all of the secured indebtedness of Scios and other senior indebtedness of Scios has been paid. As a result, there may not be sufficient assets remaining to pay amounts due on any or all of the outstanding notes. For a description of the subordination provisions of the notes, see the "Description of Notes--Subordination of the notes" section of this prospectus. The Johnson & Johnson guarantees are subordinated in right of payment to all of its existing and future senior indebtedness. As of April 28, 2003, Johnson & Johnson's aggregate outstanding senior indebtedness was approxiamtely $5,118 million. You cannot be sure that a public market will develop for the notes. On August 5, 2002, Scios issued the notes to the initial purchasers in a private placement. The notes are eligible to trade in PORTAL, the Private Offering, Resale and Trading through Automated Linkages Market of the National Association of Securities Dealers, Inc., a screen-based automated market for trading securities for qualified institutional buyers. However, the notes resold pursuant to this prospectus will no longer trade on the PORTAL market. As a result, there may be a limited market for the notes. Scios does not intend to list the notes on any national securities exchange or on the Nasdaq National Market. 5 A public market may not develop for the notes. Although the initial purchasers of the notes have advised Scios that they intend to make a market in the notes, they are not obligated to do so and may discontinue such market making at any time without notice. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. Accordingly, Scios cannot assure you that any market for the notes will develop or, if one does develop, that it will be maintained. If a public market for the notes fails to develop or be sustained, the trading price of the notes could be materially adversely affected. The notes are not protected by restrictive covenants. The indenture governing the notes does not contain any financial or operating covenants or restrictions on the payment of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by Scios or any of its subsidiaries. The indenture contains no covenants or other provisions to afford protection to holders of notes in the event of a change in control involving Scios. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges for Johnson & Johnson represents its historical ratio and is calculated on a total enterprise basis. This ratio is computed by dividing the sum of earnings before provision for taxes and fixed charges (excluding capitalized interest) by fixed charges. Fixed charges represent interest (including capitalized interest) and amortization of debt discount and expense and the interest factor of all rentals, consisting of an appropriate interest factor on operating leases.
- ------------------------------------- -------------------------------------------------------------------------------- Fiscal Year Ended - ------------------------------------- ---------------- ----------------- ---------------- --------------- ------------ December 29, December 30, December 31, January 2, January 3, 2002 2001 2000 2000 1999 - ------------------------------------- ---------------- ----------------- ---------------- --------------- ------------ Ratio of Earnings to Fixed Charges........... 26.75 23.95 18.41 14.76 13.46 - ------------------------------------- ---------------- ----------------- ---------------- --------------- ------------
The ratio of earnings to fixed charges for Scios is computed by dividing earnings by fixed charges. For purposes of computing this ratio of earnings to fixed charges, earnings consist of pretax loss from continuing operations adjusted by adding fixed charges. Fixed charges consist of interest expense, amortization of financing costs and estimated interest component of rental expense on operating leases.
- ------------------------------------- -------------------------------------------------------------------------------- Fiscal Year Ended December 31, - ------------------------------------- ---------------- ----------------- ---------------- --------------- ------------ 2002 2001 2000 1999 1998 - ------------------------------------- ---------------- ----------------- ---------------- --------------- ------------ Ratio of Earnings to Fixed Charges........... n/a n/a n/a n/a 0.7 - ------------------------------------- ---------------- ----------------- ---------------- --------------- ------------
Earnings of Scios were insufficient to cover fixed charges by $869,000, $20,050,000, $42,519,000, $62,170,000 and $87,916,000 for the fiscal years ended December 31, 1998, 1999, 2000, 2001 and 2002, respectively. 6 USE OF PROCEEDS The selling securityholders will receive all of the proceeds of the sale of the notes and the associated Johnson & Johnson guarantees offered by this prospectus. Neither Johnson & Johnson nor Scios will receive any of the proceeds from the sale of the notes and the associated Johnson & Johnson guarantees offered by this prospectus. 7 DESCRIPTION OF NOTES The notes were issued under an indenture dated as of August 5, 2002 between Scios and Wells Fargo Bank, National Association, as trustee. Scios, Johnson & Johnson and Wells Fargo Bank, National Association subsequently entered into a first supplemental indenture dated as of April 29, 2003. The following summarizes some, but not all, of the provisions of the notes and the indenture, as amended and supplemented by the first supplemental indenture. You should read the indenture and the notes in their entirety because they, and not this description, define your rights as a holder of the notes. A copy of the form of indenture, the first supplemental indenture and the form of certificate evidencing the notes are exhibits to the registration statement of which this prospectus forms a part and will be made available to you upon request. GENERAL The notes are unsecured (except to the extent described under "--Security") general obligations of Scios and are subordinate in right of payment as described under "--Subordination of the notes." However, payment from the money or the proceeds from the U.S. government securities pledged by Scios to Wells Fargo Bank, National Association, as collateral agent, as security for the notes and for the benefit of the trustee and the ratable benefit of the holders of the notes, as described under "--Security," is not subordinated to any senior indebtedness of Scios or subject to the subordination provisions described under "--Security". The notes are convertible into cash as described under "--Conversion of the notes." The notes are $150,000,000 aggregate principal amount. The notes may be issued only in denominations of $1,000 or in integral multiples of $1,000. The notes bear interest at the annual rate of 5.50% from August 5, 2002, or from the most recent payment date to which interest has been paid or duly provided for. Interest is payable semi-annually in arrears on February 15 and August 15, which commenced on February 15, 2003, to holders of record at the close of business on the preceding February 1 and August 1, respectively, except: o that the interest payable upon redemption, unless the date of redemption is an interest payment date, will be payable to the person to whom principal is payable; and o as set forth in the next succeeding paragraph. o Interest will be paid, at Scios' option, either: o by check mailed to the address of the person entitled to the interest as it appears in the note register; provided that a holder of notes with an aggregate principal amount in excess of $2 million will, at the written election of the holder, be paid by wire transfer in immediately available funds; or o by transfer to an account maintained by that person located in the United States. Payments to The Depository Trust Company, New York, New York, or DTC, will be made by wire transfer of immediately available funds to the account of DTC or its nominee. Interest will be computed on the basis of a 360-day year composed of twelve 30-day months. The notes will mature on August 15, 2009 unless earlier converted or redeemed as described below. The indenture does not contain any financial covenants or restrictions on the payment of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by Scios or any of its 8 subsidiaries. The indenture contains no covenants or other provisions to protect holders of the notes in the event of a highly leveraged transaction or a change in control of Scios. In the first supplemental indenture, the indenture governing the notes was amended to eliminate the obligation of Scios to repurchase the notes at the option of the holders after the occurrence of a change in control of Scios. This provision was eliminated because the price at which the notes would have been required to be repurchased after a change in control (100% of the principal amount plus accrued and unpaid interest) was less than the cash amount payable upon conversion of the notes after the effectiveness of the merger ($1,145.04 per $1,000 in principal amount). CONVERSION OF THE NOTES Any registered holder of notes may, at any time prior to close of business on the business day prior to the date of redemption or final maturity of the notes, as appropriate, convert the principal amount of any notes or portions thereof, in denominations of $1,000 or integral multiples of $1,000, into $1,145.04 in cash without interest per $1,000 in principal amount of notes. Except as described below, no payment or adjustment will be made on conversion of any notes for interest accrued thereon. If any notes are converted between a record date and the next interest payment date, those notes must be accompanied by funds from the holder equal to the interest payable on the next interest payment date on the principal amount so converted. The foregoing sentence does not apply in the case of such notes or portions of such notes called for redemption. In the case of notes called for redemption, conversion rights will expire at the close of business on the business day preceding the day fixed for redemption unless Scios defaults in the payment of the redemption price. SECURITY On August 5, 2002, Scios used approximately $24.0 million of existing funds to purchase U.S. government securities which were pledged to the collateral agent as security for the notes and for the benefit of the trustee and the ratable benefit of the holders of the notes (and not for the benefit of Scios's other creditors). These securities, as held and invested by the collateral agent in accordance with the terms of the pledge agreement that Scios entered into with the trustee and the collateral agent, are sufficient upon receipt of scheduled interest and principal payments of such securities to provide for payment in full of the first six scheduled interest payments on the notes when due. The U.S. government securities were pledged by Scios to the collateral agent for the benefit of the trustee and the ratable benefit of the holders of the notes and are being held by the collateral agent in a pledge account. Immediately prior to an interest payment date, the collateral agent will release from the pledge account proceeds sufficient to pay interest then due on the notes. Scios may also make additional payments to the collateral agent to ensure that sufficient funds are available to pay interest then due on the notes if necessary. A failure to pay interest on the notes when due through the first six scheduled interest payment dates will constitute an event of default (as defined below) under the indenture. The pledged U.S. government securities and the pledge account also secure the repayment of the principal amount on the notes. If prior to the date on which the sixth scheduled interest payment on the notes is due: o an event of default under the notes or the indenture governing the notes occurs and is continuing; and o the trustee or the holders of 25% in aggregate principal amount of the notes accelerate the notes by declaring the principal amount of the notes to be immediately due and payable (by written 9 consent, at a meeting of note holders or otherwise), except for the occurrence of an event of default relating to the bankruptcy, insolvency or reorganization of Scios or that of any of Scios's significant subsidiaries, upon which the notes will be accelerated automatically, then the proceeds from the pledged U.S. government securities will be promptly released for payment to the note holders, subject to the automatic stay provisions of bankruptcy law, if applicable. Distributions from the pledge account will be applied: o first, to any accrued and unpaid interest on the notes; and o second, to the extent available, to the repayment of a portion of the principal amount of the notes. If any event of default is waived prior to the acceleration of the notes by the trustee or holders of the notes referred to above, the trustee and the holders of the notes will not be able to accelerate the notes as a result of that event of default. For example, if the first two interest payments were made when due but the third interest payment was not made when due and the note holders promptly exercised their right to declare the principal amount of the notes to be immediately due and payable, then, assuming the automatic stay provisions of bankruptcy law are inapplicable and the proceeds of the pledged U.S. government securities are promptly distributed from the pledge account, o an amount equal to the interest payment due on the third interest payment plus any additional interest o accrued on the missed third interest payment would be distributed from the pledge account as accrued interest; and o the balance of the proceeds of the pledge account would be distributed as a portion of the principal amount of the notes. In addition, note holders would have an unsecured claim against Scios for the remainder of the principal amount of their notes. Once Scios makes the first six scheduled interest payments on the notes, all of the remaining pledged U.S. government securities and cash, if any, will be released to Scios from the pledge account and thereafter the notes will be unsecured. OPTIONAL REDEMPTION BY SCIOS The notes are not entitled to any sinking fund. At any time on or after August 19, 2005, Scios may redeem the notes on at least 30 days' and not more than 60 days' notice as a whole or, from time to time, in part at the following prices, expressed as a percentage of the principal amount, together with accrued interest to, but excluding, the date fixed for redemption: REDEMPTION PERIOD PRICE - ----------------------------------------------------------- -------------- Beginning August 19, 2005 and ending on August 14, 2006 103.143% Beginning August 15, 2006 and ending on August 14, 2007 102.357% 10 Beginning August 15, 2007 and ending on August 14, 2008 101.571% Beginning August 15, 2008 and ending on August 14, 2009 100.786% - ------------------------------------------------------------------------------ Any accrued interest becoming due on the date fixed for redemption will be payable to the holders of record on the relevant record date of the notes being redeemed. If less than all of the outstanding notes are to be redeemed, the trustee will select the notes to be redeemed in principal amounts of $1,000 or integral multiples of $1,000 by lot, pro rata or by another method the trustee considers fair and appropriate. If a portion of a holder's notes is selected for partial redemption and that holder converts a portion of that holder's notes, the converted portion will be deemed to be of the portion selected for redemption. SUBORDINATION OF THE NOTES The indebtedness evidenced by the notes (other than with respect to payments on the notes derived from U.S. government securities pledged by Scios to the collateral agent for the benefit of the trustee and the ratable benefit of the holders of the notes (hereafter referred to as "permitted payments")) is subordinated to the extent provided in the indenture to the prior payment in full, in cash or other payment satisfactory to holders of senior indebtedness, of all of the existing and future senior indebtedness of Scios. Upon any distribution of Scios's assets upon any dissolution, winding-up, liquidation or reorganization, or in bankruptcy, insolvency, receivership or similar proceedings, payment of the principal of, premium, if any, interest and all other obligations in respect of the notes, including by way of redemption, acquisition or other purchase thereof, on the notes, except for permitted payments and payments Scios may choose to make comprised solely in permitted junior securities acceptable to the holders, is subordinated in right of payment to the prior payment in full, in cash or other payment satisfactory to holders of senior indebtedness, of all of Scios's existing and future senior indebtedness. In addition, the notes are effectively subordinated to any indebtedness and other liabilities, including trade payables and lease obligations and preferred stock, of Scios's subsidiaries. In the event of any acceleration of the notes because of an event of default, the holders of any senior indebtedness then outstanding would be entitled to payment in full, in cash or other payment satisfactory to holders of senior indebtedness of Scios, of all obligations in respect to such senior indebtedness before the holders of notes are entitled to receive any payment or other distribution, except for permitted payments and payments Scios chooses to make comprised solely in permitted junior securities acceptable to the holders. Scios will be required to promptly notify holders of senior indebtedness of Scios if payment of the notes is accelerated because of an event of default. Scios also may not make any payment upon or redemption of or purchase or otherwise acquire the notes, except for permitted payments and payments it may choose to make comprised solely in permitted junior securities acceptable to the holders, if: o a default in the payment of principal, premium, if any, interest or other obligations in respect of o designated senior indebtedness of Scios occurs and is continuing beyond any applicable period of grace (a "payment default"); or o any other default occurs and is continuing with respect to designated senior indebtedness of Scios that permits holders of the designated senior indebtedness of Scios to which such default relates to accelerate its maturity and the trustee receives a notice of such default, referred to as a payment blockage notice, from Scios or any other person permitted to give this notice under the indenture. 11 Unless the holders of any senior indebtedness of Scios have accelerated its maturity, Scios may and shall resume making such payments on the notes: o in the case of a payment default, when the default is cured or waived or ceases to exist; and o in the case of a nonpayment default, the earlier of when such nonpayment default is cured or waived or ceases to exist or 179 days after receipt of the payment blockage notice. No new period of payment blockage may be commenced pursuant to a payment blockage notice unless and until 360 days have elapsed since the initial effectiveness of the prior payment blockage notice. No default that existed or was continuing on the date of delivery of any payment blockage notice to the trustee shall be the basis for a subsequent payment blockage notice, unless the default has been cured or waived for a period of not less than 90 consecutive days. In the event of the bankruptcy, dissolution or reorganization of Scios, holders of senior indebtedness may receive more, ratably, and holders of the notes may receive less, ratably, than Scios's other creditors. Such subordination will not prevent the occurrence of any event of default under the indenture. While Scios currently has no subsidiaries with significant operations, all or a portion of its operations in the future may be conducted through subsidiaries. Any subsidiaries of Scios would be separate and distinct legal entities. None of Scios's subsidiaries would have any obligation to pay any amounts due on the notes or to provide Scios with funds for its payment obligations, whether by dividends, distributions, loans or other payments. In addition, any payment of dividends, distributions, loans or advances by Scios's subsidiaries to Scios could be subject to statutory or contractual restrictions. Payments to Scios by its subsidiaries will also be contingent upon Scios's subsidiaries' earnings and business consideration. There can be no assurance that Scios will receive adequate funds from its subsidiaries to pay interest due on the notes or to repay the notes when redeemed or upon maturity. Scios's right to receive any assets of any of its subsidiaries upon their liquidation or reorganization, and therefore the right of the holders of the notes to participate in those assets, will be effectively subordinated to the claims of that subsidiary's creditors, including its trade creditors. In addition, even if Scios was a creditor of any of its subsidiaries, Scios's rights as a creditor would be subordinate to any security interest in the assets of its subsidiaries and any indebtedness of its subsidiaries senior to that held by Scios. As of December 31, 2002, Scios had approximately $35.2 million of indebtedness that constituted senior indebtedness, no indebtedness that ranked equal in right of payment to the notes and no indebtedness at Scios's subsidiaries that would have been structurally senior to the notes. Neither Scios nor its subsidiaries are limited in or prohibited from incurring senior indebtedness or any other indebtedness or liabilities under the indenture. CERTAIN DEFINITIONS "designated senior indebtedness" means any particular senior indebtedness of Scios in which the instrument creating or evidencing the senior indebtedness or the assumption of guarantee thereof (or related documents or agreements to which Scios is a party) expressly provides that such indebtedness shall be "designated senior indebtedness" of Scios (provided that such instrument may place limitations and conditions on the right of such senior indebtedness to exercise the rights of designated senior indebtedness). 12 "indebtedness" means: (1) all of the indebtedness, obligations and other liabilities of Scios, contingent or otherwise, for borrowed money, including obligations: o in respect of overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements and any loans or advances from banks, whether or not evidenced by notes or similar instruments; or o evidenced by bonds, debentures, notes or similar instruments, whether or not the recourse of the lender is to all of Scios's assets or to only a portion thereof, other than any account payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services; (2) all of Scios's reimbursement obligations and other liabilities, contingent or otherwise, with respect to letters of credit, bank guarantees or bankers' acceptances; (3) all of Scios's obligations and liabilities, contingent or otherwise, in respect of leases required, in conformity with generally accepted accounting principles, to be accounted for as capitalized lease obligations on Scios's balance sheet or under other leases for facilities equipment or related assets, whether or not capitalized, entered into or leased for financing purposes, as determined by Scios; (4) all of Scios's obligations and other liabilities, contingent or otherwise, under any lease or related document, including a purchase agreement, in connection with the lease of real property or improvements thereon (or any personal property included as part of any such lease) which provides that Scios is contractually obligated to purchase or cause a third party to purchase the leased property and thereby guarantee a residual value of leased property to the lessor and all of Scios's obligations under such lease or related documents to purchase the leased property (whether or not such lease transaction is characterized as an operating lease or a capitalized lease in accordance with generally accepted accounting principles); (5) all of Scios's obligations, contingent or otherwise, with respect to an interest rate, currency or other swap, cap, floor or collar agreement, hedge agreement, forward contract, or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement; (6) all of Scios's direct or indirect guarantees or similar agreements to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of indebtedness, obligations or liabilities of another person of the kind described in clauses (1) through (5) above; (7) any indebtedness or other obligations of Scios described in clauses (1) through (6) above secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by Scios, regardless of whether the indebtedness or other obligation secured thereby has been assumed by Scios; and (8) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of Scios of the kind described in clauses (1) through (7) above. "permitted junior securities" means (a) shares of stock of any class of Scios or (b) securities of Scios that are subordinated in right in payment to all senior indebtedness of Scios that may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or greater extent than, the notes are so subordinated pursuant to the terms of the indenture. 13 "senior indebtedness" means all obligations with respect to indebtedness of Scios whether outstanding on the date of the indenture or thereafter created, incurred, assumed, guaranteed, or in effect guaranteed, by Scios, including, without limitation, all deferrals, renewals, extensions or refundings of, or amendments, modifications or supplements to, the foregoing, unless in the case of any particular indebtedness the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such indebtedness shall not be senior in right of payment to the notes or expressly provides that such indebtedness ranks equally in right of payment or junior to the notes. Senior indebtedness does not include the indebtedness evidenced by the notes, any indebtedness of Scios to any subsidiary of Scios, any obligation for federal, state or local or other taxes or any trade or accounts payable arising in the ordinary course of business. Scios is obligated to pay compensation to the trustee and to indemnify the trustee against certain losses, liabilities or expenses incurred by it in connection with its duties relating to the notes. The trustee's claims for such payments will generally be senior to those of the holders of the notes in respect to all funds collected and held by the trustee. DEFEASANCE The notes will not be subject to defeasance. EXCHANGE AND TRANSFER Notes may be transferred or exchanged at the office of the security registrar in accordance with the indenture. Scios will not impose a service charge for any transfer or exchange, but Scios may require holders to pay any tax or other governmental charges associated with any transfer or exchange. In the event of any potential redemption of the notes, Scios will not be required to: o issue, authenticate or register the transfer of or exchange any note during a period beginning at the opening of business 10 business days before the mailing of a notice of redemption and ending at the close of business on the day of the mailing; or o register the transfer of or exchange any note selected for redemption, in whole or in part, except the unredeemed portion of notes being redeemed in part. Scios has initially appointed the trustee as the security registrar, paying agent and conversion agent. Scios may designate additional registrars, paying or conversion agents or change registrars, paying or conversion agents. However, Scios will be required to maintain a paying agent in the place of payment for the notes. CONSOLIDATION, MERGER AND SALE OF ASSETS Scios may not consolidate with or merge into any other person, in a transaction in which Scios is not the surviving corporation, or convey, transfer or lease its properties and assets substantially as an entirety to, any person, unless: o the successor, if any, is a corporation organized under the laws of the United States or any state thereof or the District of Columbia; o the successor assumes Scios's obligations under the notes and the indenture; o immediately after giving effect to the transaction, no default or event of default shall have occurred and be continuing; and 14 o certain other conditions are met as set forth in the indenture. The foregoing shall not prohibit any of Scios's subsidiaries from merging with or into Scios or a merger effected solely for the purposes of reincorporating Scios in another jurisdiction. Under any consolidation, merger or any conveyance, transfer or lease of Scios's properties and assets described in the preceding paragraph, the successor company will be Scios's successor and shall succeed to, and be substituted for, and may exercise every right and power of, Scios under the indenture. Except in the case of a lease, if the predecessor is still in existence after the transaction, it will be released from its obligations and covenants under the indenture and the notes. EVENTS OF DEFAULT The indenture defines an event of default with respect to the notes as one or more of the following events: (1) Scios's failure to pay principal of or any premium on the notes when due (whether or not prohibited by the subordination provisions of the indenture); (2) Scios's failure to pay any interest on the notes when due, if such failure continues for 30 days (whether or not prohibited by the subordination provisions of the indenture); provided that a failure to make any of the first six scheduled interest payments on the notes within three business days after the applicable interest payment dates will constitute an event of default with no additional grace or cure period; (3) Scios's failure to perform any other covenant in the indenture, if such failure continues for 60 days after the notice required in the indenture; (4) any indebtedness for money borrowed by Scios or one of Scios's significant subsidiaries in an outstanding principal amount in excess of $20 million is not paid at final maturity or upon acceleration and such indebtedness is not discharged, or such default on payment or acceleration is not cured, waived or rescinded within 30 days after written notice as provided in the indenture; (5) certain events of bankruptcy, insolvency or reorganization of Scios or that of any of Scios's significant subsidiaries; and (6) the pledge agreement, as such agreement may be amended, restated, supplemented or otherwise modified from time to time, shall cease to be in full force and effect or enforceable in accordance with its terms. If an event of default, other than an event of default described in clause (5) above, occurs and continues, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding notes may declare the principal amount including any accrued and unpaid interest on the notes to be due and payable. If an event of default described in clause (5) above occurs, the principal amount of all the notes will automatically become immediately due and payable. Any payment by Scios on the notes following any acceleration will be subject to the subordination provisions described above under "--Subordination of the notes." After acceleration but before a judgment or decree of the money due in respect of the notes has been obtained, the holders of a majority in aggregate principal amount of the outstanding notes may 15 rescind such acceleration and its consequences if all events of default, other than the nonpayment of accelerated principal, or other specified amount, have been cured or waived. Other than the duty to act with the required care during an event of default, the trustee will not be obligated to exercise any of its rights or powers at the request of the holders unless the holders offer the trustee reasonable indemnity. Generally, the holders of a majority in aggregate principal amount of the notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. A holder will have the right to begin a proceeding under the indenture, or for the appointment of a receiver or a trustee, or for any other remedy under the indenture only if: (1) the holder gives to the trustee written notice of a continuing event of default; (2) holders of at least 25% in aggregate principal amount of notes then outstanding made a written request to the trustee to pursue the remedy; (3) such holder or holders offer to the trustee indemnity reasonably satisfactory to the trustee against any loss, liability or expense; (4) the trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) during such 60-day period the holders of a majority in aggregate principal amount of the notes then outstanding do not give the trustee a direction inconsistent with the request. Holders may, however, sue to enforce the payment of principal, premium or interest on or after the due date or their right to convert without following the procedures listed in (1) through (5) above. Scios will furnish the trustee an annual statement by its officers as to whether or not, to the officer's knowledge, Scios is in default in the performance of the indenture and, if so, specifying all known defaults. MODIFICATION AND WAIVER Scios may make modifications and amendments to the indenture with the consent of the holders of a majority in aggregate principal amount of the outstanding notes affected by the modification or amendment. However, Scios may not make any modification or amendment without the consent of the holder of each outstanding note affected by the modification or amendment if such modification or amendment would: o change the stated maturity or the maturity date of the notes; o reduce the principal, premium, if any, or interest on the notes; o change the place of payment from New York, New York or the currency in which the notes are payable; o impair the right to sue for any payment after the stated maturity, the maturity date or redemption date; o modify the subordination provisions in an adverse manner to the holders; 16 o adversely affect the right to convert the notes other than as provided in or under the indenture; o change the provisions in the indenture that relate to modifying or amending the indenture; or o reduce the percentage in principal amount of the outstanding notes necessary for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults. Without the consent of the holders of the notes, Scios and the trustee may enter into one or more supplemental indentures for any of the following purposes: o to cure any ambiguity, omission, defect or inconsistency; o to provide for uncertificated notes in addition to or in place of certificated notes; o to provide for the assumption of Scios's obligations to holders of the notes in the case of a merger or consolidation or sale of all or substantially all of Scios's assets; o to reduce the conversion price; o to make any change that would provide any additional rights or benefits to the holder of the notes or that does not adversely affect the legal rights under the indenture of any such holder; or o to comply with the requirements of the SEC in order to maintain the qualification of the indenture under the Trust Indenture Act or 1939, as amended. Holders of a majority in aggregate principal amount of the outstanding notes may waive, on behalf of the holders of all of the notes, compliance by Scios with respect to certain restrictive provisions of the indenture. Generally, the holders of not less than a majority of the aggregate principal amount of the outstanding notes may, on behalf of all holders of the notes, waive any past default or event of default unless: o Scios fails to pay principal, premium or interest on any note when due; o Scios fails to convert any note; or o Scios fails to comply with any of the provisions of the indenture that would require the consent of the holder of each outstanding note affected. An amendment may not effect any change that adversely affects the rights of any holder of senior indebtedness of Scios then outstanding under the subordination provisions unless such holder of such senior indebtedness, or a representative for such holder, consents to such change. Any notes held by Scios or by any persons directly or indirectly controlling or controlled by or under direct or indirect common control with Scios shall be disregarded (from both the numerator and denominator) for purposes of determining whether the holders of a majority in principal amount of the outstanding notes have consented to a modification, amendment or waiver of the terms of the indenture. 17 NOTICES Notices to holders will be given by mail to the addresses of the holders in the security register. GOVERNING LAW The indenture and the notes are governed by, and construed under, the law of the State of New York, without regard to conflicts of laws principles. REGARDING THE TRUSTEE Wells Fargo Bank, National Association is the trustee under the indenture. The trustee is permitted to deal with Scios and any of its affiliate with the same rights as if it were not trustee. However, under the Trust Indenture Act of 1939, as amended, if the trustee acquires any conflicting interest and there exists a default with respect to the notes, the trustee must eliminate such conflicts or resign. The holders of a majority in principal amount of all outstanding notes have the right to direct the time, method and place of conducting any proceeding for exercising any remedy or power available to the trustee. However, any such direction may not conflict with any law or the indenture, may not be unduly prejudicial to the rights of another holder or the trustee and may not involve the trustee in personal liability. BOOK-ENTRY SYSTEM Scios initially issued the notes in the form of a global security. Upon the issuance of a global security, DTC (referred to as the depository) or its nominee credited the accounts of persons holding through it with the respective principal amounts of the notes represented by such global security. Such accounts are designated by the initial purchasers with respect to notes placed by the initial purchasers for Scios. Ownership of beneficial interests in a global security is limited to persons that have accounts with the depository ("participants") or persons that hold interests through participants. Ownership of beneficial interests by participants in a global security is shown on, and the transfer of that ownership interest will be effected only through, records maintained by the depository for such global security. Ownership of beneficial interests in such global security held through participants is shown on, and the transfer of that ownership interests through such participant will be effected only through, records maintained by such participant. The foregoing may impair the ability to transfer beneficial interests in a global security. Scios will make payment of principal, premium, if any, and interest on notes represented by any such global security to the paying agent for the benefit of the depository or its nominee, as the case may be, as the sole holder of the notes represented thereby for all purposes under the indenture. None of Scios, the trustee, any agent of Scios, or the trustee or the initial purchasers have any responsibility or liability for any aspect of the depository's records relating to or payments made on account of beneficial ownership interests in the global security representing any notes or for maintaining, supervising or reviewing any of the depository's records relating to such beneficial ownership interests. Scios has been advised by the depository that, upon receipt of any payment of principal, premium, if any, or interest on any global security, the depository will immediately credit, on its book-entry registration and transfer system, the accounts of participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such global security as shown on the records of the depository. Payments by participants to owners of beneficial interests in a global security held through such participants will be governed by standing instructions and customary practices as is now the case with securities held for customer accounts registered in "street name," and will be the sole responsibility of such participants. 18 A global security may not be transferred except as a whole by the depository for such global security to a nominee of such depository or by a nominee of such depository to such depository or another nominee of such depository or by such depository or any such nominee to a successor of such depository or a nominee of such successor. If (i) the depository notifies us that it is at any time unwilling or unable to continue as depository and a successor depository is not appointed by us or the depository within 90 days, or (ii) an event of default has occurred and is continuing and the registrar has received a written request from the depository to issue physical securities, Scios will issue notes in definitive form in exchange for the global security. In either instance, an owner of a beneficial interest in the global security will be entitled to have notes equal in principal amount to such beneficial interest registered in its name and will be entitled to physical delivery of such notes in definitive form. Notes so issued in definitive form will be issued in denominations of $1,000 and integral multiples thereof and will be issued in registered form only, without coupons. Scios will pay principal, premium, if any, and interest on the notes and the notes may be presented for registration of transfer or exchange, at the offices of the trustee. So long as the depository for a global security, or its nominee, is the registered owner of such global security, such depository or such nominee, as the case may be, will be considered the sole holder of the notes represented by such global security for the purposes of receiving payment on the notes, receiving notices and for all other purposes under the indenture and the notes. Beneficial interests in notes will be evidenced only by, and transfers thereof will be effected only through, records maintained by the depository and its participants. The depository has nominated Cede & Co. as its nominee. Except as provided above, owners of beneficial interests in a global security will not be entitled to have the notes represented by the global security registered in their name, will not be entitled to receive physical delivery of certificated notes and will not be considered the holders thereof for any purposes under the indenture. Accordingly any such person owning a beneficial interest in such a global security must rely on the procedures of the depository, and, if any such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder under the indenture. The indenture provides that the depository may grant proxies and otherwise authorize participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a holder is entitled to give or take under the indenture. Scios understands that under existing industry practices, in the event that a holder of the notes requests any action or that an owner of a beneficial interest in such a global security desires to give or take any action which a holder is entitled to give or take under the indenture, the depository would authorize the participants holding the relevant beneficial interest to give or take such action and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners owning through them. The depository has advised Scios that the depository is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered under the Exchange Act. The depository was created to hold the securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The depository's participants include securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives) own the depository. Access to the depository's book-entry system is also available to others, such as banks, brokers, dealers and trust companies, that clear through or maintain a custodial relationship with a participant, either directly or indirectly. 19 DESCRIPTION OF JOHNSON & JOHNSON GUARANTEES The following summary of the Johnson & Johnson guarantees is subject in all respects to the first supplemental indenture dated as of April 29, 2003, among Scios, Johnson & Johnson and Wells Fargo Bank, National Association, as trustee, to the indenture governing the notes. See "Where You Can Find More Information". Johnson & Johnson has unconditionally and irrevocably guaranteed: o the full and punctual payment of principal of, premium, if any, and interest on the notes when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of Scios under the indenture and the notes; and o the full and punctual performance within applicable grace periods of all other obligations of Scios under the indenture and the notes. The Johnson & Johnson guarantees constitute a guarantee of payment, performance and compliance when due and not a guarantee of collection. Johnson & Johnson's obligations under the Johnson & Johnson guarantees are subordinated in right of payment to all of its senior indebtedness that is currently outstanding or that it may incur in the future. As of April 28, 2003, Johnson & Johnson's aggregate outstanding senior indebtedness was approximately $5,118 million. The terms of the indenture, the first supplemental indenture and the notes do not limit Johnson & Johnson's or any of its subsidiaries' ability, including Scios's, to incur additional senior indebtedness. The Johnson & Johnson guarantees are in uncertificated form and are embodied in the first supplemental indenture. SELLING SECURITYHOLDERS The notes originally were issued by Scios and sold by the initial purchasers of the notes on August 5, 2002 in a transaction exempt from the registration requirements of the Securities Act of 1933 to persons reasonably believed by the initial purchasers to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933. Selling securityholders, including their transferees, pledges or donees or their successors, may from time to time offer and sell pursuant to this prospectus any or all of the notes and the associated Johnson & Johnson guarantees. On January 10, 2003, a registration statement on Form S-3 filed by Scios to register resales of the notes and Scios common stock then issuable upon conversion of the notes was declared effective by the Securities and Exchange Commission. On April 29, 2003, Scios became a wholly owned subsidiary of Johnson & Johnson through the merger of a wholly owned subsidiary of Johnson & Johnson with and into Scios, and each outstanding share of Scios common stock was converted into the right to receive $45.00 in cash. In connection with the merger, each $1,000 principal amount of the notes became convertible only into the right to receive $1,145.04 in cash without interest, and Johnson & Johnson issued its subordinated guarantee of the notes. The following table sets forth as of April 29, 2003 (1) the principal amount of notes held by the selling securityholders, (2) the percentage of the aggregate principal amount of notes outstanding, (3) the principal amount of notes that may be offered and sold pursuant to this prospectus, (4) the principal amount of the Johnson & Johnson guarantees associated with the notes held by the selling securityholders, (5) the percentage of the aggregate principal amount of Johnson & Johnson guarantees 20 outstanding, represented by that principal amount of Johnson & Johnson guarantees and (6) the principal amount of the Johnson & Johnson guarantees that may be offered and sold pursuant to this prospectus.
Notes Guarantees --------------------------- --------------------------- Principal Percentage Principal Percentage Principal Amount amount of of amount of of of notes and notes bene- outstanding guarantees outstanding associated ficially notes bene- beneficially guarantees guarantees owned and ficially owned and beneficially beneficially owned offered owned prior offered owned prior after completion Name of Selling Securityholder hereby ($) to offering hereby ($) to offering of the offering(1) - ------------------------------ ------------- ------------ ------------ -------------- ------------------
- ----------------- * Represents beneficial ownership of less than 1% of the aggregate principal amount of notes and Johnson & Johnson guarantees outstanding as of , 2003. (1) Assumes that all of the notes and the associated Johnson & Johnson guarantees have been sold by the selling securityholders. Based upon this assumption, no selling securityholder will beneficially own greater than one percent of the notes and the associated Johnson & Johnson guarantees after completion of the offering. None of the selling securityholders has, or within the past three years has had, any position, office or other material relationship with Johnson & Johnson or Scios or any of their predecessors or affiliates. The initial purchasers purchased all of the notes from Scios in a private transaction on August 5, 2002. All of the notes were "restricted securities" under the Securities Act prior to this registration. The selling securityholders have represented to Scios that they purchased the notes for their own account for investment only and not with a view toward selling or distributing them, except pursuant to sales registered under the Securities Act or exempt from such registration. Information concerning other selling securityholders will be set forth in prospectus supplements from time to time, if required. Information concerning the securityholders may change from time to time and any changed information will be set forth in supplements to this prospectus if and when necessary. In addition, the selling securityholders identified above may have sold, transferred or otherwise disposed of all or some portion of the notes and the associated Johnson & Johnson guarantees held by the selling securityholders since the date on which they provided the information regarding such notes and guarantees, in transactions exempt from the registration requirements of the Securities Act of 1933. PLAN OF DISTRIBUTION The selling securityholders and their successors, which term includes their transferees, pledges or donees or their successors may sell the notes and the associated Johnson & Johnson guarantees directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders of the purchasers. These discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may be in excess of those customary in the types of transactions involved. The notes and the associated Johnson & Johnson guarantees may be sold in one or more transactions at: 21 o fixed prices, o prevailing market prices at the time of sale, o prices related to the prevailing market prices, o varying prices determined at the time of sale, or o negotiated prices. These sales may be effected in transactions: o on any national securities exchange or quotation service on which the notes and the associated Johnson & Johnson guarantees may be listed or quoted at the time of sale, o in the over-the-counter market, o otherwise than on such exchanges or services or in the over-the-counter market, o through the writing of options, whether the options are listed on an options exchange or otherwise, or o through the settlement of short sales. These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as agent on both sides of the trade. In connection with the sale of the notes and the associated Johnson & Johnson guarantees or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions. The selling securityholders may also sell the notes and the associated Johnson & Johnson guarantees short and deliver these securities to close out such short positions, or loan or pledge the notes and the associated Johnson & Johnson guarantees to broker-dealers that in turn may sell these securities. The aggregate proceeds to the selling securityholders from the sale of the notes and the associated Johnson & Johnson guarantees offered by them hereby will be the purchase price thereof less discounts and commissions, if any. Neither Scios nor Johnson & Johnson will receive any of the proceeds from this offering. Scios and Johnson & Johnson do not intend to list the notes and the associated Johnson & Johnson guarantees for trading on any national securities exchange or on the Nasdaq National Market and cannot assure you that any trading market for the notes the associated Johnson & Johnson guarantees will develop. In order to comply with the securities laws of some states, if applicable, the notes and the associated Johnson & Johnson guarantees may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the notes and the associated Johnson & Johnson guarantees may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with. 22 The selling securityholders and any broker-dealers or agents that participate in the sale of the notes and the associated Johnson & Johnson guarantees may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act. Profits on the sale of the notes and the associated Johnson & Johnson guarantees by selling securityholders and any discounts, commissions or concessions received by any broker-dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. Selling securityholders who are deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act. To the extent the selling securityholders may be deemed to be "underwriters," they may be subject to statutory liabilities, including, but not limited to, Sections 11, 12 and 17 of the Securities Act. The selling securityholders and any other person participating in a distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder. Regulation M of the Exchange Act may limit the timing of purchases and sales of any of the securities by the selling securityholders and any other person. In addition, Regulation M may restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities with respect to the particular securities being distributed for a period of up to five business days before the distribution. The selling securityholders have acknowledged that they understand their obligations to comply with the provisions of the Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M, and have agreed that they will not engage in any transaction in violation of such provisions. A selling securityholder may decide not to sell any notes and the associated Johnson & Johnson guarantees described in this prospectus. Scios and Johnson & Johnson cannot assure you that any selling securityholder will use this prospectus to sell any or all of the notes and the associated Johnson & Johnson guarantees. Any securities covered by this prospectus which qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. In addition, a selling securityholder may transfer, devise or gift the notes and the associated Johnson & Johnson guarantees by other means not described in this prospectus. With respect to a particular offering of the notes and the associated Johnson & Johnson guarantees, to the extent required, an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this prospectus is a part will be prepared and will set forth the following information: o the specific notes and the associated Johnson & Johnson guarantees to be offered and sold, o the names of the selling securityholders, o the respective purchase prices and public offering prices and other material terms of the offering, o the names of any participating agents, broker-dealers or underwriters, and o any applicable commissions, discounts, concessions and other items constituting, compensation from the selling securityholders. Scios entered into the registration rights agreement for the benefit of holders of the notes to register their notes and the underlying common stock the notes were then convertible into under applicable federal and state securities laws under certain circumstances and at certain times. The registration rights agreement provides that the selling securityholders and Scios will indemnify each other and their respective directors, officers and controlling persons against specific liabilities in connection 23 with the offer and sale of the notes and the underlying common stock the notes were then convertible into, including liabilities under the Securities Act, or will be entitled to contribution in connection with those liabilities. Scios and Johnson & Johnson will pay all of their expenses and specified expenses incurred by the selling securityholders incidental to the registration, offering and sale of the notes and the associated Johnson & Johnson guarantees to the public, but each selling securityholder will be responsible for payment of commissions, concessions, fees and discounts of underwriters, broker-dealers and agents. MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following is a discussion of the material U.S. Federal income tax consequences relevant to the purchase, ownership, and disposition of the notes. This discussion applies only to persons who hold the notes as capital assets (generally, property held for investment within the meaning of Section 1221 of the Internal Revenue Code of 1986 (the "Code"), as amended). This discussion is based upon the Code, U.S. Treasury Regulations promulgated thereunder ("Treasury Regulations"), Internal Revenue Service (the "IRS") rulings and pronouncements, and judicial decisions now in effect, all of which are subject to change at any time by legislative, administrative, or judicial action, possibly with retroactive effect. This discussion does not discuss every aspect of U.S. Federal income taxation that may be relevant to a particular taxpayer in light of their personal circumstances or to persons who are otherwise subject to special tax treatment (including, without limitation, banks, broker-dealers, insurance companies, pension and other employee benefit plans, tax exempt organizations and entities, investors in pass-through entities, persons who acquire notes in connection with the performance of services, certain U.S. expatriates, persons holding notes as a part of a hedging or conversion transaction or a straddle, certain hybrid entities and owners of interest therein, U.S. persons whose functional currency is not the U.S. dollar and, except to the limited extent described below, persons who are not U.S. Holders (as defined below)) and it does not discuss the effect of any applicable U.S. state and local or non-U.S. tax laws or estate or gift tax laws (other than estate tax consequences to the extent described below under "Non-U.S. Holders") or tax laws other than U.S. Federal income tax law. Scios has not sought and will not seek any rulings from the IRS concerning the tax consequences of the purchase, ownership or disposition of the notes and, accordingly, there can be no assurance that the IRS will not successfully challenge the tax consequences described below. If a partnership holds notes acquired upon conversion of the notes, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the notes, you should consult your tax advisor regarding the tax consequences of the ownership and disposition of the notes. EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT SUCH PURCHASER'S OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF HOLDING AND DISPOSING OF NOTES, AS WELL AS ANY TAX CONSEQUENCES APPLICABLE UNDER THE LAWS OF ANY U.S. STATE, LOCAL, OR NON-U.S. TAXING JURISDICTION. U.S. HOLDERS As used herein, the term "U.S. Holder" refers to a person that is classified for U.S. Federal income tax purposes as a U.S. person. For this purpose, a U.S. person includes (i) a citizen or resident of the United States, (ii) a corporation created or organized in the United States or under the laws of the United States or of any state or political subdivision thereof, (iii) an estate the income of which is subject to U.S. Federal income taxation regardless of its source, or (iv) a trust whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent 24 provided in Treasury Regulations, certain trusts in existence on August 20, 1996, and treated as U.S. persons prior to such date that elect to continue to be treated as U.S. persons, shall also be considered U.S. Holders. Interest. Interest paid or accrued on the notes will be taxable to a U.S. Holder as ordinary income at the time it is accrued or received in accordance with the holder's method of accounting for U.S. Federal income tax purposes. Conversion, sale, retirement, redemption or other taxable disposition of notes. Except as set forth under "Market discount," upon the conversion, sale, retirement, redemption or other taxable disposition of a note (including a repurchase of a note by a third party), a U.S. Holder will recognize gain or loss to the extent of the difference between the sum of the cash and the fair market value of any property received in exchange therefor (except to the extent attributable to the payment of accrued and unpaid interest on the notes, which generally will be taxed as ordinary income to the extent that the holder has not previously recognized this income), and the U.S. Holder's adjusted tax basis in the notes. A U.S. Holder's tax basis in a note will initially equal the cost of the note and will subsequently be increased by market discount previously included in income in respect thereof and will be reduced by any premium that the U.S. Holder has taken into account. Generally, any such gain or loss recognized by a U.S. Holder upon the sale, retirement, redemption or other taxable disposition of a note will be capital gain or loss. In the case of a non-corporate U.S. Holder, such capital gain will be subject to tax at a reduced rate if the note is held for more than one year. The deductibility of capital losses is subject to limitation. Market discount. If a U.S. Holder acquires a note at a cost that is less than the stated redemption price at maturity of the note, the amount of such difference is treated as market discount for federal income tax purposes, unless such difference is less than .0025 multiplied by the stated redemption price at maturity multiplied by the number of complete years to maturity (from the date of acquisition). The market discount provisions of the Code require a U.S. Holder who acquires a note at a market discount to treat as ordinary income any gain recognized on the disposition of that note to the extent of the accrued market discount on that note at the time of maturity or disposition that such holder has not previously included in income. In addition, a U.S. Holder that disposes of a note with market discount in certain otherwise nontaxable transactions must include accrued market discount as ordinary income as if such holder had sold the note at its then fair market value. A U.S. Holder may elect to include market discount in income over the life of the note. Once made, this election applies to all market discount obligations acquired on or after the first taxable year to which the election applies and may not be revoked without the consent of the IRS. In general, market discount will be treated as accruing on a straight-line basis over the remaining term of the note at the time of acquisition, or, at the election of the U.S. Holder, under a constant yield method. If an election is made, it will apply only to the note with respect to which it is made, and may not be revoked. A U.S. Holder who acquires a note at a market discount and who does not elect to include accrued market discount in income over the life of the note may be required to defer the deduction of a portion of the interest on any indebtedness incurred or maintained to purchase or carry the note until maturity or until the note is disposed of in a taxable transaction. Amortizable premium. A U.S. Holder who purchases a note at a premium over the sum of all amounts payable on the note after the acquisition date (other than stated interest payments) generally may elect to amortize that premium (referred to as Section 171 premium) from the purchase date to the note's maturity date under a constant-yield method that reflects semiannual compounding based on the note's payment period. The notes are subject to call provisions at Scios's option at various times, as described under the heading "Description of Notes--Optional redemption by Scios." A U.S. Holder will calculate the amount of Section 171 premium based on the amount payable at the applicable call date, but only if 25 the use of the call date (in lieu of the stated maturity date) results in a smaller amortizable bond premium for the period ending on the call date. Amortizable premium will not include any amount attributable to a note's conversion feature. The amount attributable to the conversion feature may be determined under any reasonable method, including by comparing the note's purchase price to the market price of a similar note that does not have a conversion feature. Amortized Section 171 premium is treated as an offset to interest income on a note and not as a separate deduction. The election to amortize premium on a constant yield method, once made, applies to all debt obligations held or subsequently acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. Information reporting; backup withholding. Scios is required to furnish to the record holders of the notes, other than corporations and other exempt holders, and to the IRS, information with respect to interest paid on the notes. A U.S. Holder may be subject to backup withholding with respect to interest paid on the notes or with respect to proceeds received from a disposition of the notes. Certain holders (including, among others, corporations and certain tax-exempt organizations) are generally not subject to backup withholding. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and such holder (i) fails to furnish its taxpayer identification number ("TIN"), which, for an individual is ordinarily his or her social security number; (ii) furnishes an incorrect TIN; (iii) is notified by the IRS that it has failed to properly report payments of interest; or (iv) fails to certify, under penalties of perjury, that it has furnished a correct TIN and that the IRS has not notified the U.S. Holder that it is subject to backup withholding. Backup withholding is not an additional tax but, rather, is a method of tax collection. U.S. Holders will be entitled to credit any amounts withheld under the backup withholding rules against their actual tax liabilities provided the required information is furnished to the IRS. NON-U.S. HOLDERS As used herein, the term "Non-U.S. Holder" refers to a person that is classified for U.S. Federal income tax purposes as (i) a non-resident alien individual, (ii) a foreign corporation, or (iii) a nonresident alien fiduciary of a foreign estate or trust. Interest. In general, a Non-U.S. Holder will not be subject to U.S. Federal withholding tax with respect to interest received on the notes so long as (a) the Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all Johnson & Johnson's classes of stock entitled to vote, (b) the Non-U.S. Holder is not a controlled foreign corporation that is related to us actually or constructively through stock ownership, and (c) the Non-U.S. Holder provides its name and address, and certifies, under penalties of perjury, that it is not a U.S. person (which certification may be made on an IRS Form W-8BEN (or successor form)) or the Non-U.S. Holder holds its notes through certain foreign intermediaries, and the Non-U.S. Holder and the foreign intermediary satisfy the certification requirements of applicable Treasury Regulations. If a Non-U.S. Holder cannot satisfy the requirements described above, payments of interest to such holder will be subject to the 30% U.S. Federal withholding tax, unless the holder provides us with a properly executed (1) IRS Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of an applicable tax treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on the note is not subject to withholding tax because it is effectively connected with the conduct of a U.S. trade or business. If a Non-U.S. Holder is engaged in a trade or business in the United States and interest on a note is effectively connected with the conduct of that trade or business, the holder will be subject to U.S. Federal income tax on that interest on a net income basis (although the holder will be exempt from the 30% withholding tax, provided the certification requirements described 26 above are satisfied) in the same manner as if the Non-U.S. Holder was a U.S. person as defined under the Code. In addition, if the Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of its earnings and profits for the taxable year, subject to adjustments, that are effectively connected with its conduct of a trade or business in the United States. Gain on disposition of notes. Non-U.S. Holders generally will not be subject to U.S. Federal income taxation, including by way of withholding, on gain recognized on a disposition of notes so long as (i) the gain is not effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States (or if a tax treaty applies, the gain is not effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States and attributable to a U.S. permanent establishment maintained by such Non-U.S. Holder) and (ii) in the case of a Non-U.S. Holder who is an individual, such Non-U.S. Holder is not present in the United States for 183 days or more in the taxable year of disposition and certain other requirements are met. A Non-U.S. Holder whose gain is effectively connected with the conduct of a trade or business within the United States generally will be subject to U.S. Federal income tax on the net gain derived from the sale. Any such effectively connected gain received by a Non-U.S. Holder that is a corporation may also, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or such lower rate as may be applicable under an income tax treaty. An individual Non-U.S. Holder who is present in the United States for 183 days or more in the taxable year of disposition and meets certain other conditions will be subject to a 30% U.S. Federal income tax on the gain derived from the sale. United States Federal estate tax. A note held by an individual who at the time of death is not a citizen or resident of the United States, as specifically defined for United States Federal estate tax purposes, will not be subject to United States Federal estate tax if the individual did not actually or constructively own 10% or more of the total combined voting power of all classes of Johnson & Johnson's stock and, at the time of the individual's death, payments with respect to that note would not have been effectively connected with the conduct by that individual of a trade or business in the United States. Information reporting; backup withholding. Generally, payments of interest or principal on the notes to Non-U.S. Holders will not be subject to information reporting or backup withholding if the Non-U.S. Holder certifies, under penalties of perjury, as to its foreign status or otherwise establishes an exemption. Information reporting requirements and backup withholding generally will not apply to any payments of the proceeds of the disposition of notes effected outside the U.S. by a foreign office or a foreign broker (as defined in applicable Treasury regulations). However, unless such broker has documentary evidence in its records that the beneficial owner is a Non-U.S. Holder and certain other conditions are met, or the beneficial owner otherwise establishes an exemption, information reporting (but not backup withholding) will apply to any such payments effected outside the U.S. by such a broker if it: 1. derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the U.S.; 2. is a controlled foreign corporation for U.S. Federal income tax purposes; or 3. is a foreign partnership that, at any time during its taxable year, has 50% or more of its income or capital interests owned by U.S. persons or is engaged in the conduct of a U.S. trade or business. 27 Payments of the proceeds of a disposition of notes effected by the U.S. office of a broker will be subject to information reporting requirements and backup withholding tax unless the Non-U.S. Holder properly certifies under penalties of perjury as to its foreign status and certain other conditions are met or it otherwise establishes an exemption. Any amount withheld under the backup withholding rules may be credited against the Non-U.S. Holder's U.S. Federal income tax liability and any excess may be refundable if the proper information is provided to the IRS. LEGAL MATTERS Certain legal matters in connection with the notes offered hereby have been passed upon for Scios by Latham & Watkins LLP, San Francisco, California. The enforceability of the Johnson & Johnson guarantees offered hereby have been passed upon by John T. Crisan, Esq., Assistant General Counsel and Assistant Secretary of Johnson & Johnson. Mr. Crisan is paid a salary by Johnson & Johnson, is a participant in various employee benefit plans offered to employees of Johnson & Johnson generally and owns and has options to purchase shares of Johnson & Johnson common stock. EXPERTS The consolidated financial statements and financial statement schedule of Johnson & Johnson and its subsidiaries as of December 29, 2002 and December 30, 2001 and for each of the three fiscal years in the period ended December 29, 2002 incorporated in this prospectus by reference to the Johnson & Johnson Annual Report on Form 10-K for the year ended December 29, 2002, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of Scios incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2002 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. WHERE YOU CAN FIND MORE INFORMATION Johnson & Johnson and Scios have filed registration statements on Form S-3 with the Securities and Exchange Commission to register resales of the notes and the associated Johnson & Johnson guarantees held by certain selling securityholders. This prospectus forms a part of those registration statements. As allowed by Securities and Exchange Commission rules, this prospectus does not contain all the information contained in the registration statements or in the exhibits to the registration statements. Johnson & Johnson is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. Prior to its acquisition by Johnson & Johnson, Scios filed annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy those reports, statements or other information at the Securities and Exchange Commission's public reference room: 28 Public Reference Room 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549 Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference room. These 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." Reports, proxy statements and other information concerning Johnson & Johnson may also be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. The Securities and Exchange Commission allows certain important information to be "incorporated by reference" into this prospectus, which means that such information can be disclosed to you by referring you to other documents filed separately with the Securities and Exchange Commission. The information incorporated by reference is considered to be part of this prospectus, except for any information superseded by information contained directly in this prospectus or in later filed documents incorporated by reference in this prospectus. This prospectus incorporates by reference the documents set forth below that Johnson & Johnson and Scios have previously filed with the Securities and Exchange Commission. These documents contain important business and financial information about Johnson & Johnson and Scios that is not included in or delivered with this prospectus. JOHNSON & JOHNSON FILINGS (FILE NO. 001-03215) PERIOD OR DATE FILED - ---------------------------------------- ------------------------------------ Annual Report on Form 10-K.............. Fiscal Year ended December 29, 2002 filed on Form 10-K on March 18, 2003 Current Report on Form 8-K.............. Filed on April 29, 2003 SCIOS INC. FILINGS (FILE NO. 000-11749) PERIOD OR DATE FILED - ---------------------------------------- ------------------------------------ Annual Report on Form 10-K.............. Fiscal Year ended December 31, 2002 filed on Form 10-K on March 17, 2003 - -------------------------------------------------------------------------------- Johnson & Johnson is also incorporating by reference additional documents that it will file before the termination of this offering. 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. You can request a free copy of any or all of these documents, other than the exhibits to those documents, unless those exhibits are specifically incorporated by reference into these documents, by writing to or calling the following address or telephone number: Johnson & Johnson One Johnson & Johnson Plaza New Brunswick, NJ 08933 Attention: Office of Corporate Secretary Telephone: (732) 524-2455 29 You should rely only on the information contained or incorporated by reference in this prospectus before deciding to purchase the notes and the associated Johnson & Johnson guarantees being offered by this prospectus. Johnson & Johnson and Scios have not authorized anyone to provide you with information that is different from what is contained in this prospectus. This prospectus is dated , 2003. You should not assume that the information contained in this prospectus is accurate as of any date other than that date unless the information specifically indicates that another date applies. If you are in a jurisdiction where it is unlawful to offer to convert or sell or to ask for offers to convert or buy the securities offered by this prospectus, or if you are a person to whom it is unlawful to direct those activities, then the offer presented in this prospectus does not extend to you. 30 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the various expenses to be paid by Johnson & Johnson and Scios in connection with the sale and distribution of the securities being offered by the prospectus forming a part of this Registration Statement. All amounts shown are estimates except for amounts of filing and listing fees.
Prior costs and expenses of Scios pursuant to the note registration statement Anticipated costs and (Registration Statement No. expenses of Johnson & 333-99641) Johnson and Scios Securities and Exchange Commission registration fee..................................................... $13,800 $0 Legal fees and expenses................................. 100,000 10,000 Accounting fees and expenses............................ 20,000 5,000 Printing, EDGAR formatting and mailing expenses......... 20,000 1,000 Miscellaneous........................................... 15,000 5,500 ---------------------------- ----------------------- Total.............................................. $168,800 $21,500 ============================ =======================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. JOHNSON & JOHNSON The New Jersey Business Corporation Act (the "NJBCA") provides that a New Jersey corporation has the power to indemnify a director or officer against his or her expenses and liabilities in connection with any proceeding involving the director or officer by reason of his or her being or having been such a director or officer, other than a proceeding by or in the right of the corporation, if such director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation; and with respect to any criminal proceeding, such director or officer had no reasonable cause to believe his or her conduct was unlawful. The indemnification and advancement of expenses shall not exclude any other rights, including the right to be indemnified against liabilities and expenses incurred in proceedings by or in the right of the corporation, to which a director or officer may be entitled under a certificate of incorporation, by-law, agreement, vote of shareholders, or otherwise; provided, that no indemnification shall be made to or on behalf of a director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his or her acts or omissions (a) were in breach of his or her duty of loyalty to the corporation or its shareholders, (b) were not in good faith or involved a knowing violation of law or (c) resulted in receipt by the director or officer of an improper personal benefit. Johnson & Johnson's Restated Certificate of Incorporation provides that, to the full extent that the laws of the State of New Jersey permit the limitation or elimination of the liability of directors and II-1 officers, no director or officer of Johnson & Johnson shall be personally liable to the Johnson & Johnson or its stockholders for damages for breach of any duty owed to Johnson & Johnson or its stockholders. The By-laws of Johnson & Johnson provide that to the full extent permitted by the laws of the State of New Jersey, Johnson & Johnson shall indemnify any person (an "Indemnitee") who was or is involved in any manner (including, without limitation, as a party or witness) in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative, arbitrative, legislative or investigative (including, without limitation, any action, suit or proceeding by or in the right of Johnson & Johnson to procure a judgment in its favor) (a "Proceeding"), or who is threatened with being so involved, by reason of the fact that he or she is or was a director or officer of Johnson & Johnson or, while serving as a director or officer of Johnson & Johnson, is or was at the request of Johnson & Johnson also serving as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan), against all expenses (including attorneys' fees), judgments, fines, penalties, excise taxes and amounts paid in settlement actually and reasonably incurred by the Indemnitee in connection with such Proceeding; provided, that there shall be no indemnification under the By-laws with respect to any settlement or other nonadjudicated disposition of any threatened or pending Proceeding unless Johnson & Johnson has given its prior consent to such settlement or disposition. The right of indemnification created by the By-laws shall be a contract right enforceable by an Indemnitee against Johnson & Johnson, and it shall not be exclusive of any other rights to which an Indemnitee may otherwise be entitled. The indemnification provisions of the By-laws shall inure to the benefit of the heirs and legal representatives of an Indemnitee and shall be applicable to Proceedings commenced or continuing after the adoption of the By-laws, whether arising from acts or omissions occurring before or after such adoption. No amendment, alteration, change, addition or repeal of or to the By-laws shall deprive any Indemnitee of any rights under the By-laws with respect to any act or omission of such Indemnitee occurring prior to such amendment, alteration, change, addition or repeal. Johnson & Johnson enters into indemnification agreements with its directors and officers and enters into insurance agreements on its own behalf. The indemnification agreements provide that Johnson & Johnson agrees to hold harmless and indemnify its directors and officers to the fullest extent authorized or permitted by the NJBCA, or any other applicable law, or by any amendment thereof or other statutory provisions authorizing or permitting such indemnification that is adopted after the date hereof. Without limiting the generality of the foregoing, Johnson & Johnson agrees to hold harmless and indemnify its directors and officers to the fullest extent permitted by applicable law against any and all expenses, judgments, fines, and amounts paid in settlement actually and reasonably incurred by its directors and officers in connection with the defense of any present or future threatened, pending, or completed claim, action, suit, or proceeding by reason of the fact that they were, are, shall be, or shall have been a director or officer of Johnson & Johnson, or are or were serving, shall serve, or shall have served, at the request of Johnson & Johnson, as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. SCIOS INC. Scios' Restated Certificate of Incorporation provides that to the fullest extent permitted by the Delaware General Corporation Law ("DGCL"), a director or officer of Scios shall not be liable to Scios or its stockholders for monetary damages for breach of fiduciary duty as a director or officer. The effect of the provision of the Scios Restated Certificate of Incorporation is to eliminate the rights of Scios and its stockholders (through stockholders' derivative suits on behalf of Scios) to recover monetary damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior) except in certain situations set forth in Section 102(b)(7) of the DGCL. This provision does not limit or eliminate the rights of Scios or any II-2 stockholder to seek nonmonetary relief such as an injunction or rescission in the event of a breach of a director's or officer's duty of care. Under Section 145 of the DGCL, a corporation may indemnify its directors, officers, employees and agents and its former directors, officers, employees and agents and those who serve, at the corporation's request, in such capacities with another enterprise, against expenses (including attorney's fees), as well as judgments, fines and settlements in nonderivative lawsuits, actually and reasonably incurred in connection with the defense of any action, suit or proceeding in which they or any of them were or are made parties or are threatened to be made parties by reason of their serving or having served in such capacity. The DGCL provides, however, that such person must have acted in good faith and in a manner he or she reasonably believed to be in (or not opposed to) the best interests of the corporation and, in the case of a criminal action, such person must have had no reasonable cause to believe his or her conduct was unlawful. In addition, the DGCL does not permit indemnification in an action or suit by or in the right of the corporation, where such person has been adjudged liable to the corporation, unless, and only to the extent that, a court determines that such person fairly and reasonably is entitled to indemnity for costs the court deems proper in light of liability adjudication. Indemnity is mandatory to the extent a claim, issue or matter has been successfully defended. Scios' Restated Certificate of Incorporation contains a provision permitted by the DGCL that provides that directors, officers and other agents will be indemnified by Scios to the fullest extent not prohibited by the DGCL. In addition, Scios has entered into indemnification agreements with certain officers of Scios pursuant to which Scios has agreed to indemnify such officer from claims, liabilities, damages, expenses, losses, costs, penalties or amounts paid in settlement incurred by such officer and arising out of his or her capacity as an officer, employee and/or agent of the corporation of which he or she is an officer to the maximum extent provided by applicable law. In addition, the directors and officers of Scios will be entitled to an advance of expenses to the maximum extent authorized or permitted by law to meet the obligations indemnified against. Scios also maintains insurance for the benefit and on behalf of its directors and officers insuring against all liabilities that may be incurred by such director or officer in or arising out of his or her capacity as a director, officer, employee and/or agent of Scios. ITEM 16. EXHIBITS. See the index to exhibits, which is incorporated herein by reference. The Registrants agree to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request. ITEM 17. UNDERTAKINGS. (a) The undersigned Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) II-3 if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the Registration Statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, 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. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrants' annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new Securities 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. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by such Registrant of expenses incurred or paid by a director, officer or controlling person of such Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the such Registrant will, unless in the opinion of such Registrant's 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 of 1933 and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Johnson & Johnson certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New Brunswick, State of New Jersey on this 29th day of April, 2003. JOHNSON & JOHNSON By /s/ Christine A. Poon ---------------------------------- Name: Christine A. Poon Title: Worldwide Chairman, Pharmaceuticals Group and Member, Executive Committee POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints M. H. Ullmann and J. T. Crisan, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including pre-effective and post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 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 dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ W.C. Weldon - --------------------- Chairman, Board of Directors and April 29, 2003 W. C. Weldon Chief Executive Officer and Director (Principal Executive Officer) /s/ R.J. Darretta - --------------------- Executive Vice President; Chief April 29, 2003 R. J. Darretta Financial Officer and Director (Principal Financial Officer) /s/ S. J. Cosgrove - --------------------- Controller April 29, 2003 S. J. Cosgrove (Principal Accounting Officer) II-5 SIGNATURE TITLE DATE --------- ----- ---- /s/ G. N. Burrow - --------------------- Director April 29, 2003 G. N. Burrow /s/ J. G. Cullen - --------------------- Director April 29, 2003 J. G. Cullen /s/ M. J. Folkman - --------------------- Director April 29, 2003 M. J. Folkman /s/ A. D. Jordan - --------------------- Director April 29, 2003 A. D. Jordan /s/ A. G. Langbo - --------------------- Director April 29, 2003 A. G. Langbo /s/ J. T. Lenehan - --------------------- Vice Chairman, Board of Directors April 29, 2003 J. T. Lenehan and Director /s/ L. F. Mullin - --------------------- Director April 29, 2003 L. F. Mullin /s/ D. Satcher - --------------------- Director April 29, 2003 D. Satcher /s/ H. B. Schacht - --------------------- Director April 29, 2003 H. B. Schacht II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Post-Effective Amendment No. 1 to Form S-3 and has duly caused this Post-Effective Amendment No. 1 to Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Sunnyvale, State of California, on the 29th day of April, 2003. SCIOS INC. By /s/ Christine A. Poon ------------------------------- Name: Christine A. Poon Title: Director Pursuant to the requirements of the Securities Act of 1933, as amended, this Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Richard B. Brewer President and Chief April 29, 2003 - ---------------------- Executive Officer Richard B. Brewer (Principal Executive Officer) /s/ David W. Gryska Senior Vice President, Finance April 29, 2003 - ---------------------- and Chief Financial Officer David W. Gryska (Principal Financial and Accounting Officer) /s/ Christine A. Poon Director April 29, 2003 - ---------------------- Christine A. Poon /s/ Joseph Scodari Director April 29, 2003 - ---------------------- Joseph Scodari II-7 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION 2.1 Agreement and Plan of Merger dated as of February 10, 2003, among Johnson & Johnson, Saturn Merger Sub, Inc. and Scios Inc. 4.1* Indenture, dated as of August 5, 2002, between Scios Inc. and Wells Fargo Bank, National Association, as trustee, filed as an exhibit to Scios Inc.'s Report on Form 8-K dated August 5, 2002. 4.2* Form of $150,000,000 aggregate principal amount 5.50% Convertible Subordinated Note due 2009, filed as an exhibit to Scios Inc.'s Report on Form 8-K dated August 5, 2002. 4.3* Registration Rights Agreement dated as of August 5, 2002, by and among Scios Inc., J.P. Morgan Securities, Inc., Lehman Brothers Inc., SG Cowen Securities Corporation, Needham & Company, Inc., Adams, Harkness & Hill, Inc. and Prudential Securities Incorporated, filed as an exhibit to Scios Inc.'s Report on Form 8-K dated August 5, 2002. 4.4* Pledge Agreement dated as of August 5, 2002, among the Scios Inc., Wells Fargo Bank, National Association, as trustee, and Wells Fargo Bank, National Association, as collateral agent, filed as an exhibit to Scios Inc.'s Report on Form 8-K dated August 5, 2002. 4.5* Control Agreement, dated as of August 5, 2002, by and among Scios Inc, Wells Fargo Bank, National Association, as trustee, Wells Fargo Bank, National Association, as collateral agent, and Wells Fargo Bank, National Association, in its capacity as securities intermediary and depository bank, filed as an exhibit to Scios Inc.'s Report on Form 8-K dated August 5, 2002. 4.7 First Supplemental Indenture dated as of April 29, 2003, among Scios Inc., Johnson & Johnson and Wells Fargo Bank, National Association, as trustee. 5.1* Opinion of Latham & Watkins LLP. 5.2 Opinion of John T. Crisan, Esq., Assistant General Counsel and Assistant Secretary of Johnson & Johnson, regarding the enforceability of the guarantees. 12.1 Statement of Computation of Ratio of Earnings to Fixed Charges of Johnson & Johnson (incorporated by reference to Exhibit 12 to Johnson & Johnson's Annual Report on Form 10-K for the fiscal year ended December 29, 2002). 12.2 Statement of Computation of Ratio of Earnings to Fixed Charges of Scios Inc. 23.1 Consent of PricewaterhouseCoopers LLP, independent accountants to Johnson & Johnson. 23.2 Consent of PricewaterhouseCoopers LLP, independent accountants to Scios Inc. 23.3* Consent of Latham & Watkins LLP (included in Exhibit 5.1). 23.4 Consent of John T. Crisan, Esq., Assistant General Counsel and Assistant Secretary of Johnson & Johnson (included in Exhibit 5.2). 24.1 Power of Attorney (included on the signature page of this Registration Statement). 25.1* Statement of Eligibility under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee of Wells Fargo Bank, National Association (Form T-1). - ----------------- *Previously Filed Exhibit 5.1 [Johnson & Johnson Letterhead] April 29, 2003 Johnson & Johnson One Johnson & Johnson Plaza New Brunswick, NJ 08933 Ladies and Gentlemen: I am Assistant General Counsel and Assistant Secretary of Johnson & Johnson, a New Jersey corporation (the "Company"), and I am familiar with the Registration Statement on Form S-3 (the "Registration Statement") being filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the proposed registration of resales by certain selling securityholders of the Company's guarantees (the "Guarantees") of up to $150,000,000 aggregate principal amount of the 5.50% Convertible Subordinated Notes Due 2009 (the "Notes") of Scios Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("Scios"). The Notes were originally issued pursuant to the Indenture dated as of August 5, 2002, between Scios and Wells Fargo Bank, National Association, as trustee (the "Trustee"), as supplemented and amended by the First Supplemental Indenture thereto dated as of April 29, 2003 (the "First Supplemental Indenture"), among Scios, the Company and the Trustee. The Guarantees were issued by the Company under the First Supplemental Indenture. I have reviewed the Company's Restated Certificate of Incorporation and By-laws and such other corporate records and documents of the Company, including, without limitation, the Indenture and the First Supplemental Indenture, and documents and certificates of public officials and others as I have deemed necessary as a basis for the opinion hereinafter expressed. Based on the foregoing and having regard for such legal considerations as I deem relevant, I am of the opinion that, assuming that the First Supplemental Indenture has been duly authorized, executed and delivered by Scios and the Trustee, the Guarantees constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity, including, without limitation, good faith and fair dealing regardless of whether in a proceeding in equity or at law). I hereby consent to the use of my name under the caption "Legal Matters" in the Registration Statement and to the use of this opinion as an Exhibit to the Registration Statement. Very truly yours, /s/ John T. Crisan --------------------------- Name: John T. Crisan Title: Assistant General Counsel and Assistant Secretary Exhibit 12.1 JOHNSON & JOHNSON AND SUBSIDIARIES STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1) (DOLLARS IN MILLIONS)
FISCAL YEAR ENDED ------------------------------------------------------------------------- DECEMBER 29, DECEMBER 30, DECEMBER 31, JANUARY 2, JANUARY 3, 2002 2001 2000 2000 1999 ------------- ------------- ------------- ------------- ------------- Determination of Earnings: Earnings Before Provision for $ 9,291 $ 7,898 $ 6,868 $ 5,877 $ 4,333 Taxes on Income.......... Fixed Charges................. 259 245 292 337 269 ------------- ------------- ------------- ------------- ------------- Total Earnings as Defined.. $ 9,550 $ 8,143 $ 7,160 $ 6,214 $ 4,602 ============= ============= ============= ============= ============= Fixed Charges and Other: Rents...................... 99 92 88 82 83 Interests.................. 160 153 204 255 186 ------------- ------------- ------------- ------------- ------------- Fixed Charges............ 259 245 292 337 269 Capitalized Interest....... 98 95 97 84 73 ------------- ------------- ------------- ------------- ------------- Total Fixed Charges...... $ 357 $ 340 $ 389 $ 421 $ 342 ============= ============= ============= ============= ============= Ratio of Earnings to Fixed 26.75 23.95 18.41 14.76 13.46 Charges.................. ============= ============= ============= ============= =============
- ---------------------------------- (1) The ratio of earnings to fixed charges represents the historical ratio of Johnson & Johnson and is calculated on a total enterprise basis. The ratio is computed by dividing the sum of earnings before provision for taxes and fixed charges (excluding capitalized interest) by fixed charges. Fixed charges represent interest (including capitalized interest) and amortization of debt discount and expense and the interest factor of all rentals, consisting of an appropriate interest factor on operating leases. Exhibit 12.2
SCIOS INC AND SUBSIDIARIES STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1) (DOLLARS IN MILLIONS) FISCAL YEAR ENDED -------------------------------------------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2002 2001 2000 1999 1998 -------------------------------------------------------------------------------- Pre-tax loss before adjustment for minority interests and equity in net loss of affiliate $(87,916) $(62,170) $ (42,519) $ (20,050) $ (869) Interest expense 13,897 2,818 3,796 2,793 2,685 Amortization of interest expense related to warrants issued 2,468 ---- ---- ---- --- Lease rental expense representative of interest(1) 1,146 637 534 723 321 Pre-tax loss before adjustment for minority interests and equity in net loss of affiliate plus fixed charges (70,405) (58,715) (38,189) (16,534) 2,137 Less: fixed charges Interest expense 13,897 2,818 3,796 2,793 2,685 Amortization of interest expense related to warrants issued 2,468 ---- ---- ---- --- Lease rental expense representative of interest(1) 1,146 637 534 723 321 TOTAL FIXED CHARGES 17,511 3,455 4,330 3,516 3,006 ========= ========= ========= ========= ======== PRE-TAX LOSS BEFORE ADJUSTMENT FOR MINORITY INTERESTS AND EQUITY IN NET LOSS OF AFFILIATE $(87,916) $(62,170) $(42,519) $(20,050) $(869) ========= ========= ========= ========= ====== RATIO OF EARNINGS FIXED CHARGES N/A N/A N/A N/A 0.7 DEFICIENCY IN EARNINGS $(87,916) $(62,170) $(42,519) $(20,050) $(869) - ------------------
(1) Calculated as one-third of rentals, which is a reasonable approximation of the interest factor. Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of Johnson & Johnson of our report dated January 20, 2003, except for Note 22 for which the date is February 10, 2003 relating to the financial statements of Johnson & Johnson, which appears in the Johnson & Johnson 2002 Annual Report to Shareholders, which is incorporated by reference in its Annual Report on Form 10-K for the fiscal year ended December 29, 2002. We also consent to the incorporation by reference of our report dated January 20, 2003 relating to the financial statement schedule, which appears in such Annual Report on Form 10-K. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP New York, New York April 25, 2003 Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 (Registration No. 333-99641) of Scios Inc. of our report dated February 7, 2003, except as to Note 20, which is as of February 10, 2003, relating to the consolidated financial statements, which appears in the Scios Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2002. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP San Jose, California April 28, 2003 EX-2.1 3 ex2_1.txt AGREEMENT & PLAN OF MERGER EXHIBIT 2.1 EXECUTION COPY ============================================================================= AGREEMENT AND PLAN OF MERGER Dated as of February 10, 2003 Among JOHNSON & JOHNSON, SATURN MERGER SUB, INC. And SCIOS INC. ============================================================================= TABLE OF CONTENTS Page ARTICLE I THE MERGER SECTION 1.01. The Merger.............................................1 SECTION 1.02. Closing................................................2 SECTION 1.03. Effective Time.........................................2 SECTION 1.04. Effects of the Merger..................................2 SECTION 1.05. Certificate of Incorporation and By-laws..............................................2 SECTION 1.06. Directors..............................................3 SECTION 1.07. Officers...............................................3 ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES SECTION 2.01. Effect on Capital Stock................................3 SECTION 2.02. Exchange of Certificates...............................5 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Representations and Warranties of the Company..........8 SECTION 3.02. Representations and Warranties of Parent and Sub......................................45 ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS SECTION 4.01. Conduct of Business...................................48 SECTION 4.02. No Solicitation.......................................56 ARTICLE V ADDITIONAL AGREEMENTS SECTION 5.01. Preparation of the Proxy Statement; Stockholders' Meeting...............................60 SECTION 5.02. Access to Information; Confidentiality................61 SECTION 5.03. Commercially Reasonable Efforts.......................62 SECTION 5.04. Company Stock Options; ESPP...........................63 SECTION 5.05. Indemnification, Advancement of Expenses, Exculpation and Insurance.................66 SECTION 5.06. Fees and Expenses.....................................67 SECTION 5.07. Public Announcements..................................68 SECTION 5.08. Stockholder Litigation................................69 SECTION 5.09. Employee Matters......................................69 SECTION 5.10. Company Notes and Company Preferred Stock.............70 SECTION 5.11. Consents and Other Action.............................70 ARTICLE VI CONDITIONS PRECEDENT SECTION 6.01. Conditions to Each Party's Obligation to Effect the Merger...................................71 SECTION 6.02. Conditions to Obligations of Parent and Sub...........71 SECTION 6.03. Conditions to Obligation of the Company...............73 SECTION 6.04. Frustration of Closing Conditions.....................73 ARTICLE VII TERMINATION, AMENDMENT AND WAIVER SECTION 7.01. Termination...........................................73 SECTION 7.02. Effect of Termination.................................75 SECTION 7.03. Amendment.............................................75 SECTION 7.04. Extension; Waiver.....................................75 SECTION 7.05. Procedure for Termination or Amendment................76 ARTICLE VIII GENERAL PROVISIONS SECTION 8.01. Nonsurvival of Representations and Warranties.........76 SECTION 8.02. Notices...............................................76 SECTION 8.03. Definitions...........................................77 SECTION 8.04. Interpretation........................................79 SECTION 8.05. Consents and Approvals................................79 SECTION 8.06. Counterparts..........................................79 SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries........80 SECTION 8.08. GOVERNING LAW.........................................80 SECTION 8.09. Assignment............................................80 SECTION 8.10. Specific Enforcement; Consent to Jurisdiction.........80 SECTION 8.11. Severability..........................................81 SECTION 8.12. Performance by Sub....................................81 Annex I Index of Defined Terms Exhibit A Restated Certificate of Incorporation of the Surviving Corporation 82 AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of February 10, 2003, among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), SATURN MERGER SUB, INC., a Delaware corporation and a wholly owned Subsidiary of Parent ("Sub"), and SCIOS INC., a Delaware corporation (the "Company"). WHEREAS the Board of Directors of each of the Company and Sub has approved and declared advisable, and the Board of Directors of Parent has approved, this Agreement and the merger of Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby (a) each issued and outstanding share of common stock, par value $.001 per share, of the Company ("Company Common Stock"), other than the Appraisal Shares and shares of Company Common Stock directly owned by Parent, Sub or the Company, will be converted into the right to receive $45.00 in cash and (b) each issued and outstanding share of Series B preferred stock, par value $.001 per share, of the Company ("Company Preferred Stock"), other than the Appraisal Shares and shares of Company Preferred Stock directly owned by Parent, Sub or the Company, will be converted into the right to receive $4,500.00 in cash; and WHEREAS Parent, Sub and the Company 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 representations, warranties, covenants and agreements contained in this Agreement, and subject to the conditions set forth herein, the parties hereto agree as follows: ARTICLE I The Merger SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Sub in accordance with the DGCL. SECTION 1.02. CLOSING. The closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified by the parties, which shall be no later than the second business day after satisfaction or (to the extent permitted by law) waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by law) waiver of those conditions), at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, unless another time, date or place is agreed to in writing by Parent and the Company; provided, however, that if all the conditions set forth in Article VI shall not have been satisfied or (to the extent permitted by law) waived on such second business day, then the Closing shall take place on the first business day on which all such conditions shall have been satisfied or (to the extent permitted by law) waived. The date on which the Closing occurs is referred to in this Agreement as the "Closing Date". SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall file with the Secretary of State of the State of Delaware a certificate of merger (the "Certificate of Merger") executed and acknowledged by the parties in accordance with the relevant provisions of the DGCL and, as soon as practicable on or after the Closing Date, shall make all other filings or recordings required under the DGCL. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or at such other time as Parent and the Company shall agree and shall specify in the Certificate of Merger (the time the Merger becomes effective being the "Effective Time"). SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects set forth in Section 259 of the DGCL. SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) The Restated Certificate of Incorporation of the Company (the "Company Certificate") shall be amended at the Effective Time to be in the form of Exhibit A and, as so amended, such Company Certificate shall be the Restated Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The By-laws of Sub, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. SECTION 1.06. DIRECTORS. The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. SECTION 1.07. OFFICERS. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES SECTION 2.01. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or Company Preferred Stock or any shares of capital stock of Parent or Sub: (a) CAPITAL STOCK OF SUB. Each issued and outstanding share of capital stock of Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. (b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share of Company Common Stock and Company Preferred Stock that is directly owned by the Company, Parent or Sub immediately prior to the Effective Time shall automatically be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) CONVERSION OF COMPANY COMMON STOCK AND COMPANY PREFERRED STOCK. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 2.01(b) and the Appraisal Shares) shall be converted into the right to receive $45.00 in cash, without interest (the "Common Stock Merger Consideration"). Each share of Company Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 2.01(b) and the Appraisal Shares) shall be converted into the right to receive $4,500.00 in cash, without interest, which is equivalent to the Common Stock Merger Consideration on an as converted basis (the "Preferred Stock Merger Consideration" and, together with the Common Stock Merger Consideration, the "Merger Consideration"). At the Effective Time, all such shares of Company Common Stock and Company Preferred Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate which immediately prior to the Effective Time represented any such shares of Company Common Stock or Company Preferred Stock (each, a "Certificate") shall cease to have any rights with respect thereto, except the right to receive the Common Stock Merger Consideration or the Preferred Stock Merger Consideration, respectively. The right of any holder of a Certificate to receive the applicable Merger Consideration shall be subject to and reduced by the amount of any withholding that is required under applicable tax law. (d) APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to the contrary, shares (the "Appraisal Shares") of Company Common Stock or Company Preferred Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such Appraisal Shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL ("Section 262") shall not be converted into the right to receive the Merger Consideration as provided in Section 2.01(c), but instead such holder shall be entitled to payment of the fair value of such Appraisal Shares in accordance with the provisions of Section 262. At the Effective Time, all Appraisal Shares shall no longer be outstanding, shall automatically be canceled and shall cease to exist, and each holder of Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such Appraisal Shares in accordance with the provisions of Section 262. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262, or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262, then the right of such holder to be paid the fair value of such holder's Appraisal Shares under Section 262 shall cease and such Appraisal Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration as provided in Section 2.01(c). The Company shall serve prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock or Company Preferred Stock, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing. SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to the Effective Time, Parent shall appoint JPMorgan Chase or another comparable bank or trust company to act as paying agent (the "Paying Agent") for the payment of the Merger Consideration. At the Effective Time, Parent shall deposit, or cause the Surviving Corporation to deposit, with the Paying Agent, for the benefit of the holders of Certificates, cash in an amount sufficient to pay the aggregate Merger Consideration required to be paid pursuant to Section 2.01(c) (such cash being hereinafter referred to as the "Exchange Fund"). The Exchange Fund shall not be used for any other purpose. (b) EXCHANGE PROCEDURES. As soon as practicable (but not later than five (5) business days) after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and which shall be in customary form) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Each holder of record of a Certificate shall, upon surrender to the Paying Agent of such Certificate, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, be entitled to receive in exchange therefor the amount of cash which the number of shares of Company Common Stock or Company Preferred Stock previously represented by such Certificate shall have been converted into the right to receive pursuant to Section 2.01(c), and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock or Company Preferred Stock which is not registered in the transfer records of the Company, payment of the Merger Consideration may be made to a person other than the person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of such Certificate or establish to the reasonable satisfaction of Parent that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.02(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration which the holder thereof has the right to receive in respect of such Certificate pursuant to this Article II. No interest shall be paid or will accrue on any cash payable to holders of Certificates pursuant to the provisions of this Article II. (c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK AND COMPANY PREFERRED STOCK. All cash paid upon the surrender of Certificates in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock or Company Preferred Stock formerly represented by such Certificates. At the close of business on the day on which the Effective Time occurs, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock and Company Preferred Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate is presented to the Surviving Corporation for transfer, it shall be canceled against delivery of cash to the holder thereof as provided in this Article II. (d) TERMINATION OF THE EXCHANGE FUND. Any portion of the Exchange Fund which remains undistributed to the holders of the Certificates for six months after the Effective Time shall be delivered to Parent, upon demand, and any holders of the Certificates who have not theretofore complied with this Article II shall thereafter look only to Parent for, and Parent shall remain liable for, payment of their claim for the Merger Consideration. (e) NO LIABILITY. None of Parent, Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any cash from the Exchange Fund properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificate shall not have been surrendered immediately prior to the date on which any Merger Consideration would otherwise escheat to or become the property of any Governmental Entity, any such Merger Consideration shall, to the extent permitted by applicable law, become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto. (f) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest the cash in the Exchange Fund as directed by Parent. Any interest and other income resulting from such investments shall be paid to and be income of Parent. (g) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto. (h) WITHHOLDING RIGHTS. Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock or Company Preferred Stock such amounts as Parent, the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent, the Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock or Company Preferred Stock in respect of which such deduction and withholding was made by Parent, the Surviving Corporation or the Paying Agent. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as disclosed in the Company SEC Documents filed by the Company and publicly available prior to the date of this Agreement (the "Filed Company SEC Documents") or as set forth in the disclosure schedule (with specific reference to the particular Section or subsection of this Agreement to which the information set forth in such disclosure schedule relates; provided, however, that any information set forth in one section of the Company Disclosure Schedule shall be deemed to apply to each other Section or subsection thereof or hereof to which its relevance is apparent on its face) delivered by the Company to Parent prior to the execution of this Agreement (the "Company Disclosure Schedule"), the Company represents and warrants to Parent and Sub as follows: (a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company and its Subsidiaries has been duly organized, and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as the case may be, and has all requisite power and authority and possesses all governmental licenses, permits, authorizations and approvals necessary to enable it to use its corporate or other name and to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as presently conducted, except where the failure to have such government licenses, permits, authorizations or approvals individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. The Company has made available to Parent, prior to the execution of this Agreement, complete and accurate copies of the Company Certificate and its By-laws (the "Company By-laws"), and the comparable organizational documents of each of its Subsidiaries, in each case as amended to the date hereof. The Company has made available to Parent complete and accurate copies of the minutes (or, in the case of minutes that have not yet been finalized, drafts thereof (if available)) of all meetings of the stockholders of the Company and each of its Subsidiaries, the Board of Directors of the Company and each of its Subsidiaries and the committees of each of such Board of Directors, in each case held since January 1, 2001 and prior to the date hereof. (b) SUBSIDIARIES. Section 3.01(b) of the Company Disclosure Schedule lists each of the Subsidiaries of the Company and, for each such Subsidiary, the state of incorporation or formation and, as of the date hereof, each jurisdiction in which such Subsidiary is qualified or licensed to do business. All the issued and outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company free and clear of all pledges, liens, charges, encumbrances or security interests of any kind or nature whatsoever (collectively, "Liens"), and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests. Except for the capital stock of, or voting securities or equity interests in, its Subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other voting securities or equity interests in, any corporation, partnership, joint venture, association or other entity. (c) CAPITAL STRUCTURE. The authorized capital stock of the Company consists of 150,000,000 shares of Company Common Stock and 20,000,000 shares of preferred stock, par value $.001 per share (of which 50,000 shares have been designated as Company Preferred Stock). At the close of business on January 31, 2003, (i) 47,042,335 shares of Company Common Stock were issued and outstanding, (ii) 261,800 shares of Company Common Stock were held by the Company in its treasury, (iii) 3,093,355 shares of Company Common Stock were reserved and available for issuance pursuant to the Company's 1996 Non-Officer Stock Option Plan, as amended, 1992 Equity Incentive Plan, as amended, and 2001 Employee Stock Purchase Plan (the "ESPP") (such plans, collectively, the "Company Stock Plans"), and 7,749,446 shares of Company Common Stock were subject to outstanding Company Stock Options (other than rights under the ESPP), and no shares of Company Common Stock were subject to vesting and restrictions on transfer (collectively, "Company Restricted Stock"), (iv) 499,100 shares of Company Common Stock were reserved for issuance and issuable upon conversion of the Company Preferred Stock, (v) 3,816,793 shares of Company Common Stock were reserved for issuance and issuable upon conversion of the 5.50% Convertible Subordinated Notes due 2009 of the Company (the "Company Notes"), (vi) 4,991 shares of Company Preferred Stock were issued or outstanding, (vii) no other shares of preferred stock of the Company were issued or outstanding or were held by the Company as treasury shares and (viii) warrants to acquire 700,000 shares of Company Common Stock from the Company pursuant to the warrant agreements set forth on Section 3.01(c) of the Company Disclosure Schedule and previously delivered in complete and correct form to Parent (the "Warrants") were issued and outstanding. Except as set forth above in this Section 3.01(c), at the close of business on January 31, 2003, no shares of capital stock or other voting securities or equity interests of the Company were issued, reserved for issuance or outstanding. There are no outstanding stock appreciation rights, "phantom" stock rights, performance units, rights to receive shares of Company Common Stock on a deferred basis or other rights (other than Company Preferred Stock, Company Notes, Company Stock Options and Warrants) that are linked to the value of Company Common Stock (collectively, "Company Stock-Based Awards"). Section 3.01(c) of the Company Disclosure Schedule sets forth a complete and accurate list, as of February 6, 2003, of all outstanding options to purchase shares of Company Common Stock (collectively, "Company Stock Options") and all outstanding Company Stock-Based Awards, granted under the Company Stock Plans or otherwise (other than rights under the ESPP), and all outstanding Warrants, the number of shares of Company Common Stock (or other stock) subject thereto, the grant dates, expiration dates, exercise or base prices (if applicable) and vesting schedules thereof and the names of the holders thereof. All outstanding Company Stock Options (other than rights under the ESPP) and shares of Company Restricted Stock are evidenced by stock option agreements, restricted stock purchase agreements or other award agreements, in each case in the forms set forth in Section 3.01(c) of the Company Disclosure Schedule, and no stock option agreement, restricted stock purchase agreement or other award agreement contains terms that are inconsistent with such forms. Each Company Stock Option intended to qualify as an "incentive stock option" under Section 422 of the Code so qualifies and the exercise price of each other Company Stock Option is no less than the fair market value of a share of Company Common Stock as determined on the date of grant of such Company Stock Option. As of the close of business on January 31, 2003, there were outstanding Company Stock Options (other than rights under the ESPP) to purchase 7,749,446 shares of Company Common Stock with exercise prices on a per share basis lower than the Common Stock Merger Consideration, and the weighted average exercise price of such Company Stock Options was equal to $18.46. The maximum number of shares of Company Common Stock that could be purchased with accumulated payroll deductions under the ESPP at the close of business of May 30, 2003 and November 28, 2003 (assuming the fair market value of a share of Company Common Stock on such dates is equal to the Common Stock Merger Consideration and payroll deductions continue at the current rate) is 112,792 and 70,190, respectively. As of the close of business on January 31, 2003, there were outstanding Warrants to purchase 700,000 shares of Company Common Stock with exercise prices on a per share basis lower than the Common Stock Merger Consideration. All outstanding shares of capital stock of the Company are, and all shares which may be issued pursuant to the Company Preferred Stock, Company Notes, Company Stock Options, Company Stock-Based Awards or the Warrants will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except for the Company Notes, there are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above in this Section 3.01(c), (x) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities or equity interests of the Company, (B) any securities of the Company convertible into or exchangeable or exercisable for shares of capital stock or other voting securities or equity interests of the Company or (C) any warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, and no obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company and (y) there are not any outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. Neither the Company nor any of its Subsidiaries is a party to any voting agreement with respect to the voting of any such securities. Except as set forth above in this Section 3.01(c), there are no outstanding (1) securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or voting securities or equity interests of any Subsidiary of the Company, (2) warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, and no obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or voting securities of any Subsidiary of the Company or (3) obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such outstanding securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. (d) AUTHORITY; NONCONTRAVENTION. The Company has all requisite corporate power and authority to execute and deliver this Agreement and, subject to receipt of the Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, subject, in the case of the consummation of the Merger, to the obtaining of the Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Board of Directors of the Company, at a meeting duly called and held at which all directors of the Company were present, duly and unanimously adopted resolutions (i) approving and declaring advisable this Agreement, the Merger and the other transactions contemplated by this Agreement, (ii) declaring that it is in the best interests of the stockholders of the Company that the Company enter into this Agreement and consummate the Merger and the other transactions contemplated by this Agreement on the terms and subject to the conditions set forth in this Agreement, (iii) directing that the adoption of this Agreement be submitted as promptly as practicable to a vote at a meeting of the stockholders of the Company and (iv) recommending that the stockholders of the Company adopt this Agreement, which resolutions, as of the date of this Agreement, have not been subsequently rescinded, modified or withdrawn in any way. The execution and delivery of this Agreement do not, and the consummation of the Merger and the other transactions contemplated by this Agreement and compliance by the Company and its Subsidiaries with the provisions of this Agreement will not, (x) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, the Company Certificate or the Company By-laws or the comparable organizational documents of any of its Subsidiaries, (y) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of the Company or any of its Subsidiaries under, any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement or other contract, agreement, obligation, commitment, instrument, franchise or license, whether oral or written (each, including all amendments thereto, a "Contract"), to which the Company or any of its Subsidiaries is a party or any of their respective properties or other assets is subject or (z) subject to the governmental filings, the obtaining of the Stockholder Approval and the other matters referred to in the following sentence, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, any (A) statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or their respective properties or other assets or (B) order, writ, injunction, decree, judgment or stipulation, in each case applicable to the Company or any of its Subsidiaries or their respective properties or other assets, other than, in the case of clauses (y) and (z), any such conflicts, violations, breaches, defaults, rights, losses or Liens that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Federal, state, local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental self-regulatory agency, commission or authority (each, a "Governmental Entity") is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation of the Merger or the other transactions contemplated by this Agreement, except for (1) the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"), and the receipt, termination or expiration, as applicable, of approvals or waiting periods required under the HSR Act or any other applicable competition, merger control, antitrust or similar law or regulation, (2) the filing with the Securities and Exchange Commission (the "SEC") of (A) a proxy statement relating to the adoption by the stockholders of the Company of this Agreement (as amended or supplemented from time to time, the "Proxy Statement") and (B) such reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (3) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is qualified to do business, (4) any filings required under the rules and regulations of the Nasdaq National Market and (5) such other consents, approvals, orders, authorizations, actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. (e) COMPANY SEC DOCUMENTS. The Company has filed all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) with the SEC required to be filed by the Company since January 1, 2001 (the "Company SEC Documents"). As of their respective filing dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Documents, and none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Company SEC Document has been revised, amended, supplemented or superseded by a later-filed Company SEC Document, none of the Company SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including the related notes) of the Company included in the Company SEC Documents complied at the time they were filed as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and each fairly presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which individually or in the aggregate have had or would reasonably be expected to have a Material Adverse Effect. None of the Subsidiaries of the Company are, or have at any time since January 1, 2001 been, subject to the reporting requirements of Sections 13(a) and 15(d) of the Exchange Act. (f) INFORMATION SUPPLIED. None of the information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the stockholders of the Company and at the time of the Stockholders' Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Parent or Sub for inclusion or incorporation by reference in the Proxy Statement. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. (g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities incurred in connection with this Agreement or as expressly permitted pursuant to Section 4.01(a)(i) through (xvi), since the date of the most recent financial statements included in the Filed Company SEC Documents, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice, and there has not been any Material Adverse Change, and from such date until the date hereof there has not been (i) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any capital stock of the Company or any of its Subsidiaries, other than dividends or distributions by a direct or indirect wholly owned Subsidiary of the Company to its shareholders, (ii) any purchase, redemption or other acquisition by the Company or any of its Subsidiaries of any shares of capital stock or any other securities of the Company or any of its Subsidiaries or any options, warrants, calls or rights to acquire such shares or other securities, (iii) any split, combination or reclassification of any capital stock of the Company or any of its Subsidiaries or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of their respective capital stock, (iv) (A) any granting by the Company or any of its Subsidiaries to any current or former director, officer, employee or consultant of the Company or its Subsidiaries of any increase in compensation, bonus or fringe or other benefits or any granting of any type of compensation or benefits to any current or former director, officer, employee or consultant not previously receiving or entitled to receive such type of compensation or benefit, except for normal increases in cash compensation (including cash bonuses) in the ordinary course of business consistent with past practice or as was required under any Company Benefit Agreement or Company Benefit Plan in effect as of the date of the most recent financial statements included in the Filed Company SEC Documents, (B) any granting by the Company or any of its Subsidiaries to any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries of any right to receive any increase in severance or termination pay, or (C) any entry by the Company or any of its Subsidiaries into, or any amendments of, (1) any employment, deferred compensation, consulting, severance, change of control, termination or indemnification agreement or any other agreement with or involving any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries or (2) any agreement with any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of a nature contemplated by this Agreement (all such agreements under this clause (C), collectively, "Company Benefit Agreements"), (D) any adoption of, any amendment to or any termination of any Company Benefit Plan, or (E) any payment of any benefit under, or the grant of any award under, or any amendment to, or termination of, any bonus, incentive, performance or other compensation plan or arrangement, Company Benefit Agreement or Company Benefit Plan (including in respect of stock options, "phantom" stock, stock appreciation rights, restricted stock, "phantom" stock rights, restricted stock units, deferred stock units, performance stock units or other stock-based or stock-related awards or the removal or modification of any restrictions in any Company Benefit Agreement or Company Benefit Plan or awards made thereunder) except as required to comply with applicable law or any Company Benefit Agreement or Company Benefit Plan in effect as of the date of the most recent financial statements included in the Filed Company SEC Documents, provided, that this clause (iv) shall not apply with respect to any consultant of the Company who, as of the date of this Agreement, had not been paid more than $20,000 in one fiscal year by the Company, (v) any damage, destruction or loss, whether or not covered by insurance, that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect, (vi) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or businesses, except insofar as may have been required by a change in GAAP or (vii) any change in any material tax election or any settlement or compromise of any material income tax liability. (h) LITIGATION. There is no suit, action or proceeding pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective assets that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against, or, to the Knowledge of the Company, investigation by any Governmental Entity involving, the Company or any of its Subsidiaries or any of their respective assets that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect. (i) CONTRACTS. Except with respect to licenses and other agreements relating to intellectual property, which are the subject of Section 3.01(p), as of the date hereof, neither the Company nor any of its Subsidiaries is a party to, and none of their respective properties or other assets is subject to, any contract or agreement that is of a nature required to be filed as an exhibit to a report or filing under the Securities Act or the Exchange Act and the rules and regulations promulgated thereunder. None of the Company, any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto is in material violation of or in default under (in each case with or without notice or lapse of time, or both) any of the Contracts set forth in Section 3.01(i)-(A) of the Company Disclosure Schedule. None of the Company, any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto is in violation of or in default under (in each case with or without notice or lapse of time, or both) any Contract (other than the Contracts listed in Section 3.01(i)-(A) of the Company Disclosure Schedule), to which it is a party or by which it or any of its properties or other assets is bound, except for violations or defaults that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has entered into any Contract with any Affiliate of the Company that is currently in effect other than agreements that are disclosed in the Filed Company SEC Documents. Neither the Company nor any of its Subsidiaries is a party to or otherwise bound by any agreement or covenant restricting the Company's or any of its Subsidiaries' ability to compete. (j) COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS. (i) Except with respect to Environmental Laws, the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and taxes, which are the subjects of Sections 3.01(j)(ii), 3.01(l) and 3.01(n), respectively, each of the Company and its Subsidiaries is in compliance with all statutes, laws, ordinances, rules, regulations, judgments, orders and decrees of any Governmental Entity applicable to it, its properties or other assets or its business or operations (collectively, "Legal Provisions"), except for failures to be in compliance that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries has in effect all approvals, authorizations, certificates, filings, franchises, licenses, notices and permits of or with all Governmental Entities (collectively, "Permits"), including all Permits under the Federal Food, Drug and Cosmetic Act of 1938, as amended (the "FDCA"), and the regulations of the Federal Food and Drug Administration (the "FDA") promulgated thereunder, necessary for it to own, lease or operate its properties and other assets and to carry on its business and operations as presently conducted, except where the failure to have such Permits individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. There has occurred no default under, or violation of, any such Permit, except for any such default or violation that individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. The consummation of the Merger, in and of itself, would not cause the revocation or cancellation of any such Permit that individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. No action, demand, requirement or investigation by any Governmental Entity and no suit, action or proceeding by any other person, in each case with respect to the Company or any of its Subsidiaries or any of their respective properties or other assets under any Legal Provision, is pending or, to the Knowledge of the Company, threatened, other than, in each case, those the outcome of which individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. (ii) Except for those matters that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect: (A) each of the Company and its Subsidiaries is, and has been, in compliance with all applicable Environmental Laws and has obtained and complied with all Permits required under any Environmental Laws to own, lease or operate its properties or other assets and to carry on its business and operations as presently conducted; (B) there have been no Releases or threatened Releases of Hazardous Materials in, on, under or affecting any properties currently or formerly owned, leased or operated by the Company or any of its Subsidiaries; (C) there is no investigation, suit, claim, action or proceeding pending, or to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries relating to or arising under Environmental Laws, and neither the Company nor any of its Subsidiaries has received any written notice of any such investigation, suit, claim, action or proceeding; (D) neither the Company nor any of its Subsidiaries has entered into or assumed by contract or operation of law or otherwise, any obligation, liability, order, settlement, judgment, injunction or decree relating to or arising under Environmental Laws; and (E) to the Knowledge of the Company, there are no facts, circumstances or conditions that would reasonably be expected to form the basis for any investigation, suit, claim, action, proceeding or liability against or affecting the Company or any of its Subsidiaries relating to or arising under Environmental Laws. The term "Environmental Laws" means all Federal, state, local and foreign laws (including the common law), statutes, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices, Permits, treaties or binding agreements issued, promulgated or entered into by any Governmental Entity, relating in any way to the environment, preservation or reclamation of natural resources or endangered species, the presence, management, Release or threat of Release of, or exposure to, Hazardous Materials, or to human health and safety. The term "Hazardous Materials" means (1) petroleum products and by-products, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances or (2) any chemical, material, substance, waste, pollutant or contaminant that is prohibited, limited or regulated by or pursuant to any Environmental Law. The term "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migrating into or through the environment or any natural or man-made structure. (k) ABSENCE OF CHANGES IN COMPANY BENEFIT PLANS; LABOR RELATIONS. Except as expressly permitted pursuant to Section 4.01(a)(i) through (xvi), since the date of the most recent financial statements included in the Filed Company SEC Documents, there has not been any adoption or amendment by the Company or any of its Subsidiaries of any collective bargaining agreement or any employment, bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock appreciation, restricted stock, stock option, "phantom" stock, performance, retirement, thrift, savings, stock bonus, paid time off, perquisite, fringe benefit, vacation, severance, disability, death benefit, hospitalization, medical, welfare benefit or other plan, program, policy, arrangement or understanding (whether or not legally binding) maintained, contributed to or required to be maintained or contributed to by the Company or any of its Subsidiaries or any other person or entity that, together with the Company, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each, a "Commonly Controlled Entity"), in each case providing benefits to any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries (collectively, the "Company Benefit Plans"), or any material change in any actuarial or other assumption used to calculate funding obligations with respect to any Company Pension Plans, or any change in the manner in which contributions to any Company Pension Plans are made or the basis on which such contributions are determined, other than amendments or other changes as required to ensure that such Company Benefit Plan is not then out of compliance with applicable law, or reasonably determined by the Company to be necessary or appropriate to preserve the qualified status of a Company Pension Plan under Section 401(a) of the Code. There exist no currently binding Company Benefit Agreements. There are no collective bargaining or other labor union agreements to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound. As of the date hereof, none of the employees of the Company or any of its Subsidiaries are represented by any union with respect to their employment by the Company or such Subsidiary. As of the date hereof, since January 1, 2001, neither the Company nor any of its Subsidiaries has experienced any labor disputes, union organization attempts or work stoppages, slowdowns or lockouts due to labor disagreements. (l) ERISA COMPLIANCE. (i) Section 3.01(l)(i) of the Company Disclosure Schedule contains a complete and accurate list of each Company Benefit Plan that is an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) (sometimes referred to herein as a "Company Pension Plan"), each Company Benefit Plan that is an "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) and all other Company Benefit Plans. The Company has provided or made available to Parent complete and accurate copies of (A) each Company Benefit Plan (or, in the case of any unwritten Company Benefit Plans, descriptions thereof), (B) the two most recent annual reports on Form 5500 required to be filed with the Internal Revenue Service (the "IRS") with respect to each Company Benefit Plan (if any such report was required), (C) the most recent summary plan description for each Company Benefit Plan for which such summary plan description is required and (D) each trust agreement and insurance or group annuity contract relating to any Company Benefit Plan. Each Company Benefit Plan has been administered in all material respects in accordance with its terms. The Company, its Subsidiaries and all the Company Benefit Plans are all in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable laws, including laws of foreign jurisdictions, and the terms of all collective bargaining agreements. (ii) All Company Pension Plans intended to be tax-qualified have received favorable determination letters from the IRS with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and have timely filed with the IRS determination letter applications with respect to "GUST" (as defined in Section 1 of Notice 2001-42), to the effect that such Company Pension Plans are qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked (or, to the Knowledge of the Company, has revocation been threatened) and no event has occurred since the date of the most recent determination letter or application therefor relating to any such Company Pension Plan that would reasonably be expected to adversely affect the qualification of such Company Pension Plan or materially increase the costs relating thereto or require security under Section 307 of ERISA. In addition, all Company Pension Plans have been, or shall have been by the end of the 2002 plan year, amended to comply with the requirements of the Economic Growth and Tax Relief Reconciliation Act of 2001 which are or have become effective on or before the end of the 2002 plan year, as set forth in Notice 2001-42. All Company Pension Plans required to have been approved by any foreign Governmental Entity have been so approved, no such approval has been revoked (or, to the Knowledge of the Company, has revocation been threatened) and no event has occurred since the date of the most recent approval or application therefor relating to any such Company Pension Plan that would reasonably be expected to materially affect any such approval relating thereto or materially increase the costs relating thereto. The Company has delivered or made available to Parent a complete and accurate copy of the most recent determination letter received prior to the date hereof with respect to each Company Pension Plan, as well as a complete and accurate copy of each pending application for a determination letter, if any. The Company has also provided or made available to Parent a complete and accurate list of all amendments to any Company Pension Plan as to which a favorable determination letter has not yet been received. (iii) Neither the Company nor any Commonly Controlled Entity has (A) maintained, contributed to or been required to contribute to any Company Benefit Plan that is subject to Title IV of ERISA or (B) has any unsatisfied liability under Title IV of ERISA. (iv) All reports, returns and similar documents with respect to all Company Benefit Plans required to be filed with any Governmental Entity or distributed to any Company Benefit Plan participant have been duly and timely filed or distributed. None of the Company or any of its Subsidiaries has received notice of, and to the Knowledge of the Company, there are no investigations by any Governmental Entity with respect to, termination proceedings or other claims (except claims for benefits payable in the normal operation of the Company Benefit Plans), suits or proceedings against or involving any Company Benefit Plan or asserting any rights or claims to benefits under any Company Benefit Plan that would give rise to any material liability, and, to the Knowledge of the Company, there are not any facts that could give rise to any material liability in the event of any such investigation, claim, suit or proceeding. (v) All contributions, premiums and benefit payments under or in connection with the Company Benefit Plans that are required to have been made as of the date hereof in accordance with the terms of the Company Benefit Plans have been timely made or have been reflected on the most recent consolidated balance sheet filed or incorporated by reference into the Filed Company SEC Documents. Neither any Company Pension Plan nor any single-employer plan of any Commonly Controlled Entity has an "accumulated funding deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived. (vi) With respect to each Company Benefit Plan, (A) there has not occurred any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) in which the Company or any of its Subsidiaries or any of their respective employees, or, to the Knowledge of the Company, any trustee, administrator or other fiduciary of such Company Benefit Plan, or any agent of the foregoing, has engaged that would reasonably be expected to subject the Company or any of its Subsidiaries or any of their respective employees, or a trustee, administrator or other fiduciary of any trust created under any Company Benefit Plan, to the tax or penalty on prohibited transactions imposed by Section 4975 of the Code or the sanctions imposed under Title I of ERISA and (B) neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any trustee, administrator or other fiduciary of any Company Benefit Plan nor any agent of any of the foregoing, has engaged in any transaction or acted in a manner, or failed to act in a manner, that would reasonably be expected to subject the Company or any of its Subsidiaries or, to the Knowledge of the Company, any trustee, administrator or other fiduciary, to any liability for breach of fiduciary duty under ERISA or any other applicable law. No Company Benefit Plan or related trust has been terminated, nor has there been any "reportable event" (as that term is defined in Section 4043 of ERISA) for which the 30-day reporting requirement has not been waived with respect to any Company Benefit Plan during the last five years, and no notice of a reportable event will be required to be filed in connection with the transactions contemplated by this Agreement. (vii) Section 3.01(l)(vii) of the Company Disclosure Schedule discloses whether each Company Benefit Plan that is an employee welfare benefit plan is (A) unfunded or self-insured, (B) funded through a "welfare benefit fund", as such term is defined in Section 419(e) of the Code, or other funding mechanism or (C) insured. Each such employee welfare benefit plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without material liability (other than benefits then payable under such plan without regard to such amendment or termination) to the Company or any of its Subsidiaries at any time after the Effective Time. Each of the Company and its Subsidiaries complies in all material respects with the applicable requirements of Section 4980B(f) of the Code or any similar state statute with respect to each Company Benefit Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code or such state statute. Neither the Company nor any of its Subsidiaries has any material obligations for retiree health or life insurance benefits under any Company Benefit Plan (other than for continuation coverage required under Section 4980(f) of the Code). (viii) None of the execution and delivery of this Agreement, the obtaining of the Stockholder Approval or the consummation of the Merger or any other transaction expressly contemplated by this Agreement (including as a result of any termination of employment on or following the Effective Time) will (A) entitle any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries to severance or termination pay, (B) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise) of, compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Company Benefit Plan or Company Benefit Agreement or (C) result in any breach or violation of, or a default under, any Company Benefit Plan or Company Benefit Agreement. The Company's good faith estimate as of the date hereof of the total amount of all payments and the fair market value of all non-cash benefits (other than Company Stock Options and Company Restricted Stock) that may become payable or provided to any director, officer, employee or consultant of the Company or any of its Subsidiaries under the Company Benefit Agreements (assuming for such purpose that such individual's employment were terminated immediately following the Effective Time as if the Effective Time were the date hereof) is set forth in Section 3.01(l)(viii) of the Company Disclosure Schedule. (ix) Neither the Company nor any of its Subsidiaries has any material liability or obligations, including under or on account of a Company Benefit Plan, arising out of the hiring of persons to provide services to the Company or any of its Subsidiaries and treating such persons as consultants or independent contractors and not as employees of the Company or any of its Subsidiaries. (x) No deduction by the Company or any of its Subsidiaries in respect of any "applicable employee remuneration" (within the meaning of Section 162(m) of the Code) has been disallowed or is subject to disallowance by reason of Section 162(m) of the Code. (m) NO EXCESS PARACHUTE PAYMENTS. No amount or other entitlement or economic benefit that could be received (whether in cash or property or the vesting of property) as a result of the execution and delivery of this Agreement, the obtaining of the Stockholder Approval, the consummation of the Merger or any other transaction contemplated by this Agreement (including as a result of termination of employment on or following the Effective Time) by or for the benefit of any director, officer, employee or consultant of the Company or any of its Affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Company Benefit Plan, Company Benefit Agreement or otherwise would be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code), and no disqualified individual is entitled to receive any additional payment from the Company or any of its Subsidiaries, the Surviving Corporation or any other person in the event that the excise tax required by Section 4999(a) of the Code is imposed on such disqualified individual. Section 3.01(m) of the Company Disclosure Schedule sets forth the Company's good faith estimate, calculated as of the date of this Agreement, (i) the "base amount" (as such term is defined in Section 280G(b)(3) of the Code) for the Company's chief executive officer and each other disqualified individual (defined as set forth above) (collectively, the "Primary Company Executives") and (ii) the maximum amount of "parachute payments" as defined in Section 280G of the Code that could be paid or provided to each Primary Company Executive as a result of the execution and delivery of this Agreement, the obtaining of the Stockholder Approval, the consummation of the Merger or any other transaction contemplated by this Agreement (including as a result of any termination of employment on or following the Effective Time). (n) TAXES. (i) Each of the Company and its Subsidiaries has filed or has caused to be filed in a timely manner (within any applicable extension period) all tax returns required to be filed with any taxing authority pursuant to the Code (and any applicable U.S. Treasury regulations) or applicable state, local or foreign tax laws. All such tax returns are complete and accurate in all material respects. Each of the Company and its Subsidiaries has paid or caused to be paid (or the Company has paid on its behalf) all taxes due and owing, and the most recent financial statements contained in the Filed Company SEC Documents reflect an adequate reserve (determined in accordance with GAAP) (excluding any reserves for deferred taxes established to reflect timing differences between book and tax income) for all taxes accrued and payable by the Company and its Subsidiaries for all taxable periods and portions thereof accrued through the date of such financial statements. (ii) No tax return of the Company or any of its Subsidiaries is or has ever been under audit or examination by any taxing authority, and no written notice of such an audit or examination has been received by the Company or any of its Subsidiaries. The Company has received no notice of and otherwise has no knowledge of any deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any material amount of taxes due and owing by the Company or any of its Subsidiaries. Each deficiency resulting from any completed audit or examination relating to material taxes by any taxing authority has been timely paid or is being contested in good faith and has been reserved for on the books of the Company. No issues relating to taxes were raised by the relevant taxing authority in any completed audit or examination that could reasonably be expected to recur in a later taxable period and have a material effect on the Company in such later taxable period. There is no currently effective agreement or other document extending, or having the effect of extending, the period of assessment or collection of any taxes of the Company or its Subsidiaries, nor has any request been made in writing for any such extension, and no power of attorney (other than powers of attorney authorizing employees of the Company to act on behalf of the Company) with respect to any taxes has been executed or filed with any taxing authority. (iii) None of the Company or any of its Subsidiaries will be required to include in a taxable period ending after the Effective Time a material amount of taxable income attributable to income that accrued (for purposes of the financial statements of the Company included in the Filed Company SEC Documents) in a prior taxable period (or portion of a taxable period) but was not recognized for tax purposes in any prior taxable period as a result of (A) an open transaction disposition made on or before the Effective Time, (B) a prepaid amount received on or prior to the Effective Time, (C) the installment method of accounting, (D) the completed contract method of accounting, (E) the long-term contract method of accounting, (F) the cash method of accounting or Section 481 of the Code or (G) any comparable provisions of state or local tax law, domestic or foreign, or for any other reason, other than any amounts that are specifically reflected in a reserve for taxes on the financial statements of the Company included in the Filed Company SEC Documents. (iv) The Company and its Subsidiaries have complied with all applicable statutes, laws, ordinances, rules and regulations relating to the payment and withholding of any material amount of taxes (including withholding of taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code and similar provisions under any Federal, state, local or foreign tax laws) and have, within the time and the manner prescribed by law, withheld from and paid over to the proper governmental authorities all material amounts required to be so withheld and paid over under applicable laws. (v) In the three (3) year period prior to the Effective Time, none of the Company or any of its Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" as such terms are defined in Section 355 of the Code in a distribution of stock outside of the affiliated group of which the Company is the common parent qualifying or intended to qualify for tax-free treatment (in whole or in part) under Section 355(a) or 361 of the Code. (vi) Neither the Company nor any of its Subsidiaries has filed a consent under Section 341 of the Code concerning collapsible corporations. (vii) Neither the Company nor any of its Subsidiaries joins or has joined, for any taxable period in the filing of any affiliated, aggregate, consolidated, combined or unitary tax return other than consolidated tax returns for the consolidated group of which the Company is the common parent. None of the Company and its Subsidiaries has any liability for the Taxes of any Person (other than Taxes of the Company and its Subsidiaries) (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii)_as a transferee or successor, (iii) by contract or (iv) otherwise. (viii) No claim has ever been made by any authority in a jurisdiction where any of the Company or its Subsidiaries does not file a tax return that it is, or may be, subject to a material amount of tax by that jurisdiction. (ix) Neither the Company nor any of its Subsidiaries is a party to or bound by any tax sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any taxing authority). (x) No taxing authority has asserted in writing any material liens for taxes with respect to any assets or properties of the Company or its Subsidiaries, except for statutory liens for taxes not yet due and payable. (xi) Neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. (xii) As used in this Agreement (A) "tax" or "taxes" shall include (whether disputed or not) all Federal, state, local and foreign income, property, sales, use, excise, withholding, payroll, employment, social security, capital gain, alternative minimum, transfer and other taxes and similar governmental charges, including any interest, penalties and additions with respect thereto; (B) "taxing authority" means any Federal, state, local or foreign government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority; and (C) "tax return" or "tax returns" means all returns, declarations of estimated tax payments, reports, estimates, information returns and statements (including any related or supporting information with respect to any of foregoing) filed or to be filed with any taxing authority in connection with the determination, assessment, collection or administration of any taxes. (o) TITLE TO PROPERTIES. (i) Each of the Company and its Subsidiaries has good and valid title to, or valid leasehold or sublease interests or other comparable contract rights in or relating to all of its properties and other assets necessary for the conduct of its business as currently conducted, except as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances that individually or in the aggregate have not materially interfered with, and would not reasonably be expected to materially interfere with, its ability to conduct its business as presently conducted. All such properties and other assets, other than properties and other assets in which the Company or any of its Subsidiaries has a leasehold or sublease interest or other comparable contract right, are free and clear of all Liens, except for Liens that individually or in the aggregate have not materially interfered with, and would not reasonably be expected to materially interfere with, the ability of the Company or any of its Subsidiaries to conduct their respective businesses as presently conducted. (ii) Each of the Company and its Subsidiaries has complied with the terms of all leases or subleases to which it is a party and under which it is in occupancy, and all leases to which the Company is a party and under which it is in occupancy are in full force and effect, except for such failure to comply or be in full force and effect that individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries is in possession of the properties or assets purported to be leased under all its leases, except for such failure to be in possession that individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received as lessee any written notice from the lessor of any event or occurrence that has resulted or could result (with or without the giving of notice, the lapse of time or both) in a default with respect to any material lease or sublease to which it is a party. (p) INTELLECTUAL PROPERTY. (i) Section 3.01(p)(i) of the Company Disclosure Schedule sets forth, as of the date hereof, a complete and accurate list of all patents and applications therefor, registered trademarks and applications therefor, domain name registrations and copyright registrations (if any) owned by or licensed to the Company or any of its Subsidiaries. Such intellectual property rights as listed in Section 3.01(p)(i) of the Company Disclosure Schedule, together with any tradename rights, trade secret or know-how rights, service mark rights, rights in computer programs or software, or other type of intellectual property rights that are owned or licensed by the Company or any of its Subsidiaries and are material to the conduct of the business of the Company and its Subsidiaries, are collectively referred to herein as "Intellectual Property Rights". All Intellectual Property Rights are either (x) owned by, or subject to an obligation of assignment to, the Company or a Subsidiary of the Company free and clear of all Liens or (y) licensed to the Company or a Subsidiary of the Company free and clear (to the Knowledge of the Company) of all Liens. There are no claims pending or, to the Knowledge of the Company, threatened with regard to the ownership or licensing by the Company or any of its Subsidiaries of any Intellectual Property Rights which individually or in the aggregate have had or would reasonably be expected to have a Material Adverse Effect. Except as provided for in any agreement identified in Section 3.01(p)(v) of the Company Disclosure Schedule, the Company and its Subsidiaries have the legal power to convey to a successor all of their respective ownership and license interests in the Intellectual Property Rights. (ii) To the Knowledge of the Company, the Intellectual Property Rights of the Company or any of its Subsidiaries have not been infringed, and are not being infringed, in a manner which individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries have used commercially reasonable efforts to investigate the potential infringement of any Intellectual Property Rights. (iii) There are no pending or, to the Knowledge of the Company, threatened claims that the Company or any of its Subsidiaries has infringed or is infringing (including with respect to the manufacture, use or sale by the Company or any of its Subsidiaries of any commercial products or to the operations of the Company and its Subsidiaries) any intellectual property rights of any person which individually or in the aggregate have had or would reasonably be expected to have a Material Adverse Effect. To the Knowledge of the Company, there is no intellectual property right or other legal right that could be asserted by a person to exclude or prevent the Company or any of its Subsidiaries from freely using any intellectual property under its Intellectual Property Rights that is material to the conduct of the business of the Company and its Subsidiaries. To the Knowledge of the Company, there is no contractual, legal or other restriction on the use of any Intellectual Property Rights which are owned by or licensed to the Company, other than as set forth in the agreements identified in Section 3.01(p)(v) of the Company Disclosure Schedule. The Company and its Subsidiaries have used commercially reasonable efforts to avoid infringing the valid, enforceable intellectual property rights of other persons, other than such infringements which individually or in the aggregate have not had or would not reasonably be expected to have a Material Adverse Effect. (iv) The patent applications listed in Section 3.01(p)(i) of the Company Disclosure Schedule that are owned by the Company or any of its Subsidiaries are (and such material applications that are licensed to the Company or any of its Subsidiaries are to the Company's Knowledge after diligent review) pending and have not been abandoned, and have been and continue to be timely prosecuted. All patents, registered trademarks and applications therefor owned by the Company or any of its Subsidiaries have been (and all such material patents, registered trademarks and applications licensed to the Company or any of its Subsidiaries have been to the Company's Knowledge after diligent review) duly registered and/or filed with or issued by each appropriate Governmental Entity in the jurisdiction indicated in Section 3.01(p)(i) of the Company Disclosure Schedule, all necessary affidavits of continuing use have been (or, with respect to material licenses, to the Company's Knowledge after diligent review have been) timely filed, and all necessary maintenance fees have been (or, with respect to material licenses, to the Company's Knowledge after diligent review have been) timely paid to continue all such rights in effect. None of the patents listed in Section 3.01(p)(i) of the Company Disclosure Schedule that are owned by the Company or any of its Subsidiaries has (and no such material patents that are licensed to the Company or any of its Subsidiaries have to the Company's Knowledge after diligent review) expired or been declared invalid, in whole or in part, by any Governmental Entity. There are no ongoing interferences, oppositions, reissues, reexaminations or other proceedings involving any of the patents or patent applications listed in Section 3.01(p)(i) of the Company Disclosure Schedule and owned by the Company or any of its Subsidiaries (or, with respect to material patents or patent applications, to the Company's Knowledge after diligent review, licensed to the Company or any of its Subsidiaries), including ex parte and post-grant proceedings, in the United States Patent and Trademark Office or in any foreign patent office or similar administrative agency, other than such interferences, oppositions, reissues, reexaminations or proceedings that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. To the Knowledge of the Company based on reasonable investigation, there are no published patents, patent applications, articles or other prior art references, or any other prior art or material information, that could adversely affect the validity or enforceability of any patent listed in Section 3.01(p)(i) of the Company Disclosure Schedule that relates to any of the Specified Compounds or that is otherwise material to the conduct of the business of the Company or its Subsidiaries. Each of the patents and patent applications listed in Section 3.01(p)(i) of the Company Disclosure Schedule that are owned by the Company or any of its Subsidiaries properly identifies (and to the Knowledge of the Company based on reasonable investigation, such material patents and applications licensed to the Company or any of its Subsidiaries properly identify) each and every inventor of the claims thereof as determined in accordance with the laws of the jurisdiction in which such patent is issued or such patent application is pending. Each inventor named on the patents and patent applications listed in Section 3.01(p)(i) of the Company Disclosure Schedule that are owned by the Company or any of its Subsidiaries, alone or together with any joint owners, has executed (and such inventors named on such material patents and applications licensed to the Company or any of its Subsidiaries, to the Company's Knowledge based on reasonable investigation, have executed) an agreement agreeing to assign or actually assigning his or her entire right, title and interest in and to such patent or patent application, and the inventions embodied and claimed therein, to the Company or a Subsidiary of the Company, alone or together with any joint owners as appropriate, or in the case of licensed Patents, to the appropriate owners from whom the Company's license rights have been duly conveyed. To the Knowledge of the Company based on reasonable investigation, no such inventor has any contractual or other obligation that would preclude any such assignment or otherwise conflict with the obligations of such inventor to the Company or such Subsidiary or appropriate owners under such agreement with the Company or such Subsidiary or such appropriate owners, as the case may be. (v) Section 3.01(p)(v) of the Company Disclosure Schedule sets forth a complete and accurate list of all agreements with respect to any options, rights, licenses or interests of any kind relating to Intellectual Property Rights granted (x) to the Company or any of its Subsidiaries (other than agreements commonly generated in the ordinary course of business (including software licenses for generally available software, employee assignment agreements, nondisclosure agreements, consulting agreements, material transfer agreements, clinical trial agreements and evaluation agreements) that individually and in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect) or (y) by the Company or any of its Subsidiaries to any other person (other than agreements commonly generated in the ordinary course of business (including software licenses for generally available software, employee assignment agreements, nondisclosure agreements, consulting agreements, material transfer agreements, clinical trial agreements and evaluation agreements) that individually and in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect). There are no such options, rights, licenses or interests of any kind relating to Intellectual Property Rights other than as set forth in the agreements listed in Section 3.01(p)(v) of the Company Disclosure Schedule. Section 3.01(p)(v)-(A) of the Company Disclosure Schedule sets forth, as of the date hereof, all agreements under which the Company or any Subsidiary of the Company is obligated to make payments (in any form, including royalties, milestones and other contingent payments) to third parties for use of any intellectual property rights with respect to the commercialization of any of the Specified Compounds. (vi) The Company and its Subsidiaries have used reasonable efforts to maintain their material trade secrets in confidence, including entering into licenses and contracts that generally require licensees, contractors and other third persons with access to such trade secrets to keep such trade secrets confidential. (vii) Section 3.01(p)(vii) of the Company Disclosure Schedule sets forth a complete and accurate list of each application or official request for any extension (i.e., under Hatch-Waxman) of the term of any patent owned or licensed by the Company or any of its Subsidiaries relating to any commercial product of the Company or any of its Subsidiaries that was subject to regulatory review, including an identification of the patent and the term extension requested. To the Knowledge of the Company, it or its Subsidiary (as the case may be) exercised due diligence during the regulatory review of each such product. To the Knowledge of the Company based on reasonable investigation, there is no information that would materially affect the eligibility of such patent for the full period of the term of the extension requested. (viii) As used in this Section 3.01(p), "Specified Compounds" means the drug products or candidates being sold, manufactured, or developed by the Company that are set forth in Section 3.01(p)(viii) of the Company Disclosure Schedule. (q) VOTING REQUIREMENTS. The affirmative vote of holders of a majority of the outstanding shares of Company Common Stock at the Stockholders' Meeting or any adjournment or postponement thereof to adopt this Agreement (the "Stockholder Approval") is the only vote of the holders of any class or series of capital stock of the Company necessary to adopt this Agreement and approve the transactions contemplated hereby. (r) STATE TAKEOVER STATUTES; COMPANY CERTIFICATE PROVISIONS. The Board of Directors of the Company has unanimously approved the terms of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement, and such approval represents all the action necessary to render inapplicable to this Agreement, the Merger and the other transactions contemplated by this Agreement, the restrictions (i) on "business combinations" (as defined in Section 203 of the DGCL ("Section 203")) set forth in Section 203 and (ii) on "Business Combinations" (as defined in Article VII of the Company Certificate ("Article VII")) set forth in Article VII, in each case to the extent, if any, such restrictions would otherwise be applicable to this Agreement, the Merger and the other transactions contemplated by this Agreement. For purposes of Article VII, the approval of the Board of Directors of the Company referred to in the immediately preceding sentence constitutes the approval of the Merger and the other transactions contemplated by this Agreement by the "Continuing Directors" (as defined in Article VII) pursuant to paragraph 1(a) of Article VII. No other state takeover statute or similar statute or regulation or similar provision of the Company Certificate or the Company By-laws applies or purports to apply to this Agreement, the Merger or the other transactions contemplated by this Agreement. (s) Brokers and Other Advisors. No broker, investment banker, financial advisor or other person (other than JPMorgan Securities Inc.), the fees and expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The Company has delivered to Parent complete and accurate copies of all agreements under which any such fees or expenses are payable and all indemnification and other agreements related to the engagement of the persons to whom such fees are payable. The fees and expenses of all accountants, brokers, financial advisors (including JPMorgan Securities Inc.) and legal counsel (including Latham & Watkins LLP) retained by the Company in connection with this Agreement or the transactions contemplated hereby incurred or to be incurred by the Company will not exceed the fees and expenses set forth in Section 3.01(s) of the Company Disclosure Schedule. (t) OPINION OF FINANCIAL ADVISOR. The Company has received the oral opinion of JPMorgan Securities Inc., dated the date hereof, to the effect that, as of such date, the Merger Consideration is fair, from a financial point of view, to the holders of shares of Company Common Stock. A signed copy of the written opinion confirming such oral opinion will be delivered to Parent promptly after delivery thereof to the Company. (u) DEVELOPMENT, DISTRIBUTION, MARKETING, SUPPLY AND MANUFACTURING AGREEMENTS. (i)Section 3.01(u) of the Company Disclosure Schedule sets forth, as of the date hereof, a complete and accurate list of all Contracts (other than arrangements with wholesalers entered into in the ordinary course of business consistent with past practice) to which the Company or any of its Subsidiaries is a party (x) relating to research, development, distribution, sale, supply, license, marketing or manufacturing of any product of the Company or any Subsidiary of the Company or any product or patent or other Intellectual Property Right licensed by the Company or any Subsidiary of the Company, in each case that have a remaining value of $250,000 or more individually, (y) relating to the distribution by third parties of any product of the Company or any Subsidiary of the Company or any product or patent or other Intellectual Property Right licensed by the Company or any Subsidiary of the Company and (z) entered into in connection with Biotechnology Research Partners, Ltd. The Company has made available to Parent a complete and accurate copy of each such Contract. (ii) Section 3.01(u)(ii) of the Company Disclosure Schedule sets forth a complete and accurate list of all Contracts (other than arrangements with wholesalers entered into in the ordinary course of business consistent with past practice) to which the Company or any of its Subsidiaries is a party relating to the research, development, distribution, sale, supply, license, marketing or manufacturing of any product of the Company or any Subsidiary of the Company or any product, patent or other Intellectual Property Right licensed by the Company or any Subsidiary of the Company, which grant an exclusive right to such third party for the research, development, distribution, supply, license, marketing or manufacturing of any such product, patent or other Intellectual Property Right. (v) REGULATORY COMPLIANCE. (i) As to each product subject to the FDCA and the FDA regulations promulgated thereunder or similar Legal Provisions in any foreign jurisdiction that are developed, manufactured, tested, distributed and/or marketed by the Company or any of its Subsidiaries (each such product, a "Medical Device", a "Biologic" or a "Drug", as the case may be), each such Medical Device, Biologic or Drug is being developed, manufactured, tested, distributed and/or marketed in compliance with all applicable requirements under the FDCA and similar Legal Provisions, including those relating to investigational use, premarket clearance or marketing approval to market a Medical Device, and applications or abbreviated applications to market a new Biologic or a new Drug, good manufacturing practices, labeling, advertising, record keeping, filing of reports and security, and in compliance with the AMA's guidelines on gifts to physicians, except for failures in compliance that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any material notice or other material communication from the FDA or any other Governmental Entity (A) contesting the premarket clearance or approval of, the uses of or the labeling or promotion of any products of the Company or any of its Subsidiaries or (B) otherwise alleging any material violation applicable to any Medical Device, Biologic or Drug by the Company or any of its Subsidiaries of any Legal Provision. (ii) No Medical Device, Biologic or Drug is under consideration for or has been recalled, withdrawn, suspended or discontinued (other than for commercial or other business reasons) by the Company or any of its Subsidiaries in the United States or outside the United States (whether voluntarily or otherwise). No proceedings in the United States or outside of the United States of which the Company has Knowledge (whether completed or pending) seeking the recall, withdrawal, suspension, seizure or discontinuance of any Medical Device, Biologic or Drug are pending against the Company or any of its Subsidiaries or, to the Knowledge of the Company, any licensee of any Medical Device, Biologic or Drug, nor have any such proceedings been pending at any time in the five year period prior to the date hereof. To the Knowledge of the Company, there are no facts, circumstances or conditions that would reasonably be expected to form the basis for any investigation, suit, claim, action (legal or regulatory) or proceeding (legal or regulatory) with respect to a recall, withdrawal, suspension, seizure or discontinuance of any Drug or Biologic of the Company or with respect to any of the Specified Compounds. Complete and accurate copies of all material data of the Company with respect to the safety or efficacy of the Specified Compounds have been made available to Parent. (iii) As to each Biologic or Drug of the Company or any of its Subsidiaries for which a biological license application, new drug application, investigational new drug application or similar state or foreign regulatory application has been approved, the Company and its Subsidiaries are in compliance with 21 U.S.C.ss.ss.355, Section 626 of the Public Health Service Act or 21 C.F.R. Parts 312, 314, 600 or 601 et seq., respectively, and similar Legal Provisions and all terms and conditions of such licenses or applications, except for any such failure or failures to be in compliance which individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. As to each such drug, the Company and any relevant Subsidiary of the Company, and the officers, employees or agents of the Company or such Subsidiary, have included in the application for such drug, where required, the certification described in 21 U.S.C.ss. 335a(k)(1) or any similar Legal Provision and the list described in 21 U.S.C.ss. 335a(k)(2) or any similar Legal Provision, and each such certification and list was true, complete and correct in all material respects when made. In addition, the Company and its Subsidiaries are in substantial compliance with all applicable registration and listing requirements set forth in 21 U.S.C.ss.360 and 21 C.F.R. Part 207 and all similar Legal Provisions. (iv) No article of any Biologic or Drug manufactured and/or distributed by the Company or any of its Subsidiaries is (A) adulterated within the meaning of 21 U.S.C. ss. 351 (or similar Legal Provisions), (B) misbranded within the meaning of 21 U.S.C. ss. 352 (or similar Legal Provisions) or (C) a product that is in violation of 21 U.S.C. ss. 355 (or similar Legal Provisions), except for failures to be in compliance with the foregoing that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. (v) Neither the Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any officer, employee or agent of the Company or any of its Subsidiaries, has made an untrue statement of a material fact or fraudulent statement to the FDA or any other Governmental Entity, failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Entity, or committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, would reasonably be expected to provide a basis for the FDA or any other Governmental Entity to invoke its policy respecting "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities", set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy. Neither the Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any officer, employee or agent of the Company or any of its Subsidiaries, has been convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C.ss. 335a(a) or any similar Legal Provision or authorized by 21 U.S.C. ss. 335a(b) or any similar Legal Provision. Neither the Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any officer, employee or agent of the Company or any of its Subsidiaries, has been convicted of any crime or engaged in any conduct for which such person or entity could be excluded from participating in the federal health care programs under Section 1128 of the Social Security Act or any similar Legal Provision. (vi) Neither the Company nor any of its Subsidiaries has received any written notice that the FDA or any other Governmental Entity has (a) commenced, or threatened to initiate, any action to withdraw its approval or request the recall of any Medical Device, Biologic or Drug, (b) commenced, or threatened to initiate, any action to enjoin production of any Medical Device, Biologic or Drug or (c) to the Company's Knowledge, commenced, or threatened to initiate, any action to enjoin the production of any Medical Device, Biologic or Drug produced at any facility where any Medical Device, Biologic or Drug is manufactured, tested or packaged, except for any such action that individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. (vii) To the Knowledge of the Company, there are no facts, circumstances or conditions that would reasonably be expected to form the basis for any material investigation, suit, claim, action (legal or regulatory) or proceeding (legal or regulatory) by a Governmental Entity against or affecting the Company or any of its Subsidiaries relating to or arising under (a) the FDCA or the regulations of the FDA promulgated thereunder or (b) the Social Security Act or regulations of the Office of the Inspector General of the Department of Health and Human Services. (viii) Notwithstanding the foregoing, each representation and warranty made by the Company in this Section 3.01(v) with respect to the Medical Devices, Biologics or Drugs licensed by the Company to third parties (for which the Company has assumed or retained no responsibility for regulatory compliance) set forth on Section 3.01(v)(viii) of the Company Disclosure Schedule shall be deemed to be limited to the Company's Knowledge. (w) INSURANCE. Section 3.01(w) of the Company Disclosure Schedule contains a complete and accurate list of all policies of fire, liability, workers' compensation, title and other forms of insurance owned, held by or applicable to the Company (or its assets or business) as of the date hereof, and the Company has heretofore made available to Parent a complete and accurate copy of all such policies, including all occurrence-based policies applicable to the Company (or its assets or business) for all periods prior to the Closing Date. All such policies (or substitute policies with substantially similar terms and underwritten by insurance carriers with substantially similar or higher ratings) are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been paid, and no notice of cancellation or termination has been received with respect to any such policy except for such policies, premiums, cancellations or terminations that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. Such policies are sufficient for compliance by the Company with all Contracts to which the Company is a party, and each of the Company and its Subsidiaries has complied in all material respects with the provisions of each such policy under which it is an insured party. The Company has not been refused any insurance with respect to its assets or operations by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance, during the last three (3) years. There are no pending or, to the Knowledge of the Company, threatened claims under any insurance policy that individually or in the aggregate have had or would reasonably be expected to have a Material Adverse Effect. SECTION 3.02. Representations and Warranties of Parent and Sub. Parent and Sub represent and warrant to the Company as follows: (a) Organization, Standing and Corporate Power. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has all requisite corporate power and authority to carry on its business as now being conducted. Each of Parent and Sub is duly qualified or licensed to do business and is in good standing in each material jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary. Parent has made available to the Company complete and accurate copies of its certificate of incorporation and bylaws and the certificate of incorporation and bylaws of Sub, in each case as amended to date. (b) Authority; Noncontravention. Each of Parent and Sub has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Parent and Sub and no other corporate proceedings on the part of Parent or Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement and the transactions contemplated hereby do not require approval of the holders of any shares of capital stock of Parent. This Agreement has been duly executed and delivered by each of Parent and Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Parent and Sub, as applicable, enforceable against Parent and Sub, as applicable, in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding at equity or at law). The execution and delivery of this Agreement do not, and the consummation of the Merger and the other transactions contemplated by this Agreement and compliance by Parent and its Subsidiaries with the provisions of this Agreement will not, (x) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, the Restated Certificate of Incorporation or By-laws of Parent or the Certificate of Incorporation or By-laws of Sub, (y) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of Parent or Sub under, any Contract to which Parent or Sub is a party or any of their respective properties or other assets is subject, in any way that would prevent, materially impede or materially delay the consummation by Parent of the Merger (including the payments required to be made pursuant to Article II) or the other transactions contemplated hereby or (z) subject to the governmental filings and other matters referred to in the following sentence, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, any (A) statute, law, ordinance, rule or regulation applicable to Parent or Sub or their respective properties or other assets or (B) order, writ, injunction, decree, judgment or stipulation, in each case applicable to Parent or Sub or their respective properties or other assets, and in each case, in any way that would prevent, materially impede or materially delay the consummation by Parent of the Merger (including the payments required to be made pursuant to Article II) or the other transactions contemplated hereby. No material consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Parent or Sub in connection with the execution and delivery of this Agreement by Parent and Sub or the consummation by Parent and Sub of the Merger or the other transactions contemplated by this Agreement, except for (1) the filing of a premerger notification and report form by Parent under the HSR Act and the receipt, termination or expiration, as applicable, of approvals or waiting periods required under the HSR Act or any other applicable competition, merger control, antitrust or similar law or regulation and (2) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware. (c) Information Supplied. None of the information supplied or to be supplied by or on behalf of Parent or Sub specifically for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the stockholders of the Company and at the time of the Stockholders' Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (d) Interim Operations of Sub. Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. (e) Capital Resources. Parent has, and will have at the Effective Time, sufficient cash to pay the aggregate Merger Consideration. (f) Brokers. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Sub. (g) Company Stock. Neither Parent nor Sub is, nor at any time during the last three years has it been, an "interested stockholder" of the Company as defined in Section 203. As of the date hereof, neither Parent nor Sub owns (directly or indirectly, beneficially or of record), and is not a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of, in each case, any shares of capital stock of the Company (except as contemplated by this Agreement and except for any such shares that may be owned by any employee benefit or other plan administered by or on behalf of Parent or any of its Subsidiaries, to the extent the determination to acquire such shares was not directed by Parent or Sub). ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS SECTION 4.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date of this Agreement to the Effective Time, except as set forth in Section 4.01(a) of the Company Disclosure Schedule or as consented to in writing in advance by Parent or as expressly permitted pursuant to this Section 4.01(a)(i) through (xvi) or otherwise pursuant to this Agreement, the Company shall, and shall cause each of its Subsidiaries to, carry on its business in the ordinary course consistent with past practice (including in respect of research and development activities and programs) and in compliance in all material respects with all applicable laws, rules, regulations and treaties and, to the extent consistent therewith, use commercially reasonable efforts to preserve intact its current business organizations, keep available the services of its current officers, employees and consultants and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with it with the intention that its goodwill and ongoing business shall be unimpaired at the Effective Time. In addition to and without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except as otherwise set forth in Section 4.01(a) of the Company Disclosure Schedule or as otherwise expressly permitted pursuant to this Agreement, the Company shall not, and shall not permit any of its Subsidiaries to, without Parent's prior written consent: (i) (x) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock, other than dividends or distributions by a direct or indirect wholly owned Subsidiary of the Company to its shareholders, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (z) purchase, redeem or otherwise acquire any shares of its capital stock or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, except for purchases, redemptions or other acquisitions of capital stock or other securities required under the terms of any plans, arrangements or agreements existing on the date hereof between the Company or any of its Subsidiaries and any director, officer, employee or consultant of the Company or any of its Subsidiaries (complete and accurate copies of which have been heretofore delivered to Parent); (ii) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any Lien any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, or any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock based performance units, including pursuant to Contracts as in effect on the date hereof (other than the issuance of shares of Company Common Stock upon the conversion of Company Preferred Stock or Company Notes, or the exercise of Company Stock Options (including rights under the ESPP, subject to Section 5.04(b)) or Warrants, in each case outstanding on the date hereof in accordance with their terms on the date hereof); (iii) amend (x) the Company Certificate or the Company By-laws or other comparable charter or organizational documents of any of the Company's Subsidiaries or (y) the Certificate of Designation with respect to the Company Preferred Stock or the Indenture dated as of August 5, 2002 between the Company and Wells Fargo Bank, National Association, with respect to the Company Notes, in each case except as may be required by law or the rules and regulations of the SEC or The Nasdaq Stock Market, Inc.; (iv) directly or indirectly acquire (x) by merging or consolidating with, or by purchasing assets of, or by any other manner, any person or division, business or equity interest of any person or (y) any asset or assets that, individually, has a purchase price in excess of $500,000 or, in the aggregate, have a purchase price in excess of $1,000,000, except for new capital expenditures, which shall be subject to the limitations of clause (vii) below, and except for purchases of components, raw materials or supplies in the ordinary course of business consistent with past practice; (v) (x) sell, lease, license, mortgage, sell and leaseback or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or other assets or any interests therein (including securitizations), except for sales of inventory and used equipment in the ordinary course of business consistent with past practice; or (y) enter into, modify or amend any lease of property, except for modifications or amendments that are not materially adverse to the Company and its Subsidiaries taken as a whole; (vi) (x) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities of the Company or any of its Subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing or (y) make any loans, advances or capital contributions to, or investments in, any other person, other than to employees in the ordinary course of business consistent with past practice; (vii) make any new capital expenditure or expenditures in excess of the amounts set forth in Section 4.01(a)(vii) of the Company Disclosure Schedule; (viii) except as required by law or any judgment by a court of competent jurisdiction, (v) pay, discharge, settle or satisfy any material claims, liabilities, obligations or litigation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities disclosed, reflected or reserved against in the most recent financial statements (or the notes thereto) of the Company included in the Filed Company SEC Documents (for amounts not in excess of such reserves) or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, (w) cancel any indebtedness (other than upon the conversion of any Company Notes outstanding on the date hereof in accordance with their terms on the date hereof), (x) waive or assign any claims or rights of substantial value or (y) waive any benefits of, or agree to modify in any respect, or, subject to the terms hereof, knowingly fail to enforce, or consent to any matter with respect to which consent is required under, any standstill or similar agreement containing provisions prohibiting a third party from purchasing the capital stock of the Company or otherwise seeking to influence or exercise control over the Company to which the Company or any of its Subsidiaries is a party or (z) waive any material benefits of, or agree to modify in any material respect, or, subject to the terms hereof, knowingly fail to enforce in any material respect, or consent to any matter with respect to which consent is required under, any material confidentiality or similar agreement to which the Company or any of its Subsidiaries is a party; (ix) enter into any material Contracts relating to the research, clinical trial, development, distribution, sale, supply, license, marketing, co-promotion or manufacturing of products of the Company or any Subsidiary of the Company or products licensed by the Company or any Subsidiary of the Company, or the Intellectual Property Rights of the Company or any Subsidiary of the Company, other than (x) confidentiality agreements entered into in the ordinary course of business consistent with past practice containing customary terms which do not impose any obligations on the Company or its Subsidiaries other than those relating to the treatment of confidential information, (y) consulting agreements entered into in the ordinary course of business consistent with past practice which individually have aggregate values of no more than $50,000 and (z) pursuant to any such Contracts currently in place (that have been disclosed in writing to Parent prior to the date hereof) in accordance with their terms as of the date hereof; (x) enter into, modify, amend or terminate any material Contract or waive, release or assign any material rights or claims thereunder, which if so entered into, modified, amended, terminated, waived, released or assigned would reasonably be expected to (A) materially adversely affect the Company, (B) impair in any material respect the ability of the Company to perform its obligations under this Agreement or (C) prevent or materially delay the consummation of the transactions contemplated by this Agreement; (xi) enter into any Contract to the extent consummation of the transactions contemplated by this Agreement or compliance by the Company with the provisions of this Agreement would reasonably be expected to conflict with, or result in a violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of the Company or any of its Subsidiaries under, or give rise to any increased, additional, accelerated, or guaranteed right or entitlements of any third party under, or result in any material alteration of, any provision of such Contract; (xii) enter into any Contract containing any restriction on the ability of the Company or any of its Subsidiaries to assign its rights, interests or obligations thereunder, unless such restriction expressly excludes any assignment to Parent or any of its Subsidiaries in connection with or following the consummation of the Merger and the other transactions contemplated by this Agreement; (xiii) sell, transfer or license to any person or otherwise extend, amend or modify any rights to the Intellectual Property Rights of the Company or any of its Subsidiaries, other than pursuant to (x) confidentiality agreements entered into in the ordinary course of business consistent with past practice containing customary terms which do not impose any obligations on the Company or its Subsidiaries other than those relating to the treatment of confidential information, (y) consulting agreements entered into in the ordinary course of business consistent with past practice which individually have aggregate values of no more than $50,000 and (z) any such Contracts currently in place (that have been disclosed in writing to Parent prior to the date hereof) in accordance with their terms as of the date hereof; (xiv) except as otherwise contemplated by this Agreement or as required to ensure that any Company Benefit Plan or Company Benefit Agreement is not then out of compliance with applicable law or to comply with any Contract or Company Benefit Plan or Company Benefit Agreement entered into prior to the date hereof (complete and accurate copies of which have been heretofore delivered to Parent), (A) adopt, enter into, terminate or amend (I) any collective bargaining agreement or Company Benefit Plan or (II) any Company Benefit Agreement or other agreement, plan or policy involving the Company or any of its Subsidiaries and one or more of their respective current or former directors, officers, employees or consultants, (B) increase in any manner the compensation, bonus or fringe or other benefits of, or pay any bonus of any kind or amount whatsoever to, any current or former director, officer, employee or consultant, except for any planned salary increases and payment of bonuses, each as described in Section 4.01(a)(xiv) of the Company Disclosure Schedule, (C) pay any benefit or amount not required under any Company Benefit Plan or Company Benefit Agreement or any other benefit plan or arrangement of the Company or any of its Subsidiaries as in effect on the date of this Agreement, other than as contemplated in clause (B), (D) grant or pay any severance or termination pay or increase in any manner the severance or termination pay of any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries, (E) grant any awards under any bonus, incentive, performance or other compensation plan or arrangement, Company Benefit Agreement or Company Benefit Plan (including the grant of Company Stock Options (including rights under the ESPP), Company Restricted Stock, "phantom" stock, stock appreciation rights, "phantom" stock rights, stock based or stock related awards, performance units or restricted stock or the removal of existing restrictions in any Company Benefit Agreements, Company Benefit Plans or agreements or awards made thereunder), other than as contemplated in clause (B), (F) amend or modify any Stock Option or Warrant, (G) take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Company Benefit Plan or Company Benefit Agreement, (H) take any action to accelerate the vesting or payment of any compensation or benefit under any Company Benefit Plan or Company Benefit Agreement or (I) materially change any actuarial or other assumption used to calculate funding obligations with respect to any Company Pension Plan or change the manner in which contributions to any Company Pension Plan are made or the basis on which such contributions are determined; (xv) except as required by GAAP or by the Company's independent public accountants, revalue any material assets of the Company or any of its Subsidiaries or make any material change in accounting methods, principles or practices; or (xvi) authorize any of, or commit, resolve, propose or agree to take any of, the foregoing actions. (b) Other Actions. The Company, Parent and Sub shall not, and shall not permit any of their respective Subsidiaries to, take any action that would, or that would reasonably be expected to, result in any of the conditions to the Merger set forth in Article VI not being satisfied. (c) Advice of Changes; Filings. The Company and Parent shall promptly advise the other party orally and in writing if, to such party's Knowledge, (i) any representation or warranty made by it (and, in the case of Parent, made by Sub) contained in this Agreement that is qualified as to materiality becomes untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becomes untrue or inaccurate in any material respect or (ii) it (and, in the case of Parent, Sub) fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement. The Company and Parent shall, to the extent permitted by law, promptly provide the other with copies of all filings made by such party with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby, other than the portions of such filings that include confidential information not directly related to the transactions contemplated by this Agreement. (d) Certain Tax Matters. (i) During the period from the date of this Agreement to the Effective Time, the Company shall, and shall cause each of its Subsidiaries to, (A) timely file all tax returns ("Post-Signing Returns") required to be filed by or on behalf of each such entity; (B) timely pay all taxes due and payable in respect of such Post-Signing Returns that are so filed; (C) accrue a reserve in the books and records and financial statements of any such entity in accordance with past practice for all taxes payable by such entity for which no Post-Signing Return is due prior to the Effective Time; (D) promptly notify Parent of any suit, claim, action, investigation, proceeding or audit (collectively, "Actions") pending against or with respect to the Company or any of its Subsidiaries in respect of any material amount of tax and not settle or compromise any such Action without Parent's consent; (E) not make any material tax election or settle or compromise any material tax liability, other than with Parent's consent or other than in the ordinary course of business; and (F) cause all existing tax sharing agreements, tax indemnity obligations and similar agreements, arrangements or practices with respect to taxes to which the Company or any of its Subsidiaries is or may be a party or by which the Company or any of its Subsidiaries is or may otherwise be bound to be terminated as of the Closing Date so that after such date neither the Company nor any of its Subsidiaries shall have any further rights or liabilities thereunder. Any tax returns described in this Section 4.01(d) shall be complete and correct in all material respects and shall be prepared on a basis consistent with the past practice of the Company, provided that no Post-Signing Returns shall be filed with any taxing authority without Parent's prior written consent. (ii) The Company shall deliver to Parent at or prior to the Closing a certificate, in form and substance satisfactory to Parent, duly executed and acknowledged, certifying that the payment of the Merger Consideration and any payments made in respect of Appraisal Shares pursuant to the terms of this Agreement are exempt from withholding pursuant to the Foreign Investment in Real Property Tax Act. SECTION 4.02. NO SOLICITATION. (a) The Company shall not, nor shall it authorize or permit any of its Subsidiaries or any of their respective directors, officers or employees or authorize or knowingly permit any investment banker, financial advisor, attorney, accountant or other advisor, agent or representative (collectively, "Representatives") retained by it or any of its Subsidiaries to (and shall instruct such Representatives not to), directly or indirectly through another person, (i) solicit, initiate or knowingly encourage, or take any other action designed to, or which could reasonably be expected to, facilitate, any Takeover Proposal or (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any information, or otherwise cooperate in any way with, any Takeover Proposal. The Company shall, and shall cause its Subsidiaries to, immediately cease and cause to be terminated all existing discussions or negotiations with any person conducted heretofore with respect to any Takeover Proposal and request the prompt return or destruction of all confidential information previously furnished. Notwithstanding the foregoing, at any time prior to obtaining the Stockholder Approval, in response to a bona fide written Takeover Proposal that the Board of Directors of the Company determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) constitutes or is reasonably likely to lead to a Superior Proposal, and which Takeover Proposal was not solicited after the date hereof and was made after the date hereof and did not otherwise result from a breach of this Section 4.02(a), the Company may, if its Board of Directors determines in good faith (after consultation with outside counsel) that the failure to do so would result in a breach of its fiduciary duties to the stockholders of the Company under applicable law, and subject to compliance with Section 4.02(c), (x) furnish information with respect to the Company and its Subsidiaries to the person making such Takeover Proposal (and its Representatives) pursuant to a customary confidentiality agreement not less restrictive as a whole of such person than the Confidentiality Agreement, provided that all such information has previously been provided to Parent or is provided to Parent prior to or substantially concurrent with the time it is provided to such person, and (y) participate in discussions or negotiations with the person making such Takeover Proposal (and its Representatives) regarding such Takeover Proposal. The term "Takeover Proposal" means any inquiry, proposal or offer from any person relating to, or that would reasonably be expected to lead to, any direct or indirect acquisition or purchase, in one transaction or a series of transactions, of assets or businesses that constitute 15% or more of the revenues, net income or the assets of the Company and its Subsidiaries, taken as a whole, or 15% or more of any class of equity securities of the Company or any of its Subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of the Company or any of its Subsidiaries, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution, joint venture, binding share exchange or similar transaction involving the Company or any of its Subsidiaries pursuant to which any person or the shareholders of any person would own 15% or more of any class of equity securities of the Company or any of its Subsidiaries or of any resulting parent company of the Company, other than the transactions contemplated by this Agreement. The term "Superior Proposal" means any bona fide offer made by a third party that if consummated would result in such person (or its stockholders) owning, directly or indirectly, all or substantially all of the shares of Company Common Stock then outstanding (or of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger) or all or substantially all the assets of the Company, which the Board of Directors of the Company determines in good faith (after consultation with a financial advisor of nationally recognized reputation) to be (i) more favorable to the stockholders of the Company from a financial point of view than the Merger (taking into account all the terms and conditions of such proposal and this Agreement (including any changes to the financial terms of this Agreement proposed by Parent in response to such offer or otherwise)) and (ii) reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal. (b) Neither the Board of Directors of the Company nor any committee thereof shall (i) (A) withdraw (or modify in a manner adverse to Parent), or publicly propose to withdraw (or modify in a manner adverse to Parent), the approval, recommendation or declaration of advisability by such Board of Directors or any such committee thereof of this Agreement, the Merger or the other transactions contemplated by this Agreement or (B) recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any Takeover Proposal (any action described in this clause (i) being referred to as a "Company Adverse Recommendation Change") or (ii) approve or recommend, or propose to approve or recommend, or allow the Company or any of its Subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement constituting or related to, or that is intended to or would reasonably be expected to lead to, any Takeover Proposal (other than a confidentiality agreement referred to in Section 4.02(a)) (an "Acquisition Agreement"). Notwithstanding the foregoing, at any time prior to obtaining the Stockholder Approval, the Board of Directors of the Company may, if such Board of Directors determines in good faith (after consultation with outside counsel) that the failure to do so would result in a breach of its fiduciary duties to the stockholders of the Company under applicable law, (x) make a Company Adverse Recommendation Change or (y) in response to a Superior Proposal that was not solicited after the date hereof and was made after the date hereof and did not otherwise result from a breach of this Section 4.02, cause the Company to terminate this Agreement (and concurrently with or after such termination, if it so chooses, cause the Company to enter into any Acquisition Agreement with respect to any Superior Proposal); provided, however, that (1) no Company Adverse Recommendation Change may be made and (2) no such termination of this Agreement by the Company may be made, in each case until after the third business day following Parent's receipt of written notice from the Company advising Parent that the Board of Directors of the Company intends to make a Company Adverse Recommendation Change or terminate this Agreement pursuant to this Section 4.02(b) and specifying the reasons therefor, including the terms and conditions of any Superior Proposal that is the basis of the proposed action by the Board of Directors (it being understood and agreed that any amendment to the financial terms or any other material term of such Superior Proposal shall require a new written notice by the Company and a new two business day period). In determining whether to make a Company Adverse Recommendation Change or to terminate this Agreement pursuant to this Section 4.02(b), the Board of Directors of the Company shall take into account any changes to the financial terms of this Agreement proposed by Parent in response to any such written notice by the Company or otherwise. (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 4.02, the Company shall promptly advise Parent orally and in writing of any Takeover Proposal, the material terms and conditions of any such Takeover Proposal (including any changes thereto) and the identity of the person making any such Takeover Proposal. The Company shall keep Parent fully informed of the status and material details (including any material change to the terms thereof) of any such Takeover Proposal. (d) Nothing contained in this Section 4.02 shall prohibit the Company from (x) taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or (y) making any disclosure to the stockholders of the Company if, in the good faith judgment of the Board of Directors of the Company (after consultation with outside counsel) failure to so disclose would be inconsistent with its obligations under applicable law, including the Board of Directors' duty of candor to the stockholders of the Company; provided, however, that in no event shall the Company or its Board of Directors or any committee thereof take, or agree or resolve to take, any action prohibited by Section 4.02(b). ARTICLE V ADDITIONAL AGREEMENTS SECTION 5.01. PREPARATION OF THE PROXY STATEMENT; STOCKHOLDERS' MEETING. (a) As promptly as practicable following the date of this Agreement, the Company and Parent shall prepare and the Company shall file with the SEC the Proxy Statement and the Company shall use its commercially reasonable efforts to respond as promptly as practicable to any comments of the SEC with respect thereto and to cause the Proxy Statement to be mailed to the stockholders of the Company as promptly as practicable following the date of this Agreement. The Company shall promptly notify Parent upon the receipt of any comments from the SEC or the staff of the SEC or any request from the SEC or the staff of the SEC for amendments or supplements to the Proxy Statement and shall provide Parent with copies of all correspondence between the Company and its Representatives, on the one hand, and the SEC and the staff of the SEC, on the other hand. Notwithstanding the foregoing, prior to filing or mailing the Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC or the staff of the SEC with respect thereto, the Company (i) shall provide Parent an opportunity to review and comment on such document or response and (ii) shall include in such document or response all comments reasonably proposed by Parent; provided, that Parent shall use commercially reasonable efforts to provide or cause to be provided its comments to the Company as promptly as reasonably practicable after the Proxy Statement is transmitted to Parent for its review. (b) The Company shall, as soon as practicable following the date of this Agreement, establish a record date for, duly call, give notice of, convene and hold a meeting of its stockholders (the "Stockholders' Meeting") solely for the purpose of obtaining the Stockholder Approval. Subject to Sections 4.02(b) and 4.02(d), the Company shall, through its Board of Directors, recommend to its stockholders adoption of this Agreement and shall include such recommendation in the Proxy Statement. Without limiting the generality of the foregoing, the Company's obligations pursuant to the first sentence of this Section 5.01(b) shall not be affected by (i) the commencement, public proposal, public disclosure or communication to the Company of any Takeover Proposal or (ii) the withdrawal or modification by the Board of Directors of the Company or any committee thereof of such Board of Directors' or such committee's approval or recommendation of this Agreement, the Merger or the other transactions contemplated by this Agreement. SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. The Company shall afford to Parent, and to Parent's officers, employees, accountants, counsel, financial advisors and other Representatives, reasonable access (including for the purpose of coordinating integration activities and transition planning with the employees of the Company and its Subsidiaries) during normal business hours and upon reasonable prior notice to the Company during the period prior to the Effective Time or the termination of this Agreement to all its and its Subsidiaries' properties, books, contracts, commitments, personnel and records and, during such period, the Company shall furnish promptly to Parent (a) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal or state securities laws, (b) a copy of each correspondence or written communication with any United States Federal governmental agency and (c) all other information concerning its and its Subsidiaries' business, properties and personnel as Parent may reasonably request. Except for disclosures expressly permitted by the terms of the Confidentiality Agreement dated as of December 15, 2002 between Parent and the Company (as it may be amended from time to time, the "Confidentiality Agreement"), Parent shall hold, and shall cause its officers, employees, accountants, counsel, financial advisors and other Representatives to hold, all information received from the Company, directly or indirectly, in confidence in accordance with the Confidentiality Agreement. No investigation pursuant to this Section 5.02 or information provided or received by any party hereto pursuant to this Agreement will affect any of the representations or warranties of the parties hereto contained in this Agreement or the conditions hereunder to the obligations of the parties hereto. SECTION 5.03. COMMERCIALLY REASONABLE EFFORTS. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement, including using commercially reasonable efforts to accomplish the following: (i) the taking of all acts necessary to cause the conditions to Closing to be satisfied as promptly as practicable, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities) and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity and (iii) the obtaining of all necessary consents, approvals or waivers from third parties; provided that none of the Company, Parent or Sub shall be required to make any payment to any such third parties or concede anything of value to obtain such consents. In connection with and without limiting the foregoing, the Company and Parent shall duly file with the U.S. Federal Trade Commission and the Antitrust Division of the Department of Justice the notification and report form (the "HSR Filing") required under the HSR Act with respect to the transactions contemplated by this Agreement as promptly as practicable. The HSR Filing shall be in substantial compliance with the requirements of the HSR Act. Each party shall cooperate with the other party to the extent necessary to assist the other party in the preparation of its HSR Filing, to request early termination of the waiting period required by the HSR Act and, if requested, to promptly amend or furnish additional information thereunder. The Company and its Board of Directors shall (1) take all reasonable action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement and (2) if any state takeover statute or similar statute becomes applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement, take all reasonable action necessary to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on this Agreement, the Merger and the other transactions contemplated by this Agreement. Nothing in this Agreement shall be deemed to require Parent to agree to, or proffer to, divest or hold separate any assets or any portion of any business of Parent, the Company or any of their respective Subsidiaries. SECTION 5.04. COMPANY STOCK OPTIONS; ESPP. (a) As soon as practicable following the date of this Agreement, the Board of Directors of the Company (or, if appropriate, any committee thereof administering the Company Stock Plans) shall adopt such resolutions or take such other actions as may be required to effect the following: (i) adjust the terms of all outstanding Company Stock Options (other than rights granted under the ESPP), whether vested or unvested, as necessary to provide that, at the Effective Time, each such Company Stock Option outstanding immediately prior to the Effective Time shall be amended and converted into an option to acquire, on the same terms and conditions as were applicable under such Company Stock Option, the number of shares of common stock, par value $1.00 per share, of Parent ("Parent Common Stock") (rounded down to the nearest whole share) determined by multiplying the number of shares of Company Common Stock subject to such Company Stock Option by the Option Exchange Ratio (as defined below), at a price per share of Parent Common Stock equal to (A) the aggregate exercise price for the shares of Company Common Stock otherwise purchasable pursuant to such Company Stock Option divided by (B) the aggregate number of shares of Parent Common Stock deemed purchasable pursuant to such Company Stock Option (each, as so adjusted, an "Adjusted Option"), provided that such exercise price shall be rounded up to the nearest whole cent. The "Option Exchange Ratio" means the quotient obtained by dividing the Common Stock Merger Consideration by the Average Closing Price (as defined below) and rounding to the nearest 1/10,000. The "Average Closing Price" means the amount equal to the average per share closing price of Parent Common Stock, as reported on the New York Stock Exchange Composite Transaction Tape for the five (5) consecutive trading days ending with the second trading day immediately preceding the Effective Time; (ii) adjust the terms of each share of Company Restricted Stock as necessary to provide that the restrictions on such shares shall lapse at the Effective Time; and (iii) make such other changes to the Company Stock Plans as Parent and the Company may agree are appropriate to give effect to the Merger. (b) As soon as practicable following the date of this Agreement, the Board of Directors of the Company (or, if appropriate, any committee of the Board of Directors of the Company administering the ESPP), shall adopt such resolutions or take such other actions as may be required to provide that (i) participants may not increase their payroll deductions or purchase elections from those in effect on the date of this Agreement, (ii) no offering period shall be commenced after the date of this Agreement, (iii) each participant's outstanding right to purchase shares of Company Common Stock under the ESPP shall terminate on the day immediately prior to the day on which the Effective Time occurs, provided that all amounts allocated to each participant's account under the ESPP as of such date shall thereupon be used to purchase from the Company whole shares of Company Common Stock at the applicable price determined under the terms of the ESPP for then outstanding offering periods using such date as the final purchase date for each such offering period and (iv) the ESPP shall terminate immediately following the purchases of Company Common Stock on the day prior to the day on which the Effective Time occurs. (c) The adjustments provided in Section 5.04(a)(i) with respect to any Company Stock Options that are "incentive stock options" as defined in Section 422 of the Code shall be and are intended to be effected in a manner which is consistent with Section 424(a) of the Code. (d) As soon as practicable following the Effective Time, Parent shall deliver to the holders of Adjusted Options appropriate notices setting forth such holders' rights pursuant to the respective Company Stock Plans and the agreements evidencing the grants of such Adjusted Options, including that such Adjusted Options and agreements have been assumed by Parent and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 5.04 after giving effect to the Merger). (e) As soon as practicable following the Effective Time, Parent shall prepare and file with the SEC a registration statement on Form S-8 (or another appropriate form) registering a number of shares of Parent Common Stock equal to the number of shares of Parent Common Stock subject to the Adjusted Options. Such registration statement shall be kept effective (and the current status of the prospectus or prospectuses required thereby shall be maintained) at least for so long as any Adjusted Options may remain outstanding. (f) Except as otherwise contemplated by this Section 5.04 and except to the extent required under the respective terms of the Adjusted Options, all restrictions or limitations on transfer and vesting with respect to Adjusted Options awarded under the Company Stock Plans or any other plan, program or arrangement of the Company or any of its Subsidiaries, to the extent that such restrictions or limitations shall not have already lapsed, shall remain in full force and effect with respect to such Adjusted Options after giving effect to the Merger and the assumption by Parent as set forth above. (g) The Company shall ensure that following the Effective Time, no holder of a Company Stock Option (or former holder of a Company Stock Option) or any participant in any Company Stock Plan, Company Benefit Plan or Company Benefit Agreement shall have any right thereunder to acquire any capital stock of the Company or the Surviving Corporation or any other equity interest therein (including "phantom" stock or stock appreciation rights). SECTION 5.05. INDEMNIFICATION, ADVANCEMENT OF EXPENSES, EXCULPATION AND INSURANCE. (a) Parent shall cause the Surviving Corporation to assume the obligations with respect to all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing in favor of the current or former directors or officers of the Company as provided in the Company Certificate, the Company By-laws or any indemnification agreement between such directors or officers and the Company (in each case, as in effect on the date hereof), without further action, as of the Effective Time and such obligations shall survive the Merger and shall continue in full force and effect for a period of not less than six years from and after the Effective Time; provided, that in the event any claim or claims are asserted or made within such six year period, all rights to indemnification in respect of any claim or claims shall continue until final disposition of any and all such claims. (b) In the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and other assets to any person, then, and in each such case, Parent shall cause proper provision to be made so that the successors and assigns of the Surviving Corporation shall expressly assume the obligations set forth in this Section 5.05. (c) For six years after the Effective Time, Parent shall maintain (directly or indirectly through the Company's existing insurance programs) in effect the Company's current directors' and officers' liability insurance in respect of acts or omissions occurring at or prior to the Effective Time, covering each person currently covered by the Company's directors' and officers' liability insurance policy (a complete and accurate copy of which has been heretofore delivered to Parent), on terms with respect to such coverage and amounts no less favorable than those of such policy in effect on the date hereof; provided, however, that Parent may (i) substitute therefor policies of Parent containing terms with respect to coverage (including as coverage relates to deductibles and contractual provisions) and amount no less favorable to such directors and officers or (ii) request that the Company obtain such extended reporting period coverage under its existing insurance programs (to be effective as of the Effective Time); provided further, however, that in satisfying its obligation under this Section 5.05(c), neither the Company nor Parent shall be obligated to pay more than $8,200,000 in the aggregate, less any applicable credit (the "Premium Amount"), to obtain such coverage. It is understood and agreed that in the event such coverage cannot be obtained for the Premium Amount or less in the aggregate, Parent shall be obligated to provide such coverage as may be obtained for the Premium Amount. (d) The provisions of this Section 5.05 (i) are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. SECTION 5.06. FEES AND EXPENSES. (a) Except as provided in paragraph (b) of this Section 5.06, all fees and expenses incurred in connection with this Agreement, the Merger and the other transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated; provided, that the fees and expenses incurred in connection with the printing, filing and mailing to stockholders of the Proxy Statement and the solicitation of the Stockholder Approval, and all SEC and other regulatory filing fees incurred in connection with the Proxy Statement, shall be shared equally by the Company and Parent. (b) In the event that (i) this Agreement is terminated by Parent pursuant to Section 7.01(e), (ii) this Agreement is terminated by the Company pursuant to Section 7.01(f) or (iii) (A) prior to the obtaining of the Stockholder Approval, a Takeover Proposal shall have been made to the Company or shall have been made directly to the stockholders of the Company generally or shall have otherwise become publicly known or any person shall have publicly announced an intention (whether or not conditional) to make a Takeover Proposal, (B) thereafter this Agreement is terminated by either Parent or the Company pursuant to Section 7.01(b)(i) (but only if a vote to obtain the Stockholder Approval or the Stockholders' Meeting has not been held) or Section 7.01(b)(iii) and (C) within 9 months after such termination, the Company enters into a definitive agreement to consummate, or consummates, the transactions contemplated by any Takeover Proposal, then the Company shall pay Parent a fee equal to $70,000,000 (the "Termination Fee") by wire transfer of same-day funds (x) in the case of a payment required by clause (i) above, on the first business day following the date of termination of this Agreement, (y) in the case of a payment required by clause (ii) above, on the date of termination of this Agreement and (z) in the case of a payment required by clause (iii) above, on the first business day following the date of the first to occur of the events referred to in clause (iii)(C). (c) The Company and Parent acknowledge and agree that the agreements contained in Section 5.06(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent would not enter into this Agreement; accordingly, if the Company fails promptly to pay the amount due pursuant to Section 5.06(b), and, in order to obtain such payment, Parent commences a suit that results in a judgment against the Company for the Termination Fee, the Company shall pay to Parent its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the Termination Fee from the date such payment was required to be made until the date of payment at the prime rate of Citibank, N.A. in effect on the date such payment was required to be made. SECTION 5.07. PUBLIC ANNOUNCEMENTS. Except with respect to any Company Adverse Recommendation Change made in accordance with the terms of this Agreement, Parent and the Company shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as such party may reasonably conclude may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. SECTION 5.08. STOCKHOLDER LITIGATION. The Company shall give Parent the opportunity to participate in the defense or settlement of any stockholder litigation against the Company and/or its directors relating to the transactions contemplated by this Agreement, and no such settlement shall be agreed to without Parent's prior written consent, such consent not to be unreasonably withheld or delayed. SECTION 5.09. EMPLOYEE MATTERS. (a) For a period of not less than twelve months following the Effective Time, the employees of the Company who remain in the employment of the Surviving Corporation and its Subsidiaries (the "Continuing Employees") shall receive employee benefits that in the aggregate are substantially comparable to the employee benefits provided under the Company's employee benefit plans to such employees immediately prior to the Effective Time; provided that neither Parent nor the Surviving Corporation nor any of their Subsidiaries shall have any obligation to issue, or adopt any plans or arrangements providing for the issuance of shares of capital stock, warrants, options, stock appreciation rights or other rights in respect of any shares of capital stock of any entity or any securities convertible or exchangeable into such shares pursuant to any such plans or arrangements; provided, further, that no plans or arrangements of the Company or any of its Subsidiaries providing for such issuance nor the Company's Flexible Time Off program shall be taken into account in determining whether employee benefits are substantially comparable in the aggregate. (b) Nothing contained herein shall be construed as requiring, and the Company shall take no action that would have the effect of requiring, Parent or the Surviving Corporation to continue any specific plans or to continue the employment of any specific person. (c) Parent shall cause the Surviving Corporation to recognize the service of each Continuing Employee as if such service had been performed with Parent (i) for purposes of vesting (but not benefit accrual) under Parent's defined benefit pension plan, (ii) for purposes of eligibility for vacation under Parent's vacation program, (iii) for purposes of eligibility and participation under any health or welfare plan maintained by Parent (other than any post-employment health or post-employment welfare plan) and (iv) unless covered under another arrangement with or of the Company, for benefit accrual purposes under Parent's severance plan (in the case of each of clauses (i), (ii), (iii) and (iv), solely to the extent that Parent makes such plan or program available to employees of the Surviving Corporation), but not for purposes of any other employee benefit plan of Parent. (d) With respect to any welfare plan maintained by Parent in which Continuing Employees are eligible to participate after the Effective Time, Parent shall, and shall cause the Surviving Corporation to, (i) waive all limitations as to preexisting conditions and exclusions with respect to participation and coverage requirements applicable to such employees to the extent such conditions and exclusions were satisfied or did not apply to such employees under the welfare plans of the Company and its Subsidiaries prior to the Effective Time and (ii) provide each Continuing Employee with credit for any co-payments and deductibles paid prior to the Effective Time in satisfying any analogous deductible or out-of-pocket requirements to the extent applicable under any such plan. SECTION 5.10. COMPANY NOTES AND COMPANY PREFERRED STOCK. Each of the Company, Parent and Sub shall take each action required to be taken by such party pursuant to (i) the Indenture dated as of August 5, 2002 between the Company and Wells Fargo Bank, National Association, with respect to the Company Notes and (ii) the Certificate of Designation with respect to the Company Preferred Stock, in each case as necessary to consummate the Merger and the other transactions contemplated by this Agreement in compliance therewith. SECTION 5.11. CONSENTS AND OTHER ACTION. The Company agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to accomplish the items set forth on Section 5.11 of the Company Disclosure Schedule as soon as practicable after the date hereof. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligation of each party to effect the Merger is subject to the satisfaction or (to the extent permitted by law) waiver on or prior to the Closing Date of the following conditions: (a) STOCKHOLDER APPROVAL. The Stockholder Approval shall have been obtained. (b) HSR ACT. The waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired. (c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any court of competent jurisdiction or other statute, law, rule, legal restraint or prohibition (collectively, "Restraints") shall be in effect (i) preventing the consummation of the Merger or (ii) which otherwise has had or would reasonably be expected to have a Material Adverse Effect. SECTION 6.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations of Parent and Sub to effect the Merger are further subject to the satisfaction or (to the extent permitted by law) waiver on or prior to the Closing Date of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained in this Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of the Company contained in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date. Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and the chief financial officer of the Company to such effect. (b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer and the chief financial officer of the Company to such effect. (c) NO LITIGATION. There shall not be pending or threatened any suit, action or proceeding by any Governmental Entity (i) challenging the acquisition by Parent or Sub of any shares of Company Common Stock or Company Preferred Stock, seeking to restrain or prohibit the consummation of the Merger, or seeking to place limitations on the ownership of shares of Company Common Stock or Company Preferred Stock (or shares of common stock or preferred stock of the Surviving Corporation) by Parent or Sub or seeking to obtain from the Company, Parent or Sub any damages that are material in relation to the Company, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries of any portion of any business or of any assets of the Company, Parent or any of their respective Subsidiaries, or to compel the Company, Parent or any of their respective Subsidiaries to divest or hold separate any portion of any business or of any assets of the Company, Parent or any of their respective Subsidiaries, as a result of the Merger, (iii) seeking to prohibit Parent or any of its Subsidiaries from effectively controlling in any material respect the business or operations of the Company or any of its Subsidiaries or (iv) otherwise having, or being reasonably expected to have, a Material Adverse Effect. (d) RESTRAINTS. No Restraint that would reasonably be expected to result, directly or indirectly, in any of the effects referred to in clauses (i) through (iv) of paragraph (c) of this Section 6.02 shall be in effect. SECTION 6.03. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company to effect the Merger is further subject to the satisfaction or (to the extent permitted by law) waiver on or prior to the Closing Date of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Parent and Sub contained in this Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of Parent and Sub contained in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date. The Company shall have received a certificate signed on behalf of Parent by an executive officer of Parent to such effect. (b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of Parent by an executive officer of Parent to such effect. SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS. None of the Company, Parent or Sub may rely on the failure of any condition set forth in Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by such party's failure to act in good faith or to use its commercially reasonable efforts to consummate the Merger and the other transactions contemplated by this Agreement, as required by and subject to Section 5.03. ARTICLE VII TERMINATION, AMENDMENT AND WAIVER SECTION 7.01. TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of the Stockholder Approval: (a) by mutual written consent of Parent, Sub and the Company; (b) by either Parent or the Company: (i) if the Merger shall not have been consummated on or before August 1, 2003; provided, however, that the right to terminate this Agreement under this Section 7.01(b)(i) shall not be available to any party whose breach of a representation or warranty in this Agreement or whose action or failure to act has been a principal cause of or resulted in the failure of the Merger to be consummated on or before such date; (ii) if any Restraint having any of the effects set forth in Section 6.01(c) shall be in effect and shall have become final and nonappealable; or (iii) if the Stockholder Approval shall not have been obtained at the Stockholders' Meeting duly convened therefor or at any adjournment or postponement thereof; (c) by Parent (i) if the Company shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.02(a) or 6.02(b) and (B) is incapable of being cured by the Company within 30 calendar days following receipt of written notice of such breach or failure to perform from Parent or (ii) if any Restraint having the effects referred to in clauses (i) through (iv) of Section 6.02(c) shall be in effect and shall have become final and nonappealable; (d) by the Company, if Parent shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.03(a) or 6.03(b) and (B) is incapable of being cured by Parent within 30 calendar days following receipt of written notice of such breach or failure to perform from the Company; (e) by Parent, in the event that prior to the obtaining of the Stockholder Approval (i) a Company Adverse Recommendation Change shall have occurred or (ii) the Board of Directors of the Company fails publicly to reaffirm its recommendation of this Agreement, the Merger or the other transactions contemplated by this Agreement within ten business days of receipt of a written request by Parent to provide such reaffirmation following a Takeover Proposal; or (f) by the Company in accordance with Section 4.02(b). SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of this Agreement by either the Company or Parent as provided in Section 7.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Parent, Sub or the Company, other than the provisions of Section 3.01(s), Section 3.02(f), the penultimate sentence of Section 5.02, Section 5.06, this Section 7.02 and Article VIII, which provisions shall survive such termination, and except with respect to any liabilities or damages incurred or suffered by a party as a result of the wilful and material breach (or any termination of this Agreement resulting therefrom) by the other party of any of its representations, warranties, covenants or agreements set forth in this Agreement. SECTION 7.03. AMENDMENT. This Agreement may be amended by the parties hereto at any time before or after receipt of the Stockholder Approval; provided, however, that after such approval has been obtained, there shall be made no amendment that by law requires further approval by the stockholders of the Company without such approval having been obtained. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. SECTION 7.04. EXTENSION; WAIVER. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) to the extent permitted by law, waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (c) subject to the proviso to the first sentence of Section 7.03 and to the extent permitted by law, waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. SECTION 7.05. PROCEDURE FOR TERMINATION OR AMENDMENT. A termination of this Agreement pursuant to Section 7.01 or an amendment of this Agreement pursuant to Section 7.03 shall, in order to be effective, require, in the case of Parent or the Company, action by its Board of Directors or, with respect to any amendment of this Agreement pursuant to Section 7.03, the duly authorized committee of its Board of Directors to the extent permitted by law. ARTICLE VIII GENERAL PROVISIONS SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 8.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. SECTION 8.02. NOTICES. Except for notices that are specifically required by the terms of this Agreement to be delivered orally, all notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Parent or Sub, to: Johnson & Johnson One Johnson & Johnson Plaza New Brunswick, NJ 08933 Telecopy No.: (732) 524-2788 Attention: John T. Crisan with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019 Telecopy No.: (212) 474-3700 Attention: Robert I. Townsend, III, Esq. if to the Company, to: Scios Inc. 820 West Maude Avenue Sunnyvale, CA 94085 Telecopy No.: (408) 616-8319 Attention: Matthew Hooper with a copy to: Latham & Watkins LLP 135 Commonwealth Drive Menlo Park, CA 94025 Telecopy No.: (650) 463-2600 Attention: Christopher L. Kaufman, Esq. SECTION 8.03. Definitions. For purposes of this Agreement: (a) an "Affiliate" of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person; (b) "Knowledge" of any person that is not an individual means, with respect to any matter in question, the actual knowledge of the persons listed on Section 8.03(b) of the Company Disclosure Schedule; (c) "Material Adverse Change" or "Material Adverse Effect" means any (i) change, (ii) effect, (iii) event, (iv) occurrence, (v) state of facts or (vi) development or developments which individually or in the aggregate would reasonably be expected to result in any change or effect, that (A) is materially adverse to the business, financial condition, properties, assets, liabilities (contingent or otherwise) or results of operations of the Company and its Subsidiaries, taken as a whole, or (B) would reasonably be expected to prevent or materially impede, interfere with, hinder or delay the consummation by the Company of the Merger or the other transactions contemplated by this Agreement; provided, that none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect or a Material Adverse Change: any change, effect, event, occurrence, state of facts or development or developments (1) in financial or securities markets or the economy in general, including any fluctuation, in and of itself, in the price of shares of Company Common Stock (it being understood that the facts or occurrences giving rise or contributing to such fluctuation may be deemed to constitute, or be taken into account in determining whether there has been or will be, a Material Adverse Effect or a Material Adverse Change), (2) in the biopharmaceutical industry in general, to the extent that the effects thereof do not disproportionately impact the Company or (3) as a result of any failure, in and of itself, by the Company to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement (it being understood that the facts or occurrences giving rise or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or will be, a Material Adverse Effect or a Material Adverse Change); (d) "person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity; and (e) a "Subsidiary" of any person means another person, an amount of the voting securities, other voting rights or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person. SECTION 8.04. INTERPRETATION. When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to "this Agreement" shall include the Company Disclosure Schedule. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. SECTION 8.05. CONSENTS AND APPROVALS. For any matter under this Agreement requiring the consent or approval of any party to be valid and binding on the parties hereto, such consent or approval must be in writing. SECTION 8.06. COUNTERPARTS. This Agreement may be executed in one or more counterparts (including by facsimile), all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 8.07. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement and the Confidentiality Agreement (a) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement and the Confidentiality Agreement and (b) except for the provisions of Article II and Section 5.05, are not intended to confer upon any person other than the parties any legal or equitable rights or remedies. SECTION 8.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. SECTION 8.09. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, and any assignment without such consent shall be null and void, except that Sub, upon prior written notice to the Company, may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to Parent or to any direct or indirect wholly owned Subsidiary of Parent, but no such assignment shall relieve Parent or Sub of any of its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. SECTION 8.10. SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION. The parties agree that irreparable damage would occur and that the parties 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 the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the State of Delaware or in any state court in the State of Delaware, 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 (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or of any state court located in the State of Delaware in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than a Federal court located in the State of Delaware or a state court located in the State of Delaware. SECTION 8.11. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. SECTION 8.12. PERFORMANCE BY SUB. Parent hereby agrees to cause Sub to comply with its obligations hereunder and to cause Sub to consummate the Merger as contemplated herein, and whenever this Agreement requires Sub to take any action, such requirement shall be deemed to include an undertaking by Parent to cause Sub to take such action. IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers hereunto duly authorized, all as of the date first written above. JOHNSON & JOHNSON, by /s/ Christine A. Poon ------------------------------------ Name: Christine A Poon Title: Worldwide Chairman, Pharmaceuticals Group and Member, Executive Committee SATURN MERGER SUB, INC., by /s/ Christine A. Poon ------------------------------------ Name: Christine A. Poon Title: President SCIOS INC., by /s/ Richard B. Brewer ------------------------------------ Name: Richard B. Brewer Title: President and Chief Executive Officer ANNEX I TO THE MERGER AGREEMENT Index of Defined Terms ---------------------- Term - ---- Acquisition Agreement..........................................Section 4.02(b) Actions........................................................Section 4.01(d) Adjusted Option...................................................Section 5.04 Affiliate......................................................Section 8.03(a) Agreement.............................................................Preamble Applicable ESPP Price..........................................Section 5.04(b) Applicable ESPP Shares.........................................Section 5.04(b) Appraisal Shares...............................................Section 2.01(d) Article VII....................................................Section 3.01(r) Biologic.......................................................Section 3.01(v) Certificate....................................................Section 2.01(c) Certificate of Merger.............................................Section 1.03 Class Action Suit..............................................Section 3.01(h) Closing...........................................................Section 1.02 Closing Date......................................................Section 1.02 Code...........................................................Section 2.02(h) Common Stock Merger Consideration..............................Section 2.01(c) Commonly Controlled Entity.....................................Section 3.01(k) Company...............................................................Preamble Company Adverse Recommendation Change..........................Section 4.02(b) Company Benefit Agreements.....................................Section 3.01(g) Company Benefit Plans..........................................Section 3.01(k) Company By-laws................................................Section 3.01(a) Company Certificate............................................Section 1.05(a) Company Common Stock..................................................Preamble Company Consolidated Group.....................................Section 3.01(n) Company Disclosure Schedule.......................................Section 3.01 Company Notes..................................................Section 3.01(c) Company Pension Plan...........................................Section 3.01(l) Company Preferred Stock...............................................Preamble Company Restricted Stock.......................................Section 3.01(c) Company SEC Documents..........................................Section 3.01(e) Company Stock-Based Awards.....................................Section 3.01(c) Company Stock Options..........................................Section 3.01(c) Company Stock Plans............................................Section 3.01(c) Confidentiality Agreement.........................................Section 5.02 Continuing Employees...........................................Section 5.09(a) Contract.......................................................Section 3.01(d) DGCL..............................................................Section 1.01 Drug...........................................................Section 3.01(v) Effective Time....................................................Section 1.03 Environmental Laws.............................................Section 3.01(j) ERISA..........................................................Section 3.01(j) ESPP...........................................................Section 3.01(c) Exchange Act...................................................Section 3.01(d) Exchange Fund..................................................Section 2.02(a) FDA............................................................Section 3.01(j) FDCA...........................................................Section 3.01(j) Filed Company SEC Documents.......................................Section 3.01 GAAP...........................................................Section 3.01(e) Governmental Entity............................................Section 3.01(d) Hazardous Materials............................................Section 3.01(j) HSR Act........................................................Section 3.01(d) HSR Filing........................................................Section 5.03 Intellectual Property Rights...................................Section 3.01(p) IRS............................................................Section 3.01(l) Knowledge......................................................Section 8.03(b) Legal Provisions...............................................Section 3.01(j) Liens..........................................................Section 3.01(b) Material Adverse Change........................................Section 8.03(c) Material Adverse Effect........................................Section 8.03(c) Medical Device.................................................Section 3.01(v) Merger................................................................Preamble Merger Consideration...........................................Section 2.01(c) Option Exchange Ratio.............................................Section 5.04 Parent................................................................Preamble Parent Common Stock...............................................Section 5.04 Paying Agent...................................................Section 2.02(a) Permits........................................................Section 3.01(j) person.........................................................Section 8.03(d) Post-Signing Returns...........................................Section 4.01(d) Preferred Stock Merger Consideration...........................Section 2.01(c) Premium Amount.................................................Section 5.05(c) Primary Company Executives.....................................Section 3.01(m) Proxy Statement................................................Section 3.01(d) Representatives................................................Section 4.02(a) Release........................................................Section 3.01(j) Restraints.....................................................Section 6.01(c) SEC............................................................Section 3.01(d) Section 203....................................................Section 3.01(r) Section 262....................................................Section 2.01(d) Securities Act.................................................Section 3.01(e) Specified Compounds............................................Section 3.01(p) Stockholder Approval...........................................Section 3.01(q) Stockholders' Meeting..........................................Section 5.01(b) Sub...................................................................Preamble Subsidiary.....................................................Section 8.03(e) Superior Proposal..............................................Section 4.02(a) Surviving Corporation.............................................Section 1.01 Takeover Proposal..............................................Section 4.02(a) taxes..........................................................Section 3.01(n) taxing authority...............................................Section 3.01(n) tax returns....................................................Section 3.01(n) Termination Fee................................................Section 5.06(b) Warrants.......................................................Section 3.01(c) EXHIBIT A TO THE MERGER AGREEMENT RESTATED CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION FIRST: The name of the corporation (hereinafter called the "Corporation") is Scios Inc. SECOND: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is Corporate Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The aggregate number of shares which the Corporation shall have authority to issue is 1,000 shares of Common Stock, par value $0.01 per share. FIFTH: In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the By-laws of the Corporation. SIXTH: To the fullest extent permitted by the General Corporation Law of the State of Delaware as it now exists and as it may hereafter be amended, no director or officer of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director or officer; provided, however, that nothing contained in this Article SIXTH shall eliminate or limit the liability of a director or officer (i) for any breach of the director's or officer's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director or officer derived an improper personal benefit. No amendment to or repeal of this Article SIXTH shall apply to or have any effect on the liability or alleged liability of any director or officer of the Corporation for or with respect to any acts or omissions of such director or officer occurring prior to such amendment or repeal. SEVENTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said Section. Such indemnification shall be mandatory and not discretionary. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. Any repeal or modification of this Article SEVENTH shall not adversely affect any right to indemnification of any persons existing at the time of such repeal or modification with respect to any matter occurring prior to such repeal or modification. The Corporation shall to the fullest extent permitted by the General Corporation Law of the State of Delaware advance all costs and expenses (including, without limitation, attorneys' fees and expenses) incurred by any director or officer within 15 days of the presentation of same to the Corporation, with respect to any one or more actions, suits or proceedings, whether civil, criminal, administrative or investigative, so long as the Corporation receives from the director or officer an unsecured undertaking to repay such expenses if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation under the General Corporation Law of the State of Delaware. Such obligation to advance costs and expenses shall be mandatory, and not discretionary, and shall include, without limitation, costs and expenses incurred in asserting affirmative defenses, counterclaims and cross claims. Such undertaking to repay may, if first requested in writing by the applicable director or officer, be on behalf of (rather than by) such director or officer, provided that in such case the Corporation shall have the right to approve the party making such undertaking. EIGHTH: Unless and except to the extent that the By-laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. EX-4.7 4 ex4_7.txt FIRST SUPPLEMENTAL INDENTURE Exhibit 4.7 EXECUTION COPY SCIOS INC., JOHNSON & JOHNSON AND WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee FIRST SUPPLEMENTAL INDENTURE Dated as of April 29, 2003 FIRST SUPPLEMENTAL INDENTURE dated as of April 29, 2003, among SCIOS INC., a Delaware corporation (the "Company"), JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as trustee (the "Trustee"). WHEREAS, pursuant to the Indenture dated as of August 5, 2002 (the "Indenture"), between the Company and the Trustee, the Company issued $150,000,000 aggregate principal amount of 5.50% Convertible Subordinated Notes Due 2009 (the "Securities"); WHEREAS, pursuant to the Agreement and Plan of Merger dated as of February 10, 2003 (the "Merger Agreement"), among Parent, Saturn Merger Sub, Inc, a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and the Company, Sub has agreed to merge (the "Merger") with and into the Company, with the Company being the surviving corporation in the Merger, and following which the Company will be a wholly owned subsidiary of Parent; WHEREAS, pursuant to the Merger Agreement, as of the effective time of the Merger (the "Effective Time") (a) each issued and outstanding share of common stock, par value $.001 per share, of the Company ("Scios Common Stock"), other than shares directly owned by the Company, Parent or Sub, shall be converted into the right to receive $45.00 in cash without interest and (b) each issued and outstanding share of Series B preferred stock, par value $.001 per share, of the Company (the "Scios Preferred Stock"), other than shares directly owned by the Company, Parent or Sub, shall be converted into the right to receive $4,500.00 in cash without interest; WHEREAS, pursuant to Section 10.7 of the Indenture, as a result of the Merger, the Company is required to execute and deliver to the Trustee a supplemental indenture; WHEREAS Parent desires to unconditionally and irrevocably guarantee, on a subordinated basis, the obligations of the Company under the Indenture and the Securities on the terms and conditions set forth herein; WHEREAS, Section 9.1 of the Indenture provides that the Company, when authorized by resolutions of the Board of Directors of the Company, the Company and the Trustee may from time to time and at any time enter into a supplemental indenture, without the consent of any Holder of the Securities, to, among other things, (i) comply with Section 10.7 of the Indenture and (ii) make any change that would provide any additional rights or benefits to the Holders of the Securities or that does not adversely affect the legal rights under the Indenture or any such Holders; and WHEREAS, the Company and Parent have complied with all conditions precedent provided for in the Indenture relating to this First Supplemental Indenture. NOW, THEREFORE, the Company, Parent and the Trustee hereby agree for the equal and ratable benefit of the Holders of the Securities as follows: ARTICLE I Definitions SECTION 1.1. DEFINITIONS. (a) Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Indenture. (b) Section 1.1 of the Indenture is hereby amended to add the following definitions: "DESIGNATED PARENT SENIOR INDEBTEDNESS" means Parent Senior Indebtedness in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or related agreements or documents to which Parent is a party) expressly provides that such Parent Senior Indebtedness shall be "Designated Parent Senior Indebtedness" for purposes of the Indenture (provided that such instrument, agreement or other document may place limitations and conditions on the right of such Parent Senior Indebtedness to exercise the rights of Designated Parent Senior Indebtedness). If any payment made to any holder of any Designated Parent Senior Indebtedness or its Representative with respect to such Designated Parent Senior Indebtedness is rescinded or must otherwise be returned by such holder or Representative upon the insolvency, bankruptcy or reorganization of Parent or otherwise, the reinstated Indebtedness of Parent arising as a result of such rescission or return shall constitute Designated Parent Senior Indebtedness effective as of the date of such rescission or return. "EFFECTIVE TIME" means the time at which the merger of Saturn Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent, with and into the Company, with the Company as the surviving corporation, becomes effective. "PARENT" means Johnson & Johnson, a New Jersey corporation, having its principal office at One Johnson & Johnson Plaza, New Brunswick, NJ 08933. "PARENT RESOLUTION" means a copy of a resolution certified by the secretary or an assistant secretary of Parent to have been duly adopted by the board of directors or finance committee of Parent and to be in full force and effect on the date of such certification, and delivered to the Trustee. "PARENT OFFICERS' CERTIFICATE" means a certificate signed by two Officers of Parent. "PARENT SENIOR INDEBTEDNESS" means the principal of, premium, if any, interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such proceeding) and rent payable on or in connection with, and all fees, costs, expenses and other amounts accrued or due on or in connection with, Indebtedness of Parent, whether outstanding on the date of this First Supplemental Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by Parent (including all deferrals, renewals, extensions or refundings of, or amendments, modifications or supplements to, the foregoing), unless in the case of any particular Indebtedness the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such Indebtedness shall not be senior in right of payment to Parent's guarantees under Section 3.1 of this Supplemental Indenture or expressly provides that such Indebtedness is "pari passu" or "junior" to Parent's guarantees under Section 3.1 of this Supplemental Indenture. Notwithstanding the foregoing, the term "Parent Senior Indebtedness" shall not include any Indebtedness of Parent to any subsidiary of Parent, all of the outstanding voting stock of which is owned, directly or indirectly, by Parent. If any payment made to any holder of any Parent Senior Indebtedness or its Representative with respect to such Parent Senior Indebtedness is rescinded or must otherwise be returned by such holder or Representative upon the insolvency, bankruptcy or reorganization of Parent or otherwise, the reinstated Indebtedness of Parent arising as a result of such rescission or return shall constitute Parent Senior Indebtedness effective as of the date of such rescission or return. (c) Each reference to "the Company" in the definitions of the terms "Indebtedness" and "Officer" in Section 1.1 of the Indenture is hereby deleted and replaced with a reference to "such Person". ARTICLE II SECTION 2.1. CONVERSION RIGHT. Notwithstanding any provisions of the Indenture or the Securities to the contrary, subject to and upon compliance with the provisions of this Article II of this First Supplemental Indenture, the Holder of any Security outstanding at the Effective Time of the Merger shall have the right, at the Effective Time and at any time thereafter during the period such Security shall be convertible as specified in paragraph 9 of the Securities, to convert such Security only into an amount in cash equal to the product of the number of shares of Company Common Stock into which such Security was convertible immediately prior to the Effective Time and $45.00 in cash, without interest thereon. The Company acknowledges that immediately preceding the Effective Time the Conversion Price was $39.30 and that as a result of the Merger each $1,000 aggregate principal amount of the Securities shall be convertible only into the right to receive $1,145.04 in cash without interest thereon. SECTION 2.2. CONVERSION PROCEDURE. Notwithstanding any provisions of the Indenture or the Securities to the contrary, in order to convert a Security, a Holder must (1) deliver to a Conversion Agent written notice in form satisfactory to the Company that the Holder elects to convert such Security into cash which notice shall also state the name (with address) in which the cash shall be issued, (2) surrender the Security to a Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent, (4) pay the amount of interest, if any, the Holder may be paid as provided in the immediately succeeding sentence of this paragraph, and (5) pay any transfer or similar tax if required pursuant to Section 1.3 hereof. If any Security is converted during the period from, but excluding, a record date for the payment of interest to, but excluding, the next succeeding interest payment date, unless such Security has been called for redemption on a redemption date between such dates, such Security, when surrendered for conversion, must be accompanied by payment of an amount equal to the interest payable to the registered Holder on such interest payment date on the principal amount so converted. Except as provided in the immediately preceding sentence, no payment or adjustment for the principal of, premium, if any, interest on or liquidated damages with respect to, the Securities will be made. The following sentence does not apply in the case of a Security or portions of a Security called for redemption or subject to repurchase following a Change in Control during that period. A Security which the Holder has elected to be repurchased may be converted only if the Holder withdraws its election to have such Security repurchased in accordance with the terms of the Indenture before the close of business on the business day prior to the Repurchase Date. A Holder may convert a portion of a Security if the portion is $1,000 principal amount or an integral multiple of $1,000 principal amount. Upon surrender of a Security that is converted in part the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unconverted portion of the Security surrendered. If the last day on which a Security may be converted is a Legal Holiday in a place where a Conversion Agent is located, the Security may be surrendered to that Conversion Agent on the next succeeding day that is not a Legal Holiday. As soon as practicable after satisfaction of the requirements listed above, the Company shall cause to be issued or delivered at the office of the Conversion Agent to such Holder, or on his written order, a check representing the amount of cash into which such Security may be converted. SECTION 2.3. TAX CONSIDERATIONS. If a Holder converts its Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due in respect of the payment of cash upon the conversion. However, the Holder shall pay any such tax which is due in respect of any transfer involved in the issuance and delivery of any check in a name other than the Holder's name. ARTICLE III GUARANTEE SECTION 3.1. GUARANTEE. Parent hereby unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of, premium, if any, and interest (including liquidated damages (as defined in the Indenture), if any) in respect of the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under the Indenture (including obligations to the Trustee) and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under the Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Parent further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it will remain bound under this Article III notwithstanding any extension or renewal of any Obligation. Parent waives presentation to, demand of payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Parent waives notice of any default under the Securities or the Obligations. The obligations of Parent under this Section 3.1 shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under the Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any Obligation; (c) any rescission, waiver, amendment, modification or supplement of any of the terms or provisions of the Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of the Company. Parent further agrees that its guarantees under this Section 3.1 constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. The guarantee of Parent under this Section 3.1 shall, to the extent and in the manner set forth in Article IV of this First Supplemental Indenture, be subordinated and subject in right of payment to the prior payment in full of all Parent Senior Indebtedness and is made subject to the provisions of Article IV of this First Supplemental Indenture. Except as set forth in Section 3.2 of this First Supplemental Indenture, the obligations of Parent under this Section 3.1 shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense, setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of Parent under this Section 3.1 shall not be discharged or impaired or otherwise affected by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of Parent or would otherwise operate as a discharge of Parent as a matter of law or equity. Parent agrees that its guarantee under this Section 3.1 shall remain in full force and effect until payment in full of all the Obligations. Parent further agrees that its guarantee under this Section 3.1 shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee may have at law or in equity against Parent by virtue hereof, upon the failure of the Company to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, Parent hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Parent agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in Article IV of this First Supplemental Indenture. Parent further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI of the Indenture for the purposes of the guarantee under this Section 3.1, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article VI of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by Parent for the purposes of this Section 3.1. Parent also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section 3.1. SECTION 3.2. LIMITATION ON LIABILITY. Any term or provision of the Indenture to the contrary notwithstanding, the maximum aggregate amount of the Obligations guaranteed under this Section 3.1 by Parent shall not exceed the maximum amount that can be hereby guaranteed without rendering the Indenture, as it relates to Parent, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 3.3. SUCCESSORS AND ASSIGNS. This Article III shall be binding on Parent and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in the Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of the Indenture. ARTICLE IV SUBORDINATION OF THE GUARANTEE SECTION 4.1. Agreement to Subordinate. Parent covenants and agrees, and each Person holding any Security, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees, that the obligations of Parent under Section 3.1 of this First Supplemental Indenture with respect to the payment of the principal of, premium, if any, and interest (including liquidated damages (as defined in the Indenture), if any) on all Securities (including, but not limited to, the redemption price with respect to Securities called for redemption in accordance with Section 3.1 of the Indenture) issued under the Indenture shall, to the extent and in the manner set forth in this Article IV, be subordinated and subject in right of payment to the prior payment in full of all Parent Senior Indebtedness and that the subordination is for the benefit of the holders of Parent Senior Indebtedness. No provision of this Article IV shall prevent the occurrence of any default or Event of Default under the Indenture. SECTION 4.2. PAYMENTS TO HOLDERS. Parent shall not make any payment pursuant to its obligations under Section 3.1 of this First Supplemental Indenture with respect to any of the Obligations (including, but not limited to, the redemption price with respect to the Securities to be called for redemption in accordance with Section 3.1 of the Indenture) if: (a) a default in the payment of principal, premium, if any, interest, rent or other obligations in respect of Parent Senior Indebtedness occurs and is continuing (a "Parent Payment Default"), unless and until such Parent Payment Default shall have been cured or waived or shall have ceased to exist; or (b) a default, other than a Parent Payment Default, on any Designated Parent Senior Indebtedness (a "Parent Non-Payment Default") occurs and is continuing that then permits holders of such Designated Parent Senior Indebtedness to accelerate its maturity and the Trustee receives a written notice of the default (a "Parent Payment Blockage Notice") from a holder of Designated Parent Senior Indebtedness, a Representative of Designated Parent Senior Indebtedness or Parent. No Parent Non-Payment Default that existed or was continuing on the date of delivery of any Parent Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Parent Payment Blockage Notice. Parent may and shall resume payments on and distributions in respect of the Securities pursuant to its obligations under Section 3.1 of this First Supplemental Indenture, including any past scheduled payments of the principal of, premium, if any, and interest (including liquidated damages (as defined in the Indenture), if any) on such Securities to which the holders of the Securities would have been entitled but for the provisions of this Article IV: (1) in the case of a Parent Payment Default, on the date upon which such Parent Payment Default is cured or waived or ceases to exist; and (2) in the case of a Parent Non-Payment Default, the earlier of (i) the date upon which such default is cured or waived or ceases to exist or (ii) 179 days after the Parent Payment Blockage Notice is received by the Trustee if the maturity of such Designated Parent Senior Indebtedness has not been accelerated and no Parent Payment Default with respect to any Parent Senior Indebtedness has occurred which has not been cured or waived or ceased to exist (in such event clause (1) above shall instead be applicable), unless this Article IV otherwise prohibits such payment or distribution at the time of such payment or distribution. Upon any payment by Parent, or distribution of assets of Parent, whether in cash, property or securities, to creditors upon any dissolution or winding up or liquidation or reorganization of Parent, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Parent Senior Indebtedness shall first be paid in full in cash or other payment satisfactory to the holders of such Parent Senior Indebtedness, or provision is made for such payment thereof in accordance with its terms provided for in cash or other payment satisfactory to the holders of such Parent Senior Indebtedness, before any payment by Parent is made on account of the principal of, premium, if any, or interest (including liquidated damages (as defined in the Indenture), if any) on the Securities; and upon any such dissolution or winding up or liquidation or reorganization of Parent or bankruptcy, insolvency, receivership or other proceeding, any payment by Parent, or distribution of assets of Parent of any kind or character, whether in cash, property or securities, to which the holders of the Securities or the Trustee would be entitled, except for the provision of this Article IV, shall (except as aforesaid) be paid by Parent or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the holders of the Securities or by the Trustee under the Indenture if received by them or it, directly to the holders of Parent Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Parent Senior Indebtedness held by such holders, or as otherwise required by law or a court order) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Parent Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Parent Senior Indebtedness in full in cash or other payment satisfactory to the holders of such Parent Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of Parent Senior Indebtedness, before any payment or distribution is made to the holders of the Securities or to the Trustee. For purposes of this Article IV, the words, "cash, property or securities" shall not be deemed to include shares of stock of Parent as reorganized or readjusted, or securities of Parent or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article IV with respect to Parent's guarantees under Section 3.1 of this Supplemental Indenture to the payment of all Parent Senior Indebtedness which may at the time be outstanding; provided that the Parent Senior Indebtedness is assumed by the new corporation, if any, resulting from any reorganization or readjustment. In the event of the acceleration of the Securities because of an Event of Default and a demand for payment is made on Parent pursuant to Section 3.1 of this First Supplemental Indenture, no payment or distribution by Parent pursuant to any of its obligations under Section 3.1 of this First Supplemental Indenture shall be made to the Trustee or any holder of Securities in respect of the principal of, premium, if any, or interest (including liquidated damages (as defined in the Indenture), if any) on the Securities (including, but not limited to, the redemption price with respect to the Securities called for redemption in accordance with Section 3.1 of the Indenture) until all Parent Senior Indebtedness have been paid in full in cash or other payment satisfactory to the holders of Parent Senior Indebtedness or such acceleration is rescinded in accordance with the terms of the Indenture. If payment of the Securities is accelerated because of an Event of Default and a demand for payment is made on Parent pursuant to Article III of this First Supplemental Indenture, Parent shall promptly notify holders of Parent Senior Indebtedness of the acceleration. In the event that, notwithstanding the foregoing provisions, any payment or distribution of assets of Parent, whether in cash, property or securities (including, without limitation, by way of setoff or otherwise), prohibited by the foregoing provisions in this Section 4.2, shall be received by the Trustee or the holders of the Securities before all Parent Senior Indebtedness is paid in full in cash or other payment satisfactory to the holders of such Parent Senior Indebtedness, or provision is made for such payment thereof in accordance with its terms in cash or other payment satisfactory to the holders of such Parent Senior Indebtedness, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Parent Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Parent Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by Parent, for application to the payment of any Parent Senior Indebtedness remaining unpaid to the extent necessary to pay all Parent Senior Indebtedness in full in cash or other payment satisfactory to the holders of such Parent Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of such Parent Senior Indebtedness. Nothing in this Section 4.2 shall apply to claims of the Trustee under Section 7.7 of the Indenture or to payments to the Trustee made by Parent pursuant to its obligations under Section 3.1 of this First Supplemental Indenture with respect to Section 7.7 of the Indenture. This Section 4.2 shall be subject to the further provisions of Section 4.5. SECTION 4.3. SUBROGATION OF SECURITIES. Subject to the payment in full of all Parent Senior Indebtedness, the rights of the holders of the Securities shall be subrogated, to the extent of the payments or distributions made to the holders of such Parent Senior Indebtedness pursuant to the provisions of this Article IV (equally and ratably with the holders of all indebtedness of Parent which by its express terms is subordinated to other indebtedness of Parent to substantially the same extent as the Securities are subordinated and is entitled to like rights of subrogation), to the rights of the holders of Parent Senior Indebtedness to receive payments or distributions of cash, property or securities of Parent applicable to the Parent Senior Indebtedness until the principal, premium, if any, and interest (including liquidated damages (as defined in the Indenture), if any) on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Parent Senior Indebtedness of any cash, property or securities to which the holders of the Securities or the Trustee would be entitled except for the provisions of this Article IV, and no payment over pursuant to the provisions of this Article IV, to or for the benefit of the holders of Parent Senior Indebtedness by holders of the Securities or the Trustee, shall, as between Parent, its creditors other than holders of Parent Senior Indebtedness, and the holders of the Securities, be deemed to be a payment by Parent to or on account of the Parent Senior Indebtedness; and no payments or distributions of cash, property or securities to or for the benefit of the holders of the Securities pursuant to the subrogation provisions of this Article IV which would otherwise have been paid to the holders of Parent Senior Indebtedness shall be deemed to be a payment by Parent to or for the account of the Securities. It is understood that the provisions of this Article IV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of the Parent Senior Indebtedness, on the other hand. Nothing contained in this Article IV or elsewhere in this First Supplemental Indenture, in the Indenture or in the Securities is intended to or shall impair, as among Parent, its creditors other than the holders of Parent Senior Indebtedness, and the holders of the Securities, the obligation of Parent, which is absolute and unconditional, to make payments pursuant to its obligations under Section 3.1 of this First Supplemental Indenture with respect to the payment of the principal of, premium, if any, and interest (including liquidated damages (as defined in the Indenture), if any) on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Securities and creditors of Parent other than the holders of the Parent Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Security from exercising all remedies otherwise permitted by applicable law upon a default by Parent under its obligations under Section 3.1 of this First Supplemental Indenture, subject to the rights, if any, under this Article IV of the holders of Parent Senior Indebtedness in respect of cash, property or securities of Parent received upon the exercise of any such remedy. SECTION 4.4. AUTHORIZATION TO EFFECT SUBORDINATION. Each holder of a Security, whether upon original issue or upon transfer, assignment or exchange thereof, authorizes and directs the Trustee on the holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article IV and appoints the Trustee to act as the holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.9 of the Indenture at least thirty (30) days before the expiration of the time to file such claim, the holders of any Parent Senior Indebtedness or their representatives are hereby authorized to file an appropriate claim for and on behalf of the holders of the Securities. SECTION 4.5. NOTICE TO TRUSTEE. During any period for which a demand for payment by Parent pursuant to Article III remains outstanding, Parent shall give prompt written notice in the form of a Parent Officers' Certificate to a Trust Officer of the Trustee having responsibility for the administration of the trust established by the Indenture and to any paying agent of any fact known to Parent which would prohibit the making of any payment of monies to or by the Trustee or any paying agent in respect of the Securities pursuant to the provisions of this Article IV. Notwithstanding the provisions of this Article IV or any other provision of the Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article IV, unless and until a Trust Officer of the Trustee having responsibility for the administration of the trust established by the Indenture shall have received written notice thereof from Parent (in the form of a Parent Officers' Certificate) or a holder or holders of Parent Senior Indebtedness or from any trustee thereof; and before the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided that if on a date not less than three (3) Business Days prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of the principal of, or premium, if any, or interest (including liquidated damages (as defined in the Indenture), if any) on any Security) the Trustee shall not have received, with respect to such monies, the notice provided for in this Section 4.5, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to apply monies received to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. The Trustee shall be entitled to conclusively rely on the delivery to it of a written notice by a person representing himself or herself to be a holder of Parent Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Parent Senior Indebtedness or a trustee on behalf of any such holder or holders. The Trustee shall not be required to make any payment or distribution to or on behalf of a holder of Parent Senior Indebtedness pursuant to this Article IV unless it has received reasonably satisfactory evidence as to the amount of Parent Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article IV. SECTION 4.6. TRUSTEE'S RELATION TO PARENT SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article IV in respect of any Parent Senior Indebtedness at any time held by it, to the same extent as any other holder of Parent Senior Indebtedness, and nothing in this First Supplemental Indenture, in Section 7.11 of the Indenture or elsewhere in the Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Parent Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article IV, and no implied covenants or obligations with respect to the holders of Parent Senior Indebtedness shall be read into the Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Parent Senior Indebtedness. SECTION 4.7. NO IMPAIRMENT OF SUBORDINATION. No right of any present or future holder of any Parent Senior Indebtedness to enforce subordination as provided in this Article IV shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of Parent or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by Parent with the terms, provisions and covenants of the Indenture, regardless of any knowledge thereof with which any such holder may have or otherwise be charged. SECTION 4.8. ARTICLE APPLICABLE TO PAYING AGENTS. If at any time any paying agent other than the Trustee shall have been appointed by the Company and be then acting under the Indenture, the term "Trustee" as used in this Article IV shall (unless the context otherwise requires) be construed as extending to and including such paying agent within its meaning as fully for all intents and purposes as if such paying agent were named in this Article IV in addition to or in place of the Trustee; provided, however, that the first paragraph of Section 4.5 shall not apply to Parent or any Affiliate of Parent if it or such Affiliate acts as paying agent. The Trustee shall not be responsible for the actions or inactions of any other paying agents (including Parent if acting as its own paying agent) and shall have no control of any funds held by such other paying agents. SECTION 4.9. PARENT SENIOR INDEBTEDNESS ENTITLED TO RELY. The holders of Parent Senior Indebtedness (including, without limitation, Designated Parent Senior Indebtedness) shall have the right to rely upon this Article IV. SECTION 4.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. Upon any payment or distribution of assets of Parent referred to in this Article IV, the Trustee and the Holders shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of Parent Senior Indebtedness and other indebtedness of Parent, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article IV. ARTICLE V MISCELLANEOUS AMENDMENTS SECTION 5.1. Section 3.7 is hereby amended as follows: the first, sixth, eighth and tenth references to "the Company" are hereby deleted and replaced with "the Company and Parent". SECTION 5.2. Section 3.8 is hereby deleted in its entirety and replaced with a reference to "[Reserved]". SECTION 5.3. The first, second, third, fourth, fifth and sixth references to "the Company" in Section 4.3 of the Indenture are hereby deleted and replaced with references to "the Company and Parent". SECTION 5.4. Section 9.1 of the Indenture is hereby amended so that the beginning of the first paragraph thereof reads "Without the consent of the Holders of the Securities, the Company when authorized by a Board Resolution, and the Parent when authorized by a Parent Resolution, and the Trustee may". SECTION 5.5. Section 9.2 of the Indenture is hereby amended so that (i) the beginning of the first sentence of the first paragraph thereof reads "The Company when authorized by a Board Resolution, and the Parent when authorized by a Parent Resolution, and the Trustee may", (ii) "or Parent, as the case may be," is inserted after the reference to "the Company" in the second sentence of the first paragraph, (iii) "or Parent Senior Indebtedness" is inserted after all references to "Senior Indebtedness" in the second paragraph and (iv) "or the First Supplemental Indenture" is inserted after the reference to "Section Twelve" in the second paragraph. SECTION 5.6. Sections 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8 are hereby deleted in their entirety and replaced with a reference to "[Reserved]". All references in the Indenture and the Securities to the aforementioned Sections within said Article X of the Indenture shall be deemed to be references to the appropriate Sections of this First Supplemental Indenture. SECTION 5.7. The heading and provisions of Section 12.9 of the Indenture are hereby deleted in their entirety and replaced with a reference to "[Reserved]". ARTICLE VI ACCEPTANCE OF FIRST SUPPLEMENTAL INDENTURE SECTION 6.1. TRUSTEE'S ACCEPTANCE. The Trustee hereby accepts this First Supplemental Indenture and agrees to perform the same under the terms and conditions set forth in the Indenture. ARTICLE VII Miscellaneous Provisions SECTION 7.1. EFFECTIVENESS OF FIRST SUPPLEMENTAL INDENTURE. This First Supplemental Indenture shall be effective as of the Effective Time. In the event the Merger Agreement shall be terminated or the Merger shall otherwise not become effective, this First Supplemental Indenture shall be null and void and without effect. SECTION 7.2. EFFECT OF FIRST SUPPLEMENTAL INDENTURE. Upon the execution and delivery of this First Supplemental Indenture by the Company, Parent and the Trustee, the Indenture shall be supplemented and amended in accordance herewith, and this First Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder heretofore or hereafter authenticated and delivered under the Indenture shall be bound thereby. SECTION 7.3. INDENTURE REMAINS IN FULL FORCE AND EFFECT. Except as supplemented or amended hereby, all other provisions in the Indenture and the Securities, to the extent not inconsistent with the terms and provisions of this First Supplemental Indenture, shall remain in full force and effect. SECTION 7.4. Incorporation of Indenture. All the provisions of this First Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented and amended by this First Supplemental Indenture, shall be read, taken and construed as one and the same instrument. SECTION 7.5. ADDRESS OF PARENT FOR NOTICES. Any notice, request or communication by Parent or the Trustee to the other is duly given if in writing and delivered in person, mailed by first-class mail or by express delivery to the other's address, in the case of the Trustee, stated in Section 13.2 of the Indenture or, in the case of Parent, stated below: Johnson & Johnson One Johnson & Johnson Plaza New Brunswick, NJ 08933 Attention: Treasurer If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. All notices or communications shall be in writing. SECTION 7.6. HEADINGS. The headings of the Articles and Sections of this First Supplemental Indenture are inserted for convenience of reference and shall not be deemed to be a part thereof. SECTION 7.7. COUNTERPARTS. This First Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 7.8. CONFIRMATION AND PRESERVATION OF INDENTURE. The Indenture as supplemented and amended by this First Supplemental Indenture is in all respects confirmed and preserved. SECTION 7.9. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this First Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act that is required under the Trust Indenture Act to be part of and govern any provision of this First Supplemental Indenture, the provision of the Trust Indenture Act shall control. If any provision of this First Supplemental Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the provision of the Trust Indenture Act shall be deemed to apply to the Indenture as so modified or to be excluded by this First Supplemental Indenture, as the case may be. SECTION 7.10. SUCCESSORS. All covenants and agreements in this First Supplemental Indenture by the Company and Parent shall be binding upon and accrue to benefit of their respective successors. All covenants and agreements in this First Supplemental Indenture by the Trustee shall be binding upon and accrue to the benefit of its successors. SECTION 7.11. SEPARABILITY CLAUSE. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 7.12. BENEFITS OF FIRST SUPPLEMENTAL INDENTURE. Nothing in this First Supplemental Indenture, the Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder and thereunder and the holders, any benefit of any legal or equitable right, remedy or claim under this First Supplemental Indenture, the Indenture or the Securities. SECTION 7.13. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals herein contained are made by the Company and Parent, and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representations as to the validity or sufficiency of this First Supplemental Indenture. SECTION 7.14. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. In entering into this First Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability or affording protection to the Trustee, whether or not elsewhere herein so provided, and the Trustee shall not be under any responsibility to determine the correctness of any provisions contained in this First Supplemental Indenture relating to the amount of cash receivable by Holders upon the conversion of their Securities. SECTION 7.15. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, SHALL GOVERN THIS FIRST SUPPLEMENTAL INDENTURE. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, all as of the day and year first above written. SCIOS INC., by /s/ Matthew R. Hooper -------------------------------- Name: Matthew R. Hooper Title: Vice President and General Counsel JOHNSON & JOHNSON, by /s/ John A. Papa --------------------------------- Name: John A. Papa Title: Treasurer WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee, by /s/ Robert Schneider -------------------------------- Name: Robert Schneider Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----