EXHIBIT (a)(6)(J)
MEMORANDUM OF UNDERSTANDING
The undersigned parties to the actions filed in the Court of
Chancery of the State of Delaware in and for New Castle County (the "Court"),
consolidated under the caption IN RE EON LABS, INC. SHAREHOLDERS LITIGATION,
Consolidated C.A. No. 1134-N (the "Action"), have reached an agreement in
principle providing for the settlement of the Action on the terms and subject to
the conditions set forth below:
WHEREAS, the consolidated amended complaint (the "Amended
Complaint") in the Action asserts purported claims on behalf of plaintiffs Ellen
Wiehl, Jason Hung, Erste Sparinvest Kapitalanlagegesellschaft MBH, Peter T.
Calcagno, Robert Kemp, and Paulena Partners (collectively, "Plaintiffs") and a
putative class of all public stockholders of Eon Labs, Inc. ("Eon") against the
following defendants: Eon; Eon directors Thomas Strungmann, Bernhard Hampl, Mark
R. Patterson, Frank F. Beelitz and Douglas M. Karp (collectively, the "Eon
Director Defendants"); Eon's controlling shareholder, Santo Holding
(Deutschland) GmbH ("Santo"); and Novartis AG, Novartis Corporation ("Novartis
U.S.") and Zodnas Acquisition Corporation ("Zodnas") (collectively, the
"Defendants");
WHEREAS, on February 11, 2005, Eon and Novartis entered into a
Confidentiality Agreement that provides, among other things, that during the
period from February 11, 2005 through February 11, 2006 (the "Restricted
Period"), without the prior approval of a majority of the Eon Board of Directors
and a majority of the Special Committee of the Eon Board of Directors, Novartis
and its affiliates will not, subject to certain additional exceptions, acquire
any Eon securities other than the shares of Eon common stock owned by
Santo, a limited liability company owned by members of the Strungmann family
(the "Santo Shares");
WHEREAS, on February 16-17, 2005, Novartis AG and one of its
subsidiaries and members of the Strungmann family and certain of their
affiliates entered into a Share and Partnership Interest Sale and Transfer
Agreement (the "Hexal Sale Agreement"), pursuant to which the Novartis
subsidiary agreed to purchase 100% of the Strungmann family's equity interest in
Hexal AG, one of the leading generic pharmaceutical companies in Europe;
WHEREAS, on February 20, 2005, Novartis U.S. and Santo entered
into the Agreement for Purchase and Sale of Stock of Eon Labs, Inc. (the "Santo
Sale Agreement"), pursuant to which Novartis U.S. agreed to purchase the Santo
Shares, which shares represent approximately 67.5% of the issued and outstanding
common stock of Eon;
WHEREAS, on February 20, 2005, Eon, Novartis U.S. and Zodnas
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which Zodnas has commenced a tender offer (the "Tender Offer") to purchase
all of the outstanding shares of Eon common stock other than the Santo Shares
(the "Public Shares") at $31 per share, and, if a majority of the Public Shares
are purchased in the Tender Offer, to merge Zodnas with and into Eon in a
transaction in which the remaining holders of Eon common stock would receive $31
per share (the "Merger");
WHEREAS, the Merger Agreement amended the Confidentiality
Agreement to permit Novartis U.S. and Zodnas, in the event that less than a
majority of the Public Shares are tendered and accepted for purchase in the
Tender Offer, thereafter to make additional acquisitions of Public Shares that
are voluntary to the sellers through open market purchases or
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tender offers, but to prohibit Novartis U.S. and Zodnas from effecting a merger
transaction with Eon unless (i) a majority of the remaining outstanding Public
Shares vote in favor of such a merger transaction or (ii) Novartis U.S. and its
subsidiaries own, at that time, at least 90% of Eon's outstanding common stock,
provided that the consideration to be received by the holders of Public Shares
in any merger transaction described in (ii) above will be at least $31 per
share;
WHEREAS, on May 23, 2005, Zodnas commenced the Tender Offer
pursuant to the Merger Agreement;
WHEREAS, on May 23, 2005, Eon filed with the Securities and
Exchange Commission and disseminated to Eon shareholders a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
in response to the Tender Offer;
WHEREAS, on May 27, 2005, Plaintiffs filed the Amended
Complaint in the Action seeking, among other things, preliminary and permanent
injunctive relief, and monetary damages on the alleged grounds that the
Defendants owed and breached fiduciary duties of loyalty and due care to Eon's
public shareholders in connection with their negotiation, entry into, or
approval of the Merger Agreement, the Santo Sale Agreement, and the Hexal Sale
Agreement, and that Defendants owed and breached a duty of disclosure in
connection with the Schedule 14D-9;
WHEREAS, on May 27, 2005, Plaintiffs filed a motion for
preliminary injunction in the Action, seeking an order preliminarily enjoining
Defendants from consummating the Tender Offer and the Merger;
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WHEREAS, the parties thereafter engaged in expedited discovery
proceedings in the Action, including the production of hundreds of thousands of
pages of documents and the depositions of seven witnesses, including four of
Eon's directors, Thomas Strungmann, Frank Beelitz, Mark R. Patterson and Douglas
M. Karp, as well as representatives of Novartis, Goldman Sachs International and
Merrill Lynch, Pierce, Fenner & Smith Incorporated;
WHEREAS, on July 1, 2005, in response to Plaintiffs' opening
brief in support of their motion for a preliminary injunction, Eon filed an
amendment to the Schedule 14D-9 in which Eon disclosed certain additional facts
that Plaintiffs contended should have been disclosed in the Schedule 14D-9;
WHEREAS, following negotiations between counsel for the
parties in the Action, an agreement in principle has been reached providing for
the settlement of the Action on the terms and conditions set forth below; and
WHEREAS, counsel for the parties believe that the proposed
settlement (the "Settlement") is in the best interests of the parties and of Eon
and its public stockholders;
IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS:
1. Plaintiffs' counsel have been offered the opportunity to review the Schedule
14D-9 and amendments thereto filed by Eon in response to the Tender Offer and to
suggest further additions thereto, and the Schedule 14D-9 has been amended in
certain respects in response to Plaintiffs' counsel's suggestions.
2. Novartis has extended the expiration date of the Tender Offer until at least
July 15, 2005 and has publicly announced such extension in a press release that
informs Eon's
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shareholders that the Schedule 14D-9 has been supplemented and that Eon
shareholders' right to withdraw tendered shares will expire on July 15, 2005,
unless otherwise extended.
3. The last sentence of Section 1.1(b) of the Merger Agreement will be
deemed modified to provide as follows:
On the Acceptance Date, the Confidentiality Agreement, dated as of
February 11, 2005, by and between Novartis and the Company (the
"CONFIDENTIALITY AGREEMENT") shall be amended such that the fifth
paragraph thereof shall permit Novartis and Merger Sub to make
acquisitions of Public Shares that are voluntary to the holders of
Public Shares (such as by means of legally permissible open market
purchases or tender offers), but shall not permit Novartis to
cause a merger transaction (or other business combination) to be
effected which would cancel Public Shares unless (i) a majority of
the Public Shares outstanding at that time votes in favor of such
a transaction and the Company shall have received an opinion of an
independent, nationally recognized investment banking firm that
the consideration offered in such transaction is fair to the
holders of the Public Shares from a financial point of view, or
(ii) Novartis and its Subsidiaries shall, at that time, own at
least 90% of the outstanding Company Common Stock, provided that
the consideration to be received by the holders of Public Shares
in any such transaction described in (i) or (ii) above shall be at
least equal to the Offer Price per Public Share.
4. The Restricted Period as defined in the Confidentiality Agreement shall be
defined as the period from February 11, 2005 through August 11, 2006.
5. Novartis U.S. and Zodnas shall use commercially reasonable efforts, following
the Acceptance Date (as defined in the Merger Agreement) and until the earlier
of (i) the Effective Time (as defined in the Merger Agreement) or (ii) August
11, 2006, to keep Eon's common stock quoted for trading on the NASDAQ National
Market, as long as Eon satisfies the NASDAQ National Market listing standards
(other than standards entirely within Eon's control); provided, however, that
nothing in the preceding clause shall prohibit Novartis from making voluntary
acquisitions of Public Shares in accordance with paragraph 3 above, and
provided,
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further that in connection with any such voluntary acquisitions of Public Shares
Novartis shall take into account the potential for such transactions to result
in Eon's inability to satisfy NASDAQ National Market listing standards.
6. The parties to the Action will attempt in good faith to agree upon and
execute an appropriate stipulation of settlement (the "Stipulation") and such
other documentation as may be required in order to obtain final Court approval
of the Settlement and dismissal of the Action upon the terms set forth in this
Memorandum of Understanding (collectively, the "Settlement Documents"). The
Stipulation will expressly provide, INTER ALIA, for: (a) certification of a non
opt-out class for settlement purposes pursuant to Chancery Court Rules 23(b)(1)
and (b)(2) on behalf of a class consisting of all public stockholders of Eon
(other than the Defendants and their affiliates, successors in interest,
predecessors, representatives, trustees, executors, administrators, heirs,
assigns or transferees, immediate and remote, and any person or entity acting
for or on behalf of, or claiming under any of them, and each of them) during the
period from February 20, 2005 through the later of (i) the expiration of the
Tender Offer (including any subsequent offering period after the Expiration Date
in accordance with Section 1.1(b) of the Merger Agreement) or (ii) the Effective
Time of the Merger (as defined in Section 2.2 of the Merger Agreement) (the
"Class"); (b) entry of a judgment of dismissal with prejudice and on the merits;
and (c) a complete release and settlement of all claims that Plaintiffs and the
members of the Class (in their capacities as Eon stockholders) may have against
any of the Defendants and their respective families, predecessors, successors,
parent entities, subsidiaries, affiliates, general or limited partners or
partnerships, and agents (including, without limitation, any past or present
officers, directors, stockholders, employees, advisors, accountants, attorneys,
consultants, investment bankers or commercial bankers of any of the foregoing)
and any of their
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respective heirs, executors, administrators, trustees, personal representatives,
estates, successors or assigns, which have been or could have been asserted in
any tribunal relating to any of the subject matters described in the Amended
Complaint in the Action (the "Released Claims"). The Released Claims will
include all claims, derivative or direct, whether based on federal, state,
local, statutory, common, foreign or international law, rule or regulation,
whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated,
matured or unmatured, and known or unknown, arising out of or related to: (i)
any of the subject matters described in the Amended Complaint, Plaintiffs'
motion for a preliminary injunction or any other submission filed by Plaintiffs
in the Action; (ii) the entry by Eon and Novartis into the Merger Agreement, the
Eon Director Defendants' approval thereof and all actions taken pursuant
thereto, including the Tender Offer and the Merger; (iii) the entry by Novartis
and the Strungmann family and their affiliates into the Hexal Sale Agreement; or
(iv) the entry by Novartis U.S. and Santo into the Santo Sale Agreement,
including claims relating to any of the facts, negotiations, transactions,
agreements, disclosures or omissions with respect to any of the matters
described in (i), (ii), (iii) or (iv) of this paragraph 6; provided, however,
that the Released Claims shall not include any claims for statutory appraisal
pursuant to Section 262 of the Delaware General Corporation Law. The Stipulation
will further provide that: (a) the Defendants have denied and continue to deny
that they have committed or attempted to commit any violations of law or
breaches of duty to Eon or its stockholders or otherwise and that the Defendants
are entering into the Stipulation because the proposed Settlement as described
above would eliminate the burden and expense of further litigation, and (b)
Plaintiffs' entry into the Proposed Settlement is not an admission as to the
lack of merit of any of the claims asserted in the Action. If any claims which
are or would be subject to the release and dismissal contemplated by the
Stipulation are asserted against any
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person in any court prior to final approval
of the Settlement, Plaintiffs shall join, at the request of Defendants in any
motion to dismiss or stay such proceedings.
7. The parties to the Action will present the Settlement Documents to the Court
for approval as soon as practicable following execution of this Memorandum of
Understanding, and will use their best efforts to obtain final Court approval of
the Settlement and the dismissal of the Action with prejudice as to all claims
asserted or which could have been asserted against Defendants in the Action and
without costs to any party (other than counsel fees and expenses as provided in
paragraph 9 below). As used herein, "final Court approval" of the Settlement
means that the Court has entered an order approving the Settlement and that such
order is finally affirmed on appeal or is no longer subject to appeal.
8. The consummation of the Settlement is subject to: (a) the drafting and
execution of the Settlement Documents; (b) final Court approval (as defined in
paragraph 7 above) of the Settlement and dismissal of the Action with prejudice
and without awarding costs to any party (except as provided in paragraph 9
below); and (c) Novartis's acceptance of shares for payment under the Tender
Offer. This Memorandum of Understanding shall be null and void and of no force
and effect should any of these conditions not be met and, in that event, this
Memorandum of Understanding shall neither be deemed to prejudice in any way the
positions of the parties with respect to the Action nor entitle any party to
recover any costs or expenses incurred in connection with the implementation of
this Memorandum of Understanding.
9. Following the negotiation of the Settlement terms referenced above, the
parties negotiated at arm's length and in good faith the attorneys' fees, costs
and expenses to be awarded to Plaintiffs' counsel subject to approval by the
Court. Plaintiffs' counsel intend to
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apply to the Court in the Action for an award of attorneys' fees, and
reimbursement of expenses and disbursements, in an aggregate amount of no more
than $850,000 to be paid solely by Zodnas, and Defendants agree not to oppose
such application. The amount of fees and expenses awarded by the Court shall be
paid to the account of Milberg Weiss Bershad & Schulman, LLP ("Milberg Weiss"),
as escrow agent for Plaintiffs' counsel, ten (10) days (or the first business
day following the 10th day if not a business day) following the Court's approval
of the Settlement and fee award. The funds in escrow shall not be disbursed, but
shall accrue interest payable to Plaintiffs' counsel until the fee award becomes
final by operation of law or exhaustion of appeals. To the extent such fee award
is reduced on appeal, Milberg Weiss shall refund to Zodnas the amount so reduced
and any proportionate amount of interest paid thereon.
10. Miscellaneous: (a) this Memorandum of Understanding may be executed in
counterparts by any of the signatories hereto, including by fax or telecopy, and
as so executed shall constitute one agreement; (b) this Memorandum of
Understanding and the Settlement contemplated by it shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
Delaware conflict of laws rules; (c) this Memorandum of Understanding shall be
binding upon and inure to the benefit of the parties and their respective
agents, executors, heirs, successors and assigns, subject to the conditions set
forth herein; (d) each of the attorneys executing this Memorandum of
Understanding has been duly empowered and authorized by his/her respective
client(s) to do so; (e) Plaintiffs and their counsel represent and warrant that
none of the Released Claims has been assigned, encumbered or in any manner
transferred in whole or in part; (f) except as provided herein, the Defendants,
shall bear no expenses, costs, damages or fees alleged or incurred by any named
plaintiff, any member of the Class or their respective attorneys, experts,
advisors, agents or representatives; (g) the
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provisions contained in this Memorandum of Understanding shall not be deemed a
presumption, concession or admission by any of the Defendants, of any breach of
duty, liability, default or wrongdoing as to any facts or claims alleged or
asserted in the Action, or in any other actions or proceedings, or a concession
or admission by Plaintiffs as to the lack of merit of any of the claims alleged
or asserted in the Action, and shall not be interpreted, construed, deemed,
invoked, offered or received in evidence or otherwise used by any person in the
Action or in any other action or proceeding of any nature whatsoever; and (h)
this Memorandum of Understanding may be modified or amended only by a writing
signed by the signatories hereto.
Dated: July 8, 2005
MILBERG WEISS BERSHAD & SCHULMAN LLP
By: /s/ Seth D. Rigrodsky
---------------------------------
Seth D. Rigrodsky
919 N. Market Street, Suite 411
Wilmington, Delaware 19801
(302) 984-0597
-and-
Steven G. Schulman
One Pennsylvania Plaza
New York, NY 10019
Lead Counsel for Plaintiffs
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POTTER ANDERSON & CORROON LLP
By: /s/ Matthew E. Fischer
---------------------------------
Donald J. Wolfe, Jr.
Matthew E. Fischer
1313 N. Market Street
Wilmington, DE 19801
(302) 984-6015
Attorneys for Defendants Douglas M.
Karp and Mark R. Patterson
THE BAYARD FIRM
By: /s/ Kurt M. Heyman
---------------------------------
Vernon R. Proctor
Kurt M. Heyman
222 Delaware Avenue, Suite 900
Wilmington, DE 19801
(302) 429-4235
Attorneys for Defendants Eon Labs,
Inc. and Dr. Bernhard Hampl
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ASHBY & GEDDES
By: /s/ Stephen E. Jenkins
---------------------------------
Stephen E. Jenkins
Richard I.G. Jones, Jr.
222 Delaware Avenue
Wilmington, DE 19801
(302) 654-1888
Attorneys for Defendants Frank F.
Beelitz, Thomas Strungmann and Santo
Holdings (Deutschland) GmBH
RICHARDS, LAYTON & FINGER, P.A.
By: /s/ Gregory P. Williams
---------------------------------
Gregory P. Williams
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Attorneys for Novartis Defendants
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