Kos Pharma - Abbott Labs

Kos Pharmaceuticals, Inc. (KOSP)
Abbott Laboratories (ABT)
$3.7B Two-Step Merger Closed

Summary

Big pharma company acquires biotech

Two-step merger at $78 per share; $3.7B, net

KOSP has a drug that can raise good cholesterol levels

Business description

Announced 11.06.06

Closed 12.15.06

Developments

Majority of KOSP shares have been locked-up

See Deal Protection below

Clears HSR Act review 12.04.06
Minimum tender condition satisfied (91.4% acquired) 12.13.06

Advisors

Financial

KOSP: Greenhill

Legal

ABT: Covington & Burling
KOSP: Cravath / Holland Knight / Kramer Levin

Deal Terms

Offer to purchase

Top-up option

Merger agreement §2.2
Offer to purchase summary At page 30

Merger Agreement

General

EDGAR filing
Hyperlinked version
Detailed hyperlinked index follows

Article I The Offer and the Merger

1.1 The Offer
1.2 Company Actions
1.3 Treatment of Options; MJ Warrant
1.4 The Merger
1.5 Closing; Effective Time
1.6 Effects of the Merger
1.7 Articles of Incorporation; Bylaws
1.8 Directors and Officers

Article II Effect of the Merger on the Capital Stock of the
Constituent Corporations

2.1 Conversion of Securities
2.2 Treatment of ESPP, Warrants, Etc
2.3 Surrender of Shares
2.4 Withholding Taxes

Article III Representations and Warranties of the
Company

3.1 Organization and Qualification; Subsidiaries; Joint
Ventures
3.2 Articles of Incorporation and Bylaws
3.3 Capitalization
3.4 Authority
3.5 No Conflict; Required Filings and Consents
3.6 Compliance
3.7 Sec Filings; Financial Statements
3.8 Absence of Certain Changes or Events
3.9 Absence of Litigation
3.10 Employee Benefit Plans
3.11 Labor and Employment Matters
3.12 Insurance
3.13 Properties
3.14 Tax Matters
3.15 Information Supplied
3.16 Opinion of Financial Advisors
3.17 Brokers
3.18 Takeover Statutes
3.19 Intellectual Property
3.20 Environmental Matters
3.21 Contracts
3.22 Affiliate Transactions

Article IV Representations and Warranties of Parent and
Merger Sub

4.1 Organization
4.2 Authority
4.3 No Conflict; Required Filings and Consents
4.4 Information Supplied
4.5 Brokers
4.6 Operations of Merger Sub
4.7 Ownership of Shares
4.8 Absence of Litigation
4.9 Available Funds

Article V Conduct of Business Pending the Merger

5.1 Conduct of Business of the Company Pending the
Merger

Article VI Additional Agreements

6.1 Shareholders Meeting
6.2 Proxy Statement
6.3 Access to Information; Confidentiality
6.4 Acquisition Proposals
6.5 Employment and Employee Benefits Matters
6.6 Directors and Officers Indemnification and Insurance
6.7 Further Action; Efforts
6.8 Public Announcements
6.9 Notification
6.10 Directors
6.11 Transfer Taxes
6.12 Anti-takeover Statute
6.13 Rule 14d-10(c) Matters
6.14 NDA No. 20-381

Article VII Conditions of Merger

7.1 Each Party
7.2 Parent and Merger Sub

Article VIII Termination, Amendment and Waiver

8.1 Termination
8.2 Effect of Termination
8.3 Fees and Expenses
8.4 Amendment
8.5 Waiver

Article IX General Provisions

9.1 Non-survival of Representations, Warranties,
Covenants and Agreements
9.2 Notices
9.3 Certain Definitions
9.4 Severability
9.5 Entire Agreement; Assignment
9.6 Parties in Interest
9.7 Governing Law
9.8 Headings
9.9 Counterparts
9.10 Specific Performance; Jurisdiction
9.11 Parent Guarantee
9.12 Interpretation
9.13 Waiver of Jury Trial

Other Agreements

Employment arrangements

SEC Filings

Schedule TO filings

Schedule TO 11.14.06

Exhibits

Amendment #1 12.04.06

HSR Act clearance

Schedule 14D-9 filings

Schedule 14D-9 11.14.06

Letter to stockholders

Schedule 13 filings

Schedule 13D 11.15.06

Amendment #1 12.13.06

Announces tender of a majority of shares
The shares accepted for payment, together with the shares acquired in a concurrent transaction, represent approximately 91.4 percent of Koss outstanding common shares.

Deal Protection

Majority of KOSP shares have been locked-up

Shareholders agreement

Co-founder agrees to tender 35% of shares

Stock purchase agreement

Entity controlled by another co-founder agrees to sell 18%

Thus, minimum tender condition should be satisfied

Unless Kos board changes its recommendation on offer
Which would trigger requirement that deal be approved by a majority of the minority

See Lock-up Voting Agreements

No shop covenant

Merger agreement §6.4

Break-up fee

$126mm, plus out-of-pocket expenses
Agreement §8.3

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