Item 1.01. Entry into a Material Definitive Agreement
On May 15, 2018, Zoetis Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Abaxis, Inc., a California corporation (“Abaxis”), and Zeus Merger Sub, Inc., a California corporation and an indirect wholly owned subsidiary of the Company (“Merger Sub”). The Merger Agreement provides for, among other things, the merger of Merger Sub with and into Abaxis, with Abaxis continuing as the surviving corporation and a wholly owned subsidiary of the Company (the “Merger”).
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of common stock, no par value, of Abaxis (the “Abaxis Common Stock”) (other than shares, if any, held by Abaxis, the Company, Merger Sub or any of their subsidiaries and shares with respect to which dissenters rights have been properly demanded in accordance with the Corporations Code of the State of California) will be converted into the right to receive $83.00 in cash, without interest, per share (the “Merger Consideration”).
Subject to the terms and conditions of the Merger Agreement, certain Abaxis time- and performance-based restricted stock unit awards will vest automatically upon the occurrence of the Effective Time in accordance with their existing terms and will be cancelled and automatically converted into the right to receive the Merger Consideration in respect of each share of Abaxis Common Stock underlying such awards. Subject to the terms and conditions of the Merger Agreement, all other Abaxis time- and performance-based restricted stock unit awards will be cancelled and automatically converted at the Effective Time into time-vesting restricted stock unit awards with respect to shares of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”), with the number of underlying shares adjusted to reflect an exchange ratio based on the closing prices of shares of Company Common Stock and Abaxis Common Stock for the ten full trading days before the closing of the Merger, and on substantially the same terms and conditions (including the time-based vesting schedule) as were applicable to such Abaxis restricted stock unit awards immediately prior to the Effective Time, except that any performance goals underlying such Abaxis performance-based restricted stock unit awards will be deemed satisfied as of the Effective Time.
The Merger Agreement contains customary representations, warranties and covenants, including, among others, covenants requiring Abaxis to conduct its business in the ordinary course consistent with past practice during the period between the execution of the Merger Agreement and the Effective Time and to use reasonable best efforts to obtain required government approvals, subject to certain exceptions. The Merger Agreement also includes covenants requiring Abaxis (1) not to solicit, or enter into discussions with third parties relating to, alternative business combination transactions during the period between the execution of the Merger Agreement and the Effective Time, subject to certain exceptions, and (2) to call and hold a special meeting of the Abaxis shareholders to approve the Merger Agreement, the Merger and the principal terms thereof and, subject to certain exceptions, not to withdraw, amend or modify in a manner adverse to the Company the recommendation of the Abaxis Board that the Abaxis shareholders approve the Merger Agreement, the Merger and the principal terms thereof.
The completion of the Merger is subject to certain conditions, including (1) approval of the Merger Agreement, the Merger and the principal terms thereof by holders of a majority of the outstanding shares of Abaxis Common Stock, (2) expiration or early termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, and receipt of certain other regulatory approvals and (3) the absence of any order, injunction or other legal restraint preventing the completion of the Merger. Each party’s obligation to complete the Merger is also subject to certain additional conditions, including (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) the absence of a material adverse effect with respect Abaxis and (c) performance in all material respects by the other party of its obligations under the Merger Agreement.
The Merger Agreement contains certain termination rights, including (1) the right of either party to terminate the Merger Agreement if the Merger does not occur by November 15, 2018 (which date the Company may extend by six months until May 15, 2019 in order to receive the required regulatory approvals) (such date, as may be extended, the “Outside Date”), (2) the right of Abaxis to terminate the Merger Agreement to accept a superior proposal for an alternative business combination (so long as Abaxis complies with certain notice and other requirements under the Merger Agreement) and (3) the right of the Company to terminate due to a change of recommendation by the Abaxis Board. Upon termination of the Merger Agreement by Abaxis or the Company upon specified conditions, a termination fee of $70,000,000 may be payable by Abaxis to the Company.
Additionally, the Merger Agreement provides that (i) a termination fee of $60,000,000 may be payable by the Company to Abaxis upon certain terminations of the Merger Agreement if the parties fail to obtain the required regulatory approvals and the Company does not exercise its right to extend the Outside Date by 6 months, and (ii) a termination fee of $120,000,000 may be payable by the Company to Abaxis upon certain terminations of the Merger Agreement if Abaxis exercised its right to extend the Outside Date by 6 months and the parties fail to obtain the required regulatory approvals.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (1) will not survive completion of the Merger, unless otherwise specified therein, and (2) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding the Company or Abaxis, their respective affiliates or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company, Abaxis, their respective affiliates or their respective businesses, the Merger Agreement and the Merger that will be contained in, or incorporated by reference into, the proxy statement of Abaxis, as well as in the Forms 10-K, Forms 10-Q and other filings that each of the Company and Abaxis make with the Securities and Exchange Commission.