<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
August 13, 2000
by and
among
PATHOGENESIS CORPORATION,
CHIRON CORPORATION
and
PICARD ACQUISITION CORP.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
THE OFFER
<TABLE>
Page
----
<S> <C> <C>
Section 1.01. The Offer............................... 1
Section 1.02. Company Actions......................... 3
Section 1.03. Directors of the Company................ 4
</TABLE>
ARTICLE II
THE MERGER
<TABLE>
<S> <C> <C>
Section 2.01. The Merger.............................. 5
Section 2.02. Closing................................. 5
Section 2.03. Effective Time.......................... 5
Section 2.04. Effects of the Merger................... 5
Section 2.05. Certificate of Incorporation and By-laws 5
Section 2.06. Directors............................... 6
Section 2.07. Officers................................ 6
Section 2.08. Effect on Capital Stock................. 6
Section 2.09. Exchange of Certificates................ 7
Section 2.10. Options................................. 8
Section 2.11. Warrants................................ 10
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
<TABLE>
<S> <C> <C>
Section 3.01. Organization and Qualification.......... 10
Section 3.02. Authority; Non-Contravention; Approvals. 10
Section 3.03. Interim Operations of Merger Sub........ 12
Section 3.04. Capital Resources....................... 12
Section 3.05. Offer Documents; Proxy Statement........ 12
Section 3.06. Ownership of Capital Stock.............. 13
</TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<S> <C> <C>
Section 4.01. Organization and Qualification.......... 13
Section 4.02. Capitalization.......................... 13
Section 4.03. Subsidiaries............................ 15
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.04. Authority; Non-Contravention; Approvals... 15
Section 4.05. Reports and Financial Statements.......... 16
Section 4.06. Absence of Undisclosed Liabilities........ 17
Section 4.07. Absence of Certain Changes or Events...... 17
Section 4.08. Litigation................................ 17
Section 4.09. Offer Documents; Proxy Statement.......... 18
Section 4.10. No Violation of Law....................... 18
Section 4.11. Compliance with Agreements................ 18
Section 4.12. Taxes..................................... 19
Section 4.13. Employee Benefit Plans; ERISA............. 19
Section 4.14. Labor Controversies....................... 21
Section 4.15. Environmental Matters..................... 21
Section 4.16. Intellectual Property..................... 22
Section 4.17. Opinion of Financial Advisor.............. 23
Section 4.18. Brokers and Finders....................... 23
Section 4.19. Insurance................................. 23
Section 4.20. Takeover Statutes......................... 23
Section 4.21. ESPP...................................... 23
</TABLE>
ARTICLE V
COVENANTS
<TABLE>
<S> <C> <C>
Section 5.01. Conduct of Business Pending the Merger.... 23
Section 5.02. Restrictions on Parent and the Company.... 25
Section 5.03. No Solicitation........................... 26
Section 5.04. Access to Information; Confidentiality.... 27
Section 5.05. Merger Sub................................ 28
Section 5.06. Employee Benefits......................... 28
Section 5.07. Proxy Statement........................... 29
Section 5.08. Company Meeting........................... 29
Section 5.09. Public Announcement....................... 30
Section 5.10. Expenses and Fees......................... 30
Section 5.11. Agreement to Cooperate.................... 30
Section 5.12. Directors' and Officers' Indemnification.. 31
Section 5.13. Section 16 Matters........................ 32
Section 5.14. Further Assurances........................ 33
</TABLE>
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. Conditions to the Obligations of Each Party.. 33
-ii-
<PAGE>
ARTICLE VII
TERMINATION
Section 7.01. Termination 33................................... 33
ARTICLE VIII
MISCELLANEOUS
<TABLE>
<S> <C> <C>
Section 8.01. Effect of Termination........................... 36
Section 8.02. Non-Survival of Representations and Warranties.. 37
Section 8.03. Notices......................................... 37
Section 8.04. Interpretation.................................. 38
Section 8.05. Miscellaneous................................... 38
Section 8.06. Counterparts.................................... 39
Section 8.07. Amendments; Extensions.......................... 39
Section 8.08. Entire Agreement................................ 39
Section 8.09. Severability.................................... 39
Section 8.10. Specific Performance............................ 40
Section 8.11. No Admission.................................... 40
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 13, 2000 (this
"Agreement"), by and among Chiron Corporation, a Delaware corporation
("Parent"), Picard Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent ("Merger Sub"), and PathoGenesis Corporation, a Delaware
corporation (the "Company").
WHEREAS, the respective boards of directors of each of Parent, Merger
Sub and the Company have approved the acquisition of the Company by Parent on
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, Parent proposes to cause Merger Sub
to make a tender offer (as it may be amended from time to time as permitted
under this Agreement (the "Offer")) to purchase all the outstanding shares of
common stock, par value $0.001, of the Company, together with the associated
Company Rights (as defined herein) (the "Company Common Stock"), at a purchase
price of $38.50 per share (such price, or any greater amount paid per share of
Company Common Stock pursuant to the Offer, herein referred to as the "Offer
Price"), net to the seller in cash, without interest on the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, the respective boards of directors of each of Parent, Merger
Sub and the Company have approved the merger of Merger Sub with and into the
Company following the consummation of the Offer, on the terms and subject to the
conditions set forth in this Agreement, whereby each issued share of Company
Common Stock not owned by Parent, Merger Sub or the Company, other than the
Appraisal Shares (as defined herein), shall be converted into the right to
receive the price per share paid pursuant to the Offer; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE I
THE OFFER
Section 1.01. The Offer. (a) Subject to the conditions of this
Agreement and provided that this Agreement shall not have been terminated in
accordance with its terms pursuant to Article VII hereof and none of the events
set forth in paragraphs (a) through (e) of Exhibit A hereto shall have occurred
or be existing, as promptly as reasonably practicable but in no event later than
six business days after the date of the public announcement of this Agreement
Merger Sub shall, and Parent shall cause Merger Sub to, commence the Offer
within the meaning of the applicable rules and regulations of the Securities and
Exchange Commission (the "SEC"). The obligations of Merger Sub to, and of
Parent to cause Merger Sub to, accept for payment, and pay for, any shares of
Company Common Stock tendered pursuant to the Offer are subject to the
<PAGE>
conditions set forth in Exhibit A. The initial expiration date of the Offer
shall be the 20th business day following the commencement of the Offer. Merger
Sub expressly reserves the right to waive any condition to the Offer or modify
the terms of the Offer, except that, without the written consent of the Company,
Merger Sub shall not (i) reduce the number of shares of Company Common Stock
subject to the Offer, (ii) reduce the price per share of Company Common Stock to
be paid pursuant to the Offer, (iii) change or waive the Minimum Tender
Condition (as defined in Exhibit A), add to the conditions set forth in Exhibit
A or modify any condition set forth in Exhibit A in any manner adverse to the
holders of Company Common Stock, (iv) except as provided below in this Section
1.01(a), extend the Offer, (v) change the form of consideration payable in the
Offer or (vi) otherwise amend the Offer in any manner adverse to the holders of
Company Common Stock. Notwithstanding the foregoing, Merger Sub may (but shall
not be obligated to), without the consent of the Company, (A) extend the Offer
for one or more periods of time (which, without the written consent of the
Company, shall not exceed ten days per extension) that Merger Sub reasonably
believes are necessary to cause the conditions of the Offer set forth herein to
be satisfied, if at the scheduled expiration date of the Offer any of the
conditions to Merger Sub's obligation to purchase shares of Company Common Stock
are not satisfied, until such time as such conditions are satisfied or waived,
(B) extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC or the staff thereof applicable to the
Offer or (C) extend the Offer on one or more occasions for an aggregate period
of not more than ten business days if the Minimum Tender Condition has been
satisfied but fewer than 90% of the Company Common Shares have been validly
tendered and not withdrawn. Parent and Merger Sub agree that if all of the
conditions to the Offer are not satisfied on any scheduled expiration date of
the Offer then Merger Sub shall from time to time and on each such occurrence
extend the Offer for a period of time (which, without the written consent of the
Company, shall not exceed ten days per extension) that Merger Sub reasonably
believes is necessary to cause the conditions of the Offer set forth herein to
be satisfied until such conditions are satisfied or waived, provided that, so
long as Parent and Merger Sub shall have complied with their obligations under
this Agreement, Merger Sub shall not be required to extend the Offer beyond the
Drop Dead Date (as defined in Section 7.01(b)). Merger Sub may, with the
written consent of the Company, elect to provide a subsequent offering period
for the Offer in accordance with Rule 14d-11 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), following its acceptance for payment of
shares of Company Common Stock in the Offer. On the terms and subject to the
conditions of the Offer and this Agreement, promptly after expiration of the
Offer, Merger Sub shall, and Parent shall cause Merger Sub to, accept for
payment and purchase all shares of Company Common Stock validly tendered and not
withdrawn pursuant to the Offer that Merger Sub is permitted to accept and pay
for under applicable law.
(b) On the date of commencement of the Offer, Parent and Merger Sub
shall file with the SEC, and cause to be disseminated to the Company's
stockholders, as and to the extent required by applicable Federal securities
laws, a Tender Offer Statement on Schedule TO with respect to the Offer, which
shall contain an offer to purchase and a related letter of transmittal and
summary advertisement (such Schedule TO and the documents included therein
pursuant to which the Offer will be made, together with any supplements or
amendments thereto, the "Offer Documents"). Each of Parent, Merger Sub and the
Company shall promptly correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and each of Parent
-2-
<PAGE>
and Merger Sub shall take all steps necessary to amend or supplement the Offer
Documents and to cause the Offer Documents as so amended or supplemented to be
filed with the SEC and the Offer Documents as so amended or supplemented to be
disseminated to the Company's stockholders, in each case as and to the extent
required by or deemed advisable under applicable Federal securities laws. The
Company and its counsel shall be given reasonable opportunity to review and
comment upon the Offer Documents prior to their filing with the SEC or
dissemination to the stockholders of the Company. Parent and Merger Sub shall
provide to the Company and its counsel in writing any written comments (and
orally, any oral comments), Parent, Merger Sub or their counsel may receive from
the SEC or its staff with respect to the Offer Documents promptly after the
receipt of such comments and shall consult with the Company and its counsel
prior to responding to any such comments.
(c) Parent shall provide or cause to be provided to Merger Sub on a
timely basis the funds necessary to purchase any shares of Company Common Stock
that Merger Sub becomes obligated to purchase pursuant to the Offer.
Section 1.02. Company Actions. (a) The Company hereby approves of and
consents to the Offer, the Merger and the other transactions contemplated by
this Agreement. The Company hereby consents to the inclusion in the Offer
Documents of the recommendation of the Company's board of directors described in
Section 4.04(d).
(b) Subject to Section 5.03(d), on the date the Offer Documents are
filed with the SEC, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended or supplemented from time to time, the
"Schedule 14D-9") containing the recommendations referred to in Section 4.04(d)
and shall mail the Schedule 14D-9 to the holders of Company Common Stock. Each
of the Company, Parent and Merger Sub shall promptly correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company shall take all steps necessary to amend or supplement the Schedule
14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed
with the SEC and disseminated to the Company's stockholders, in each case as and
to the extent required by or deemed advisable under applicable Federal
securities laws. Parent and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to stockholders of the Company. The Company shall provide Parent
and its counsel in writing with any written comments (and orally, any oral
comments) the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments and
shall consult with Parent and its counsel prior to responding to such comments.
(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Merger Sub promptly with mailing labels
containing the names and addresses of the record holders of Company Common Stock
as of a recent date and of those persons becoming record holders subsequent to
such date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Company Common Stock,
and shall furnish to Merger Sub such information and assistance (including
updated lists of stockholders, security position listings and computer files) as
Parent may reasonably request in
-3-
<PAGE>
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer, the Merger and the other transactions contemplated by this Agreement,
Parent and Merger Sub shall hold in confidence the information contained in any
such labels, listings and files, shall use such information only in connection
with the Offer and the Merger and, if this Agreement shall be terminated, shall,
upon request, deliver to the Company all copies of such information then in
their possession.
Section 1.03. Directors of the Company.
------------------------
(a) Promptly upon the purchase of and payment for shares of Company
Common Stock by Merger Sub or any of its affiliates pursuant to the Offer,
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as is equal to
the product obtained by multiplying the total number of directors on such Board
(giving effect to the directors designated by Parent pursuant to this sentence)
by the percentage that the number of shares of Company Common Stock so purchased
and paid for, plus any shares beneficially owned by Parent or its affiliates on
the date of such purchase and payment, bears to the total number of shares of
Company Common Stock then outstanding. In furtherance thereof, the Company
shall, upon request of Parent, promptly increase the size of its Board of
Directors or exercise its best efforts to secure the resignations of such number
of directors, or both, as is necessary to enable Parent's designees to be so
elected to the Company's Board and, subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder, shall cause Parent's designees to be so
elected. At such time, the Company shall, if requested by Parent, also cause
directors designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company's Board of Directors
of each committee of the Company's Board of Directors. Notwithstanding the
foregoing, if shares of Company Common Stock are purchased pursuant to the
Offer, there shall be until the Effective Time at least two members of the
Company's Board of Directors who are directors on the date hereof and are not
employees of the Company.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under Section 1.03(a), including mailing to
stockholders together with the Schedule 14D-9 the information required by such
Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be
elected to the Company's Board of Directors. Parent and Merger Sub will supply
the Company and be solely responsible for any information with respect to them
and their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1.
(c) Following the election of Parent's designees to the Company's
Board of Directors pursuant to this Section 1.03, prior to the Effective Time
(i) any amendment or termination of this Agreement by the Company, (ii) any
extension or waiver by the Company of the time for the performance of any of the
obligations or other acts of Parent or Merger Sub under this Agreement, or (iii)
any waiver of any of the Company's rights hereunder shall, in any such case,
require the concurrence of a majority of the directors of the Company then in
office who neither were designated by Parent nor are employees of the Company
(the "Independent Director Approval") .
-4-
<PAGE>
ARTICLE II
THE MERGER
Section 2.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Merger Sub shall be merged with and into
the Company at the Effective Time (as defined in Section 2.03). At the Effective
Time, the separate corporate existence of Merger Sub shall cease and the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Merger Sub in
accordance with the DGCL.
Section 2.02. Closing. Upon the terms and subject to the conditions
set forth in this Agreement, the closing of the Merger (the "Closing") shall
take place at 10:00 a.m., New York time, on the second business day after the
satisfaction or (to the extent permitted by applicable law) waiver of the
conditions set forth in Article VI (other than those conditions to be satisfied
or waived at the Closing), at the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York 10019, or at such other time, date or place
agreed to in writing by Parent and the Company. The date on which the Closing
occurs is referred to in this Agreement as the "Closing Date".
Section 2.03. Effective Time. Upon the terms and subject to the
conditions set forth in this Agreement, as soon as practicable on or after the
Closing Date, a certificate of merger or other appropriate documents (in any
such case, the "Certificate of Merger") shall be duly prepared, executed and
acknowledged by the parties in accordance with the relevant provisions of the
DGCL and filed with the Secretary of State of the State of Delaware. 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 subsequent time or date
(not later than 90 days after the date of filing) as Parent and the Company
shall agree and specify in the Certificate of Merger. The time at which the
Merger becomes effective is referred to in this Agreement as the "Effective
Time".
Section 2.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
Section 2.05. Certificate of Incorporation and By-laws. (a) At the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall be amended in its entirety to read as the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, until
thereafter changed or amended as provided therein or by applicable law;
provided, however, that the Certificate of Incorporation of the Surviving
Corporation shall provide that the Surviving Corporation shall be named
"PathoGenesis Corporation" and shall contain indemnification provisions
consistent with the obligations set forth in Section 5.12(a).
(b) The By-laws of Merger 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; provided
that the By-Laws of the Surviving Corporation
-5-
<PAGE>
shall contain indemnification provisions consistent with the obligations set
forth in Section 5.12(a).
Section 2.06. Directors. The directors of Merger 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 2.07. 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.
Section 2.08. 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 capital stock of the Company, Parent or Merger Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of common
stock of Merger Sub, par value $0.001 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock that is owned by the Company (as treasury stock), Parent
or any subsidiary of Parent (including Merger Sub) immediately prior to the
Effective Time shall automatically be cancelled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
shares to be cancelled in accordance with Section 2.08(b)) and the Appraisal
Shares (as defined in Section 2.08(d)) shall be converted into the right to
receive from the Surviving Corporation in cash, without interest, the Offer
Price (the "Merger Consideration"). At the Effective Time all such shares shall
no longer be outstanding and shall automatically be cancelled and shall cease to
exist, and each holder of a certificate that immediately prior to the Effective
Time represented any such shares (a "Certificate") shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares (the "Appraisal Shares") of Company Common 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 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 2.08(c), but instead such holder shall be
entitled to payment of the fair value of such shares in accordance with the
provisions of Section 262. At the Effective Time, all Appraisal Shares shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist, and each holder of Appraisal Shares shall
-6-
<PAGE>
cease to have any rights with respect thereto, except the right to receive the
fair value of such 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 2.08(c). The Company shall serve prompt
notice to Parent of any demands for appraisal of any shares of Company Common
Stock, and Parent shall have the opportunity 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, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
Section 2.09. Exchange of Certificates. (a) Paying Agent. Prior to
the Effective Time, Parent shall designate, or shall cause to be designated, a
bank or trust company reasonably acceptable to the Company to act as agent for
the payment of the Merger Consideration upon surrender of Certificates (the
"Paying Agent"), and, from time to time after the Effective Time, Parent shall
provide, or cause the Surviving Corporation to provide, to the Paying Agent
funds in amounts and at the times necessary for the payment of the Merger
Consideration pursuant to Section 2.08(c) upon surrender of Certificates, it
being understood that any and all interest or income earned on funds made
available to the Paying Agent pursuant to this Agreement shall be turned over to
Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall 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 held
by such person shall pass, only upon proper delivery of the Certificates to the
Paying Agent and shall be in customary form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly executed, and such other documents as
may reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash into which
the shares formerly represented by such Certificate shall have been converted
pursuant to Section 2.08(c), and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of Company Common Stock
that is not registered in the stock transfer books of the Company, the proper
amount of cash may be paid in exchange therefor 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 to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate.
-7-
<PAGE>
(c) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender of a Certificate 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 formerly represented by such
Certificate. 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 that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for transfer or any other reason, they shall be cancelled and exchanged as
provided in this Article II.
(d) No Liability. None of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. All funds held by the Paying Agent for payment to the holders of
unsurrendered Certificates and unclaimed at the end of one year after the
Effective Time shall be returned to the Surviving Corporation, after which time
any holder of unsurrendered Certificates shall look as a general creditor only
to Parent for payment of such funds to which such holder may be due, subject to
applicable law.
(e) 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
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent shall pay in respect of such lost, stolen or destroyed Certificate
the Merger Consideration.
(f) 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 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, and the rules and
regulations promulgated thereunder (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 in respect of which such deduction and withholding was made by Parent, the
Surviving Corporation or the Paying Agent.
Section 2.10. Options. (a) At the Effective Time, each holder of
outstanding and unexercised options to purchase shares of Company Common Stock
granted under any of the Company Option Plans or otherwise (each, a "Company
Option"), whether or not exercisable or vested, shall be entitled to receive, in
full satisfaction of such Company Option, cash in an amount equal to the product
of (A) the excess, if any, of the Offer Price over the exercise price per share
thereof and (B) the number of shares of Company Common Stock subject to such
Company Option (the "Option Cash-Out Right"). Each option holder shall have the
right to elect, in lieu of such holder's Option Cash Out Right, to cause each
and every Company Option
-8-
<PAGE>
held by such holder (but not fewer than all Company Options held by such holder)
to be converted, at the Effective Time, into options (each, a "Parent Option")
to purchase a number of shares of common stock, par value $0.01 per share
("Parent Shares"), of Parent equal to the product, rounded down to the nearest
whole share, of (A) the number of Company Shares subject to the original Company
Option and (B) the Conversion Ratio (as defined below), at a per Parent Share
exercise price, rounded up to the nearest whole cent, equal to (I) the per share
exercise price for the shares of Company Common Stock originally issuable
pursuant to such Company Option divided by (II) the Conversion Ratio; provided,
however, that (A) in the case of any Company Option to which Section 422 of the
Code applies, the exercise price, the number of Parent Shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in accordance with the foregoing, subject to such
adjustments as are necessary in order to satisfy the requirements of Section
424(a) of the Code; (B) any holder making such election shall thereby waive such
holder's right to accelerated vesting of all of the Company Options held by such
holder on the date of acceptance for payment of shares of Company Common Stock
pursuant to the Offer (the "Acceptance Date") and the Effective Time or as a
result of any other event contemplated by this Agreement, and any Parent Options
issued upon the conversion of Company Options held by such holder that had not
become vested and exercisable prior to the Acceptance Date shall vest and become
exercisable only in accordance with the original terms of such Company Options;
and (C) at the Effective Time Parent shall grant to such holder making such
election and granting the waiver contemplated by clause (B) an option (each, a
"New Parent Option") to purchase a number of Parent Shares equal to the product
of (x) the number of Parent Shares subject to Parent Options issued upon
conversion of all unvested and unexercisable Company Options held by such
holder, and (y) .30. The New Parent Options shall have a vesting schedule and a
per Parent Share exercise price determined as of the Effective Time in
accordance with the Chiron Corporation 1991 Stock Option Plan, as amended. The
exercise price per share of the New Parent Options shall be no more than the
fair market value of Parent Common Stock on the grant date and the vesting
schedule for the New Parent Options shall provide that such New Parent Options
shall vest and become exercisable with respect to no fewer than 25% of the
shares subject to such New Parent Option on each anniversary of the grant date.
Each of the New Parent Options shall be an incentive stock option to the extent
permitted under applicable law. The election referred to in the second sentence
of this Section 2.10(a) shall be made prior to the Effective Time and shall be
effective at the Effective Time. The term "Conversion Ratio" means the ratio of
(y) the Offer Price to (z) the average (the "Parent Average Price") of the
closing prices per Parent Share on the NASDAQ Stock Market ("Nasdaq") for the
five consecutive trading days immediately preceding the Effective Time. Any
amounts payable pursuant to this Section 2.10 shall be subject to any required
withholding of taxes and shall be paid without interest. In respect of each
Parent Option and New Parent Option and the Parent Common Shares underlying such
option, Parent shall file at the Effective Time, and keep current, a Form S-8 or
other appropriate registration statement for as long as any Parent Options or
New Parent Options remain outstanding. In connection with the issuance of Parent
Options and New Parent Options, Parent shall reserve for issuance the number of
Parent Common Shares that will become subject to Parent Options and New Parent
Options pursuant to this Section 2.10. In the event that any holder of a Company
Option is terminated within twelve months after the Effective Time other than
for cause or terminates within 13 months following the Effective Time pursuant
to "good reason" as defined in any applicable employment or severance agreement,
then each Parent Option received upon
-9-
<PAGE>
conversion of a Company Option shall immediately become exercisable and vested
whether or not then exercisable or vested and shall be converted into the right
to receive cash in an amount equal to the product of (A) the amount, if any, by
which the Parent Average Price exceeds the exercise price per share thereof for
such Parent Option and (B) the number of shares of Parent Common Stock subject
to such Parent Option. All Parent Options and New Parent Options issued pursuant
to this Section 2.10 shall have customary "cashless exercise" provisions.
(b) The Company shall make the payment of the amount determined
pursuant to Section 2.10(a) above to holders that have not made the election
described in the second sentence thereof as soon as reasonably practicable
following the Effective Time, but in no event later than five business days
following the Effective Time.
(c) The Company and the Parent shall cooperate to provide, at least
20 days prior to the Effective Time, each holder of Company Options with an
election form to make the election and waiver described in this Section 2.10,
which election form shall confirm the terms of the election, the Parent Options
and the New Parent Options as set forth above and, upon the making of such
election and waiver by such option holder, shall constitute a written agreement
enforceable by the option holder.
Section 2.11. Warrants. (a) At the Effective Time, each outstanding
warrant to purchase shares of Company Common Stock shall be converted into an
obligation of Parent to pay, and a right of the holder thereof to receive in
full satisfaction of such warrant, cash in an amount in respect thereof equal to
an amount equal to the product of (A) the excess, if any, of the Offer Price
over the exercise price of such warrant and (B) the number of shares of Company
Common Stock subject to such warrant.
(b) Parent shall make the payment of the amount determined pursuant
to Section 2.11(a) above as soon as reasonably practicable following the
Effective Time, but in no event later than five business days following the
Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company that:
Section 3.01. Organization and Qualification. Each of Parent and
Merger Sub is a corporation duly organized and validly existing under the laws
of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted or as contemplated herein. Merger Sub
is a wholly-owned subsidiary of Parent.
Section 3.02. Authority; Non-Contravention; Approvals. (a) Each of
Parent and Merger Sub has full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been unanimously approved by the Board of Directors of each of Parent and
Merger Sub, and by Parent as sole
-10-
<PAGE>
stockholder in Merger Sub, and no other corporate proceedings on the part of
either Parent or Merger Sub are necessary to authorize the execution and
delivery of this Agreement or the consummation by each of Parent and Merger Sub
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Parent and Merger Sub, and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a valid
and legally binding agreement of each of Parent and Merger Sub, enforceable
against each of Parent and Merger Sub in accordance with its terms, except that
such enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
(b) The execution, delivery and performance of this Agreement by
each of Parent and Merger Sub and the consummation of the transactions
contemplated hereby do not and will not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or require any offer to purchase or
any prepayment of any debt or result in the creation of any lien, security
interest or encumbrance upon any of the properties or assets of Parent or any of
its subsidiaries under any of the terms, conditions or provisions of (i) the
respective certificates of incorporation or by-laws or similar organizational
documents of Parent, Merger Sub or any subsidiary of Parent, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or governmental authority applicable to Parent,
Merger Sub or any subsidiary of Parent or any of their respective properties or
assets, subject in the case of consummation, to obtaining prior to the
Acceptance Date the Parent Required Statutory Approvals, or (iii) any loan or
credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease
or other contract, commitment, obligation, undertaking, permit, concession,
franchise or license, whether oral or written (each, including all amendments
thereto, a "Contract") to which Parent, Merger Sub or any subsidiary of Parent
is a party or by which Parent, Merger Sub or any subsidiary of Parent or any of
their respective properties or assets may be bound or affected, other than, in
the case of (ii) and (iii) above, such violations, conflicts, breaches,
defaults, terminations, accelerations, offers, prepayments or creations of
liens, security interests or encumbrances that are not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect, or
prevent or materially impede or delay the consummation of the Offer, the Merger
or the other transactions contemplated hereby.
For purposes of this Agreement, the term "Parent Material Adverse
Effect" shall mean any effect that is materially adverse to (i) the business,
financial condition or operations of Parent and its subsidiaries, taken as a
whole, or (ii) the ability of Parent or Merger Sub to consummate the
transactions contemplated hereby, except, in the case of clause (i), for any
such effect resulting from or arising our of the condition of the United States
economy or financial markets generally, of from a condition generally affecting
participants in the industry in which Parent competes.
(c) Except for (i) the filings by Parent and Merger Sub required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) filings by Parent and Merger Sub required by, and approvals
under, foreign antitrust and competition laws ("Foreign Antitrust Laws"), (iii)
the applicable requirements of the Exchange Act and the rules
-11-
<PAGE>
and regulations promulgated thereunder, (iv) the filing and recordation of
appropriate merger documents as required by the DGCL, (v) any filings with or
approvals from authorities required solely by virtue of the jurisdictions in
which the Company or its subsidiaries conduct any business or own any assets and
(vi) any required filings with or approvals from applicable domestic or foreign
environmental authorities (the filings and approvals referred to in clauses (i)
through (vi) collectively referred to as the "Parent Required Statutory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
Parent or Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which are not
material and which, if not made or obtained, as the case may be, individually
and in the aggregate, would not impair in any material respect the ability of
Parent or Merger Sub to perform its obligations under this Agreement or prevent
or materially impede or delay the consummation of the Offer, the Merger and the
other transactions contemplated hereby or subject Parent or any of its
subsidiaries or any of its or their officers, directors or employees to any
criminal liability.
Section 3.03. Interim Operations of Merger Sub. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated
hereby and has engaged in no business and has incurred no liabilities other than
in connection with the transactions contemplated by this Agreement.
Section 3.04. Capital Resources. Parent has, and prior to the
expiration of the Offer Merger Sub will have, sufficient cash resources to pay
for all shares of Company Common Stock validly tendered into and not withdrawn
from the Offer and to pay the Merger Consideration and all associated costs and
expenses.
Section 3.05. Offer Documents; Proxy Statement. Neither the Offer
Documents nor any information supplied by Parent or Merger Sub for inclusion in
the Schedule 14D-9 will, at the time the Offer Documents, the Schedule 14D-9, or
any amendments or supplements thereto, are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
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
made therein, in the light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in any proxy
statement to be sent to stockholders of the Company in connection with a meeting
of the Company's stockholders to consider the Merger (the "Company Meeting")
(such proxy statement, as amended or supplemented, the "Proxy Statement"), on
the date the Proxy Statement (or any amendment or supplement thereto) is first
mailed to stockholders of the Company, will not 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, or shall, at the time
of the Company Meeting, omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Meeting which shall have become false or misleading.
Notwithstanding the foregoing, Parent and Merger Sub make no representation or
warranty with respect to any information supplied by or on behalf of the Company
which is contained in any of the Offer Documents, the Proxy Statement or any
amendment or supplement thereto. The Offer
-12-
<PAGE>
Documents shall comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder.
Section 3.06. Ownership of Capital Stock. Immediately prior to the
execution and delivery of this Agreement, neither Parent nor any of its
subsidiaries beneficially owned any shares of Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the disclosure schedule dated as of the date hereof
delivered by the Company to Parent and Merger Sub (the "Company Disclosure
Schedule"):
Section 4.01. Organization and Qualification. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted or as contemplated herein. The Company is qualified to transact
business and, where applicable, is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except as is not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect. True, accurate and complete copies of the Company's Amended and
Restated Certificate of Incorporation and Bylaws, in each case as in effect on
the date hereof, including all amendments thereto, have heretofore been filed
with the SEC or delivered to Parent.
For purposes of this Agreement, the term "Company Material Adverse
Effect" shall mean any effect that is materially adverse to (i) the business,
financial condition, operations or prospects of the Company and its
subsidiaries, taken as a whole, or (ii) the ability of the Company to consummate
the transactions contemplated hereby, except, in each case, for any such effect
resulting from or arising out of (x) any employee attrition, including without
limitation resignations or other terminations of employment of any employees of
the Company, whether or not in the ordinary course of business, (y) the
condition of the United States economy or financial markets generally, or (z) a
condition generally affecting participants in the industry in which the Company
competes.
Section 4.02. Capitalization. (a) The authorized capital stock of
the Company consists of 60,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $0.001 (the "Company Preferred Shares"). As
of July 26, 2000, (i) 16,581,400 shares of Company Common Stock, including in
each case the associated Company Rights (as defined in Section 4.02(b)), and no
Company Preferred Shares, were issued and outstanding, all of which shares of
Company Common Stock were validly issued and are fully paid, nonassessable and
free of preemptive rights, (ii) not more than 44,400 shares of Company Common
Stock were held in the treasury of the Company and (iii) 4,177,916 shares of
Company Common Stock were reserved for issuance upon exercise of Company Stock
Options and warrants issued and outstanding. Since July 26, 2000 through the
date hereof, except as
-13-
<PAGE>
permitted by this Agreement, (i) no shares of Company Common Stock have been
issued, except in connection with the exercise of Company Stock Options or
warrants issued and outstanding and except for shares of Company Common Stock
required to be issued in connection with the Company's existing 401(k) Plan (the
"401(k) Plan") or Employee Stock Purchase Plan (the "ESPP") and (ii) no options,
warrants, securities convertible into, or commitments with respect to the
issuance of, shares of capital stock of the Company have been issued, granted or
made except Company Rights in accordance with the terms of the Company Rights
Agreement.
(b) Except for (i) the Preferred Share Purchase Rights (the
"Company Rights") issued pursuant to the Rights Agreement, as amended (the
"Company Rights Agreement"), dated as of June 26, 1997, by and between the
Company and Harris Trust and Savings Bank (the "Company Rights Agent"), as
amended, (ii) Company Stock Options issued and outstanding, (iii) rights under
the 401(k) Plan and the ESPP, and (iv) warrants to purchase a maximum of 3,375
shares of Company Common Stock, as of the date hereof, there were no outstanding
subscriptions, options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement and also including any rights plan or other anti-takeover agreement,
obligating the Company or any subsidiary of the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of Company
Common Stock or obligating the Company or any subsidiary of the Company to
grant, extend or enter into any such agreement or commitment. As of the date
hereof, there are no obligations, contingent or otherwise, of the Company to (i)
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock or other equity interests of any subsidiary of the Company
except in connection with the exercise of Company Stock Options issued and
outstanding or (ii) (other than advances to subsidiaries in the ordinary course
of business) provide material funds to, or make any material investment in (in
the form of a loan, capital contribution or otherwise), or provide any guarantee
with respect to the obligations of, any subsidiary of the Company or any other
person. There are no outstanding stock appreciation rights or similar derivative
securities or rights of the Company or any of its subsidiaries. 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
otherwise contemplated by this Agreement there are no voting trusts, irrevocable
proxies or other agreements or understandings to which the Company or any
subsidiary of the Company is a party or is bound with respect to the voting of
any shares of Company Common Stock. The Board of Directors of the Company has
taken all action to amend the Company Rights Agreement (subject only to
execution of such amendment by the Company Rights Agent) to provide that, for so
long as this Agreement is in full force and effect, (i) none of the Parent and
its subsidiaries (including Merger Sub) shall become an "Acquiring Person" and
no "Stock Acquisition Date" shall occur as a result of the execution, delivery
and performance of this Agreement and the consummation of the Offer or the
Merger, (ii) no "Distribution Date" shall occur as a result of the announcement
of or the execution of this Agreement or any of the transactions contemplated
hereby and (iii) each of Parent and Merger Sub will not be an Acquiring Person
as a result of the transactions contemplated hereby.
(c) The Company has filed with the SEC or previously made available
to Parent complete and correct copies of the 1992 Stock Option Plan, the 1996
Non-Employee
-14-
<PAGE>
Director Stock Option Plan, the 1997 Stock Option Plan, the 1999 Stock Plan and
the 1999 Employee Stock Option Plan (the "Company Option Plans"), including all
amendments thereto. Section 4.02(c) of the Company Disclosure Schedule contains
a correct and complete list as of July 31, 2000 of each outstanding Company
Stock Option, including the holder, date of grant, exercise price and number of
Company Common Shares subject thereto, and setting forth the weighted average
exercise price for all outstanding Company Stock Options.
Section 4.03. Subsidiaries. Each direct and indirect subsidiary of
the Company is duly organized, validly existing and, where applicable, in good
standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted and each
subsidiary of the Company is qualified to transact business, and is in good
standing, in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary; except in all cases as are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect. All of the
outstanding shares of capital stock of each subsidiary of the Company are
validly issued, fully paid, nonassessable and free of preemptive rights and are
owned directly or indirectly by the Company. There are no subscriptions,
options, warrants, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting or transfer
of any shares of capital stock of any subsidiary of the Company, including any
right of conversion or exchange under any outstanding security, instrument or
agreement. The Company has no material investment in any entity other than its
subsidiaries.
Section 4.04. Authority; Non-Contravention; Approvals. (a) The
Company has full corporate power and authority to enter into this Agreement and,
subject to the approval of the stockholders of the Company if required by the
DGCL (the "Company Stockholder Approval"), to consummate the transactions
contemplated hereby. This Agreement has been approved by the Board of Directors
of the Company, and no other corporate proceedings on the part of the Company
are necessary to authorize the execution and delivery of this Agreement or,
except for the Company Stockholder Approval, the consummation by the Company of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Merger Sub, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated hereby do not
and will not violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or require any offer to purchase or any prepayment of any
debt or result in the creation of any lien, security interest or encumbrance
upon any of the properties or assets of the Company or any of its subsidiaries
under any of the terms, conditions or provisions of (i) the respective
certificates of incorporation or bylaws or similar organizational documents of
the Company or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment,
-15-
<PAGE>
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, subject in the case of consummation, to
obtaining (prior to the Acceptance Date) the Company Required Statutory
Approvals and prior to the Effective Time, the Company Stockholder Approval, or
(iii) any Contract to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or any of their respective
properties or assets may be bound or affected, other than, in the case of (ii)
and (iii) above, such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests or encumbrances that are
not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect or prevent or materially impede or delay the
consummation of the Offer, the Merger or the other transactions contemplated
hereby.
(c) Except for (i) the filings by the Company required by the HSR
Act, (ii) filings by the Company required by, and approvals under, Foreign
Antitrust Laws, (iii) the applicable requirements of the Exchange Act and the
rules and regulations promulgated thereunder, (iv) the filing and recordation of
appropriate merger documents as required by the DGCL, (v) any filings with or
approvals from authorities required solely by virtue of the jurisdictions in
which Parent or its subsidiaries conduct any business or own any assets and (vi)
any required filings with or approvals from applicable domestic or foreign
environmental authorities (the filings and approvals referred to in clauses (i)
through (vi) collectively referred to as the "Company Required Statutory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which are not material and which, if not
made or obtained, as the case may be, are not reasonably likely to prevent or
materially impede or delay the consummation of the Offer, the Merger and the
other transactions contemplated hereby or subject the Company or any of its
subsidiaries or any its or their officers, directors or employees to any
criminal liability.
(d) The Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously, by all those present, adopted resolutions that
are still in full force and effect as of the date hereof, (i) approving and
declaring advisable the Offer, the Merger, this Agreement and the transactions
contemplated hereby, (ii) declaring that it is in the best interests of the
Company's stockholders that the Company enter into this Agreement and consummate
the Offer and the Merger on the terms and subject to the conditions set forth in
this Agreement, (iii) recommending that the Company's stockholders accept the
Offer, tender their shares pursuant to the Offer and adopt this Agreement (if
required by applicable law), (iv) approving the acquisition of the shares of the
Company Common Stock by Merger Sub pursuant to the Offer and the other
transactions contemplated by this Agreement and (v) exempting this Agreement and
the transactions contemplated hereby from the restrictions of Section 203 of the
DGCL.
Section 4.05. Reports and Financial Statements. Since January 1,
1998, the Company has filed with the SEC all material forms, statements, reports
and documents (including all exhibits, posteffective amendments and supplements
thereto) (the "Company SEC Reports") required to be filed by it under each of
the Securities Act of 1933, as amended, the
-16-
<PAGE>
Exchange Act and the respective rules and regulations thereunder, all of which,
as amended if applicable, complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder. As
of their respective dates except as amended or supplemented prior to the date
hereof, the Company SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The audited consolidated financial
statements of the Company included in the Company's Annual Report on Form 10-K
for the twelve months ended December 31, 1999 and the unaudited financial
statements of the Company included in the Company's Quarterly Report on Form 10-
Q (the "Company 10-Q") for the quarterly period ended March 31, 2000
(collectively, the "Company Financial Statements") have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present in all material respects the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of their operations and changes in financial position for the periods
then ended (subject, in the case of the unaudited financial statements, to
normal year-end adjustments). The Company's Annual Report on Form 10-K for the
twelve months ended December 31, 1999, the Company 10-Q and the Current Report
on Form 8-K filed by the Company on June 5, 2000 are collectively referred to as
the "Company Recent SEC Reports".
Section 4.06. Absence of Undisclosed Liabilities. Except as
disclosed in the unaudited financial statements included in the Company 10-Q or
in the Company Recent SEC Reports, neither the Company nor any of its
subsidiaries had at March 31, 2000, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature, except (a) liabilities, obligations or contingencies (i) which
are accrued or reserved against in the financial statements in the Company 10-Q
or reflected in the notes thereto or (ii) which were incurred in the ordinary
course of business and consistent with past practices, (b) liabilities,
obligations or contingencies which (i) are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect, or (ii)
have been discharged or paid in full prior to the date hereof, and (c)
liabilities, obligations and contingencies which are of a nature not required to
be reflected in the consolidated financial statements of the Company and its
subsidiaries prepared in accordance with GAAP consistently applied.
Section 4.07. Absence of Certain Changes or Events. Since December
31, 1999, there has not occurred, and there is not currently existing, any
circumstance or event that is reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 4.08. Litigation. Except as disclosed in the Company
Recent SEC Reports, as of the date hereof, there are no claims, suits, actions
or proceedings pending, or, to the knowledge of the Company, threatened against,
relating to or affecting the Company or any of its subsidiaries, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that are reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect or that are reasonably
likely to prevent or materially impede or delay the consummation of the Offer or
the Merger. Neither the Company nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority, or any
-17-
<PAGE>
arbitrator which prohibits the consummation of the transactions contemplated
hereby or is reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
Section 4.09. Offer Documents; Proxy Statement. Neither the Schedule
14D-9 nor any information supplied by the Company for inclusion in the Offer
Documents will, at the respective times the Schedule 14D-9, the Offer Documents
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
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
made therein, in the light of the circumstances under which they are made, not
misleading. The Proxy Statement will not, on the date the Proxy Statement (or
any amendment or supplement thereto) is first mailed to stockholders of the
Company, 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 made therein, in the light of the circumstances under which they are
made, not misleading and will not, at the time of the Company Meeting, omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Meeting which shall have become false or misleading in any material respect.
The Schedule 14D-9 and the Proxy Statement will, when filed by the Company with
the SEC, comply as to form in all material respects with the applicable
provisions of the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to information supplied by or on behalf of Parent or Merger Sub
which is contained in any of the foregoing documents.
Section 4.10. No Violation of Law. Except as disclosed in the
Company Recent SEC Reports, neither the Company nor any of its subsidiaries is
in violation of, or has been given written notice that it is currently
violating, any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable environmental law, ordinance or
regulation) of any governmental or regulatory body or authority, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. No investigation or review by any
governmental or regulatory body or authority is pending or, to the knowledge of
the Company, threatened, nor has any governmental or regulatory body or
authority indicated an intention to conduct the same, other than, in each case,
those the outcome of which, as far as reasonably can be foreseen, is not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect. The Company and its subsidiaries have all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct their businesses as presently
conducted (collectively, the "Company Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which is not reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect. The Company and its
subsidiaries are not in violation of the terms of any Company Permit, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 4.11. Compliance with Agreements. The Company and each of
its subsidiaries are not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, would result in a default
under, (a) the respective articles or certificates of incorporation,
-18-
<PAGE>
bylaws or similar organizational instruments of the Company or any of its
subsidiaries or (b) any Contract to which the Company or any of its subsidiaries
is a party or by which any of them is bound or to which any of their property is
subject, other than as is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 4.12. Taxes. (a) The Company and its subsidiaries have (i)
duly filed with the appropriate governmental authorities all Tax Returns
required to be filed by them, and such Tax Returns are true, correct and
complete, and (ii) duly paid in full all Taxes shown as due on such Tax Returns,
except in each case where the failure to file such Tax Returns or pay such Tax
or the failure of such Tax Returns to be true, correct and complete is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect. There are no material liens for Taxes upon any property or asset
of the Company or any subsidiary thereof, except for liens for Taxes not yet due
or Taxes contested in good faith and reserved against in accordance with GAAP.
There are no unresolved issues of law or fact arising out of a notice of
deficiency, proposed deficiency or assessment from the Internal Revenue Service
(the "IRS") or any other governmental taxing authority with respect to Taxes of
the Company or any of its subsidiaries which are reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) For purposes of this Agreement, "Tax" (including, with
correlative meaning, the terms "Taxes") includes all federal, state, local and
foreign income, profits, franchise, gross receipts, environmental, customs duty,
capital stock, communications services, severance, stamp, sales, unemployment,
disability, use, property, withholding, excise, production, value added,
occupancy and other taxes, duties or assessments of any nature whatsoever,
together with all interest, penalties and additions imposed with respect to such
amounts, and "Tax Return" means any return, report or similar statement
(including attached schedules) required to be filed with respect to any Tax,
including without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
Section 4.13. Employee Benefit Plans; ERISA. (a) Section 4.13(a) of
the Company Disclosure Schedule includes a complete list of each employee
benefit plan, program or policy providing benefits to any current or former
employee, officer or director of the Company or any of its subsidiaries or any
beneficiary or dependent thereof that is sponsored or maintained by the Company
or any of its subsidiaries or to which the Company or any of its subsidiaries
contributes or is obligated to contribute (other than those programs or policies
that do not provide material benefits and other than employee benefit plans,
programs or policies providing benefits to non-U.S. employees of the Company),
including without limitation any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, any employee pension benefit plan within the
meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA,
and including any "multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA (a "Multiemployer Plan")) and any material bonus, incentive, deferred
compensation, vacation, stock purchase, stock option, stock based, severance,
employment, change of control or fringe benefit agreement, plan, program or
policy (collectively, the "Company Employee Benefit Plans").
(b) With respect to each Company Employee Benefit Plan other than a
Multiemployer Plan (a "Company Plan"), the Company has delivered or made
available to
-19-
<PAGE>
Parent a true, correct and complete copy of: (i) all plan documents and trust
agreements; (ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedule, if any; (iii) the current summary plan description, if
any; (iv) the most recent annual financial report, if any; (v) the most recent
actuarial report, if any; and (vi) the most recent determination letter from the
IRS, if any. Except as specifically provided in the foregoing documents, or in
other documents, delivered or made available to Parent, there are no amendments
to any Company Plan that have been adopted or approved.
(c) The IRS has issued a favorable determination letter with respect
to each Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Plan") and its related trust that has
not been revoked, and there are no circumstances and no events have occurred
that would reasonably be expected to result in a revocation of such letter,
which cannot be cured without a Company Material Adverse Effect.
(d) Except as is not reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect: (i) the Company and its
subsidiaries have complied, and are now in compliance, with all provisions of
ERISA, the Code and all laws and regulations applicable to the Company Employee
Benefit Plans and each Company Plan has been administered in all material
respects in accordance with its terms; (ii) none of the Company and its
subsidiaries nor any other person, including any fiduciary, has engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section 406
of ERISA), which could subject any of the Company Employee Benefit Plans or
their related trusts, the Company, any of its subsidiaries or any person that
the Company or any of its subsidiaries has an obligation to indemnify, to any
tax or penalty imposed under Section 4975 of the Code or Section 502 of ERISA;
(iii) there are no pending or, to the Company's knowledge, threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Company Plans,
any fiduciaries thereof with respect to their duties to the Company Plans or the
assets of any of the trusts under any of the Company Plans which could
reasonably be expected to result in any liability of the Company or any of its
subsidiaries to the Pension Benefit Guaranty Corporation, the Department of
Treasury, the Department of Labor, any Multiemployer Plan or any Plan.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause the
accelerated vesting, funding or delivery of, or increase the amount or value of,
any material payment or benefit to any employee, officer or director of the
Company or any of its subsidiaries, or result in any limitation on the right of
the Company or any of its subsidiaries to amend, merge, terminate or receive a
reversion of assets from any Company Employee Benefit Plan or related trust.
(f) No Company Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code, and none of the Company and its subsidiaries,
nor any of their respective ERISA Affiliates, has, at any time during the last
six years contributed to or been obligated to contribute to any plan subject to
Title IV of ERISA.
(g) No Company Employee Benefit Plan is a Multiemployer Plan, none of
the Company and its subsidiaries nor any of their respective ERISA Affiliates
has, at any time during the last six years, contributed to or been obligated to
contribute to any Multiemployer
-20-
<PAGE>
Plan, and none of the Company and its subsidiaries nor any ERISA Affiliates has
incurred any withdrawal liability to a Company Multiemployer Plan that has not
been satisfied in full.
(h) Neither the Company nor any of its subsidiaries has any
obligations for retiree health and life benefits under any Company Employee
Benefit Plan, except as set forth in Section 4.13(h) of the Company Disclosure
Schedule and except for obligations under Section 601 et. seq. of ERISA and
Section 4980B of the Code ("COBRA").
(i) Except as is not reasonably likely to have a Company Material
Adverse Effect, each employee benefit plan, program, policy or arrangement
providing benefits to any current or former non-U.S. employee, officer or
director of the Company or any of its subsidiaries or any beneficiary or
dependent thereof that is sponsored or maintained by the Company or any of its
subsidiaries to which the Company or any of its subsidiaries contributes or is
obligated to contribute (the "Foreign Plan"), is in compliance in all respects
with applicable law and is being administered in accordance with its terms and
all contributions required to be made to such Foreign Plans pursuant to
applicable law have been made.
Section 4.14. Labor Controversies. Except as is not reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect, (i) there is not pending or, to the knowledge of the Company,
threatened, any labor strike, material dispute, walk-out, work stoppage, slow-
down or lockout involving the Company or any of its subsidiaries, (ii) there are
no controversies pending or, to the knowledge of the Company, threatened between
the Company or its subsidiaries and any representatives (including unions) of
any of their employees, and (iii) to the knowledge of the Company, there are no
organizational efforts being made involving any of the presently unorganized
employees of the Company or its subsidiaries.
Section 4.15. Environmental Matters. (a) (i) The Company and its
subsidiaries have conducted their respective businesses in compliance with all
applicable Environmental Laws, including, without limitation, having all
permits, licenses and other approvals and authorizations necessary for the
operation of their respective businesses as presently conducted, (ii) none of
the properties owned by the Company or any of its subsidiaries contain any
Hazardous Substance as a result of any activity of the Company or any of its
subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) since January 1, 1997, neither the Company nor any of
its subsidiaries has received any notices, demand letters or requests for
information from any federal, state, local or foreign governmental entity
indicating that the Company or any of its subsidiaries may be in violation of,
or liable under, any Environmental Law in connection with the ownership or
operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no Hazardous Substance has been disposed of, released or
transported in violation of any applicable Environmental Law, or in a manner
giving rise to any liability under Environmental Law, from or on any properties
owned by the Company or any of its subsidiaries as a result of any activity of
the Company or any of its subsidiaries during the time such properties were
owned, leased or operated by the Company or any of its subsidiaries and (vi)
neither the Company, its subsidiaries nor any of their respective properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim
-21-
<PAGE>
asserted or arising under any Environmental Law, except for violations of the
foregoing clauses (i) through (vi) that are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) As used herein, "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, order, judgment, decree, injunction,
requirement or agreement with any governmental entity relating to (x) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource) or to human health or safety, or (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each case
as amended and as in effect at the date hereof.
(c) As used herein, "Hazardous Substance" means any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or byproduct thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation or
polychlorinated biphenyls.
Section 4.16. Intellectual Property. Except as disclosed in Section
4.16 of the Company Disclosure Schedule, the Company and its subsidiaries own,
or are licensed to use, all Intellectual Property used in and material to the
conduct of the Company's business as it is currently conducted, and, to the
knowledge of the Company, all material patents, trademarks, trade names, service
marks and copyrights held by the Company and/or its subsidiaries are valid and
subsisting. Except as disclosed in Section 4.16 of the Company Disclosure
Schedule, to the Company's knowledge, the Company and its subsidiaries own or
are licensed to use all Intellectual Property necessary to exploit the Company's
or its subsidiaries' projects in development that have been disclosed in the
Company SEC Reports or otherwise publicly announced. Except as is not reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect, (i) the use of the Intellectual Property by the Company and its
subsidiaries does not infringe on or other otherwise violate the rights of any
third party, and is in accordance in all material respects with the applicable
license pursuant to which the Company acquired the right to use such
Intellectual Property, (ii) to the knowledge of the Company, no third party is
challenging, infringing on or otherwise violating any right of the Company in
the Intellectual Property, and (iii) neither the Company nor any of its
subsidiaries has received any written notice of any offer to license, pending
claim, order or proceeding with respect to any unlicensed third party
Intellectual Property used in and material to the conduct of the Company's
business as it is currently conducted, and to the Company's knowledge no
Intellectual Property is being used or enforced by the Company in a manner that
would reasonably be expected to result in the abandonment, cancellation or
unenforceability of any Intellectual Property used in and material to the
conduct of the Company's business as it is currently conducted. For purposes of
this Agreement, the term "Intellectual Property" means all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
technology, know-how, computer
-22-
<PAGE>
software programs or applications, and tangible or intangible proprietary
information or materials.
Section 4.17. Opinion of Financial Advisor. The Company's financial
advisor, Goldman, Sachs & Co. (the "Company Financial Advisor"), has delivered
to the Board of Directors of the Company an oral opinion, to be confirmed in
writing (the "Fairness Opinion"), to the effect that, as of the date of this
Agreement, the consideration to be received by the Company's stockholders in the
Offer and the Merger is fair to such holders from a financial point of view.
Section 4.18. Brokers and Finders. The Company has not entered into
any contract, arrangement or understanding with any person or firm which may
result in the obligation of the Company to pay any investment banking fees,
finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby, other than fees payable to
the Company Financial Advisor. A true and complete copy of any fee agreement
with the Company Financial Advisor has been provided to Parent.
Section 4.19. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of the Company and its subsidiaries
and their respective properties and assets.
Section 4.20. Takeover Statutes. The Board of Directors of the
Company has taken all actions necessary to exempt the Offer, the Merger, this
Agreement and the transactions contemplated hereby under Section 203 of the
DGCL. No other state takeover or similar statute or regulation is applicable to
this Agreement, the Offer, the Merger or the other transactions contemplated
hereby.
Section 4.21. ESPP. The Company has amended the ESPP to delete
Section 18(b) of the plan and to provide that participants shall not be allowed
to make new deposits following the Acceptance Date (though participants shall be
deemed to have exercised their rights to purchase shares of Company Common Stock
with amounts remaining in their accounts immediately prior to the Effective Time
and that the ESPP will terminate immediately prior to the Effective Time).
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business Pending the Merger. Except as
otherwise contemplated by this Agreement, required by law or disclosed in
Section 5.01 of the Company Disclosure Schedule, and except within the amounts
and pursuant to the time schedules contemplated by the Company's annual budget
or capital budget (copies of which have been delivered to Parent on or prior to
the date of this Agreement), after the date hereof and prior to the Effective
Time, without Parent's consent (which shall not be unreasonably withheld), the
Company shall, and shall cause its subsidiaries to:
-23-
<PAGE>
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective certificates of
incorporation or bylaws or equivalent constitutional documents, (ii) split,
combine or reclassify their outstanding capital stock or (iii) declare, set
aside or pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions to the Company
or a subsidiary of the Company by a subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell, pledge
or dispose of, any additional shares of, or any options, warrants or rights of
any kind to acquire any shares of their capital stock of any class or any debt
or equity securities convertible into or exchangeable for such capital stock,
except that (i) the Company may issue shares of capital stock of the Company (A)
upon exercise of Company Stock Options outstanding on the date hereof or
hereafter granted in accordance with the provisions of subclause (ii) or (iii)
of this clause (c), (B) in accordance with the 401(k) Plan, the ESPP and the
Company Rights Agreement as in effect on the date hereof, and (C) upon exercise
of warrants outstanding on the date hereof, and (ii) the Company may grant
Company Stock Options to purchase in the aggregate with respect to all such
Company Stock Options 100,000 shares of Company Common Stock in accordance with
the terms of the Company Option Plans to persons who are not currently directors
or officers of the Company or its subsidiaries consistent with past practice and
with an exercise price per share of Company Common Stock no less than the fair
market value of a share of Company Common Stock as of the date of grant and no
new options will be allowed to accelerate as a result of the change of control
caused by consummation of the Offer or the Merger;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary course
of business or borrowings under the existing credit facilities of the Company or
any of its subsidiaries as such facilities may be amended or replaced in a
manner that does not have a Company Material Adverse Effect (the "Existing
Credit Facilities") up to the existing borrowing limit on the date hereof and
(B) borrowings to refinance existing indebtedness, (ii) redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or any
options, warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock other than in connection
with the exercise of outstanding Company Stock Options and warrants pursuant to
the terms of the Company Option Plans and the relevant written agreements
evidencing the grant of Company Stock Options and warrants, or to use for the
401(k) Plan or the ESPP, (iii) make any material acquisition of any assets or
businesses other than expenditures for current assets in the ordinary course of
business and expenditures for fixed or capital assets in the ordinary course of
business or (iv) sell, pledge, dispose of or encumber any material assets or
businesses other than (A) sales of businesses or assets disclosed in the Company
Disclosure Schedule, (B) pledges or encumbrances pursuant to Existing Credit
Facilities or other permitted borrowings, (C) sales or dispositions of
businesses or assets
-24-
<PAGE>
as may be required by applicable law, (D) sales of inventory and other current
assets, or (E) sales of idle facilities and related assets.
(e) use reasonable best efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them other than as contemplated by the terms of this
Agreement;
(f) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees or
with any other persons, except pursuant to (i) applicable law; (ii)
previously existing contractual arrangements or policies or (iii)
employment agreements entered into with a person who is hired or promoted
by the Company or one of its subsidiaries after the date hereof in the
ordinary course of business;
(g) not materially increase the salary or monetary compensation of
any person except for increases in the ordinary course of business
consistent with past practice or except pursuant to previously existing
contractual arrangements;
(h) not adopt, enter into or amend to materially increase benefits or
obligations of any Company Plan, except (i) any of the foregoing involving
any such then existing plans, agreements, trusts, funds or arrangements of
any company acquired after the date hereof or (ii) as required pursuant to
existing contractual arrangements or this Agreement;
(i) not make capital expenditures, or enter into any binding
commitment or contract to make such expenditures, in each case other than
in the ordinary course of business;
(j) not enter into any contract or commitment (i) providing for the
provision of products by the Company or any of its subsidiaries that has a
term of more than three years and which is reasonably expected to generate
more than $2 million in revenues over its term or (ii) providing for the
purchase of services by the Company or any of its subsidiaries that has a
term of more than one year and which is reasonably expected to involve
payments of more than $2 million over its term;
(k) not make, change or revoke any material Tax election unless
required by law or make any agreement or settlement with any taxing
authority regarding any material amount of Taxes or which is reasonably
likely to materially increase the obligations of the Company or the
Surviving Corporation to pay Taxes in the future; or
(l) enter into an agreement or arrangement with respect to any of the
foregoing.
Section 5.02. Restrictions on Parent and the Company. (a) Parent
agrees that, from and after the date hereof and prior to the Acceptance Date,
and except as may be agreed in
-25-
<PAGE>
writing by the Company or as may be expressly permitted pursuant to this
Agreement (including the exercise of termination rights under this Agreement),
Parent shall not, and shall not permit any of its subsidiaries to agree, in
writing or otherwise, to take any action which would materially delay the
consummation of the Offer, including by application of Rule 14e-5 under the
Exchange Act.
(b) The Company agrees that, from and after the date hereof and prior
to the Acceptance Date, and except as may be agreed in writing by Parent or as
may be expressly permitted pursuant to this Agreement (including any actions
pursuant to Section 5.03 and including the exercise of termination rights under
this Agreement), the Company shall not, and shall not permit any of its
subsidiaries to agree, in writing or otherwise, to take any action which would
materially delay the consummation of the Offer.
Section 5.03. No Solicitation. (a) After the date hereof and prior
to the Effective Time or earlier termination of this Agreement, the Company
shall not and shall not permit its subsidiaries to, and the Company shall use
its reasonable best efforts to cause any officer, director or employee of the
Company or any of its subsidiaries, and any attorney, accountant, investment
banker, financial advisor or other agent retained by it or any of its
subsidiaries, not to, directly or indirectly, initiate, solicit, encourage or
negotiate or provide nonpublic or confidential information to facilitate, any
proposal or offer (other than any proposal or offer by Parent or any of its
subsidiaries) to acquire all or 15% or more of the business, properties or
capital stock of the Company, whether by merger, purchase of assets, tender
offer or otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transactions, other than any transaction involving
Parent or any of its subsidiaries, being referred to herein as an "Acquisition
Transaction").
(b) Notwithstanding the provisions of paragraph (a) above or any
other provision of this Agreement, prior to the Effective Time, the Company may,
in response to an unsolicited bona fide written offer or proposal with respect
to a potential or proposed Acquisition Transaction (an "Acquisition Proposal")
from a corporation, partnership, person or other entity or group (a "Potential
Acquiror") which the Company's Board of Directors determines, in good faith and
after consultation with its independent financial advisor and legal counsel,
could reasonably be expected to lead to a Superior Proposal, furnish
confidential or nonpublic information to, and engage in discussions and
negotiate with, such Potential Acquiror, provided that the Company Board of
Directors determines in good faith after consultation with outside legal counsel
that such action is necessary in order for its directors to comply with their
fiduciary duties under applicable law. For purposes of this Agreement, "Superior
Proposal" means an Acquisition Proposal which the Company's Board of Directors
determines, in good faith and after consultation with its independent financial
advisor and legal counsel, would, if consummated, likely provide consideration
to the holders of Company Common Stock with greater financial value than the
consideration payable in the Offer and the Merger. The Company agrees that it
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. The Company agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to in Section
5.03(a) that have been engaged in connection with the evaluation of a possible
Acquisition Transaction of the obligations undertaken in this Section 5.03.
-26-
<PAGE>
(c) The Company shall promptly notify Parent after receipt of any
Acquisition Proposal. Such notice to Parent shall be made orally and in writing
and shall indicate in reasonable detail the identity of the offeror and the
material terms and conditions of such proposal, to the extent known. The Company
shall thereafter keep Parent informed, on a reasonably current basis, on the
status and terms of any such Acquisition Proposal and the status of any
discussion or negotiations with any Potential Acquiror related thereto.
(d) At any time prior to the Effective Time, the Board of Directors
of the Company may withdraw or modify the recommendation by the Board of
Directors of the Company of this Agreement, the Offer or the Merger, if the
Board of Directors of the Company determines in good faith (after consultation
with outside counsel) that its fiduciary obligations require it to do so.
(e) Nothing contained in this Section 5.03 or any other provision of
this Agreement shall prohibit the Company or the Board of Directors of the
Company from (i) taking and disclosing to the Company's stockholders a position
with respect to a tender or exchange offer by a third party pursuant to Rule
14d-9 and 14e-2 promulgated under the Exchange Act or (ii) making such
disclosure to the Company's stockholders as, in the good faith judgment of the
Board of Directors of the Company, with the advice of outside counsel, is
required under applicable law.
Section 5.04. Access to Information; Confidentiality. (a) Except for
competitively sensitive information as to which access, use and treatment is
covered by Section 5.04(b), and subject to applicable law, the Company and its
subsidiaries shall afford to Parent and Merger Sub and their respective
accountants, counsel, financial advisors and other representatives (the "Parent
Representatives") reasonable access during normal business hours upon reasonable
notice throughout the period prior to the Effective Time to their respective
properties, books, contracts, commitments and records and, during such period,
shall furnish promptly such information concerning its businesses, properties
and personnel as Parent or Merger Sub shall reasonably request; provided,
however, such investigation shall not unreasonably disrupt the Company's
operations. All nonpublic information provided to, or obtained by, Parent in
connection with the transactions contemplated hereby shall be "Evaluation
Material" for purposes of the Confidentiality Agreement dated August 8, 2000
between Parent and the Company (the "Confidentiality Agreement"), the terms of
which shall continue in force until the Effective Time; provided that Parent,
Merger Sub and the Company may disclose such information as may be necessary in
connection with seeking the Parent Required Statutory Approvals, the Company
Required Statutory Approvals and the Company Stockholder Approval.
Notwithstanding the foregoing, the Company shall not be required to provide any
information which it reasonably believes it may not provide to Parent by reason
of applicable law, rules or regulations, which constitutes information protected
by attorney/client privilege, or which the Company or any subsidiary is required
to keep confidential by reason of contract, agreement or understanding with
third parties. No investigation pursuant to this Section 5.04(a) shall affect
any representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
(b) As promptly as possible following the date hereof the parties
intend to establish an appropriate protocol which shall remain in place until
the expiration of the
-27-
<PAGE>
applicable waiting periods under the HSR Act pursuant to which the Company may
disclose to a limited number of representatives of the Parent confidential
information which is competitively sensitive in nature for the purpose of
preparing filings required under the HSR Act, and otherwise consistent with the
advice of the parties outside antitrust counsel. Any such information shall be
"Evaluation Material" for purposes of the Confidentiality Agreement. The Company
and Parent may, as each deems advisable and necessary, reasonably designate any
competitively sensitive material provided to the other under this Section as
"outside counsel only." Such materials and the information contained therein
shall be given only to the outside legal counsel of the recipient and will not
be disclosed by such outside counsel to employees, officers or directors of the
recipient unless express permission is obtained in advance from the source of
such materials (the Company or Parent as the case may be) or its legal counsel.
Section 5.05. Merger Sub. Parent will take all action necessary
(a) to cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement
and (b) to ensure that, prior to the Effective Time, Merger Sub shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement, or incur or guarantee any indebtedness.
Section 5.06. Employee Benefits. (a) Parent agrees that the Company
will honor, and from and after the Effective Time, Parent and its Affiliates
shall honor, all Company Employee Benefit Plans in accordance with their terms
as in effect immediately before the Acceptance Date, subject to any amendment or
termination thereof that may be permitted by such terms and provided that
nothing in this sentence shall prevent Parent or the Surviving Corporation from
replacing the Company's existing Company Employee Benefit Plans as contemplated
by and in accordance with the following sentence. Through December 31, 2001,
Parent shall provide, or shall cause to be provided, to current and former
employees of the Company and its subsidiaries (the "Company Employees")
compensation and employee benefits that are, in the aggregate, not less
favorable than those provided to Company Employees immediately before the
Acceptance Date. The foregoing shall not be construed to prevent the
termination of employment of any Company Employee or the amendment or
termination of any particular Company Employee Benefit Plan to the extent
permitted by its terms as in effect immediately before the Acceptance Date.
(b) For purposes of eligibility and vesting and levels of benefits
under the employee benefit plans of Parent and its Affiliates providing benefits
to any Company Employees after the Acceptance Date (the "New Plans"), each
Company Employee shall be credited with his or her years of service with the
Company and its Affiliates before the Effective Time, to the same extent as such
Company Employee was entitled, before the Effective Time, to credit for such
service under any similar Company Employee Benefit Plans, except to the extent
such credit would result in a duplication of benefits. In addition, and without
limiting the generality of the foregoing: (i) each Company Employee shall be
immediately eligible to participate, without any waiting time, in any and all
New Plans to the extent coverage under such New Plan replaces coverage under a
comparable Company Employee Benefit Plan in which such Company Employee
participated immediately before the Effective Time (such plans, collectively,
the "Old Plans"); and (ii) for purposes of each New Plan providing medical,
dental, pharmaceutical and/or vision benefits to any Company Employee, Parent
shall cause all pre-
-28-
<PAGE>
existing condition exclusions and actively-at-work requirements of such New Plan
to be waived for such employee and his or her covered dependents, and Parent
shall cause any eligible expenses incurred by such employee and his or her
covered dependents during the portion of the plan year of the Old Plan ending on
the date such employee's participation in the corresponding New Plan begins to
be taken into account under such New Plan for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such New Plan.
(c) Parent hereby acknowledges that the transactions contemplated
by this Agreement shall constitute a "change of control" under the Company
Employee Benefit Plans, as applicable.
(d) Parent hereby acknowledges that the executives listed on
Section 5.06(d) of the Company Disclosure Schedule shall have "Good Reason"
under their employment agreements as of the Acceptance Date and shall be
eligible to terminate employment and receive severance benefits for a "Good
Reason" termination following the Acceptance Date. Parent and the Company
acknowledge that none of such executives is a participant on his own behalf with
respect to the transactions contemplated by this Agreement.
Section 5.07. Proxy Statement. As promptly as practicable after the
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use all reasonable efforts to have
cleared by the SEC, and promptly thereafter shall mail to stockholders, the
Proxy Statement. Parent and Merger Sub agree to cooperate with the Company in
the preparation of the Proxy Statement and other proxy solicitation materials of
the Company. Subject to the fiduciary duties of the Company's Board of
Directors, the Proxy Statement shall contain the recommendation of the Company's
Board of Directors that the Company's stockholders approve this Agreement and
the Merger.
Section 5.08. Company Meeting. Following the consummation of the
Offer, the Company shall promptly take all action necessary in accordance with
the DGCL and its Certificate of Incorporation and By-Laws to convene the Company
Meeting, if such meeting is required. The stockholder vote required for approval
of the Merger will be no greater than that set forth in the DGCL. The Company
shall use its reasonable efforts to solicit from stockholders of the Company
proxies in favor of the Merger and shall take all other action necessary or, in
the reasonable opinion of Parent, advisable to secure any vote of stockholders
required by the DGCL to effect the Merger. Notwithstanding the foregoing, if
Merger Sub or any other subsidiary of Parent shall acquire at least 90 percent
of the outstanding shares of Company Common Stock, and provided that the
conditions set forth in Article VI shall have been satisfied or waived, the
Company shall, at the request of Parent, take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after such
acquisition, without the approval of the stockholders of the Company, in
accordance with Section 253 of the DGCL. Parent shall vote, or shall cause to be
voted, all of the shares of Company Common Stock acquired in the Offer or
otherwise owned by it or any of its subsidiaries (including Merger Sub) in favor
of the approval and adoption of this Agreement and the Merger.
-29-
<PAGE>
Section 5.09. Public Announcements. Parent and the Company will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with Nasdaq, will not issue any such press release or make any such public
statement prior to such consultation.
Section 5.10. Expenses and Fees. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, except that those expenses incurred
in connection with printing and filing the Proxy Statement shall be equally
borne by Parent and the Company.
Section 5.11. Agreement to Cooperate. (a) Subject to the terms and
conditions of this Agreement and applicable law, Parent and the Company shall
use all reasonable efforts to take, or cause to be taken, all action and do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including to obtain all necessary or appropriate
waivers, consents or approvals of third parties required in order to preserve
contractual relationships of Parent and the Company and their respective
subsidiaries, all necessary or appropriate waivers, consents and approvals to
effect all necessary registrations, filings and submissions and to lift any
injunction or other legal bar to consummation of the Offer or the Merger (and,
in such case, to proceed with the consummation of the Offer and the Merger as
expeditiously as possible), including through all possible appeals.
(b) In addition to and without limitation of the foregoing, each of
Parent and the Company undertakes and agrees to file (and Parent agrees to cause
any person or entity that may be deemed to be the ultimate parent entity or
otherwise to control Parent to file, if such filing is required by law) as soon
as practicable, and in any event prior to five business days after the date
hereof, a Notification and Report Form under the HSR Act with the United States
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice (and shall file as soon as practicable any form or report
required by any other Governmental Agency relating to antitrust matters). Each
of Parent and the Company shall (and Parent shall cause any such parent entity
to) (i) respond as promptly as practicable to any inquiries or requests received
from any domestic or foreign government or governmental agency or authority
(each, a "Governmental Agency") for additional information or documentation, and
(ii) not extend any waiting period under the HSR Act or enter into any agreement
with any Governmental Agency not to consummate the transactions contemplated by
this Agreement, except with the prior consent of the other parties hereto (which
shall not be unreasonably withheld or delayed). Parent shall (and shall cause
any such parent entity to) offer to take (and if such offer is accepted, commit
to take) all steps that it is capable of taking to avoid or eliminate
impediments under any antitrust, competition, or trade regulation law that may
be asserted by any Governmental Agency with respect to the Offer or the Merger
so as to enable the Acceptance Date to occur no later than the date that is six
months after the date hereof (the "Outside Date"), other than any such actions
that are reasonably likely to have, individually or in the aggregate, a material
adverse effect on the business, financial condition or results of operations of
Parent and its subsidiaries, taken as a whole, and shall defend through
litigation on the merits any claim asserted in any court by any party, including
appeals. In addition to and without limiting the foregoing, Parent shall (and
shall cause any such parent entity to) propose,
-30-
<PAGE>
negotiate, offer to commit and effect (and if such offer is accepted, commit to
and effect), by consent decree, hold separate order, or otherwise, the sale,
divestiture or disposition of such assets or businesses of Parent (or any such
parent entity) or its (or their) subsidiaries or, effective as of the Effective
Time, the Surviving Corporation or its subsidiaries, or otherwise offer to take
or offer to commit to take any action which it is capable of taking and, if the
offer is accepted, take or commit to take such action that limits its freedom of
action with respect to, or its ability to retain, any of the businesses,
services or assets of Parent, any such parent entity, the Surviving Corporation
or their respective subsidiaries, in order to avoid the filing of any suit or
proceeding or the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order in any suit or proceeding, which
would otherwise have the effect of preventing or delaying the occurrence of the
Acceptance Date beyond the Outside Date, or which may be necessary to allow the
Acceptance Date to occur prior to the Outside Date; provided that nothing in
this sentence shall require the Parent to take or agree to take any action or
actions that are reasonably likely to have, individually or in the aggregate, a
material adverse effect on the business, financial condition or results of
operations of Parent and its subsidiaries, taken as a whole, and provided,
further, that any such action may be conditioned upon the occurrence of the
Acceptance Date. At the request of Parent, the Company shall agree to divest,
hold separate or otherwise take or commit to take any action that limits its
freedom of action with respect to, or its ability to retain, any of the
businesses, services or assets of the Company or any of its subsidiaries,
provided that any such action may be conditioned upon the consummation of the
Merger and the transactions contemplated hereby. Each party shall (i) promptly
notify the other party of any written communication to that party or its
affiliates from any Governmental Agency and, subject to applicable law, permit
the other party to review in advance any proposed written communication to any
of the foregoing; (ii) not agree to participate, or to permit its affiliates to
participate, in any substantive meeting or discussion with any Governmental
Agency in respect of any filings, investigation or inquiry concerning this
Agreement or the Merger unless it consults with the other party in advance and,
to the extent permitted by such Governmental Agency, gives the other party the
opportunity to attend and participate thereat; and (iii) to the extent permitted
under applicable law, furnish the other party with copies of all correspondence,
filings, and communications (and memoranda setting forth the substance thereof)
between them and their affiliates and their respective representatives on the
one hand, and any government or regulatory authority or members or their
respective staffs on the other hand, with respect to this Agreement and the
Merger.
Section 5.12. Directors' and Officers' Indemnification. (a) The
indemnification provisions of the Company's Certificate of Incorporation or
Bylaws as in effect at the Acceptance Date shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of the Company.
From and after the Acceptance Date, Parent shall assume, be jointly and
severally liable for, and honor, guaranty and stand surety for, and shall cause
the Company to honor, in accordance with their respective terms, each of the
covenants contained in this Section 5.12, without limit as to time.
(b) From and after the Acceptance Date, each of Parent and the
Company and, from and after the Effective Time, the Surviving Corporation,
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless each present and former director,
-31-
<PAGE>
officer, employee and agent of the Company or any of its subsidiaries (each,
together with such person's heirs, executors or administrators, an "Indemnified
Party" and collectively, the "Indemnified Parties") against any costs or
expenses (including advancing attorneys' fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any actual or threatened claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of, relating to or in connection with any action or omission occurring or
alleged to occur prior to the Effective Time (including, without limitation,
acts or omissions in connection with such persons serving as an officer,
director or other fiduciary in any entity if such service was at the request or
for the benefit of the Company) or the Merger or the other transactions
contemplated by this Agreement or arising out of or pertaining to the
transactions contemplated by this Agreement to the fullest extent that the
Company would have been permitted under Delaware law and the Company's
Certificate of Incorporation and By-laws in effect on the date of this
Agreement.
(c) For a period of six years after the Effective Time, Parent shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company and its subsidiaries
(provided that Parent may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions that are no less
advantageous to the Indemnified Parties, and which coverages and amounts shall
be no less than the coverages and amounts provided at that time for Parent's
directors and officers) with respect to matters arising on or before the
Effective Time; provided, however, that if the existing current policies expire,
are terminated or cancelled during such six-year period, Parent will use its
reasonable efforts to obtain as much coverage as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
two times the premiums paid the Company as of the date of this Agreement.
(d) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided in this Section 5.12.
(e) The rights of each Indemnified Party hereunder shall be in
addition to, and not in limitation of, any other rights such Indemnified Party
may have under the Certificate of Incorporation or Bylaws of the Company, any
other indemnification arrangement, the DGCL or otherwise. The provisions of this
Section 5.12 shall survive the consummation of the Merger and expressly are
intended to benefit each of the Indemnified Parties.
Section 5.13. Section 16 Matters. Prior to the Acceptance Date,
Parent and the Company shall take all such steps as may be required and
permitted to cause the transactions contemplated by this Agreement, including
any dispositions of shares of Company Common Stock (including derivative
securities with respect to shares of Company Common Stock) by each individual
who is or will be subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company to be exempt under Rule 16b-3
promulgated under the Exchange Act.
-32-
<PAGE>
Section 5.14. Further Assurances. Each party hereby agrees to
perform any further acts and to execute and deliver any documents which may be
reasonably necessary to carry out the provisions of this Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. Conditions to the Obligations of Each Party. The
respective obligations of the Company, Parent and Merger Sub to consummate the
Merger are subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) Merger Sub shall have purchased shares of Company Common Stock
pursuant to the Offer, except that this condition shall not be a condition to
Parent's and Merger Sub's obligation to effect the Merger if Merger Sub shall
have failed to purchase shares of Company Common Stock pursuant to the Offer in
breach of (or as a result of Parent's breach of) this Agreement;
(b) this Agreement and the Merger shall have been approved and
adopted by the requisite vote of the stockholders of the Company, if required by
the DGCL;
(c) no judgment, injunction, order or decree of a court or
governmental agency or authority of competent jurisdiction shall be in effect
which has the effect of making the Merger illegal or otherwise restraining or
prohibiting the consummation of the Merger; provided, however, that no party may
rely on this condition if it is in breach of its obligations under Section 5.11
hereof and such breach has, directly or indirectly, resulted in such judgment,
injunction, order or decree being in effect; and
(d) (i) any waiting period applicable to consummation of the Merger
under the HSR Act and Foreign Antitrust Laws shall have expired or been
terminated and (ii) all approvals required under Foreign Antitrust Laws before
consummation of the Merger shall have been obtained, except in the case of (i)
and (ii) above, such waiting periods (other than the HSR Act) or approvals the
failure of which to expire or be obtained is not reasonably likely to have a
Parent Material Adverse Effect or a Company Material Adverse Effect or to
provide a reasonable basis to conclude that the parties hereto or any of their
respective directors, officers, agents, advisors or other representatives would
be subject to the risk of criminal liability.
ARTICLE VII
TERMINATION
Section 7.01. Termination. This Agreement may be terminated and the
Offer and the Merger contemplated hereby may be abandoned at any time prior to
the Effective Time (notwithstanding any approval of this Agreement by the
stockholders of the Company):
-33-
<PAGE>
(a) by mutual written consent of the Company (including, from and
after the Acceptance Date, the Independent Director Approval contemplated by
Section 1.03(c)) and Parent;
(b) by either Parent or the Company:
(i) if Merger Sub shall not have accepted for payment any shares
of Company Common Stock pursuant to the Offer prior to the date that is twenty
business days following the Outside Date (the "Drop Dead Date"); provided that
(A) if at such date the waiting period applicable to the consummation of the
Offer or the Merger under the HSR Act or any Foreign Antitrust Law shall not
have expired or been terminated, or any approval required under any Foreign
Antitrust Law shall not have been obtained (except for such waiting periods
(other than under the HSR Act) or approvals the failure of which to expire or be
obtained is not reasonably likely to have a Parent Material Adverse Effect or a
Company Material Adverse Effect or to provide a reasonable basis to conclude
that the parties hereto or any of their respective directors, officers, agents,
advisors or other representatives would be subject to the risk of criminal
liability), the Drop Dead Date may be extended to the date that is three months
from such twentieth business day following the Outside Date (the "Extended Drop
Dead Date") by Parent or the Company by written notice to the other party,
provided that the party extending the Drop Dead Date has a reasonable
expectation, assuming that all other parties comply with their obligations under
this Agreement, that the applicable waiting period or approval will have expired
or been terminated or obtained, as the case may be, on or prior to such Extended
Drop Dead Date and (B) the right to terminate this Agreement pursuant to this
Section 7.01(b)(i) shall not be available to any party whose breach of this
Agreement has been the cause of, or resulted in, the failure of shares of
Company Common Stock to have been purchased pursuant to the Offer by the Drop
Dead Date; or
(ii) if any governmental entity shall have issued an order,
injunction or other decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for payment of,
or payment for the Company Common Stock pursuant to the Offer or the Merger and
such order, injunction, decree or ruling or other action shall have become final
and nonappealable; provided, that the party seeking to terminate this Agreement
pursuant to this Section 7.01(b) shall have used its reasonable best efforts to
remove such order, decree, ruling or injunction and shall not be in violation of
Section 5.11;
(c) prior to the Acceptance Date by Parent if the Company shall have
breached any of its representations, warranties or covenants contained in this
Agreement, which breach would give rise to the failure of a condition set forth
in paragraph (c) or (d) of Exhibit A and which breach has not been or is
incapable of being cured by the Company prior to the Drop Dead Date;
-34-
<PAGE>
(d) prior to the Acceptance Date by the Company if Parent or Merger
Sub shall have breached in any material respect any of its obligations to be
performed by either of them under this Agreement, or if the representations and
warranties of Parent and Merger Sub contained in this Agreement shall not be
true and correct, except for such failures to be true and correct that,
individually and in the aggregate, are not reasonably likely to have a Parent
Material Adverse Effect;
(e) prior to the Acceptance Date by the Company if (i) the Company is
not in material breach of Section 5.03(a), (ii) the Board of Directors of the
Company authorizes the Company, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and the Company gives Parent notice (which
may be revoked by the Company by a subsequent notice to that effect) in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement to such notice, (iii) Parent does not make, within
three business days of receipt of the Company's written notification of its
intention to enter into a binding agreement for Superior Proposal, an offer that
the Board of Directors of the Company determines, in good faith after
consultation with its financial advisors, is at least as favorable from a
financial point of view, to the stockholders of the Company as the Superior
Proposal and (iv) the Company prior to or concurrently with such termination
pays to Parent in immediately available funds the Termination Fee (as defined in
Section 8.01(b)) and acknowledges in writing to Parent its obligation to pay to
Parent the Reimbursable Expenses (as defined in Section 8.01(b)) in accordance
with Section 8.01(c). The Company agrees (i) that it will not enter into a
binding agreement referred to in clause (ii) above until at least the fourth
business day after it has provided the notice (which has not been revoked) to
Parent required thereby and (y) to notify Parent promptly if its intention to
enter into a written agreement referred to in its notification shall change at
any time after giving such notification;
(f) prior to the Acceptance Date by Parent, if (i) the Board of
Directors of the Company shall have failed to recommend, or shall have
withdrawn, adversely modified or adversely amended in any material respect its
approval or recommendation of the Offer, the Merger or this Agreement to the
Company's stockholders or fails to reconfirm its recommendation of this
Agreement within five business days after a written request from Parent to do
so, it being understood that (x) the fact that the Company or any of the other
Persons described in Section 5.03(a) has taken any of the actions that would be
proscribed by Section 5.03(a) but for Section 5.03(b) and disclosure of such
fact, (y) disclosure of any competing proposal that is not being recommended by
the Board of Directors of the Company, or (z) disclosure of any other facts or
circumstances, in each case together with a statement that the Board of
Directors of the Company continues to recommend the Offer, the Merger and this
Agreement, shall not be considered to be a withdrawal, adverse modification or
adverse amendment in any material respects of such approval or recommendation or
a failure to reconfirm its recommendation of this Agreement; or (ii) the Company
shall have entered into a definitive agreement for a Superior Proposal;
(g) by the Company if as the result of the failure to be satisfied of
any of the conditions set forth in Exhibit A, Parent or Merger Sub shall have
terminated or withdrawn the Offer or the Offer shall have expired without Merger
Sub having purchased any Shares pursuant thereto; provided, however, that the
Company may not terminate this Agreement pursuant to this
-35-
<PAGE>
Section 7.01(g) if the failure of any such condition to be satisfied at the time
of such termination results from (i) the Company's failure to perform any of its
obligations under this Agreement or (ii) facts or circumstances that constitute
a breach of any representation or warranty of the Company under this Agreement;
(h) by Parent if the Offer shall have expired without Merger Sub
having purchased any Shares pursuant thereto; provided, however, that Parent may
not terminate this Agreement pursuant to this Section 7.01(h) if Merger Sub has
failed to extend the Offer at any time that it is required to do so under this
Agreement or if the failure of any conditions to the Offer to be satisfied at
the time of such termination results from (i) Parent's failure to perform any of
its obligations under this Agreement or (ii) facts or circumstances that
constitute a breach of any representation or warranty of Parent under this
Agreement; or
(i) by the Company if Parent or Merger Sub shall have failed to
commence the Offer in accordance with the Section 1.01; provided, however, that
the Company may not terminate this Agreement pursuant to this Section 7.01(i) if
such failure to have commenced the Offer shall have been caused by (i) the
Company's failure to perform any of its obligations under this Agreement, (ii)
facts or circumstances that constitute a breach of any representation or
warranty of the Company under this Agreement or (iii) the occurrence of any of
the events specified in paragraph (b), (c) or (d) of Exhibit A.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Effect of Termination. (a) In the event of
termination of this Agreement by either Parent or the Company prior to the
Acceptance Date pursuant to the provisions of Section 7.01, this Agreement shall
forthwith become void, and there shall be no liability or further obligation on
the part of the Company, Parent, Merger Sub or their respective officers or
directors (except as set forth in this Section 8.01, in the second sentence of
Section 5.04 and in Sections 5.10 and 8.05, all of which shall survive the
termination). Nothing in this Section 8.01 shall relieve any party from
liability for any willful or material breach of any covenant or agreement of
such party contained in this Agreement.
(b) In the event that this Agreement is terminated (i) by the Company
pursuant to Section 7.01(g) or by Parent pursuant to Section 7.01(h), and prior
to any such termination (but after the date hereof) (A) an Acquisition Proposal
shall have been made to the Company or any of its subsidiaries or any of its
stockholders and shall have been announced publicly or (B) any Person shall have
publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal with respect to the Company or any of its subsidiaries, or
(ii) by Parent pursuant to Section 7.01(f)(i), and in each case within 12 months
after any such termination the Company enters into a definitive agreement (which
is reasonably capable of being consummated within 18 months of such termination)
with respect to or consummates a transaction contemplated by such Acquisition
Proposal, then the Company shall promptly, but in no event later than two days
after the date of entering into (or, if earlier, consummating) such transaction,
pay Parent a termination fee of $25,000,000 (the "Termination Fee") and shall
promptly, but in no event later than two days after being notified of such by
-36-
<PAGE>
Parent, pay all of the reasonable, documented charges and expenses, including
those of the Paying Agent, incurred by Parent or Merger Sub in connection with
this Agreement and the transactions contemplated by this Agreement up to a
maximum amount of $3,100,000 (the "Reimbursable Expenses") (upon receipt of
reasonable documentation with respect thereto), in each case payable by wire
transfer of same day funds.
(c) In the event that this Agreement is terminated (i) by the
Company pursuant to Section 7.01(e) or by Parent pursuant to Section
7.01(f)(ii), the Company shall, in the case of termination by the Company, prior
to or concurrently with such termination, and in the case of termination by
Parent, promptly but in no event later than two days after the date of such
termination, pay Parent the Termination Fee and in each case shall promptly, but
in no event later than two days after being notified of such by Parent, pay
Parent the Reimbursable Expenses (upon receipt of reasonable documentation with
respect thereto), in each case payable by wire transfer of same day funds.
(d) The Company acknowledges that the Agreements contained in
Section 8.01(b) and (c) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent and Merger Sub would
not enter into this Agreement; accordingly, if the Company fails to promptly pay
the amount due pursuant to Section 8.01(b) or (c), and, in order to obtain such
payments, Parent or Merger Sub commences a suit which results in a judgment
against the Company for the fee set forth in Section 8.01 (b) or (c), the
Company shall pay to Parent or Merger Sub its costs and expenses (including
attorneys' fees) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Bank of America, N.A. in effect on the
date such payment was required to be made.
Section 8.02. Non-Survival of Representations and Warranties. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Acceptance Date, with respect to
representations and warranties of the Company, or the Effective Time, with
respect to representations and warranties of Parent and Merger Sub. This
Section 8.02 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after such time.
Section 8.03. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
mailed by registered or certified mail (return receipt requested) or sent via
facsimile 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 Merger Sub, to:
Chiron Corporation
4560 Horton Street
Emeryville, California 94608-2916
Attention: Sean Lance, Chairman and CEO
William Green, Senior Vice President and General Counsel
Facsimile: (510) 654-5360
-37-
<PAGE>
with copies to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Alison S. Ressler, Esq.
Facsimile: (310) 712-8800
If to the Company, to:
PathoGenesis Corporation
5215 Old Orchard Road
Suite 900
Skokie, Illinois 60077
Attention: Wilbur H. Gantz, Chairman and CEO
Cameron S. Avery, General Counsel
Facsimile: (847) 583-5409
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: David M. Silk, Esq.
Facsimile: (212) 403-2000
Section 8.04. Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, (ii) "knowledge" shall mean
actual knowledge of the executive officers of the Company or Parent, as the case
may be, and (iii) reference to any Article or Section means such Article or
Section hereof. No provision of this Agreement shall be interpreted or construed
against any party hereto solely because such party or its legal representative
drafted such provision. Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
Section 8.05. Miscellaneous. This Agreement (including the documents
and instruments referred to herein) shall not be assigned by operation of law or
otherwise except that Merger Sub may assign its obligations under this Agreement
to any other wholly-owned subsidiary of Parent subject to the terms of this
Agreement. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING
VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO
-38-
<PAGE>
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE.
Section 8.06. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 8.07. Amendments; Extensions. (a) This Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after the Company Stockholder
Approval has been obtained; provided that, (i) after Acceptance Date, (A) no
amendment shall be made which decreases the Merger Consideration and (B) any
amendment will require the Independent Director Approval contemplated by Section
1.03 and (ii) after the Company Stockholder Approval has been obtained, there
shall be made no amendment that by law requires further approval by stockholders
of the Company without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
(b) At any time prior to the Effective Time, the parties hereto, by
action taken or authorized by their respective Boards of Directors (which after
the Acceptance Date will require, with respect to the Company, the Independent
Director Approval contemplated by Section 1.03), may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein; provided that after the Company Stockholder
Approval has been obtained, there shall be made no waiver that by law requires
further approval by stockholders of the Company without the further approval of
such stockholders. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure or delay of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
Section 8.08. Entire Agreement. This Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been made
or relied upon by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any person other than the parties hereto any
rights or remedies hereunder except for the provisions of Sections 5.06(d) and
5.12, which are intended for the benefit of the Company's former and present
officers, directors, employees and agents.
Section 8.09. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the
-39-
<PAGE>
transactions contemplated hereby is not affected in any manner materially
adverse to any party.
Section 8.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.
Section 8.11. No Admission. Nothing herein, including Section 4.11,
shall be deemed an admission by the Company, in any action or proceeding by or
on behalf of a third-party, that such third-party is not in breach or violation
of, or in default in, the performance or observance of any term or provision of
any contract.
-40-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
PATHOGENESIS CORPORATION
By: /s/ Wilbur H. Gantz
--------------------------------------
Wilbur H. Gantz
Chairman and Chief Executive Officer
CHIRON CORPORATION
By: /s/ Sean Lance
--------------------------------------
Sean Lance
Chairman and Chief Executive Officer
PICARD ACQUISITION CORP.
By: /s/ James Sulat
--------------------------------------
James Sulat
President
<PAGE>
EXHIBIT A
Conditions of the Offer
-----------------------
Notwithstanding any other term of the Offer or the Agreement, Merger
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act
(relating to Merger Sub's obligation to pay for or return tendered shares of
Company Common Stock promptly after the termination or withdrawal of the Offer),
to pay for any shares of Company Common Stock tendered pursuant to the Offer,
unless (i) there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer that number of shares of Company Common Stock which,
when added together with all other shares of Company Common Stock owned by
Parent and its subsidiaries, would represent at least a majority of the
outstanding Company Common Stock (determined on a fully diluted basis for all
outstanding stock options and any other rights (other than Company Rights, if
such Company Rights are not at such time exercisable) to acquire Company Common
Stock outstanding on the date of purchase) (the "Minimum Tender Condition"),
(ii) any requisite waiting period under the HSR Act applicable to the purchase
of shares of Company Common Stock pursuant to the Offer or to the Merger shall
have been terminated or shall have expired, and (iii) the applicable waiting
periods under the Foreign Antitrust Laws shall have been terminated or shall
have expired, except for such waiting periods the failure of which to terminate
or expire is not reasonably likely to have a Parent Material Adverse Effect or a
Company Material Adverse Effect or to provide a reasonable basis to conclude
that the parties hereto or any of their respective directors, officers, agents,
advisors or other representatives would be subject to the risk of criminal
liability. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Merger Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any shares of Company Common Stock not theretofore
accepted for payment or paid for, if, immediately prior to the acceptance for
payment of shares of Company Common Stock pursuant to the Offer, any of the
following conditions exists:
(a) there shall have been entered, enforced or issued by any
governmental entity, any judgment, order, injunction or decree (i) which makes
illegal, restrains or prohibits the making of the Offer, the acceptance for
payment of, or payment for, any shares of Company Common Stock by Parent or
Merger Sub, or the consummation of the Merger; or (ii) which prohibits the
ownership or operation by Parent or any of its subsidiaries of the Company;
provided, in each case, that Parent has complied with its obligations under
Section 5.11 of the Agreement;
(b) there shall have been any statute, rule, regulation,
legislation or interpretation enacted, enforced, promulgated, amended or issued
by any governmental entity or deemed by any governmental entity applicable to
(i) Parent, the Company or any subsidiary or affiliate of Parent or the Company
or (ii) any transaction contemplated by this Agreement, other than the HSR Act
and the Foreign Antitrust Laws which would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in clauses (i) or
(ii) of paragraph (a) above;
(c) the representations and warranties of the Company contained in
this Agreement shall not be true and
<PAGE>
correct as of such time, except for such failures to be true and correct that,
in the aggregate, are not reasonably likely to have a Company Material Adverse
Effect;
(d) the Company shall have failed to perform in any material
respect any material obligation required to be performed by it at or prior to
such time under this Agreement; or
(e) this Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable judgment of Merger Sub or Parent, in any such case, and
regardless of the circumstances giving rise to any such condition (including any
action or inaction by Parent or any of its affiliates), makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Merger Sub and
Parent and may be asserted by Merger Sub or Parent regardless of the
circumstances giving rise to such condition or may be waived by Merger Sub and
Parent in whole or in part at any time and from time to time in their reasonable
discretion. The failure by Parent, Merger Sub or any other affiliate of Parent
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right; the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances, and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
The terms in this Exhibit A that are defined in the attached Agreement
have the meanings set forth therein.
A-2
