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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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SCHEDULE 14D-9
Solicitation / Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
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DIATIDE, INC.
(Name of Subject Corporation)
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DIATIDE, INC.
(Name of Person(s) Filing Statement)
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Common Stock, $.001 par value per share
(Title of Class of Securities)
252842 10 9
(CUSIP Number of Class of Securities)
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Richard T. Dean
President and Chief Executive Officer
Diatide, Inc.
Nine Delta Drive
Londonderry, New Hampshire 03053
(603) 437-8970
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
With a copy to:
David E. Redlick, Esq.
Jonathan Wolfman, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telephone: (617) 526-6000
Telecopy: (617) 526-5000
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule
14D-9") relates to an offer by BXA Acquisition Company, a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of Schering Berlin Inc., a
Delaware corporation ("Parent"), which is a wholly owned subsidiary of Schering
Aktiengesellschaft, a company organized under the laws of the Federal Republic
of Germany ("AG"), to purchase all of the outstanding shares of Common Stock
(as defined below) of Diatide, Inc., a Delaware corporation (the "Company").
Item 1. Security and Subject Company.
The name and address of the principal executive offices of the subject
company is Diatide, Inc., Nine Delta Drive, Londonderry, New Hampshire 03053.
The title of the class of equity securities to which this Schedule 14D-9
relates is common stock, $.001 par value per share (the "Common Stock"), of the
Company (the "Shares").
Item 2. Tender Offer of the Bidder.
This Schedule 14D-9 relates to a tender offer by the Purchaser disclosed in
a Tender Offer Statement on Schedule 14D-1 dated September 24, 1999 (as amended
or supplemented from time to time, the "Schedule 14D-1"), to purchase all of
the outstanding Shares at a price of $9.50 per Share (the "Offer Price"), net
to the seller in cash, without interest, on the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated September 24,
1999 (as amended or supplemented from time to time, the "Offer to Purchase"),
and the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of September 17, 1999 (the "Merger Agreement"), among Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, subject to
the terms and conditions contained therein, for (1) the making of the Offer by
the Purchaser and (2) following the consummation of the Offer and the
satisfaction of certain conditions, the merger of the Purchaser with and into
the Company in accordance with the Delaware General Corporation Law (the
"Merger"). In the Merger:
(a) each outstanding Share (other than Shares held by stockholders who
perfect their appraisal rights under Delaware law, Shares owned by the Company
as treasury stock, and Shares owned by Parent or any direct or any indirect
subsidiary of Parent) will be converted into the right to receive the Offer
Price, or any higher price per Share paid pursuant to the Offer, without
interest thereon;
(b) each outstanding share of Series A Convertible Preferred Stock, $.01 par
value per share, of the Company (the "Company Series A Preferred Stock"), not
owned directly or indirectly by Parent or the Company, will be converted into
the right to receive $9.75 in cash, or if greater, the highest per Share cash
consideration paid pursuant to the Offer without interest thereon;
(c) each outstanding share of Series B Convertible Preferred Stock, $.01 par
value per share of the Company (the "Company Series B Preferred Stock" and,
together with the Company Series A Preferred Stock, the "Company Series
Preferred Stock" and, together with the Common Stock, the "Company Capital
Stock"), not owned directly or indirectly by Parent or the Company, will be
converted into the right to receive the Offer Price, or any higher price per
Share paid pursuant to the Offer, without interest thereon; and
(d) all outstanding stock options of the Company will be canceled in
exchange for a cash payment by the Company of an amount equal to (i) the
excess, if any, of (x) the Offer Price, or any higher price per Share paid
pursuant to the Offer, over (y) the exercise price per Share subject to such
stock option, multiplied by (ii) the number of Shares for which such stock
option has not been exercised (whether vested or not).
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Pursuant to the Merger Agreement, Parent may elect at any time prior to the
Merger, instead of merging the Purchaser into the Company as described above,
to merge the Company with and into the Purchaser. The consideration receivable
by holders of Company Capital Stock in the event of such an election by Parent
would be the same as described above.
A copy of the Merger Agreement is filed as Exhibit (c)(1) to this Schedule
14D-9 and is incorporated herein by reference.
The Offer to Purchase states that the principal executive offices of each of
the Purchaser and Parent are located at 340 Changebridge Road, P.O. Box 1000,
Montville, New Jersey 07045-1000.
Item 3. Identity and Background.
(a) The name and business address of the Company, which is the person filing
this Schedule 14D-9, are set forth in Item 1 above.
(b) (1) General.
Each material contract, agreement, arrangement and understanding, and each
material actual or potential conflict of interest between the Company or its
affiliates and (x) the Company, its executive officers, directors or affiliates
or (y) the Purchaser and Parent, their executive officers, directors or
affiliates, is described in the Company's Information Statement set forth on
Annex A hereto or set forth below.
(2) Agreement and Plan of Merger.
A summary of the Merger Agreement is contained in the sections of the Offer
to Purchase entitled "Section 12--Purpose of the Offer; the Merger Agreement;
Other Agreements; Plans for the Company" and "Section 14--Certain Conditions of
the Offer" and is incorporated herein by reference. A copy of the Merger
Agreement is filed as Exhibit (c)(1) to this Schedule 14D-9 and is incorporated
herein by reference.
(3) Other Agreements.
A summary of the Confidentiality Agreement entered into between Parent and
the Company and the Stock Purchase Agreements entered into between the
Purchaser and the holders of the Company Series Preferred Stock is contained in
the section of the Offer to Purchase entitled "Section 12--Purpose of the
Offer; the Merger Agreement; Other Agreements; Plans for the Company" and is
incorporated herein by reference.
(4) Effect on Employee Benefit and Stock Plans.
In addition to the provisions of the Merger Agreement relating to employee
benefit and stock plans which are described in the section of the Offer to
Purchase entitled "Section 12--Purpose of the Offer; the Merger Agreement;
Other Agreements; Plans for the Company" (which is incorporated herein by
reference), on September 17, 1999, the Board of Directors of the Company (the
"Company Board") adopted resolutions accelerating the vesting of all
outstanding stock options such that if and when the Purchaser accepts for
payment and pays for any Shares pursuant to the Offer, such stock options shall
be deemed to have become fully vested immediately prior to the expiration of
the Offer.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Board of Directors.
At a meeting held on September 17, 1999, the Company Board unanimously (1)
approved the Merger Agreement, the Offer, the Merger, the Stock Purchase
Agreements and the other transactions contemplated by the Merger Agreement; (2)
determined that the terms of the Offer, the Merger, the Stock Purchase
Agreements and the other transactions contemplated by the Merger Agreement are
fair to, and in the best interests of, the Company and its stockholders; (3)
voted to recommend that the holders of Shares accept the Offer and tender their
Shares pursuant to the Offer; (4) voted to recommend that the Company's
stockholders adopt the Merger Agreement, if required; and (5) declared that the
Merger Agreement is advisable. Accordingly, the Company Board unanimously
recommends that the stockholders of the Company accept the Offer and tender
their Shares pursuant to the Offer.
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(b) Background and Reasons for Recommendation.
During 1999, the Company contacted a number of pharmaceutical companies to
explore their interest in collaborating with the Company in the development of
various products for which the Company had not yet entered into partnering
arrangements.
As part of this process, in the spring of 1999, Dr. Richard T. Dean, the
Company's President and Chief Executive Officer, contacted Dr. Harold
Goldstein, Vice President of Clinical Diagnostics of one of Parent's
subsidiaries to propose a meeting. On May 6, 1999, representatives of the
Company made a presentation of nonconfidential information regarding the
Company's unpartnered products to scientific and managerial representatives of
Parent. Following that meeting, the Company provided additional nonconfidential
information to Parent.
In June 1999, Mr. Robert Milos, Corporate Vice President and General Manager
of one of Parent's subsidiaries, called Dr. Dean to inquire whether the Company
would be willing to consider the possibility of Parent acquiring the Company.
Dr. Dean indicated that the Company would be willing to consider such a
proposal. On July 2, 1999, the Parent and the Company entered into a
confidentiality agreement.
During July 1999, Parent conducted a due diligence review of the Company,
and personnel of Parent and the Company met on a number of occasions to discuss
the Company's business and operations.
On July 29, 1999, the Company engaged CIBC World Markets Corp. ("CIBC") to
advise the Company with respect to the Company's strategic alternatives,
including a possible acquisition of the Company, and to assist the Company in
its negotiations with Parent.
In early August 1999, the Company advised Parent that the Company was
seeking to raise approximately $5 million in new financing in the form of a
secured loan. The Company and Parent discussed the possibility of Parent making
such a loan. However, on August 11, 1999, Parent advised the Company that
Parent had determined not to proceed with the loan, but that Parent intended to
make a proposal to acquire the Company.
On August 12, 1999, Parent submitted a non-binding letter to the Company in
which Parent proposed to acquire 100% of the Company's common stock for $8.00
per share in cash, subject to Parent's satisfactory completion of its due
diligence. On August 13, 1999, Parent sent a second letter to the Company
extending this proposal until August 18, 1999. In response, on August 13, 1999,
the Company sent Parent a letter indicating that it or CIBC would be in contact
with Parent during the week of August 16 to continue discussions.
On August 20, 1999, Dr. Dean met with Mr. Lutz Lingnau, Parent's Chief
Executive Officer, to discuss the Company's business and operations and
Parent's acquisition proposal.
On August 23, 1999, Parent entered into the Confidentiality Agreement
described in Item 3 of this Schedule 14D-9, replacing the confidentiality
agreement previously entered into by Parent and the Company. On August 24, 1999
and August 25, 1999, Parent's scientific, legal and financial personnel and
advisors performed additional due diligence relating to the Company. This due
diligence included meetings between scientific and managerial personnel of
Parent and the Company.
On August 31, 1999, representatives of Parent and Warburg Dillon Read,
Parent's financial advisor, met with representatives of the Company and CIBC to
discuss the status of Parent's due diligence and to negotiate the proposed
financial terms of a transaction. Parent modified its offer by proposing to
acquire all of the Shares and the outstanding shares of Company Series B
Preferred Stock for $9.00 per share in cash and to purchase all of the
outstanding shares of Company Series A Preferred Stock for $9.75 per share in
cash, an amount equal to the liquidation preference which the holders of
Company Series A Preferred Stock would be entitled to as a result of a business
combination transaction. Parent stated that it desired to structure any
transaction as a cash merger with a first step cash tender offer.
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On September 1, 1999, Cravath, Swaine & Moore, counsel for Parent, sent a
draft Merger Agreement to Hale and Dorr LLP, counsel to the Company.
On September 3, 1999, the Company Board met by telephone to discuss Parent's
revised acquisition proposal. During this meeting, the Company Board received
advice from the Company's financial and legal advisors as to various aspects of
the proposal. At the conclusion of the meeting, the Company Board instructed
CIBC to advise Parent that Parent would need to increase its offer for the
Company if it wished the Company Board to determine to proceed with final
negotiations of a transaction. Following the meeting, Hale and Dorr LLP sent a
memorandum to Parent's financial advisor and counsel outlining the principal
issues to be negotiated between the parties arising out of the draft Merger
Agreement provided by Cravath, Swaine & Moore.
On September 9, 1999, Parent advised CIBC, at a meeting between
representatives of Parent and CIBC, that Parent was prepared to increase its
offer to $9.50 per share in cash for the Shares and Company Series B Preferred
Stock, with the per share consideration for the Company Series A Preferred
Stock remaining at $9.75 in cash.
On September 10, 1999, the Company Board met by telephone to consider the
revised proposal from Parent. At the conclusion of this meeting, the Company
Board authorized the Company's management and financial and legal advisers to
proceed with the negotiation of a transaction based on the proposed cash
purchase price of $9.50 per Share and share of Company Series B Preferred Stock
and $9.75 per share of Company Series A Preferred Stock.
On September 10, 1999, Hale and Dorr LLP submitted comments on the draft
Merger Agreement to Cravath, Swaine & Moore. On September 13, 1999, the
Company's financial advisers and legal counsel met with the financial advisers
and legal counsel for Parent and internal legal and financial personnel of
Parent to negotiate the Merger Agreement. These negotiations continued by
telephone over the course of the week. As part of these negotiations, legal
counsel for the Company and legal counsel for Parent determined that it would
expedite the transactions contemplated by Parent if Parent entered into
purchase agreements with the holders of the Company Series Preferred Stock.
At a meeting held on September 17, 1999, the Company Board unanimously
determined that the terms of the Offer, the Merger, the Stock Purchase
Agreements and the other transactions contemplated by the Merger Agreement are
fair to, and in the best interests of, the Company and its stockholders and
adopted resolutions (a) approving the Merger Agreement, the Offer, the Merger,
the Stock Purchase Agreements and the other transactions contemplated by the
Merger Agreement, (b) recommending that the holders of Shares accept the Offer
and tender their Shares pursuant to the Offer, (c) recommending that the
Company's stockholders adopt the Merger Agreement, if required, and (d)
declaring that the Merger Agreement is advisable.
After this meeting of the Company Board, the parties executed the Merger
Agreement, and Parent and the holders of the Company Series Preferred Stock
entered into the Stock Purchase Agreements. On the morning of September 20,
1999, Parent and the Company issued a joint press release announcing the Merger
Agreement and the Offer.
In making the determinations and recommendations set forth above, the Board
considered the following factors which, taken as a whole, supported its
decision:
1. The status of the Company's various products and development programs.
2. The Company's prospects if it were to remain independent, including the
risks and benefits inherent in remaining independent and the fact that the
Company does not anticipate becoming profitable until at least 2001.
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3. The Company's need, if it were to remain independent, to raise significant
additional capital in order to continue its product development programs
and fund marketing efforts for its recently introduced products and the
fact that obtaining such financing was likely to result in dilution to
existing stockholders.
4 The recent discussions engaged in by the Company with several pharmaceutical
companies regarding potential corporate partnering arrangements for the
Company's unpartnered products.
5. The process undertaken by the Company, following receipt of Parent's
acquisition proposal, to identify and negotiate acquisition or licensing
alternatives, including the engagement of CIBC as the Company's financial
advisor.
6. The terms and conditions of the Merger Agreement, including the parties'
representations, warranties and covenants and the conditions to their
respective obligations.
7. The amount and form of consideration to be received by holders of the
Shares in the Offer and the Merger; including the Company Board's judgment
that $9.50 per Share is the highest available price, based, in part, on the
course of negotiation between the Company and Parent.
8. The historical and recent market prices of the Shares and the fact that the
purchase price of $9.50 per Share represented an approximate 20% premium to
the last sales price of the Shares on September 17, 1999, the last full
trading date prior to public announcement of the Merger Agreement.
9. The written opinion of CIBC dated September 17, 1999 to the effect that, as
of such date, and based upon and subject to certain conditions and
limitations stated in such opinion, the $9.50 per Share cash consideration
to be received by holders of Shares pursuant to the Merger Agreement was
fair to such holders from a financial point of view. The full text of
CIBC's written opinion, which sets forth the assumptions made, matters
considered and limitations on the review undertaken by CIBC, is attached
hereto as Exhibit (a)(3) and is incorporated herein by reference. CIBC's
opinion is directed only to the fairness, from a financial point of view,
of the cash consideration to be received pursuant to the Merger Agreement
by holders of Shares and is not intended to constitute, and does not
constitute, a recommendation as to whether any stockholder should tender
Shares pursuant to the Offer. Holders of Shares are urged to read such
opinion carefully in its entirety.
The Company Board did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the Company
Board viewed its position and recommendations as being based on the totality of
the information available to and considered by it.
Item 5. Persons Retained, Employed or to be Compensated.
The Company has retained CIBC as its financial advisor in connection with
the transactions contemplated by the Merger Agreement.
Pursuant to the terms of a letter agreement, dated July 29, 1999, between
CIBC and the Company (the "CIBC Agreement"), the Company has agreed to pay
CIBC: (1) an engagement fee of $50,000; (2) an agreement fee of $100,000 upon
the execution of the Merger Agreement; and (3) an opinion fee of $300,000 upon
delivery of a fairness opinion. The engagement fee, agreement fee and opinion
fee paid by the Company will be credited against the Transaction Fee (as
defined below), which is expected to be payable upon consummation of the Offer.
The Transaction Fee is a percentage of the Transaction Value (as defined
below), which percentage is calculated on a prorated basis between 1.2% for a
Transaction Value of $100 million and 1.0% for a Transaction Value of $150
million. "Transaction Value" means the total value of all consideration
(including cash, securities or other property) paid or received or to be paid
or received in connection with the Offer and the Merger in respect of the
outstanding securities of the Company on a fully diluted basis (treating any
securities issuable upon exercise of options, warrants or other convertible
securities and any securities to be redeemed as outstanding), plus the amount
of any debt (including capitalized leases) and any other liabilities of the
Company for borrowed money outstanding or assumed, refinanced or extinguished
in connection with a transaction.
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In addition, the Company has agreed to reimburse CIBC for its reasonable out
of pocket expenses (including reasonable legal fees and expenses) up to
$25,000, unless otherwise authorized by the Company, and to indemnify CIBC
against certain liabilities, including liabilities under the federal securities
laws or relating to or arising out of CIBC's engagement.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to its stockholders on its behalf
concerning the Offer.
Item 6. Recent Transactions and Intent With Respect to Securities.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director or affiliate of the Company.
(b) To the best of the Company's knowledge, all of its executive officers
and directors currently intend to tender to the Purchaser pursuant to the Offer
all of the Shares that they hold of record or beneficially. Such Shares will be
purchased by the Purchaser on the same terms and conditions offered to all
stockholders of the Company. The Company does not know whether its affiliates
(other than its executive officers and directors) intend to tender Shares to
the Purchaser pursuant to the Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Except as set forth in Item 3 or Item 4 of this Schedule 14D-9, no
negotiation is being undertaken or is underway by the Company in response to
the Offer which relates to or would result in:
(1) an extraordinary transaction, such as a merger or reorganization,
involving the Company;
(2) a purchase, sale or transfer of a material amount of assets by the
Company;
(3) a tender offer for or other acquisition of securities by or of the
Company; or
(4) any material change in the present capitalization or dividend policy
of the Company.
(b) Except as described in Item 3 of this Schedule 14D-9, there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) of this Schedule 14D-9.
Item 8. Additional Information to be Furnished.
The Information Statement attached hereto as Annex A is being furnished in
connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Company Board other
than at a meeting of the Company's stockholders, following the acceptance for
payment of, and payment by the Purchaser for, Shares pursuant to the Offer.
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Item 9. Material to be Filed as Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
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(a)(1)* -- Letter to Stockholders, dated September 24, 1999.
(a)(2) -- Text of press release issued on September 20, 1999.
(a)(3)* -- Opinion of CIBC World Markets Corp., dated September 17, 1999.
(a)(4)* -- Offer to Purchase, dated September 24, 1999.
(a)(5)* -- Letter of Transmittal, dated September 24, 1999.
(a)(6) -- Form of Summary Advertisement, dated September 24, 1999.
(b) -- Not applicable.
(c)(1) -- Agreement and Plan of Merger, dated as of September 17, 1999,
among Parent, the Purchaser and the Company.
(c)(2) -- Confidentiality Agreement, dated August 23, 1999, between
Parent and the Company.
(c)(3) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Chase Venture Capital Associates, L.P. and the
Purchaser.
(c)(4) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Alta BioPharma Partners L.P. and the Purchaser.
(c)(5) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Medsource S.A. and the Purchaser.
(c)(6) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Neomed Fund Limited and the Purchaser.
(c)(7) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Alta Embarcadero BioPharma Partners LLC and the
Purchaser.
</TABLE>
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* Included with Schedule 14D-9 mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Diatide, Inc.
September 24, 1999 /s/ Richard T. Dean
By: _______________________________
Richard T. Dean
President and Chief Executive
Officer
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ANNEX A
DIATIDE, INC.
Nine Delta Drive
Londonderry, New Hampshire 03053
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INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED, AND RULE 14f-1 THEREUNDER
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NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about September 24, 1999,
as part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Diatide, Inc., a Delaware corporation (the "Company"), to
the holders of record of shares of the common stock of the Company, $.001 par
value per share (the "Common Stock"), the Series A Convertible Preferred Stock
of the Company, $.01 par value per share (the "Series A Preferred Stock"), and
the Series B Convertible Preferred Stock of the Company, $.01 par value per
share (the "Series B Preferred Stock" and, together with the Series A Preferred
Stock, the "Preferred Stock" and, together with the Common Stock, the "Company
Capital Stock"), at the close of business on or about September 22, 1999.
You are receiving this Information Statement in connection with the possible
election of persons designated by BXA Acquisition Company, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Schering Berlin
Inc., a Delaware corporation ("Parent"), which is a wholly owned subsidiary of
Schering Aktiengesellschaft, a company organized under the laws of the Federal
Republic of Germany ("AG"), to a majority of the seats on the Board of
Directors of the Company (the "Company Board"). The Agreement and Plan of
Merger, dated as of September 17, 1999 (the "Merger Agreement"), among Parent,
the Purchaser and the Company requires the Company to take such actions as are
necessary to cause the directors designated by the Purchaser to be elected to
the Company Board under the circumstances described in the Merger Agreement.
Capitalized terms used herein and not otherwise defined shall have the meaning
set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
September 24, 1999. The Offer is scheduled to expire at 12:00 midnight, New
York City time, on Friday, October 22, 1999, unless the Offer is extended.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder.
The information contained in this Information Statement concerning Parent,
the Purchaser and the Purchaser Designees has been furnished to the Company by
Parent and the Purchaser, and the Company assumes no responsibility for the
accuracy or completeness of such information. The principal executive offices
of Parent and Purchaser are located at 340 Changebridge Road, P.O. Box 1000,
Montville, New Jersey 07045-1000.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
General Information Regarding the Company
The only classes of voting securities of the Company outstanding are the
Common Stock, the Series A Preferred Stock and the Series B Preferred Stock.
Holders of shares of Common Stock are entitled to one vote per share. Holders
of shares of Preferred Stock are entitled to one vote for each share of Common
Stock issuable as of the date of such vote upon conversion of each share of
Preferred Stock held (currently, one vote per share of Preferred Stock). As of
September 16, 1999, there were an aggregate of 12,651,179 shares of Company
Capital Stock outstanding, consisting of 10,615,614 shares of Common Stock,
1,210,256 shares of Series A Preferred Stock and 825,309 shares of Series B
Preferred Stock.
The Company Board currently consists of six directors, three of whom are
designated Class I directors, one of whom is designated a Class II director and
two of whom are designated Class III directors. The officers of the Company
serve at the discretion of the Company Board.
Right to Designate Directors; the Purchaser Designees
Pursuant to the Merger Agreement, upon the acceptance for payment of, and
payment by the Purchaser for, any shares of Common Stock pursuant to the Offer,
the Purchaser shall designate such number of directors on the Company Board
(the "Purchaser Designees") as will give the Purchaser, subject to compliance
with Section 14(f) of the Exchange Act, representation on the Company Board
equal to at least that number of directors, rounded up to the next whole
number, which is the product of (a) the total number of directors on the
Company Board (including the Purchaser Designees appointed pursuant to this
sentence) multiplied by (b) the percentage that (i) such number of shares of
Common Stock so accepted for payment and paid for by the Purchaser plus the
number of shares of Company Capital Stock otherwise owned by Parent or the
Purchaser or any other subsidiary of Parent bears to (ii) the number of shares
of Company Capital Stock then outstanding; provided, however, that until the
effective time of the Merger, the Company Board will have at least two
directors who were directors on September 17, 1999 (the "Independent
Directors"); and provided, further that, if the number of Independent Directors
is reduced below two for any reason, the remaining Independent Director will be
entitled to designate a person to fill such vacancy who shall be deemed to be
an Independent Director or, if no Independent Directors then remain, the other
directors of the Company then in office will designate two persons to fill such
vacancies who are not directors, officers, employees, stockholders or
affiliates of the Company, Parent, the Purchaser or any affiliate of Parent and
such persons will be deemed to be Independent Directors. Purchaser's Designees
shall be divided among the classes of directors so as to comply with the
requirements of the charter and by-laws of the Company.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from among the persons listed below and that each of the persons
listed below has consented to act as a director, if so designated.
The following table provides information concerning each of the persons who
may be designated by the Purchaser as a Purchaser Designee.
<TABLE>
<CAPTION>
Principal Occupation,
Other Business Experience During Past Five
Name Age Years and Other Directorships
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<C> <C> <S>
Robert A. Chabora................ 50 Vice President-Law, General Counsel and
Secretary of Parent; Vice President-Law and
President, DD&T Division of Berlex
Laboratories, Inc. ("Berlex"); and,
Director, President and Secretary of the
Purchaser.
Frank J. Curtis.................. 47 Assistant Secretary of Parent; Vice
President and General Counsel (since
December 1998) and Director-Legal Affairs
(prior to December 1998) of Berlex
Laboratories Division, Berlex; and,
Assistant Secretary of the Purchaser.
</TABLE>
A-2
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<TABLE>
<CAPTION>
Principal Occupation,
Other Business Experience During Past Five
Name Age Years and Other Directorships
---- --- ------------------------------------------
<C> <C> <S>
Joseph A. Gould, Jr. ............ 51 Controller (since April 1996) of Berlex;
Director, International Reporting (prior to
April 1996) of American Home Products Corp.
John Nicholson................... 48 Treasurer of Parent, Treasurer of Berlex, and
Director and Treasurer of the Purchaser.
Alan D. Sokaler.................. 34 Director of Taxes (since 1997) of Parent; Tax
Manager (1994-1996) of Berlex.
</TABLE>
The Purchaser has advised the Company that all of the above persons are
citizens of the United States. The Purchaser has also advised the Company that
none of the above persons (1) has, during the last five years, been convicted
in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was, or is, subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws, (2) is currently a
director of, or holds any position with, the Company, (3) beneficially owns any
securities (or rights to acquire any securities) of the Company or (4) has been
involved in any transaction with the Company or any of its directors, executive
officers or affiliates which is required to be disclosed pursuant to the rules
and regulations of the Securities and Exchange Commission (the "SEC"), except
as may be disclosed herein or in the Schedule 14D-9.
Current Executive Officers and Directors of the Company
The following table provides information concerning the executive officers
and directors of the Company as of September 24, 1999:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Richard T. Dean, Ph.D............ 52 President, Chief Executive Officer and
Director
Ronald B. Kinder................. 51 Executive Vice President, Chief
Operating Officer and Secretary
Gustav A. Christensen (1)........ 52 Director
Hirsch Handmaker................. 59 Director
Robert S. Lees (2)............... 65 Director
Joseph F. Lovett (1)............. 50 Director
Donald L. Murfin (2)............. 56 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Richard T. Dean, Ph.D. has served as President, Chief Executive Officer and
a director since April 1990, and is a founder of the Company. Prior to joining
the Company, from 1986 to 1990, Dr. Dean served as Director of
Radiopharmaceutical Research and Development at Centocor, Inc., a
pharmaceutical company, where he was responsible for cardiovascular
radiopharmaceutical imaging agent research and development. From 1981 to 1986,
Dr. Dean served in a variety of positions at Mallinckrodt, Inc., a
pharmaceutical and surgical instruments company ("Mallinckrodt"), most recently
as Associate Director, Diagnostic Chemistry Research and Development. Dr. Dean
received a B.S. in chemical engineering from Cornell University, an M.S. in
chemistry from the University of Michigan and a Ph.D. in organic chemistry from
the University of California, Berkeley.
A-3
<PAGE>
Ronald B. Kinder serves as Executive Vice President, Chief Operating Officer
and Secretary, and joined the Company in April 1994. Prior to joining the
Company, Mr. Kinder served as Vice President and General Manager of Teledyne
Waterpik, Inc., a medical products company, from 1989 to 1994. From 1986 to
1989, Mr. Kinder served as Director of Marketing and Sales for Gambro, Inc., a
medical technology products company, and from 1970 to 1986, he served in a
variety of positions at Mallinckrodt, most recently as Director of Marketing,
Diagnostic Products Division. Mr. Kinder received a B.A. in zoology from the
University of Missouri and a M.B.A. from St. Louis University.
Gustav A. Christensen has served as a director of the Company since 1990.
Mr. Christensen is a founder of Phytera, Inc., a biotechnology company, and has
been a member of its board of directors since 1992. From 1990 to 1999, he
served as Chairman of the Board of Directors of Alpha-Beta Technologies, Inc.,
a biotechnology company. From 1988 to 1990, Mr. Christensen served as President
and Chief Executive Officer of Immulogic Pharmaceutical Corporation, a
biotechnology company, and from 1983 to 1988, he served as Senior Vice
President of Commercial Affairs and Vice President of Marketing and Business
Development for Genetics Institute, Inc., a biotechnology company.
Hirsch Handmaker, M.D. has served as a director of the Company since 1997.
Dr. Handmaker has been the President of Healthcare Technology Group ("HTG")
since 1986. From 1996 to 1997, he was a physician with Clinical Diagnostic
Radiology, Inc. From 1994 to 1997, Dr. Handmaker served as Executive Director
of the Arizona Institute of Nuclear Medicine (the "Arizona Institute") and
Medical Director of Papago Imaging, a medical imaging company and, from 1972 to
1994, as Director of Nuclear Medicine at the Children's Hospital of San
Francisco and its successor, the California Pacific Medical Center. From 1983
to 1987, he served as President and Chairman of Diagnostic Networks, Inc., a
healthcare company. From 1974 to 1982, Dr. Handmaker served as President and
Chairman of RadPharm, Inc., a healthcare company subsequently sold to
Mallinckrodt. He is a Diplomate of the American Boards of Radiology and Nuclear
Medicine and a fellow of the American College of Nuclear Physicians.
Robert S. Lees, M.D. has served as a director of the Company since 1998. Dr.
Lees is a founder of the Company and Chairman of the Company's Board of
Scientific Advisors. He has been a professor of Health Sciences and Technology
in the Harvard-Massachusetts Institute of Technology Division of Health
Sciences and Technology since 1988 and has served as President of the Boston
Heart Foundation since 1985. Dr. Lees has also been a director and founder of
the Arteriosclerosis Center at the Massachusetts Institute of Technology
("MIT") since 1973. He serves as Chairman of the Metabolism Study Section at
the National Institutes of Health and is the former director of the Noninvasive
Diagnostic Laboratory at the Massachusetts General Hospital. Dr. Lees has been
a Professor at MIT since 1968 and Harvard University since 1988.
Joseph F. Lovett has served as a director of the Company since 1990. Mr.
Lovett has been a general partner of Medical Science Ventures, L.P., the
general partner of Medical Science Partners, L.P., a venture capital firm,
since 1988. From 1985 to 1988, he served as Senior Vice President of Damon
Biotech, a biotechnology company. From 1980 to 1985, Mr. Lovett served in a
variety of positions at Mallinckrodt, most recently as Vice President and
General Manager of the Diagnostic Products Division.
Donald L. Murfin has served as a director of the Company since 1990. Mr.
Lovett is a General Partner of Chemicals and Materials Enterprise Associates,
L.P., a venture capital firm affiliated with New Enterprise Associates V, L.P.,
of which he has been a Special Partner, since 1989. From 1979 to 1988, he
served as President and a director of Lubrizol Enterprises, Inc., a venture
development company, and from 1985 to 1988, Mr. Murfin served as Vice President
of The Lubrizol Corporation, its parent company. He is a member of the board of
directors of Genentech, Inc., a biotechnology company.
A-4
<PAGE>
Company Board and Committee Meetings
The Company Board held five meetings during 1998. All directors attended at
least 75% of the meetings of the Company Board and the meetings of the
committees on which they served.
The Company Board has a Compensation Committee, which makes recommendations
concerning salaries and incentive compensation for employees of and consultants
to the Company, establishes and approves salaries and incentive compensation
for certain senior officers and employees and administers and grants stock
options pursuant to the Company's stock option plans. The Compensation
Committee held three meetings during 1998. The members of the Compensation
Committee are Messrs. Christensen and Lovett.
The Company Board has an Audit Committee, which reviews the results and
scope of the audit and other services provided by the Company's independent
public accountants. The Audit Committee held three meetings during 1998. The
members of the Audit Committee are Dr. Lees and Mr. Murfin. Dr. Handmaker also
served on the Audit Committee during 1998.
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Company Board.
Compensation of Directors
Prior to May 5, 1999, each non-employee director was paid $1,500 for
personal or telephonic attendance at a Company Board or committee meeting.
Since May 5, 1999, each non-employee director is paid $2,000 for personal or
telephonic attendance at a Company Board meeting and $500 for personal
attendance at a committee meeting. Other directors are not entitled to
compensation in their capacities as directors. All of the directors are
reimbursed for their expenses incurred in connection with their attendance at
Company Board and committee meetings.
Each non-employee director is entitled to participate in the Company's 1996
Director Stock Option Plan (the "Director Plan"). The Director Plan provides
that options to purchase 5,000 shares of Common Stock will be granted to each
new director upon his or her initial election to the Company Board. Under the
Director Plan, annual options to purchase 2,500 shares of Common Stock will be
granted to each eligible director on May 1 of each year. All options will vest
on the first anniversary of the date of grant; provided, that the
exercisability of these options will be accelerated upon the occurrence of a
change in control of the Company (as defined in the Director Plan). A total of
250,000 shares of Common Stock may be issued upon the exercise of stock options
granted under the Director Plan. The exercise price of options granted under
the Director Plan will equal the closing price of the Common Stock on the date
of grant. On May 1, 1998 and on May 1, 1999, each director of the Company other
than Dr. Dean received stock options under the Director Plan to purchase 2,500
shares of Common Stock at a price of $9.50 and $4.625 per share, respectively,
the fair market value on the date of grant. As of September 20, 1999, options
to purchase an aggregate of 60,000 shares of stock were outstanding under the
Director Plan.
Dr. Lees received approximately $42,000 in compensation in the year ended
December 31, 1998 in connection with the provision of certain consulting
services to the Company, including his attendance at the Company's Scientific
Advisory Board meeting.
The Company is a party to consulting and other arrangements with affiliates
of Dr. Handmaker. For a description of these arrangements with the Company, see
"Certain Relationships and Related Transactions."
A-5
<PAGE>
Compensation of Executive Officers
Summary Compensation Table
The following table sets forth the compensation for each of the last three
fiscal years for the Company's Chief Executive Officer and the Company's four
other most highly compensated executive officers (other than the Chief
Executive Officer) whose total annual salary and bonus exceeded $100,000 for
the year ended December 31, 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------- ------------
Securities
Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options(#) Compensation
--------------------------- ---- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard T. Dean........................ 1998 $233,093 $46,689(1) 80,000 $5,842(2)(3)
President, Chief Executive 1997 221,194 50,625(4) 75,000 5,835(5)(6)
Officer and Director 1996 207,500 47,250(7) -- 5,998(8)(9)
Ronald B. Kinder....................... 1998 187,751 25,862(1) 40,000 3,707(2)(3)
Executive Vice President, 1997 177,500 27,000(4) 38,000 3,024(5)(6)
Chief Operating Officer and Secretary 1996 152,607 -- -- 2,939(8)(9)
Daniel F. Harrington(10)............... 1998 173,614 17,623(1) 25,000 2,890(2)(3)
Former Vice President, Chief 1997 165,344 37,202(4) -- 1,843(5)(6)
Financial Officer and Treasurer 1996 6,875 50,000(11) 100,000 --
Gerald F. Eisen(12).................... 1998 90,342 45,877(1)(11) 50,000 389(3)
Former Vice President of Clinical
Operations
Christopher F. Nicodemus(13)........... 1998 204,033 -- -- 2,970(2)(3)
Former Vice President of Clinical 1997 104,583 12,000(4) 75,000 217(6)
Operations
</TABLE>
- --------
(1) Reflects amounts paid as a bonus in 1999 to the Named Executive Officer
for 1998.
(2) Includes $2,500 contributed by the Company for each of Dr. Dean, Mr.
Kinder, Mr. Harrington and Dr. Nicodemus pursuant to the Company's 401(k)
Plan in 1998.
(3) Includes $3,342, $1,207, $390, $389 and $470 of insurance premiums paid
by the Company on behalf of Dr. Dean, Mr. Kinder, Mr. Harrington, Mr.
Eisen and Dr. Nicodemus, respectively, during 1998 with respect to life
insurance for the benefit of the Named Executive Officer.
(4) Reflects amounts paid as a bonus in 1998 to the Named Executive Officer
for 1997.
(5) Includes $997, $2,375 and $1,449 contributed by the Company on behalf of
Dr. Dean, Mr. Kinder and Mr. Harrington respectively, pursuant to the
Company's 401(k) Plan in 1997.
(6) Includes $4,838, $649, $394 and $217 of insurance premiums paid by the
Company on behalf of Dr. Dean, Mr. Kinder, Mr. Harrington and Dr.
Nicodemus, respectively, during 1997 with respect to life insurance for
the benefit of the Named Executive Officer.
(7) Reflects amount paid as a bonus in 1997 to Dr. Dean for 1996.
(8) Includes $1,000 and $2,289 contributed by the Company on behalf of Dr.
Dean and Mr. Kinder, respectively, pursuant to the Company's 401(k) Plan
in 1996.
(9) Includes $4,998 and $650 of insurance premiums paid by the Company on
behalf of Dr. Dean and Mr. Kinder, respectively, during 1996 with respect
to life insurance for the benefit of the Named Executive Officer.
(10) Mr. Harrington commenced his employment with the Company on December 15,
1996 and terminated his employment with the Company on June 4, 1999.
(11) Reflects amount paid by the Company as a signing bonus.
A-6
<PAGE>
(12) Mr. Eisen commenced his employment with the Company on July 6, 1998 and
terminated his employment with the Company on June 16, 1999.
(13) Dr. Nicodemus commenced his employment with the Company on June 23, 1997
and terminated his employment with the Company on January 22, 1999.
Employment Agreements
The Company is a party to an employment agreement with Dr. Dean for the
period ending April 1, 2000, subject to automatic extension for additional one-
year periods unless either Dr. Dean or the Company provides written notice to
the contrary to the other party at least six months prior to the expiration of
the employment period. Under this agreement, Dr. Dean is currently entitled to
receive an annual base salary of $245,117, as it may be adjusted in the
discretion of the Company Board or as a result of changes in the U.S. Consumer
Price Index, and an annual cash bonus equal to up to 25% of his annual base
salary based on the attainment of management objectives determined by the
Company Board in its sole discretion. In the event Dr. Dean's employment is
terminated (i) by the Company without cause, (ii) due to nonrenewal of the
employment agreement by the Company or (iii) by Dr. Dean following a change in
control of the Company or the significant diminution in his authority or
responsibility, he will continue to receive his annual base salary during the
one-year period commencing on the date of termination. In the event of a change
in control of the Company (as defined in his option agreements), all
outstanding unvested options held by Dr. Dean will become immediately vested.
The Company has also entered into a registration rights agreement with Dr.
Dean that provides that in the event the Company proposes to register any of
its securities under the Securities Act of 1933, as amended, at any time, with
certain exceptions, Dr. Dean shall be entitled to include the shares of Common
Stock held by him in such registration, subject to the right of the managing
underwriter of any underwritten offering to exclude from such registration for
marketing reasons some or all of such shares.
The Company is party to a letter agreement, dated May 25, 1999, with Mr.
Harrington, pursuant to which the Company is paying Mr. Harrington six months'
salary and medical and dental benefits which commenced on June 4, 1999 in
connection with the termination of his employment with the Company.
The Company is party to a letter agreement, dated June 4, 1999, with Mr.
Eisen, pursuant to which the Company is paying Mr. Eisen three months' salary
and medical and dental benefits which commenced on June 15, 1999 in connection
with the termination of his employment with the Company.
Option Grants Table
The following table sets forth, as to the Named Executive Officers,
information concerning stock options granted in the year ended December 31,
1998. No options were granted to Dr. Dean or Mr. Kinder during 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(1)
-------------------------------------------- ---------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Option in Fiscal Price Expiration
Name Granted (#) Year ($/sh)(2) Date(3) 5% 10%
- ---- ------------ ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard T. Dean........... 80,000(4) 26.3 $7.00 12/16/08 $ 352,181 $ 892,496
Ronald B. Kinder.......... 40,000(4) 13.1 7.00 12/16/08 176,091 446,248
Daniel F. Harrington...... 25,000(4)(5) 8.2 7.00 12/16/08 110,057 278,905
Gerald F. Eisen........... 50,000(5)(6) 16.4 8.50 07/06/08 267,280 677,341
Christopher F. Nicodemus.. -- -- -- -- -- --
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for respective
options if exercised at the end of the option term. These gains are based
on assumed rates of stock price appreciation of 5% and 10%,
A-7
<PAGE>
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock, the option holder's
continued employment through the option period and the date on which the
options are exercised.
(2) The exercise price of an option is equal to the fair market value of the
Company's Common Stock on the date of grant.
(3) The expiration date of an option is the tenth anniversary of the date on
which the option was originally granted.
(4) These stock options vest in five equal installments when the average
price of a share of the Company's Common Stock over a period of 10
trading days reaches each of the following levels: $10.00, $12.50,
$15.00, $17.50 and $20.00; and, in any event, the stock options will vest
in full eight years after the date of grant. In addition, if and when the
Purchaser accepts for payment and pays for any Shares pursuant to the
Offer, these options, to the extent they are then outstanding, shall be
deemed to have become fully vested immediately prior to the expiration of
the Offer.
(5) These options are no longer outstanding.
(6) These options are exercisable in five equal annual installments
commencing on the first anniversary of the date on which the option was
originally granted. These options are intended to qualify as incentive
stock options.
Aggregated Option Exercises and Year-End Option Table
The following table sets forth certain information regarding each exercise
of a stock option during the year ended December 31, 1998 by each of the Named
Executive Officers and the number and value of unexercised options held by
each of the Named Executive Officers on December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Value Number of Shares Underlying In-the-Money Options at
Acquired Realized Options at Fiscal Year-End Fiscal Year-End(2)
Name on Exercise ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- --------------------------- -------------------------
<S> <C> <C> <C> <C>
Richard T. Dean........... -- -- 139,087/164,000 $882,395/$290,500
Ronald B. Kinder.......... -- -- 74,200/90,800 457,600/166,900
Daniel F. Harrington...... -- -- 52,000/73,000 9,724/15,226
Gerald F. Eisen........... -- -- 0/50,000 0/0
Christopher F. Nicodemus.. -- -- 15,000/60,000 24,375/97,500
</TABLE>
- --------
(1) Based on fair market value of the Common Stock on the date of exercise
less the option exercise price.
(2) Value based on the closing sales price of the Company's Common Stock on
December 31, 1998 ($7.25), the last trading day of 1998, less the
applicable option exercise price.
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Company Board is responsible for
establishing compensation policies with respect to the Company's executive
officers, including the Chief Executive Officer and the other executive
officers named in the Summary Compensation Table, and setting the compensation
for these individuals.
A-8
<PAGE>
The Compensation Committee seeks to achieve three broad goals in connection
with the Company's executive compensation programs and decisions regarding
individual compensation. First, the Compensation Committee structures executive
compensation programs in a manner that the Committee believes will enable the
Company to attract and retain key executives. Second, the Compensation
Committee establishes compensation programs that are designed to reward
executives for the achievement of business objectives of the Company and/or the
individual executive's particular area of responsibility. By tying compensation
in part to achievement, the Compensation Committee believes that a performance-
oriented environment is created for the Company's executives. Finally, the
Company's executive compensation programs are intended to provide executives
with an equity interest in the Company so as to link a portion of the
compensation of the Company's executives with the performance of the Company's
Common Stock.
The compensation programs for the Company's executives established by the
Compensation Committee consist principally of two elements based upon the
foregoing objectives: base salary and a stock-based equity incentive in the
form of participation in the Company's stock option plans.
In establishing base salaries for the executive officers, including the
Chief Executive Officer, the Compensation Committee monitors salaries at other
companies, particularly those that are in the same industry as the Company or
related industries and/or located in the same general geographic area as the
Company, considers historic salary levels of the individual and the nature of
the individual's responsibilities and compares the individual's base salary
with those of other executives at the Company. To the extent determined to be
appropriate, the Compensation Committee also considers general economic
conditions, the Company's financial performance and the individual's
performance. In 1998, Dr. Dean's base salary was as specified in his employment
agreement with the Company.
The Compensation Committee uses stock options as a significant element of
the compensation package of the Company's executive officers, including the
Chief Executive Officer, because they provide an incentive to executives to
maximize stockholder value and because they reward the executives only to the
extent that stockholders also benefit. It is not the policy of the Compensation
Committee, however, to grant stock options to executives annually, and the
timing of such grants depends upon a number of factors, including new hires of
executives, the executives' current stock and option holdings and such other
factors as the Compensation Committee deems relevant. In 1998, after reviewing
the Company's executive officers' stock and option holdings, the Compensation
Committee granted stock options to Dr. Dean, Mr. Kinder and Mr. Harrington in
connection with the Company's performance in 1998, including the commercial
launch of AcuTect(TM) in the United States market, the filing of a New Drug
Application for NeoTect(TM) and other accomplishments in areas such as product
development and enhancement of the Company's patent position. The Compensation
Committee also granted stock options to Mr. Eisen in connection with the
commencement of his employment with the Company. When granting stock options,
it has generally been the policy of the Compensation Committee to fix the
exercise price of such options at 100% of the fair market value of the Common
Stock on the date of grant.
In addition to base salary and stock options, the Compensation Committee
also considers the payment of cash bonuses as part of its compensation program.
In this regard, the Compensation Committee determined to pay a cash bonus of
$46,689 to Dr. Dean for 1998. This bonus, which was consistent with bonuses
previously paid to Dr. Dean, was paid in recognition of Dr. Dean's leadership
of the Company in attaining its 1998 performance goals, including the
commercial launch of AcuTect(TM) in the United States market, the filing of a
New Drug Application for NeoTect(TM) and other accomplishments in areas such as
product development and enhancement of the Company's patent position.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for compensation over $1,000,000
paid to its chief executive officer and its four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. In this regard,
the Company has limited the number of shares subject to stock options which may
be granted to Company employees in a manner that complies with the
A-9
<PAGE>
performance-based requirements of Section 162(m). Based on the compensation
awarded to Dr. Dean and the other executive officers of the Company, it does
not appear that the Section 162(m) limitation will have a significant impact on
the Company in the near term. While the Committee does not currently intend to
qualify its bonus and other incentive awards as qualified performance-based
compensation, it will continue to monitor the impact of Section 162(m) on the
Company.
COMPENSATION COMMITTEE
Gustav Christensen
Joseph F. Lovett
Compensation Committee Interlocks and Insider Participation
The current members of the Company's Compensation Committee are Messrs.
Christensen and Lovett. No executive officer of the Company has served as a
director or member of the compensation committee (or other committee serving an
equivalent function) of any other entity, one of whose executive officers
served as a director of or member of the Compensation Committee of the Company.
Certain Relationships and Related Transactions
Since January 1, 1998, the Company has entered into or engaged in the
following transactions with the following directors, executive officers and
stockholders who beneficially own more than 5% of the outstanding voting stock
of the Company (the "5% Stockholders"), and affiliates of such directors,
officers and 5% Stockholders.
In August 1995, the Company and Nycomed Imaging AS ("Nycomed"), a 5%
Stockholder until June 1999, entered into a strategic alliance relating to the
Company's radiolabelled peptide imaging products ("Techtides"). The strategic
alliance contemplates research and development support and a marketing
collaboration. Under the strategic alliance, the Company granted Nycomed
options to co-promote Techtides in the United States and to distribute and
license Techtides in Europe, South Africa and certain countries in the Middle
East. During the year ended December 31, 1998, Nycomed paid to the Company an
aggregate of $6,000,000 under the collaborative agreements as research and
development support and milestone payments. In August 1998, the Company
received notice that Nycomed had elected to terminate the option and
development agreement between the Company and Nycomed. As a result, Nycomed
discontinued its research and development support payments effective December
31, 1998. This decision did not affect the co- promotion and license agreements
in place relating to the Company's two lead products, AcuTect(TM) and
NeoTect(TM). Pursuant to these agreements, the Company incurred expenses of
$832,000 and $473,000 for the year ended December 31, 1998 and the six months
ended June 30, 1999, respectively, for its portion of promotional costs and
royalties on product sales due to Nycomed. In addition, $275,000 and $425,000
for the year ended December 31, 1998 and the six months ended June 30, 1999,
respectively, was due from Nycomed pursuant to these agreements for promotional
costs incurred by the Company.
The Company is a party to a number of clinical trial agreements with the
Arizona Institute, an organization for which Dr. Handmaker serves as Executive
Director. These agreements provide for the Arizona Institute to act as a site
for clinical trials of the Company's products and provide that Dr. Handmaker
will serve as principal investigator in connection with the conduct of the
clinical trials at the site. During 1998, the Company paid to the Arizona
Institute a total of $12,260 under these agreements.
On January 1, 1998, the Company entered into a one-year scientific advisory
consulting agreement with HTG, an entity of which Dr. Handmaker is the
principal. Under this agreement, HTG provided the Company with up to 20 days of
consulting services and the Company paid HTG consulting fees and expenses of
$54,978. In addition, in May 1999, the Company granted HTG options under the
Company's 1999 Stock Incentive Plan to purchase 40,000 shares of Common Stock
at an exercise price of $4.50 per share. On May 18, 1999, the
A-10
<PAGE>
Company and HTG entered into a new one-year consulting agreement, effective as
of January 1, 1999, that terminated the prior agreement and provided for HTG to
provide the Company with five days a month of consulting services and HTG to
receive consulting fees of $7,500 per month, certain additional fees based upon
the achievement of specific objectives and reimbursement of expenses for a
period of one year.
In the Merger Agreement, Parent has agreed, to the fullest extent permitted
by law, to cause the surviving corporation in the Merger to honor all the
Company's obligations to indemnify (including any obligations to advance funds
for expenses) the current or former directors or officers of the Company for
acts or omissions by such directors and officers occurring prior to the
effective time of the Merger to the extent that such obligations of the Company
to indemnify and advance expenses exist on the date of the Merger Agreement,
whether pursuant to the Company's charter, the Company's by-laws, individual
indemnity agreements or otherwise, and such obligations shall survive the
Merger and shall continue in full force and effect in accordance with the terms
of the Company's charter, the Company's by-laws and such individual indemnity
agreements from the effective time of the Merger until the later or (x) the
expiration of the applicable statute of limitations with respect to any claims
against such directors or officers arising out of such acts or omissions or (y)
in the case of any claims made prior to the expiration of the applicable
statute of limitations, the final disposition of such claims.
In addition, under the Merger Agreement, from and after the effective time
of the Merger, Parent has agreed to indemnify and hold harmless each current
and former director and officer of the Company against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement (in the case of settlements, with the
approval of Parent (which approval shall not be unreasonably withheld or
delayed)) incurred in connection with their duties as directors or officers of
the Company, as the case may be, to the extent arising out of any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the effective time of the Merger, whether
asserted or claimed prior to, at or after the effective time of the Merger, in
each case to the extent that the Company's current directors' and officers'
liability insurance policies provide coverage for such costs, expenses,
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement, and Parent has agreed to advance expenses in the same manner and to
the same extent as provided in such current policies.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock
to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Such persons are required by the SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such person
with respect to the Company.
Based solely on its review of copies of reports filed by reporting persons
pursuant to Section 16(a) of the Exchange Act, or written representations from
reporting persons that no Form 5 filing was required for such person, the
Company believes that, during 1998, all filings required to be made by
reporting persons of the Company were timely made in accordance with the
requirements of the Exchange Act, other than a filing by Ronald B. Kinder with
respect to a stock option grant, a filing by Hirsch Handmaker with respect to a
disposition of stock and a filing by Gerald Eisen with respect to a stock
option grant, which filings were not made on a timely basis.
A-11
<PAGE>
Stock Performance Graph
The stock performance graph below compares the cumulative stockholder return
on the Common Stock of the Company for the period from June 12, 1996 (the date
of the Company's initial public offering) through December 31, 1998 with the
cumulative total return on (i) the S&P 500 Index and (ii) the Nasdaq
Pharmaceutical Index. This graph assumes the investment of $100 in the
Company's Common Stock (at the initial public offering price), the S&P 500
Index and the Nasdaq Pharmaceutical Index on June 12, 1996 and assumes
dividends are reinvested. Prior to June 12, 1996, the Company's Common Stock
was not registered under the Exchange Act.
COMPARATIVE TOTAL RETURNS: DIATIDE, INC., S&P 500 INDEX, NASDAQ PHARMACEUTICAL
INDEX
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
6/12/96 12/31/96 12/31/97 12/31/98
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Diatide, Inc. 100.00 83.82 107.35 85.29
- -----------------------------------------------------------------
S&P 500 Index 100.00 112.11 149.51 192.24
- -----------------------------------------------------------------
Nasdaq Pharmaceutical Index 100.00 99.23 102.54 131.17
- -----------------------------------------------------------------
</TABLE>
A-12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of September 20,
1999, regarding the beneficial ownership of shares of the Company's Common
Stock, Series A Preferred Stock and Series B Preferred Stock, the Company's
three classes of voting stock, by (i) each person or entity known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock; (ii) each person or entity known by the Company to own beneficially more
than 5% of the outstanding shares of Series A Preferred Stock; (iii) each
person or entity known by the Company to own beneficially more than 5% of the
outstanding shares of Series B Preferred Stock; (iv) each director of the
Company; (v) the Named Executive Officers; and (vi) the directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Series A Convertible Series B Convertible
Common Stock Preferred Stock Preferred Stock
----------------------- -------------------- --------------------
Number Number Number Total Percent of
of of of Common and
Shares Percent Shares Percent Shares Percent Preferred Stock on
Beneficially of Beneficially of Beneficially of an As-Converted
Owned(1) Class Owned Class Owned Class Basis(2)
------------ ------- ------------ ------- ------------ ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5% Stockholders
Chase Venture Capital
Associates, L.P.......... 1,653,564(3) 14.2% 871,795 72.0% -- -- 12.9%
c/o Chase Capital
Partners
380 Madison Avenue, 12th
Floor
New York, NY 10019
Medsource S.A............. 1,450,346(4) 13.2% 307,692 25.4% -- -- 11.4%
c/o BB Medtech AG
Vodergasse 3
CH-8200 Schaffhausen
Switzerland
Entities affiliated with
MDNH..................... 1,185,400(5) 11.2% -- -- -- -- 9.4%
220 Bush Street, Suite
660
San Francisco, CA 94104-
3508
Entities affiliated with
DLJ Capital Corporation.. 1,135,953(6) 10.7% -- -- -- -- 9.0%
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA
94025-7114
Medical Science Partners
Group.................... 1,028,830(7) 9.7% -- -- -- -- 8.1%
20 William Street, Suite
250
Wellesley, MA 02181
Entities affiliated with
Alta Partners............ 949,104(8) 8.2% -- -- 825,309 100% 7.4%
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
Directors
Gustav Christensen........ 36,900(9) * -- -- -- -- *
Richard T. Dean........... 547,696(10) 5.0% -- -- -- -- 4.2%
Hirsch Handmaker.......... 114,200(11) 1.1% -- -- -- -- *
Robert S. Lees............ 182,587(12) 1.7% -- -- -- -- 1.4%
Joseph F. Lovett.......... 1,050,170(13) 9.9% -- -- -- -- 8.3%
Donald L. Murfin.......... 270,544(14) 2.5% -- -- -- -- 2.1%
Other Named Executive
Officers
Ronald B. Kinder.......... 169,314(15) 1.6% -- -- -- -- 1.3%
Daniel F. Harrington...... -- -- -- -- -- -- --
Gerald F. Eisen........... -- -- -- -- -- -- --
Christopher F. Nicodemus.. -- -- -- -- -- -- --
All directors and
executive officers as
a group (10 persons)..... 2,371,411(16) 21.1% -- -- -- -- 17.9%
</TABLE>
- --------
* Less than 1%.
A-13
<PAGE>
(1) The number of shares beneficially owned by each person or entity known by
the Company to own beneficially more than 5% of the outstanding voting
stock, director and executive officer is determined under rules
promulgated by the SEC, and the information is not necessarily indicative
of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which an individual or
group has sole or shared voting power or investment power and also any
shares which an individual or group has the right to acquire within 60
days after September 20, 1999 through the conversion of Preferred Stock
or the exercise of any stock option, warrant or other right. The
inclusion herein of such shares, however, does not constitute an
admission that the named stockholder is a direct or indirect beneficial
owner of such shares. Unless otherwise indicated, each person or group
named in the table has sole voting and investment power (or shares such
power with his or her spouse) with respect to all shares of capital stock
listed as owned by such person or entity. On September 17, 1999, each
holder of Preferred Stock entered into a Stock Purchase Agreement with
the Purchaser pursuant to which the Purchaser is to acquire all the
Preferred Stock on the first date on which the Purchaser pays for any
shares of Common Stock accepted for payment pursuant to the Offer, or as
otherwise agreed between the parties. Pursuant to the Stock Purchase
Agreements, effective upon such time as the Purchaser accepts for payment
and pays for any shares of Common Stock pursuant to the Offer, each
seller of Preferred Stock irrevocably appoints the Purchaser and Robert
Chabora as such seller's proxy and attorney-in-fact to vote their shares
of Preferred Stock on any matter in such proxy's soles discretion. In
addition, each seller agrees not to transfer, or enter into any contract,
option or other arrangement (including any profit sharing arrangement)
with respect to the transfer of, any shares of Preferred Stock to any
person other than to the Purchaser pursuant to the Stock Purchase
Agreements or enter into voting arrangement, whether by proxy, voting
agreement or otherwise, with respect to any shares of Preferred Stock.
(2) This column reflects each listed individual's or group's percent
beneficial ownership of the Company's voting stock on an as-converted
basis. This column differs from the column entitled "Percent of Class"
with respect to the Company's Common Stock because the percent
calculation in this column is based on the assumption that all of the
shares of Series A Preferred Stock currently outstanding are converted
into 1,210,256 shares of Common Stock and that all of the shares of
Series B Preferred Stock currently outstanding are converted into 825,309
shares of Common Stock. The percent calculation in the column entitled
"Percent of Class" with respect to the Company's Common Stock includes
shares of Common Stock issuable upon conversion of the Preferred Stock
only to the extent that the listed individual or group beneficially owns
such shares of Preferred Stock.
(3) Includes 871,795 shares of Common Stock issuable upon conversion of
871,795 shares of Series A Preferred Stock held by Chase Venture Capital
Associates, L.P. ("CVC") and 130,769 shares of Common Stock subject to
outstanding common stock purchase warrants held by CVC. This information
is taken from a Schedule 13D filed with the SEC on February 10, 1999.
(4) Includes 307,692 shares of Common Stock issuable upon conversion of
307,692 shares of Series A Preferred Stock held by Medsource S.A.
("Medsource") and 46,154 shares of Common Stock subject to outstanding
common stock purchase warrants held by Medsource. This information is
taken from a Schedule 13D and a Schedule 13G filed with the SEC on July
7, 1998. Medsource is a wholly-owned subsidiary of BB Medtech AG.
(5) MDNH Partners, L.P. ("MDNH Partners") and MDNH Trading, Inc., the general
partner of MDNH Partners ("MDNH Trading"), report shared voting and
dispositive power over 570,150 shares of Common Stock. In addition, MDNH
Trading, Engmann Options, Inc., Douglas J. Engmann, Michael W. Engmann,
Neil Stipanich and Herbert C. Kurlan report sole voting and dispositive
power over 50,000, 517,250, 5,000, 3,000, 15,000 and 25,000,
respectively, shares of Common Stock. This information is taken from a
Schedule 13G/A filed with the SEC on June 16, 1999.
(6) Consists of 809,705 shares held by ML Venture Partners II, L.P., 281,647
shares held by Sprout Capital VI, L.P. and 44,601 shares held by DLJ
Capital Corporation. These entities are affiliates under common control.
(7) Consists of 919,089 shares held by Medical Science Partners, L.P.
("MSP"), 96,154 shares held by Medical Science Partners II, L.P. ("MSP
II") and 13,587 shares held by Medical Science II Co-Investment L.P. ("MS
Co-Investment"). These entities are affiliates under common control. This
information is taken from a Schedule 13D and a Schedule 13G filed with
the SEC on February 14, 1997.
(8) Includes 795,332 shares of Common Stock issuable upon conversion of
795,332 shares of Series B Preferred Stock held by Alta BioPharma
Partners L.P. ("Alta BioPharma"), 29,977 shares of Common Stock issuable
upon conversion of 29,977 Series B Preferred Stock held by Alta
Embarcadero BioPharma Partners LLC ("Alta Embarcadero"), 119,299 shares
of Common Stock subject to outstanding common stock purchase warrants
held by Alta BioPharma and 4,496 shares of Common Stock subject to
outstanding common stock purchase warrants held by Alta Embarcadero.
These entities are affiliates under common control.
(9) Includes 19,700 shares subject to outstanding stock options held by Mr.
Christensen, which are exercisable within the 60-day period following
September 20, 1999 assuming the vesting of all outstanding stock options
has been accelerated and 7,200 shares held in an individual retirement
account of which Mr. Christensen is the beneficiary.
(10) Includes 303,087 shares subject to outstanding stock options held by Dr.
Dean, which are exercisable within the 60-day period following September
20, 1999 assuming the vesting of all outstanding stock options has been
accelerated.
(11) Includes 30,200 shares held by HTG, an entity of which Dr. Handmaker is
the principal. Also includes 70,000 shares subject to outstanding stock
options held by HTG and 10,000 shares subject to outstanding stock
options held by Dr. Handmaker. These options are exercisable within the
60-day period following September 20, 1999 assuming the vesting of all
outstanding stock options has been accelerated.
(12) Includes 13,700 shares subject to outstanding stock options held by Dr.
Lees, which are exercisable within the 60-day period following September
20, 1999 assuming the vesting of all outstanding stock options has been
accelerated and 1,000 shares held by his spouse.
A-14
<PAGE>
(13) Includes 12,500 shares subject to outstanding stock options held by Mr.
Lovett, which are exercisable within the 60-day period following
September 20, 1999 assuming the vesting of all outstanding stock options
has been accelerated, 919,089 shares held by MSP, 96,154 shares held by
MSP II and 13,587 shares held by MS Co-Investment. Mr. Lovett is a
general partner of the general partners of MSP, MSP II and MS Co-
Investment and may be considered a beneficial owner of the shares
beneficially owned by such entities, although Mr. Lovett disclaims
beneficial ownership of such shares, except as to his pecuniary interests
therein.
(14) Includes 12,500 shares subject to outstanding stock options held by Mr.
Murfin, which are exercisable within the 60-day period following
September 20, 1999 assuming the vesting of all outstanding stock options
has been accelerated and 257,456 shares held by Chemicals and Materials
Enterprise Associates, L.P. ("CMEA"). Mr. Murfin is a general partner of
CMEA and may be considered a beneficial owner of the shares beneficially
owned by CMEA, although Mr. Murfin disclaims beneficial ownership of such
shares, except as to his pecuniary interests therein.
(15) Includes 165,000 shares subject to outstanding stock options held by Mr.
Kinder, which are exercisable within the 60-day period following
September 20, 1999 assuming the vesting of all outstanding stock options
has been accelerated.
(16) See Notes (8) through (15) above.
A-15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<C> <S>
(a)(1) -- Letter to Stockholders, dated September 24, 1999.
(a)(2) -- Text of press release issued on September 20, 1999.
(a)(3) -- Opinion of CIBC World Markets Corp., dated September 17, 1999.
(a)(4) -- Offer to Purchase, dated September 24, 1999.
(a)(5) -- Letter of Transmittal, dated September 24, 1999.
(a)(6) -- Form of Summary Advertisement, dated September 24, 1999.
(b) -- Not applicable.
(c)(1) -- Agreement and Plan of Merger, dated as of September 17, 1999,
among the Parent, the Purchaser and the Company.
(c)(2) -- Confidentiality Agreement, dated August 23, 1999, between
Parent and the Company.
(c)(3) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Chase Venture Capital Associates, L.P. and the
Purchaser.
(c)(4) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Alta BioPharma Partners L.P. and the Purchaser.
(c)(5) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Medsource S.A. and the Purchaser.
(c)(6) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Neomed Fund Limited and the Purchaser.
(c)(7) -- Stock Purchase Agreement, dated as of September 17, 1999,
between Alta Embarcadero BioPharma Partners LLC and the
Purchaser.
</TABLE>
<PAGE>
Exhibit (a)(1)
9 Delta Drive . Londonderry, New Hampshire 03053
[LOGO] Diatide, Inc. (603) 437-8970 . FAX (603) 437-8977
- --------------------------------------------------------------------------------
September 24, 1999
To our Stockholders:
On behalf of your Board of Directors, I am pleased to inform you that on
September 17, 1999, Diatide entered into a Merger Agreement with Schering
Berlin Inc., a wholly owned subsidiary of Schering Aktiengesellschaft, and BXA
Acquisition Company, a wholly owned subsidiary of Schering Berlin Inc.
(the "Purchaser"). The Merger Agreement provides for the acquisition of Diatide
by Schering Berlin Inc.
Pursuant to the Merger Agreement, the Purchaser has commenced a tender offer
(the "Offer") to purchase all of the outstanding shares of Diatide's Common
Stock at a purchase price of $9.50 per share, net to the seller in cash,
without interest. The Offer is currently scheduled to expire at 12:00 midnight,
New York City time, on Friday, October 22, 1999, unless the Offer is extended.
Following the successful completion of the Offer, upon the terms and subject
to the conditions contained in the Merger Agreement, the Purchaser will merge
with and into Diatide (the "Merger"), and all shares of Diatide's Common Stock
not purchased in the Offer will be converted into the right to receive, without
interest, an amount in cash equal to the amount paid pursuant to the Offer.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER, DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, DIATIDE'S STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR COMMON STOCK
PURSUANT TO THE OFFER.
In arriving at its decision, the Board gave careful consideration to a
number of factors described in the attached Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") that is being filed today
with the Securities and Exchange Commission. Among other things, the Board
considered the opinion dated September 17, 1999 of CIBC World Markets Corp.,
Diatide's financial advisor, that, as of such date, and subject to the
conditions and limitations set forth therein, the consideration to be received
by the holders of Diatide Common Stock pursuant to the Merger Agreement is fair
to such holders from a financial point of view.
Accompanying this letter, in addition to the Schedule 14D-9, is the
Purchaser's Offer to Purchase, dated September 24, 1999, together with related
materials including a Letter of Transmittal to be used for tendering your
Diatide Common Stock. These documents set forth the terms and conditions of the
Offer and the Merger and provide instructions as to how you can tender your
Diatide Common Stock.
WE URGE YOU TO READ EACH OF THE ENCLOSED MATERIALS CAREFULLY.
The management and directors thank you for the support you have given
Diatide.
Very truly yours,
/s/ Richard T. Dean
RICHARD T. DEAN
President and Chief Executive Officer
<PAGE>
Exhibit (a)(2)
Company Press Release
Schering Berlin Inc. Announces Tender Offer for Diatide, Inc.
MONTVILLE, N.J. and LONDONDERRY, N.H.--(BUSINESS WIRE)--Sept. 20, 1999--
Schering Berlin Inc., a wholly-owned subsidiary of Schering AG, Germany (DAX:
SCHG) and Diatide Inc. (NASDAQ: DITI - news) jointly announced today that
Schering Berlin Inc. and its wholly-owned subsidiary BXA Acquisition Company,
have entered into an agreement to acquire Diatide for a cash payment of $9.50
per share of common stock. The agreement provides for a tender offer for all of
the outstanding shares of common stock of Diatide to be initiated shortly and
for a subsequent merger of BXA into Diatide.
"This acquisition is a key component of our global strategy to widen our
business focus to include radiopharmaceuticals which not only have excellent
market potential but also complement our business interests in Diagnostic
Imaging and Therapeutics," said Dr. Hubertus Erlen, Chairman-Scherling Berlin
Inc. "We're convinced that the combination of Diatide's product portfolio, R&D
pipeline, and expertise in developing radiopharmaceuticals along with the long-
standing scientific expertise of Schering AG, Germany in Diagnostics and
Therapeutics will make a strong contribution to our goal of becoming a leading
global provider of innovative radiopharmaceuticals. By investing in Diatide, we
expect to develop new technologies in this area more quickly than if we expanded
our own internal capabilities."
Diatide, a New Hampshire-based pharmaceutical company, applies its proprietary
technologies in peptide engineering, molecular biology, and radiolabeling
chemistry to the development of disease-specific diagnostic agents and
therapeutics for life-threatening diseases. The company's current pipeline
includes novel imaging products and tumor and vascular therapeutics. Diatide
launched its first product, AcuTect(tm), in 1998 for imaging for acute deep vein
thrombosis in the lower extremities. The Food and Drug Administration (FDA)
approved Diatide' second product, NeoTect(tm), for imaging of lung cancer on
August 3, 1999. Diatide is exploring a line of therapeutics, primarily for
cancer treatment, called Theratides. These consist of targeting peptides that
are similar to those used in Diatide's imaging products; however, Theratides are
labeled with a therapeutic beta-emitting radioisotope.
Dr. Richard T. Dean, Diatide President and CEO said, "With its global resources
and extensive experience in diagnostics and therapeutics, the Schering AG,
Germany organization is well positioned to take Diatide's technology to the next
level of development. Through this merger, we believe that Diatide is
<PAGE>
gaining the resources and commercialization capabilities that will facilitate
the successful development and positioning of our products. Our Board of
Directors has determined that the tender offer and subsequent merger are in the
best interest of our stockholders."
Scherling Berlin Inc., is the U.S. management holding company for Schering AG,
Germany. In addition to BXA, Schering Berlin Inc. has five research-driven
subsidiaries: Berlex Laboratories, Inc. (pharmaceuticals in the areas of
Diagnostic Imaging, Female Healthcare, and Therapeutics for life-threatening and
chronic, disabling diseases), Medrad Inc. (magnetic resonance injection systems
and vascular injection systems), AgrEvo USA Company (crop production and crop
protection), Berlichem Inc. (pharmaceutical chemicals), and Scherling Berlin
Venture Corporation (equity investments in leading-edge technologies). Schering
Berlin Inc. is located in Montville, New Jersey.
Warburg Dillon Read acted as financial advisor to Schering Berlin Inc., and CIBC
World Markets Corp. acted as financial advisor to Diatide
______________________________
Contact:
Wendy K. Neininger
973-276-2043
<PAGE>
Exhibit (a)(3)
[LOGO] CIBC World Markets
CIBC World
Markets Corp.
425 Lexington Avenue
New York, NY 10017
Tel: 212-856-4000
September 17, 1999
The Board of Directors
Diatide, Inc.
Nine Delta Drive
Londonderry, NH 03053
Ladies and Gentlemen:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Fairness Opinion") to the Board of Directors as to the
fairness to the holders of common stock of Diatide, Inc. ("Diatide" or the
"Company"), from a financial point of view, of the consideration to be received
by such holders pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") by and among BXA Acquisition Company ("Merger Subsidiary"), a
wholly owned subsidiary of Schering Berlin Inc. ("Parent") and Diatide. The
Merger Agreement provides for, among other things, a transaction (the "Merger")
whereby all of the outstanding common stock, par value $0.001 per share of
Diatide ("Common Stock"), other than shares held in treasury, held by the
Parent or the Merger Subsidiary or as to which appraisal rights are perfected,
will be converted into the right to receive $9.50 in cash ("Merger
Consideration").
In arriving at our Fairness Opinion we:
(a) reviewed the Merger Agreement, dated September 17, 1999;
(b) reviewed Diatide's Annual Reports to stockholders, Proxy Statements
and Annual Reports on Form 10-K, including the audited consolidated
financial statements, for the fiscal years ended December 31, 1996,
1997, and 1998;
(c) reviewed Diatide's Quarterly Reports on Form 10-Q, including the
unaudited consolidated financial statements, for the three months
ended March 31, 1999 and the six months ended June 30, 1999;
(d) reviewed financial projections of Diatide prepared by Diatide's
management and consultants;
(e) reviewed the historical market prices and trade volume for Diatide
Common Stock;
(f) held discussions with senior management of Diatide with respect to the
business and prospects for future growth of Diatide;
(g) performed discounted cash flow analyses of Diatide using certain
assumptions of future performance provided to us by the management of
Diatide;
(h) reviewed and analyzed certain publicly available financial data for
certain companies we deemed comparable to Diatide;
(i) reviewed and analyzed certain publicly available financial information
for transactions that we deemed comparable to the Merger;
(j) reviewed public information concerning Diatide; and reviewed the
financial terms, to the extent publicly available, of cash merger
transactions that we deemed comparable; and
(k) performed such other analyses and reviewed such other information as
we deemed appropriate.
In rendering our Fairness Opinion we relied upon and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information provided to us by the
<PAGE>
Company and its employees, consultants, representatives and affiliates. With
respect to forecasts of future financial condition and operating results of
Diatide provided to us, we assumed at the direction of Diatide's management,
without independent verification or investigation, that such forecasts were
reasonably prepared on bases reflecting the best available information,
estimates and judgement of Diatide's management. We have neither made nor
obtained any independent evaluations or appraisals of the assets or the
liabilities of Diatide or such other affiliated entities. We are not expressing
any opinion as to the underlying valuation, future performance or long term
viability of Diatide following the Merger. We express no opinion as to the
fairness of any consideration to be received in the Merger by the holder of any
securities of the Company other than the holders of Common Stock. Our opinion
is necessarily based on the information available to us and general economic,
financial and stock market conditions and circumstances as they exist and can
be evaluated by us on the date hereof. It should be understood that, although
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm the opinion. In rendering our Fairness Opinion,
we have assumed, with your consent, that the Merger will be consummated on the
terms described in the Merger Agreement, without any waiver of any material
terms or conditions.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We acted as financial advisor to Diatide in connection with the Merger and
to the Board of Directors of Diatide in rendering this opinion and will receive
a fee for our services. CIBC World Markets has performed investment banking and
other services for Diatide in the past and has been compensated for such
services. In the ordinary course of its business, CIBC World Markets and its
affiliates may actively trade securities of Diatide for their own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, and such other factors as we deem
relevant, it is our opinion that, as of the date hereof, the Merger
Consideration to be received by the holders of Common Stock of the Company
pursuant to the Merger Agreement is fair to such holders from a financial point
of view.
This Fairness Opinion is for the benefit of the Board of Directors of
Diatide. This Fairness Opinion is not intended to and does not constitute a
recommendation to any holder of Common Stock of Diatide as to whether such
holder should tender or vote to approve the Merger. Neither this Fairness
Opinion nor the services provided by CIBC World Markets in connection herewith
may be publicly disclosed or referred to in any manner by Diatide without the
prior written approval by CIBC World Markets; provided however, CIBC World
Markets consents to the inclusion of this opinion in its entirety in any
prospectus, proxy statement, solicitation/recommendation statement, the offer
to purchase or Securities and Exchange Commission Schedules 14D-1 and 14D-9, as
the case may be.
Very Truly Yours,
/s/ CIBC WORLD MARKETS CORP.
<PAGE>
Exhibit (a)(4)
OFFER TO PURCHASE FOR CASH
All Outstanding Shares of Common Stock
of
Diatide, Inc.
at
$9.50 Per Share
by
BXA Acquisition Company
A Wholly Owned Subsidiary of
Schering Berlin Inc.
A Wholly Owned Subsidiary of
Schering Aktiengesellschaft
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 22, 1999, UNLESS THE OFFER IS EXTENDED
THE BOARD OF DIRECTORS OF DIATIDE, INC. (THE "COMPANY") HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE
TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT THE
COMMON STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES (AS
DEFINED HEREIN).
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER
OF SHARES OF COMMON STOCK WHICH, ASSUMING THE PURCHASER THEN OWNED ALL THE
OUTSTANDING SERIES A AND SERIES B PREFERRED STOCK OF THE COMPANY, WOULD
TOGETHER REPRESENT AT LEAST A MAJORITY OF THE VOTING POWER OF THE
COMPANY'S VOTING SECURITIES ON A FULLY DILUTED BASIS.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver the Letter of Transmittal (or such facsimile), or,
in the case of a book-entry transfer effected pursuant to the procedure set
forth in Section 2, an Agent's Message (as defined herein), and any other
required documents to the Depositary (as defined herein) and either deliver the
certificates for such Shares to the Depositary along with the Letter of
Transmittal (or a facsimile thereof) or deliver such Shares pursuant to the
procedure for book-entry transfer set forth in Section 2 or (ii) request such
stockholder's broker, dealer, bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder having Shares registered in the
name of a broker, dealer, bank, trust company or other nominee must contact such
broker, dealer, bank, trust company or other nominee if such stockholder desires
to tender such Shares.
If a stockholder desires to tender Shares and such stockholder's
certificates for Shares are not immediately available or the procedure for book-
entry transfer cannot be completed on a timely basis, or time will not permit
all required documents to reach the Depositary prior to the expiration of the
Offer, such stockholder's tender may be effected by following the procedure for
guaranteed delivery set forth in Section 2.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent or to the Dealer Manager at
their respective addresses and telephone numbers set forth on the back cover of
this Offer to Purchase.
The Dealer Manager for the Offer is:
Warburg Dillon Read LLC
September 24, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION.............................................................. 1
THE TENDER OFFER.......................................................... 3
1.Terms of the Offer................................................... 3
2.Procedure for Tendering Shares....................................... 4
3.Withdrawal Rights.................................................... 7
4.Acceptance for Payment and Payment................................... 8
5.Certain Federal Income Tax Consequences.............................. 9
6.Price Range of the Shares; Dividends on the Shares................... 10
7.Effect of the Offer on the Market for the Shares; Stock Quotations;
Exchange Act Registration; Margin Regulations........................ 10
8.Certain Information Concerning the Company........................... 12
9.Certain Information Concerning the Purchaser, Parent and AG.......... 14
10.Source and Amount of Funds........................................... 15
11.Contacts and Transactions with the Company; Background of the Offer.. 16
12.Purpose of the Offer; the Merger Agreement; Other Agreements; Plans
for the Company...................................................... 17
13.Dividends and Distributions.......................................... 27
14.Certain Conditions of the Offer...................................... 27
15.Certain Legal Matters................................................ 29
16.Fees and Expenses.................................................... 31
17.Miscellaneous........................................................ 31
Schedule I--Directors and Executive Officers.............................. I-1
</TABLE>
<PAGE>
To the Holders of Shares of
Diatide, Inc.
INTRODUCTION
BXA Acquisition Company, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Schering Berlin Inc., a Delaware corporation
("Parent"), which is a wholly owned subsidiary of Schering Aktiengesellschaft,
a company organized under the laws of the Federal Republic of Germany ("AG"),
hereby offers to purchase all outstanding shares of Common Stock (the "Common
Stock"), par value $.001 per share (the "Shares"), of Diatide, Inc., a
Delaware corporation (the "Company"), at $9.50 per Share (the "Offer Price"),
net to seller in cash, without interest thereon, upon the terms and subject to
the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of September 17, 1999 (the "Merger Agreement"), among Parent, the Purchaser
and the Company pursuant to which, as soon as practicable following the
consummation of the Offer and the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company (the "Surviving Corporation") surviving the Merger
as a wholly owned subsidiary of Parent. At the effective time of the Merger
(the "Effective Time"), each outstanding Share (other than Shares held by
stockholders who perfect their appraisal rights under Delaware law, Shares
owned by the Company as treasury stock, and Shares owned by Parent or any
direct or any indirect subsidiary of Parent) will be converted into the right
to receive $9.50 in cash, or any higher price per Share paid pursuant to the
Offer, without interest thereon. The Merger Agreement provides that the
Purchaser may assign any or all of its rights and obligations (including the
right to purchase Shares in the Offer) to Parent or any direct or indirect
wholly owned subsidiary of Parent, but no such assignment shall relieve the
Purchaser of its obligations under the Merger Agreement. The Merger is subject
to a number of conditions, including the adoption of the Merger Agreement by
stockholders of the Company, if required by applicable law. In the event the
Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer
or otherwise, 90% or more of the Series A Convertible Preferred Stock, par
value $.01 per share, of the Company (the "Company Series A Preferred Stock")
and 90% or more of the Series B Convertible Preferred Stock, par value $.01
per share, of the Company (the "Company Series B Preferred Stock" and,
together with the Company Series A Preferred Stock, the "Company Series
Preferred Stock"), the Purchaser will effect the Merger pursuant to the short-
form merger provisions of the Delaware General Corporation Law (the "DGCL"),
without prior notice to, or any action by, any other stockholder of the
Company. See Section 12.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
Shareholders who hold their Shares through their broker, dealer, bank, trust
company or other nominee should consult with such institution as to whether
there are any fees applicable to a tender of Shares. Parent will pay all fees
and expenses of Warburg Dillon Read LLC, which is acting as Dealer Manager
(the "Dealer Manager" or "Warburg Dillon Read"), ChaseMellon Shareholder
Services, L.L.C., which is acting as the Depositary (the "Depositary"), and
ChaseMellon Consulting Services, L.L.C., which is acting as Information Agent
(the "Information Agent"), incurred in connection with this Offer. See Section
16.
The Board of Directors of the Company (the "Board") has unanimously approved
the Offer and the Merger and determined that the terms of the Offer and the
Merger are fair to, and in the best interests of, the Company's stockholders
and unanimously recommends that the holders of the Shares accept the Offer and
tender their Shares pursuant to the Offer. The factors considered by the Board
in arriving at its decision to approve the Offer and the Merger and to
recommend that holders of the Shares accept the Offer and tender their Shares
are described in the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders
of the Company herewith. The Company's financial advisor, CIBC World Markets
Corp. ("CIBC") has delivered its opinion to the Board dated September 17, 1999
that, as of such date, and subject to the conditions and limitations set forth
therein, the consideration to be received by the holders of Shares pursuant to
the Merger Agreement is fair to such holders from a financial point of view.
Such opinion is set forth in full as an exhibit to the Schedule 14D-9.
1
<PAGE>
The Company has represented to Parent and the Purchaser that each member of
the Board and each of the Company's executive officers has advised the Company
that he intends to tender all Shares owned by him pursuant to the Offer.
In connection with the Merger Agreement, the Purchaser concurrently entered
into certain purchase agreements, dated as of September 17, 1999, with the
holders of all the Company Series Preferred Stock (the "Stock Purchase
Agreements") pursuant to which the Purchaser is to acquire all the Company
Series Preferred Stock on the first date on which the Purchaser pays for any
Shares accepted for payment pursuant to the Offer, or as otherwise agreed
between the parties. Pursuant to such Stock Purchase Agreements, Purchaser
will pay (i) the holders of the Company Series B Preferred Stock, Alta
Embarcadero Biopharma Partners, L.L.C. and Alta Biopharma Partners, L.P. (the
"Company Series B Preferred Stock Holders"), $9.50 in cash, or such greater
amount as shall be equal to the highest price per Share paid pursuant to the
Offer for each share of Company Series B Preferred Stock, and (ii) the holders
of the Company Series A Preferred Stock, Medsource S.A., Neomed Fund Limited,
and Chase Venture Capital Associates, L.P. (the "Company Series A Preferred
Stock Holders", and together with the Company Series B Preferred Stock
Holders, the "Company Preferred Stock Holders"), $9.75 in cash (the
liquidation value of the Company Series A Preferred Stock) or such greater
amount as shall be equal to the highest price per Share paid pursuant to the
Offer for each share of Company Series A Preferred Stock.
The Offer is conditioned upon, among other things, (a) there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, assuming the Purchaser then owned all the outstanding Company
Series Preferred Stock, would together represent at least a majority of the
voting power of the Fully Diluted Shares (the "Minimum Tender Condition") and
(b) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), applicable to the purchase of Shares
pursuant to the Offer having expired or been terminated (the "HSR Act
Condition"). The Purchaser reserves the right (with the Company's consent and
subject to the applicable rules and regulations of the Securities and Exchange
Commission (the "SEC")) to waive or reduce the Minimum Tender Condition and to
elect to purchase, pursuant to the Offer, fewer than the minimum number of
Shares necessary to satisfy the Minimum Tender Condition. For purposes hereof,
the term "Fully Diluted Shares" means all outstanding securities entitled
generally to vote in the election of directors of the Company on a fully
diluted basis, after giving effect to the exercise or conversion of all
options, rights and securities exercisable or convertible into such voting
securities. See Sections 1 and 14.
The Company has informed the Purchaser that, as of the close of business on
September 16, 1999, (i) 10,615,614 Shares, 1,210,256 shares of Company Series
A Preferred Stock and 825,309 shares of Company Series B Preferred Stock were
issued and outstanding, (ii) 4,800 Shares were held by the Company in its
treasury, (iii) 1,002,436 Shares were subject to outstanding options to
purchase Shares ("Stock Options"), (iv) 11,290 additional Shares were
authorized for issuance pursuant to certain employee benefit plans, (v)
123,795 Shares were subject to outstanding warrants expiring January 17, 2001,
with an exercise price of $8.72 per Share and (vi) 198,138 Shares were subject
to outstanding warrants expiring August 13, 2006, with an exercise price of
$5.047 per Share (the warrants described in this subsection (vi) and
subsection (v) above being referred to herein as "Warrants"). As a result, as
of such date, the Minimum Tender Condition would be satisfied if the Purchaser
acquired 4,957,855 Shares.
Certain Federal income tax consequences of the sale of Shares pursuant to
the Offer are described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE>
THE TENDER OFFER
1. Terms of the Offer
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, October 22, 1999, unless and until the Purchaser shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as
so extended by the Purchaser, will expire.
In the Merger Agreement, the Purchaser has agreed that it will not, without
the written consent of the Company, waive the Minimum Tender Condition. The
Purchaser expressly reserves the right to modify the terms of the Offer,
except that, without the written consent of the Company, the Purchaser shall
not (a) reduce the number of Shares subject to the Offer, (b) reduce the Offer
Price, (c) modify or add to the conditions to the Offer in any manner adverse
to the holders of the Shares, (d) except as provided in the next paragraph,
extend the Offer, (e) change the form of consideration payable in the Offer or
(f) otherwise amend the Offer in a manner adverse to the holders of Shares.
Notwithstanding the foregoing, the Purchaser may, without the consent of the
Company, (a) extend the Offer, if at the scheduled Expiration Date of the
Offer (the initial scheduled Expiration Date being 20 business days following
the commencement of the Offer), any of the conditions to the Purchaser's
obligation to purchase the Shares are not satisfied or waived, until such time
as such conditions are satisfied or waived, (b) extend the Offer for a period
of not more than five business days beyond the initial Expiration Date of the
Offer, if on the date of such extension the Minimum Tender Condition has been
satisfied but less than 90% of the outstanding Shares have been validly
tendered and not properly withdrawn pursuant to the Offer, (c) 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 and (d)
extend the Offer for any reason for a period of not more than two business
days beyond the latest expiration date that would otherwise be permitted under
clause (a) or (c) of this sentence (it being understood that the Purchaser may
not extend the Offer pursuant to clause (d) if it has previously extended the
Offer pursuant to clause (b) of this sentence).
Subject to the terms of the Merger Agreement and applicable rules and
regulations of the SEC, the Purchaser reserves the right, in its sole
discretion, at any time and from time to time, and regardless of whether or
not any of the events or facts set forth in Section 14 hereof shall have
occurred, to (a) extend the period of time during which the Offer is open and
thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (b)
except as set forth above, amend the Offer in any other respect by giving oral
or written notice of such amendment to the Depositary. Under no circumstances
will interest be paid on the purchase price for tendered Shares, whether or
not the Purchaser exercises its right to extend the Offer.
If by 12:00 Midnight, New York City time, on Friday, October 22, 1999 (or
any date or time then set as the Expiration Date), any of or all of the
conditions of the Offer have not been satisfied or waived, the Purchaser
reserves the right (but shall not be obligated), subject to the terms and
conditions contained in the Merger Agreement and to the applicable rules and
regulations of the SEC, to (a) terminate the Offer and not accept for payment
or pay for any Shares and return all tendered Shares to tendering
stockholders, (b) except as set forth above with respect to the Minimum Tender
Condition, waive all the unsatisfied conditions and accept for payment and pay
for all Shares validly tendered prior to the Expiration Date and not
theretofore withdrawn, (c) extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended or (d) amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement. In the case of
3
<PAGE>
an extension, Rule 14e-1(d) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires that the announcement be issued no
later than 9:00 a.m., New York City time on the next business day after the
previously scheduled Expiration Date in accordance with the public
announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment for Shares (whether before or after its
acceptance for payment of Shares) or it is unable to accept for payment or pay
for Shares pursuant to the Offer for any reason, then, without prejudice to
the Purchaser's rights under the Offer (but subject to compliance with Rule
14e-1(c) under the Exchange Act, which requires that a tender offeror pay the
consideration offered or return the tendered securities promptly after
termination or withdrawal of a tender offer, and the terms of the Merger
Agreement), the Depositary may nevertheless, on behalf of the Purchaser,
retain tendered Shares, and such Shares may not be withdrawn except to the
extent tendering stockholders are entitled to exercise, and duly exercise,
withdrawal rights as described in Section 3.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, subject to the Merger Agreement, a waiver of the Minimum Tender
Condition), the Purchaser will disseminate additional tender offer materials
and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and
14e-1 under the Exchange Act. The minimum period during which an offer must
remain open following material changes in the terms of the offer or
information concerning the offer, other than a change in price or a change in
the percentage of securities sought, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. With respect to a change in price or a change in the
percentage of securities sought, a minimum period of 10 business days is
generally required to allow for adequate dissemination to stockholders.
The Company has provided the Purchaser with the Company's stockholder list
and security position listing for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and will be furnished to brokers, dealers, banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list, or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal
to beneficial owners of Shares.
2. Procedure for Tendering Shares
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (a) a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), together with any required signature guarantees and
any other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
confirmation of such delivery, including an Agent's Message (as defined
below), must be received by the Depositary), in each case prior to the
Expiration Date or (b) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
in accordance with the Book-Entry Transfer Facility's procedures for such
transfer. However, although delivery of Shares may be effected through book-
entry transfer into the Depositary's account
4
<PAGE>
at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message, and any other required documents, must, in
any case, be transmitted to, and received by, the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. The confirmation of a book-entry transfer
of Shares into the Depositary's account at the Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation." Delivery
of documents to the Book-Entry Transfer Facility in accordance with the Book-
Entry Transfer Facility's procedures does not constitute delivery to the
Depositary.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the tendering stockholder. Shares
will be deemed delivered only when actually received by the Depositary
(including, in the case of a book-entry transfer, by Book-Entry Confirmation).
If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder(s) of Shares (which term for purposes of this Section, includes any
participant in the Book-Entry Transfer Facility's system whose name appears on
a security position listing as the owner of the Shares) tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or (b) if such Shares are tendered for the account
of a firm that is a participant in the Security Transfer Agents Medallion
Program or the New York Stock Exchange Guarantee Program or the Stock Exchange
Medallion Program or by any other "eligible guarantor institution", as such
term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible
Institution"). In all other cases, all signatures on the Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the
Letter of Transmittal. If the certificates for Shares are registered in the
name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made or certificates for Shares not tendered or not accepted
for payment are to be returned to a person other than the registered holder of
the certificates surrendered, the tendered certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed in the
manner described above. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading
5
<PAGE>
days after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the Nasdaq National Market (the "Nasdaq
National Market") operated by the Nasdaq Stock Market, Inc. ("Nasdaq"), a
subsidiary of the National Association of Securities Dealers, Inc., is open
for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
such Shares are actually received by the Depositary. Under no circumstances
will any interest be paid on the purchase price of the Shares, regardless of
any extension of the Offer or any delay in making such payment.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of the Purchaser as
such stockholder's attorneys-in-fact and proxies in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by
such stockholder and accepted for payment by the Purchaser and with respect to
any and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after September 17, 1999. All such proxies will
be considered coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts for payment Shares tendered by such stockholder as provided herein and
deposits the purchase price therefor with the Depositary. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given (and, if given, will not be
deemed effective). The designees of the Purchaser will thereby be empowered to
exercise all voting and other rights with respect to such Shares and other
securities or rights in respect of any annual, special or adjourned meeting of
the Company's stockholders, actions by written consent in lieu of any such
meeting or otherwise, as they in their sole discretion deem proper. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares, the Purchaser must be able to exercise full voting, consent and
other rights with respect to such Shares and other securities or rights,
including voting at any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders determined by it not to be in proper form
or the acceptance for payment of or payment for which may, in the opinion of
the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right to waive any defect or irregularity in the tender of any Shares of any
particular stockholder whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed
to have been validly made until all defects or irregularities relating thereto
have been cured or waived. None of the Purchaser, Parent, AG, the Depositary,
the Information Agent, the Dealer Manager or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the instructions thereto) will be final and binding.
6
<PAGE>
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a stockholder tendering Shares
in the Offer must, unless an exemption applies, provide the Depositary with
such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to
provide the certifications described above, the Internal Revenue Service (the
"IRS") may impose a penalty on such stockholder and payment of cash to such
stockholder pursuant to the Offer may be subject to backup withholding of 31%.
All stockholders tendering Shares pursuant to the Offer should complete and
sign the Substitute Form W-9 included as part of the Letter of Transmittal to
provide the information and certification necessary to avoid backup
withholding (unless an applicable exemption exists and is provided in a manner
satisfactory to the Purchaser and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign a Form W-8, Certificate of Foreign
Status, a copy of which may be obtained from the Depositary, in order to avoid
backup withholding. See Instruction 9 to the Letter of Transmittal.
Company Series Preferred Stock and Warrants. The Purchaser is not offering
to purchase the Warrants or the Company Series Preferred Stock pursuant to the
Offer. The Purchaser has made arrangements with the Depositary so that holders
of Warrants may tender Shares pursuant to the Offer by delivering to the
Depositary certificates representing Warrants, together with such documents,
other than payment of the exercise price of the Warrants, as may be required
pursuant to the terms thereof to effect the exercise thereof for Shares, and
the Depositary shall deduct from the proceeds otherwise payable pursuant to
the Offer to each such tendering holder of Warrants an amount equal to the
aggregate exercise price of the Warrants represented by the certificates so
delivered. The Purchaser has also made arrangements with the Depositary so
that holders of Company Employee Stock Options (as defined herein) may tender
Shares pursuant to the Offer by delivering to the Depositary such documents,
other than payment of the exercise price of the Company Employee Stock
Options, as may be required pursuant to the terms thereof to effect the
exercise thereof for Shares, and the Depositary shall deduct from the proceeds
otherwise payable pursuant to the Offer to each such tendering holder of
Company Employee Stock Options an amount equal to the aggregate exercise price
of the Company Employee Stock Options being exercised. In any such case, the
exercise of such Warrants or such Company Employee Stock Options shall not be
deemed to occur unless the Purchaser accepts for payment and pays for any
Shares pursuant to the Offer, in which case such exercise shall be deemed to
have occurred as of immediately prior to the Expiration Date.
3. Withdrawal Rights
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant
to the procedures set forth below at any time prior to the Expiration Date
and, unless theretofore accepted for payment and paid for by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after Monday,
November 22, 1999.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must
specify the name of the person having tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of the
Shares to be withdrawn, if different from the name of the person who tendered
the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted
to the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been delivered pursuant to the
procedure for book-entry transfer as set forth in Section 2, any notice of
withdrawal must also specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Shares and otherwise
comply with the Book-Entry Transfer Facility's procedures. Withdrawals of
tenders of Shares may not be rescinded, and any Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by again following one of the procedures
described in Section 2 at any time prior to the Expiration Date.
7
<PAGE>
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, AG, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification.
4. Acceptance for Payment and Payment
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and will pay for all
Shares validly tendered prior to the Expiration Date, and not properly
withdrawn in accordance with Section 3, promptly after the Expiration Date.
All questions as to the satisfaction of such terms and conditions will be
determined by the Purchaser in its sole discretion, which determination will
be final and binding. See Sections 1 and 14. The Purchaser expressly reserves
the right, in its sole discretion, to delay acceptance for payment of or
payment for Shares in order to comply in whole or in part with any applicable
law, including without limitation, the HSR Act. Any such delays will be
effected in compliance with Rule 14e-1(c) under the Exchange Act, which
requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after termination or withdrawal of a tender
offer.
Parent will file a Notification and Report Form with respect to the Offer
under the HSR Act. The waiting period under the HSR Act with respect to the
Offer will expire at 11:59 p.m., New York City time, on the 15th day after the
day such form is filed, unless early termination of the waiting period is
granted. However, the Antitrust Division of the Department of Justice (the
"Antitrust Division") or the Federal Trade Commission (the "FTC") may extend
the waiting period by requesting additional information or documentary
material from Parent. If such a request is made, such waiting period will
expire at 11:59 p.m., New York City time, on the 10th day after substantial
compliance by Parent with such request. See Section 15.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and (c) any other documents required by
the Letter of Transmittal. The per Share consideration paid to any stockholder
pursuant to the Offer will be the highest per Share consideration paid to any
other holder of Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares.
Payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to tendering stockholders. Under no
circumstances will interest be paid on the purchase price of any Shares to be
paid by the Purchaser, regardless of any extension of the Offer or any delay
in making such payment.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment for Shares (whether before or after its
acceptance for payment of Shares) or it is unable to accept for payment or pay
for Shares pursuant to the Offer for any reason, then, without prejudice to
the Purchaser's rights under the Offer (but subject to compliance with Rule
14e-1(c) under the Exchange Act, which requires that a tender offeror pay the
consideration offered or return the tendered securities promptly after
termination or withdrawal of a tender offer, and the terms of the Merger
Agreement), the Depositary may, nevertheless, on behalf of the
8
<PAGE>
Purchaser, retain tendered Shares, and such Shares may not be withdrawn except
to the extent tendering stockholders are entitled to exercise, and duly
exercise, withdrawal rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned without expense to
the tendering stockholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedure set forth in Section 2, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to an affiliate of Parent, the right to
purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer
and will in no way prejudice the rights of tendering stockholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
5. Certain Federal Income Tax Consequences
The following is a general discussion of certain United States Federal
income tax consequences of the receipt of cash by a holder of Shares pursuant
to the Offer or the Merger. Except as specifically noted, this discussion
applies only to a U.S. Holder.
A "U.S. Holder" means a holder of Shares that is (i) a citizen or resident
of the United States, (ii) a corporation or other entity taxable as a
corporation created or organized in or under the laws of the United States or
any political subdivision thereof or therein, (iii) an estate the income of
which is subject to United States Federal income taxation regardless of its
source, or (iv) a trust if (x) a court within the United States is able to
exercise primary supervision over the administration of the trust and (y) one
or more United States fiduciaries have the authority to control all
substantial decisions of the trust. A "Non-U.S. Holder" is a holder of Shares
that is not a U.S. Holder.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for Federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also be a taxable transaction
under applicable state, local or foreign income or other tax laws. Generally,
for Federal income tax purposes, a U.S. Holder will recognize gain or loss
equal to the difference between the amount of cash received by the U.S. Holder
pursuant to the Offer or the Merger and the aggregate tax basis in the Shares
purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or
loss will be calculated separately for each block of Shares purchased pursuant
to the Offer (or canceled pursuant to the Merger).
Gain (or loss) will be capital gain (or loss), assuming that such Shares are
held as capital assets. Capital gains of individuals, estates and trusts
generally are subject to a maximum Federal income tax rate of (i) 20% if, at
the time the Purchaser accepts the Shares for payment (or the Shares are
canceled pursuant to the Merger) the stockholder held the Shares for more than
one year or (ii) 39.6% if, at the time the Purchaser accepts the Shares for
payment (or the Shares are canceled pursuant to the Merger) the stockholder
held the Shares for not more than one year. Capital gains of corporations
generally are taxed at the Federal income tax rates applicable to corporate
ordinary income. In addition, the ability to use capital losses to offset
ordinary income is limited.
A stockholder that tenders Shares pursuant to the Offer or surrenders Shares
pursuant to the Merger may be subject to 31% backup withholding unless the
stockholder provides its TIN and certifies that such number is correct or
properly certifies that it is awaiting a TIN, or unless an exemption applies.
A stockholder that does not furnish its TIN may be subject to a penalty
imposed by the IRS. See "--Backup Withholding" under Section 2.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not
an additional tax. Rather, the amount of the backup withholding can be
credited against the Federal income tax liability of the person subject to the
backup withholding, provided
9
<PAGE>
that the required information is given to the IRS. If backup withholding
results in an overpayment of tax, a refund can be obtained by the stockholder
upon filing an income tax return.
The foregoing discussion may not be applicable with respect to Shares
received pursuant to the exercise of Warrants, Company Employee Stock Options
or otherwise as compensation or with respect to holders of Shares who are
subject to special tax treatment under the Code, such as Non-U.S. Holders,
life insurance companies, tax-exempt organizations, financial institutions,
dealers in securities or currencies, persons who hold Shares as a position in
a "straddle" or as part of a "hedging" or "conversion" transaction and persons
that have a functional currency other than the U.S. dollar, and may not apply
to a holder of Shares in light of individual circumstances. Stockholders are
urged to consult their own tax advisors to determine the particular tax
consequences to them (including the application and effect of any state, local
or foreign income and other tax laws) of the Offer and the Merger.
6. Price Range of the Shares; Dividends on the Shares
The Shares are quoted on the Nasdaq National Market under the symbol "DITI".
The following table sets forth the high and low sales prices per Share as
reported by IDD Information Services for the periods indicated.
<TABLE>
<CAPTION>
Price of Shares
----------------
High Low
-------- -------
<S> <C> <C>
Calendar Year
-------------
1997
First Quarter........................................... $ 7.875 $ 6.250
Second Quarter.......................................... 7.000 4.250
Third Quarter........................................... 15.375 4.875
Fourth Quarter.......................................... 12.375 5.375
1998
First Quarter........................................... 11.125 8.125
Second Quarter.......................................... 10.750 6.875
Third Quarter........................................... 10.125 5.625
Fourth Quarter.......................................... 8.250 4.500
1999
First Quarter........................................... 8.500 3.625
Second Quarter.......................................... 5.250 2.750
Third Quarter (through September 22, 1999).............. 9.375 4.125
</TABLE>
On September 17, 1999, the last full trading day before the first public
announcement of the execution of the Merger Agreement, the last reported sales
price of the Shares on the Nasdaq National Market was $7.875 per Share. The
Offer Price of $9.50 represents a premium of approximately 21% over this
closing price. On September 23, 1999, the last full trading day before the
commencement of the Offer, the last reported sales price of the Shares on the
Nasdaq National Market was $9.219 per Share.
The Purchaser has been advised by the Company that the Company has never
paid any cash dividends on the Shares.
Stockholders are urged to obtain current market quotations for the Shares.
7. Effect of the Offer on the Market for the Shares; Stock Quotations;
Exchange Act Registration; Margin Regulations
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
10
<PAGE>
Stock Quotations. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of Nasdaq for
continued inclusion in the Nasdaq National Market, which among other things
require that an issuer have either (i) at least 750,000 publicly held shares,
held by at least 400 stockholders of round lots, with a market value of at
least $5,000,000 and net tangible assets of at least $4,000,000, at least two
registered and active market makers for the shares and a minimum bid price of
$1.00 per share or (ii) at least 1,100,000 publicly held shares, held by at
least 400 stockholders of round lots, with a market value of at least
$15,000,000 and either (x) a market capitalization of at least $50,000,000 or
(y) total assets and total revenue of at least $50,000,000 each for the most
recently completed fiscal year or two of the last three most recently
completed fiscal years, at least four registered and active market markers and
a minimum bid price of $5.00 per share. The Shares might nevertheless continue
to be included in the Nasdaq Stock Market if the issuer has at least 500,000
shares publicly held, held by at least 300 shareholders of round lots, with a
market value of at least $1,000,000, a minimum bid price of $1.00 per share
and either (x) a market capitalization of at least $35,000,000, (y) net
tangible assets of $2,000,000 or (z) net income of $500,000 in the most
recently completed fiscal year or in two of the last three most recently
completed fiscal years, and at least two registered active market makers.
Shares held directly or indirectly by directors, officers or beneficial owners
of more than 10% of the Shares are not considered as being publicly held for
this purpose. If, as a result of the purchase of Shares pursuant to the Offer
or otherwise, the Shares no longer meet the requirements of Nasdaq for
continued inclusion in the Nasdaq National Market or in any other tier of the
Nasdaq Stock Market, as the case may be, the market for Shares could be
adversely affected.
In the event that the Shares no longer meet the requirements of Nasdaq for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible
that the Shares would continue to trade in the over-the-counter market and
that price quotations would be reported by other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend upon the number of holders of Shares remaining at such time,
the interest in maintaining a market in Shares on the part of securities
firms, the possible termination of registration of the Shares under the
Exchange Act, as described below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the SEC if the Shares are not
listed on a national securities exchange or held by 300 or more holders of
record. Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company
to its stockholders and to the SEC and would make certain provisions of the
Exchange Act no longer applicable to the Company, such as the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), may be impaired or eliminated. The
Purchaser intends to seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met.
If public quotation and registration of the Shares is not terminated prior
to the Merger, then the Shares will no longer be quoted and the registration
of the Shares under the Exchange Act will be terminated following the
consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve
11
<PAGE>
Board and therefore could no longer be used as collateral for loans made by
brokers. In any event, the Shares will cease to be "margin securities" if
registration of the Shares under the Exchange Act is terminated.
8. Certain Information Concerning the Company
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, the Company is a Delaware corporation and engages in
the discovery, development and commercialization of patented imaging and
therapeutic drugs. Most of the Company's products incorporate radioactive
isotopes as an active component and are based on the Company's patented
peptides which target diseased tissues. The Company's peptide-based imaging
products are called "Techtides" and its peptide-based therapeutic products
"Theratides." Such products address a variety of life-threatening diseases and
conditions, such as cancer, cardiovascular diseases and infections.
The Company received marketing approval from the FDA in September 1998 for
its Techtide AcuTect for the imaging of acute venous thrombosis in the lower
extremities and began marketing AcuTect in the United States in October 1998.
The Company received marketing approval from the FDA in August 1999 for its
Techtide NeoTect. NeoTect is a technetium labeled synthetic peptide for
imaging malignant tumors in the lung. The Company began marketing NeoTect in
the United States in September 1999. The Company's principal offices are
located at 9 Delta Drive, Londonderry, NH 03053.
Set forth below is certain selected financial information with respect to
the Company, which is excerpted from the information contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, and the Company's Report on Form 10-Q for the quarterly period ended
June 30, 1999. More comprehensive financial information is included in such
reports and other documents filed by the Company with the SEC, and the
following summary is qualified in its entirety by reference to such reports
and such other documents and all the financial information (including any
related notes) contained therein. Such reports and such other documents should
be available for inspection and copies thereof should be obtainable in the
manner set forth below under "Available Information".
DIATIDE, INC.
SELECTED FINANCIAL INFORMATION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
---------------- ----------------------------
1999 1998 1998 1997 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Summary of Earnings Data
Total revenues........... $ 757 $ 3,130 $ 6,385 $ 4,140 $ 2,606
Costs related to research
and development......... 4,960 6,042 10,940 11,762 11,976
Loss from operations..... (9,066) (5,474) (10,873) (11,794) (12,537)
Net loss................. (8,890) (5,047) (10,217) (10,989) (11,834)
Net loss per common
share*.................. (0.84) (0.48) (0.97) (1.05) (1.28)
</TABLE>
- --------
* Under FAS No. 128, common stock equivalents, such as outstanding stock
options and convertible preferred stocks, are excluded in calculating
diluted earnings per share if their effect would be anti-dilutive.
Accordingly, basic earnings per share and diluted earnings per share are
the same for the Company.
<TABLE>
<CAPTION>
At June 30, At December 31,
----------- -----------------------
1999 1998 1997 1996
----------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance Sheet Data
Total assets......................... $7,342 $10,273 $19,016 $18,315
Long-term debt; less current
portion............................. 185 251 10 13
Total stockholders' equity........... 3,377 6,126 15,908 14,684
</TABLE>
12
<PAGE>
On August 20, 1999, the Company borrowed $5,000,000 under a three-year, term
loan agreement entered into by the Company with two institutional investors on
August 13, 1999. The loan is payable over three years at an interest rate
equal to the U.S. Treasury Rate plus a premium, includes prepayment penalties
and is secured by substantially all assets of the Company. In addition, on
August 12, 1999, the Company received a $2,000,000 milestone payment from
Nycomed Amersham as a result of the FDA approval of NeoTect.
Available Information. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options and other matters, the principal
holders of the company's securities and any material interest of such persons
in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the SEC.
Such reports, proxy statements and other information should be available for
inspection at the public reference facilities of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the SEC located
at Seven World Trade Center, 13th Floor, New York, NY 10049 and Citicorp
Center, 500 West Madison Street (Suite 1400), Chicago, IL 60661. Copies of
such information should be obtainable, by mail, upon payment of the SEC's
customary charges, by writing to the SEC's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The SEC maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. Such reports,
proxy and information statements and other information may be found on the
SEC's web site address, http://www.sec.gov.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the SEC and other publicly available
information. Although the Purchaser, Parent and AG do not have any knowledge
that any information is untrue, none of the Purchaser, Parent or AG takes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information.
Certain Company Projections. During the course of discussions between
representatives of Parent and the Company, the Company provided certain non-
public business and financial information about the Company. The following is
a summary of selected projected financial information provided by the Company
with respect to two scenarios, one of which assumed the Company would have
access to limited capital to fund its development and commercialization
programs and the second of which assumed the Company would have unrestricted
access to capital to fund its development and commercialization programs.
<TABLE>
<CAPTION>
Projections for
Year Ending December 31,
----------------------------------------------------
1999 2000 2001 2002 2003 2004
------- ------- ------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Case A: Limited Access to
Funding
Revenues................. $ 6,416 $16,622 $36,452 $62,216 $104,426 $299,863
Research and development
expenses................ 8,115 6,412 7,781 12,116 16,770 19,173
Operating income (loss).. (12,339) (6,353) 2,444 9,852 37,528 224,150
Net income (loss)........ (12,317) (6,680) 2,317 10,604 39,128 225,750
Case B: Unrestricted
Access to Funding
Revenues................. $ 6,416 $16,622 $36,452 $62,216 $125,331 $329,130
Research and development
expenses................ 8,115 9,237 11,778 14,371 16,971 19,580
Operating income (loss).. (12,339) (9,178) (1,630) 7,462 55,977 250,848
Net income (loss)........ (12,317) (9,505) (1,757) 8,214 57,577 252,448
</TABLE>
13
<PAGE>
Subsequent to providing Parent with the above projections, the Company
provided Parent with revised projections for 1999 which indicated total
revenues for 1999 of approximately $4.35 million, research and development
expenses of approximately $9.2 million, operating loss of approximately $14
million and net loss for 1999 of approximately $13.6 million.
The Company has advised the Purchaser, Parent and AG that it does not as a
matter of course make public any projections as to future performance or
earnings, and the projections set forth above are included in this Offer to
Purchase only because the information was provided to representatives of
Parent. The projections were not prepared with a view to public disclosure or
compliance with the published guidelines of the SEC or the guidelines
established by the American Institute of Certified Public Accountants
regarding projections or forecasts. The Company's internal operating
projections are, in general, prepared solely for internal use and capital
budgeting and other management decisions and are subjective in many respects
and thus susceptible to various interpretations and periodic revision based on
actual experience and business developments. The projections were based on a
number of assumptions that are beyond the control of the Company, the
Purchaser, Parent or AG or their respective financial advisors, including
economic forecasting (both general and specific to the Company's business),
which is inherently uncertain and subjective. Accordingly, there can be no
assurance that these projections will be realized and actual results may
differ materially from those expressed in the projections. None of the
Purchaser, Parent or AG or their respective financial advisors assumes any
responsibility for the accuracy of any of the projections. The inclusion of
the foregoing projections should not be regarded as an indication that the
Company, the Purchaser, Parent or AG or any other person who received such
information considers it an accurate prediction of future events and this
information should not be relied on as such. None of the Company, the
Purchaser, Parent or AG intends to update, revise or correct such projections
if they become inaccurate (even in the short term).
9. Certain Information Concerning the Purchaser, Parent and AG
The Purchaser, a Delaware corporation, was recently incorporated for the
purpose of acting as an acquisition vehicle. It has not conducted any
unrelated activities since its incorporation. The principal executive office
of the Purchaser is located at 340 Changebridge Road, P.O. Box 1000,
Montville, NJ 07045-1000. All outstanding shares of common stock of Purchaser
are owned by Parent.
The principal executive office of Parent, a Delaware corporation, is located
at 340 Changebridge Road, P.O. Box 1000, Montville, NJ 07045-1000. Parent is a
holding company whose principal business is the holding of stock in and the
providing of services to its subsidiaries. All outstanding shares of common
stock of Parent are directly owned by AG.
AG is a company organized under the laws of the Federal Republic of Germany
with its principal executive office at Mullerstrabe 178, D-13342 Berlin,
Germany. AG's principal business is the research, development, manufacture and
sale of a broad range of pharmaceutical and health care products. Parent, AG
and Purchaser are not related to and have no affiliation with Schering-Plough
Corporation of Kenilworth, New Jersey.
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Purchaser, Parent and AG are set forth in Schedule I
hereto.
Except as described in this Offer to Purchase, none of the Purchaser, Parent
or AG (together, the "Corporate Entities") or, to the best knowledge of the
Corporate Entities, any of the persons listed in Schedule I or any associate
or majority-owned subsidiary of the Corporate Entities or any of the persons
so listed, beneficially owns any equity security of the Company, and none of
the Corporate Entities or, to the best knowledge of the Corporate Entities,
any of the other persons referred to above, or any of the respective
directors, executive officers or subsidiaries of any of the foregoing, has
effected any transaction in any equity security of the Company during the past
60 days.
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Except as described in this Offer to Purchase, (a) there have not been any
contacts, transactions or negotiations between the Corporate Entities, any of
their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand,
that are required to be disclosed pursuant to the rules and regulations of the
SEC and (b) none of the Corporate Entities or, to the best knowledge of the
Corporate Entities, any of the persons listed in Schedule I has any contract,
arrangement, understanding or relationship with any person with respect to any
securities of the Company.
Set forth below is a summary of certain selected consolidated financial
information with respect to AG and its consolidated subsidiaries for the
fiscal years ended December 31, 1997 and 1998 and for the six month periods
ended June 30, 1998 and 1999. Such financial information is excerpted and
derived from the English language translations of AG's Annual Report 1998 and
Interim Report-First Six Months 1999. The selected consolidated financial
information is stated in Deutsche Mark and euro, as indicated. Such
information is provided for supplemental information purposes only. Because
the only consideration in the Offer and Merger is cash and the Offer covers
all outstanding Shares, and in view of the absence of a financing condition
and the amount of consideration payable in relation to the financial
capability of AG and its affiliates, the Purchaser, Parent and AG believe the
financial condition of AG and its affiliates is not material to a decision by
a holder of Shares whether to sell, tender or hold Shares pursuant to the
Offer. On September 23, 1999, The Wall Street Journal reported that, as of
September 22, 1999, one Deutsche Mark equaled 0.54 U.S. dollars and one euro
equaled 1.04 U.S. dollars.
SCHERING AKTIENGESELLSCHAFT
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(euro in millions)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, December 31,
----------- ---------------
1999 1998 1998 1997
----- ----- ------- -------
<S> <C> <C> <C> <C>
Income Statement:
Net sales......................................... 1,754 1,644 3,285 3,193
Gross profit...................................... 1,356 1,258 2,485 2,379
Operating profit.................................. 281 250 410 422
Profit after tax.................................. 169 157 245 228
<CAPTION>
At June 30, At December 31,
----------- ---------------
1999 1998 1998 1997
----- ----- ------- -------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Fixed assets...................................... 1,938 1,963 1,908 1,933
Current assets.................................... 2,723 2,664 2,661 2,466
Capital and reserves.............................. 2,112 2,098 2,058 2,000
</TABLE>
10. Source and Amount of Funds
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related
to the Offer and the Merger is estimated to be approximately $128 million. The
Purchaser plans to obtain all funds needed for the Offer and the Merger
through a capital contribution and/or an intercompany loan that will be made
by AG to Parent and a capital contribution and/or an intercompany loan that
will be made by Parent to the Purchaser. AG plans to use funds it has
available in cash accounts for its capital contribution and/or intercompany
loan to Parent. The Purchaser has not conditioned the Offer on obtaining
financing.
15
<PAGE>
11. Contacts and Transactions with the Company; Background of the Offer
In the spring of 1999, Dr. Richard T. Dean, the Company's President and
Chief Executive Officer, contacted Dr. Harold Goldstein, Vice President of
Clinical Diagnostic of one of Parent's subsidiaries, to propose a meeting to
explore Parent's interest in collaborating with the Company in the development
of various products for which the Company had not yet entered into partnering
arrangements. On May 6, 1999, representatives of the Company made a
presentation of nonconfidential information regarding the Company's
unpartnered products to scientific and managerial representatives of Parent.
Following that meeting, the Company provided additional nonconfidential
information to Parent.
In June 1999, Mr. Robert Milos, Corporate Vice President and General Manager
of one of Parent's subsidiaries, called Dr. Dean to inquire whether the
Company would be willing to consider the possibility of Parent acquiring the
Company. Dr. Dean indicated that the Company would be willing to consider such
a proposal. On July 2, 1999, Parent and the Company entered into a
confidentiality agreement.
During July 1999, Parent conducted a due diligence review of the Company,
and personnel of Parent and the Company met on a number of occasions to
discuss the Company's business and operations.
In early August 1999, the Company advised Parent that the Company was
seeking to raise approximately $5 million in new financing in the form of a
secured loan. The Company and Parent discussed the possibility of Parent
making such a loan. However, on August 11, 1999, Parent advised the Company
that Parent had determined not to proceed with the loan, but that Parent
intended to make a proposal to acquire the Company.
On August 12, 1999, Parent submitted a non-binding letter to the Company in
which Parent proposed to acquire 100% of the Common Stock for $8.00 per Share
in cash, subject to Parent's satisfactory completion of its due diligence. On
August 13, 1999, Parent sent a second letter to the Company extending this
proposal until August 18, 1999. In response, on August 13, 1999, the Company
sent Parent a letter indicating that it or CIBC would be in contact with
Parent during the week of August 16, 1999 to continue discussions.
On August 20, 1999, Dr. Dean met with Mr. Lutz Lingnau, Parent's Chief
Executive Officer, to discuss the Company's business and operations and
Parent's acquisition proposal.
On August 23, 1999, Parent entered into the Confidentiality Agreement,
described under "Purpose of the Offer; the Merger Agreement; Other Agreements;
Plans for the Company--Confidentiality Agreement" below, replacing the
confidentiality agreement previously entered into by Parent and the Company.
On August 24, 1999 and August 25, 1999, Parent's scientific, legal and
financial personnel and advisors performed additional due diligence relating
to the Company. This due diligence included meetings between scientific and
managerial personnel of Parent and the Company.
On August 31, 1999, representatives of Parent and Warburg Dillon Read,
Parent's financial advisor, met with representatives of the Company and CIBC
to discuss the status of Parent's due diligence and to negotiate the proposed
financial terms of a transaction. Parent modified its offer by proposing to
acquire all of the Shares and the outstanding shares of Company Series B
Preferred Stock for $9.00 per share in cash and to purchase all of the
outstanding shares of Company Series A Preferred Stock for $9.75 per share in
cash, an amount equal to the liquidation preference which the Company Series A
Preferred Stock Holders would be entitled to as a result of a business
combination transaction. Parent stated that it desired to structure any
transaction as a cash merger with a first step cash tender offer.
On September 1, 1999, Cravath, Swaine & Moore, counsel for Parent, sent a
draft Merger Agreement to Hale and Dorr LLP, counsel to the Company.
On September 3, 1999, CIBC advised Parent that the Board had met and that
Parent would need to increase its offer for the Company if it wished the Board
to determine to proceed with final negotiations of a transaction. Following
the meeting, Hale and Dorr LLP sent a memorandum to Parent's financial advisor
and Parent's counsel
16
<PAGE>
outlining the principal issues to be negotiated between the parties arising
out of the draft Merger Agreement provided by Cravath, Swaine & Moore.
On September 9, 1999, Parent advised CIBC, at a meeting between
representatives of Parent and CIBC, that Parent was prepared to increase its
offer to $9.50 per share in cash for the Shares and Company Series B Preferred
Stock, with the per share consideration for the Company Series A Preferred
Stock remaining at $9.75 in cash.
On September 10, 1999, Hale and Dorr LLP submitted comments on the draft
Merger Agreement to Cravath, Swaine & Moore. On September 13, 1999, the
Company's financial advisers and legal counsel met with the financial advisers
and legal counsel for Parent and internal legal and financial personnel of
Parent to negotiate the Merger Agreement. These negotiations continued by
telephone over the course of the week. As part of these negotiations, legal
counsel for the Company and legal counsel for Parent determined that it would
expedite the transactions contemplated by Parent if Parent entered into
purchase agreements with the holders of the Company Series Preferred Stock.
At a meeting held on September 17, 1999, the Board unanimously determined
that the terms of the Offer, the Merger, the Stock Purchase Agreements and the
other transactions contemplated by the Merger Agreement are fair to, and in
the best interests of, the Company and its stockholders and adopted
resolutions (a) approving the Merger Agreement, the Offer, the Merger, the
Stock Purchase Agreements and the other transactions contemplated in the
Merger Agreement, (b) recommending that the holders of Shares accept the Offer
and tender their Shares pursuant to the Offer, (c) recommending that the
Company's stockholders adopt the Merger Agreement, if required, and (d)
declaring that the Merger Agreement is advisable.
After this meeting of the Board, the parties executed the Merger Agreement,
and Purchaser, Parent, as guarantor, and the holders of the Company Series
Preferred Stock entered into the Stock Purchase Agreements. On the morning of
September 20, 1999, Parent and the Company issued a joint press release
announcing the Merger Agreement and the Offer.
12. Purpose of the Offer; the Merger Agreement; Other Agreements; Plans for
the Company
Purpose. The purpose of the Offer is to acquire control of and the entire
equity interest in the Company. Following the Offer, the Purchaser and Parent
intend to acquire any remaining equity interest in the Company not acquired in
the Offer by consummating the Merger.
The Merger Agreement. The Merger Agreement provides that following the
satisfaction of the conditions described below under "Conditions to
Obligations of Each Party under the Merger Agreement", the Purchaser will be
merged with and into the Company, or (at the election of Parent) the Company
will be merged with and into the Purchaser and each issued and outstanding
Share (other than Shares held by stockholders who perfect their appraisal
rights under Delaware law, Shares owned by the Company as treasury stock, and
Shares owned by Parent or any direct or any indirect subsidiary of Parent)
will be converted into the right to receive the highest per Share cash
consideration paid pursuant to the Offer. Each issued and outstanding share of
Company Series A Preferred Stock, not owned directly or indirectly by Parent
or the Company, will be converted into the right to receive $9.75 in cash or,
if greater, the highest per Share cash consideration paid pursuant to the
Offer, and each issued and outstanding share of Company Series B Preferred
Stock, not owned directly or indirectly by Parent or the Company, will be
converted into the right to receive the highest per Share cash consideration
paid pursuant to the Offer.
(1) Vote Required to Approve Merger. The DGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company be
approved by the Board and generally by a majority vote of the stockholders of
the Company. The Board has approved the Offer and the Merger. Consequently,
the only additional action of the Company that may be necessary to effect the
Merger is approval by such stockholders if the "short-form" merger procedure
described below is not available. Under the Company's charter, the
17
<PAGE>
affirmative vote of the holders of a majority of the outstanding Shares and
Company Series Preferred Stock, voting together as a single class, is the only
vote of holders of any class or series of the Company's capital stock
necessary to approve the Merger. If the Purchaser acquires, through the Offer
or otherwise, voting power with respect to at least a majority of the
Company's voting securities (which would be the case if the Minimum Tender
Condition were satisfied and the Purchaser were to accept for payment Shares
tendered pursuant to the Offer and if the Purchaser had acquired the Company
Series Preferred Stock pursuant to the Stock Purchase Agreements), it would
have sufficient voting power to effect the Merger without the vote of any
other stockholder of the Company. However, the DGCL also provides that if a
parent company owns at least 90% of the outstanding shares of each class of
voting stock of a subsidiary, the parent company can effect a short-form
merger with that subsidiary without the action of the other stockholders of
the subsidiary. Accordingly, if, as a result of the Offer, the Stock Purchase
Agreements or otherwise, the Purchaser acquires or controls at least 90% of
the outstanding Shares, and the outstanding shares of each of the Company
Series A Preferred Stock and Company Series B Preferred Stock, the Purchaser
will effect the Merger without prior notice to, or any action by, any other
stockholder of the Company.
(2) Conditions to Obligations of Each Party Under The Merger Agreement. The
respective obligation of each party to effect the Merger under the Merger
Agreement is subject to the satisfaction or waiver on or prior to the closing
date of the following conditions: (a) if required by the DGCL, the Merger
Agreement and the Merger shall have been approved and adopted by the holders
of a majority of the outstanding Shares and Company Series Preferred Stock,
voting together as a single class (the "Company Stockholder Approval"); (b)
any waiting period (and any extension thereof) applicable to the Merger under
the HSR Act shall have been terminated or shall have expired; (c) no temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or prohibition
making illegal or otherwise prohibiting the consummation of the Merger shall
be in effect; provided, however, that prior to asserting this condition,
subject to the conditions set forth below under "Commercially Reasonable
Efforts", the party seeking to assert this condition shall have used its
commercially reasonable efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any such injunction or other
order that may be entered; (d) the Purchaser shall have accepted Shares for
payment pursuant to the Offer. The obligations of Parent and the Purchaser to
effect the Merger are further subject to the condition that the Company shall
have caused the designees of the Purchaser to be elected or appointed to the
Board in accordance with the provisions described below under "Directors";
provided, however, that neither Parent nor the Purchaser shall be entitled to
assert this condition if either Parent or the Purchaser has not complied with
its obligations described below under "Directors".
(3) Termination of the Merger Agreement. The Merger Agreement may be
terminated at any time prior to the time the Merger becomes effective, which
shall be when the Certificate of Merger is duly filed with the Secretary of
State, or at such other time as Parent and the Company shall agree and specify
in the Certificate of Merger (the "Effective Time"), whether before or after
receipt of the Company Stockholder Approval: (a) by mutual written consent of
Parent, the Purchaser and the Company; (b) by either Parent or the Company (i)
if the Offer shall not have been consummated within 90 days from the date of
the Merger Agreement (the "Outside Date"); provided, however, that the right
to so terminate the Merger Agreement shall not be available to any party whose
failure to fulfill any obligation or condition therein has been the cause of,
or resulted in, the failure of the Offer to be consummated by the Outside
Date, (ii) if any governmental entity issues an order, decree or ruling or
takes any other action permanently enjoining, restraining or otherwise
prohibiting the Offer or the Merger and such order, decree, ruling or other
action shall have become final and nonappealable, (iii) if as the result of
the failure of any of the conditions set forth in Section 14 ("Certain
Conditions of the Offer"), (A) the Purchaser shall have failed to commence the
Offer within 30 days following the date of the Merger Agreement or (B) the
Offer shall have terminated or expired in accordance with its terms without
the Purchaser having purchased any Shares pursuant to the Offer; provided,
however, that the right to so terminate the Merger Agreement shall not be
available to any party whose failure to fulfill any of its obligations under
the Merger Agreement results in the failure of any such condition, or (iv) if,
upon a vote at a duly held meeting to obtain the Company Stockholder Approval,
the Company Stockholder Approval is not obtained; provided, however, that the
right to so terminate the Merger Agreement shall not be available to Parent or
the Purchaser if they have
18
<PAGE>
failed to fulfill their obligations under the Merger Agreement to vote all
Company securities owned by them in favor of the Merger; (c) by Parent prior
to the first time that designees of the Purchaser constitute a majority of the
Board (the "Control Time"), if the Company breaches or fails to perform any of
its representations, warranties or covenants contained in the Merger
Agreement, which breach or failure to perform causes the failure of a
condition set forth in Section 14 (or would cause the failure of such a
condition if the Offer were then in effect) and which breach or failure to
perform shall not have been cured prior to the earlier of (i) 10 days
following notice to the Company thereof and (ii) one business day prior to the
then scheduled Expiration Date; provided, however, that the Company shall have
no right to cure in the event that such breach or failure to perform was
intentional or in the case of a breach of or failure to perform the provisions
described below under "Acquisition Proposals"; (d) by Parent prior to the
Control Time, if the Board or any committee thereof withdraws or modifies, or
publicly (or in a manner designed to become public) proposes to withdraw or
modify, in a manner adverse to Parent or the Purchaser, its approval or
recommendation of the Merger Agreement, the Offer or the Merger, fails to
recommend to the Company's stockholders that they accept the Offer and give
the Company Stockholder Approval or publicly (or in a manner designed to
become public) approves or recommends, or proposes to approve or recommend,
any Company Takeover Proposal (as defined below); (e) by the Company prior to
the acceptance of Shares for payment pursuant to the Offer in accordance with
the provisions of the Merger Agreement as described in the next paragraph;
provided, however, that the Company shall have complied with all provisions
thereof, including the notice provisions therein; or (f) by the Company prior
to the acceptance of Shares for payment pursuant to the Offer, if any
representation and warranty of either Parent or the Purchaser that is
qualified as to materiality shall not be true and correct in any respect, or
any such representation and warranty that is not so qualified shall not be
true and correct in any material respect, as of such time of termination,
except to the extent such representation and warranty expressly relates to an
earlier date (in which case as of such earlier date) or Parent or the
Purchaser shall have failed to perform in any material respect any obligation
or to comply in any material respect with any agreement or covenant of Parent
or the Purchaser to be performed or complied with by it under the Merger
Agreement which failure to be true and correct or failure to perform or comply
shall not have been cured within 10 days following notice to Parent or the
Purchaser, as the case may be, thereof.
The Merger Agreement further provides that the Company may terminate the
Merger Agreement pursuant to the provisions described above under clause (e)
of "Termination of the Merger Agreement" only if (i) the Board has received a
Superior Company Proposal (as defined below), (ii) in light of such Superior
Company Proposal the Board shall have determined in good faith, after
consultation with outside counsel, that it is necessary for the Board to
withdraw or modify its approval or recommendation of the Merger Agreement, the
Offer or the Merger in order to comply with its fiduciary duty under
applicable law, (iii) the Company has notified Parent in writing of the
determinations described in clause (ii) above, (iv) at least three business
days following receipt by Parent of the notice referred to in clause (iii)
above, and taking into account any revised proposal made by Parent since
receipt of the notice referred to in clause (iii) above, such Superior Company
Proposal remains a Superior Company Proposal and the Board has again made the
determinations referred to in clause (ii) above, (v) the Company is in
compliance with the provisions set forth below under "Acquisition Proposals",
(vi) the Company concurrently pays the fee described below under "Fees and
Expenses" and (vii) the Board concurrently approves, and the Company
concurrently enters into, a definitive agreement providing for the
implementation of such Superior Company Proposal.
(4) Acquisition Proposals. Pursuant to the Merger Agreement, the Company has
agreed that it will not, and will not authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor
or representative (collectively, "Representatives") of, the Company to, (i)
directly or indirectly solicit, initiate or encourage the submission of, any
Company Takeover Proposal, (ii) except in connection with a termination of the
Merger Agreement pursuant to the provisions described above under clause (e)
of "Termination of the Merger Agreement", enter into any agreement with
respect to any Company Takeover Proposal or (iii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action designed to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Company Takeover Proposal;
provided, however, that prior to the acceptance for payment of Shares pursuant
to the Offer the Company may,
19
<PAGE>
to the extent required by the fiduciary obligations of the Board, as
determined in good faith by it after consultation with outside counsel, in
response to a bona fide, written Company Takeover Proposal made or received
after the date of the Merger Agreement that was not solicited by the Company
in breach or deemed breach of the provisions described in this paragraph and
that did not otherwise result from a breach or deemed breach of such
provisions and that the Board determines in good faith is reasonably likely to
result in a Superior Company Proposal within a reasonable period of time, and
subject to compliance with the Merger Agreement, (x) furnish information with
respect to the Company to the person making such Company Takeover Proposal and
its Representatives pursuant to a customary confidentiality agreement not less
restrictive of the other party than the Confidentiality Agreement and (y)
participate in discussions or negotiations (including solicitation of a
revised Company Takeover Proposal) with such person and its Representatives
regarding any Company Takeover Proposal. Without limiting the foregoing, any
violation of the restrictions set forth in the preceding sentence by any
Representative or affiliate of the Company, whether or not such person is
purporting to act on behalf of the Company or otherwise, shall be deemed to be
a breach of the provisions described in this paragraph by the Company. The
Company has also agreed that it will, and will cause its Representatives to,
cease immediately all discussions and negotiations regarding any proposal that
constitutes, or may reasonably be expected to lead to, a Company Takeover
Proposal that commenced prior to the date of the Merger Agreement (it being
understood that this sentence does not preclude responding to a bona fide,
written Company Takeover Proposal made or received after the date of the
Merger Agreement from a party that made a Company Takeover Proposal prior to
the date of the Merger Agreement so long as the Company is in compliance with
all the other provisions described in this section.
The Merger Agreement further provides that, except as described below,
neither the Board nor any committee thereof shall (i) withdraw or modify, or
publicly (or in a manner designed to become public) propose to withdraw or
modify, in a manner adverse to Parent or the Purchaser, the approval or
recommendation by the Board or any such committee of the Merger Agreement, the
Offer or the Merger, (ii) approve any letter of intent, agreement in
principle, acquisition agreement or similar agreement relating to any Company
Takeover Proposal or (iii) approve or recommend, or publicly (or in a manner
designed to become public) propose to approve or recommend, any Company
Takeover Proposal. Notwithstanding the foregoing, if, prior to the acceptance
for payment of Shares pursuant to the Offer, the Board receives a Superior
Company Proposal and the Board determines in good faith, after consultation
with outside counsel, that it is necessary to do so in order to comply with
their fiduciary obligations, the Board may withdraw or modify its approval or
recommendation of the Offer, the Merger and the Merger Agreement or enter into
an agreement in connection with a Superior Company Proposal in connection with
a termination of the Merger Agreement in accordance with the provisions
described above under clause (e) of "Termination of the Merger Agreement".
In addition, under the Merger Agreement, the Company has agreed to promptly
advise Parent orally and in writing of any Company Takeover Proposal or any
inquiry with respect to or that would reasonably be expected to lead to any
Company Takeover Proposal, in each case made or received after the date of the
Merger Agreement, and the identity of the person making any such Company
Takeover Proposal or inquiry. The Company has further agreed to keep Parent
reasonably informed of the status including any change to the details of any
such Company Takeover Proposal or inquiry.
Nothing described in this section shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any required disclosure to
the Company's stockholders if, in the good faith judgment of the Board, after
consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law.
"Company Takeover Proposal" means (i) any proposal or offer for a merger,
consolidation, dissolution, recapitalization or other business combination
involving the Company, (ii) any proposal for the issuance by the Company of a
material amount of its equity securities as consideration for the assets or
securities of another person or (iii) any proposal or offer to acquire in any
manner, directly or indirectly, a material equity interest in any voting
securities of, or a substantial portion of the assets of, the Company, in each
case other than the Offer, the Merger, the transactions contemplated by the
Stock Purchase Agreements and the other transactions
20
<PAGE>
contemplated by the Merger Agreement (the "Transactions"). "Superior Company
Proposal" means any proposal made by a third party to acquire substantially
all the equity securities or assets of the Company, pursuant to a tender or
exchange offer, a merger, a consolidation, a liquidation or dissolution, a
recapitalization, a sale of its assets or otherwise (but excluding any
proposal to license any or all assets of the Company), (i) on terms which the
Board determines in its good faith judgment to be more favorable to the
holders of Company Common Stock than the Transactions (after receiving advice
of the Company's independent financial advisor), taking into account all the
terms and conditions of such proposal and the Merger Agreement (including any
proposal by Parent to amend the terms of the Transactions) and (ii) that in
the good faith judgment of the Board is reasonably capable of being completed,
taking into account all financial, regulatory, legal and other aspects of such
proposal.
(5) Fees and Expenses. Except as provided below, all fees and expenses
incurred in connection with the Offer, the Merger and the other Transactions
will be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.
The Merger Agreement provides that (a) the Company shall pay to Parent a fee
of $4,000,000 if: (i) the Merger Agreement is terminated pursuant to the
provisions described above under clause (b)(iii) of "Termination of the Merger
Agreement" as a result of the failure of the condition set forth in paragraph
(e)(ii) of Section 14 ("Certain Conditions of the Offer"); (ii) the Company
terminates the Merger Agreement pursuant to the provisions described above
under clause (e) of "Termination of the Merger Agreement"; (iii) Parent
terminates the Merger Agreement pursuant to the provisions described above
under clause (c) of "Termination of the Merger Agreement" as a result of the
Company's breach of or failure to perform the provisions described above under
"Acquisition Proposals" or pursuant to the provisions described above under
clause (d) of "Termination of the Merger Agreement"; or (iv) after the date of
the Merger Agreement, (A) any person publicly (or in a manner designed to
become public) makes a Company Takeover Proposal or publicly (or in a manner
designed to become public) amends a Company Takeover Proposal made prior to
the date of the Merger Agreement, (B) the Merger Agreement is terminated
pursuant to the provisions described above under clause (b)(iii) of
"Termination of the Merger Agreement" as a result of the failure of the
Minimum Tender Condition or any condition set forth in paragraph (f) or (g) of
Section 14 ("Certain Conditions of the Offer") or pursuant to the provisions
described above under clause (b)(i) or (c) of "Termination of the Merger
Agreement" and (C) within one year of such termination the Company enters into
a definitive agreement to consummate, or consummates, the transactions
contemplated by a Company Takeover Proposal (assuming for this purpose only
that: (x) the phrase "that if consummated would result in the owners of the
capital stock of the Company immediately prior to such transaction (1) owning,
as a group, less than 50% of the outstanding securities entitled to vote
generally in the election of directors of the resulting, surviving or
acquiring corporation in such transaction or (2) owning, as among themselves,
voting securities of the resulting, surviving or acquiring corporation in such
transaction in substantially different proportions than immediately prior to
such transaction" is added at the end of clause (i) of the definition of
Company Takeover Proposal and (y) the phrases "a material amount" in clause
(ii) and "a material" and "a substantial portion" in clause (iii) of the
definition of Company Takeover Proposal are replaced, in each case, with the
phrase "50% or more"). Any fee due under the provisions described above shall
be paid by wire transfer of same-day funds on the date of termination of the
Merger Agreement (except that in the case of termination pursuant to clause
(iv) above such payment shall be made on the date of execution of such
definitive agreement or, if earlier, consummation of such transactions) and
any such fee shall be subject to a credit for any expense reimbursement
actually paid pursuant to the following clause: the Company shall pay Parent
and the Purchaser up to $1,000,000 as reimbursement for their out of pocket
expenses (excluding any fees paid on a purely discretionary basis) actually
incurred in connection with the Merger Agreement or any of the Transactions
prior to termination if the Merger Agreement is terminated pursuant to the
provisions described above under clause (b)(iii) of "Termination of the Merger
Agreement" as a result of the failure of any condition set forth in paragraph
(e)(i), (f) or (g) of Section 14 ("Certain Conditions to the Offer") or
pursuant to the provisions described above under clause (c) of "Termination of
the Merger Agreement". Such reimbursement shall be paid upon demand following
such termination, except that no payment shall be due under clause (b) of the
preceding sentence if the Company has previously made any payment due under
clause (a) of such sentence.
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(6) Conduct of Business of the Company. Pursuant to the Merger Agreement,
except for matters set forth in the disclosure letter delivered by the Company
to Parent on or before September 17, 1999 (the "Company Disclosure Letter"),
or otherwise expressly permitted by the Merger Agreement, from the date of the
Merger Agreement to the Effective Time the Company has agreed that it will
conduct its business in the ordinary course consistent with past practices and
use commercially reasonable efforts to preserve intact its current business
organization, the services of its current officers and employees and its
relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time.
(7) Prohibited Actions by the Company. Under the Merger Agreement, except
for matters set forth in the Company Disclosure Letter or otherwise expressly
permitted by the Merger Agreement, from the date of the Merger Agreement to
the Effective Time, the Company will not do any of the following without the
prior written consent of Parent: (i) (A) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its
capital stock, (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (C) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities; (ii) issue, deliver, sell or grant (A) any shares
of its capital stock, (B) any voting debt of the Company or other voting
securities, (C) any securities convertible into or exchangeable for, or any
options, warrants or rights to acquire, any such shares, voting debt , voting
securities or convertible or exchangeable securities or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than the issuance of Shares upon the conversion of
the Company Series Preferred Stock or the exercise of Company Employee Stock
Options and Warrants, in each case outstanding on the date of the Merger
Agreement and in accordance with their present terms; (iii) amend the
Company's charter or the Company's by-laws; (iv) subject to the provisions
described under "Acquisition Proposals" above, acquire or agree to acquire (A)
by merging or consolidating with, or by purchasing a substantial equity
interest in or portion of the assets of, or by any other manner, any business
or any corporation, partnership, joint venture, association or other business
organization or division thereof or (B) any assets that are material,
individually or in the aggregate, to the Company (other than acquisitions of
assets in the ordinary course of business); (v) (A) grant to any employee,
officer or director of the Company (1) any increase in compensation, except in
the ordinary course of business consistent with prior practice or to the
extent required under employment agreements in effect as of the date of the
Merger Agreement, or (2) any options, capital stock or other equity-based
compensation except to the extent required under currently existing
contractual arrangements, (B) grant to any employee, officer or director of
the Company any increase in severance or termination pay, except to the extent
required under any agreement in effect as of the date of the Merger Agreement,
(C) enter into any employment, consulting, indemnification, severance or
termination agreement with any such employee, officer or director other than
at will employment agreements, (D) except as required by law, establish,
adopt, enter into or amend in any material respect any collective bargaining
agreement or Company benefit plan or (E) take any discretionary action to
accelerate any rights or benefits, or make any material determinations not in
the ordinary course of business consistent with prior practice, under any
collective bargaining agreement or Company benefit plan; (vi) make any change
in accounting methods, principles or practices materially affecting the
reported assets, liabilities or results of operations of the Company, except
insofar as may be required by a change in U.S. generally accepted accounting
principles ("GAAP"); (vii) sell, lease (as lessor), license or otherwise
dispose of or subject to any lien any material properties or assets, except
sales of inventory and excess or obsolete assets in the ordinary course of
business consistent with past practice; (viii) (A) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Company, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice, or
(B) make any loans, advances (other than employee expense advances in the
ordinary course of business) or capital contributions to, or investments in,
any other person; (ix) make or agree to make any new capital expenditure or
expenditures that, individually, is in excess of $50,000 or, in the aggregate,
are in excess
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of $250,000; (x) (A) make or change any material tax election, (B) settle or
compromise any material tax liability or refund or (C) amend in any material
respect any tax return; (xi) fail to (i) timely file with the relevant taxing
authority all material tax returns and reports required to be filed by it, on
a basis consistent with the elections, accounting methods, conventions and
principles of taxation used for the most recent taxable periods for which tax
returns involving similar tax items have been filed, and in a manner that does
not unreasonably accelerate deductions or defer income, (ii) timely pay all
taxes due and payable, or establish proper reserves therefor in its books and
records in accordance with GAAP, (iii) make adequate provision on its books
and records, to the extent required in accordance with GAAP, for all taxes due
and payable after the Effective Time, and (iv) promptly notify Parent of any
action, suit, proceeding, claim or audit pending against it in respect of any
taxes; (xii) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by,
the most recent financial statements (or the notes thereto) of the Company
included in the SEC documents filed by the Company prior to the date of the
Merger Agreement or thereafter incurred in the ordinary course of business
consistent with past practice, (B) cancel any material indebtedness
(individually or in the aggregate) or waive any claims or rights of
substantial value or (C) waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the
Company is a party; (xiii) enter into any supply agreement for any
pharmaceutical product, component of pharmaceutical products or services
related to pharmaceutical products, other than short-term purchase orders
entered into in the ordinary course of business; or (xiv) authorize any of, or
commit or agree to take any of, the foregoing actions.
(8) Directors. The Merger Agreement provides that upon the acceptance for
payment of, and payment by the Purchaser for, any Shares pursuant to the
Offer, the Purchaser shall designate such number of directors on the Board as
will give the Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board equal to at least that number of
directors, rounded up to the next whole number, which is the product of (a)
the total number of directors on the Board (giving effect to the directors
elected or appointed pursuant to this sentence) multiplied by (b) the
percentage that (i) such number of Shares so accepted for payment and paid for
by the Purchaser plus the number of shares of capital stock of the Company
otherwise owned by the Parent, the Purchaser or any other subsidiary of Parent
bears to (ii) the number of such shares outstanding, and the Company shall, at
such time, cause the Purchaser's designees to be so elected; provided,
however, that in the event that the Purchaser's designees are appointed or
elected to the Board, until the Effective Time the Board shall have at least
two directors who are directors on the date of the Merger Agreement (the
"Independent Directors"); and provided further that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, the remaining Independent Director shall be entitled to designate
a person to fill such vacancies who shall be deemed to be an Independent
Director for purposes of the Merger Agreement or, if no Independent Directors
then remain, the other directors promptly shall designate two persons to fill
such vacancies who shall not be directors, officers, employees, stockholders
or affiliates of the Company, Parent, the Purchaser or any affiliate of
Parent, and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement. Subject to applicable law, the Company has
agreed to take all action requested by Parent necessary to effect any such
election, including mailing to its stockholders an information statement
containing the information required by Section 14(f) of the Exchange Act and
Rule l4f-1 promulgated thereunder, which information statement is attached as
Annex A to the Schedule 14D-9. In connection with the foregoing, the Company
shall, at the option of the Purchaser, use its best efforts to either increase
the size of the Board or obtain the resignation of such number of its current
directors as is necessary to enable the Purchaser's designees to be elected or
appointed to the Board as provided above.
The Merger Agreement further provides that from and after the Control Time
and prior to the Effective Time, subject to the terms of the Merger Agreement,
any amendment or modification of the Merger Agreement, any amendment to the
Company's charter or the Company's by-laws, any termination of the Merger
Agreement by the Company, any extension of time for performance of any of the
obligations of Parent or the Purchaser thereunder, any waiver of any condition
to the Company's obligations thereunder or any of the Company's rights
thereunder or any other action by the Company thereunder which adversely
affects holders of Shares (other than
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Parent or the Purchaser) may be effected only if there are in office one or
more Independent Directors and such action is approved by a majority vote of a
quorum of the Board, such majority to include an Independent Director.
(9) Stock Options. The Merger Agreement provides that as soon as practicable
following the date of the Merger Agreement, the Board (or, if appropriate, any
committee administering the Company Stock Plans) shall adopt such resolutions
or take such other actions as are required to adjust the terms of all
outstanding Company Employee Stock Options theretofore granted under any
Company Stock Plan to provide that each Company Employee Stock Option
outstanding shall be canceled in exchange for a cash payment by the Company at
the Effective Time of an amount equal to (i) the excess, if any, of (x) the
Merger Consideration per Share over (y) the exercise price per Share subject
to such Company Employee Stock Option, multiplied by (ii) the number of Shares
for which such Company Employee Stock Option shall not theretofore have been
exercised (whether vested or not). Subject to the preceding sentence, the
Company Stock Plans shall terminate as of the Effective Time, and the
provisions in any other benefit plan providing for the issuance, transfer or
grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company shall be deleted as of the Effective Time, and
the Company shall ensure that following the Effective Time no holder of a
Company Employee Stock Option or Company SAR or any participant in any Company
Stock Plan or other Company benefit plan shall have any right thereunder to
acquire any capital stock of the Company or the Surviving Corporation. The
Merger Agreement also provides that as soon as practicable following the date
of the Merger Agreement, the Board or, if appropriate, any committee
administering the Company's 1996 Employee Stock Purchase Plan, shall adopt
such resolutions or take such other actions as are required to (i) make all
options granted under such plan exercisable at least 10 days prior to the
Effective Time based on the payroll deductions then credited to the
participants' respective accounts thereunder and (ii) cancel, as of the
Effective Time, all options which have not then been exercised. "Company
Employee Stock Option" means any option to purchase Shares granted under any
Company Stock Plan. "Company SAR" means any stock appreciation right linked to
the price of Shares and granted under any Company Stock Plan. "Company
Restricted Stock" mean shares of Company Stock granted under a Company Stock
Plan which are subject to forfeiture or repurchase by the Company. "Company
Stock Plans" means the 1999 Stock Incentive Plan, the 1996 Director Stock
Option Plan and the 1992 Stock Option Plan.
(10) Indemnification of Directors and Officers. In the Merger Agreement,
Parent has agreed, to the fullest extent permitted by law, to cause the
Surviving Corporation to honor all the Company's obligations to indemnify
(including any obligations to advance funds for expenses) the current or
former directors or officers of the Company for acts or omissions by such
directors and officers occurring prior to the Effective Time to the extent
that such obligations of the Company to indemnify and advance expenses exist
on the date of the Merger Agreement, whether pursuant to the Company's
charter, the Company's by-laws, individual indemnity agreements or otherwise,
and such obligations shall survive the Merger and shall continue in full force
and effect in accordance with the terms of the Company's charter, the
Company's by-laws and such individual indemnity agreements from the Effective
Time until the later of (x) the expiration of the applicable statute of
limitations with respect to any claims against such directors or officers
arising out of such acts or omissions or (y) in the case of any claims made
prior to the expiration of the applicable statute of limitations, the final
disposition of such claims.
In addition, under the Merger Agreement, from and after the Effective Time,
Parent has agreed to indemnify and hold harmless each current and former
director and officer of the Company against any costs or expenses (including
attorneys' fees), judgments, fines, losses, claims, damages, liabilities or
amounts paid in settlement (in the case of settlements, with the approval of
Parent (which approval shall not be unreasonably withheld or delayed))
incurred in connection with their duties as directors or officers of the
Company, as the case may be, to the extent arising out of any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring
at or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, in each case to the extent that the Company's
current directors' and officers' liability insurance policies provide coverage
for such costs,
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expenses, judgments, fines, losses, claims, damages, liabilities or amounts
paid in settlement, and Parent has agreed to advance expenses in the same
manner and to the same extent as provided in such current policies.
(11) Commercially Reasonable Efforts. The Merger Agreement provides that,
subject to the terms of the Merger Agreement and certain exceptions, each of
the parties has agreed to use its commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger and the other Transactions. In connection
with and without limiting the foregoing, the Company and the Board shall (i)
take all commercially reasonable action available to them to ensure that no
state takeover statute or similar statute or regulation is or becomes
applicable to the Merger Agreement or any of the Transactions and (ii) if any
state takeover statute or similar statute or regulation becomes applicable to
the Merger Agreement or any of the Transactions, take all commercially
reasonable action necessary to ensure that the Offer, the Merger and the other
Transactions may be consummated as promptly as practicable on the terms
contemplated by the Merger Agreement and otherwise to minimize the effect of
such statute or regulation on the Offer, the Merger and the other
Transactions. Nothing in the Merger Agreement shall be deemed to require any
party to waive any substantial rights or agree to any substantial limitation
on its operations or to dispose of any significant asset or collection of
assets.
(12) Directors and Officers. The directors of the Purchaser 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. 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 or appointed
and qualified, as the case may be.
(13) Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
(14) Procedure for Termination, Amendment, Extension or Waiver. The Merger
Agreement provides that a termination of the Merger Agreement pursuant to the
provisions described above under "Termination of the Merger Agreement", an
amendment of the Merger Agreement pursuant to the provisions thereof or an
extension or waiver pursuant to the provisions thereof, in order to be
effective, require, in the case of the Purchaser or the Company, action by its
Board of Directors or the duly authorized designee of its Board of Directors
(which, in the case of the Company, shall require the approval contemplated by
the second paragraph under "Directors" above).
Stock Purchase Agreements. In connection with the Merger Agreement, the
Purchaser concurrently entered into the Stock Purchase Agreements with all the
Company Preferred Stock Holders pursuant to which the Purchaser is to acquire
all the Company Series Preferred Stock on the first date on which the
Purchaser pays for any Shares accepted for payment pursuant to the Offer, or
as otherwise agreed between the parties. Pursuant to such Stock Purchase
Agreements, Purchaser will pay (i) $9.50 in cash or such greater amount as
shall be equal to the highest price per Share paid pursuant to the Offer for
each share of Company Series B Preferred Stock and (ii) $9.75 in cash or such
greater amount as shall be equal to the highest price per Share paid pursuant
to the Offer for each share of Company Series A Preferred Stock. Pursuant to
the Stock Purchase Agreements, effective as of such time as the Purchaser
accepts for payment and pays for any Shares pursuant to the Offer, each
Company Preferred Stock Holder irrevocably appointed the Purchaser and Robert
Chabora as such Company Preferred Stock Holder's proxy and attorney-in-fact to
vote its shares of Company Series Preferred Stock on any matter in such
proxy's sole discretion. In addition, each Company Preferred Stock Holder
agreed not to transfer, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the
transfer of, any of its shares of Company Series Preferred Stock to any person
other than to the Purchaser pursuant to the Stock Purchase Agreements or enter
into any voting arrangement, whether by proxy, voting agreement or otherwise,
with respect to any of its shares.
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As of the close of business on September 16, 1999, the Company Series A
Preferred Stock Holders held an aggregate of 1,210,256 shares of Company
Series A Preferred Stock, each of which is convertible into one Share. As of
the same date, the Company Series B Preferred Stock Holders held an aggregate
of 825,309 shares of Company Series B Preferred Stock, each of which is
convertible into one Share. As of the date of the Stock Purchase Agreements,
the Company Series Preferred Stock, the holders of which are entitled to vote
together as a single class with the holders of Shares on approval of the
Merger, represented approximately 16% of the Company's voting capital stock.
Confidentiality Agreement. Pursuant to the Confidentiality Agreement dated
August 23, 1999, between Parent and the Company (the "Confidentiality
Agreement"), the Company and Parent agreed to keep confidential certain
information exchanged between such parties. The Confidentiality Agreement also
contains customary non-solicitation and standstill provisions. The Merger
Agreement provides that the provisions of the Confidentiality Agreement shall
remain binding and in full force and effect and that the parties shall comply
with and shall cause their respective representatives to comply with, all of
their respective obligations under the Confidentiality Agreement.
Appraisal Rights. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
will have certain rights pursuant to the provisions of Section 262 of the DGCL
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their shares. If the statutory procedures were complied with, such
rights could lead to a judicial determination of the fair value required to be
paid in cash to such dissenting holders for their shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the Offer Price or the market value of the
Shares, including asset values and the investment value of the Shares. The
fair value so determined could be more or less than the Offer Price or the Per
Share Merger Consideration.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his right to appraisal, as
provided in the DGCL, the Shares of such holder will be converted into the Per
Share Merger Consideration in accordance with the Merger Agreement.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights.
Going Private Transactions. The Merger would have to comply with any
applicable Federal law operative at the time of its consummation. Rule l3e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Purchaser does not believe that Rule l3e-3 will be applicable to the
Merger unless the Merger is consummated more than one year after the
termination of the Offer. If applicable, Rule l3e-3 would require, among other
things, that certain financial information concerning the Company and certain
information relating to the fairness of the Merger and the consideration
offered to minority shareholders be filed with the SEC and disclosed to
minority shareholders prior to consummation of the Merger.
Plans for the Company. Parent intends to conduct a detailed review of the
Company and its assets, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and to consider,
subject to the terms of the Merger Agreement, what, if any, changes would be
desirable in light of the circumstances then existing, and reserves the right
to take such actions or effect such changes as it deems desirable. Such
changes could include changes in the Company's business, corporate structure,
capitalization, management or dividend policy.
Except as otherwise described in this Offer to Purchase, none of the
Purchaser, Parent or AG have any current plans or proposals that would relate
to, or result in, any extraordinary corporate transaction involving the
Company, such as a merger, reorganization or liquidation involving the
Company, a sale or transfer of a material
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amount of assets of the Company, any change in the Company's capitalization or
dividend policy or any other material change in the Company's business,
corporate structure or personnel.
13. Dividends and Distributions
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two succeeding paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
its rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
If, on or after September 17, 1999, the Company should (a) split, combine or
otherwise change the Shares or its capitalization, (b) acquire or otherwise
cause a reduction in the number of outstanding Shares or other securities or
(c) issue or sell additional Shares (other than the issuance of Shares upon
the conversion of Company Series Preferred Stock or the exercise of Company
Employee Stock Options and Warrants outstanding on September 17, 1999, and in
accordance with their terms as in effect on September 17, 1999), shares of any
other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, then, subject to the provisions of Section 14
("Certain Conditions of the Offer"), the Purchaser, in its sole discretion,
may make such adjustments as it deems appropriate in the Offer Price and other
terms of the Offer, including, without limitation, the number or type of
securities offered to be purchased.
If, on or after September 17, 1999, the Company should declare or pay any
cash dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares or any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to stockholders of record on a date prior
to the transfer of Shares purchased pursuant to the Offer to the Purchaser or
its nominee or transferee on the Company's stock transfer records, then,
subject to the provisions of Section 14, (a) the Offer Price may, in the sole
discretion of the Purchaser, be reduced by the amount of any such cash
dividend or cash distribution and (b) the whole of any such noncash dividend,
distribution or issuance to be received by the tendering stockholders will (i)
be received and held by the tendering stockholders for the account of the
Purchaser and will be required to be promptly remitted and transferred by each
tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer Price or
deduct from the Offer Price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
14. Certain Conditions of the Offer
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser 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 the Purchaser's obligation to pay for or return
tendered Shares promptly after the termination or withdrawal of the Offer), to
pay for any Shares 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 which, assuming the Purchaser then owned all the
outstanding Company Series Preferred Stock, would together represent at least
a majority of the voting power of the Fully Diluted Shares (the "Minimum
Tender Condition") and (ii) any waiting period under the HSR Act applicable to
the purchase of Shares pursuant to the Offer shall have expired or been
terminated. The term "Fully Diluted Shares" means all outstanding securities
entitled generally to vote in the election of directors of the Company on a
fully diluted basis, after giving effect to the exercise or conversion of all
options, rights and securities exercisable or convertible into such voting
securities. Furthermore, notwithstanding any other term of the Offer or the
Merger Agreement (except as described in the third and fourth paragraphs of
Section 1 of this Offer to Purchase), the Purchaser shall not be
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required to commence the Offer, accept for payment or, subject as aforesaid,
to pay for any Shares not theretofore accepted for payment or paid for, and
may terminate or amend the Offer, with the consent of the Company or if, at
any time on or after the date of the Merger Agreement and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions shall have occurred and be continuing:
(a) there shall be instituted or pending any suit, action or proceeding
by any governmental entity, or any suit, action or proceeding by any other
person that has a reasonable likelihood of success, (i) challenging the
acquisition by Parent or the Purchaser of any Shares, seeking to restrain
or prohibit the making or consummation of the Offer or the Merger or any
other material Transaction, or seeking to obtain from the Company, Parent
or the Purchaser any damages in connection with any of the Transactions
that are material in relation to the Company, (ii) seeking to prohibit or
materially limit the ownership or operation by the Company, Parent or any
of Parent's subsidiaries of any material portion of the business or assets
of the Company, or of Parent and its subsidiaries taken as a whole, or to
compel the Company, Parent or any of Parent's subsidiaries to dispose of or
hold separate any material portion of the business or assets of the
Company, or of Parent and its subsidiaries taken as a whole, in any case as
a result of the Offer, the Merger or any other Transaction, (iii) seeking
to impose material limitations on the ability of Parent or the Purchaser to
acquire or hold, or exercise full rights of ownership of, any Shares or any
shares of Company Series Preferred Stock, including the right to vote such
shares purchased by it on all matters properly presented to the
stockholders of the Company or (iv) seeking to prohibit Parent or any of
its subsidiaries from effectively controlling in any material respect the
business or operations of the Company or (v) which otherwise is reasonably
likely to have a Company Material Adverse Effect (as hereinafter defined);
(b) any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction shall be enacted, entered, enforced,
promulgated, amended or issued with respect to, or deemed applicable to, or
any consent or approval withheld with respect to, (i) Parent, the Company
or any of Parent's subsidiaries or (ii) the Offer, the Merger or any other
Transaction, by any governmental entity, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
paragraph (a) above;
(c) except as disclosed in the Company Disclosure Letter, since the date
of the Merger Agreement there shall have occurred any event, change, effect
or development that, individually or in the aggregate, has had or is
reasonably likely to have, a Company Material Adverse Effect;
(d) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the
United States for a period of five business days (excluding any coordinated
trading halt triggered solely by a specified decrease in a market index and
any suspensions or limitations resulting solely from physical damage or
interference with such markets not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks by a governmental entity in the United States or (iii) in
the case of any of the foregoing existing on the date of the Merger
Agreement, a material acceleration or worsening thereof;
(e)(i) beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of
more than 15% of the outstanding Shares has been acquired by any person
other than Parent, the Purchaser or any of their affiliates, or any group
of which any of them is a member (it being understood for this purpose that
the conversion or exercise of Company Series Preferred Stock or Warrants
outstanding on the date of the Merger Agreement shall not be deemed to
constitute an acquisition of Shares), or (ii) the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified, or
publicly (or in a manner designed to become public) proposed to withdraw or
modify, in a manner adverse to Parent or the Purchaser, its approval or
recommendation of the Merger Agreement, the Offer or the Merger, failed to
recommend to the Company's stockholders that they accept the Offer and give
the Company Stockholder Approval or approved or recommended, or publicly
(or in a manner designed to become public) proposed to approve or
recommend, any Company Takeover Proposal;
(f) any representation and warranty of the Company in the Merger
Agreement that is qualified as to materiality shall not be true and correct
in any respect, or any such representation and warranty that is not
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so qualified shall not be true and correct in any material respect, as of
such time, except to the extent such representation and warranty expressly
relates to an earlier date (in which case on and as of such earlier date),
which failure to be true and correct shall not have been cured prior to the
earlier of (i) 10 days following notice to the Company thereof and (ii) one
business day prior to the then scheduled Expiration Date; provided,
however, that the Company shall have no right to cure in the event that
such failure to be true and correct results from an intentional breach;
(g) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement which failure to perform or comply shall not have been
cured prior to the earlier of (i) 10 days following notice to the Company
thereof and (ii) one business day prior to the then scheduled Expiration
Date; provided, however, that the Company shall have no right to cure in
the event that such failure to perform or comply was intentional or in the
case of a failure to perform or comply with the provisions set forth above
under "Acquisition Proposals"; or
(h) the Merger Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable judgment of the Purchaser 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 such acceptance for payment or payment. A
"Company Material Adverse Effect" means a material adverse effect on the
Company, a material adverse effect on the ability of the Company to perform
its obligations under the Merger Agreement or a material adverse effect on the
ability of the Company to consummate the Offer, the Merger or the
Transactions; provided, however, that "Company Material Adverse Effect" shall
not include any adverse change, effect or circumstance primarily arising out
of or resulting primarily from actions contemplated by the parties in
connection with the Merger Agreement. The term "material adverse effect" on a
party means any change, effect or circumstance that is materially adverse to
the business, assets, prospects, financial condition or results of operations
of such party and its subsidiaries, if any, taken as a whole (other than
changes that are the result of economic factors affecting the economy as a
whole, changes that are the result of factors generally affecting the specific
industry or markets in which such party competes and changes, effects and
circumstances that are primarily attributable to the announcement of the
Merger Agreement or the Transactions).
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be asserted by the Purchaser or Parent regardless of the
circumstances giving rise to such condition or may be waived by the Purchaser
and Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent, the Purchaser 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.
15. Certain Legal Matters
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the SEC and other publicly
available information concerning the Company, none of the Purchaser, Parent or
AG is aware of any license or regulatory permit that appears to be material to
the business of the Company, that might be adversely affected by the
Purchaser's acquisition of Shares as contemplated herein or of any approval or
other action by any governmental entity that would be required for the
acquisition or ownership of Shares by the Purchaser as contemplated herein.
Should any such approval or other action be required, the Purchaser, Parent
and AG currently contemplate that such approval or the action will be sought,
except as described below under "State Takeover Laws". While, except as
otherwise expressly described in this Section 15, the Purchaser does not
presently intend to delay the acceptance for payment of or payment for Shares
tendered pursuant to the Offer pending the outcome of any such matter, there
can be no assurance that any such approval or other action, if needed, would
be obtained or would be obtained without substantial conditions or that
failure to obtain any such approval or other action might not result in
consequences adverse to the
29
<PAGE>
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other
actions were not taken or in order to obtain any such approval or other
action. If certain types of adverse action are taken with respect to the
matters discussed below, the Purchaser could, subject to the terms and
conditions of the Merger Agreement, decline to accept for payment or pay for
any Shares tendered. See Section 14 for certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, stockholders, executive offices or places of business in such
states. In Edgar v. MITE Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that make the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without prior approval of the remaining stockholders, provided
that such laws were applicable only under certain circumstances. Subsequently,
a number of Federal courts ruled that various state takeover statutes were
unconstitutional insofar as they apply to corporations incorporated outside
the state of enactment.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined
generally as any beneficial owner of 15% or more of the outstanding voting
stock of the corporation) for a period of three years from the time such
interested stockholders became the holders of 15% or more of such Shares
unless, among other things, the corporation's board of directors had given its
prior approval to either the business combination or the transaction which
resulted in the stockholder becoming an "interested stockholder". The Board
has approved the Merger Agreement and the Stock Purchase Agreements and the
Purchaser's acquisition of Shares pursuant to the Offer and, therefore,
Section 203 of the DGCL is inapplicable to the Offer, the acquisition of
shares of Company Series Preferred Stock pursuant to the Stock Purchase
Agreements or the Merger.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser
reserves the right to challenge the validity or applicability of any state law
allegedly applicable to the Offer and nothing in this Offer to Purchase nor
any action taken in connection with the Offer or the Merger is intended as a
waiver of that right. In the event that any state takeover statute is found
applicable to the Offer or the Merger, the Purchaser might be unable to accept
for payment or pay for Shares tendered pursuant to the Offer or be delayed in
continuing or consummating the Offer or the Merger. In such case, the
Purchaser might not be obligated to accept for payment or pay for any Shares
tendered. See Section 14.
Antitrust. Parent will file a Notification and Report Form with respect to
the Offer under the HSR Act. The acquisition of Shares under the Offer may be
consummated following the expiration of a 15-calendar day waiting period
following the filing unless Parent receives a request for additional
information or documentary material from the Antitrust Division or the FTC or
unless early termination of the waiting period is granted. If, within the
initial 15-day waiting period, either the Antitrust Division or the FTC
requests additional information or material from Parent concerning the Offer,
the waiting period will be extended and would expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance
by Parent with such request. Only one extension of the waiting period pursuant
to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with
the consent of Parent. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with
a proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. Expiration or termination of the applicable waiting
period under the HSR Act is a condition to the Purchaser's obligation to
accept for payment and pay for Shares tendered pursuant to the Offer.
30
<PAGE>
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed
acquisition of the Company. At any time before or after the Purchaser's
acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Purchaser or the divestiture of
substantial assets of the Company or Parent or its subsidiaries. Private
parties may also bring legal action under the antitrust laws under certain
circumstances. Based upon a preliminary examination of information provided by
the Company relating to the businesses in which Parent and the Company are
engaged, Parent and the Purchaser believe that the acquisition of Shares by
the Purchaser will not violate the antitrust laws. Nevertheless, there can be
no assurance that a challenge to the Offer on antitrust grounds will not be
made or, if such a challenge is made, of the result thereof.
16. Fees and Expenses
Warburg Dillon Read is acting as Dealer Manager in connection with the
Purchaser's acquisition of the Company and is acting as financial advisor to
Parent in connection with the Offer. Warburg Dillon Read will receive
customary compensation for its services as financial advisor and Dealer
Manager in connection with the Offer. Parent has also agreed to reimburse
Warburg Dillon Read for its reasonable out-of-pocket expenses related to such
services, including the reasonable fees and expenses of its counsel, and to
indemnify Warburg Dillon Read and certain related persons against certain
liabilities and expenses, including certain liabilities and expenses under the
Federal securities laws.
The Purchaser has retained ChaseMellon Consulting Services, L.L.C. to act as
the Information Agent and ChaseMellon Shareholder Services, L.L.C., to serve
as the Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the Federal securities laws.
None of the Purchaser, Parent or AG will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and the
Information Agent) in connection with the solicitation of tenders of Shares
pursuant to the Offer. Brokers, dealers, banks and trust companies will be
reimbursed by the Purchaser upon request for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. Miscellaneous
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. To the extent the Purchaser, Parent or AG becomes aware of
any state law that would limit the class of offerees in the Offer, the
Purchaser reserves the right to amend the Offer and, depending on the timing
of such amendment, if any, will extend the Offer to provide adequate
dissemination of such information to holders of Shares prior to the expiration
of the Offer. In any jurisdiction the securities, blue sky or other laws of
which require the Offer to be made by a licensed broker or dealer, the Offer
is being made on behalf of the Purchaser by the Dealer Manager or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser, Parent or AG not contained in this
Offer to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
31
<PAGE>
The Purchaser, Parent and AG have filed with the SEC the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. In addition, the Company has filed the Schedule 14D-9
pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting
forth its recommendations with respect to the Offer and the reasons for such
recommendation and furnishing such additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Section 8 (except that such material will not be available at the regional
offices of the SEC).
BXA Acquisition Company
September 24, 1999
32
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
AG, PARENT AND THE PURCHASER
Directors and Executive Officers of Schering Aktiengesellschaft
The following table sets forth the name, business address, present principal
occupation or employment and five-year employment history of each of the
directors and executive officers of AG. Unless otherwise indicated, the
business address of each individual listed below is Schering AG, Mullerstrabe
178, D-13342 Berlin, Germany, and the position listed is with AG. All the
directors and officers listed below are citizens of the Federal Republic of
Germany, except for Giuseppe Vita, who is a citizen of Italy, and John A.
Dormandy, who is a citizen of the United Kingdom.
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation or Employment
Address and Five-Year Employment History
------------------------ ------------------------------------------------
<S> <C>
Dr. Giuseppe Vita Chairman, Executive Board.
Dr. Klaus Pohle Vice Chairman, Executive Board; CFO.
Dr. Hubertus Erlen Member, Executive Board.
Dr. Ulrich Kostlin Member, Executive Board.
Prof. Gunter Stock Member, Executive Board.
Klaus Subjetzki Chairman, Supervisory Board; Chairman,
Berliner Handels- und Supervisory Boards Berliner Handels- und
Frankfurter Bank AG Frankfurter Bank AG.
D-60323 Frankfurt am
Main
Jurgen Wingefeld Vice Chairman, Supervisory Board; Regional
Lausitser und Head of Mining, Chemical and Energy Industrial
Mitteldeutsche Trade Union, Northern Region.
Bergbau mbH D-10100
Berlin
Dr. Karl-Hermann Baumann Member, Supervisory Board; Member
Siemens AG Executive Committee and Chairman,
D-80333 Munich Supervisory Board, Siemens AG.
Norbert Deutschmann Member, Supervisory Board; Chairman,
Wedding Works Council; Chairman,
Group Works Council (1996-1998).
Prof. John A. Dormandy Member, Supervisory Board; Professor of
St. George's Hospital Vascular Sciences, University of London;
London SW 17 005 Vascular Surgeon, St. George's Hospital, London.
Johannes Heitbaum Member, Supervisory Board.
Schering AG Bergkamen
D-59192 Bergkamen
Dr. Martin Kohlhaussen Member, Supervisory Board; Spokesman,
Commerzbank AG Board of Executive Directors, Commerzbank AG.
D-60261 Frankfurt am
Main
Horst Kramp Member, Supervisory Board; President, Berlin
Berlin Chamber of Chamber of Commerce.
Commerce
D-10623 Berlin
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation or Employment
Address and Five-Year Employment History
----------------------- ----------------------------------------------------------------
<S> <C>
Jurgen Krumnow Member, Supervisory Board; Member, Board of
Deutsche Bank AG Executive Directors, Deutsche Bank AG.
D-60325 Frankfurt am
Main
Dr. Hans Peter Niendorf Member, Supervisory Board; Head of Clinical
Development Diagnostics, SBU Diagnostics, Schering AG.
Hans-Jurgen Scheel Member, Supervisory Board; Vice Chairman, Wedding Works Council.
Gunter Schmitt Member, Supervisory Board;
Member, Wedding Works Council.
Dr. Ulrich Sommer Member, Supervisiory Board; Area Manager
Marketing for Fertility Control and Hormone
Replacement Therapy Products.
Heinz Georg Webers Member, Supervisory Board; Member, Works Council.
Schering AG
D-53132 Bergkamen
Prof. Dr. Meinhart H. Member, Supervisory Board; University Professor,
Zenk University of Chair of Pharmaceutical Biology Dept.,
Munich University of Munich.
D-80333 Munich
</TABLE>
I-2
<PAGE>
Directors and Executive Officers of Schering Berlin Inc.
The following table sets forth the name, business address, present principal
occupation or employment and five-year employment history of each of the
directors and executive officers of Parent. Unless otherwise indicated, the
business address of each individual listed below is Schering Berlin Inc., 340
Changebridge Road, P.O. Box 1000, Montville, NJ 07045-1000, and the position
listed is with Parent. All the directors and officers listed below are
citizens of the United States of America, except for Lutz Lingnau, Wolfgang
Kunze, Dr. Hubertus Erlen, Dr. Ulrich Kostlin, Dr. Klaus Pohle and Prof.
Gunter Stock, each of whom is a citizen of the Federal Republic of Germany.
Directors are indicated by an asterisk.
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation or Employment
Address and Five-Year Employment History
----------------------- ---------------------------------------------------
<S> <C>
Lutz Lingnau* President & CEO.
Robert A. Chabora Secretary; VP-Law and General Counsel;
VP-Law and President, DD&T Division,
Berlex Laboratories, Inc.
Wolfgang Kunze* VP-Finance & CFO.
Robert C. Milos Asst. Treasurer; VP Business Development &
Berlex Laboratories Human Resources (1989-1998) and VP &
Inc. General Manager, Diagnostic Imaging (since 1998),
300 Fairfield Road Berlex Laboratories, Inc.
Wayne, NJ 07047
John Nicholson Treasurer; Treasurer, Berlex Laboratories, Inc.
John F. Rotondo Asst. Secretary and VP; VP Sales (since July 1999),
Berlex Laboratories VP Human Resources (May 1998-June 1999) and
Inc. Area Sales Director (before May 1998),
300 Fairfield Road Berlex Laboratories, Inc.
Wayne, NJ 07047
Dr. Hubertus Erlen* Chairman, Board of Directors; Member,
Schering AG Executive Board, Schering AG.
D-13342 Berlin
Dr. Ulrich Kostlin* Member, Executive Board, Schering AG.
Schering AG
D-13342 Berlin
George G. Montgomery, Managing Director (until 1996) and Advisor Director
Jr.* Hambrecht & Quist (since 1996), Hambrecht & Quist LLC.
LLC
1 Bush Street
San Francisco, CA
94104
Dr. Klaus Pohle* Vice Chairman, Executive
Schering AG Board and CFO, Schering AG.
D-13342 Berlin
Prof. Gunter Stock* Member, Executive Board, Schering AG.
Schering AG
D-13342 Berlin
</TABLE>
I-3
<PAGE>
Directors and Executive Officers of BXA Acquisition Company
The following table sets forth the name, business address, present principal
occupation or employment and five-year employment history of each of the
directors and executive officers of Purchaser. Unless otherwise indicated, the
business address of each individual listed below is Schering Berlin Inc., 340
Changebridge Road, P.O. Box 1000, Montville, NJ 07045-1000, and the position
listed is with the Purchaser. All the directors and officers listed below are
citizens of the United States of America. Directors are indicated by an
asterisk.
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation or Employment and
Address Five-Year Employment History
--------------------- -------------------------------------------------
<S> <C>
Robert A. Chabora* President and Secretary; Secretary,
VP--Law and General Counsel,
Schering Berling Inc.; VP--Law and
President, DD&T Division, Berlex
Laboratories, Inc.
John Nicholson* Treasurer; Treasurer, Schering Berling Inc.
Treasurer, Berlex Laboratories, Inc.
Frank J. Curtis
Berlex Laboratories, Assistant Secretary; VP and General Counsel
Inc. (since Dec. 1998) and Director, Legal Affairs
300 Fairfield Road (before Dec. 1998), Berlex Laboratories Division,
Wayne, NJ 07047 Berlex Laboratories, Inc.
</TABLE>
I-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal, properly
completed and duly signed, will be accepted. The Letter of Transmittal,
certificates for Shares and any other required documents should be sent or
delivered by each stockholder of the Company or such stockholder's broker,
dealer, bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
By Facsimile Confirm by Telephone:
Transmission:
(For Eligible (201) 296-4860
Institutions Only)
(201) 296-4293
By Mail: By Overnight Courier: By Hand:
Reorganization Department Reorganization Reorganization Department
PO Box 3301 Department 120 Broadway, 13th Floor
South Hackensack, NJ 07606 85 Challenger Road New York, NY 10271
Mail Stop--Reorg
Ridgefield Park, NJ
07660
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective addresses and telephone numbers listed below. You may also contact
your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
ChaseMellon Consulting Services, L.L.C.
450 West 33rd Street
14th Floor
New York, NY 10001
Banks and Brokers Call Collect: (212) 273-8070
All Others Call Toll-Free: (800) 932-6798
The Dealer Manager for the Offer is:
Warburg Dillon Read LLC
299 Park Avenue
New York, New York 10171
Call Collect: (212) 821-2881
<PAGE>
Exhibit (a)(5)
LETTER OF TRANSMITTAL
To Tender
Shares of Common Stock
of
Diatide, Inc.
Pursuant to the Offer to Purchase
Dated September 24, 1999
by
BXA Acquisition Company
A Wholly Owned Subsidiary of
Schering Berlin Inc.
A Wholly Owned Subsidiary of
Schering Aktiengesellschaft
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 22, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is
ChaseMellon Shareholder Services, L.L.C.
By Mail: By Hand:
Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13th Floor
South Hackensack, NJ 07606 New York, NY 10271
By Overnight Courier: By Facsimile Transmission:
Reorganization Department (for Eligible Institutions Only)
85 Challenger Road (201) 296-4293
Mail Stop-Reorg
Ridgefield Park, NJ 07660 Confirm by Telephone:
(201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
Name(s) and
Address(es) of
Registered Holder(s)
(Please fill in,
if blank, exactly as
name(s) appear(s) on Shares Tendered
Share Certificate(s)) (Attach additional signed list if necessary)
- --------------------------------------------------------------------------------
Total Number of
Shares
Share Represented by Number
Certificate Share of Shares
Number(s)* Certificate(s)* Tendered**
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Total Shares
- --------------------------------------------------------------------------------
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, it will be assumed that all Shares described
above are being tendered. See Instruction 4.
IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN
LOST OR DESTROYED SEE INSTRUCTION 11.
<PAGE>
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase (as defined below)) is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at the Book-Entry Transfer Facility (as
defined in and pursuant to the procedures set forth in Section 2 of the Offer
to Purchase). Stockholders who deliver Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders" and other stockholders are
referred to herein as "Certificate Stockholders". Stockholders whose
certificates for Shares are not immediately available or who cannot deliver
either the certificates for, or a Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to, their Shares and all other documents
required hereby to the Depositary prior to the Expiration Date (as defined in
the Offer to Purchase) must tender their Shares in accordance with the
guaranteed delivery procedures set forth in Section 2 of the Offer to
Purchase. See Instruction 2. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Depositary.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY. ENCLOSE A PHOTOCOPY
OF SUCH NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution that Guaranteed Delivery _______________________________
If delivered by book-entry transfer check box: [_]
Account number _____________________________________________________________
Transaction Code Number ____________________________________________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to BXA Acquisition Company, a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Schering Berlin
Inc., a Delaware corporation ("Parent"), which is a wholly owned subsidiary of
Schering Aktiengesellschaft, a company organized under the laws of the Federal
Republic of Germany ("AG"), the above-described shares of Common Stock, par
value $.001 per share (the "Shares"), of Diatide, Inc., a Delaware corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated September 24, 1999 (the "Offer to
Purchase"), and this Letter of Transmittal (which, together with any
amendments or supplements thereto or hereto, collectively constitute the
"Offer"), receipt of each of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with
the terms of the Offer, the undersigned hereby sells, assigns and transfers
to, or upon the order of, the Purchaser all right, title and interest in and
to all the Shares that are being tendered hereby (and any and all other Shares
or other securities or rights issued or issuable in respect thereof on or
after September 17, 1999) and irrevocably constitutes and appoints ChaseMellon
Shareholder Services, L.L.C. (the "Depositary"), the true and lawful agent and
attorney-in-fact of the undersigned, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to the full extent of the undersigned's rights with respect to such
Shares (and any such other Shares or securities or rights) (a) to deliver
certificates for such Shares (and any such other Shares or securities or
rights) or transfer ownership of such Shares (and any such other Shares or
securities or rights) on the account books maintained by a Book-Entry Transfer
Facility together, in any such case, with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Purchaser, (b) to
present such Shares (and any such other Shares or securities or rights) for
transfer on the Company's books and (c) to receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and any such other
Shares or securities or rights), all in accordance with the terms of the
Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all other Shares or other securities or rights issued or issuable
in respect thereof on or after September 17, 1999) and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances
and the same will not be subject to any adverse claim. The undersigned will,
upon request, execute any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the tendered Shares (and any such other Shares or other securities
or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Robert A. Chabora, Wolfgang
Kunze and Frank J. Curtis, and each of them, and any other designees of the
Purchaser, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to vote at any annual, special or adjourned
meeting of the Company's stockholders or otherwise in such manner as each such
attorney-in-fact and proxy or his or her substitute shall in his or her sole
discretion deem proper with respect to, to execute any written consent
concerning any matter as each such attorney-in-fact and proxy or his or her
substitute shall in his or her sole discretion deem proper with respect to,
and to otherwise act as each such attorney-in-fact and proxy or his or her
substitute shall in his or her sole discretion deem proper with respect to,
the Shares tendered hereby that have been accepted for payment and paid for by
the Purchaser prior to the time any such action is taken and with respect to
which the undersigned is entitled to vote (and any and all other Shares or
other securities or rights issued or issuable in respect of such Shares on or
after September 17, 1999). This appointment is effective when, and only to the
extent that, the Purchaser accepts for payment and pays for such Shares as
provided in the Offer to Purchase. This power of attorney and proxy are
irrevocable and are granted in consideration of the acceptance for payment of
and payment for such Shares in accordance with the terms of the Offer. Upon
such acceptance and payment, all prior powers of attorney, proxies and
consents given by
3
<PAGE>
the undersigned with respect to such Shares (and any such other Shares or
securities or rights) will, without further action, be revoked and no
subsequent powers of attorney, proxies, consents or revocations may be given
(and, if given, will not be deemed effective) by the undersigned.
The Purchaser has made arrangements with the Depositary so that holders of
Warrants and Company Employee Stock Options (each as defined in the Offer to
Purchase) may tender Shares pursuant to the Offer by delivering to the
Depositary certificates and/or documents, other than payment of the exercise
price, as may be required pursuant to the terms of such Warrants and Company
Employee Stock Options to effect the exercise thereof for Shares. The
Depositary shall deduct from the proceeds otherwise payable pursuant to the
Offer to each such tendering holder an amount equal to the exercise price of
such Warrants or Company Employee Stock Options. In any case, the exercise of
such Warrants or such Company Employee Stock Options shall not be deemed to
occur unless the Purchaser accepts for payment and pays for any Shares
pursuant to the Offer, in which case such exercise shall be deemed to have
occurred as of immediately prior to the Expiration Date. Any holder that
wishes to avail itself of this service should contact Michael Legregin of the
Depositary at (201) 329-8929.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered".
Similarly, unless otherwise indicated under "Special Delivery Instructions",
please mail the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered". In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please
issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and any accompanying documents,
as appropriate) in the name of, and deliver such check and/or return such
certificates (and any accompanying documents, as appropriate) to, the person
or persons so indicated. Please credit any Shares tendered herewith by book-
entry transfer that are not accepted for payment by crediting the account at
the Book-Entry Transfer Facility designated above. The undersigned recognizes
that the Purchaser has no obligation pursuant to "Special Payment
Instructions" to transfer any Shares from the name of the registered holder
thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
[_] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number, Class and Series of Shares represented by the lost or destroyed
certificates:
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7) (See Instructions 5, 6 and 7)
To be completed ONLY if To be completed ONLY if
certificates for Shares not certificates for Shares not
tendered or not accepted for tendered or not accepted for
payment and/or the check for the payment and/or the check for the
purchase price of Shares accepted purchase price of Shares accepted
for payment are to be issued in for payment is to be sent to
the name of someone other than someone other than the
the undersigned. undersigned or to the undersigned
at an address other than that
above.
Issue [_] Check [_] Certificate(s) Mail [_] Check [_] Certificate(s)
to: to:
Name _____________________________ Name______________________________
(Please Print) (Please Print)
Address __________________________ Address __________________________
__________________________________ __________________________________
(Include Zip Code) (Include Zip Code)
__________________________________
__________________________________ (Employer Identification or
(Employer Identification or Social Security Number)
Social Security Number)
4
<PAGE>
SIGN HERE
(Also Complete Substitute Form W-9 below)
(left arrow) ____________________________________________________ (right arrow)
(left arrow) ____________________________________________________ (right arrow)
(Signature(s) of Stockholder(s))
Dated: _________________ , 1999
(Must be signed by registered holder(s) as name(s) appear(s) on
the certificate(s) for the Shares or on a security position
listing or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith. If signature
is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following
information and see Instruction 5.)
Name(s)_____________________________________________
____________________________________________________
(Please Print)
Capacity (full title)_______________________________
Address_____________________________________________
____________________________________________________
(Include Zip Code)
Daytime Area Code and Telephone Number _____________
Employer Identification or
Social Security Number _____________________________
(See Substitute Form W-9)
Guarantee of Signature(s)
(If Required--See Instructions 1 and 5)
Authorized Signature _______________________________ (right arrow)
Name _______________________________________________
(Please Print)
Title ______________________________________________
Name of Firm _______________________________________
Address ____________________________________________
(Include Zip Code)
Daytime Area Code and Telephone Number _____________
Dated: _________________, 1999
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Instruction, includes
any participant in the Book-Entry Transfer Facility's system whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are
tendered for the account of a firm that is a participant in the Security
Transfer Agents Medallion Program or the New York Stock Exchange Guarantee
Program or the Stock Exchange Medallion Program or by any other "eligible
guarantor institution", as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each, an "Eligible Institution").
In all other cases, all signatures on this Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 5.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message (as defined below) is utilized, if delivery of Shares is to be
made pursuant to the procedures for book-entry transfer set forth in Section 2
of the Offer to Purchase. For a stockholder validly to tender Shares pursuant
to the Offer, either (a) a Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date (as defined in the
Offer to Purchase) and either certificates for tendered Shares must be
received by the Depositary at one of such addresses or Shares must be
delivered pursuant to the procedures for book-entry transfer set forth herein
(and a Book-Entry Confirmation (as defined in the Offer to Purchase) must be
received by the Depositary), in each case, prior to the Expiration Date, or
(b) the tendering stockholder must comply with the guaranteed delivery
procedures set forth below and in Section 2 of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedures set forth in Section 2 of the Offer to Purchase. Pursuant
to such procedures, (a) such tender must be made by or through an Eligible
Institution, (b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser must be received
by the Depositary prior to the Expiration Date and (c) the certificates for
all tendered Shares in proper form for transfer (or a Book-Entry Confirmation
with respect to all such Shares), together with a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other required documents, must be received by the Depositary
within three trading days after the date of execution of such Notice of
Guaranteed Delivery as provided in Section 2 of the Offer to Purchase. A
"trading day" is any day on which the Nasdaq National Market operated by the
Nasdaq Stock Market, Inc., a subsidiary of the National Association of
Securities Dealers, Inc. is open for business.
"Agent's Message" means a message transmitted by the Book-Entry Transfer
Facility to, and received by, the Depositary and forming a part of a Book-
Entry Confirmation, that states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
The method of delivery of Shares, this Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the tendering stockholder. Shares
will be deemed delivered only when actually received by the Depositary
(including, in the case of a book- entry transfer, by Book-Entry
Confirmation). If delivery is by mail, registered mail, with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
6
<PAGE>
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (Applicable to Certificate Stockholders Only). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered". In any such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered holder, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the acceptance
of payment of, and payment for the Shares tendered herewith. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or accepted for payment are to be issued
to a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of certificates listed, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any person(s) other than the registered owner(s),
or if tendered certificates are registered in the name of any person(s) other
than the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered owner(s) or such person(s))
payable on account of the transfer to such person(s) will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name of, and/or certificates for Shares not accepted for payment are to be
returned to, a person other than the signer of this Letter of Transmittal or
if a check is to be sent and/or such certificates are to be returned to a
person other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed.
8. Waiver of Conditions. Subject to the terms of the Merger Agreement, the
Purchaser reserves the absolute right in its sole discretion to waive any of
the specified conditions of the Offer, in whole or in part, in the case of any
Shares tendered.
9. 31% Backup Withholding. In order to avoid backup withholding of Federal
income tax on payments of cash pursuant to the Offer, a stockholder
surrendering Shares in the Offer must, unless an exemption applies, provide
the
7
<PAGE>
Depositary with such stockholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 below in this Letter of Transmittal and certify
under penalties of perjury that such TIN is correct and that such stockholder
is not subject to backup withholding. If a stockholder does not provide such
stockholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on
such stockholder and payment of cash to such stockholder pursuant to the Offer
may be subject to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the Federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the stockholder upon filing an
income tax return.
The stockholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN
is provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
10. Requests for Assistance or Additional Copies. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent or the Dealer Manager at their respective
addresses set forth below.
11. Lost, Destroyed or Stolen Certificates. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary by checking the box immediately preceding the special
payment/special delivery instructions and indicating the number of Shares so
lost, destroyed or stolen, or by calling the Company's Transfer Agent at (781)
575-3120. The stockholder will then be instructed by the Depositary as to the
steps that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: This Letter of Transmittal (or a manually signed facsimile
thereof) together with any signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other required documents, must be
received by the Depositary prior to the Expiration Date and either
certificates for tendered Shares must be received by the Depositary or Shares
must be delivered pursuant to the procedures for book-entry transfer, in each
case prior to the Expiration Date, or the tendering stockholder must comply
with the procedures for guaranteed delivery.
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: ChaseMellon Shareholder Services, L.L.C.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Part 1--PLEASE PROVIDE YOUR TIN IN Social security number or
THE BOX AT RIGHT AND CERTIFY BY Employer identification number
SIGNING AND DATING BELOW.
----------------------------------
--------------------------------------------------------------------------
SUBSTITUTE
Form W-9 Part 2--Certification under penalties of perjury, I certify that (1)
Department of the the number shown on this form is my correct Taxpayer Identification
Treasury Number (or I am waiting for a number to be issued to me) and (2) I am
Internal Revenue Service not subject to backup withholding because: (a) I am exempt from backup
withholding or (b) I have not been I have not been notified by the
Payer's Request for Taxpayer Internal Revenue Service (the "IRS") that I am subject to backup
Identification Number (TIN) withholding as a result of a failure to report all interest or dividends,
or (c) the IRS has notified me that I am no longer subject to backup
withholding.
---------------------------------------------------------------------------
Certification Instructions--You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends on your tax
returns. However, if after being notified by the IRS that you are subject
to backup withholding, you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross
out such item (2). If you are exempt from backup withholding, check the box
in Part 4.
- ------------------------------------------------------------------------------------------------------------------------------------
Part 3
Awaiting TIN [_]
- --------------------------------------------------------
Part 4
Exempt [_]
- ------------------------------------------------------------------------------------------------------------------------------------
Signature ___________________________________________________________________ Dated _____________________________________, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
INFORMATION.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number to the
Depositary, 31% percent of all reportable payments made to me will be
withheld, but will be refunded to me if I provide a certified Taxpayer
Identification Number within 60 days.
Signature _______________________________________ Dated ______ ,_1999_______
- -------------------------------------------------------------------------------
9
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Stop-Reorg New York, NY 10271
Ridgefield Park, NJ 07660
</TABLE>
By Facsimile Transmission:
(for Eligible Institutions Only)
(201) 296-4293
Confirm by Telephone:
(201) 296-4860
---------------
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your
broker, dealer, bank, trust company or other nominee for assistance concerning
the Offer.
The Information Agent for the Offer is:
ChaseMellon Consulting Services, L.L.C.
450 West 33rd Street
14th Floor
New York, NY 10001
Banks and Brokers Call Collect (212) 273-8070
All Others Call Toll Free (800) 932-6798
The Dealer Manager for the Offer is:
Warburg Dillon Read LLC
299 Park Avenue
New York, New York 10171
Call Collect (212) 821-2881
10
<PAGE>
EXHIBIT (a)(6)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
September 24, 1999, and the related Letter of Transmittal and is not being made
to (nor will tenders be accepted from or on behalf of) holders of Shares in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. In any jurisdiction the
securities, blue sky or other laws of which require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed made on behalf of the
Purchaser by the Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Diatide, Inc.
at
$9.50 Per Share
by
BXA Acquisition Company
A Wholly Owned Subsidiary Of
Schering Berlin Inc.
A Wholly Owned Subsidiary Of
Schering Aktiengesellschaft
BXA Acquisition Company, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Schering Berlin Inc., a Delaware corporation
("Parent"), which is a wholly owned subsidiary of Schering Aktiengesellschaft, a
company organized under the laws of the Federal Republic of Germany ("AG"), is
offering to purchase all outstanding shares of Common Stock, par value $.001 per
share (the "Shares"), of Diatide, Inc., a Delaware corporation (the "Company"),
at $9.50 per Share (the "Offer Price"), net to seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated September 24, 1999 (the "Offer to Purchase") and in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer").
-----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, OCTOBER 22, 1999, UNLESS THE OFFER IS EXTENDED.
-----------------------------------------------------------------------
The Offer is conditioned upon, among other things, (a) there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, assuming the Purchaser then owned all the outstanding Series A and
Series B Preferred Stock of the Company, would together represent at least a
majority of the voting power of the Company's voting securities on a fully
diluted basis and (b) any waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the purchase of Shares
pursuant to the Offer having expired or been terminated. The Purchaser has
entered into certain stock purchase agreements, dated September 17, 1999, with
the holders of all the outstanding Series A and Series B Preferred Stock of the
Company pursuant to which the Purchaser is to acquire such Preferred Stock on
the first date on which the Purchaser pays for any Shares accepted for payment
pursuant to the Offer, or as otherwise agreed between the parties.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of September 17, 1999 (the "Merger Agreement"), among Parent, the Purchaser
and the Company pursuant to which, as soon as practicable following the
consummation of the Offer and the satisfaction or waiver of certain conditions,
the Purchaser will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger as a wholly owned subsidiary of Parent. At the
effective time of the Merger, each outstanding Share (other than Shares held by
stockholders who perfect their appraisal rights under Delaware law, Shares owned
by the Company as treasury stock, and Shares owned by Parent or any direct or
any indirect subsidiary of Parent) will be converted into the right to receive
$9.50 in cash, or any higher price per Share paid pursuant to the Offer, without
interest thereon, as set forth in the Merger Agreement and described in the
Offer to Purchase.
The Board of Directors of the Company has unanimously approved the Offer
and the Merger and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the Company's stockholders and
unanimously recommends that the holders of the Shares accept the Offer and
tender their Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Upon
the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (a) certificates for such Shares or timely
confirmation of book-entry transfer of such Shares into the Depositary's account
at the Book-Entry Transfer Facility (as defined in the Offer to Purchase), (b) a
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase),
and (c) any other documents required by the Letter of Transmittal. Under no
circumstances will interest be paid on the purchase price of any Shares to be
paid by the Purchaser, regardless of any extension of the Offer or any delay in
making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, October 22, 1999, unless and until the Purchaser, in its sole discretion
(but subject to the terms of the Merger Agreement), shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, will expire. Subject to the terms of the Merger
Agreement and applicable rules and regulations of the Securities and Exchange
Commission, the Purchaser reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
or facts set forth in Section 14 of the Offer to Purchase shall have occurred,
to extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by giving oral or
written notice of such extension to the Depositary. Under no circumstances will
interest be paid on the purchase price for tendered Shares, whether or not the
Purchaser exercises its right to extend the Offer. There can be no assurance
that the Purchaser will exercise its right to extend the Offer. Any such
extension will be followed by a public announcement thereof no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment and paid for by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after Monday,
November 22, 1999. For a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution (as defined in the Offer to Purchase), the signatures on the notice
of withdrawal must be guaranteed by an Eligible Institution. If Shares have been
delivered pursuant to the procedure for book-entry transfer as set forth in
Section 2 of the Offer to Purchase, any notice of withdrawal must also specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with the Book-Entry
Transfer Facility's procedures. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 2 of
the Offer to Purchase at any time prior to the Expiration Date. All questions as
to the form and validity (including time of receipt) of notices of withdrawal
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the Company's stockholder lists, or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
The Offer to Purchase and the Letter of Transmittal contain important
information that should be read before any decision is made with respect to
the Offer.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and
all other tender offer materials may be directed to the Information Agent or the
Dealer Manager as set forth below, and copies will be furnished promptly at the
Purchaser's expense. No fees or commissions will be payable to brokers, dealers
or other persons (other than the Dealer Manager and the Information Agent) for
soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO] ChaseMellon
Consulting Services L.L.C.
450 West 33rd Street
14th Floor
New York, NY 10001
Banks and Brokers Call Collect: (212) 273-8070
All Others Call Toll-Free: (800) 932-6798
The Dealer Manager for the Offer is:
Warburg Dillon Read LLC
299 Park Avenue
New York, New York 10171
Call Collect: (212) 821-2881
September 24, 1999
<PAGE>
EXHIBIT (c)(1)
===============================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of September 17, 1999,
Among
SCHERING BERLIN INC.,
BXA ACQUISITION COMPANY
And
DIATIDE, INC.
===============================================================================
<PAGE>
TABLE OF CONTENTS
2
Page
----
ARTICLE I
The Offer and the Merger
------------------------
SECTION 1.01. The Offer............................. 2
SECTION 1.02. Company Actions....................... 4
SECTION 1.03. The Merger............................ 5
SECTION 1.04. Closing............................... 5
SECTION 1.05. Effective Time........................ 5
SECTION 1.06. Effects............................... 7
SECTION 1.07. Certificate of Incorporation and
By-laws.............................. 7
SECTION 1.08. Directors............................. 7
SECTION 1.09. Officers.............................. 7
ARTICLE II
Effect on the Capital Stock of the Constituent Corporations; Exchange
---------------------------------------------------------------------
of Certificates
---------------
SECTION 2.01. Effect on Capital Stock............... 7
SECTION 2.02. Exchange of Certificates.............. 9
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
SECTION 3.01. Organization, Standing and Power....... 12
SECTION 3.02. Company Subsidiaries; Equity
Interests............................ 12
SECTION 3.03. Capital Structure...................... 12
SECTION 3.04. Authority; Execution and Delivery;
Enforceability....................... 13
SECTION 3.05. No Conflicts; Consents................. 15
SECTION 3.06. SEC Documents; Undisclosed
Liabilities.......................... 16
SECTION 3.07. Information Supplied................... 17
SECTION 3.08. Absence of Certain Changes
or Events............................ 17
SECTION 3.09. Taxes.................................. 18
SECTION 3.10. Absence of Changes in Benefit Plans.... 20
<PAGE>
3
SECTION 3.11. ERISA Compliance; Excess Parachute
Payments............................ 21
SECTION 3.12. Litigation............................ 23
SECTION 3.13. Compliance with Applicable Laws....... 23
SECTION 3.14. Brokers; Schedule of Fees and
Expenses............................ 24
SECTION 3.15. Opinion of Financial Advisor.......... 24
SECTION 3.16. Year 2000 Compliance.................. 24
Section 3.17. Environmental Matters................. 25
SECTION 3.18. Contracts; Debt Instruments........... 26
SECTION 3.19 Title to Properties.................... 27
SECTION 3.20 Intellectual Property.................. 28
ARTICLE IV
Representations and Warranties of Parent and Sub
------------------------------------------------
SECTION 4.01. Organization, Standing and Power..... 28
SECTION 4.02. Sub.................................. 29
SECTION 4.03. Authority; Execution and Delivery;
Enforceability...................... 29
SECTION 4.04. No Conflicts; Consents............... 29
SECTION 4.05. Information Supplied................. 30
SECTION 4.06. Brokers.............................. 31
SECTION 4.07. Financing............................ 31
SECTION 4.08. Financial Statements................. 31
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 5.01. Conduct of Business.................. 31
SECTION 5.02. No Solicitation...................... 35
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.01. Preparation of Proxy Statement;
Stockholders Meeting................ 38
SECTION 6.02. Access to Information;
Confidentiality..................... 39
SECTION 6.03. Commercially Reasonable Efforts;
Notification........................ 39
SECTION 6.04. Stock Options........................ 41
<PAGE>
4
SECTION 6.05. Benefit Plans........................ 43
SECTION 6.06. Indemnification...................... 43
SECTION 6.07. Fees and Expenses.................... 44
SECTION 6.08. Public Announcements................. 46
SECTION 6.09. Transfer Taxes....................... 46
SECTION 6.10. Directors............................ 46
SECTION 6.11. Stockholder Litigation............... 48
SECTION 6.12. Parent Guaranty...................... 48
ARTICLE VII
Conditions Precedent
--------------------
SECTION 7.01. Conditions to Each Party's
Obligation To Effect The Merger..... 48
SECTION 7.02. Further Conditions................... 49
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination.......................... 49
SECTION 8.02. Effect of Termination................ 51
SECTION 8.03. Amendment............................ 51
SECTION 8.04. Extension; Waiver.................... 52
SECTION 8.05. Procedure for Termination
Amendment, Extension or Waiver...... 52
ARTICLE IX
General Provisions
------------------
SECTION 9.01. Nonsurvival of Representations and
Warranties.......................... 53
SECTION 9.02. Notices.............................. 53
SECTION 9.03. Definitions.......................... 54
SECTION 9.04. Interpretation; Company Disclosure
Letter.............................. 55
SECTION 9.05. Severability......................... 55
SECTION 9.06. Counterparts......................... 55
SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries....................... 55
SECTION 9.08. Governing Law........................ 56
SECTION 9.09. Assignment........................... 56
SECTION 9.10. Enforcement.......................... 56
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of September 17, 1999,
among SCHERING BERLIN INC., a Delaware corporation ("Parent"),
------
BXA ACQUISITION COMPANY, a Delaware corporation ("Sub") and a
---
wholly owned subsidiary of Parent, and DIATIDE, INC., a Delaware
corporation (the "Company").
-------
WHEREAS the respective Boards of Directors of Parent, 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 of such acquisition, Parent proposes to cause
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 per share, of the Company (the "Company Common
--------------
Stock"), at a price per share of Company Common Stock of $9.50, net to the
- -----
seller in cash, on the terms and subject to the conditions set forth in this
Agreement;
WHEREAS the respective Boards of Directors of Sub and the Company, and
Parent acting as the sole stockholder of Sub, have approved the merger (the
"Merger") of Sub into the Company, or (at the election of Parent) the Company
- -------
into Sub, on the terms and subject to the conditions set forth in this
Agreement, whereby (a) each issued and outstanding share of Company Common
Stock, not owned directly or indirectly by Parent or the Company, shall be
converted into the right to receive the highest per share cash consideration
paid pursuant to the Offer; (b) each issued and outstanding share of Series A
Convertible Preferred Stock, par value $0.01 per share, of the Company (the
"Company Series A Preferred Stock"), not owned directly or indirectly by Parent
- ---------------------------------
or the Company, shall be converted into the right to receive $9.75 in cash or,
if greater, the highest per share cash consideration paid pursuant to the Offer;
and (c) each issued and outstanding share of Series B Convertible Preferred
Stock, par value $0.01 per share, of the Company (the "Company Series B
----------------
Preferred Stock" and, together with the Company Series A Preferred Stock, the
- ---------------
"Company Series Preferred Stock" and, together with the Company Common Stock,
- -------------------------------
the "Company Capital Stock"), not owned directly or indirectly by Parent or the
---------------------
Company, shall be converted into the right to receive the highest per share cash
consideration paid pursuant to the Offer in cash; and
<PAGE>
2
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agree ments in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
The Offer and the Merger
------------------------
SECTION 1.01. The Offer. (a) Subject to the conditions of this
----------
Agreement, as promptly as practicable but in no event later than five business
days after the date of public announcement of this Agreement, Sub shall, and
Parent shall cause Sub to, commence the Offer within the meaning of the
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC"). The obligation of Sub to, and of Parent to cause Sub to, commence the
---
Offer and accept for payment, and pay for, any shares of Company Common Stock
tendered pursuant to the Offer are subject to the conditions set forth in
Exhibit A (any of which may be waived by Sub in its sole discretion, provided
that, without the written consent of the Company, Sub may not waive the Minimum
Tender Condition (as defined in Exhibit A)). The initial expiration date of the
Offer shall be the 20th business day following the commencement of the Offer
(determined using Rule 14d-1(e)(6) of the SEC). Sub expressly reserves the
right to modify the terms of the Offer, except that, without the written consent
of the Company, 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) modify or add to the conditions
set forth in Exhibit A in any manner adverse to the holders of Company Common
Stock, (iv) except as provided in the next sentence, extend the Offer, (v)
change the form of consideration payable in the Offer or (vi) otherwise amend
the Offer in a manner adverse to the holders of Company Common Stock.
Notwithstanding the foregoing, Sub may, without the consent of the Company, (i)
extend the Offer, if at the scheduled expiration date of the Offer any of the
conditions to Sub's obligation to purchase shares of Company Common Stock are
not satisfied or waived, until such time as such conditions are satisfied or
waived, (ii) extend the Offer for a period of not more than five business days
beyond the initial expiration date of the Offer, if on the date of such
extension the Minimum Tender Condition has been satisfied but less than 90% of
the
<PAGE>
3
outstanding shares of Company Common Stock have been validly tendered and
not properly withdrawn pursuant to the Offer, (iii) 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 and (iv) extend the Offer for any
reason for a period of not more than two business days beyond the latest
expiration date that would otherwise be permitted under clause (i) or (iii) of
this sentence (it being understood that Sub may not extend the Offer pursuant to
this clause (iv) if it has previously extended the Offer pursuant to clause (ii)
of this sentence). On the terms and subject to the conditions of the Offer and
this Agreement, Sub shall, and Parent shall cause Sub to, pay for all shares of
Company Common Stock validly tendered and not withdrawn pursuant to the Offer
that Sub becomes obligated to purchase pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to
the Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 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, Sub
---------------
and the Company shall promptly correct any written 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 and
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 to be disseminated to the Company's stockholders, in each case as
and to the extent required by 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 their dissemination to
the Company's stockholders. Parent and Sub shall provide the Company and its
counsel in writing with any comments Parent, 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.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to purchase any shares of Company Common Stock that
Sub becomes obligated to purchase pursuant to the Offer.
(d) Sub shall make all appropriate arrangements with the depositary
for the Offer so that (i) holders of
<PAGE>
4
Warrants (as defined in Section 3.03) may tender shares of Company Common Stock
pursuant to the Offer by delivering to such depositary certificates representing
Warrants, together with such documents, other than payment of the exercise price
of the Warrants, as may be required pursuant to the terms thereof to effect the
exercise thereof for shares of Company Common Stock (together with all other
documentation required in connection with a valid tender of shares of Company
Common Stock pursuant to the Offer), provided that such exercise shall not be
--------
deemed to occur unless Sub accepts for payment and pays for any shares of
Company Common Stock tendered pursuant to the Offer, in which case such exercise
shall be deemed to have occurred as of immediately prior to the expiration date
of the Offer, and such depositary shall deduct from the proceeds otherwise
payable pursuant to the Offer to each such tendering holder of Warrants an
amount equal to the aggregate exercise price of the Warrants represented by the
certificates so delivered and (ii) holders of Company Employee Stock Options (as
defined in Section 6.04) may tender shares of Company Common Stock pursuant to
the Offer by delivering to such depositary such documents, other than payment of
the exercise price of the Company Employee Stock Options, as may be required
pursuant to the terms thereof to effect the exercise thereof for shares of
Company Common Stock (together with all other documentation required in
connection with a valid tender of shares of Company Common Stock pursuant to the
Offer), provided that such exercise shall not be deemed to occur unless
--------
Sub accepts for payment and pays for any shares of Company Common Stock tendered
pursuant to the Offer, in which case such exercise shall be deemed to have
occurred as of immediately prior to the expiration date of the Offer, and such
depositary shall deduct from the proceeds otherwise payable pursuant to the
Offer to each such tendering holder of Company Employee Stock Options an amount
equal to the aggregate exercise price of the Company Employee Stock Options
being exercised.
SECTION 1.02. Company Actions. (a) The Company hereby approves of
----------------
and consents to the Offer.
(b) 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 from
time to time, the "Schedule 14D-9") containing, subject to Section 5.02(b), the
--------------
recommendations described in Section 3.04(b) and shall mail the Schedule 14D-9
to the holders of Company Common Stock. Each of the Company, Parent and Sub
shall promptly correct any written information provided by it for use in the
Schedule 14D-9 if
<PAGE>
5
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 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 the Company's stockholders. The Company shall provide Parent
and its counsel in writing with any 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.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish 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 stock holders, 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
Sub such information and assistance (including updated lists of stockholders,
security position listings and computer files and the names, holdings and
addresses of the record holders of the Company Series Preferred Stock and the
Warrants) as Parent may reasonably request in communicating the Offer to the
Company's securityholders. Subject to the requirements of applicable Law (as
defined in Section 3.05(a)), 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
(the Offer, the Merger and such other transactions, together with the
transactions contemplated by the Stock Purchase Agreements entered into by Sub
with each of the holders of the Company Series Preferred Stock immediately prior
to the execution of this Agreement, collectively, the "Transactions"), Parent
------------
and Sub shall, and shall use reasonable efforts to cause their agents to, 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, upon request, shall, and shall use
reasonable efforts to cause their agents to, promptly deliver to the Company all
copies of such information then in their possession or control.
<PAGE>
6
SECTION 1.03. The Merger. On the terms and subject to the conditions
-----------
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at
----
the Effective Time (as defined in Section 1.05). At the Effective Time, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation"). Notwithstanding the
---------------------
foregoing, Parent may elect at any time prior to the Merger, instead of merging
Sub into the Company as provided above, to merge the Company with and into Sub;
provided, however, that the Company shall not be deemed to have breached any of
- -------- -------
its representations, warranties or covenants set forth in this Agreement solely
by reason of such election or any change, effect or circumstance resulting from
such election. In such event, the parties shall execute an appropriate
amendment to this Agreement in order to reflect the foregoing. At the election
of Parent, any direct or indirect subsidiary of Parent may be substituted for
Sub as a constituent corporation in the Merger. In such event, the parties
shall execute an appropriate amendment to this Agreement in order to reflect the
foregoing.
SECTION 1.04. Closing. The closing (the "Closing") of the Merger
-------- -------
shall take place at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue,
New York, New York 10019 at 10:00 a.m. on the second business day following the
satisfaction (or, to the extent permitted by Law, waiver by the party or parties
entitled to the benefits thereof) of the conditions set forth in Article VII, or
at such other place, time and date as shall be agreed in writing between Parent
and the Company. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date".
------------
SECTION 1.05. Effective Time. Prior to the Closing, Parent shall
---------------
prepare, and on the Closing Date or as soon as practicable thereafter Parent
shall cause to be filed with the Secretary of State of the State of Delaware, a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
- ----------------------
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with such Secretary of State, or at such other time as Parent and the
Company shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being the "Effective Time").
--------------
<PAGE>
7
SECTION 1.06. Effects. The Merger shall have the effects set forth
--------
in Section 259 of the DGCL.
SECTION 1.07. Certificate of Incorporation and By-laws. (a) The
-----------------------------------------
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time shall be amended at the Effective Time as set forth in
Exhibit B, and, as so amended, such Certificate of Incorporation shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable Law.
(b) The By-laws of Sub as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
SECTION 1.08. Directors. The directors of Sub immediately prior to
----------
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 1.09. 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 or appointed and qualified, as the case may be.
ARTICLE II
Effect on the Capital Stock of the
----------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 2.01. Effect on Capital Stock. At the Effective Time, by
------------------------
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or Company Series Preferred Stock or any shares
of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
---------------------
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $1.00 per share, of the Surviving
Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. Each share
-----------------------------------------------------
of Company Capital Stock that is
<PAGE>
8
owned by the Company, Parent, Sub or any other subsidiary of Parent shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and no consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion of Company Capital Stock. (i) Subject to Sections
------------------------------------
2.01(b) and 2.01(d), each issued and outstanding share of Company Common Stock
shall be converted into the right to receive such amount as shall be equal to
the highest price per share of Company Common Stock paid pursuant to the Offer
in cash.
(ii) Subject to Sections 2.01(b) and 2.01(d), each issued and
outstanding share of Company Series A Preferred Stock shall be converted into
the right to receive $9.75 or, if applicable, such greater amount as shall be
equal to the highest price per share of Company Common Stock paid pursuant to
the Offer in cash.
(iii) Subject to Sections 2.01(b) and 2.01(d), each issued and
outstanding share of Company Series B Preferred Stock shall be converted into
the right to receive such amount as shall be equal to the highest price per
share of Company Common Stock paid pursuant to the Offer in cash.
(iv) The cash payable upon the conversion of shares of Company
Capital Stock pursuant to this Section 2.01(c) is referred to collectively as
the "Merger Consideration". As of the Effective Time, all such shares of
--------------------
Company Capital Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Capital Stock shall cease to have any
rights with respect thereto, except the right to receive the applicable Merger
Consideration upon surrender of such certificate in accordance with Section
2.02, without interest.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
-----------------
the contrary, shares ("Appraisal Shares") of Company Capital Stock that are
----------------
outstanding immediately prior to the Effective Time and that are held by any
person who is entitled to demand and properly demands appraisal of such
Appraisal Shares pursuant to, and who complies in all respects with, Section 262
of the DGCL ("Section 262") shall not be converted into Merger Consideration as
-----------
provided in Section 2.01(c), but rather the holders of Appraisal Shares shall be
entitled to payment of the fair market value of such Appraisal Shares in
accordance with Section 262; provided, however, that if any such holder
-------- -------
<PAGE>
9
shall fail to perfect or otherwise shall waive, withdraw or lose the right to
appraisal under Section 262, then the right of such holder to be paid the fair
value of such holder's Appraisal Shares shall cease and such Appraisal Shares
shall be deemed to have been converted as of the Effective Time into, and to
have become exchangeable solely for the right to receive, the applicable Merger
Consideration as provided in Section 2.01(c). The Company shall give prompt
notice to Parent of any demands received by the Company for appraisal of any
shares of Company Capital Stock, and Parent shall have the right to participate
in and direct all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands, or agree to do any of the foregoing.
SECTION 2.02. Exchange of Certificates. (a) Paying Agent. Prior to
------------------------- -------------
the Effective Time, Parent shall select a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration upon
------------
surrender of certificates representing Company Common Stock. Parent shall take
all steps necessary to enable and cause the Surviving Corporation to provide to
the Paying Agent on a timely basis, as and when needed after the Effective Time,
cash necessary to pay for the shares of Company Common Stock converted into the
right to receive cash pursuant to Section 2.01(c)(i) (such cash being
hereinafter referred to as the "Exchange Fund").
-------------
(b) Exchange Procedure. As soon as reasonably practicable after the
-------------------
Effective Time (and in any event within 10 business days), the Paying Agent (or,
in the case of the Company Series Preferred Stock, the Surviving Corporation)
shall mail to each holder of record of a certificate or certificates (the
"Certificates") that immediately prior to the Effective Time represented
- -------------
outstanding shares of Company Capital Stock whose shares were converted into the
right to receive Merger Consideration pursuant to Section 2.01, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such 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 Merger
Consideration. Upon surrender of a Certificate for cancelation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly
<PAGE>
10
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 of Company Capital Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.01, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Capital Stock that is not
registered in the transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment 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. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the shares of Company
Capital Stock theretofore represented by such Certificate have been converted
pursuant to Section 2.01. No interest shall be paid or shall accrue on the cash
payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Capital Stock. The Merger
-----------------------------------------------------
Consideration paid in accordance with the terms of this Article II upon
conversion of any shares of Company Capital Stock shall be deemed to have been
paid in full satisfaction of all rights pertaining to such shares of Company
Capital Stock, and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Company Capital Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
-----------------------------
that remains undistributed to the holders of Company Common Stock for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holder of Company Common Stock who has not theretofore complied with this
Article II shall thereafter look only to Parent for payment of its claim for
Merger Consideration.
(e) No Liability. None of Parent, Sub, the Company, the Surviving
-------------
Corporation or the Paying Agent shall
<PAGE>
11
be liable to any person in respect of any cash from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar Law. If any Certificate has not been surrendered prior to five years
after the Effective Time (or immediately prior to such earlier date on which
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as defined in Section
3.05(b)), any such cash in respect of such Certifi cate shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest any
----------------------------
cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent.
(g) Withholding Rights. Parent or its Paying Agent shall be entitled
-------------------
to deduct and withhold from the consideration otherwise payable to any holder of
Company Capital Stock pursuant to this Agreement such amounts as may be required
to be deducted and withheld with respect to the making of such payment under the
Code (as defined in Section 3.11(b)), or under any provision of state, local or
foreign tax Law.
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to Parent and Sub that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure letter delivered by the Company to Parent on or before
the date of this Agreement (the "Company Disclosure Letter"). The Company
Disclosure Letter shall be arranged in paragraphs corresponding to the numbered
and lettered Sections and paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other Sections and paragraphs in this
Article III to the extent that it is reasonably apparent from a reading of such
disclosure that it also qualifies or applies to such other Sections and
paragraphs; provided, however, that nothing in the Company Disclosure Letter
-------- -------
shall qualify Section 3.08 unless it is set forth under paragraph 3.08 of the
Company Disclosure Letter.
<PAGE>
12
SECTION 3.01. Organization, Standing and Power. The Company is duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its businesses as presently conducted. The Company is duly
qualified to do business in each jurisdiction where the nature of its business
or the ownership or leasing of its properties make such qualification necessary
except for any such failure to be qualified that has not had and would not
reasonably be expected to have a Company Material Adverse Effect (as defined in
Section 9.03). The Company has delivered to Parent true and complete copies of
the certificate of incorporation of the Company, as amended to the date of this
Agreement (as so amended, the "Company Charter"), and the By-laws of the
---------------
Company, as amended to the date of this Agreement (as so amended, the "Company
-------
By-laws").
- -------
SECTION 3.02. Company Subsidiaries; Equity Interests. The Company
---------------------------------------
does not have any subsidiaries (as defined in Section 9.03). Except for any
ownership interests set forth in the Company Disclosure Letter the Company does
not own, directly or indirectly, any capital stock, membership interest,
partnership interest, joint venture interest or other equity interest in any
person.
SECTION 3.03. Capital Structure. The authorized capital stock of the
------------------
Company consists of 50,000,000 shares of Company Common Stock and 10,591,874
shares of preferred stock, par value $0.01 per share, of the Company (the
"Company Preferred Stock") (with 1,300,000 shares of the Company Preferred Stock
- ------------------------
designated as Company Series A Preferred Stock and 830,000 shares of the Company
Preferred Stock designated as Company Series B Preferred Stock). At the close
of business on September 16, 1999, (i) 10,615,614 shares of Company Common
Stock, 1,210,256 shares of Company Series A Preferred Stock and 825,309 shares
of Company Series B Preferred Stock were issued and outstanding, (ii) 4,800
shares of Company Common Stock were held by the Company in its treasury, (iii)
1,002,436 shares of Company Common Stock were subject to outstanding Company
Employee Stock Options, (iv) 3,130,087 additional shares of Company Common Stock
were reserved for issuance pursuant to the Company Stock Plans and the Company
Stock Purchase Plan (each as defined in Section 6.04), (v) 123,795 shares of
Company Common Stock were subject to outstanding warrants expiring January 17,
2001, with an exercise price of $8.72 per share of Company
<PAGE>
13
Common Stock, (vi) 198,138 shares of Company Common Stock were subject to
outstanding warrants expiring August 13, 2006, with an exercise price of $5.047
per share of Company Common Stock and (vii) 181,538 shares of Company Common
Stock were subject to outstanding warrants expiring September 23, 1999, with an
exercise price of $11.70 per share of Company Common Stock (the warrants
described in this subsection (vii) and subsections (v) and (vi) above being
referred to herein as "Warrants"). Except as set forth above, at the close of
--------
business on September 16, 1999, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding.
There are no outstanding Company SARs, Company Restricted Stock or Company
Stock-based Awards (each as defined in Section 6.04). All outstanding shares of
Company Capital Stock are, and all such shares that may be issued prior to the
Effective Time will be when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, the Company Charter,
the Company By-laws or any Contract (as defined in Section 3.05(a)) to which the
Company is a party or otherwise bound. There are not any 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 holders of Company Capital Stock may vote ("Voting Company
--------------
Debt"). Except as set forth above, there are not any options, warrants, rights,
- ----
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Company is a party or by
which it is bound (i) obligating the Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
equity interests in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity interest in, the Company
or any Voting Company Debt, (ii) obligating the Company to issue, grant, extend
or enter into any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking or (iii) that give any person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights accruing to holders of Company Capital Stock. There are not
any outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of Company Capital Stock.
SECTION 3.04. Authority; Execution and Delivery; Enforceability. (a)
--------------------------------------------------
The Company has all requisite
<PAGE>
14
corporate power and authority to execute and deliver this Agreement and to
consummate the Transactions. The execution and delivery by the Company of this
Agreement and the consummation by the Company of the Transactions have been duly
authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to receipt of the Company Stockholder
Approval (as defined in Section 3.04(c)), if required. The Company has duly
executed and delivered this Agreement, and this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) The Board of Directors of the Company (the "Company Board"), at a
-------------
meeting duly called and held, duly and unanimously adopted resolutions (i)
approving this Agreement, the Offer, the Merger and the other Transactions, (ii)
determining that the terms of the Offer, the Merger and the other Transactions
are fair to and in the best interests of the Company and its stockholders, (iii)
recommending that the holders of Company Common Stock accept the Offer and
tender their shares of Company Common Stock pursuant to the Offer, (iv)
recommending that the Company's stockholders adopt this Agreement, if required,
and (v) declaring that this Agreement is advisable. Such resolutions are
sufficient to render inapplicable to Parent and Sub and this Agreement, the
Offer, the Merger and the other Transactions the provisions of Section 203 of
the DGCL. To the Company's knowledge, no other state takeover statute or
similar statute or regulation applies or purports to apply to the Company with
respect to this Agreement, the Offer, the Merger or any other Transaction. The
Company has been advised by each of its directors and executive officers that
each such person intends to tender all shares of Company Common Stock owned by
such person pursuant to the Offer.
(c) The only vote of holders of any class or series of Company
Capital Stock necessary to approve and adopt this Agreement and the Merger is
the adoption, if required, of this Agreement by the holders of a majority of the
outstanding Company Common Stock and Company Series Preferred Stock, voting
together as a single class (the "Company Stockholder Approval"). The
----------------------------
affirmative vote of the holders of Company Capital Stock, or any of them, is not
necessary to consummate the Offer or any Transaction other than the Merger.
<PAGE>
15
SECTION 3.05. No Conflicts; Consents. (a) Except as set forth in the
-----------------------
Company Disclosure Letter, the execution and delivery by the Company of this
Agreement do not, and the consummation of the Offer, the Merger and the other
Transactions and compliance with the terms hereof will not, conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Lien (as defined in Section
3.09(d)), upon any of the properties or assets of the Company (collectively,
"Violations") under, any provision of (i) the Company Charter or the Company By-
laws, (ii) any contract, lease, license, indenture, note, bond, agreement,
permit, concession, franchise or other instrument (a "Contract") to which the
--------
Company is a party or by which any of its properties or assets is bound or (iii)
subject to the filings and other matters referred to in Section 3.05(b), any
judgment, order or decree ("Judgment") or statute, law (including common law),
--------
ordinance, rule or regulation ("Law") applicable to the Company or its
---
properties or assets, except in the case of clauses (ii) and (iii) for such
Violations that have not had and would not reasonably be expected to have a
Company Material Adverse Effect.
(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or permit from, any
- ---------
Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity"), is
-------------------
required to be obtained or made by or with respect to the Company in connection
with the execution, delivery and performance of this Agreement or the
consummation of the Transactions, other than (i) compliance with and filings
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if required, (ii) the filing with the SEC of (A) the Schedule 14D-9,
-------
(B) a proxy or information statement relating to the adoption of this Agreement
by the Company's stockholders (the "Proxy Statement"), if such adoption is
---------------
required by Law, (C) any information statement (the "Information Statement")
---------------------
required under Rule 14f-1 in connection with the Offer and (D) such reports
under Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement, the
- -------------
Offer, the Merger and the other Transactions, (iii) the filing of the
Certificate
<PAGE>
16
of Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of the other jurisdictions in which the
Company is qualified to do business, (iv) compliance with and such filings as
may be required under applicable environmental Laws, (v) such filings as may be
required in connection with the Taxes (as defined in Section 3.09) described in
Section 6.09, (vi) filings under any applicable state takeover Law, (vii) such
other items as are set forth in the Company Disclosure Letter and (viii) such
other Consents, registrations, declarations, filings and permits that the
Company does not have knowledge of and the failure of which to obtain or make
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.06. SEC Documents; Undisclosed Liabilities. The Company
---------------------------------------
has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company with the SEC since December 31, 1997 (the "Company
-------
SEC Documents"). As of its respective date, each Company SEC Document complied
- -------------
in all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as the case may be,
--------------
and the rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Document, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the Company SEC Documents complied, as of the date they were
filed, as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") (except as may be indicated in the notes thereto
----
and, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial position of the
Company as of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal, recurring year-end audit adjustments). Except as set forth in the Filed
Company SEC Documents (as defined in Section 3.08), the Company has no material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a balance sheet of the Company
or in the notes thereto other than liabilities and obligations
<PAGE>
17
incurred in the ordinary course of business since June 30, 1999.
SECTION 3.07. Information Supplied. None of the information supplied
---------------------
or to be supplied by the Company for inclusion or incorporation by reference in
(i) the Offer Documents, the Schedule 14D-9 or the Information Statement will,
at the time such document is filed with the SEC, at any time it is amended or
supplemented or at the time it is first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading, or (ii) the Proxy Statement (if required) will, at the date it
is first mailed to the Company's stockholders or at the time of the Company
Stockholders Meeting (as defined in Section 6.01), 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. The Schedule 14D-9,
the Information Statement and the Proxy Statement (if required) will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder, except that no representation is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub in writing for inclusion or
incorporation by reference therein.
SECTION 3.08. Absence of Certain Changes or Events. Except as
-------------------------------------
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Company SEC Documents") or in the Company
---------------------------
Disclosure Letter, from June 30, 1999, to the date of this Agreement, the
Company has conducted its business only in the ordinary course, and during such
period there has not been:
(i) any event, change, effect or development that, individually or in
the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
Company Capital Stock or any repurchase for value by the Company of any
Company Capital Stock;
<PAGE>
18
(iii) any split, combination or reclassification of any Company
Capital Stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Company Capital Stock;
(iv) (A) any granting by the Company to any director or executive
officer of the Company of any increase in compensation, except in the
ordinary course of business consistent with prior practice or as was
required under employment agreements in effect as of the date of the most
recent audited financial statements included in the Filed Company SEC
Documents, (B) any granting by the Company to any such director or
executive officer of any increase in severance or termination pay, except
as was required under any employment, severance or termination agreements
in effect as of the date of the most recent audited financial statements
included in the Filed Company SEC Documents, or (C) any entry by the
Company into, or any amendment of, any employment, severance or termination
agreement with any such director or executive officer;
(v) any change in accounting methods, principles or practices by the
Company materially affecting the assets, liabilities or results of
operations of the Company, except insofar as may have been required by a
change in GAAP; or
(vi) any material elections with respect to Taxes by the Company or
settlement or compromise by the Company of any material Tax liability or
refund.
SECTION 3.09. Taxes. (a) The Company has timely filed, or has
------
caused to be timely filed on its behalf (in each case, taking into account any
extension of time within which to file), all Tax Returns required to be filed by
it, and all such Tax Returns are true, complete and accurate in all material
respects. All Taxes shown to be due on such Tax Returns, or otherwise owed,
have been timely paid except (i) where the payment of such Taxes is being or was
contested in good faith by the Company and the Company has established adequate
reserves for such Taxes in accordance with GAAP or (ii) where the failure to pay
such Taxes would not reasonably be expected to have a Company Material Adverse
Effect.
(b) The most recent financial statements contained in the Filed
Company SEC Documents reflect an adequate reserve for all Taxes payable by the
Company for all Taxable periods and portions thereof through the date of
<PAGE>
19
such financial statements. No deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Company, and no requests for waivers
of the time to assess any such Taxes are pending.
(c) The Tax Returns of the Company have been examined by and/or
settled with the relevant Taxing Authority for all years through December 31,
1995, or the applicable statutory period for the assessment of the Tax to which
the Tax Return relates has expired. All material assessments for Taxes due with
respect to such completed and settled examinations or any concluded litigation
have been fully paid. Neither the Internal Revenue Service nor any other Taxing
Authority has given notice (either orally or in writing) that it will commence
any such audit or examination.
(d) There are no material pledges, liens, charges, mortgages,
encumbrances or security interests of any kind or nature whatsoever
(collectively, "Liens") for Taxes (other than for current Taxes not yet due and
-----
payable and for Taxes as to which the Company is contesting in good faith and
has established adequate reserves in accordance with GAAP) on the assets of the
Company. The Company is not bound by any agreement with respect to Taxes.
(e) The Company shall not be required to include in a taxable period
ending after the Effective Time an amount of taxable income attributable to
income that accrued in a prior taxable period but was not recognized in any
prior taxable period as a result of the installment method of accounting, the
completed contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign Tax law, and there is no
application pending with any Taxing Authority requesting permission for any
change in any accounting method of the Company.
(f) The Company may not be held liable for, or may not be required to
make any contribution with respect to, Taxes of any person (other than members
of the affiliated group of which the Company is the common parent) by reason of
Treasury Regulation Section 1.1502-6 or any comparable provision of state, local
or foreign law or under any Tax indemnity, Tax sharing or similar agreement.
(g) (i) There are no outstanding agreements or waivers extending, or
having the effect of extending, the statutory period of limitation applicable to
any Tax Returns required to be filed with respect to the Company,
<PAGE>
20
(ii) neither the Company nor any affiliated group, within the meaning of Section
1504 of the Code, of which the Company is or has ever been a member, has
requested any extension of time within which to file any Tax Return, which
return has not yet been filed, and (iii) no power of attorney with respect to
any Taxes has been executed or filed with any Taxing Authority by or on behalf
of the Company.
(h) The Company has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code
or any comparable provision of any state, local or foreign Laws) and have,
within the time and in the manner prescribed by applicable Law, withheld from
and paid over to the proper Taxing Authorities all amounts required to be so
withheld and paid over under applicable Laws.
(i) For purposes of this Agreement:
"Tax" or "Taxes" includes all forms of taxation, whenever created or
--- -----
imposed, and whether of the United States or elsewhere, and whether imposed by a
local, municipal, governmental, state, foreign, Federal or other Governmental
Entity, or in connection with any agreement with respect to Taxes, including all
interest, penalties and additions imposed with respect to such amounts.
"Taxing Authority" shall mean any domestic, foreign, Federal,
----------------
national, state, county or municipal or other local government, any subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising tax regulatory authority.
"Tax Return" means all Federal, state, local, provincial and foreign
----------
Tax returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
SECTION 3.10. Absence of Changes in Benefit Plans. Except as
------------------------------------
disclosed in the Filed Company SEC Documents or in the Company Disclosure
Letter, from June 30, 1999, there has not been any adoption or amendment in any
material respect, other than amendments required by law, by the Company of any
collective bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether
<PAGE>
21
or not legally binding) providing benefits to any current or former employee,
officer or director of the Company, other than any such plan, arrangement or
understanding which is applicable to only one person and which provides benefits
that are not material (collectively, "Company Benefit Plans"). Except as
---------------------
disclosed in the Filed Company SEC Documents or in the Company Disclosure
Letter, as of the date of this Agreement there are not any employment,
consulting, indemnification, severance or termination agreements or arrangements
between the Company and any current or former employee, officer or director of
the Company (other than at will employment agreements), nor does the Company
have any general severance plan or policy or practice.
SECTION 3.11. ERISA Compliance; Excess Parachute Payments. (a) The
--------------------------------------------
Company Disclosure Letter contains a list and brief description of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
-----
as "Company Pension Plans"), "employee welfare benefit plans" (as defined in
---------------------
Section 3(1) of ERISA) and all other Company Benefit Plans maintained, or
contributed to, by the Company for the benefit of any current or former
employees, officers or directors of the Company. The Company has delivered to
Parent true, complete and correct copies of (i) each Company Benefit Plan (or,
in the case of any unwritten Company Benefit Plan, a description thereof) and
each amendment thereto, (ii) the two most recent annual reports on Form 5500
filed with the Internal Revenue Service with respect to each Company Benefit
Plan (if any such report was required), (iii) the most recent summary plan
description for each Company Benefit Plan for which such summary plan
description is required and (iv) each trust agreement and group annuity contract
relating to any Company Benefit Plan.
(b) Except as disclosed in the Company Disclosure Letter, all Company
Pension Plans have been the subject of determination letters from the Internal
Revenue Service to the effect that such Company Pension Plans are qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Internal Revenue Code of 1986, as amended (the "Code"), and no such
----
determination letter has been revoked nor, to the knowledge of the Company, has
revocation been threatened, nor has any such Company Pension Plan been amended
since the date of its most recent determi nation letter or application therefor
in any respect that would adversely affect its qualification or materially
increase its costs.
<PAGE>
22
(c) No Company Pension Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA (a "Company Multiemployer Pension Plan")
----------------------------------
or is subject to (i) the minimum funding requirements of Section 412 of the Code
or Section 306 of ERISA or (ii) Title IV of ERISA, and the Company has no actual
or contingent liability in respect of any such plan. None of the Company, any
officer of the Company or any of the Company Benefit Plans which are subject to
ERISA, including the Company Pension Plans, any trusts created thereunder or any
trustee or administrator thereof, has engaged in a "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any
other breach of fiduciary responsibility that could subject the Company or any
officer of the Company to the tax or penalty on prohibited transactions imposed
by such Section 4975 or to any liability under Section 502(i) or 502(1) of
ERISA. The Company has not incurred a "complete withdrawal" or a "partial
withdrawal" (as such terms are defined in Sections 4203 and 4205, respectively,
of ERISA) since the effective date of such Sections 4203 and 4205 with respect
to any Multiemployer Pension Plan.
(d) With respect to any Company Benefit Plan that is an employee
welfare benefit plan, except as disclosed in the Company Disclosure Letter, (i)
no such Company Benefit Plan is unfunded or funded through a "welfare benefits
fund" (as such term is defined in Section 419(e) of the Code), (ii) each such
Company Benefit Plan that is a "group health plan" (as such term is defined in
Section 5000(b)(1) of the Code), complies in all material respects with the
applicable requirements of Sections 4980B(f), 9801 and 9802 of the Code and
(iii) each such Company Benefit Plan (including any such Plan covering retirees
or other former employees) may be amended or terminated without material
liability to the Company (other than for ordinary administrative expenses
incurred and benefits accrued through the date of such amendment or termination)
on or at any time after the Effective Time.
(e) All Company Benefit Plans have been administered in accordance
with their terms in all material respects, and comply in form and in operation
in all material respects with applicable law.
(f) No amount paid or expected to be payable under existing benefit
plans, arrangements or agreements to any employee or former employee of the
Company based on current or past compensation levels of such employee, as the
case may be, would fail to be deductible by virtue of Section 162(m) of the
Code.
<PAGE>
23
(g) There has been no act or omission which has given rise to or may
give rise to material fines, penalties, taxes or charges under Section 502(c) of
ERISA or Chapters 43, 47, or 68 of the Code for which the Company is or may be
liable.
(h) There are no actions, suits or claims (other than routine claims
for benefits) pending or, to the Company's knowledge, threatened involving any
Company Benefit Plan that, individually or in the aggregate, have had or would
reasonably be expected to have a Company Material Adverse Effect.
(i) The Company has no material liability or contingent liability
under any plan, arrangement or agreement for providing post-retirement medical
or life insurance benefits, other than statutory liability for providing group
health plan continuation coverage under Part 6 of Title I of ERISA or Section
4980B (or any predecessor section thereto) of the Code or other applicable Law.
(j) No amount that could be received (whether in cash or property or
the vesting of property) as a result of the Offer, the Merger or any other
Transaction by any employee, officer or director of the Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Company Benefit Plan
currently in effect would be characterized as an "excess parachute payment" (as
defined in Section 280G(b)(1) of the Code).
SECTION 3.12. Litigation. Except as disclosed in the Filed Company
-----------
SEC Documents or in the Company Disclosure Letter, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company that, individually or in the aggregate, has had or would
reasonably be expected to have a Company Material Adverse Effect, nor is there
any Judgment outstanding against the Company that has had or would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.13. Compliance with Applicable Laws. Except as disclosed in
--------------------------------
the Filed Company SEC Documents or in the Company Disclosure Letter, the Company
is in compliance with all applicable Laws, except for instances of noncompliance
that, individually and in the aggregate, have not had and would not reasonably
be expected to have a Company Material Adverse Effect. Except as set forth in
the
<PAGE>
24
Filed Company SEC Documents or in the Company Disclosure Letter, the Company has
not received any written notice during the past three years from a Governmental
Entity that alleges that the Company is not in compliance with any material
applicable Law. This Section 3.13 does not relate to matters with respect to
Taxes, which are the subject of Section 3.09, or with respect to Environmental
Laws (as defined in Section 3.17), which are the subject of Section 3.17.
SECTION 3.14. Brokers; Schedule of Fees and Expenses. No broker,
---------------------------------------
investment banker, financial advisor or other person, other than CIBC World
Markets Corp., the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the Offer, the Merger and the other Transactions
based upon arrangements made by or on behalf of the Company. The estimated fees
and expenses incurred and to be incurred by the Company in connection with the
Offer, the Merger and the other Transactions (including the fees of CIBC World
Markets Corp. and the fees of the Company's legal counsel) as estimated by the
Company as of the date of this Agreement are set forth in the Company Disclosure
Letter. The Company has furnished to Parent a true and complete copy of all
agreements between the Company and CIBC World Markets Corp. relating to the
payment of fees and expenses in connection with the Offer, the Merger and the
other Transactions.
SECTION 3.15. Opinion of Financial Advisor. The Company has received
-----------------------------
the opinion of CIBC World Markets Corp., dated the date of this Agreement, to
the effect that, as of such date, the consideration to be received in the Offer
and the Merger by the holders of Company Common Stock is fair from a financial
point of view, a signed copy of which opinion has been delivered to Parent.
SECTION 3.16. Year 2000 Compliance. (a) Except as set forth in the
---------------------
Filed Company SEC Documents or the Company Disclosure Letter, the computer
software and hardware operated by the Company that is used in and material to
the conduct of its business is capable of providing or is in the process of
being adapted to provide uninterrupted millennium functionality to record,
store, process and present calendar dates falling on or after January 1, 2000,
in substantially the same manner and with the same functionality as such
software and hardware records, stores, processes and presents such calendar
dates falling on or before December 31, 1999 ("Year 2000 Compliant"), other than
such interruptions in millennium functionality that would not reasonably be
expected to have
<PAGE>
25
a Company Material Adverse Effect. The best current estimates of the Company of
capital expenditures to be Year 2000 Compliant are included in the Company's
1999 budget, a copy of which has been made available to Parent.
Section 3.17. Environmental Matters. (a) Except for any matters
----------------------
that would not reasonably be expected to have a Company Material Adverse Effect
or that are set forth in the Filed Company SEC Documents or in the Company
Disclosure Letter:
(i) the Company is, and has for the past five years been, in
compliance with all Environmental Laws;
(ii) the Company holds and is in compliance with, and for the past
five years has held and been in compliance with, all permits, licenses,
authorizations and approvals from Governmental Entities required to conduct its
business operations under Environmental Laws ("Environmental Permits");
---------------------
(iii) to the Company's knowledge, there are no aboveground or
underground storage tanks, known or suspected asbestos-containing materials, or
light ballasts, transformers or other equipment containing polychlorinated
biphenyls on, under or about property owned, operated or leased by the Company,
nor were there any underground storage tanks which the Company owned, operated
or controlled on, under or about any such property in the past; and
(iv) no Hazardous Substances are present on, at or under any
properties currently or formerly owned, leased or operated by the Company nor,
to the Company's knowledge, has there in the past been any Release or threatened
Release of any Hazardous Substances emanating from any properties currently or
formerly owned, leased or operated by the Company except, in any such case, at
levels or in quantities that do not require investigation or remediation under
Environmental Law.
(b) Except as set forth in the Filed Company SEC Documents or in the
Company Disclosure Letter, there are no pending or, to the knowledge of the
Company, threatened, claims, proceedings or investigations against the Company
arising under Environmental Laws, and the Company has not received any
communication from any Governmental Entity or other person that alleges that the
Company is not in compliance in any respect with, or is subject to liability
under, any Environmental Laws or Environmental Permits.
<PAGE>
26
(c) Except as set forth in the Company Disclosure Letter, no
Environmental Law or Environmental Permit imposes any obligation upon the
Company arising out of, or as a condition to, any Transaction (including any
requirement to: (i) modify or transfer any Environmental Permit, (ii) file any
notice or other submission with any Governmental Entity, (iii) place any notice,
acknowledgment or covenant in any land records, or (iv) modify or provide notice
under any agreement, consent order or consent decree) which obligation would
reasonably be expected to have a Company Material Adverse Effect either in
fulfilling it or as a consequence of failing to fulfill it.
As used in this Agreement, the term "Environmental Law" means any and
-----------------
all applicable treaties, laws, regulations, enforceable requirements, binding
determinations or agreements, orders, decrees, judgments or injunctions issued,
promulgated or entered into by any Governmental Entity, relating to the
environment, natural resources, human health and safety, or the use, management,
disposal, Release or threatened Release of, or exposure to, Hazardous Substances
or noxious odor.
As used in this Agreement, the term "Hazardous Substance" means all
-------------------
explosive or regulated radioactive materials or substances, hazardous or toxic
materials, wastes or chemicals, petroleum and petroleum products (including
crude oil or any fraction thereof), asbestos or asbestos-containing materials,
polychlorinated biphenyls, and all other materials or substances regulated
pursuant to any Environmental Law.
As used in this Agreement, the term "Release" means any spilling,
-------
leaking, pumping, purging, discharging, emitting, leaching, injecting or
migrating into or through the environment.
SECTION 3.18. Contracts; Debt Instruments. (a) Except as disclosed
----------------------------
in the Filed Company SEC Documents or in the Company Disclosure Letter, there
are no Contracts that are material to the business, assets or operations of the
Company. The Company is not in violation of or in default under (nor does there
exist any condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under) any loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other Contract, arrangement or understanding to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that would not,
<PAGE>
27
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.
(b) Set forth in the Company Disclosure Letter is (x) a complete and
correct list of all loan or credit agreements, notes, bonds, mortgages,
indentures and other agreements and instruments pursuant to which any
indebtedness of the Company in an aggregate principal amount in excess of
$250,000 is outstanding or may be incurred and (y) the respective principal
amounts outstanding as of the date of this Agreement thereunder. For purposes
of this Section 3.18(b), "indebtedness" shall mean, with respect to any person,
without duplication, (A) all obligations of such person for borrowed money, or
with respect to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person upon which interest charges are
customarily paid, (D) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such person,
(E) all obligations of such person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such person to creditors
for raw materials, inventory, services and supplies incurred in the ordinary
course of such person's business), (F) all capitalized lease obligations of such
person, (G) all obligations of others secured by any lien on property or assets
owned or acquired by such person, whether or not the obligations secured thereby
have been assumed, (H) all obligations of such person under interest rate or
currency hedging transactions (valued at the termination value thereof), (I) all
letters of credit issued for the account of such person and (J) all guarantees
and arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
3.19 Title to Properties. (a) Except as set forth in the Company
--------------------
Disclosure Letter, the Company has good title to, or valid leasehold interests
in, all its properties and assets except for such as are no longer used or
useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar encumbrances or impediments that, in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect. All such assets and properties, other than assets and
properties in which the Company has leasehold interests, are free and clear of
all Liens other than those set forth in the Company Disclosure Letter and except
for Liens that, in the aggregate, do not
<PAGE>
28
and would not reasonably be expected to have a Company Material Adverse Effect.
(b) Except as set forth in the Company Disclosure Letter, the Company
has complied in all material respects with the terms of all material leases to
which it is a party and under which it is in occupancy, and all such leases are
in full force and effect. The Company enjoys peaceful and undisturbed
possession under all such material leases.
3.20 Intellectual Property. The Company owns, or is validly licensed
----------------------
or otherwise has the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, copyrights and other proprietary intellectual property rights and
computer programs (collectively, "Intellectual Property Rights") which are used
----------------------------
in and material to the conduct of the business of the Company. Except as set
forth in the Company Disclosure Letter, no claims are pending or, to the
knowledge of the Company, threatened that the Company is infringing or
misappropriating the rights of any person with regard to any Intellectual
Property Right (and the Company is not aware of any basis for any such claims
that would reasonably be expected to have a Company Material Adverse Effect).
To the knowledge of the Company, except as set forth in the Company Disclosure
Letter, no person is infringing the rights of the Company with respect to any
Intellectual Property Right except for any such infringements that would not
reasonably be expected to have a Company Material Adverse Effect.
ARTICLE IV
Representations and Warranties of Parent and Sub
------------------------------------------------
Parent and Sub, jointly and severally, represent and warrant to the
Company as follows:
SECTION 4.01. Organization, Standing and Power. Each of Parent and
---------------------------------
Sub is duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is organized and has full corporate power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to own, lease or otherwise
hold its properties and assets and to conduct its businesses as presently
conducted, other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, has not had and
would not reasonably be expected to have a material adverse effect on Parent, a
<PAGE>
29
material adverse effect on the ability of Parent or Sub to perform its
obligations under this Agreement or a material adverse effect on the ability of
Parent or Sub to consummate the Offer, the Merger and the other Transactions (a
"Parent Material Adverse Effect").
------------------------------
SECTION 4.02. Sub. (a) Since the date of its incorporation, Sub has
----
not carried on any business or conducted any operations other than the execution
of this Agreement, the performance of its obligations hereunder and matters
ancillary thereto.
(b) The authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $1.00 per share, all of which have been validly issued,
are fully paid and nonassessable and are owned by Parent free and clear of any
Lien.
SECTION 4.03. Authority; Execution and Delivery; Enforceability.
--------------------------------------------------
Each of Parent and Sub has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions. The
execution and delivery by each of Parent and Sub of this Agreement and the
consummation by it of the Transactions have been duly authorized by all
necessary corporate action on the part of Parent and Sub. Parent, as sole
stockholder of Sub, has adopted this Agreement. Each of Parent and Sub has duly
executed and delivered this Agreement, and this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
SECTION 4.04. No Conflicts; Consents. (a) The execution and
-----------------------
delivery by each of Parent and Sub of this Agreement do not, and the
consummation of the Offer, the Merger and the other Transactions and compliance
with the terms hereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termina tion, cancelation or acceleration of any obligation or to
loss of a material benefit under, or to increased, addi tional, accelerated or
guaranteed rights or entitlements of any person under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any of its
subsidiaries under, any provision of (i) the charter or organizational documents
of Parent or Sub, (ii) any Contract to which Parent or Sub is a party or by
which any of their respective properties or assets is bound or (iii) subject to
<PAGE>
30
the filings and other matters referred to in Section 4.04(b), any Judgment or
Law applicable to Parent or Sub or their respective properties or assets, except
in the case of clauses (ii) and (iii) for such Violations that have not had and
would not reasonably be expected to have a Parent Material Adverse Effect.
(b) No material Consent of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to Parent or Sub in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions, other
than (i) compliance with and filings under the HSR Act, if required, (ii) the
filing with the SEC of (A) the Offer Documents and (B) such reports under
Sections 13 and 16 of the Exchange Act, as may be required in connection with
this Agreement, the Offer, the Merger and the other Transactions, (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (iv) compliance with and such filings as may be required under
applicable environmental Laws, (v) such filings as may be required in connection
with the Taxes described in Section 6.09, (vi) filings under any applicable
state takeover Law, (vii) such other items required solely by reason of the
participation of the Company (as opposed to any third party) in the Transactions
and (viii) such other Consents, registrations, declarations, filings and permits
that Parent does not have knowledge of and the failure of which to obtain or
make would not, individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect.
SECTION 4.05. Information Supplied. None of the information supplied
---------------------
or to be supplied by Parent or Sub for inclusion or incorporation by reference
in (i) the Offer Documents, the Schedule 14D-9 or the Information Statement
will, at the time such document is filed with the SEC, at any time it is amended
or supplemented or at the time it is first published, sent or given to the
Company's stock holders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, or (ii) the Proxy Statement (if required) will, at the
date it is first mailed to the Company's stockholders or at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Offer Documents will comply as to form in all
material
<PAGE>
31
respects with the requirements of the Securities Act and the rules and
regulations thereunder, except that no representation is made by Parent or Sub
with respect to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or incorporation by reference
therein.
SECTION 4.06. Brokers. No broker, investment banker, financial
--------
advisor or other person, other than Warburg Dillon Read, the fees and expenses
of which will be paid by or on behalf of Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Offer, the Merger and the other Transactions based upon arrangements
made by or on behalf of Parent.
SECTION 4.07. Financing. Parent will have the funds necessary to
----------
consummate the Offer and the Merger on the terms contemplated by this Agreement
and will provide such funds to Sub as required by Sections 1.01(c) and 2.02(a),
as the case may be.
Section 4.08. Financial Statements. Copies of the audited
---------------------
consolidated financial statements of Parent and its subsidiaries as of and for
the years ended December 31, 1998 and 1997 have previously been delivered to the
Company and such financial statements fairly present the consolidated financial
position of Parent and its subsidiaries as of the dates thereof and the
consolidated results of operations and cash flows of Parent and its subsidiaries
for the periods then ended in conformity with International Accounting
Standards. As of June 30, 1999, the consolidated shareholder's equity of Parent
and its subsidiaries is not less than the consolidated shareholder's equity of
Parent and its subsidiaries as of December 31, 1998. Since June 30, 1999, there
has been no material adverse change in the consolidated shareholder's equity of
Parent and its subsidiaries.
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 5.01. Conduct of Business. (a) Conduct of Business by the
-------------------- --------------------------
Company. Except for matters set forth in the Company Disclosure Letter or
- --------
otherwise expressly permitted by this Agreement, from the date of this Agreement
to the Effective Time the Company shall conduct its business in the ordinary
course consistent with past practices and use commercially reasonable efforts to
preserve intact its
<PAGE>
32
current business organization, the services of its current officers and
employees and its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with it to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time. In
addition, and without limiting the generality of the foregoing, except for
matters set forth in the Company Disclosure Letter or otherwise expressly
permitted by this Agreement, from the date of this Agreement to the Effective
Time, the Company shall not do any of the following without the prior written
consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (B) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (C) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell or grant (A) any shares of its capital
stock, (B) any Voting Company Debt or other voting securities, (C) any
securities convertible into or exchangeable for, or any options, warrants
or rights to acquire, any such shares, Voting Company Debt, voting
securities or convertible or exchangeable securities or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than the issuance of Company Common Stock upon the
conversion of the Company Series Preferred Stock or the exercise of Company
Employee Stock Options and Warrants, in each case outstanding on the date
of this Agreement and in accordance with their present terms;
(iii) amend the Company Charter or the Company By-laws;
(iv) subject to Section 5.02, acquire or agree to acquire (A) by
merging or consolidating with, or by purchasing a substantial equity
interest in or portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture, association or
other business organization or division thereof or (B) any assets that are
material, individually or in the aggregate, to the Company (other than
acquisitions of assets in the ordinary course of business);
<PAGE>
33
(v) (A) grant to any employee, officer or director of the Company (1)
any increase in compensation, except in the ordinary course of business
consistent with prior practice or to the extent required under employment
agreements in effect as of the date of this Agreement, or (2) any options,
capital stock or other equity-based compensation except to the extent
required under currently existing contractual arrangements, (B) grant to
any employee, officer or director of the Company any increase in severance
or termination pay, except to the extent required under any agreement in
effect as of the date of this Agreement, (C) enter into any employment,
consulting, indemnification, severance or termination agreement with any
such employee, officer or director other than at will employment
agreements, (D) except as required by Law, establish, adopt, enter into or
amend in any material respect any collective bargaining agreement or
Company Benefit Plan or (E) take any discretionary action to accelerate any
rights or benefits, or make any material determinations not in the ordinary
course of business consistent with prior practice, under any collective
bargaining agreement or Company Benefit Plan;
(vi) make any change in accounting methods, principles or practices
materially affecting the reported assets, liabilities or results of
operations of the Company, except insofar as may be required by a change in
GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of or
subject to any Lien any material properties or assets, except sales of
inventory and excess or obsolete assets in the ordinary course of business
consistent with past practice;
(viii) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company,
guarantee any debt securities of another person, enter into any "keep well"
or other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing, except for short-term borrowings incurred in the ordinary
course of business consistent with past practice, or (B) make any loans,
advances (other than employee expense advances in the ordinary course of
business) or capital contributions to, or investments in, any other person;
<PAGE>
34
(ix) make or agree to make any new capital expendi ture or
expenditures that, individually, is in excess of $50,000 or, in the
aggregate, are in excess of $250,000;
(x) (A) make or change any material Tax election, (B) settle or
compromise any material Tax liability or refund or (C) amend in any
material respect any Tax Return;
(xi) fail to (i) timely file with the relevant Taxing Authority all
material Tax Returns and reports required to be filed by it, on a basis
consistent with the elections, accounting methods, conventions and
principles of taxation used for the most recent taxable periods for which
Tax Returns involving similar Tax items have been filed, and in a manner
that does not unreasonably accelerate deductions or defer income, (ii)
timely pay all Taxes due and payable, or establish proper reserves therefor
in its books and records in accordance with GAAP, (iii) make adequate
provision on its books and records, to the extent required in accordance
with GAAP, for all Taxes due and payable after the Effective Time, and (iv)
promptly notify Parent of any action, suit, proceeding, claim or audit
pending against it in respect of any Taxes;
(xii) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent financial statements (or the notes
thereto) of the Company included in the Filed Company SEC Documents or
thereafter incurred in the ordinary course of busi ness consistent with
past practice, (B) cancel any material indebtedness (individually or in the
aggre gate) or waive any claims or rights of substantial value or (C)
waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company is a
party;
(xiii) enter into any supply agreement for any pharmaceutical product,
component of pharmaceutical products or services related to pharmaceutical
products, other than short-term purchase orders entered into in the
ordinary course of business; or
<PAGE>
35
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. Except as otherwise permitted by Section 5.02,
--------------
the Company and Parent shall not, and Parent shall not permit Sub to, knowingly
take any action that would, or that would reasonably be expected to, result in
any condition to the Offer set forth in Exhibit A, or any condition to the
Merger set forth in Article VII, not being satisfied.
SECTION 5.02. No Solicitation. (a) The Company shall not, and shall
----------------
not authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative (collectively,
"Representatives") of, the Company to, (i) directly or indirectly solicit,
- ----------------
initiate or encourage the submission of, any Company Takeover Proposal (as
defined in Section 5.02(e)), (ii) except in connection with a termination of
this Agreement pursuant to Section 8.01(e), enter into any agreement with
respect to any Company Takeover Proposal or (iii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action designed to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Company Takeover Proposal; provided,
--------
however, that prior to the acceptance for payment of shares of Company Common
- -------
Stock pursuant to the Offer the Company may, to the extent required by the
fiduciary obligations of the Company Board, as determined in good faith by it
after consultation with outside counsel, in response to a bona fide, written
Company Takeover Proposal made or received after the date of this Agreement that
was not solicited by the Company in breach or deemed breach of this Section
5.02(a) and that did not otherwise result from a breach or deemed breach of this
Section 5.02(a) and that the Company Board determines in good faith is
reasonably likely to result in a Superior Company Proposal (as defined in
Section 5.02(e)) within a reasonable period of time, and subject to compliance
with Section 5.02(c), (x) furnish information with respect to the Company to the
person making such Company Takeover Proposal and its Representatives pursuant to
a customary confidentiality agreement not less restrictive of the other party
than the Confidentiality Agreement (as defined in Section 6.02) and (y)
participate in discussions or negotiations (including solicitation of a revised
Company Takeover Proposal) with such person and its Representatives regarding
any Company Takeover Proposal. Without limiting the foregoing, it is agreed that
any violation of the restrictions set forth in the preceding
<PAGE>
36
sentence by any Representative or affiliate of the Company, whether or not such
person is purporting to act on behalf of the Company or otherwise, shall be
deemed to be a breach of this Section 5.02(a) by the Company. The Company shall,
and shall cause its Representatives to, cease immediately all discussions and
negotiations regarding any proposal that constitutes, or may reasonably be
expected to lead to, a Company Takeover Proposal that commenced prior to the
date of this Agreement (it being understood that this sentence does not preclude
responding to a bona fide, written Company Takeover Proposal made or received
after the date of this Agreement from a party that made a Company Takeover
Proposal prior to the date of this Agreement so long as the Company is in
compliance with all the other provisions of this Section 5.02).
(b) Except as permitted by this Section 5.02(b), neither the Company
Board nor any committee thereof shall (i) withdraw or modify, or publicly (or in
a manner designed to become public) propose to withdraw or modify, in a manner
adverse to Parent or Sub, the approval or recommendation by the Company Board or
any such committee of this Agreement, the Offer or the Merger, (ii) approve any
letter of intent, agreement in principle, acquisition agreement or similar
agreement relating to any Company Takeover Proposal or (iii) approve or
recommend, or publicly (or in a manner designed to become public) propose to
approve or recommend, any Company Takeover Proposal. Notwithstanding the
foregoing, if, prior to the acceptance for payment of shares of Company Common
Stock pursuant to the Offer, the Company Board receives a Superior Company
Proposal and the Company Board determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with their
fiduciary obligations, the Company Board may withdraw or modify its approval or
recommendation of the Offer, the Merger and this Agreement or enter into an
agreement in connection with a Superior Company Proposal in connection with a
termination of this Agreement in accordance with Section 8.01(e).
(c) The Company promptly shall advise Parent orally and in writing of
any Company Takeover Proposal or any inquiry with respect to or that would
reasonably be expected to lead to any Company Takeover Proposal, in each case
made or received after the date of this Agreement, and the identity of the
person making any such Company Takeover Proposal or inquiry. The Company shall
keep Parent reasonably informed of the status including any change to the
details of any such Company Takeover Proposal or inquiry.
<PAGE>
37
(d) Nothing contained in Section 5.02 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any required disclosure
to the Company's stockholders if, in the good faith judgment of the Company
Board, after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable Law (it being understood that
this Section 5.02(d) does not permit the Company Board or any committee thereof
to take any action prohibited by the first sentence of Section 5.02(b) except as
permitted by the second sentence of Section 5.02(b)).
(e) For purposes of this Agreement:
"Company Takeover Proposal" means (i) any proposal or offer for a
-------------------------
merger, consolidation, dissolution, recapitalization or other business
combination involving the Company, (ii) any proposal for the issuance by
the Company of a material amount of its equity securities as consideration
for the assets or securities of another person or (iii) any proposal or
offer to acquire in any manner, directly or indirectly, a material equity
interest in any voting securities of, or a substantial portion of the
assets of, the Company, in each case other than the Transactions.
"Superior Company Proposal" means any proposal made by a third party
-------------------------
to acquire substantially all the equity securities or assets of the
Company, pursuant to a tender or exchange offer, a merger, a consolidation,
a liquidation or dissolution, a recapitalization, a sale of its assets or
otherwise (but excluding any proposal to license any or all assets of the
Company), (i) on terms which the Company Board determines in its good faith
judgment to be more favorable to the holders of Company Common Stock than
the Transactions (after receiving advice of the Company's independent
financial advisor), taking into account all the terms and conditions of
such proposal and this Agreement (including any proposal by Parent to amend
the terms of the Transactions) and (ii) that in the good faith judgment of
the Company Board is reasonably capable of being completed, taking into
account all financial, regulatory, legal and other aspects of such
proposal.
<PAGE>
38
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.01. Preparation of Proxy Statement; Stockholders Meeting.
-----------------------------------------------------
(a) If the adoption of this Agree ment by the Company's stockholders is
required by Law, the Company shall, at Parent's request, as soon as practicable
following the acceptance for payment of, and payment for, Company Common Stock
pursuant to the Offer, prepare and file with the SEC the Proxy Statement in
preliminary form, and each of the Company and Parent shall use its commercially
reasonable efforts to respond as promptly as practicable to any comments of the
SEC with respect thereto. The Company shall notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and shall supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement. If at any
time prior to receipt of the Company Stockholder Approval there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its stockholders such
an amendment or supplement. The Company shall not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects;
provided, however, that Parent shall cooperate with the Company to resolve such
- -------- -------
objections. The Company shall use its best efforts to cause the Proxy Statement
to be mailed to the Company's stockholders as promptly as practicable after
filing with the SEC.
(b) If the adoption of this Agreement by the Company's stockholders
is required by Law, the Company shall, at Parent's request, as soon as
practicable following the acceptance for payment of, and payment for, Company
Common Stock pursuant to the Offer, duly call, give notice of, convene and hold
a meeting of its stockholders (the "Company Stockholders Meeting") for the
----------------------------
purpose of seeking the Company Stockholder Approval. The Company shall, through
the Company Board, recommend to its stockholders that they give the Company
Stockholder Approval, except to the extent that the Company Board shall have
withdrawn or modified its approval or recommendation of this Agreement, the
Offer or the Merger as permitted by Section 5.02(b). Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
the first sentence of this Section 6.01(b) shall not be affected by (i) the
commencement, public proposal, public disclosure or
<PAGE>
39
communication to the Company of any Company Takeover Proposal or (ii) the
withdrawal or modification by the Company Board of its approval or
recommendation of this Agreement, the Offer or the Merger. Notwithstanding the
foregoing, if Parent or any of its affiliates shall own at least 90% of the
outstanding shares of Company Common Stock and of each series of Company Series
Preferred Stock, Parent shall take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after the expiration of
the Offer without a stockholders meeting in accordance with Section 253 of the
DGCL.
(c) Parent shall cause all shares of Company Common Stock purchased
pursuant to the Offer and all other shares of Company Capital Stock owned by
Parent or Sub or any other subsidiary of Parent to be voted in favor of the
adoption of this Agreement.
SECTION 6.02. Access to Information; Confidentiality. The Company
---------------------------------------
shall afford to Parent, and to Parent's officers, employees, accountants,
counsel, financial advisors and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to all its
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall furnish promptly to Parent (a) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of Federal or state securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. Without limiting the generality of the
foregoing, the Company shall, within two business days of any request therefor,
provide to Parent the information described in Rule 14a-7(a)(2)(ii) under the
Exchange Act and any information to which a holder of Company Common Stock would
be entitled under Section 220 of the DGCL (assuming such holder met the
requirements of such section). All information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality agree ment dated August
24, 1999, between the Company and Parent (the "Confidentiality Agreement").
-------------------------
SECTION 6.03. Commercially Reasonable Efforts; Notification. (a)
----------------------------------------------
Upon the terms and subject to the conditions set forth in this Agreement, each
of the parties shall use its commercially reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger and the other
<PAGE>
40
Transactions, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of any of the Transactions,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) the execution
and delivery of any additional instruments necessary to consummate the
Transactions and to fully carry out the purposes of this Agreement; provided,
--------
however, that Parent shall not be required to consent to any actions (i)
- -------
challenging the acquisition by Parent or Sub of any Company Capital Stock,
seeking to restrain or prohibit the consummation of the Offer, the Merger or any
other material Transaction or seeking to obtain from the Company, Parent or Sub
any damages in connection with the Transactions that would reasonably be
expected to have a Company Material Adverse Effect, (ii) seeking to prohibit or
materially limit the ownership or operation by the Company or Parent or Parent's
subsidiaries of a material portion of the business or assets of the Company, or
of Parent or any of Parent's subsidiaries taken as a whole, or to compel the
Company, Parent or any of Parent's subsidiaries to dispose of or hold separate
any material portion of the business or assets of the Company, or of Parent or
any of Parent's subsidiaries taken as a whole, as a result of the Offer, the
Merger or any other Transaction, (iii) seeking to impose material limitations on
the ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Company Capital Stock, including the right to vote
the Company Capital Stock purchased by it on all matters properly presented to
the stockholders of the Company, or (iv) seeking to prohibit Parent or any of
its subsidiaries from effectively controlling in any material respect the
business or assets of the Company. In connection with and without limiting the
foregoing, the Company and the Company Board shall (i) take all commercially
reasonable action available to them to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to this Agreement or any
of the Transactions and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to this Agreement or any of the Transactions, take
all commercially reasonable action necessary to ensure that the Offer, the
<PAGE>
41
Merger and the other Transactions may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on the Offer, the Merger and the other
Transactions. Nothing in this Agreement shall be deemed to require any party to
waive any substantial rights or agree to any substantial limitation on its
operations or to dispose of any significant asset or collection of assets.
Notwithstanding the foregoing, the Company Board shall not be prohibited under
this Section 6.03(a) from taking any action permitted by Section 5.02.
(b) The Company shall give prompt notice to Parent, and Parent or Sub
shall give prompt notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
-------- -------
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
(c) The Company shall give prompt notice to Parent or Sub, as the case
may be, and Parent or Sub shall give prompt notice to the Company if the party
to provide the notice obtains actual knowledge of any breach or failure to
perform by the party to receive the notice of any of the representations,
warranties or covenants contained in this Agreement of the party to receive the
notice that the party to receive the notice has the right to cure pursuant to
the provisions of Section 8.01 or Exhibit A.
SECTION 6.04. Stock Options. (a) As soon as practicable following
--------------
the date of this Agreement, the Company Board (or, if appropriate, any committee
admini stering the Company Stock Plans) shall adopt such resolutions or take
such other actions as are required to adjust the terms of all outstanding
Company Employee Stock Options heretofore granted under any Company Stock Plan
to provide that each Company Employee Stock Option outstanding shall be canceled
in exchange for a cash payment by the Company at the Effective Time of an amount
equal to (i) the excess, if any, of (x) the Merger Consideration per share of
Company Common Stock over (y) the exercise price per share of Company Common
Stock subject to such Company Employee Stock Option, multiplied by (ii) the
number of shares of
<PAGE>
42
Company Common Stock for which such Company Employee Stock Option shall not
theretofore have been exercised (whether vested or not).
(b) All amounts payable pursuant to this Section 6.04 shall be
subject to any required withholding of Taxes and shall be paid without interest.
The Company shall use its best efforts to obtain all consents of the holders of
the Company Employee Stock Options as shall be necessary to effectuate the
foregoing. Notwithstanding anything to the contrary contained in this
Agreement, payment shall, at Parent's request, be withheld in respect of any
Company Employee Stock Option until all such consents are obtained.
(c) Subject to Section 6.04(a), the Company Stock Plans shall
terminate as of the Effective Time, and the provisions in any other Benefit Plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall be
deleted as of the Effective Time, and the Company shall ensure that following
the Effective Time no holder of a Company Employee Stock Option or Company SAR
or any participant in any Company Stock Plan or other Company Benefit Plan shall
have any right thereunder to acquire any capital stock of the Company or the
Surviving Corporation.
(d) As soon as practicable following the date of this Agreement, the
Company Board or, if appropriate, any committee administering the Company Stock
Purchase Plan, shall adopt such resolutions or take such other actions as are
required to (i) make all options granted under such plan exercisable at least 10
days prior to the Effective Time based on the payroll deductions then credited
to the participants' respective accounts thereunder and (ii) cancel, as of the
Effective Time, all options which have not then been exercised.
(e) In this Agreement:
"Company Employee Stock Option" means any option to purchase Company
-----------------------------
Common Stock granted under any Company Stock Plan.
"Company SAR" means any stock appreciation right linked to the price
-----------
of Company Common Stock and granted under any Company Stock Plan.
"Company Restricted Stock" mean shares of Company Stock granted under
------------------------
a Company Stock Plan which are subject to forfeiture or repurchase by the
Company.
<PAGE>
43
"Company Stock-based Awards" means any phantom stock rights, stock-
--------------------------
based performance units, or other rights or interests (excluding a Company
Employee Stock Option, Company SAR or Company Restricted Stock) granted
under a Company Stock Plan that gives any person any right to receive any
economic benefit or right similar to or derived from the benefits and
rights accruing to a holder of Company Common Stock.
"Company Stock Purchase Plan" means the 1996 Employee Stock Purchase
---------------------------
Plan.
"Company Stock Plans" means the 1999 Stock Incentive Plan, the 1996
-------------------
Director Stock Option Plan and the 1992 Stock Option Plan.
SECTION 6.05. Benefit Plans. (a) From and after the Effective Time,
--------------
Parent shall, and shall cause the Surviving Corporation to, honor in accordance
with their respective terms (as in effect on the date of this Agreement), all
the Company's employment, severance and termination agreements, plans and
policies disclosed in the Filed Company SEC Documents or the Company Disclosure
Letter.
(b) Parent shall waive, or cause to be waived, any pre-existing
condition limitation under any welfare benefit plan maintained by Parent or any
of its affiliates (other than the Company) in which employees of the Company
(and their eligible dependents) will be eligible to participate from and after
the Effective Time, except to the extent that such pre-existing condition
limitation would have been applicable under the comparable Company welfare
benefit plan immediately prior to the Effective Time. Parent shall recognize, or
cause to be recognized, the dollar amount of all expenses incurred by each
Company employee (and his or her eligible dependents) during the calendar year
in which the Effective Time occurs for purposes of satisfying such year's
deductible and co-payment limitations under the relevant welfare benefit plans
in which they will be eligible to participate from and after the Effective Time.
SECTION 6.06. Indemnification. (a) Parent shall, to the fullest
----------------
extent permitted by Law, cause the Surviving Corporation to honor all the
Company's obligations to indemnify (including any obligations to advance funds
for expenses) the current or former directors or officers of the Company for
acts or omissions by such directors and officers occurring prior to the
Effective Time to the extent that such obligations of the Company to indemnify
and advance
<PAGE>
44
expenses exist on the date of this Agreement, whether pursuant to the Company
Charter, the Company By-laws, individual indemnity agreements or otherwise, and
such obligations shall survive the Merger and shall continue in full force and
effect in accordance with the terms of the Company Charter, the Company By-laws
and such individual indemnity agreements from the Effective Time until the later
of (x) the expiration of the applicable statute of limitations with respect to
any claims against such directors or officers arising out of such acts or
omissions or (y) in the case of any claims made prior to the expiration of the
applicable statute of limitations, the final disposition of such claims.
(b) From and after the Effective Time, Parent shall indemnify and
hold harmless each current and former director and officer of the Company
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities or amounts paid in settlement (in the case
of settlements, with the approval of Parent (which approval shall not be
unreasonably withheld or delayed)) incurred in connection with their duties as
directors or officers of the Company, as the case may be, to the extent arising
out of any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, in each case to
the extent that the Company's current directors' and officers' liability
insurance policies provide coverage for such costs, expenses, judgments, fines,
losses, claims, damages, liabilities or amounts paid in settlement, and Parent
shall advance expenses in the same manner and to the same extent as provided in
such current policies.
(c) The provisions of this Section 6.06 (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 6.07. Fees and Expenses. (a) Except as provided below, all
-----------------
fees and expenses incurred in connection with the Offer, the Merger and the
other Transactions shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated.
<PAGE>
45
(b) The Company shall pay to Parent a fee of $4,000,000 if: (i) this
Agreement is terminated pursuant to Section 8.01(b)(iii) as a result of the
failure of the condition set forth in paragraph (e)(ii) of Exhibit A; (ii) the
Company terminates this Agreement pursuant to Section 8.01(e); (iii) Parent
terminates this Agreement pursuant to Section 8.01(c) as a result of the
Company's breach of or failure to perform Section 5.02 or pursuant to Section
8.01(d); or (iv) after the date of this Agreement, (A) any person publicly (or
in a manner designed to become public) makes a Company Takeover Proposal or
publicly (or in a manner designed to become public) amends a Company Takeover
Proposal made prior to the date of this Agreement, (B) this Agreement is
terminated pursuant to Section 8.01(b)(iii) as a result of the failure of the
Minimum Tender Condition or any condition set forth in paragraph (f) or (g) of
Exhibit A or pursuant to Section 8.01(b)(i) or 8.01(c) and (C) within one year
of such termination the Company enters into a definitive agreement to
consummate, or consummates, the transactions contemplated by a Company Takeover
Proposal (assuming for this purpose only that: (x) the phrase "that if
consummated would result in the owners of the Company Capital Stock immediately
prior to such transaction (1) owning, as a group, less than 50% of the
outstanding securities entitled to vote generally in the election of directors
of the resulting, surviving or acquiring corporation in such transaction or (2)
owning, as among themselves, voting securities of the resulting, surviving or
acquiring corporation in such transaction in substantially different proportions
than immediately prior to such transaction" is added at the end of clause (i) of
the definition of Company Takeover Proposal and (y) the phrases "a material
amount" in clause (ii) and "a material" and "a substantial portion" in clause
(iii) of the definition of Company Takeover Proposal are replaced, in each case,
with the phrase "50% or more"). Any fee due under this Section 6.07(b) shall be
paid by wire transfer of same-day funds on the date of termination of this
Agreement (except that in the case of termination pursuant to clause (iv) above
such payment shall be made on the date of execution of such definitive agreement
or, if earlier, consummation of such transactions) and any such fee shall be
subject to a credit for any expense reimbursement actually paid pursuant to
Section 6.07(c).
(c) The Company shall pay Parent and Sub up to $1,000,000 as
reimbursement for their out-of-pocket expenses (excluding any fees paid on a
purely discretionary basis) actually incurred in connection with this Agreement
or any of the Transactions prior to termination if this Agreement is terminated
pursuant to Section 8.01(b)(iii) as a result
<PAGE>
46
of the failure of any condition set forth in paragraph (e)(i), (f) or (g) of
Exhibit A or pursuant to Section 8.01(c). Such reimbursement shall be paid upon
demand following such termination, except that no payment shall be due under
this Section 6.07(c) if the Company has previously made any payment due under
Section 6.07(b).
SECTION 6.08. Public Announcements. Parent and Sub, on the one hand,
---------------------
and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Offer, the Merger
and the other Transactions and shall not issue any such press release or make
any such public state ment prior to such consultation (and in the case of a
press release or other public statement by Company, prior to the approval
thereof by Parent, which is not to be withheld unreasonably), except as may be
required by applicable Law, court process or by obligations pursuant to any
listing agreement with any applicable securities exchange or the Nasdaq Stock
Market, Inc. The Company shall consult with Parent before issuing, and shall
provide Parent with the opportunity to review and comment upon, any press
release or other public statement which includes any reference to the name
"Schering Aktiengesellschaft".
SECTION 6.09. Transfer Taxes. All stock trans fer, real estate
---------------
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("Transfer Taxes") incurred
--------------
in connection with the Transactions shall be paid by either Sub or the Surviving
Corporation, and the Company shall cooperate with Sub and Parent in preparing,
executing and filing any Tax Returns with respect to such Transfer Taxes.
SECTION 6.10. Directors. (a) Upon the acceptance for payment of,
----------
and payment by Sub for, any shares of Company Common Stock pursuant to the
Offer, Sub shall designate such number (subject to the other provisions of this
Section 6.10) of directors on the Company Board as will give Sub, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Company
Board equal to at least that number of directors, rounded up to the next whole
number, which is the product of (a) the total number of directors on the Company
Board (giving effect to the directors elected or appointed pursuant to this
sentence) multiplied by (b) the percentage that (i) such number of shares of
Company Common Stock so accepted for payment and paid for by Sub plus the number
of shares of Company Capital Stock otherwise owned by Parent or Sub or any other
subsidiary of Parent bears to (ii) the number of shares of
<PAGE>
47
Company Capital Stock then outstanding. Sub's designees shall be divided among
the classes of directors so as to comply with the requirements of the Company
Charter and the Company By-laws. In furtherance thereof, the Company shall, at
such time and at Sub's option, use its best efforts either to increase the size
of the Company Board or to secure the resignations of such number of its
incumbent directors, or both, as is necessary to enable Sub's designees to be
elected or appointed to the Company Board as provided above. Notwithstanding any
other provision of this Agreement, in the event that Sub's designees are
appointed or elected to the Company Board, until the Effective Time the Company
Board shall have at least two directors who are Directors on the date of this
Agreement (the "Independent Directors"); and provided further that, in such
---------------------- ----------------
event, if the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall be entitled to
designate a person to fill such vacancy who shall be deemed to be an Independent
Director for purposes of this Agreement or, if no Independent Directors then
remain, the other directors of the Company then in office shall designate two
persons to fill such vacancies who are not directors, officers, employees,
stockholders or affiliates of the Company, Parent, Sub or any affiliate of
Parent and such persons shall be deemed to be Independent Directors for purposes
of this Agreement. Subject to applicable Law, the Company shall take all action
requested by Parent necessary to effect any such election, including mailing to
its stock holders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company shall make such mailing with the mailing of the Schedule 14D-9
(provided that Sub shall have provided to the Company on a timely basis all
information required to be included in the Information Statement with respect to
Sub's designees).
(b) From and after the first time (the "Control Time") that designees
of Sub constitute a majority of the Company Board and prior to the Effective
Time, subject to the terms hereof, any amendment or modification of this
Agreement, any amendment to the Company Charter or the Company By-laws, any
termination of this Agreement by the Company, any extension of time for
performance of any of the obligations of Parent or Sub hereunder, any waiver of
any condition to the Company's obligations hereunder or any of the Company's
rights hereunder or any other action by the Company hereunder which adversely
affects holders of Company Common Stock (other than Parent or Sub) may be
effected only if there are in office one or more Independent Directors and such
action is approved by a majority vote of a quorum of
<PAGE>
48
the Company Board, such majority to include an Independent Director.
SECTION 6.11. Stockholder Litigation. The Company shall give Parent
-----------------------
the opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any Transaction;
provided, however, that no such settlement shall be agreed to without Parent's
- -------- -------
consent.
SECTION 6.12. Parent Guaranty. Parent unconditionally and
----------------
irrevocably guarantees the performance by Sub of its obligations under this
Agreement and the performance by the Surviving Corporation of its obligations
under Section 6.06 and agrees to be liable for any breach of this Agreement by
Sub or of Section 6.06 by the Surviving Corporation.
ARTICLE VII
Conditions Precedent
--------------------
SECTION 7.01. Conditions to Each Party's Obliga tion To Effect The
----------------------------------------------------
Merger. The respective obligation of each party to effect the Merger is subject
- -------
to the satisfac tion or waiver (subject to Section 6.10(b)) on or prior to the
Closing Date of the following conditions:
(a) Stockholder Approval. If required by the DGCL, the Company shall
---------------------
have obtained the Company Stockholder Approval.
(b) Antitrust. Any waiting period (and any extension thereof)
----------
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
-----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition making illegal or
otherwise prohibiting the consummation of the Merger shall be in effect;
provided, however, that prior to asserting this condition, subject to Section
- -------- -------
6.03, the party seeking to assert this condition shall have used its
commercially reasonable efforts to prevent the entry of any such injunc tion or
other order and to appeal as promptly as possible any such injunction or other
order that may be entered.
<PAGE>
49
(d) Consummation of Offer. Sub shall have accepted shares of Company
----------------------
Common Stock for payment pursuant to the Offer.
SECTION 7.02. Further Condition. The obligations of Parent and Sub
------------------
to effect the Merger are further subject to the condition that the Company shall
have caused the designees of Sub to be elected or appointed to the Company Board
in accordance with Section 6.10(a); provided, however, that neither Parent nor
-------- -------
Sub shall be entitled to assert this condition if either Parent or Sub has not
complied with its obligations under Section 6.10(a).
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
SECTION 8.01. Termination. Subject to Section 6.10(b), this
------------
Agreement may be terminated at any time prior to the Effective Time, whether
before or after receipt of the Company Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Offer shall not have been consum mated within 90 days
from the date of this Agreement (the "Outside Date"); provided,
------------ --------
however, that the right to terminate this Agreement pursuant to this
-------
Section 8.01(b)(i) shall not be available to any party whose failure
to fulfill any obligation or condition herein has been the cause of,
or resulted in, the failure of the Offer to be consummated by the
Outside Date;
(ii) if any Governmental Entity issues an order, decree or ruling
or takes any other action permanently enjoining, restraining or
otherwise prohibiting the Offer or the Merger and such order, decree,
ruling or other action shall have become final and nonappealable;
(iii) if as the result of the failure of any of the conditions
set forth in Exhibit A to this Agreement, (A) Sub shall have failed to
commence the Offer within 30 days following the date of this Agreement
or (B) the Offer shall have terminated or expired in accordance with
its terms
<PAGE>
50
without Sub having purchased any shares of Company Common
Stock pursuant to the Offer; provided, however, that the right to
-------- -------
terminate this Agreement pursuant to this clause (iii) shall not be
available to any party whose failure to fulfill any of its obligations
under this Agreement results in the failure of any such condition; or
(iv) if, upon a vote at a duly held meeting to obtain the Company
Stockholder Approval, the Company Stockholder Approval is not
obtained; provided, however, that the right to terminate this
-------- -------
Agreement pursuant to this Section 8.01(b)(iv) shall not be available
to Parent or Sub if they have failed to fulfill their obligations
under Section 6.01(c);
(c) by Parent prior to the Control Time, if the Company breaches or
fails to perform any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform causes the
failure of a condition set forth in Exhibit A (or would cause the failure
of such a condition if the Offer were then in effect) and which breach or
failure to perform shall not have been cured prior to the earlier of (i) 10
days following notice to the Company thereof and (ii) one business day
prior to the then scheduled expiration date of the Offer; provided,
--------
however, that the Company shall have no right to cure in the event that
-------
such breach or failure to perform was intentional or in the case of a
breach of or failure to perform Section 5.02;
(d) by Parent prior to the Control Time, if the Company Board or any
committee thereof withdraws or modifies, or publicly (or in a manner
designed to become public) proposes to withdraw or modify, in a manner
adverse to Parent or Sub, its approval or recommendation of this Agreement,
the Offer or the Merger, fails to recommend to the Company's stockholders
that they accept the Offer and give the Company Stockholder Approval or
publicly (or in a manner designed to become public) approves or recommends,
or proposes to approve or recommend, any Company Takeover Proposal;
(e) by the Company prior to the acceptance of shares of Company Common
Stock for payment pursuant to the Offer in accordance with Section 8.05(b);
provided, however, that the Company shall have complied with all
-------- -------
<PAGE>
51
provisions thereof, including the notice provisions therein; or
(f) by the Company prior to the acceptance of shares of Company Common
Stock for payment pursuant to the Offer, if any representation and warranty
of either Parent or Sub that is qualified as to materiality shall not be
true and correct in any respect, or any such representation and warranty
that is not so qualified shall not be true and correct in any material
respect, as of such time of termination, except to the extent such
representation and warranty expressly relates to an earlier date (in which
case as and as of such earlier date) or Parent or Sub shall have failed to
perform in any material respect any obligation or to comply in any material
respect with any agreement or covenant of Parent or Sub to be performed or
complied with by it under this Agreement which failure to be true and
correct or failure to perform or comply shall not have been cured within 10
days following notice to Parent or Sub, as the case may be, thereof.
SECTION 8.02. Effect of Termination. In the event of termination of
----------------------
this Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, except that (i) the
last sentence of Section 1.02(c), Section 3.14, Section 4.06, the last sentence
of Section 6.02, Section 6.07, this Section 8.02 and Article IX shall survive
such termination and (ii) to the extent that such termination results from the
breach by a party of any representation, warranty or covenant set forth in this
Agreement, such termination shall not relieve the breaching party from liability
to the other parties for such breach. Any damages obtained by Parent or Sub
from the Company as a result of any such breach shall be subject to a credit for
any fee or expense reimbursement actually paid pursuant to Section 6.07(b) or
(c).
SECTION 8.03. Amendment. This Agreement may (subject to Section
----------
6.10(b)) be amended by the parties at any time before or after receipt of the
Company Stockholder Approval; provided, however, that after receipt of the
-------- -------
Company Stockholder Approval, there shall be made no amendment that requires
further approval by the stockholders of the Company under the DGCL 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 (which, in
the case of the Company, shall require the approval contemplated by Section
6.10(b)).
<PAGE>
52
SECTION 8.04. Extension; Waiver. At any time prior to the Effective
------------------
Time, the parties may (subject to Section 6.10(b)) (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 8.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party (which, in the case of the Company,
shall require the approval contemplated by Section 6.10(b)). The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 8.05. Procedure for Termination, Amend ment, Extension or
---------------------------------------------------
Waiver. (a) A termination of this Agreement pursuant to Section 8.01, an
- -------
amendment of this Agreement pursuant to Section 8.03 or an extension or waiver
pursuant to Section 8.04 shall, in order to be effective, require, in the case
of Sub or the Company, action by its Board of Directors or the duly authorized
designee of its Board of Directors (which, in the case of the Company, shall
require the approval contemplated by Section 6.10(b)).
(b) The Company may terminate this Agreement pursuant to Section
8.01(e) only if (i) the Company Board has received a Superior Company Proposal,
(ii) in light of such Superior Company Proposal the Company Board shall have
determined in good faith, after consultation with outside counsel, that it is
necessary for the Company Board to withdraw or modify its approval or
recommendation of this Agreement, the Offer or the Merger in order to comply
with its fiduciary duty under applicable Law, (iii) the Company has notified
Parent in writing of the determinations described in clause (ii) above, (iv) at
least three business days following receipt by Parent of the notice referred to
in clause (iii) above, and taking into account any revised proposal made by
Parent since receipt of the notice referred to in clause (iii) above, such
Superior Company Proposal remains a Superior Company Proposal and the Company
Board has again made the determinations referred to in clause (ii) above, (v)
the Company is in compliance with Section 5.02, (vi) the Company concurrently
pays the fee due under Section 6.07 and (vii) the Company Board concurrently
approves, and the Company concurrently enters into, a definitive agreement
providing for the implementation of such Superior Company Proposal.
<PAGE>
53
ARTICLE IX
General Provisions
------------------
SECTION 9.01. Nonsurvival of Representations and Warranties. None of
----------------------------------------------
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time. Each party agrees
that, except for the representations and warranties contained in this Agreement,
none of the Company, Parent or Sub makes any other representations or
warranties, and each hereby disclaims any other representations and warranties
made by itself or any of its officers, directors, employees, agents, financial
and legal advisors or other representatives, with respect to the execution and
delivery of this Agreement or the Transactions.
SECTION 9.02. Notices. All notices, requests, claims, demands and
--------
other communications under this Agree ment shall be in writing and shall be
deemed given upon receipt by the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Schering Berlin Inc.
340 Changebridge Road
P.O. Box 1000
Montville, NJ 07045
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Peter S. Wilson, Esq.
<PAGE>
54
(b) if to the Company, to
Diatide, Inc.
9 Delta Drive
Londonderry, NH 03053
Attention: Dr. Richard T. Dean
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: David E. Redlick, Esq.
SECTION 9.03. Definitions. For purposes of this Agreement:
------------
An "affiliate" of any person means another person that directly or
---------
indirectly, through one or more intermedi aries, controls, is controlled by, or
is under common control with, such first person.
A "Company Material Adverse Effect" means a material adverse effect on
-------------------------------
the Company, a material adverse effect on the ability of the Company to perform
its obligations under this Agreement or a material adverse effect on the ability
of the Company to consummate the Offer, the Merger or the other Transactions;
provided, however, that "Company Material Adverse Effect" shall not include any
- -------- -------
adverse change, effect or circumstance primarily arising out of or resulting
primarily from actions contemplated by the parties in connection with this
Agreement.
A "material adverse effect" on a party means any change, effect or
-----------------------
circumstance that is materially adverse to the business, assets, prospects,
financial condition or results of operations of such party and its subsidiaries,
if any, taken as a whole (other than changes that are the result of economic
factors affecting the economy as a whole, changes that are the result of factors
generally affecting the specific industry or markets in which such party
competes and changes, effects and circumstances that are primarily attributable
to the announcement of this Agreement or the Transactions).
A "person" means any individual, firm, corporation, partnership,
------
company, limited liability company,
<PAGE>
55
trust, joint venture, association, Governmental Entity or other entity.
A "subsidiary" of any person means another person, an amount of the
----------
voting securities or other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
SECTION 9.04. Interpretation; Company Disclosure Letter. When a
------------------------------------------
reference is made in this Agreement to an Article or a Section, such reference
shall be to an Article or a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The inclusion of any information in the Company
Disclosure Letter shall not be deemed an admission or acknowledgment, in and of
itself, that such information is required by the terms hereof to be disclosed,
is material or is outside the ordinary course of business.
SECTION 9.05. Severability. If any term or other provision of this
-------------
Agreement is invalid, illegal or incapable of being enforced by any rule or Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the Transactions are fulfilled to the extent possible.
SECTION 9.06. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries. Except
-----------------------------------------------
for the Confidentiality Agreement, which shall survive in accordance with it
terms, this
<PAGE>
56
Agreement, taken together with the Company Disclosure Letter, (a) constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the Transactions and (b)
except for the provisions of Article II, Section 6.04 and Section 6.06, are not
intended to confer upon any person other than the parties any rights or
remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed by,
--------------
and construed in accordance with, the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof, except to the extent the laws of Delaware are mandatorily
applicable to the Merger.
SECTION 9.09. Assignment. Neither this Agreement nor any of the
-----------
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by any of the parties without the prior written consent of the
other parties, except that Sub may assign, in its sole discretion, any of or all
its rights, interests and obligations under this Agreement to Parent or to any
direct or indirect wholly owned subsidiary of Parent, but no such assignment
shall relieve Sub of any of its obligations under this Agreement. Any purported
assignment without such consent shall be void. Subject to the preceding
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.10. Enforcement. The parties agree that irreparable damage
------------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Delaware state court or any
Federal court located in the State of Delaware, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Delaware state court or any Federal court located in the State of
Delaware in the event any dispute arises out of this Agreement or any
Transaction, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c)
agrees that it will not bring any action relating to this Agreement or any
Transaction in any court other than any Delaware state court or any Federal
court sitting in the State of Delaware and (d) waives any
<PAGE>
57
right to trial by jury with respect to any action related to or arising out of
this Agreement or any Transaction.
IN WITNESS WHEREOF, Parent, Sub and the Company have duly executed
this Agreement, all as of the date first written above.
SCHERING BERLIN INC.,
by
/s/ ROBERT CHABORA
--------------------------
Name: Robert Chabora
Title: Vice President-Law
BXA ACQUISITION COMPANY,
by
/s/ ROBERT CHABORA
--------------------------
Name: Robert Chabora
Title: President
DIATIDE, INC.,
by
/s/ RICHARD T. DEAN
--------------------------
Name: Richard T. Dean
Title: President
<PAGE>
EXHIBIT A
Conditions of the Offer
-----------------------
Notwithstanding any other term of the Offer or this Agreement, 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 Sub's obligation to pay for or return tendered shares of Company
Common Stock promptly after the termina tion 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,
assuming Sub then owned all the outstanding Company Series Preferred Stock,
would together represent at least a majority of the voting power of the Fully
Diluted Shares (the "Minimum Tender Condition") and (ii) any waiting period
------------------------
under the HSR Act applicable to the purchase of shares of Company Common Stock
pursuant to the Offer shall have expired or been terminated. The term "Fully
-----
Diluted Shares" means all outstanding securities entitled generally to vote in
- --------------
the election of directors of the Company on a fully diluted basis, after giving
effect to the exercise or conversion of all options, rights and securities
exercisable or convertible into such voting securities. Furthermore,
notwithstanding any other term of the Offer or this Agreement (other than the
fourth and fifth sentences of Section 1.01(a)), Sub shall not be required to
commence the Offer, accept for payment or, subject as aforesaid, to pay for any
shares of Company Common Stock not theretofore accepted for payment or paid for,
and may terminate or amend the Offer, with the consent of the Company or if, at
any time on or after the date of this Agreement and before the acceptance of
such shares for payment or the payment therefor, any of the following conditions
shall have occurred and be continuing:
(a) there shall be instituted or pending any suit, action or
proceeding by any Governmental Entity, or any suit, action or proceeding by
any other person that has a reasonable likelihood of success, (i)
challenging the acquisition by Parent or Sub of any Company Common Stock,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger or any other material Transaction, or seeking to obtain from the
Company, Parent or Sub any damages in connection with any of the
Transactions that are material in relation to the Company, (ii) seeking to
prohibit or materially limit the ownership or operation by the Company,
Parent or any of Parent's subsidiaries of any material portion of the
business or assets of the Company, or of Parent and its subsidiaries taken
as a whole, or to compel the
<PAGE>
2
Company, Parent or any of Parent's subsidiaries to dispose of or hold
separate any material portion of the business or assets of the Company, or
of Parent and its subsidiaries taken as a whole, in any case as a result of
the Offer, the Merger or any other Transaction, (iii) seeking to impose
material limitations on the ability of Parent or Sub to acquire or hold, or
exercise full rights of ownership of, any shares of Company Capital Stock,
including the right to vote the Company Capital Stock purchased by it on
all matters properly presented to the stockholders of the Company or (iv)
seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the
Company or (v) which otherwise is reasonably likely to have a Company
Material Adverse Effect;
(b) any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction shall be enacted, entered, enforced,
promulgated, amended or issued with respect to, or deemed applicable to, or
any consent or approval withheld with respect to, (i) Parent, the Company
or any of Parent's subsidiaries or (ii) the Offer, the Merger or any other
Transaction, by any Governmental Entity, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
paragraph (a) above;
(c) except as disclosed in the Company Disclosure Letter, since the
date of this Agreement there shall have occurred any event, change, effect
or development that, individually or in the aggregate, has had or is
reasonably likely to have, a Company Material Adverse Effect;
(d) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the
United States for a period of five business days (excluding any coordinated
trading halt triggered solely by a specified decrease in a market index and
any suspensions or limitations resulting solely from physical damage or
interference with such markets not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks by a Governmental Entity in the United States or (iii) in
the case of any of the foregoing existing on the date of this Agreement, a
material acceleration or worsening thereof;
<PAGE>
3
(e)(i) beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of
more than 15% of the outstanding shares of the Company Common Stock has
been acquired by any person other than Parent, Sub or any of their
affiliates, or any group of which any of them is a member (it being
understood for this purpose that the conversion or exercise of Company
Series Preferred Stock or Warrants outstanding on the date of this
Agreement shall not be deemed to constitute an acquisition of shares of
Company Common Stock), or (ii) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified, or publicly (or in a
manner designed to become public) proposed to withdraw or modify, in a
manner adverse to Parent or Sub, its approval or recommendation of this
Agreement, the Offer or the Merger, failed to recommend to the Company's
stockholders that they accept the Offer and give the Company Stockholder
Approval or approved or recommended, or publicly (or in a manner designed
to become public) proposed to approve or recommend, any Company Takeover
Proposal;
(f) any representation and warranty of the Company in this Agreement
that is qualified as to materiality shall not be true and correct in any
respect, or any such representation and warranty that is not so qualified
shall not be true and correct in any material respect, as of such time,
except to the extent such representation and warranty expressly relates to
an earlier date (in which case on and as of such earlier date), which
failure to be true and correct shall not have been cured prior to the
earlier of (i) 10 days following notice to the Company thereof and (ii) one
business day prior to the then scheduled expiration date of the Offer;
provided, however, that the Company shall have no right to cure in the
-------- -------
event that such failure to be true and correct results from an intentional
breach;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement which failure to perform or comply shall not have been cured
prior to the earlier of (i) 10 days following notice to the Company thereof
and (ii) one business day prior to the then scheduled expiration date of
the Offer; provided, however, that the Company shall have no right to cure
-------- -------
in the event that such failure to perform or comply was intentional or in
the
<PAGE>
4
case of a failure to perform or comply with Section 5.02; or
(h) this Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of 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 such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Sub and Parent
and may be asserted by Sub or Parent regardless of the circumstances giving rise
to such condition or may be waived by Sub and Parent in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent,
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 circum stances 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.
<PAGE>
EXHIBIT B
Article Fourth shall be amended to read as follows: "The total number
of shares of all classes of stock that the Corporation shall have authority to
issue is 1,000 shares of Common Stock having the par value of $1.00 per share."
Article Eleventh shall be amended to read as follows: "Unless and
except to the extent that the By-laws of the Corporation so require, the
election of directors of the Corporation need not be by written ballot."
Articles Twelfth and Thirteenth shall be deleted.
<PAGE>
Exhibit (c)(2)
CIBC CIBC World Market Corp.
World Markets 425 Lexington Avenue, 6th Floor
between 43rd and 44th Streets
New York, NY 10017
Tel: 212-456-4000
Fax: 212-5-4013
August 23, 1999
Schering Berlin Inc.
340 Changebridge Road
P.O. Box 1000
Montville, NJ 07045-2000
Attention: Lutz Lingnau
President & CEO
Gentlemen:
In connection with your consideration of a possible negotiated transaction
with Diatide, Inc. (the "Company"), you have requested, and the Company is
prepared to make available to you, certain information concerning its business,
operations, assets and liabilities. As a condition to such information being
furnished to you and your directors, officers, employees, agents or advisors
(including, without limitation, attorneys, accountants, consultants, bankers and
financial advisors) (collectively, "Representatives"), you agree to treat any
information concerning the Company (whether prepared by the Company, its
advisors or otherwise and irrespective of the form of communication) which has
been or is furnished to you or to your Representatives by or on behalf of the
Company (herein collectively referred to as the "Evaluation Material") in
accordance with the provisions of this letter agreement, and to take or abstain
from taking certain other actions hereinafter set forth.
The term "Evaluation Material" shall be deemed to include any notes,
analyses, compilations, studies, interpretations, memoranda or other documents
(regardless of the form thereof) prepared by you or your Representatives to the
extent that they contain, reflect or are based upon, in whole or in part, any
information furnished to you or your Representatives pursuant hereto. The term
"Evaluation Material" does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure
directly or indirectly by you or your Representatives; (ii) was within your
possession prior to it being furnished to you or your Representatives by or on
behalf of the Company pursuant hereto, provided that such information is not
subject to another confidentiality agreement with or other contractual, legal or
fiduciary
<PAGE>
Diatide, Inc.
August 23, 1999
Page 2
obligation of confidentiality to the Company or any other party with respect to
such information; (iii) becomes available to you on a non-confidential basis
from a source other than the Company or any of its Representatives, provided
that such source is not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information; or (iv) information developed
by or for you independently of the Evaluation Material provided by the Company
which you can demonstrate with clear and convincing documentation.
You hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible negotiated transaction
between the Company and you, that the Evaluation Material will be kept
confidential and that you and your Representatives will not disclose any of the
Evaluation Material in any manner whatsoever, provided, however, that (i) you
may make any disclosure of such information to which the Company gives its prior
written consent; and (ii) any of such information may be disclosed to your
Representatives who need to know such information for the sole purpose of
evaluating a possible negotiated transaction with the Company, who agree to keep
such information confidential and who are provided with a copy of this letter
agreement and agree to be bound by the terms hereof with respect to
confidentiality to the same extent as if they were parties hereto. In any
event, you shall be responsible for any breach of this letter agreement by any
of your Representatives, and you agree, at your sole expense, to take all
reasonable measures (including but not limited to court proceedings) to restrain
your Representatives from prohibited or unauthorized disclosure or use of the
Evaluation Material.
In addition, you agree that, without the prior written consent of the
Company, you and your Representatives will not disclose to any other person the
existence of this letter agreement, the fact that the Evaluation Material has
been made available to you, that discussions or negotiations are taking place
concerning a possible transaction involving the Company or any of the terms,
conditions or other facts with respect thereto (including the status thereof),
provided that you may make such disclosure if (a) you have received the written
opinion of your outside counsel that such disclosure must be made by you in
order that you not commit a violation of any law (in which case you agree to
give the Company at least 24 hours advance notice of such planned disclosure if
such notice is not inconsistent with
<PAGE>
Diatide, Inc.
August 23, 1999
Page 3
your obligations or those of your Representatives under such law) or (b) such
information becomes known to the public as a result of a disclosure by the
Company. The term "person" as used in this letter agreement shall be broadly
interpreted to include the media and any governmental representative or
authority, corporation, company, partnership, joint venture, group, limited
liability company, other entity or individual. The Company acknowledges that,
subject to its prior written approval, you may contact certain representatives
of Nycomed Amersham PLC (collectively with its affiliates "Nycomed") to discuss
and evaluate the status of the relationship of the Company and Nycomed prior to
the consummation of the transaction being contemplated hereby.
In the event that you or any of your Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) to disclose any of the Evaluation Material, you shall provide
the Company with prompt written notice of any such request or requirement so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this letter agreement. If, in the
absence of a protective order or other remedy or the receipt of a waiver by the
Company, you or any of your Representatives are nonetheless, in the opinion of
your outside counsel, legally compelled to disclose Evaluation Material to any
tribunal or other entity or else stand liable for contempt or suffer other
censure or penalty, you or your Representatives may, without liability
hereunder, disclose to such tribunal or other entity only that portion of the
Evaluation Material which such counsel advises you is legally required to be
disclosed, provided that you exercise your best efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Evaluation
Material by such tribunal or other entity.
If you decide that you do not wish to proceed with a transaction with the
Company, you will promptly inform the Company of that decision. In that case,
or at any time upon the request of the Company for any reason, you will promptly
(and in no event later than five business days after such request) deliver to
the Company all Evaluation Material (and all copies thereof) furnished to you or
your Representatives by or on behalf of the Company pursuant hereto and you
shall
<PAGE>
Diatide, Inc.
August 23, 1999
Page 4
not retain any copies, extracts or other reproductions in whole or in part of
such material (except that your outside counsel may retain one (1) copy of the
Evaluation Material in a sealed file). In the event of such a decision or
request, all Evaluation Material prepared by you or your Representatives shall
be destroyed and no copy thereof (including that stored in any computer or
similar device) shall be retained and such destruction shall, upon the Company's
written request, be certified in writing to the Company by an authorized officer
supervising such destruction. Notwithstanding the return or destruction of the
Evaluation Material, you and your Representatives will continue to be bound by
your obligations of confidentiality and other obligations hereunder.
You understand and acknowledge that neither the Company nor any of its
Representatives (including, without limitation, CIBC World Markets ("CIBC")), or
any of their respective directors, officers, stockholders, partners, owners,
employees, affiliates or agents make any representation or warranty, express or
implied, as to the accuracy or completeness of the Evaluation Material. You
agree that neither the Company nor any of its Representatives (including,
without limitation, CIBC), or any of their respective directors, officers,
stockholders partners, owners, employees, affiliates or agents shall have any
liability to you or to take any of your Representatives or any other person
relating to or resulting from the use of the Evaluation Material or any errors
therein or omissions therefrom. Only those representations or warranties which
are made in a final definitive agreement regarding any transactions contemplated
hereby, whom, as and if executed, and subject to such limitations and
restrictions as may be specified therein, will have any legal effect.
In addition, you hereby acknowledge that you are aware (and that prior to
their receipt of any Evaluation Material your Representatives who are apprised
of a possible transaction have been or will be advised) that the United States
and other applicable securities laws may prohibit any person who has material,
non-public public information about a company obtained directly or indirectly
from that company from purchasing or selling securities of such company or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
<PAGE>
Diatide, Inc.
August 23, 1999
Page 5
You agree that all communications regarding a possible transaction
regarding the Company, all requests for additional information, facility tours
or management meetings and all discussions or questions regarding procedures
with respect to a possible transaction, will be submitted or directed to CIBC or
the Company. Without the express prior consent of the Company, you agree that
you will not, directly or indirectly, contact or communicate with any officer,
employee or agent of the Company.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of one year from the date thereof, neither you
nor any of your affiliates will directly or indirectly, (a) solicit for
employment or hire any of the employees of the Company or say former employee of
the Company whose employment terminated within the two months prior to such
solicitation or hiring if you have had contact with such employee or former
employee or such employee or former employee became known to you in connection
with your consideration of the Evaluation Material and the possible transaction
between the Company and you; and (b) solicit for employment any other employee
of the Company, except general solicitations not directed at the Company.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of two (2) years from the date of this letter
agreement, unless such shall have been specifically invited in writing by the
Company, neither you nor any of your affiliates (as such term is defined under
the Securities Exchange Act of 1934, as amended (the "1934 Act")) will in any
manner, directly or indirectly: (a) effect or seek, offer or propose (whether
publicly or otherwise) to effect, or cause or participate in or in any way
assist any other person to effect or seek, offer or propose (whether publicly or
otherwise) to effect or participate in, (i) any acquisition of any class of
voting securities (or beneficial ownership thereof) or a material portion of
assets (outside the normal course of business of the Company, (ii) any tender or
exchange offer, merger or other business combination involving the Company;
(iii) any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to the Company; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or consents to vote any voting securities of
the Company; (b) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the 1934 Act) with respect to any class
<PAGE>
Diatide, Inc.
August 23, 1999
Page 6
of voting securities of the Company; (c) otherwise act, alone or in concert with
others, to seek to control or influence the management, Board of Directors or
policies of the Company; (d) take any action which could reasonably be expected
to force the Company to make a public announcement regarding any of the types of
matters set forth in (a) above; or (e) enter into any discussions or
arrangements with any third party with respect to any of the foregoing; provided
however that, in the event that the Company enters into a final definitive
agreement during such two (2) year period with a third party with respect to the
sale of the Company through a merger, business combination, recapitalization or
similar transaction or the sale of all or substantially all of the assets of the
Company, each of the restrictions in clauses (a) through (c) above shall
terminate and cease to be in effect upon the execution of such final definitive
agreement (although nothing herein shall relieve you of your other obligations
under this Agreement, including without limitation your obligations with respect
to the Evaluation Material). You also agree during such period not to request
the Company (or its directors, officers, employees or agents), directly or
indirectly, to amend or waive any provision of this paragraph (including this
sentence).
You understand and agree that no contract or agreement providing for any
transaction involving the Company shall be deemed to exist between you and the
Company unless and until a final definitive agreement has been executed and
delivered, and you hereby waive, in advance, any claims (including, without
limitation, claims for breach of contract) in connection with any transaction
involving the Company unless and until you and the Company shall have entered
into a final definitive agreement. You also agree that unless and until a final
definitive agreement regarding a transaction between the Company and you has
been executed and delivered, neither the Company nor you will be under any legal
obligation of any kind whatsoever with respect to such a transaction by virtue
of this letter agreement or any other written or oral expression with respect to
such transaction, except for the matters specifically agreed to herein. You
further acknowledge and agree that the Company reserves the right, in its sole
discretion, to reject any and acknowledge and agree that the Company reserves
the right, in its sole discretion, to reject any and all proposals made by you
or any of your Representatives with regard to a transaction between the Company
and you, and to terminate discussions and negotiations with you at any time and
for any reason or no reason. You further understand
<PAGE>
Diatide, Inc.
August 23, 1999
Page 7
that (i) the Company and its Representatives shall be free to conduct any
process for any transaction involving the Company, if and as they in their sole
discretion shall determine (including, without limitation, negotiating with any
other interested parties and entering into a preliminary or definitive agreement
without prior notice to you or any other person); (ii) any procedures relating
to such process or transaction may be changed at any time without notice to you
or any other person and (iii) you shall not have any claims whatsoever against
the Company, its Representatives or any of their respective directors, officers,
stockholders, owners, partners, employees, affiliates or agents arising out of
or relating to any transaction involving the Company (other than those as
against the parties to a final definitive agreement with you in accordance with
the terms thereof) nor, unless a final definitive agreement is entered into with
you, against any third party with whom a transaction is entered into. Neither
this paragraph nor any other provision in this letter agreement can be waived or
amended except by written consent of the Company, which consent shall
specifically refer to this paragraph (or such provision) and explicitly make
such waiver or amendment. For the purposes of this paragraph, the term
"definitive agreement" shall not include an executed letter of intent or any
other preliminary written agreement, nor does it include any written or verbal
acceptance by the Company of any offer or bid on your part.
It is understood and agreed that no failure or delay by the parties hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
You recognize and acknowledge the competitive value and confidential nature
of the Evaluation Material and that irreparable damage may result to the Company
if information contained therein or derived therefrom is disclosed to any third
party except as herein provided or is used for any purpose other than the
evaluation of a possible negotiated transaction with the Company. It is further
understood and agreed that money damages may not be a sufficient remedy for any
breach of this letter agreement by you or any of your Representatives and that
if money damages are not a sufficient remedy the Company shall be entitled to
equitable relief, including injunction and specific performance, as a remedy for
any such breach. Such remedies shall not be deemed to be the exclusive remedies
for a breach by you of
<PAGE>
Diatide, Inc.
August 23, 1999
Page 8
this letter agreement but shall be in addition to all other remedies available
at law or equity to the Company.
This letter agreement is for the benefit of the Company, its
Representatives (including, without limitation, CIBC) and their respective
directors, officers, stockholders, partners, owners, employees, affiliates and
agents, and shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, without giving effect to the principles of
conflicts of law thereof to the extent this application would require the
application of the laws of any other jurisdiction. You hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the courts of
the Commonwealth of Massachusetts and the United States of America located in
the Commonwealth of Massachusetts for any actions, suits or proceedings arising
out of or relating to this agreement and the transactions contemplated hereby
(and you agree not to commence any action, suit or proceeding relating thereto
except in such courts), and further agree that service of any process, summons,
notice or document by U.S. registered mail to your address set forth above shall
be effective service of process for any action, suit or proceeding brought
against you in any such court. You hereby irrevocably and unconditionally waive
any objection to the laying of venue of any action, suit or proceeding arising
out of this agreement or the transactions contemplated hereby, in the courts of
the Commonwealth of Massachusetts or the United States of America located in the
Commonwealth of Massachusetts, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
The rights of the Company under this letter agreement may be assigned in
whole or in part to any purchaser of the Company, which purchaser shall be
entitled to enforce this agreement to the same extent and in the same manner as
the Company is entitled to enforce this agreement. You may not assign your
rights or obligation under this agreement to any person or entity without the
prior written consent of the Company. Subject to the foregoing, this agreement
shall be binding on the respective successors and assigns of the parties hereto.
The letter agreement contains the entire agreement between you and the
Company concerning the subject matter hereof, and no modification of this of
this agreement or
<PAGE>
Diatide, Inc.
August 23, 1999
Page 9
waiver of the terms and conditions hereof will be binding unless approved in
writing by you and the Company.
For the convenience of the parties, this letter agreement may be executed
by facsimile and in counterparts, each of which shall be deemed to be an
original, and both of which taken together, shall constitute one agreement
binding on both parties.
This agreement supersedes all prior agreements, written or oral, between
you and the Company relating to the subject matter of this agreement including
but not limited to the "Secrecy Agreement" dated July 2, 1999. In accordance
with the terms of this letter agreement, all information furnished to you
pursuant to the Secrecy Agreement shall be deemed Evaluation Material hereunder.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter agreement to the undersigned, whereupon this letter
agreement shall become a binding agreement between you and the Company.
Very truly yours,
DIATIDE, INC.
As financial advisor to
and on behalf of, Diatide, Inc.
By: /s/ David Buxbaum
---------------------------
Name: David Buxbaum
Title: Executive Director
Accepted and agreed as of the date first written above:
Schering Berlin Inc.
By: /s/
--------------------
Name:
Title:
<PAGE>
EXHIBIT (c)(3)
EXECUTION COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of September 17, 1999,
between Chase Venture Capital Associates, L.P. (the "Seller") and
------
BXA Acquisition Company, a Delaware corporation ("Purchaser").
---------
Seller understands that Purchaser is contemplating entering into an
agreement and plan of merger dated as of September 17, 1999 (the "Merger
Agreement"), among Schering Berlin Inc., a Delaware corporation ("Parent"),
Purchaser and Diatide, Inc., a Delaware corporation (the "Company"). The Merger
Agreement provides, among other things, for the commencement of a tender offer
(as it may be amended from time to time, the "Offer") to purchase all the shares
of common stock, par value $0.001 (the "Company Common Stock"), of the Company.
In connection with the transactions contemplated by the Merger
Agreement, Purchaser desires to purchase from Seller, and Seller desires to sell
to Purchaser, 871,795 shares of the Series A Convertible Preferred Stock, par
value $0.01 per share (the "Shares"), of the Company.
------
Accordingly, to induce Purchaser to enter into the Merger Agreement,
the parties hereby agree as follows:
SECTION 1.01. Purchase and Sale of the Shares. On the terms and
--------------------------------
subject to the conditions of this Agreement, if Purchaser accepts for payment
and pays for any shares of Company Common Stock pursuant to the Offer, Seller
shall sell, transfer and deliver to Purchaser, and Purchaser shall purchase from
Seller, on the first date on which Purchaser pays for any shares of Company
Common Stock accepted for payment pursuant to the Offer, the Shares for a
purchase price per share of $9.75 in cash or such greater amount as shall be
equal to the highest price per share of Company Common Stock paid pursuant to
the Offer (the "Per Share Price"), payable as set forth in Section 1.03 (the
---------------
"Acquisition").
- ------------
SECTION 1.02. Closing Date. The closing of the Acquisition (the
-------------
"Closing") shall take place at the offices of Hale and Dorr LLP, 60 State
- --------
Street, Boston, Massachusetts 02109, at 10:00 a.m. on the first date on which
Purchaser pays for any shares of Company Common Stock accepted for payment
pursuant to the Offer, or at such other place, time and date as shall be agreed
between Seller and Purchaser.
<PAGE>
2
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".
------------
SECTION 1.03. Transactions To Be Effected at the Closing. At the
---------------------------------- --------
Closing:
(a) Seller shall deliver to Purchaser certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed
in blank in proper form for transfer, with appropriate transfer tax stamps,
if any, affixed; and
(b) Purchaser shall deliver to Seller payment, by wire transfer to a
bank account designated in writing by Seller, of immediately available
funds in an amount equal to the product of the number of Shares and the Per
Share Price.
Section 1.04. Proxy. (a) Effective upon such time as Purchaser
------
accepts for payment and pays for, pursuant to the Offer and prior to Closing,
any shares of Company Common Stock pursuant to the Offer, Seller hereby
irrevocably grants to, and appoints, Purchaser and Robert Chabora, or either of
them, and any individual designated in writing by either of them, and each of
them individually, as Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Shares or grant a consent or approval in respect of the Shares on any matter in
such proxy's sole discretion. The Seller hereby further affirms that such
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. Seller hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the DGCL.
(b) Seller agrees not to (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
--------
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any Shares to any person other
than to Purchaser pursuant to the Acquisition or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, with respect to
any Shares other than this Agreement, and shall not commit or agree to take any
of the foregoing actions.
SECTION 1.05. Representations and Warranties of Seller. Seller hereby
-----------------------------------------
represents and warrants as of the date hereof and as of the Closing Date that:
Seller has good
<PAGE>
3
and valid title to the Shares, free and clear of all liens, mortgages, security
interests, charges, covenants, options, claims, restrictions or encumbrances of
any type, other than any restrictions pursuant to (i) the Securities Purchase
Agreement dated September 23, 1997 (the "Purchase Agreement"), among the
Company, Seller and the other parties party thereto or (ii) the Registration
Rights Agreement dated as of September 23, 1997 (the "Registration Rights
Agreement"), among the Company, Seller and the other parties party thereto
(collectively, "Liens"). Assuming Purchaser has the requisite power and
-----
authority to be the lawful owner of the Shares, upon delivery to Purchaser at
the Closing of certificates representing the Shares, duly endorsed by Seller for
transfer to Purchaser, and upon Seller's receipt of the purchase price for the
Shares specified in Section 1.01, good and valid title to the Shares will pass
to Purchaser, free and clear of any Liens, other than those arising from acts of
Purchaser or its affiliates. Other than this Agreement, the Purchase Agreement
and the Registration Rights Agreement, the Shares are not subject to any voting
trust agreement or other contract, including any contract restricting or
otherwise relating to the voting, dividend rights or disposition of the Shares.
SECTION 1.06. Termination. (a) This Agreement may be terminated at
-----------
any time prior to the Closing by mutual written consent of Seller and Purchaser.
This Agreement shall automatically terminate upon the termination or expiration
of the Offer without the purchase of any shares of Company Common Stock
thereunder.
SECTION 1.07. Miscellaneous. This Agreement may not be amended or
--------------
modified except by an instrument in writing signed by Purchaser and Seller.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State. Each party submits to the
exclusive jurisdiction of the courts of the State of New York and the Federal
District Court, in each case located in the Borough of Manhattan, in connection
with any suit, action or proceeding arising out of this Agreement.
<PAGE>
4
IN WITNESS WHEREOF, Seller and Purchaser have duly executed this
Agreement as of the date first written above.
CHASE VENTURE CAPITAL ASSOCIATES, L.P.,
By: Chase Capital Partners, its General Partner
by /s/ DAMIEN WICKER
---------------------------
Name: Damien Wicker
Title: Managing Director
BXA ACQUISITION COMPANY,
by /s/ ROBERT CHABORA
---------------------------
Name: Robert Chabora
Title: President
Parent hereby unconditionally and irrevocably guarantees the
performance by Purchaser of its obligations under this Agreement.
SCHERING BERLIN INC.,
by /s/ ROBERT CHABORA
----------------------------
Name: Robert Chabora
Title: Vice President - Law
<PAGE>
EXHIBIT (c)(4)
EXECUTION COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of September 17, 1999,
between Alta Biopharma Partners, L.P. (the "Seller") and BXA
------
Acquisition Company, a Delaware corporation ("Purchaser").
---------
Seller understands that Purchaser is contemplating entering into an
agreement and plan of merger dated as of September 17, 1999 (the "Merger
Agreement") among Schering Berlin Inc., a Delaware corporation ("Parent"),
Purchaser and Diatide, Inc., a Delaware corporation (the "Company"). The Merger
Agreement provides, among other things, for the commencement of a tender offer
(as it may be amended from time to time, the "Offer") to purchase all the shares
of common stock, par value $0.001 (the "Company Common Stock"), of the Company.
In connection with the transactions contemplated by the Merger
Agreement, Purchaser desires to purchase from Seller, and Seller desires to sell
to Purchaser, 795,332 shares of the Series B Convertible Preferred Stock, par
value $0.01 per share (the "Shares"), of the Company.
------
Accordingly, to induce Purchaser to enter into the Merger Agreement,
the parties hereby agree as follows:
SECTION 1.01. Purchase and Sale of the Shares. On the terms and
--------------------------------
subject to the conditions of this Agreement, if Purchaser accepts for payment
and pays for any shares of Company Common Stock pursuant to the Offer, Seller
shall sell, transfer and deliver to Purchaser, and Purchaser shall purchase from
Seller, on the first date on which Purchaser pays for any shares of Company
Common Stock accepted for payment pursuant to the Offer, the Shares for a
purchase price per share of $9.50 in cash or such greater amount as shall be
equal to the highest price per share of Company Common Stock paid pursuant to
the Offer (the "Per Share Price"), payable as set forth in Section 1.03 (the
---------------
"Acquisition").
- ------------
SECTION 1.02. Closing Date. The closing of the Acquisition (the
-------------
"Closing") shall take place at the offices of Hale and Dorr LLP, 60 State
- --------
Street, Boston, Massachusetts 02109, at 10:00 a.m. on the first date on which
Purchaser pays for any shares of Company Common Stock accepted for payment
pursuant to the Offer, or at such other place, time and date as shall be agreed
between Seller and Purchaser.
<PAGE>
2
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".
------------
SECTION 1.03. Transactions To Be Effected at the Closing. At the
---------------------------------- --------
Closing:
(a) Seller shall deliver to Purchaser certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed
in blank in proper form for transfer, with appropriate transfer tax stamps,
if any, affixed; and
(b) Purchaser shall deliver to Seller payment, by wire transfer to a
bank account designated in writing by Seller (such designation to be made
at least two business days prior to the Closing Date), of immediately
available funds in an amount equal to the product of the number of Shares
and the Per Share Price.
Section 1.04. Proxy. (a) Effective upon such time as Purchaser
------
accepts for payment and pays for, pursuant to the Offer and prior to Closing,
any shares of Company Common Stock pursuant to the Offer, Seller hereby
irrevocably grants to, and appoints, Purchaser and Robert Chabora, or either of
them, and any individual designated in writing by either of them, and each of
them individually, as Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Shares or grant a consent or approval in respect of the Shares on any matter in
such proxy's sole discretion. Seller hereby further affirms that such
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. Seller hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the DGCL.
(b) Seller agrees not to (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
--------
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any Shares to any person other
than to Purchaser pursuant to the Acquisition or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, with respect to
any Shares other than this Agreement, and shall not commit or agree to take any
of the foregoing actions.
<PAGE>
3
SECTION 1.05. Representations and Warranties of Seller. Seller hereby
-----------------------------------------
represents and warrants as of the date hereof and as of the Closing Date that:
Seller has good and valid title to the Shares free and clear of all liens,
mortgages, security interests, charges, covenants, options, claims, restrictions
or encumbrances of any type, other than any restrictions pursuant to (i) the
Securities Purchase Agreement dated January 19, 1999 (the "Purchase Agreement"),
among the Company, Seller and the other parties party thereto or (ii) the
Registration Rights Agreement dated as of January 19, 1999 (the "Registration
Rights Agreement"), among the Company, Seller and the other parties party
thereto (collectively, "Liens"). Assuming Purchaser has the requisite power and
-----
authority to be the lawful owner of such Shares, upon delivery to Purchaser at
the Closing of certificates representing the Shares, duly endorsed by Seller for
transfer to Purchaser, and upon Seller's receipt of the purchase price for the
Shares specified in Section 1.01, good and valid title to the Shares will pass
to Purchaser, free and clear of any Liens, other than those arising from acts of
Purchaser or its affiliates. Other than this Agreement, the Purchase Agreement
and the Registration Rights Agreement, the Shares are not subject to any voting
trust agreement or other contract, including any contract restricting or
otherwise relating to the voting, dividend rights or disposition of the Shares.
SECTION 1.06. Termination. (a) This Agreement may be terminated at
-----------
any time prior to the Closing by mutual written consent of Seller and Purchaser.
This Agreement shall automatically terminate upon the termination or expiration
of the Offer without the purchase of any shares of Company Common Stock
thereunder.
SECTION 1.07. Miscellaneous. This Agreement may not be amended or
--------------
modified except by an instrument in writing signed by Purchaser and Seller.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State. Each party submits to the
exclusive jurisdiction of the courts of the State of New York and the Federal
District Court, in each case located in the Borough of Manhattan, in connection
with any suit, action or proceeding arising out of this Agreement.
<PAGE>
4
IN WITNESS WHEREOF, Seller and Purchaser have duly executed this
Agreement as of the date first written above.
ALTA BIOPHARMA PARTNERS, L.P.,
By: Alta Biopharma Management, LLC
by /s/ J. DELEAGE
--------------------------------
Name: J. Deleage
Title: Member
BXA ACQUISITION COMPANY,
by /s/ ROBERT CHABORA
--------------------------------
Name: Robert Chabora
Title: President
Parent hereby unconditionally and irrevocably guarantees the
performance by Purchaser of its obligations under this Agreement.
SCHERING BERLIN INC.,
by /s/ ROBERT CHABORA
--------------------------------
Name: Robert Chabora
Title: Vice President - Law
<PAGE>
EXHIBIT (c)(5)
EXECUTION COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of September 17, 1999,
between Medsource S.A. (the "Seller"), and BXA Acquisition
------
Company, a Delaware corporation ("Purchaser").
---------
Seller understands that Purchaser is contemplating entering into an
agreement and plan of merger dated as of September 17, 1999 (the "Merger
Agreement"), among Schering Berlin Inc., a Delaware corporation ("Parent"),
Purchaser and Diatide, Inc., a Delaware corporation (the "Company"). The Merger
Agreement provides, among other things, for the commencement of a tender offer
(as it may be amended from time to time, the "Offer") to purchase all the shares
of common stock, par value $0.001 (the "Company Common Stock"), of the Company.
In connection with the transactions contemplated by the Merger
Agreement, Purchaser desires to purchase from Seller, and Seller desires to sell
to Purchaser, 307,692 shares of the Series A Convertible Preferred Stock, par
value $0.01 per share (the "Shares"), of the Company.
------
Accordingly, to induce Purchaser to enter into the Merger Agreement,
the parties hereby agree as follows:
SECTION 1.01. Purchase and Sale of the Shares. On the terms and
--------------------------------
subject to the conditions of this Agreement, if Purchaser accepts for payment
and pays for any shares of Company Common Stock pursuant to the Offer, Seller
shall sell, transfer and deliver to Purchaser, and Purchaser shall purchase from
Seller, on the first date on which Purchaser pays for any shares of Company
Common Stock accepted for payment pursuant to the Offer, the Shares for a
purchase price per share of $9.75 in cash or such greater amount as shall be
equal to the highest price per share of Company Common Stock paid pursuant to
the Offer (the "Per Share Price"), payable as set forth in Section 1.03 (the
---------------
"Acquisition").
- ------------
SECTION 1.02. Closing Date. The closing of the Acquisition (the
-------------
"Closing") shall take place at the offices of Hale and Dorr LLP, 60 State
- --------
Street, Boston, Massachusetts 02109, at 10:00 a.m. on the first date on which
Purchaser pays for any shares of Company Common Stock accepted for payment
pursuant to the Offer, or at such other place, time and date as shall be agreed
between Seller and Purchaser. The date on which the Closing occurs is referred
to in this Agreement as the "Closing Date".
------------
<PAGE>
2
SECTION 1.03. Transactions To Be Effected at the Closing. At the
---------------------------------- --------
Closing:
(a) Seller shall deliver to Purchaser certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed
in blank in proper form for transfer, with appropriate transfer tax stamps,
if any, affixed; and
(b) Purchaser shall deliver to Seller payment, by wire transfer to a
bank account designated in writing by Seller (such designation to be made
at least two business days prior to the Closing Date), of immediately
available funds in an amount equal to the product of the number of Shares
and the Per Share Price.
Section 1.04. Proxy. (a) Effective upon such time as Purchaser
------
accepts for payment and pays for, pursuant to the Offer and prior to Closing,
any shares of Company Common Stock pursuant to the Offer, Seller hereby
irrevocably grants to, and appoints, Purchaser and Robert Chabora, or either of
them, and any individual designated in writing by either of them, and each of
them individually, as Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Shares or grant a consent or approval in respect of the Shares on any matter in
such proxy's sole discretion. The Seller hereby further affirms that such
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. Seller hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the DGCL.
(b) Seller agrees not to (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
--------
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any Shares to any person other
than to Purchaser pursuant to the Acquisition or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, with respect to
any Shares other than this Agreement, and shall not commit or agree to take any
of the foregoing actions.
SECTION 1.05. Representations and Warranties of Seller. Seller hereby
-----------------------------------------
represents and warrants as of the date hereof and as of the Closing Date that:
Seller has good and valid title to the Shares, free and clear of all liens,
<PAGE>
3
mortgages, security interests, charges, covenants, options, claims, restrictions
or encumbrances of any type, other than any restrictions pursuant to (i) the
Securities Purchase Agreement dated September 23, 1997 (the "Purchase
Agreement"), among the Company, Seller and the other parties party thereto or
(ii) the Registration Rights Agreement dated as of September 23, 1997 (the
"Registration Rights Agreement"), among the Company, Seller and the other
parties party thereto (collectively, "Liens"). Assuming Purchaser has the
-----
requisite power and authority to be the lawful owner of the Shares, upon
delivery to Purchaser at the Closing of certificates representing the Shares,
duly endorsed by Seller for transfer to Purchaser, and upon Seller's receipt of
the purchase price for the Shares specified in Section 1.01, good and valid
title to the Shares will pass to Purchaser, free and clear of any Liens, other
than those arising from acts of Purchaser or its affiliates. Other than this
Agreement, the Purchase Agreement and the Registration Rights Agreement, the
Shares are not subject to any voting trust agreement or other contract,
including any contract restricting or otherwise relating to the voting, dividend
rights or disposition of the Shares.
SECTION 1.06. Termination. (a) This Agreement may be terminated at
-----------
any time prior to the Closing by mutual written consent of Seller and Purchaser.
This Agreement shall automatically terminate upon the termination or expiration
of the Offer without the purchase of any shares of Company Common Stock
thereunder.
SECTION 1.07. Miscellaneous. This Agreement may not be amended or
--------------
modified except by an instrument in writing signed by Purchaser and Seller.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State. Each party submits to the
exclusive jurisdiction of the courts of the State of New York and the Federal
District Court, in each case located in the Borough of Manhattan, in connection
with any suit, action or proceeding arising out of this Agreement.
<PAGE>
4
IN WITNESS WHEREOF, Seller and Purchaser have duly executed this
Agreement as of the date first written above.
MEDSOURCE S.A.,
by /s/ P. MECKLER
------------------------
Name: P. Meckler
Title:
by /s/ C. ZIMMERMANN
------------------------
Name: C. Zimmermann
Title:
BXA ACQUISITION COMPANY,
by /s/ ROBERT CHABORA
------------------------
Name: Robert Chabora
Title: President
Parent hereby unconditionally and irrevocably guarantees the
performance by Purchaser of its obligations under this Agreement.
SCHERING BERLIN INC.,
by /s/ ROBERT CHABORA
------------------------
Name: Robert Chabora
Title: Vice President - Law
<PAGE>
EXHIBIT (c)(6)
EXECUTION COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of September 17, 1999,
between Neomed Fund Limited (the "Seller") and BXA Acquisition
------
Company, a Delaware corporation ("Purchaser").
---------
Seller understands that Purchaser is contemplating entering into an
agreement and plan of merger dated as of September 17, 1999 (the "Merger
Agreement"), among Schering Berlin Inc., a Delaware corporation ("Parent"),
Purchaser and Diatide, Inc., a Delaware corporation (the "Company"). The Merger
Agreement provides, among other things, for the commencement of a tender offer
(as it may be amended from time to time, the "Offer") to purchase all the shares
of common stock, par value $0.001 (the "Company Common Stock"), of the Company.
In connection with the transactions contemplated by the Merger
Agreement, Purchaser desires to purchase from Seller, and Seller desires to sell
to Purchaser, 30,769 shares of the Series A Convertible Preferred Stock, par
value $0.01 per share (the "Shares"), of the Company.
------
Accordingly, to induce Purchaser to enter into the Merger Agreement,
the parties hereby agree as follows:
SECTION 1.01. Purchase and Sale of the Shares. On the terms and
--------------------------------
subject to the conditions of this Agreement, if Purchaser accepts for payment
and pays for any shares of Company Common Stock pursuant to the Offer, Seller
shall sell, transfer and deliver to Purchaser, and Purchaser shall purchase from
Seller, on the first date on which Purchaser pays for any shares of Company
Common Stock accepted for payment pursuant to the Offer, the Shares for a
purchase price per share of $9.75 in cash or such greater amount as shall be
equal to the highest price per share of Company Common Stock paid pursuant to
the Offer (the "Per Share Price"), payable as set forth in Section 1.03 (the
---------------
"Acquisition").
- ------------
SECTION 1.02. Closing Date. The closing of the Acquisition (the
-------------
"Closing") shall take place at the offices of Hale and Dorr LLP, 60 State
- --------
Street, Boston, Massachusetts 02109, at 10:00 a.m. on the first date on which
Purchaser pays for any shares of Company Common Stock accepted for payment
pursuant to the Offer, or at such other place, time and date as shall be agreed
between Seller and Purchaser.
<PAGE>
2
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".
------------
SECTION 1.03. Transactions To Be Effected at the Closing. At the
---------------------------------- --------
Closing:
(a) Seller shall deliver to Purchaser certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed
in blank in proper form for transfer, with appropriate transfer tax stamps,
if any, affixed; and
(b) Purchaser shall deliver to Seller payment, by wire transfer to a
bank account designated in writing by Seller (such designation to be made
at least two business days prior to the Closing Date), of immediately
available funds in an amount equal to the product of the number of Shares
and the Per Share Price.
Section 1.04. Proxy. (a) Effective upon such time as Purchaser
------
accepts for payment and pays for, pursuant to the Offer and prior to Closing,
any shares of Company Common Stock pursuant to the Offer, Seller hereby
irrevocably grants to, and appoints, Purchaser and Robert Chabora, or either of
them, and any individual designated in writing by either of them, and each of
them individually, as Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Shares or grant a consent or approval in respect of the Shares on any matter in
such proxy's sole discretion. The Seller hereby further affirms that such
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. Seller hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the DGCL.
(b) Seller agrees not to (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
--------
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any Shares to any person other
than to Purchaser pursuant to the Acquisition or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, with respect to
any Shares other than this Agreement, and shall not commit or agree to take any
of the foregoing actions.
<PAGE>
3
SECTION 1.05. Representations and Warranties of Seller. Seller hereby
-----------------------------------------
severally and not jointly represents and warrants as of the date hereof and as
of the Closing Date that: Seller has good and valid title to the Shares, free
and clear of all liens, mortgages, security interests, charges, covenants,
options, claims, restrictions or encumbrances of any type, other than any
restrictions pursuant to (i) the Securities Purchase Agreement dated September
23, 1997 (the "Purchase Agreement"), among the Company, Seller and the other
parties party thereto or (ii) the Registration Rights Agreement dated as of
September 23, 1997 (the "Registration Rights Agreement"), among the Company,
Seller and the other parties party thereto (collectively, "Liens"). Assuming
-----
Purchaser has the requisite power and authority to be the lawful owner of the
Shares, upon delivery to Purchaser at the Closing of certificates representing
the Shares, duly endorsed by Seller for transfer to Purchaser, and upon Seller's
receipt of the purchase price for the Shares specified in Section 1.01, good and
valid title to the Shares will pass to Purchaser, free and clear of any Liens,
other than those arising from acts of Purchaser or its affiliates. Other than
this Agreement, the Purchase Agreement and the Registration Rights Agreement,
the Shares are not subject to any voting trust agreement or other contract,
including any contract restricting or otherwise relating to the voting, dividend
rights or disposition of the Shares.
SECTION 1.06. Termination. (a) This Agreement may be terminated at
-----------
any time prior to the Closing by mutual written consent of Seller and Purchaser.
This Agreement shall automatically terminate upon the termination or expiration
of the Offer without the purchase of any shares of Company Common Stock
thereunder.
SECTION 1.07. Miscellaneous. This Agreement may not be amended or
--------------
modified except by an instrument in writing signed by Purchaser and Seller.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State. Each party submits to the
exclusive jurisdiction of the courts of the State of New York and the Federal
District Court, in each case located in the Borough of Manhattan, in connection
with any suit, action or proceeding arising out of this Agreement.
<PAGE>
4
IN WITNESS WHEREOF, Seller and Purchaser have duly executed this
Agreement as of the date first written above.
NEOMED FUND LIMITED,
by /s/ LYNNIECE ROBINSON
------------------------
Name: Lynniece Robinson
Title: Secretary
BXA ACQUISITION COMPANY,
by /s/ ROBERT CHABORA
------------------------
Name: Robert Chabora
Title: President
Parent hereby unconditionally and irrevocably guarantees the
performance by Purchaser of its obligations under this Agreement.
SCHERING BERLIN INC.,
by /s/ ROBERT CHABORA
------------------------
Name: Robert Chabora
Title: Vice President - Law
<PAGE>
EXHIBIT (c)(7)
EXECUTION COPY
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of September 17, 1999,
between Alta Embarcadero Biopharma Partners, LLC (the "Seller")
------
and BXA Acquisition Company, a Delaware corporation
("Purchaser").
---------
Seller understands that Purchaser is contemplating entering into an
agreement and plan of merger dated as of September 17, 1999 (the "Merger
Agreement"), among Schering Berlin Inc., a Delaware corporation ("Parent"),
Purchaser and Diatide, Inc., a Delaware corporation (the "Company"). The Merger
Agreement provides, among other things, for the commencement of a tender offer
(as it may be amended from time to time, the "Offer") to purchase all the shares
of common stock, par value $0.001 (the "Company Common Stock"), of the Company.
In connection with the transactions contemplated by the Merger
Agreement, Purchaser desires to purchase from Seller, and Seller desires to sell
to Purchaser, 29,977 shares of the Series B Convertible Preferred Stock, par
value $0.01 per share (the "Shares"), of the Company.
------
Accordingly, to induce Purchaser to enter into the Merger Agreement,
the parties hereby agree as follows:
SECTION 1.01. Purchase and Sale of the Shares. On the terms and
--------------------------------
subject to the conditions of this Agreement, if Purchaser accepts for payment
and pays for any shares of Company Common Stock pursuant to the Offer, Seller
shall sell, transfer and deliver to Purchaser, and Purchaser shall purchase from
Seller, on the first date on which Purchaser pays for any shares of Company
Common Stock accepted for payment pursuant to the Offer, the Shares for a
purchase price per share of $9.50 in cash or such greater amount as shall be
equal to the highest price per share of Company Common Stock paid pursuant to
the Offer (the "Per Share Price"), payable as set forth in Section 1.03 (the
---------------
"Acquisition").
- ------------
SECTION 1.02. Closing Date. The closing of the Acquisition (the
-------------
"Closing") shall take place at the offices of Hale and Dorr LLP, 60 State
- --------
Street, Boston, Massachusetts 02109, at 10:00 a.m. on the first date on which
Purchaser pays for any shares of Company Common Stock accepted for payment
pursuant to the Offer, or at such other place, time and date as shall be agreed
between Seller and Purchaser.
<PAGE>
2
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".
------------
SECTION 1.03. Transactions To Be Effected at the Closing. At the
---------------------------------- --------
Closing:
(a) Seller shall deliver to Purchaser certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed
in blank in proper form for transfer, with appropriate transfer tax stamps,
if any, affixed; and
(b) Purchaser shall deliver to Seller payment, by wire transfer to a
bank account designated in writing by Seller (such designation to be made
at least two business days prior to the Closing Date), of immediately
available funds in an amount equal to the product of the number of Shares
and the Per Share Price.
Section 1.04. Proxy. (a) Effective upon such time as Purchaser
------
accepts for payment and pays for, pursuant to the Offer and prior to Closing,
any shares of Company Common Stock pursuant to the Offer, Seller hereby
irrevocably grants to, and appoints, Purchaser and Robert Chabora, or either of
them, and any individual designated in writing by either of them, and each of
them individually, as Seller's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of Seller, to vote the
Shares or grant a consent or approval in respect of the Shares on any matter in
such proxy's sole discretion. Seller hereby further affirms that such
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. Seller hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 212(e) of the DGCL.
(b) Seller agrees not to (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or enter
--------
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any Shares to any person other
than to Purchaser pursuant to the Acquisition or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, with respect to
any Shares other than this Agreement, and shall not commit or agree to take any
of the foregoing actions.
<PAGE>
3
SECTION 1.05. Representations and Warranties of Seller. Seller hereby
-----------------------------------------
represents and warrants as of the date hereof and as of the Closing Date that:
Seller has good and valid title to the Shares free and clear of all liens,
mortgages, security interests, charges, covenants, options, claims, restrictions
or encumbrances of any type, other than any restrictions pursuant to (i) the
Securities Purchase Agreement dated January 19, 1999 (the "Purchase Agreement"),
among the Company, Seller and the other parties party thereto or (ii) the
Registration Rights Agreement dated as of January 19, 1999 (the "Registration
Rights Agreement"), among the Company, Seller and the other parties party
thereto (collectively, "Liens"). Assuming Purchaser has the requisite power and
-----
authority to be the lawful owner of such Shares, upon delivery to Purchaser at
the Closing of certificates representing the Shares, duly endorsed by Seller for
transfer to Purchaser, and upon Seller's receipt of the purchase price for the
Shares specified in Section 1.01, good and valid title to the Shares will pass
to Purchaser, free and clear of any Liens, other than those arising from acts of
Purchaser or its affiliates. Other than this Agreement, the Purchase Agreement
and the Registration Rights Agreement, the Shares are not subject to any voting
trust agreement or other contract, including any contract restricting or
otherwise relating to the voting, dividend rights or disposition of the Shares.
SECTION 1.06. Termination. (a) This Agreement may be terminated at
-----------
any time prior to the Closing by mutual written consent of Seller and Purchaser.
This Agreement shall automatically terminate upon the termination or expiration
of the Offer without the purchase of any shares of Company Common Stock
thereunder.
SECTION 1.07. Miscellaneous. This Agreement may not be amended or
--------------
modified except by an instrument in writing signed by Purchaser and Seller.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State. Each party submits to the
exclusive jurisdiction of the courts of the State of New York and the Federal
District Court, in each case located in the Borough of Manhattan, in connection
with any suit, action or proceeding arising out of this Agreement.
<PAGE>
4
IN WITNESS WHEREOF, Seller and Purchaser have duly executed this
Agreement as of the date first written above.
ALTA EMBARCADERO BIOPHARMA PARTNERS, LLC,
by /s/ J. DELEAGE
----------------------------
Name: J. Deleage
Title: Member
BXA ACQUISITION COMPANY,
by /s/ ROBERT CHABORA
----------------------------
Name: Robert Chabora
Title: President
Parent hereby unconditionally and irrevocably guarantees the
performance by Purchaser of its obligations under this Agreement.
SCHERING BERLIN INC.,
by /s/ ROBERT CHABORA
--------------------------
Name: Robert Chabora
Title: Vice President - Law
