<PAGE>
CN BIOSCIENCES, INC.
10394 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
November 25, 1998
To Our Stockholders:
We are pleased to inform you that on November 18, 1998, CN Biosciences,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with EM Industries, Incorporated ("Parent") and EM Acquisition
Corp., a wholly owned subsidiary of Parent ("Purchaser"), pursuant to which
Purchaser has commenced a tender offer (the "Offer") to purchase all of the
outstanding shares of the Company's common stock, par value $.01 per share (the
"Shares"), for a cash price of $25.00 per Share. Parent is an indirect
subsidiary of Merck KGaA, a corporation organized under the laws of Germany. The
Offer is conditioned upon, among other things, the tender of a majority of the
number of Shares outstanding on a fully diluted basis (assuming the exercise of
all outstanding stock options). The Merger Agreement provides that following
consummation of the Offer, Purchaser will be merged (the "Merger") with and into
the Company and those Shares that are not acquired in the Offer will be
converted into the right to receive $25.00 per Share in cash.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AGREEMENT AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board of
Directors considered the factors described in the accompanying Schedule 14D-9,
including the opinion of the Company's financial advisor, Vector Securities
International, Inc. ("Vector Securities"), to the effect that the cash
consideration to be offered to holders of Shares pursuant to the Offer and the
Merger was fair to such holders from a financial point of view. A copy of Vector
Securities' written opinion, which sets forth the assumptions made, matters
considered and the limits on the review undertaken by Vector Securities, is
attached to the Schedule 14D-9 as Schedule I.
The accompanying Offer to Purchase sets forth the terms of the Offer. The
enclosed Schedule 14D-9 sets forth additional information regarding the Offer
and the Merger relevant to making an informed decision. We urge you to read
these materials carefully and in their entirety.
Very truly yours,
/s/ Stelios B. Papadopoulos
Stelios B. Papadopoulos
Chairman, Chief Executive Officer
and President
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, NOVEMBER 25, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
------------------------
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
CN BIOSCIENCES, INC.
(NAME OF SUBJECT COMPANY)
CN BIOSCIENCES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
125946 10 3
(CUSIP NUMBER OF CLASS OF SECURITIES)
STELIOS B. PAPADOPOULOS
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
CN BIOSCIENCES, INC.
10394 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
(619) 450-5500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
Copies to:
PETER H. JAKES, ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
(212) 728-8000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is CN Biosciences, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 10394 Pacific Center Court, San Diego, California 92121. The
title of the class of equity securities to which this Statement relates is the
common stock, par value $.01 per share (the "Common Stock"), of the Company.
ITEM 2. TENDER OFFER OF PURCHASER.
This Statement relates to the tender offer made pursuant to a Tender Offer
Statement on Schedule 14D-1, dated November 25, 1998 (the "Schedule 14D-1"), of
EM Industries, Incorporated, a New York corporation ("Parent"), its wholly owned
subsidiary, EM Acquisition Corp., a Delaware corporation ("Purchaser"), and
Merck KGaA, a corporation organized under the laws of Germany that controls
Parent ("Merck KGaA"), to purchase all of the outstanding shares of Common Stock
(the "Shares") at a price of $25.00 per Share (the "Per Share Amount"), net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated November 25, 1998 (the "Offer to Purchase") and the
related Letter of Transmittal and any supplement thereto (which together
constitute the "Offer"). The Offer is being made pursuant to an Agreement and
Plan of Merger, dated as of November 18, 1998 (the "Merger Agreement"), among
Parent, Purchaser and the Company.
According to the Schedule 14D-1, the address of the principal executive
offices of Parent and Purchaser is 7 Skyline Drive, Hawthorne, New York 10532.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b)(i) Certain contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of its directors and executive
officers are, except as noted below, described in the sections entitled
"Executive Compensation" and "Certain Transactions" in the Company's Proxy
Statement for its 1998 Annual Meeting of Stockholders (the "1998 Proxy
Statement"). A copy of the relevant sections of the 1998 Proxy Statement has
been filed with the Securities and Exchange Commission (the "Commission") as
Exhibit 1 to this Statement and is incorporated herein by reference. Except as
described herein (including in Schedule II hereto) or incorporated by reference
herein, to the knowledge of the Company, as of the date hereof there exists no
material contract, agreement, arrangement or understanding and no actual or
potential conflict of interest between the Company or its affiliates and
(i) the Company's executive officers, directors or affiliates or (ii) Parent's
or Purchaser's executive officers, directors or affiliates.
(ii) The Merger Agreement. The following is a summary of certain portions
of the Merger Agreement and is qualified in its entirety by reference to the
Merger Agreement, a copy of which has been filed with the Commission as
Exhibit 2 to this Statement and is incorporated herein by reference. Capitalized
terms not otherwise defined below shall have the meaning set forth in the Merger
Agreement.
The Offer. The Offer is being made pursuant to the Merger Agreement. Upon
the terms and subject to the conditions of the Offer, Parent will cause
Purchaser to accept for payment and purchase, as soon as practicable after the
expiration of the Offer, all Shares validly tendered and not properly withdrawn
prior to the expiration date of the Offer.
Directors. The Merger Agreement provides that, promptly upon the purchase
by Purchaser of any Shares pursuant to the Offer (and assuming that the Minimum
Condition (as defined in the Merger Agreement) has been satisfied), Parent shall
be entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company (the "Board") as will give
Purchaser, subject to compliance with Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), representation on the Board equal
to at least that number of directors which equals the product of (i) the total
number of directors on the Board (giving effect to the directors appointed or
elected pursuant to such entitlement of Parent) multiplied by (ii) the
percentage that (a) the aggregate number of Shares beneficially owned by Parent
or any affiliate of Parent (including for purposes of such calculations such
Shares as are accepted for payment pursuant to the Offer, but excluding Shares
held by the Company) bears to (b) the number of Shares outstanding. At such
times, if requested by Parent, the Company will also cause each committee of the
Board and the Board of Directors of
<PAGE>
each Company Subsidiary (as defined in the Merger Agreement) to include persons
designated by Parent constituting the same percentage of each such committee and
the Board of Directors of each Company Subsidiary as Parent's designees are of
the Board. The Company shall, upon request by Parent, promptly increase the size
of the Board and of the Boards of Directors of the Company Subsidiaries by
whatever number of directors as is necessary to enable Parent's designees to be
elected to the Board and the Boards of Directors of the Company Subsidiaries in
accordance with the terms of the Merger Agreement and shall cause Parent's
designees to be so elected.
The Merger Agreement further provides that in the event that Parent's
designees are appointed or elected to the Board and the Boards of Directors of
the Company Subsidiaries, until the time when the merger (the "Merger") of
Purchaser with and into the Company following the expiration of the Offer shall
become effective (the "Effective Time"), the Board shall have at least one
Independent Director. An Independent Director is a director who is a director of
the Company on the date of the Merger Agreement and who is neither an officer of
the Company nor a designee, stockholder, affiliate or associate (within the
meaning of the federal securities laws) of Parent. If no Independent Directors
remain, the other members of the Board shall designate one person to fill one of
the vacancies who shall not be either an officer of the Company or a designee,
shareholder, affiliate or associate of Parent, and such person shall be deemed
to be an Independent Director for purposes of the Merger Agreement. Following
the time Parent's designees constitute a majority of the Board and prior to the
Effective Time, any (i) amendment or termination of the Merger Agreement on
behalf of the Company, (ii) exercise or waiver of any of the Company's rights or
remedies under the Merger Agreement, (iii) extension of the time for performance
of Parent's obligations under the Merger Agreement or (iv) the taking of any
other action by the Company in connection with the Merger Agreement required to
be taken by the Board will require the affirmative vote of a majority of the
Independent Directors then in office.
The Merger. The Merger Agreement provides that as soon as practicable
after the satisfaction or waiver of the conditions to the Merger set forth in
the Merger Agreement, at the Effective Time, upon the terms and subject to the
conditions of the Merger Agreement and in accordance with the Delaware General
Corporation Law ("DGCL"), Purchaser shall be merged with and into the Company,
and the separate existence of Purchaser shall cease, and the Company, as the
surviving corporation in the Merger (the "Surviving Corporation") shall continue
its corporate existence under the laws of the State of Delaware as a subsidiary
of Parent. At Parent's election, any direct or indirect subsidiary of Parent
other than Purchaser may be merged with and into the Company instead of
Purchaser. In the event of such an election, the Merger Agreement provides that
the parties agree to execute an appropriate amendment to the Merger Agreement to
reflect such election. The parties will prepare and execute a Certificate of
Merger in order to comply in all respects with the requirements of the DGCL and
with the provisions of the Merger Agreement or, if applicable, a Certificate of
Ownership and Merger (each, a "Certificate of Merger"). The Merger will become
effective at the time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the DGCL or at
such later time as is specified in the Certificate of Merger.
Pursuant to the Merger Agreement, at the Effective Time, by virtue of the
Merger, each Share issued and outstanding immediately before the Effective Time
(other than Shares held in the treasury of the Company or owned by Parent or any
direct or indirect wholly owned subsidiary of Parent or Dissenting Shares, as
defined below) will be cancelled and extinguished and converted into the right
to receive the Per Share Amount (the "Merger Consideration"), without interest
thereon. Although it is Parent's intention to consummate the Merger as promptly
as practicable, there can be no assurance that the Merger will be consummated
or, if consummated, of the timing thereof.
The Merger Agreement also provides that at the Effective Time, the
Certificate of Incorporation and the Bylaws of the Surviving Corporation shall
be the Certificate of Incorporation and the Bylaws of Purchaser in effect at the
Effective Time (subject to any subsequent amendments) and that the directors of
Purchaser immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, and the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case,
until their successors are duly elected or appointed and qualified.
Stockholders Meeting and Approval. Pursuant to the Merger Agreement, if
required by applicable law in order to consummate the Merger, the Company,
acting through the Board, will, in accordance with applicable
2
<PAGE>
law, (i) duly call, give notice of, convene and hold a special meeting of its
stockholders for the purpose of considering and taking action upon the Merger
Agreement and the transactions contemplated thereby (the "Company Proposals") as
soon as practicable following the acceptance for payment and purchase of the
Shares by Purchaser pursuant to the Offer; (ii) prepare and file with the
Commission a preliminary proxy or information statement relating to the Merger
and the Merger Agreement; (iii) obtain and furnish the information required to
be included by the Commission in the definitive proxy statement or information
statement (as amended or supplemented, the "Proxy Statement"); (iv) after
consultation with Parent, respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement;
(v) cause the Proxy Statement to be mailed to stockholders; and (vi) obtain the
necessary approvals of the Merger and the Merger Agreement by the stockholders.
The Merger Agreement further provides that the Company will include in the Proxy
Statement the recommendation of the Board that the stockholders of the Company
vote in favor of approval of the Merger and the adoption of the Merger
Agreement.
The Merger Agreement provides that, notwithstanding the foregoing, in the
event that Parent, Purchaser or any other subsidiary of Parent shall acquire at
least 90% of the outstanding Shares pursuant to the Offer or otherwise, the
parties will take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition without a meeting
of the Company's stockholders, in accordance with the "short form" merger
provisions of Section 253 of the DGCL.
Conversion of Shares. At the Effective Time, by virtue of the Merger and
without any action on the part of Purchaser, the Company or the holder of any of
the following securities:
(i) each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled as described in
clause (ii) below and any Dissenting Shares) shall be cancelled and
extinguished and be converted into the right to receive the Merger
Consideration, without interest, promptly upon surrender of the certificate
representing such Share or appropriate proof of lost certificates, in
accordance with the Merger Agreement and from and after the Effective Time,
the holders of certificates evidencing ownership of any such Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares except as otherwise provided for in the
Merger Agreement or by applicable law;
(ii) each Share held in the treasury of the Company and each Share
owned by Parent or any direct or indirect wholly owned subsidiary of Parent
immediately before the Effective Time, including Purchaser, shall be
cancelled and extinguished and no payment or other consideration shall be
made with respect thereto; and
(iii) the shares of Purchaser common stock outstanding immediately
prior to the Merger shall be converted into one validly issued, fully paid
and non-assessable share of the common stock of the Surviving Corporation,
which one share shall constitute all of the issued and outstanding capital
stock of the Surviving Corporation and shall be owned by Parent.
The Merger Agreement further provides that, notwithstanding any provision
of the Merger Agreement to the contrary, any Shares issued and outstanding
immediately prior to the Effective Time and held by a stockholder who has
demanded and perfected such stockholder's demand for appraisal of such
stockholder's Shares in accordance with the DGCL (including, but not limited to
Section 262 thereof) and as of the Effective Time has neither effectively
withdrawn nor lost such stockholder's right to such appraisal ("Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration, but the holder thereof shall be entitled to only such
rights as are granted by the DGCL. Notwithstanding the foregoing, if any
stockholder who demands appraisal of such stockholder's Shares under the DGCL
shall effectively withdraw or lose (through failure to perfect or otherwise)
such stockholder's right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such stockholder's Shares
shall automatically be converted into and represent only the right to receive
the Merger Consideration, without interest thereon, upon surrender of the Share
certificate(s).
3
<PAGE>
Termination of the Merger Agreement. The Merger Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval of the stockholders of the Company and
the stockholders of Parent, as described in the Merger Agreement:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company:
(i) if the Offer is terminated or withdrawn pursuant to its terms
without any Shares being purchased under the Offer, provided that such
provision may not be used by Parent or the Company to terminate the
Merger Agreement if such party has materially breached the Merger
Agreement;
(ii) if any nation or government, any state or other political
subdivision thereof, any entity, authority or body exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any
governmental or regulatory authority, agency, department, board,
commission, administrator, instrumentality, court, tribunal or
arbitrator and any self-regulatory organization, domestic or foreign
(each a "Governmental Authority"), shall have issued an order, decree,
ruling or injunction or taken any other action permanently enjoining,
restraining or otherwise prohibiting acceptance for payment of Shares
pursuant to the Offer or the consummation of the Merger or, for the
benefit of Parent only, the Stockholder Agreement (as defined below),
and such order, decree, ruling, injunction or other action shall have
become final and nonappealable; provided that Parent or the Company, as
the case may be, may not terminate the Merger Agreement on such basis if
it has not complied with its obligation under the Merger Agreement to
use its reasonable best efforts to (A) obtain all consents from
Governmental Authorities and other third parties required for the
consummation of the Offer and the Merger and the transactions
contemplated thereby, (B) timely make all necessary filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act") and
similar foreign laws and (C) have vacated, dismissed or withdrawn any
order, stay, decree, judgment or injunction of any Governmental
Authority which temporarily, preliminarily or permanently prohibits or
prevents the transactions contemplated by the Merger Agreement;
(c) by the Company if (i) Parent or Purchaser fails to commence the
Offer as provided in the Merger Agreement, or (ii) Parent or Purchaser
shall not have accepted for payment and paid for Shares pursuant to the
Offer in violation of the terms of the Merger Agreement and of the Offer,
provided that such provision may not be used by the Company to terminate
the Merger Agreement if the Company has materially breached the Merger
Agreement;
(d) by Parent if the Company shall have breached in any material
respect any of its material covenants or other agreements in the Merger
Agreement which breach or failure to perform is incapable of being cured
or, the Company having been given reasonable written notice of such breach
by Parent, has not been cured within one business day prior to the then
scheduled expiration date of the Offer;
(e) by Parent if (i) the Board or any committee thereof shall have
withdrawn or modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer or recommendation of the
Company Proposals, or approved or recommended any Takeover Proposal (as
defined below) or (ii) the Board or any committee thereof shall have
resolved to take any of the foregoing actions;
(f) by the Company if Parent shall have breached in any material
respect any of its material covenants or other agreements contained in the
Merger Agreement, which breach or failure to perform is incapable of being
cured or, Parent having been given reasonable written notice of such breach
by the Company, has not been cured within one business day prior to the
expiration date of the Offer;
(g) by the Company in order to enter into an Acquisition Agreement (as
defined below) providing for a Superior Proposal (as defined below) entered
into in accordance with the exceptions to the non-solicitation covenants
described below, provided that prior thereto the Company has reimbursed
Parent for all reasonable out-of-pocket charges and expenses (not to exceed
$1,500,000) incurred by Parent and Purchaser in connection with the Merger
Agreement, the Offer and the Merger in accordance with the Merger
Agreement; or
4
<PAGE>
(h) by Parent if the Company, any of its officers or directors or
financial or legal advisors shall take any of the actions that would be
proscribed by the non-solicitation covenants described below but for the
exceptions thereto described below.
No Solicitation Covenants. The Merger Agreement provides that the Company
may not, nor may it permit any of the Company Subsidiaries to, nor may it
authorize or permit any of the respective officers, directors or employees of
the Company and the Company Subsidiaries, or any investment banker, attorney,
accountant or other representative retained by it or any of the Company
Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information, other than publicly available
information provided pursuant to routine stockholder requests consistent with
past practice), or take any other action designed or reasonably likely to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal or
(ii) participate in any discussions or negotiations regarding any Takeover
Proposal. In addition, except as set forth in the Merger Agreement, neither the
Board nor any committee thereof may (a) withdraw or modify, or propose publicly
to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by the Board or such committee of the Offer, the Merger or the
Stockholder Agreement, or (b) approve or recommend any Takeover Proposal, or
(c) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or similar agreement related to any Takeover
Proposal (each, an "Acquisition Agreement").
Notwithstanding the provisions contained in the preceding paragraph, if at
any time prior to the expiration date of the Offer and following the receipt of
a Superior Proposal, the Board determines in good faith, based upon the advice
of outside counsel, that such action is consistent with its fiduciary duties to
the Company's stockholders under applicable law, in response to a Superior
Proposal that was made in circumstances not otherwise involving a breach of the
Merger Agreement, and subject to compliance with the covenants described in the
second succeeding paragraph, the Company may (i) furnish information with
respect to the Company and the Company Subsidiaries to any person pursuant to a
confidentiality agreement having terms substantially the same as the
Confidentiality Agreement (as defined below), provided that (a) such
confidentiality agreement may not include any provision calling for an exclusive
right to negotiate with the Company and (b) the Company advises Parent of all
such nonpublic information delivered to such person concurrently with, or
promptly following, its delivery to the requesting party, (ii) participate in
negotiations regarding such Superior Proposal, and (iii) take any of the actions
set forth in the last sentence of the preceding paragraph at any time that is
after the second business day following Parent's receipt of written notice
advising Parent that the Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal, identifying the person
making such Superior Proposal and providing notice of the determination of the
Board of what action referred to herein the Board expects to take. The foregoing
proviso does not prevent the Board from taking any actions described above
within two business days of the expiration date of the Offer so long as the
notice described in the foregoing proviso is received by Parent prior to Noon,
New York City time, on the then scheduled expiration date of the Offer.
Under the Merger Agreement (i) the term "Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 15% or more of the assets of the Company and the
Company Subsidiaries or 15% or more of any class of equity securities of the
Company or any Company Subsidiary, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of the Company or any Company Subsidiary, or any
merger, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
Company Subsidiary, other than the transactions contemplated by the Merger
Agreement, and (ii) the term "Superior Proposal" means a bona fide written
Takeover Proposal which the majority of the members of the Board determines, in
their good faith judgment (which may be based on the opinion of independent
financial advisors) that the value of the consideration provided for in such
proposal exceeds the Per Share Amount then provided in the Offer, and,
considering all relevant factors, is more favorable to the Company and its
stockholders than the Offer and the Merger and for which financing, to the
extent required, is fully committed.
The Merger Agreement requires the Company to promptly advise Parent orally
and in writing of any request for information or of any Takeover Proposal, the
material terms and conditions of such request or Takeover Proposal and the
identity of the person making such request or Takeover Proposal and to promptly
advise Parent
5
<PAGE>
of all significant developments which could reasonably be expected to culminate
in the Board withdrawing, modifying or amending its recommendation of the Offer,
the Merger and the transactions contemplated by the Merger Agreement.
The Merger Agreement does not prohibit the Company from (i) taking and
disclosing to the Company's stockholders a position contemplated by Rule
14e-2(a) under the Exchange Act or (ii) from making any disclosure to the
stockholders, provided, however, that neither the Company nor the Board nor any
committee thereof shall, except in accordance with the covenants in the Merger
Agreement described above, withdraw or modify, or propose publicly to withdraw
or modify, its position with respect to the Offer or the Company Proposals or
approve or recommend, or propose publicly to approve or recommend, a Takeover
Proposal.
Expense Reimbursement. The Merger Agreement provides that in the event
that:
(i) the Company terminates the Merger Agreement in order to enter into
an Acquisition Agreement providing for a Superior Proposal entered into in
accordance with the non-solicitation provisions of the Merger Agreement; or
(ii) Parent terminates the Merger Agreement after the Board or any
committee thereof has withdrawn or modified or changed in a manner adverse
to Parent or Purchaser its approval or recommendation of the Offer or any
of the Company Proposals, or approved or recommended any Takeover Proposal,
or the Board or any committee thereof has resolved to take any of the
foregoing actions,
the Company shall promptly pay Parent upon its request all reasonable
out-of-pocket charges and expenses incurred by Parent or any of its affiliates
in connection with the Merger Agreement and the transactions contemplated
thereby, including, without limitation, reasonable attorneys' and accountants'
fees and disbursements, fees and expenses of Parent's financial advisor and any
information agent and depositary retained in connection with the Offer and all
printing and mailing fees and expenses, in an amount not to exceed $1,500,000.
Except as described above, each party will bear its own expenses in
connection with the Merger Agreement and the transactions contemplated thereby.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, the Company is obligated to, and to
cause its accountants and legal counsel to, provide Parent and its respective
authorized representatives (including, without limitation, its financial
advisors, accountants and legal counsel), at all reasonable times, access as
reasonably requested to all personnel, offices and other facilities and to all
contracts, agreements, commitments, books and records of or pertaining to the
Company and the Company Subsidiaries. The Company will also permit the foregoing
persons to make such reasonable inspections as they may require and will cause
its officers promptly to furnish Parent with (i) such financial and operating
data and other information with respect to the business and properties of the
Company and the Company Subsidiaries as Parent may from time to time reasonably
request, and (ii) a copy of each report, schedule and other document filed or
received by the Company or any of the Company Subsidiaries pursuant to the
requirements of applicable securities laws or the National Association of
Securities Dealers, Inc.
The Merger Agreement further provides that each of Parent, Purchaser and
the Company will hold and will cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives to hold, any
nonpublic information in accordance with the terms of the Confidentiality
Agreement dated June 3, 1998 between Merck KGaA and the Company (the
"Confidentiality Agreement"). A copy of such Confidentiality Agreement is filed
as an Exhibit to the Schedule 14D-1.
Efforts to Consummate. Upon the terms and subject to the conditions of the
Merger Agreement, each of Parent and the Company has agreed to use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by the
Merger Agreement, including, but not limited to, (i) obtaining all consents,
approvals, waivers or authorizations of, notices to or declarations or filings
("Consents") from Governmental Authorities and other third parties required for
the consummation of the Offer and the Merger and the transactions contemplated
thereby, (ii) timely making all necessary filings under the HSR Act and similar
foreign laws and (iii) having vacated, dismissed or withdrawn any order, stay,
decree, judgment or
6
<PAGE>
injunction of any Governmental Authority which temporarily, preliminarily or
permanently prohibits or prevents the transactions contemplated by the Merger
Agreement. Upon the terms and subject to the conditions of the Merger Agreement,
each of Parent and the Company has committed to use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to satisfy the other conditions to the closing of the
transactions contemplated by the Merger Agreement. Notwithstanding any other
provision contained in the Merger Agreement, in no event will Parent, Purchaser
or any of their affiliates be required to take or fail to take any action in
order to obtain or make a Consent arising out of any contractual or legal
obligation of or applicable to the Company or the Company Subsidiaries, other
than obligations such as those under the HSR Act which apply to both the Company
and Parent, Purchaser and any of their affiliates and then only to the extent
applicable to Parent, Purchaser and any of their affiliates, and in no event
will Parent, Purchaser or any of their affiliates be required to enter into or
offer to enter into any divestiture, hold-separate, business limitation or
similar agreement or undertaking in connection with the Merger Agreement or the
transactions contemplated thereby.
Conduct of Business Pending the Merger. Pursuant to the Merger Agreement,
the Company has covenanted and agreed that, except for certain exceptions set
forth in the Merger Agreement, during the period from the date of the Merger
Agreement to the Effective Time, the Company shall, and shall cause the Company
Subsidiaries to, conduct their businesses in the ordinary course and consistent
with past practice, and the Company shall, and shall cause the Company
Subsidiaries to, use their reasonable best efforts to preserve intact their
business organization, keep available the services of their officers and
employees and preserve intact the present commercial relationships of the
Company and the Company Subsidiaries with all persons with whom they do
business. Without limiting the generality or effect of the foregoing, the
Company has agreed that it will not, and will cause the Company Subsidiaries not
to:
(i) amend or propose to amend its Certificate of Incorporation or
Bylaws (or comparable governing instruments) or change the number of
directors constituting the entire Board or the Board of Directors of any of
the Company Subsidiaries;
(ii) authorize for issuance, issue, deliver, grant, sell, pledge, or
otherwise dispose of or propose to issue, deliver, grant, sell, pledge or
otherwise dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of, the
capital stock or other securities of the Company or any of the Company
Subsidiaries including, but not limited to, stock appreciation rights,
phantom stock, any securities convertible into or exchangeable for shares
of stock of any class of the Company or any of the Company Subsidiaries;
provided, however, that the foregoing shall not prohibit the issuance of
Shares upon the exercise of options granted prior to the date of the Merger
Agreement;
(iii) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock, securities or other property or any combination thereof) in
respect of its capital stock, or directly or indirectly redeem, purchase or
otherwise acquire or offer to acquire, directly or indirectly, any shares
of its capital stock or other securities;
(iv) (a) except in the ordinary course of business consistent with
past practice (1) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise) for
the obligations of any person or (2) make any loans, advances or capital
contributions to, or investments in, any other person (other than to a
Company Subsidiary); (b) acquire the stock or assets of, or merge or
consolidate with, any other person; (c) voluntarily incur any liability or
obligation (absolute, accrued, contingent or otherwise) other than in the
ordinary course of business consistent with past practice; (d) sell,
transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree
to sell, transfer, mortgage, pledge or otherwise dispose of or encumber,
any assets or properties, real, personal or mixed of the Company and the
Company Subsidiaries other than sales of products in the ordinary course of
business and in a manner consistent with past practice; (e) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person (other than in the
ordinary course of business consistent with past practice); (f) enter into
any contract or agreement other than in the ordinary course of business
consistent with past practice or amend, alter or terminate any Company
Material Contract (as defined in the Merger Agreement); or (g) subject to
certain
7
<PAGE>
exceptions set forth in the Merger Agreement, authorize any single capital
expenditure which is in excess of $200,000 or capital expenditures (during
any one-month period) which are, in the aggregate, in excess of $200,000
for the Company and the Company Subsidiaries taken as a whole;
(v) increase in any manner the compensation of any of its directors,
officers or employees or enter into, establish, amend or terminate any
Benefit Plan (as defined below), employment, consulting, retention, change
in control, collective bargaining, bonus or other incentive compensation,
profit sharing, health or other welfare, stock option or other equity,
pension, retirement, vacation, severance, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any stockholder, officer, director, other
employee, agent, consultant or affiliate other than as required pursuant to
the terms of agreements in effect on the date of the Merger Agreement and
specifically disclosed to Parent. A "Benefit Plan" includes (a) an employee
benefit plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, together with all regulations thereunder
("ERISA"), even if, because of some other provision of ERISA, such plan is
not subject to any or all of ERISA's provisions, and (b) whether or not
described in the preceding clause (a), any pension, profit sharing,
severance, employment, change-in-control, bonus, stock bonus, deferred or
supplemental compensation, retiree medical or life insurance, death benefit
or insurance, retirement, thrift, stock purchase or stock option plan or
any other compensation, welfare, fringe benefit, perquisite or retirement
plan, or other material program, policy or arrangement of any kind or
nature whatsoever, whether oral or written, providing for compensation,
benefits for or the welfare of any or all of the current or former
employees, directors, consultants or agents of the Company or any of the
Company Subsidiaries or their beneficiaries or dependents;
(vi) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(vii) make any material tax election, settle or compromise any
material federal, state, local or foreign tax liability, or waive any
statute of limitations for any tax claim or assessment;
(viii) settle or compromise any material pending or threatened suit,
action or claim;
(ix) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any Company Subsidiary (other than the
Merger);
(x) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction (a) in the ordinary course of
business consistent with past practice of liabilities reflected or reserved
against in the financial statements of the Company or incurred in the
ordinary course of business and consistent with past practice and (b) of
liabilities required to be paid, discharged or satisfied pursuant to the
terms of any contract in existence on the date of the Merger Agreement or
entered into in accordance with the Merger Agreement;
(xi) permit any insurance policy naming the Company or any of the
Company Subsidiaries as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent, except in the ordinary
course of business consistent with past practice; or
(xii) take, or offer or propose to take, or agree to take in writing
or otherwise, any of the actions described above or take or omit to take
any action which would make any of the representations or warranties of the
Company contained in the Merger Agreement untrue and incorrect in any
material respect as of the date when made if such action had then been
taken or omitted, or would result in any of the Offer Conditions (as
defined in the Merger Agreement) or certain covenants of the Company in the
Merger Agreement as described herein not being satisfied.
The Company also agreed to, and to cause the Company Subsidiaries to, use
its or their best efforts to comply in all material respects with all laws
applicable to it or any of its properties, assets or business and maintain in
full force and effect all the Permits (as defined in the Merger Agreement)
necessary for such business.
8
<PAGE>
Indemnification. Purchaser and Parent have agreed in the Merger Agreement
that all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time existing in favor of the
current or former directors, officers or employees of the Company as provided in
the Company's Certificate of Incorporation or Bylaws or pursuant to agreements
existing on the date of the Merger Agreement will be assumed by the Surviving
Corporation, and Parent will cause the Surviving Corporation to honor such
obligations in accordance with the terms thereof, without further action, as of
the Effective Time, and such rights will continue in full force and effect in
accordance with their respective terms. Such rights, and the Surviving
Corporation's and Parent's related obligations, shall apply in all respects to
the current or former directors, officers and employees of each of the Company
Subsidiaries as though such directors, officers and employees were entitled to
indemnification rights pursuant to the Company's Certificate of Incorporation or
Bylaws as in effect on the date of the Merger Agreement or pursuant to such
agreements, as the case may be. In addition, from and after the Effective Time,
directors and officers of the Company who become or remain directors or officers
of Parent will be entitled to the same indemnity rights and protections
(including those provided by directors' and officers' liability insurance) as
are afforded to other directors and officers of Parent. The Merger Agreement
provides further that Parent will, and will cause the Surviving Corporation or
one of its affiliates to, maintain for six years from the Effective Time
policies of directors' and officers' liability insurance equivalent in all
material respects to those maintained by or on behalf of the Company and the
Company Subsidiaries on the date of the Merger Agreement (and having coverage
and containing terms and conditions which in the aggregate are not less
advantageous to the persons currently covered by such policies as insured) with
respect to claims arising from any actual or alleged wrongful act or omission
occurring at or prior to the Effective Time for which a claim has not been made
against any director or officer of the Company or any director or officer of the
Company Subsidiaries prior to the Effective Time.
Options. The Merger Agreement provides that all outstanding options to
purchase Shares (the "Company Options") granted under the Company's stock option
plans, each as amended (collectively, the "Company Option Plans"), whether or
not then exercisable or vested, pursuant to the terms of the Company Option
Plans, will be cancelled as of the consummation of the Offer and the holders of
Company Options will be entitled to receive from Parent upon consummation of the
Offer, in respect of each Share subject to such Company Option, an amount in
cash equal to the excess, if any, of the Per Share Amount over the exercise
price per Share of such Company Option (such payment to be net of applicable
withholding taxes).
The Company has agreed to cause the Company Option Plans to terminate as of
the Effective Time and the Company has represented and warranted to Parent that
all Company Option Plans provide, or have been or will be amended as and when
required to provide, for the actions described in the preceding paragraph. The
Company has represented and warranted that 607,437 Shares were issuable pursuant
to Company Options as of November 18, 1998 (and will, unless exercised prior to
the Effective Time, be cancelled pursuant to the preceding paragraph).
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by the Company as to the
Company's capitalization, the absence of any required filings and consents, the
absence of conflicts with charter documents and contracts, financial statements,
the absence of certain changes or events, compliance with laws, the absence of
litigation, employee benefit plans, ownership and use of assets and properties,
intellectual property, insurance, the filing and compliance of reports with the
requirements of the Commission and the accuracy thereof, environmental matters,
labor relations, brokers and taxes.
Merger Conditions. Under the Merger Agreement, the obligations of each
party to effect the Merger shall be subject to the fulfillment or waiver at or
prior to the Effective Time of the following conditions, provided that the
obligation of each party to effect the Merger shall not be relieved by the
failure of any such conditions if such failure is the proximate result of any
breach by such party of any of its material obligations under the Merger
Agreement:
(i) Purchaser shall have accepted for payment all Shares validly
tendered in the Offer and not withdrawn; provided, however, that neither
Parent nor Purchaser may invoke this condition if Purchaser shall have
failed to purchase Shares so tendered and not withdrawn in violation of the
terms of the Merger Agreement or the Offer;
9
<PAGE>
(ii) if required, the Company Proposals shall have been approved at or
prior to the Effective Time by the requisite vote of the stockholders of
the Company in accordance with the DGCL and the Company's Certificate of
Incorporation and Bylaws, which the Company has represented shall be solely
the affirmative vote of a majority of the outstanding Shares;
(iii) no order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court or other Governmental Authority which
temporarily, preliminarily or permanently prohibits or prevents the
consummation of the Merger which has not been vacated, dismissed or
withdrawn prior to the Effective Time; and
(iv) on or prior to the closing date of the Merger, the waiting period
(and any extension thereof) applicable to the Merger under the HSR Act and
similar foreign laws shall have been terminated or shall have expired, and
all consents necessary for the consummation of the Merger shall have been
obtained.
Pursuant to the Merger Agreement, the obligations of Parent and Purchaser
to effect the Merger are subject to the satisfaction of the condition (which may
be waived in whole or in part by Parent) that the Company shall have performed
in all material respects all obligations required to be performed by it under
the Merger Agreement on or before the earlier of (i) such time as Parent's or
Purchaser's designees shall constitute at least a majority of the Board and
(ii) the closing date of the Merger; provided, however, that no failure by the
Company to have so performed any such material obligation shall constitute a
failure of satisfaction of the foregoing condition where the Company's failure
of performance was caused by Parent.
(iii) Stockholder Agreement. As a condition and inducement to Parent's and
Purchaser's entering into the Merger Agreement, concurrently with the execution
and delivery of the Merger Agreement, Warburg, Pincus Investors, L.P. ("WP
Investors"), which owns approximately 39.3% of the Shares (the "Option Shares"),
entered into a Stockholder Agreement, dated as of November 18, 1998 (the
"Stockholder Agreement"), with Parent and Purchaser.
The following summary of the Stockholder Agreement is qualified in its
entirety by reference to the Stockholder Agreement, a copy of which has been
filed with the Commission as Exhibit 3 to this Statement and is incorporated
herein by reference.
Under the Stockholder Agreement, WP Investors has agreed to tender the
Option Shares pursuant to the Offer and has granted Parent or Purchaser, as
Parent may designate (the "Optionee"), the irrevocable option (the "Option") to
purchase all of such Option Shares at $25.00 per Share (or such higher price as
may be paid in the Offer). The Option may be exercised by the Optionee if the
Company becomes obligated to pay Parent its reasonable expenses incurred in
connection with the Merger Agreement, the Offer or the Merger pursuant to the
Merger Agreement (see "Expense Reimbursement" above) or if the Offer is
consummated but (due to the failure by WP Investors to validly tender the Option
Shares or a withdrawal of the Option Shares by WP Investors) Purchaser has not
accepted for payment or paid for the Shares in the Offer (in which case the
price per Option Share will be equal to the highest price paid in the Offer).
The Option will become exercisable, in whole but not in part, on the first to
occur of the foregoing events or, if later, the date on which the HSR Act and
similar foreign law waiting periods required for the purchase of the Option
Shares upon exercise of the Option shall have expired or been terminated and
there is not in effect any preliminary or final injunction or other order issued
by any court or other governmental, administrative or regulatory agency or
authority prohibiting the exercise of the Option pursuant to the Merger
Agreement. The Option will remain exercisable for a period of 20 days after the
Option first becomes exercisable.
Voting of Shares. In the Stockholder Agreement, WP Investors agrees that
from the date thereof until the termination of the Stockholder Agreement, at any
meeting of the Company's stockholders, however called, and in any action by
consent of the Company's stockholders, WP Investors shall vote its Shares
(except to the extent that WP Investors no longer has any voting rights in
respect of the Shares as a result of the exercise of the Option) (i) in favor of
the Merger and the Merger Agreement (as amended from time to time),
(ii) against any Takeover Proposal and against any proposal for action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or which is reasonably likely to result in any of the conditions of
the Company's obligations under the Merger Agreement not being fulfilled, any
change in the directors of the Company, any change in the present
10
<PAGE>
capitalization of the Company or any amendment to the Company's Certificate of
Incorporation or Bylaws, any other material change in the Company's corporate
structure or business, or any other action which in the case of each of the
matters referred to in this clause (ii) could reasonably be expected to impede,
interfere with, delay, postpone or materially adversely affect the transactions
contemplated by the Merger Agreement or the likelihood of such transactions
being consummated and (iii) in favor of any other matter necessary for
consummation of the transactions contemplated by the Merger Agreement which is
considered at any such meeting of the Company's stockholders or in such consent,
and in connection therewith to execute any documents which are necessary or
appropriate in order to effectuate the foregoing, including the ability of
Purchaser or its nominees to vote the Shares directly.
Agreement not to Dispose of or Encumber Shares. WP Investors has agreed
that, except pursuant to the Offer, during the term of the Stockholder
Agreement, it will not, and will not offer or agree to, sell, transfer, tender,
assign, pledge, hypothecate or otherwise dispose of, or create or permit to
exist any encumbrance on any of its Shares.
Agreement to Tender. WP Investors has agreed to validly tender (or cause
the record owner of such Shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer, its Shares. For its Shares
validly tendered in the Offer and not properly withdrawn, WP Investors will be
entitled to receive the highest price paid by Parent pursuant to the Offer.
No Solicitation. WP Investors has agreed in the Stockholder Agreement that
during the term of the Stockholder Agreement, it will not, directly or
indirectly, through any officer, director, agent or other representative,
solicit, initiate or encourage, or take any other action designed or reasonably
likely to facilitate, any inquiries or the making of any proposal from any
person (other than Parent, Purchaser and any of their affiliates) relating to
(i) any acquisition of all or any of the Option Shares or (ii) any transaction
that constitutes a Takeover Proposal, or participate in any negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in or facilitate
or encourage, any effort or attempt by any person to do or seek any of the
foregoing. WP Investors has agreed to notify Parent and Purchaser promptly if
any such proposal or offer, or any inquiry or contact with any person with
respect thereto, is made and shall, in any such notice to Parent and Purchaser,
indicate in reasonable detail the identity of the person making such proposal,
offer, inquiry or contact and the terms and conditions of such proposal, offer,
inquiry or contact. Notwithstanding any provision of this paragraph to the
contrary, if WP Investors or any officer, director, agent or representative of
WP Investors is a member of the Board, such member may take actions in such
capacity to the extent permitted by the Merger Agreement.
Representations and Warranties. The Stockholder Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by WP Investors as to
organization, power and authority, the absence of any failure to make required
filings and consents, the absence of conflicts with charter documents and
contracts and title to its Shares. The Stockholder Agreement also provides that,
as of the Effective Time, any and all contractual rights in favor of WP
Investors and its affiliates then in effect between WP Investors or its
affiliates, on the one hand, and the Company or its affiliates, on the other
hand, shall terminate, except for indemnification, contribution or exculpation
provisions contained in any contracts, agreements or instruments or in the
Certificate of Incorporation or Bylaws of the Company in favor of WP Investors
or any of its affiliates as in effect as of the Effective Time.
Termination. The Stockholder Agreement shall terminate and be of no
further force and effect (i) by the written mutual consent of the parties
thereto, or (ii) automatically and without any required action of the parties
thereto upon the earlier to occur of (a) the Effective Time and (b) the calendar
day immediately after the termination of the Merger Agreement in accordance with
its terms; provided, however, that in the event that the Option shall become
exercisable, the provisions of the Stockholder Agreement governing the exercise
and exercisability of the Option, the representations, warranties and covenants
of WP Investors, the representations and warranties of Parent and Purchaser and
other miscellaneous matters of the Stockholder Agreement shall survive the
termination of the Stockholder Agreement until the earlier to occur of the
closing of the exercise of the Option and the expiration of the Option. No such
termination of the Stockholder Agreement shall relieve any party thereto from
any liability for any breach of the Stockholder Agreement prior to termination.
11
<PAGE>
(iv) Merck KGaA Financing Letter. Merck KGaA has agreed in a letter, dated
November 18, 1998 (the "Merck KGaA Financing Letter"), that it will ensure that
Parent will have sufficient funds available to satisfy promptly Parent's payment
obligations with respect to the Offer and the Merger. The foregoing summary of
the Merck KGaA Financing Letter is qualified in its entirety by reference to the
Merck KGaA Financing Letter, a copy of which has been filed with the Commission
as Exhibit 4 to this Statement and is incorporated herein by reference.
(v) New Employment Agreements. On November 18, 1998, the Company entered
into new employment agreements (the "New Employment Agreements") with the
following executive officers of the Company: Stelios B. Papadopoulos, the
Company's Chairman, Chief Executive Officer and President, Dr. Robert C.
Mierendorf, President and General Manager of Novagen, Inc., a subsidiary of the
Company, James G. Stewart, Vice President, Administration, Chief Financial
Officer and Secretary of the Company, Douglas J. Greenwold, Vice President,
Sales and Marketing of the Company, Dr. John T. Snow, Vice President, New
Business Development of the Company and Mark Zimmerman. The New Employment
Agreements will become effective at the Effective Time and supersede any
existing employment agreements or severance agreements between the Company and
those executive officers. The following summary of the New Employment Agreements
is qualified in its entirety by reference to those agreements, copies of which
have been filed with the Commission as Exhibits 5, 6, 7, 8, 9 and 10 to this
Statement and are incorporated herein by reference.
Mr. Papadopoulos will be employed as the Chief Executive Officer of the
Company after the Merger. Mr. Papadopoulos' New Employment Agreement provides
for a three year term which will automatically be extended for consecutive one
year periods unless notice of termination of employment is given by either the
Company or Mr. Papadopoulos at least ninety days prior to the expiration of the
initial or any renewal term. Mr. Papadopoulos will receive an annual base salary
of $275,000, to be reviewed at least annually. Bonuses and increases in base
salary may be awarded to Mr. Papadopoulos in the sole discretion of the Board,
based upon the Company's performance and consistent with the Company's
compensation policies. In addition to his participation in any group life
insurance programs provided by the Company to its employees, the Company will
provide Mr. Papadopoulos with term life insurance in the amount of $150,000.
Mr. Papadopoulos will be entitled to participate in a new long-term incentive
compensation plan to be developed by the Company and will receive an allocation
of units under such plan effective as of the Effective Time, which allocation
shall be commensurate with his position and consistent in incentive opportunity
with allocations to similarly situated employees of the Company. If
Mr. Papadopoulos' New Employment Agreement is terminated due to disability, he
will receive disability pay from the date of such termination until the second
anniversary of the Effective Time at the rate of 50% of his base salary, reduced
by applicable payroll taxes and amounts received under any Company-maintained
disability insurance policy or plan or under Social Security or similar laws. If
Mr. Papadopoulos is terminated without cause, or if he voluntarily terminates
his employment as the result of the assignment to him of duties which are
materially inconsistent with his duties (a "Material Demotion") or if the
Company does not offer to continue his employment at the expiration of the
three-year term at a base salary at least equal to his then base salary, he will
receive salary continuation pay for twelve months from the date of such
termination equal to his then most recent base salary. Mr. Papadopoulos' New
Employment Agreement contains a covenant not to compete with the Company for one
year from the date of his termination of employment (except for termination due
to disability, termination without cause or voluntary termination following a
Material Demotion). The covenant also prohibits Mr. Papadopoulos from
interfering with the Company's business relationships for such one-year period.
If Mr. Papadopoulos breaches his covenant not to compete or interferes with the
Company's business relationships, the amount of his severance payments will be
reduced. Mr. Papadopoulos' New Employment Agreement contains an assignment to
the Company of his rights in inventions and other intellectual property and an
agreement to maintain confidentiality about the Company's know-how, trade
secrets, proprietary processes and other confidential matters.
The New Employment Agreements for Dr. Mierendorf, Messrs. Stewart,
Greenwold and Zimmerman and Dr. Snow (each, an "Executive Officer") provide for
two-year terms (other than the New Employment Agreement for Dr. Snow which
provides for a three-year term), each of which will automatically be extended
for consecutive one-year periods unless notice of termination of employment is
given by either the Company or the Executive Officer at least ninety days prior
to the expiration of the initial or any renewal term. The New Employment
Agreements for Dr. Mierendorf, Messrs. Stewart, Greenwold and Zimmerman and
Dr. Snow
12
<PAGE>
provide for annual base salaries of $165,000, $195,000, $145,000, $145,000 and
$150,000, respectively. Each of Dr. Mierendorf and Mr. Zimmerman shall be
entitled to receive a $50,000 bonus to the extent he is an employee of the
Company at the Effective Time as set forth in a letter agreement, copies of
which have been filed with the Commission as Exhibits 11 and 12 to this
Statement and are incorporated herein by reference. Each of the Executive
Officers will have the same title as he held prior to the Merger and will
perform duties consistent with his title. The base salary for each Executive
Officer is determined annually by the Compensation Committee of the Board (the
"Compensation Committee") and may be adjusted based upon certain factors
including the Executive Officer's performance, the financial performance of the
Company and economic conditions. Each Executive Officer will be eligible for an
executive bonus of up to a maximum of 35% of his base salary, based on the
achievement of objectives established by the Compensation Committee and to be
awarded in the sole discretion of the Compensation Committee. Each Executive
Officer will also be entitled to participate in a new long-term incentive
compensation program to be developed by the Company and will receive an
allocation of units under such plan effective as of the Effective Time, which
allocation shall be commensurate with his position and consistent in incentive
opportunity with allocations to similarly situated employees of the Company.
Each Executive Officer will also be eligible for fringe benefits as are
generally provided to executives of the Company. If an Executive Officer is
involuntarily terminated without cause, or if an Executive Officer voluntarily
terminates employment as the result of a material reduction in his
responsibilities, he will receive salary continuation pay equal to his base
salary in effect at the time of termination for the greater of (i) the remaining
term of his New Employment Agreement and (ii) twelve months from the date of
termination, provided that the salary continuation payments will cease if the
Executive Officer engages in any business which is competitive with the Company
or interferes with the Company's business relationships. The New Employment
Agreements for the Executive Officers contain the same provisions with respect
to the assignment of inventions and other intellectual property and
confidentiality as are contained in Mr. Papadopoulos' New Employment Agreement.
(vi) Indemnification Agreements. The Company is a party to indemnification
agreements with certain of its directors and officers pursuant to which the
Company provides indemnification and contribution against expenses and losses
incurred for claims brought against them by reason of their being a director or
officer of the Company.
(vii) Commercial Arrangements. The Company from time to time in the
ordinary course of its business has purchased products from and sold products to
affiliates of the Parent.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
AT A MEETING HELD ON NOVEMBER 18, 1998, THE BOARD UNANIMOUSLY APPROVED THE
OFFER AND THE MERGER AGREEMENT AND DETERMINED THAT THE TERMS OF THE OFFER AND
THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
(b)(i) BACKGROUND OF THE OFFER; CONTACTS WITH PARENT AND MERCK KGAA
During the last several years, the Company has successfully implemented its
niche catalog strategy and developed its distribution and cataloging
capabilities. In order to be able to further leverage upon the expertise of its
scientific staff and its technical service and support personnel, its marketing
expertise, and its highly automated order fulfillment systems, the Company has
continuously sought to increase both the breadth of its product offerings and
the size of its customer base. Substantial growth has increasingly been viewed
by the Company's management and the Board as a necessary element to enable the
Company to compete with the industry's dominant suppliers, including
Sigma-Aldrich Corporation and Roche Molecular Biochemicals, particularly in
light of a number of industry trends, including: the growing trend in the
Company's customer base to seek "one stop shopping" to facilitate centralized
order processing, maximize potential for volume discounts, and reduce purchasing
costs; the development of electronic commerce systems and strategies, which
require the expenditure of significant resources and increase the risk of
competition from a number of industry players, both larger and smaller than the
Company; and general trends toward industry consolidation among providers of
life sciences research products.
13
<PAGE>
While the Company continued to pursue growth through internal growth and
strategic acquisitions similar to its acquisition of Oncogene Research Products
and Novagen, Inc., the Board and management believed that it was appropriate to
examine the possibility of a transaction with a substantially larger industry
participant.
Accordingly, in April 1998, the Company engaged Vector Securities
International, Inc. ("Vector Securities") to assist it in analyzing a variety of
strategic alternatives, identifying potential acquisition candidates or
acquirors, and, if an appropriate opportunity emerged, in discussing and
negotiating a possible transaction.
During the spring and summer of 1998, Vector Securities made contact with
over thirty companies regarding the possibility of various strategic
transactions involving the Company and furnished a basic information package to
twenty-eight of these companies. Confidentiality agreements were entered into
with seven companies, each of which was then given a management presentation in
which more detailed confidential information about the Company and its plans was
discussed. During these discussions, Vector Securities assisted the Company in
exploring a variety of transactions, including acquisitions by the Company,
"mergers of equals" and a sale of the Company. Ultimately, four companies,
including Merck KGaA, gave Vector Securities or the Company verbal expressions
of interest in acquiring the Company.
Early in the process, Merck KGaA was identified as a company that might
have a serious strategic interest in undertaking a transaction with the Company.
While not directly engaged in the life sciences research products market of the
Company in the United States, Merck KGaA has an analytical reagents business in
Europe, Latin America and Asia, as well as a significant presence in the
laboratory supply business both in Europe, and through its approximately 49%
ownership of VWR Scientific Products Corp., in the United States. Merck KGaA was
originally contacted by Vector Securities on May 15, 1998, and a Confidentiality
Agreement was signed on June 3, 1998. On August 3, 1998, Messrs. Papadopoulos
and Stewart, together with a representative of Vector Securities, met with Merck
KGaA at its headquarters in Darmstadt, Germany, to present information about the
Company and explore the possibility of a transaction. Additional information was
provided by the Company to Merck KGaA during August and September, and on
September 14, 1998, Merck KGaA delivered to Vector Securities a non-binding
written expression of interest in acquiring the Company at a range of $24 to $25
per share. Thereafter, Merck KGaA arranged for a visit by its auditors to the
Company's headquarters, and on October 7 and 8, 1998, representatives of Merck
KGaA, its affiliates and their advisors visited the Company's headquarters in
San Diego for extensive due diligence discussions. Over the next several weeks,
Merck KGaA, Parent and their advisors engaged in further examinations of the
business, strategies and prospects of the Company, and on October 16,
Mr. Papadopoulos and a representative of Vector Securities had an additional
meeting in Darmstadt with executives of Merck KGaA.
At Board meetings on July 23, 1998 and October 22, 1998, Vector Securities
gave the Board updates on the nature and progress of its discussions. At the
October meeting, the Board was advised that Merck KGaA appeared to be very
interested in the Company. On October 29, 1998, Mr. Papadopoulos, in a telephone
call with Mr. Wolfgang Honn, a senior executive of Merck KGaA, was informed that
Merck KGaA was prepared to offer a price of $23 per share. After consultation
with Vector Securities and certain members of the Board, Mr. Papadopoulos
advised Merck KGaA that such an offer would not be acceptable. Thereafter, on
November 4, 1988, Mr. Papadopoulos was advised that Merck KGaA would consider a
transaction in the range of $24 to $25 per share, and on November 5, 1998,
Mr. Papadopoulos was advised that Merck KGaA's management was prepared to
recommend to its Board of Directors a price of $25 per share in cash, if a
transaction could be consummated rapidly, if appropriate employment arrangements
could be made with senior management, and if WP Investors were prepared to
commit to tender its shares at such price. Mr. Papadopoulos was also advised on
November 5, 1998 that Merck KGaA would not engage in any further negotiations
regarding price.
In a telephonic Board meeting held on November 9, 1998, the Board was
advised of the status of the discussions with Merck KGaA. Mr. Papadopoulos
reported to the Board the most recent pricing discussions and the final price
that had been offered. Representatives of Vector Securities reviewed with the
Board the process that had taken place since April 1998, and the discussions
that had been held with Merck KGaA and with other potentially interested
parties. At the meeting, legal counsel also advised the Board regarding its
fiduciary duties. Vector Securities then discussed with the Board its
preliminary views regarding the offer price in relation to a number of standard
valuation methodologies. While the Board acknowledged that a transaction at a
price below then current trading levels was unusual, Vector Securities advised
the Board that its research had revealed other
14
<PAGE>
such transactions in the last two years, and that the price offered must, among
other elements, be viewed in light of the significant volatility of the
Company's share price and the low trading volume of the Shares during the course
of 1998. Mr. Joseph Landy, a Board member and a Managing Director of
E.M. Warburg, Pincus & Co., LLC, indicated that in addition to supporting the
proposed transaction in his capacity as a Board member, he would recommend its
approval by WP Investors, the Company's largest single stockholder. At the
conclusion of this meeting, the Board unanimously authorized Mr. Papadopoulos to
proceed to negotiate a definitive agreement on the basis of the price that had
been offered.
After Mr. Papadopoulos advised Merck KGaA that the Board had authorized him
to proceed with negotiations, additional diligence trips were arranged at the
Company's Swiss, German and United Kingdom subsidiaries. Contractual
negotiations between the parties commenced on November 12, 1998, and continued
through the course of the weekend.
On November 18, 1998, the Board met in New York with its legal and
financial advisors to consider the proposed transaction. The Company's legal
counsel reviewed the fiduciary duties of the Board in considering the proposed
transaction, and then made a detailed presentation to the Board regarding the
terms of the Merger Agreement, including a summary of the representations,
warranties, covenants, conditions, termination events and termination
consequences, as well as the structure of the proposed transaction, including
the mechanics of a tender offer followed by a merger. Also presented to the
Board were descriptions of the Merck KGaA Financing Letter, the Stockholder
Agreement and the New Employment Agreements. Vector Securities then made a
detailed presentation including various financial analyses with respect to the
proposed transaction and delivered its oral opinion, subsequently confirmed in
writing, that the cash consideration to be offered to the holders of Shares
pursuant to the Offer and the Merger was fair to such holders from a financial
point of view. The full text of the opinion of Vector Securities, dated
November 18, 1998, which sets forth the assumptions made, matters considered and
the limits on the review undertaken by Vector Securities, is attached as
Schedule I hereto and is incorporated herein by reference. During the meeting,
the Board was also advised that at a meeting earlier in the day, the Board of
Directors of Merck KGaA and of Parent had approved the proposed transaction.
The Board, after consideration of the presentations by legal counsel, the
fairness opinion of Vector Securities and the factors concerning its business
set forth in Item 4(b) of this Statement, unanimously approved the Merger
Agreement, the terms of the Offer and the transactions contemplated by the
Merger Agreement. The parties executed the Merger Agreement in the evening on
November 18, 1998, and publicly announced the transaction on the morning of
November 19, 1998.
(b)(ii) REASONS FOR THE RECOMMENDATION BY THE BOARD OF DIRECTORS
In reaching its conclusions and recommendation described above, the Board
considered a number of factors, including, without limitation, the following:
(a) The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement.
(b) The presentation of Vector Securities to the Board on
November 18, 1998, and the oral opinion of Vector Securities (which opinion
was subsequently confirmed by delivery of a written opinion dated
November 18, 1998, the date of execution of the Merger Agreement) to the
effect that, as of the date of such opinion and based upon the assumptions
made, matters considered and limits of review set forth therein, the cash
consideration to be offered to holders of Shares pursuant to the Offer and
the Merger was fair to such holders from a financial point of view. The
full text of the written opinion of Vector Securities, dated November 18,
1998, which is set forth as Schedule I hereto and is incorporated herein by
reference, sets forth the assumptions made, matters considered and limits
on the review undertaken by Vector Securities. THE COMPANY'S STOCKHOLDERS
ARE URGED TO READ THE OPINION IN ITS ENTIRETY. Vector Securities' opinion
does not constitute a recommendation to any stockholder of the Company as
to whether to accept the Offer or vote to approve the Merger Agreement. In
addition, such opinion does not address the relative merits of the Offer
and the Merger or any other transactions or business strategies discussed
by the Board as alternatives to the Offer and the Merger or the decision of
the Board to proceed with the Offer and the Merger. In considering such
opinion, the Board was aware that Vector Securities is entitled to certain
fees described elsewhere herein in connection with Vector Securities'
engagement by the Company.
15
<PAGE>
(c) The fact that the structure of the acquisition of the Company by
Parent as provided for in the Merger Agreement involves a cash tender offer
for all outstanding Shares to be commenced within five business days of the
public announcement of the Merger Agreement to be followed as promptly as
practicable by a merger for the same consideration, thereby enabling the
Company's stockholders to obtain cash for their Shares at the earliest
possible time.
(d) The fact that the Merger Agreement, which prohibits the Company,
its subsidiaries and their respective officers, directors, employees,
representatives or agents from soliciting, initiating or encouraging any
competing Takeover Proposal or participating in any discussion regarding
any Takeover Proposal, does permit the Company to furnish non-public
information to, and participate in negotiations with, any person that
makes an unsolicited Superior Proposal if the Board, based upon the advice
of outside counsel, determines in good faith that taking such action is
consistent with the fiduciary duties of the Board under applicable law.
(e) The fact that, in the event that the Board decides to accept a
Superior Proposal from a third party, the Board may terminate the Merger
Agreement, without payment of a termination fee to Parent, but with the
reimbursement of up to $1,500,000 of fees and expenses incurred by Parent
in connection with the proposed transaction. The Board did not believe that
such termination provision would be a significant deterrent to a higher
offer by a third party interested in acquiring the Company.
(f) The view of the Board, based in part upon the presentations of
management and upon the process outlined above that led to the Offer and
the Merger Agreement, that there was a limited likelihood of a superior
offer arising.
(g) The fact that WP Investors, the beneficial owner of approximately
39.3% of the outstanding Shares, was willing to enter into the Stockholder
Agreement pursuant to which WP Investors agreed, among other things, to
tender all of its Shares pursuant to the Offer and granted to Parent or
Purchaser, as Parent may designate, an option, exercisable under certain
circumstances, in respect of its Shares.
(h) The fact that the Offer would not be subject to a financing
condition, that Parent represented that it has the funds available to
consummate the Offer and the Merger, and that Merck KGaA has agreed to
ensure that Parent has sufficient funds to satisfy promptly its payment
obligations under the Merger Agreement.
(i) The historical market price of, recent trading activity in, and
ownership of, the Shares, including in particular the significant trading
volatility experienced by the Shares on small trading volumes and the
relatively large number of Shares held by affiliates of the Company and
institutional investors that results in low trading volume.
(j) The familiarity of the Board with (i) the business, results of
operations, properties and financial condition of the Company, (ii) the
competition the Company faces from companies with substantially greater
financial resources and (iii) the prospects of the Company, including the
risks and benefits inherent in remaining independent.
(k) The regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals.
(l) The ability to benefit the Company's customers and employees by
creating a stronger enterprise offering a wider range of products.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation and approval of
the Merger Agreement and the transactions completed thereby, the Board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the Board may have given different weights to
different factors.
16
<PAGE>
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Vector Securities as its exclusive financial
advisor in connection with the sale of the Company and acquisitions of
businesses by the Company. Pursuant to an engagement letter, dated April 28,
1998, the Company agreed to pay Vector Securities a cash fee (a "Transaction
Fee") equal to (i) 1.25% of the first $160 million of aggregate consideration
(as defined in the engagement letter) to be paid in a sale, merger, tender
offer, business combination, or other similar transaction involving all or a
portion of the Company's stock or assets, plus (ii) 2.25% of any such aggregate
consideration, to the extent that it exceeds $160 million and is less than or
equal to $190 million, plus (iii) 3.25% of any such aggregate consideration in
excess of $190 million. The Transaction Fee is payable upon the closing of such
a transaction. The Company also agreed to pay Vector Securities a non-refundable
retainer fee of $75,000 payable in three installments, which will be credited
against any Transaction Fee. In addition, the Company has agreed to reimburse
Vector Securities' reasonable out-of-pocket expenses, including the fees and
disbursements of counsel, and indemnify and defend Vector Securities and certain
related persons against certain liabilities, including, without limitation,
liabilities under the federal securities laws, arising out of Vector Securities'
engagement. In the event such indemnification were not available, however, the
Company has agreed to contribute to the settlement, loss or expense involved in
the proportion that the relative benefits of the Company bears to Vector
Securities' benefits, such contribution not to exceed, in the case of Vector
Securities, the amount of the fee received by Vector Securities from the Company
with respect to the engagement. In the ordinary course of its business, Vector
Securities and its affiliates may actively trade or hold the securities of the
Company for their own account and for the accounts of their customers and,
accordingly, may at any time hold a long or short position in such securities.
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 security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for the issuance of Shares upon exercise of outstanding options,
no transactions in Shares have been effected during the past 60 days by the
Company or, to the best of the Company's knowledge, by an executive officer,
director, subsidiary or affiliate of the Company.
(b) To the best of the Company's knowledge, each executive officer,
director and affiliate of the Company currently intends to tender all Shares to
Purchaser over which he or she has sole dispositive power as of the expiration
date of the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above or in 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: (i) an extraordinary transaction such as a merger
or reorganization involving the Company or any subsidiary of the Company;
(ii) a purchase, sale or transfer of a material amount of assets by the Company
or any subsidiary of the Company; (iii) a tender offer for or other acquisition
of securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in Item 3(b) or 4 above (the provisions of which
are hereby incorporated by reference), 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) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Information Statement attached as Schedule II hereto is being
furnished in connection with the possible designation by Parent, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's stockholders as described in Item 3 above.
(b) Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203
("Section 203") of the DGCL. Under Section 203, certain "business combinations"
between a Delaware corporation whose stock is publicly traded or
17
<PAGE>
held of record by more than 2,000 stockholders and an "interested stockholder"
are prohibited for a three-year period following the date that such a
stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction in
which the stockholder became an interested stockholder or the business
combination was approved by the Board of Directors of the corporation before the
other party to the business combination became an interested stockholder,
(iii) upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the commencement of the transaction (excluding
voting stock owned by directors who are also officers or held in employee
benefit plans in which the employees do not have a confidential right to tender
or vote stock held by the plan) or (iv) the business combination was approved by
the Board of Directors of the corporation and ratified by 66 2/3% of the voting
stock which the interested stockholder did not own. The term "business
combination" is defined generally to include mergers or consolidations between a
Delaware corporation and an "interested stockholder," transactions with an
"interested stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an "interested
stockholder's" percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who, together with affiliates and
associates, owns (or, within three years prior, did own) 15% or more of a
Delaware corporation's voting stock.
The Board approved the Merger Agreement, the Stockholder Agreement and the
acquisition of Shares pursuant to the Offer, the Merger and the Stockholder
Agreement and, therefore, the restrictions of Section 203 are inapplicable to
the acquisition of Shares pursuant to the Offer, the Merger and the Stockholder
Agreement.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
Exhibit 1 Excerpts from the Company's Proxy Statement for its 1998 Annual Meeting of Stockholders.
Exhibit 2 Agreement and Plan of Merger, dated as of November 18, 1998, by and among EM Industries, Incorporated,
EM Acquisition Corp. and CN Biosciences, Inc.
Exhibit 3 Stockholder Agreement, dated as of November 18, 1998, among EM Industries, Incorporated, EM
Acquisition Corp. and Warburg, Pincus Investors, L.P.
Exhibit 4 Letter dated November 18, 1998 from Merck KGaA to the Company.
Exhibit 5 Employment Agreement, dated as of November 18, 1998, between the Company and Stelios B. Papadopoulos.
Exhibit 6 Employment Agreement, dated as of November 18, 1998, between the Company and James G. Stewart.
Exhibit 7 Employment Agreement, dated as of November 18, 1998, between the Company and Douglas J. Greenwold.
Exhibit 8 Employment Agreement, dated as of November 18, 1998, between the Company and Robert C. Mierendorf.
Exhibit 9 Employment Agreement, dated as of November 18, 1998, between the Company and John T. Snow.
Exhibit 10 Employment Agreement, dated as of November 18, 1998, between the Company and Mark Zimmerman.
Exhibit 11 Letter Agreement, dated November 18, 1998, between the Company and Robert C. Mierendorf.
Exhibit 12 Letter Agreement, dated November 18, 1998, between the Company and Mark Zimmerman.
Exhibit 13 Letter to Stockholders of the Company, dated November 25, 1998.*
Exhibit 14 Joint Press Release of the Company and Parent, dated November 18, 1998.
Exhibit 15 Opinion of Vector Securities International, Inc. (attached as Schedule I to the Schedule 14D-9).*
</TABLE>
- ------------------
* Included in copies mailed to stockholders.
18
<PAGE>
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.
CN BIOSCIENCES, INC.
By: /s/ JAMES G. STEWART
----------------------------------
Name: James G. Stewart
Title: Vice President
Dated: November 25, 1998
19
<PAGE>
SCHEDULE I
Vector VECTOR SECURITIES INTERNATIONAL, INC.
Securities 1751 LAKE COOK ROAD, SUITE 350
International DEERFIELD, ILLINOIS 60015
TELEPHONE (847) 940-1970
FAX (847) 940-0774
November 18, 1998
The Board of Directors
CN Biosciences, Inc.
10394 Pacific Center Court
San Diego, California 92121
Members of the Board:
You have requested our opinion as investment bankers with respect to the
fairness, from a financial point of view as of the date hereof, to the holders
of common stock, par value $0.01 per share ("Common Stock"), of CN Biosciences,
Inc. ("CN Biosciences"), a Delaware corporation, of the cash consideration to be
offered to such stockholders pursuant to the terms of the Agreement and Plan of
Merger, dated as of November 18, 1998 (the "Agreement"), among (i) EM
Industries, Incorporated, a New York corporation ("EM Industries"), (ii) EM
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of EM
Industries ("Merger Sub"), and (iii) CN Biosciences.
The Agreement provides, among other things, that Merger Sub will make a
cash tender offer for all outstanding shares of Common Stock of CN Biosciences
at $25.00 per share and that, following consummation of the offer, Merger Sub
will merge with and into CN Biosciences in a transaction in which all
outstanding shares of Common Stock of CN Biosciences not tendered in the tender
offer will be converted into the right to receive $25.00 per share in cash (the
"Proposed Transaction"). The terms and conditions of the Proposed Transaction
are more fully set forth in the Agreement.
In arriving at the opinion set forth herein, we, among other things:
(i) reviewed CN Biosciences' Annual Reports to Stockholders, Annual Reports on
Form 10-K and/or related financial information for the four fiscal years ended
December 31, 1997, and its Quarterly Reports on Form 10-Q and related unaudited
financial information for the nine months ended September 30, 1998; (ii)
reviewed certain information, including financial forecasts, relating to the
business, earnings, cash flows, assets and prospects of CN Biosciences,
furnished to us by CN Biosciences; (iii) conducted discussions with members of
senior management of CN Biosciences concerning its business and prospects; (iv)
reviewed the historical market prices and trading activity for the Common Stock
and compared such prices and trading histories with those of certain publicly
traded companies which we deemed to be relevant; (v) compared the financial
position and operating results of CN Biosciences with those of certain other
publicly traded companies which we deemed relevant; (vi) compared the proposed
financial terms of the Proposed Transaction with the financial terms of certain
other transactions which we deemed relevant; (vii) reviewed the financial terms
of the Proposed Transaction as set forth in the Agreement; and (viii) reviewed
such other financial studies and analyses and performed such other
investigations and took into account such other matters as we deemed
appropriate.
In connection with our opinion, we have not assumed any responsibility for
independent verification of any information publicly available or supplied or
otherwise made available to us regarding CN Biosciences and we have assumed and
relied on such information being accurate and complete in all respects. We have
not made or obtained or been provided with any independent evaluation or
appraisal of the assets or liabilities of CN Biosciences. With respect to the
financial projections of CN Biosciences referred to above, we have assumed that
they have been reasonably prepared on bases reflecting the best available
estimates and judgements of the
<PAGE>
CN Biosciences, Inc.
November 18, 1998
Page 2
management of CN Biosciences as to the future financial performance of CN
Biosciences and that CN Biosciences will perform in accordance with such
projections. We assume no responsibility for and express no view as to such
forecasts or the assumptions under which they are prepared. Our conclusions are
based solely on information available to us on or before the date hereof and
reflect economic, market, and other conditions as of such date. In rendering our
opinion, we have assumed that the Proposed Transaction will be consummated on
the terms described in the Agreement, without any waiver of any material terms
or conditions, and that obtaining any necessary regulatory approvals for the
transaction will not have an adverse effect on CN Biosciences.
Vector Securities International, Inc. is a full service securities firm,
and in the course of its normal trading activities, may from time to time effect
transactions and hold positions in securities of CN Biosciences. We have
performed investment banking services for CN Biosciences in the past and have
received customary compensation for such services. We are currently acting as
financial advisor to CN Biosciences in connection with the Proposed Transaction
and will receive a fee in connection therewith, with such fee being contingent
upon consummation of the Proposed Transaction.
This opinion has been prepared at the request and for the use and benefit
of the Board of Directors of CN Biosciences and is rendered to the Board of
Directors of CN Biosciences in connection with its consideration of the Proposed
Transaction. This opinion does not constitute a recommendation to any
stockholder of CN Biosciences as to whether to accept the consideration to be
offered to the stockholders in connection with the Proposed Transaction. This
opinion does not address the relative merits of the Proposed Transaction or any
other transactions or business strategies discussed by the Board of Directors of
CN Biosciences as alternatives to the Proposed Transaction or the decision of
the Board of Directors of CN Biosciences to proceed with the Proposed
Transaction.
This opinion shall not be reproduced, summarized, described or referred to,
or provided to any other person, without our prior written consent.
On the basis of and subject to the foregoing, including the various
assumptions and limitations set forth herein, and based upon such other matters
as we consider relevant, it is our opinion as of the date hereof that the cash
consideration to be offered to the holders of Common Stock of CN Biosciences
pursuant to the Proposed Transaction is fair to such stockholders from a
financial point of view.
Very truly yours,
VECTOR SECURITIES INTERNATIONAL, INC.
By: /s/ JEFFREY A. FINK
-----------------------------------
Jeffrey A. Fink
Managing Director
2
<PAGE>
SCHEDULE II
CN BIOSCIENCES, INC.
10394 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
INFORMATION PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
The following information is being furnished to holders of the common
stock, par value $.01 per share ("Common Stock" or the "Shares"), of CN
Biosciences, Inc., a Delaware corporation (the "Company"), in connection with
the possible designation by EM Industries, Incorporated, a New York corporation
("Parent"), of at least a majority of the Board of Directors of the Company (the
"Board") pursuant to the terms of an Agreement and Plan of Merger, dated as of
November 18, 1998 (the "Merger Agreement"), by and among the Company, Parent and
EM Acquisiiton Corp., a Delaware corporation and wholly owned subsidiary of
Parent ("Purchaser"). THIS INFORMATION IS BEING PROVIDED SOLELY FOR
INFORMATIONAL PURPOSES AND NOT IN CONNECTION WITH A VOTE OF THE COMPANY'S
STOCKHOLDERS.
The Merger Agreement provides that promptly following the purchase by
Purchaser of any Shares pursuant to the tender offer (the "Offer") to purchase
all of the Shares, for a cash price of $25.00 per Share (and assuming that the
Minimum Condition (as defined in the Merger Agreement) has been satisfied),
Parent will be entitled to designate persons to become directors of the Company
(the "Parent Designees") so that the total number of directorships held by such
persons is proportionate to the percentage calculated by dividing (i) the number
of Shares beneficially owned by Parent or its affiliates by (ii) the total
number of Shares then outstanding; provided that prior to the consummation of
the merger of Purchaser with and into the Company (the "Merger") following
consummation of the Offer, the Board shall always have at least one member who
is a director of the Company on the date of the Merger Agreement and who is
neither an officer of the Company nor a designee, shareholder or affiliate of
Parent. The Company has also agreed, upon Parent's request, to increase the size
of the Board to enable the Parent Designees to be elected to the Board.
The information contained in this Schedule II concerning the Parent
Designees has been furnished to the Company by Purchaser, and the Company
assumes no responsibility for the accuracy or completeness of any such
information.
VOTING SECURITIES OF THE COMPANY
As of November 17, 1998, there were issued and outstanding 5,721,790 shares
of Common Stock, each of which entitles the holder to one vote.
BOARD OF DIRECTORS, PARENT DESIGNEES AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
The persons named below are the current members of the Board. The following
sets forth as to each director, his age (as of November 18, 1998), and principal
occupation and business experience, the period during which he has served as a
director, any family relationship with any other director or executive officer
of the Company and the directorships currently held by him in corporations whose
shares are publicly traded.
Joseph P. Landy, 37, has served as a director of the Company since March
1992. Since January 1994, Mr. Landy has been a Managing Director of E.M.
Warburg, Pincus & Co., LLC ("EMW LLC") and its predecessor, E.M. Warburg, Pincus
& Co., Inc. ("EMW Inc."). Mr. Landy has been employed in various capacities by
EMW LLC and EMW Inc. since 1985. Mr. Landy serves on the Board as a nominee of
Warburg, Pincus Investors, L.P. ("WP Investors"), a significant stockholder of
the Company. Mr. Landy also serves as a director of Level One Communications,
Inc. and Indus International, Inc.
<PAGE>
Dr. Richard A. Lerner, 59, has served as a director of the Company since
February 1997. Since 1991, Dr. Lerner has been the President of The Scripps
Research Institute. From 1986 to 1991, Dr. Lerner was Director of the Research
Institute of Scripps Clinic ("Scripps"). From 1982 to 1986, Dr. Lerner served as
Chairman of the Department of Molecular Biology of Scripps. Previously, he held
staff appointments at Scripps and the Wistar Institute in Philadelphia.
Dr. Lerner is a graduate of Northwestern University and Stanford Medical School
and received postdoctoral training at Scripps. Dr. Lerner is a member of the
National Academy of Science USA and numerous editorial and scientific advisory
boards.
S. Joshua Lewis, 36, has served as a director of the Company since June
1995. Since January 1998, Mr. Lewis has been a Managing Director of EMW LLC.
Mr. Lewis has been employed in various capacities by EMW LLC and EMW Inc. since
1989. Mr. Lewis serves on the Board as a nominee of WP Investors. Mr. Lewis also
serves as a director of Ventana Genetics Inc. and Chemdex Corp.
Robert E. McGill, III, 67, has served as a director of the Company since
November 1995. Since February 1997, Mr. McGill has served as a Managing Director
of Berkshires Management Company, L.L.C., the general partner of The Berkshires
Capital Investors Limited Partnership. For more than the past five years,
Mr. McGill has also served as a member of the Board of Managers of variable
annuity managed separate accounts and a Trustee of mutual funds sponsored by The
Travelers Insurance Company. From 1989 to December 1994, Mr. McGill served as
Executive Vice President--Finance and Administration of The Dexter Corporation,
where he also served as a director from 1983 to April 1995. Mr. McGill also
serves as a director of Connecticut Surety Corporation and Chemfab Corporation.
Stelios B. Papadopoulos, 58, has served as Chairman of the Board and Chief
Executive Officer of the Company since January 1993 and President of the Company
since June 1995. From June 1992 to December 1992, Mr. Papadopoulos served as
President of Fisher Scientific Worldwide Inc. (now Fisher Scientific
International Inc.) ("Fisher") and was responsible for the day-to-day operations
of Fisher's worldwide organization which provides equipment, laboratory supplies
and various other products to customers in the life sciences research market.
From May 1989 to June 1992, Mr. Papadopoulos served as President of Fisher
Scientific Company, the principal operating unit of Fisher. Prior to joining
Fisher Scientific Company, Mr. Papadopoulos served in a number of companies
involved in the life sciences industry including Instrumentation Laboratory and
Orion Research.
PARENT DESIGNEE BIOGRAPHICAL INFORMATION
The following, prepared from information furnished to the Company by
Parent, sets forth the name, occupation and age of each of the individuals from
whom Parent will select the Parent Designees.
Peter A. Wriede, 54, is President and CEO of Parent, as well as the
Regional Manager, North America, for Merck KGaA, which controls Parent. From
1994 to 1998, Dr. Wriede held the position of Divisional Director and General
Manager of Merck KGaA in charge of the worldwide pigments and cosmetics division
and, from 1987 to 1994, he was Group Vice President in charge of the specialty
chemicals division of Parent. Dr. Wriede is a director of Dey, Inc., an indirect
subsidiary of Merck KGaA, and EM Laboratories, Incorporated, a wholly owned
subsidiary of Parent ("EML"). Dr. Wriede is a citizen of the United States of
America.
Stephen J. Kunst, Esq., 49, is Group Vice President and, since 1995, has
been General Counsel of Parent. Mr. Kunst has also served as Vice President and
Secretary of Purchaser since November 1998. From 1989 through 1995, Mr. Kunst
served as Vice President--Administrative Services of Parent. Mr. Kunst is a
director of Parent, EML and VWR Scientific Products Corp., 49.89% of the shares
of which are beneficially owned by Merck KGaA ("VWR"). Mr. Kunst is a citizen of
the United States of America.
Dieter Janssen, 56, is Group Vice President and Chief Financial Officer of
Parent. Mr. Janssen has also served as President and Chief Executive Officer of
Purchaser since November 1998. From 1994 to 1996, Mr. Janssen was the Divisional
Manager of Purchasing and Controlling for MEPRO, an affiliate of Merck KGaA.
From 1988 to 1994, Mr. Janssen was Chief Financial Officer of Merck S.A.,
Caracas, Venezuela, an affiliate of Merck KGaA. Mr. Janssen is a director of
VWR. Mr. Janssen is a citizen of Germany.
2
<PAGE>
Wolfgang Honn, 61, is a partner of E. Merck, the entity that controls Merck
KGaA, and, since 1981, has been a member of the Executive Board of Merck KGaA.
Mr. Honn is also a director of VWR. Mr. Honn is a citizen of Germany.
Dr. Harald Schroder, 60, has been a partner of E. Merck and a member of the
Executive Board of E. Merck since 1990 and is currently serving as Vice Chairman
of the Executive Board. Dr. Schroder is Chairman of the Board of Directors of
Parent and is also a director of VWR. Dr. Schroder is a citizen of Germany.
Dr. Bernd Reckmann, 42, has been General Manager, Scientific Laboratory
Products, of Merck KGaA since April 1998 and is a Director of Merck KGaA. From
1997 to April 1998, Dr. Reckmann served as General Manager, Environmental and
Bioanalysis, Laboratory Products Division, of Merck KGaA, and from 1994 to 1996,
as Director of Marketing and Sales, Diagnostic Products Division, of Merck KGaA.
Prior thereto, Dr. Reckmann was Director of Marketing and Sales, Immuno
Diagnostic Products, of the Diagnostic Products Division of Merck KGaA.
Dr. Reckmann is a citizen of Germany.
MEETINGS OF THE BOARD OF DIRECTORS
The Board met six times during 1997. During 1997, each of the directors
during such period attended at least 75% of all meetings of the Board and of
each committee on which such director served as a member, except for Dr. Lerner
who attended 50% of all meetings of the Board.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has, as standing committees, an Audit Committee (the "Audit
Committee"), a Stock Option Committee (the "Stock Option Committee") and a
Compensation Committee (the "Compensation Committee"). The Company does not have
a Nominating Committee.
Compensation Committee. Messrs. Landy and McGill are the members of the
Compensation Committee. The Compensation Committee provides recommendations to
the Board concerning salaries and incentive compensation for the Company's
officers and administers the Company's benefit plans, other than the Company's
Second Amended and Restated 1992 Stock Option Plan (the "Stock Option Plan").
The Compensation Committee met two times in 1997.
Audit Committee. Messrs. Lewis and McGill are the members of the Audit
Committee. The Audit Committee recommends to the Board the engagement of the
Company's independent public accountants and reviews the scope and results of
their audits and other services. The Audit Committee meets with management and
with the independent public accountants to review matters relating to the
quality of the Company's financial reporting and internal accounting controls,
including the nature, extent and results of the audits, proposed changes to the
Company's accounting principles and otherwise maintains communications between
the independent public accountants and the Board. The Audit Committee met two
times in 1997.
Stock Option Committee. Messrs. Lewis and McGill are the members of the
Stock Option Committee. The Stock Option Committee determines grants under and
otherwise administers the Company's Stock Option Plan. The Stock Option
Committee met three times in 1997.
After the consummation of the Merger, it is expected that the Company's
Board will act to appoint new members to the Audit and Compensation Committees.
To the Company's knowledge, no decision has been made by the Parent Designees
regarding the membership of any such committees of the Board.
COMPENSATION OF DIRECTORS
Directors, other than WP Investors' nominees, are reimbursed for expenses
incurred in attending meetings of the Board. In addition, directors, other than
those directors who are also employees of the Company or WP Investors' nominees,
are paid $1,500 for each Board meeting attended. Prior to February 1997, such
directors were paid $500 for each Board meeting attended. At the time that
Mr. McGill joined the Board, he was granted options to purchase 11,829 shares of
Common Stock at an exercise price of $3.38 per share. Additionally, under an
agreement with the Company, Mr. McGill from time to time provides certain
consulting services for which he is compensated at the rate of $1,000 per day.
During 1997, no consulting fees were paid by the Company to
3
<PAGE>
Mr. McGill. At the time that Dr. Lerner joined the Board, he was granted options
to purchase 25,000 shares of Common Stock at an exercise price of $14.50 per
share.
EXECUTIVE OFFICERS
Executive officers serve at the discretion of the Board. The following sets
forth certain information concerning the executive officers of the Company (as
of November 18, 1998) who are expected to serve in such capacity until the
consummation of the Merger, other than Mr. Papadopoulos, for whom information is
set forth under "Board Biographical Information" above. None of the executive
officers has a family relationship with another executive officer.
Douglas J. Greenwold, 56, has served as Vice President, Sales and Marketing
of the Company since January 1994. From 1990 to 1993, Mr. Greenwold was employed
in various capacities, including Vice President Sales and Marketing, Research
Products Americas at Life Technologies, Inc., a supplier of research products to
the life sciences research market. Prior to joining Life Technologies,
Mr. Greenwold held a number of sales and marketing positions at Survival
Technology, Inc., a supplier of cardiac monitoring and drug delivery
technologies, and Xerox Corporation.
Ben Matzilevich, 52, has served as Vice President, Market Development
- --Niche Applications since joining the Company in April 1995. From August 1993
to March 1995, Mr. Matzilevich served as Vice President Sales and Marketing with
Endogen, Inc., a producer and seller of research products for the study of
cytokines. In November 1989, Mr. Matzilevich co-founded Biosource International,
Inc., a research products company, and through August 1993, was primarily
responsible for day-to-day operations, product development and development of
the sales and marketing organization. Prior to founding Biosource,
Mr. Matzilevich held various positions at NEN/E.I. du Pont de Nemours and
Company and acted as an industry consultant to a number of research products
companies serving the life sciences research industry.
John T. Snow, Ph.D., 54, has served as Vice President, New Business
Development of the Company since March 1992, and was Vice President, Marketing
and Sales of the Company from April 1989 until March 1992. Dr. Snow has been
employed by the Company and its predecessors in various other capacities since
1975 and is the author and co-author of over 40 published scientific papers.
James G. Stewart, 45, has served as Vice President, Administration, Chief
Financial Officer and Secretary of the Company since June 1995 and President of
Calbiochem-Novabiochem Corporation, the Company's U.S. operating subsidiary,
since November 1997. From April 1994 to April 1995, Mr. Stewart served as Vice
President--Finance and Chief Financial Officer of Fightertown Entertainment,
Inc., and from October 1988 to April 1994, Mr. Stewart served as Vice
President--Finance and Chief Financial Officer of VERTEQ, Inc. Mr. Stewart is a
certified public accountant and a former partner of Arthur Young & Company (now
Ernst & Young LLP).
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 18, 1998, certain
information regarding the beneficial ownership of Common Stock by (i) the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers in 1997, (ii) each director of the
Company, (iii) each person who is known to the Company to own beneficially more
than 5% of the Common Stock and (iv) all executive officers and directors of the
Company as a group. Such information is based, in part, upon information
provided by such persons.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
--------------------
NAME NUMBER PERCENT
- ---- --------- -------
<S> <C> <C>
Warburg, Pincus Investors, L.P. (1)
466 Lexington Avenue
New York, New York 10017.................................................................. 2,248,485 39.3%
Putnam Investments, Inc. (2)
One Post Office Square
Boston, Massachusetts 02109............................................................... 555,100 9.7
The Kaufmann Fund, Inc. (3)
140 East 45th Street
New York, New York 10017.................................................................. 360,000 6.3
Standish, Ayer & Wood, Inc. (4)
One Financial Center
Boston, Massachusetts 02111............................................................... 318,900 5.6
Stelios B. Papadopoulos(5).................................................................. 208,265 3.6
James G. Stewart(6)......................................................................... 49,993 *
John T. Snow(7) ............................................................................ 46,021 *
Ben Matzilevich(8).......................................................................... 45,522 *
Douglas J. Greenwold(9)..................................................................... 42,661 *
Joseph P. Landy(10)......................................................................... 2,248,485 39.3
Richard A. Lerner(11)....................................................................... 5,000 *
S. Joshua Lewis(12)......................................................................... 2,248,485 39.3
Robert E. McGill, III(13)................................................................... 10,098 *
Directors and Executive Officers as a group (11 persons)(14)................................ 2,662,045 45.7
</TABLE>
Each person or entity named above has sole voting and dispositive power as
to the shares shown to be beneficially owned, unless otherwise indicated below.
- ------------------
* Less than 1%.
(1) The sole general partner of WP Investors is Warburg, Pincus & Co., a New
York general partnership ("WP"). EMW LLC manages WP Investors. The members
of EMW LLC are substantially the same as the partners of WP. Lionel I.
Pincus is the managing partner of WP and the managing member of EMW LLC and
may be deemed to control both WP and EMW LLC. WP, as the sole general
partner of WP Investors, has a 20% interest in the profits of WP Investors.
Messrs. Landy and Lewis, directors of the Company, are Managing Directors
and members of EMW LLC and general partners of WP. As such, each of Messrs.
Landy and Lewis may be deemed to have an indirect pecuniary interest
(within the meaning of Rule 16a-1 under the Securities Exchange Act of 1934
(the "Exchange Act")) in an indeterminate portion of the shares
beneficially owned by WP Investors and WP. See Notes (10) and (12) below.
(2) On March 6, 1998, a joint Statement on Schedule 13G was filed by Marsh &
McClennan Companies, Inc. ("MMC"), Putnam Investments, Inc. ("PII"), Putnam
Investment Management, Inc. ("PIM"), The Putnam Advisory Company, Inc.
("PAC") and The Putnam Health Sciences Trust ("PHST"). PAC and PIM are both
subsidiaries of PII, which is itself a subsidiary of MMC. PIM, as
investment advisor to Putnam mutual funds, shares dispositive power over
437,200 shares of Common Stock, including 384,000 shares held in the PHST,
but has no voting power over any shares of Common Stock. PAC, as investment
advisor to institutional clients, shares dispositive power over 124,400
shares of Common Stock and shares voting power over 118,000 shares of
Common Stock.
(Footnotes continued on next page)
5
<PAGE>
(Footnotes continued from previous page)
(3) As reflected as beneficially owned in a Statement on Schedule 13G filed on
January 28, 1998.
(4) As reflected as beneficially owned in a Statement on Schedule 13G filed on
March 3, 1998.
(5) Includes 18,400 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of November 18, 1998. Also
includes 185,365 shares of Common Stock held through a trust over which
Mr. Papadopoulos has voting and dispositive power and 500 shares of Common
Stock held by Mr. Papadopoulos' wife. Mr. Papadopoulos disclaims
"beneficial ownership" of the shares held by his wife within the meaning of
Rule 13d-3 under the Exchange Act. Excludes 33,600 shares of Common Stock
which may be acquired pursuant to stock options which are not exercisable
within 60 days of November 18, 1998.
(6) Includes 21,863 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of November 18, 1998. Excludes
34,063 shares of Common Stock which may be acquired pursuant to stock
options which are not exercisable within 60 days of November 18, 1998.
(7) Includes 10,400 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of November 18, 1998. Excludes
21,600 shares of Common Stock which may be acquired pursuant to stock
options which are not exercisable within 60 days of November 18, 1998.
(8) Includes 17,132 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of November 18, 1998. Excludes
34,063 shares of Common Stock which may be acquired pursuant to stock
options which are not exercisable within 60 days of November 18, 1998.
(9) Includes 15,861 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of November 18, 1998. Excludes
21,600 shares of Common Stock which may be acquired pursuant to stock
options which are not exercisable within 60 days of November 18, 1998.
(10) All of the shares of Common Stock indicated as owned by Mr. Landy are owned
directly by WP Investors and are included because of Mr. Landy's
affiliation with WP Investors. Mr. Landy disclaims "beneficial ownership"
of these shares within the meaning of Rule 13d-3 under the Exchange Act,
except to the extent of his indirect pecuniary interest. See Note (1).
(11) Includes 5,000 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of November 18, 1998. Excludes
20,000 shares of Common Stock which may be acquired pursuant to stock
options which are not exercisable within 60 days of November 18, 1998.
(12) All of the shares of Common Stock indicated as owned by Mr. Lewis are owned
directly by WP Investors and are included because of Mr. Lewis' affiliation
with WP Investors. Mr. Lewis disclaims "beneficial ownership" of these
shares within the meaning of Rule 13d-3 under the Exchange Act, except to
the extent of his indirect pecuniary interest. See Note (1).
(13) The shares of Common Stock beneficially owned by Mr. McGill are held
through a revocable trust. Includes 2,366 shares of Common Stock which may
be acquired pursuant to stock options exercisable within 60 days of
November 18, 1998. Excludes 4,731 shares of Common Stock which may be
acquired pursuant to stock options which are not exercisable within 60 days
of November 18, 1998.
(14) Includes shares of Common Stock which may be acquired within 60 days of
November 18, 1998. Excludes shares of Common Stock which may not be
acquired within 60 days of November 18, 1998. See Notes (5), (6), (7), (8),
(9), (11) and (13).
Pursuant to the terms of the Stockholder Agreement by and among Parent,
Purchaser and WP Investors, dated as of November 18, 1998 (the "Stockholder
Agreement"), WP Investors has, among other things, (i) agreed to tender all of
its Shares in the Offer and (ii) to vote its Shares in favor of the Merger and
the Merger Agreement and against any Takeover Proposal (as defined therein). In
addition, upon the occurrence of certain events, Parent is entitled to exercise
an option to purchase all the Shares held by WP Investors. A summary of the
Stockholder Agreement is contained in Item 3(b)(iii) of the Schedule 14D-9 to
which this information statement pursuant to Rule 14f-1 is attached as Schedule
II. The Stockholder Agreement (the terms of which are incorporated by reference
herein) has been filed with the Securities and Exchange Commission (the
"Commission") as Exhibit 3 to such Schedule 14D-9.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the four other most highly compensated
executive officers (collectively, the "Named Executive Officers") for the
periods indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION OTHER ANNUAL SECURITIES ALL OTHER
NAME AND ----------------------------- COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($)
- ------------------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos(1) .......... 1997 $ 244,212 $ 40,000 $ -- -- $ 2,970
Chief Executive Officer 1996 228,846 45,000 -- 40,000 2,970
and President 1995 204,327 -- 162,640 -- 2,112
Douglas J. Greenwold(2) ............. 1997 124,838 35,000 -- -- 3,773
Vice President, Sales 1996 118,923 30,000 -- 20,000 3,495
and Marketing 1995 115,000 -- -- -- 3,352
John T. Snow(3) ..................... 1997 118,069 35,000 1,953 -- 3,885
Vice President, New 1996 112,019 30,000 -- 20,000 3,619
Business Development 1995 110,021 -- -- -- 3,804
James G. Stewart(4) ................. 1997 162,808 40,000 -- -- 7,462
Vice President, Administration, 1996 152,788 35,000 -- 25,000 7,462
Chief Financial Officer and 1995 80,865 -- 21,518 47,317 45,471
Secretary
Ben Matzilevich(5) .................. 1997 133,827 15,000 10,800 -- 485
Vice President, Market 1996 126,308 35,000 -- 25,000 345
Development--Niche 1995 87,692 -- -- 23,659 --
Applications
</TABLE>
- ------------------
(1) "Other Annual Compensation" in 1995 represents forgiveness of principal and
interest related to a note receivable from Mr. Papadopoulos in connection
with his purchase of capital stock of the Company pursuant to his employment
agreement. "All Other Compensation" includes $1,098, $1,098 and $1,098 in
premiums for personal beneficiary life insurance in excess of non-taxable
group limits, and $1,872, $1,872 and $1,014 of Company matching
401(k) contributions in 1997, 1996 and 1995, respectively.
(2) "All Other Compensation" includes $923, $753 and $580 in premiums for
personal beneficiary life insurance in excess of nontaxable group limits and
$2,850, $2,743 and $2,772 of Company matching 401(k) contributions in 1997,
1996 and 1995, respectively.
(3) "Other Annual Compensation" in 1997 represents forgiveness of interest
related to a note receivable from Dr. Snow. "All Other Compensation"
includes $1,035, $1,035 and $1,035 in premiums for personal beneficiary life
insurance in excess of non-taxable group limits and $2,850, $2,584 and
$2,769 of Company matching 401(k) contributions in 1997, 1996 and 1995,
respectively.
(4) Joined the Company in June 1995. "Other Annual Compensation" in 1995
represents tax reimbursement payments related to relocation. "All Other
Compensation" includes $39,231 relocation expense reimbursement in 1995,
$4,612, $4,612 and $4,680 of premiums for personal beneficiary life
insurance in
(Footnotes continued on next page)
7
<PAGE>
(Footnotes continued from previous page)
excess of non-taxable group limits and $2,850, $2,850 and $1,560 of Company
matching 401(k) contributions in 1997, 1996 and 1995, respectively.
(5) Joined the Company in April 1995. "Other Annual Compensation" in 1997
represents forgiveness of interest related to a note receivable from
Mr. Matzilevich. See "Certain Relationships and Transactions." "All Other
Compensation" represents premiums for personal beneficiary life insurance in
excess of non-taxable group limits.
OPTION GRANT TABLE
No stock options were granted to the Named Executive Officers in 1997.
Therefore, the Company has omitted the "Option Grants During Year Ended
December 31, 1997" table.
AGGREGATED 1997 OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(1)
EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos............ 110,249 $ 1,676,336 8,000 32,000 $ 200,000 $ 800,000
Douglas J. Greenwold............... -- -- 41,856 25,461 1,046,400 636,525
John T. Snow....................... 6,624 104,858 4,000 16,000 100,000 400,000
James G. Stewart................... 28,391 697,851 5,000 38,926 125,000 973,150
Ben Matzilevich.................... 9,464 223,161 5,000 34,195 125,000 854,875
</TABLE>
- ------------------
(1) Based on a value of $25.00 per share, the closing price for the Common Stock
on December 31, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy. The Compensation Committee generally follows
several guidelines to arrive at its recommendations to the Board concerning the
compensation of the Company's executive officers. The Company's executive
compensation program is designed to (i) attract and retain executive officers
who contribute to the long-term success of the Company, (ii) motivate executive
officers to achieve strategic business objectives and reward them for their
achievement, and (iii) fairly compensate executive officers based on their
corporate and individual performance and responsibilities.
To date, the primary elements of the Company's compensation program for its
executive officers have been (i) an annual compensation component consisting of
base salary and bonus, and (ii) a long-term compensation component consisting of
stock options granted under the Stock Option Plan.
Annual Compensation. The Compensation Committee has generally targeted
annual salary and bonus levels to be competitive with those paid to executives
at other companies that have similar operating dynamics. Base salaries are
determined by evaluating the responsibilities associated with the position being
evaluated and the individual's overall level of experience. Annual salary
adjustments are determined by giving consideration to the Company's performance
and the individual's contribution to that performance.
With the exception of Mr. Papadopoulos, each of the executive officers'
annual bonus is determined based on the achievement of certain agreed-upon
objectives. In determining these objectives, the Compensation Committee
considers the Company's performance and the individual's contribution to that
performance. Corporate performance is measured by various quantitative and
qualitative factors. However, the Compensation Committee believes that, in
accordance with its exercise of sound business judgment, the determination of
annual
8
<PAGE>
salary and bonus levels is inherently subjective and must include a review of
all relevant information, with no predetermined weight given to any of the
factors considered.
Messrs. Papadopoulos and Matzilevich are the only executive officers
currently under employment agreements. These agreements provide that their
annual base salaries will be determined annually by the Board. The annual base
salaries for Messrs. Stewart and Greenwold and Dr. Snow were, and future salary
increases will be, based on the considerations noted above.
Long-Term Compensation. In order to align stockholder and executive
officer interests, the long-term component of the Company's executive
compensation program utilizes stock option awards whose value is directly
related to the value of the Common Stock. The Compensation Committee makes
recommendations to the Stock Option Committee concerning awards to executive
officers. These stock options are granted by the Stock Option Committee pursuant
to the Stock Option Plan. Individuals to whom stock options awards are to be
granted and the amount of Common Stock related to such awards are determined
solely at the discretion of the Stock Option Committee. Because individual stock
option award levels will be based on a subjective evaluation of each
individual's overall past and expected future contribution, no specific formula
is used to determine such awards for any executive.
Chief Executive Officer Compensation for 1997. Under the terms of the
employment agreement with Mr. Papadopoulos, the Board reviews Mr. Papadopoulos'
compensation at least once each year, and will award such bonuses and effect
such increases in base salary as it shall determine. The determination by the
Board with respect to Mr. Papadopoulos' compensation for 1997 was based on the
considerations noted above.
Section 162(m) of the Code. Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), generally limits the deductibility of annual
compensation payable to a publicly held company's Chief Executive Officer and
four next most highly compensated officers to $1 million. Compensation
attributed to the exercise of stock options granted prior to a company's initial
public offering, as well as certain "performance-based compensation," is exempt
from the deduction limits. To date, no compensation paid to the Company's
executive officers has been affected by the deduction limits, including
compensation attributable to the exercise of options. Although the Compensation
Committee has no present intention to pay compensation in excess of the
deduction limits, it reserves the ability to do so if it determines that such
payments are in the best interests of the Company.
COMPENSATION COMMITTEE
Joseph P. Landy
Robert E. McGill, III (appointed in
February 1997)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No officer or employee of the Company currently serves as a member of the
Compensation Committee. Mr. Landy, a current member of the Compensation
Committee, and Frederick L. Bryant, a former director and former member of the
Compensation Committee, served on the Compensation Committee in 1997. Messrs.
Landy and Bryant have in the past served as officers of the Company. Mr. Landy
may be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Exchange Act) in an indeterminate portion of the securities
of the Company beneficially owned by WP Investors. Frederick L. Bryant served as
a director of the Company and as a member of the Compensation and Stock Option
Committees until his resignation from the Board in February 1997. Mr. Bryant
served on the Board as a nominee of ABS MB (C-N) Limited Partnership ("ABS"), a
former significant stockholder of the Company. Mr. Bryant may be deemed to have
an indirect pecuniary interest (within the meaning of Rule 16a-1 under the
Exchange Act), in an indeterminate portion of the securities of the Company
formerly beneficially owned by ABS.
WP Investors currently has the following rights with respect to the
nomination and election of directors to the Board: for so long as WP Investors
owns beneficially at least 20% of the outstanding shares of Common Stock, the
Company will nominate and use reasonable efforts to have two individuals
designated by WP Investors and reasonably acceptable to the Company elected to
the Company's Board, and from the date that
9
<PAGE>
WP Investors owns beneficially less than 20% of the outstanding shares of Common
Stock but for so long as it owns beneficially at least 10% of the outstanding
shares of Common Stock, the Company will nominate and use reasonable efforts to
have one individual designated by WP Investors and reasonably acceptable to the
Company elected to the Company's Board.
ABS formerly had the following rights with respect to the nomination and
election of directors to the Company's Board: for so long as ABS owned
beneficially at least 10% of the outstanding shares of Common Stock, the Company
was obligated to nominate and use reasonable efforts to have one individual
designated by ABS and reasonably acceptable to the Company elected to the
Company's Board. As of April 7, 1997, ABS beneficially owned no shares of Common
Stock, and therefore no longer has a nomination and election right.
EXISTING EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Papadopoulos and
Matzilevich and Dr. Mierendorf. Mr. Papadopoulos' employment agreement provides
for his employment at an annual base salary determined by the Board (currently
$250,000) and that the Board will review his compensation at least once each
year and award such bonuses and effect such increases in base salary as the
Board, in its sole discretion, determines are merited, based upon his
performance and consistent with the Company's compensation policies.
Mr. Matzilevich's employment agreement provides for his employment at an annual
base salary determined by the Board (currently $140,000), and that in addition
to any annual adjustment made to his salary, he is eligible for a bonus up to
35% of base salary, based on the achievement of certain agreed-upon objectives.
Dr. Mierendorf's employment agreement provides for his employment at an annual
base salary of $150,000 and that in addition to any annual adjustment made to
his salary, he is eligible for a bonus up to 30% of base salary, based upon the
achievement of certain agreed-upon objectives. In addition, all three of these
executives may participate in such fringe benefits as are generally provided to
the Company's executives.
Unless terminated earlier in accordance with their respective terms,
Mr. Papadopoulos' employment agreement terminates on January 4, 2000,
Mr. Matzilevich's employment agreement terminates on April 3, 2000 and
Dr. Mierendorf's employment agreement terminates on December 27, 1999. In
addition, each of these agreements provides that the Company and the executive
will, not later than 90 days prior to the termination thereof, begin to
negotiate in good faith the terms of any extension of the employment agreement.
If Mr. Papadopoulos' employment is terminated without cause, if there is a
material change in his duties, or if the Company does not offer to continue his
employment with the Company after the agreement's expiration at a base salary at
least equal to his then most recent salary, Mr. Papadopoulos will be entitled to
receive severance payments equal to his base salary payable for the 12-month
period from the date of such termination. The employment agreement with
Mr. Papadopoulos also provides that if, within 90 days of a Change of Control of
the Company (as defined below), Mr. Papadopoulos resigns from the Company, he
will be entitled to receive severance payments equal to his base salary payable
over the 12-month period following such resignation. In addition,
Mr. Papadopoulos' employment agreement provides that for a 30-day period
following such termination, any options to purchase Common Stock then held by
him will become exercisable to the full extent that they would otherwise have
become exercisable on January 4, 2000, without regard to certain restrictions or
deferrals of the right to exercise such options. Mr. Papadopoulos' employment
agreement contains a covenant not to compete with the Company for one year from
the date of his termination of employment (except for termination due to
disability, termination without cause or voluntary termination following the
assignment to him of duties which are materially inconsistent with his duties).
The covenant also prohibits Mr. Papadopoulos from interfering with the Company's
business relationships for such one-year period. If Mr. Papadopoulos breaches
his covenant not to compete or interferes with the Company's business
relationships, the amount of his severance payments will be reduced.
Mr. Papadopoulos' employment agreement contains an assignment to the Company of
his rights in inventions and other intellectual property and an agreement to
maintain confidentiality about the Company's know-how, trade secrets,
proprietary processes and other confidential matters.
Under Mr. Matzilevich's employment agreement, if Mr. Matzilevich's
employment is terminated without cause and such termination is not within
90 days of a Change of Control of the Company, Mr. Matzilevich will be entitled
to receive severance payments equal to the compensation due under his employment
agreement for the remainder of its term. If such termination without cause is
within 90 days of a Change of Control of the
10
<PAGE>
Company, Mr. Matzilevich will be entitled to receive severance payments equal to
the greater of (i) the compensation due under his employment agreement for the
remainder of its term or (ii) his base salary payable over the 12-month period
following such termination. If, within 90 days of a Change of Control of the
Company, Mr. Matzilevich resigns from the Company, he will be entitled to
receive severance payments equal to his base salary payable over the 12-month
period following such resignation.
The Company has entered into agreements with each of Messrs. Stewart,
Zimmerman and Greenwold and Doctors Mierendorf and Snow providing for severance
pay in the event of termination of the executive's employment other than for
cause or if, within 90 days of a Change of Control of the Company, the
executive's employment is terminated by the Company other than for cause or the
executive resigns. Upon termination of employment within 90 days of a Change of
Control, the executive will be eligible to receive severance payments equal to
his base salary payable over the 12-month period following such termination. If
the executive's employment is otherwise terminated by the Company other than for
cause, he will be eligible to receive severance payments equal to his base
salary payable over the six-month period following such termination.
"Change of Control" is defined in the employment and severance agreements
discussed above, and in the agreements governing outstanding stock options, as
(i) an acquisition (other than directly from the Company) by an individual,
entity or a group (excluding the Company, an employee benefit plan of the
Company or EMW LLC or its affiliates) of 50% or more of the Common Stock, or
voting securities; (ii) a change in a majority of the Company's current Board
(the "Incumbent Board") (excluding any persons approved by a vote of at least a
majority of the Incumbent Board or persons elected with the concurrence of a
majority of the Incumbent Board); or (iii) the consummation of a complete
liquidation or dissolution of the Company or a merger, consolidation or sale of
all or substantially all of the Company's assets (collectively, a "Business
Combination") other than a Business Combination in which all or substantially
all of the Company's stockholders receive 50% or more of the stock of the
Company resulting from the Business Combination, at least a majority of the
board of directors of the resulting corporation were members of the Incumbent
Board, and after which no person owns 50% or more of the stock of the resulting
corporation, who did not own such stock immediately before the Business
Combination.
The Company maintains $1.0 million of key man life insurance on the lives
of Messrs. Papadopoulos and Matzilevich and Doctors Mierendorf and Snow, naming
the Company as beneficiary.
Messrs. Stewart, Greenwold and Zimmerman and Doctors Mierendorf and Snow
are eligible for incentive bonuses up to approximately 35% of their base
salaries, based on the achievement of certain agreed-upon objectives.
NEW EMPLOYMENT AGREEMENTS
On November 18, 1998, the Company entered into new employment agreements
(the "New Employment Agreements") with the following executive officers of the
Company: Stelios B. Papadopoulos, James G. Stewart, Douglas J. Greenwold, Robert
C. Mierendorf, John T. Snow and Mark Zimmerman. The New Employment Agreements
will become effective at the effective time of the Merger (the "Effective Time")
and supersede any existing employment agreements or severance agreements between
the Company and those executive officers. Each of Dr. Mierendorf and
Mr. Zimmerman shall be entitled to receive a $50,000 bonus to the extent he is
an employee of the Company at the Effective Time as set forth in a letter
agreement that he entered into in connection with his New Employment Agreement.
A summary of the New Employment Agreements and the letter agreements is
contained in Item 3(b)(v) of the Schedule 14D-9 to which this information
statement pursuant to Rule 14f-1 is attached as Schedule II. In addition, the
New Employment Agreements and the separate letter agreements (the terms of which
are incorporated by reference herein) have been filed with the Commission as
Exhibits 5, 6, 7, 8, 9, 10, 11 and 12 to such Schedule 14D-9.
STOCK PERFORMANCE GRAPH
The graph below compares the total cumulative return of a $100 investment
in the Common Stock during the period from October 2, 1996 (the date trading of
the Common Stock commenced) to December 31, 1997, to the performance of the same
amount invested in the Nasdaq Total Return Index and the AMEX Biotechnology
Index during such period. The AMEX Biotechnology Index is an equal-dollar
weighted index of 15 mid-cap and large-cap biotechnology companies. The graph
assumes that dividends were reinvested.
11
<PAGE>
COMPARISON OF TOTAL RETURN AMONG
CN BIOSCIENCES, INC.,
NASDAQ TOTAL RETURN INDEX
AND
AMEX BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
AMEX
MEASUREMENT PERIOD NASDAQ TOTAL BIOTECHNOLOGY
(FISCAL YEAR COVERED) CN BIOSCIENCES, INC. RETURN INDEX INDEX
- ---------------------- -------------------- ------------ -------------
<S> <C> <C> <C>
10/2/96 100.00 100.00 100.00
12/31/96 137.38 104.05 103.69
12/31/97 186.92 127.28 116.71
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The following is a summary of certain transactions among the Company and
its directors, executive officers and principal stockholders:
CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK AND EXCHANGE OF SERIES B
PREFERRED STOCK
Upon the consummation of the initial public offering of the Company's
Common Stock in October 1996, WP Investors converted its 4,001 shares of Series
A Convertible Preferred Stock into 788,814 shares of Class A Common Stock.
Thereafter, WP Investors made the requisite certification required under the
Company's Certificate of Incorporation regarding its share ownership to the
Company and converted such shares of Class A Common Stock into 788,814 shares of
Common Stock.
Pursuant to an agreement among the Company, WP Investors, ABS,
Mr. Papadopoulos and Dr. Snow (the "Conversion and Exchange Agreement"), upon
the consummation of the initial public offering of the Company's Common Stock,
each share of Series B Preferred Stock was exchanged for the number of shares of
Common Stock that equalled the liquidation preference of a share of Series B
Preferred Stock ($100) divided by the initial public offering price of the
Common Stock ($12.50). As a result, all of the shares of Series B Preferred
Stock were exchanged for an aggregate of 1,435,424 shares of Common Stock. WP
Investors, ABS,
12
<PAGE>
Mr. Papadopoulos and Dr. Snow were the holders of the Series B Preferred Stock,
holding 124,023 shares, 50,356 shares, 4,377 shares and 672 shares,
respectively, and, accordingly, were issued 992,184, 402,848, 35,016 and 5,376
shares of Common Stock, respectively, upon such exchange.
The Company granted certain registration rights to the holders of the
Series A Convertible Preferred Stock and Series B Preferred Stock with respect
to the shares of Common Stock issuable upon conversion or exchange, as
applicable. Additionally, the Company granted WP Investors and ABS certain
rights to nominate directors as long as they continue to own specified
percentages of the outstanding shares of Common Stock as discussed above in
"Compensation Committee Interlocks and Insider Participation."
ACQUISITION OF THE COMPANY; RIGHTS OF WP INVESTORS AND ABS
In March 1992, the Company acquired all of the issued and outstanding
capital stock, together with certain bank and intercompany indebtedness, of the
Company's subsidiaries from Biodor Holding AG, Ixora Holding AG and Biodor US
Holding Corporation. WP Investors, ABS and certain current and former employees
of the Company provided the principal equity financing for these acquisitions by
purchasing from the Company 1,012,984 shares of Common Stock at $.42 per share,
4,001 shares of Series A Convertible Preferred Stock at $100 per share and
178,166 shares of Series B Preferred Stock at $100 per share, representing a
total investment of approximately $18.6 million. In addition, these investors
received certain registration rights.
In connection with their initial investment in the Company, WP Investors
and ABS received certain rights pursuant to a subscription and shareholder
agreement, including rights with respect to the nomination and election of
directors to the Board. These rights were subsequently modified at the time of
the initial public offering. Pursuant to such rights, WP Investors has
maintained two nominees to the Board and ABS maintained two nominees to the
Board until July 1996 and one nominee from July 1996 until February 1997. In
addition to their rights to nominate and elect directors, until terminated at
the time of the initial public offering, WP Investors and ABS were also
beneficiaries of certain drag along, tag along, subscription and informational
rights.
TRANSACTIONS WITH OFFICERS
On January 4, 1993, Mr. Papadopoulos, the Company's Chairman, Chief
Executive Officer and President, purchased 44,100 shares of Common Stock at $.42
per share and 4,377 shares of Series B Preferred Stock at $100 per share, in
exchange for $4,000 and a $452,000 promissory note. The Company has granted
Mr. Papadopoulos certain registration rights for such shares of Common Stock.
This unsecured note bore interest at the rate of 8% per annum and matured on
January 4, 1996. In accordance with the terms of the note, as a result of
Mr. Papadopoulos' continued employment with the Company, one-third of the
principal amount, together with accrued interest, was forgiven on each of the
first three anniversaries of the note.
Effective June 9, 1995, Richard B. Slansky, the former President and Chief
Operating Officer of the Company, resigned to pursue other business
opportunities. In connection therewith, the Company and Mr. Slansky entered into
an agreement which provided for the payment to Mr. Slansky of six months
severance pay and also provided for the sale by Mr. Slansky to the Company of
59,726 shares of Common Stock at a price of approximately $3.45 per share and
1,199 shares of Series B Preferred Stock at a price of $100 per share.
On January 31, 1996, Mr. Matzilevich, the Company's Vice President, Market
Development--Niche Applications, purchased 28,390 shares of Common Stock at
$3.38 per share from the Company in exchange for a $96,000 promissory note. The
note bore interest at the rate of 5.65% per annum, matured on January 31, 1998,
and was secured by such shares of Common Stock. The principal amount of the note
was paid in full by Mr. Matzilevich and the accrued interest was forgiven by the
Company in December 1997. The Company has granted Mr. Matzilevich certain
registration rights for such shares of Common Stock.
On May 27, 1997, the Company guaranteed a portion of certain indebtedness
incurred by Mr. Papadopoulos relating to his exercise of stock options and the
payment of taxes thereon. Such indebtedness is presently secured by shares of
Common Stock owned by Mr. Papadopoulos. The maximum liability of the Company
under such guarantee is $450,000, plus certain costs and expenses of the lender;
however, based upon the principal balance of such indebtedness as of March 16,
1998, the Company's obligation under the guarantee would be limited to
13
<PAGE>
approximately $150,000. The guarantee also includes provisions subordinating any
future indebtedness of Mr. Papadopoulos owed to the Company in favor of the
guaranteed indebtedness.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a party to indemnification agreements with certain of its
directors and officers pursuant to which the Company provides indemnification
and contribution against expenses and losses incurred for claims brought against
them by reason of their being a director or officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of the Common Stock, to
file with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock. Officers, directors and greater than 10% stockholders
are required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with during the fiscal year ended December 31, 1997.
14
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the four other most highly compensated
executive officers (collectively, the "Named Executive Officers") for the
periods indicated.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation -------------
---------------------------------------- Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
- ----------------------------- --- --------- -------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos(1) 1997 $244,212 $ 40,000 $ -- -- $ 2,970
Chief Executive Officer and 1996 228,846 45,000 -- 40,000 2,970
President 1995 204,327 -- 162,640 -- 2,112
Douglas J. Greenwold(2) 1997 124,838 35,000 -- -- 3,773
Vice President, Sales and 1996 118,923 30,000 -- 20,000 3,495
Marketing 1995 115,000 -- -- -- 3,352
John T. Snow(3) 1997 118,069 35,000 1,953 -- 3,885
Vice President, New 1996 112,019 30,000 -- 20,000 3,619
Business Development 1995 110,021 -- -- -- 3,804
James G. Stewart(4) 1997 162,808 40,000 -- -- 7,462
Vice President, 1996 152,788 35,000 -- 25,000 7,462
Administration, Chief 1995 80,865 -- 21,518 47,317 45,471
Financial Officer and
Secretary
Ben Matzilevich(5) 1997 133,827 15,000 10,800 -- 485
Vice President, Market 1996 126,308 35,000 -- 25,000 345
Development-- Niche 1995 87,692 -- -- 23,659 --
Applications
</TABLE>
- ------------
(1) "Other Annual Compensation" in 1995 represents forgiveness of principal and
interest related to a note receivable from Mr. Papadopoulos in connection
with his purchase of capital stock of the Company pursuant to his employment
agreement. "All Other Compensation" includes $1,098, $1,098 and $1,098 in
premiums for personal beneficiary life insurance in excess of non-taxable
group limits, and $1,872, $1,872 and $1,014 of Company matching 401(k)
contributions in 1997, 1996 and 1995, respectively.
(2) "All Other Compensation" includes $923, $753 and $580 in premiums for
personal beneficiary life insurance in excess of nontaxable group limits and
$2,850, $2,743 and $2,772 of Company matching 401(k) contributions in 1997,
1996 and 1995, respectively.
(3) "Other Annual Compensation" in 1997 represents forgiveness of interest
related to a note receivable from Dr. Snow. "All Other Compensation"
includes $1,035, $1,035 and $1,035 in premiums for personal beneficiary life
insurance in excess of non-taxable group limits and $2,850, $2,584 and
$2,769 of Company matching 401(k) contributions in 1997, 1996 and 1995,
respectively.
(4) Joined the Company in June 1995. "Other Annual Compensation" in 1995
represents tax reimbursement payments related to relocation. "All Other
Compensation" includes $39,231 relocation expense reim-bursement in 1995,
$4,612, $4,612 and $4,680 of premiums for personal beneficiary life
insurance in excess of non-taxable group limits and $2,850, $2,850 and
$1,560 of Company matching 401(k) contributions in 1997, 1996 and 1995,
respectively.
(5) Joined the Company in April 1995. "Other Annual Compensation" in 1997
represents forgiveness of interest related to a note receivable from Mr.
Matzilevich. See "Certain Transactions." "All Other Compensation" represents
premiums for personal beneficiary life insurance in excess of non-taxable
group limits.
No stock options were granted to the Named Executive Officers in 1997.
Therefore, the Company has omitted the "Option Grants During Year Ended December
31, 1997" table.
<PAGE>
<TABLE>
<CAPTION>
Aggregated 1997 Option Exercises and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Shares Underlying Options as In-the-Money Options at
Acquired on December 31, 1997(#) December 31, 1997($)(1)
Exercise Value ------------------------------ ---------------------------
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos 110,249 $ 1,676,336 8,000 32,000 $ 200,000 $ 800,000
Douglas J. Greenwold.. -- -- 41,856 25,461 1,046,400 636,525
John T. Snow.......... 6,624 104,858 4,000 16,000 100,000 400,000
James G. Stewart...... 28,391 697,851 5,000 38,926 125,000 973,150
Ben Matzilevich....... 9,464 223,161 5,000 34,195 125,000 854,875
</TABLE>
- ------------
(1) Based on a value of $25.00 per share, the closing price for the Common Stock
on December 31, 1997.
Employment Agreements
The Company has employment agreements with Messrs. Papadopoulos and
Matzilevich. Mr. Papadopoulos' employment agreement provides for his employment
at an annual base salary determined by the Board of Directors (currently
$250,000) and that the Board of Directors will review his compensation at least
once each year and award such bonuses and effect such increases in base salary
as the Board of Directors, in its sole discretion, determines are merited, based
upon his performance and consistent with the Company's compensation policies.
Mr. Matzilevich's employment agreement provides for his employment at an annual
base salary determined by the Board of Directors (currently $140,000), and that
in addition to any annual adjustment made to his salary, he is eligible for a
bonus up to 35% of base salary, based on the achievement of certain agreed-upon
objectives. In addition, both of these executives may participate in such fringe
benefits as are generally provided to the Company's executives.
Unless terminated earlier in accordance with their respective terms, Mr.
Papadopoulos' employment agreement terminates on January 4, 2000, and Mr.
Matzilevich's employment agreement terminates on April 3, 2000. In addition,
each of these agreements provides that the Company and the executive will, not
later than 90 days prior to the termination thereof, begin to negotiate in good
faith the terms of any extension of the employment agreement.
If Mr. Papadopoulos' employment is terminated without cause, if there is a
material change in his duties, or if the Company does not offer to continue his
employment with the Company after the agreement's expiration at a base salary at
least equal to his then most recent salary, Mr. Papadopoulos will be entitled to
receive severance payments equal to his base salary payable for the 12-month
period from the date of such termination. The employment agreement with Mr.
Papadopoulos also provides that if, within 90 days of a Change of Control of the
Company (as defined below), Mr. Papadopoulos resigns from the Company, he will
be entitled to receive severance payments equal to his base salary payable over
the 12-month period following such resignation. In addition, Mr. Papadopoulos'
employment agreement provides that upon any such termination, any options to
purchase Common Stock then held by him will become exercisable to the full
extent that they would otherwise have become exercisable on January 4, 2000,
without regard to certain restrictions or deferrals of the right to exercise
such options.
Under Mr. Matzilevich's employment agreement, if Mr. Matzilevich's
employment is terminated other than for cause and such termination is not within
90 days of a Change of Control of the Company, Mr. Matzilevich will be entitled
to receive severance payments equal to the compensation due under his employment
agreement for the remainder of its term. If such termination without cause is
within 90 days of a Change of Control of the Company, Mr. Matzilevich will be
entitled to receive severance payments equal to the greater of (i) the
compensation due under his employment agreement for the remainder of its term or
(ii) his base salary payable over the 12-month period following such
termination. If, within 90 days of a Change of Control of the Company, Mr.
Matzilevich resigns from the Company, he will be entitled to receive severance
payments equal to his base salary payable over the 12-month period following
such resignation.
The Company has entered into agreements with each of Messrs. Stewart and
Greenwold and Dr. Snow providing for severance pay in the event of termination
of the executive's employment other than for cause or if, within 90 days of a
Change of Control of the Company, the executive's employment is terminated by
the Company other than for cause or the executive resigns. Upon termination of
employment within 90 days of a Change of Control, the executive will be eligible
to receive severance payments equal to his base salary payable over the 12-month
period following such termination. If the executive's employment is otherwise
terminated by the Company other than for cause, he will be eligible to receive
severance payments equal to his base salary payable over the six-month period
following such termination.
2
<PAGE>
"Change of Control" is defined in the employment and severance agreements
discussed above, and in the agreements governing outstanding stock options, as
(i) an acquisition (other than directly from the Company) by an individual,
entity or a group (excluding the Company, an employee benefit plan of the
Company or E.M. Warburg, Pincus & Co., LLC or its affiliates) of 50% or more of
the Company's Common Stock, or voting securities; (ii) a change in a majority of
the Company's current Board of Directors (the "Incumbent Board") (excluding any
persons approved by a vote of at least a majority of the Incumbent Board or
persons elected with the concurrence of a majority of the Incumbent Board); or
(iii) the consummation of a complete liquidation or dissolution of the Company
or a merger, consolidation or sale of all or substantially all of the Company's
assets (collectively, a "Business Combination") other than a Business
Combination in which all or substantially all of the Company's stockholders
receive 50% or more of the stock of the Company resulting from the Business
Combination, at least a majority of the board of directors of the resulting
corporation were members of the Incumbent Board, and after which no person owns
50% or more of the stock of the resulting corporation, who did not own such
stock immediately before the Business Combination.
The Company maintains $1.0 million of key man life insurance on the lives
of Messrs. Papadopoulos and Matzilevich and Dr. Snow, naming the Company as
beneficiary.
Messrs. Stewart and Greenwold and Dr. Snow are eligible for incentive
bonuses up to approximately 35% of their base salaries, based on the achievement
of certain agreed-upon objectives.
Meetings of the Board of Directors
The Board of Directors met six times during 1997. During 1997, each of the
directors during such period attended at least 75% of all meetings of the Board
of Directors and of each committee on which such director served as a member,
except for Dr. Lerner who attended 50% of all meetings of the Board of
Directors.
Committees of the Board of Directors
The Company has, as standing committees, an Audit Committee, a Stock Option
Committee and a Compensation Committee. The Company does not have a Nominating
Committee.
Compensation Committee. Messrs. Landy and McGill are the members of the
Compensation Committee. The Compensation Committee provides recommendations to
the Board of Directors concerning salaries and incentive compensation for the
Company's officers and administers the Company's benefit plans, other than the
Stock Option Plan. The Compensation Committee met two times in 1997.
Audit Committee. Messrs. Lewis and McGill are the members of the Audit
Committee. The Audit Committee recommends to the Board of Directors the
engagement of the Company's independent public accountants and reviews the scope
and results of their audits and other services. The Audit Committee meets with
management and with the independent public accountants to review matters
relating to the quality of the Company's financial reporting and internal
accounting controls, including the nature, extent and results of the audits,
proposed changes to the Company's accounting principles and otherwise maintains
communications between the independent public accountants and the Board of
Directors. The Audit Committee met two times in 1997.
Stock Option Committee. Messrs. Landy and McGill are the members of the
Stock Option Committee. The Stock Option Committee determines grants under and
otherwise administers the Company's Stock Option Plan. The Stock Option
Committee met three times in 1997.
Compensation of Directors
Directors, other than Warburg's nominees, are reimbursed for expenses
incurred in attending meetings of the Board of Directors. In addition,
directors, other than those directors who are also employees of the Company or
Warburg's nominees, are paid $1,500 for each Board of Directors meeting
attended. Prior to February 1997, such directors were paid $500 for each Board
of Directors meeting attended. At the time that Mr. McGill joined the Board of
Directors, he was granted options to purchase 11,829 shares of Common Stock at
an exercise price of $3.38 per share. Additionally, under an agreement with the
Company, Mr. McGill from time to time provides certain consulting services for
which he is compensated at the rate of $1,000 per day. During 1997, no
consulting fees were paid by the Company to Mr. McGill. At the time that Dr.
Lerner joined the Board of Directors, he was granted options to purchase 25,000
shares of Common Stock at an exercise price of $14.50 per share.
3
<PAGE>
Compensation Committee Report on Executive Compensation
Compensation Philosophy. The Compensation Committee generally follows
several guidelines to arrive at its recommendations to the Board of Directors
concerning the compensation of the Company's executive officers. The Company's
executive compensation program is designed to (i) attract and retain executive
officers who contribute to the long-term success of the Company, (ii) motivate
executive officers to achieve strategic business objectives and reward them for
their achievement, and (iii) fairly compensate executive officers based on their
corporate and individual performance and responsibilities.
To date, the primary elements of the Company's compensation program for its
executive officers have been (i) an annual compensation component consisting of
base salary and bonus, and (ii) a long-term compensation component consisting of
stock options granted under the Stock Option Plan.
Annual Compensation. The Compensation Committee has generally targeted
annual salary and bonus levels to be competitive with those paid to executives
at other companies that have similar operating dynamics. Base salaries are
determined by evaluating the responsibilities associated with the position being
evaluated and the individual's overall level of experience. Annual salary
adjustments are determined by giving consideration to the Company's performance
and the individual's contribution to that performance.
With the exception of Mr. Papadopoulos, each of the executive officers'
annual bonus is determined based on the achievement of certain agreed-upon
objectives. In determining these objectives, the Compensation Committee
considers the Company's performance and the individual's contribution to that
performance. Corporate performance is measured by various quantitative and
qualitative factors. However, the Compensation Committee believes that, in
accordance with its exercise of sound business judgment, the determination of
annual salary and bonus levels is inherently subjective and must include a
review of all relevant information, with no predetermined weight given to any of
the factors considered.
Messrs. Papadopoulos and Matzilevich are the only executive officers
currently under employment agreements. These agreements provide that their
annual base salaries will be determined annually by the Board of Directors. The
annual base salaries for Messrs. Stewart and Greenwold and Dr. Snow were, and
future salary increases will be, based on the considerations noted above.
Long-Term Compensation. In order to align stockholder and executive officer
interests, the long-term component of the Company's executive compensation
program utilizes stock option awards whose value is directly related to the
value of the Common Stock. The Compensation Committee makes recommendations to
the Stock Option Committee concerning awards to executive officers. These stock
options are granted by the Stock Option Committee pursuant to the Stock Option
Plan. Individuals to whom stock options awards are to be granted and the amount
of Common Stock related to such awards are determined solely at the discretion
of the Stock Option Committee. Because individual stock option award levels will
be based on a subjective evaluation of each individual's overall past and
expected future contribution, no specific formula is used to determine such
awards for any executive.
Chief Executive Officer Compensation for 1997. Under the terms of the
employment agreement with Mr. Papadopoulos, the Board of Directors reviews Mr.
Papadopoulos' compensation at least once each year, and will award such bonuses
and effect such increases in base salary as it shall determine. The
determination by the Board of Directors with respect to Mr. Papadopoulos'
compensation for 1997 was based on the considerations noted above.
Section 162(m) of the Code. Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), generally limits the deductibility of annual
compensation payable to a publicly held company's Chief Executive Officer and
four next most highly compensated officers to $1 million. Compensation
attributed to the exercise of stock options granted prior to a company's initial
public offering, as well as certain "performance-based compensation," is exempt
from the deduction limits. To date, no compensation paid to the Company's
executive officers has been affected by the deduction limits, including
compensation attributable to the exercise of options. Although the Compensation
Committee has no present intention to pay compensation in excess of the
deduction limits, it reserves the ability to do so if it determines that such
payments are in the best interests of the Company.
COMPENSATION COMMITTEE
Joseph P. Landy
Robert E. McGill, III (appointed in February 1997)
4
<PAGE>
Comparative Stock Price Performance Graph
The graph below compares the total cumulative return of a $100 investment in
the Common Stock during the period from October 2, 1996 (the date trading of the
Common Stock commenced) to December 31, 1997, to the performance of the same
amount invested in the Nasdaq Total Return Index and the AMEX Biotechnology
Index during such period. The AMEX Biotechnology Index is an equal-dollar
weighted index of 15 mid-cap and large-cap biotechnology companies. The graph
assumes that dividends were reinvested.
Comparison of Total Return Among
CN Biosciences, Inc.,
Nasdaq Total Return Index
and
AMEX Biotechnology Index
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
AMEX
Measurement Period Nasdaq Total Biotechnology
(Fiscal Year Covered) CN Biosciences, Inc. Return Index Index
--------------------- -------------------- ------------- --------------
<S> <C> <C> <C>
10/2/96 100.00 100.00 100.00
12/31/96 137.38 104.05 103.69
12/31/97 186.92 127.28 116.71
</TABLE>
Compensation Committee Interlocks and Insider Participation
No officer or employee of the Company currently serves as a member of the
Compensation Committee. Mr. Landy, a current member of the Compensation
Committee, and Frederick L. Bryant, a former director and former member of the
Compensation Committee, served on the Compensation Committee in 1997. Messrs.
Landy and Bryant have in the past served as officers of the Company. Mr. Landy
may be deemed to have an indirect pecuniary interest (within the meaning of Rule
16a-1 under the Exchange Act) in an indeterminate portion of the securities of
the Company beneficially owned by Warburg. Frederick L. Bryant served as a
director of the Company and as a member of the Compensation and Stock Option
Committees until his resignation from the Board of Directors in February 1997.
Mr. Bryant served on the Board of Directors as a nominee of ABS MB (C-N) Limited
Partnership ("ABS"), a former significant stockholder of the Company. Mr. Bryant
may be deemed to have an indirect pecuniary interest (within the meaning of Rule
16a-1 under the Exchange Act), in an indeterminate portion of the securities of
the Company formerly beneficially owned by ABS.
Warburg currently has the following rights with respect to the nomination
and election of directors to the Company's Board of Directors: for so long as
Warburg owns beneficially at least 20% of the outstanding shares of Common
Stock, the Company will nominate and use reasonable efforts to have two
individuals designated by Warburg and reasonably acceptable to the Company
elected to the Company's Board of Directors, and from the date that Warburg owns
beneficially less than 20% of the outstanding shares of Common Stock but for so
long as it owns beneficially at least 10% of the outstanding shares of Common
Stock, the Company will nominate and use reasonable efforts to have one
individual designated by Warburg and reasonably acceptable to the Company
elected to the Company's Board of Directors.
ABS formerly had the following rights with respect to the nomination and
election of directors to the Company's Board of Directors: for so long as ABS
owned beneficially at least 10% of the outstanding shares of Common Stock, the
Company was obligated to nominate and use reasonable efforts to have one
individual designated by ABS and reasonably acceptable to the Company
5
<PAGE>
elected to the Company's Board of Directors. As of April 7, 1997, ABS
beneficially owned no shares of Common Stock, and therefore no longer has a
nomination and election right.
Certain Transactions
The following is a summary of certain transactions among the Company and its
directors, executive officers and principal stockholders:
Conversion of Series A Convertible Preferred Stock and Exchange of Series B
Preferred Stock
Upon the consummation of the initial public offering of the Company's Common
Stock in October 1996, Warburg converted its 4,001 shares of Series A
Convertible Preferred Stock into 788,814 shares of Class A Common Stock.
Thereafter, Warburg made the requisite certification required under the
Company's Certificate of Incorporation regarding its share ownership to the
Company and converted such shares of Class A Common Stock into 788,814 shares of
Common Stock.
Pursuant to an agreement among the Company, Warburg, ABS, Mr. Papadopoulos
and Dr. Snow (the "Conversion and Exchange Agreement"), upon the consummation of
the initial public offering of the Company's Common Stock, each share of Series
B Preferred Stock was exchanged for the number of shares of Common Stock that
equalled the liquidation preference of a share of Series B Preferred Stock
($100) divided by the initial public offering price of the Common Stock
($12.50). As a result, all of the shares of Series B Preferred Stock were
exchanged for an aggregate of 1,435,424 shares of Common Stock. Warburg, ABS,
Mr. Papadopoulos and Dr. Snow were the holders of the Series B Preferred Stock,
holding 124,023 shares, 50,356 shares, 4,377 shares and 672 shares, respectively
and, accordingly, were issued 992,184, 402,848, 35,016 and 5,376 shares of
Common Stock, respectively, upon such exchange.
The Company granted certain registration rights to the holders of the Series
A Convertible Preferred Stock and Series B Preferred Stock with respect to the
shares of Common Stock issuable upon conversion or exchange, as applicable.
Additionally, the Company granted Warburg and ABS certain rights to nominate
directors as long as they continue to own specified percentages of the
outstanding shares of Common Stock as discussed above in "Compensation Committee
Interlocks and Insider Participation."
Acquisition of the Company; Rights of Warburg and ABS
In March 1992, the Company acquired all of the issued and outstanding
capital stock, together with certain bank and intercompany indebtedness, of the
Company's subsidiaries from Biodor Holding AG, Ixora Holding AG and Biodor US
Holding Corporation. Warburg, ABS and certain current and former employees of
the Company provided the principal equity financing for these acquisitions by
purchasing from the Company 1,012,984 shares of Common Stock at $.42 per share,
4,001 shares of Series A Convertible Preferred Stock at $100 per share and
178,166 shares of Series B Preferred Stock at $100 per share, representing a
total investment of approximately $18.6 million. In addition, these investors
received certain registration rights.
In connection with their initial investment in the Company, Warburg and ABS
received certain rights pursuant to a subscription and shareholder agreement,
including rights with respect to the nomination and election of directors to the
Company's Board of Directors. These rights were subsequently modified at the
time of the initial public offering. Pursuant to such rights, Warburg has
maintained two nominees to the Company's Board of Directors and ABS maintained
two nominees to the Company's Board of Directors until July 1996 and one nominee
from July 1996 until February 1997. In addition to their rights to nominate and
elect directors, until terminated at the time of the initial public offering,
Warburg and ABS were also beneficiaries of certain drag along, tag along,
subscription and informational rights.
Transactions with Officers
On January 4, 1993, Mr. Papadopoulos, the Company's Chairman of the Board,
Chief Executive Officer and President, purchased 44,100 shares of Common Stock
at $.42 per share and 4,377 shares of Series B Preferred Stock at $100 per
share, in exchange for $4,000 and a $452,000 promissory note. The Company has
granted Mr. Papadopoulos certain registration rights for such shares of Common
Stock. This unsecured note bore interest at the rate of 8% per annum and matured
on January 4, 1996. In accordance with the terms of the note, as a result of Mr.
Papadopoulos' continued employment with the Company, one-third of the principal
amount, together with accrued interest, was forgiven on each of the first three
anniversaries of the note.
6
<PAGE>
Effective June 9, 1995, Richard B. Slansky, the former President and Chief
Operating Officer of the Company, resigned to pursue other business
opportunities. In connection therewith, the Company and Mr. Slansky entered into
an agreement which provided for the payment to Mr. Slansky of six months
severance pay and also provided for the sale by Mr. Slansky to the Company of
59,726 shares of Common Stock at a price of approximately $3.45 per share and
1,199 shares of Series B Preferred Stock at a price of $100 per share.
On January 31, 1996, Mr. Matzilevich, the Company's Vice President, Market
Development -- Niche Applications, purchased 28,390 shares of Common Stock at
$3.38 per share from the Company in exchange for a $96,000 promissory note. The
note bore interest at the rate of 5.65% per annum, matured on January 31, 1998,
and was secured by such shares of Common Stock. The principal amount of the note
was paid in full by Mr. Matzilevich and the accrued interest was forgiven by the
Company in December 1997. The Company has granted Mr. Matzilevich certain
registration rights for such shares of Common Stock.
On May 27, 1997, the Company guaranteed a portion of certain indebtedness
incurred by Mr. Papadopoulos relating to his exercise of stock options and the
payment of taxes thereon. Such indebtedness is presently secured by shares of
Common Stock owned by Mr. Papadopoulos. The maximum liability of the Company
under such guarantee is $450,000, plus certain costs and expenses of the lender;
however, based upon the principal balance of such indebtedness as of March 16,
1998, the Company's obligation under the guarantee would be limited to
approximately $150,000. The guarantee also includes provisions subordinating any
future indebtedness of Mr. Papadopoulos owed to the Company in favor of the
guaranteed indebtedness.
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EM INDUSTRIES, INCORPORATED
EM ACQUISITION CORP.
and
CN BIOSCIENCES, INC.
Dated as of November 18, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I. TENDER OFFER AND MERGER.................................................................... 2
1.1 The Offer.................................................................................. 2
1.2 Company Action............................................................................. 4
1.3 Directors.................................................................................. 5
1.4 The Merger................................................................................. 6
1.5 Effective Time............................................................................. 6
1.6 Conversion of Shares....................................................................... 6
1.7 Dissenting Shares.......................................................................... 7
1.8 Surrender of Shares........................................................................ 8
1.9 Options.................................................................................... 9
1.10 Certificate of Incorporation and Bylaws.................................................... 10
1.11 Directors and Officers..................................................................... 10
1.12 Other Effects of Merger.................................................................... 10
1.13 Proxy Statement............................................................................ 10
1.14 Merger Without Meeting of Stockholders..................................................... 11
1.15 Additional Actions......................................................................... 11
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................. 11
2.1 Organization and Good Standing............................................................. 11
2.2 Capitalization............................................................................. 12
2.3 Subsidiaries............................................................................... 12
2.4 Authorization; Binding Agreement........................................................... 13
2.5 Governmental Approvals..................................................................... 13
2.6 No Violations.............................................................................. 14
2.7 Securities Filings......................................................................... 14
2.8 Company Financial Statements............................................................... 15
2.9 Absence of Certain Changes or Events....................................................... 15
2.10 Compliance With Laws....................................................................... 16
2.11 Permits.................................................................................... 16
2.12 Litigation................................................................................. 16
2.13 Contracts.................................................................................. 16
2.14 Employee Benefit Plans..................................................................... 16
2.15 Taxes and Tax Returns...................................................................... 18
2.16 Ownership and Use of Assets and Properties................................................. 20
2.17 Intellectual Property...................................................................... 22
2.18 Insurance.................................................................................. 22
2.19 Environmental Matters...................................................................... 22
2.20 Labor Relations............................................................................ 24
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
2.21 Offer Documents; Proxy Statement........................................................... 24
2.22 Finders and Investment Bankers............................................................. 25
2.23 Fairness Opinion........................................................................... 25
2.24 Related Party Transactions................................................................. 25
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT................................................... 25
3.1 Organization and Good Standing............................................................. 25
3.2 Authorization; Binding Agreement........................................................... 26
3.3 Governmental Approvals..................................................................... 26
3.4 No Violations.............................................................................. 26
3.5 Offer Documents; Proxy Statement........................................................... 26
3.6 Finders and Investment Bankers............................................................. 27
3.7 Financing.................................................................................. 27
3.8 No Prior Activities........................................................................ 27
ARTICLE IV. ADDITIONAL COVENANTS OF THE COMPANY........................................................ 27
4.1 Conduct of Business of the Company and the Company Subsidiaries............................ 27
4.2 Notification of Certain Matters............................................................ 30
4.3 Access and Information..................................................................... 30
4.4 Stockholder Approval....................................................................... 30
4.5 Reasonable Best Efforts.................................................................... 31
4.6 Public Announcements....................................................................... 31
4.7 Compliance................................................................................. 31
4.8 No Solicitation............................................................................ 32
4.9 SEC and Stockholder Filings................................................................ 34
4.10 Takeover Statutes.......................................................................... 34
4.11 Related Party Agreements................................................................... 34
ARTICLE V. ADDITIONAL COVENANTS OF PARENT............................................................. 34
5.1 Reasonable Best Efforts.................................................................... 34
5.2 Public Announcements....................................................................... 35
5.3 Compliance................................................................................. 35
5.4 [Intentionally omitted].................................................................... 35
5.5 Indemnification, Exculpation and Insurance................................................. 35
5.6 Certain Share Purchases Prohibited......................................................... 36
ARTICLE VI. MERGER CONDITIONS.......................................................................... 36
6.1 Offer...................................................................................... 36
6.2 Stockholder Approval....................................................................... 36
6.3 No Injunction or Action.................................................................... 36
6.4 Other Approvals............................................................................ 36
6.5 Conditions of Obligations of Parent and Merger Sub......................................... 37
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VII. TERMINATION AND ABANDONMENT................................................................ 37
7.1 Termination................................................................................ 37
7.2 Effect of Termination and Abandonment...................................................... 38
ARTICLE VIII. MISCELLANEOUS.............................................................................. 39
8.1 Confidentiality............................................................................ 39
8.2 Amendment and Modification................................................................. 39
8.3 Waiver of Compliance; Consents............................................................. 39
8.4 Survival................................................................................... 39
8.5 Notices.................................................................................... 40
8.6 Binding Effect; Assignment................................................................. 41
8.7 Expenses................................................................................... 41
8.8 Governing Law.............................................................................. 41
8.9 Counterparts............................................................................... 41
8.10 Interpretation............................................................................. 41
8.11 Entire Agreement........................................................................... 41
8.12 Severability............................................................................... 42
8.13 Specific Performance....................................................................... 42
8.14 Third Parties.............................................................................. 42
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
<S> <C> <C> <C>
Term Section Term Section
Acquisition Agreement .......................................................................................4.8(b)
Affiliate .....................................................................................................8.10
Agreement ..................................................................................................Parties
Benefit Plan ..................................................................................................2.14
Certificate of Merger ..........................................................................................1.4
Closing ........................................................................................................1.5
Closing Date ...................................................................................................1.5
Code........................................................................................................2.14(b)
Company ....................................................................................................Parties
Company Benefit Plan ..........................................................................................2.14
Company Class A Common Stock ...................................................................................2.2
Company Common Stock ......................................................................................Recitals
Company Disclosure Letter ........................................................................................2
Company Filed Documents ........................................................................................2.7
Company Financial Statements ...................................................................................2.8
Company Material Adverse Effect ................................................................................2.1
Company Material Contract .....................................................................................2.13
Company Option Plans ........................................................................................1.9(a)
Company Options .............................................................................................1.9(a)
Company Permits ...............................................................................................2.11
Company Proposals ..............................................................................................4.4
Company Securities Filings .....................................................................................2.7
Company Subsidiary .............................................................................................2.1
Confidentiality Agreement ......................................................................................8.1
Consent ........................................................................................................2.5
DGCL ...........................................................................................................1.4
Dissenting Shares ..............................................................................................1.7
Effective Time .................................................................................................1.5
Environmental Claim ........................................................................................2.19(b)
Environmental Laws .........................................................................................2.19(b)
Environmental Permit .......................................................................................2.19(b)
ERISA .........................................................................................................2.14
ERISA Affiliate.............................................................................................2.14(b)
Exchange Agent ..............................................................................................1.8(a)
Expiration Date .............................................................................................1.1(d)
Financial Advisor ...........................................................................................1.2(a)
Governmental Authority .........................................................................................2.5
Hazardous Materials ........................................................................................2.19(b)
HSR Act ........................................................................................................2.5
Independent Directors ..........................................................................................1.3
Law ...........................................................................................................2.6
Leased Real Property .......................................................................................2.16(b)
Litigation ....................................................................................................2.12
Merger ....................................................................................................Recitals
Merger Consideration ........................................................................................1.6(a)
Merger Sub .................................................................................................Parties
Minimum Condition ..........................................................................................Annex I
Multiemployer Plan .........................................................................................2.14(a)
NASD ...........................................................................................................2.5
Offer .....................................................................................................Recitals
Offer Conditions ............................................................................................1.1(a)
Offer Documents .............................................................................................1.1(c)
Offer to Purchase ...........................................................................................1.1(c)
Parent .....................................................................................................Parties
Parent Group ...................................................................................................5.1
Parent Information .............................................................................................3.5
Per Share Amount ..........................................................................................Recitals
Person ........................................................................................................8.10
Proxy Statement ........................................................................................1.13(a)(ii)
Related Party .................................................................................................2.24
Schedule 14D-1...............................................................................................1.1(c)
Schedule 14D-9 ..............................................................................................1.2(b)
SEC .........................................................................................................1.1(c)
Securities Act ................................................................................................2.13
Securities Exchange Act .....................................................................................1.1(a)
Series A Preferred Stock .......................................................................................2.2
Series B Preferred Stock .......................................................................................2.2
Shares ....................................................................................................Recitals
Special Meeting .........................................................................................1.13(a)(i)
Stockholder ...............................................................................................Recitals
Stockholder Agreement .....................................................................................Recitals
Subsidiary ....................................................................................................8.10
Superior Proposal ...........................................................................................4.8(b)
Surviving Corporation ..........................................................................................1.4
Surviving Corporation Common Stock ..........................................................................1.6(c)
Takeover Proposal ...........................................................................................4.8(a)
Takeover Statute ..............................................................................................4.10
Tax ........................................................................................................2.15(f)
Tax Return .................................................................................................2.15(f)
Voting Securities ..........................................................................................Annex I
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of November 18, 1998, by and among EM Industries, Incorporated,
a New York corporation ("Parent"), EM Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of Parent ("Merger Sub"), and CN Biosciences, Inc.,
a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company, Merger Sub
and Parent have approved the acquisition by Parent of the Company in accordance
with the provisions of this Agreement;
WHEREAS, in furtherance thereof, it is proposed that, upon the terms
and subject to the conditions set forth herein, Merger Sub will make a cash
tender offer (as it may be amended from time to time in accordance herewith, the
"Offer") to purchase all of the outstanding shares (the "Shares") of common
stock, $.01 par value, of the Company (the "Company Common Stock"), for $25.00
per Share (such price or any higher price as may be paid in the Offer, the "Per
Share Amount"), in each case net to the seller in cash, without interest;
WHEREAS, also in furtherance of such acquisition, the respective
Boards of Directors of the Company, Merger Sub and Parent have each approved
the merger (the "Merger") of Merger Sub with and into the Company following
the expiration of the Offer in accordance with the laws of the State of
Delaware and the provisions of this Agreement;
WHEREAS, Parent and Merger Sub are unwilling to enter into this
Agreement (and effect the transactions contemplated hereby) unless,
simultaneously with the execution and delivery hereof, a certain holder of
Shares (the "Stockholder") enters into an agreement (the "Stockholder
Agreement") providing for certain matters with respect to its Shares, the
tender of its Shares and certain other actions relating to the Offer and the
other transactions contemplated by this Agreement and, in order to induce
Parent and Merger Sub to enter into this Agreement, the Company has approved
the execution and delivery by Parent and Merger Sub and Stockholder of the
Stockholder Agreement, and Stockholder has executed and delivered the
Stockholder Agreement;
WHEREAS, the Board of Directors of the Company has approved this
Agreement and the Stockholder Agreement, has resolved to recommend acceptance
of the Offer and the Merger to the holders of Shares and has determined that
the consideration to be paid for each Share in the Offer and the Merger is
fair to the holders of such Shares and to recommend that the holders of such
Shares accept the Offer and adopt this Agreement and the transactions
contemplated hereby; and
<PAGE>
WHEREAS, the Company, Merger Sub and Parent desire to make certain
representations, warranties and agreements in connection with, and establish
various conditions precedent to, the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I.
TENDER OFFER AND MERGER
1.1 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 7.1 hereof and no event set forth in
Annex I hereto shall have occurred and be existing, Parent shall cause Merger
Sub to commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder
(the "Securities Exchange Act")) the Offer as promptly as practicable, but in
no event later than five business days following the public announcement of
this Agreement; provided, however, that Parent may designate another direct
subsidiary of Parent as the bidder (within the meaning of Rule 14d-1(c) under
the Securities Exchange Act) in the Offer, in which case references herein to
Merger Sub shall be deemed to apply to such subsidiary, as appropriate. The
obligation of Parent to cause Merger Sub to accept for payment any Shares
tendered shall be subject to the satisfaction of only those conditions set
forth in Annex I hereto (the "Offer Conditions"). The Per Share Amount shall
be net to each seller in cash, subject to reduction only for any applicable
federal back-up withholding or stock transfer taxes payable by such seller.
The Company agrees that no Shares held by the Company shall be tendered
pursuant to the Offer.
(b) Without the prior written consent of the Company,
Parent shall not permit Merger Sub to (i) decrease the Per Share Amount or
change the form of consideration payable in the Offer, (ii) decrease the
number of Shares sought in the Offer, (iii) amend or waive satisfaction of the
Minimum Condition (as defined in Annex I hereto) or (iv) impose additional
conditions to the Offer or amend any other term of the Offer in any manner
adverse to the holders of Shares, provided that nothing herein shall prohibit
any waiver of any condition or term of the Offer (other than the Minimum
Condition) or any other action permitted hereby. Upon the terms and subject to
the conditions of the Offer, Parent shall cause Merger Sub to accept for
payment and purchase, as soon as practicable after the expiration of the
Offer, all Shares validly tendered and not withdrawn prior to the expiration
of the Offer. It is agreed that the Offer Conditions are for the benefit of
Merger Sub and may be asserted by Merger Sub regardless of the circumstances
giving rise to any such condition (except for any action or inaction by Parent
or Merger Sub constituting a breach of this Agreement) or, except with respect
to the Minimum Condition, may be waived by Merger Sub, in whole or in part at
any time and from time to time, in its sole discretion.
2
<PAGE>
(c) The Offer shall be made by means of an offer to
purchase (the "Offer to Purchase") having only the conditions set forth in
Annex I hereto. On the date the Offer is commenced, Parent and Merger Sub
shall file with the Securities and Exchange Commission (the "SEC") a Tender
Offer Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "Schedule 14D-1") with respect to the Offer that
shall contain (including as an exhibit) or incorporate by reference the Offer
to Purchase and forms of the related letter of transmittal and summary
advertisement (which documents, together with any supplements or amendments
thereto, and any other SEC schedule or form which is filed in connection with
the Offer and related transactions, are referred to collectively herein as the
"Offer Documents") and shall mail the Offer to Purchase to the holders of the
Shares. Parent and Merger Sub agree promptly to correct the Schedule 14D-1 if
and to the extent it shall become false and misleading in any material respect
(and the Company, with respect to written information supplied by it
specifically for use in the Schedule 14D-1, shall promptly notify Parent and
Merger Sub of any required corrections of such information and cooperate with
the Company with respect to correcting such information) and to supplement the
information contained in the Schedule 14D-1 to include any information that
shall become necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and Parent and
Merger Sub shall take all steps necessary to cause the Schedule 14D- 1 as so
corrected to be filed with the SEC and disseminated to the Company's
stockholders to the extent required by applicable Laws, including federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment on any Offer Documents before they are filed
with the SEC. In addition, Parent and Merger Sub agree to provide the Company
and its counsel in writing with any comments or other communications that
Parent, Merger Sub or their counsel may receive from time to time from the SEC
or its staff with respect to the Offer Documents promptly after the receipt of
such comments or other communications.
(d) The Offer to Purchase shall provide for an initial
expiration date for the Offer (the "Expiration Date") of 20 business days (as
defined in Rule 14d-1 under the Securities Exchange Act) from the date of
commencement of the Offer. Parent and Merger Sub agree that they shall not
terminate or withdraw the Offer or extend the Expiration Date unless at the
Expiration Date any of the Offer Conditions shall not have been satisfied or
earlier waived. Notwithstanding the foregoing, Merger Sub may (i) extend the
Expiration Date (including as it may be extended) for up to ten business days
in connection with an increase in the consideration to be paid pursuant to the
Offer so as to comply with applicable rules and regulations of the SEC and
(ii) extend the initial Expiration Date (including as it may be extended) for
up to ten business days, notwithstanding that on such Expiration Date the
Offer Conditions shall have been satisfied or waived, if the number of Shares
that have been validly tendered and not withdrawn represents more than 50
percent but less than 90 percent of the then issued and outstanding Shares.
3
<PAGE>
1.2 Company Action.
(a) The Company hereby approves of and consents to the
Offer and represents and warrants that (A) the Board of Directors of the
Company, at a meeting duly called and held on November 18, 1998, at which all
of the Directors were present, duly approved by unanimous vote this Agreement
and the transactions contemplated hereby, including the Offer, the Merger and
the Stockholder Agreement, resolved to recommend that the stockholders of the
Company accept the Offer, tender their Shares pursuant to the Offer and adopt
this Agreement and the transactions contemplated hereby, including the Merger,
and determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to and in the best interests of
the stockholders of the Company and (B) Vector Securities International, Inc.
(the "Financial Advisor") has delivered to the Board of Directors of the
Company its written opinion that as of the date hereof the consideration to be
received by the stockholders of the Company pursuant to each of the Offer and
the Merger is fair to the stockholders of the Company from a financial point
of view. The Company has been authorized by the Financial Advisor to permit
the inclusion of such fairness opinion (or a reference thereto) in the Offer
Documents and in the Schedule 14D-9 referred to below. The Company hereby
consents to the inclusion in the Offer Documents of the recommendations of the
Company's Board of Directors described in this Section 1.2(a).
(b) The Company shall file with the SEC, no later than
the fifth business day following the public announcement of this Agreement, a
Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 (together
with any amendments or supplements thereto, the "Schedule 14D-9") that shall
comply in all material respects with the provisions of all applicable Law (as
hereinafter defined), including federal securities laws. The Company shall
mail such Schedule 14D-9 to the stockholders of the Company promptly after the
commencement of the Offer together with the initial mailing of the Offer
Documents. The Schedule 14D-9 and the Offer Documents shall contain the
recommendations of the Board of Directors of the Company described in Section
1.2(a) hereof. The Company agrees promptly to correct the Schedule 14D-9 if
and to the extent that it shall become false or misleading in any material
respect (and each of Parent and Merger Sub, with respect to written
information supplied by it specifically for use in the Schedule 14D-9, shall
promptly notify the Company of any required corrections of such information
and cooperate with the Company with respect to correcting such information)
and to supplement the information contained in the Schedule 14D-9 to include
any information that shall become necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and the Company shall take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
the Company's stockholders to the extent required by applicable Laws,
including federal securities laws. Parent and its counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 before it
is filed with the SEC. In addition, the Company agrees to provide Parent,
Merger Sub and their counsel in writing with any comments or other
communications that the Company or its counsel may receive from time to time
from the SEC or its staff with respect to the Schedule 14D-9 promptly after
the receipt of such comments or other communications.
4
<PAGE>
(c) In connection with the Offer, the Company shall
promptly upon execution of this Agreement furnish Parent with mailing labels
containing the names and addresses of all record holders of Shares,
non-objecting beneficial owner lists (to the extent reasonably available),
security position listings of Shares held in stock depositories, each as of a
recent date, and shall promptly furnish Parent with such additional
information, including updated lists of stockholders, mailing labels and
security position listings, and such other information and assistance as
Parent or its agents may reasonably request for the purpose of communicating
the Offer to the record and beneficial holders of Shares.
1.3 Directors. Promptly upon the purchase by Merger Sub of any Shares
pursuant to the Offer (and assuming that the Minimum Condition has been
satisfied), Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company
as will give Merger Sub, subject to compliance with Section 14(f) of the
Securities Exchange Act, representation on the Board of Directors of the
Company equal to at least that number of directors which equals the product of
the total number of directors on the Board of Directors of the Company (giving
effect to the directors appointed or elected pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Parent or any affiliate of Parent (including for purposes of this
Section 1.3 such Shares as are accepted for payment pursuant to the Offer, but
excluding Shares held by the Company) bears to the number of Shares
outstanding. At such times, if requested by Parent, the Company shall also
cause each committee of the Board of Directors of the Company and the Board of
Directors of each Company Subsidiary (as hereinafter defined) to include
persons designated by Parent constituting the same percentage of each such
committee and the Board of Directors of each Company Subsidiary as Parent's
designees are of the Board of Directors of the Company. The Company shall,
upon request by Parent, promptly increase the size of the Board of Directors
of the Company and of the Company Subsidiaries as is necessary to enable
Parent's designees to be elected to the Board of Directors of the Company and
of the Company Subsidiaries in accordance with the terms of this Section 1.3
and shall cause Parent's designees to be so elected; provided, however, that,
subject to the following proviso, in the event that Parent's designees are
appointed or elected to the Board of Directors of the Company and of the
Company Subsidiaries, until the Effective Time (as hereinafter defined) the
Board of Directors of the Company shall have at least one director who is a
director on the date hereof and who is neither an officer of the Company nor a
designee, stockholder, affiliate or associate (within the meaning of the
federal securities laws) of Parent (one or more of such directors, the
"Independent Directors"); provided further, that if no Independent Directors
remain, the other directors shall designate one person to fill one of the
vacancies who shall not be either an officer of the Company or a designee,
shareholder, affiliate or associate of Parent, and such person shall be deemed
to be an Independent Director for purposes of this Agreement. Subject to
applicable Law, the Company shall promptly take all action necessary pursuant
to Section 14(f) of the Securities Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 1.3 and
shall include in the Schedule 14D-9 mailed to stockholders promptly after the
commencement of the Offer (or an amendment thereof or an information statement
pursuant to Rule 14f-1 if Parent has not theretofore designated directors)
such information with respect to the Company and its officers and directors as
5
<PAGE>
is required under Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 1.3. Parent shall supply the Company and be
solely responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding anything in this Agreement to the contrary, following the time
directors designated by Parent constitute a majority of the Board of Directors
of the Company and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors shall be required to (i) amend or
terminate this Agreement on behalf of the Company, (ii) exercise or waive any of
the Company's rights or remedies hereunder, (iii) extend the time for
performance of Parent's obligations hereunder or (iv) take any other action by
the Company in connection with this Agreement required to be taken by the Board
of Directors of the Company.
1.4 The Merger. Upon the terms and subject to the conditions of this
Agreement, the Merger shall be consummated in accordance with the Delaware
General Corporation Law (the "DGCL"). At the Effective Time (as defined in
Section 1.5 hereof), upon the terms and subject to the conditions of this
Agreement, Merger Sub shall be merged with and into the Company in accordance
with the DGCL and the separate existence of Merger Sub shall thereupon cease,
and the Company, as the surviving corporation in the Merger (the "Surviving
Corporation"), shall continue its corporate existence under the laws of the
State of Delaware as a Subsidiary of Parent. At Parent's election, any direct
or indirect Subsidiary of Parent other than Merger Sub may be merged with and
into the Company instead of Merger Sub. In the event of such an election, the
parties agree to execute an appropriate amendment to this Agreement to reflect
such election. The parties shall prepare and execute a certificate of merger
in order to comply in all respects with the requirements of the DGCL and with
the provisions of this Agreement or, if applicable, a certificate of ownership
and merger (each, a "Certificate of Merger").
1.5 Effective Time. The Merger shall become effective at the time of
the filing of the Certificate of Merger with the Secretary of State of
Delaware in accordance with the applicable provisions of the DGCL or at such
later time as may be specified in the Certificate of Merger. As soon as
practicable after all of the conditions set forth in Article VI of this
Agreement have been satisfied or waived by the party or parties entitled to
the benefit of the same, the parties hereto shall cause the Merger to become
effective. Parent and the Company shall mutually determine the time of such
filing and the place where the closing of the Merger (the "Closing") shall
occur. The time when the Merger shall become effective is herein referred to
as the "Effective Time" and the date on which the Effective Time occurs is
herein referred to as the "Closing Date."
1.6 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holder of any of the following securities:
(a) Each Share issued and outstanding immediately
before the Effective Time (other than any Shares to be cancelled pursuant to
Section 1.6(b) hereof and any Dissenting Shares (as hereinafter defined)) shall
be cancelled and extinguished and be converted into the
6
<PAGE>
right to receive the Per Share Amount (the "Merger Consideration") in cash
payable to the holder thereof, without interest, promptly upon surrender of
the certificate representing such Share or appropriate proof of lost
certificates, in accordance with Section 1.8 hereof. From and after the
Effective Time, the holders of certificates evidencing ownership of any such
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares except as otherwise provided for herein
or by applicable Law.
(b) Each Share held in the treasury of the Company and
each Share owned by Parent or any direct or indirect wholly owned Subsidiary of
Parent immediately before the Effective Time, including without limitation
Merger Sub, shall be cancelled and extinguished and no payment or other
consideration shall be made with respect thereto.
(c) The shares of Merger Sub common stock outstanding
immediately prior to the Merger shall be converted into one validly issued,
fully paid and non-assessable share of the common stock of the Surviving
Corporation (the "Surviving Corporation Common Stock"), which one share of the
Surviving Corporation Common Stock shall constitute all of the issued and
outstanding capital stock of the Surviving Corporation and shall be owned by
Parent.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any Shares issued and outstanding immediately prior to the Effective
Time and held by a holder who has demanded and perfected his demand for
appraisal of his Shares in accordance with the DGCL (including but not limited
to Section 262 thereof) and as of the Effective Time has neither effectively
withdrawn nor lost his right to such appraisal ("Dissenting Shares") shall not
be converted into or represent a right to receive the Merger Consideration, but
the holder thereof shall be entitled to only such rights as are granted by the
DGCL.
(b) Notwithstanding the provisions of Section 1.7(a)
hereof, if any holder of Shares who demands appraisal of his Shares under the
DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) his right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such holder's Shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration, without interest thereon, upon surrender of the
certificate or certificates representing such Shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Shares,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL which are received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not voluntarily make any payment with respect to any
demands for appraisal and shall not, except with the prior written consent of
Parent, settle or offer to settle any such demands.
7
<PAGE>
1.8 Surrender of Shares.
(a) Prior to the Closing Date, Parent shall appoint First
Chicago Trust Company of New York or another agent reasonably acceptable to the
Company to act as exchange agent (the "Exchange Agent") for the Merger. No later
than the business day following the mailing of the letter of transmittal
referred to in Section 1.8(b) hereof, Parent shall make available to the
Exchange Agent for the benefit of holders of Shares, the aggregate Merger
Consideration to which such holders shall be entitled at the Effective Time
pursuant to Section 1.6 hereof. Such funds shall be invested by the Exchange
Agent as directed by Parent or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$500 million. Any net profit resulting from, or interest or income produced by,
such investments shall be payable to the Merger Sub or Parent, as Parent
directs.
(b) On the Closing Date, Parent shall instruct the
Exchange Agent to mail to each holder of record of a certificate representing
any Shares cancelled upon the Merger pursuant to Section 1.6(a) hereof, within
five business days of receiving from the Company a list of such holders of
record, (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 Exchange 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. Each holder
of a certificate or certificates representing any Shares cancelled upon the
Merger pursuant to Section 1.6(a) hereof may thereafter surrender such
certificate or certificates to the Exchange Agent, as agent for such holder, to
effect the surrender of such certificate or certificates on such holder's behalf
for a period ending one year after the Effective Time. Upon the surrender of
certificates representing the Shares, Parent shall cause the Exchange Agent to
pay the holder of such certificates in exchange therefor cash in an amount equal
to the Per Share Amount multiplied by the number of Shares represented by such
certificate. Until so surrendered, each such certificate (other than
certificates representing Dissenting Shares or Shares referred to in Section
1.6(b) hereof) shall represent solely the right to receive the aggregate Merger
Consideration relating thereto.
(c) If payment of cash in respect of cancelled Shares is
to be made to a person other than the person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such payment
that the certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the person requesting
such payment shall have paid any transfer and other Taxes (as hereinafter
defined) required by reason of such payment in a name other than that of the
registered holder of the certificate or instrument surrendered or shall have
established to the satisfaction of Parent or the Exchange Agent that such Tax
either has been paid or is not payable.
8
<PAGE>
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of Shares shall be made thereafter,
other than transfers of Shares that have occurred prior to the Effective Time.
In the event that, after the Effective Time, certificates for Shares (other than
Shares referred to in Section 1.6(b) hereof) are presented to the Surviving
Corporation, its transfer agent or the Exchange Agent, they shall be cancelled
and exchanged for cash as provided in Section 1.6(a) hereof. No interest shall
accrue or be paid on any cash payable upon the surrender of a certificate or
certificates which immediately before the Effective Time represented outstanding
Shares.
(e) The Merger Consideration paid in the Merger shall be
net to the holder of Shares in cash, subject to reduction only for any
applicable federal back-up withholding or, as set forth in Section 1.8(c)
hereof, stock transfer Taxes payable by such holder.
(f) Promptly following the date which is one year after
the Effective Time, the Exchange Agent shall deliver to Parent all cash
(including interest received with respect thereto), certificates and other
documents in its possession relating to the transactions contemplated hereby,
and the Exchange Agent's duties shall terminate. Thereafter, each holder of a
certificate representing Shares (other than certificates representing Dissenting
Shares and Shares referred to in Section 1.6(b) hereof) may surrender such
certificate to Parent and (subject to applicable abandoned property, escheat and
similar Laws) receive in consideration thereof the aggregate Merger
Consideration relating thereto payable upon surrender of such certificate,
without any interest or dividends thereon.
(g) None of the Company, Merger Sub, Parent or the
Exchange Agent shall be liable to any holder of Shares for cash delivered to a
public official pursuant to any abandoned property, escheat or similar law,
rule, regulation, statute, order, judgment or decree.
1.9 Options.
(a) The Company hereby represents and warrants, and based
thereon Parent and Merger Sub hereby acknowledge, that (i) all outstanding
options to purchase Shares (the "Company Options") granted under the Company's
stock option plans referred to in Section 2.14 of the Company Disclosure Letter
(as hereinafter defined), each as amended (collectively, the "Company Option
Plans"), whether or not then exercisable or vested, shall, pursuant to the terms
of the Company Option Plans, be cancelled as of the consummation of the Offer
and the holders thereof shall be entitled to receive from Parent upon
consummation of the Offer, in respect of each Share subject to such Company
Option, an amount in cash equal to the excess, if any, of the Per Share Amount
over the exercise price per share thereof (such payment to be net of applicable
withholding taxes).
(b) The Company hereby represents and warrants that all
Company Option Plans provide, or have been or will be amended as and when
required to provide for the actions
9
<PAGE>
described in Section 1.9(a) hereof. The Company shall cause the Company Option
Plans to terminate as of the Effective Time.
1.10 Certificate of Incorporation and Bylaws. Subject to Section 5.5
hereof, at the Effective Time, the Certificate of Incorporation and the Bylaws
of the Surviving Corporation shall be the Certificate of Incorporation and the
Bylaws of Merger Sub in effect at the Effective Time (subject to any
subsequent amendments).
1.11 Directors and Officers. At the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, and the officers of the Company immediately prior
to the Effective Time shall be the officers of the Surviving Corporation, in
each case until their successors are duly elected or appointed and qualified.
1.12 Other Effects of Merger. The Merger shall have all further
effects as specified in the applicable provisions of the DGCL.
1.13 Proxy Statement.
(a) If required by applicable Law in order to consummate
the Merger, the Company, acting through its Board of Directors, shall, in
accordance with applicable Law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as soon
as practicable following the acceptance for payment and purchase of
the Shares by Merger Sub pursuant to the Offer for the purpose of
considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and shall (x) obtain and furnish the information required
to be included by the SEC in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, to respond promptly to
any comments made by the SEC with respect to the preliminary proxy or
information statement and cause a definitive proxy or information
statement (as amended or supplemented, the "Proxy Statement") to be
mailed to its stockholders and (y) obtain the necessary approvals of
the Merger and this Agreement by its stockholders; and
(iii) include in the Proxy Statement the
recommendation of the Board that stockholders of the Company vote in
favor of approval of the Merger and the adoption of this Agreement.
(b) Parent agrees that it will provide the Company with
the information concerning Parent and Merger Sub required to be included in the
Proxy Statement and will vote, or
10
<PAGE>
cause to be voted, all of the Shares then owned by it, Merger Sub or any of its
other Subsidiaries and affiliates in favor of approval of the Merger and the
adoption of this Agreement.
(c) Each of Parent, Merger Sub and the Company agrees
promptly to correct any information provided by it for use in the Proxy
Statement as and to the extent it shall have become false or misleading in any
material respect and to supplement the information provided by it specifically
for use in the Proxy Statement to include any information that shall have become
necessary, in order to make statements contained therein, in light of the
circumstances in which they were made, not misleading, and the Company further
agrees to take all steps necessary to cause the Proxy Statement, as so corrected
or supplemented, to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws.
1.14 Merger Without Meeting of Stockholders. Notwithstanding Section
1.13 hereof, in the event that Parent, Merger Sub or any other Subsidiary of
Parent shall acquire at least 90 percent of the outstanding Shares pursuant to
the Offer or otherwise, the parties hereto agree to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of stockholders of the
Company, in accordance with the DGCL.
1.15 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary
or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Merger Sub or the Company or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of Merger Sub or the Company, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Merger Sub or the Company, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that,
except as set forth in the correspondingly numbered Sections of the letter,
dated the date hereof, from the Company to Parent (the "Company Disclosure
Letter"):
2.1 Organization and Good Standing. The Company and each of the
Company Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and
11
<PAGE>
authority and any necessary governmental approval to own, lease and operate its
properties and to carry on its business as now being conducted. The Company and
each of the Company Subsidiaries is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not, individually
or in the aggregate, have or be reasonably likely in the future to have a
material adverse effect on the business, assets, condition (financial or
otherwise), liabilities or results of operations of the Company and the Company
Subsidiaries taken as a whole ("Company Material Adverse Effect") or prevent or
delay the consummation of the Offer or the Merger. The Company has heretofore
made available to Parent accurate and complete copies of the Certificate of
Incorporation and Bylaws or other governing instruments, as currently in effect,
of the Company and each Company Subsidiary. For purposes of this Agreement, the
term "Company Subsidiary" shall mean any corporation, partnership or other legal
entity of which the Company (either alone or through or together with any other
Subsidiary) owns a majority of the capital stock or other equity interests, and
the Company is entitled to vote for the election of the board of directors or
other governing body of such corporation, partnership or other legal entity.
2.2 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (a) 30,000,000 shares of Company Common
Stock, (b) 800,000 shares of Class A Common Stock, par value $.01 per share
(the "Company Class A Common Stock"), (c) 5,000 shares of Series A Preferred
Stock, par value $1.00 per share (the "Series A Preferred Stock"), (d) 200,000
shares of Series B Preferred Stock (the "Series B Preferred Stock"), par value
$1.00 per share, and (e) 500,000 shares of preferred stock, par value $.01 per
share. As of the close of business on November 17, 1998, (a) 5,721,790 shares
of Company Common Stock were issued and outstanding, and (b) no shares of
Company Class A Common Stock, Series A Preferred Stock, Series B Preferred
Stock or preferred stock were issued and outstanding. No other capital stock
of the Company is authorized or issued. All issued and outstanding shares of
the Company Common Stock are duly authorized, validly issued, fully paid and
non-assessable and free of preemptive or similar rights. Except as set forth
in the Company Filed Documents (as hereinafter defined) or Section 2.2 of the
Company Disclosure Letter, as of the date hereof there were no, and as of the
Expiration Date there will be no, outstanding options, warrants, rights or
other commitments of any character whatsoever relating to any of the
outstanding, authorized but unissued, unauthorized or treasury shares of the
capital stock or any other interest in the ownership or earnings of the
Company or other security of the Company, and there is no authorized or
outstanding security of any kind convertible into or exchangeable for any such
capital stock or other security and there are no contracts, commitments,
understandings or arrangements by which the Company is bound to issue
additional shares of its capital stock, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock or securities
convertible into or exchangeable for such shares. Except as set forth in
Section 2.2 of the Company Disclosure Letter, there are no outstanding
contractual obligations of the Company or any Company Subsidiaries to
repurchase, redeem or otherwise acquire any shares of common stock of the
Company or the capital stock of any Company Subsidiary or to provide funds
12
<PAGE>
to or make any investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity.
2.3 Subsidiaries. Section 2.3 of the Company Disclosure Letter sets
forth the name and jurisdiction of incorporation or organization of each
Company Subsidiary, each of which is, except for directors' qualifying shares
disclosed in the Company Disclosure Letter, wholly owned by the Company or
another Company Subsidiary. All of the capital stock and other interests of the
Company Subsidiaries so held by the Company are owned by it or a Company
Subsidiary as indicated in Section 2.3 of the Company Disclosure Letter, free
and clear of any claim, lien, encumbrance, security interest or agreement with
respect thereto. All of the outstanding shares of capital stock in each of the
Company Subsidiaries directly or indirectly held by the Company are duly
authorized, validly issued, fully paid and non-assessable and were issued free
of preemptive or similar rights and in compliance with applicable Laws. There
are no outstanding options, warrants, rights or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Company
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares.
2.4 Authorization; Binding Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, including, but
not limited to, the Merger, have been duly and validly authorized by the
Company's Board of Directors and no other corporate proceedings on the part of
the Company or any Company Subsidiary are necessary to authorize the execution
and delivery of this Agreement or to consummate the transactions contemplated
hereby (other than the adoption of this Agreement by the stockholders of the
Company to the extent required by the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and constitutes the legal, valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforceability hereof may
be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
principles of equity regarding the availability of remedies. The Board of
Directors of the Company has approved this Agreement, the Stockholder
Agreement and the transactions contemplated hereby and thereby (including but
not limited to the Offer, the Merger and the matters provided for in the
Stockholder Agreement) so as to render inapplicable hereto and thereto the
limitation on business combinations contained in Section 203 of the DGCL (or
any similar provision). As a result, the only vote of holders of any class or
series of the Company's capital stock required to adopt this Agreement and the
transactions contemplated hereby, including the Merger, is the affirmative
vote of a majority of the outstanding Shares, and if Section 253 of the DGCL
is applicable to the Merger, no such vote shall be required. No other state
takeover or control share statute or similar statute or regulation
13
<PAGE>
applies or purports to apply to the Offer, the Merger, the Stockholder Agreement
or any of the transactions contemplated hereby or thereby.
2.5 Governmental Approvals. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("Consent"), any
nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any governmental or regulatory authority, agency,
department, board, commission, administration or instrumentality, any court,
tribunal or arbitrator and any self-regulatory organization, domestic or foreign
("Governmental Authority"), on the part of the Company or any of the Company
Subsidiaries is required in connection with the execution, delivery or
performance by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby other than (i) the filing of the
Certificate of Merger with the Secretary of State of Delaware in accordance with
the DGCL, (ii) filings with the SEC and the National Association of Securities
Dealers, Inc. ("NASD"), and (iii) filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act") and similar foreign requirements.
2.6 No Violations. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by the Company with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws or other governing instruments of the Company or any
of the Company Subsidiaries, (ii) require any Consent under or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any Company Material Contract (as hereinafter defined), (iii) result in the
creation or imposition of any lien or encumbrance of any kind upon any of the
assets of the Company or any Company Subsidiary or (iv) subject to obtaining
the Consents from Governmental Authorities referred to in Section 2.5 hereof,
contravene any applicable provision of any statute, law, rule or regulation or
any order, decision, injunction, judgment, award or decree ("Law") to which
the Company or any Company Subsidiary or its or any of their respective assets
or properties are subject.
2.7 Securities Filings. The Company and, to the extent applicable,
each of its then or current Company Subsidiaries, has filed all forms,
reports, statements and documents required to be filed with the SEC since
October 1996, each of which has complied in all material respects with the
applicable requirements of the Securities Act (as hereinafter defined) or the
Securities Exchange Act, each as in effect on the date so filed. The Company
has made available to Parent true and complete copies of (i) its Annual
Reports on Form 10-K, as amended, for the years ended December 31, 1996 and
1997, as filed with the SEC, (ii) its proxy statements relating to all of the
meetings of stockholders (whether annual or special) of the Company since
October 1996, as filed with the SEC, and (iii) all other reports, statements
and registration statements and amendments thereto (including, without
limitation, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
amended)
14
<PAGE>
filed by the Company with the SEC since October 1996 and prior to the date
hereof (collectively, the "Company Filed Documents"). The reports and statements
required to be filed or furnished to stockholders pursuant to the Securities
Exchange Act subsequent to the date hereof, collectively with the Company Filed
Documents, are referred to collectively herein as the "Company Securities
Filings." As of their respective dates, or as of the date of the last amendment
thereof, if amended after filing, none of the Company Securities Filings
contained or, as to the Company Securities Filings subsequent to the date
hereof, will contain, any untrue statement of a material fact or omitted or, as
to the Company Securities Filings subsequent to the date hereof, will omit, to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company has heretofore furnished or made available to Parent
a complete and correct copy of any amendments or modifications which have not
yet been filed with the SEC to executed agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Securities Act or the Securities Exchange Act.
2.8 Company Financial Statements. The audited consolidated financial
statements and unaudited interim financial statements of the Company included
in the Company Securities Filings (the "Company Financial Statements") have
been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except, with
respect to any Company Filed Documents, as may be indicated therein or in the
notes thereto) and present fairly the consolidated financial position of the
Company and the Company Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments (which in the aggregate are not material in
nature or amount), and any other adjustments described in the Company Filed
Documents.
2.9 Absence of Certain Changes or Events. Except as set forth in the
Company Filed Documents or Section 2.9 of the Company Disclosure Letter, since
September 30, 1998, the Company and the Company Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice and, since such date, there has not been: (i) any event that,
individually or in the aggregate, has had or is reasonably likely in the
future to have a Company Material Adverse Effect, (ii) any declaration,
payment or setting aside for payment of any dividend or other distribution or
any redemption or other acquisition of any shares of capital stock or
securities of the Company by the Company, (iii) any material damage or loss to
any material asset or property, whether or not covered by insurance, (iv) any
change by the Company in accounting principles or practices, (v) any
revaluation by the Company of any material amount of its assets, including but
not limited to, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business, (vi) any
entry by the Company or any Company Subsidiaries into any commitment or
transactions material to the Company and the Company Subsidiaries taken as a
whole (other than commitments or transactions entered into in the ordinary
course of business), or (vii) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including without limitation the granting of stock
15
<PAGE>
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any present or former directors or officers, or any employment,
consulting or severance agreement or arrangement entered into with any such
present or former directors, officers or employees of the Company or any of the
Company Subsidiaries. Since October 1, 1998, neither the Company nor any Company
Subsidiary has taken, or failed to take, any action that would have constituted
a breach of Section 4.1 hereof had the covenants therein applied since that
date.
2.10 Compliance With Laws. Except as set forth in the Company Filed
Documents, the business and operations of the Company and each of the Company
Subsidiaries have been operated in compliance with all Laws applicable
thereto, except for any instances of non-compliance which, individually or in
the aggregate, have not had and would not be reasonably likely in the future
to have a Company Material Adverse Effect.
2.11 Permits. (i) The Company and the Company Subsidiaries have all
material permits, certificates, licenses, approvals and other authorizations
required in connection with the operation of their respective businesses
(collectively, "Company Permits"), (ii) neither the Company nor any of the
Company Subsidiaries is in violation in any material respect of any Company
Permit and (iii) no proceedings are pending or, to the knowledge of the
Company, threatened, to revoke or limit any Company Permit.
2.12 Litigation. Except as disclosed in the Company Filed Documents,
there is no suit, action, investigation, claim or proceeding ("Litigation")
pending or, to the best knowledge of the Company, threatened against the
Company or any of the Company Subsidiaries, nor is there any judgment, decree,
writ, award, injunction, rule or order of any Governmental Authority
outstanding against the Company or any of the Company Subsidiaries.
2.13 Contracts. Except as set forth in Section 2.13 of the Company
Disclosure Letter, neither the Company nor any of the Company Subsidiaries is
a party or is subject to any note, bond, mortgage, indenture, contract, lease,
license, agreement or instrument that (a) involves the payment of $200,000 or
more, (b) has a remaining term of one year or more, (c) evidences
indebtedness, or (d) is required to be described in or filed as an exhibit to
any Company Securities Filing ("Company Material Contract") which is not so
described in or filed as required by the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), or the
Securities Exchange Act. All such Company Material Contracts are valid and
binding and are in full force and effect and enforceable against the Company
or such Subsidiary and, to the knowledge of the Company, against the other
parties thereto in accordance with their respective terms, except to the
extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies. Neither the Company nor any of the
16
<PAGE>
Company Subsidiaries is in violation or breach of or default under any such
Company Material Contract.
2.14 Employee Benefit Plans.
(a) Section 2.14 of the Company Disclosure Letter contains
a complete and accurate list of all Benefit Plans (as hereinafter defined)
maintained or contributed to by the Company or any of the Company Subsidiaries
("Company Benefit Plan"). A "Benefit Plan" shall include (i) an employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended, together with all regulations thereunder ("ERISA"), even
if, because of some other provision of ERISA, such plan is not subject to any or
all of ERISA's provisions, and (ii) whether or not described in the preceding
clause, any pension, profit sharing, severance, employment, change-in-control,
bonus, stock bonus, deferred or supplemental compensation, retiree medical or
life insurance, death benefit or insurance, retirement, thrift, stock purchase
or stock option plan or any other compensation, welfare, fringe benefit,
perquisite or retirement plan, or other material program, policy or arrangement
of any kind or nature whatsoever, whether oral or written, providing for
compensation, benefits for or the welfare of any or all of the current or former
employees, directors, consultants or agents of the Company or any of the Company
Subsidiaries or their beneficiaries or dependents. Each of the Company Benefit
Plans has been maintained in compliance in all material respects with its terms
and all applicable Law. Neither the Company nor any of the Company Subsidiaries
contributes to or has contributed to, or has any outstanding liability with
respect to, any Multiemployer Plan as defined in Section 3(37) of ERISA.
(b) Except as set forth in Section 2.14 of the Company
Disclosure Letter: (i) each Benefit Plan has been established and administered
in accordance with its terms and in compliance with applicable provisions of
ERISA, the Internal Revenue Code of 1986, as amended, together with all
regulations thereunder, and any substitute or successor provisions thereof or
thereunder (the "Code") and other applicable laws, rules and regulations; (ii)
the Company has received no notice from any Governmental Authority questioning
or challenging such compliance; (iii) each Benefit Plan which is intended to be
qualified (within the meaning of Code Section 401(a)) is so qualified in form
and operation and has received a favorable determination letter as to its
qualification, and nothing has occurred, whether by action or failure to act,
that would cause the loss of such qualification; (iv) no event has occurred and
no condition exists with respect to a Benefit Plan that would subject the
Company or any of the Company Subsidiaries, either directly or by reason of
their affiliation with an ERISA Affiliate (as hereinafter defined) to any
material tax, fine, lien or penalty imposed by ERISA, the Code or other
applicable laws, rules and regulations; (v) for each Benefit Plan with respect
to which a Form 5500 has been filed, no material change has occurred with
respect to the matters covered by the most recent Form 5500 since the date
thereof; (vi) no "reportable event" (as such term is defined in ERISA Section
4043), "prohibited transactions" (as such term is defined in ERISA Section 406
and Code Section 4975), "accumulated funding deficiency" (as such term is
defined in ERISA Section 302 and Code Section 412 (whether or not waived)) or
failure to make by its due date a required installment under Code Section 412(m)
has
17
<PAGE>
occurred with respect to any Benefit Plan or any other plan maintained for
employees of any ERISA Affiliate of the Company or any of the Company
Subsidiaries. "ERISA Affiliate," as applied to any person, means (i) any
corporation which is a member of a controlled group of corporations (within the
meaning of Code Section 414(b)) of which that person is a member, (ii) any trade
or business (whether or not incorporated) which is a member of a group of trades
or businesses under common control (within the meaning of Code Section 414(c))
of which that person is a member and (iii) any member of an affiliated service
group (within the meaning of Code Section 414(m) and (o)) of which that person,
any corporation described in clause (i) above or any trade or business described
in clause (ii) above is a member.
(c) With respect to any Benefit Plan, (i) no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
are pending or, to the knowledge of the Company, threatened and (ii) no facts or
circumstances exist, to the knowledge of the Company, that could reasonably be
expected to give rise to any such actions, suits or claims.
(d) Except as set forth in Section 2.14 of the Company
Disclosure Letter and the accelerated vesting and cash-out of Company Options as
described in Section 1.9 hereof, no Benefit Plan exists that could result in the
payment to any present or former employee, director, consultant or agent of the
Company or any Company Subsidiary of any money or other property, or accelerate
or provide any other rights or benefits, to any such person as a result of the
transactions contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code Section 280G, and no
payment in respect of a Benefit Plan would constitute an excess parachute
payment under Code Section 280G.
(e) With respect to each Benefit Plan, the Company has
made available to Parent a true and correct copy of (i) the Benefit Plans and
all amendments thereto, (ii) the most recent annual report on Form 5500 filed
with the IRS, (iii) each trust agreement and group annuity contract, if any, and
all amendments thereto relating to such Benefit Plan, (iv) the most recent
actuarial report or valuation relating to any such Benefit Plan subject to Title
IV of ERISA, (v) the most recent IRS determination letter with respect to any
such Benefit Plan which is intended to be "qualified" within the meaning of
Section 401(a) of the Code and (vi) the most recent summary plan descriptions.
(f) As of the date hereof, (i) all material payments
required to be made by or under any Benefit Plan, any related trusts, or any
related collective bargaining agreement have been made or are being processed in
accordance with normal operating procedures, and except as set forth in the
Company's financial statements, all material amounts required to be reflected
thereon have been properly accrued to date as liabilities under or with respect
to each Benefit Plan for the current year.
(g) None of the Benefit Plans is subject to Title IV of
ERISA.
18
<PAGE>
(h) The Company does not have any post-retirement or
similar obligations under any employee welfare benefit plan (as such term is
defined in Section 3(1) of ERISA) or otherwise to provide health or death
benefits to or in respect of current or former employees, directors, agents or
consultants, except as specifically required by the continuation requirements of
Part 6 of Title I of ERISA.
2.15 Taxes and Tax Returns. Except as set forth in Section 2.15
of the Company Disclosure Letter:
(a) The Company and each of the Company Subsidiaries and
any consolidated, combined, unitary or aggregate group for tax purposes of which
the Company or any of the Company Subsidiaries is or has been a member has
timely filed, or caused to be timely filed all Tax Returns (as hereinafter
defined) required to be filed by it, and has paid, collected or withheld, or
caused to be paid, collected or withheld, all Taxes required to be paid,
collected or withheld, other than such Taxes for which adequate reserves in the
Company Financial Statements have been established in accordance with generally
accepted accounting principles, consistently applied, or which are being
contested in good faith. All such Tax Returns were true, correct and complete in
all material respects. None of the Tax Returns contains any position which is or
would be subject to penalties under Section 6662 of the Code (or any
corresponding provision of state, local or foreign Tax law). There are no claims
or assessments pending against the Company or any of the Company Subsidiaries
for any alleged deficiency in any Tax, and the Company has not been notified in
writing of any proposed Tax claims or assessments against the Company or any of
the Company Subsidiaries (other than in each case, claims or assessments for
which adequate reserves in the Company Financial Statements have been
established or which are being contested in good faith or are immaterial in
amount). Neither the Company nor any of the Company Subsidiaries has any waivers
or extensions of any applicable statute of limitations to assess any Taxes.
There are no outstanding requests by the Company or any of the Company
Subsidiaries for any extension of time within which to file any Tax Return or
within which to pay any material amounts of Taxes shown to be due on any return.
No claim has been made in writing to the Company or to any of the Company
Subsidiaries in the past three years by an authority in a jurisdiction where the
Company or the Company Subsidiaries do not file Tax Returns that it is or may be
subject to taxation by that jurisdiction, nor is there any meritorious basis for
an investigation or other proceeding that would result in such an assessment. To
the best knowledge of the Company, there are no liens for Taxes on the assets of
the Company or any of the Company Subsidiaries except for statutory liens for
current Taxes not yet due and payable.
(b) Section 2.15 of the Company Disclosure Letter sets
forth (1) the taxable years of the Company and the Company Subsidiaries as to
which the respective statutes of limitations have not expired, and (2) with
respect to such years, sets forth those years for which examinations have been
completed, those years for which examinations are presently being conducted,
those years for which examinations have not been initiated, and those years for
which Tax Returns have not yet been filed.
19
<PAGE>
(c) All material elections with respect to Tax affecting
the Company as of the date hereof are set forth in Section 2.15(c) of the
Company Disclosure Letter.
(d) Neither the Company nor any of the Company
Subsidiaries has filed a consent under Section 341(f) of the Code concerning
collapsible corporations. Neither the Company nor any of the Company
Subsidiaries has made any payments, or is obligated to make any payments, or is
a party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Sections 162(m) or 280G of
the Code or any similar provision of foreign, state or local law. Neither the
Company nor any of the Company Subsidiaries is a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement or arrangement. Except for
the group of which the Company is presently the common parent, neither the
Company nor any of its Company Subsidiaries has ever been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code.
(e) Neither the Company nor any of its Company
Subsidiaries has (i) a material amount of income reportable for a period ending
after the Closing Date but attributable to a transaction (e.g., an installment
sale) occurring in or a change in accounting method made for a period ending on
or prior to the Closing Date which resulted in a deferred reporting of income
from such transaction or from such change in accounting method (other than a
deferred intercompany transaction); or (ii) deferred gain or loss arising out of
any deferred intercompany transaction. Neither the Company nor any Company
Subsidiary has any excess loss account (as defined in Treasury Regulation
Section 1.1502-19) with respect to the stock of any Company Subsidiary. No
"ownership change" (within the meaning of Section 382(g) of the Code) has, to
the Company's knowledge, occurred prior to the date hereof which currently
limits the Company's ability to utilize any net operating loss carryovers under
Section 382 of the Code.
(f) For purposes of this Agreement, the term "Tax" shall
mean any federal, state, local, foreign or provincial income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll,
alternative or added minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
Governmental Authority. The term "Tax Return" shall mean a report, return or
other information (including any attached schedules or any amendments to such
report, return or other information) required to be supplied to or filed with a
Governmental Authority with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
2.16 Ownership and Use of Assets and Properties.
(a) The Company and its Subsidiaries have good and
marketable title to all assets and properties which the Company and the
Subsidiaries own, including, without limitation, the assets and properties
reflected in the Company Financial Statements or acquired after the date of the
Company Financial Statements (other than assets and properties sold or otherwise
disposed of since such date in the ordinary course of business and consistent
with past practice), free and clear
20
<PAGE>
of all liens or other encumbrances, except for liens or imperfections of title
which do not, individually or in the aggregate, materially impair the continued
use and operation of the assets to which they relate ("Permitted Liens").
(b) The Company and its Subsidiaries do not own any real
property. Section 2.16(b) of the Company Disclosure Letter contains a complete
and correct list of all real property leased by such persons (the "Leased Real
Property"), in each case indicating the entity leasing such property and the
persons from whom such property is being leased. The Company and the Company
Subsidiaries have previously made available to the Parent complete and correct
copies of each such lease (and any amendments). The Company and the Company
Subsidiaries have good and marketable title to all structures, plants, leasehold
improvements, systems, fixtures and other property located on or about any of
the Leased Real Property, to the extent that the same are used by the Company
and the Company Subsidiaries in the conduct of their business, free of any liens
or other encumbrances other than Permitted Liens or as disclosed in Section
2.16(b) of the Company Disclosure Letter. No work has been performed on or with
respect to or in connection with any of the Leased Real Property that would
cause such Leased Real Property to become subject to any mechanics',
materialmen's, workmen's, repairmen's, carriers' or similar liens which would
result in a Company Material Adverse Effect and which will not be paid by the
Company or any such Subsidiary, as the case may be, in the ordinary course of
its business consistent with past practice. The structures, plants,
improvements, systems (including, without limitation, heating, ventilation, air
conditioning, electrical, plumbing, fire sprinkler, lighting, elevator and other
mechanical systems) and fixtures (including, without limitation, storage tanks
or other impoundment vessels, whether above or below ground) located in or about
each such parcel of Leased Real Property conform in all material respects with
all legal requirements and are in good operating condition and repair, ordinary
wear and tear excepted. Each such parcel of Leased Real Property, in view of the
purposes for which it is currently used, conforms in all material respects with
all covenants or restrictions of record and conforms in all material respects
with all applicable building codes and zoning requirements, and the Company is
not aware of any proposed material change in any such governmental or regulatory
requirements or in any such zoning requirements. The Company and the Company
Subsidiaries have all easements, rights-of-way and similar rights necessary to
conduct their respective businesses as presently conducted and to use the items
of Leased Real Property as currently used, including, without limitation,
easements and licenses for pipelines, power lines, water lines, roadways and
other access the absence of which would result in a Company Material Adverse
Effect.
(c) All personal property of the Company, whether or not
reflected in the Company Financial Statements, is in good operating condition
and repair, ordinary wear and tear excepted, is physically located at or about
the places of business of the Company and the Company Subsidiaries and is owned
outright by the Company and the Company Subsidiaries or is validly leased under
one of the personal property leases set forth in Section 2.16(c) of the Company
Disclosure Letter. The maintenance and operation of all such assets and
properties has complied in all material respects with all applicable laws,
regulations, ordinances, contractual commitments and obligations. None of such
personal property with a fair market value of $200,000 or more is subject
21
<PAGE>
to any agreement, arrangement or understanding for its use by any person other
than the Company and the Company Subsidiaries. Except as set forth in Section
2.16(c) of the Company Disclosure Letter, no item of tangible personal property
with a fair market value of $200,000 or more owned or used by the Company or the
Company Subsidiaries as of the date of this Agreement is subject to any lien or
other encumbrance.
(d) Except as set forth in Section 2.16(d) of the Company
Disclosure Letter, with respect to any lease of Leased Real Property or any
lease of personal property involving annual expenditures of $200,000 or more,
(i) each such lease is in full force and effect; (ii) all lease payments due to
date on any such lease have been paid, and neither the Company, any Subsidiary
nor (to the knowledge of the Company) any other party is in default under any
such lease, and no event has occurred which constitutes, or with the lapse of
time or the giving of notice or both would constitute, a default in any material
respect by the Company, any Subsidiary or (to the knowledge of the Company) any
other party under such lease; and (iii) to the knowledge of the Company, there
are no disputes or disagreements between the Company and the Company
Subsidiaries, on the one hand, and any other party with respect to any such
lease.
2.17 Intellectual Property. With respect to all patents, trademarks,
trade names, service marks, copyrights and any applications therefor,
technology, know-how, trade secrets, computer software programs or applications,
trade names and tangible or intangible proprietary information or materials that
are used in the respective businesses of the Company and the Company
Subsidiaries as currently conducted, the Company has no knowledge (a) that such
use violates the rights of any third person or (b) of any pending or threatened
litigation involving such use, which violation or litigation in the aggregate
has or could be reasonably expected to have a Company Material Adverse Effect.
2.18 Insurance. Section 2.18 of the Company Disclosure Letter
contains a complete and correct list of all insurance policies carried by, or
covering, the Company and the Company Subsidiaries with respect to their
businesses, assets and properties, together with, in respect of each such
policy, the name of the insurer, the policy number, the type of policy and
each pending claim. Complete and correct copies of each such policy have
previously been provided to Parent. All such policies are in full force and
effect, and no notice of cancellation has been given with respect to any such
policy. All premiums due on such policies have been paid in a timely manner
and the Company and the Company Subsidiaries have complied in all material
respects with the terms and provisions of such policies.
2.19 Environmental Matters.
(a) Except as set forth in Section 2.19 of the Company
Disclosure Letter and except as, individually or in the aggregate, have not had
and are not reasonably likely in the future to have a Company Material Adverse
Effect or prevent or materially delay the consummation of the Offer or the
Merger:
(i) the Company and the Company Subsidiaries are,
and within the period of all applicable statutes of limitation have
been, in compliance with all Environmental Laws (as hereinafter
defined);
(ii) the Company and the Company Subsidiaries
hold all Environmental Permits (as hereinafter defined) (each of
which is in full force and effect) required for any of their current
operations and for any property owned, leased, or otherwise operated
by any of them, and are, and within the period of all applicable
statutes of limitation have been, in compliance with the terms of all
such Environmental Permits;
22
<PAGE>
(iii) no review by, or approval of, any
Governmental Authority or other person is required under any
Environmental Law in connection with the execution or delivery of
this Agreement;
(iv) neither the Company nor any of the Company
Subsidiaries has received any written notice of Environmental Claim
(as hereinafter defined) and, to the knowledge of the Company, no
such Environmental Claims are currently pending or threatened;
(v) to the knowledge of the Company, Hazardous
Materials (as hereinafter defined) are not present on any property
owned, leased or operated by the Company or any Company Subsidiaries
that is reasonably likely to form the basis of any Environmental
Claim against any of them, and neither the Company nor any of the
Company Subsidiaries has reason to believe that Hazardous Materials
are present on any other property that is reasonably likely to form
the basis of any Environmental Claim against any of them; and
(vi) the Company has informed the Parent and
Merger Sub of: (A) all material facts which the Company reasonably
believes could form the basis of a material Environmental Claim
against any person (including, without limitation, any predecessor of
the Company or any of the Company Subsidiaries whose liability the
Company or any of the Company Subsidiaries has or may have retained
or assumed, either contractually or by operation of law, arising out
of non-compliance with any Environmental Law or the presence of
Hazardous Materials at any location owned, operated or leased by the
Company or the Company Subsidiaries or on any other property; (B) all
currently estimated material costs the Company reasonably expects it
and any of the Company Subsidiaries to incur to comply with
Environmental Laws during the next three years; and (C) all currently
estimated material costs the Company and any of the Company
Subsidiaries reasonably expect to incur for ongoing, and reasonably
anticipated, investigation and remediation of Hazardous Materials
(including, without limitation, any payments to resolve any
threatened or asserted Environmental Claim for investigation and
remediation costs).
23
<PAGE>
(b) For purposes of this Agreement, the terms below shall
have the following meanings:
"Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, lien, demand letter, or
notice of alleged noncompliance, violation or liability, by any person or
entity asserting liability or potential liability (including without
limitation, liability or potential liability for enforcement, investigatory
costs, remediation costs, operation and maintenance costs, governmental
response costs, natural resource damages, property damage, personal injury,
fines or penalties), regardless of legal theory, arising out of, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location or (ii) otherwise relating to
obligations or liabilities under any Environmental Law.
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees or other legally
enforceable requirement (including, without limitation, common law) of any
foreign government, the United States or any Governmental Authority
regulating, relating to or imposing liability or standards of conduct
concerning protection of human health or the environment.
"Environmental Permit" means all permits, licenses, registrations,
approvals, exemptions and other filings with or authorizations by any
Governmental Authority under any Environmental Law.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any fraction
thereof), petroleum products, asbestos, asbestos-containing materials,
pollutants and contaminants that are regulated pursuant to any Environmental
Laws.
2.20 Labor Relations. No employee of the Company or any of the
Company Subsidiaries is represented by any union or other labor organization.
There have been no organizational efforts by any labor union or other
collective bargaining representative with respect to any employees of the
Company or any Company Subsidiary. No representation election, arbitration
proceeding, grievance, labor strike, dispute, slowdown, stoppage or other
labor trouble is pending or, to the knowledge of the Company, threatened
against the Company or any of the Company Subsidiaries. No complaint against
the Company or any of the Company Subsidiaries is pending or, to the knowledge
of the Company, threatened before the National Labor Relations Board, the
Equal Employment Opportunity Commission or any similar foreign, state or local
agency, by or on behalf of any employee of the Company or any of the Company
Subsidiaries. The Company and each Company Subsidiary is in compliance in all
material respects with all laws and regulations governing workplace safety,
terms and conditions of employment, payment of wages and overtime, employment
of non-citizens, discrimination in the workplace, and other employment and
labor laws. The Company and each Company Subsidiary has not engaged in any
unfair labor practice.
24
<PAGE>
2.21 Offer Documents; Proxy Statement. The Proxy Statement will
comply in all material respects with the applicable requirements of the
Securities Exchange Act except that no representation or warranty is being
made by the Company with respect to any information supplied to the Company by
Parent or Merger Sub or any of their Affiliates specifically for inclusion in
the Proxy Statement. The Proxy Statement will not, at the time the Proxy
Statement is filed with the SEC or first sent to stockholders, at the time of
the Company's stockholders' meeting or at the Effective Time, 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 were made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the meeting of the Company's
stockholders held for approval of the Merger which has become false or
misleading. Neither the Schedule 14D-9 nor any of the information relating to
the Company or its affiliates provided by or on behalf of the Company
specifically for inclusion in the Schedule 14D-1 or the Offer Documents will, at
the respective times the Schedule 14D-9, the Schedule 14D-1 and the Offer
Documents are filed with the SEC or are first published, sent or given to
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, except that no representation is made by
the Company with respect to written information supplied by Parent or Merger Sub
or their Affiliates specifically for inclusion in the Schedule 14D-9. The
Schedule 14D-9 will comply in all material respects with the Securities Exchange
Act.
2.22 Finders and Investment Bankers. Neither the Company nor any of
its officers or directors has employed any broker, finder or financial advisor
or otherwise incurred any liability for any brokerage fees, commissions or
financial advisors' or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to an agreement with the Financial
Advisor, a copy of which has been provided to Parent.
2.23 Fairness Opinion. The Company's Board of Directors has received
from the Financial Advisor a written opinion addressed to it to the effect
that, as of the date hereof, the consideration to be paid to stockholders
pursuant to each of the Offer and the Merger is fair to such stockholders from
a financial point of view.
2.24 Related Party Transactions. Except as set forth in the Company
Filed Documents, no director, officer or affiliate of the Company, including
for these purposes, the Stockholders, or director, officer or partner of such
affiliate (each a "Related Party") (i) has outstanding any indebtedness or
other similar obligation to the Company or any of the Company Subsidiaries or
(ii) other than employment-related benefits contemplated by or disclosed in
this Agreement, is a party to any legally binding material contract,
commitment or obligation to, from or with the Company or any Company
Subsidiary.
25
<PAGE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
3.1 Organization and Good Standing. Each of Parent and Merger Sub are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdiction of their incorporation and have all requisite
corporate power and authority and any necessary governmental authority to own,
lease and operate their properties and to carry on business as now being
conducted.
3.2 Authorization; Binding Agreement. Parent and Merger Sub have all
requisite corporate power and authority to execute and deliver this Agreement,
to perform their obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, including, but
not limited to, the Merger, have been duly and validly authorized by the
respective Boards of Directors of Parent and Merger Sub, as appropriate, and
no other corporate proceedings on the part of Parent, Merger Sub or any other
Subsidiary of Parent are necessary to authorize the execution and delivery of
this Agreement or to consummate the transactions contemplated hereby (other
than the requisite approval by the sole stockholder of Merger Sub of this
Agreement and the Merger). This Agreement has been duly and validly executed
and delivered by each of Parent and Merger Sub and constitutes the legal,
valid and binding agreements of Parent and Merger Sub, enforceable against
each of Parent and Merger Sub in accordance with its terms, except to the
extent enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
3.3 Governmental Approvals. No Consent from or with any Governmental
Authority on the part of Parent or Merger Sub is required in connection with
the execution or delivery by Parent and Merger Sub of this Agreement or the
consummation by Parent and Merger Sub of the transactions contemplated hereby
other than (i) filings under the HSR Act and similar foreign requirements,
(ii) filings with the SEC and the NASD, and (iii) those Consents that, if they
were not obtained or made, would not prevent or materially delay consummation
of the Offer or the Merger, or prevent or materially delay Parent or Merger
Sub from performing its obligations under this Agreement.
3.4 No Violations. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Parent with any of the provisions hereof will not (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws or other governing instruments of Parent or any of the
Parent Subsidiaries, (ii) require any Consent under or result in a violation
or breach of, or constitute (with
26
<PAGE>
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any material contract, instrument, permit, license
or franchise to which the Parent is a party or by which Parent or any of its
assets or property is subject, (iii) result in the creation or imposition of any
material lien or encumbrance of any kind upon any of the assets of Parent or any
Subsidiary of Parent or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in Section 3.4 hereof, contravene any Law to which
Parent or any Subsidiary of Parent or its or any of their respective assets or
properties are subject.
3.5 Offer Documents; Proxy Statement. None of the information
supplied by Parent, Merger Sub or their respective officers, directors,
representatives, agents or employees (the "Parent Information"), specifically
for inclusion in the Proxy Statement will, on the date the Proxy Statement is
first mailed to stockholders, at the time of the Company's stockholders'
meeting or at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it will be made, will be false or
misleading with respect to any material fact, or will omit to state any material
fact necessary in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for such stockholders' meeting which has become
false or misleading. Neither the Schedule 14D-1, the Offer Documents, nor any
Parent Information provided by Parent or Merger Sub specifically for inclusion
in the Schedule 14D-9 will, at any time the Offer Documents are filed with the
SEC or 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 necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, neither
Parent nor Merger Sub makes any representation or warranty with respect to any
information that has been supplied by the Company or its accountants, counsel or
other authorized representatives for use in any of the foregoing documents. The
Schedule 14D-1 and the Offer Documents will comply as to form in all material
respects with the provisions of the Securities Exchange Act.
3.6 Finders and Investment Bankers. Neither Parent nor Merger Sub nor
any of their respective officers or directors has employed any broker, finder
or financial advisor or otherwise incurred any liability for any brokerage
fees, commissions or financial advisors' or finders' fees in connection with
the transactions contemplated hereby, other than pursuant to an agreement with
Bear, Stearns & Co. Inc.
3.7 Financing. Parent has funds available to it sufficient to
purchase the Shares in accordance with the terms of this Agreement and
sufficient to consummate the Merger.
3.8 No Prior Activities. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby (including any financing in connection therewith), Merger
Sub has not incurred any obligations or liabilities, and has not engaged in
any business or activities of
27
<PAGE>
any type or kind whatsoever or entered into any agreements or arrangements with
any person or entity.
ARTICLE IV.
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
4.1 Conduct of Business of the Company and the Company
Subsidiaries.
(a) During the period from the date of this Agreement to
the Effective Time, (i) the Company shall, and shall cause the Company
Subsidiaries to, conduct their businesses in the ordinary course and consistent
with past practice, and the Company shall, and shall cause the Company
Subsidiaries to, use their reasonable best efforts to preserve intact their
business organization, keep available the services of their officers and
employees and preserve intact the present commercial relationships of the
Company and the Company Subsidiaries with all persons with whom they do business
and (ii) without limiting the generality or effect of the foregoing, the Company
shall not, and shall cause each Company Subsidiary not to:
(A) amend or propose to amend its Certificate of
Incorporation or Bylaws (or comparable governing instruments) or
change the number of directors constituting the entire Board of
Directors of the Company or any of the Company Subsidiaries;
(B) authorize for issuance, issue, deliver,
grant, sell, pledge, or otherwise dispose of or propose to issue,
deliver, grant, sell, pledge or otherwise dispose of any shares of,
or any options, warrants, commitments, subscriptions or rights of any
kind to acquire or sell any shares of, the capital stock or other
securities of the Company or any of the Company Subsidiaries
including, but not limited to, stock appreciation rights, phantom
stock, any securities convertible into or exchangeable for shares of
stock of any class of the Company or any of the Company Subsidiaries;
provided, however, that the foregoing shall not prohibit the issuance
of Shares upon the exercise of Company Options granted prior to the
date of this Agreement;
(C) split, combine or reclassify any shares of
its capital stock or declare, pay or set aside any dividend or other
distribution (whether in cash, stock, securities or other property or
any combination thereof) in respect of its capital stock, or directly
or indirectly redeem, purchase or otherwise acquire or offer to
acquire, directly or indirectly, any shares of its capital stock or
other securities;
(D) (a) except in the ordinary course of business
consistent with past practice (i) assume, guarantee, endorse or
otherwise become liable or responsible (whether
28
<PAGE>
directly, indirectly, contingently or otherwise) for the obligations of
any person or (ii) make any loans, advances or capital contributions
to, or investments in, any other person (other than to a Company
Subsidiary); (b) acquire the stock or the assets of, or merge or
consolidate with, any other person; (c) voluntarily incur any liability
or obligation (absolute, accrued, contingent or otherwise) other than
in the ordinary course of business consistent with past practice; or
(d) sell, transfer, mortgage, pledge or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets or properties, real, personal or
mixed of the Company and the Company Subsidiaries other than sales of
products in the ordinary course of business and in a manner
consistent with past practice; (e) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person (other than in
the ordinary course of business consistent with past practice); (f)
enter into any contract or agreement, other than in the ordinary
course of business consistent with past practice, or amend, alter or
terminate any Company Material Contract; or (g) except as set forth in
Section 4.1 of the Company Disclosure Letter, authorize any single
capital expenditure which is in excess of $200,000 or capital
expenditures (during any month period) which are, in the aggregate, in
excess of $200,000 for the pany and the Company Subsidiaries taken as a
whole;
(E) increase in any manner the compensation of
any of its directors, officers or employees or enter into, establish,
amend or terminate any Benefit Plan, employment, consulting,
retention, change in control, collective bargaining, bonus or other
incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation,
severance, deferred compensation or other compensation or benefit
plan, policy, agreement, trust, fund or arrangement with, for or in
respect of, any stockholder, officer, director, other employee,
agent, consultant or affiliate other than as required pursuant to the
terms of agreements in effect on the date of this Agreement and set
forth in Section 4.1 of the Company Disclosure Letter;
(F) except as may be required as a result of a
change in Law or in generally accepted accounting principles, change
any of the accounting practices or principles used by it;
(G) make any material Tax election, settle or
compromise any material federal, state, local or foreign Tax
liability, or waive any statute of limitations for any Tax claim or
assessment;
(H) settle or compromise any material pending or
threatened suit, action or claim;
29
<PAGE>
(I) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any
Company Subsidiary (other than the Merger);
(J) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction (a) in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved
against in the financial statements of the Company or incurred in the
ordinary course of business and consistent with past practice and (b)
of liabilities required to be paid, discharged or satisfied pursuant
to the terms of any contract in existence on the date hereof or
entered into in accordance with this Section 4.1;
(K) permit any insurance policy naming the
Company or any Company Subsidiary as a beneficiary or a loss payable
payee to be cancelled or terminated without notice to Parent, except
in the ordinary course of business and consistent with past practice;
or
(L) take, or offer or propose to take, or agree
to take in writing or otherwise, any of the actions described in this
Section 4.1(a) or take or omit to take any action which would make
any of the representations or warranties of the Company contained in
this Agreement untrue and incorrect in any material respect as of the
date when made if such action had then been taken or omitted, or
would result in any of the Offer Conditions or the conditions set
forth in Article VI hereof not being satisfied.
(b) The Company shall, and the Company shall cause each of
the Company Subsidiaries to, use its or their best efforts to comply in all
material respects with all Laws applicable to it or any of its properties,
assets or business and maintain in full force and effect all the Company Permits
necessary for such business.
4.2 Notification of Certain Matters. The Company shall give prompt
notice to Parent if any of the following occur after the date of this
Agreement: (i) receipt of any notice or other communication in writing from
any third party alleging that the Consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement;
(ii) receipt of any notice or other communication from any Governmental
Authority (including, but not limited to, the SEC, the NASD or any securities
exchange) in connection with the transactions contemplated by this Agreement;
(iii) the occurrence of an event which would or would be reasonably likely in
the future to (A) have a Company Material Adverse Effect or prevent or delay
the consummation of the Offer or the Merger or (B) cause any Offer Condition
to be unsatisfied at any time prior to the consummation of the Offer; (iv) any
breach by the Company of any provision hereof; or (v) the commencement or
threat of any Litigation involving or affecting the Company or any of the
Company Subsidiaries, or any of their respective properties or assets, or, to
its knowledge, any
30
<PAGE>
employee, agent, director or officer, in his or her capacity as such, of the
Company or any of the Company Subsidiaries.
4.3 Access and Information. Between the date of this Agreement and
the Effective Time, the Company shall give, and shall cause its accountants
and legal counsel to give, Parent and its respective authorized
representatives (including, without limitation, its financial advisors,
accountants and legal counsel), at all reasonable times, access as reasonably
requested to all personnel, offices and other facilities and to all contracts,
agreements, commitments, books and records of or pertaining to the Company and
the Company Subsidiaries, shall permit the foregoing persons to make such
reasonable inspections as they may require and shall cause its officers
promptly to furnish Parent with (a) such financial and operating data and
other information with respect to the business and properties of the Company
and the Company Subsidiaries as Parent may from time to time reasonably
request, and (b) a copy of each report, schedule and other document filed or
received by the Company or any of the Company Subsidiaries pursuant to the
requirements of applicable securities laws or the NASD.
4.4 Stockholder Approval. As soon as practicable following the
consummation of the Offer, the Company shall take all steps necessary to duly
call, give notice of, convene and hold a meeting of its stockholders for the
purpose of voting upon the approval and adoption of this Agreement and the
transactions contemplated hereby and thereby (the "Company Proposals"), if such
meeting is required. Except as otherwise contemplated by this Agreement, (i) the
Board of Directors of the Company shall recommend to the stockholders of the
Company that they approve the Company Proposals, (ii) the Company shall include
in the Proxy Statement the unanimous recommendation of the Company's Board of
Directors that the stockholders of the Company vote in favor of the adoption of
this Agreement and the transactions contemplated hereby and the written opinion
of the Financial Advisor that the consideration to be received by the
stockholders of the Company pursuant to the Offer and the Merger is fair from a
financial point of view and (iii) the Company shall use its reasonable best
efforts to obtain any necessary approval by the Company's stockholders of the
Company Proposals. Notwithstanding the foregoing, in the event that Merger Sub
shall acquire at least 90 percent of the outstanding Shares, the Company agrees,
at the request of Merger Sub, subject to Article VI, to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with Section 253 of the DGCL.
4.5 Reasonable Best Efforts. Subject to the terms and conditions
herein provided, the Company agrees to use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, but not limited to, (i) obtaining all Consents from Governmental
Authorities and other third parties required for the consummation of the Offer
and the Merger and the transactions contemplated thereby, (ii) timely making
all necessary filings under the HSR Act and similar foreign Laws and (iii)
having vacated, dismissed or withdrawn any order, stay, decree, judgment or
injunction of any
31
<PAGE>
Governmental Authority which temporarily, preliminarily or permanently prohibits
or prevents the transactions contemplated by this Agreement. Upon the terms and
subject to the conditions hereof, the Company agrees to use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary to satisfy the other conditions of the Closing set
forth herein.
4.6 Public Announcements. So long as this Agreement is in effect, the
Company shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Offer or the Merger or the transactions contemplated hereby without the
consent of Parent, except for such of the foregoing as the Company determines
is required by applicable Law or pursuant to any applicable listing agreement
with, or rules or regulations of, the NASD, in which case the Company, prior
to making such announcement, shall consult in advance with Parent regarding
the same.
4.7 Compliance. In consummating the transactions contemplated hereby,
the Company shall comply, and cause the Company Subsidiaries to comply or to
be in compliance, in all material respects, with all applicable Laws.
4.8 No Solicitation.
(a) The Company shall, and shall cause the Company
Subsidiaries and the respective officers, directors, employees, representatives
and agents of the Company and the Company Subsidiaries to, immediately cease any
discussions or negotiations with any parties that may be ongoing with respect to
a Takeover Proposal (as hereinafter defined). The Company shall not, nor shall
it permit any of the Company Subsidiaries to, nor shall it authorize or permit
any of the respective officers, directors or employees of the Company and the
Company Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of the Company
Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information other than publicly available
information provided pursuant to routine stockholder requests consistent with
past practice), or take any other action designed or reasonably likely to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal or (ii) participate
in any discussions or negotiations regarding any Takeover Proposal; provided,
however, that if, at any time prior to the Expiration Date and following the
receipt of a Superior Proposal (as hereinafter defined), the Board of Directors
of the Company determines in good faith, based upon the advice of outside
counsel, that such action is consistent with the Board of Directors' fiduciary
duties to the Company's stockholders under applicable Law, the Company may, in
response to a Superior Proposal that was made in circumstances not otherwise
involving a breach of this Agreement, and subject to compliance with Section
4.8(c), (x) furnish information with respect to the Company and the Company
Subsidiaries to any person pursuant to a confidentiality agreement having terms
substantially the same as the Confidentiality Agreement (as hereinafter
defined), provided that (i) such confidentiality agreement may not include any
provision calling for an exclusive right to negotiate with the Company and (ii)
32
<PAGE>
the Company advises Parent of all such nonpublic information delivered to such
person concurrently with or promptly following its delivery to the requesting
party, and (y) participate in negotiations regarding such Superior Proposal.
"Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of 15 percent or more
of the assets of the Company and the Company Subsidiaries or 15 percent or more
of any class of equity securities of the Company or any Company Subsidiary, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 15 percent or more of any class of equity securities of the
Company or any Company Subsidiary, or any merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any Company Subsidiary, but does not
include the transactions contemplated by this Agreement.
(b) Except as set forth in this Section 4.8, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by such Board of Directors or such
committee of the Offer, the Merger, or the Stockholder Agreement, (ii) approve
or recommend any Takeover Proposal or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the Expiration Date
the Board of Directors of the Company determines in good faith, in response to a
Superior Proposal that was made in circumstances not otherwise involving a
breach of this Agreement, upon receipt of written advice from outside counsel,
that such action is consistent with the Board of Directors' fiduciary duties to
the Company's stockholders under applicable Law, the Board of Directors of the
Company may (subject to this and the following sentences) take any of the
foregoing actions at any time that is after the second business day following
Parent's receipt of written notice advising Parent that the Board of Directors
of the Company has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal, identifying the person making such
Superior Proposal and providing notice of the determination of the Board of
Directors of the Company of what action referred to herein the Board of
Directors of the Company expects to take. The foregoing proviso shall not
prevent the Board of Directors of the Company from taking any actions described
in clause (x) within two business days of the Expiration Date so long as the
notice described in the foregoing proviso is received by Parent prior to Noon,
New York City time, on the then scheduled Expiration Date. For purposes of this
Agreement, a "Superior Proposal" means a bona fide written Takeover Proposal
which (i) a majority of the members of the Board of Directors of the Company
determines, in their good faith judgment (which may be based on the opinion of
independent financial advisors) that the value of the consideration provided for
in such proposal exceeds the Per Share Amount then provided in the Offer, and,
considering all relevant factors, is more favorable to the Company and its
stockholders than the Offer and the Merger and (ii) for which financing, to the
extent required, is then fully committed. Notwithstanding anything to the
contrary contained herein, the Board of Directors may not withdraw or modify its
approval of the Stockholders Agreement or the transactions contemplated thereby
for purposes of Section 203 of the DGCL (or any similar provision).
33
<PAGE>
(c) In addition to the obligations of the Company set
forth in paragraphs (a) and (b) of this Section 4.8, the Company shall promptly
advise Parent orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or the
Takeover Proposal and the identity of the person making such request or Takeover
Proposal and shall keep Parent promptly advised of all significant developments
which could reasonably be expected to culminate in the Board of Directors of the
Company withdrawing, modifying or amending its recommendation of the Offer, the
Merger and the transactions contemplated by this Agreement.
(d) Nothing contained in this Section 4.8 shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Securities Exchange Act or
from making any disclosure to the Company's stockholders; provided, however,
neither the Company nor its Board of Directors nor any committee thereof shall,
except in accordance with Section 4.8(b), withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to the Offer or the
Company Proposals or approve or recommend, or propose publicly to approve or
recommend, a Takeover Proposal.
4.9 SEC and Stockholder Filings. The Company shall send to Parent a
copy of all public reports and materials as and when it sends the same to its
stockholders, the SEC or any state or foreign Governmental Authority.
4.10 Takeover Statutes. If any "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute")
is or may become applicable to the Offer or the Merger, the Company and the
members of its Board of Directors shall grant such approvals, and take such
actions as are necessary so that the transactions contemplated by this
Agreement and the Company Proposals may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of any Takeover Statute on any of the transactions
contemplated hereby.
4.11 Related Party Agreements. Except as set forth in Section 4.11 of
the Company Disclosure Letter and except for employment-related agreements or
obligations contemplated by or disclosed in this Agreement, the Company shall
take all actions necessary to terminate, effective as of the Effective Time,
all contracts, commitments or obligations to, from or with the Company or
Company Subsidiary, on the one hand, and any Related Party, on the other hand.
ARTICLE V.
ADDITIONAL COVENANTS OF PARENT
Parent covenants and agrees as follows:
34
<PAGE>
5.1 Reasonable Best Efforts. Subject to the terms and conditions
herein provided, Parent agrees to use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including, but
not limited to, (i) obtaining all Consents from Governmental Authorities and
other third parties required for the consummation of the Offer and the Merger
and the transactions contemplated thereby, (ii) timely making all necessary
filings under the HSR Act and similar foreign Laws and (iii) having vacated,
dismissed or withdrawn any order, stay, decree, judgment or injunction of any
Governmental Authority which temporarily, preliminarily or permanently
prohibits or prevents the transactions contemplated by this Agreement. Upon
the terms and subject to the conditions hereof, Parent agrees to use its
reasonable best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary to satisfy the other conditions of
the Closing set forth herein. Notwithstanding any other provision hereof, in
no event shall Parent, Merger Sub or any of their Affiliates (collectively,
the "Parent Group") be required to take or fail to take any action in order to
obtain or make a Consent arising out of any contractual or legal obligation of
or applicable to the Company or the Company Subsidiaries, other than
obligations such as those under the HSR Act which apply to both the Company
and the Parent Group and then only to the extent applicable to the Parent
Group, and in no event shall any member of the Parent Group be required to enter
into or offer to enter into any divestiture, hold-separate, business limitation
or similar agreement or undertaking in connection with this Agreement or the
transactions contemplated hereby.
5.2 Public Announcements. So long as this Agreement is in effect,
Parent shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Offer or the Merger or the transactions contemplated hereby without the
consent of the Company, except for such of the foregoing as to which Parent
determines is required by applicable Law or pursuant to any applicable listing
agreement with, or rules or regulations of, any stock exchange on which shares
the Parent's capital stock are listed or the NASD, in which case Parent, prior
to making such announcement, shall consult in advance with the Company
regarding the same.
5.3 Compliance. In consummating the transactions contemplated hereby,
Parent shall comply, and shall cause its Subsidiaries to comply or to be in
compliance, in all material respects, with all applicable Laws.
5.4 [Intentionally omitted].
5.5 Indemnification, Exculpation and Insurance
(a) All rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time
existing in favor of the current or former directors, officers or employees of
the Company as provided in the Company's Certificate of Incorporation or Bylaws
or pursuant to agreements existing on the date of this Agreement shall be
35
<PAGE>
assumed by the Surviving Corporation, and Parent shall cause the Surviving
Corporation to honor such obligations in accordance with the terms thereof,
without further action, as of the Effective Time, and such rights will continue
in full force and effort in accordance with their respective terms. Such rights,
and the Surviving Corporation's and Parent's related obligations, shall apply in
all respects to the current or former directors, officers and employees of each
of the Company Subsidiaries as though such directors, officers and employees
were entitled to indemnification rights pursuant to the Company's Certificate of
Incorporation or Bylaws as in effect on the date hereof or pursuant to such
agreements, as the case may be. In addition, from and after the Effective Time,
directors and officers of the Company who become or remain directors or officers
of Parent shall be entitled to the same indemnity rights and protections
(including those provided by directors' and officers' liability insurance) as
are afforded to other directors and officers of Parent. Notwithstanding any
other provision hereof, the provisions of this Section 5.5 (i) are intended to
be for the benefit of, and shall 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.
(b) Parent shall, and shall cause the Surviving
Corporation or one of its Affiliates to, maintain in effect for six years after
the Effective Time policies of directors' and officers' liability insurance
equivalent in all material respects to those maintained by or on behalf of the
Company and the Company Subsidiaries on the date hereof (and having coverage and
containing terms and conditions which in the aggregate are not less advantageous
to the persons currently covered by such policies as insured) with respect to
claims arising from any actual or alleged wrongful act or omission occurring at
or prior to the Effective Time for which a claim has not been made against any
director or officer of the Company or any director or officer of the Company
Subsidiaries prior to the Effective Time.
5.6 Certain Share Purchases Prohibited. Parent and Merger Sub agree
that they shall not, and that they shall cause their Affiliates not to,
purchase or arrange for the purchase of any Shares at any time prior to the
Effective Time, other than pursuant to the Offer or in connection with the
cashout of Company Options to purchase Shares as contemplated by Section 1.9
hereof or pursuant to the Stockholder Agreement.
ARTICLE VI.
MERGER CONDITIONS
The respective obligations of each party to effect the Merger shall
be subject to the fulfillment or waiver at or prior to the Effective Time of
the following conditions, provided that the obligation of each party to effect
the Merger shall not be relieved by the failure of any such conditions if such
failure is the proximate result of any breach by such party of any of its
material obligations under this Agreement:
36
<PAGE>
6.1 Offer. Merger Sub shall have accepted for payment all Shares
validly tendered in the Offer and not withdrawn. Neither Parent nor Merger Sub
may invoke this condition if Merger Sub fails to purchase Shares so tendered and
not withdrawn in violation of the terms of this Agreement or the Offer.
6.2 Stockholder Approval. If required, the Company Proposals shall
have been approved at or prior to the Effective Time by the requisite vote of
the stockholders of the Company in accordance with the DGCL and the Company's
Certificate of Incorporation and Bylaws, which the Company has represented
shall be solely the affirmative vote of a majority of the outstanding Shares.
6.3 No Injunction or Action. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any court or other Governmental Authority
which temporarily, preliminarily or permanently prohibits or prevents the
consummation of the Merger which has not been vacated, dismissed or withdrawn
prior to the Effective Time.
6.4 Other Approvals. On or prior to the Closing Date, the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
and any similar foreign Laws shall have been terminated or shall have expired
and all Consents necessary for the consummation of the Merger shall have been
obtained.
6.5 Conditions of Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of the condition (which may be waived in whole or in part by
Parent) that the Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement on or before
the earlier of (i) such time as Parent's or Merger Sub's designees shall
constitute at least a majority of the Company's Board of Directors pursuant to
Section 1.3 of this Agreement and (ii) the Closing Date; provided, however,
that no failure by the Company to have so performed any such obligation shall
constitute a failure of satisfaction of the foregoing condition where the
Company's failure of performance was caused by Parent.
ARTICLE VII.
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company and the stockholders of Parent
described herein:
(a) by mutual written consent of Parent and the Company;
37
<PAGE>
(b) by Parent or the Company:
(i) if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased thereunder;
provided, however, that neither Parent nor the Company may terminate
this Agreement pursuant to this Section 7.1(b)(i) if such party shall
have materially breached this Agreement; or
(ii) if any Governmental Authority shall have
issued an order, decree, ruling or injunction or taken any other
action permanently enjoining, restraining or otherwise prohibiting
acceptance for payment of Shares pursuant to the Offer or the
consummation of the Merger or, for the benefit of Parent only, the
Stockholder Agreement and such order, decree, ruling, injunction or
other action shall have become final and nonappealable; provided,
however, that Parent or the Company, as the case may be, may not
terminate this Agreement pursuant to this Section 7.1(b)(ii) if it
has not complied with its obligations under Section 5.1 hereof or
Section 4.5 hereof with respect to such order, decree, ruling,
injunction or other action;
(c) by the Company if (i) Parent or Merger Sub fails to
commence the Offer as provided in Section 1.1 hereof, or (ii) Parent or Merger
Sub shall not have accepted for payment and paid for Shares pursuant to the
Offer in violation of the terms hereof and thereof; provided, however, that the
Company may not terminate this Agreement pursuant to this Section 7.1(c) if the
Company shall have materially breached this Agreement;
(d) by Parent if the Company shall have breached in any
material respect any of its material covenants or other agreements contained in
this Agreement which breach or failure to perform is incapable of being cured
or, the Company having been given reasonable written notice of such breach by
Parent, has not been cured within one business day prior to the then scheduled
Expiration Date;
(e) by Parent if (i) the Board of Directors of the Company
or any committee thereof shall have withdrawn or modified or changed in a manner
adverse to Parent or Merger Sub its approval or recommendation of the Offer or
any of the Company Proposals, or approved or recommended any Takeover Proposal
or (ii) the Board of Directors of the Company or any committee thereof shall
have resolved to take any of the foregoing actions;
(f) by the Company if Parent shall have breached in any
material respect any of its material covenants or other agreements contained in
this Agreement, which breach or failure to perform is incapable of being cured
or, Parent having been given reasonable written notice of such breach by the
Company, has not been cured within one business day prior to the Expiration
Date;
(g) by the Company in order to enter into an Acquisition
Agreement providing for a Superior Proposal entered into in accordance with
Section 4.8, provided that prior thereto the
38
<PAGE>
Company has reimbursed Parent for all reasonable out-of-pocket charges and
expenses incurred by Parent or its Affiliates in connection with this Agreement
and the transactions contemplated hereby in accordance with Section 7.2; or
(h) by Parent, if the Company, any of its officers or
directors or financial or legal advisors shall take any of the actions that
would be proscribed by Section 4.8 hereof but for the exceptions therein
allowing certain actions to be taken pursuant to the proviso in the second
sentence of Section 4.8(a) hereof or pursuant to the second and following
sentences of Section 4.8(b) hereof.
The party desiring to terminate this Agreement pursuant to the
preceding paragraphs shall give written notice of such termination to the
other party in accordance with Section 8.5 hereof.
7.2 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the
abandonment of the Offer or the Merger pursuant to this Article VII, this
Agreement (other than this Section 7.2 and Article VIII hereof) shall become
void and of no effect with no liability on the part of any party hereto (or of
any of its directors, officers, employees, agents, legal or financial advisors
or other representatives); provided, however, that no such termination shall
relieve any party hereto from any liability for any breach of this Agreement
prior to termination. If this Agreement is terminated as provided herein, each
party shall hold in confidence in accordance with the terms and conditions of
the Confidentiality Agreement all materials obtained from, or based on or
otherwise reflecting or generated in whole or in part from information obtained
from, any other party hereto in connection with the transactions contemplated by
this Agreement, and shall not use any such materials for the purpose of
competing with the businesses of the other parties hereto, whether obtained
before or after the execution hereof.
(b) In the event that this Agreement is terminated (x) by
the Company pursuant to Section 7.1(g) hereof or (y) by Parent pursuant to
Section 7.1(e) hereof, then the Company shall promptly pay Parent upon its
request all reasonable out-of-pocket charges and expenses incurred by Parent or
its Affiliates in connection with this Agreement and the transactions
contemplated hereby, including without limitation reasonable attorneys' and
accountants' fees and disbursements and fees and expenses of Parent's financial
advisor and any information agent and depositary retained in connection with the
Offer and all printing and mailing fees and expenses, in an amount not to exceed
$1,500,000.
ARTICLE VIII.
MISCELLANEOUS
8.1 Confidentiality. Each of Parent, Merger Sub and the Company shall
hold, and shall cause its respective officers, employees, accountants,
counsel, financial advisors and other
39
<PAGE>
representatives to hold, any nonpublic information in accordance with the terms
of the Confidentiality Agreement dated June 3, 1998, between Parent and the
Company (the "Confidentiality Agreement").
8.2 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written agreement among the Company
(authorized by the affirmative vote required by Section 1.3, if applicable),
Parent and Merger Sub.
8.3 Waiver of Compliance; Consents. Any failure of the Company on the
one hand, or Parent and Merger Sub on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Parent on
the one hand, or the Company on the other hand (authorized by the affirmative
vote required by Section 1.3, if applicable), only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 8.3.
8.4 Survival. The respective representations, warranties, covenants
and agreements of the Company and Parent contained herein or in any
certificates or other documents delivered prior to or at the Closing shall
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other party, but shall
terminate at the Effective Time or the earlier termination of this Agreement in
accordance with its terms, except for those contained in Sections 1.7, 1.8, 1.9,
1.14, 5.5, 7.2(b) and 8.1 hereof, which shall survive beyond the Effective Time
and, in the case of Section 8.1 hereof, which shall survive beyond any such
earlier termination.
8.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in
person, by facsimile, receipt confirmed, or on the next business day when sent
by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(i) if to the Company, to:
CN Biosciences, Inc.
10394 Pacific Center Court
San Diego, California 92121
Attention: Stelios B. Papadopoulos
Facsimile: (619) 450-5522
40
<PAGE>
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attention: Peter H. Jakes, Esq.
Facsimile: (212) 728-8111
and
(ii) if to Parent or Merger Sub, to:
EM Industries, Incorporated
7 Skyline Drive
Hawthorne, New York 10532
Attention: Stephen J. Kunst
Facsimile: (914) 592-8775
with copies to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036-7703
Attention: Thomas J. Drago, Esq.
Facsimile: (212) 626-4120
8.6 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned or delegated by any of the parties hereto prior to the Effective
Time without the prior written consent of the other party hereto except that
Parent and Merger Sub may assign or delegate all or any of their respective
rights and obligations hereunder to a direct or indirect wholly-owned
Subsidiary or Subsidiaries of Parent, provided, however, that no such
assignment or delegation shall relieve the assigning or delegating party of
its duties hereunder.
8.7 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses, subject to the rights of Parent under
Section 7.2(b) hereof.
8.8 Governing Law. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed and governed by and in
accordance with the internal laws of, the State of New York without regard to
its conflict of laws principles.
41
<PAGE>
8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 Interpretation. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"Person" shall mean and include an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity,
(ii) unless otherwise specified herein, the term "Affiliate," with respect to
any person, shall mean and include any person controlling, controlled by or
under common control with such person and (iii) the term "Subsidiary" of any
specified person shall mean any corporation 50 percent or more of the
outstanding voting power of which, or any partnership, joint venture, limited
liability company or other entity 50 percent or more of the total equity
interest of which, is directly or indirectly owned by such specified person.
8.11 Entire Agreement. This Agreement and the documents or
instruments referred to herein including, but not limited to, the Annex(es)
attached hereto and the Company Disclosure Letter referred to herein, which
Annex(es) and Company Disclosure Letter are incorporated herein by reference,
the Confidentiality Agreement and the Stockholder Agreement embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth
or referred to herein or therein. This Agreement and such other documents,
instruments and agreements supersede all prior agreements and the
understandings between the parties with respect to such subject matter.
8.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in
any way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other
jurisdiction.
8.13 Specific Performance. The parties hereto 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. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled
under this Agreement, at law or in equity.
42
<PAGE>
8.14 Third Parties. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any person that is not a party hereto
or thereto or a successor or permitted assign of such a party; provided
however, that the parties hereto specifically acknowledge that the provisions
of Sections 1.9 and 5.5 hereof are intended to be for the benefit of, and
shall be enforceable by, the current or former employees, officers and
directors of the Company and/or the Company Subsidiaries affected thereby and
their heirs and representatives and the provisions of Section 1.8(b) are
intended to be for the benefit of, and shall be enforceable by, stockholders
of the Company affected thereby and their heirs and representatives.
43
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be signed and delivered by their respective duly authorized
officers as of the date first above written.
EM INDUSTRIES, INCORPORATED
By: /s/ Richard K. Hackett
----------------------------
Name: Richard K. Hackett
Title: Vice President, Finance
EM ACQUISITION CORP.
By: /s/ Dieter Janssen
----------------------------
Name: Dieter Janssen
Title: President & CEO
CN BIOSCIENCES, INC.
By: /s/ Stelios B. Papadopoulos
----------------------------
Name: Stelios B. Papadopoulos
Title: Chairman & CEO
44
<PAGE>
ANNEX I
Conditions to the Offer
Notwithstanding any other provision of the Offer, Merger Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) promulgated under the
Securities Exchange Act (relating to Merger Sub's obligation to pay for or
return tendered Shares promptly after termination or withdrawal of the Offer),
pay for, and (subject to any such rules or regulations) may delay the
acceptance for payment of any tendered Shares and (except as provided in this
Agreement) amend or terminate the Offer (whether or not any Shares have been
theretofore purchased or paid for pursuant to the Offer) (A) unless the
following conditions shall have been satisfied: (i) there shall be validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which represents a majority of the total voting power of the
outstanding securities of the Company entitled to vote in the election of
directors or in a merger ("Voting Securities") on a fully-diluted basis (the
"Minimum Condition") ("on a fully-diluted basis" having the following meaning
as of any date: the number of Voting Securities outstanding, together with
Voting Securities issuable pursuant to obligations outstanding at that date
under employee stock option or other benefit plans or otherwise) and (ii) any
applicable waiting period under the HSR Act or any similar applicable foreign
Law shall have expired or been terminated prior to the expiration of the Offer
and the required approval of any Governmental Authority for this Agreement or
the consummation of the transactions contemplated by this Agreement shall have
been obtained or (B) if at any time after the date of this Agreement and
before the time of payment for any such Shares (whether or not any Shares have
theretofore been accepted for payment or paid for pursuant to the Offer), any
of the following events shall occur and be continuing:
(a) there shall be any Law, injunction or other order, decree,
judgment or ruling by a Governmental Authority of competent jurisdiction
promulgated, enacted, issued or taken by a Governmental Authority of competent
jurisdiction which in any such case (i) restrains or prohibits the making or
consummation of the Offer, the consummation of the Merger or the transactions
contemplated by the Stockholder Agreement, (ii) prohibits or restricts the
ownership or operation by Parent (or any of its affiliates or Subsidiaries) of
any portion of the business or assets of Parent, the Company or the Company
Subsidiaries which is material to the business of all such entities taken as a
whole, or compels Parent (or any of its affiliates or Subsidiaries) to dispose
of or hold separate any portion of the business or assets of Parent, the
Company or the Company Subsidiaries which is material to the business of all
such entities taken as a whole, (iii) imposes material limitations on the
ability of Merger Sub effectively to acquire or to hold or to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by Merger Sub on all matters properly presented to
the stockholders of the Company, or (iv) imposes any material limitations on
the ability of Parent or any of its affiliates or Subsidiaries effectively to
control in any material respect the business and operations of the Company or
the Company Subsidiaries;
A-1
<PAGE>
(b) this Agreement shall have been terminated by the Company or
Parent in accordance with its terms or any event shall have occurred which
gives Parent or Merger Sub the right to terminate the Agreement or not to
consummate the Merger;
(c) there shall have occurred any event that, individually or when
considered together with any other matter, has had or is reasonably likely in
the future to have a Company Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices (other than suspensions or limitations triggered by price
fluctuations on a trading day) for, trading in securities on any national
securities exchange or the over-the-counter market, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any material limitation (whether or not mandatory) by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, on, the extension of credit by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or other
national calamity directly involving the United States and Parent shall have
determined that there is a reasonable likelihood that such event may be of
material adverse significance to it or the Company, or (v) in the case of any
of the foregoing existing at the time of the execution of this Agreement, a
material acceleration or worsening thereof;
(e) any of the representations and warranties of the Company set
forth in this Agreement that are qualified by reference to a Company Material
Adverse Effect shall not be true and correct, or any such representations and
warranties that are not so qualified shall not be true and correct in any
respect that is reasonably likely to have a Company Material Adverse Effect,
in each case as if such representations and warranties were made at the time
of such determination;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under this Agreement;
(g) the Company shall have entered into an Acquisition Agreement with
any person with respect to a Takeover Proposal or shall have resolved to do
so; or
(h) the Company's Board of Directors or any committee thereof shall
have withdrawn, or modified or changed in a manner adverse to Parent or Merger
Sub (including by amendment of the Schedule 14D-9) its recommendation of the
Offer, the Merger or this Agreement or approved or recommended a Takeover
Proposal, or shall have resolved to do so;
which, in the judgment of Parent with respect to each and every matter
referred to above and regardless of the circumstances giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Shares or to proceed with the Merger.
A-2
<PAGE>
The foregoing conditions are for the sole benefit of Merger Sub and
may be asserted by Merger Sub regardless of the circumstances giving rise to
any such condition and (other than the Minimum Condition) may be waived by
Merger Sub in whole or in part at any time and from time to time in its sole
discretion (subject to the terms of this Agreement). The failure by Merger Sub
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 other 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.
A-3
<PAGE>
STOCKHOLDER AGREEMENT
This Stockholder Agreement, dated as of November 18, 1998 (this
"Agreement"), is made and entered into among EM Industries, Incorporated, a
New York corporation ("Parent"), EM Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub"), and Warburg, Pincus
Investors, L.P., a Delaware limited partnership ("Stockholder").
WHEREAS, as of the date hereof, Stockholder owns (beneficially and of
record) 2,248,485 shares of common stock, par value $.01 per share, of CN
Biosciences, Inc., a Delaware corporation (the "Company") (all such shares so
owned and which may hereafter be acquired by Stockholder prior to the
termination of this Agreement, whether upon the exercise of options or by
means of purchase, dividend, distribution or otherwise, being referred to
herein as the "Shares");
WHEREAS, immediately prior to the execution and delivery of this
Agreement, Parent, Merger Sub and the Company have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"),
which provides, upon the terms and subject to the conditions set forth
therein, for (i) the commencement by Merger Sub of a tender offer (the
"Offer") for all of the issued and outstanding shares of common stock, par
value $.01 per share, of the Company at a price per share equal to the Per
Share Amount, and (ii) the subsequent merger of Merger Sub with and into the
Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent and Merger Sub
to enter into the Merger Agreement, Parent and Merger Sub have required that
Stockholder agrees, and in order to induce Parent and Merger Sub to enter into
the Merger Agreement, Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I.
TRANSFER AND VOTING OF SHARES
1.1. Voting of Shares. Stockholder agrees that from the date hereof
until the termination of this Agreement pursuant to Section 6.2 hereof (the
"Term"), at any meeting of the stockholders of the Company, however called,
and in any action by consent of the stockholders of the Company, Stockholder
shall vote its Shares (except to the extent that Stockholder no longer has any
voting rights in respect of the Shares as a result of the exercise of the
Stock Option referred to in Section 3.1 hereof) (i) in favor of the Merger and
the Merger Agreement (as amended from time to time), (ii) against any Takeover
Proposal and against any proposal for action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation
or agreement of the
<PAGE>
Company under the Merger Agreement or which is reasonably likely to result in
any of the conditions of the Company's obligations under the Merger Agreement
not being fulfilled, any change in the directors of the Company, any change in
the present capitalization of the Company or any amendment to the Company's
Certificate of Incorporation or Bylaws, any other material change in the
Company's corporate structure or business, or any other action which in the case
of each of the matters referred to in this clause (ii) could reasonably be
expected to impede, interfere with, delay, postpone or materially adversely
affect the transactions contemplated by the Merger Agreement or the likelihood
of such transactions being consummated and (iii) in favor of any other matter
necessary for consummation of the transactions contemplated by the Merger
Agreement which is considered at any such meeting of shareholders or in such
consent, and in connection therewith to execute any documents which are
necessary or appropriate in order to effectuate the foregoing, including the
ability for Merger Sub or its nominees to vote the Shares directly.
1.2. Disposition or Encumbrance of Shares. Except pursuant to the
Offer, Stockholder hereby agrees that, during the Term, it shall not, and
shall not offer or agree to, sell, transfer, tender, assign, pledge,
hypothecate or otherwise dispose of, or create or permit to exist any
Encumbrance (as hereinafter defined) on any Shares.
1.3. No Solicitation. Stockholder covenants and agrees that, during
the Term, it shall not, directly or indirectly through any officer, director,
agent or other representative, solicit, initiate or encourage, or take any
other action designed or reasonably likely to facilitate, any inquiries or the
making of any proposal from any person (other than Parent, Merger Sub and any
of their Affiliates) relating to (i) any acquisition of all or any Shares or
(ii) any transaction that constitutes a Takeover Proposal, or participate in
any negotiations regarding, or furnish to any person any information with
respect to, or otherwise cooperate in any way with, or assist or participate
in or facilitate or encourage, any effort or attempt by any person to do or
seek any of the foregoing. Stockholder immediately shall cease and cause to be
terminated all existing discussions or negotiations of Stockholder and its
officers, directors, agents or other representatives with any person conducted
heretofore with respect to any of the foregoing. Stockholder shall notify
Parent and Merger Sub promptly if any such proposal or offer, or any inquiry
or contact with any person with respect thereto, is made and shall, in any
such notice to Parent and Merger Sub, indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact.
Notwithstanding any provision of this Section 1.3 to the contrary, if
Stockholder or any officer, director, agent or representative of Stockholder
is a member of the Board of Directors of the Company, such member of the Board
of Directors of the Company may take actions in such capacity to the extent
permitted by Section 4.8 of the Merger Agreement.
1.4. Waiver of Appraisal Rights. Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger.
1.5. Stop Transfer. Stockholder agrees with, and covenants to, Parent
and Merger Sub that Stockholder shall not request that the Company register the
transfer (book-entry or otherwise)
-2-
<PAGE>
of any certificate or uncertificated interest representing any of Stockholder's
Shares, unless such transfer is made in compliance with this Agreement
(including the provisions of Article III hereof).
ARTICLE II.
TENDER OF SHARES
2.1. Tender. Stockholder hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursuant to Section 1.1 of
the Merger Agreement and Rule 14d-2 under the Securities Exchange Act, the
Shares. Stockholder hereby acknowledges and agrees that Parent's and Merger
Sub's obligation to accept for payment and pay for the Shares in the Offer is
subject to the terms and conditions of the Offer. For all the Shares validly
tendered in the Offer and not withdrawn, Stockholder will be entitled to
receive the highest price paid by Merger Sub pursuant to the Offer.
2.2. Certain Warranties. Without limiting the generality or effect of
any other term or condition of the Offer, the transfer by Stockholder of the
Shares to Merger Sub in the Offer shall pass to and unconditionally vest in
Merger Sub good and valid title to the Shares, free and clear of all liens,
claims, restrictions, security interests, pledges, limitations and
Encumbrances whatsoever.
2.3. Disclosure. Stockholder hereby authorizes Parent and Merger Sub
to publish and disclose in the Offer Documents and, if approval of the
Company's stockholders is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the SEC), its identity and
ownership of the Company Common Stock and the nature of its commitments,
arrangements and understandings under this Agreement provided that Stockholder
is provided with a reasonable opportunity to review in advance any such
disclosure contained in the Offer Documents or the Proxy Statement.
ARTICLE III.
OPTION
3.1. Option Shares.
(a) In order to induce Parent and Merger Sub to enter into
the Merger Agreement, Stockholder hereby grants to Parent or Merger Sub, as
Parent may designate (the "Optionee"), an irrevocable option (the "Stock
Option") to purchase all, but not in any part or less than all, the Shares (in
such context, the "Option Shares") at a purchase price per share equal to
$25.00 or such higher price as may be paid by Parent or Merger Sub pursuant to
the Offer.
(b) The Stock Option may be exercised by the Optionee if (i)
the Merger Agreement is terminated (x) by the Company pursuant to Section
7.1(g) of the Merger Agreement
-3-
<PAGE>
or (y) by Parent pursuant to Section 7.1(e) of the Merger Agreement, or (ii) the
Offer is consummated but (due to failure by Stockholder to validly tender and
not withdraw) Merger Sub has not accepted for payment or paid for the aggregate
number of Shares (in which case the price per share for the Option Shares shall
be equal to the highest price paid in the Offer).
(c) The Stock Option (i) shall become exercisable, in whole
but not in part, on the date on which the first event referred to in Section
3.1(b) shall occur or, if later, the date on which (A) all waiting periods
under the HSR Act or similar foreign Law required for the purchase of the
Option Shares upon such exercise shall have expired or been waived and (B)
there shall not be in effect any preliminary or final injunction or other
order issued by any court or governmental, administrative or regulatory agency
or authority prohibiting the exercise of the Stock Option pursuant to this
Agreement, and (ii) shall remain exercisable until the date which is 20 days
following the first such date on which the Stock Option becomes exercisable
pursuant to clause (i) of this paragraph (c).
(d) If the Optionee wishes to exercise the Stock Option it
shall, prior to the expiration thereof, send a written notice to Stockholder
identifying the time and place for the closing of such purchase at least three
business days prior to such closing.
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
STOCKHOLDER
Stockholder hereby represents and warrants to Parent and Merger Sub
as follows:
4.1. Due Organization, Authorization, etc. Stockholder is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Stockholder has all requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of Stockholder.
This Agreement has been duly executed and delivered by or on behalf of
Stockholder and, assuming its due authorization, execution and delivery by
Parent and Merger Sub, constitutes a legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court
before which any proceeding for such remedy may be brought. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which Stockholder is trustee whose consent is required for the
execution and delivery of this Agreement or the consummation by Stockholder of
the transactions contemplated hereby.
-4-
<PAGE>
4.2. No Conflicts; Required Filings and Consents.
(a) The execution and delivery of this Agreement by
Stockholder does not, and the performance of this Agreement by Stockholder
will not, (i) conflict with or violate any partnership agreement or other
similar organizational documents of Stockholder, (ii) conflict with or violate
any Law applicable to Stockholder or by which Stockholder or any of
Stockholder's properties is bound or affected or (iii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any assets of Stockholder or any of its Subsidiaries,
including, without limitation, the Shares, pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Stockholder is a party or by which
Stockholder or any of Stockholder's assets is bound or affected, except, in
the case of clauses (ii) and (iii), for any such breaches, defaults or other
occurrences that would not prevent or delay the performance by Stockholder of
Stockholder's obligations under this Agreement.
(b) The execution and delivery of this Agreement by
Stockholder does not, and the performance of this Agreement by Stockholder
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority (other than
any necessary filing under the HSR Act or similar foreign Laws or the
Securities Exchange Act), domestic or foreign, except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by
Stockholder of Stockholder's obligations under this Agreement.
4.3. Title to Shares. Stockholder is the sole record and beneficial
owner of the Shares, free and clear of any pledge, lien, security interest,
mortgage, charge, claim, equity, option, proxy, voting restriction, voting
trust or agreement, understanding, arrangement, right of first refusal,
limitation on disposition, adverse claim of ownership or use or encumbrance of
any kind ("Encumbrances"), other than restrictions imposed by the securities
laws or pursuant to this Agreement and the Merger Agreement.
4.4. No Inconsistent Arrangements. Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger
Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares or any interest therein, (ii) enter into
any contract, option or other agreement or understanding with respect to any
transfer of any or all of such shares or any interest therein, (iii) grant any
proxy, power-of-attorney or other authorization in or with respect to such
Shares, (iv) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares, or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
-5-
<PAGE>
4.5. No Finder's Fees. No broker, investment banker, financial
adviser or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf
of Stockholder. Stockholder, on behalf of itself and its Affiliates, hereby
acknowledges that it is not entitled to receive any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated hereby or by the Merger Agreement.
4.6. Affiliate Agreements. As of the Effective Time, Stockholder, on
behalf of itself and its Affiliates, hereby terminates any and all contractual
rights in favor of Stockholder and its Affiliates then in effect between
Stockholder or Affiliates, on the one hand, and the Company or any of its
affiliates, on the other hand; provided, however, that nothing contained
herein shall be deemed a termination of any indemnification, contribution or
exculpation provisions contained in any contracts, agreements or instruments
or in the Certificate of Incorporation or By-laws of the Company in favor of
Stockholder or any of its Affiliates as in effect as of the Effective Time.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
MERGER SUB AND PURCHASER
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to Stockholder as follows:
5.1. Due Organization, Authorization, etc. Merger Sub and Parent are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdiction of their incorporation. Merger Sub and Parent have
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by each of Merger Sub and Parent have been
duly authorized by all necessary corporate action on the part of Merger Sub
and Parent, respectively. This Agreement has been duly executed and delivered
by each of Merger Sub and Parent and, assuming its due authorization,
execution and delivery by Stockholder, constitutes a legal, valid and binding
obligation of each of Merger Sub and Parent, enforceable against Merger Sub
and Parent in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding for such
remedy may be brought.
5.2. Funds. Parent has sufficient funds available to it to pay for
the Option Shares in accordance with Section 3.1(a) hereof.
-6-
<PAGE>
ARTICLE VI.
MISCELLANEOUS
6.1. Definitions. Terms used but not otherwise defined in this
Agreement, including those defined in Section 8.10 of the Merger Agreement,
have the meanings assigned to such terms in the Merger Agreement.
6.2. Termination. This Agreement shall terminate and be of no further
force and effect (i) by the written mutual consent of the parties hereto, or
(ii) automatically and without any required action of the parties hereto upon
the earlier to occur of (A) the Effective Time and (B) the calendar day
immediately after the termination of the Merger Agreement in accordance with
its terms; provided, however, that in the event that the Stock Option shall
become exercisable pursuant to Section 3.1 hereof, Articles III, IV, V and VI
of this Agreement shall survive the termination of this Agreement until the
earlier to occur of the closing of the exercise of the Stock Option and the
expiration of the Stock Option. No such termination of this Agreement shall
relieve any party hereto from any liability for any breach of this Agreement
prior to termination.
6.3. Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be for the account of the
party incurring such costs and expenses.
6.4. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in
person, by facsimile, receipt confirmed, or on the next business day when sent
by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to
the respective 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 Merger Sub, to:
EM Industries, Incorporated
7 Skyline Drive
Hawthorne, New York 10532
Attention: Stephen J. Kunst
Facsimile: (914) 592-8775
-7-
<PAGE>
with copies to:
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036-7703
Attention: Thomas J. Drago, Esq.
Facsimile: (212) 626-4120
(b) If to Stockholder, to:
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Joseph P. Landy
Facsimile: (212) 878-9200
6.5. Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in
any way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other
jurisdiction.
6.6. Entire Agreement; Assignment. This Agreement and the Merger
Agreement, as amended from time to time, constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect thereto. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned or delegated by
any of the parties hereto (whether by operation of law or otherwise),
provided, however, that Parent or Merger Sub may, in its sole discretion,
assign or delegate its rights and obligations hereunder to any direct or
indirect wholly-owned Subsidiary of Parent.
6.7. Parties in Interest. This Agreement shall be binding upon and
shall inure solely to the benefit of, and be enforceable by, the parties
hereto and their respective successors and permitted assigns, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
person, other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities of any
nature whatsoever under or by reason of this Agreement, provided, however,
that the that the provisions of Section 4.6 hereof are intended to be for the
benefit of, and shall be enforceable by, the Company.
-8-
<PAGE>
6.8. Further Assurance. From time to time, at another party's request
and without consideration, each party hereto shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
6.9. Certain Events. Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise, including, without limitation,
Stockholder's heirs, guardians, administrators, or successors. Notwithstanding
any transfer of Shares, the transferor shall remain liable for the performance
of all obligations under this Agreement.
6.10. No Waiver. The failure of any party hereto to exercise any
right, power, or remedy provided under this agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, any custom or practice of
the parties at variance with the terms hereof shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
6.11. Specific Performance. The parties hereto 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. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled
under this Agreement, at law or in equity.
6.12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
without regard to its conflict of laws principles.
6.13. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
6.14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, each of Parent and Merger Sub has caused this
Agreement to be executed by its officer thereunto duly authorized and
Stockholder has caused this Agreement to be executed, or duly executed by an
authorized signatory, as of the date first written above.
EM INDUSTRIES, INCORPORATED
By: /s/ Richard K. Hackett
-------------------------------
Name Richard K. Hackett
Title: Vice President, Finance
EM ACQUISITION CORP.
By: /s/ Dieter Janssen
-------------------------------
Name: Dieter Janssen
Title: President & CEO
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ S. Joshua Lewis
-------------------------------
Name: S. Joshua Lewis
Title: General Partner
-10-
<PAGE>
November 18, 1998
CN Biosciences, Inc.
10394 Pacific Center Court
San Diego, CA 92121
Gentlemen,
Reference is made to that certain Agreement and Plan of Merger dated
November 18, 1998 (the "Merger Agreement") by and among our affiliate, EM
Industries, Inc., its subsidiary, EM Acquisition Corp., and CN Biosciences,
Inc., which has been reviewed by Merck KGaA. For purposes of this letter,
capitalized terms used herein shall have the meanings set forth in the Merger
Agreement, unless otherwise indicated herein.
Merck KGaA hereby undertakes to ensure that EM Industries, Inc. shall have
sufficient funds committed and available promptly to satisfy the financial
obligations of EM Industries, Inc. and EM Acquisition Corp., pursuant to
Article I of the Merger Agreement, in respect of the acceptance for payment and
purchase by EM Acquisition Corp. of the Shares in accordance with the terms
thereof and the consummation of the Merger, up to a maximum amount of
$160,000,000.
By this letter Merck KGaA has not assumed, and shall not be bound by, any
other obligations of EM Industries, Inc. or of EM Acquisition Corp. under the
Merger Agreement or otherwise.
Very truly yours,
Merck KGaA
/s/ H.J. Langmann
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 18th of November 1998, between
CN Biosciences, Inc., a Delaware corporation (the "Company") and Stelios B.
Papadopoulos (the "Employee").
WHEREAS, the Company and EM Industries, Inc. ("Parent") and EM
Acquisition Corp. have entered into an Agreement and Plan of Merger ("Merger
Agreement") to acquire 100% of the outstanding stock of the Company;
WHEREAS, the Employee has been employed by the Company or one of its
subsidiaries prior to the date hereof;
WHEREAS, the Employee possesses unique knowledge of the business and
affairs of the Company, its policies, methods, personnel and operations and
the Parent recognizes that the continued service of the Employee is important
to the growth and success of the Company subsequent to the date of closing of
the transactions contemplated by the Merger Agreement ("Closing Date") and
desires to ensure such continued service;
WHEREAS, as an inducement for Parent to enter into the Merger
Agreement, Employee agrees to continue his employment with the Company after
the Closing Date on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and Employee agree
as follows:
1. Effective Date. This Employment Agreement shall become effective
on the Closing Date of the Merger Agreement (the "Effective Date"). If the
Merger Agreement is terminated, this Agreement shall be null and void.
Notwithstanding the foregoing, Employee agrees to continue to serve until the
Closing Date as an employee of the Company in the same capacity and in
accordance with the same terms and conditions as on the date immediately
preceding the date hereof.
2. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment all upon the terms and conditions herein
set forth.
3. Duties. The Employee is engaged as the Chief Executive Officer of
the Company and promises to perform and discharge well and faithfully the
duties, which may be assigned to him from time to time by the Company in
connection with the conduct of its business. If the Employee is elected as a
director or officer of any subsidiary or affiliate of the Company, the
Employee shall serve in such capacity or capacities without further
compensation.
4. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not during the
term of this Agreement be engaged in any
<PAGE>
other business activity whether or not such business activity is pursued for
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing the Employee from investing his personal assets in businesses which
do not compete with the Company in such form or manner as will not require any
services on the part of the Employee in the operation of the affairs of the
companies in which such investments are made and in which his participation is
solely that of an investor, nor shall this be construed as preventing the
Employee from purchasing securities in any corporation whose securities are
regularly traded provided that such purchases shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to that
of the Company, without the express prior written consent of the Company.
5. Compensation.
(a) For services rendered under this Employment Agreement, the
Company shall pay the Employee a salary at the rate determined annually by the
Compensation Committee of the Board of Directors (the "Base Salary"), payable
(after deduction of applicable payroll taxes as an employee in the State of
California) in equal bi-weekly installments. Employee's Base Salary as of the
Effective Date shall be $275,000. The Employee shall also be eligible for and
participate in such fringe benefits as shall be generally provided to executives
of the Company, including medical insurance and retirement programs which may be
adopted from time to time during the term hereof by the Company.
(b) The Compensation Committee shall review the Employee's
compensation at least once a year and award such bonuses and effect such
increases in the Base Salary as the Board of Directors, in its sole
discretion, determines are merited, based upon the Employee's performance and
consistent with the Company's compensation policies.
(c) In addition to his participation in any group life insurance
programs that the Company may provide to its employees, the Company shall, at
its sole expense, provide for the Employee term life insurance in the amount
of $150,000.
(d) The Company agrees that, effective as of the Effective Date,
it will establish, or cause to be established, a new long-term incentive
compensation plan (the "New Plan"). The Company further agrees that the
Employee shall be immediately entitled to participate in such New Plan and the
Employee shall receive an allocation of units under the New Plan effective as
of the Effective Date which allocation shall be commensurate with his position
and consistent in incentive opportunity with allocations to similarly situated
employees of the Company.
6. Paid Time Off. During the term of this Employment Agreement, the
Employee shall be entitled to twenty-nine (29) paid days off pursuant to the
Company's customary paid time off policy ("CalTime").
2
<PAGE>
7. Expenses. During the term of this Employment Agreement, the Company
shall reimburse the Employee for all reasonable out-of-pocket expenses incurred
by the Employee in connection with the business of the Company and in
performance of his duties under this Employment Agreement upon the Employee's
presentation to the Company of an itemized accounting of such expenses with
reasonable supporting data. The Employee shall be entitled to utilize business
(or club) class service for all international flights, and first-class service
for all transcontinental flights within the United States, in each case, in
connection with business-related travel.
8. Term.
(a) The Employee's employment under this Employment Agreement
shall commence on the Effective Date and shall expire on the three year
anniversary date thereof. The term of employment shall automatically be extended
for consecutive periods of one (1) year each unless notice of termination of
employment is given by either party hereto at least ninety (90) days prior to
the expiration of the initial or any renewal term, in which case, this Agreement
shall terminate at the end of such initial or renewal term, as the case may be.
In the case of a renewal and unless otherwise agreed to in writing by both
parties, the terms and conditions of this Employment Agreement shall apply to
any renewals or extensions thereto. Notwithstanding the foregoing, the Company
may, at its election, terminate the Employee's employment hereunder as follows:
(i) Upon thirty (30) days' notice if the Employee
becomes physically or mentally incapacitated or is injured
so that he is unable to perform the services required of him
hereunder and such inability to perform continues for a
period in excess of six months and is continuing at the time
of such notice; or
(ii) For "Cause" upon notice of such termination to
the Employee. For purposes of this Employment Agreement, the
Company shall have "Cause" to terminate its obligations
hereunder upon (A) the reasonable determination by the Board
of Directors that the Employee has failed substantially to
perform his duties hereunder (other than as a result of his
incapacity due to physical or mental illness or injury),
which failure amounts to an intentional and extended neglect
of his duties hereunder, (B) refusal to carry out any lawful
direction of the Board of Directors, (C) the Board of
Director's reasonable determination that the Employee has
engaged or is about to engage in conduct materially
injurious to the Company, (D) the Employee's having been
convicted of a felony, (E) a material breach by the Employee
of any of the other covenants or representations herein or
any other agreement between Employee and the Company, or (F)
theft, embezzlement or misappropriation of Company property;
or
(iii) Without Cause upon 30 days' notice of such
termination to the Employee; or
3
<PAGE>
(iv) Upon the death of the Employee.
In addition, the Employee shall have the right to terminate this Employment
Agreement upon notice to the Company if he shall have been assigned to duties
which are materially inconsistent with those specified in paragraph 3 hereof
(a "Material Demotion").
(b) (i) if this Employment Agreement is terminated pursuant
to paragraph 8(a)(i) above, the Employee shall receive
disability pay from the date of such termination until the
second anniversary of the Effective Date at the rate of 50%
of the Base Salary, reduced by applicable payroll taxes and
further reduced by the amount received by the Employee
during such period under any Company-maintained disability
insurance policy or plan or under Social Security or similar
laws. Such disability payments shall be paid periodically to
the Employee as provided in paragraph 5(a) for the payment
of salary.
(ii) If the Employment Agreement is terminated pursuant
to paragraph 8(a)(ii) or 8(a)(iv) above, the Employee shall
receive no salary continuation pay or severance pay.
(iii) If this Employment Agreement is terminated
pursuant to paragraph 8(a)(iii) above or as a result of the
Employee having terminated this Employment Agreement
following a Material Demotion, or if the Company does not
offer to continue the Employee's employment with the Company
at the expiration of the stated term of this Employment
Agreement at a Base Salary at least equal to his then most
recent Base Salary, the Employee shall receive salary
continuation pay for twelve (12) months from the date of
such termination (the "Salary Continuation Period") equal to
the Base Salary. Such salary continuation payments (less
applicable payroll taxes) shall be paid periodically to the
Employee as provided in paragraph 5(a) for the payment of
the Base Salary.
(c) During the Salary Continuation Period, the Employee
shall be under no obligation to mitigate the costs to the
Company of the salary continuation payments, and, provided
that the Employee is not in breach of his obligations under
paragraph 12 hereof, no compensation that the Employee may
receive from another employer during the Salary Continuation
Period shall be offset against amounts owed to Employee
hereunder.
9. Representations. The Employee hereby represents to the Company
that (a) he is legally entitled to enter into this Employment Agreement and to
perform the services contemplated herein and is not bound under any employment
or consulting agreement to render services to any third party, (b) he has the
full right, power and authority, subject to no rights of third parties, to
grant to the Company the rights contemplated by paragraph 11 hereof, and (c)
he does not now have, nor
4
<PAGE>
within the last three years has he had, any ownership interest in any business
enterprise (other than interests in publicly traded corporations where his
ownership does not exceed one percent (1%) or more of the equity capital) which
is a customer of the Company, any of its subsidiaries, or from which the Company
or any of its subsidiaries purchases any goods or services or to whom such
corporations owe any financial obligations or are required or directed to make
any payments.
10. Disclosure of Information. The Employee recognizes and
acknowledges that the trade secrets, know-how and proprietary processes of the
Company and its affiliates as they may exist from time to time are valuable,
special and unique assets of the business of the Company and its affiliates,
access to and knowledge of which are essential to the performance of the
Employee's duties hereunder. The Employee will not, during or after the term
of his employment by the Company or any of its affiliates, in whole or in
part, disclose such secrets, know-how or processes to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever,
nor shall the Employee make use of any such property for his own purposes or
for the benefit of any person, firm, corporation or other entity (except the
Company and its affiliates) under any circumstances during or after the term
of his employment, provided that after the term of his employment these
restrictions shall not apply to such secrets, know-how and processes which are
then in the public domain (provided that the Employee was not responsible,
directly or indirectly, for such secrets, know-how or processes entering the
public domain without the Company's consent).
11. Inventions.
(a) The Employee hereby sells, transfers and assigns to the
Company or to any person or entity designated by the Company all of the entire
right, title and interest of the Employee in and to all inventions, ideas,
disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or jointly,
during the term hereof which relate to methods, apparatus, designs, products,
processes or devices, sold, leased, used or under consideration or development
by the Company or any of its affiliates or which otherwise relate to or
pertain to the business, functions or operations of the Company or any of its
affiliates or which arise from the efforts of the Employee during the course
of his employment for the Company or any of its affiliates. The Employee shall
communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to the aforementioned
inventions, ideas, disclosures and improvements; and the Employee shall
execute and deliver to the Company such formal transfers and assignments and
such other papers and documents as may be necessary or required of the
Employee to permit the Company or any person or entity designated by the
Company to file and prosecute the patent applications and, as to copyrightable
material, to obtain copyright thereof. Any invention relating to the business
of the Company and its affiliates and disclosed by the Employee within one
year following the termination of this Agreement shall be deemed to fall
within the provisions of this paragraph unless proved to have been first
conceived and made following such termination.
5
<PAGE>
(b) The Employee has been notified and understands that the
provisions of this paragraph 11 do not apply to any of the aforementioned
inventions, ideas, disclosures and improvements that qualify fully under the
provisions of Section 2870 of the California Labor Code, which states as
follows:
(i) Any provision in an employment agreement which
provides that an employee shall assign, or offer to assign, any of
his or her rights in an invention to his or her employer shall not
apply to an invention that the employee developed entirely on his or
her own time without using the employer's equipment, supplies,
facilities, or trade secret information except for those inventions
that either:
(a) Relate at the time of conception or
reduction to practice of the invention to the employer's business, or
actual or demonstrably anticipated research or development of the
employer.
(b) Result from any work performed by
the employee for the employer.
(ii) To the extent a provision in an employment
agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under
subsection (i), the provision is against the public policy of this
state and is unenforceable.
12. Covenants Not to Compete or Interfere. In consideration for the
Parent's and the Company's promise to provide the compensation and benefits
set forth in this Employment Agreement and as an inducement for Parent to
enter into the Merger Agreement, for a period ending twelve (12) months from
and after the date of termination of the Employee's employment hereunder,
except for a termination of employment pursuant to paragraph 8(a) (i) or 8(a)
(iii) or a voluntary termination by the Employee following a Material
Demotion, the Employee shall not engage in any business (whether as an
officer, director, owner, employee, partner or other direct or indirect
participant) which is engaged in the manufacturing, distribution or research
and development of any products being sold by, or under development by, the
Company or its subsidiaries as of the date of such termination of employment,
in any geographic area where the Company or such subsidiaries are then so
manufacturing or distributing such products, nor shall the Employee interfere
with, disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company and any customer, supplier, lessor, lessee or
employee of the Company.
It is the desire and intent of the parties that the
provisions of this paragraph 12 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought.
6
<PAGE>
Accordingly, if any particular portion of this paragraph 12 shall
be adjudicated to be invalid or unenforceable, this paragraph 12 shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
paragraph in the particular jurisdiction in which such adjudication is made.
13. Injunctive Relief. If there is a breach or threatened breach of
the provisions of paragraph 10, 11 or 12 of this Employment Agreement, the
Company shall be entitled to an injunction restraining the Employee from such
breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies for such breach or threatened breach.
14. Insurance. The Company may, at its election and for its benefit,
insure the Employee against accidental loss or death, and the Employee shall
submit to such physical examination and supply such information as may be
required in connection therewith.
15. Notices. Any notice required or permitted to be given under this
Employment Agreement shall be sufficient if in writing and if sent by
registered mail to Stelios B. Papadopoulos at his home address as reflected on
the records of the Company, in the case of the Employee, or, in the case of
the Company, to CN Biosciences, Inc., 10394 Pacific Center Court, San Diego,
CA 92121, Attention: Chief Financial Officer, or to such other officer or
address as the Company shall notify Employee.
16. Waiver of Breach. A waiver by the Company or the Employee of a
breach of any provision of this Employment Agreement by the other party shall
not operate or be construed as a waiver of any subsequent breach by the other
party.
17. Governing Law. This Employment Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California
without giving effect to the choice of law or conflict of law provisions
thereof.
18. Assignment. This Employment Agreement may be assigned, without
the consent of the Employee, by the Company to any affiliate of the Company,
or to any person, partnership, corporation, or other entity which has
purchased substantially all the assets of the Company, provided such assignee
assumes all the liabilities of the Company hereunder.
19. Prior Agreement. Effective as of the Effective Date, the
Employment Agreement between the Company and the Employee dated January 4,
1998 is hereby terminated and superseded in its entirety by this Employment
Agreement and Employee hereby waives any right which he may have under such
agreement to resign following the effective date of a "Change in Control" of
the Company (as defined in such agreement) and any and all other rights or
claims to severance benefits or other compensation or benefits under such
agreement following his termination of employment.
7
<PAGE>
20. Entire Agreement. This Employment Agreement contains the entire
agreement of the parties and supersedes any and all agreements, letter of
intent or understandings between the Employee and (a) the Company, (b) the
Parent or (c) any of the Company's principal shareholders, affiliates or
subsidiaries. This Employment Agreement may be changed only by an agreement in
writing signed by a party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day first herein above written.
CN BIOSCIENCES, INC.
By: /s/ James G. Stewart
-----------------------------
Name: James G. Stewart
Title: V.P.
EM INDUSTRIES, INC.
By: /s/Dieter Janssen
-----------------------------
Name: Dieter Janssen
Title: Group Vice President & CFO
EMPLOYEE
By: /s/ Stelios B. Papadopoulos
-----------------------------
Stelios B. Papadopoulos
8
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 18th day of November 1998,
between CN Biosciences, Inc., a Delaware corporation (the "Company") and
James G. Stewart (the "Employee").
WHEREAS, the Company and EM Industries, Inc. ("Parent") and EM
Acquisition Corp. have entered into an Agreement and Plan of Merger ("Merger
Agreement") to acquire 100% of the outstanding stock of the Company;
WHEREAS, the Employee has been employed by the Company or one of its
subsidiaries prior to the date hereof;
WHEREAS, the Employee possesses unique knowledge of the business
and affairs of the Company, its policies, methods, personnel and operations
and the Parent recognizes that the continued service of the Employee is
important to the growth and success of the Company subsequent to the date of
closing of the transactions contemplated by the Merger Agreement ("Closing
Date") and desires to ensure such continued service;
WHEREAS, as an inducement for Parent to enter into the Merger
Agreement, Employee agrees to continue his employment with the Company after
the Closing Date on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and Employee
agree as follows:
1. Effective Date. This Employment Agreement shall become effective
on the Closing Date of the Merger Agreement (the "Effective Date"). If the
Merger Agreement is terminated, this Agreement shall be null and void.
Notwithstanding the foregoing, Employee agrees to continue to serve until
the Closing Date as an employee of the Company in the same capacity and in
accordance with the same terms and conditions as on the date immediately
preceding the date hereof.
2. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment all upon the terms and conditions herein
set forth.
3. Duties. The Employee shall perform such management duties for
the Company and its affiliates as may from time to time be assigned and
which are consistent with his titles. During the Term, the Employee shall
have the same titles as he held immediately prior to the date of this
Agreement. The Employee hereby promises to perform and discharge well and
faithfully all duties of his position. If Employee is elected as a director
or officer of any affiliate of the Company, the Employee shall serve in such
capacity or capacities without further compensation.
<PAGE>
4. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not during
the term of this Employment Agreement be engaged in any other business
activity whether or not such business activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
the Employee from investing his personal assets in businesses which do not
compete with the Company in such form or manner as will not require any
services on the part of the Employee in the operation of the affairs of the
companies in which such investments are made and in which his participation
is solely that of an investor, nor shall this be construed as preventing the
Employee from purchasing securities in any corporation whose securities are
regularly traded provided that such purchases shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to
that of the Company, without the express prior written consent of the
Company.
5. Compensation.
(a) For services rendered under this Employment Agreement,
the Company shall pay the Employee a salary determined annually by the
Compensation Committee of the Board of Directors (the "Base Salary"),
payable (after deduction of applicable payroll taxes) in equal bi-weekly
installments. Employee's Base Salary as of the Effective Date shall be
$195,000. The Employee shall also be eligible for and participate in such
fringe benefits as shall be generally provided to executives of the Company,
including medical insurance and retirement programs which may be adopted
from time to time during the term hereof by the Company. On an annual basis,
the Compensation Committee shall review Employee's salary and make such
adjustment as may be warranted based upon Employee performance, Company
financial performance, economic conditions, etc.
(b) At the conclusion of each Fiscal Year, the Employee
shall be eligible for, and the Compensation Committee, in its sole
discretion, may award an executive bonus up to a maximum of 35% of Base
Salary, based on the achievement of objectives established by the
Compensation Committee.
(c) The Company agrees that, effective as of the Effective
Date, it will establish, or cause to be established, a new long-term
incentive compensation plan (the "New Plan"). The Company further agrees
that the Employee shall be immediately entitled to participate in such New
Plan and the Employee shall receive an allocation of units under the New
Plan effective as of the Effective Date, which allocation shall be
commensurate with his position and consistent in incentive opportunity with
allocations to similarly situated employees of the Company.
6. Paid Time Off. During the term of this Employment Agreement, the
Employee shall be entitled to the same number of paid days off pursuant to
the Company's customary paid time off policy ("CalTime") as he has on the
date of this Agreement.
2
<PAGE>
7. Expenses. During the term of this Employment Agreement, the
Company shall reimburse the Employee for all reasonable out-of-pocket
expenses incurred by the Employee in connection with the business of the
Company and in performance of his duties under this Employment Agreement
upon the Employee's presentation to the Company of an itemized accounting of
such expenses with reasonable supporting data.
8. Term. The Employee's employment under this Employment Agreement
shall commence on the Effective Date and shall expire on the two year
anniversary date thereof. The term of employment shall automatically be
extended for consecutive periods of one (1) year each unless notice of
termination of employment is given by either party hereto at least ninety
(90) days prior to the expiration of the initial or any renewal term, in
which case, this Agreement shall terminate at the end of such initial or
renewal term, as the case may be. In the case of a renewal and unless
otherwise agreed to in writing by both parties, the terms and conditions of
this Employment Agreement shall apply to any renewals or extensions thereto.
Notwithstanding the foregoing, the Company may, at its election, terminate
the Employee's employment hereunder as follows:
(i) Upon thirty (30) days' notice if the Employee
becomes physically or mentally incapacitated or is injured so that
he is unable to perform the services required of him hereunder and
such inability to perform continues for a period in excess of
ninety (90) days and is continuing at the time of such notice; or
(ii) For "Cause" upon notice of such termination
to the Employee. For purposes of this Employment Agreement, the
Company shall have "Cause" to terminate its obligations hereunder
upon (A) the reasonable determination by the Chief Executive
Officer that the Employee has failed substantially to perform his
duties hereunder (other than as a result of his incapacity due to
physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties hereunder, (B)
refusal to carry out any lawful direction of the Chief Executive
Officer or Board of Directors, (C) the Chief Executive Officer's
reasonable determination that the Employee has engaged or is about
to engage in conduct materially injurious to the Company, (D) the
Employee's having been convicted of a felony, (E) a material breach
by the Employee of any of the other covenants or representations
herein or any other agreement between Employee and the Company, or
(F) theft, embezzlement or misappropriation of Company property; or
(iii) Without Cause at any time upon notice of
such termination to the Employee, by paying to the Employee salary
continuation pay equal to the Employee's Base Salary in effect at
the time of termination for the remaining term of this Employment
Agreement but not in any event for less than 12 months from the
date of such termination; provided, however, that the salary
continuation payments shall cease if the Employee shall engage in
any business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant) which is engaged
in the manufacturing, distribution or research and development of
any products being sold by, or under development by, the Company or
3
<PAGE>
its affiliates as of the date of such termination of employment, in
any geographic area where the Company or such affiliates are then so
manufacturing or distributing such products, or the Employee shall
interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any customer,
supplier, lessor, lessee or employee of the Company. If the Company
shall decide not to renew this Employment Agreement, the ninety (90)
day notification of the Company's intention not to renew prior to
expiration of the initial or any subsequent renewal term shall
serve as adequate termination notice and the Employee hereby agrees
to make a smooth transition of responsibilities during that ninety
(90) day period and the Employee further agrees not to take any
legal action against the Company related to said non-renewal and
termination of employment; or
(iv) Upon the death of the Employee.
In addition, the Employee shall have the right to terminate this Employment
Agreement upon notice to the Company if, without his consent, his
responsibilities and duties on the date hereof are materially reduced (a
"Material Demotion") and such Material Demotion continues for ten (10)
business days after the date of notice to the Company. A Material Demotion
shall be treated as a termination by the Company without Cause and the
Employee shall be entitled to receive salary continuation pay as provided
by, and subject to the terms and conditions of, subparagraph 8 (iii) above.
9. Representations. The Employee hereby represents to the Company
that (a) he is legally entitled to enter into this Employment Agreement and
to perform the services contemplated herein and is not bound under any
employment or consulting agreement to render services to any third party,
(b) he has the full right, power and authority, subject to no rights of
third parties, to grant to the Company the rights contemplated by paragraph
10 hereof, and (c) he does not now have, nor within the last three years has
had, any ownership interest in any business enterprise (other than interest
in publicly traded corporations where his ownership does not exceed one
percent (1%) or more of the equity capital) which is a customer of the
Company, any of its subsidiaries, or from which the Company or any of its
subsidiaries purchases any goods or services or to whom such corporations
owe any financial obligations or are required or directed to make any
payments.
10. Inventions.
(a) The Employee hereby sells, transfers and assigns to
the Company or to any person or entity designated by the Company all of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or
jointly, during the term hereof which relate to methods, apparatus, designs,
products, processes or devices, sold, leased, used or under consideration or
development by the Company or any of its affiliates or which otherwise
relate to or pertain to the business, functions or operations of the Company
or any of its affiliates or which
4
<PAGE>
arise from the efforts of the Employee during the course of his employment for
the Company or any of its affiliates. The Employee shall communicate promptly
and disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to the aforementioned inventions,
ideas, disclosures and improvements; and the Employee shall execute and deliver
to the Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Employee to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof. Any invention relating to the business of the Company and its
affiliates and disclosed by the Employee within one year following the
termination of this Agreement shall be deemed to fall within the provisions of
this paragraph unless proved to have been first conceived and made following
such termination.
(b) The Employee has been notified and understands that
the provisions of this Section 10 do not apply to any of the aforementioned
inventions, ideas, disclosures and improvements that qualify fully under the
provisions of Section 2870 of the California Labor Code, which states as
follows:
(i) Any provision in an employment agreement
which provides that an employee shall assign, or offer to assign,
any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except
for those inventions that either:
(a) Relate at the time of conception
or reduction to practice of the invention to the employer's business,
or actual or demonstrably anticipated research or development of the
employer.
(b) Result from any work performed by
the employee for the employer.
(ii) To the extent a provision in an employment
agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under
subsection (i), the provision is against the public policy of this
state and is unenforceable.
11. Disclosure of Information. The Employee recognizes and
acknowledges that the trade secrets, know-how and proprietary processes of
the Company and its affiliates as they may exist from time to time are
valuable, special and unique assets of the business of the Company and its
affiliates, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company or any of its
affiliates, in whole or in part, disclose such secrets, know-how or
processes to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, nor shall the
5
<PAGE>
Employee make use of any such property for his own purposes or for the benefit
of any person, firm, corporation or other entity (except the Company and its
affiliates) under any circumstances during or after the term of his employment,
provided that after the term of his employment these restrictions shall not
apply to such secrets, know-how and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, know-how or processes entering the public domain without the
Company's consent).
12. Injunctive Relief. If there is a breach or threatened breach of
the provisions of paragraph 10 or 11 of this Employment Agreement, the
Company shall be entitled to an injunction restraining the Employee from
such breach. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies for such breach or threatened breach.
13. Insurance. The Company may, at its election and for its
benefit, insure the Employee against accidental loss or death, and the
Employee shall submit to such physical examination and supply such
information as may be required in connection therewith.
14. Notices. Any notice required or permitted to be given under
this Employment Agreement shall be sufficient if in writing and if sent by
registered mail to the Employee at his home address as reflected on the
records of the Company, in the case of the Employee, or Mr. Stelios B.
Papadopoulos, Chief Executive Officer, CN Biosciences, Inc., 10394 Pacific
Center Court, San Diego, CA 92121, in the case of the Company.
15. Waiver of Breach. A waiver by the Company or the Employee of a
breach of any provision of this Employment Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by
the other party.
16. Governing Law. This Employment Agreement shall be governed by
and construed and enforce in accordance with the laws of the State of
California without giving effect to the choice of law or conflict of laws
provisions thereof.
17. Assignment. This Employment Agreement may be assigned, without
the consent of the Employee, by the Company to any of its affiliates, or to
any other person, partnership, corporation, or other entity which has
purchased substantially all the assets of the Company, provided such
assignee assumes all the liabilities of the Company hereunder.
18. Prior Agreement. Effective as of the Effective Date, the
Severance Agreement between the Company and the Employee dated February 27,
1997 is hereby terminated and superseded in its entirety by this Employment
Agreement and Employee hereby waives any right which he may have under such
agreement to resign following the effective date of a "Change in Control" of
the Company (as defined in such agreement) and any and all other rights or
claims to severance benefits or other compensation or benefits under such
agreement following his termination of employment.
6
<PAGE>
19. Entire Agreement. This Employment Agreement contains the entire
agreement of the parties and supersedes any and all agreements, letter of
intent or understandings between the Employee and (a) the Company, (b) the
Parent or (c) any of the Company's and the Parent's principal shareholders,
affiliates or subsidiaries regarding employment. This Employment Agreement
may be changed only by an agreement in writing signed by a party against
whom enforcement of any waiver, change, modification, extension or discharge
is sought.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day first herein above written.
CN BIOSCIENCES, INC.
By: /s/ Stelios B. Papadopoulos
---------------------------------
Stelios B. Papadopoulos
Chief Executive officer
EM INDUSTRIES, INC.
By: /s/ Dieter Janssen
---------------------------------
Name: Dieter Janssen
Title: Group Vice President & CFO
EMPLOYEE
By: /s/ James G. Stewart
---------------------------------
James G. Stewart
7
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 18th day of November 1998,
between CN Biosciences, Inc., a Delaware corporation (the "Company") and
Douglas J. Greenwold (the "Employee").
WHEREAS, the Company and EM Industries, Inc. ("Parent") and EM
Acquisition Corp. have entered into an Agreement and Plan of Merger ("Merger
Agreement") to acquire 100% of the outstanding stock of the Company;
WHEREAS, the Employee has been employed by the Company or one of
its subsidiaries prior to the date hereof;
WHEREAS, the Employee possesses unique knowledge of the business
and affairs of the Company, its policies, methods, personnel and operations
and the Parent recognizes that the continued service of the Employee is
important to the growth and success of the Company subsequent to the date of
closing of the transactions contemplated by the Merger Agreement ("Closing
Date") and desires to ensure such continued service;
WHEREAS, as an inducement for Parent to enter into the Merger
Agreement, Employee agrees to continue his employment with the Company after
the Closing Date on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and Employee
agree as follows:
1. Effective Date. This Employment Agreement shall become effective
on the Closing Date of the Merger Agreement (the "Effective Date"). If the
Merger Agreement is terminated, this Agreement shall be null and void.
Notwithstanding the foregoing, Employee agrees to continue to serve until
the Closing Date as an employee of the Company in the same capacity and in
accordance with the same terms and conditions as on the date immediately
preceding the date hereof.
2. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment all upon the terms and conditions herein
set forth.
3. Duties. The Employee shall perform such management duties for
the Company and its affiliates as may from time to time be assigned and
which are consistent with his titles. During the Term, the Employee shall
have the same titles as he held immediately prior to the date of this
Agreement. The Employee hereby promises to perform and discharge well and
faithfully all duties of his position. If Employee is elected as a director
or officer of any affiliate of the Company, the Employee shall serve in such
capacity or capacities without further compensation.
<PAGE>
4. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not during
the term of this Employment Agreement be engaged in any other business
activity whether or not such business activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
the Employee from investing his personal assets in businesses which do not
compete with the Company in such form or manner as will not require any
services on the part of the Employee in the operation of the affairs of the
companies in which such investments are made and in which his participation
is solely that of an investor, nor shall this be construed as preventing the
Employee from purchasing securities in any corporation whose securities are
regularly traded provided that such purchases shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to
that of the Company, without the express prior written consent of the
Company.
5. Compensation.
(a) For services rendered under this Employment Agreement,
the Company shall pay the Employee a salary determined annually by the
Compensation Committee of the Board of Directors (the "Base Salary"),
payable (after deduction of applicable payroll taxes) in equal bi-weekly
installments. Employee's Base Salary as of the Effective Date shall be
$145,000. The Employee shall also be eligible for and participate in such
fringe benefits as shall be generally provided to executives of the Company,
including medical insurance and retirement programs which may be adopted
from time to time during the term hereof by the Company. On an annual basis,
the Compensation Committee shall review Employee's salary and make such
adjustment as may be warranted based upon Employee performance, Company
financial performance, economic conditions, etc.
(b) At the conclusion of each Fiscal Year, the Employee
shall be eligible for, and the Compensation Committee, in its sole
discretion, may award an executive bonus up to a maximum of 35% of Base
Salary, based on the achievement of objectives established by the
Compensation Committee.
(c) The Company agrees that, effective as of the Effective
Date, it will establish, or cause to be established, a new long-term
incentive compensation plan (the "New Plan"). The Company further agrees
that the Employee shall be immediately entitled to participate in such New
Plan and the Employee shall receive an allocation of units under the New
Plan effective as of the Effective Date, which allocation shall be
commensurate with his position and consistent in incentive opportunity with
allocations to similarly situated employees of the Company.
6. Paid Time Off. During the term of this Employment Agreement, the
Employee shall be entitled to the same number of paid days off pursuant to
the Company's customary paid time off policy ("CalTime") as he has on the
date of this Agreement.
2
<PAGE>
7. Expenses. During the term of this Employment Agreement, the
Company shall reimburse the Employee for all reasonable out-of-pocket
expenses incurred by the Employee in connection with the business of the
Company and in performance of his duties under this Employment Agreement
upon the Employee's presentation to the Company of an itemized accounting of
such expenses with reasonable supporting data.
8. Term. The Employee's employment under this Employment Agreement
shall commence on the Effective Date and shall expire on the two year
anniversary date thereof. The term of employment shall automatically be
extended for consecutive periods of one (1) year each unless notice of
termination of employment is given by either party hereto at least ninety
(90) days prior to the expiration of the initial or any renewal term, in
which case, this Agreement shall terminate at the end of such initial or
renewal term, as the case may be. In the case of a renewal and unless
otherwise agreed to in writing by both parties, the terms and conditions of
this Employment Agreement shall apply to any renewals or extensions thereto.
Notwithstanding the foregoing, the Company may, at its election, terminate
the Employee's employment hereunder as follows:
(i) Upon thirty (30) days' notice if the Employee
becomes physically or mentally incapacitated or is injured so that
he is unable to perform the services required of him hereunder and
such inability to perform continues for a period in excess of
ninety (90) days and is continuing at the time of such notice; or
(ii) For "Cause" upon notice of such termination
to the Employee. For purposes of this Employment Agreement, the
Company shall have "Cause" to terminate its obligations hereunder
upon (A) the reasonable determination by the Chief Executive
Officer that the Employee has failed substantially to perform his
duties hereunder (other than as a result of his incapacity due to
physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties hereunder, (B)
refusal to carry out any lawful direction of the Chief Executive
Officer or Board of Directors, (C) the Chief Executive Officer's
reasonable determination that the Employee has engaged or is about
to engage in conduct materially injurious to the Company, (D) the
Employee's having been convicted of a felony, (E) a material breach
by the Employee of any of the other covenants or representations
herein or any other agreement between Employee and the Company, or
(F) theft, embezzlement or misappropriation of Company property; or
(iii) Without Cause at any time upon notice of
such termination to the Employee, by paying to the Employee salary
continuation pay equal to the Employee's Base Salary in effect at
the time of termination for the remaining term of this Employment
Agreement but not in any event for less than 12 months from the
date of such termination; provided, however, that the salary
continuation payments shall cease if the Employee shall engage in
any business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant) which is engaged
in the manufacturing, distribution or research and development of
any products being sold by, or under development by, the Company or
3
<PAGE>
its affiliates as of the date of such termination of employment, in any
geographic area where the Company or such affiliates are then so
manufacturing or distributing such products, or the Employee shall
interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any customer,
supplier, lessor, lessee or employee of the Company. If the Company
shall decide not to renew this Employment Agreement, the ninety (90)
day notification of the Company's intention not to renew prior to
expiration of the initial or any subsequent renewal term shall serve as
adequate termination notice and the Employee hereby agrees to make a
smooth transition of responsibilities during that ninety (90) day
period and the Employee further agrees not to take any legal action
against the Company related to said non-renewal and termination of
employment; or
(iv) Upon the death of the Employee.
In addition, the Employee shall have the right to terminate this Employment
Agreement upon notice to the Company if, without his consent, his
responsibilities and duties on the date hereof are materially reduced (a
"Material Demotion") and such Material Demotion continues for ten (10)
business days after the date of notice to the Company. A Material Demotion
shall be treated as a termination by the Company without Cause and the
Employee shall be entitled to receive salary continuation pay as provided
by, and subject to the terms and conditions of, subparagraph 8 (iii) above.
9. Representations. The Employee hereby represents to the Company
that (a) he is legally entitled to enter into this Employment Agreement and
to perform the services contemplated herein and is not bound under any
employment or consulting agreement to render services to any third party,
(b) he has the full right, power and authority, subject to no rights of
third parties, to grant to the Company the rights contemplated by paragraph
10 hereof, and (c) he does not now have, nor within the last three years has
had, any ownership interest in any business enterprise (other than interest
in publicly traded corporations where his ownership does not exceed one
percent (1%) or more of the equity capital) which is a customer of the
Company, any of its subsidiaries, or from which the Company or any of its
subsidiaries purchases any goods or services or to whom such corporations
owe any financial obligations or are required or directed to make any
payments.
10. Inventions.
(a) The Employee hereby sells, transfers and assigns to
the Company or to any person or entity designated by the Company all of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or
jointly, during the term hereof which relate to methods, apparatus, designs,
products, processes or devices, sold, leased, used or under consideration or
development by the Company or any of its affiliates or which otherwise
relate to or pertain to the business, functions or operations of the
Company or any of its affiliates or which
4
<PAGE>
arise from the efforts of the Employee during the course of his employment for
the Company or any of its affiliates. The Employee shall communicate promptly
and disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to the aforementioned inventions,
ideas, disclosures and improvements; and the Employee shall execute and deliver
to the Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Employee to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof. Any invention relating to the business of the Company and its
affiliates and disclosed by the Employee within one year following the
termination of this Agreement shall be deemed to fall within the provisions of
this paragraph unless proved to have been first conceived and made following
such termination.
(b) The Employee has been notified and understands that
the provisions of this Section 10 do not apply to any of the aforementioned
inventions, ideas, disclosures and improvements that qualify fully under the
provisions of Section 2870 of the California Labor Code, which states as
follows:
(i) Any provision in an employment agreement
which provides that an employee shall assign, or offer to assign,
any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except
for those inventions that either:
(a) Relate at the time of conception
or reduction to practice of the invention to the employer's business,
or actual or demonstrably anticipated research or development of the
employer.
(b) Result from any work performed by
the employee for the employer.
(ii) To the extent a provision in an employment
agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under
subsection (i), the provision is against the public policy of this
state and is unenforceable.
11. Disclosure of Information. The Employee recognizes and
acknowledges that the trade secrets, know-how and proprietary processes of
the Company and its affiliates as they may exist from time to time are
valuable, special and unique assets of the business of the Company and its
affiliates, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company or any of its
affiliates, in whole or in part, disclose such secrets, know-how or
processes to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, nor shall the
5
<PAGE>
Employee make use of any such property for his own purposes or for the benefit
of any person, firm, corporation or other entity (except the Company and its
affiliates) under any circumstances during or after the term of his employment,
provided that after the term of his employment these restrictions shall not
apply to such secrets, know-how and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, know-how or processes entering the public domain without the
Company's consent).
12. Injunctive Relief. If there is a breach or threatened breach of
the provisions of paragraph 10 or 11 of this Employment Agreement, the
Company shall be entitled to an injunction restraining the Employee from
such breach. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies for such breach or threatened breach.
13. Insurance. The Company may, at its election and for its
benefit, insure the Employee against accidental loss or death, and the
Employee shall submit to such physical examination and supply such
information as may be required in connection therewith.
14. Notices. Any notice required or permitted to be given under
this Employment Agreement shall be sufficient if in writing and if sent by
registered mail to the Employee at his home address as reflected on the
records of the Company, in the case of the Employee, or Mr. Stelios B.
Papadopoulos, Chief Executive Officer, CN Biosciences, Inc., 10394 Pacific
Center Court, San Diego, CA 92121, in the case of the Company.
15. Waiver of Breach. A waiver by the Company or the Employee of a
breach of any provision of this Employment Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by
the other party.
16. Governing Law. This Employment Agreement shall be governed by
and construed and enforce in accordance with the laws of the State of
California without giving effect to the choice of law or conflict of laws
provisions thereof.
17. Assignment. This Employment Agreement may be assigned, without
the consent of the Employee, by the Company to any of its affiliates, or to
any other person, partnership, corporation, or other entity which has
purchased substantially all the assets of the Company, provided such
assignee assumes all the liabilities of the Company hereunder.
18. Prior Agreement. Effective as of the Effective Date, the
Severance Agreement between the Company and the Employee dated February 27,
1997 is hereby terminated and superseded in its entirety by this Employment
Agreement and Employee hereby waives any right which he may have under such
agreement to resign following the effective date of a "Change in Control" of
the Company (as defined in such agreement) and any and all other rights or
claims to severance benefits or other compensation or benefits under such
agreement following his termination of employment.
6
<PAGE>
19. Entire Agreement. This Employment Agreement contains the entire
agreement of the parties and supersedes any and all agreements, letter of
intent or understandings between the Employee and (a) the Company, (b) the
Parent or (c) any of the Company's and the Parent's principal shareholders,
affiliates or subsidiaries regarding employment. This Employment Agreement
may be changed only by an agreement in writing signed by a party against
whom enforcement of any waiver, change, modification, extension or discharge
is sought.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day first herein above written.
CN BIOSCIENCES, INC.
By: /s/ Stelios B. Papadopoulos
------------------------------
Stelios B. Papadopoulos
Chief Executive officer
EM INDUSTRIES, INC.
By: /s/ Dieter Janssen
--------------------------------
Name: Dieter Janssen
Title: Group Vice President & CFO
EMPLOYEE
By: /s/ Douglas J. Greenwold
------------------------------------
Douglas J. Greenwold
7
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 18th day of November 1998,
between CN Biosciences, Inc., a Delaware corporation (the "Company") and
Robert C. Mierendorf (the "Employee").
WHEREAS, the Company and EM Industries, Inc. ("Parent") and EM
Acquisition Corp. have entered into an Agreement and Plan of Merger ("Merger
Agreement") to acquire 100% of the outstanding stock of the Company;
WHEREAS, the Employee has been employed by the Company or one of
its subsidiaries prior to the date hereof;
WHEREAS, the Employee possesses unique knowledge of the business
and affairs of the Company, its policies, methods, personnel and operations
and the Parent recognizes that the continued service of the Employee is
important to the growth and success of the Company subsequent to the date of
closing of the transactions contemplated by the Merger Agreement ("Closing
Date") and desires to ensure such continued service;
WHEREAS, as an inducement for Parent to enter into the Merger
Agreement, Employee agrees to continue his employment with the Company after
the Closing Date on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and Employee
agree as follows:
1. Effective Date. This Employment Agreement shall become effective
on the Closing Date of the Merger Agreement (the "Effective Date"). If the
Merger Agreement is terminated, this Agreement shall be null and void.
Notwithstanding the foregoing, Employee agrees to continue to serve until
the Closing Date as an employee of the Company in the same capacity and in
accordance with the same terms and conditions as on the date immediately
preceding the date hereof.
2. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment all upon the terms and conditions herein
set forth.
3. Duties. The Employee shall perform such management duties for
the Company and its affiliates as may from time to time be assigned and
which are consistent with his titles. During the Term, the Employee shall
have the same titles as he held immediately prior to the date of this
Agreement. The Employee hereby promises to perform and discharge well and
faithfully all duties of his position. If Employee is elected as a director
or officer of any affiliate of the Company, the Employee shall serve in such
capacity or capacities without further compensation.
<PAGE>
4. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not during
the term of this Employment Agreement be engaged in any other business
activity whether or not such business activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
the Employee from investing his personal assets in businesses which do not
compete with the Company in such form or manner as will not require any
services on the part of the Employee in the operation of the affairs of the
companies in which such investments are made and in which his participation
is solely that of an investor, nor shall this be construed as preventing the
Employee from purchasing securities in any corporation whose securities are
regularly traded provided that such purchases shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to
that of the Company, without the express prior written consent of the
Company.
5. Compensation.
(a) For services rendered under this Employment Agreement,
the Company shall pay the Employee a salary determined annually by the
Compensation Committee of the Board of Directors (the "Base Salary"),
payable (after deduction of applicable payroll taxes) in equal bi-weekly
installments. Employee's Base Salary as of the Effective Date shall be
$165,000. The Employee shall also be eligible for and participate in such
fringe benefits as shall be generally provided to executives of the Company,
including medical insurance and retirement programs which may be adopted
from time to time during the term hereof by the Company. On an annual basis,
the Compensation Committee shall review Employee's salary and make such
adjustment as may be warranted based upon Employee performance, Company
financial performance, economic conditions, etc.
(b) At the conclusion of each Fiscal Year, the Employee
shall be eligible for, and the Compensation Committee, in its sole
discretion, may award an executive bonus up to a maximum of 35% of Base
Salary, based on the achievement of objectives established by the
Compensation Committee.
(c) The Company agrees that, effective as of the Effective
Date, it will establish, or cause to be established, a new long-term
incentive compensation plan (the "New Plan"). The Company further agrees
that the Employee shall be immediately entitled to participate in such New
Plan and the Employee shall receive an allocation of units under the New
Plan effective as of the Effective Date, which allocation shall be
commensurate with his position and consistent in incentive opportunity with
allocations to similarly situated employees of the Company.
6. Paid Time Off. During the term of this Employment Agreement, the
Employee shall be entitled to the same number of paid days off pursuant to
the Company's customary paid time off policy ("CalTime") as he has on the
date of this Agreement.
2
<PAGE>
7. Expenses. During the term of this Employment Agreement, the
Company shall reimburse the Employee for all reasonable out-of-pocket
expenses incurred by the Employee in connection with the business of the
Company and in performance of his duties under this Employment Agreement
upon the Employee's presentation to the Company of an itemized accounting of
such expenses with reasonable supporting data.
8. Term. The Employee's employment under this Employment Agreement
shall commence on the Effective Date and shall expire on the two year
anniversary date thereof. The term of employment shall automatically be
extended for consecutive periods of one (1) year each unless notice of
termination of employment is given by either party hereto at least ninety
(90) days prior to the expiration of the initial or any renewal term, in
which case, this Agreement shall terminate at the end of such initial or
renewal term, as the case may be. In the case of a renewal and unless
otherwise agreed to in writing by both parties, the terms and conditions of
this Employment Agreement shall apply to any renewals or extensions thereto.
Notwithstanding the foregoing, the Company may, at its election, terminate
the Employee's employment hereunder as follows:
(i) Upon thirty (30) days' notice if the Employee
becomes physically or mentally incapacitated or is injured so that
he is unable to perform the services required of him hereunder and
such inability to perform continues for a period in excess of
ninety (90) days and is continuing at the time of such notice; or
(ii) For "Cause" upon notice of such termination
to the Employee. For purposes of this Employment Agreement, the
Company shall have "Cause" to terminate its obligations hereunder
upon (A) the reasonable determination by the Chief Executive
Officer that the Employee has failed substantially to perform his
duties hereunder (other than as a result of his incapacity due to
physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties hereunder, (B)
refusal to carry out any lawful direction of the Chief Executive
Officer or Board of Directors, (C) the Chief Executive Officer's
reasonable determination that the Employee has engaged or is about
to engage in conduct materially injurious to the Company, (D) the
Employee's having been convicted of a felony, (E) a material breach
by the Employee of any of the other covenants or representations
herein or any other agreement between Employee and the Company, or
(F) theft, embezzlement or misappropriation of Company property; or
(iii) Without Cause at any time upon notice of
such termination to the Employee, by paying to the Employee salary
continuation pay equal to the Employee's Base Salary in effect at
the time of termination for the remaining term of this Employment
Agreement but not in any event for less than 12 months from the
date of such termination; provided, however, that the salary
continuation payments shall cease if the Employee shall engage in
any business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant) which is engaged
in the manufacturing, distribution or research and development of
any products being sold by, or under development by, the Company or
3
<PAGE>
its affiliates as of the date of such termination of employment, in
any geographic area where the Company or such affiliates are then so
manufacturing or distributing such products, or the Employee shall
interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any customer,
supplier, lessor, lessee or employee of the Company. If the Company
shall decide not to renew this Employment Agreement, the ninety (90)
day notification of the Company's intention not to renew prior to
expiration of the initial or any subsequent renewal term shall
serve as adequate termination notice and the Employee hereby agrees
to make a smooth transition of responsibilities during that ninety
(90) day period and the Employee further agrees not to take any
legal action against the Company related to said non-renewal and
termination of employment; or
(iv) Upon the death of the Employee.
In addition, the Employee shall have the right to terminate this Employment
Agreement upon notice to the Company if, without his consent, his
responsibilities and duties on the date hereof are materially reduced (a
"Material Demotion") and such Material Demotion continues for ten (10)
business days after the date of notice to the Company. A Material Demotion
shall be treated as a termination by the Company without Cause and the
Employee shall be entitled to receive salary continuation pay as provided
by, and subject to the terms and conditions of, subparagraph 8 (iii) above.
9. Representations. The Employee hereby represents to the Company
that (a) he is legally entitled to enter into this Employment Agreement and
to perform the services contemplated herein and is not bound under any
employment or consulting agreement to render services to any third party,
(b) he has the full right, power and authority, subject to no rights of
third parties, to grant to the Company the rights contemplated by paragraph
10 hereof, and (c) he does not now have, nor within the last three years has
had, any ownership interest in any business enterprise (other than interest
in publicly traded corporations where his ownership does not exceed one
percent (1%) or more of the equity capital) which is a customer of the
Company, any of its subsidiaries, or from which the Company or any of its
subsidiaries purchases any goods or services or to whom such corporations
owe any financial obligations or are required or directed to make any
payments.
10. Inventions.
(a) The Employee hereby sells, transfers and assigns to
the Company or to any person or entity designated by the Company all of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or
jointly, during the term hereof which relate to methods, apparatus, designs,
products, processes or devices, sold, leased, used or under consideration or
development by the Company or any of its affiliates or which otherwise
relate to or pertain to the business, functions or operations of the Company
or any of its affiliates or which
4
<PAGE>
arise from the efforts of the Employee during the course of his employment for
the Company or any of its affiliates. The Employee shall communicate promptly
and disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to the aforementioned inventions,
ideas, disclosures and improvements; and the Employee shall execute and deliver
to the Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Employee to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof. Any invention relating to the business of the Company and its
affiliates and disclosed by the Employee within one year following the
termination of this Agreement shall be deemed to fall within the provisions of
this paragraph unless proved to have been first conceived and made following
such termination.
(b) The Employee has been notified and understands that
the provisions of this Section 10 do not apply to any of the aforementioned
inventions, ideas, disclosures and improvements that qualify fully under the
provisions of Section 2870 of the California Labor Code, which states as
follows:
(i) Any provision in an employment agreement
which provides that an employee shall assign, or offer to assign,
any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(a) Relate at the time of conception or
reduction to practice of the invention to the employer's business,
or actual or demonstrably anticipated research
or development of the employer.
(b) Result from any work performed by the
employee for the employer.
(ii) To the extent a provision in an employment
agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under
subsection (i), the provision is against the public policy of
this state and is unenforceable.
11. Disclosure of Information. The Employee recognizes and
acknowledges that the trade secrets, know-how and proprietary processes of
the Company and its affiliates as they may exist from time to time are
valuable, special and unique assets of the business of the Company and its
affiliates, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company or any of its
affiliates, in whole or in part, disclose such secrets, know-how or
processes to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, nor shall the
5
<PAGE>
Employee make use of any such property for his own purposes or for the benefit
of any person, firm, corporation or other entity (except the Company and its
affiliates) under any circumstances during or after the term of his employment,
provided that after the term of his employment these restrictions shall not
apply to such secrets, know-how and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, know-how or processes entering the public domain without the
Company's consent).
12. Injunctive Relief. If there is a breach or threatened breach
of the provisions of paragraph 10 or 11 of this Employment Agreement, the
Company shall be entitled to an injunction restraining the Employee from
such breach. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies for such breach or threatened breach.
13. Insurance. The Company may, at its election and for its
benefit, insure the Employee against accidental loss or death, and the
Employee shall submit to such physical examination and supply such
information as may be required in connection therewith.
14. Notices. Any notice required or permitted to be given under
this Employment Agreement shall be sufficient if in writing and if sent by
registered mail to the Employee at his home address as reflected on the
records of the Company, in the case of the Employee, or Mr. Stelios B.
Papadopoulos, Chief Executive Officer, CN Biosciences, Inc., 10394 Pacific
Center Court, San Diego, CA 92121, in the case of the Company.
15. Waiver of Breach. A waiver by the Company or the Employee of a
breach of any provision of this Employment Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by
the other party.
16. Governing Law. This Employment Agreement shall be governed by
and construed and enforce in accordance with the laws of the State of
California without giving effect to the choice of law or conflict of laws
provisions thereof.
17. Assignment. This Employment Agreement may be assigned, without
the consent of the Employee, by the Company to any of its affiliates, or to
any other person, partnership, corporation, or other entity which has
purchased substantially all the assets of the Company, provided such
assignee assumes all the liabilities of the Company hereunder.
18. Prior Agreement. Effective as of the Effective Date, the
Employment Agreement between the Company and the Employee dated December 27,
1997 and the Severance Agreement between the Company and the Employee are
hereby terminated and superseded in their entirety by this Employment
Agreement and Employee hereby waives any right which he may have under such
agreements to resign following the effective date of a "Change in Control"
of the Company (as defined in such agreements) and any and all other rights
or claims to severance benefits or other compensation or benefits under such
agreements following his termination of employment.
6
<PAGE>
19. Entire Agreement. This Employment Agreement contains the entire
agreement of the parties and supersedes any and all agreements, letter of
intent or understandings between the Employee and (a) the Company, (b) the
Parent or (c) any of the Company's and the Parent's principal shareholders,
affiliates or subsidiaries regarding employment. This Employment Agreement
may be changed only by an agreement in writing signed by a party against
whom enforcement of any waiver, change, modification, extension or
discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day first herein above written.
CN BIOSCIENCES, INC.
By: /s/ Stelios B. Papadopoulos
----------------------------------
Stelios B. Papadopoulos
Chief Executive officer
EM INDUSTRIES, INC.
By: /s/ Dieter Janssen
----------------------------------
Name: Dieter Janssen
Title: Group Vice President & CFO
EMPLOYEE
By: /s/ Robert C. Mierendorf
----------------------------------
Robert C. Mierendorf
134022.01
7
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 18th day of November 1998,
between CN Biosciences, Inc., a Delaware corporation (the "Company") and
John T. Snow (the "Employee").
WHEREAS, the Company and EM Industries, Inc. ("Parent") and EM
Acquisition Corp. have entered into an Agreement and Plan of Merger ("Merger
Agreement") to acquire 100% of the outstanding stock of the Company;
WHEREAS, the Employee has been employed by the Company or one of
its subsidiaries prior to the date hereof;
WHEREAS, the Employee possesses unique knowledge of the business
and affairs of the Company, its policies, methods, personnel and operations
and the Parent recognizes that the continued service of the Employee is
important to the growth and success of the Company subsequent to the date of
closing of the transactions contemplated by the Merger Agreement ("Closing
Date") and desires to ensure such continued service;
WHEREAS, as an inducement for Parent to enter into the Merger
Agreement, Employee agrees to continue his employment with the Company after
the Closing Date on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and Employee
agree as follows:
1. Effective Date. This Employment Agreement shall become effective
on the Closing Date of the Merger Agreement (the "Effective Date"). If the
Merger Agreement is terminated, this Agreement shall be null and void.
Notwithstanding the foregoing, Employee agrees to continue to serve until
the Closing Date as an employee of the Company in the same capacity and in
accordance with the same terms and conditions as on the date immediately
preceding the date hereof.
2. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment all upon the terms and conditions herein
set forth.
3. Duties. The Employee shall perform such management duties for
the Company and its affiliates as may from time to time be assigned and
which are consistent with his titles. During the Term, the Employee shall
have the same titles as he held immediately prior to the date of this
Agreement. The Employee hereby promises to perform and discharge well and
faithfully all duties of his position. If Employee is elected as a director
or officer of any affiliate of the Company, the Employee shall serve in such
capacity or capacities without further compensation.
<PAGE>
4. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not during
the term of this Employment Agreement be engaged in any other business
activity whether or not such business activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
the Employee from investing his personal assets in businesses which do not
compete with the Company in such form or manner as will not require any
services on the part of the Employee in the operation of the affairs of the
companies in which such investments are made and in which his participation
is solely that of an investor, nor shall this be construed as preventing the
Employee from purchasing securities in any corporation whose securities are
regularly traded provided that such purchases shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to
that of the Company, without the express prior written consent of the
Company.
5. Compensation.
(a) For services rendered under this Employment Agreement,
the Company shall pay the Employee a salary determined annually by the
Compensation Committee of the Board of Directors (the "Base Salary"),
payable (after deduction of applicable payroll taxes) in equal bi-weekly
installments. Employee's Base Salary as of the Effective Date shall be
$150,000. The Employee shall also be eligible for and participate in such
fringe benefits as shall be generally provided to executives of the Company,
including medical insurance and retirement programs which may be adopted
from time to time during the term hereof by the Company. On an annual basis,
the Compensation Committee shall review Employee's salary and make such
adjustment as may be warranted based upon Employee performance, Company
financial performance, economic conditions, etc.
(b) At the conclusion of each Fiscal Year, the Employee
shall be eligible for, and the Compensation Committee, in its sole
discretion, may award an executive bonus up to a maximum of 35% of Base
Salary, based on the achievement of objectives established by the
Compensation Committee.
(c) The Company agrees that, effective as of the Effective
Date, it will establish, or cause to be established, a new long-term
incentive compensation plan (the "New Plan"). The Company further agrees
that the Employee shall be immediately entitled to participate in such New
Plan and the Employee shall receive an allocation of units under the New
Plan effective as of the Effective Date, which allocation shall be
commensurate with his position and consistent in incentive opportunity with
allocations to similarly situated employees of the Company.
6. Paid Time Off. During the term of this Employment Agreement, the
Employee shall be entitled to the same number of paid days off pursuant to
the Company's customary paid time off policy ("CalTime") as he has on the
date of this Agreement.
2
<PAGE>
7. Expenses. During the term of this Employment Agreement, the
Company shall reimburse the Employee for all reasonable out-of-pocket
expenses incurred by the Employee in connection with the business of the
Company and in performance of his duties under this Employment Agreement
upon the Employee's presentation to the Company of an itemized accounting of
such expenses with reasonable supporting data.
8. Term. The Employee's employment under this Employment Agreement
shall commence on the Effective Date and shall expire on the three year
anniversary date thereof. The term of employment shall automatically be
extended for consecutive periods of one (1) year each unless notice of
termination of employment is given by either party hereto at least ninety
(90) days prior to the expiration of the initial or any renewal term, in
which case, this Agreement shall terminate at the end of such initial or
renewal term, as the case may be. In the case of a renewal and unless
otherwise agreed to in writing by both parties, the terms and conditions of
this Employment Agreement shall apply to any renewals or extensions thereto.
Notwithstanding the foregoing, the Company may, at its election, terminate
the Employee's employment hereunder as follows:
(i) Upon thirty (30) days' notice if the Employee
becomes physically or mentally incapacitated or is injured so that
he is unable to perform the services required of him hereunder and
such inability to perform continues for a period in excess of
ninety (90) days and is continuing at the time of such notice; or
(ii) For "Cause" upon notice of such termination
to the Employee. For purposes of this Employment Agreement, the
Company shall have "Cause" to terminate its obligations hereunder
upon (A) the reasonable determination by the Chief Executive
Officer that the Employee has failed substantially to perform his
duties hereunder (other than as a result of his incapacity due to
physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties hereunder, (B)
refusal to carry out any lawful direction of the Chief Executive
Officer or Board of Directors, (C) the Chief Executive Officer's
reasonable determination that the Employee has engaged or is about
to engage in conduct materially injurious to the Company, (D) the
Employee's having been convicted of a felony, (E) a material breach
by the Employee of any of the other covenants or representations
herein or any other agreement between Employee and the Company, or
(F) theft, embezzlement or misappropriation of Company property; or
(iii) Without Cause at any time upon notice of
such termination to the Employee, by paying to the Employee salary
continuation pay equal to the Employee's Base Salary in effect at
the time of termination for the remaining term of this Employment
Agreement but not in any event for less than 12 months from the
date of such termination; provided, however, that the salary
continuation payments shall cease if the Employee shall engage in
any business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant) which is engaged
in the manufacturing, distribution or research and development of
any products being sold by, or under development by, the Company or
3
<PAGE>
its affiliates as of the date of such termination of employment, in any
geographic area where the Company or such affiliates are then so
manufacturing or distributing such products, or the Employee shall
interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any customer,
supplier, lessor, lessee or employee of the Company. If the Company
shall decide not to renew this Employment Agreement, the ninety (90)
day notification of the Company's intention not to renew prior to
expiration of the initial or any subsequent renewal term shall serve as
adequate termination notice and the Employee hereby agrees to make a
smooth transition of responsibilities during that ninety (90) day
period and the Employee further agrees not to take any legal action
against the Company related to said non-renewal and termination of
employment; or
(iv) Upon the death of the Employee.
In addition, the Employee shall have the right to terminate this Employment
Agreement upon notice to the Company if, without his consent, his
responsibilities and duties on the date hereof are materially reduced (a
"Material Demotion") and such Material Demotion continues for ten (10)
business days after the date of notice to the Company. A Material Demotion
shall be treated as a termination by the Company without Cause and the
Employee shall be entitled to receive salary continuation pay as provided
by, and subject to the terms and conditions of, subparagraph 8 (iii) above.
9. Representations. The Employee hereby represents to the Company
that (a) he is legally entitled to enter into this Employment Agreement and
to perform the services contemplated herein and is not bound under any
employment or consulting agreement to render services to any third party,
(b) he has the full right, power and authority, subject to no rights of
third parties, to grant to the Company the rights contemplated by paragraph
10 hereof, and (c) he does not now have, nor within the last three years has
had, any ownership interest in any business enterprise (other than interest
in publicly traded corporations where his ownership does not exceed one
percent (1%) or more of the equity capital) which is a customer of the
Company, any of its subsidiaries, or from which the Company or any of its
subsidiaries purchases any goods or services or to whom such corporations
owe any financial obligations or are required or directed to make any
payments.
10. Inventions.
(a) The Employee hereby sells, transfers and assigns to
the Company or to any person or entity designated by the Company all of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or
jointly, during the term hereof which relate to methods, apparatus, designs,
products, processes or devices, sold, leased, used or under consideration or
development by the Company or any of its affiliates or which otherwise relate
to or pertain to the business, functions or operations of the Company or any
of its affiliates or which
4
<PAGE>
arise from the efforts of the Employee during the course of his employment for
the Company or any of its affiliates. The Employee shall communicate promptly
and disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to the aforementioned inventions,
ideas, disclosures and improvements; and the Employee shall execute and deliver
to the Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Employee to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof. Any invention relating to the business of the Company and its
affiliates and disclosed by the Employee within one year following the
termination of this Agreement shall be deemed to fall within the provisions of
this paragraph unless proved to have been first conceived and made following
such termination.
(b) The Employee has been notified and understands that
the provisions of this Section 10 do not apply to any of the aforementioned
inventions, ideas, disclosures and improvements that qualify fully under the
provisions of Section 2870 of the California Labor Code, which states as
follows:
(i) Any provision in an employment agreement
which provides that an employee shall assign, or offer to assign,
any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except
for those inventions that either:
(a) Relate at the time of conception
or reduction to practice of the invention to the employer's business,
or actual or demonstrably anticipated research or development of the
employer.
(b) Result from any work performed by
the employee for the employer.
(ii) To the extent a provision in an employment
agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under
subsection (i), the provision is against the public policy of this
state and is unenforceable.
11. Disclosure of Information. The Employee recognizes and
acknowledges that the trade secrets, know-how and proprietary processes of
the Company and its affiliates as they may exist from time to time are
valuable, special and unique assets of the business of the Company and its
affiliates, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company or any of its
affiliates, in whole or in part, disclose such secrets, know-how or
processes to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, nor shall the
5
<PAGE>
Employee make use of any such property for his own purposes or for the benefit
of any person, firm, corporation or other entity (except the Company and its
affiliates) under any circumstances during or after the term of his employment,
provided that after the term of his employment these restrictions shall not
apply to such secrets, know-how and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, know-how or processes entering the public domain without the
Company's consent).
12. Injunctive Relief. If there is a breach or threatened breach of
the provisions of paragraph 10 or 11 of this Employment Agreement, the
Company shall be entitled to an injunction restraining the Employee from
such breach. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies for such breach or threatened breach.
13. Insurance. The Company may, at its election and for its
benefit, insure the Employee against accidental loss or death, and the
Employee shall submit to such physical examination and supply such
information as may be required in connection therewith.
14. Notices. Any notice required or permitted to be given under
this Employment Agreement shall be sufficient if in writing and if sent by
registered mail to the Employee at his home address as reflected on the
records of the Company, in the case of the Employee, or Mr. Stelios B.
Papadopoulos, Chief Executive Officer, CN Biosciences, Inc., 10394 Pacific
Center Court, San Diego, CA 92121, in the case of the Company.
15. Waiver of Breach. A waiver by the Company or the Employee of a
breach of any provision of this Employment Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by
the other party.
16. Governing Law. This Employment Agreement shall be governed by
and construed and enforce in accordance with the laws of the State of
California without giving effect to the choice of law or conflict of laws
provisions thereof.
17. Assignment. This Employment Agreement may be assigned, without
the consent of the Employee, by the Company to any of its affiliates, or to
any other person, partnership, corporation, or other entity which has
purchased substantially all the assets of the Company, provided such
assignee assumes all the liabilities of the Company hereunder.
18. Prior Agreement. Effective as of the Effective Date, the
Severance Agreement between the Company and the Employee dated February 27,
1997 is hereby terminated and superseded in its entirety by this Employment
Agreement and Employee hereby waives any right which he may have under such
agreement to resign following the effective date of a "Change in Control" of
the Company (as defined in such agreement) and any and all other rights or
claims to severance benefits or other compensation or benefits under such
agreement following his termination of employment.
6
<PAGE>
19. Entire Agreement. This Employment Agreement contains the entire
agreement of the parties and supersedes any and all agreements, letter of
intent or understandings between the Employee and (a) the Company, (b) the
Parent or (c) any of the Company's and the Parent's principal shareholders,
affiliates or subsidiaries regarding employment. This Employment Agreement
may be changed only by an agreement in writing signed by a party against
whom enforcement of any waiver, change, modification, extension or discharge
is sought.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day first herein above written.
CN BIOSCIENCES, INC.
By: /s/ Stelios B. Papadopoulos
---------------------------
Stelios B. Papadopoulos
Chief Executive officer
EM INDUSTRIES, INC.
By: /s/ Dieter Janssen
-----------------------------
Name: Dieter Janssen
Title: Group Vice President & CFO
EMPLOYEE
By: /s/ John T. Snow
---------------------------
John T. Snow
7
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 18th day of November 1998,
between CN Biosciences, Inc., a Delaware corporation (the "Company") and
Mark Zimmerman (the "Employee").
WHEREAS, the Company and EM Industries, Inc. ("Parent") and EM
Acquisition Corp. have entered into an Agreement and Plan of Merger ("Merger
Agreement") to acquire 100% of the outstanding stock of the Company;
WHEREAS, the Employee has been employed by the Company or one of its
subsidiaries prior to the date hereof;
WHEREAS, the Employee possesses unique knowledge of the business
and affairs of the Company, its policies, methods, personnel and operations
and the Parent recognizes that the continued service of the Employee is
important to the growth and success of the Company subsequent to the date of
closing of the transactions contemplated by the Merger Agreement ("Closing
Date") and desires to ensure such continued service;
WHEREAS, as an inducement for Parent to enter into the Merger
Agreement, Employee agrees to continue his employment with the Company after
the Closing Date on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and Employee
agree as follows:
1. Effective Date. This Employment Agreement shall become effective
on the Closing Date of the Merger Agreement (the "Effective Date"). If the
Merger Agreement is terminated, this Agreement shall be null and void.
Notwithstanding the foregoing, Employee agrees to continue to serve until
the Closing Date as an employee of the Company in the same capacity and in
accordance with the same terms and conditions as on the date immediately
preceding the date hereof.
2. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment all upon the terms and conditions herein
set forth.
3. Duties. The Employee shall perform such management duties for
the Company and its affiliates as may from time to time be assigned and
which are consistent with his titles. During the Term, the Employee shall
have the same titles as he held immediately prior to the date of this
Agreement. The Employee hereby promises to perform and discharge well and
faithfully all duties of his position. If Employee is elected as a director
or officer of any affiliate of the Company, the Employee shall serve in such
capacity or capacities without further compensation.
<PAGE>
4. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not during
the term of this Employment Agreement be engaged in any other business
activity whether or not such business activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
the Employee from investing his personal assets in businesses which do not
compete with the Company in such form or manner as will not require any
services on the part of the Employee in the operation of the affairs of the
companies in which such investments are made and in which his participation
is solely that of an investor, nor shall this be construed as preventing the
Employee from purchasing securities in any corporation whose securities are
regularly traded provided that such purchases shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to
that of the Company, without the express prior written consent of the
Company.
5. Compensation.
(a) For services rendered under this Employment Agreement,
the Company shall pay the Employee a salary determined annually by the
Compensation Committee of the Board of Directors (the "Base Salary"),
payable (after deduction of applicable payroll taxes) in equal bi-weekly
installments. Employee's Base Salary as of the Effective Date shall be
$145,000. The Employee shall also be eligible for and participate in such
fringe benefits as shall be generally provided to executives of the Company,
including medical insurance and retirement programs which may be adopted
from time to time during the term hereof by the Company. On an annual basis,
the Compensation Committee shall review Employee's salary and make such
adjustment as may be warranted based upon Employee performance, Company
financial performance, economic conditions, etc.
(b) At the conclusion of each Fiscal Year, the Employee shall be
eligible for, and the Compensation Committee, in its sole discretion, may award
an executive bonus up to a maximum of 35% of Base Salary, based on the
achievement of objectives established by the Compensation Committee.
(c) The Company agrees that, effective as of the Effective Date, it
will establish, or cause to be established, a new long-term incentive
compensation plan (the "New Plan"). The Company further agrees that the Employee
shall be immediately entitled to participate in such New Plan and the Employee
shall receive an allocation of units under the New Plan effective as of the
Effective Date, which allocation shall be commensurate with his position and
consistent in incentive opportunity with allocations to similarly situated
employees of the Company.
6. Paid Time Off. During the term of this Employment Agreement, the
Employee shall be entitled to the same number of paid days off pursuant to
the Company's customary paid time off policy ("CalTime") as he has on the
date of this Agreement.
2
<PAGE>
7. Expenses. During the term of this Employment Agreement, the Company
shall reimburse the Employee for all reasonable out-of-pocket expenses incurred
by the Employee in connection with the business of the Company and in
performance of his duties under this Employment Agreement upon the Employee's
presentation to the Company of an itemized accounting of such expenses with
reasonable supporting data.
8. Term. The Employee's employment under this Employment Agreement
shall commence on the Effective Date and shall expire on the two year
anniversary date thereof. The term of employment shall automatically be
extended for consecutive periods of one (1) year each unless notice of
termination of employment is given by either party hereto at least ninety
(90) days prior to the expiration of the initial or any renewal term, in
which case, this Agreement shall terminate at the end of such initial or
renewal term, as the case may be. In the case of a renewal and unless
otherwise agreed to in writing by both parties, the terms and conditions of
this Employment Agreement shall apply to any renewals or extensions thereto.
Notwithstanding the foregoing, the Company may, at its election, terminate
the Employee's employment hereunder as follows:
(i) Upon thirty (30) days' notice if the Employee
becomes physically or mentally incapacitated or is injured so that
he is unable to perform the services required of him hereunder and
such inability to perform continues for a period in excess of
ninety (90) days and is continuing at the time of such notice; or
(ii) For "Cause" upon notice of such termination
to the Employee. For purposes of this Employment Agreement, the
Company shall have "Cause" to terminate its obligations hereunder
upon (A) the reasonable determination by the Chief Executive
Officer that the Employee has failed substantially to perform his
duties hereunder (other than as a result of his incapacity due to
physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties hereunder, (B)
refusal to carry out any lawful direction of the Chief Executive
Officer or Board of Directors, (C) the Chief Executive Officer's
reasonable determination that the Employee has engaged or is about
to engage in conduct materially injurious to the Company, (D) the
Employee's having been convicted of a felony, (E) a material breach
by the Employee of any of the other covenants or representations
herein or any other agreement between Employee and the Company, or
(F) theft, embezzlement or misappropriation of Company property; or
(iii) Without Cause at any time upon notice of
such termination to the Employee, by paying to the Employee salary
continuation pay equal to the Employee's Base Salary in effect at
the time of termination for the remaining term of this Employment
Agreement but not in any event for less than 12 months from the
date of such termination; provided, however, that the salary
continuation payments shall cease if the Employee shall engage in
any business (whether as an officer, director, owner, employee,
partner or other direct or indirect participant) which is engaged
in the manufacturing, distribution or research and development of
any products being sold by, or under development by, the Company or
3
<PAGE>
affiliates as of the date of such termination of employment, in any
geographic area where the Company or such affiliates are then so
manufacturing or distributing such products, or the Employee shall
interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any customer,
supplier, lessor, lessee or employee of the Company. If the Company
shall decide not to renew this Employment Agreement, the ninety
(90) day notification of the Company's intention not to renew prior to
expiration of the initial or any subsequent renewal term shall serve
as adequate termination notice and the Employee hereby agrees to make
a smooth transition of responsibilities during that ninety (90) day
period and the Employee further agrees not to take any legal action
against the Company related to said non-renewal and termination of
employment; or
(iv) Upon the death of the Employee.
In addition, the Employee shall have the right to terminate this Employment
Agreement upon notice to the Company if, without his consent, his
responsibilities and duties on the date hereof are materially reduced (a
"Material Demotion") and such Material Demotion continues for ten (10)
business days after the date of notice to the Company. A Material Demotion
shall be treated as a termination by the Company without Cause and the
Employee shall be entitled to receive salary continuation pay as provided
by, and subject to the terms and conditions of, subparagraph 8 (iii) above.
9. Representations. The Employee hereby represents to the Company
that (a) he is legally entitled to enter into this Employment Agreement and
to perform the services contemplated herein and is not bound under any
employment or consulting agreement to render services to any third party,
(b) he has the full right, power and authority, subject to no rights of
third parties, to grant to the Company the rights contemplated by paragraph
10 hereof, and (c) he does not now have, nor within the last three years has
had, any ownership interest in any business enterprise (other than interest
in publicly traded corporations where his ownership does not exceed one
percent (1%) or more of the equity capital) which is a customer of the
Company, any of its subsidiaries, or from which the Company or any of its
subsidiaries purchases any goods or services or to whom such corporations
owe any financial obligations or are required or directed to make any
payments.
10. Inventions.
(a) The Employee hereby sells, transfers and assigns to
the Company or to any person or entity designated by the Company all of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or
jointly, during the term hereof which relate to methods, apparatus, designs,
products, processes or devices, sold, leased, used or under consideration or
development by the Company or any of its affiliates or which otherwise
relate to or pertain to the business, functions or operations of the Company
or any of its affiliates or which
4
<PAGE>
arise from the efforts of the Employee during the course of his employment for
the Company or any of its affiliates. The Employee shall communicate promptly
and disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to the aforementioned inventions,
ideas, disclosures and improvements; and the Employee shall execute and deliver
to the Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Employee to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof. Any invention relating to the business of the Company and its
affiliates and disclosed by the Employee within one year following the
termination of this Agreement shall be deemed to fall within the provisions of
this paragraph unless proved to have been first conceived and made following
such termination.
(b) The Employee has been notified and understands that
the provisions of this Section 10 do not apply to any of the aforementioned
inventions, ideas, disclosures and improvements that qualify fully under the
provisions of Section 2870 of the California Labor Code, which states as
follows:
(i) Any provision in an employment agreement
which provides that an employee shall assign, or offer to assign,
any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except
for those inventions that either:
(a) Relate at the time of conception or
reduction to practice of the invention to the employer's business, or
actual or demonstrably anticipated research or development of the
employer.
(b) Result from any work performed by
the employee for the employer.
(ii) To the extent a provision in an employment
agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under
subsection (i), the provision is against the public policy of this
state and is unenforceable.
11. Disclosure of Information. The Employee recognizes and
acknowledges that the trade secrets, know-how and proprietary processes of
the Company and its affiliates as they may exist from time to time are
valuable, special and unique assets of the business of the Company and its
affiliates, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not,
during or after the term of his employment by the Company or any of its
affiliates, in whole or in part, disclose such secrets, know-how or
processes to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, nor shall the
5
<PAGE>
Employee make use of any such property for his own purposes or for the benefit
of any person, firm, corporation or other entity (except the Company and its
affiliates) under any circumstances during or after the term of his employment,
provided that after the term of his employment these restrictions shall not
apply to such secrets, know-how and processes which are then in the public
domain (provided that the Employee was not responsible, directly or indirectly,
for such secrets, know-how or processes entering the public domain without the
Company's consent).
12. Injunctive Relief. If there is a breach or threatened breach of
the provisions of paragraph 10 or 11 of this Employment Agreement, the
Company shall be entitled to an injunction restraining the Employee from
such breach. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies for such breach or threatened breach.
13. Insurance. The Company may, at its election and for its
benefit, insure the Employee against accidental loss or death, and the
Employee shall submit to such physical examination and supply such
information as may be required in connection therewith.
14. Notices. Any notice required or permitted to be given under
this Employment Agreement shall be sufficient if in writing and if sent by
registered mail to the Employee at his home address as reflected on the
records of the Company, in the case of the Employee, or Mr. Stelios B.
Papadopoulos, Chief Executive Officer, CN Biosciences, Inc., 10394 Pacific
Center Court, San Diego, CA 92121, in the case of the Company.
15. Waiver of Breach. A waiver by the Company or the Employee of a
breach of any provision of this Employment Agreement by the other party
shall not operate or be construed as a waiver of any subsequent breach by
the other party.
16. Governing Law. This Employment Agreement shall be governed by
and construed and enforce in accordance with the laws of the State of
California without giving effect to the choice of law or conflict of laws
provisions thereof.
17. Assignment. This Employment Agreement may be assigned, without
the consent of the Employee, by the Company to any of its affiliates, or to
any other person, partnership, corporation, or other entity which has
purchased substantially all the assets of the Company, provided such
assignee assumes all the liabilities of the Company hereunder.
18. Prior Agreement. Effective as of the Effective Date, the
Severance Agreement between the Company and the Employee dated July 16, 1998
is hereby terminated and superseded in its entirety by this Employment
Agreement and Employee hereby waives any right which he may have under such
agreement to resign following the effective date of a "Change in Control" of
the Company (as defined in such agreement) and any and all other rights or
claims to severance benefits or other compensation or benefits under such
agreement following his termination of employment.
6
<PAGE>
19. Entire Agreement. This Employment Agreement contains the entire
agreement of the parties and supersedes any and all agreements, letter of
intent or understandings between the Employee and (a) the Company, (b) the
Parent or (c) any of the Company's and the Parent's principal shareholders,
affiliates or subsidiaries regarding employment. This Employment Agreement
may be changed only by an agreement in writing signed by a party against
whom enforcement of any waiver, change, modification, extension or discharge
is sought.
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day first herein above written.
CN BIOSCIENCES, INC.
By: /s/ Stelios B. Papadopoulos
--------------------------------
Stelios B. Papadopoulos
Chief Executive Officer
EM INDUSTRIES, INC.
By: /s/ Dieter Janssen
--------------------------------
Name: Dieter Janssen
Title: Group Vice President & CFO
EMPLOYEE
By: /s/ Mark Zimmerman
--------------------------------
Mark Zimmerman
7
<PAGE>
[Letterhead of CN Biosciences, Inc.]
November 18, 1998
Dr. Robert Mierendorf
President
Novagen, Inc.
601 Science Drive
Madison, Wisconsin 53711
Dear Bob:
This letter agreement shall supplement the Employment Agreement between CN
Biosciences, Inc. (the "Company") and you dated November 18, 1998 (the
"Employment Agreement").
As consideration for the promises and agreements made by you in the
Employment Agreement, and your agreement to remain in employment with the
Company through the Effective Date (as defined in the Employment Agreement),
as soon as practicable after the Effective Date, the Company will make a
lump sum payment to you, less applicable withholdings, of $50,000 if you are
still in the employ of the Company on the Effective Date.
Please signify your acceptance of this letter agreement by signing below and
returning a copy to the undersigned.
Very truly yours,
/s/ Stelios B. Papadopoulos
- -----------------------------
Stelios B. Papadopoulos
Chairman and CEO
Agreed and Accepted the
18th day of November 1998
/s/ Dr. Robert Mierendorf
- ---------------------------
Dr. Robert Mierendorf
<PAGE>
[Letterhead of CN Biosciences, Inc.]
November 18, 1998
Mark Zimmerman
V.P. and General Manager
Oncogene Research Products
84 Rogers Street
Cambridge, MA
Dear Mark:
This letter agreement shall supplement the Employment Agreement between CN
Biosciences, Inc. (the "Company") and you dated November 18, 1998 (the
"Employment Agreement").
As consideration for the promises and agreements made by you in the
Employment Agreement, and your agreement to remain in employment with the
Company through the Effective Date (as defined in the Employment Agreement),
as soon as practicable after the Effective Date, the Company will make a
lump sum payment to you, less applicable withholdings, of $50,000 if you are
still in the employ of the Company on the Effective Date.
Please sign your acceptance of this letter agreement by signing below and
returning a copy to the undersigned.
Very truly yours,
/s/ Stelios B. Papadopoulos
- -----------------------------
Stelios B. Papadopoulos
Chairman and CEO
Agreed and Accepted this
18th day of November 1998
/s/ Mark Zimmerman
- --------------------
Mark Zimmerman
<PAGE>
CN BIOSCIENCES, INC.
10394 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
November 25, 1998
To Our Stockholders:
We are pleased to inform you that on November 18, 1998, CN Biosciences,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with EM Industries, Incorporated ("Parent") and EM Acquisition
Corp., a wholly owned subsidiary of Parent ("Purchaser"), pursuant to which
Purchaser has commenced a tender offer (the "Offer") to purchase all of the
outstanding shares of the Company's common stock, par value $.01 per share (the
"Shares"), for a cash price of $25.00 per Share. Parent is an indirect
subsidiary of Merck KGaA, a corporation organized under the laws of Germany. The
Offer is conditioned upon, among other things, the tender of a majority of the
number of Shares outstanding on a fully diluted basis (assuming the exercise of
all outstanding stock options). The Merger Agreement provides that following
consummation of the Offer, Purchaser will be merged (the "Merger") with and into
the Company and those Shares that are not acquired in the Offer will be
converted into the right to receive $25.00 per Share in cash.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AGREEMENT AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER. In arriving at its recommendation, the Board of
Directors considered the factors described in the accompanying Schedule 14D-9,
including the opinion of the Company's financial advisor, Vector Securities
International, Inc. ("Vector Securities"), to the effect that the cash
consideration to be offered to holders of Shares pursuant to the Offer and the
Merger was fair to such holders from a financial point of view. A copy of Vector
Securities' written opinion, which sets forth the assumptions made, matters
considered and the limits on the review undertaken by Vector Securities, is
attached to the Schedule 14D-9 as Schedule I.
The accompanying Offer to Purchase sets forth the terms of the Offer. The
enclosed Schedule 14D-9 sets forth additional information regarding the Offer
and the Merger relevant to making an informed decision. We urge you to read
these materials carefully and in their entirety.
Very truly yours,
/s/ Stelios B. Papadopoulos
Stelios B. Papadopoulos
Chairman, Chief Executive Officer
and President
<PAGE>
Contact: Richard K. Hackett - V.P. James Stewart - V.P.
EM Industries, Incorporated CN Biosciences, Inc.
(914) 592-4660 (619) 450-5589
For Immediate Release
- ---------------------
EM INDUSTRIES, INCORPORATED TO ACQUIRE
CN BIOSCIENCES, INC.
Hawthorne, New York and San Diego, California, November 19, 1998 -- EM
Industries, Incorporated and CN Biosciences, Inc. (NASDAQ:CNBI) announced today
that they had executed a definitive merger agreement providing for EM
Industries, Incorporated's acquisition of all of the outstanding shares of CN
Biosciences, Inc. for $25.00 per share in cash for a total transaction value of
approximately $150,000,000.
The merger agreement provides for a cash tender offer by EM Acquisition Corp., a
subsidiary of EM Industries, Incorporated, for all outstanding CN Biosciences,
Inc. shares at $25.00 per share. The tender offer will be commenced within five
business days. The tender offer will be conditioned upon, among other things,
there being validly tendered and not withdrawn at least a majority of the
outstanding shares of CN Biosciences, Inc. Any CN Biosciences, Inc. shares not
purchased pursuant to the tender offer will be acquired in a subsequent merger
at the same $25.00 per share cash price.
In connection with the execution of the merger agreement, EM Industries,
Incorporated has entered into an agreement with the holder of approximately 39%
of CN Biosciences, Inc. outstanding shares under which such holder has agreed to
tender its shares in the tender offer and has granted EM Industries,
Incorporated an option to acquire such shares under certain circumstances at the
$25.00 per share price.
EM Industries, Incorporated is a member of the Merck KGaA Darmstadt, Germany
group of companies focused on the global Pharmaceutical, Specialty Chemicals and
Laboratory markets. Dr. Peter Wriede, President & CEO of EM Industries,
Incorporated, said today "the merger with CN Biosciences, Inc. will strengthen
Merck KGaA's position as a manufacturer of specialty products for the rapidly
growing Life Sciences Reagents market. The product portfolio of CN Biosciences,
Inc. closes gaps in Merck KGaA's existing biochemical reagent product line and
enables the group, together with its strong European and US distribution
activities (49.9% equity position in VWR Scientific Products Corporation), to
solidify its position in the world laboratory market."
CN Biosciences, Inc. is engaged in the development, production, marketing and
distribution of a broad array of products used worldwide in disease-related life
sciences research at pharmaceutical and biotechnology companies, academic
institutions and government laboratories. The Company's products include
biochemical and biological reagents, antibodies, assays and research kits which
it sells principally through its general and specialty catalogs under its well
established brand names, Calbiochem, Novabiochem, Oncogene Research Products and
Novagen.
####
