<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMBICHEM, INC.
(NAME OF SUBJECT COMPANY)
E.I. DU PONT DE NEMOURS AND COMPANY
DUPONT PHARMA, INC.
DPC NEWCO, INC.
(BIDDERS)
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
20009P-10-3
(CUSIP NUMBER OF COMMON STOCK)
DONALD P. MCAVINEY, ESQ.
E.I. DU PONT DE NEMOURS AND COMPANY
DUPONT PHARMA, INC.
DPC NEWCO, INC.
1007 MARKET STREET
WILMINGTON, DELAWARE 19898
(302) 774-9564
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPIES TO:
JUSTIN P. KLEIN, ESQ.
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
1735 MARKET STREET, 51ST FLOOR
PHILADELPHIA, PENNSYLVANIA
(215) 864-8606
------------------------
CALCULATION OF FILING FEE
================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- --------------------------------------------------------------------------------
$101,374,106 $20,274
================================================================================
* FOR PURPOSES OF CALCULATING FEE ONLY. THIS AMOUNT IS BASED ON A PER SHARE
OFFERING PRICE OF $6.75 FOR 13,489,604 SHARES OF COMMON STOCK OUTSTANDING
AS OF SEPTEMBER 27, 1999, PLUS THE NUMBER OF SHARES ASSUMED ISSUABLE
PURSUANT TO EXERCISE
<PAGE>
OF OUTSTANDING OPTIONS AND WARRANTS TO PURCHASE SHARES
OF COMMON STOCK. THE AMOUNT OF THE FILING FEE, CALCULATED IN ACCORDANCE
WITH RULE 0-11 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
EQUALS 1/50 OF ONE PERCENT OF THE AGGREGATE OF THE CASH OFFERED BY THE
BIDDERS.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(a)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
AMOUNT PREVIOUSLY PAID: NA
FORM OR REGISTRATION NO.: NA
FILING PARTY: NA
DATE FILED: NA
2
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
E.I. DU PONT DE NEMOURS AND COMPANY
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
Instructions)
(a) |_|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,234,022
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
(See Instructions) |_|
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
44.7%(1)
10 TYPE OF REPORTING PERSON (See Instructions)
CO
(1) E.I. du Pont de Nemours ("Parent"), DPC Newco, Inc. ("Merger Sub"), a
direct wholly owned subsidiary of DuPont Pharma, Inc. ("Purchaser"), a wholly
owned subsidiary of Parent, and CombiChem, Inc. ("CombiChem") entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of October 5,
1999, providing for, among other things, the merger of Merger Sub with and into
CombiChem. Simultaneously with the execution and delivery of the Merger
Agreement, Merger Sub entered into a Shareholders Agreement, dated as of October
5, 1999 (the "Shareholders Agreement"), with certain shareholders of CombiChem
3
<PAGE>
(the "Major Stockholders") who, as of September 27, 1999 own 4,549,591 shares of
CombiChem Common Stock in the aggregate. Under the Shareholders Agreement, the
Major Stockholders have agreed, subject to the terms thereof, to tender all of
their shares of CombiChem Common Stock to Merger Sub pursuant to the tender
offer described in the Merger Agreement, and to vote their shares in favor of
the merger described in the Merger Agreement. The Major Stockholders have also
granted Merger Sub a proxy to vote their shares, representing approximately
33.7% of the issued and outstanding shares of CombiChem Common Stock as of
September 27, 1999, in favor of the merger. Simultaneously with the execution
and delivery of the Merger Agreement, Parent also entered into a Stock Option
Agreement dated as of October 5, 1999 (the "Option Agreement"), pursuant to
which CombiChem granted to Parent an option to purchase 2,684,431 shares of
Common Stock, subject to the terms thereof. If this option were to be exercised
and these shares were issued to Parent and outstanding, such shares would,
together with the shares subject to the Shareholders Agreement, represent
approximately 44.7% of the issued and outstanding shares of CombiChem Common
Stock as of September 27, 1999. As permitted by each of the Merger Agreement,
the Shareholders Agreement and the Option Agreement, Parent assigned all of its
rights thereunder to Purchaser and Purchaser agreed to assume all of the
obligations of Parent thereunder.
4
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DUPONT PHARMA, INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
Instructions)
(a) |_|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,234,022
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
(See Instructions) |_|
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
44.7%(2)
10 TYPE OF REPORTING PERSON (See Instructions)
CO
(2) E.I. du Pont de Nemours ("Parent"), DPC Newco, Inc. ("Merger Sub"), a
direct wholly owned subsidiary of DuPont Pharma, Inc. ("Purchaser"), a wholly
owned subsidiary of Parent, and CombiChem, Inc. ("CombiChem") entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of October 5,
1999, providing for, among other things, the merger of Merger Sub with and into
CombiChem. Simultaneously with the execution and delivery of the Merger
Agreement, Merger Sub entered into a Shareholders Agreement, dated as of October
5, 1999 (the "Shareholders Agreement"), with certain shareholders of CombiChem
(the "Major Stockholders") who, as of September 27, 1999 own
5
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4,549,591 shares of CombiChem Common Stock in the aggregate. Under the
Shareholders Agreement, the Major Stockholders have agreed, subject to the terms
thereof, to tender all of their shares of CombiChem Common Stock to Merger Sub
pursuant to the tender offer described in the Merger Agreement, and to vote
their shares in favor of the merger described in the Merger Agreement. The Major
Stockholders have also granted Merger Sub a proxy to vote their shares,
representing approximately 33.7% of the issued and outstanding shares of
CombiChem Common Stock as of September 27, 1999, in favor of the merger.
Simultaneously with the execution and delivery of the Merger Agreement, Parent
also entered into a Stock Option Agreement dated as of October 5, 1999 (the
"Option Agreement"), pursuant to which CombiChem granted to Parent an option to
purchase 2,684,431 shares of Common Stock, subject to the terms thereof. If this
option were to be exercised and these shares were issued to Parent and
outstanding, such shares would, together with the shares subject to the
Shareholders Agreement, represent approximately 44.7% of the issued and
outstanding shares of CombiChem Common Stock as of September 27, 1999. As
permitted by each of the Merger Agreement, the Shareholders Agreement and the
Option Agreement, Parent assigned all of its rights thereunder to Purchaser and
Purchaser agreed to assume all of the obligations of Parent thereunder.
The foregoing summary of the Shareholders Agreement and Option Agreement is
qualified in its entirety by reference to such agreements, which have been filed
as exhibits to this Schedule 14D-1.
6
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DPC NEWCO, INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
Instructions)
(a) |_|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,549,591
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
(See Instructions) |_|
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
33.7%(3)
10 TYPE OF REPORTING PERSON (See Instructions)
CO
(3) E.I. du Pont de Nemours ("Parent"), DPC Newco, Inc. ("Merger Sub"), a
direct wholly owned subsidiary of DuPont Pharma, Inc. ("Purchaser"), a wholly
owned subsidiary of Parent, and CombiChem, Inc. ("CombiChem") entered into an
Agreement and Plan of Merger (the "Merger Agreement") as of October 5, 1999
providing for, among other things, the merger of Merger Sub with and into
CombiChem. Simultaneously with the execution and delivery of the Merger
Agreement, Merger Sub entered into a Shareholders Agreement dated as of October
5, 1999 (the "Shareholders Agreement") with certain shareholders of CombiChem
7
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(the "Major Stockholders") who, as of September 27, 1999 own 4,549,591 shares of
CombiChem Common Stock in the aggregate. Under the Shareholders Agreement, the
Major Stockholders have agreed, subject to the terms thereof, to tender all of
their shares of CombiChem Common Stock to Merger Sub pursuant to the tender
offer described in the Merger Agreement, and to vote their shares in favor of
the merger described in the Merger Agreement. The Major Stockholders have also
granted Merger Sub a proxy to vote their shares, representing approximately
33.7% of the issued and outstanding shares of CombiChem Common Stock as of
September 27, 1999, in favor of the merger. Simultaneously with the execution
and delivery of the Merger Agreement, Parent also entered into a Stock Option
Agreement dated as of October 5, 1999 (the "Option Agreement"), pursuant to
which CombiChem granted to Parent an option to purchase 2,684,431 shares of
Common Stock, subject to the terms thereof. If this option were to be exercised
and these shares were issued to Parent and outstanding, such shares would,
together with the shares subject to the Shareholders Agreement, represent
approximately 44.7% of the issued and outstanding shares of CombiChem Common
Stock as of September 27, 1999. As permitted by each of the Merger Agreement,
the Shareholders Agreement and the Option Agreement, Parent assigned all of its
rights thereunder to Purchaser and Purchaser agreed to assume all of the
obligations of Purchaser thereunder.
The foregoing summary of the Shareholders Agreement and Option Agreement is
qualified in its entirety by reference to such agreements, which have been filed
as exhibits to this Schedule 14D.
8
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This Tender Offer Statement on Schedule 14D-1 relates to a tender offer by
DPC Newco, Inc.("Offeror"), a Delaware corporation and a direct wholly owned
subsidiary of DuPont Pharma, Inc. ("Purchaser"), a Delaware corporation and
wholly owned subsidiary of E.I. du Pont de Nemours and Company, a Delaware
corporation ("Parent"), to purchase all outstanding shares (the "Shares") of
Common Stock, par value $.001 per share (the "Common Stock"), of CombiChem,
Inc., a Delaware corporation (the "Company"), at a purchase price of $6.75 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated October 12, 1999
(the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereto,
respectively, and which are incorporated herein by reference. Offeror is a
corporation, newly formed by Purchaser in connection with the Offer and the
transactions contemplated thereby.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is CombiChem, Inc. The address of the
principal executive office of the Company is 9050 Camino Sante Fe, Suite 200,
San Diego, California 92121.
(b) The information set forth in the Introduction and Section 1 ("Terms of
the Offer; Expiration Date") of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 6 ("Price Range of Shares") of the
Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g) This Schedule 14D-1 is filed by Parent, Purchaser
and Offeror. The information set forth in the Introduction and Section 9
("Certain Information Concerning Parent, Purchaser and Offeror") of the Offer to
Purchase and in Schedule I thereto is incorporated herein by reference.
(e) and (f) None of Offeror, Parent or Purchaser or, to the best of their
knowledge, any of the persons listed in Schedule I of the Offer to Purchase, has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
9
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ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 8
("Certain Information Concerning the Company"), Section 9 ("Certain Information
Concerning Parent, Purchaser and Offeror"), Section 11 ("Background of the
Offer") and Section 12 (Purpose of the Offer and the Merger; Plans for the
Company; The Transaction Documents) of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 10 ("Source and Amount of Funds")
of the Offer to Purchase is incorporated herein by reference.
(b) and (c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (c), (e) The information set forth in the Introduction, Section
12 ("Purpose of the Offer and the Merger; Plans for the Company; The Transaction
Documents") and Section 13 ("Dividends and Distributions") of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Section 13 ("Dividends and Distributions")
of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for Shares; Stock Quotation; Exchange Act Registration and Margin
Securities") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 1
("Terms of the Offer"), Section 11 ("Background of the Offer"), Section 9
("Certain Information Concerning Parent, Purchaser and Offeror") and Section 12
("Purpose of the Offer and the Merger; Plans for the Company; The Transaction
Documents") of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 1 ("Terms of the
Offer"), Section 9 ("Certain Information Concerning Parent and Offeror"),Section
10 ("Source and Amount of Funds"), Section 11 ("Background of the Offer"),
Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The
Transaction Documents"), Section 13 ("Dividends and
10
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Distributions")and Section 14 ("Certain Conditions to the Offer") of the Offer
to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning
Parent, Purchaser and Offeror") of the Offer to Purchase is incorporated herein
by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Parent, Purchaser Offeror") and Section 12 ("Purpose of
the Offer and the Merger; Plans for the Company; The Transaction Documents") of
the Offer to Purchase is incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Regulatory
and Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for Shares, Stock Quotation, Exchange Act Registration and Margin
Securities") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase, a copy of which is
attached as Exhibit (a)(1), and the Letter of Transmittal, a copy of which is
attached as Exhibit (a)(2), is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated October 5, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Joint Press Release, dated October 5, 1999.
(a)(8) Summary Advertisement
11
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(b) Not applicable.
(c)(1) Agreement and Plan of Merger dated as of October 5, 1999, among
Parent, Offeror and the Company.
(c)(2) Shareholders Agreement dated as of October 5, 1999 among the
persons listed on Schedule 1 thereto, Parent and Offeror.
(c)(3) Stock Option Agreement dated as of October 5, 1999, among Parent,
Offeror and the Company.
(c)(4) Mutual Non-Disclosure Agreement dated as of March 10, 1999,
between Company and DuPont Pharmaceuticals Company.
(d) None.
(e) Not applicable.
(f) None.
SIGNATURE
After due inquiry and to the best of the undersigneds' knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: October 12, 1999
E.I. DU PONT DE NEMOURS AND COMPANY
By: /s/ Susan M. Stalnecker
__________________________
Name: Susan M. Stalnecker
Title: Vice President and Treasurer
DUPONT PHARMA, INC.
By: /s/ Susan M. Stalnecker
__________________________
Name: Susan M. Stalnecker
Title: President
DPC NEWCO, INC.
By: /s/ Richard E. Gies
_________________________
Name: Richard E. Gies
Title: President
12
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EXHIBIT INDEX
EXHIBIT DESCRIPTION NO.
NO.
(a)(l) -- Offer to Purchase, dated October 12, 1999.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(4) -- Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees to Clients.
(a)(5) -- Notice of Guaranteed Delivery.
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) -- Joint Press Release, dated October 5, 1999.
(a)(8) -- Summary Advertisement.
(b) -- Not applicable.
(c)(1) -- Agreement and Plan of Merger dated as of October 5, 1999, among
Parent, Offeror and the Company.
(c)(2) -- Shareholders Agreement dated as of October 30, 1999, among the
persons listed on Schedule 1 thereto, Parent and Offeror.
(c)(3) -- Stock Option Agreement dated as of October 5, 1999 among Parent,
Offeror and the Company.
(c)(4) -- Mutual Non-Disclosure Agreement dated as of March 10, 1999
between Company and DuPont Pharmaceuticals Company.
(d) -- None.
(e) -- Not applicable.
(f) -- None.
13
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Exhibit (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
CombiChem, Inc.
at
$6.75 Net Per Share
by
DPC Newco, Inc.,
a direct wholly owned subsidiary of
DuPont Pharma, Inc.,
a wholly owned subsidiary of
E.I. du Pont de Nemours and Company
------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED.
------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) OF
THE OFFER AT LEAST THAT NUMBER OF SHARES OF COMMON STOCK EQUIVALENT TO A
MAJORITY OF THE TOTAL NUMBER OF SHARES OF COMMON STOCK ISSUED AND OUTSTANDING
ON A FULLY DILUTED BASIS. SEE SECTIONS 12 AND 14.
------------------
THE BOARD OF DIRECTORS OF COMBICHEM, INC. (THE "COMPANY") HAS UNANIMOUSLY
APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT REFERRED TO HEREIN AND
HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, HAS DECLARED THE MERGER
ADVISABLE AND RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER
AND TENDER ALL OF THEIR SHARES PURSUANT THERETO.
------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) should either (i) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal and mail or deliver the certificate(s) representing
the tendered Shares, and all other required documents, to the Depositary or
tender such Shares pursuant to the procedure for book-entry transfer set forth
in Section 3 or (ii) request his broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for him. A stockholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such person if he desires to
tender such Shares.
A stockholder who desires to tender Shares and whose certificates representing
such Shares are not immediately available or who cannot comply with the
procedures for book-entry transfer on a timely basis may tender such shares by
following the procedure for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to Morgan Stanley & Co.
Incorporated, the Dealer Manager, or to D.F. King & Co., Inc., the Information
Agent, at their respective addresses and telephone numbers set forth on the
back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies.
------------------
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
October 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<C> <S> <C>
INTRODUCTION........................................................... 1
THE OFFER.............................................................. 4
1. Terms of the Offer; Expiration Date............................... 4
2. Acceptance for Payment and Payment for Shares..................... 4
3. Procedure for Tendering Shares.................................... 5
4. Withdrawal Rights................................................. 8
5. Certain Federal Income Tax Consequences........................... 8
6. Price Range of Shares............................................. 9
7. Effect of the Offer on the Market for Shares; Stock Quotation;
Exchange Act Registration and Margin Securities................... 10
8. Certain Information Concerning the Company........................ 11
</TABLE>
<TABLE>
<CAPTION>
Page
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<C> <S> <C>
9. Certain Information Concerning Parent, Purchaser and Offeror........ 14
10. Source and Amount of Funds.......................................... 15
11. Background of the Offer............................................. 15
12. Purpose of the Offer and the Merger; Plans for the Company;
The Transaction Documents........................................... 15
13. Dividends and Distributions......................................... 30
14. Certain Conditions to the Offer..................................... 30
15. Certain Regulatory and Legal Matters................................ 32
16. Fees and Expenses................................................... 33
17. Miscellaneous....................................................... 34
Schedule I--Certain Information Concerning the Directors and Executive
Officers of Parent, Purchaser and Offeror............................... I-1
</TABLE>
i
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To the Holders of Common Stock of
COMBICHEM, INC.
INTRODUCTION
DPC Newco, Inc., a Delaware corporation ("Offeror") and a direct wholly-
owned subsidiary of DuPont Pharma, Inc., a Delaware corporation ("Purchaser")
and a wholly-owned subsidiary of E.I. du Pont de Nemours and Company, a
Delaware corporation ("Parent"), hereby offers to purchase all outstanding
shares of Common Stock, par value $.001 per share (the "Shares"), of
CombiChem, Inc., a Delaware corporation (the "Company"), at a purchase price
of $6.75 per Share, net to the seller in cash, without interest (the "Offer
Price"), upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
Offeror is a corporation newly formed by Purchaser in connection with the
Offer and the transactions contemplated thereby. For information concerning
Parent, Purchaser and Offeror see Section 9.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer.
Offeror will pay all fees and expenses of Morgan Stanley & Co. Incorporated,
which is acting as Dealer Manager (the "Dealer Manager"), The First Chicago
Trust Company of New York, which is acting as the Depositary (the
"Depositary"), and D.F. King & Co., Inc., which is acting as Information Agent
(the "Information Agent"), incurred in connection with the Offer. See Section
16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AND THE MERGER AGREEMENT AND DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY, HAS DECLARED THE MERGER ADVISABLE AND RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES
PURSUANT THERETO.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, THE COMPANY'S FINANCIAL
ADVISOR (THE "FINANCIAL ADVISOR"), HAS DELIVERED TO THE BOARD OF DIRECTORS OF
THE COMPANY ITS WRITTEN OPINION TO THE EFFECT THAT, BASED UPON AND SUBJECT TO
THE ASSUMPTIONS AND QUALIFICATIONS SET FORTH IN SUCH OPINION, AS OF OCTOBER 4,
1999, THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF SHARES (OTHER THAN
PARENT, PURCHASER, OFFEROR AND ANY AFFILIATES THEREOF) PURSUANT TO THE MERGER
AGREEMENT IS FAIR TO SUCH HOLDERS FROM A FINANCIAL POINT OF VIEW. SUCH OPINION
IS SET FORTH IN FULL AS AN ANNEX TO THE COMPANY'S SOLICITATION/RECOMMENDATION
STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"), WHICH IS BEING MAILED TO
STOCKHOLDERS OF THE COMPANY CONCURRENTLY HEREWITH.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER AT LEAST
THAT NUMBER OF SHARES OF COMMON STOCK EQUIVALENT TO A MAJORITY OF THE TOTAL
NUMBER OF SHARES OF COMMON STOCK ISSUED AND OUTSTANDING ON A FULLY DILUTED
BASIS (SUCH CONDITION, THE "MINIMUM CONDITION," AND SUCH SHARES, THE "MINIMUM
SHARES"). SEE SECTIONS 12 AND 14.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of October 5, 1999 (the "Merger Agreement"), among Parent, Offeror and the
Company, pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, Offeror will be merged with and
into the Company (the "Merger"). On October 11, 1999, Parent assigned all of
its rights under the Merger Agreement to
<PAGE>
Purchaser and Purchaser assumed all of Parent's obligations under the Merger
Agreement. Following the consummation of the Merger, the Company will be the
surviving corporation (the "Surviving Corporation"). In the Merger, each
outstanding Share (other than Shares held by the Company or any direct or
indirect subsidiary of the Company or owned by Parent, Purchaser or Offeror or
any other direct or indirect subsidiary of Parent or Purchaser and other than
Shares held by stockholders, if any, who perfect their appraisal rights under
Delaware or other applicable law (the "Excluded Shareholders")) will be
converted into, and become exchangeable for, the right to receive $6.75 per
Share in cash (the "Merger Consideration") and the Company will become a
direct wholly owned subsidiary of Purchaser. See Section 12.
Subject to the limitations imposed by the Merger Agreement and the
applicable rules and regulations of the Securities and Exchange Commission
(the "Commission"), Offeror expressly reserves the right, in its sole
discretion, at any time and from time to time, and regardless of whether or
not any of the events set forth in Section 14 hereof shall have occurred or
shall have been determined by Offeror to have occurred, (i) to extend the
period of time during which the Offer is open, and thereby delay acceptance
for payment of and the payment for any Shares, by giving oral or written
notice of such extension to the Depositary and (ii) to amend the Offer in any
other respect by giving oral or written notice of such amendment to the
Depositary.
If by 12:00 Midnight, New York City time, on Monday, November 8, 1999 (or
any other date or time then set as the expiration date, the "Expiration
Date"), any or all conditions to the Offer have not been satisfied or waived,
Offeror reserves the right (but shall not be obligated), subject to the terms
and conditions contained in the Merger Agreement and to the applicable rules
and regulations of the Commission, to (i) terminate the Offer and not accept
for payment any Shares and return all tendered Shares to tendering
stockholders, (ii) waive all the unsatisfied conditions and, subject to
complying with the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn,
(iii) extend the Offer and, subject to the right of stockholders to withdraw
Shares until the Expiration Date, retain the Shares that have been tendered
during the period or periods for which the Offer is extended or (iv) amend the
Offer.
There can be no assurance that Offeror will exercise its right to extend the
Offer. Any extension, waiver, amendment or termination will be followed as
promptly as practicable by public announcement thereof. In the case of an
extension, Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires that the announcement be issued no later than
9:00 a.m., Eastern time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act, subject to applicable
law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which
require that any material change in the information published, sent or given
to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change). Without limiting the obligation of Offeror under such rules or the
manner in which Offeror may choose to make any public announcement, Offeror
will not have any obligation to publish, advertise or otherwise communicate
any such public announcement other than by issuing a release to the Dow Jones
News Service.
In the Merger Agreement, Offeror has agreed that it will not, without the
prior consent of the Company, extend the Offer if all of the conditions to the
Offer have been satisfied, except that Offeror may, without the consent of the
Company, extend the Offer (i) if on the scheduled Expiration Date of the Offer
any of the conditions to the Offer shall not have been satisfied or waived,
for one or more periods (none of which shall exceed ten business days) but in
no event past 60 days from the date of the Merger Agreement unless the waiting
period applicable to the transactions contemplated by the Merger Agreement
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), has not terminated or expired and then in any event not later
than May 31, 2000, (ii) for such period as may be required by any rule,
regulation, interpretation or position of the Commission or its staff
applicable to the Offer or (iii) if all conditions to the Offer are satisfied
or waived but less than 90% of the shares of Common Stock issued and
outstanding on a fully diluted basis have been tendered, for one or more
periods (each such period to be for not more than five business days and such
extensions to be for an aggregate period of not more than fifteen business
days beyond
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the latest expiration date that would be permitted under clause (i) or (ii) of
this sentence). In addition, Offeror has agreed that, without the prior
written consent of the Company, it will not (i) decrease the amount or change
the form of consideration payable in the Offer, (ii) decrease the number of
Shares sought in the Offer, (iii) impose additional conditions to the Offer,
(iv) change any conditions to the Offer (including the conditions described in
Section 14) or amend any other term of the Offer if any such change or
amendment would be materially adverse to the holders of Shares (other than
Parent, Purchaser or Offeror) or (v) amend or waive the Minimum Condition.
If Offeror makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the consent of the Company, the Minimum Condition), Offeror
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-l under the Exchange Act.
The minimum period during which an offer must remain open following material
changes in the terms of the offer or information concerning the offer, other
than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances then existing, including the
relative materiality of the changed terms or information. With respect to a
change in price or a change in the percentage of securities sought, a minimum
period of 10 business days is generally required to allow for adequate
dissemination to stockholders. As used in this Offer to Purchase, "business
day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
Based on the representations and warranties of the Company contained in the
Merger Agreement, and information provided by the Company, as of September 27,
1999, (i) 13,489,604 Shares were outstanding, (ii) 3,355,069 shares of Common
Stock were reserved for issuance under the Company's 1997 Stock Incentive
Plan, of which options to acquire 1,213,476 shares of Common Stock were
outstanding, (iii) 150,000 shares of Common Stock were reserved for issuance
under the Company's 1997 Employee Stock Purchase Plan (together with the 1997
Stock Incentive Plan, the "Stock Plans"), of which approximately 35,000 shares
of Common Stock currently are available for purchase, (iv) 70,000 shares of
Common Stock were reserved for issuance pursuant to options granted outside of
the Stock Plans, of which options to acquire 70,000 shares of Common Stock
were outstanding, and (v) 247,220 shares of Common Stock were reserved for
issuance upon exercise of Warrants to purchase shares of Common Stock
("Warrants").
Based on the foregoing, the Minimum Condition will be satisfied if 7,527,651
Shares are validly tendered and not withdrawn prior to the Expiration Date.
The number of Shares required to be validly tendered and not withdrawn in
order to satisfy the Minimum Condition will increase to the extent additional
Shares are deemed to be outstanding on a fully diluted basis. For purposes of
the Offer to Purchase, any reference to a majority of the total issued and
outstanding shares or shares outstanding on a fully diluted basis excludes any
shares of Common Stock issuable upon exercise of or subject to the Stock
Option Agreement, as defined below.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required, the approval of the Merger by
the requisite vote or consent of the stockholders of the Company. Under the
General Corporation Law of the State of Delaware ("DGCL") and the Company's
certificate of incorporation, the stockholder vote necessary to approve the
Merger will be the affirmative vote of the holders of at least a majority of
the outstanding Shares. Accordingly, if Offeror acquires a majority of the
outstanding Shares, Offeror will have the voting power required to approve the
Merger without the affirmative vote of any other stockholders of the Company.
Furthermore, if Offeror acquires at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, Offeror would be able to effect the Merger
pursuant to the "short-form" merger provisions of Section 253 of the DGCL,
without prior notice to, or any action by, any other stockholder of the
Company. In such event, Offeror intends to effect the Merger as promptly as
practicable following the purchase of Shares in the Offer. The Merger
Agreement is more fully described in Section 12.
Concurrently with the execution and delivery of the Merger Agreement, the
Company granted to Parent an option to purchase up to 2,684,431 Shares at a
cash price equal to $6.75 per share and on the other terms and subject to the
conditions set forth in the Stock Option Agreement dated October 5, 1999,
among the Company, Parent and Offeror (the "Stock Option Agreement"). See
Section 12. Parent has assigned all of its rights under the Stock Option
Agreement to Purchaser and Purchaser has assumed all of Parent's obligations
thereunder.
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Concurrently with the execution and delivery of the Merger Agreement, First
Union Trust Company, National Association, as Voting Trustee Under that
Certain Voting Trust Agreement dated May 5, 1998 (Sprout Capital VII, L.P.),
DLJ Capital Corporation, Sequoia Capital VI, Sequoia Technology Partners VI,
Sequoia XXIV, Sequoia 1995, BVCF III, L.P., Brinson Trust Company, as Trustee
of the Brinson MAP Venture Capital Fund III, Vicente Anido, Jr., Peter Myers,
Michael Pazzani, Philippe Chambon, William Scott, Arthur Reidel, Lee McCracken
and Klaus Gubernator (collectively, the "Major Stockholders"), entered into a
Shareholders Agreement, dated as of October 5, 1999 (the "Shareholders
Agreement"), with Parent and Offeror. As of October 5, 1999, the Major
Stockholders owned approximately 34% of the Shares (approximately 30% of the
Shares on a fully diluted basis). Pursuant to the Shareholders Agreement, the
Major Stockholders have, among other things, entered into a voting agreement
with Parent and Offeror, granted an irrevocable proxy to Offeror's designees
with respect to their Shares, agreed to tender their Shares in the Offer and
agreed to grant to Offeror an option to purchase the Shares held by them at
the Offer Price under specified circumstances. If the Major Stockholders
tender in the Offer, as they have agreed to do, the Minimum Condition will be
satisfied if an additional 2,978,060 Shares (approximately 20% of the Shares
on a fully diluted basis) are tendered in the Offer by other stockholders. For
purposes of this Offer to Purchase, any reference to beneficial ownership of
Purchaser or Offeror of Shares or similar references shall exclude Shares
subject to the Shareholders Agreement. Parent has assigned all of its rights
under the Shareholders Agreement to Purchaser and Purchaser has assumed all of
Parent's obligations thereunder.
This Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is
made with respect to the Offer. This Offer to Purchase may contain forward-
looking statements that involve risks and uncertainties, including the risks
associated with satisfying the conditions to the Offer. Certain of these risk
factors, as well as additional risks and uncertainties, are detailed in the
Company's periodic filings with the Commission.
THE OFFER
1. Terms of the Offer; Expiration Date.
Upon the terms and subject to the conditions to the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not withdrawn in accordance with
Section 4. The term "Expiration Date" means 12:00 Midnight, New York City
time, on Monday, November 8, 1999, unless and until Offeror (subject to the
terms of the Merger Agreement) shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by Offeror, shall
expire.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition and the other conditions set forth in Section 14. Subject to the
terms and conditions contained in the Merger Agreement, Offeror reserves the
right (but shall not be obligated) to waive any or all such conditions.
The Company is providing Offeror with its list of stockholders and security
position listings for the purpose of disseminating the Offer to holders of
Shares. This Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed by Offeror to record holders of Shares and
will be furnished by Offeror to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. Acceptance for Payment and Payment for Shares.
Subject to and in accordance with the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Offeror will accept
4
<PAGE>
for payment and will pay for all Shares validly tendered prior to the
Expiration Date, and not properly withdrawn in accordance with Section 4, as
soon as practicable after the Expiration Date. Any determination concerning
the satisfaction or waiver of such terms and conditions will be within the
reasonable discretion of Offeror, and such determination will be final and
binding on all tendering stockholders. See Sections 1 and 14. Offeror
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of, or payment for, Shares in order to comply in whole or in part with
any applicable law. Any such delays will be effected in compliance with Rule
14e-1(c) under the Exchange Act (relating to Offeror's obligation to pay for
or return tendered Shares promptly after the termination or withdrawal of the
Offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares or timely confirmation (a "Book-Entry Confirmation") of the
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3, (ii) a Letter of Transmittal (or facsimile
thereof) properly completed and duly executed, with any required signature
guarantees, or an Agent's Message (as hereinafter defined) in connection with
a book-entry transfer and (iii) any other documents required by the Letter of
Transmittal.
If the per Share consideration to be paid to tendering stockholders pursuant
to the Offer is increased, all stockholders who validly tender and do not
withdraw their Shares will receive the highest per Share consideration paid
pursuant to the Offer, regardless of whether the stockholder tendered his
shares before or after any such increase.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-
Entry Confirmation, that such participant has received and agrees to be bound
by the terms of the Letter of Transmittal and that Offeror may enforce such
agreement against such participant.
For purposes of the Offer, Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Offeror and not
withdrawn as, if and when Offeror gives oral or written notice to the
Depositary of Offeror's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions to the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Offeror and
transmitting payment to tendering stockholders. If Offeror is delayed in its
acceptance for payment of, or payment for, Shares or is unable to accept for
payment or pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Offeror's rights under the Offer (but subject to compliance with
Rule 14e-l(c) under the Exchange Act, which requires that a tender offeror pay
the consideration offered or return the tendered securities promptly after the
termination or withdrawal of a tender offer), the Depositary may,
nevertheless, on behalf of Offeror, retain tendered Shares, and any such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to exercise, and duly exercise, withdrawal rights as described in
Section 4. Under no circumstances will interest be paid on the purchase price
of the Shares to be paid by Offeror, regardless of any extension of the Offer
or any delay in making such payment.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set
forth in Section 3, such Shares will be credited to an account maintained at
the Book-Entry Transfer Facility), as promptly as practicable after the
expiration or termination of the Offer.
3. Procedure for Tendering Shares.
Valid Tender. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), together with any required signature
5
<PAGE>
guarantees, or an Agent's Message in connection with a book-entry transfer of
Shares, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date. In addition, either
(i) certificates for tendered Shares must be received by the Depositary along
with the Letter of Transmittal at one of such addresses or such Shares must be
tendered pursuant to the procedure for book-entry transfer set forth below
(and a Book-Entry Confirmation received by the Depositary), in each case prior
to the Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below.
The method of delivery of Share certificates, the Letter of Transmittal and
all other required documents, including delivery through any book-entry
transfer facility, is at the election and risk of the tendering stockholder.
Shares will be deemed delivered only when actually received by the Depositary.
If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Shares by causing the Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry at the Book-Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) with any required signature guarantees or an Agent's
Message in connection with a book-entry delivery of Shares, and any other
documents required by the Letter of Transmittal, must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedure described below. Delivery of documents to the Book-Entry Transfer
Facility in accordance with the Book-Entry Transfer Facility's procedures does
not constitute delivery to the Depositary.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered
holder of Shares (which term, for purposes of this Section, includes any
participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the Shares) tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or(ii) such Shares are tendered for the account of a
bank, broker, dealer, credit union, savings association or other entity that
is a member in good standing of a recognized Medallion Program approved by The
Securities Transfer Association, Inc. (an "Eligible Institution"). In all
other cases, all signatures on the Letter of Transmittal must be guaranteed by
an Eligible Institution. See Instructions 1 and 5 to the Letter of
Transmittal. If the certificates for Shares are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made or certificates for Shares not tendered or not accepted for payment
are to be issued to a person other than the registered holder of the
certificates surrendered, the tendered certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as
described above. See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Offeror herewith, is received by the
Depositary as provided below, prior to the Expiration Date; and
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(3) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to such Shares), together with a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees and any
other documents required by the Letter of Transmittal, are received by the
Depositary within three Nasdaq National Market trading days after the date
of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a signature guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for the Shares or a Book-Entry
Confirmation with respect to such Shares, (ii) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantees or an Agent's Message in connection with a
book-entry delivery of Shares, and (iii) any other documents required by the
Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares or Book-Entry
Confirmations are actually received by the Depositary. Under no circumstances
will interest be paid on the purchase price of the Shares to be paid by
Offeror, regardless of any extension of the Offer or any delay in making such
payment.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and
Offeror upon the terms and subject to the conditions to the Offer.
Backup Withholding. Under the United States federal income tax backup
withholding rules, payments in connection with the Offer or the Merger may be
subject to "backup withholding" as discussed in Section 5.
Appointment. By executing the Letter of Transmittal, the tendering
stockholder will irrevocably appoint designees of Offeror as such
stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by
such stockholder and accepted for payment by Offeror and with respect to any
and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after October 12, 1999. All such proxies shall be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Offeror accepts for
payment Shares tendered by such stockholder as provided herein. Upon such
acceptance for payment, all prior powers of attorney and proxies given by such
stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective). The
designees of Offeror will thereby be empowered to exercise all voting and
other rights with respect to such Shares or other securities or rights in
respect of any annual, special or adjourned meeting of the Company's
stockholders, or otherwise, as they in their sole discretion deem proper.
Offeror reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon Offeror's acceptance for payment of such
Shares, Offeror must be able to exercise full voting and other rights with
respect to such Shares and other securities or rights, including voting at any
meeting of stockholders then scheduled.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Offeror, in its sole discretion, which
determination will be final and binding. Offeror reserves the absolute right
to reject any or all tenders determined by it not to be in proper form or the
acceptance for payment of or payment for which may, in the opinion of
Offeror's counsel, be unlawful. Offeror also reserves the absolute right, in
its sole discretion, subject to the terms and conditions of the Merger
Agreement, to waive any of the conditions to the Offer or any defect or
irregularity in any tender with respect to any particular Shares, whether or
not similar defects or irregularities are waived in the case of other Shares.
No tender of Shares will be deemed to have been validly made until all defects
or irregularities relating thereto have been cured or waived. None of Parent,
Purchaser, Offeror, the Depositary, the
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Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. Offeror's interpretation
of the terms and conditions of the Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
4. Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant
to the procedures set forth below at any time prior to the Expiration Date
and, unless accepted for payment and paid for by Offeror pursuant to the
Offer, may also be withdrawn at any time after December 10, 1999.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been tendered pursuant
to the procedures for book-entry transfer set forth in Section 3, the notice
of withdrawal must specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals
of tenders of Shares may not be rescinded, and any Shares properly withdrawn
will thereafter be deemed not validly tendered for any purpose of the Offer.
However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Offeror in its sole discretion,
which determination will be final and binding. None of Parent, Purchaser,
Offeror, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. Certain Federal Income Tax Consequences.
The following is a summary of certain federal income tax consequences of the
Offer and the Merger to holders whose Shares are purchased pursuant to the
Offer or whose Shares are converted into the right to receive cash in the
Merger. The summary is based on the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), applicable current and proposed United States
treasury regulations issued thereunder, judicial authority and administrative
rulings and practice, all of which are subject to change, possibly with
retroactive effect, at any time and, therefore, the following statements and
conclusions could be altered or modified. The discussion does not address
holders of Shares in whose hands shares are not capital assets, nor does it
address holders who received Shares as part of a hedging, "straddle,"
conversion or other integrated transaction, upon conversion of securities or
exercise of warrants or other rights to acquire Shares or pursuant to the
exercise of employee stock options or otherwise as compensation, or to holders
of Shares who are in special tax situations (such as insurance companies, tax-
exempt organizations, financial institutions, United States expatriates or
non-U.S. persons). Furthermore, the discussion does not address the tax
treatment of holders who exercise appraisal rights in the Merger, nor does it
address any aspect of foreign, state or local taxation or estate and gift
taxation.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH
HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH
8
<PAGE>
STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX
LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes under the Code (and also
may be a taxable transaction under applicable state, local, foreign and other
income tax laws). In general, for federal income tax purposes, a holder of
Shares will recognize gain or loss in an amount equal to the difference
between its adjusted tax basis in the Shares sold pursuant to the Offer or
converted into the right to receive cash in the Merger and the amount of cash
received therefor. Gain or loss must be determined separately for each block
of Shares (i.e., Shares acquired at the same cost in a single transaction)
sold pursuant to the Offer or converted to cash in the Merger. Such gain or
loss will be capital gain or loss and will be long-term gain or loss if, on
the date of sale (or, if applicable, the date of the Merger), the Shares were
held for more than one year.
Under the United States federal income tax backup withholding rules,
payments in connection with the Offer or the Merger may be subject to "backup
withholding" at a rate of 31%. In order to avoid backup withholding, each
tendering stockholder, unless an exemption applies, must provide the
Depositary with such stockholder's correct taxpayer identification number and
certify that such stockholder is not subject to such backup withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal.
Backup withholding is not an additional tax but merely an advance payment,
which may be refunded to the extent it results in an overpayment of tax.
Certain persons generally are entitled to exemption from backup withholding,
including corporations, financial institutions and certain foreign
individuals. Each stockholder should consult with such holder's own tax
advisor as to such holder's qualification for exemption from backup
withholding and the procedure for obtaining such exemption.
All stockholders surrendering Shares pursuant to the Offer should complete
and sign the main signature form and the Substitute Form W-9 included as part
of the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding (unless an applicable exemption exists
and is proved in a manner satisfactory to Offeror and the Depositary).
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instruction 9 to the Letter of Transmittal.
6. Price Range of Shares.
The Shares are included for trading on the Nasdaq National Market System
("Nasdaq/NMS") under the trading symbol "CCHM." The Company has never paid
cash dividends on the Shares. The following table sets forth, for the periods
indicated, the high and low sale prices per share of Common Stock on the
Nasdaq/NMS for the applicable periods.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1998
Second Quarter (beginning May 8, 1998).............. $8 3/4 $6 1/8
Third Quarter....................................... 8 5/8 3 3/8
Fourth Quarter...................................... 5 7/8 3 3/8
1999
First Quarter....................................... $ 5 $2 3/8
Second Quarter...................................... 5 1/8 2 13/16
Third Quarter....................................... 5 3/4 2 3/4
Fourth Quarter (through October 11, 1999)........... 6 21/32 5
</TABLE>
On October 5, 1999, the last full trading day before the public announcement
of the execution of the Merger Agreement, the closing sales price per Share as
reported on the Nasdaq/NMS was $5 11/16. On October 11, 1999, the last full
trading day before the commencement of the Offer, the closing sales price per
Share as reported on
9
<PAGE>
the Nasdaq/NMS was $6 5/8 per Share. Stockholders are urged to obtain current
market quotations for the Shares.
7. Effect of the Offer on the Market for Shares; Stock Quotation; Exchange Act
Registration and Margin Securities.
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares, if any, held by the public.
The Shares are currently listed and traded on the Nasdaq/NMS, which
constitutes the principal trading market for the Shares. Depending upon the
number of Shares purchased pursuant to the Offer, the Shares may no longer
meet the requirements of the NASD for continued inclusion on the Nasdaq/NMS,
which requires that an issuer either (i) have at least 750,000 publicly held
shares, 400 round lot shareholders, a market value of $5.0 million, two active
market makers, net tangible assets of $4.0 million, and a minimum bid price of
$1 or (ii) have at least 1.1 million publicly held shares, 400 round lot
shareholders, a market value of $15.0 million, a minimum bid price of $5, four
active market makers and either (A) market capitalization of $50.0 million or
(B) total assets and total revenue of $50.0 million, each for the most
recently completed fiscal year or two of the last three most recently
completed fiscal years. If the Nasdaq/NMS were to cease to publish quotations
for the Shares, it is possible that the Shares would continue to trade in the
over-the-counter market and that price or other quotations would be reported
by other sources. The extent of the public market for such Shares and the
availability of such quotations would depend, however, upon such factors as
the number of stockholders and/or the aggregate market value of such
securities remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration under the Exchange Act, as described below and other factors.
Parent, Purchaser and Offeror cannot predict whether the reduction in the
number of Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for, or marketability of, the Shares or
whether it would cause future market prices to be greater or lesser than the
Offer Price.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders
and to the Commission and would make certain provisions of the Exchange Act no
longer applicable to the Company, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement of furnishing
a proxy statement pursuant to Section 14(a) of the Exchange Act in connection
with stockholders' meetings and the related requirement of furnishing an
annual report to stockholders, and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
or 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired or eliminated.
Purchaser intends to seek delisting of the Shares from the Nasdaq/NMS and to
cause the Company to apply for termination of registration of the Shares under
the Exchange Act as soon after the completion of the Offer as the requirements
for such delisting and termination are met. If registration of the Shares is
not terminated prior to the Merger, then the Shares will cease to be reported
on the Nasdaq/NMS and the registration of the Shares under the Exchange Act
will be terminated following the consummation of the Merger.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, it is
possible that following the Offer the Shares would no longer
10
<PAGE>
constitute "margin securities" for the purposes of the margin regulations of
the Federal Reserve Board and therefore could no longer be used as collateral
for loans made by brokers.
8. Certain Information Concerning the Company.
Except as specifically set forth herein, the historical information
concerning the Company contained in this Offer to Purchase, including
financial information, has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources.
None of Parent, Purchaser, Offeror, the Information Agent or the Depositary
assumes any responsibility for the accuracy or completeness of the information
concerning the Company contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information to Parent,
Purchaser or Offeror.
The Company is a Delaware corporation with its principal place of business
located at 9050 Camino Santa Fe, San Diego, California 92121. According to the
Company's Form 10-K for the period ended December 31, 1998, the Company is a
computational product discovery company that applies its proprietary design
technology and rapid synthesis capabilities to accelerate the discovery
process for new drugs and chemical products. The Company believes its approach
offers pharmaceutical and chemical companies the opportunity to conduct their
discovery efforts in a more productive and cost-effective manner.
Set forth below is certain selected historical consolidated financial
information with respect to the Company and its subsidiaries excerpted or
derived from the audited consolidated financial statements included in the
Company's Form 10-K and from the unaudited consolidated financial statements
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to such reports
and such other documents and all the financial information (including any
related notes) contained therein. The reports and other documents filed with
the Commission should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information."
CombiChem, Inc.
Selected Historical Financial Data
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1998 1997 1996 1995 1994 (1)
-------- ------- ------- ------ --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenue..................... $ 15,074 $ 7,471 $ 2,967 $ 50 $ --
Total operating expenses.......... 19,111 12,004 8,085 6,763 711
Loss from operations.............. (4,037) (4,533) (5,118) (6,713) (711)
Net loss.......................... (3,312) (4,322) (5,118) (6,675) (706)
Basic net loss per share.......... (0.36) (4.45) (11.30) (19.18)
Shares used in computing basic net
loss per share................... 9,140 971 453 348
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------
1998 1997 1996 1995 1994 (1)
-------- ------- -------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents...... $ 20,334 $ 5,867 $ 367 $ 3,136 $ 1,622
Short-term investments......... 9,025 11,055 12,166 -- --
Working capital................ 26,146 12,896 8,946 1,990 1,420
Total assets................... 41,980 25,376 16,505 3,997 1,796
Long-term obligations,
including
current portion............... 6,214 4,944 2,541 584 --
Redeemable convertible
preferred stock............... -- 23,130 23,107 9,650 2,250
Accumulated deficit............ (20,133) (16,821) (12,499) (7,381) (706)
Total stockholders' equity
(deficit)..................... 30,177 (6,449) (12,516) (7,414) (682)
</TABLE>
<TABLE>
<CAPTION>
Six months Ended June 30,
-----------------------------------
1999 1998
--------------- ----------------
(in thousands, except per data)
<S> <C> <C> <C>
Statement of Operations Data
(Unaudited):
Total revenue....................... $ 6,317 $ 7,005
Total operating expenses............ 12,402 8,974
Loss from operations................ (6,265) (1,969)
Net loss............................ (6,675) (1,731)
Basic net loss per share............ (0.52) (0.16)
Shares used in computing basic
net loss per share................. 12,916 10,799
<CAPTION>
June 30, 1999 December 31,
(unaudited) 1998
--------------- ----------------
(In Thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $ 15,878 $ 20,334
Short-term investments.............. 8,049 9,025
Working capital..................... 18,704 26,146
Total assets........................ 34,446 41,980
Long-term obligations, including
current portion.................... 5,962 6,214
Redeemable convertible
preferred stock.................... -- --
Accumulated deficit................. (26,808) (20,133)
Total stockholders' equity.......... 23,995 30,177
</TABLE>
- --------
(1) Period from May 23, 1994 (inception) to December 31, 1994.
12
<PAGE>
Certain Company Projections
To the knowledge of Parent, Purchaser and Offeror, the Company does not as a
matter of course make public forecasts as to its future financial performance.
However, in connection with the preliminary discussions concerning the
feasibility of the Offer and the Merger, the Company furnished Parent with
certain financial projections.
As part of Parent and Purchaser's due diligence review of the Company and
the Company's presentation to Parent and Purchaser of its business, technology
and strategy on August 30, 1999, the Company reviewed its five year financial
forecast. The Company projected revenues of $22.6 million in 1999, $31.1
million in 2000, $37.7 million in 2001, $45.9 million in 2002 and $54.6
million in 2003. Net income (loss) was projected by the Company to be ($2.3
million) in 1999, $0.5 million in 2000, $5.6 million in 2001, $11.5 million in
2002 and $12.5 million in 2003. Neither Parent nor Purchaser considered any of
the foregoing projections to be significant in its decision to enter into the
Merger Agreement.
The projections set forth above (the "Projections") are derived or excerpted
from information provided by the Company and are based on numerous assumptions
concerning future events. The Projections have not been adjusted to reflect
the effects of the Offer or the Merger including, without limitation, the
effect of the announcement of execution of the Merger Agreement on existing
and future collaborations of the Company. The Projections should be read
together with the other information contained in this Section 8.
The Projections were not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants
regarding projections or forecasts and are included herein only because such
information was provided to Parent and Purchaser. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from the Projections. The Projections
reflect numerous assumptions (not all of which were stated in the Projections
and not all of which were provided to Parent and Purchaser), all made by
management of the Company, with respect to industry performance, general
business, economic, market and financial conditions and other matters, all of
which are difficult to predict, many of which are beyond the Company's control
and none of which were subject to approval by Parent, Purchaser or Offeror.
Accordingly, there can be no assurance that the assumptions made in preparing
the Projections will prove accurate, and actual results may be materially
greater or less than those contained in the Projections. The inclusion of the
Projections herein should not be regarded as an indication that any of Parent,
Purchaser, Offeror or their respective representatives considered or consider
the Projections to be a reliable prediction of future events, and the
Projections should not be relied upon as such. None of Parent, Purchaser,
Offeror or their respective representatives assumes any responsibility for the
validity, reasonableness, accuracy or completeness of the Projections. In
fact, none of Parent, Purchaser or Offeror considered any of the projections
to be significant in its decision to enter into the Merger Agreement. None of
Parent, Purchaser, Offeror or any of their representatives has made, or makes,
any representation to any person regarding the information contained in the
Projections and none of them intends to update or otherwise revise the
Projections to reflect circumstances existing after the date when made or to
reflect the occurrence of future events even in the event that any or all of
the assumptions underlying the Projections are shown to be in error.
Available Information
The Company is subject to the reporting requirements of the Exchange Act
and, in accordance therewith, is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information as of particular dates concerning the Company's
directors and officers, their remuneration, options granted to them, the
principal holders of the Company's securities and any material interests of
such persons in transactions with the Company is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located in the Northwestern Atrium Center, 500 West
Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World
13
<PAGE>
Trade Center, 13th Floor, New York, New York 10048. Copies should be
obtainable, by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a World Wide Web site on
the Internet at http://www.sec.gov that contains reports, proxy statements and
other information regarding registrants that file electronically with the
Commission.
9. Certain Information Concerning Parent, Purchaser and Offeror.
Purchaser is an indirect wholly owned subsidiary of Parent. Founded in 1802,
Parent is a global science and technology-based company. Parent serves
worldwide markets including food and nutrition, healthcare, agriculture,
fashion and apparel, home and construction, electronics and transportation.
Parent operates in 65 countries and has 97,000 employees.
Together, Parent and Purchaser operate a worldwide business that focuses on
research, development and delivery of pharmaceuticals to treat unmet medical
needs in the fights against HIV infection, cardiovascular disease, central
nervous system disorders, cancer, arthritis and related disorders and also is
a leader in medical imaging.
Parent is subject to the reporting requirements of the Exchange Act and, in
accordance therewith, is required to file reports and other information with
the Commission relating to its business, financial condition and other
matters. Information as of particular dates concerning Parent's directors and
officers, their remuneration, options granted to them, the principal holders
of Parent's securities and any material interests of such persons in
transactions with Parent is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. Such
reports and other documents should be available for inspection and copies
should be attainable from the offices of the Commission in the same manner as
set forth under "Available Information" in Section 8 above.
Offeror is a Delaware corporation, newly formed by Purchaser in connection
with the Offer and the transactions contemplated thereby. The offices of
Parent, Purchaser and Offeror are located at 1007 Market Street, Wilmington,
Delaware 19898. Purchaser directly owns all the outstanding capital stock of
Offeror. It is not anticipated that, prior to the consummation of the Offer
and the Merger, Offeror will have any significant assets or liabilities or
will engage in any activities other than those incident to the Offer and the
Merger.
For certain information concerning the directors and executive officers of
Parent, Purchaser and Offeror, see Schedule I to this Offer to Purchase.
Except as set forth in this Offer to Purchase: (i) none of Parent, Purchaser
and Offeror and, to the best knowledge of any of the foregoing, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority owned subsidiary of any of the foregoing, beneficially owns or has a
right to acquire any Shares or any other equity securities of the Company;
(ii) none of Parent, Purchaser and Offeror and, to the best knowledge of any
of the foregoing, any of the persons or entities referred to in clause (i)
above or any of their executive officers, directors, or subsidiaries has
effected any transaction in the Shares or any other equity securities of the
Company during the past 60 days; (iii) none of Parent, Purchaser and Offeror
and, to the best knowledge of any of the foregoing, any of the persons listed
in Schedule I to this Offer to Purchase has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including but not limited to, contracts,
arrangements, understandings or relationships concerning the transfer or
voting thereof, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies, consents or authorizations; (iv) since January 1, 1996, there have
been no transactions or business relationships which would be required to be
disclosed under the rules and regulations of the Commission between any of
Parent, Purchaser, Offeror or any of their respective subsidiaries or, to the
best knowledge of any of Parent, Purchaser, Offeror or any of the persons
listed in Schedule I to this Offer to Purchase, on the one hand, and the
Company or any of its executive officers, directors or affiliates, on the
other hand; and (v) since January 1, 1996, there have been no contacts,
negotiations or
14
<PAGE>
transactions between any of Parent, Purchaser, Offeror or any of their
respective subsidiaries or, to the best knowledge of any of Parent, Purchaser,
Offeror or any of the persons listed in Schedule I to this Offer to Purchase,
on the one hand, and the Company or its subsidiaries or affiliates, on the
other hand, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets of the Company or any of its
subsidiaries.
Except for discussions with respect to certain possible collaborative
arrangements between Parent and the Company, none of Parent, Purchaser or
Offeror had any relationship with the Company prior to the commencement of the
discussions which led to the execution of the Merger Agreement. See Section
11. Each of Parent, Purchaser and Offeror disclaims that it is an "affiliate"
of the Company within the meaning of Rule 13e-3 under the Exchange Act.
10. Source and Amount of Funds.
The total amount of funds required by Offeror to purchase all of the Shares
and to pay related fees and expenses is expected to be approximately $100
million. Offeror intends to obtain all of such funds from Purchaser which in
turn would obtain such funds from Parent or Purchaser's existing working
capital.
11. Background of the Offer.
On August 25, 1999, an Executive Vice President and Chief Operating Officer
of Parent, contacted the President and Chief Executive Officer of the Company,
concerning a possible acquisition of the Company by Purchaser. On several
occasions prior to August 25, 1999, various representatives of Parent,
Purchaser and the Company had discussed the possibility of entering into a
collaborative agreement. However, no such agreement was entered into by the
Company and Purchaser or Parent.
On August 30, 1999, representatives and advisors of Parent and Purchaser met
with representatives and advisors of the Company at the Company's headquarters
to discuss the possibility of Purchaser acquiring the Company. Various
representatives of the Company delivered presentations reviewing the Company's
technology, business and strategy. Representatives of Parent and Purchaser
conducted initial due diligence of the Company at that time and indicated to
the Company that, subject to satisfactory completion of due diligence and
negotiation of a mutually satisfactory merger agreement, Purchaser would
consider acquiring the Company.
From August 31, 1999 to September 15, 1999, representatives of Parent,
Purchaser and the Company discussed and negotiated various terms of the
proposed transaction. On September 15, 1999, Parent and Purchaser delivered a
written term sheet to the Company which described a proposed offer by
Purchaser to acquire the Company at a price of $6.75 per share, subject to
certain terms and conditions, including the negotiation of a merger agreement,
a stock option agreement, a shareholders agreement and various employment
agreements with key employees of the Company. Representatives of Parent,
Purchaser and the Company continued to discuss and negotiate the proposed
transaction and on September 20, 1999, representatives of Parent, Purchaser
and the Company agreed in principle to a merger at a per share price of $6.75,
subject to the terms and conditions set forth in the written term sheet and
subject to approval of their respective Boards of Directors.
On September 22, 1999, representatives of Purchaser provided a draft of the
Merger Agreement to representatives of the Company and on September 23, 1999
representatives of the Company, Parent and Purchaser, and their respective
legal and financial advisors, met at the offices of Parent to negotiate the
Merger Agreement and related documents. Representatives of the Company and
Parent and Purchaser and their respective legal and financial advisors
conducted business and legal due diligence and negotiated the terms of the
Merger Agreement and related documents from September 23, 1999 through October
5, 1999. The Merger Agreement and related documents were executed on October
5, 1999, at which time Parent and the Company issued a joint press release.
12. Purpose of the Offer and the Merger; Plans for the Company; the
Transaction Documents.
Purpose of the Offer and the Merger
The purpose of the Offer is to enable Purchaser to acquire control of, and
the entire equity interest in, the Company. The purpose of the Merger is to
acquire all outstanding Shares not purchased pursuant to the Offer. The
purchase of Shares pursuant to the Offer will increase the likelihood that the
Merger will be effected. Following the completion of the Offer, Purchaser
intends to acquire any remaining Shares not then owned by it
15
<PAGE>
by consummating the Merger. In the Merger, each outstanding Share (other than
Shares held by the Excluded Shareholders), will be converted into the right to
receive the Merger Consideration, without interest, and the Company will
become a wholly owned subsidiary of Purchaser.
The acquisition of the entire interest in the Company is structured as a
cash tender offer followed by a merger in order to expedite the opportunity
for Purchaser to obtain a controlling interest in the Company. Under the DGCL
and the Company's certificate of incorporation, the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve the
Merger. If the Minimum Condition is satisfied, Purchaser would have sufficient
voting power to approve the Merger without the affirmative vote of any other
stockholder of the Company.
Plans for the Company
Following the Offer and the Merger, Purchaser intends to operate the Company
generally consistent with the Company's existing plans and programs. If and to
the extent that the Purchaser acquires control of the Company, Purchaser
intends to conduct a detailed review of the Company and its assets, corporate
structure, capitalization, operations, properties, policies, management and
personnel and consider and determine what, if any, changes would be desirable
in light of the circumstances which then exist. Such strategies could include,
among other things and subject to the terms of the Merger Agreement, changes
in the Company's business, corporate structure, certificate of incorporation,
bylaws, capitalization, management or dividend policy.
Except as noted in this Offer to Purchase, Purchaser has no present plans or
proposals that would result in an extraordinary corporate transaction, such as
a merger, reorganization, liquidation, or sale or transfer of a material
amount of assets, involving the Company or any subsidiary of the Company or
any other material changes in the Company's capitalization, dividend policy,
corporate structure, business or composition of its management or Board of
Directors. Following completion of the acquisition, the Company will operate
as part of Purchaser and will remain in California, a center for biotechnology
and computer technology development.
The Transaction Documents
The Merger Agreement
The following is a summary of the material terms of the Merger Agreement. As
expressly permitted by the Merger Agreement, Parent has assigned all of its
rights under the Merger Agreement to Purchaser and Purchaser has assumed all
of Parent's obligations under the Merger Agreement. This summary is not a
complete description of the terms and conditions thereof and is qualified in
its entirety by reference to the full text thereof, which is incorporated
herein by reference and a copy of which has been filed with the Commission as
an exhibit to the Schedule 14D-1. The Merger Agreement may be examined, and
copies thereof may be obtained, as set forth in Section 8.
The Offer. The Merger Agreement provides for the commencement of the Offer,
in connection with which Parent and Offeror have expressly reserved the right
to waive certain conditions to the Offer, but without the prior written
consent of the Company, Offeror has agreed not to (i) decrease the amount or
change the form of consideration payable in the Offer, (ii) decrease the
number of Shares sought in the Offer, (iii) impose additional conditions to
the Offer, (iv) change any conditions to the Offer or amend any other term of
the Offer if any such change or amendment would be materially adverse in any
respect to the holders of Shares (other than Parent or Offeror), (v) except as
provided below, extend the Offer if all of the conditions to the Offer have
been satisfied or (vi) amend or waive the Minimum Condition. Notwithstanding
the foregoing, Offeror may, without the consent of the Company, (A) extend the
Offer, if on the scheduled Expiration Date of the Offer any of the conditions
to the Offer shall not have been satisfied or waived, for one or more periods
(none of which shall exceed ten business days) but in no event past 60 days
from the date of the Merger Agreement, unless the waiting period applicable to
the transactions contemplated by the Merger Agreement under the HSR Act has
not terminated or expired, and then in any event not later than May 31, 2000,
(B) extend the Offer for such period as
16
<PAGE>
may be required by any rule, regulation, interpretation or position of the
Commission or its staff applicable to the Offer or (C) extend the Offer for
one or more periods (each such period to be for not more than five business
days and such extensions to be for an aggregate period of not more than
fifteen business days beyond the latest expiration date that would otherwise
be permitted under clause (A) or (B) of this sentence) if on such expiration
date the conditions to the Offer shall have been satisfied or waived but there
shall not have been tendered that number of Shares which would equal more than
90% of the issued and outstanding Shares on a fully diluted basis. So long as
the Merger Agreement is in effect and the conditions to the Offer have not
been satisfied on any scheduled Expiration Date of the Offer, then, provided
that all such conditions are and continue to be reasonably probable of being
satisfied by the date that is 45 days after the commencement of the Offer,
Offeror shall extend the Offer for one period of not more than 5 business days
if requested to do so by the Company; provided that Offeror shall not be
required to extend the Offer beyond 45 days after commencement of the Offer
or, if earlier, the date of termination of the Merger Agreement in accordance
with the terms thereof.
Consideration to be Paid in the Merger. The Merger Agreement provides that
subject to the terms and conditions set forth in the Merger Agreement and the
applicable provisions of the DGCL, Offeror shall be merged with and into the
Company, and the Company shall be the Surviving Corporation and shall be a
wholly owned subsidiary of Purchaser. In the Merger, each share of common
stock, $.01 par value per share, of Offeror issued and outstanding immediately
prior to the time of filing of a certificate of merger relating to the Merger
with the Secretary of State of the State of Delaware, or such later time as is
set forth therein (the "Effective Time"), shall continue to remain outstanding
and shall constitute one share of common stock of the Surviving Corporation.
At the Effective Time, each outstanding Share (other than Shares owned by
Parent or any direct or indirect subsidiary of Parent or the Excluded
Shareholders or shares owned by the Company or any direct or indirect
subsidiary of the Company), shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive the Merger Consideration, without interest. The Merger Agreement
provides that (subject to the provisions of the Merger Agreement and the
applicable provisions of the DGCL) the closing of the Merger shall occur on
the latest to occur of (i) the business day on which the condition set forth
in Section 8.1(a) of the Merger Agreement is satisfied or waived in accordance
with the Merger Agreement or (ii) the first business day following the date on
which the last to be satisfied or waived of the other conditions set forth in
Article VIII of the Merger Agreement (other than those conditions that by
their nature are to be satisfied at the closing of the Merger, but subject to
the satisfaction or waiver of those conditions) are satisfied or waived in
accordance with the Merger Agreement.
Treatment of Warrants and Stock Options. The Merger Agreement provides that
at the Effective Time, each warrant to purchase shares of Common Stock listed
on Schedule 6.1(b) of the Merger Agreement (the "Warrants") will be canceled
in exchange for a cash payment by the Company of an amount equal to the
excess, if any, of the Offer Price over the exercise price per share of Common
Stock subject to such Warrant, multiplied by the number of shares of Common
Stock for which such Warrant shall not theretofore have been exercised (the
"Warrant Spread"). Parent agreed to deliver to the holders of the Warrants the
Warrant Spread as set forth in Section 5.1 of the Merger Agreement. If there
is no excess of the Offer Price over the exercise price per share of Common
Stock subject to a Warrant, then the Warrant shall be canceled for no
consideration. At the Effective Time, each outstanding Company Option (as
defined in the Merger Agreement) shall be canceled in exchange for a cash
payment of an amount equal to the excess, if any, of the Offer Price over the
exercise price per share of Common Stock subject to such Company Option,
multiplied by the number of shares of Common Stock for which such Company
Option shall not theretofore have been exercised. If there is no excess of the
Offer Price over the exercise price per share of Common Stock subject to a
Company Option, such Company Option shall be canceled for no consideration.
Board Representation. The Merger Agreement provides that, promptly upon the
acceptance for payment of, and payment by Offeror in accordance with the Offer
for, not less than that number of Shares equal to the Minimum Condition,
Offeror shall be entitled to designate such number of directors, rounded up to
the next whole number, as will give Offeror percentage representation on the
Board of Directors of the Company equal to Offeror's percentage ownership of
the Shares then outstanding. Upon the written request of Offeror, the Company
shall, on the date of such request, (x) either increase the size of the Board
of Directors or use its reasonable
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efforts to secure the resignations of such number of its incumbent directors
as is necessary to enable Parent's designees to be so elected to the Board of
Directors of the Company and (y) cause Parent's designees to be so elected.
The Company's obligations to appoint designees to the Board of Directors are
subject to Section 14(f) of the Exchange Act.
Stockholders' Meeting. The Merger Agreement provides that, if approval or
action in respect of the Merger by the stockholders of the Company is required
by applicable law, the Company, acting through the Board of Directors, shall
(i) call as promptly as practicable following consummation of the Offer, a
meeting of its stockholders (the "Stockholders' Meeting") for the purpose of
adopting the Merger Agreement and approving the Merger, (ii) hold the
Stockholders' Meeting as soon as practicable following the purchase of Shares
pursuant to the Offer and (iii) recommend to its stockholders the approval of
the Merger. At the Stockholders Meeting, Parent and Offeror shall cause all
Shares then owned by them to be voted in favor of approval and adoption of the
Merger Agreement and the Merger. The Merger Agreement provides that,
notwithstanding the foregoing, if Parent, Offeror or any other subsidiary of
Parent shall acquire at least 90% of the outstanding Shares, the parties
thereto shall take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a stockholders meeting in accordance with Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to (i) the due
organization, existence, qualification, good standing, corporate power and
authority of the Company and its subsidiaries; (ii) the capital structure of
the Company; (iii) the due authorization, execution, delivery and performance
of the Merger Agreement and the Stock Option Agreement and the consummation of
transactions contemplated thereby, and the validity and enforceability
thereof; (iv) required filings, consents and approvals and the absence of any
violations, breaches or defaults which would result from performance by the
Company of the Merger Agreement and the Stock Option Agreement; (v) the
accuracy of reports filed by the Company with the Commission (including
financial statements) since October 15, 1997; (vi) the absence of certain
changes or events; (vii) the absence of any material litigation; (viii) the
absence of any undisclosed material liabilities; (ix) certain employee benefit
matters; (x) compliance with applicable laws, licenses and permits and the
absence of any default or violation with respect to material contracts; (xi)
antitakeover statutes; (xii) environmental matters relating to the Company and
its subsidiaries; (xii) the opinion of the Financial Advisor; (xiii) certain
tax matters; (xiv) certain intellectual property matters; (xv) year 2000
compliance; (xvi) labor matters; (xvii) the absence of brokers or finders
other than the Financial Advisor; (xviii) the validity and enforceability of
material contracts; (xix) the documents supplied by the Company relating to
the Offer; (xx) stockholder approvals; (xxi) compliance with the Foreign
Corrupt Practices Act; (xxii) possession of necessary licenses and permits;
and (xxiii) the employment agreements with certain employees of the Company
have been executed and remain in full force and effect.
Parent and Offeror have also made certain representations and warranties,
including with respect to (i) the due organization, existence, good standing,
corporate power and authority of Parent and Offeror; (ii) the due
authorization, execution, delivery and performance of the Merger Agreement and
the Stock Option Agreement and the consummation of transactions contemplated
thereby, and the validity and enforceability thereof; (iii) required filings,
consents and approvals and the absence of any violations, breaches or defaults
which would result from performance by Parent or Offeror of the Merger
Agreement and the Stock Option Agreement; (iv) the absence of any litigation
which would materially impair the ability of Parent or Offeror to consummate
the Offer; (v) compliance with applicable laws and the absence of any default
or violation with respect to material contracts; (vi) the absence of brokers
or finders; (vii) the sufficiency of funds available to Parent and Offeror for
the consummation of the Offer and the Merger; and (viii) documents related to
the Offer and the Merger.
Conduct of Interim Operations. The Company has agreed that from the date of
the Merger Agreement to the Effective Time, with certain exceptions, unless
Parent has consented in writing thereto (such consent not to be unreasonably
withheld or delayed), the Company shall, and shall cause each of its
subsidiaries to: (i) conduct its business, in all material respects, in the
ordinary and usual course and use its commercially reasonable best efforts to
preserve its business organization substantially intact and substantially
maintain its existing relations
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<PAGE>
and goodwill with customers, suppliers, distributors, creditors, lessors,
employees and business associates; (ii) not issue, sell, pledge, dispose of or
encumber any capital stock owned by it in any of its subsidiaries; (iii) not
amend its certificate or bylaws; (iv) not split, combine or reclassify its
outstanding shares of capital stock; (v) not declare, set aside or pay any
dividend payable in cash, stock or other property in respect of any capital
stock; (vi) not repurchase, redeem or otherwise acquire, except in connection
with its Stock Plans, 1997 Employee Stock Purchase Plan (the "ESPP") or
employment arrangements any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its capital
stock; (vii) not issue, sell, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable or exercisable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
its capital stock of any class or any voting debt or any other property or
assets, with certain exceptions; (viii) not transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any other property
or assets (including capital stock of any of its subsidiaries) or incur or
modify any material indebtedness or other liability; (ix) not make any
commitments for, make or authorize any capital expenditures or, by any means,
make any acquisition of, or investment in, assets or stock of any other person
or entity in each case, involving amounts in excess of $50,000 in the
aggregate; (x) not, except as may be required by existing contractual
commitments or as required by applicable law, enter into any new agreements or
commitments for any severance or termination pay to, or enter into an
employment or severance agreement with, any of its directors, officers or
employees or terminate, establish, adopt, enter into, make any new grants or
awards under, amend or otherwise modify, any compensation and benefit plans or
increase or accelerate the salary, wage, bonus or other compensation of any
employees, officers or directors (except for increases in salaries, wages and
cash bonuses of nonexecutive employees made in the ordinary course of business
consistent with past practice) or pay or agree to pay any pension, retirement
allowance or other employee benefit not required by any existing compensation
and benefit plan; (xi) not settle or compromise any material claims or
litigation or modify, amend or terminate any of its material contracts or
waive, release or assign any material rights or claims; (xii) not make any tax
election or permit any insurance policy naming it as a beneficiary or loss-
payable payee to be canceled or terminated, except in the ordinary and usual
course of business; (xiii) not, except as may be required as a result of a
change in law, change any of the accounting practices or principles used by
it; (xiv) not adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization, or other
reorganization of the Company or any of its subsidiaries not constituting an
inactive subsidiary (other than the Merger); (xv) not suffer or permit capital
expenditures made or incurred by the Company and its subsidiaries to exceed
$50,000, except for expenses incurred in connection with the transactions
contemplated by the Merger Agreement; (xvi) not offer to, or enter into an
agreement to, do any of the foregoing; and (xvii) not take, or permit a
subsidiary to take, any action that would, or that could reasonably be
expected to, result in any of the Company's representations and warranties
becoming untrue.
Access to Information. Under the Merger Agreement, from the date of the
Merger Agreement to the Effective Time or the termination of the Merger
Agreement, the Company has agreed to afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of Parent
reasonable access to all of its and its subsidiaries properties, books,
contracts, commitments and records and to furnish promptly to Parent,
consistent with obligations under the Merger Agreement and its legal
obligations, all information concerning its business, properties and personnel
as the other party may reasonably request.
No Solicitation. The Company has agreed in the Merger Agreement that the
Company shall, and it shall cause its affiliates and the officers, directors,
employees, representatives and agents of the Company and its subsidiaries
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) to, immediately cease and
terminate any existing activities, discussions or negotiations, if any, with
any parties (other than Parent and Offeror, any affiliate or associate of
Parent and Offeror or any designees of Parent and Offeror) conducted before
execution of the Merger Agreement with respect to any acquisition or exchange
of all or any material portion of the assets of, or any equity interest in,
the Company or any of its subsidiaries (by direct purchase from the Company,
tender or exchange offer or otherwise) or any business combination, merger or
similar transaction (including an exchange of stock or assets) with or
involving the Company or any subsidiary of the Company (an "Acquisition
Transaction"), other than the Offer and the Merger.
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Except as otherwise set forth in the following paragraph, the Company has
also agreed that it shall not, and shall cause its affiliates and the
officers, directors, employees, representatives and agents of the Company and
its subsidiaries (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its subsidiaries) not
to, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any nonpublic information or data
(other than the Company's standard public information package) to, any
corporation, partnership, person or other entity or group (other than Parent
and Offeror, any affiliate or associate of Parent and Offeror or any designees
of Parent and Offeror) with respect to any inquiries or the making of any
offer or proposal (including, without limitation, any offer or proposal to the
stockholders of the Company) concerning an Acquisition Transaction (an
"Acquisition Proposal") or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal.
Prior to the consummation of the Offer, the Company may furnish information
and access, but only in response to a request for information or access, to
any person or entity making a bona fide written Acquisition Proposal to the
Board of Directors of the Company after the date of the Merger Agreement which
was not encouraged, solicited or initiated by the Company or any of its
affiliates or any director, employee, representative or agent of the Company
or any of its subsidiaries (including, without limitation, any investment
banker, attorney or accountant retained by the Company or any of its
subsidiaries) on or after the date of the Merger Agreement and may participate
in discussions and negotiate with such person or entity concerning any such
Acquisition Proposal and may authorize the Company to enter into a binding
written agreement concerning a Superior Proposal (as defined below), if and
only if, in any such case, (i) the Board of Directors determines in good
faith, (A) after receiving advice of outside counsel to the Company that
failing to provide such information or access or to participate in such
discussions or negotiations or so to authorize, as the case may be, would
constitute a breach of the Board of Directors' fiduciary duties under
applicable law, and (B) after consultation with the financial advisors to the
Company, that such Acquisition Proposal, if accepted, is reasonably likely to
be consummated, taking into account all legal, financial and regulatory
aspects of the proposal and the person or entity making the proposal and
would, if consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transaction contemplated
by the Merger Agreement (any such more favorable Acquisition Proposal as to
which both of the determinations referred to in subclauses (A) and (B) above
have been made, a "Superior Proposal"), and (ii) the Company receives from the
person or entity making such bona fide written Acquisition Proposal an
executed confidentiality agreement. The Company has further agreed to notify
Parent within 24 hours if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with the Company and shall in such
notice indicate the identity of the offeror and the material terms and
conditions of any such proposal and thereafter shall keep Parent reasonably
informed, on a current basis, of the status and material terms of such
proposals and the status of such negotiations or discussions, providing copies
to Parent of any Acquisition Proposals made in writing.
The Company is required to provide Parent with three business days advance
notice of, in each and every case, its intention to either enter into any
agreement with or to provide any information to any person or entity making
any such inquiry or proposal. The Company has also agreed not to release any
third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party and will use its best
efforts to enforce any such agreements at the request of and on behalf of
Parent.
Fees and Expenses. Pursuant to the Merger Agreement, the Surviving
Corporation shall pay all charges and expenses, including those of the
Depositary, in connection with the Merger, and Parent shall reimburse the
Surviving Corporation for such charges and expenses. The Merger Agreement also
provides that except as otherwise described below, whether or not the Merger
is consummated, all costs and expenses incurred in connection with the Merger
Agreement, the Stock Option Agreement, the Shareholders Agreement, the Offer
and the Merger and the other transactions contemplated by the Merger
Agreement, the Stock Option Agreement and the Shareholders Agreement shall be
paid by the party incurring such expense.
The Merger Agreement provides that, under certain circumstances, the Company
shall reimburse Parent for all of the costs, charges and expenses incurred by
Parent or Offeror in connection with the Merger Agreement, the Stock Option
Agreement and the Shareholders Agreement and the transactions contemplated by
the Merger
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Agreement, the Stock Option Agreement and the Shareholders Agreement,
including, without limitation, fees and expenses of accountants, attorneys and
financial advisors, up to a maximum of $1,000,000 in the aggregate (the
"Reimbursement Fee"). The Company is obligated to pay the Reimbursement Fee
under the following circumstances: (i)(A) a bona fide Acquisition Proposal
shall have been made to the Company or any of its stockholders or any person
or entity shall have announced an intention (whether or not conditional) to
make an Acquisition Proposal with respect to the Company, and on or following
the date of the Merger Agreement but prior to the date that the Offer is
consummated, such Acquisition Proposal, announcement or intention is or
becomes publicly known, and (B) on or following the date on which such
Acquisition Proposal, announcement or intention is or becomes publicly known,
the Merger Agreement is terminated by either Parent or the Company because the
Merger shall not have been consummated by April 30, 2000 (subject to
extension, in certain circumstances, to May 31, 2000), whether such date is
before or after the date of approval by the stockholders of the Company, or
(ii) the Merger Agreement is terminated (x) by the Company because it has
decided to enter into a binding written agreement concerning a Superior
Proposal and the Company notifies Parent in writing that it intends to enter
into such an agreement, attaching the most current version of such agreement
to such notice, and Parent does not make, within three business days of
receipt of the Company's written notification of its intention to enter into
such an agreement, a written offer that is at least as favorable to the
stockholders of the Company as the Superior Proposal or (y) by Parent if the
Board of Directors of the Company shall have failed to recommend, or shall
have withdrawn or adversely modified its approval or recommendation of, the
Offer or the Merger or failed to reconfirm its recommendation of the Offer or
the Merger within two calendar days after a written request by Parent to do
so, or shall have resolved to do any of the foregoing, or (z) because of the
failure of any of the conditions to the Offer described in paragraphs (c), (e)
and (f) of Section 14.
Other Agreements. The Merger Agreement provides that the Company and Parent
shall cooperate with each other and use (and shall cause their respective
subsidiaries to use) their respective commercially reasonable best efforts to
take or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable under the Merger Agreement, the Stock Option
Agreement, the Shareholders Agreement and applicable laws to consummate and
make effective the Offer, the Merger and the other transactions contemplated
by the Merger Agreement, the Stock Option Agreement and the Shareholders
Agreement as soon as practicable, including preparing and filing as promptly
as practicable all documentation to effect all necessary applications,
notices, petitions, filings and other documents and to obtain as promptly as
practicable all permits, consents, approvals and authorizations necessary or
advisable to be obtained from any third party and/or any U.S. governmental or
regulatory authority, agency, commission, body or other governmental entity
("Governmental Entity") in order to consummate the Offer and the Merger or any
of the other transactions contemplated by the Merger Agreement, the Stock
Option Agreement and the Shareholders Agreement.
Conditions to the Merger. The Merger Agreement provides that the respective
obligation of each party to effect the Merger is subject to the satisfaction
or waiver at or prior to the closing of the Merger of each of the following
conditions: (i) if the approval of the Merger Agreement and the Merger by the
holders of Shares is required by applicable law, the Merger Agreement shall
have been duly adopted by holders of a majority of the Shares outstanding;
(ii) any waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated; (iii) (A) no court or
Governmental Entity of competent jurisdiction shall have enacted, issued,
enforced or entered any statute, rule, regulation, judgment, decree,
injunction or other order (whether temporary, preliminary or permanent) that
is in effect and restrains, enjoins or otherwise prohibits consummation of the
Offer or Merger (collectively, an "Order"); provided however, that prior to
invoking this provision, each party shall use its commercially reasonable best
efforts to have any such Order lifted or withdrawn, and (B) no Governmental
Entity shall have instituted any proceeding seeking any such Order; (iv)
Offeror shall have (A) commenced the Offer and (B) purchased, pursuant to the
terms and conditions of such Offer, all Shares duly tendered and not
withdrawn; provided, however, that neither Parent nor Offeror shall be
entitled to rely on the condition described in clause (iv)(B) above if either
of them shall have failed to purchase Shares pursuant to the Offer in breach
of their obligations under the Merger Agreement; (v) the Company shall have
complied with its obligations to enable Parent's designees to be elected to
the Board of Directors of the Company; and (vi) Parent and Merger Sub shall
have received the opinion of counsel to the Company substantially in the form
attached to the Merger Agreement.
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Termination. The Merger Agreement, notwithstanding approval thereof by the
stockholders of the Company, may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent of the Company, Parent and Offeror;
(b) by Parent or the Company:
(i) if the Merger shall not have been consummated by April 30, 2000,
whether such date is before or after the date of approval by the
stockholders of the Company; provided, however, that if a request for
additional information is received from the United States Federal Trade
Commission (the "FTC") or the Antitrust Division of the United States
Department of Justice (the "DOJ") pursuant to the HSR Act or additional
information is requested by a governmental authority pursuant to the
antitrust, competition, foreign investment, or similar laws of any
foreign countries or supranational commissions or boards that require
pre-merger notifications or filings with respect to the Merger, then
such date shall be extended to the 30th day following the date when the
FTC or the Antitrust Division of the DOJ has deemed Parent and/or the
Company, as applicable, to be in substantial compliance with such
request for additional information, but in any event not later than May
31, 2000; provided that the right to terminate the Merger Agreement
described in this clause (i) shall not be available to any party that
has breached in any material respect its obligations under the Merger
Agreement in any manner that shall have been the proximate cause of, or
resulted in, the failure to consummate the Merger by the date referred
to in this clause (i);
(ii) if the Stockholders Meeting shall have been convened, held and
completed and the approval of the Company stockholders shall not have
been obtained thereat or at any adjournment or postponement thereof;
provided however, that Parent shall not be permitted to terminate the
Merger Agreement pursuant to the circumstances described in this clause
(ii) if Parent or Offeror shall not have voted all Shares then owned
beneficially or of record by them in favor of approval and adoption of
the Merger Agreement, the Merger and the transactions contemplated
thereby;
(iii) if any Order permanently restraining, enjoining or otherwise
prohibiting the Offer or the Merger shall become final and non-
appealable (whether before or after the approval of the Company
stockholders); provided, however, that the right to terminate the
Merger Agreement pursuant to the circumstances described in this clause
(iii) shall not be available to any party that fails to use
commercially reasonable best efforts to prevent such Order from being
issued and to use commercially reasonable best efforts to cause such
Order to be vacated, withdrawn or lifted; or
(iv) if the Offer terminates or expires on account of the failure of
any condition described in Section 14;
(c) by the Company:
(i) if (A) the Company is not in material breach of any of its
representations, warranties, covenants and agreements in the Merger
Agreement, (B) the Board of Directors of the Company authorizes the
Company, prior to Parent beneficially owning a majority of the Shares,
and subject to complying with the terms of the Merger Agreement, to
enter into a binding written agreement concerning a Superior Proposal
and the Company notifies Parent in writing that it intends to enter
into such an agreement, attaching the most current version of such
agreement to such notice, and (C) Parent does not make, within three
business days of receipt of the Company's written notification of its
intention to enter into such an agreement, a written offer that is at
least as favorable to the stockholders of the Company as the Superior
Proposal; provided that the Company agreed (x) that it would not enter
into a binding agreement referred to in clause (B) until at least the
first calendar day following the third business day after it has
provided the written notice to Parent described in the Merger
Agreement, (y) to notify Parent promptly if its intention to enter into
a written agreement referred to in such notice shall change at any time
after giving such notification and (z) that it will not terminate the
Merger Agreement or enter into a binding agreement referred to in
clause (B) if Parent has, within the period referred to in clause (x)
of this sentence, made a written offer that is at least as favorable to
the Company's stockholders as the Superior Proposal;
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(ii) if, the Company is not in material breach of any of its
representations, warranties, covenants or agreements in the Merger
Agreement and prior to consummation of the Offer, there has been a
material breach by Parent or Offeror of any representation, warranty,
covenant or agreement of Parent or Offeror contained in the Merger
Agreement which has had, or is reasonably likely to have, the effect of
materially impairing the ability of Parent or Offeror to consummate the
Offer or the Merger (a "Terminating Parent Breach"); provided, however,
that, if such Terminating Parent Breach is curable by Parent through
the exercise of reasonable best efforts and such cure is reasonably
likely to be completed prior to the termination date of the Merger
Agreement described in (b)(i) above, then for so long as Parent
continues to exercise reasonable best efforts to cure such Terminating
Parent Breach, the Company may not terminate the Merger Agreement under
the circumstances described in this clause (ii); or
(iii) the Company is not in material breach of any of its
representations, warranties, covenants or agreements in the Merger
Agreement and if Offeror shall have failed to commence the Offer within
five business days after the date of the Merger Agreement; or
(d) by Parent, prior to the Effective Time;
(i) if the Board of Directors shall have failed to recommend, or
shall have withdrawn or adversely modified its approval or
recommendation of, the Offer or the Merger or failed to reconfirm its
recommendation of the Offer or the Merger within two calendar days
after a written request by Parent to do so, or shall have resolved to
do any of the foregoing; or
(ii) if there has been a material breach by the Company of any
representation, warranty, covenant or agreement of the Company
contained in the Merger Agreement which would give rise to the failure
of the condition to the Offer that (A) any of the representations and
warranties of the Company set forth in the Merger Agreement shall be
true and correct as of the date of the Merger Agreement and as of the
consummation of the Offer in all material respects (except for those
representations and warranties made as of a specific date, which shall
be true and correct as of such date); or (B) the Company shall have
breached or failed to comply in any material respect with any of its
obligations, covenants or agreements under the Merger Agreement and any
such breach or failure shall not have been substantially cured by the
Company within five business days after Parent provides written notice
to the Company of such breach or failure.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that from and after the Consummation of the Offer and the election of
Offeror's nominees to the Board of Directors of the Company, Parent will cause
and ensure that the Surviving Corporation has sufficient funds, if necessary,
to fulfill and honor in all respects the obligations of the Company to each
person who is or was a director or officer of the Company and who is entitled
to indemnification and advance of expenses pursuant to each indemnification
agreement previously disclosed to Parent and any indemnification provision or
any exculpation provision set forth in the Company's certificate of
incorporation or bylaws in effect on the date of the Merger Agreement for a
period of at least six years. In addition, the certificate of incorporation
and bylaws of the Surviving Corporation shall contain provisions with respect
to indemnification and exculpation from liability no less favorable than those
set forth in the Company's certificate of incorporation and bylaws on the date
of the Merger Agreement for a period of at least six years.
The Merger Agreement also provides that prior to the consummation of the
Offer, the Company may purchase insurance coverage extending for a period of
three years after the Effective Time the level and scope of the Company's
directors' and officers' liability insurance coverage in effect as of the date
of the Merger Agreement; provided that the aggregate annual premium payable
for such insurance shall not exceed 125% of the last annual premium paid for
such coverage prior to the date of the Merger Agreement. In addition, Parent
has agreed that through the third anniversary of the Effective Time, Parent
shall maintain in effect, for the benefit of the Indemnified Parties, such
insurance coverage, and subject to the limitations in the preceding sentence,
shall pay the annual premium for such insurance coverage. In the event the
annual premium payable for such insurance coverage exceeds 125% of the last
annual premium paid by the Company for such coverage, Parent shall be
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obligated to obtain and maintain in effect a policy with the greatest amount
of coverage available for a cost not exceeding 125% of such amount.
Certain Employee Matters. The Merger Agreement provides that, for a period
of at least one year from the Effective Date, Parent will maintain, and the
employees of the Company on the date of the Merger Agreement (the "Current
Employees") will be eligible for, the employee benefit plans of the Company as
of the Effective Date until Parent develops alternative plans (other than
stock options or other plans involving the issuance of securities of the
Company or Parent) which in the aggregate are substantially comparable to
those maintained by the Company as of the date of the Merger Agreement. Parent
agreed to use its best efforts to cause each employee benefit plan of
Purchaser in which the Current Employees are eligible to participate to take
into account for purposes of eligibility and vesting thereunder the service of
such Current Employees with the Company as if such service were with
Purchaser, to the same extent that such service was credited under a
comparable plan of the Company and such service period would have been
credited to an employee of Purchaser participating in the relevant plan. The
Current Employees shall be entitled to the vacation time and holidays provided
for under plans applicable to employees of Purchaser. In no event, however,
shall a Current Employee's vacation time or ability to accrue or carry over
vacation be less than that to which such Current Employee was entitled under
the Company's vacation plan. For the first plan year ending after the
Effective Time, any pre-existing condition exclusion under any plan providing
medical or dental benefits shall be no more restrictive for any Current
Employee who, immediately prior to commencing participation in such plan, was
participating in a Company plan providing medical or dental benefits and had
satisfied any pre-existing condition provision under such Company plan. Parent
agreed to provide any Current Employee whose employment with the Company is
terminated as a result of the Merger with at the least the minimum severance
benefits provided to employees of Purchaser.
Amendment. Subject to the provisions of applicable law, at any time prior to
the Effective Time, the parties to the Merger Agreement may modify or amend
the Merger Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
Timing. The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Offeror pursuant to the Offer. Although Parent has agreed to cause
the Merger to be consummated on the terms contained in the Merger Agreement,
there can be no assurance as to the timing of the Merger.
The Stock Option Agreement
The following is a summary of the material terms of the Stock Option
Agreement. As expressly permitted by the Stock Option Agreement, Parent has
assigned all of its rights under the Stock Option Agreement to Purchaser and
Purchaser has assumed all of Parent's obligations under the Stock Option
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof, which is incorporated herein by reference and a copy of which
has been filed with the Commission as an exhibit to the Schedule 14D-1.
Concurrently with the execution and delivery of the Merger Agreement, the
Company entered into the Stock Option Agreement with Parent and Offeror.
Pursuant to the Stock Option Agreement, the Company has agreed, on the terms
and subject to the conditions thereof, to grant to Parent an irrevocable
option to purchase up to 2,684,431 shares of Common Stock. Any references to a
majority of the issued and outstanding shares or Shares outstanding on a fully
diluted basis, or similar references, for purposes of this Offer to Purchase,
as provided in the documents described herein, exclude from the determination
thereof any shares of Common Stock issuable upon the exercise of the Stock
Option Agreement and any reference to beneficial ownership of Shares, or
similar references, exclude from the determination thereof any Shares issuable
upon exercise of or subject to the Shareholders Agreement or the Stock Option
Agreement.
Grant of Purchase Option. Under the Stock Option Agreement, the Company
granted to Parent an irrevocable option (the "Option") to purchase up to
2,684,431 Shares at a cash purchase price equal to $6.75 per
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share (the "Purchase Price"). The Option may be exercised by Parent, in whole
or in part, at any time, but only on one occasion, following (but not prior
to) the occurrence of the events set forth in any of clauses (i) or (ii)
below, and prior to the Option Termination Date (as defined below). The Option
is subject to appropriate adjustment in the event of any change in the number
of issued and outstanding shares of capital stock of the Company to maintain
Parent's right to purchase 19.9% of the capital stock of the Company entitled
to vote generally for election of directors of the Company outstanding
immediately prior to exercise.
Exercise of Option. The option may be exercised if:
(i) (A) a bona fide Acquisition Proposal shall have been made to the
Company or any of its stockholders or any person or entity shall have
announced an intention (whether or not conditional) to make an Acquisition
Proposal with respect to the Company, and on or following the date of the
Merger Agreement but prior to the date that the Offer is consummated, such
Acquisition Proposal, announcement or intention is or becomes publicly
known, (B) no event shall have become publicly known prior to the time that
such Acquisition Proposal, announcement or intention is or becomes publicly
known that would have a material adverse effect on the ability of Parent or
Offeror to consummate the Merger (other than any event related to such
Acquisition Proposal, announcement or intention or any event related to a
breach of the Merger Agreement or the Stock Option Agreement by the
Company) and (C) on or following the date on which such Acquisition
Proposal, announcement or intention is or becomes publicly known, the
Merger Agreement is terminated by either Parent or the Company because,
subject to certain exceptions, the Merger shall not have been consummated
by April 30, 2000 (subject, in certain circumstances, to extension to May
31, 2000), unless Offeror consummated the Offer and the Board of Directors
of the Company consists of the same percentage of directors designated by
Offeror as the percentage of the number of shares outstanding owned by
Offeror; or
(ii) the Merger Agreement is terminated (x) by the Company because it has
decided to enter into a binding written agreement concerning a Superior
Proposal and the Company notifies Parent in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice, and Parent does not make, within three business
days of receipt of the Company's written notification of its intention to
enter into such an agreement, a written offer that is at least as favorable
to the stockholders of the Company as the Superior Proposal or (y) by
Parent if the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn or adversely modified its approval or
recommendation of, the Offer or the Merger or failed to reconfirm its
recommendation of the Offer or the Merger within two calendar days after a
written request by Parent to do so, or shall have resolved to do any of the
foregoing, or (z) because of the failure of any one of the conditions to
the Offer described in paragraphs (c), (e) and (f) of Section 14.
Under the Stock Option Agreement, if at any time the Option is then
exercisable and at or prior to such time the Reimbursement Fee shall have
become payable, Parent may on one occasion elect, in lieu of exercising the
Option to purchase Shares, to send a written notice to the Company (a "Cash
Exercise Notice") specifying a date not later than 20 business days and not
earlier than 10 business days following the date such notice is given on which
date the Company shall pay to Parent an amount in cash (the "Cancellation
Amount") equal to the Spread (as defined below) multiplied by all or such
portion of the Shares subject to the Option as Parent shall specify.
As used in the Stock Option Agreement, "Spread" means the excess, if any,
over the Purchase Price of the higher of (x) if applicable, the highest price
per Share (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid or proposed to be paid by any person pursuant to any
Acquisition Proposal occurring after the date of the Stock Option Agreement
and prior to the Option Termination Date (the "Alternative Purchase Price") or
(y) the average of the closing bid and asked prices of the Shares on the
Nasdaq/NMS or on such other national securities exchange on which the Shares
are then listed for the last five trading days immediately prior to the date
of the Cash Exercise Notice (the "Closing Price").
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If the Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market
value of such other property. If such other property consists of securities
with an existing public trading market, the average of the closing prices (or
the average of the closing bid and asked prices if closing prices are
unavailable) for such securities in their principal public trading market on
the five trading days ending five days prior to the date of the Cash Exercise
Notice shall be deemed to equal the fair market value of such property. If
such other property consists of something other than cash or securities with
an existing public trading market and, as of the payment date for the Spread,
agreement on the value of such other property has not been reached, the
Alternative Purchase Price shall be deemed to equal the Closing Price.
Upon exercise of its right to receive cash described above, the obligations
of the Company to deliver Shares pursuant to the Option shall be terminated
with respect to such number of Shares for which Parent shall have elected to
be paid the Spread.
Registration Rights. The Stock Option Agreement provides that, in the event
that the Parent shall desire to sell any of the Shares and such sale requires,
in the reasonable opinion of counsel to Parent, registration of such Shares
under the Securities Act, the Company will cooperate with Parent and any
underwriters selected by Parent in registering such Shares for resale for a
period of at least 45 days, including, without limitation, promptly filing a
registration statement which complies with the requirements of applicable
federal and state securities laws, and entering into an underwriting agreement
with such underwriters upon such terms and conditions as are customarily
contained in underwriting agreements with respect to secondary distributions;
provided that the Company shall not be required to have declared effective
more than two registration statements and shall be entitled to delay the
filing or effectiveness of any registration statement and may suspend the use
of any registration statement (and related prospectus) for one or more periods
of time not exceeding an aggregate of 60 days in any one-year period if the
offering would, in the judgment of the Board of Directors of the Company in
consultation with counsel to the Company, require premature disclosure of any
material corporate development or material transaction involving the Company
or interfere with any previously planned securities offering by the Company.
The Stock Option Agreement also provides that the Company shall bear the
cost of the registration, including, but not limited to, all registration and
filing fees, printing expenses, and fees and disbursements of counsel and
accountants for the Company, except that Parent shall pay the fees and
disbursements of its counsel, and the underwriting fees and selling
commissions applicable to the shares sold by Parent. The Stock Option
Agreement further provides that the Company shall indemnify and hold harmless
(i) Parent, its affiliates and its officers and directors and (ii) each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act or the Exchange Act (collectively, the "Underwriters") ((i)
and (ii) being referred to as "Registration Indemnified Parties") against any
losses, claims, damages, liabilities or expenses, to which the Registration
Indemnified Parties may become subject, insofar as such losses, claims,
damages, liabilities (or actions in respect thereof) and expenses arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained or incorporated by reference in any registration
statement filed pursuant to the registration rights under the Stock Option
Agreement, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
liability, claim, damage or expense arises out of or is based upon (A) an
untrue statement or alleged untrue statement in or omission or alleged
omission from any such documents in reliance upon and in conformity with
written information furnished to the Company by the Registration Indemnified
Parties expressly for use or incorporation by reference therein, or (B) the
fact that the person asserting any such loss, liability, claim, damage or
expense did not receive a copy of an amended preliminary prospectus or the
final prospectus (or the final prospectus as amended or supplemented) at or
prior to the written confirmation of the sale of the Shares to such person
because of the failure of Parent to so provide such amended preliminary or
final prospectus.
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In addition, Parent has agreed and the Underwriters will be required to
agree to indemnify and hold harmless the Company, its affiliates and its
officers and directors against any losses, claims, damages, liabilities or
expenses to which the Company, its affiliates and its officers and directors
may become subject, insofar as such losses, claims, damages, liabilities (or
actions in respect thereof) and expenses arise out of or are based upon (i)
any untrue statement of any material fact contained or incorporated by
reference in any registration statement filed pursuant to the registration
rights under the Stock Option Agreement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by
the Registration Indemnified Parties, as applicable, specifically for use or
incorporation by reference therein, or (ii) the fact that the person asserting
any such loss, liability, claim, damage or expense did not receive a copy of
an amended preliminary prospectus or the final prospectus (or the final
prospectus as amended or supplemented) at or prior to the written confirmation
of the sale of the Shares to such person because of the failure of Parent to
so provide such amended preliminary or final prospectus.
Other Agreements. The Stock Option Agreement provides that after the Option
becomes exercisable, the Company will promptly file an application to list the
Shares on Nasdaq/NMS or on such other national securities exchange on which
the Shares are then listed and will use its reasonable best efforts to obtain
approval of such listing and to effect all necessary filings by the Company
under the HSR Act and any other necessary consents.
Conditions. The Stock Option Agreement provides that the Company's
obligation to deliver Shares upon exercise of the Option is subject to the
conditions that: (i) no preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction prohibiting the
delivery of the Shares shall be in effect; (ii) any applicable waiting periods
under the HSR Act shall have expired or been terminated; (iii) the
representations and warranties of Parent made in the Stock Option Agreement
shall be true and correct in all material respects as of the date of the
closing of the issuance of the Shares; and (iv) the circumstances described in
clauses (i) and (ii) under "Exercise of Options" above exist.
Termination. The Stock Option Agreement provides that the right to exercise
the Option shall terminate at (and the Option shall no longer be exercisable
after) the earliest of (i) the Effective Time, (ii) the nine month anniversary
of the earliest to occur of the events set forth in clauses (i) and (ii) under
"Exercise of Options" above, and (iii) the fifteenth day following the
termination of the Merger Agreement if prior to such fifteenth day the events
set forth in clause (i) or (ii) under Exercise of Options shall not have
occurred (such earliest date the "Option Termination Date"); provided that, if
the Option cannot be exercised or the Shares cannot be delivered to Parent
upon such exercise because one or more of the conditions set forth in clause
(i) or (ii) in "Conditions" above have not yet been satisfied, the Option
Termination Date shall be extended until fifteen days after such impediment to
exercise or delivery has been removed.
Other. Because the rights and obligations of Parent and the Company under
the Stock Option Agreement are subject to compliance with the HSR Act, Parent
will include in its merger notifications to be filed with the DOJ and the FTC
a description of its rights under the Stock Option Agreement. See Section 15.
The Shareholders Agreement
The following is a summary of the material terms of the Shareholders
Agreement. As expressly permitted by the Shareholders Agreement, Parent has
assigned all of its rights under the Shareholders Agreement to Purchaser and
Purchaser has assumed all of Parent's obligations under the Shareholders
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof, which is incorporated herein by reference and a copy of which
has been filed with the Commission as an exhibit to the Schedule 14D-1.
Tender of Shares. Concurrently with the execution and delivery of the Merger
Agreement, and in order to induce Parent and Offeror to enter into the Merger
Agreement, the Major Stockholders who own in the aggregate,
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as of October 5, 1999, 4,549,591 Shares (representing approximately 34% of the
outstanding Shares) and additional options and warrants representing the right
to purchase 410,002 Shares (collectively, the "Optioned Securities") or have
the right to vote Shares or other securities (the "Voting Securities") have
entered into a Shareholders Agreement with Parent and Offeror. Pursuant to the
Shareholders Agreement, the Major Stockholders have agreed to tender the
Optioned Securities in the Offer and not to withdraw such Optioned Securities
prior to the expiration of the Offer. The obligation to sell any of such
Optioned Securities under the Shareholders Agreement, as described below,
shall be satisfied, solely with respect to the Shares so tendered, upon the
purchase of such Shares by Offeror pursuant to the Offer. In the event of any
change in the Optioned Securities by reason of stock dividend, stock split,
recapitalizations, combinations, exchanges or the like, the number of Optioned
Securities subject to the Shareholders Agreement will be appropriately
adjusted.
Shareholder Option. Pursuant to the Shareholders Agreement, the Major
Stockholders have granted to Offeror an irrevocable option (the "Shareholder
Option") to purchase all Optioned Securities at the Offer Price. The
Shareholder Option may be exercised by Offeror at any time after the date on
which all waiting periods under the HSR Act applicable to the exercise of the
Shareholder Option have expired or been terminated, but only if:
(i) (A) a bona fide Acquisition Proposal shall have been made to the
Company or any of its stockholders or any person or entity shall have
announced an intention (whether or not conditional) to make an Acquisition
Proposal with respect to the Company, and on or following the date of the
Merger Agreement but prior to the date that the Offer is consummated, such
Acquisition Proposal, announcement or intention is or becomes publicly
known, (B) no event shall have become publicly known prior to the time that
such Acquisition Proposal, announcement or intention is or becomes publicly
known that would have a material adverse effect on the ability of Parent or
Offeror to consummate the Merger (other than any event related to such
Acquisition Proposal, announcement or intention or any event related to a
breach of the Merger Agreement or this Agreement by the Company) and (C) on
or following the date on which such Acquisition Proposal, announcement or
intention is or becomes publicly known, the Merger Agreement is terminated
by either Parent or the Company because, subject to certain exceptions, the
Merger shall not have been consummated by April 30, 2000 (subject, in
certain circumstances, to extension to May 31, 2000), unless Offeror
consummated the Offer and the Board of Directors of the Company consists of
the same percentage of directors designated by Offeror as the percentage of
the number of shares outstanding owned by Offeror; or
(ii) the Merger Agreement is terminated (x) by the Company because it has
decided to enter into a binding written agreement concerning a Superior
Proposal and the Company notifies Parent in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice, and Parent does not make, within three business
days of receipt of the Company's written notification of its intention to
enter into such an agreement, a written offer that is at least as favorable
to the stockholders of the Company as the Superior Proposal or (y) by
Parent if the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn or adversely modified its approval or
recommendation of, the Offer or the Merger or failed to reconfirm its
recommendation of the Offer or the Merger within two calendar days after a
written request by Parent to do so, or shall have resolved to do any of the
foregoing, or (z) because of the failure of any of the conditions to the
Offer described in paragraphs (c), (e) and (f) of Section 14.
Agreement to Vote and Irrevocable Proxy. The Major Stockholders have further
agreed to (a) vote all of their respective Voting Securities in favor of the
Merger; (b) not vote any Voting Securities in favor of any action or agreement
which would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Company under the
Merger Agreement; and (c) vote all Voting Securities of such Major Stockholder
against any action or agreement which would impede, interfere with or attempt
to discourage the Offer or the Merger, including, but not limited to: (i) any
proposal opposed by Parent or Offeror; (ii) any Acquisition Proposal (other
than the Offer and the Merger) involving the Company or any of its
subsidiaries; (iii) any change in the management or board of directors of the
Company, except as otherwise agreed to in
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writing by the Offeror; (iv) any material change in the present capitalization
or dividend policy of the Company; or (v) any other material change in the
Company's corporate structure or business. The Major Stockholders have also
granted Offeror or its designees an irrevocable proxy to vote their Shares for
all purposes whatsoever.
No Inconsistent Agreements; Non Solicitation. Pursuant to the Shareholders
Agreement, the Major Stockholders also agreed that while the agreement was in
effect they would not make any disposition of or enter into any voting
arrangement with respect to the subject securities or initiate or solicit or
enter into or endorse any Acquisition Proposal, or otherwise engage in any
action inconsistent with their performance of the Shareholders Agreement.
Representations and Warranties. The Shareholders Agreement contains certain
customary representations and warranties, including, without limitation,
representations by the Major Stockholders as to ownership of the Shares and
power and authority.
Termination. The Shareholder Option shall expire on the earliest of (1) the
Effective Time (as defined in the Merger Agreement), (2) January 31, 2000 or,
if the Offer is extended past January 31, 2000 because the waiting period
applicable to the transaction contemplated by the Shareholders Agreement under
the HSR Act has not terminated or expired, immediately after the expiration of
the Offer, and (3) the thirtieth day following the termination of the Merger
Agreement if prior to such thirtieth day the events set forth in either of
clause (i) or (ii) described under Shareholder Option shall not have occurred
(such earliest date being referred to as the "Shareholder Option Expiration
Date"); provided that, if the Shareholder Option cannot be exercised or the
Optioned Securities cannot be delivered to Offeror upon such exercise because
(x) there shall be in effect a preliminary or permanent injunction or other
order issued by any federal or state court of competent jurisdiction
prohibiting delivery of the Optioned Securities or (y) any applicable waiting
periods under the HSR Act shall not have expired or been terminated, then the
Shareholder Option Expiration Date shall be extended until thirty days after
such impediment to exercise or delivery has been removed.
Other Matters
Section 203 of the DGCL. Section 203 of the DGCL limits the ability of a
Delaware corporation to engage in business combinations with "interested
stockholders" (defined as any beneficial owner of 15% or more of the
outstanding voting stock of the corporation) unless, among other things, the
corporation's board of directors has given its prior approval to either the
business combination or the transaction which resulted in the stockholder's
becoming an "interested stockholder." On October 4, 1999, the Board of
Directors of the Company approved the Offer, the Merger and the Merger
Agreement, the Shareholders Agreement and the Stock Option Agreement for
purposes of Section 203, and, therefore, Section 203 is inapplicable to the
Offer, the Merger, the Merger Agreement, the Shareholders Agreement and the
Stock Option Agreement and the transactions contemplated thereby. See Section
15.
Appraisal Rights. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, other than
by a "short-form" merger, holders of Shares will have certain rights under
Section 262 of the DGCL to dissent and demand appraisal of, and payment in
cash for the fair value of, their Shares. Such rights, if the statutory
procedures are complied with, could lead to a judicial determination of the
fair value (excluding any element of value arising from accomplishment or
expectation of the Merger) required to be paid in cash to such dissenting
holders for their Shares. Any such judicial determination of the fair value of
Shares could be based upon considerations other than the Offer Price and the
market value of the Shares, including asset values and the investment value of
the Shares. The value so determined could be more or less than the Offer Price
or the Merger Consideration.
Also, although the Company is a Delaware corporation and is therefore
subject to the DGCL, pursuant to Section 2115 of the California General
Corporation Law (the "CGCL"), the Company may be subject to California law
with respect to dissenter's rights in connection with the Merger. Accordingly,
pursuant to Chapter 13 of the CGCL, stockholders of the Company who do not
vote in favor of the Merger and who comply with the requirements of Chapter 13
of the CGCL will have the right to demand payment for, and appraisal of, the
"fair value" of their Shares.
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If any holder of Shares who demands appraisal under Section 262 of the DGCL
or Chapter 13 of the CGCL fails to perfect, or effectively withdraws or loses
his right to appraisal, as provided in the DGCL or the CGCL, the shares of
such holder will be converted into the Merger Consideration in accordance with
the Merger Agreement. A stockholder may withdraw his demand for appraisal by
delivery to Purchaser of a written withdrawal of his demand for appraisal and
acceptance of the Merger.
Failure to follow the steps required by Section 262 of the DGCL or Chapter
13 of the CGCL for perfecting appraisal rights may result in the loss of such
rights.
Rule 13e-3: The Commission has adopted Rule 13e-3 under the Exchange Act
("Rule 13e-3"), which is applicable to certain "going private" transactions.
Rule 13e-3 requires, among other things, that certain financial information
concerning the company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction be filed with the Commission and disclosed to stockholders
prior to consummation of the transaction.
Purchaser believes that Rule 13e-3 will not be applicable to the Merger
because of the exemption afforded by Rule 13e-3(g)(1), among other reasons.
However, under certain circumstances, Rule 13e-3 could be applicable to the
Merger or other business combination in which Purchaser seeks to acquire the
remaining Shares it does not beneficially own following the purchase of Shares
pursuant to the Offer. For example, if the Merger as consummated is not
substantially similar to the Merger as described in this Offer to Purchase and
the Merger Agreement, Rule 13e-3 could apply. However, the terms and
conditions of the Merger are governed by the Merger Agreement, and any
amendment to the Merger Agreement must be approved by each party thereto. If
Purchaser has exercised its right to appoint directors to the Board of
Directors following its purchase of Shares pursuant to the Offer, any such
amendment must be approved on behalf of the Company by the directors of the
Company, in the manner set forth above.
There can be no assurance that the Merger will take place, even though each
party has agreed in the Merger Agreement to use its best efforts to cause the
Merger to occur, because the Merger is subject to certain conditions, some of
which are beyond the control of either Purchaser or the Company. Since the
Purchaser's ultimate objective is to acquire ownership of all the Shares, if
the Merger does not take place, the Purchaser would consider the acquisition,
whether directly or through an affiliate, of Shares through private or open
market purchases, or subsequent tender offers, a different type of merger or
other combination of the Company with the Offeror or an affiliate or
subsidiary thereof or by any other permissible means deemed advisable by it.
Except as described in the section captioned "The Merger Agreement," any of
these possible transactions might be on terms the same as, or more or less
favorable than, those of the Offer or the Merger.
13. Dividends and Distributions.
Pursuant to the terms of the Merger Agreement, from and after the date of
the Merger Agreement until the Effective Time, unless Purchaser has consented
in writing thereto, the Company shall not, and shall not permit its
subsidiaries to, (a) issue, sell, pledge, dispose of or encumber any capital
stock owned by it in any of its subsidiaries; (b) amend its certificate or
bylaws; (c) split, combine or reclassify its outstanding shares of capital
stock; (d) declare, set aside or pay any dividend payable in cash, stock or
property in respect of any capital stock; (e) repurchase, redeem or otherwise
acquire, except in connection with the Stock Plans, the ESPP or employment
arrangements or permit any of its subsidiaries to purchase or otherwise
acquire, any shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock; or (f) issue,
sell, pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital stock
of any class or any voting debt or any other property or assets (other than
the issuance of Shares pursuant to options outstanding on the date of the
Merger Agreement under the Stock Plans, the issuance of Shares under the ESPP
and the issuance of Shares pursuant to warrants).
14. Certain Conditions to the Offer.
Notwithstanding any other provision of the Offer, and subject to the terms
and conditions of the Merger Agreement, the Merger Agreement provides that
Offeror shall not be obligated to accept for payment any Shares until the
expiration or termination of any waiting periods applicable under the HSR Act,
and Offeror shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission (including
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Rule 14e-l(c) under the Exchange Act), pay for, and may delay the acceptance
for payment of or payment for, any Shares tendered in the Offer and (subject
to the terms and conditions of the Merger Agreement) if:
(a) there shall be threatened or pending any action, litigation or
proceeding (hereinafter, an "Action") brought by any Governmental Entity:
(i) that would reasonably be expected to challenge the acquisition by
Purchaser or Offeror of Shares or seek to restrain or prohibit the
consummation of the Offer or the Merger; (ii) that would reasonably be
expected to seek to prohibit or impose any material limitation on
Purchaser's, Offeror's or any of their respective affiliates' ownership or
operation of all or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole or Purchaser and its
subsidiaries taken as a whole that, in each case referred to in this clause
(ii) individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect (as defined in the Merger Agreement) or a
material adverse effect on Purchaser; or (iii) that would reasonably be
expected to seek to impose material limitations on the ability of Purchaser
or Offeror effectively to acquire or hold, or to exercise full rights of
ownership of, the shares of Common Stock including the right to vote the
shares of Common Stock purchased by them on an equal basis with all other
shares of Common Stock on all matters properly presented to the
stockholders of the Company; or
(b) there shall be any statute, rule, regulation, order or injunction
threatened, proposed, sought, enacted, promulgated, entered, enforced or
deemed to or become applicable to the Offer or the Merger (and in each
case, remain in effect), or any other action shall have been taken, by any
court of competent jurisdiction or other U.S. Governmental Entity, that has
any of the consequences referred to in clauses (i) through (iii) of
paragraph (a) above; or
(c) (i) Any of the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and correct in all material
respects when considered without regard to any qualification by, or
reference to, materiality in any manner (except for those representations
and warranties made as of a specific date, which shall be true and correct
as of such date) and except for such failures of any representations or
warranties, when so considered, to be true and correct that individually or
in the aggregate do not have, and are not reasonably likely to have, a
Company Material Adverse Effect; or (ii) the Company shall have breached or
failed to comply in any material respect with any of its obligations,
covenants or agreements under the Merger Agreement and any such breach or
failure shall not have been substantially cured by the Company within five
(5) Business Days after Purchaser provides written notice to the Company of
such breach or failure; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms; or
(e) any corporation, entity, "group" or "person" (as defined in the
Exchange Act), other than Purchaser, Offeror or any of the stockholders
that are party to the Shareholders Agreement (so long as such stockholders
do not become beneficial owners of any additional Shares after the date
hereof and so long as such stockholders do not breach any of the provisions
of the Shareholders Agreement), shall have acquired beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of more than 20% of the
outstanding Shares; or
(f) the Company's Board shall have modified or amended its recommendation
of the Offer in any manner adverse to Purchaser or Offeror or shall have
withdrawn its recommendation of the Offer or shall have recommended
acceptance of any Acquisition Proposal or shall have failed to reconfirm
its recommendation of the Offer within five (5) calendar days after a
written request by Purchaser to do so, or shall have resolved to do any of
the foregoing; or
(g) there shall exist (i) any general suspension of, or limitation on
prices for, trading in securities on the Nasdaq National Market for more
than one full trading day (other than shortening of trading hours or any
trading halt resulting from a specified increase or decrease in a market
index), (ii) a declaration of any banking moratorium by federal or state
authorities or any suspension of payments in respect of banks or any
limitation (whether or not mandatory) imposed by federal or state
authorities on the extension of credit by lending institutions in the
United States or, in the case of any of the foregoing existing at the time
of the commencement of the Offer, (iii) a material acceleration or
worsening thereof.
31
<PAGE>
The conditions in clauses (a) through (g) are for the sole benefit of
Purchaser and Offeror and may be asserted by Purchaser and Offeror regardless
of the circumstances giving rise to such conditions and may be waived by
Purchaser and Offeror in whole or in part at any time and from time to time,
by express and specific action to that effect, in their reasonable
discretions. The failure by Purchaser or Offeror 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.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares will be promptly returned by the Depositary to the tendering
stockholders.
15. Certain Regulatory and Legal Matters.
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, as well as certain
representations made to Parent and Offeror in the Merger Agreement by the
Company, none of Parent, Purchaser or Offeror is aware of any license or
regulatory permit that appears to be material to the business of the Company
and its subsidiaries, taken as a whole, that might be adversely affected by
the Offeror's acquisition of Shares as contemplated herein or of any approval
or other action by any Governmental Entity that would be required for the
acquisition or ownership of Shares by Offeror as contemplated herein. Should
any such approval or other action be required, Purchaser and Offeror currently
contemplate that such approval or other action will be sought, except as
described below under "State Takeover Laws." While, except as otherwise
expressly described in this Section 15, Offeror does not presently intend to
delay the acceptance for payment of, or payment for, Shares tendered pursuant
to the Offer, pending the outcome of any such matter, there can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that failure to obtain
any such approval or other action might not result in consequences adverse to
the Company's business, or that certain parts of the Company's business might
not have to be disposed of if such approvals were not obtained or such other
actions were not taken. If certain types of adverse action are taken with
respect to the matters discussed below (or if any governmental approval is not
obtained), the Offeror could decline to accept for payment or pay for any
Shares tendered. See Section 14 for certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, stockholders, executive offices or places of business in such
states. In Edgar v. MITE Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without prior approval of the remaining stockholders, provided
that such laws were applicable only under certain conditions.
The Company is incorporated under the laws of Delaware. Section 203 of the
DGCL prevents an "Interested Stockholder" (defined generally as a person with
15% or more of the corporation's outstanding voting stock) from engaging in a
"Business Combination" (defined to include a variety of transactions,
including mergers) with a Delaware corporation for three years following the
date such person becomes an Interested Stockholder, unless (i) before such
person became an Interested Stockholder, the board of directors of the
corporation approved the transaction in which the Interested Stockholder
became an Interested Stockholder or approved the Business Combination, or (ii)
upon consummation of the transaction which resulted in the Interested
Stockholder becoming an Interested Stockholder, the Interested Stockholder
owned at least 85% of the voting stock of the
32
<PAGE>
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of the corporation and by certain
employee stock ownership plans), or (iii) following the transaction in which
such person became an Interested Stockholder, the Business Combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds
of the outstanding voting stock of the corporation not owned by the Interested
Stockholder. The Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby, including the Offer, the
Merger, the Shareholders Agreement and the Stock Option Agreement, for
purposes of Section 203 of the DGCL, and the restrictions of such Section 203
are, accordingly, not applicable to Purchaser, Offeror or their affiliates or
associates as a result of the consummation of the transactions contemplated by
this Offer to Purchase.
Neither Purchaser nor Offeror has currently complied with any state takeover
statute or regulation. Offeror reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer
or the Merger and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Merger, Offeror might
be required to file certain information with, or to receive approvals from,
the relevant state authorities, and Offeror might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer or is delayed in
consummating the Offer or the Merger. In such case, Offeror may not be obliged
to accept for payment or pay for any Shares tendered pursuant to the Offer.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the DOJ and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer is subject to these requirements.
Parent expects to file a Notification and Report Form with respect to the
Offer under the HSR Act as soon as practicable following commencement of the
Offer. The waiting period under the HSR Act with respect to the Offer will
expire at 11:59 p.m., Washington, D.C. time, on the 15th day after the date
such form is filed, unless early termination of the waiting period is granted.
In addition, the DOJ or the FTC may extend such waiting period by requesting
additional information or documentary material from Purchaser. If such a
request is made with respect to the Offer, the waiting period related to the
Offer will expire at 11:59 p.m., Washington, D.C. time, on the 10th day after
substantial compliance by Parent or the Company with such request. With
respect to each acquisition, the DOJ or the FTC may issue only one request for
additional information. In practice, complying with a request for additional
information or material can take a significant amount of time. Expiration or
termination of applicable waiting periods under the HSR Act is a condition to
Offeror's obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.
The FTC and the DOJ frequently scrutinize the legality under the antitrust
laws of transactions such as Offeror's proposed acquisition of the Company. At
any time before or after Offeror's purchase of Shares pursuant to the Offer,
the DOJ or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
purchase of Shares pursuant to the Offer or the consummation of the Merger or
seeking the divestiture of Shares acquired by Offeror or the divestiture of
substantial assets of Parent, Purchaser or its subsidiaries, or the Company or
its subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, of the results thereof.
16. Fees and Expenses.
Parent and Offeror have retained D.F. King & Co., Inc. to act as the
Information Agent and First Chicago Trust Company of New York to serve as the
Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws.
33
<PAGE>
Parent has engaged Morgan Stanley & Co. Incorporated ("Morgan Stanley") to
act as its financial advisor and as the Dealer Manager. Pursuant to a letter
agreement dated September 13, 1999, Parent has agreed to pay Morgan Stanley
for its services as Dealer Manger and as financial advisor to Parent, under
customary terms and conditions, an aggregate of $1.5 million upon consummation
of the Offer. Parent has also agreed to reimburse Morgan Stanley for all
reasonable expenses, and to indemnify Morgan Stanley against liabilities and
expenses in connection with its services, including liabilities under the
federal securities laws.
Except as described herein, none of Parent, Purchaser or Offeror will pay
any fees or commissions to any broker or dealer or other person in connection
with the solicitation of tenders of Shares pursuant to the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by Offeror upon request
for customary mailing and handling expenses incurred by them in forwarding
material to their customers.
17. Miscellaneous.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. None of Parent, Purchaser or Offeror is aware of any
jurisdiction in which the making of the Offer or the tender of Shares in
connection therewith would not be in compliance with the laws of such
jurisdiction. If Parent, Purchaser or Offeror becomes aware of any state law
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto in such state, Offeror will make a good faith effort to comply with
any such state statute or seek to have such state statute declared
inapplicable to the Offer. If, after such good faith effort, Offeror cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such
jurisdiction. In any jurisdiction the securities, blue sky or other laws of
which require the Offer to be made by a licensed broker or dealer, the Offer
will be made on behalf of Offeror by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of Parent, Purchaser or Offeror not contained herein
or in the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized. Neither the
delivery of this Offer to Purchase nor any purchase pursuant to the Offer
shall, under any circumstances, create any implication that there has been no
change in the affairs of Parent, Purchaser or the Company since the date as of
which information is furnished or the date of this Offer to Purchase.
Parent, Purchaser and Offeror have filed with the Commission the Schedule
14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain
additional information with respect to the Offer. In addition, the Company has
filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the
Exchange Act, setting forth its recommendation with respect to the Offer and
the reasons for such recommendation and furnishing certain additional related
information. Such schedules and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable in the
manner set forth in Sections 8 and 9 (except that they will not be available
at the regional offices of the Commission).
DPC NEWCO, INC.
October 12, 1999
34
<PAGE>
SCHEDULE I
CERTAIN INFORMATION CONCERNING THE
DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT, PURCHASER AND OFFEROR
The names and ages of the directors and executive officers of Parent,
Purchaser and Offeror, and their present principal occupations or employment
and five-year employment history, are set forth below. Unless otherwise
indicated, each individual is a citizen of the United States, his business
address is 1007 Market Street, Wilmington, Delaware 19898 and he has been
employed by Parent, Purchaser or Offeror, as applicable, for the last five
years.
PARENT
Directors
<TABLE>
<CAPTION>
Present Principal Occupation or Employment with
E. I. du Pont de Nemours and Company; Material
Name and Age Positions Held During the Past Five Years
------------ -----------------------------------------------
<C> <S>
Curtis J. Crawford (52) Director since 1998. Mr. Crawford is President
and Chief Executive Officer of ZiLOG, Inc., a
producer of application specific standard
products in the semiconductor industry. From 1995
to January 1998, Mr. Crawford was group
president, Microelectronics Group, Lucent
Technologies, Inc., and also served as president,
Intellectual Property Division, from October
1997. From 1993 to 1995, he was president of AT&T
Microelectronics, a business unit of AT&T
Corporation. Mr. Crawford is a director of ITT
Industries, Inc., and ZiLOG, Inc.
Louisa C. Duemling (63) Director since 1982. Mrs. Duemling is a member of
the board of governors of the Nature Conservancy
and the board of trustees of the Chesapeake Bay
Foundation.
Edward B. du Pont (65) Director since 1978. Mr. du Pont was chairman of
Atlantic Aviation Corporation, the principal
business of which is the charter, completion,
storage, operation and maintenance of aircraft.
He serves as a director of Wilmington Trust
Corporation, a trustee of Christiana Care
Corporation and the University of Delaware,
president and a trustee of Eleutherian Mills-
Hagley Foundation, and vice president and a
trustee of Longwood Foundation, Inc.
Charles O. Holliday, Jr. (51) Director since 1997. Chairman and Chief Executive
Officer. Mr. Holliday is a former president,
executive vice president, president and chairman-
DuPont Asia Pacific and senior vice president. He
is a director of Analog Devices, Inc. and a
member of The Business Council and The Business
Roundtable. Mr. Holliday also serves on the
Chancellor's Advisory Council for Enhancement at
the University of Tennessee and is a trustee of
the Winterthur Museum and Gardens.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment with E. I.
du Pont de Nemours and Company; Material
Name and Age Positions Held During the Past Five Years
------------ -----------------------------------------------------
<C> <S>
Lois D. Juliber (50) Director since 1995. Ms. Juliber is Executive Vice
President and Chief of Operations, Developed Markets,
Colgate-Palmolive Company, the principal business of
which is the production and marketing of consumer
products. She formerly served as president, Colgate-
Palmolive North America and chief technological officer
of Colgate-Palmolive. Ms. Juliber is a member of the
board of trustees of Wellesley College and the
Brookdale Foundation.
Goran Lindahl (54) Director since 1999. Mr. Lindahl is President and Chief
Executive Officer of ABB Ltd., a globalized technology
and engineering company serving customers in power
transmission and distribution; automation; oil, gas and
petrochemicals; industrial products and contracting;
and in financial services. Mr. Lindahl is member of the
Board of ABB Ltd., Switzerland, the Board of LM
Ericsson, Sweden, the Salomon Smith Barney
International Advisory Board, USA, the European Union-
Japan Industrialists Round Table, the International
Advisory Board of the Alliance for Global
Sustainability, the World Commission on Dams and the
Royal Swedish Academy of Engineering Sciences, as well
as Vice-chairman of the Prince of Wales Business
Leaders Forum and Advisor of the International Council
of "The Executives' Club of Chicago." Mr. Lindahl is
also Co-Chairman of the EU-ASEAN Industrialists Round
Table.
William K. Reilly (59) Director since 1993. Mr. Reilly is President and Chief
Executive Officer of Aqua International Partners, L.P.,
which finances water supply and wastewater treatment in
developing countries. He formerly served as
administrator of the United States Environmental
Protection Agency, the Payne visiting professor at the
Institute for International Studies at Stanford
University and president of World Wildlife Fund and The
Conservation Foundation. Mr. Reilly is a director of
Conoco Inc., Evergreen Holdings, Inc., and Royal
Caribbean International and a trustee of The National
Geographic Society, Presidio Trust and World Wildlife
Fund. He also serves on the board of Yale University
Corporation and is chairman of American Farmland Trust
and the Environmental Education and Training Institute
of North America.
H. Rodney Sharp, III (64) Director since 1981. Mr. Sharp is President of the
Board of Trustees of Longwood Foundation, Inc., and a
director of Wilmington Trust Corporation. He is a
trustee of St. Augustine's College (Raleigh, North
Carolina) and a trustee and director of Christiana Care
Corporation. Mr. Sharp also serves as treasurer and a
director of Planned Parenthood of Delaware and a
director of First Call for Help, Inc., and the YMCA of
Delaware.
Charles M. Vest (58) Director since 1993. Mr. Vest is President of the
Massachusetts Institute of Technology. He is a former
provost and vice president of Academic Affairs and dean
of Engineering of the University of Michigan. Mr. Vest
is a director of International Business Machines
Corporation, a fellow of the American Association for
the Advancement of Science, and a member of the
National Academy of Engineering and the President's
Committee of Advisors on Science and Technology. He is
vice chair of the Council on Competitiveness.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment with E. I.
du Pont de Nemours and Company; Material
Name and Age Positions Held During the Past Five Years
------------ -----------------------------------------------------
<C> <S>
Sanford I. Weill (66) Director since 1998. Mr. Weill is Chairman and co-
Chief Executive Officer of Citigroup Inc., a
diversified financial services company. He formerly
served as chairman and chief executive officer of
Travelers Group. He is a director of AT&T Corporation
and Citigroup Inc., and a member of The Business
Council and The Business Roundtable. He also serves
as chairman of the board of trustees of Carnegie Hall
and chairman of the board of overseers of the Joan
and Sanford I. Weill Medical College and Graduate
School of Medical Sciences of Cornell University.
Edgar S. Woolard, Jr. (65) Director since 1983. Mr. Woolard served as chairman
of the Board, chief executive officer, president and
chief operating officer, vice chairman and executive
vice president. He is a director of Apple Computer,
Inc., and Citigroup Inc. and a member of The Business
Council. He also serves as a trustee of Protestant
Episcopal Theological Seminary and the Winterthur
Museum and Gardens.
Officers
<CAPTION>
Present Principal Occupation or Employment with E. I.
du Pont de Nemours and Company; Material
Name and Age Positions Held During the Past Five Years
------------ -----------------------------------------------------
<C> <S>
Richard R. Goodmanson (52) Since May 1999, Mr. Goodmanson has been an Executive
Vice President and a Chief Operating Officer. From
1996 to April 1999, he was President and Chief
Executive Officer of America West Airlines. From 1992
to 1996, he was Senior Vice President of Operations
for Frito-Lay Inc. (division of PepsiCo.).
Charles S. Johnson (61) Since October 1999, Mr. Johnson has been an Executive
Vice President. Mr. Johnson was named Chairman of the
Board of Pioneer Hi-Bred International, Inc. in
December 1996. Mr. Johnson served as President and
Chief Executive Officer of Pioneer from September
1995 to October 1999. Mr. Johnson previously was
President and Chief Operating Officer from March 1995
to September 1995. Mr. Johnson was Executive Vice
President from March 1993 to March 1995. Since 1973,
Mr. Johnson has served in an executive position with
Pioneer. Mr. Johnson is a Director of The Principal
Financial Group, a financial services company, and
Gaylord Container Corporation, a national
manufacturer and distributor of brown paper and
packaging products.
Kurt M. Landgraf (53) Since May 1999, Mr. Landgraf has been a Chief
Operating Officer. Since September 1997, he has been
an Executive Vice President. Mr. Landgraf is also
Chairman of DuPont Europe and Chairman and CEO of
DuPont Pharmaceuticals Company. From December 1996 to
October 1997, he was Chief Financial Officer. From
1993 to December 1996, he was President and Chief
Executive Officer of DuPont Merck Pharmaceutical
Company.
Joseph A. Miller, Jr. (57) Since 1996, Mr. Miller has been Chief Science and
Technology Officer. Since 1994, he has been a Senior
Vice President.
Stacey J. Mobley (54) Since May 1999, Mr. Mobley has been Chief
Administrative Officer. Since May 1992, he has been a
Senior Vice President.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment with E. I. du
Pont de Nemours and
Name and Age Company; Material Positions Held During the Past Five Years
------------ -----------------------------------------------------------
<C> <S>
Gary M. Pfeiffer (49) Since October 1997, Mr. Pfeiffer has been a Senior Vice
President and Chief Financial Officer. From April 1994 to
October 1997, he was Vice President and General Manager,
DuPont Nylon-North America.
Dennis H. Reilley (46) Since May 1999, Mr. Reilley has been an Executive Vice
President and a Chief Operating Officer. From November 1997
to May 1999 he was a Senior Vice President. From July 1996
to November 1997, he was Vice President and General Manager
of Lycra(R)/Terrathane(R). From October 1995 to July 1996,
he was Vice President and General Manager of Specialty
Chemicals. From September 1991 to October 1995, he was Vice
President and General Manager of DuPont White Pigment and
Mineral Products.
Howard J. Rudge (64) Since March 1994, he has been a Senior Vice President and
General Counsel.
PURCHASER
<CAPTION>
Present Principal Occupation or Employment with
DuPont Pharma, Inc.; Material
Name and Age Positions Held During the Past Five Years
------------ -----------------------------------------------
<C> <S>
Susan M. Stalnecker (46) Director, President. Since September 1998, Ms. Stalnecker
has been Vice President and Treasurer of Parent. From March
1998 to August 1998, she was Vice President and Treasurer
Designate. From November 1997 to February 1998, she was
Assistant Treasurer. From January 1995 to October 1997, she
was Director-Finance and Administration--DuPont Nylon,
Global & North America. From April 1994 to December 1994,
she was Director-Finance-Nylon North America.
Joseph A. Girardi (42) Director, Vice President and Treasurer. Since April 1999,
Mr. Girardi has been Manager, Treasury Administration and
Cash Operations of Parent. From July 1996 to March 1999, he
was Global Credit Manager, DuPont Fluoroproducts. From June
1995 to June 1996, he was Project Leader, DuPont Photomasks
Initial Public Offering. From March 1993 to May 1995, he
was Accounting Manager, Business Accounting & Reporting.
Lloyd Adams (52) Director, Vice President and Assistant Treasurer. Since May
1998, Mr. Adams has been Banking Consultant-Treasury
Services-DuPont Global Treasury Organization. From February
1979 to April 1998, he was Banking Consultant--Cash
Management & Banking--Treasury.
OFFEROR
<CAPTION>
Present Principal Occupation or
Employment with DPC Newco, Inc.
Name and Age Material Positions Held During the Past Five Years
------------ --------------------------------------------------
<C> <S>
Richard E. Gies (51) President. Since June 1999, Mr. Gies has been Senior Vice
President and Chief Financial Officer of DuPont
Pharmaceuticals Company. From July 1998 to May 1999, he was
Vice President and Chief Financial Officer of DuPont
Canada, Inc. From August 1994 to June 1998, he was Finance
Director, Corporate Plans of DuPont.
Steven J. Capolarello (44) Vice President and Treasurer. Since July 1994, Mr.
Capolarello has been Financial Manager of DuPont
Pharmaceuticals Company. From February 1994 to June 1994,
he was Financial Consultant.
Donald P. McAviney (49) Director. Since March 1997, Mr. McAviney has been Senior
Counsel and Assistant Secretary, Corporate and Securities
Law Group, Parent. From October 1994 to March 1997, he was
Senior Counsel of DuPont Performance Coatings.
</TABLE>
I-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or his broker, dealer, commercial bank, trust company or other nominee
to the Depositary at one of the addresses set forth below:
The Depositary for the Offer is:
First Chicago Trust Company of New York
<TABLE>
<CAPTION>
By Mail: By Overnight Delivery: By Hand:
<S> <C> <C>
First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company
of New York of New York of New York
Corporate Actions, Suite 4660 Corporate Actions, Suite 4680 c/o Securities Transfer and
P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services Inc.
Jersey City, NJ 07303-2569 New York, NY 10005 Attn: Corporate Actions
100 William Street, Galleria
New York, NY 10038
</TABLE>
Any questions or requests for assistance or additional copies of the Offer to
Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone number and addresses listed below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 488-8075
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-6088
<PAGE>
Exhibit (a)(2)
Letter of Transmittal
To Tender Shares of Common Stock
of
CombiChem, Inc.
at
$6.75 Net Per Share
Pursuant to the Offer to Purchase dated October 12, 1999
by
DPC Newco, Inc.,
a direct wholly owned subsidiary of
DuPont Pharma, Inc.,
a wholly owned subsidiary of
E.I. du Pont de Nemours and Company
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED
The Depositary for the Offer Is:
First Chicago Trust Company of New York
By Mail: By Overnight Delivery: By Hand:
First Chicago Trust First Chicago Trust First Chicago Trust
Company of New York Company of New York Company of New York
Corporate Actions, Suite Corporate Actions, Suite c/o Securities Transfer
4660 4680 and Reporting Services
P.O. Box 2569 14 Wall Street, 8th Floor Inc.
Jersey City, NJ 07303- New York, NY 10005 Attn: Corporate Actions
2569 100 William Street,
Galleria
New York, NY 10038
---------------
Delivery of this Letter of Transmittal to an address other than as set forth
above shall not constitute a valid delivery.
You must sign this Letter of Transmittal in the appropriate space therefor
provided below and complete the Substitute Form W-9 set forth below.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
This letter of Transmittal is to be completed by stockholders of CombiChem,
Inc. if certificates are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase) is utilized, if delivery of
Shares (as defined below) is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase. Delivery of documents to a Book-Entry Transfer Facility does not
constitute delivery to the Depositary.
Stockholders whose Share Certificates (as defined in the Offer to Purchase)
are not immediately available or who cannot deliver their Share Certificates
and all other documents required hereby to the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedure for the book-entry transfer on a timely basis, may nevertheless
tender their Shares pursuant to the guaranteed delivery procedures set forth
in Section 3 of the Offer to Purchase. See Instruction 2.
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ___________________________________________
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s) _____________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution which Guaranteed Delivery ___________________________
If delivery is by book-entry transfer:
Name of Tendering Institution _________________________________________
Account No. ___________________________________________________________
Transaction Code No. __________________________________________________
2
<PAGE>
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and
Address(es)
of
Registered
Holder(s)
(Please
fill in, if Shares Tendered
blank) (Attach additional signed list if necessary)
- ----------------------------------------------------------
Total Number
of Shares Number
Certificate Represented by of Shares
Number(s)(1) Certificate(s)(1) Tendered(2)
<S> <C> <C> <C>
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Total Shares
- ----------------------------------------------------------
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by Share certificates delivered to the Depositary are being
tendered hereby. See Instruction 4.
Ladies and Gentlemen:
The undersigned hereby tenders to DPC Newco, Inc., a Delaware corporation
("Offeror") and a direct wholly owned subsidiary of DuPont Pharma, Inc., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of E.I. du
Pont de Nemours and Company, a Delaware corporation ("Parent"), the above-
described shares of common stock, $.001 par value (the "Shares"), of
CombiChem, Inc., a Delaware corporation (the "Company"), pursuant to Offeror's
offer to purchase for cash all of the outstanding Shares at a purchase price
of $6.75 per Share, net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
October 12, 1999 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer"). Offeror is a corporation, newly formed by Purchaser in connection
with the Offer and the transactions contemplated thereby. The Offer is being
made in connection with the Agreement and Plan of Merger, dated as of October
5, 1999 (the "Merger Agreement"), among Parent, Offeror and the Company.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith, the undersigned hereby sells, assigns and
transfers to, or upon the order of, Offeror all right, title and interest in
and to all the Shares that are being tendered hereby and appoints First
Chicago Trust Company of New York, as the Depositary (the "Depositary"), the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares or transfer ownership of such Shares on the
account books maintained by the Book-Entry Transfer Facility, together, in any
such case, with all accompanying evidences of transfer and authenticity, to or
upon the order of Purchaser, (b) present such Shares for transfer on the books
of the Company and (c) receive all benefits and otherwise exercise all rights
of beneficial ownership of such Shares, all in accordance with the terms of
the Offer.
The undersigned hereby irrevocably appoints designees of Offeror and each of
them as the attorneys-in-fact and proxies of the undersigned, each with full
power of substitution, to the full extent of the rights of the undersigned
with respect to the Shares tendered hereby and accepted for payment by Offeror
prior to the time of any vote or other action (and any and all other shares or
other securities issued or issuable in respect of such Shares on or after the
date of the Offer to Purchase). All such powers of attorney and proxies shall
be considered irrevocable and coupled with an interest. Such appointment will
be effective when, and only to the extent that, Offeror accepts such Shares
for payment. Upon such acceptance for payment, all prior powers of attorney
and proxies given by the stockholder with respect to such Shares (and such
other shares and securities) will, without further action, be revoked and no
subsequent powers of attorney and proxies may be given nor any subsequent
written consents executed (and, if given or executed, will not be deemed
effective). The designees of Offeror will, with respect to the Shares (and
such other shares and securities) for which such appointment is effective, be
empowered to exercise all voting and other rights of such stockholder as they
in their sole discretion may deem proper at any annual or special meeting of
the Company's stockholders, or any adjournment or postponement thereof by
written consent in lieu of any such meeting or otherwise. Offeror reserves the
right to require that, in order for Shares to be deemed validly tendered,
3
<PAGE>
immediately upon Offeror's payment for such Shares, Offeror must be able to
exercise full voting and other rights with respect to such Shares (and such
other shares and securities), including voting at any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and that when the same are accepted for payment by Offeror, Offeror
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned, upon request, will execute and deliver any additional
documents deemed by the Depositary or Offeror to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
Offeror upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price of any Shares purchased (less the
amount of any federal income or backup withholding tax required to be
withheld), and return any Shares not tendered or not purchased, in the name(s)
of the undersigned (or, in the case of Shares tendered by book-entry transfer,
by credit to the account at the Book-Entry Transfer Facility designated
above). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased (less the amount of any federal income or backup withholding tax
required to be withheld) and any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the undersigned at
the address shown below the undersigned's signature(s). In the event that both
"Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the check for the Purchase Price of any Shares
purchased (less the amount of any federal income or backup withholding tax
required to be withheld) and return any Shares not tendered or not purchased
in the name(s) of, and mail said check and any certificates to, the person(s)
so indicated. Unless otherwise indicated under "Special Payment Instructions,"
please credit any Shares tendered hereby and delivered by book-entry transfer,
but which are not purchased by crediting the account at the Book-Entry
Transfer Facility. The undersigned recognizes that the Company has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder(s) thereof if Offeror does not
accept for payment any of the Shares so tendered.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if the
To be completed ONLY if the check for the purchase price of
check for the purchase price of Shares purchased (less the amount
Shares purchased (less the amount of any federal income and backup
of any federal income and backup withholding tax required to be
withholding tax required to be withheld) and certificates for
withheld) and certificates for Shares not tendered or not
Shares not tendered or not purchased are to be mailed to
purchased are to be issued in the someone other than the
name of someone other than the undersigned or to the undersigned
undersigned, or if Shares at an address other than that
tendered hereby and delivered by shown below the undersigned's
book-entry transfer which are not signature.
accepted for payment are to be
returned by credit to an account
at the Book-Entry Transfer
Facility.
Deliver check and certificates
to:
Name: ____________________________
Issue check and certificate(s) (Please Print)
to:
Address: _________________________
Name: ____________________________
(Please Print) ----------------------------------
(Include Zip Code)
Address: _________________________
----------------------------------
---------------------------------- (Taxpayer Indentification Number
(Include Zip Code) or Social Security Number)
----------------------------------
(Taxpayer Identification Number
or Social Security Number)
[_] Credit shares delivered by
book-entry transfer and not
purchased to the account
set forth above.
5
<PAGE>
SIGN HERE
(Please Complete Substitute Form W-9 below)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Signature(s) of Owner(s)
Name(s) ______________________________________________________________________
(Please Print)
Capacity (full title) ________________________________________________________
Address ______________________________________________________________________
------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number _______________________________________________
Taxpayer Identification Number or Social Security Number _____________________
Dated ________________________________________________________________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person operating
in a fiduciary or representative capacity, please set forth full title and
see Instruction 5.)
GUARANTEE OF SIGNATURE(S), IF REQUIRED
(See Instructions 1 and 5)
Name of Firm _________________________________________________________________
Address (Include Zip Code) ___________________________________________________
Authorized Signature _________________________________________________________
Name(s) ______________________________________________________________________
Area Code and Telephone Number _______________________________________________
Dated ________________________________________________________________________
6
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks and brokerage houses) which is a participant
in the Securities Transfer Agents Medallion Program (an "Eligible
Institution"). Signatures on this Letter of Transmittal need not be guaranteed
(a) if this Letter of Transmittal is signed by the registered holder(s) of the
Shares (which term, for purposes of this document, shall include any
participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) tendered herewith and such
holder(s) have not completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on this
Letter of Transmittal or (b) if such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Shares; Guaranteed Delivery
Procedure. You should use this Letter of Transmittal only if you are either
forwarding certificates herewith or causing the Shares to be delivered by
book-entry transfer pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. In order for you to validly tender Shares, certificates for
all physically delivered Shares or a confirmation of a book-entry transfer of
all Shares delivered electronically into the Depositary's account at the Book-
Entry Transfer Facility, as well as a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and any other documents required
by this Letter of Transmittal or an Agent's Message, in the case of a book-
entry transfer, must be received by the Depositary at one of its addresses set
forth on the front page of this Letter of Transmittal by the Expiration Date
(as defined in the Offer to Purchase).
If you cannot deliver your Shares and all other required documents to the
Depositary by the Expiration Date, you must tender your Shares pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (a) such tender must be made by or through an
Eligible Institution; (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by Offeror must be
received by the Depositary by the Expiration Date; and (c) the certificates
for all physically delivered Shares or a confirmation of a book-entry transfer
of all Shares delivered electronically into the Depositary's account at the
Book-Entry Transfer Facility, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by this Letter of Transmittal or an Agent's Message, must be received
by the Depositary within three Nasdaq Stock Market trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in Section
3 of the Offer to Purchase.
The method of delivery of all documents, including Share certificates, is at
your option and risk. If you choose to deliver the documents by mail,
registered mail with return receipt requested, properly insured, is
recommended.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal
(or facsimile thereof), you waive any right to receive any notice of the
acceptance for payment of the Shares.
3. Inadequate Space. If the space provided in the box captioned "Description
of Shares Tendered" is inadequate, you should list the certificate numbers
and/or the number of Shares on a separate signed schedule attached hereto.
4. Partial Tenders (not applicable to shareholders who tender by book-entry
transfer). If you wish to tender (offer to sell) fewer than all of the Shares
represented by any certificates that you deliver to the Depositary, fill in
the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such case, a new certificate for the remainder of the
Shares represented by the old certificate will be sent to the person(s)
signing this Letter of Transmittal, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as promptly as practicable
after the expiration or termination of the Offer. Unless you indicate
otherwise, all Shares represented by certificates delivered to the Depositary
will be deemed to have been tendered.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
7
<PAGE>
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made, or
Shares not tendered or not purchased are to be returned in the name of any
person other than the registered holder(s). Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificates for such Shares. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Purchaser of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. Except as provided in this Letter of Transmittal,
Offeror will pay any stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the Purchase Price is to be made to, or Shares not tendered or not
purchased are to be returned in the name of, any person other than the
registered holder(s), or tendered Shares are registered in the name of a
person other than the name of the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder(s), such other person or otherwise) payable on account of
the transfer to such person will be deducted from the purchase price, unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
7. Special Payment and Delivery Instructions. If a check for the Purchase
Price of any Shares accepted for payment is to be issued in the name of,
and/or Share certificates for Shares not accepted for payment or not tendered
are to be issued in the name of and/or returned to, a person other than the
signer of this Letter of Transmittal or if a check is to be sent, and/or such
certificates are to be returned, to a person other than the signer of this
Letter of Transmittal, or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed. Any
stockholder(s) delivering Shares by book-entry transfer may request that
Shares not purchased be credited to such account maintained at the Book-Entry
Transfer Facility as such stockholder(s) may designate in the box entitled
"Special Payment Instructions." If no such instructions are given, any such
Shares not purchased will be returned by crediting the account at the Book-
Entry Transfer Facility designated above as the account from which such Shares
were delivered.
8. Federal Income Tax Withholding. Under the federal income tax laws, the
Depositary will be required to withhold 31% of the amount of any payments made
to certain shareholders pursuant to the Offer. In order to avoid such backup
withholding, each tendering shareholder must provide the Depositary with such
stockholder's correct taxpayer identification number by completing the
Substitute Form W-9 set forth below. In general, if a stockholder is an
individual, the taxpayer identification number is the social security number
of such individual. If the Depositary is not provided with the correct
taxpayer identification number, the stockholder may be subject to a $50
penalty imposed by the Internal Revenue Service and payments that are made to
such stockholder pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order to satisfy the Depositary that a foreign individual
qualifies as an exempt recipient, such stockholder must submit an IRS Form W-
8, signed under penalties of perjury, attesting to that individual's exempt
status. Such statements can be obtained from the Depositary. For further
information concerning backup withholding and instructions for completing the
Substitute Form W-9 (including how to obtain a taxpayer identification number
if you do not have one and how to complete the Substitute Form W-9 if Shares
are held in more than one name), consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
8
<PAGE>
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidly tendered, but may require the Depositary to
withhold 31% of the amount of any payments made pursuant to the Offer. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of a person subject to backup withholding will be reduced
by the amount of the tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained.
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
9. Requests for Assistance or Additional Copies. Questions and requests for
assistance or additional copies of the Offer to Purchase and this Letter of
Transmittal should be directed to the Information Agent or the Dealer Manager
at their respective addresses and telephone numbers set forth below.
10. Waiver of Conditions. The conditions of the Offer may be waived by
Offeror (subject to certain limitations in the Merger Agreement), in whole or
in part, at any time or from time to time, in Offeror's reasonable discretion.
9
<PAGE>
PAYER'S NAME: First Chicago Trust Company of New York
Part 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND
DATING BELOW
----------------------
SUBSTITUTE Social Security Number
FORM W-9 (If awaiting TIN write
Department of the "Applied For")
Treasury
Internal Revenue OR
Service
----------------------
Payer's Request for Employer Identification
Taxpayer Number
Identification Number (If awaiting TIN write
(TIN) "Applied For")
--------------------------------------------------------
Part 2--Certificate--Under penalties of perjury, I
certify that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued for me), and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
--------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are currently subject to backup withholding
because of under-reporting interest or dividends on
your tax returns. However, if after being notified by
the IRS that you are subject to backup withholding,
you receive another notification from the IRS that
you are no longer subject to backup withholding, do
not cross out such item (2). (Also see instructions
in the enclosed Guidelines).
--------------------------------------------------------
Part 3--
SIGNATURE ______________ DATE ___, 1999 Awaiting
TIN [_]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Officer or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number to the
Depositary by the time of payment, 31% of all reportable payments made to me
thereafter will be withheld, but that such amounts will be refunded to me if
I provide a certified Taxpayer Identification Number to the Depositary within
sixty (60) days.
SIGNATURE ___________________________________________ DATE ___________, 1999
10
<PAGE>
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 488-8075
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-6088
<PAGE>
Exhibit (a)(3)
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Offer to Purchase For Cash
All Outstanding Shares of Common Stock
of
CombiChem, Inc.
at
$6.75 Net Per Share
by
DPC Newco, Inc.,
a direct wholly owned subsidiary of
DuPont Pharma, Inc.,
a wholly owned subsidiary of
E.I. du Pont de Nemours and Company
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Commercial Banks, October 12, 1999
Trust Companies and Other Nominees:
We have been appointed by DPC Newco, Inc., a Delaware corporation
("Offeror") and a direct wholly owned subsidiary of DuPont Pharma, Inc., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of E.I. du
Pont de Nemours and Company, a Delaware corporation ("Parent"), to act as
Dealer Manager in connection with Offeror's offer to purchase for cash all
outstanding shares of common stock, $.001 par value (the "Shares"), of
CombiChem, Inc., a Delaware corporation (the "Company"), at a purchase price
of $6.75 per Share, net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
October 12, 1999 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer"). Offeror is a corporation,
newly formed by Purchaser in connection with the Offer and the transactions
contemplated thereby. The Offer is being made in connection with the Agreement
and Plan of Merger dated as of October 5, 1999 (the "Merger Agreement"), among
Parent, Offeror and the Company. Holders of Shares whose certificates for such
Shares (the "Certificates") are not immediately available or who cannot
deliver their Certificates and all other required documents to First Chicago
Trust Company of New York (the "Depositary") or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase) must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
1
<PAGE>
For your information and for forwarding to clients for whom you hold Shares
registered in your name or in the name of your nominee, we are enclosing the
following documents:
1. Offer to Purchase, dated October 12, 1999;
2. Letter of Transmittal for your use and for the information of your
clients;
3. Letter to stockholders from Vicente Anido, Jr., President and Chief
Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to the
stockholders of the Company;
4. Notice of Guaranteed Delivery to be used to accept the Offer if the
Certificates, and all other required documents cannot be delivered to
the Depositary by the Expiration Date (as defined in the Offer to
Purchase);
5. A form of letter that may be sent to clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to
the Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 providing information relating to backup federal
income tax withholding; and
7. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary, for your use only.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
MONDAY, NOVEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED.
Please note carefully the following:
1. The tender price is $6.75 per Share, net to the seller in cash, without
interest.
2. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the
Offer to Purchase) that number of Shares which would represent at least a
majority of the outstanding Shares on a fully diluted basis.
3. The Offer and withdrawal rights expire at 12:00 midnight New York City
time, on November 8, 1999, unless Offeror extends the Offer.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer. However, federal income tax backup withholding at a rate of 31% may be
required, unless an exemption is available or unless the required taxpayer
identification information is provided. See Instruction 6 of the Letter of
Transmittal.
5. The Board of Directors of the Company has unanimously approved the Offer
and the Merger (as defined in the Offer to Purchase) and determined that the
terms of the Offer and the Merger are fair to, and in the best interests of,
the stockholders of the Company, and recommends that the stockholders of the
Company accept the Offer and tender all of their Shares pursuant thereto.
6. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) Certificates pursuant to the
procedures set forth in Section 3 of the Offer to Purchase or a timely Book-
Entry Confirmation (as defined in the Offer to Purchase) with respect to such
Shares, (b) a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) with any required signature guarantees or
an Agent's Message (as
2
<PAGE>
defined in the Offer to Purchase) in connection with a book-entry delivery of
Shares and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when Certificates for Shares or Book-Entry Confirmations are actually
received by the Depositary.
In order to take advantage of the Offer, (i) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantees or an Agent's Message in connection with a
book-entry delivery of Shares, and any other documents required by the Letter
of Transmittal should be sent to the Depository and (ii) Certificates
representing the tendered Shares or a timely Book-Entry Confirmation should be
delivered to the Depository in accordance with the instructions set forth in
the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may
be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
None of Offeror, Purchaser or Parent will pay any fees or commissions to any
broker, dealer or other person (other than the Dealer Manager, as described in
the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer.
Offeror will, however, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding materials to their customers. Offeror will pay
all stock transfer taxes applicable to its purchase of Shares pursuant to the
Offer, subject to Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers
set forth on the back cover of the Offer to Purchase.
Very truly yours,
MORGAN STANLEY DEAN WITTER
Nothing contained herein or in the enclosed documents shall constitute you
the agent of the Company, the Dealer Manager, the Information Agent or the
Depositary, or authorize you or any other person to use any document or make
any statement on behalf of any of them in connection with the Offer, other
than the documents enclosed herewith and the statements contained therein.
3
<PAGE>
Exhibit (a)(4)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
CombiChem, Inc.
at
$6.75 Net Per Share
by
DPC Newco, Inc.,
a direct wholly owned subsidiary of
DuPont Pharma, Inc.,
a wholly owned subsidiary of
E.I. du Pont de Nemours and Company
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, NOVEMBER 8, 1999,
UNLESS THE OFFER IS EXTENDED.
To Our Clients: October 12, 1999
Enclosed for your consideration are the Offer to Purchase, dated October 12,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") in connection with the Offer by DPC Newco,
Inc., a Delaware corporation ("Offeror") and a direct wholly owned subsidiary
of DuPont Pharma, Inc., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of E.I. du Pont de Nemours and Company, a Delaware
corporation ("Parent"), to purchase for cash all outstanding shares of common
stock, $.001 par value (the "Shares"), of CombiChem, Inc., a Delaware
corporation (the "Company"), at a purchase price of $6.75 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal. Offeror is a corporation, newly formed by Purchaser in connection
with the Offer and the transactions contemplated thereby. The Offer is being
made in connection with the Agreement and Plan of Merger dated as of October
5, 1999 (the "Merger Agreement"), among Parent, Offeror and the Company.
We are the holder of record of Shares held for your account. As the holder
of record of your Shares, only we, pursuant to your instructions, can tender
your Shares. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares held by us for
your account.
<PAGE>
We request your instructions as to whether you wish us to tender any or all
of the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the Letter of Transmittal.
Please note carefully the following:
1. The tender price is $6.75 per Share, net to the seller in cash, without
interest.
2. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the
Offer to Purchase) that number of Shares which would represent at least a
majority of the outstanding Shares on a fully diluted basis.
3. The Offer and withdrawal rights expire at 12:00 midnight New York City
time, on November 8, 1999, unless Offeror extends the Offer.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer. However, federal income tax backup withholding at a rate of 31% may be
required, unless an exemption is available or unless the required taxpayer
identification information is provided. See Instruction 6 of the Letter of
Transmittal.
5. The Board of Directors of the Company has unanimously approved the Offer
and the Merger (as defined in the Offer to Purchase) and determined that the
terms of the Offer and the Merger are fair to, and in the best interests of,
the stockholders of the Company, and recommends that the stockholders of the
Company accept the Offer and tender all of their Shares pursuant thereto.
6. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) Certificates pursuant to the
procedures set forth in Section 3 of the Offer to Purchase or a timely Book-
Entry Confirmation (as defined in the Offer to Purchase) with respect to such
Shares, (b) a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) with any required signature guarantees or
an Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares and (c) any other documents required by the
Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when Certificates for Shares or Book-Entry
Confirmations are actually received by the Depositary.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form set forth below. An envelope to return your instructions to us is
enclosed. Please forward your instructions to us as soon as possible to allow
us ample time to tender your Shares on your behalf prior to the expiration of
the Offer.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making
of the Offer or acceptance thereof would not be in compliance with the
securities laws of such jurisdiction. However, Offeror may, in its discretion,
take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of Offeror by Morgan Stanley & Co. Incorporated, the Dealer
Manager for the Offer, or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK OF COMBICHEM, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated October 12, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer"), in connection
with the Offer by DPC Newco, Inc., a Delaware corporation ("Offeror") and a
direct wholly owned subsidiary of DuPont Pharma, Inc., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of E.I. du Pont de Nemours and
Company, a Delaware corporation ("Parent"), to purchase for cash all
outstanding shares of common stock, $.001 par value (the "Shares"), of
CombiChem, Inc., a Delaware corporation (the "Company"), at a purchase price
of $6.75 per Share, net to the undersigned in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer. Offeror is a
corporation, newly formed by Purchaser in connection with the Offer and the
transactions contemplated thereby. The Offer is being made in connection with
the Agreement and Plan of Merger dated as of October 5, 1999 (the "Merger
Agreement"), among Parent, Offeror and the Company.
The undersigned hereby instruct(s) you to tender to Offeror the number of
Shares indicated below or, if no number is indicated, all Shares held by you
for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
[_] By checking this box, all Shares held by us for your account, excluding
fractional Shares, will be tendered. If fewer than all Shares are to be
tendered, please check the box and indicate below the aggregate number of
Shares to be tendered by us: Shares*
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
SIGN HERE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Signatures)
Dated: ________________________________________________________________________
Name of Shareholders:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Zip Code)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Area Code and Telephone No.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Taxpayer ID No. or Social Security No.)
3
<PAGE>
Exhibit (a)(5)
Notice of Guaranteed Delivery
for
Tender of Shares of Common Stock
of
CombiChem, Inc.
to
DPC Newco, Inc.,
a direct wholly owned subsidiary of
DuPont Pharma, Inc.,
a wholly owned subsidiary of
E.I. du Pont de Nemours and Company
The attached form, or a form substantially equivalent to the attached form,
must be used to accept the Offer (as defined below) if certificates for shares
of common stock, $.001 par value (the "Shares"), of CombiChem, Inc., a
Delaware corporation (the "Company"), and all other documents required by the
Letter of Transmittal cannot be delivered to the Depositary prior to the
Expiration Date (as defined in the Offer to Purchase). Such form may be
delivered by hand, facsimile transmission or mail to the Depositary. See
Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
First Chicago Trust Company of New York
By Mail: By Overnight Delivery: By Hand:
First Chicago Trust First Chicago Trust First Chicago Trust
Company of Company of Company of
New York New York New York
Corporate Actions, Suite Corporate Actions, Suite c/o Securities Transfer
4660 4680 and
P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services Inc.
Jersey City, NJ 07303- New York, NY 10005 Attn: Corporate Actions
2569 100 William Street,
Galleria
New York, NY 10038
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN THOSE
SHOWN ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES.
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE
GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON
THE LETTER OF TRANSMITTAL.
THE ELIGIBLE INSTITUTION THAT COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL OR AN
AGENT'S MESSAGE (AS DEFINED IN THE OFFER TO PURCHASE) AND CERTIFICATES FOR
SHARES TO THE DEPOSITARY WITHIN THE TIME PERIOD SHOWN HEREIN. FAILURE TO DO SO
COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to DPC Newco, Inc., a Delaware corporation
("Offeror") and a direct wholly owned subsidiary of DuPont Pharma, Inc., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of E.I. du
Pont de Nemours and Company, a Delaware corporation ("Parent"), upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
October 12, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, the number (indicated below) of shares of common stock,
$.001 par value (the "Shares"), of CombiChem, Inc., a Delaware corporation
(the "Company"), at a purchase price of $6.75 per Share, net to the seller in
cash, without interest, pursuant to the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase. Offeror is a corporation, newly
formed by Purchaser in connection with the Offer and the transactions
contemplated thereby. The Offer is being made in connection with the Agreement
and Plan of Merger dated as of October 5, 1999 (the "Merger Agreement"), among
Parent, Offeror and the Company.
SIGN HERE
Number of Shares:___________________
------------------------------------
Certificate Nos. (if available):
------------------------------------
------------------------------------ Signatures
Dated:______________________________
------------------------------------
Name of Shareholders:
------------------------------------
------------------------------------
If Shares will be tendered by book-
entry transfer: ------------------------------------
Name of Tendering Institution: (Please Type or Print)
------------------------------------ ------------------------------------
------------------------------------ ------------------------------------
(Address)
Account Number:_____________________
------------------------------------
------------------------------------
(Zip Code)
------------------------------------
------------------------------------
(Area Code and Telephone No.)
------------------------------------
------------------------------------
(Taxpayer ID No. or Social Security
No.)
GUARANTEE
(Not to Be Used for Signature Guarantees)
The undersigned, a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office, branch or agency in the
United States, guarantees (a) that the above named person(s) "own(s)" the
Shares tendered hereby within the meaning of Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, (b) that such tender of Shares complies with
Rule 14e-4 and (c) to deliver to the Depositary the Shares tendered hereby,
together with a properly completed and duly executed Letter(s) of Transmittal
(or facsimile(s) thereof), unless an Agent's Message is utilized, and any
other required documents, all within three Nasdaq Stock Market trading days of
the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the same time period herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm: _______________________ -------------------------------------
Authorized Signature
Address: ____________________________
Name: _______________________________
- ------------------------------------- Please Print
Zip Code
Area Code & Tel. No.: _______________ Title: ______________________________
Date: ________________________ , 1999
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE.
CERTIFICATES SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
Exhibit (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payor.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payor.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Give the NAME and
SOCIAL SECURITY
For this type of account: NUMBER of--
- ---------------------------------------------
<S> <C>
1. One account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor
(Uniform Gift to Minors
Act)
5. Adult and minor (joint The adult, or,
account) if the minor is
the only
contributor, the
minor(2)
6. Account in the name of The ward, minor,
guardian or committee or
for a designated ward, incompetent(3)
minor, or incompetent
person
7.a The usual revocable The grantor-
savings trust (grantor trustee(1)
is also trustee)
b So-called trust account The actual
that is not a legal or owner(1)
valid trust under state
law
8. Sole proprietorship The owner(4)
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Give the NAME
and EMPLOYER
IDENTIFICATION
For this type of account: NUMBER of--
--
<S> <C>
9. A valid trust, estate, Legal entity (Do
or pension trust not furnish the
identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(5)
10. Corporation The corporation
11. Association, club, The organization
religious, charitable
or educational, or
other tax-exempt
organization
12. Partnership held in the The partnership
name of the business
13. A broker or registered The broker or
nominee nominee
14. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a state or
local government,
school district, or
prison) that receives
agricultural program
payments
--
</TABLE>
- -------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must
be furnished.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Circle the ward's name, the minor's name, or the incompetent person's name
and furnish such person's SSN or EIN.
(4) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your SSN or EIN.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Card (for
individuals) or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), from the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on interest and dividend
payments include the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S.,
Washington, D.C., or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a) of the Code.
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
. A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Securities, Inc., Nominee List.
Payments Exempt from Backup Withholding
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441
of the Code.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident alien partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You will
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payor's trade or business and you have not
provided your correct taxpayer identification number to the payor.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
. Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
. Payments on tax-free covenant bonds under section 1451 of the Code.
. Payments made by certain foreign organizations.
. Payments of mortgage interest to you.
Exempt payees described above should file Substitute Form W-9 with the payor
to avoid possible erroneous backup withholding. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN
ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYOR A COMPLETED INTERNAL
REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A,
6042, 6044, 6045, 6049, 6050A, and 6050N of the Code.
Privacy Act Notice.--Section 6109 of the Code requires most recipients of
dividend, interest, or other payments to give correct taxpayer identification
numbers to payors who must report the payments to the IRS. The IRS uses the
numbers for identification purposes and to help verify the accuracy of your
tax return. Payors must be given the numbers whether or not recipients are
required to file a tax return. Payors must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a correct taxpayer identification number to a payor. Certain penalties may
also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you
fail to furnish your correct taxpayer identification number to a requester,
you are subject to a penalty of $50 for each such failure unless your failure
is due to reasonable cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect To Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (a)(7)
DuPont Plans to Acquire CombiChem To Assist in Drug Discovery
WILMINGTON, Del. and SAN DIEGO, Calif., Oct. 5 -- DuPont (NYSE: DD) and
CombiChem, Inc. (NASDAQ: CCHM) today announced they have entered into an
agreement that provides for DuPont to acquire CombiChem for $6.75 per share in
cash, or approximately $95 million. Once completed, this acquisition is
expected to drive DuPont's efforts in the discovery and development of new
medicines.
The planned acquisition is the second in a series of actions taken by DuPont
recently to strengthen its pharmaceuticals business through alliances and
acquisitions. The company announced a major research collaboration with
Pharmasset Limited on Sept. 27, which will focus on research and development of
proprietary HIV and hepatitis B virus antiviral compounds.
"This acquisition demonstrates DuPont's firm commitment to be a leader in
discovering, developing and delivering medicines that improve the health of
people worldwide," said Kurt M. Landgraf, DuPont executive vice president and
chief operating officer. "CombiChem is an outstanding company with demonstrated
performance in linking sophisticated computer technology with chemistry to
identify potential new medicines, as well as agricultural and other
biotechnology products.
"The combination of DuPont's position as a premier science company and
CombiChem's innovative approach to drug discovery is expected to produce
medicines with far-reaching health benefits."
"This agreement was approved unanimously by CombiChem's board of directors,"
said Vince Anido, president and chief executive officer of CombiChem. "We look
forward to being a part of DuPont and joining a team of scientists who, like us,
are dedicated to the discovery of new medicines."
Based in San Diego, CombiChem integrates proprietary computer modeling
technology with advanced chemistry expertise to discover potential new drug
compounds, as well as compounds that have applications in agriculture and
materials sciences. The company uses computer-based methods to shorten the time
of discovery, identify potential drug development problems early and to point
the way to new compounds not previously considered.
Following completion of the acquisition, CombiChem will operate as part of
DuPont Pharmaceuticals Laboratories and will remain in California, a center for
biotechnology and computer technology development.
"DuPont has an abundance of excellent drug discovery targets. We look forward to
having the CombiChem staff join the DuPont Pharmaceuticals research team to move
medicines acting on these targets into development," said Paul Friedman, M.D.,
president of DuPont Pharmaceuticals Research Laboratories.
<PAGE>
"This agreement with CombiChem exemplifies DuPont's commitment to the
pharmaceuticals industry," said Nicholas L. Teti, president of DuPont
Pharmaceuticals. "We fully expect the acquisition to add significant strength
to our product pipeline."
The agreement provides for a tender offer for all of the outstanding shares of
common stock of CombiChem at $6.75 per share, which will commence within five
business days. If successful, the tender offer will be followed by a merger in
which all of the shares not tendered will be purchased at the same price. The
tender offer will be made only by means of an Offer to Purchase which will
contain the specific terms of the transaction and which will be provided to
CombiChem stockholders.
CombiChem stockholders owning approximately 34 percent of CombiChem's
outstanding shares have committed to support the transaction and have entered
into voting and option agreements with DuPont. CombiChem has granted DuPont an
option to purchase other CombiChem shares under certain conditions. The
acquisition is subject to customary regulatory approvals and conditions, and the
receipt of a majority of CombiChem shares by DuPont. The two companies expect
to complete the transaction prior to the end of the year.
DuPont Pharmaceuticals is a worldwide business that focuses on research,
development and delivery of pharmaceuticals to treat unmet medical needs in the
fights against HIV infection, cardiovascular disease, central nervous system
disorders, cancer, arthritis and related disorders. The company also is a leader
in medical imaging.
DuPont is a science company, delivering science-based solutions that make a
difference in people's lives in food and nutrition; health care; apparel; home
and construction; electronics; and transportation. Founded in 1802, the company
operates in 65 countries and has 97,000 employees.
Forward-Looking Statements: This news release contains forward-looking
statements based on management's current expectations, estimates and
projections. All statements that address expectations or projections about the
future, including statements about the company's strategy for growth, product
development, market position, expected expenditures and financial results are
forward-looking statements. Some of the forward-looking statements may be
identified by words like "expects," "anticipates," "plans," "intends,"
"projects," "indicates," and similar expressions. These statements are not
guarantees of future performance and involve a number of risks, uncertainties
and assumptions. Many factors, including those discussed more fully elsewhere
in this release and in DuPont's filings with the Securities and Exchange
Commission, particularly its latest annual report on Form 10-K, as well as
others, could cause results to differ materially from those stated. These
factors include, but are not limited to successful completion of the tender
offer and subsequent merger, whether the merger will result in the discovery and
development of new medicines, changes in the laws, regulations, policies and
economic conditions of countries in which the company does business; competitive
pressures; successful integration of structural changes, including acquisitions,
divestitures and alliances; failure of the
2
<PAGE>
company or related third parties to become Year 2000 capable; research and
development of new products, including regulatory approval and market
acceptance.
3
<PAGE>
Exhibit (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated
October 12, 1999, and the related Letter of Transmittal, and is not being made
to, and tenders will not be accepted from, or on behalf of, holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. If the securities
laws of any jurisdiction require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Offeror by Morgan
Stanley & Co. Incorporated, the Dealer Manager for the Offer, or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase
All Outstanding Shares of Common Stock
of
CombiChem, Inc.
at
$6.75 Net Per Share in Cash
by
DPC Newco, Inc.,
a direct wholly owned subsidiary of
DuPont Pharmaceuticals Company,
a wholly owned subsidiary of
E.I. du Pont de Nemours and Company
DPC Newco, Inc., a Delaware corporation ("Offeror"), and a direct wholly
owned subsidiary of DuPont Pharma, Inc., a Delaware corporation ("Purchaser")
and a wholly owned subsidiary of E.I. du Pont de Nemours and Company, a Delaware
corporation ("DuPont"), is offering to purchase all outstanding shares
("Shares") of Common Stock, par value $0.001 per share ("Common Stock"), of
CombiChem, Inc., a Delaware corporation ("Company"), at a purchase price of
$6.75 per share, net to the seller in cash, without interest ("Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated October 12, 1999, and in the related Letter of Transmittal (which,
together with any amendments or supplements hereto or thereto, collectively
constitute the "Offer"). See the Offer to Purchase for capitalized terms used
but not defined herein.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW
YORK CITY TIME, ON MONDAY, NOVEMBER 8, 1999, UNLESS THE
OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the Expiration Date (as defined below)
Shares representing not less than a majority of the Shares then outstanding on a
fully diluted basis on the date of purchase ("Minimum Condition") and (ii) the
expiration or termination of any applicable waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). See Sections 12 and 14 of the Offer to Purchase.
The Offer is not conditioned on obtaining financing.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of October 5, 1999 ("Merger Agreement"), by and among Offeror, DuPont and the
Company. DuPont has assigned all of its rights under the Merger Agreement to
Purchaser and Purchaser has agreed to assume all of DuPont's obligations under
the Merger Agreement. The Merger Agreement provides, among other things, for the
commencement of the Offer by Offeror and further provides that, after the
purchase of the Shares pursuant to the Offer and subject to the satisfaction or
waiver of certain conditions set forth therein, Offeror will be merged with and
into the Company ("Merger"), with the Company surviving the Merger as a direct
wholly owned subsidiary of Purchaser, and an indirect wholly owned subsidiary of
DuPont. Pursuant to the Merger, each outstanding Share (other than (i) Shares
owned by DuPont, Purchaser, Offeror or any subsidiaries thereof or Shares held
in the Company's treasury and (ii) Shares held by holders who have properly
exercised their appraisal rights under the Delaware General Corporation Law
or other applicable law) immediately prior to the Effective Time (as defined in
the Merger Agreement), will be converted into the right to receive the Offer
Price, in cash, without interest thereon, less any required withholding taxes,
upon the surrender of certificates formerly representing such Shares.
Simultaneously with the execution and delivery of the Merger Agreement, Offeror
and DuPont entered into a Shareholders Agreement, dated as of October 5, 1999
(the "Shareholders Agreement"), with certain stockholders of the Company (the
"Major Stockholders") who, as of September 27, 1999 own 4,549,541 shares of
Common Stock of the Company, in the aggregate. Under the Shareholders Agreement,
the Major Stockholders have agreed, subject to the terms thereof, to tender all
of their shares of Common Stock of the Company to Offeror pursuant to the tender
offer described in the Merger Agreement, and to vote their shares in favor of
the Merger described in the Merger Agreement. The Major Stockholders have also
granted Offeror and the Company a proxy to vote their shares,
<PAGE>
representing approximately 33.7% of the issued and outstanding shares of Common
Stock of the Company as of September 27, 1999, in favor of the Merger.
Simultaneously with the execution and delivery of the Merger Agreement, DuPont,
Offeror and the Company also entered into a Stock Option Agreement, dated as of
October 5, 1999 (the "Option Agreement"), pursuant to which the Company granted
to DuPont an option to purchase 2,684,431 shares of Common Stock, subject to the
terms thereof. If this option were to be exercised and these shares were issued
to DuPont, such shares would, together with the shares subject to the
Shareholders Agreement, represent approximately 44.7% of the issued and
outstanding shares of Common Stock of the Company as of September 27, 1999.
DuPont assigned all of its rights under the Shareholders Agreement and the Stock
Option Agreement to Purchaser and Purchaser assumed all of DuPont's obligations
thereunder.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN
THE BEST INTERESTS OF THE COMPANY AND THE HOLDERS OF SHARES AND HAS UNANIMOUSLY
RECOMMENDED THAT THE HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES.
For purposes of the Offer, Offeror will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered to Offeror and not
withdrawn on or prior to the Expiration Date if, as and when Offeror gives oral
or written notice to The First Chicago Trust Company of New York (the
"Depositary") of Offeror's acceptance for payment of such Shares. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted for
payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from Offeror and transmitting payments to
tendering stockholders. Upon the deposit of funds with the Depositary for the
purpose of making payments to tendering stockholders, Offeror's obligation to
make such payments will be satisfied, and tendering stockholders must thereafter
look solely to the Depositary for payments of amounts owed to them by reason of
the acceptance for payment of Shares pursuant to the Offer.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Monday, November 8, 1999 unless and until Offeror, in accordance with the terms
of the Offer and the Merger Agreement, extends the period of time during which
the Offer is open, in which event the term "Expiration Date" means the latest
time and date at which the Offer, as so extended, expires. In the Merger
Agreement, Offeror has agreed that it will not, without the prior consent of the
Company, extend the Offer if all of the conditions to the Offer have been
satisfied, except that Offeror may, without the consent of the Company, extend
the Offer (i) if on the scheduled Expiration Date of the Offer any of the
conditions to the Offer shall not have been satisfied or waived, for one or more
periods (none of which shall exceed ten business days) but in no event past 60
days from the date of the Merger Agreement, unless the waiting period applicable
to the transactions contemplated by the Merger Agreement under the HSR Act has
not terminated or expired, and then in any event not later than May 31, 2000,
(ii) for such period as may be required by any rule, regulation, interpretation
or position of the Commission or its staff applicable to the Offer, or (iii) if
all conditions to the Offer are satisfied or waived but more than 90% of the
shares of Common Stock issued and outstanding on a fully diluted basis have not
been tendered, for one or more periods (each such period to be for not more than
five business days and such extensions to be for an aggregate period of not more
than fifteen business days and such extensions to be for an aggregate period of
not more than fifteen business days beyond the latest expiration date that would
be permitted under clause (i) or (ii) of this sentence). There can be no
assurance that Offeror will exercise its right to extend the Offer.
Offeror reserves the right (but shall not be obligated), in accordance with
applicable rules and regulations of the Commission, to waive any condition to
the Offer; provided, however, that pursuant to the Merger Agreement, Offeror has
agreed that it will not, without the consent of the Company, (i) decrease the
amount or change the form of consideration payable in the Offer, (ii) decrease
the number of Shares sought in the Offer, (iii) impose additional conditions to
the Offer, (iv) change any conditions to the Offer (including the conditions
described in Section 1 of the Offer to Purchase) or amend any other term of the
Offer if any such change or amendment would be materially adverse to the holders
of Shares (other than DuPont or Offeror) or (v) amend or waive the Minimum
Condition. If the Minimum Condition, or any of the other conditions set forth in
Section 14 of the Offer to Purchase, has not been satisfied by 12:00 midnight,
New York City time, on Monday, November 8, 1999 (or any other time then set as
the Expiration Date), Offeror may elect to (1) subject to the qualifications
above with respect to the extension of the Offer, extend the Offer and, subject
to applicable withdrawal rights, retain all tendered Shares until the expiration
of the Offer, as extended, subject to the terms of the Offer, (2) subject to
complying with applicable rules and regulations of the Commission and to the
terms of the Merger Agreement, accept for payment all Shares so tendered and not
extend the Offer or (3) subject to the terms of the Merger Agreement, terminate
the Offer and not accept for payment any Shares and return all tendered Shares
to tendering stockholders.
Except as set forth above, and subject to the applicable rules and
regulations of the Commission, Offeror expressly reserves the right, in its sole
discretion, to amend the Offer in any respect. Any extension of the period
during which the Offer is open, or delay in acceptance for payment or
termination or amendment of the Offer, will be followed, as promptly as
practicable, by public announcement thereof, such announcement in the case of an
extension to be issued not later than 9:00 a.m. New York City time, on the next
business day after the previously scheduled Expiration Date in accordance with
the public announcement requirements of Rule 14d-4(c) under the Securities
Exchange Act of 1934, as amended ("Exchange Act"). The reservation by Offeror of
the right to delay acceptance for payment of, or payment for, Shares is subject
to the provisions of Rule 14e-1(c) under the Exchange Act, which requires that
Offeror pay consideration offered or return the Shares deposited by or on behalf
of stockholders promptly after the termination or withdrawal of the Offer.
Offeror shall not have any obligation to pay interest on the purchase price for
tendered Shares whether or not Offeror exercises its right to extend the Offer.
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in Section 4 of the Offer to Purchase. Shares tendered
pursuant to the Offer may be withdrawn pursuant to the procedures set forth in
Section 4 of the Offer to Purchase at any time prior to the Expiration Date
and, unless theretofore accepted for payment and paid for by Offeror pursuant to
the Offer, may also be withdrawn at any time after December 10, 1999. For a
withdrawal to be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder, if different from that of the person who tendered such Shares. If
certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the tendering stockholder must also submit to the Depositary the
serial numbers shown on the particular certificates evidencing the Shares to be
withdrawn, and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution (as defined below), except in the case of Shares
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer set forth in Section
3 of the Offer to Purchase, the notice of withdrawal must also specify the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Shares and otherwise comply with such Book-Entry Transfer
Facility's procedures. An "Eligible Institution" is a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of a recognized Medallion Program approved by The Securities Transfer
Association, Inc.
THE INFORMATION REQUIRED TO BE DISCLOSED BY RULE 14D-6(E)(1)(VII) OF THE
GENERAL RULES AND REGULATIONS UNDER THE EXCHANGE ACT IS CONTAINED IN THE OFFER
TO PURCHASE AND IS INCORPORATED HEREIN BY REFERENCE.
The Company has provided Offeror with its stockholder list and security
position listings for the purpose of disseminating the Offer to stockholders.
The Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's stockholder list,
or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
STOCKHOLDERS ARE URGED TO READ THE OFFER TO PURCHASE AND THE RELATED LETTER
OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR SHARES PURSUANT
TO THE OFFER.
Questions and requests for assistance or for copies of the Offer to
Purchase, the related Letter of Transmittal, the Notice of Guaranteed Delivery
or other related materials may be directed to the Information Agent or the
Dealer Manager at their respective addresses and telephone numbers set forth
below, and copies will be furnished promptly at Offeror's expense. Holders of
Shares may also contact brokers, dealers, commercial bankers and trust companies
for additional copies of the Offer to Purchase, the related Letter of
Transmittal, the Notice of Guaranteed Delivery or other related materials.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 488-8075
<PAGE>
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-6088
October 12, 1999
<PAGE>
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
among
COMBICHEM, INC.,
E. I. DU PONT DE NEMOURS AND COMPANY
and
DPC NEWCO, INC.
Dated as of October 5, 1999
<PAGE>
Table of Contents
Section Page
- -------- ----
ARTICLE I
The Tender Offer
<TABLE>
<CAPTION>
<S> <C> <C>
1.1. The Offer.................................................... 2
1.2. SEC Filings.................................................. 4
1.3 Company Action............................................... 5
1.4 Composition of the Company Board............................. 5
ARTICLE II
The Merger; Closing; Effective Time
2.1. The Merger................................................... 6
2.2. Closing...................................................... 6
2.3. Effective Time............................................... 6
ARTICLE III
Certificate of Incorporation and Bylaws of the Surviving Corporation
3.1. The Certificate of Incorporation............................. 7
3.2. The Bylaws................................................... 7
ARTICLE IV
Officers and Directors of the Surviving Corporation
4.1. Directors.................................................... 7
4.2. Officers..................................................... 7
ARTICLE V
Effect of the Merger on Capital Stock; Exchange of Certificates
5.1. Effect on Outstanding Securities............................. 7
5.2. Surrender and Payment........................................ 9
5.3. Adjustment of Merger Consideration........................... 10
5.4. Merger Without Meeting of Stockholders....................... 11
ARTICLE VI
Representations and Warranties
6.1. Representations and Warranties of the Company................ 11
6.2. Representations and Warranties of Parent and Merger Sub...... 28
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VII
Covenants
<S> <C> <C>
7.1. Company Interim Operations................................... 30
7.2. Acquisition Proposals........................................ 32
7.3. Company Stockholder Approval; Proxy Statement................ 33
7.4. Approvals and Consents; Cooperation.......................... 35
7.5. Filings; Other Actions; Notification......................... 36
7.6. Access....................................................... 37
7.7. De-registration.............................................. 37
7.8. Publicity.................................................... 37
7.9. Benefits..................................................... 37
7.10. Expenses..................................................... 39
7.11. Indemnification; Directors' and Officers' Insurance.......... 39
7.12. Antitakeover Statutes........................................ 40
ARTICLE VIII
Conditions
8.1. Conditions to Each Party's Obligation to Effect the Merger... 40
ARTICLE IX
Termination
9.1. Termination by Mutual Consent................................ 41
9.2. Termination by Either Parent or the Company.................. 41
9.3. Termination by the Company................................... 42
9.4. Termination by Parent........................................ 43
9.5. Effect of Termination and Abandonment........................ 44
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE X
Miscellaneous and General
<S> <C> <C>
10.1. Survival.................................................... 44
10.2. Modification or Amendment................................... 45
10.3. Waiver of Conditions........................................ 45
10.4. Counterparts................................................ 45
10.5. Governing Law and Venue; Waiver of Jury Trial............... 45
10.6. Notices..................................................... 46
10.7. Entire Agreement............................................ 47
10.8. No Third Party Beneficiaries................................ 47
10.9. Obligations of Parent and of the Company.................... 47
10.10. Severability................................................ 47
10.11. Specific Performance........................................ 48
10.12. Interpretation.............................................. 48
10.13. Assignment.................................................. 48
10.14. Captions.................................................... 48
</TABLE>
Annex A - Conditions to the Offer
Schedules and Exhibits
----------------------
Schedule 6.1(a) Subsidiaries
Schedule 6.1(b) Outstanding Stock Options and Warrants
Schedule 6.1(d)(ii) Consents and Waivers
Schedule 6.1(f) Certain Changes
Schedule 6.1(h)(i) Compensation and Benefit Plans
Schedule 6.1(n)(i) Intellectual Property
Schedule 6.1(n)(ii) Exceptions to IP Ownership
Schedule 6.1(n) (xvi) Employees Not Subject to Confidentiality Agreements
Schedule 6(o)(ii) Year 2000 Testing and Analysis
Schedule 6(o)(iii) Year 2000 Plan
Schedule 6.1(p)(i) Labor Matters
Schedule 6.1(r) Company Material Contracts
Schedule 6.1(w) Employment Agreements with Key Employees
Schedule 7.1 Company Interim Operations
Schedule 7.11(a) Indemnification Agreements
Exhibit 8.1(f) Opinion of Counsel to the Company
iii
<PAGE>
Cross-Reference of Defined Terms
--------------------------------
Term Defined in
- ---- ----------
Acquisition Proposal Section 7.2(b)
Acquisition Transaction Section 7.2(a)
Action Annex A
Agreement Introductory paragraph
Antitakeover Statute Section 6.1(j)
Audit Date Section 6.1(f)
Business Days Section 1.1(a)
Bylaws Section 3.2
Certificate Section 5.1(a)(ii)
Certificate of Merger Section 2.3
Charter Section 3.1
Closing Date Section 2.2
Closing Section 2.2
COBRA Section 6.1(h)(i)
Code Section 6.1(h)(ii)
Common Stock Recitals
Company Introductory paragraph
Company Disclosure Schedules Section 6.1
Company 401(k) Section 7.9(b)
Company Intellectual Property Section 6.1(n)(ii)
Company Material Adverse Effect Section 6.1(a)
Company Material Contracts Section 6.1(u)
Company Option Section 6.1(b)
Company Owned IP Section 6.1(n)(i)
Company Reports Section 6.1(e)
Company Requisite Vote Section 6.1(c)(i)
Company Stockholders Meeting Section 7.3(a)
Compensation and Benefit Plan Section 6.1(h)(i)
Constituent Corporations Introductory paragraph
Contracts Section 6.1(d)(ii)
Controlled Group Affiliate Section 6.1(h)(i)
Current Employees Section 7.9(b)
Depositary Section 5.2(a)
DGCL Recitals
DLJ Section 1.2(b)
Dissenting Shares Recitals
DPC Section 7.6
Effective Time Section 2.3
Employees Section 6.1(h)(i)
Employment Agreements Recitals
iv
<PAGE>
Environmental Law Section 6.1(k)
ERISA Section 6.1(h)(i)
ESPP Section 6.1(b)
Exchange Act Section 1.1(a)
Excluded Shares Section 5.1(a)(i)
Foreign Authority Section 9.2
Foreign Merger Laws Section 9.2
GAAP Section 6.1(e)
Governmental Entity Section 6.1(d)(i)
Hazardous Substance Section 6.1(k)
HSR Act Section 1.1(b)(ii)
Intellectual Property Rights Section 6.1(n)(ix)
Knowledge Section 6.1(g)
Laws Section 6.1(i)
Letter of Transmittal Section 5.2(b)
Merger Recitals
Merger Consideration Section 5.1(a)(i)
Merger Sub Introductory paragraph
Minimum Condition Section 1.1(b)(i)
MNDA Section 7.6
Offer Recitals
Offer Conditions Section 1.1(b)(i)
Offer Documents Section 1.2(a)
Order Section 8.1(c)
Parent Introductory paragraph
Parent Companies Section 5.1(a)(i)
Parent Representatives Section 7.6
Payment Fund Section 5.2(a)
Pension Plan Section 6.1(h)(ii)
Person Section 5.2(b)
Preferred Shares Section 6.1(b)
Price Per Share Recitals
Proxy Statement Section 7.4(b)
Schedule 14D-l Section 1.2(a)
Schedule 14D-9 Section 1.2(b)
Scheduled Expiration Date Section 1.1(b)(ii)
SEC Section 1.1(b)(ii)
Share Recitals
Shareholders Agreement Recitals
Software Section 6.1(o)(iv)
Stock Option Agreement Recitals
Stock Plans Section 6.1(b)
Subsidiary Section 6.1(a)
Superior Proposal Section 7.2(c)
v
<PAGE>
Surviving Corporation Section 2.1
Taxes Section 6.1(m)
Tax Returns Section 6.1(m)
Terminating Company Breach Section 9.4(b)
Terminating Parent Breach Section 9.3(b)
Third Party Licenses Section 6.1(n)(ii)
Voting Debt Section 6.1(b)
Warrants Section 5.1(a)(iii)
Warrant Spread Section 5.1(a)(iii)
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 5, 1999, among CombiChem, Inc., a Delaware corporation (the "Company"),
E. I. du Pont de Nemours and Company, a Delaware corporation ("Parent"), and DPC
Newco, Inc., a Delaware corporation and a wholly owned subsidiary of Parent
("Merger Sub," the Company and Merger Sub sometimes being hereinafter
collectively referred to as the "Constituent Corporations").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each approved the Offer (as defined herein) and the Merger (as
defined herein) and have determined that it is in the best interests of their
respective companies and stockholders for Parent to acquire the Company upon the
terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Merger Sub to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all of the outstanding
shares of common stock, $.001 par value per share ("Common Stock"), of the
Company (each a "Share" or collectively, the "Shares") at a price per Share of
U.S. $6.75 net to the seller in cash (such price, or any higher price paid in
the Offer, the "Price Per Share"), upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, the Board of Directors of the Company has unanimously
approved this Agreement, the Offer and the Merger, has determined that the Offer
and the Merger are fair to and in the best interests of the Company's
stockholders, declared the Merger advisable and has resolved to recommend that
the Company's stockholders accept the Offer, tender their Shares thereunder and
adopt this Agreement;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company is entering into a stock option agreement with Parent
(the "Stock Option Agreement"), pursuant to which the Company has granted to
Parent an option to purchase up to 2,684,431 shares of Common Stock (19.9% of
the outstanding Shares) under the terms and conditions set forth in the Stock
Option Agreement, at a price of $6.75 per Share;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, certain employees of the Company are entering into employment
agreements with the Company (the "Employment Agreements");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, certain holders of Shares are entering into an agreement with Parent
(the "Shareholders Agreement") pursuant to which such holders shall agree to
take certain actions to support the transactions contemplated by this Agreement;
and
1
<PAGE>
WHEREAS, in order to complete such acquisition, the respective Boards
of Directors of Parent, Merger Sub and the Company have each approved the merger
of Merger Sub with and into the Company, with the Company surviving (the
"Merger"), upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), whereby each
issued and outstanding Share not owned directly or indirectly by Parent or the
Company and, except Shares, if any, held by persons who object to the Merger and
comply with all the provisions of Delaware law concerning the right of holders
of Shares, to dissent from the Merger and require appraisal of their Shares
("Dissenting Shares"), will be converted into the right to receive the Price Per
Share.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein and in
the Stock Option Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I
The Tender Offer
1.1. The Offer.
---------
(a) Subject to the provisions of this Agreement (including,
without limitation, Annex A attached hereto), and provided that this Agreement
has not been terminated in accordance with Article IX hereof, as promptly as
practicable but in no event later than five business days, as defined in Rule
14d-1(e)(6) ("Business Days") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the announcement of this Agreement, Merger
Sub will commence the Offer.
(b) (i) The obligation of Merger Sub to accept for payment,
purchase and pay for any Shares tendered pursuant to the Offer shall be subject
to the satisfaction or waiver of the conditions set forth in Annex A attached
hereto (the "Offer Conditions") (including the Offer Condition that at least
that number of Shares equivalent to a majority of the total Shares issued and
outstanding on a fully diluted basis on the date such shares are purchased
pursuant to the Offer shall have been validly tendered and not withdrawn prior
to the expiration of the Offer (the "Minimum Condition")). Merger Sub expressly
reserves the right to modify the terms of the Offer and to waive any condition
of the Offer, except that, Merger Sub will not, without the prior written
consent of the Company (i) decrease the amount or change the form of
consideration payable in the Offer, (ii) decrease the number of Shares sought in
the Offer, (iii) impose additional conditions to the Offer, (iv) change any
Offer Condition or amend any other term of the Offer if any such change or
amendment would be materially adverse in any respect to the holders of Shares
(other than Parent or Merger Sub), (v) except as provided below, extend the
Offer if all of the Offer Conditions have been satisfied or (vi) amend or waive
the Minimum Condition.
2
<PAGE>
(ii) Subject to the terms and conditions hereof, the Offer
shall expire at midnight, New York City time, on the date that is twenty (20)
Business Days after the Offer is commenced (within the meaning of Rule 14d-2
under the Exchange Act) (the "Scheduled Expiration Date"); provided, however,
that without the consent of the Company, Merger Sub may (x) extend the Offer, if
on the Scheduled Expiration Date of the Offer any of the Offer Conditions shall
not have been satisfied or waived, for one (1) or more periods (none of which
shall exceed ten (10) Business Days), provided that Merger Sub may not extend
the expiration of the Offer past sixty (60) days from the date of this
Agreement, unless the waiting period applicable to the transactions contemplated
by this Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), has not terminated or expired in which case
Merger Sub may not extend the offer past the date set forth in Section 9.2(i),
or (y) extend the Offer for such period as may be required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
("SEC") or the staff thereof applicable to the Offer or (z) extend the Offer for
one (1) or more periods (each such period to be for not more than five (5)
Business Days and such extensions to be for an aggregate period of not more than
fifteen (15) Business Days beyond the latest expiration date that would
otherwise be permitted under clause (x) or (y) of this sentence) if on such
expiration date the Offer Conditions shall have been satisfied or waived, but
there shall not have been tendered that number of Shares which would equal more
than ninety percent (90%) of the Shares issued and outstanding on a fully-
diluted basis. Parent shall cause Merger Sub to, and agrees to use its best
efforts to, consummate the Offer as soon as legally permissible, subject to
Merger Sub's right to extend the Offer as provided in this Section 1.1(b)(ii).
(iii) Merger Sub agrees that if all of the Offer Conditions are
not satisfied on the Scheduled Expiration Date, then, provided that all such
conditions are and continue to be reasonably probable of being satisfied by the
date that is forty-five (45) days after the commencement of the Offer, Merger
Sub shall extend the Offer for one period of not more than five (5) Business
Days if requested to do so by the Company; provided that Merger Sub shall not be
required to extend the Offer beyond forty-five (45) days after commencement of
the Offer or, if earlier, the date of termination of this Agreement in
accordance with the terms hereof.
(iv) On the terms of the Offer and subject to the satisfaction
or waiver of the Offer Conditions and the terms of this Agreement, Merger Sub
shall (A) be obligated to purchase all Shares validly tendered and not withdrawn
on the earliest date that all of the Offer Conditions are satisfied or waived
and (B) pay for all Shares validly tendered and not withdrawn pursuant to the
Offer that Merger Sub becomes obligated to purchase pursuant to the Offer as
soon as practicable after the expiration of the Offer. Notwithstanding any other
provision of this Agreement, the Stock Option Agreement or the Shareholders
Agreement, any reference to a majority of the total issued and outstanding
shares or Shares, or shares or Shares outstanding on a fully diluted basis, or
similar references, shall, for purposes of such agreements, exclude from the
determination thereof any shares of Common Stock issuable upon exercise of or
subject to the Stock Option Agreement and any reference to beneficial ownership
of shares of Common Stock or similar references shall, for purposes of such
agreements, exclude from the determination thereof any shares of Common Stock
issuable upon exercise of or subject to the
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Stock Option Agreement and/or the Shareholders Agreement.
1.2. SEC Filings.
-----------
(a) As promptly as practicable, but in no event later than the
fifth Business Day after the announcement of this Agreement and the Offer,
Parent and Merger Sub shall file with the SEC a Tender Offer Statement on
Schedule 14D-l with respect to the Offer (as supplemented or amended from time
to time, the "Schedule 14D-l") to provide for the purchase of the issued and
outstanding Shares in accordance with the terms hereof. The Schedule 14D-l, the
Offer to Purchase and related summary advertisement and Letter of Transmittal
(which documents, as supplemented or amended from time to time, together
constitute the "Offer Documents") will comply as to form and content in all
material respects with the applicable provisions of the federal securities laws.
The Company and its counsel shall be given an opportunity to review and comment
upon the Offer Documents and any amendment or supplement thereto prior to the
filing thereof with the SEC and Parent and Merger Sub shall consider such
comments in good faith. Parent and Merger Sub agree to provide to the Company
and its counsel any comments which Parent, Merger Sub or their counsel may
receive from the Staff of the SEC promptly after receipt thereof, and any
proposed responses thereto, with respect to the Offer Documents and any
amendment or supplement thereto. Parent, Merger Sub and the Company agree to
correct promptly any information provided by any of them for use in the Offer
Documents which shall have become false or misleading in any material respect,
and Parent and Merger Sub further agree to take all steps necessary to cause the
Schedule 14D-l as so corrected to be filed with the SEC and to disseminate any
revised Offer Documents to the Company's stockholders, in each case as and to
the extent required by the applicable provisions of the federal securities laws.
(b) The Company Board shall recommend acceptance of the Offer to
its stockholders in a Solicitation/Recommendation on Schedule 14D-9 (as
supplemented or amended from time to time, the "Schedule 14D-9"), provided,
however, that the Company Board may thereafter amend or withdraw its
recommendation if it has received an Acquisition Proposal (as defined herein)
which in accordance with Section 7.2 is a Superior Proposal (as defined herein).
On the date the Offer Documents are filed with the SEC, the Company shall file
the Schedule 14D-9, which will comply as to form and content in all material
respects with the applicable provisions of the federal securities laws. The
Company will cooperate with Parent and Merger Sub in mailing or otherwise
disseminating the Schedule 14D-9 with the appropriate Offer Documents to the
stockholders of the Company. Parent and its counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 and any amendment or
supplement thereto prior to the filing thereof with the SEC, and the Company
shall consider any such comments in good faith. The Company agrees to provide to
Parent and Merger Sub and their counsel any comments which the Company or its
counsel may receive from the Staff of the SEC promptly after receipt thereof,
and any proposed responses thereto, with respect to the Schedule 14D-9 and any
amendment or supplement thereto. The Company, Parent and Merger Sub agree to
correct promptly any information provided by any of them for use in the Schedule
14D-9 which shall have become false or misleading in any material respect, and
the Company further
4
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agrees to take all steps necessary to cause such Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by the applicable provisions of the federal
securities laws. Parent, Merger Sub and the Company each hereby agree to
provide promptly such information necessary to the preparation of the exhibits
and schedules to the Schedule 14D-9 and the Offer Documents which the respective
party responsible therefor shall reasonably request. The Company represents
that Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") has delivered
to the Company Board a written opinion, as of the date hereof, that, subject to
the assumptions and qualifications set forth in such opinion, the consideration
to be paid in the Offer and the Merger is fair to the holders of the Shares from
a financial point of view. The Company hereby consents to the inclusion in the
Offer Documents of the recommendations and approvals referred to in this Section
1.2, unless the Company Board has changed or withdrawn its recommendation after
receipt of an Acquisition Proposal that in accordance with Section 7.2 is a
Superior Proposal.
1.3. Company Action. In connection with the Offer, the Company
--------------
shall promptly furnish Merger Sub with such information (including a list of the
record holders of the Common Stock and their addresses, as well as mailing
labels containing the names and addresses of all record holders of Shares, any
non-objecting beneficial owner lists and lists of security positions of Shares
held in stock depositories in the Company's possession or control, in each case
as of a date not more than three (3) Business Days before the date of this
Agreement), and shall thereafter render such assistance as Parent, Merger Sub or
their agents may reasonably request in communicating the Offer to the record and
beneficial holders of Shares. Subject to the requirements of applicable law and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Offer and the Merger, Parent and
Merger Sub shall (a) hold in confidence the information contained in any of such
labels and lists, (b) use such information only in connection with the Offer and
the Merger and (c) if this Agreement is terminated, shall, upon request, deliver
to the Company or destroy all copies of such information then in their or their
agents' possession.
1.4 Composition of the Company Board.
--------------------------------
(a) Promptly upon the acceptance for payment of, and payment by Merger
Sub in accordance with the Offer for, not less than that number of Shares equal
to the Minimum Condition, Merger Sub shall be entitled to designate such number
of members of the Company Board, rounded up to the next whole number, equal to
that number of directors which equals the product of the total number of
directors on the Company Board (giving effect to the directors elected pursuant
to this sentence) multiplied by the percentage that such number of Shares owned
in the aggregate by Merger Sub or Parent, upon such acceptance for payment,
bears to the number of Shares outstanding. Upon the written request of Merger
Sub, the Company shall, on the date of such request, (i) either increase the
size of the Company Board or use its reasonable efforts to secure the
resignations of such number of its incumbent directors as is necessary to enable
Parent's designees to be so elected to the Company Board and (ii) cause Parent's
designees to be so elected, in each case as may be necessary to comply with the
foregoing provisions of this Section 1.4(a).
5
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(b) The Company's obligation to cause designees of Merger Sub to
be elected or appointed to the Company Board shall be subject to Section 14(f)
of the Exchange Act and Rule 14f-l promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-l in
order to fulfill its obligations under this Section 1.4, and shall include in
the Schedule 14D-9 such information with respect to Merger Sub and its designees
as is required under Section 14(f) and Rule 14f-l. Parent and Merger Sub will
supply to the Company in writing and be solely responsible for any information
with respect to any of them and their designees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-l and applicable rules and
regulations.
ARTICLE II
The Merger; Closing; Effective Time
2.1. The Merger. Upon the terms and subject to the conditions set
----------
forth in this Agreement, at the Effective Time (as defined in Section 2.3)
Merger Sub shall be merged with and into the Company. The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware. The Merger shall have the effects specified in the DGCL.
Parent, as the sole stockholder of Merger Sub, hereby approves the Merger and
this Agreement.
2.2. Closing. The closing of the Merger (the "Closing") shall take
-------
place (i) at the offices of Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market
Street, Philadelphia, Pennsylvania at 10:00 a.m. on the latest to occur of (A)
the business day on which the condition set forth in Section 8.1(a) shall be
satisfied or waived in accordance with this Agreement and (B) the first business
day following the date on which the last to be satisfied or waived of the other
conditions set forth in Article VIII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions) shall be satisfied or waived in accordance with this
Agreement, or (ii) at such other place and time and/or on such other date as the
Company and Parent may agree in writing (the "Closing Date").
2.3. Effective Time. As soon as practicable following the Closing,
--------------
the Company will cause a Certificate of Merger (the "Certificate of Merger") to
be executed, acknowledged and filed with the Secretary of State of the State of
Delaware as provided in Section 251 of the DGCL. The Merger shall become
effective at the time when the Certificate of Merger has been duly filed with
the Secretary of State of the State of Delaware or, if agreed to by Parent and
the Company, such later time or date set forth in the Certificate of Merger (the
"Effective Time").
6
<PAGE>
ARTICLE III
Certificate of Incorporation and Bylaws of the Surviving Corporation
3.1. The Certificate of Incorporation. The certificate of
--------------------------------
incorporation of the Company shall be amended as of the Effective Time so that
it is identical to the certificate of incorporation of Merger Sub in effect
immediately prior to the Effective Time, except that Article FIRST of the
Charter shall provide that the name of the Company shall be the name of the
Surviving Corporation, and such certificate shall be the certificate of
incorporation of the Surviving Corporation (the "Charter").
3.2. The Bylaws. The bylaws of Merger Sub in effect immediately
----------
prior to the Effective Time shall be the bylaws of the Surviving Corporation
(the "Bylaws"), until thereafter amended as provided therein or by applicable
law.
ARTICLE IV
Officers and Directors of the Surviving Corporation
4.1. Directors. The directors of Merger Sub immediately prior to
---------
the Effective Time shall, from and after the Effective Time, be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and Bylaws. Subject to the consummation of the
Offer and the purchase by Merger Sub of at least that number of shares equal to
the Minimum Condition, prior to the Effective Time, the Company shall take all
actions necessary to obtain any resignations of its directors necessary to give
effect to the provisions of this Section and Section 1.4.
4.2. Officers. The officers of the Company immediately prior to
--------
the Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and Bylaws.
ARTICLE V
Effect of the Merger on Outstanding Securities; Exchange of Certificates
5.1. Effect on Outstanding Securities. At the Effective Time, as
--------------------------------
a result of the Merger and without any action on the part of the Company,
Parent, Merger Sub or any holder of any capital stock of the Company:
7
<PAGE>
(a) Merger Consideration.
--------------------
(i) Each Share issued and outstanding immediately prior to
the Effective Time (other than (A) Shares owned by Parent or any direct or
indirect Subsidiary (as defined herein) of Parent (collectively, the "Parent
Companies"), (B) Dissenting Shares, or (C) Shares that are owned by the Company
or any direct or indirect Subsidiary of the Company (and in each case not held
on behalf of third Parties) (collectively, "Excluded Shares")) shall be
converted into, and become exchangeable for the right to receive the Price Per
Share in cash (the "Merger Consideration").
(ii) At the Effective Time, all Shares shall no longer be
outstanding and shall be canceled and retired and shall cease to exist, and each
certificate (a "Certificate") formerly representing any of such Shares (other
than Excluded Shares) shall thereafter represent only the right to receive the
Merger Consideration.
(iii) At the Effective Time, each warrant to purchase shares
of Common Stock listed on Schedule 6.1(b) (the "Warrants") shall be canceled in
exchange for a cash payment of an amount equal to (A) the excess, if any, of (1)
the Price Per Share over (2) the exercise price per share of Common Stock
subject to such Warrant, multiplied by (B) the number of shares of Common Stock
for which such Warrant shall not theretofore have been exercised (the "Warrant
Spread"). Upon surrender to Parent at the address set forth in Section 10.6 of
Warrants and/or such other documents as may reasonably be requested by Parent,
Parent hereby agrees to deliver to the registered holders of such Warrants (as
indicated in the records of the Company) the Warrant Spread. If there is no
excess of the Price Per Share over the exercise price per share of Common Stock
subject to a Warrant, then such Warrant shall be canceled for no consideration.
(iv) At the Effective Time, each outstanding Company Option
(as defined herein) shall be canceled in accordance with Section 7.9(a).
(b) Cancellation of Excluded Shares. Each Excluded Share (other
-------------------------------
than Dissenting Shares) issued and outstanding immediately prior to the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, shall cease to be outstanding and shall be canceled and
retired without payment of any consideration therefor and shall cease to exist.
(c) Merger Sub. As of the Effective Time, each share of Common
----------
Stock, par value $.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall continue to remain outstanding and
shall constitute one share of common stock of the Surviving Corporation.
(d) Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who is entitled to
8
<PAGE>
and has demanded appraisal for such shares in accordance with the DGCL, or other
applicable law, shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses its right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses its right to appraisal, such shares shall be
treated as if they had been converted as of the Effective Time into a right to
receive the Merger Consideration. The Company shall give Parent prompt notice of
any demands received by the Company for appraisal of Shares, and Parent shall
have the right to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, except as otherwise required under applicable law.
5.2. Surrender and Payment.
---------------------
(a) Depositary. Prior to the Effective Time, Parent shall
----------
designate a bank or trust company reasonably acceptable to the Company to act as
agent for the holders of Shares in connection with the Merger (the "Depositary")
to receive the Merger Consideration to which holders of Shares shall become
entitled pursuant to Section 5.1. Prior to the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, Parent or Merger
Sub shall deposit with the Depositary cash in an aggregate amount equal to the
product of (i) the number of Shares outstanding (and not to be canceled pursuant
to Section 5.1(b)) immediately prior to the Effective Time, multiplied by (ii)
the Merger Consideration. The deposit made by Parent or Merger Sub pursuant to
the preceding sentence is hereinafter referred to as the "Payment Fund." The
Depositary shall cause the Payment Fund to be (i) held for the benefit of the
holders of Shares and (ii) promptly applied to making the payments provided for
in Section 5.1(a). The Payment Fund shall not be used for any purpose that is
not provided for herein.
(b) Exchange Procedures. As soon as reasonably practicable
-------------------
after the Effective Time, Parent shall cause the Depositary to mail to each
holder of record a Certificate or Certificates (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
Depositary) (the "Letter of Transmittal") and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Depositary, together with such Letter of Transmittal, duly executed, and such
other documents as may reasonably be required by the Depositary, the Depositary
shall pay the holder of such Certificate the Merger Consideration in respect of
such Certificate, less any required withholding taxes, and the Certificate so
surrendered shall forthwith be canceled. If any portion of the Merger
Consideration is to be paid to a person (as defined in the Exchange Act) (a
"Person") other than the registered holder of the shares represented by the
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such payment that the Certificate or Certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Depositary any transfer or
other taxes required as a result of such payment to a Person other than the
registered holder of such shares or establish to the satisfaction of the
Depositary that such tax has been paid or is not payable. Until surrendered as
contemplated by this Section 5.2, each Certificate (other
9
<PAGE>
than Certificates representing Dissenting Shares) or Shares to be canceled
pursuant to Section 5.1(b)) shall be deemed at any time after the Effective Time
to represent only the right to receive the Merger Consideration upon such
surrender.
(c) No Further Ownership Rights in Common Stock. All Merger
-------------------------------------------
Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article V shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares theretofore represented by
such Certificates. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Depositary
for any reason, they shall be canceled and exchanged as provided in this Article
V, except as otherwise provided by law.
(d) Unclaimed Funds. Any portion of the Payment Fund made
---------------
available to the Depositary pursuant to Section 5.2(a) that remains unclaimed by
holders of the Certificates for six (6) months after the Effective Time shall be
delivered to the Surviving Corporation or a United States parent thereof, upon
demand, and any holders of Certificates who have not theretofore complied with
this Article V shall thereafter look only to Parent for payment of their claim
for Merger Consideration.
(e) No Liability. None of Parent, Merger Sub, the Company or the
------------
Depositary shall be liable to any Person in respect of any Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate has not been surrendered prior to
five (5) years after the Effective Time (or immediately prior to such earlier
date on which Merger Consideration in respect of such Certificate would
otherwise escheat to or become the property of any public official), any such
shares, cash, dividends or distributions in respect of such Certificate shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any Person previously
entitled thereto.
(f) Investment of Funds. The Payment Fund shall be invested by
-------------------
the Depositary in accordance with the instructions of Parent and all earnings
thereon shall inure to the benefit of Parent or Merger Sub.
(g) Lost Certificates. In the event that any Certificate shall
-----------------
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the granting of an indemnity reasonably satisfactory
to Parent against any claim that may be made against it, the Surviving
Corporation or the Depositary, with respect to such Certificate, the Depositary
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration with respect to such Certificate, to which such Person is entitled
pursuant hereto.
5.3. Adjustment of Merger Consideration. In the event that,
----------------------------------
subsequent to the date of this Agreement but prior to the Effective Time, the
outstanding Shares shall have been
10
<PAGE>
changed into a different number of shares or a different class as a result of a
stock split, reverse stock split, stock dividend, subdivision, reclassification,
split, combination, exchange, recapitalization or other similar transaction, the
Merger Consideration shall be appropriately adjusted.
5.4. Merger Without Meeting of Stockholders. In the event that
--------------------------------------
Merger Sub, or any other direct or indirect subsidiary of Parent, shall acquire
at least ninety percent (90%) of the outstanding Shares, the parties hereto
shall take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
vote of stockholders of the Company, in accordance with Section 253 of the DGCL.
ARTICLE VI
Representations and Warranties
6.1. Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants to Parent and Merger Sub, except as specifically
identified in the Schedules described in this Section 6.1 and delivered to
Parent on the date of this Agreement and attached hereto (the "Company
Disclosure Schedules"), as follows:
(a) Organization, Good Standing and Qualification. Each of the
---------------------------------------------
Company and each of its Subsidiaries is a corporation or limited liability
company duly organized, validly existing and in good standing (where such
concept is recognized) under the laws of its respective jurisdiction of
organization. Each of the Company and each of its Subsidiaries has all
requisite corporate or limited liability company power and authority to own and
operate their respective properties and assets and to carry on their respective
businesses as presently conducted. Each of the Company and each of its
Subsidiaries is qualified to do business and is in good standing as a foreign
corporation or limited liability company in each jurisdiction (where such
concept is recognized) where the ownership or operation of its properties or
conduct of its business requires such qualification, except where the failure to
be so qualified or in such good standing, when taken together with all other
such failures, is not reasonably likely to have a Company Material Adverse
Effect (as defined below) or impair the ability of the Company, the Surviving
Corporation, Parent or any of their respective affiliates, following
consummation of the Offer or the Merger, to conduct any material business or
operations in any jurisdiction where they are now being conducted. The Company
has made available to Parent a complete and correct copy of the Company's and
its Subsidiaries' certificates of incorporation and bylaws (or documents of a
similar scope for (i) limited liability companies and (ii) corporations
organized in jurisdictions outside the United States), each as amended to date.
The Company's and its Subsidiaries' certificates of incorporation and bylaws (or
similar documents) so made available are in full force and effect.
As used in this Agreement, (i) "Subsidiary" means, with respect to the
Company, Parent or Merger Sub, as the case may be, any entity, whether
incorporated or unincorporated, of which at least fifty percent (50%) of the
securities or ownership interests having by their terms
11
<PAGE>
ordinary voting power to elect fifty percent (50%) of the board of directors or
other Persons performing similar functions is directly or indirectly owned or
controlled by such party or by one or more of its respective Subsidiaries or by
such party and any one or more of its respective Subsidiaries, and (ii) "Company
Material Adverse Effect" means any change in or effect on the business of the
Company and its Subsidiaries that is, or is reasonably likely to be, materially
adverse to the business, operations or assets (including intangible assets),
liabilities (contingent or otherwise), prospects, condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole. In no event
shall any of the following constitute, or be taken into account in determining
whether there has been or is likely to be, a "Company Material Adverse Effect":
(i) an adverse change in the trading price of the Common Stock between the date
of this Agreement and the Effective Time, in and of itself; (ii) any adverse
conditions, events, circumstances, changes or effects attributable to expenses
(including, without limitation, legal, accounting and financing consulting fees
and expenses) incurred directly in connection with the transactions contemplated
by this Agreement; or (iii) any adverse conditions, events, circumstances,
changes or effects resulting from compliance by the Company with, or the taking
of any action required or contemplated by, the terms of this Agreement or any
other agreement entered into by the Company with Parent or Merger Sub in
connection with the transactions contemplated by this Agreement.
Schedule 6.1(a) lists each Subsidiary of the Company and its
jurisdiction of formation. All of the outstanding equity interests in each such
Subsidiary have been validly issued and are fully paid and non-assessable and
owned by the Company free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever. Except
for the equity interest in its Subsidiaries, the Company does not own, directly
or indirectly, an ownership interest in any corporation, partnership, joint
venture or other entity.
(b) Capital Structure. The authorized capital stock of the
-----------------
Company consists of 40,000,000 shares of Common Stock, of which 13,489,604
Shares were outstanding as of the close of business on September 27, 1999, and
5,000,000 shares of Preferred Stock, par value $0.001 per share (the "Preferred
Shares"), none of which were outstanding as of the close of business on
September 27, 1999. All of the outstanding Shares have been duly authorized and
are validly issued, fully paid and nonassessable. Other than shares of Common
Stock reserved for issuance pursuant to the Stock Option Agreement, the Company
has no shares of Common Stock or Preferred Shares subject to issuance, except
(i) 3,355,069 shares of Common Stock reserved for issuance under the Company's
1997 Stock Incentive Plan, of which options to acquire 1,213,476 shares of
Common Stock are outstanding as of September 27, 1999, (ii) 150,000 shares of
Common Stock reserved for issuance under the Company's 1997 Employee Stock
Purchase Plan (the "ESPP"), of which 79,967 shares of Common Stock are available
for purchase as of September 27, 1999, (iii) 70,000 shares of Common Stock
reserved for issuance pursuant to options granted other than pursuant to the
Stock Plans, of which options to acquire 70,000 shares of Common Stock are
outstanding as of September 27, 1999 and (iv) 247,220 shares of Common Stock
reserved for issuance upon exercise of the Warrants as of September 27, 1999.
Schedule 6.1(b) sets forth a correct and complete list of (i) each outstanding
option to purchase shares of
12
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Common Stock under the Stock Plans (as defined below) or pursuant to clause
(iii) of the preceding sentence (each a "Company Option"), as of September 27,
1999, including the holder, date of grant, exercise price and number of shares
of Common Stock subject thereto and (ii) each Warrant as of September 27, 1999,
including the holder, exercise price, and number of shares of Common Stock
subject thereto. As of September 27, 1999, there are no shares of capital stock
of the Company authorized, issued or outstanding except as set forth above and,
except as set forth above, there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character to which the Company is a party or
may be bound relating to the issued or unissued capital stock or other
securities of the Company and the Shares subject to the Stock Option Agreement
shall not be subject to any preemptive rights. The Company does not have
outstanding any bonds, debentures, notes or other obligations, the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the stockholders of the Company on any matter
("Voting Debt"). Except for the Company's 1997 Stock Incentive Plan (including
its predecessor plan, the 1995 Stock Option/Stock Issuance Plan) and the ESPP
(such plans collectively, the "Stock Plans"), at or after the Effective Time,
neither the Surviving Corporation nor Parent nor their respective affiliates
will have any obligation to issue, transfer or sell any shares or securities of
the Surviving Corporation, Parent or any of their respective affiliates pursuant
to any Compensation and Benefit Plan (as defined in Section 6.1(h)(i)) which
obligations were outstanding as of September 27, 1999. On or prior to the
consummation of the Offer, the Company will have taken all actions as are
required to adjust the terms of all outstanding Warrants to provide that the
Warrants may be canceled in accordance with Section 5.1(a)(iii). Since September
27, 1999, the Company has not issued, granted or entered into any agreement
relating to any subscription, option, warrant, right, convertible security or
any agreement or commitment of any character to which the Company is a party or
may be bound relating to the issued or unissued capital stock or other
securities of the Company, except for the Stock Option Agreement.
(c) Corporate Authority; Approval.
-----------------------------
(i) The Company has all requisite corporate power and
authority and has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement and the Stock Option
Agreement and to consummate the Offer and, subject only to obtaining the
adoption of this Agreement by a majority of the Shares outstanding as of the
record date of the Company's stockholders meeting (the "Company Requisite
Vote"), the Merger. This Agreement and the Stock Option Agreement are valid and
binding agreements of the Company, enforceable against the Company in accordance
with their respective terms subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium, or similar laws from time to
time in effect affecting creditors' rights generally, and (ii) general
principles of equity, whether such principles are considered in a proceeding at
law or in equity.
(ii) The Company Board has, at a meeting duly called and
held, unanimously (A) approved the acquisition of the Company by Parent on the
terms and subject to
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the conditions of this Agreement, (B) approved this Agreement and the Stock
Option Agreement, the Offer and the Merger and the transactions contemplated
hereby in accordance with the DGCL, (C) determined that the Offer and the Merger
are fair to and in the best interests of the Company's stockholders and declared
the Merger advisable, and (D) recommended that the stockholders of the Company
tender their shares of Common Stock into the Offer and adopt this Agreement and
approve the Merger.
(d) Governmental Filings; No Violations.
-----------------------------------
(i) Other than any filings and/or notices required (A)
pursuant to Section 2.3, (B) under the HSR Act, and (C) the Exchange Act and
state securities or "blue sky" laws, no notices or other filings are required to
be made by the Company with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by the Company from, any
governmental or regulatory authority, agency, commission, body or other
governmental entity ("Governmental Entity"), in connection with the execution
and delivery of this Agreement and the Stock Option Agreement by the Company and
the consummation by the Company of the Offer and the Merger and the other
transactions contemplated hereby and thereby, except those that the failure to
make or obtain are not, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement and the Stock Option Agreement.
(ii) The execution, delivery and performance of this
Agreement and the Stock Option Agreement by the Company do not and will not, and
the consummation by the Company of the Offer and the Merger and the other
transactions contemplated hereby and thereby will not, constitute or result in
(A) a breach or violation of, or a default under, the certificate of
incorporation or bylaws of the Company or the comparable governing instruments
of any of its Subsidiaries, (B) a breach or violation of, or a default under,
the acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on the assets of the Company or any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant to, any
agreement, lease, contract, note, mortgage, indenture or other obligation
("Contracts") binding upon the Company or any of its Subsidiaries or any Law (as
defined in Section 6.1(i)) or governmental or non-governmental permit or license
to which the Company or any of its Subsidiaries is subject, or (C) any change in
the rights or obligations of any party under any of the Contracts; except, in
the case of clause (B) and (C) above, for any breach, violation, default,
acceleration, creation, or change that, individually or in the aggregate, is not
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement.
Schedule 6.1(d)(ii) sets forth a correct and complete list of all consents and
waivers which are or may be required in connection with the consummation of the
transactions contemplated by this Agreement and the Stock Option Agreement
(whether or not subject to the exceptions set forth with respect to clauses (B)
and (C) in the preceding sentence) under Contracts to which the Company or any
of its Subsidiaries is a party, other than any consent or waiver (other than
consents or waivers pursuant to Contracts relating to indebtedness,
14
<PAGE>
securities or the guarantee thereof) the failure to obtain which is not
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement.
(e) Company Reports; Financial Statements. The Company and, to
-------------------------------------
the extent applicable, each of its then or current Subsidiaries has made all
filings required to be made by it with the SEC since January 1, 1998
(collectively, including any such reports filed subsequent to the date hereof,
the "Company Reports"). The Company has made available to Parent each
registration statement, report, proxy statement or information statement filed
with the SEC by it since October 15, 1997, including, without limitation, (i)
the Company's Annual Report on Form 10-K for the year ended December 31, 1998,
as amended on April 5, 1999, (ii) the Company's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1999 and June 30, 1999, (iii) the Company's
Proxy Statement filed on April 6, 1999 and (iv) the Registration Statement on
Form S-8 filed with the SEC on May 13, 1999, all in the form (including
exhibits, annexes and any amendments thereto) filed with the SEC. As of their
respective dates, the Company Reports complied in all material respects with the
requirements of applicable statutes and regulations and did not, and any Company
Reports filed with the SEC prior to the Effective Time of the Offer will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. Each of
the balance sheets included in or incorporated by reference into the Company
Reports (including the related notes and schedules) presents fairly, or will
present fairly, the financial position of the Company and its Subsidiaries as of
its date and each of the statements of income and of changes in financial
position included in or incorporated by reference into the Company Reports
(including any related notes and schedules) presents fairly, or will present
fairly, the results of operations, retained earnings and changes in financial
position, as the case may be, of the Company and its Subsidiaries for the
periods set forth therein (except as otherwise noted therein and subject, in the
case of unaudited statements, to notes and normal year-end audit adjustments
that will not be material in amount or effect), in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except, in the case of unaudited financial statements, as
permitted by SEC Form 10-Q, and except as may be noted therein. Other than the
Company Reports specifically recited in clauses (i) through (iv) of the first
sentence of this Section 6.1(e), the Company has not, on or prior to the date
hereof, filed any other definitive reports or statements with the SEC since
December 31, 1998.
(f) Absence of Certain Changes. Since June 30, 1999 (the "Audit
--------------------------
Date"), the Company and its Subsidiaries have conducted their respective
businesses in all material respects only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such businesses and there has not been (i) any change in the financial
condition, properties, business or results of operations of the Company or any
of its Subsidiaries or any occurrence or combination of occurrences that,
individually or in the aggregate, has had or is reasonably likely to have a
Company Material Adverse Effect; (ii) any material damage, destruction or other
casualty loss with respect to any asset or property owned,
15
<PAGE>
leased or otherwise used by the Company or any of its Subsidiaries, that has had
or is reasonably likely to have a Company Material Adverse Effect; (iii) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company; or (iv) any change by the Company
in accounting principles, practices or methods. Schedule 6.1(f) contains a
document setting forth the name, title, salary and other compensation of each
employee of the Company as of September 27, 1999. Since the date of such
document, there has not been any increase in the compensation payable or that
could become payable by the Company or any of its Subsidiaries to officers or
key employees of the Company or its Subsidiaries, or any amendment of any of the
Stock Plans or Compensation and Benefit Plans.
(g) Litigation and Liabilities. Except for matters which are
--------------------------
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect or prevent or materially delay or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement and the Stock Option Agreement, there are no (i) civil, criminal,
administrative or regulatory actions, suits, claims, hearings, investigations or
proceedings pending or, to the Knowledge (as defined herein) of the Company,
threatened against the Company or any of its Subsidiaries or (ii) material
obligations or liabilities, whether or not accrued, contingent or otherwise and
whether or not required to be disclosed, including those relating to matters
involving any Environmental Law (as defined in Section 6.1(k)). When used in
this Agreement, "Knowledge" means an individual will be deemed to have
"Knowledge" of a particular fact or other matter if (a) such individual is
actually aware of such fact or other matter or (b) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a comprehensive investigation concerning the existence
of such fact or other matter. A Person other than an individual will be deemed
to have "Knowledge" of a particular fact or other matter if any individual who
is an officer, director, an employee at the director level or above or the
Company's environmental safety officer has, or at any time, had, "Knowledge" of
such fact or matter, as defined in the previous sentence.
(h) Employee Benefits.
-----------------
(i) The Company Reports accurately describe in all material
respects all material incentive, bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option and other stock based
plans, all employment or severance agreements, plans, policies or arrangements,
other employee benefit plans and any applicable "change of control" or similar
provisions in any plan, agreement, policy or arrangement which covers current or
former employees of the Company and its Controlled Group Affiliates (the
"Compensation and Benefit Plans") or with respect to which the Company or any of
its Controlled Group Affiliates may have any liability and which are required to
be disclosed in the Company Reports. The Compensation and Benefit Plans and all
other benefit plans, agreements, policies or arrangements covering current or
former employees or directors of the Company and its Controlled Group Affiliates
(the "Employees"), including, but not limited to, "employee benefit plans"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), are listed in Schedule 6.1(h)(i). True and
complete copies of all documents relating to the
16
<PAGE>
Compensation and Benefit Plans or any other plan, agreement, policy or
arrangement listed in Schedule 6.1(h)(i), including written interpretations
thereof, and such other benefit plans, agreements, policies or arrangements,
including, but not limited to, any trust instruments and/or insurance contracts,
if any, forming a part of any such plans and agreements, and all amendments
thereto have been provided or made available to Parent. The following items have
also been provided or made available to Parent with respect to each Compensation
and Benefit Plan as applicable: (1) copy of the most recent Form 5500 annual
report (including all schedules and financial statements); (2) copy of the most
recent favorable determination letter issued by the Internal Revenue Service
with respect to each such plan; (3) copies of any governmental audit report or
correction program memorandum; (4) any governmental opinion, ruling,
determination or notice of action or disposition with regard to any such plan;
(5) the results of any testing relating to any such plan, including testing of
coverage, non-discrimination requirements, 401(k) and 401(m) compliance, benefit
limitations, etc.; and (6) a schedule of all persons who are receiving, or who
are eligible to elect to receive, health care continuation ("COBRA") coverage
with respect to the Company or a Controlled Group Affiliate.
"Controlled Group Affiliate" means any trade or business
(whether or not incorporated) that is a member of a "controlled group" of which
the Company is a member or under "common control" with the Company (within the
meaning of Section 414(b), (c), (m) or (o) of the Code).
(ii) The Compensation and Benefit Plans have been
administered in material compliance with their terms and all applicable law.
Each Plan which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") is so qualified, and has received a favorable determination letter from
the Internal Revenue Service, and the Company is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. There
is no material pending or threatened litigation, governmental audit or
investigation relating to any Compensation and Benefit Plan. Neither the Company
nor any of its Controlled Group Affiliates has engaged in a transaction with
respect to any Compensation and Benefit Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject the Company or
any of its Subsidiaries to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA.
(iii) Neither the Company nor any of its Controlled
Group Affiliates has, nor has ever had, any obligation or liability with respect
to an employee benefit plan which is subject to Title IV of ERISA, or which is a
"multiemployer plan" within the meaning of Section 3(37) or 4001(a)(3) of ERISA.
There is no entity (other than the Company or any of its Subsidiaries) which is
or was a Controlled Group Affiliate of the Company. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for any
Compensation and Benefit Plan within the 12-month period ending on the date
hereof.
17
<PAGE>
(iv) All contributions required to be made under the terms
of any Compensation and Benefit Plan have been timely made or accrued on the
Company's financial statements and all insurance premiums required as of the
Closing Date will have been paid.
(v) Neither the Company nor any of its Controlled Group
Affiliates has any obligations for retiree health and life benefits under any
Compensation and Benefit Plan. The Company or its Controlled Group Affiliates
may amend or terminate any Compensation and Benefit Plan at any time without
incurring any material liability thereunder.
(vi) The consummation of the transactions contemplated by
this Agreement will not (x) entitle any Employees to severance pay, (y)
accelerate the time of payment or vesting or trigger any material payment or
funding (through a grantor trust or otherwise) of compensation or benefits
under, materially increase the amount payable or trigger any other material
obligation pursuant to, any of the Compensation and Benefit Plans or (z) result
in payments under any of the Compensation and Benefit Plans which may not be
deductible under Section 162(m) or Section 280G of the Code.
(vii) There are no actions, suits or claims (other than
routine claims for benefits in the ordinary course) pending or, to the Company's
Knowledge, threatened, with respect to the Compensation and Benefit Plans and,
to the Company's Knowledge, there are no such facts which could give rise to any
such actions, suits or claims.
(viii) Each of the Company and its Controlled Group
Affiliates has complied in all material respects with the reporting and
disclosure requirements of ERISA.
(ix) To the Knowledge of the Company, each Compensation
and Benefit Plan which is a "group health plan" (as such term is defined in
section 5000(b)(1) of the Code) complies and has complied with the applicable
requirements of Section 4980B of the Code and Sections 601-609 of ERISA (COBRA),
and Sections 701-734 of ERISA (HIPAA), including without limitation, the
certification requirements under Section 701(e) of ERISA.
(i) Compliance. Neither the Company nor any of its Subsidiaries
----------
is in default or violation of, (i) its certificate of incorporation or bylaws
(or similar documents), (ii) any law, ordinance, rule, regulation, order,
judgment, decree, arbitration award, license or permit of any Governmental
Entity (collectively, "Laws") applicable to the Company or any of its
Subsidiaries or by which its or any of their respective properties are bound, or
(iii) any Contract to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or its or any of their
respective properties are bound or affected, except for any such defaults or
violations that, individually or in the aggregate, will not have a Company
Material Adverse Effect, or prevent or materially delay the transactions
contemplated by this Agreement. No change is required in the Company's or any of
its Subsidiaries' processes, properties or procedures in order to comply in all
material respects with any Laws, and the Company has not received any notice of
any material noncompliance with any such Laws that has not been cured.
18
<PAGE>
(j) Antitakeover Statutes. The board of directors of the
---------------------
Company has taken all necessary action to approve the transactions contemplated
by this Agreement, the Stock Option Agreement and the Shareholders Agreement
such that the restrictions under Section 203 of the DGCL shall not apply to such
transactions. No "fair price," "moratorium," "control share acquisition" or
other antitakeover statute or regulation (each, an "Antitakeover Statute") is
applicable to the Company, the Shares, the Offer, the Merger, this Agreement,
the Stock Option Agreement, the Shareholders Agreement or the other transactions
contemplated hereby or thereby.
(k) Environmental Matters. (i) The Company and its Subsidiaries
---------------------
have complied in all material respects at all times with all applicable
Environmental Laws; (ii) to the Company's Knowledge, no property currently or
formerly owned or operated by the Company or any of its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) has been
contaminated with any Hazardous Substance; (iii) to the Company's Knowledge,
neither the Company nor any of its Subsidiaries is subject to any liability for
Hazardous Substance disposal or contamination on any third party property; (iv)
to the Company's Knowledge, neither the Company nor any of its Subsidiaries is
subject to liability for any release or threat of release of any Hazardous
Substance; (v) neither the Company nor any of its Subsidiaries has received any
notice, demand, letter, claim or request for information indicating that it may
be in violation of or subject to liability under any Environmental Law; (vi)
neither the Company nor any of its Subsidiaries is subject to any order, decree,
injunction or other arrangement with any Governmental Entity or any indemnity or
other agreement with any third party relating to liability under any
Environmental Law; (vii) to the Company's Knowledge, none of the properties of
the Company or any of its Subsidiaries contain any underground storage tanks,
asbestos-containing material, lead products, or polychlorinated biphenyls;
(viii) to the Company's Knowledge, there are no other circumstances or
conditions involving the Company or any of its Subsidiaries that could
reasonably be expected to result in any claims, liability, investigations, costs
or restrictions on the ownership, use, or transfer of any property in connection
with any Environmental Law; and (ix) the Company has delivered to Parent copies
of all environmental reports, studies, assessments, sampling data and other
environmental information in its possession relating to the Company or any of
its Subsidiaries or any of their current or former properties or operations.
"Environmental Law" means any federal, state or local law, regulation,
order, decree, permit, authorization, common law or agency requirement relating
to (A) the protection, investigation or restoration of the environment, health,
safety, or natural resources, (B) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance or (C) noise, odor, indoor air,
employee exposure, wetlands, pollution, contamination or any injury or threat of
injury to persons or property relating to any Hazardous Substance.
"Hazardous Substance" means any substance that is (A) listed,
classified or regulated pursuant to any Environmental Law; (B) any chemical,
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon,
pharmaceutical, biological and/or medical waste or
19
<PAGE>
materials; or (C) any other substance which may be the subject of regulatory
action by any Governmental Authority in connection with any Environmental Law.
(l) Opinion of Financial Advisor. The Company's Board has
----------------------------
received the written opinion of DLJ to the effect that, subject to the
assumptions and qualifications set forth in such opinion, as of the date hereof,
the consideration to be received by the holders of Shares pursuant to the Offer
and the Merger is fair to such holders from a financial point of view.
(m) Taxation. The Company and each of its Subsidiaries has
--------
timely filed all Tax Returns required to be filed by it in the manner provided
by law except where the failure to make such timely filing has not had, and
could not reasonably be expected to have, a Company Material Adverse Effect.
All such Tax Returns are true, correct and complete in all material respects.
The Company and each of its Subsidiaries have timely paid all Taxes due or
required to be withheld from amounts owing to any employee, creditor or third
party or have provided adequate reserves in their financial statements for any
Taxes that have not been paid, whether or not shown as being due on any Tax
Returns. (i) No claim for unpaid Taxes (other than for Taxes not yet due) has
become a lien or encumbrance of any kind against the property of the Company or
any of its Subsidiaries or is being asserted against the Company or any of its
Subsidiaries; (ii) no audit, examination, investigation or other proceeding in
respect of Taxes is pending, being conducted, or threatened by a Tax authority
involving the Company or any of its Subsidiaries; (iii) no issues have been
raised by the relevant taxing authority in connection with any examination of
the Tax Returns filed by the Company and its Subsidiaries that have not been
resolved; (iv) no extension or waiver of the statute of limitations on the
assessment of any Taxes has been granted by the Company or any of its
Subsidiaries and is currently in effect; (v) neither the Company nor any of its
Subsidiaries is a party to, is bound by, or has any obligation under, or
potential liability with regards to, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement; (vi) no power of
attorney has been granted by or with respect to the Company or any of its
Subsidiaries with respect to any matter relating to Taxes; (vii) neither the
Company nor any of its Subsidiaries (A) has been a member of an affiliated group
filing a consolidated, combined or unitary Tax Return (other than a group the
common parent of which was the Company), or (B) has any liability for Taxes of
any person (other than the Company or its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any other similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise; (viii)
neither the Company nor any of its Subsidiaries is a party to any agreement,
plan, contract or arrangement that would result, separately or in the aggregate,
in the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; (ix) neither the Company nor any of its Subsidiaries has any
intercompany gain or loss arising as a result of an intercompany transaction
within the meaning of Treasury Regulation Section 1.1502-13 (or similar
provision under state, local or foreign law) that has not been taken into
account or any excess loss accounts within the meaning of Treasury Regulation
Section 1.1502-19; (x) the Company is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(ii) of the Code;
(xi) neither the Company nor any of its Subsidiaries has been the subject to a
Tax ruling that has continuing effect; and (xii) neither the Company nor any of
its Subsidiaries has
20
<PAGE>
agreed to include, or is required to include, in income any adjustment under
either Section 481(a) or 482 of the Code (or an analogous provision of state,
local or foreign law) by reason of a change in accounting method or otherwise.
"Taxes" means any taxes of any kind, including but not limited to
those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, employment,
payroll, premium, value added, property or windfall profits taxes, environmental
transfer taxes, customs, duties or similar fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any governmental authority, domestic or
foreign.
"Tax Return" means any return, report or statement required to be
filed with any governmental authority with respect to Taxes.
(n) Intellectual Property.
---------------------
(i) Set forth in Schedule 6.1(n)(i) is a correct and
complete list of each of the following items (A) all patents and applications
therefor, registrations of trademarks (including service marks) and applications
therefor, and registrations of copyrights and applications therefor that are
owned by the Company or any of its Subsidiaries or licensed to the Company or
any of its Subsidiaries (collectively, the "Company Owned IP"), (B) all
licenses, agreements and contracts relating to the Company Intellectual Property
(as defined in Section 6.1(n)(ii) of this Agreement) pursuant to which the
Company or any of its Subsidiaries are entitled to use any Company Intellectual
Property owned by any third party (the "Third Party Licenses") and (C) all
agreements under which the Company or any of its Subsidiaries has granted any
third party the right to use any Company Intellectual Property.
(ii) The Company, or its Subsidiaries where expressly
indicated, is the owner of, or is licensed to use, or otherwise possesses
legally enforceable rights in, all intellectual property, including, without
limitation, all patents and patent applications, supplementary protection
certificates and patent extensions, trademarks and trademark applications,
service mark and service mark registrations, logos, commercial symbols, business
name registrations, trade names, copyrights and copyright registrations,
computer software, mask works and mask work registration applications,
industrial designs and applications for registration of such industrial designs,
including, without limitation, any and all applications for renewal, extensions,
reexaminations and reissues of any of the foregoing intellectual property rights
where applicable, inventions, compounds, structures, compound libraries,
biological materials, trade secrets, formulae, know-how, technical information,
research data, research raw data, laboratory notebooks, procedures, designs,
proprietary technology and information held or used in the business of the
Company and its Subsidiaries (hereinafter the "Company Intellectual Property").
(iii) The Company and its Subsidiaries are the sole
legal and beneficial owners of all the Company Intellectual Property (except for
the Company Intellectual
21
<PAGE>
Property that is the subject of any Third Party Licenses).
(iv) The Company has not entered into any agreements,
licenses or created any mortgages, liens, security interests, leases, pledges,
encumbrances, equities, claims, charges, options, restrictions, rights of first
refusal, title retention agreements or other exceptions to title which affect
the Company Intellectual Property or restrict the use by the Company or any of
its Subsidiaries of the Company Intellectual Property, except as provided in
agreements and instruments disclosed in Schedule 6.1(n)(i) and furnished or made
available to Parent prior to the date of this Agreement.
(v) To the Company's Knowledge, the Company and its
Subsidiaries are in compliance in all material respects with the Third Party
Licenses.
(vi) The Company and its Subsidiaries are not, and will
not be as a result of the execution, delivery or performance of this Agreement
or the Stock Option Agreement or the consummation of the Offer and the Merger or
the other transactions contemplated hereby or thereby, in breach, violation or
default of any Third Party Licenses that are material to the conduct of the
business of the Company. The rights of the Company or any of its Subsidiaries to
the Company Intellectual Property are not affected by the execution, delivery or
performance of this Agreement or the Stock Option Agreement or the consummation
of the Offer and the Merger or the other transactions contemplated hereby or
thereby.
(vii) The Company and its Subsidiaries have the right to
license to third parties the use of the Company Owned IP, except as restricted
under Third Party Licenses.
(viii) To the Company's Knowledge, all registrations and
filings relating to the Company Owned IP are in good standing. To the Company's
Knowledge, all maintenance and renewal fees necessary to preserve the rights of
the Company in respect of the Company Owned IP have been made. The
registrations and filings relating to the Company Owned IP are proceeding and
there are no facts of which the Company has Knowledge which could significantly
undermine those registrations or filings.
(ix) To the Company's Knowledge, the manufacturing,
marketing, distribution, sale and use of compounds by the Company or its
Subsidiaries, licensees or sublicensees in the countries where the Company has
conducted such activities, does not infringe the patents, patent applications,
trademarks, trademark applications, service marks, service mark applications,
copyrights, copyright applications, and proprietary trade names, publication
rights, computer programs (including source code and object code), inventions,
know-how, trade secrets, technology, processes, confidential information and all
other intellectual property rights throughout the world (collectively,
"Intellectual Property Rights") of any third party.
22
<PAGE>
(x) There are no allegations, claims or proceedings
instituted, pending or threatened (and the Company is not aware of any basis for
any such allegation, claim or proceeding) which challenge the rights possessed
by the Company or its Subsidiaries to use the Company Intellectual Property or
the validity or effectiveness of the Company Intellectual Property, including
without limitation any interferences, oppositions, cancellations or other
contested proceedings.
(xi) There are no outstanding claims or proceedings
instituted, pending or threatened by any third party challenging the ownership,
priority, scope or validity or effectiveness of any Company Intellectual
Property.
(xii) To the Company's Knowledge, there are no valid
Intellectual Property Rights of any third party that have been infringed by the
identification, development, manufacture, marketing, distribution and sale and
use of any products that have been identified for development by the Company or
any of its Subsidiaries.
(xiii) To the Company's Knowledge, there are no
Intellectual Property Rights of any third party that are infringed by the
continued practice of any technologies previously used or presently in use by
the Company.
(xiv) To the Company's Knowledge, except for matters as
would not have or be reasonably likely to have a Company Material Adverse
Effect, there is no unauthorized use, infringement or misappropriation of the
Company Intellectual Property by any third party, including any employee or
former employee of the Company or any of its Subsidiaries.
(xv) The Company and its Subsidiaries have not granted
any licenses, immunities, options or other rights to the Company Intellectual
Property which could provide a third party with a defense to patent infringement
proceedings, whether domestic or foreign.
(xvi) Commercially reasonable measures have been taken
to maintain the confidentiality of the inventions, trade secrets, formulae,
know-how, technical information, research data, research raw data, laboratory
notebooks, procedures, designs, proprietary technology and information of the
Company and its Subsidiaries, and all other information the value of which to
the Company or any of its Subsidiaries is contingent upon maintenance of the
confidentiality thereof. Without limiting the generality of the foregoing, (A)
each employee of the Company and each consultant to the Company who has had
access to proprietary information with respect to the Company has entered into
an agreement suitable to vest ownership rights to any inventions, creations,
developments, and works in the Company and has entered into an agreement for
maintaining the confidential information of the Company and (B) each officer and
director of the Company has entered into an agreement to maintain the
confidential information of the Company, except for those individuals listed in
Schedule 6.1(n) (xvi) whose involvement in the business of the Company is
described with specificity therein.
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(o) Year 2000 Compliance.
--------------------
(i) All Software (as defined herein) of the Company, when
operated on the computer hardware of the Company now used for that purpose:
(A) will operate before, during, and after January 1,
2000, without any errors relating to data, in the same manner as it presently
operates;
(B) will not abnormally end a process or provide
incorrect results as a result of date data which represents or references
different centuries or more than one century;
(C) recognizes the century in date data and performs
all date calculations in a manner which accommodates multi-century formulas and
date values;
(D) includes an indication of century in all date-
related user interfaces and data interfaces;
(E) recognizes and correctly processes date and data
involving leap years; and
(F) performs all sorting operations that include a
year category on the basis of four-digit dates.
(ii) Schedule 6(o)(ii) attached hereto contains a complete
description of the testing and analysis which the Company has performed or had
performed with respect to the matters described in Section 6(o)(i), including a
true and complete listing of each document setting forth any portion of that
analysis or any related test results. The Company has provided Parent with true
and complete copies of all documents listed in Schedule 6(o)(ii).
(iii) If any exceptions to the warranties and
representations in Section 6(o)(i) are disclosed in the Company Disclosure
Schedules, Schedule 6(o)(iii) attached hereto contains a summary of the
Company's plans for dealing with those exceptions, including a timetable and a
reasonably detailed estimate of the costs the Company will incur in doing so.
Any cost estimates shown in Schedule 6(o)(iii) are reasonable, based on sound
business practices and are based on reasonable assumptions supported by
objective facts.
(iv) "Software" means all computer software and subsequent
versions thereof used, developed or currently being developed, manufactured,
sold or marketed by the Company including, but not limited to, source code,
object code, objects, comments, screens, user interfaces, report formats,
templates, menus, buttons and icons, and all files, data, materials, manuals,
design notes and other items and documentation related thereto or associated
therewith.
24
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(p) Labor Matters
-------------
(i) Schedule 6.1(p)(i) attached hereto sets forth the
name, current annual compensation rate (including bonus and commissions), title,
current base salary rate, accrued bonus, accrued sick leave, accrued severance
pay and accrued vacation benefits of each present employee of the Company;
organizational charts of the Company; and lists any collective bargaining, union
or other employee association agreements, employee confidentiality or other
agreements protecting proprietary processes, formulae or information, employee
handbook and any reports and/or plans prepared or adopted pursuant to the Equal
Employment Opportunity Act of 1972, as amended. There are no leased employees
(within the meaning of Section 414(n) of the Code) who must be taken into
account in applying the requirements of Section 414(n)(3) of the Code.
(ii) Each of the Company and its Subsidiaries is in
compliance with all applicable laws and collective bargaining agreements
respecting employment and employment practices, terms and conditions of
employment and wages and hours and occupational safety and health, and is not
engaged in any unfair labor practice within the meaning of Section 8 of the
National Labor Relations Act, and there is no action, suit or legal,
administrative, arbitration, grievance or other proceeding pending or, to the
Company's Knowledge, threatened, or, any investigation pending or to the
Company's Knowledge, threatened against the Company or any Subsidiary relating
to any thereof, and, to the Company's Knowledge, no basis exists for any such
action, suit or legal, administrative, arbitration, grievance or other
proceeding or governmental investigation.
(iii) There is no labor strike, dispute, slowdown or
stoppage actually pending or, to the Company's Knowledge, threatened against the
Company or any Subsidiary.
(iv) None of the employees of the Company or any Subsidiary
is a member of or represented by any labor union and, to the Company's
Knowledge, there are no attempts of whatever kind and nature being made to
organize any of such employees.
(v) Without limiting the generality of paragraph (iv)
above, no certification or decertification is pending or was filed within the
past twelve months respecting the employees of the Company or any Subsidiary
and, to the Company's Knowledge, no certification or decertification petition is
being or was circulated among the employees of the Company or any Subsidiary
within the past twelve (12) months.
(vi) No agreement (including any collective bargaining
agreement), arbitration or court decision, decree or order or governmental order
which is binding on the Company or any Subsidiary in any way limits or restricts
the Company or any Subsidiary from relocating or closing any of its operations.
25
<PAGE>
(vii) Neither the Company nor any Subsidiary has
experienced any organized work stoppage in the last five years.
(viii) There are no charges, administrative proceedings or
formal complaints of discrimination (including but not limited to discrimination
based upon sex, age, marital status, race, national origin, sexual orientation,
handicap or veteran status) pending or, to the Company's Knowledge, threatened,
or any investigation pending or to the Company's Knowledge, threatened before
the Equal Employment Opportunity Commission or any federal, state or local
agency or court. There have been no audits of the equal employment opportunity
practices of the Company or any Subsidiary and, to the Company's Knowledge, no
basis for any such claim exists.
(q) Brokers and Finders. Neither the Company nor any of its
-------------------
Subsidiaries, officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the Offer and the Merger or the other transactions
contemplated by this Agreement, the Stock Option Agreement or the Shareholders
Agreement, except that the Company has employed DLJ as its financial advisor,
the arrangements with which have been disclosed to Parent prior to the date
hereof.
(r) Certain Agreements. (i) All contracts listed as exhibits to
------------------
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
under the rules and regulations of the SEC relating to the business of the
Company and its Subsidiaries and (ii) any other agreement within the meaning set
forth in item 601(b)(10) of Regulation S-K of Title 17, Part 229 of the Code of
Federal Regulations (all of which are listed on Schedule 6.1(r)) (the "Company
Material Contracts") are valid and in full force and effect, except to the
extent they have previously expired in accordance with their terms and other
than as is not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. Neither the Company nor its Subsidiaries has
violated any provision of, or committed or failed to perform any act which, with
or without notice, lapse of time, or both, is reasonably likely to constitute a
default under the provisions of, any such Company Material Contract, and neither
the Company nor any of its Subsidiaries has received notice that any party to
any Company Material Contract intends to cancel, terminate or otherwise modify
the terms of any applicable Company Material Contract, except in each case, as
is not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. To the Company's Knowledge, no counterparty to any such
Company Material Contract has violated any provision of, or committed or failed
to perform any act which, with or without notice, lapse of time, or both, is
reasonably likely to constitute a default or other breach under the provisions
of, such Company Material Contract, except for defaults or breaches which are
not reasonably likely, individually or in the aggregate, to have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to, nor are any of their assets bound by, any agreement, arrangement,
commitment or understanding with any company engaged primarily in the
pharmaceutical business, other than as listed on Schedule 6.1(r).
26
<PAGE>
(s) Schedule 14D-9; Offer Documents. Neither the Schedule 14D-
-------------------------------
9, any other documents required to be filed by the Company with the SEC in
connection with the transactions contemplated hereby, nor any information
supplied by the Company for inclusion in the Offer Documents shall, at the
respective times the Schedule 14D-9, any such other filings by the Company, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to stockholders of the Company, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not misleading. The Schedule 14D-9 and any other document required to be
filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement will, when filed by the Company with the SEC,
comply as to form in all material respects with the applicable provisions of the
Exchange Act and the rules and regulations thereunder. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to the
statements made in any of the foregoing documents based on and in conformity
with information supplied by or on behalf of Parent or Merger Sub in writing
specifically for inclusion therein.
(t) Required Vote of Company Stockholders. Unless the Merger
-------------------------------------
may be consummated in accordance with Section 253 of the DGCL, the only vote of
the stockholders of the Company required to adopt this Agreement and the Stock
Option Agreement and to approve the Merger and the transactions contemplated
hereby and thereby, is the Company Requisite Vote.
(u) Foreign Corrupt Practices Act. Neither the Company nor any
-----------------------------
of its Subsidiaries, nor any director, officer or employee of the Company or any
of its Subsidiaries has, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or the rules and regulations thereunder, or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(v) Licenses and Permits. The Company and each Subsidiary has
--------------------
obtained all material licenses, registrations, permits, approvals and other
governmental authorizations required to conduct its business as described in the
Company Reports. Such licenses are in full force and effect and neither the
Company nor any Subsidiary has received notice of proceedings relating to the
revocation or modification of any such license, permit, approval and other
governmental authorization.
(w) Employment Agreements with Key Employees. The Employment
----------------------------------------
Agreements with the employees of the Company listed on Schedule 6.1(w) attached
hereto have been executed by such employees prior to or contemporaneously with
the execution of this Agreement and the Employment Agreements remain in full
force and effect and, to the
27
<PAGE>
Company's Knowledge, none of the employees listed on Schedule 6.1(w) is in
breach or violation of his or her Employment Agreement.
6.2. Representations and Warranties of Parent and Merger Sub.
-------------------------------------------------------
Parent and Merger Sub each hereby represent and warrant to the Company, except
as set forth in the Disclosure Schedules delivered to the Company on the date of
this Agreement and attached hereto (the "Parent Disclosure Schedules"), as
follows:
(a) Organization and Good Standing. Each of Merger Sub and
------------------------------
Parent is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and each of them has all requisite corporate power
and authority to own and operate its properties and assets and to carry on its
business as presently conducted. Merger Sub has not, and prior to the Effective
Time will not have, conducted any activities other than those required for the
Merger and has no, and prior to the Effective Time will have no, assets,
liabilities or obligations except as contemplated in connection with its
execution, delivery and performance of this Agreement, the Stock Option
Agreement and the Shareholders Agreement and the transactions contemplated
hereby and thereby.
(b) Corporate Authority. No vote of holders of capital stock of
-------------------
Parent is necessary to approve this Agreement, the Offer and the Merger and the
other transactions contemplated hereby. Each of Parent and Merger Sub has all
requisite corporate power and authority and each has taken all corporate action
(including approval of the stockholder of Merger Sub) necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate the Offer and the Merger. Parent has all requisite corporate power
and authority and has taken all corporate action necessary in order to execute,
deliver and perform its obligations under the Stock Option Agreement. This
Agreement is a valid and binding agreement of Parent and Merger Sub, enforceable
against each of Parent and Merger Sub in accordance with its terms subject to
(i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium, or similar laws from time to time in effect affecting creditors'
rights generally, and (ii) general principles of equity, whether such principles
are considered in a proceeding at law or in equity. The Stock Option Agreement
is a valid and binding agreement of Parent, enforceable against Parent in
accordance with its terms subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium, or similar laws from time to
time in effect affecting creditors' rights generally, and (ii) general
principles of equity, whether such principles are considered in a proceeding at
law or in equity.
(c) Governmental Filings; No Violations.
-----------------------------------
(i) Other than any filings and/or notices required (A)
pursuant to Section 2.3, (B) under the HSR Act and (C) the Exchange Act and the
"takeover" or "blue sky" laws of any state, no notices or other filings are
required to be made by Parent or Merger Sub with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
Parent or Merger Sub from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by Parent and Merger Sub or the
execution and
28
<PAGE>
delivery of the Stock Option Agreement by Parent and the consummation by Parent
and Merger Sub of the Offer and the Merger and the other transactions
contemplated hereby and by the Stock Option Agreement, except those that the
failure to make or obtain are not, individually or in the aggregate, reasonably
likely to prevent, materially delay or materially impair the ability of Parent
or Merger Sub to consummate the transactions contemplated by this Agreement, the
Stock Option Agreement and the Shareholders Agreement.
(ii) The execution, delivery and performance of this Agreement
and the Stock Option Agreement, by Parent and Merger Sub, as the case may be, do
not and will not, and the consummation by Parent and Merger Sub of the Offer and
the Merger and the other transactions contemplated hereby and by the Stock
Option Agreement, will not, constitute or result in (A) a breach or violation
of, or a default under, the certificate or bylaws of Parent or Merger Sub, (B) a
breach or violation of, or a default under, the acceleration of any obligation
or the creation of a lien, pledge, security interest or other encumbrance on the
assets of Parent or Merger Sub (with or without notice, lapse of time or both)
pursuant to, any Contracts binding upon Parent or Merger Sub or any Law or
governmental or non-governmental permit or license to which Parent or Merger Sub
is subject, or (C) any change in the rights or obligations of any party under
any of the Contracts, except, in the case of clause (B) or (C) above, for
breach, violation, default, acceleration, creation or change that, individually
or in the aggregate, is not reasonably likely to prevent, materially delay or
materially impair the ability of Parent or Merger Sub to consummate the
transactions contemplated by this Agreement.
(d) Brokers and Finders. Neither Parent nor any of its
-------------------
Subsidiaries, officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the Offer and the Merger or the other transactions
contemplated by this Agreement, the Stock Option Agreement or the Shareholders
Agreement, except that the Company has employed Morgan Stanley & Co.
Incorporated as its financial advisor and as dealer manager in connection with
the Offer.
(e) Financing. Parent has the funds necessary to consummate the
---------
Offer and the Merger on the terms contemplated by this Agreement and will
provide such funds to Merger Sub at or prior to the consummation of the Offer
and the Merger, as applicable.
(f) Offer Documents. The Offer Documents and any other
---------------
documents to be filed by Parent with the SEC or any other Governmental Entity in
connection with the Offer and the Merger and the other transactions contemplated
hereby will (in the case of the Offer Documents and any such other documents
filed with the SEC under the Exchange Act) comply as to form in all material
respects with applicable provisions of the Exchange Act and the rules and
regulations thereunder. None of the Offer Documents, any other documents
required to be filed by Parent with the SEC in connection with the transactions
contemplated hereby, nor any information supplied by Parent for inclusion in the
Schedule 14D-9 or in the information required to be distributed to the
stockholders of the Company pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder as is necessary to enable Parent's designees
to be elected to the Company's Board pursuant to Section 1.4 hereof shall, at
the
29
<PAGE>
respective times the Offer Documents, any amendments and supplements thereto
or any such other filings by the Company, Parent or Merger Sub are filed with
SEC or are first published, sent or given to stockholders of the Company, as the
case may be, contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
are made, not misleading. Notwithstanding the foregoing, neither Parent nor
Merger Sub makes any representation or warranty with respect to the statements
made in any of the foregoing documents based on and in conformity with
information supplied by or on behalf of the Company in writing specifically for
inclusion therein.
(g) No Litigation. There are no civil, criminal, administrative
-------------
or regulatory actions, suits, claims, hearings, investigations or proceedings
pending or, to the Knowledge of Parent or Merger Sub, threatened against Parent
or Merger Sub which, in the aggregate, are reasonably likely to prevent or
materially delay or materially impair the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement and the Stock Option
Agreement.
(h) Compliance. Neither Parent nor Merger Sub is in default or
----------
violation of (i) its certificate of incorporation or bylaws, (ii) any Laws
applicable to the Company or Merger Sub, or (iii) any material Contract to which
Parent or Merger Sub is a party, except for any such defaults or violations
that, in the aggregate, are not reasonably likely to prevent or materially delay
the transactions contemplated by this Agreement.
ARTICLE VII
Covenants
7.1. Company Interim Operations. The Company covenants and
--------------------------
agrees as to itself and its Subsidiaries that, after the date hereof and prior
to the Effective Time (unless Parent shall otherwise consent in writing (such
consent not to be unreasonably withheld or delayed) and except as otherwise
expressly set forth in Schedule 7.1 attached hereto or expressly contemplated by
this Agreement and the Stock Option Agreement):
(a) the business of it and its Subsidiaries shall be conducted,
in all material respects, in the ordinary and usual course and, to the extent
consistent therewith, it and its Subsidiaries shall use their respective
commercially reasonable best efforts to preserve its business organization
substantially intact and substantially maintain its existing relations and
goodwill with customers, suppliers, distributors, creditors, lessors, employees
and business associates;
(b) it shall not (i) issue, sell, pledge, dispose of or
encumber any capital stock owned by it in any of its Subsidiaries; (ii) amend
its certificate or bylaws; (iii) split, combine or reclassify its outstanding
shares of capital stock; (iv) declare, set aside or pay any dividend payable in
cash, stock or property in respect of any capital stock, or (v) repurchase,
30
<PAGE>
redeem or otherwise acquire, except in connection with the Stock Plans or
employment arrangements, or permit any of its Subsidiaries to purchase or
otherwise acquire, any shares of its capital stock or any securities convertible
into or exchangeable or exercisable for any shares of its capital stock;
(c) neither it nor any of its Subsidiaries shall (i) issue,
sell, pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital stock of
any class or any Voting Debt or any other property or assets (other than the
issuance of shares of Common Stock pursuant to the ESPP, the Company Options or
the Warrants); (ii) transfer, lease, license, guarantee, sell, mortgage, pledge,
dispose of or encumber any other property or assets (including capital stock of
any of its Subsidiaries) or incur or modify any material indebtedness or other
liability; or (iii) make any commitments for, make or authorize any capital
expenditures or, by any means, make any acquisition of, or investment in, assets
or stock of any other Person in each case, involving amounts in excess of
$50,000 in the aggregate;
(d) except as may be required by existing contractual
commitments or as required by applicable law, neither it nor any of its
Subsidiaries shall (i) enter into any new agreements or commitments for any
severance or termination pay to, or enter into employment or severance agreement
with, any of its directors, officers or employees or (ii) terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify, any Compensation and Benefit Plans or increase or accelerate the salary,
wage, bonus or other compensation of any employees, officers or directors
(except for increases in salaries, wages and cash bonuses of nonexecutive
employees made in the ordinary course of business consistent with past practice)
or pay or agree to pay any pension, retirement allowance or other employee
benefit not required by any existing Compensation and Benefit Plan;
(e) neither it nor any of its Subsidiaries shall settle or
compromise any material claims or litigation or modify, amend or terminate any
of the Company Material Contracts or waive, release or assign any material
rights or claims;
(f) neither it nor any of its Subsidiaries shall make any Tax
election or permit any insurance policy naming it as a beneficiary or loss-
payable payee to be canceled or terminated, except in the ordinary and usual
course of business;
(g) except as may be required as a result of a change in law,
neither it nor any of its Subsidiaries shall change any of the accounting
practices or principles used by it;
(h) neither it nor any of its Subsidiaries shall adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization of the Company or any
of its subsidiaries not constituting an inactive Subsidiary (other than the
Merger);
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<PAGE>
(i) it shall not suffer or permit capital expenditures made or
incurred by the Company and its Subsidiaries to exceed $50,000 except for
expenses incurred in connection with the transactions contemplated by this
Agreement;
(j) neither it nor any of its Subsidiaries will offer to, or
enter into an agreement to, do any of the foregoing; and
(k) it shall not, and shall not permit any of its Subsidiaries
to, take any action that would, or that could reasonably be expected to, result
in any of the representations or warranties of the Company becoming untrue.
7.2. Acquisition Proposals.
---------------------
(a) The Company shall, and it shall cause its affiliates and
the officers, directors, employees, representatives and agents of the Company
and its Subsidiaries (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its Subsidiaries) to,
immediately cease and terminate any existing activities, discussions or
negotiations, if any, with any parties (other than Parent and Merger Sub, any
affiliate or associate of Parent and Merger Sub or any designees of Parent and
Merger Sub) conducted heretofore with respect to any acquisition or exchange of
all or any material portion of the assets of, or any equity interest in, the
Company or any of its Subsidiaries (by direct purchase from the Company, tender
or exchange offer or otherwise) or any business combination, merger or similar
transaction (including an exchange of stock or assets) with or involving the
Company or any Subsidiary of the Company (an "Acquisition Transaction"), other
than the Offer and the Merger.
(b) Except as set forth in Section 7.2(c), the Company shall
not, nor shall it permit its affiliates and the officers, directors, employees,
representatives and agents of the Company and its Subsidiaries (including,
without limitation, any investment banker, attorney or accountant retained by
the Company or any of its subsidiaries) to, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or provide
any nonpublic information or data (other than the Company's standard public
information package) to, any corporation, partnership, Person or other entity or
group (other than Parent and Merger Sub, any affiliate or associate of Parent
and Merger Sub or any designees of Parent and Merger Sub) with respect to any
inquiries or the making of any offer or proposal (including, without limitation,
any offer or proposal to the stockholders of the Company) concerning an
Acquisition Transaction (an "Acquisition Proposal") or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal.
(c) Prior to the consummation of the Offer, the Company may
furnish information and access, but only in response to a request for
information or access, to any Person making a bona fide written Acquisition
Proposal to the board of directors of the Company after the date hereof which
was not encouraged, solicited or initiated by the Company or any of its
affiliates or any director, employee, representative or agent of the Company or
any of its Subsidiaries (including, without limitation, any investment banker,
attorney or accountant
32
<PAGE>
retained by the Company or any of its Subsidiaries) on or after the date hereof
and may participate in discussions and negotiate with such Person concerning any
such Acquisition Proposal and may authorize the Company to enter into a binding
written agreement concerning a Superior Proposal (as defined below), if and only
if, in any such case, (i) the board of directors of the Company determines in
good faith, (A) after receiving advice of outside counsel to the Company to such
effect, that failing to provide such information or access or to participate in
such discussions or negotiations or to so authorize, as the case may be, would
constitute a breach of such board's fiduciary duties under applicable law, and
(B) after consultation with the financial advisors to the Company to such
effect, that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person making the proposal and would, if consummated,
result in a transaction more favorable to the Company's stockholders from a
financial point of view than the transaction contemplated by this Agreement (any
such more favorable Acquisition Proposal as to which both of the determinations
referred to in subclauses (A) and (B) above have been made being referred to in
this Agreement as a "Superior Proposal"), and (ii) the Company receives from the
Person making such bona fide written Acquisition Proposal an executed
confidentiality agreement.
(d) Nothing in this Agreement shall prohibit the Board of
Directors of the Company from, to the extent applicable, complying with Rule
14e-2 or 14D-9 promulgated under the Exchange Act with regard to an Acquisition
Proposal. The Company will notify Parent within twenty-four (24) hours if any
such inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with the Company and shall in such notice indicate the identity of the
offeror and the material terms and conditions of any such proposal and
thereafter shall keep Parent reasonably informed, on a current basis, of the
status and material terms of such proposals and the status of such negotiations
or discussions, providing copies to Parent of any Acquisition Proposals made in
writing.
(e) The Company shall provide Parent with three business days
advance notice of, in each and every case, its intention to either enter into
any agreement with or to provide any information to any Person making any such
inquiry or proposal. The Company agrees not to release any third party from, or
waive any provisions of, any confidentiality or standstill agreement to which
the Company is a party and will use its best efforts to enforce any such
agreements at the request of and on behalf of Parent.
(f) The Company will inform the individuals or entities referred
to in the first sentence of Section 7.2(a) of the obligations undertaken in this
Section 7.2.
7.3. Company Stockholder Approval; Proxy Statement.
---------------------------------------------
(a) If approval or action in respect of the Merger by the
stockholders of the Company is required by applicable law, the Company, acting
through the Company Board, shall (i) call as promptly as practicable following
consummation of the Offer, a meeting of its
33
<PAGE>
stockholders (the "Company Stockholders Meeting") for the purpose of voting upon
adopting this Agreement and approving the Merger, (ii) hold the Company
Stockholders Meeting as soon as practicable following the purchase of Shares
pursuant to the Offer, and (iii) recommend to its stockholders the approval of
the Merger. Notwithstanding the foregoing, the Company Board may withdraw,
modify or amend any recommendation that the stockholders approve the Merger if
the Company has received an Acquisition Proposal which in accordance with
Section 7.2(c) is a Superior Proposal. The record date for the Company
Stockholders Meeting shall be no earlier than close of business on the date on
which Parent or Merger Sub becomes a record holder of Shares purchased pursuant
to the Offer. At the Company Stockholders Meeting, Parent and Merger Sub shall
cause all shares then owned beneficially or of record by them to be voted in
favor of approval and adoption of this Agreement, the Merger and the
transactions contemplated hereby. Notwithstanding the foregoing, if Parent,
Merger Sub or any other subsidiary of Parent shall acquire at least ninety
percent (90%) of the outstanding Shares, the parties shall take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a stockholders meeting in
accordance with Section 253 of the DGCL.
(b) If required by applicable Law, the Company will, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement (such proxy statement, and any amendments or
supplements thereto, the "Proxy Statement") or, if applicable, an information
statement with the SEC with respect to the Company Stockholders Meeting and will
use its best efforts to respond to any comments of the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. Parent and Merger Sub shall furnish to the Company all
information regarding Parent, Merger Sub and their affiliates that may be
required (pursuant to the Exchange Act and other applicable Laws) to be set
forth in the Proxy Statement. The Company shall give Parent and its counsel the
opportunity to review the Proxy Statement prior to it being filed with the SEC
and shall give Parent and its counsel the opportunity to review all amendments
and supplements to the Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC. Each of the Company and Parent agrees to use its best
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of and requests by the SEC. As promptly as practicable
after the Proxy Statement has been cleared by the SEC, the Company shall mail
the Proxy Statement to the stockholders of the Company. If at any time prior to
the approval of this Agreement by the Company's stockholders there shall occur
any event which should be set forth in an amendment or supplement to the Proxy
Statement, the Company will prepare and mail to its stockholders such an
amendment or supplement.
(c) The Company represents and warrants that the Proxy Statement
will comply in all material respects with the Exchange Act and, at the
respective times filed with the SEC and distributed to stockholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
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to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided that the Company makes no representation or
warranty as to any information included in the Proxy Statement that was provided
by Parent or Merger Sub. Parent represents and warrants that none of the
information supplied by Parent or Merger Sub for inclusion in the Proxy
Statement will, at the respective times filed with the SEC and distributed 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 therein, in light of the circumstances under which
they were made, not misleading.
(d) Following the consummation of the Offer, the Company shall
use its best efforts to obtain the necessary approvals by its stockholders of
the Merger, this Agreement and the transactions contemplated hereby.
7.4. Approvals and Consents; Cooperation.
-----------------------------------
(a) The Company and Parent shall cooperate with each other and
use (and shall cause their respective Subsidiaries to use) their respective
commercially reasonable best efforts to take or cause to be taken all actions,
and do or cause to be done all things, necessary, proper or advisable under this
Agreement, the Stock Option Agreement, the Shareholders Agreement and applicable
Laws to consummate and make effective the Offer, the Merger and the other
transactions contemplated by this Agreement, the Stock Option Agreement and the
Shareholders Agreement as soon as practicable, including preparing and filing as
promptly as practicable all documentation to effect all necessary applications,
notices, petitions, filings and other documents and to obtain as promptly as
practicable all permits, consents, approvals and authorizations necessary or
advisable to be obtained from any third party and/or any Governmental Entity in
order to consummate the Offer and the Merger or any of the other transactions
contemplated by this Agreement, the Stock Option Agreement and the Shareholders
Agreement.
(b) In particular, the Company and Parent each agree to use
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and do, or cause to be done, such things as may be necessary under
federal or state securities laws or the HSR Act applicable to or necessary for,
and will file as soon as reasonably practicable and, if appropriate, use
commercially reasonable efforts to have declared effective or approved, all
documents and notifications with the SEC and other governmental or regulatory
bodies that they deem necessary or appropriate for, the consummation of the
Offer and the Merger or any of the other transactions contemplated hereby and
each party shall give the other information reasonably requested by such other
party pertaining to it and its subsidiaries and affiliates to enable such other
party to take such actions.
(c) Each of the Company, Parent and Merger Sub agrees to use
commercially reasonable efforts to contest and resist any action, including
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) that is in
35
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effect and that restricts, prevents or prohibits the consummation of the Offer
and the Merger or any of the other transactions contemplated by this Agreement,
including, without limitation, by pursuing available avenues of administrative
and judicial appeal.
(d) Each of the Company, Parent and Merger Sub also agrees to
use commercially reasonable efforts to take any and all actions necessary to
avoid or eliminate each and every impediment under any antitrust law that may be
asserted by any governmental antitrust authority or any other party so as to
enable the parties to close by the date specified in Section 9.2(i) the
transactions contemplated hereby; provided, however, that nothing in this
Section 7.4 shall require, or be construed to require, Parent to proffer to, or
agree to, sell or hold separate and agree to sell, before or after the Effective
Time, any assets, businesses, or interest in any assets or businesses of Parent,
the Company or any of their respective affiliates (or to consent to any sale, or
agreement to sell, by the Company of any of its assets or businesses) or to
agree to any material changes or restriction in the operations of any such
assets or businesses; and provided, further, that nothing in this Section 7.4
shall require, or be construed to require, a proffer or agreement that would, in
the good faith judgment of Parent, be reasonably likely to have a material
adverse effect on the benefits to Parent of the transactions contemplated by
this Agreement.
(e) Subject to applicable Laws relating to the exchange of
information, Parent and the Company shall have the right to review in advance,
and to the extent practicable each will consult the other on, all the
information relating to Parent or the Company, as the case may be, and any of
their respective Subsidiaries, that appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the Offer or the Merger and the other transactions contemplated
by this Agreement, the Stock Option Agreement and the Shareholders Agreement.
In exercising the foregoing right, each of the Company and Parent shall act
reasonably and as promptly as practicable.
7.5. Filings; Other Actions; Notification.
------------------------------------
(a) The Company and Parent each shall, upon request by the
other, furnish the other with all information concerning itself, its
subsidiaries, directors, officers and stockholders and such other matters as may
be reasonably necessary or advisable in connection with the Proxy Statement, the
Offer Documents or any other statement, filing, notice or application made by or
on behalf of Parent, the Company or any of their respective subsidiaries to any
Governmental Entity in connection with the Offer or the Merger and the
transactions contemplated by this Agreement, the Stock Option Agreement and the
Shareholders Agreement.
(b) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notice or other
communications received by Parent or the Company, as the case may be, or any of
their respective subsidiaries, from any third party or any Governmental Entity
with respect to the Offer or the Merger and the other transactions contemplated
by this Agreement, the Stock Option Agreement and the Shareholders Agreement.
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The Company shall give prompt notice to Parent of any change that has resulted
in or is reasonably likely to result in a Company Material Adverse Effect and
Parent shall give the Company prompt notice of any event, fact, circumstance or
occurrence that would be reasonably likely to have an adverse effect on Parent's
or Merger Sub's ability to complete the Offer or the Merger or to comply with
their obligations contained in this Agreement or in the Stock Option Agreement.
7.6. Access. From the date hereof until the earlier of the
------
Effective Time or the termination of this Agreement, upon reasonable notice, the
Company shall afford to the officers, employees, accountants, counsel, financial
advisors and other representatives of Parent ("Parent Representatives")
reasonable access to all of its and its Subsidiaries properties, books,
contracts, commitments and records (including security position listings or
other information concerning beneficial and record owners of the Company's
securities) and its officers, management employees and representatives and,
during such period, the Company shall furnish promptly to Parent, consistent
with its obligations under this Agreement and other legal obligations, all
information concerning its business, properties and personnel as the other party
may reasonably request. Such information shall be held in confidence to the
extent required by, and in accordance with, the provisions of the Mutual Non-
Disclosure Agreement, dated March 10, 1999 (the "MNDA"), by and between the
Company and DuPont Pharmaceuticals Company, a Delaware general partnership and
wholly owned subsidiary of Parent ("DPC").
7.7. De-registration. The Company shall use its best efforts to
---------------
cause the Shares to be de-registered from the Nasdaq National Market and de-
registered under the Exchange Act as soon as practicable following the Effective
Time.
7.8. Publicity. The initial press release relating to the Offer
---------
and this Agreement shall be a joint press release, the content of which shall be
mutually agreed upon by Parent and the Company, and thereafter the Company shall
consult with and obtain approval of Parent prior to issuing any press releases
or otherwise making public statements with respect to the transactions
contemplated by this Agreement and the Stock Option Agreement and prior to
making any filings with any Governmental Entity with respect to the transactions
contemplated by this Agreement, provided that such approval shall not be
required if obtaining such approval would cause the Company to be in violation
of any Laws or the rules of the Nasdaq National Market.
7.9. Benefits.
--------
(a) Stock Options.
-------------
(1) Prior to the consummation of the Offer, the Board of
Directors of the Company (or, if appropriate, any committee administering the
Stock Plans) shall adopt such resolutions or take such other actions as are
required to adjust the terms of all outstanding Company Options to provide that,
at the Effective Time, each Company Option outstanding immediately prior to the
acceptance for payment of Shares pursuant to the Offer
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(whether or not vested) shall be canceled in exchange for a cash payment of, or
can only be exercised for net cash equal to, an amount equal to (i) the excess,
if any, of (A) the Price Per Share over (B) the exercise price per share of
Common Stock subject to such Company Option, multiplied by (ii) the number of
shares of Common Stock for which such Company Option shall not theretofore have
been exercised. Upon surrender to Parent at the address set forth in Section
10.6 of Company Options and/or such other documents as may reasonably be
requested by Parent, Parent hereby agrees to deliver to the registered holders
of such Company Options (as indicated in the records of the Company) such cash
payment. The Company represents and warrants that no consents of the holders of
the Company Options are necessary to effectuate the foregoing cash-out except as
disclosed in Schedule 6.1(d)(ii). After the date of this Agreement, neither the
Board of Directors of the Company nor any committee thereof shall cause any
Company Option to become exercisable as a result of the execution of this
Agreement or the Stock Option Agreement or the consummation of the transactions
contemplated hereby. If there is no excess of the Price Per Share over the
exercise price per share of Common Stock subject to a Company Option, such
Company Option shall be canceled for no consideration.
(2) All amounts payable pursuant to this Section 7.9 shall
be subject to any required withholding of taxes and shall be paid without
interest.
(3) The Stock Plans shall terminate as of the Effective
Time and the provisions in any other Compensation and Benefit Plan providing for
the issuance, transfer or grant of any capital stock of the Company or any
interest in respect of any capital stock of the Company shall be deleted as of
the Effective Time, and the Company shall ensure that following the Effective
Time no holder of a Stock Option or any participant in any Stock Plan or other
Compensation and Benefit Plan shall have any right thereunder to acquire any
capital stock of the Company or the Surviving Corporation. A purchase date under
the ESPP will occur immediately prior to the consummation of the Offer. The
payroll deductions for the purchase period ending with that purchase date will
be applied to the purchase of CombiChem Shares at eighty five percent (85%) of
the fair market value of the Shares on the start date of the offering period.
The employees will, thereafter, be free to tender the purchased shares in the
Offer.
(b) Employee Benefits. Parent agrees that, for a period of at
-----------------
least one year from the Effective Date, it will cause the Surviving Corporation
to maintain, and the employees of the Company on the date of this Agreement (the
"Current Employees") will be eligible for, the employee benefit plans of the
Company as of the Effective Date until it develops alternative plans (other than
stock options or other plans involving the issuance of securities of the Company
or Parent) which in the aggregate are substantially comparable to those
maintained by the Company as of the date of this Agreement. Parent will use its
best efforts to cause each employee benefit plan of DPC in which the Current
Employees are eligible to participate to take into account for purposes of
eligibility and vesting thereunder the service of such Current Employees with
the Company as if such service were with DPC, to the same extent that such
service was credited under a comparable plan of the Company and such service
period would have been credited to an employee of DPC participating in the
relevant plan. The Current
38
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Employees shall be entitled to the vacation time and holidays provided for under
plans applicable to employees of DPC. In no event, however, shall a Current
Employee's vacation time or ability to accrue or carry over vacation be less
than that to which such Current Employee was entitled under the Company's
vacation plan. For the first plan year ending after the Effective Time, any pre-
existing condition exclusion under any plan providing medical or dental benefits
shall be no more restrictive for any Current Employee who, immediately prior to
commencing participation in such plan, was participating in a Company plan
providing medical or dental benefits and had satisfied any pre-existing
condition provision under such Company plan. Parent agrees to provide any
Current Employee whose employment with the Company is terminated as a result of
the Merger with at the least the minimum severance benefits provided to
employees of DPC.
If required by Parent, the Company shall, immediately prior
to the Closing Date, terminate the Company's 401(k) plan (the "Company 401(k)")
and no further contributions shall be made to the Company 401(k), provided that
Parent provides the Current Employees the opportunity to participate in a 401(k)
plan immediately following the Closing Date. The Company shall provide to Parent
(i) resolutions of the Board of Directors of the Company authorizing the
termination and (ii) an executed amendment to the Company 401(k) sufficient to
ensure compliance with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the Company 401(k) will be
maintained at the time of termination.
7.10. Expenses. The Surviving Corporation shall pay all charges and
--------
expenses, including those of the Depositary, in connection with the
transactions contemplated in Article V, and Parent shall reimburse the Surviving
Corporation for such charges and expenses. Except as otherwise provided in
Section 9.5(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement, the Stock Option Agreement, the
Shareholders Agreement, the Offer and the Merger and the other transactions
contemplated by this Agreement, the Stock Option Agreement and the Shareholders
Agreement shall be paid by the party incurring such expense.
7.11. Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) From and after consummation of the Offer and compliance by
the Company with Section 1.4, Parent will cause and ensure that the Surviving
Corporation has sufficient funds available, if necessary, to fulfill and honor
in all respects the obligations of the Company to each person who is or was a
director or officer of the Company and who is entitled to indemnification or
advance of expenses pursuant to each indemnification agreement listed in
Schedule 7.11(a) or any indemnification provision or any exculpation provision
set forth in the Company's certificate of incorporation or bylaws in effect on
the date hereof, each in accordance with their terms for a period of not less
than six (6) years. The certificate of incorporation and bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability no less favorable than those set forth in the
Company's certificate
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<PAGE>
of incorporation and bylaws on the date of this Agreement for a period of not
less than six (6) years.
(b) Notwithstanding any contrary provision of this Agreement,
prior to the consummation of the Offer, the Company may purchase insurance
coverage extending for a period of three years after the Effective Time the
level and scope of the Company's directors' and officers' liability insurance
coverage in effect as of the date hereof; provided that the aggregate annual
premium payable for such insurance shall not exceed 125% of the last annual
premium paid for such coverage prior to the date hereof. Through the third
anniversary of the Effective Time, Parent shall maintain in effect such
insurance coverage, and subject to the limitations in the preceding sentence,
shall pay the annual premium for such insurance coverage. In the event the
annual premium payable for such insurance coverage exceeds 125% of the last
annual premium paid by the Company for such coverage, Parent shall be obligated
to obtain and maintain in effect a policy with the greatest amount of coverage
available for a cost not exceeding 125% of such amount.
(c) The provisions of this Section 7.11 are intended to be for
the benefit of, and shall be enforceable by, each of the individuals entitled to
indemnification or advance of expenses under Section 7.11(a) or insurance
coverage under Section 7.11(b) as intended third party beneficiaries and their
heirs and estates and shall be binding on all successors and assigns of Parent
and the Surviving Corporation.
7.12. Antitakeover Statutes. If any Antitakeover Statute is or
---------------------
may become applicable to the Offer or the Merger or the other transactions
contemplated by this Agreement, the Stock Option Agreement, or the Shareholders
Agreement, each of Parent and the Company and their board of directors shall
grant such approvals and take such lawful actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement, the Stock Option Agreement or the Shareholders
Agreement or by the Offer or the Merger and otherwise act to eliminate or
minimize the effects of such statute or regulation on such transactions.
ARTICLE VIII
Conditions
8.1. Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) Stockholder Approval. If the approval of this Agreement
--------------------
and the Merger by the holders of Shares is required by applicable law, this
Agreement shall have been duly adopted by holders of Shares constituting the
Company Requisite Vote.
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(b) Regulatory Consents. Any waiting period applicable to the
-------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) No Injunctions or Restraints. (i) No court or Governmental
----------------------------
Entity of competent jurisdiction shall have enacted, issued, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and restrains,
enjoins or otherwise prohibits consummation of the Offer or Merger
(collectively, an "Order"); provided however, that prior to invoking this
provision, each party shall use its commercially reasonable best efforts to have
any such Order lifted or withdrawn, and (ii) no Governmental Entity shall have
instituted any proceeding seeking any such Order.
(d) Completion of the Offer. Merger Sub shall have (i)
-----------------------
commenced the Offer pursuant to Section 1.1 hereof and (ii) purchased, pursuant
to the terms and conditions of such Offer, all shares of Company Common Stock
duly tendered and not withdrawn; provided, however, that neither Parent nor
Merger Sub shall be entitled to rely on the condition in clause (ii) above if
either of them shall have failed to purchase shares of Company Common Stock
pursuant to the Offer in breach of their obligations under this Agreement.
(e) Merger Sub Nominees Elected. The Company shall have
---------------------------
complied with its obligations under Section 1.4 hereof.
(f) Opinion of Counsel. Parent and Merger Sub shall have
------------------
received the opinion of Brobeck, Phleger and Harrison LLP in substantially the
form attached hereto as Exhibit 8.1(f).
ARTICLE IX
Termination
9.1. Termination by Mutual Consent. This Agreement may be
-----------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval by stockholders of the Company
referred to in Section 8.1(a), by mutual written consent of the Company, Parent
and Merger Sub, by action of their respective boards of directors.
9.2. Termination by Either Parent or the Company. This Agreement
-------------------------------------------
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of Parent or the board of directors of the Company if
(i) the Merger shall not have been consummated by April 30, 2000, whether such
date is before or after the date of approval by the stockholders of the Company
referred to in Section 8.1(a); provided, however, that if a request for
additional information is received from the United States Federal Trade
Commission or the Antitrust Division of the United States Department of Justice
pursuant to the HSR Act or additional information is requested by a governmental
authority (a "Foreign Authority") pursuant to the antitrust, competition,
foreign investment, or similar laws or any foreign countries or
41
<PAGE>
supranational commissions or boards that require pre-merger notifications or
filings with respect to the Merger (collectively, "Foreign Merger Laws"), then
such date shall be extended to the 30th day following the date when the United
States Federal Trade Commission or the Antitrust Division of the United States
Department of Justice has deemed the Parent and/or the Company, as applicable,
to be in substantial compliance with such request for additional information,
but in any event not later than May 31, 2000, (ii) the Company Stockholders
Meeting shall have been convened, held and completed and the approval referred
to in Section 8.1(a) shall not have been obtained thereat or at any adjournment
or postponement thereof; provided however, that Parent shall not be permitted to
terminate the Agreement pursuant to this clause (ii) if Parent or Merger Sub
shall not have voted all Shares then owned beneficially or of record by them in
favor of approval and adoption of this Agreement, the Merger and the
transactions contemplated hereby as required by Section 7.3(a), (iii) any Order
permanently restraining, enjoining or otherwise prohibiting the Offer or the
Merger shall become final and non-appealable (whether before or after the
approval referred to in Section 8.1(a)) or (iv) if the Offer terminates or
expires on account of the failure of any of the Offer Conditions; provided that
the right to terminate this Agreement pursuant to clause (i) above shall not be
available to any party that has breached in any material respect its obligations
under this Agreement in any manner that shall have been the proximate cause of,
or resulted in, the failure to consummate the Merger by the date referred to in
clause (i) of this Section 9.2 and, provided, further, that the right to
terminate this Agreement pursuant to clause (iii) of this Section 9.2 shall not
be available to any party that has breached its covenant in Section 7.4 to use
commercially reasonable best efforts to prevent such Order from being issued and
to use commercially reasonable best efforts to cause such Order to be vacated,
withdrawn or lifted.
9.3. Termination by the Company. This Agreement may be terminated
--------------------------
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company referred to in
Section 8.1(a), by action of the board of directors of the Company, if:
(a) (i) The Company is not in material breach of any of its
representations, warranties, covenants or agreements in this Agreement, (ii) the
board of directors of the Company authorizes the Company, prior to the
consummation of the Offer and the Company's compliance with Section 1.4 hereof,
and subject to complying with the terms of this Agreement, to enter into a
binding written agreement concerning a Superior Proposal and the Company
notifies Parent in writing that it intends to enter into such an agreement,
attaching the most current version of such agreement to such notice, and (iii)
Parent does not make, within three business days of receipt of the Company's
written notification of its intention to enter into such an agreement, a written
offer that is at least as favorable to the stockholders of the Company as the
Superior Proposal. The Company agrees (x) that it will not enter into a binding
agreement referred to in clause (ii) of the previous sentence until at least the
first calendar day following the third business day after it has provided the
written notice to Parent required thereby, (y) to notify Parent promptly if its
intention to enter into a written agreement referred to in such notice shall
change at any time after giving such notification and (z) that it will not
terminate this Agreement or enter into a binding agreement referred to in clause
(ii) of the previous sentence if Parent has,
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within the period referred to in clause (x) of this sentence, made a written
offer that is at least as favorable to the Company's stockholders as the
Superior Proposal; or
(b) The Company is not in material breach of any of its
representations, warranties, covenants or agreements in this Agreement and prior
to the consummation of the Offer, there has been a material breach by Parent or
Merger Sub of any representation, warranty, covenant or agreement of Parent or
Merger Sub contained in this Agreement which has had, or is reasonably likely to
have, the effect of materially impairing the ability of Parent or Merger Sub to
consummate the Offer or the Merger (a "Terminating Parent Breach"); provided,
however, that, if such Terminating Parent Breach is curable by Parent through
the exercise of reasonable best efforts and such cure is reasonably likely to be
completed prior to the applicable date specified in Section 9.2(i), then for so
long as Parent continues to exercise reasonable best efforts to cure such
Terminating Parent Breach, the Company may not terminate this Agreement under
this Section 9.3(b); or
(c) The Company is not in material breach of any of its
representations, warranties, covenants or agreements in this Agreement and
Merger Sub shall have failed to commence the Offer within five (5) Business Days
after the date of this Agreement.
9.4. Termination by Parent. This Agreement may be terminated and
---------------------
the Merger may be abandoned at any time until the Offer has been consummated and
the Company has complied with its obligations under Section 1.4, by Parent:
(a) If the board of directors of the Company shall have failed
to recommend, or shall have withdrawn or adversely modified its approval or
recommendation of, the Offer or the Merger or failed to reconfirm its
recommendation of the Offer or the Merger within two calendar days after a
written request by Parent to do so, or shall have resolved to do any of the
foregoing; or
(b) If there has been a material breach by the Company of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement which would give rise to the failure of a condition set forth in
paragraph (c) of Annex A (a "Terminating Company Breach"); provided, however,
that, if such Terminating Company Breach is curable by the Company through the
exercise of reasonable best efforts and such cure is reasonably likely to be
completed prior to the applicable date specified in Section 9.2(i), then for so
long as the Company continues to exercise reasonable best efforts, Parent may
not terminate this Agreement under this Section 9.4(b). For the purposes of
this Section 9.4(b), any breach of a representation or warranty which is
qualified or limited in any manner as to materiality shall be deemed to be a
material breach.
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9.5. Effect of Termination and Abandonment.
-------------------------------------
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article IX, this Agreement (other
than as set forth in Section 10.1) shall become void and of no effect with no
liability of any party hereto (or any of its directors, officers, employees,
agents, legal and financial advisors or other representatives); provided,
however, that except as otherwise provided herein, no such termination shall
relieve any party hereto of any liability or damages resulting from any willful
breach of this Agreement.
(b) In the event that (i)(A) a bona fide Acquisition Proposal
shall have been made to the Company or any of its stockholders or any Person
shall have announced an intention (whether or not conditional) to make an
Acquisition Proposal with respect to the Company, and on or following the date
of this Agreement but prior to the date that the Offer is consummated, such
Acquisition Proposal, announcement or intention is or becomes publicly known,
and (B) on or following the date on which such Acquisition Proposal,
announcement or intention is or becomes publicly known, this Agreement is
terminated by either Parent or the Company pursuant to Section 9.2(i), or (ii)
this Agreement is terminated (x) by the Company pursuant to Section 9.3, or (y)
by Parent pursuant to Section 9.4, or (z) pursuant to Section 9.2(iv) as a
result of the failure of the Company to satisfy any one of the conditions set
forth in paragraphs (c), (e) or (f) of Annex A, then the Company shall promptly,
but in no event later than two (2) Business Days after the date of notification
by Parent of the amount, reimburse Parent for all costs, charges and expenses
incurred by Parent or Merger Sub in connection with this Agreement, the Stock
Option Agreement and the Shareholders Agreement and the transactions
contemplated by this Agreement and the Stock Option Agreement and the
Shareholders Agreement, including, without limitation, fees and expenses of
accountants, attorneys and financial advisors, up to a maximum of $1,000,000 in
the aggregate. Such amount shall be payable in cash by wire transfer of same day
funds. The Company acknowledges that the agreements contained in this Section
9.5(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent and Merger Sub would not enter into
this Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 9.5(b), and, in order to obtain such payment, Parent or
Merger Sub commences a suit which results in a binding nonappealable judgment
rendered by a court of competent jurisdiction against the Company for the fee
set forth in this paragraph (b) the Company shall pay to Parent or Merger Sub
its costs and expenses (including reasonable attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
Chase Manhattan Bank in effect on the date such payment was required to be made.
ARTICLE X
Miscellaneous and General
10.1. Survival. This Article X and the agreements of the Company,
--------
Parent and Merger Sub contained in Articles I, II, III, IV and V and Sections
7.9 (Benefits), 7.10 (Expenses), and 7.11 (Indemnification; Directors' and
Officers' Insurance) shall survive the consummation of
44
<PAGE>
the Offer and the Merger. This Article X and the agreements of the Company,
Parent and Merger Sub contained in Section 7.10 (Expenses), and Section 9.5
(Effect of Termination and Abandonment) shall survive the termination of this
Agreement. All other agreements and covenants in this Agreement and all
representations and warranties contained herein shall not survive the
consummation of the Merger or the termination of this Agreement.
10.2. Modification or Amendment. Subject to the provisions of
-------------------------
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
10.3. Waiver of Conditions. The conditions to each of the
--------------------
parties' obligations to consummate the Merger are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law.
10.4. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
10.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
---------------------------------------------
(a) 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 LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF
THE COURTS OF THE STATE OF DELAWARE AND THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA LOCATED IN THE COUNTY OF NEW CASTLE, DELAWARE SOLELY IN RESPECT OF
THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT, THE
STOCK OPTION AGREEMENT AND THE SHAREHOLDERS AGREEMENT AND OF THE DOCUMENTS
REFERRED TO IN THIS AGREEMENT, THE STOCK OPTION AGREEMENT AND THE SHAREHOLDERS
AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY,
AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR
PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT,
THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT
BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY
NOT BE APPROPRIATE OR THAT THIS AGREEMENT, THE STOCK OPTION AGREEMENT OR THE
SHAREHOLDERS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO
SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH A DELAWARE STATE
OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE
45
<PAGE>
SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS
IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN
SECTION 10.6 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID
AND SUFFICIENT SERVICE THEREOF.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT, THE STOCK OPTION AGREEMENT OR THE
SHAREHOLDERS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES,
AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE STOCK
OPTION AGREEMENT OR THE SHAREHOLDERS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT OR THE STOCK OPTION AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.5.
10.6. Notices. Any notice, request, instruction or other document
-------
to be given hereunder by any party to the others shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile:
if to Parent or Merger Sub
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Attention: General Counsel
Fax: (302) 773-5176
with copies to:
Justin P. Klein, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Fax: (215) 864-8999
46
<PAGE>
if to the Company
Dr. Vicente Anido, Jr.
CombiChem, Inc.
9050 Camino Santa Fe
San Diego, CA 92121
Fax: (858) 271-9339
with copies to:
Faye H. Russell, Esq.
Brobeck Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, California 92101-3532
Fax: (619) 234-3848
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
10.7. Entire Agreement. This Agreement (including any exhibits
----------------
hereto), the Stock Option Agreement and the MNDA constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
10.8. No Third Party Beneficiaries. Except as provided in Section
----------------------------
7.11 (Indemnification; Directors' and Officers' Insurance), this Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder.
10.9. Obligations of Parent and of the Company. Whenever this
----------------------------------------
Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such
Subsidiary to take such action. Whenever this Agreement requires a Subsidiary
of the Company to take any action, such requirement shall be deemed to include
an undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
10.10. Severability. The provisions of this Agreement shall be
------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such
47
<PAGE>
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
10.11. Specific Performance. The parties hereto each acknowledge
--------------------
that, in view of the uniqueness of the subject matter hereof, the parties hereto
would not have an adequate remedy at law for money damages if this Agreement
were not performed in accordance with its terms, and therefore agree that the
parties hereto shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which the parties hereto may be entitled at law
or in equity.
10.12. Interpretation. The table of contents and headings herein
--------------
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof. Where a reference in this Agreement is made to a Section, Schedule or
Exhibit, such reference shall be to a Section of or Schedule or Exhibit to this
Agreement unless otherwise indicated. Whenever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation."
10.13. Assignment. This Agreement shall not be assignable by
----------
operation of law or otherwise; provided, however, that Parent may (i) assign its
rights and obligations under this Agreement to DPC or any of Parent's direct or
indirect wholly owned subsidiaries or affiliates with a net worth of
$100,000,000 or more or (ii) designate, by written notice to the Company,
another direct or indirect wholly owned subsidiary of Parent to be a Constituent
Corporation in lieu of Merger Sub, in the event of which, all references herein
to Merger Sub shall be deemed references to such other subsidiary. Any
purported assignment made in contravention of this Agreement shall be null and
void.
10.14. Captions. The Article, Section and Paragraph captions
--------
herein are for convenience of reference only and do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
[Remainder of page intentionally left blank]
48
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by duly authorized officers of the parties hereto as of the date
hereof.
COMBICHEM, INC.
By:/s/ Vicente Anido, Jr.
-----------------------------------------
Name: Vicente Anido, Jr.
Title: President and Chief Executive Officer
E. I. DU PONT DE NEMOURS AND
COMPANY
By:/s/ Kurt M. Landgraf
-----------------------------------------
Name: Kurt M. Landgraf
Title: Executive Vice President and
Chief Operating Officer
DPC NEWCO, INC.
By:/s/ Richard E. Gies
----------------------------------------
Name: Richard E. Gies
Title: President
49
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, and subject to the
terms and conditions of the Agreement, Merger Sub shall not be obligated to
accept for payment any Shares until the expiration or termination of any waiting
periods applicable under the HSR Act and Merger Sub shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC (including Rule 14e-l(c) under the Exchange Act) pay for, and may delay the
acceptance for payment of or payment for, any Shares tendered in the Offer and
(subject to the terms and conditions of the Agreement, including Section 1.1(b))
may amend, extend or terminate the Offer if, (i) immediately prior to the
Scheduled Expiration Date (as extended in accordance with clauses (x), (y) or
(z) of Section 1.1(b)(ii) of the Agreement) the Minimum Condition shall not have
been satisfied or (ii) prior to the expiration of the Offer any of the following
shall exist and be continuing:
(a) there shall be threatened or pending any action, litigation
or proceeding (hereinafter, an "Action") brought by any Governmental Entity: (i)
that would reasonably be expected to challenge the acquisition by Parent or
Merger Sub of shares of Company Common Stock or seek to restrain or prohibit the
consummation of the Offer or the Merger; (ii) that would reasonably be expected
to seek to prohibit or impose any material limitation on Parent's, Merger Sub's
or any of their respective affiliates' ownership or operation of all or any
material portion of the business or assets of the Company and its Subsidiaries
taken as a whole or Parent and its Subsidiaries taken as a whole that, in each
case referred to in this clause (ii) individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect or a material
adverse effect on Parent; or (iii) that would reasonably be expected to seek to
impose material limitations on the ability of Parent or Merger Sub effectively
to acquire or hold, or to exercise full rights of ownership of, the shares of
Common Stock, including the right to vote the shares of Common Stock purchased
by them on an equal basis with all other shares of Common Stock on all matters
properly presented to the stockholders of the Company; or
(b) there shall be any statute, rule, regulation, order or
injunction threatened, proposed, sought, enacted, promulgated, entered, enforced
or deemed to or become applicable to the Offer or the Merger (and in each case,
remain in effect), or any other action shall have been taken, by any court of
competent jurisdiction or other U.S. Governmental Entity, that has any of the
consequences referred to in clauses (i) through (iii) of paragraph (a) above; or
(c) (i) Any of the representations and warranties of the Company
set forth in this Agreement shall not be true and correct in all material
respects when considered without regard to any qualification by, or reference
to, materiality in any manner (except for those representations and warranties
made as of a specific date, which shall be true and correct as of such date) and
except for such failures of any representations or warranties, when so
considered, to be true and correct that individually or in the aggregate do not
have, and are not
A-1
<PAGE>
reasonably likely to have, a Company Material Adverse Effect; or (ii) the
Company shall have breached or failed to comply in any material respect with any
of its obligations, covenants or agreements under the Agreement and any such
breach or failure shall not have been substantially cured by the Company within
five (5) Business Days after Parent provides written notice to the Company of
such breach or failure; or
(d) the Agreement shall have been terminated in accordance with
its terms; or
(e) any corporation, entity, "group" or "person" (as defined in
the Exchange Act), other than Parent, Merger Sub or any of the stockholders that
are party to the Shareholders Agreement (so long as such stockholders do not
become beneficial owners of any additional Shares after the date hereof and so
long as such stockholders do not breach any of the provisions of the
Shareholders Agreement), shall have acquired beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of more than 20% of the outstanding Shares;
or
(f) the Company's Board shall have modified or amended its
recommendation of the Offer in any manner adverse to Parent or Merger Sub or
shall have withdrawn its recommendation of the Offer or shall have recommended
acceptance of any Acquisition Proposal or shall have failed to reconfirm its
recommendation of the Offer within five (5) calendar days after a written
request by Parent to do so, or shall have resolved to do any of the foregoing;
or
(g) there shall exist (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National Market
for more than one full trading day (other than shortening of trading hours or
any trading halt resulting from a specified increase or decrease in a market
index), (ii) a declaration of any banking moratorium by federal or state
authorities or any suspension of payments in respect of banks or any limitation
(whether or not mandatory) imposed by federal or state authorities on the
extension of credit by lending institutions in the United States, or (iii) in
the case of any of the foregoing existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof.
The conditions set forth in clauses (a) through (g) are for the sole
benefit of Parent and Merger Sub and may be asserted by Parent and Merger Sub
regardless of the circumstances giving rise to such conditions and may be waived
by Parent and Merger Sub in whole or in part at any time and from time to time,
by express and specific action to that effect, in their reasonable discretions.
The failure by Parent or 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.
The capitalized terms used in this Annex A shall have the meanings set
forth in the Agreement to which it is annexed.
A-2
<PAGE>
Exhibit (c)(2)
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this "Agreement") dated as of October 5,
1999, among the persons listed on Schedule 1 hereto (each, a "Holder" and,
collectively, the "Holders"), E. I. du Pont de Nemours and Company, a Delaware
corporation ("Parent"), and DPC Newco, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub").
WHEREAS, Parent, Merger Sub and CombiChem, Inc., a Delaware
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger (the "Merger Agreement") providing for the making of a tender offer by
Merger Sub (the "Offer") for shares of Common Stock, par value $0.001 per share,
of the Company (the "Common Stock"), at a purchase price of $6.75 per share and
a subsequent merger (the "Merger") between the Company and Merger Sub.
WHEREAS, each Holder owns the number of shares of Common Stock (the
"Shares") or options to purchase Common Stock (the "Stock Options" and,
collectively with the Shares, the "Optioned Securities"), or has the right to
vote the number of Shares or other securities (the "Voting Securities"), listed
opposite the name of such Holder on Schedule 1.
WHEREAS, Parent and Merger Sub have required, as a condition to
entering into the Merger Agreement, that the Holders enter into this Agreement.
WHEREAS, the Holders believe that it is in the best interest of the
Company and its stockholders to induce Parent and Merger Sub to enter into the
Merger Agreement and, therefore, the Holders are willing to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and such other valuable consideration
the receipt of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Option. Each Holder hereby grants Merger Sub an irrevocable
----------
option (the "Option") to purchase all of the Optioned Securities of such Holder
at the price of $6.75 per share (or such higher price as may be paid pursuant to
the Offer), payable in cash, without interest.
2. Exercise of the Option; Term.
----------------------------
(a) On the terms and subject to the conditions of this Agreement,
Merger Sub may exercise the Option at any time after the date on which all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), applicable to the Merger have expired or been
terminated, by written notice to each Holder specifying a date and time for the
closing not later than thirty (30) business days from the date of such notice
(which date and time may be one day after the delivery of such notice), but only
if:
<PAGE>
(i) (A) a bona fide Acquisition Proposal (as defined in the Merger
Agreement) shall have been made to the Company or any of its stockholders or any
person or entity shall have announced an intention (whether or not conditional)
to make an Acquisition Proposal with respect to the Company, and on or following
the date of the Merger Agreement but prior to the date that the Offer is
consummated, such Acquisition Proposal, announcement or intention is or becomes
publicly known, (B) no event shall have become publicly known prior to the time
that such Acquisition Proposal, announcement or intention is or becomes publicly
known that would have a material adverse effect on the ability of Parent or
Merger Sub to consummate the Merger (other than any event related to such
Acquisition Proposal, announcement or intention or any event related to a breach
of the Merger Agreement or this Agreement by the Company) and (C) on or
following the date on which such Acquisition Proposal, announcement or intention
is or becomes publicly known, the Merger Agreement is terminated by either the
Company or the Parent pursuant to Section 9.2(i) of the Merger Agreement, unless
Merger Sub has consummated the Offer and the Company has complied with Section
1.4 of the Merger Agreement; or
(ii) the Merger Agreement is terminated (x) by the Company pursuant to
Section 9.3(a) of the Merger Agreement, or (y) by the Parent pursuant to Section
9.4(a) of the Merger Agreement or (z) pursuant to Section 9.2(iv) of the Merger
Agreement as a result of the failure to satisfy any one of the conditions set
forth in paragraphs (c), (e) or (f) of Annex A of the Merger Agreement.
(b) As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act. Notwithstanding
any other provision of this Agreement, the Merger Agreement or the Stock Option
Agreement, any reference to a majority of the total issued and outstanding
shares or Shares, or shares or Shares outstanding on a fully diluted basis, or
similar references, shall, for purposes of such agreements, exclude from the
determination thereof any shares of Common Stock issuable upon exercise of or
subject to the Stock Option Agreement and any reference to beneficial ownership
of shares of Common Stock or similar references shall, for purposes of such
agreements, exclude from the determination thereof any shares of Common Stock
issuable upon exercise of or subject to the Stock Option Agreement and/or this
Agreement.
(c) The Option shall expire on the earliest of (1) the Effective Time
(as defined in the Merger Agreement), (2) January 31, 2000 or, if the Offer is
extended past January 31, 2000 because the waiting period applicable to the
transactions contemplated by this Agreement under the HSR Act has not terminated
or expired, immediately after the expiration of the Offer, and (3) the thirtieth
day following the termination of the Merger Agreement if prior to such thirtieth
day the events set forth in any of clauses (i) or (ii) of Section 9.5(b) of the
Merger Agreement shall not have occurred (such earliest date being referred to
in this Agreement as the "Expiration Date"); provided that, if the Option cannot
be exercised or the Optioned Securities cannot be delivered to Merger Sub upon
such exercise because (x) there shall be in effect a preliminary or permanent
injunction or other order issued by any federal or state court of competent
jurisdiction prohibiting delivery of the Optioned Securities or (y) any
applicable
2
<PAGE>
waiting periods under the HSR Act shall not have expired or been terminated,
then the Expiration Date shall be extended until thirty days after such
impediment to exercise or delivery has been removed.
3. Closing. At the closing:
-------
(a) against delivery of the Optioned Securities, free and clear of all
liens, claims, charges and encumbrances of any kind or nature whatsoever, Parent
shall cause Merger Sub to make payment of the aggregate price for each Holder's
Optioned Securities by wire transfer of immediately available funds to such
Holder; and
(b) each Holder shall deliver to Merger Sub a duly executed
certificate or certificates representing the number of Optioned Securities
purchased from such Holder, together with transfer powers endorsed in blank
relating to such certificates and, if requested by Merger Sub, an irrevocable
proxy duly executed by such Holder, authorizing such persons as Merger Sub shall
designate to act for such Holder as his lawful agents, attorneys and proxies,
with full power of substitution, to vote in such manner as each such agent,
attorney and proxy or his substitute shall in his sole discretion deem proper,
and otherwise act with respect to the Optioned Securities at any meeting
(whether annual or special and whether or not an adjourned meeting) of the
Company's Holders or otherwise, and revoking any prior proxies granted by such
Holder with respect to the Holder's Optioned Securities.
Notwithstanding any provision of this Agreement to the contrary, the
Holders shall validly tender their Shares pursuant to the Offer and shall not
withdraw such Shares prior to the expiration of the Offer, and their obligation
to sell any Optioned Securities shall be satisfied, solely with respect to the
Shares so tendered, upon the purchase of such Shares by Merger Sub pursuant to
the Offer.
4. Covenants of the Holders.
------------------------
(a) During the period from the date of this Agreement until the
expiration of this Agreement, except in accordance with the provisions of this
Agreement, each Holder severally and not jointly agrees that he will not:
(i) sell, sell short, transfer, pledge, hypothecate, assign or
otherwise dispose of, or enter into any contract, option, hedging arrangement or
other arrangement or understanding with respect to the sale, transfer, pledge,
hypothecation, assignment or other disposition of, any Optioned Securities or
Voting Securities;
(ii) deposit any Optioned Securities or Voting Securities into a
voting trust, or grant any proxies or enter into a voting agreement with respect
to any Optioned Securities or Voting Securities; or
3
<PAGE>
(iii) initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal (as defined in
the Merger Agreement) or enter into discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain an Acquisition Proposal, or
agree to or endorse any Acquisition Proposal; except that any Holder who is a
member of the board of directors of the Company may conduct himself in the
manner expressly permitted under Section 7.2 of the Merger Agreement.
(b) Any additional shares of Common Stock, warrants, options or other
securities or rights exercisable for, exchangeable for or convertible into
shares of Common Stock (collectively, "Equity Securities") acquired by any
Holder, or with respect to which any Holder obtains voting power, will become
subject to this Agreement and shall, for all purposes of this Agreement, be
considered Optioned Securities or Voting Securities, as the case may be.
(c) Each Holder agrees not to engage in any action or omit to take any
action which would have the effect of preventing or disabling such Holder from
delivering his Optioned Securities to Merger Sub or otherwise performing his
obligations under this Agreement. To the extent that any Optioned Securities
(other than Company Common Stock) may not be assigned by such Holder to Merger
Sub without exercising, exchanging or converting such Optioned Securities for or
into Company Common Stock, each Holder agrees to exercise, exchange or convert
such Optioned Securities for or into Company Common Stock prior to the closing
of the purchase of such Optioned Securities upon exercise of the Option.
5. Representations and Warranties of each Holder. Each Holder
---------------------------------------------
severally and not jointly represents and warrants to Parent and Merger Sub as
follows:
(a) (i) such Holder is the record or beneficial owner of the Optioned
Securities, or has the right to vote the Voting Securities, listed opposite the
name of such Holder on Schedule 1, (ii) such Optioned Securities or Voting
Securities are the only Equity Securities owned of record or beneficially by
such Holder or in which such Holder has any interest or which such Holder has
the right to vote, as the case may be, and (iii) such Holder does not have any
option or other right to acquire any other Equity Securities;
(b) such Holder has the right, power and authority to execute and
deliver this Agreement and to perform his obligations hereunder; the execution,
delivery and performance of this Agreement by such Holder will not require the
consent of any other person and will not constitute a violation of, conflict
with or result in a default under (i) any contract, understanding or arrangement
to which such Holder is a party or by which such Holder is bound, (ii) any
judgment, decree or order applicable to such Holder or (iii) to the Holder's
knowledge, any law, rule or regulation of any governmental body applicable to
such Holder; and this Agreement constitutes a valid and binding agreement on the
part of such Holder, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity;
4
<PAGE>
(c) to the Holder's knowledge, any Shares included in the Optioned
Securities owned by such Holder have been validly issued and are fully paid and
nonassessable and any shares of Common Stock issuable upon exercise of the Stock
Options or Warrants, when issued and upon payment of the exercise price
therefor, will be validly issued, fully paid and nonassessable;
(d) except as set forth on Schedule 1, the Optioned Securities owned
by such Holder are now, and at all times during the term of this Agreement will
be, held by such Holder free and clear of all adverse claims, liens,
encumbrances and security interests, and none of the Optioned Securities or
Voting Securities are subject to any voting trust or other agreement or
arrangement (except as created by this Agreement) with respect to the voting or
disposition of the Optioned Securities or Voting Securities; and there are no
outstanding options, warrants or rights to purchase or acquire, or agreements
(except for this Agreement) relating to, such Optioned Securities or Voting
Securities; and
(e) upon purchase of the Optioned Securities owned by such Holder,
Merger Sub will obtain good and marketable title to such Optioned Securities,
free and clear of all adverse claims, liens, encumbrances and security interests
(except any created by Merger Sub).
6. Effect of Representations, Warranties and Covenants of Holders.
--------------------------------------------------------------
The representations, warranties and covenants of the Holders shall be several
and not joint. The liability of each individual Holder shall extend only to the
representations, warranties and covenants of such Holder and not to any
representation, warranty or covenant of any other Holder.
7. Representations and Warranties of Parent and Merger Sub. Each of
-------------------------------------------------------
Parent and Merger Sub represents and warrants to each Holder that: it is a
corporation duly incorporated under the laws of the State of Delaware; it has
all requisite corporate power and authority to enter into and perform all its
obligations under this Agreement; the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on its part; this Agreement has
been duly executed and delivered by it; and this Agreement constitutes a valid
and binding agreement on its part, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
8. Voting of Equity Securities. Each Holder hereby agrees that,
---------------------------
during the period from the date of this Agreement until the expiration of this
Agreement, at any meeting of the stockholders of the Company, however called,
and in any action by written consent of the stockholders of the Company, he
shall (a) vote all Voting Securities of such Holder in favor of the Merger; (b)
not vote any Voting Securities in favor of any action or agreement which would
result in a breach in any material respect of any covenant, representation or
warranty or any other obligation of the Company under the Merger Agreement; and
(c) vote all Voting Securities of such Holder against any action or agreement
which would impede, interfere with or attempt to
5
<PAGE>
discourage the Offer or the Merger, including, but not limited to: (i) any
proposal opposed by Parent or Merger Sub; (ii) any Acquisition Proposal (other
than the Offer and the Merger) involving the Company or any of its subsidiaries;
(iii) any change in the management or board of directors of the Company, except
as otherwise agreed to in writing by Merger Sub; (iv) any material change in the
present capitalization or dividend policy of the Company; or (v) any other
material change in the Company's corporate structure or business. Each Holder
hereby irrevocably appoints designees of Merger Sub, its attorneys, agents and
proxies, with full power of substitution, for the undersigned and in the name,
place and stead of the undersigned to vote in such manner as such attorneys,
agents and proxies or their substitutes shall in their sole discretion deem
proper and otherwise act, including the execution of written consents, with
respect to all Voting Securities of the Company which the undersigned is or may
be entitled to vote at any meeting of the Company held after the date hereof,
whether annual or special and whether or not an adjourned meeting, or in respect
of which the undersigned is or may be entitled to act by written consent. This
proxy is coupled with an interest and shall be irrevocable and binding on any
successor in interest of the undersigned. This proxy shall operate to revoke any
prior proxy as to Voting Securities heretofore granted by the Holder. Such proxy
shall terminate upon the expiration of this Agreement.
9. Adjustments. In the event of any increase or decrease or other
-----------
change in the Optioned Securities by reason of stock dividend, stock split,
recapitalizations, combinations, exchanges of shares or the like, the number of
Optioned Securities and Voting Securities subject to this Agreement shall be
adjusted appropriately.
10. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the law of the State of Delaware without regard to
its rules of conflict of laws.
11. VENUE. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
-----
OF THE COURTS OF THE STATE OF DELAWARE AND THE FEDERAL COURTS OF THE UNITED
STATES OF AMERICA LOCATED IN THE COUNTY OF NEW CASTLE, DELAWARE SOLELY IN
RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS
AGREEMENT AND OF THE OTHER DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN
RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND HEREBY WAIVE,
AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE
INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH DOCUMENT, THAT IT IS NOT
SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS
NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE
OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH
COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO
SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH A DELAWARE STATE
OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH
6
<PAGE>
DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY
SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 16 OR IN SUCH OTHER
MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE
THEREOF.
12. Further Assurances. Each party hereto shall perform such
------------------
further acts and execute such further documents as may reasonably be required to
carry out the provisions of this Agreement.
13. Restrictions on Transfer.
------------------------
(a) As soon as practicable after the execution of this Agreement, the
following legend shall be placed on the certificates representing the Optioned
Securities:
"The Securities represented by this certificate are subject to
certain transfer and other restrictions contained in a Shareholders
Agreement, dated as of October 5, 1999, among E. I. du Pont de Nemours and
Company, a Delaware corporation, DPC Newco, Inc., a Delaware corporation,
and certain stockholders of the Corporation."
(b) The Company shall instruct its transfer agent not to permit any
transfers of the Optioned Securities in contravention of this Agreement.
14. Assignment. This Agreement may not be assigned by any party
----------
hereto, except that Parent may assign its rights and obligations under this
Agreement to DuPont Pharmaceuticals Company, a Delaware general partnership and
wholly owned subsidiary of Parent, or any of Parent's direct or indirect wholly
owned subsidiaries or affiliates with a net worth of more than $100,000,000.
15. Remedies. The parties agree that legal remedies for breach
--------
of this Agreement will be inadequate and that this Agreement may be enforced by
Parent and Merger Sub by injunctive or other equitable relief.
16. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing (except as otherwise provided herein)
and shall be deemed duly given if delivered in person, by confirmed facsimile
transmission or by overnight courier service, addressed as follows:
To Parent or Merger Sub:
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Attention: General Counsel
Fax: (302) 773-5176
7
<PAGE>
With a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attention: Justin P. Klein, Esq.
Fax: (215) 864-8999
To each Holder:
At the address set forth on the
signature pages hereto
With copies to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101
Attention: Faye H. Russell, Esq.
Fax: (619) 234-3848
17. Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
18. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
19. Binding Effect; Benefits. This Agreement shall survive the death
------------------------
or incapacity of any Holder and shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to or shall confer on any person other than the parties
hereto and their respective heirs, legal representatives and successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
20. Waiver of Conflicts. The Company and each Holder severally
-------------------
acknowledge and represent (i) that Brobeck, Phleger & Harrison LLP has in the
past and may continue to
8
<PAGE>
perform legal services for the Company and certain of the Holders in matters
unrelated to the transactions described in this Agreement; (ii) that Brobeck,
Phleger & Harrison LLP is representing both the Company and the Holders in the
transaction contemplated by this Agreement; (iii) that they have been given the
opportunity to ask for information relevant to the representation by Brobeck,
Phleger & Harrison LLP of both the Company and the Holders in connection with
the transaction contemplated by this Agreement. Each Holder represents that,
after such disclosure, each Holder has requested that Brobeck, Phleger &
Harrison LLP represent such Holder in connection with the transactions
contemplated by this Agreement and each of the Holders hereby gives its informed
consent to the representation by Brobeck, Pleger & Harrison LLP of the Company
and the Holders in connection with the transactions contemplated hereby.
21. Termination. This Agreement shall commence on the date hereof
-----------
and terminate upon the expiration of the Option.
[Remainder of page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the Holders, Parent and Merger Sub have entered
into this Agreement as of the date first written above.
E. I. DU PONT DE NEMOURS AND
COMPANY
By: /s/ Kurt M. Landgraf
-------------------------------------
Name: Kurt M. Landgraf
Title: Executive Vice President and
Chief Operating Officer
DPC NEWCO, INC.
By: /s/ Richard E. Gies
--------------------------------------
Name: Richard E. Gies
Title: President
[Remainder of page intentionally left blank]
10
<PAGE>
HOLDERS:
First Union Trust Company,
National Association
as Voting Trustee under that Certain
Voting Trust Dated May 5, 1998
(Sprout Capital VII, L.P.)
By: /s/ Edward L. Truitt
-------------------------------------
Name: Edward L. Truitt
Title: Vice President
DLJ Capital Corp.
By: /s/ Arthur S. Zuckerman
-------------------------------------
Arthur S. Zuckerman
Vice President
SEQUOIA CAPITAL VI
SEQUOIA TECHNOLOGY
PARTNERS VI
SEQUOIA XXIV
SEQUOIA 1995
By: /s/ Thomas F. Stephenson
-------------------------------------
Name: Thomas F. Stephenson
Title: General Partner
BVCF III, L.P.
By: J.W. Puth Associates, LLC,
its General Partner
Brinson Venture Management, LLC,
its Attorney-in-fact
By: Brinson Partners, Inc.,
its Managing Member
By: /s/ Terry P. Gould
-------------------------------------
Terry P. Gould
Executive Director
Brinson Trust Company as Trustee of the
Brinson MAP Venture Capital Fund III
By: /s/ Terry P. Gould
-------------------------------------
Terry P. Gould
Executive Director
/s/ Vicente Anido, Jr.
-------------------------------------
Vicente Anido, Jr.
/s/ Peter L. Myers
-------------------------------------
Peter L. Myers
11
<PAGE>
/s/ Michael J. Pazzani
-------------------------------------
Michael J. Pazzani
/s/ Philippe O. Chambon
-------------------------------------
Philippe O. Chambon
/s/ William Scott
-------------------------------------
William Scott
/s/ Arthur Reidel
-------------------------------------
Arthur Reidel
/s/ Lee R. McCracken
-------------------------------------
Lee R. McCracken
/s/ Klaus Gubernator
-------------------------------------
Klaus Gubernator
12
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Total
Shares Unexercised Unexercised Voting
Held Options Warrants Securities
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
First Union Trust Company, 1,386,331 0 0 1,386,331
National Association, as
Voting Trustee Under that
Certain Voting Trust Agreement
dated May 5, 1998 (Sprout
Capital VII, L.P.)
DLJ Capital Corporation 115,398 0 0 115,398
Sequoia Capital VI 1,109,962 0 16,613 1,126,575
Sequoia Technology Partners VI 60,988 0 913 61,901
Sequoia XXIV 33,012 0 730 33,742
Sequoia 1995 15,780 0 0 15,780
BVCF III, L.P. 822,340 0 0 822,340
Brinson Trust Company, as Trustee 134,113 0 0 134,113
of the Brinson MAP Venture Capital
Fund III
Vicente Anido 480,417 150,001 0 630,418
Peter Myers 225,000 150,001 0 375,001
Michael Pazzani 0 20,000 0 20,000
Phillippe Chambon 0 25,000 0 25,000
William Scott 0 25,000 0 25,000
Arthur Reidel 20,000 25,000 0 45,000
Lee McCracken 93,750 15,000 0 108,750
Klaus Gubernator 52,500 0 0 52,500
--------- ------- ------ ---------
4,549,591 410,002 18,256 4,977,849
========= ======= ====== =========
</TABLE>
13
<PAGE>
Exhibit (c)(3)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of October 5, 1999,
among E. I. du Pont de Nemours and Company, a Delaware corporation (the
"Grantee"), DPC Newco, Inc., a Delaware corporation and a wholly owned
subsidiary of the Grantee ("Merger Sub"), and CombiChem, Inc., a Delaware
corporation (the "Grantor"). Capitalized terms used herein and not otherwise
defined shall have the meanings given to such terms in the Merger Agreement (as
defined below).
WHEREAS, the Grantee, Merger Sub, and the Grantor are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger of Merger Sub
and Grantor (the "Merger");
WHEREAS, the Grantee and Merger Sub have requested that the Grantor
grant to the Grantee an option to purchase up to 2,684,431 shares of Common
Stock, par value $0.001 per share, of the Grantor (the "Common Stock"), on the
terms and subject to the conditions hereof; and
WHEREAS, the Grantor is willing to grant the Grantee the requested
option.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread.
----------------------------------------------------
(a) Contemporaneously herewith the Grantee, Merger Sub and the
Grantor are entering into the Merger Agreement. Subject to the other terms and
conditions set forth herein, the Grantor hereby grants to the Grantee an
irrevocable option (the "Option") to purchase up to 2,684,431 shares of Common
Stock (the "Shares") at a cash purchase price equal to $6.75 per share (the
"Purchase Price"). The Option may be exercised by the Grantee, in whole or in
part, at any time, but only on one occasion, following (but not prior to) the
occurrence of the events set forth in any of clauses (i) or (ii) of Section 2(d)
hereof, and prior to the Termination Date (as defined below).
(b) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying the total number of Shares it wishes to purchase and a date (subject
to the expiration or termination of any applicable waiting period under the HSR
Act (as defined below)) not later than ten (10) business days and not earlier
than three (3) business days following the date such notice is given for the
closing of such purchase. In the event of any change in the number of issued
and outstanding shares of capital stock of the Company (by reason of any stock
dividend, stock split, recapitalization, merger, issuance of capital stock upon
exercise of warrants or options or any
<PAGE>
other event), the number of Shares subject to this Option and the Purchase Price
shall be appropriately adjusted to restore the Grantee to its rights hereunder,
including its right to purchase Shares representing 19.9% of the capital stock
of the Grantor entitled to vote generally for the election of the directors of
the Grantor which is issued and outstanding immediately prior to the exercise of
the Option.
(c) If at any time the Option is exercisable pursuant to the
terms of Section 1(a) hereof and at or prior to such time the payment referred
to in Section 9.5(b) of the Merger Agreement shall have become payable, the
Grantee may on one occasion elect, in lieu of exercising the Option to purchase
Shares provided in Section 1(a) hereof, to send a written notice to the Grantor
(a "Cash Exercise Notice") specifying a date not later than twenty (20) business
days and not earlier than ten (10) business days following the date such notice
is given on which date the Grantor shall pay to the Grantee an amount in cash
(the "Cancellation Amount") equal to the Spread (as defined below) multiplied by
all or such portion of the Shares subject to the Option as Grantee shall
specify.
As used herein "Spread" shall mean the excess, if any, over
the Purchase Price of the higher of (x) if applicable, the highest price per
share of Common Stock (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid or proposed to be paid by any person pursuant to
any Acquisition Proposal occurring after the date of this Agreement and prior to
the Termination Date (the "Alternative Purchase Price") or (y) the average of
the closing bid and asked prices of the Common Stock on the Nasdaq National
Market ("Nasdaq") or on such other national securities exchange on which the
shares of Common Stock are then listed for the last five (5) trading days
immediately prior to the date of the Cash Exercise Notice (the "Closing Price").
If the Alternative Purchase Price includes any property other
than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash
amount, if any, included in the Alternative Purchase Price plus (ii) the fair
market value of such other property. If such other property consists of
securities with an existing public trading market, the average of the closing
prices (or the average of the closing bid and asked prices if closing prices are
unavailable) for such securities in their principal public trading market on the
five trading days ending five (5) days prior to the date the Cash Exercise
Notice is given shall be deemed to equal the fair market value of such property.
If such other property consists of something other than cash or securities with
an existing public trading market and, as of the payment date for the Spread,
agreement on the value of such other property has not been reached, the
Alternative Purchase Price shall be deemed to equal the Closing Price.
Upon exercise of its right to receive cash pursuant to this
Section 1(c), the obligations of the Grantor to deliver Shares pursuant to
Section 3 shall be terminated with respect to such number of Shares for which
the Grantee shall have elected to be paid the Spread.
2
<PAGE>
2. Conditions to Delivery of Shares. The Grantor's obligation to
--------------------------------
deliver Shares upon exercise of the Option is subject only to the conditions
that:
(a) No preliminary or permanent injunction or other order issued
by any federal or state court of competent jurisdiction prohibiting the delivery
of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), shall have
expired or been terminated; and
(c) the representations and warranties of the Grantee made in
Section 5 of this Agreement shall be true and correct in all material respects
as of the date of the closing of the issuance of the Shares; and
(d) (i) (A) a bona fide Acquisition Proposal shall have been
made to the Grantor or any of its stockholders or any Person shall have
announced an intention (whether or not conditional) to make an Acquisition
Proposal with respect to the Grantor, and on or following the date of the Merger
Agreement but prior to the date that the Offer is consummated, such Acquisition
Proposal, announcement or intention is or becomes publicly known, (B) no event
shall have become publicly known prior to the time that such Acquisition
Proposal, announcement or intention is or becomes publicly known that would have
a material adverse effect on the ability of Grantee or Merger Sub to consummate
the Merger (other than any event related to such Acquisition Proposal,
announcement or intention or any event related to a breach of the Merger
Agreement or this Agreement by Grantor) and (C) on or following the date on
which such Acquisition Proposal, announcement or intention is or becomes
publicly known, the Merger Agreement is terminated by either the Grantee or the
Grantor pursuant to Section 9.2(i) of the Merger Agreement, unless Merger Sub
has consummated the Offer and Grantor has complied with Section 1.4 of the
Merger Agreement; or
(ii) the Merger Agreement is terminated (x) by the Grantor
pursuant to Section 9.3(a) of the Merger Agreement, or (y) by the Grantee
pursuant to Section 9.4(a) of the Merger Agreement, or (z) pursuant to Section
9.2(iv) of the Merger Agreement as a result of the failure to satisfy any one of
the conditions set forth in paragraphs (c), (e) or (f) of Annex A of the Merger
Agreement.
(e) As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act. Notwithstanding
any other provision of this Stock Option Agreement, the Merger Agreement or the
Shareholders Agreement, any reference to a majority of the total issued and
outstanding shares or Shares, or shares or Shares outstanding on a fully diluted
basis, or similar references, shall, for purposes of such agreements, exclude
from the determination thereof any shares of Common Stock issuable upon exercise
of or subject to this Stock Option Agreement and any reference to beneficial
ownership of shares of Common Stock or similar references shall, for purposes of
such
3
<PAGE>
agreements, exclude from the determination thereof any shares of Common
Stock issuable upon exercise of or subject to this Stock Option Agreement and/or
the Shareholders Agreement.
3. The Closing.
-----------
(a) Any closing hereunder shall take place on the date specified
by the Grantee in its Stock Exercise Notice or Cash Exercise Notice or as
specified in Section 1(c), as the case may be, at 10:00 A.M., local time, at the
offices of Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street,
Philadelphia, Pennsylvania, or, if the conditions set forth in Section 2(a), (b)
or (c) have not then been satisfied, on the second business day following the
satisfaction of such conditions, or at such other time and place as the parties
hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of
a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the
Grantee a certificate or certificates, representing the Shares in the
denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price, or (ii) in the event of a closing pursuant to Section
1(c) hereof, the Grantor will deliver to the Grantee cash in an amount
determined pursuant to Section 1(c) hereof. Any payment made by the Grantee to
the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall
be made by wire transfer of federal funds to a bank designated by the party
receiving such funds.
(b) The Grantee agrees not to transfer or otherwise dispose of
the Option or the Shares, or any interest therein, except in compliance with the
Securities Act of 1933, as amended (the "Securities Act") and any applicable
state securities law. The Grantee further agrees that the certificates
representing the Shares shall bear an appropriate legend relating to the fact
that such Shares have not been registered under the Securities Act.
4. Representations and Warranties of the Grantor. The Grantor
---------------------------------------------
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to enter
into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Grantor and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantor and constitutes a valid and binding obligation
of the Grantor, enforceable against Grantor in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; (c) the Grantor has taken
all necessary corporate action to authorize and reserve the Shares issuable upon
exercise of the Option and the Shares, when issued and delivered by the Grantor
upon exercise of the Option and paid for by the Grantee as contemplated hereby,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights; (d) except as otherwise required by the HSR Act or the
rules and regulations of Nasdaq, the execution and delivery of this Agreement by
the Grantor and the consummation by it of the transactions contemplated hereby
do not require the consent, waiver, approval or authorization of or any filing
with any person or public authority (other than those that have been obtained
prior
4
<PAGE>
to the date of this Agreement or will have been obtained prior to the
Closing Date) and will not violate, result in a breach of or the acceleration of
any obligation under, or constitute a default under, any provision of the
Grantor's certificate of incorporation or bylaws, or any indenture, mortgage,
lien, lease, agreement, contract, instrument, order, rule, regulation, judgment,
ordinance, or decree, or restriction by which the Grantor or any of its
subsidiaries or any of their respective properties or assets is bound, except as
set forth in Schedule 4(d) attached hereto; and (e) no "fair price,"
"moratorium," "control share acquisition," "interested shareholder" or other
form of antitakeover statute or regulation (including but not limited to Section
203 of the Delaware General Corporation Law) is or shall be applicable to the
grant of the Option or the acquisition of Shares pursuant to this Agreement.
5. Representations and Warranties of the Grantee. The Grantee
---------------------------------------------
represents and warrants to the Grantor that (a) the Grantee is a corporation
duly incorporated and validly existing and in good standing under the laws of
the State of Delaware and has the requisite corporate power and authority to
enter into and perform this Agreement, (b) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and constitutes a valid
and binding obligation of the Grantee, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and (c) the Grantee is
acquiring the Option and, if and when it exercises the Option, will be acquiring
the Shares issuable upon the exercise thereof for its own account and not with a
view to distribution or resale in any manner which would be in violation of the
Securities Act.
6. Listing of Shares; Filings; Governmental Consents. Subject to
-------------------------------------------------
applicable law and the rules and regulations of Nasdaq or such other national
securities exchange on which the shares of the Grantor's Common Stock are then
listed, after the Option becomes exercisable hereunder, the Grantor will
promptly file an application to list the Shares on Nasdaq or on such other
national securities exchange on which the shares of Common Stock are then listed
and will use its reasonable best efforts to obtain approval of such listing and
to effect all necessary filings by the Grantor under the HSR Act; provided,
however, that if the Grantor is unable to effect such listing on Nasdaq by the
Closing Date, the Grantor will nevertheless be obligated to deliver the Shares
on the Closing Date and to continue its efforts to effect such listing on Nasdaq
or such other national securities exchange on which the shares of the Grantor's
Common Stock are then listed. Each of the parties hereto will use its
reasonable best efforts to obtain consents of all third parties and governmental
authorities, if any, necessary to the consummation of the transactions
contemplated by this Agreement.
5
<PAGE>
7. Registration Rights.
-------------------
(a) In the event that the Grantee shall desire to sell any of
the Shares after the purchase of such Shares pursuant to this Agreement, and
such sale requires, in the reasonable opinion of counsel to the Grantee (which
opinion must be reasonably satisfactory to Grantor and its counsel),
registration of such Shares under the Securities Act, the Grantor will cooperate
with the Grantee and any underwriters selected by the Grantee (which
underwriters must be reasonably satisfactory to Grantor) in registering such
Shares for resale for a period of at least forty-five (45) days, including,
without limitation, promptly filing a registration statement which complies with
the requirements of applicable federal and state securities laws and entering
into an underwriting agreement with such underwriters upon such terms and
conditions as are customarily contained in underwriting agreements with respect
to secondary distributions; provided that the Grantor shall not be required to
have declared effective more than two (2) registration statements hereunder and
shall be entitled to delay the filing or effectiveness of any registration
statement and may suspend the use of any registration statement (and related
prospectus) for one or more periods of time not exceeding an aggregate of sixty
(60) days in any one year period if the offering would, in the judgment of the
board of directors of the Grantor in consultation with counsel to Grantor,
require premature disclosure of any material corporate development or material
transaction involving the Grantor or interfere with any previously planned
securities offering by the Grantor. In addition, upon receipt of notice of the
occurrence of any event as a result of which any registration statement,
prospectus or prospectus supplement, contains any untrue statements of material
fact or fails or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, the Grantee shall forthwith discontinue the
disposition of any Shares under such registration statement, prospectus or
prospectus supplement until the Grantee receives from the Grantor copies (which
subject to the limitations on suspension set forth above shall promptly be made
available by the Grantor) of an amended or supplemented registration statement,
prospectus or supplement so that, as thereafter delivered to purchasers of such
Shares, such registration statement, prospectus or prospectus supplement shall
not contain any untrue statement of material fact or fail or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(b) If the Shares are registered pursuant to the provisions of
this Section 7, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least forty-five (45) days a prospectus
covering the Shares meeting the requirements of such securities laws, and to
furnish the Grantee such numbers of copies of the registration statement and
prospectus as amended or supplemented as may reasonably be requested. The
Grantor shall bear the cost of the registration, including, but not limited to,
all registration and filing fees, printing expenses, and fees and disbursements
of counsel and
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<PAGE>
accountants for the Grantor, except that the Grantee shall pay the fees and
disbursements of its counsel and the underwriting fees and selling commissions
applicable to the shares of Common Stock sold by the Grantee. The Grantor shall
indemnify and hold harmless (i) the Grantee, its affiliates and its officers and
directors and (ii) each underwriter and each person who controls any underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (collectively, the "Underwriters") ((i) and (ii) being referred to as
"Indemnified Parties") against any losses, claims, damages, liabilities or
expenses to which the Indemnified Parties may become subject, insofar as such
losses, claims, damages, liabilities (or actions in respect thereof) and
expenses arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in any
registration statement filed pursuant to this Section 7 or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Grantor will not be liable in any such
case to the extent that any such loss, liability, claim, damage or expense
arises out of or is based upon (A) an untrue statement or alleged untrue
statement in or omission or alleged omission from any such documents in reliance
upon and in conformity with written information furnished to the Grantor by the
Indemnified Parties expressly for use or incorporation by reference therein, or
(B) the fact that the person asserting any such loss, liability, claim, damage
or expense did not receive a copy of an amended preliminary prospectus or the
final prospectus (or the final prospectus as amended or supplemented) at or
prior to the written confirmation of the sale of the Shares to such person
because of the failure of the Grantee to so provide such amended preliminary or
final prospectus.
(c) The Grantee and the Underwriters shall indemnify and hold
harmless the Grantor, its affiliates and its officers and directors against any
losses, claims, damages, liabilities or expenses to which the Grantor, its
affiliates and its officers and directors may become subject, insofar as such
losses, claims, damages, liabilities (or actions in respect thereof) and
expenses arise out of or are based upon (i) any untrue statement of any material
fact contained or incorporated by reference in any registration statement filed
pursuant to this Section 7, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Grantor by the Indemnified
Parties, as applicable, specifically for use or incorporation by reference
therein or (ii) the fact that the person asserting any such loss, liability,
claim, damage or expense did not receive a copy of an amended preliminary
prospectus or the final prospectus (or the final prospectus as amended or
supplemented) at or prior to the written confirmation of the sale of the Shares
to such person because of the failure of the Grantee to so provide such amended
preliminary or final prospectus.
(d) Promptly after receipt by an indemnified party under
subsection (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to
7
<PAGE>
notify the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party otherwise than under such subsection. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnified party shall settle any action or claim
without the consent of the indemnifying party, which consent shall not be
unreasonably withheld or delayed.
8. Expenses. Each party hereto shall pay its own expenses incurred
--------
in connection with this Agreement, except as otherwise specifically provided
herein.
9. Modification or Amendment. Subject to the provisions of
-------------------------
applicable law, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties.
10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
11. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
---------------------------------------------
(a) 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 LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF
THE COURTS OF THE STATE OF DELAWARE AND THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA LOCATED IN THE COUNTY OF NEW CASTLE, DELAWARE SOLELY IN RESPECT OF
THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT, THE
MERGER AGREEMENT AND OF THE OTHER DOCUMENTS REFERRED TO IN THIS AGREEMENT AND
THE MERGER AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION,
SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH
DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING
MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE
THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT, THE MERGER AGREEMENT, OR
ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND
8
<PAGE>
THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION
OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH A DELAWARE STATE OR FEDERAL
COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER
THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE
THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING IN THE MANNER PROVIDED IN SECTION 12 OR IN SUCH OTHER MANNER AS MAY
BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT OR THE MERGER AGREEMENT OR THE OTHER
DOCUMENTS REFERRED TO IN THIS AGREEMENT AND THE MERGER AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE MERGER AGREEMENT, THE OTHER DOCUMENTS REFERRED TO IN THIS
AGREEMENT AND THE MERGER AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY
AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
12. Notices. Any notice, request, instruction or other document to
-------
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to the Grantee or Merger Sub:
E. I. du Pont de Nemours and Company
1007 Market Street
Wilmington, Delaware 19898
Attention: General Counsel
Fax: (302) 773-5176
with copies to:
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<PAGE>
Justin P. Klein, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Fax: (215) 864-8999
if to the Grantor:
Dr. Vicente Anido, Jr.
CombiChem, Inc.
9050 Camino Santa Fe
San Diego, CA 92121
Fax: (858) 271-9339
with copies to:
Faye H. Russell, Esq.
Brobeck Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101-3532
Fax: (619) 234-3848
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
13. Entire Agreement. This Agreement (including any exhibits and
----------------
schedules hereto), the Merger Agreement and the other documents referred to in
this Agreement and the Merger Agreement, constitute the entire agreement, and
supersede all other prior agreements, understandings, representations and
warranties both written and oral, among the parties, with respect to the subject
matter hereof.
14. No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
confer upon any person or entity other than the parties hereto any rights or
remedies hereunder.
15. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
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<PAGE>
16. Specific Performance. The parties hereto each acknowledge that,
--------------------
in view of the uniqueness of the subject matter hereof, the parties hereto would
not have an adequate remedy at law for money damages if this Agreement were not
performed in accordance with its terms, and therefore agree that the parties
hereto shall be entitled to specific enforcement of the terms hereof in addition
to any other remedy to which the parties hereto may be entitled at law or in
equity.
17. Assignment. This Agreement shall not be assignable by operation
----------
of law or otherwise; provided, however, that the Grantee may assign its rights
and obligations under this Agreement to DuPont Pharmaceuticals Company, a
Delaware general partnership and wholly owned subsidiary of Grantee, or any of
Grantee's direct or indirect wholly owned subsidiaries or affiliates with a net
worth of more than $100,000,000. Any purported assignment made in contravention
of this Agreement shall be null and void.
18. Captions. The Section captions herein are for convenience of
--------
reference only and do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
19. Termination.
-----------
(a) The right to exercise the Option granted pursuant to this
Agreement shall terminate at (and the Option shall no longer be exercisable
after) the earliest of (i) the Effective Time (as defined in the Merger
Agreement), (ii) the nine month anniversary of the earliest to occur of the
events set forth in any of clauses (i) or (ii) of Section 2(d), and (iii) the
fifteenth day following the termination of the Merger Agreement if prior to such
fifteenth day the events set forth in any of clauses (i) or (ii) of Section 2(d)
shall not have occurred (such earliest date being referred to in this Agreement
as the "Termination Date"); provided that, if the Option cannot be exercised or
the Shares cannot be delivered to the Grantee upon such exercise because one or
more of the conditions set forth in Section 2(a) or (b) hereof have not yet been
satisfied, the Termination Date shall be extended until fifteen (15) days after
such impediment to exercise or delivery has been removed.
(b) All representations and warranties contained in this
Agreement shall survive delivery of and payment for the Shares.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by duly authorized officers of the parties hereto as of the date
hereof.
COMBICHEM, INC.
By: /s/ Vicente Anido, Jr.
-----------------------------------------
Name: Vicente Anido, Jr.
Title: President and Chief Executive Officer
E. I. DU PONT DE NEMOURS AND
COMPANY
By: /s/ Kurt M. Landgraf
----------------------------------------
Name: Kurt M. Landgraf
Title: Executive Vice President and
Chief Operating Officer
DPC NEWCO, INC.
By: /s/ Richard E. Gies
-----------------------------------------
Name: Richard E. Gies
Title: President
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<PAGE>
Exhibit (c)(4)
MUTUAL NON-DISCLOSURE AGREEMENT
Each undersigned party (the "Receiving Party") understands that the
other party (the "Disclosing Party") has disclosed or may disclose information
relating to the Disclosing Party's business particularly relating to uniform
informer libraries, chemi-informatic tools and the nature of chemical libraries
(including, with limitation, names and expertise of employees and consultants,
know-how, formulas, processes, ideas, inventions (whether patentable or not),
schematics, computer programs, software code, algorithms, development tools,
manufacturing capability or processes, chemical routes, chemical structures,
relationships with other businesses, business plans, and other technical,
business, financial, customer and product development plans, forecasts,
strategies and information), which to the extent previously, presently, or
subsequently disclosed to the Receiving Party is hereinafter referred to as
"Proprietary Information" of the Disclosing Party. Proprietary Information also
includes any information which the Disclosing Party has received from a third
party which the Disclosing Party is obligated to treat as confidential or
proprietary.
Notwithstanding the foregoing, nothing will be considered "Proprietary
Information" of the Disclosing Party unless either (1) it is first disclosed in
tangible form and is conspicuously marked "Confidential", "Proprietary" or the
like or (2) it is first disclosed in non-tangible form and orally identified as
confidential at the time of disclosure and is summarized in tangible form
conspicuously marked "Confidential" within thirty (30) days of the original
disclosure.
In consideration of and solely for the purpose of the parties'
discussion regarding a possible business transaction and any access the
Receiving Party may have to Proprietary Information of the Disclosing Party,
each party (as the Receiving Party) hereby agrees as follows:
1. Non-Disclosure and Non-Use Obligations. The Receiving Party
--------------------------------------
agrees (i) to hold the Disclosing Party's Proprietary Information in strict
confidence and to take all reasonable precautions to protect such Proprietary
Information (including, without limitation, all precautions the Receiving Party
employs with respect to its most confidential materials), (ii) not to divulge
any such Proprietary Information or any information derived therefrom to any
third person (except consultants or agents, subject to the conditions stated
below), (iii) not to make any use whatsoever at any time of such Proprietary
Information except to evaluate internally whether to enter into a proposed
business transaction with the Disclosing Party without the prior written
permission of the disclosing party, (iv) not to remove or export from the United
States or re-export any such Proprietary Information or any direct product
thereof except in compliance with all licenses and approvals required under
applicable export laws and regulations, including without limitation, those of
the U.S. Department of Commerce, and (v) not to copy or reverse engineer any
such Proprietary Information. Any employee, consultant or agent given access to
any such Proprietary Information must have a legitimate "need to know" and shall
be similarly bound in writing. The parties shall be entitled to exchange
Proprietary Information under the
<PAGE>
terms of this Agreement for a period not to exceed two (2) years from the date
hereof, unless otherwise extended by mutual written agreement of the parties or
incorporated into a separate agreement. Without granting any right or license,
the Disclosing Party agrees that the foregoing clauses (i), (ii), (iii) and (v)
shall not apply with respect to all obligations after five (5) years following
the disclosure thereof or any information that the Receiving Party can document
(i) is or (through no improper action or inaction by the Receiving Party or any
agent, consultant or employee) becomes generally known to the public, (i) was in
its possession or the possession of an affiliate or consultant or known by it
prior to receipt from the Disclosing Party, (iii) was rightfully disclosed to
it, an affiliate or a consultant by a third party without restriction, or (iv)
was independently developed without use of any Proprietary Information of the
Disclosing Party by employees of the Receiving Party who can be demonstrated to
have had no access to such information. The Receiving Party may make disclosures
required by court order provided the Receiving Party uses diligent efforts to
limit disclosure and to obtain confidential treatment or a protective order and
has allowed the Disclosing Party to participate in the proceeding.
2. Patent or Copyright Infringement. Nothing in this Agreement is
--------------------------------
intended to grant any rights under any patent or copyright of the Disclosing
Party, nor shall this Agreement grant the Receiving Party any rights in or to
the Disclosing Party's Proprietary Information, except the limited right to
review such Proprietary Information solely for the purpose of evaluating a
possible business transaction.
3. Return of Materials. Immediately upon (i) the decision by either
-------------------
party not to enter into a relationship as a result of the exchange of
information hereunder, or (ii) a request by the Disclosing Party at any time,
the Receiving Party will turn over to the Disclosing Party all Proprietary
Information of the Disclosing Party and all documents or media containing any
such Proprietary Information and any and all copies or extracts or derivatives
thereof to the extent it is requested by either party in writing, except that a
single copy may be retained for legal archival purposes, subject to protection
and non-disclosure in accordance with the term of this agreement. The Receiving
Party understands that nothing herein (i) requires the disclosure of any
Proprietary Information of the Disclosing Party, which shall be disclosed if at
all solely at the option of the Disclosing Party, or (ii) requires the
Disclosing Party to proceed with any proposed transaction or relationship in
connection with which Proprietary Information may be disclosed.
4. No Publicity. Except to the extent required by law, neither
------------
party shall disclose the existence or subject matter of the negotiations or
business relationship contemplated by this Agreement.
5. Securities Law Considerations. Each party is aware, and will
-----------------------------
advise its employees, consultants and agents who are informed of the matters
that are the subject of this agreement, of the restrictions imposed by the
United States securities laws on the purchase and sale of securities by any
person who has received material, non-public information from the issuer of such
securities and on the communication of such information to any other person when
it is reasonably foreseeable that such other person is likely to purchase or
sell such securities in reliance upon such information.
2
<PAGE>
6. Miscellaneous. The Receiving Party acknowledges and agrees that
-------------
due to the unique nature of the Disclosing Party's Proprietary Information,
there can be no adequate remedy at law for any breach of its obligations
hereunder, that any such breach may allow the Receiving Party or third parties
to unfairly compete with the Disclosing Party resulting in irreparable harm to
the Disclosing Party, and therefore, that upon any such breach or any threat
thereof, the Disclosing Party may seek appropriate equitable relief (without the
need to post bond or other security) in addition to whatever remedies it might
have at law. The Receiving Party will notify the Disclosing Party in writing
immediately upon the occurrence of any such unauthorized release or other breach
of which it is aware. In the event that any of the provisions of this Agreement
shall be held by a court or other tribunal of competent jurisdiction to be to
any extent illegal, invalid or unenforceable, such provisions shall be limited
or eliminated to the minimum extent necessary so that this Agreement shall
otherwise remain in full force and effect. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
regard to principles of conflicts of law. The parties agree that any dispute
regarding the interpretation or validity of this Agreement shall be subject to
the exclusive jurisdiction of the state and federal courts in and for the County
of San Diego, California, and each party hereby agrees to submit to the personal
and exclusive jurisdiction and venue of such courts. This Agreement supersedes
all prior discussions and writings and constitutes the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may not
be amended except in an express writing signed by officers of both parties. No
waiver or modification of this Agreement will be binding upon either party
unless made in writing and signed by a duly authorized representative of such
party and no failure or delay in enforcing any right will be deemed a waiver.
Each party warrants to the other that it is duly authorized to enter
into this Agreement and that the terms of this Agreement are not inconsistent
with any of its respective outstanding contractual obligations. The execution
and performance of this Agreement does not obligate the parties to enter into
any other agreement or to perform any obligations other than as specified
herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth below.
Date: 3-10-99
-------------
COMBICHEM, INC., DUPONT PHARMACEUTICALS COMPANY,
a Delaware corporation a Delaware general partnership
By: /s/ Vicente Anido, Jr. By: /s/ David S. Block
------------------------- -----------------------
Vicente Anido, Jr., Ph.D. David S. Block, M.D.
Its: President and Its: Vice President, Product Planning
Chief Executive Officer and Acquisition
3
