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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 29, 1995
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CHIRON CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(Exact name of registrant as specified in its charter)
0-12798 94-2754624
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(Commission File Number) (IRS Employer Identification No.)
4560 Horton Street, Emeryville, California 94608-2916
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (510) 655-8730
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Page 1 of 25 Pages
Exhibit Index Appears on Page 5
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Item 2. Acquisition or Disposition of Assets.
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(a) On September 29, 1995 (the "Closing Date"), Chiron Corporation
("Chiron") acquired Viagene, Inc., a Delaware corporation ("Viagene"), as a
result of the merger of Viagene with and into Viagene Acquisition Corp., a
wholly owned subsidiary of Chiron (the "Merger"), pursuant to the Agreement and
Plan of Merger, dated as of April 23, 1995 (the "Merger Agreement"), between
Chiron and Viagene.
Pursuant to the Merger Agreement, each outstanding share of common stock,
par value $0.001 per share ("Viagene Common Stock"), of Viagene (except for
shares held directly or indirectly by Chiron, Viagene Acquisition Corp. or any
other direct or indirect subsidiary of Chiron and shares as to which appraisal
rights have been perfected under the Delaware General Corporation Law), has been
converted into the right to receive (i) $9.00 in cash (the "Cash Consideration")
or (ii) 0.155 shares of the common stock, par value $0.01 per share ("Chiron
Common Stock"), of Chiron, as adjusted pursuant to the adjustment and proration
provisions of the Merger Agreement. Chiron estimates that consideration
consisting of an aggregate of approximately $ 35.5 million in cash and 916,000
shares of Chiron Common Stock will be paid in connection with the Merger.
The Cash Consideration was funded internally by Chiron.
Reference is made to the information contained under the captions
"Summary," "The Merger -- Background of and Reasons for the Merger" and "The
Merger -- Interests of Certain Persons in the Merger" in the Proxy Statement-
Prospectus dated August 18, 1995, included in the Registration Statement on Form
S-4 (Registration No. 33-60503) of Chiron, which information is incorporated
herein by reference and attached hereto as Exhibit 99.1.
(b) Prior to the Merger, the assets of Viagene were employed in the
discovery, development and commercialization of gene transfer drugs for the
treatment of viral infections, cancers and other diseases. Following the
Merger, Chiron intends to utilize these assets in a manner and for purposes
consistent with their prior use.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
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(a) Financial Statements of the Business Acquired. It is impracticable
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for Chiron to provide the required financial statements for Viagene at this
time. The required financial statements will be filed as soon as practicable but
not later than December 13, 1995.
(b) Pro Forma Financial Information. It is impracticable for Chiron to
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provide the required pro forma financial information at this time. The pro-
forma
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financial statements will be filed as soon as practicable but not later than
December 13, 1995.
(c) Exhibits.
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2.1 Agreement and Plan of Merger, dated as of April 23, 1995, by and
between Chiron Corporation and Viagene, Inc. (incorporated herein
by reference to Exhibit 2.1 to Chiron's Registration Statement on
Form S-4 (Registration No. 33-60503).
99.1 The information contained under the captions "Summary," "The Merger
-- Background of and Reasons for the Merger" and "The Merger --
Interests of Certain Persons in the Merger" in the Proxy Statement-
Prospectus dated August 18, 1995 filed pursuant to Rule 424(b)
(Registration No. 33-60503).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHIRON CORPORATION
Date: October 12, 1995 By /s/ William G. Green
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Name: William G. Green
Title: Senior Vice President,
Secretary and General Counsel
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EXHIBIT INDEX
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Sequentially
Numbered
Page
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<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of April
23, 1995, by and between Chiron Corporation and
Viagene, Inc. (incorporated herein by reference to
Exhibit 2.1 to Chiron's Registration Statement on
Form S-4 (Registration No. 33-60503).
99.1 The information contained under the captions 6
"Summary," "The Merger -- Background of and
Reasons for the Merger" and "The Merger --
Interests of Certain Persons in the Merger" in the
Proxy Statement-Prospectus dated August 18,
1995 filed pursuant to Rule 424(b) (Registration
No. 33-60503).
</TABLE>
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EXHIBIT 99.1
SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding Chiron, Viagene and the matters to be considered at
the Special Meeting and is qualified in all respects by the information
appearing elsewhere or incorporated by reference in this Proxy Statement-
Prospectus, the Appendices hereto and the documents referred to herein.
Capitalized terms used but not defined in this Summary have the meanings
given to them elsewhere in this Proxy Statement-Prospectus.
PARTIES TO THE MERGER
Chiron. Chiron applies biotechnology and other techniques of modern biology
and chemistry to develop products intended to improve the quality of life by
diagnosing, preventing and treating human disease with a goal of reducing
overall healthcare costs. Chiron is a diversified company that participates in
the global healthcare industry in several markets based on core technologies in
infectious disease, cancer and critical care. Its businesses include Chiron
Diagnostics, Chiron Biocine, Chiron Therapeutics, Chiron Vision and Chiron
Technologies. Chiron Diagnostics, which includes Ciba Corning Diagnostics Corp.
("CCD"), develops and markets automated immunodiagnostic systems, critical
blood analytes and quantitative branched DNA ("bDNA") probe tests for human
immunodeficiency virus ("HIV"), hepatitis C virus ("HCV") and hepatitis B virus
("HBV"). Chiron also has built a joint business in the immunodiagnostic market
with Ortho Diagnostic Systems, Inc. ("Ortho"), a Johnson & Johnson company,
based largely on sales of tests used to screen blood for the potential presence
of HCV, which has been identified as a major cause of serious liver disease
throughout the world. Chiron Therapeutics is Chiron's hospital-based direct-
selling business in the United States and Europe and markets products for use
principally by oncologists, primarily Proleukin(R) (aldesleukin) (or "IL-2")
for metastatic kidney cancer. Chiron also manufactures Betaseron(R) (Interferon
beta-1b) for relapsing-remitting multiple sclerosis. Chiron Biocine develops
and markets novel adult and pediatric vaccines, including new vaccines under
development for genital herpes, HCV, cytomegalovirus ("CMV") and HIV and a
genetically engineered acellular pertussis vaccine on the market in Italy and
in clinical trials in the United States and Europe. Chiron Vision develops and
markets ophthalmic surgical products including instruments and devices used for
the surgical correction of vision and an intraocular implant to deliver drugs
into the eye. Chiron Technologies manages development of new technologies from
the company's research including a new generation of chemical therapeutics
being developed through advanced techniques of drug design and discovery and a
program in gene therapy.
In November 1994, Chiron entered into certain agreements with Ciba-Geigy
Limited, a corporation organized under the laws of Switzerland, and certain of
its affiliates (collectively, "Ciba") pursuant to which Ciba and Chiron formed
a strategic alliance in the area of biotechnology and other new technologies in
the field of human healthcare. Pursuant to these agreements, in January 1995,
Ciba acquired approximately 49.5 percent of the outstanding Chiron Common
Stock, in part through a tender offer for approximately 11.9 million shares of
Chiron Common Stock. In addition, Chiron issued 6.6 million shares and paid $24
million in cash in exchange for all of the outstanding shares of common stock
of CCD and Ciba's interests in The Biocine Company and JV Vax B.V. (of which
Biocine S.p.A. is the primary operating subsidiary). Chiron and Ciba have also
agreed, among other things, that Ciba will fund research and development
programs at Chiron in the amount of up to $250 million (or, under certain
circumstances, $300 million) through 1999, and that, at Chiron's request, from
time to time through 2005, Ciba will subscribe for up to $500 million in
additional shares of Chiron Common Stock. However, the specific programs to be
funded are subject to Ciba's approval. In the event Chiron utilizes this
research funding arrangement, Chiron will be obligated to offer to Ciba the
opportunity to share in the market opportunities of any resulting products. In
addition, Ciba and Chiron have agreed that, so long as Ciba owns equity
securities representing at least 30 percent of the aggregate number of votes
entitled to be voted in an election of directors of Chiron by all outstanding
voting stock, Ciba will, if certain exercise conditions exist, have the right
to purchase newly-issued shares of Chiron Common Stock (initially, up to a
percentage of voting power equal to 49.9% or, under certain circumstances, a
higher percentage as provided pursuant to such agreement). Ciba has also agreed
to guarantee a $425 million credit facility for Chiron. In addition, Ciba and
Chiron have entered into an agreement relating to the formation of potential
future research and development collaborations, the marketing and manufacturing
of bio-pharmaceutical and certain other pharmaceutical products and the
potential sharing of technologies.
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Chiron was incorporated in California in 1981 and reincorporated in Delaware
in 1987. Its corporate headquarters are located at 4560 Horton Street,
Emeryville, California 94608-2916, and its telephone number at that address is
(510) 655-8730.
Viagene. Viagene is a biotechnology company pursuing the discovery,
development and commercialization of gene transfer drugs for the treatment of
severe viral infections, cancers and other diseases. Viagene was founded in
February 1987 and was among the first biotechnology companies to enter the
field of gene therapy. Viagene was incorporated in Delaware in 1987. Its
corporate headquarters are located at 11055 Roselle Street, San Diego,
California 92121, and its telephone number at that address is (619) 452-1288.
Merger Sub. Merger Sub is a Delaware corporation and a wholly-owned
subsidiary of Chiron formed to effect the Merger. Merger Sub's principal
executive offices are located at 4560 Horton Street, Emeryville, California
94608-2916, and its telephone number at that address is (510) 655-8730.
SPECIAL MEETING OF STOCKHOLDERS
The Special Meeting will be held at 1:00 p.m. (Pacific Daylight Time) on
September 22, 1995 at the offices of Viagene, 11055 Roselle Street, San Diego,
California. Only Viagene stockholders of record at the close of business on the
Record Date (August 14, 1995) will be entitled to vote at the Special Meeting.
The purpose of the Special Meeting is to consider and vote upon a proposal to
approve and adopt the Merger Agreement and the Merger. See "The Special
Meeting."
VOTES REQUIRED
The affirmative vote of the holders of a majority of the shares of Viagene
Common Stock outstanding on the Record Date is required to approve and adopt
the Merger Agreement and the Merger. As of the Record Date, there were
11,316,653 shares of Viagene Common Stock outstanding and entitled to be voted
at the Special Meeting.
Pursuant to a Stockholders' Agreement dated as of April 23, 1995 (the
"Stockholders' Agreement"), certain stockholders of Viagene, together holding
an aggregate of 3,497,575 shares of Viagene Common Stock, or 30.9 percent of
the shares of Viagene Common Stock outstanding on the Record Date, have agreed
to vote their shares in favor of the Merger Agreement and the Merger. See
"Certain Related Transactions--The Stockholders' Agreement."
As of the Record Date, Chiron owned of record 1,955,556 shares of Viagene
Common Stock, or approximately 17.3 percent of the outstanding shares of
Viagene Common Stock. Chiron intends to vote such shares in favor of the Merger
Agreement and the Merger. The directors and executive officers of Viagene
beneficially owned, as of the Record Date, 2,728,656 shares, or approximately
24.1 percent, of the outstanding shares of Viagene Common Stock.
THE MERGER
General. Upon consummation of the Merger, Viagene will merge with and into
Merger Sub, Merger Sub will be the surviving corporation in the Merger (the
"Surviving Corporation") and change its name to Viagene, Inc., and the separate
corporate existence of Viagene will cease.
Basis for Converting Viagene Common Stock. Subject to allocation and
proration as described below, at the Effective Time (as defined below), each
share of Viagene Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares owned by Chiron, Merger Sub or any other
direct or indirect subsidiary of Chiron, and Dissenting Shares) will be
converted into, and become exchangeable for, (i) $9.00 in cash (the "Cash
Consideration") or (ii) 0.155 shares of Chiron Common Stock (as it may be
increased in certain circumstances at Chiron's option, as described below, the
"Stock Consideration," and, together with the Cash Consideration, the "Merger
Consideration"). It is a condition to consummation of the Merger that opinions
be obtained from Pillsbury Madison & Sutro and Sullivan & Cromwell with respect
to certain tax consequences of
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the Merger (see "The Merger--Conditions to Consummation of the Merger" and "--
Certain Federal Income Tax Considerations"). In the event that such conditions
are not fulfilled or waived, the Merger Agreement provides that Chiron, at its
option, may increase the Stock Consideration on a pro rata basis to the extent
necessary to permit such conditions to be fulfilled. See "The Merger--Basis for
Converting Viagene Common Stock." Fractional shares of Chiron Common Stock will
not be issued in connection with the Merger. A holder of Viagene Common Stock
otherwise entitled to receive a fractional share of Chiron Common Stock will be
paid cash in lieu of such fractional share. See "The Merger--Fractional
Shares."
Election Procedures. Subject to allocation and proration as described below,
each record holder of shares of Viagene Common Stock (other than shares of
Viagene Common Stock owned by Chiron, Merger Sub or any other direct or
indirect subsidiary of Chiron, and Dissenting Shares) issued and outstanding
immediately prior to the Election Deadline (as defined below) will be entitled
to elect to receive in respect of each such share (i) Cash Consideration (a
"Cash Election") or (ii) Stock Consideration (a "Stock Election") or to
indicate that such record holder has no preference as to receipt of Cash
Consideration or Stock Consideration for such shares (a "Non-Election"). Shares
in respect of which a Non-Election is made (collectively, "Non-Election
Shares") may be deemed by Chiron, in its sole discretion, to be shares in
respect of which Cash Elections or Stock Elections have been made. All such
elections are to be made on a form of election (the "Form of Election") to be
mailed to Viagene stockholders of record as of the Record Date. Persons who
become stockholders of Viagene after the Record Date may obtain copies of the
Form of Election upon request from Continental Stock Transfer & Trust Company
(the "Exchange Agent") either in writing to Continental Stock Transfer & Trust
Company, 2 Broadway, New York, New York 10004 or by telephone at (212) 509-
4000, extension 227. To be effective, a Form of Election must be (i) properly
completed, signed and submitted to the Exchange Agent at 2 Broadway, New York,
New York 10004 by 5:00 p.m., Eastern Daylight Time, on the business day that is
two trading days prior to the Effective Time (which date will be publicly
announced by Chiron as soon as practicable but in no event less than five
trading days prior to the Effective Time) (the "Election Deadline") and (ii)
accompanied by the certificates representing the shares of Viagene Common Stock
as to which the election is being made (or by an appropriate guarantee of
delivery of such certificates by a commercial bank or trust company in the
United States or a member of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., provided such
certificates are in fact delivered to the Exchange Agent within eight trading
days after the date of execution of such guarantee of delivery (a "Guaranteed
Delivery")). Should Chiron exercise its option to increase the number of shares
to preserve the tax-free reorganization status of the Merger, Viagene will mail
a supplemental Proxy Statement-Prospectus to stockholders describing the
exercise of the option and providing information regarding the new Election
Deadline. Chiron will issue a press release regarding the exercise of the
option no later than the date of the mailing of the supplemental Proxy
Statement-Prospectus describing the election to issue additional shares and
stating the new Election Deadline (which will be at least 15 business days
after mailing). Holders of record of shares of Viagene Common Stock who hold
such shares as nominees, trustees or in other such representative capacities
may submit multiple Forms of Election. Chiron will determine, in its sole and
absolute discretion, which authority it may delegate in whole or in part to the
Exchange Agent, whether Forms of Election have been properly completed, signed
and submitted or revoked. The decision of Chiron (or the Exchange Agent, as the
case may be) in such matters will be conclusive and binding. Neither Chiron nor
the Exchange Agent will be under any obligation to notify any person of any
defect in a Form of Election submitted to the Exchange Agent. A HOLDER OF
SHARES OF VIAGENE COMMON STOCK THAT DOES NOT SUBMIT AN EFFECTIVE FORM OF
ELECTION PRIOR TO THE ELECTION DEADLINE WILL BE DEEMED TO HAVE MADE A NON-
ELECTION.
If any holder of shares of Viagene Common Stock who demands appraisal of his
or her shares fails to perfect, or effectively withdraws or loses, his or her
right to appraisal, as provided in the Delaware General Corporation Law (the
"DGCL"), the shares of Viagene Common Stock of such stockholder will be deemed
to be Non-Election Shares in accordance with the Merger Agreement. See
"Appraisal Rights."
An election may be revoked, but only by written notice received by the
Exchange Agent prior to the Election Deadline. Any certificates representing
shares of Viagene Common Stock that have been submitted to the Exchange Agent
in connection with an election will be returned without charge to the holder
thereof in the
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event such election is revoked and such holder requests in writing the return
of such certificates. Upon any such revocation, unless a duly completed Form of
Election is thereafter submitted, such shares of Viagene Common Stock will be
deemed to be Non-Election Shares.
The Effective Time is currently expected to occur on or about September 29,
1995. However, the Effective Time could occur on the same day approval of the
Merger by stockholders of Viagene is obtained. Accordingly, Viagene
stockholders are urged to deliver a properly completed Form of Election
together with the applicable stock certificates (or provide for Guaranteed
Delivery) to the Exchange Agent no later than 5:00 p.m., Eastern Daylight Time,
on September 19, 1995 in order to ensure that their Forms of Election will be
received prior to the Election Deadline.
IN MAKING A STOCK ELECTION OR A CASH ELECTION, VIAGENE STOCKHOLDERS SHOULD
CONSIDER THAT BECAUSE THE STOCK CONSIDERATION HAS BEEN FIXED AT 0.155 SHARES OF
CHIRON COMMON STOCK FOR EACH SHARE OF VIAGENE COMMON STOCK, AND BECAUSE THE
MARKET PRICE OF CHIRON COMMON STOCK IS SUBJECT TO FLUCTUATION, THE MARKET VALUE
OF THE SHARES OF CHIRON COMMON STOCK THAT HOLDERS OF VIAGENE COMMON STOCK MAY
RECEIVE IN THE MERGER FOR EACH SHARE OF VIAGENE COMMON STOCK MAY BE LESS THAN,
EQUAL TO, OR GREATER THAN THE CASH CONSIDERATION OF $9.00. IN ADDITION, BECAUSE
OF SUCH FLUCTUATIONS IN THE MARKET VALUE OF CHIRON COMMON STOCK, THE MARKET
VALUE OF THE SHARES OF CHIRON COMMON STOCK THAT HOLDERS OF VIAGENE COMMON STOCK
MAY RECEIVE IN THE MERGER MAY INCREASE OR DECREASE FOLLOWING THE EFFECTIVE
TIME. VIAGENE STOCKHOLDERS ARE ALSO URGED TO CONSIDER THE DIFFERING FEDERAL
INCOME TAX CONSEQUENCES IN MAKING THEIR ELECTION, AS DISCUSSED BELOW.
AN ELECTION TO RECEIVE STOCK CONSIDERATION OR CASH CONSIDERATION MAY NOT BE
HONORED WITH RESPECT TO ALL SHARES OF VIAGENE COMMON STOCK HELD BY A VIAGENE
STOCKHOLDER DUE TO THE PRORATION PROVISIONS OF THE MERGER AGREEMENT, AS
DISCUSSED BELOW. ACCORDINGLY, VIAGENE STOCKHOLDERS MAY NOT RECEIVE ANY OR ALL
OF THE MERGER CONSIDERATION IN THE FORM REQUESTED.
Proration. The maximum number of shares of Viagene Common Stock (the "Cash
Election Number") to be converted into the right to receive Cash Consideration
in the Merger will be equal to the product of (i) 0.40 times (ii) the total
number of shares of Viagene Common Stock (other than shares owned by Chiron,
Merger Sub or any other direct or indirect subsidiary of Chiron) outstanding at
the Effective Time. The number of shares of Viagene Common Stock to be
converted into the right to receive Stock Consideration in the Merger (the
"Stock Election Number") will be equal to the number of shares of Viagene
Common Stock issued and outstanding immediately prior to the Effective Time
less the sum of (i) the Cash Election Number plus (ii) the number of shares of
Viagene Common Stock held by Chiron, Merger Sub or any other direct or indirect
subsidiary of Chiron plus (iii) the number of Dissenting Shares.
In the event that the aggregate number of shares of Viagene Common Stock in
respect of which Cash Elections have been made ("Cash Election Shares") exceeds
the Cash Election Number, all shares of Viagene Common Stock in respect of
which Stock Elections have been made ("Stock Election Shares") and all Non-
Election Shares in respect of which Stock Elections are deemed to have been
made, will be converted into the right to receive Stock Consideration, and all
Cash Election Shares will be converted into the right to receive Stock
Consideration or Cash Consideration as follows: (i) Cash Election Shares will
be deemed converted to Stock Election Shares, on a pro rata basis for each
record holder of shares of Viagene Common Stock with respect to those shares of
Viagene Common Stock, if any, of such record holder that are Cash Election
Shares, so that the number of Cash Election Shares so converted, when added to
the other Stock Election Shares and Non-Election Shares in respect of which
Stock Elections are deemed to have been made, will equal as closely as
practicable the Stock Election Number, and all such Cash Election Shares so
converted will be converted into the right to receive Stock Consideration (and
cash in lieu of fractional shares) and (ii) any remaining Cash Election Shares
will be converted into the right to receive Cash Consideration.
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In the event that the aggregate number of Stock Election Shares exceeds the
Stock Election Number, all Cash Election Shares and all Non-Election Shares in
respect of which Cash Elections are deemed to have been made will be converted
into the right to receive Cash Consideration, and all Stock Election Shares
will be converted into the right to receive Stock Consideration or Cash
Consideration in the following manner: (i) Stock Election Shares will be deemed
converted into Cash Election Shares, on a pro rata basis for each record holder
of shares of Viagene Common Stock with respect to those shares of Viagene
Common Stock, if any, of such record holder that are Stock Election Shares, so
that the number of Stock Election Shares so converted, when added to the other
Cash Election Shares and Non-Election Shares in respect of which Cash Elections
are deemed to have been made, will equal as closely as practicable the Cash
Election Number, and all such shares of Viagene Common Stock so converted will
be converted into the right to receive Cash Consideration and (ii) the
remaining Stock Election Shares will be converted into the right to receive
Stock Consideration (and cash in lieu of fractional shares).
The number of Cash Election Shares or Stock Election Shares cannot be
determined until the Effective Time. However, the following table demonstrates
the impact of the pro rata adjustments should an excess Cash Election or Stock
Election occur.
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STOCK
ELECTION
CASH ELECTION SHARES EXCEED
SHARES EXCEED STOCK
CASH ELECTION ELECTION
NUMBER OF VIAGENE COMMON SHARES NUMBER NUMBER
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Outstanding Shares of Viagene Common
Stock on August 14, 1995 (1)..................... 9,361,097 9,361,097
Cash Election Number (2).......................... 3,744,439 3,744,439
Cash Election Shares (3).......................... 5,000,000 2,361,097
Stock Election Number (4)......................... 5,616,657 5,616,657
Stock Election Shares (5)......................... 4,361,097 7,000,000
Cash Election Shares Converted to Stock Election
Shares--Number/Percentage (6).................... 1,255,561/25% --
Stock Election Shares Converted to Cash Election
Shares--Number/Percentage (7).................... -- 1,383,343/20%
</TABLE>
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(1) Excludes shares of Viagene Common Stock held by Chiron, Merger Sub or any
other direct or indirect subsidiary of Chiron.
(2) Calculated as 0.40 times 9,361,097.
(3) Represents the number of shares of Viagene Common Stock as to which Cash
Elections are made, prior to any conversion of Cash Election Shares to
Stock Election Shares pursuant to the Merger Agreement.
(4) Calculated as 9,361,097 minus the Cash Election Number and assuming there
are no Dissenting Shares.
(5) Represents the number of shares of Viagene Common Stock as to which Stock
Elections are made, prior to any conversion of Stock Election Shares to
Cash Election Shares pursuant to the Merger Agreement.
(6) Approximately 25% (i.e., 1,255,561/5,000,000) of the Cash Election Shares
of each Viagene Stockholder will be converted to Stock Election Shares.
(7) Approximately 20% (i.e., 1,383,343/7,000,000) of the Stock Election Shares
of each Viagene Stockholder will be converted to Cash Election Shares.
The foregoing is for illustrative purposes only and is not intended to
indicate the actual number of shares of Viagene Common Stock that will be
outstanding at the Effective Time or the number of Stock Election Shares, Cash
Election Shares or Stock Election Shares that will be converted into Cash
Election Shares, each of which will depend on numerous factors and may be
larger or smaller than the numbers assumed.
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REASONS FOR THE MERGER; RECOMMENDATION OF VIAGENE BOARD OF DIRECTORS
The Viagene Board of Directors (the "Viagene Board") has approved the Merger
Agreement and has determined that the Merger is in the best interests of
Viagene and its stockholders. THE VIAGENE BOARD THEREFORE RECOMMENDS THAT
VIAGENE'S STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND THE MERGER. The recommendation of the Viagene Board is based on a number of
factors discussed in this Proxy Statement-Prospectus. See "The Special
Meeting--Recommendation of Viagene Board of Directors" and "The Merger--
Background of and Reasons for the Merger." For information on the interests of
certain officers and directors of Viagene in the Merger, see "The Merger--
Interests of Certain Persons in the Merger."
OPINION OF FINANCIAL ADVISOR
Alex. Brown & Sons Incorporated ("Alex. Brown") has served as financial
advisor to Viagene in connection with the Merger and has delivered an opinion
to the Viagene Board that, as of August 15, 1995 and subject to certain
assumptions, factors and limitations set forth in such opinion, the
consideration to be received by Viagene stockholders in the Merger was fair to
such stockholders from a financial point of view. See "The Merger--Opinion of
Financial Advisor." The full text of the opinion of Alex. Brown dated August
15, 1995 which sets forth, among other things, the assumptions made, matters
considered and limitations of the review undertaken, is attached as Appendix C
to this Proxy Statement-Prospectus.
EFFECTIVE TIME
The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware (the "Effective Time"). If
the Merger is approved by the stockholders of Viagene, subject to certain
conditions described herein, the Effective Time currently is expected to occur
on or about September 29, 1995.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
Viagene stockholders who wish to submit a Form of Election should deliver
their stock certificates (or provide for Guaranteed Delivery) together with
such Form of Election to the Exchange Agent. Stock certificates should not be
sent to Viagene or Chiron. If a stockholder does not submit such stockholder's
stock certificates with a properly completed Form of Election (or provide for,
and comply with the requirements of, Guaranteed Delivery), then, promptly after
the Effective Time, a letter of transmittal and instructions for surrendering
stock certificates will be mailed to each such stockholder for use in
exchanging such stockholder's stock certificates for certificates evidencing
Chiron Common Stock or cash, including cash in lieu of fractional shares.
As of the Effective Time, Chiron will deposit or cause to be deposited with
the Exchange Agent the applicable amounts of Chiron Common Stock and cash that
constitute the Merger Consideration. Because the Election Deadline is the
business day that is two trading days prior to the Effective Time and a
Guaranteed Delivery permits the delivery of stock certificates within eight
trading days after the execution of the applicable notice of guaranteed
delivery, the Merger Consideration will not be distributed until at least six
trading days after the Effective Time.
CONDITIONS
Consummation of the Merger is subject to various conditions, any or all of
which may be waived in whole or in part by Chiron or Viagene, as the case may
be, to the extent permitted by applicable law. Such conditions include, among
others: (i) receipt of the stockholder approval solicited hereby, (ii)
expiration or termination of the waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (iii) effectiveness of the Registration Statement
of which this Proxy Statement-Prospectus forms a part, (iv) the condition that
the number of Dissenting Shares shall not exceed 5 percent of the total number
of outstanding shares of Viagene Common Stock, and (v) receipt by each of
Chiron and Viagene of an opinion of its respective counsel with respect to
certain tax consequences of the Merger. See "The Merger--Conditions to
Consummation of the Merger."
6
<PAGE>
REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain acquisition transactions, including the Merger,
may not be consummated unless certain waiting period requirements have been
satisfied. On June 23, 1995, the Notification and Report Forms required
pursuant to the HSR Act were filed by Chiron and Viagene with the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC
for review in connection with the Merger. The applicable waiting period expired
at 11:59 p.m., Eastern Daylight Time, on July 23, 1995.
Neither Chiron nor Viagene is aware of any other material governmental or
regulatory approvals required for consummation of the Merger.
ACQUISITION PROPOSALS
Pursuant to the Merger Agreement, Viagene has agreed that it will not (and it
will use its best efforts to cause its officers, directors, employees,
representatives and agents not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
concerning any merger, tender offer or exchange offer involving Viagene or the
sale of all or a significant portion of the assets, or the sale of shares of
capital stock or debt securities of Viagene, or any similar transaction
involving Viagene (collectively, an "Acquisition Proposal"). Viagene has also
agreed that it would immediately cease any existing activities, discussions or
negotiations with any parties conducted prior to the date of the Merger
Agreement with respect to any of the foregoing. Notwithstanding the foregoing,
the Merger Agreement provides that Viagene may (i) furnish information
concerning its business, properties or assets pursuant to appropriate
confidentiality agreements in response to an unsolicited request after the date
of the Merger Agreement and (ii) negotiate and participate in discussions and
negotiations with any entity or group concerning an Acquisition Proposal if
such entity or group has submitted a bona fide written proposal to the Viagene
Board relating to any such transaction which the Viagene Board determines
represents a Superior Proposal if, in the opinion of the Viagene Board, after
receipt of advice from outside legal counsel to Viagene, the failure to engage
in such discussions or negotiations would cause the Viagene Board to violate
its fiduciary duties to Viagene's stockholders under applicable law. A
"Superior Proposal" is defined as any bona fide Acquisition Proposal to merge
with Viagene or to acquire, directly or indirectly, a material equity interest
in or a significant amount of voting securities or assets of Viagene for
consideration consisting of cash and/or securities, and otherwise on terms
which the Viagene Board determines in its good faith reasonable judgment (based
on the advice of a financial advisor of nationally recognized reputation) to
provide greater aggregate value to Viagene's stockholders than the Merger. See
"The Merger--Acquisition Proposals."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval and adoption by the stockholders of
Viagene, (a) by the mutual consent of the Boards of Directors of Chiron and
Viagene, (b) by either Chiron or Viagene (i) if any court or other governmental
entity of competent jurisdiction in the United States shall have issued,
enacted, promulgated, enforced or entered an order, statute, decree, ruling or
regulation or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, statute, decree, ruling,
regulation or other action shall have become final and nonappealable or (ii) if
the Merger shall not have been consummated by October 31, 1995 (or, in the
event that the only condition not satisfied is expiration or termination of the
applicable waiting period under the HSR Act, December 31, 1995), (c) by Viagene
(i) if there should be any material breach of Chiron's representations,
warranties or covenants contained in the Merger Agreement, which breach shall
not be cured within ten days of written notice thereof or (ii) to allow Viagene
to enter into an agreement which the Viagene Board determines to be a Superior
Proposal, (d) by Chiron if the Viagene Board shall have (i) withdrawn or
modified, or proposed to withdraw or modify, in a manner adverse to Chiron, its
approval or recommendation of the Merger Agreement or the Merger, (ii)
solicited, approved or recommended, or proposed to solicit, approve or
recommend, any Acquisition Proposal or (iii) approved or authorized Viagene's
entering into any agreement with respect to any
7
<PAGE>
Acquisition Proposal or (e) by Chiron if Viagene fails to comply in any
material respect with the covenants contained in the Merger Agreement.
Viagene has agreed to pay to Chiron in cash a termination fee of $2,000,000
under certain circumstances, including if the Merger Agreement has been
terminated for the reasons described in clauses (c)(ii) or (d) of the preceding
paragraph, if any entity or group shall have become the beneficial owner of 20
percent or more of the outstanding shares of Viagene Common Stock or if the
Viagene stockholders shall have failed to vote in favor of the Merger.
See "The Merger--Termination; Termination Fee; Amendment and Waiver."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Viagene's management and the Viagene Board have interests
in the Merger in addition to their interests, if any, as stockholders of
Viagene generally. These include interests pertaining to Executive Compensation
Agreements between Viagene and certain officers of Viagene providing for
severance payments upon resignation or termination following the Merger, the
acceleration of vesting of stock options held by members of management and
certain provisions in the Merger Agreement providing for indemnification of
Viagene directors, officers and employees. See "The Merger--Interests of
Certain Persons in the Merger."
As of August 14, 1995, Chiron and certain stockholders of Viagene holding in
the aggregate 30.9 percent of the outstanding shares of Viagene Common Stock
have executed and delivered the Stockholders' Agreement pursuant to which each
of such stockholders has granted to Chiron an option to purchase the shares
held by such stockholder for consideration consisting of $3.60 in cash per
share of Viagene Common Stock (which represents 40 percent of the Cash
Consideration of $9.00) and 0.093 shares of Chiron Common Stock per share of
Viagene Common Stock (which represents 60 percent of the Stock Consideration of
0.155 shares), subject to termination of the Merger Agreement pursuant to its
terms and certain other conditions.
Pursuant to the Stockholders' Agreement, the stockholders that are parties
thereto have also agreed to vote their shares in favor of the Merger and grant
Chiron an irrevocable proxy in connection therewith.
See "Certain Related Transactions--The Stockholders' Agreement."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is intended that the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended,
and, accordingly, for federal income tax purposes no gain or loss will be
recognized by either Viagene or Chiron as a result of the Merger. Consummation
of the Merger is conditioned upon receipt by Chiron of an opinion of Sullivan &
Cromwell, special counsel for Chiron, and receipt by Viagene of an opinion by
Pillsbury Madison & Sutro, counsel for Viagene, substantially to this effect. A
citizen or resident of the United States or a domestic corporation (a "U.S.
Holder") who holds Viagene Common Stock and exchanges such stock solely for
cash generally will recognize capital gain or loss in an amount equal to the
difference between the amount of cash received and the U.S. Holder's adjusted
tax basis in the Viagene Common Stock. A U.S. Holder of Viagene Common Stock,
who, pursuant to the Merger, exchanges such U.S. Holder's Viagene Common Stock
solely for Chiron Common Stock will not recognize any gain or loss upon such
exchange, except to the extent of cash received in lieu of fractional shares. A
U.S. Holder of Viagene Common Stock who, pursuant to the Merger, exchanges such
U.S. Holder's Viagene Common Stock for a combination of Chiron Common Stock and
cash will realize gain or loss equal to the difference between the fair market
value of the Chiron Common Stock, plus the amount of cash received, and the
U.S. Holder's adjusted tax basis in the Viagene Common Stock surrendered
therefor. Such U.S. Holder's gain, if any, will be recognized, however, only to
the extent of the cash received by such U.S. Holder; any loss will not be
recognized. For purposes of determining the character of any such recognized
gain, such U.S. Holder will be treated as having received only Chiron Common
Stock in exchange for such U.S. Holder's Viagene Common Stock, and, immediately
thereafter, having such Chiron Common Stock redeemed to the extent of the cash
8
<PAGE>
actually received by such U.S. Holder. Under Section 302 of the Internal
Revenue Code of 1986, as amended (the "Code"), any recognized gain will be
capital gain if, after giving effect to the constructive ownership rules of the
Code, such deemed redemption is "substantially disproportionate" with respect
to such U.S. Holder or is "not essentially equivalent to a dividend." For a
discussion of these and other Federal income tax considerations in connection
with the Merger, see "the Merger--Certain Federal Income Tax Considerations."
ACCOUNTING TREATMENT
If the Merger is consummated, Chiron intends to account for the Merger under
the purchase method of accounting.
APPRAISAL RIGHTS
In connection with the Merger, a holder of shares of Viagene Common Stock
will be entitled to demand appraisal rights in respect of such shares of
Viagene Common Stock subject to satisfaction by such stockholder of the
conditions for appraisal rights established by Section 262 of the DGCL. Section
262 of the DGCL is set forth in full in Appendix B hereto. See "Appraisal
Rights." It is a condition to consummation of the Merger that the number of
Dissenting Shares shall not exceed 5 percent of the total number of outstanding
shares of Viagene Common Stock. See "The Merger--Conditions to Consummation of
the Merger."
COMPARATIVE STOCK PRICE INFORMATION
Viagene Common Stock and Chiron Common Stock are included for quotation in
the Nasdaq National Market (symbols: VIGN and CHIR, respectively). The
following table sets forth the quarterly high and low closing sales prices of
shares of Viagene and Chiron Common Stock as reported in the Nasdaq National
Market, during the first three quarters of 1995 through August 14, 1995, and on
a quarterly basis for the two years ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ------------------------------- -------------------------------
THIRD SECOND FIRST FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Viagene
High................... 11 3/4 9 1/2 7 1/8 4 4 9/16 8 7/8 10 1/4 9 5/8 -- -- --
Low.................... 9 1/4 5 3/8 3 3/4 3 3/8 3 5/8 4 1/2 8 5/8 8 7/8 -- -- --
Chiron
High................... 89 1/2 67 3/4 80 3/8 80 1/2 73 5/16 69 1/4 95 1/8 85 1/2 74 7/8 64 1/4 58
Low.................... 63 1/2 48 1/2 53 1/2 57 3/4 51 7/8 54 1/2 65 3/4 75 3/4 58 3/8 41 1/8 45 5/8
</TABLE>
On April 21, 1995, the last full trading day prior to public announcement of
execution of the Merger Agreement, the closing sales prices per share reported
on the Nasdaq National Market for Viagene Common Stock and Chiron Common Stock
were $5.375 and $56.50, respectively. On August 14, 1995, the closing sales
prices per share reported on the Nasdaq National Market for Viagene Common
Stock and Chiron Common Stock were $11.75 and $88.50, respectively.
SELECTED HISTORICAL FINANCIAL DATA
Chiron
The following table sets forth selected consolidated financial data of Chiron
and its subsidiaries as of and for each of the five years in the period ended
December 31, 1994, and as of and for the six-month period ended June 30, 1995
and for the six-month period ended June 30, 1994. The following selected
consolidated financial data for Chiron and its subsidiaries as of and for each
of the five years in the period ended December 31, 1994 are derived from
Chiron's audited consolidated financial statements. The following selected
financial data as of and for the six-month period ended June 30, 1995 and for
the six-month period ended June 30, 1994 are derived from unaudited financial
statements and include, in the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial condition and results of operations for such periods. This data
should be read in conjunction with the consolidated financial
9
<PAGE>
statements and notes thereto of Chiron and its subsidiaries incorporated by
reference in this Proxy Statement-Prospectus.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ---------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- -------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Total revenues......... $ 499,997 $191,492 $ 453,979 $317,535 $246,260 $ 141,498 $ 99,087
Other income (expense),
net................... (3,499) 709 (10,403) 7,949 6,973 12,997 5,305
Income (loss) before
extraordinary item.... (384,949) 9,927 18,325 18,384 (92,595) (444,650) 4,536
Net income (loss)...... (384,949) 9,927 18,325 18,384 (99,252) (444,650) 7,911
Income (loss) per share
before extraordinary
item.................. (9.60) 0.29 0.53 0.55 (3.07) (22.54) 0.26
Net income (loss) per
share................. (9.60) 0.29 0.53 0.55 (3.29) (22.54) 0.45
Shares used in
computing per share
amounts............... 40,086 34,334 34,293 33,681 30,200 19,724 17,675
Cash dividends paid.... -- -- -- -- -- -- --
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------------------------
1995 1994 1993 1992 1991 1990
---------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital........ $ 242,772 $ 314,174 $256,419 $250,874 $ 486,826 $156,279
Total assets........... 1,490,053 1,049,742 968,597 701,115 907,162 277,535
Long term debt,
excluding current
portion............... 406,548 338,061 332,991 110,681 247,466 126,116
Accumulated deficit.... (960,185) (575,236) (593,561) (611,945) (511,783) (67,133)
Stockholders' equity... 662,470 572,631 522,289 478,681 505,617 121,186
</TABLE>
Viagene
The following table sets forth selected financial data of Viagene as of and
for each of the five years in the period ended December 31, 1994, and as of and
for the six-month period ended June 30, 1995 and for the six-month period ended
June 30, 1994. The following selected financial data for Viagene as of and for
each of the five years in the period ended December 31, 1994 are derived from
Viagene's audited financial statements. The following selected financial data
as of and for the six-month period ended June 30, 1995 and for the six-month
period ended June 30, 1994 are derived from unaudited financial statements and
include, in the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial condition and
results of operations for such periods. This data should be read in conjunction
with the financial statements and notes thereto of Viagene incorporated by
reference in this Proxy Statement-Prospectus.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Research and
development revenue... $ 5,762 $ 6,040 $ 12,895 $ 9,448 $ 8,400 $ 4,501 $ --
Net loss............... (9,358) (3,934) (10,912) (5,685) (3,093) (1,950) (4,040)
Net loss per share..... (0.84) (0.36) (0.99) (0.80) (0.49) (0.37) (1.00)
Shares used in
computing per share
net loss.............. 11,159 10,929 10,979 7,136 6,272 5,326 4,039
Cash dividends declared
per share............. -- -- -- -- -- -- --
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments... $20,976 $ 29,088 $38,350 $ 4,751 $ 3,661 $ 2,547
Total assets........... 31,757 41,250 42,649 8,171 6,526 3,350
Long-term portion of
obligations under
capital leases........ 4,200 4,965 943 618 -- --
Total stockholders'
equity................ 20,173 29,216 37,123 6,862 5,849 3,114
</TABLE>
10
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
The following tables set forth certain unaudited pro forma condensed combined
financial information for Chiron after giving effect to the acquisition of
Viagene, as if it had been consummated, with respect to statement of operations
data, at the beginning of the periods presented, or, with respect to balance
sheet data, as of the date presented. The Merger will be accounted for under
the purchase method of accounting. The information presented is derived from,
should be read in conjunction with, and is qualified in its entirety by
reference to, the unaudited pro forma condensed combined financial data and the
notes thereto appearing elsewhere in this Proxy Statement-Prospectus and the
separate historical financial statements and the notes thereto incorporated in
this Proxy Statement-Prospectus by reference. The unaudited pro forma condensed
combined financial data have been included for comparative purposes only and do
not purport to be indicative of the results of operations or financial position
which actually would have been obtained if the Merger had been effected at the
beginning of the periods or as of the date indicated or of Chiron's future
financial position or results of operations. See "Incorporation of Certain
Documents by Reference," "--Selected Historical Financial Data," "Comparative
Per Share Information" and "Unaudited Pro Forma Combined Condensed Financial
Statements."
PRO FORMA
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1995 1994
------------- ------------
(1) (1)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.................................... $ 504,713 $968,568
Other expense, net................................ (3,774) (7,621)
Income (loss) before nonrecurring charges......... (394,695) 19,865
Income (loss) before nonrecurring charges per
share............................................ (9.61) 0.47
Shares used in computing per share amounts........ 41,061 41,868
<CAPTION>
JUNE 30, 1995
-------------
(1)
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................... $ 223,502
Total assets...................................... 1,466,055
Long-term debt, excluding current portion......... 410,748
Accumulated deficit............................... (1,082,802)
Stockholders' equity.............................. 623,632
</TABLE>
- --------
(1) The pro forma statement of operations data for the year ended December 31,
1994 also include the impact of the acquisition, which was effective
January 1, 1995, from Ciba of CCD, and Ciba's interests in JV Vax B.V. and
The Biocine Company in a transaction accounted for as a purchase. The pro
forma statement of operations data for the year ended December 31, 1994
have been prepared assuming the acquisitions of Viagene, CCD, and Ciba's
interests in JV Vax B.V. and The Biocine Company occurred as of January 1,
1994. The pro forma statement of operations data for the six months ended
June 30, 1995 have been prepared assuming the acquisition of Viagene
occurred as of January 1, 1995, and the pro forma balance sheet data have
been prepared assuming the acquisition of Viagene occurred as of June 30,
1995. The financial positions and results of operations of CCD, The Biocine
Company and JV Vax B.V. are included in Chiron's historical consolidated
balance sheet and statement of operations as of and for the six months
ended June 30, 1995, as the acquisition of these entities was effective as
of January 1, 1995. Excluded from the Consolidated Statement of Operations
Data are nonrecurring charges related to the write-off of acquired in-
process technology from the Viagene acquisition of $122.6 million which is
a loss of $2.93 per share for the year ended December 31, 1994 and a loss
of $2.99 per share for the six months ended June 30, 1995.
11
<PAGE>
THE MERGER
The following is a summary of the material terms of the Merger Agreement.
For additional information, reference is made to the Merger Agreement, which
is reprinted in its entirety as Appendix A to this Proxy Statement-Prospectus.
Upon consummation of the Merger, Viagene will merge with and into Merger
Sub, Merger Sub will be the Surviving Corporation in the Merger and change its
name to Viagene, Inc., and the separate corporate existence of Viagene will
cease.
BACKGROUND OF AND REASONS FOR THE MERGER
Viagene's business strategy is to develop and commercialize, both
independently and in collaboration with well-established pharmaceutical and
biotechnology companies, a broad product portfolio based upon its gene
transfer technology. As part of its strategy, Viagene has identified and
entered into various arrangements with corporate collaborators, licensors,
licensees and others.
Agreements between Viagene and Chiron.
In November 1993, Viagene and Chiron entered into an agreement (the
"Collaboration Agreement") to collaborate on the development of certain gene
transfer products for the prevention and treatment of cancer and to develop
gene therapy drug activation technology for the prevention and treatment of a
broad range of human diseases. The research and development program (the "R&D
Program") is directed by a management committee composed of an equal number of
representatives from Viagene and Chiron. The management committee is
responsible for approving all funding under the R&D Program.
Under the Collaboration Agreement, Viagene is responsible for funding the
first $12 million of approved expenditures under the collaboration, Chiron is
responsible for funding the second $12 million of approved collaboration
expenditures and the parties will equally fund all approved expenditures in
excess of $24 million. Viagene is primarily responsible for performing
research and development work up to the filing of an Investigational New Drug
application ("IND") for each product being jointly developed. Chiron is
primarily responsible for conducting all clinical studies and for product
registration. As of June 30, 1995, Viagene has funded $9.6 million of research
costs under the Collaboration Agreement. Pursuant to the terms of the
Collaboration Agreement, Viagene will have an exclusive worldwide right to
manufacture and supply, and Chiron will have an exclusive worldwide right to
market, all products developed under the Collaboration Agreement. The price at
which Viagene will sell such products to Chiron or its sublicensees is a
specified percentage of the end selling price of each product sold by Chiron.
Chiron has the right to terminate the collaboration at any time by giving 180
days' prior written notice. Upon termination, Chiron's obligation to make
ongoing funding payments would cease. Viagene has a similar right to terminate
the collaboration but only after the parties have spent a total of $24 million
on their collaborative research and development effort. Upon termination of
the collaboration, Chiron will have the right to continue to develop and
commercialize certain of the products being developed under the collaboration.
In addition, in the event of any proposed sale of all or substantially all of
the assets of Viagene, or any merger or similar transaction involving Viagene,
Chiron has the right to terminate the R&D Program and acquire a non-exclusive
license for certain Viagene technology necessary to the independent
continuation of certain product development activities under the Collaboration
12
<PAGE>
Agreement. Further, in such event Viagene would not be able to acquire rights
to some of the genes with respect to which the Collaboration Agreement
provides certain rights to Viagene and, as a result, Viagene would likely have
to terminate development of such products.
In connection with the Collaboration Agreement and pursuant to a Stock and
Warrant Purchase Agreement (the "Stock and Warrant Purchase Agreement"),
Chiron acquired 1,955,556 shares of Viagene Common Stock and warrants to
purchase an additional 2,750,000 shares of Viagene Common Stock (the "Chiron
Warrant") at an exercise price of $11.00 per share. In addition, Viagene
agreed that, so long as Chiron holds at least 15 percent of the outstanding
shares of Viagene's voting stock, Chiron would be entitled to appoint a
representative to the Viagene Board. However, to date, Chiron has not
appointed such a representative. As of August 14, 1995, Chiron held of record
1,955,556 shares of Viagene Common Stock, owned a warrant to purchase up to
2,750,000 shares of Viagene Common Stock (which was exercisable for 1,204,655
shares of Viagene Common Stock on such date) and, pursuant to the
Stockholders' Agreement, had the option to acquire, under certain
circumstances, and the right to obtain proxies with respect to, an additional
3,497,575 shares of Viagene Common Stock.
Background of the Merger.
During the summer of 1994, the Viagene Board had discussions regarding (i)
the apparent revaluation of the biotechnology industry by the capital markets
which resulted in a marked decrease in the prices of biotechnology stocks,
including Viagene Common Stock, (ii) the scientific advances and discoveries
being made by Viagene and the capital required to exploit such discoveries,
(iii) methods for improving communication of Viagene's significant scientific
discoveries in a manner that would be appreciated by the public capital
markets, (iv) the status of various human clinical trials for Viagene's HIV
ImmunoTherapeutic and cancer products and the ongoing funding requirements for
such trials, (v) the substantial dilutive effect to Viagene's existing
stockholders of any financing activity given the public capital markets' then
depressed valuation of Viagene Common Stock, and (vi) the fact that Viagene's
cash would be largely utilized by the end of 1996, assuming no new
collaborations or financings during the interim. In view of these issues, the
Viagene Board considered the possible advantages to Viagene and its
stockholders of a strategic business combination and discussed candidates that
might be suitable.
Acting upon these considerations, management of Viagene met, on several
occasions during the summer of 1994, with a viral vector company regarding a
potential merger. Viagene also met, on two occasions in September 1994, with a
liposome company regarding a potential merger.
At a meeting in November 1994, the Viagene Board appointed several directors
(Mr. David F. Hale, Chairman of the Viagene Board, Mr. Paul H. Klingenstein
and Dr. Richard S. Schneider) as a negotiating committee (the "Negotiating
Committee") to act on behalf of the Viagene Board for the purpose of
conducting preliminary discussions with potential strategic business
combination candidates. The Board also briefly discussed Chiron as a possible
strategic partner in light of Chiron's announced intent to form a partnership
with Ciba and the industry's perception that Chiron intended to use capital
resources resulting from such a partnership to fund biotechnology companies
with technology considered by Chiron to be attractive.
On November 25, 1994, the Viagene Board adopted a stockholder rights plan
(the "Viagene Rights Plan") pursuant to which rights to purchase shares of
Viagene's Series A Participating Preferred Stock (the "Viagene Rights") were
issued. The Viagene Rights are generally exercisable upon the acquisition of,
or announcement of a tender offer which if consummated would result in the
acquisition of, 20 percent of the outstanding Viagene Common Stock, other than
as a result of the exercise of Chiron's rights under the Stock and Warrant
Purchase Agreement and the Chiron Warrant.
During November and December 1994, Viagene had preliminary discussions with
a biotechnology company in the gene therapy area about the possibility of a
strategic merger between the companies. On January 5, 1995, Viagene executed a
confidentiality agreement with such company, although the Viagene Board
subsequently determined, at a regularly scheduled meeting later that month,
not to proceed with such a transaction based on its determination that a
combination of the companies would likely lead to increased risks associated
with trying
13
<PAGE>
to obtain financing for the activities of the combined companies without
sufficient offsetting benefits. In January and February of 1995, Viagene had
exploratory discussions with two additional gene therapy companies regarding
potential mergers.
During late 1994 and early 1995, certain issues arose between Viagene and
Chiron with respect to the Collaboration Agreement, including the scope of
technology that was included thereunder. On March 4, 1995, senior officers of
Chiron and Viagene met at Chiron's offices to discuss such issues. In the
course of such discussions, representatives of Chiron proposed that an
acquisition of Viagene by Chiron be considered as a potential means of
resolving such issues. Representatives of Viagene present at the meeting
indicated that they would discuss the possibility of such an acquisition with
the Viagene Board.
On March 5, 1995, the Negotiating Committee, Dr. Robert T. Abbott, President
and Chief Executive Officer of Viagene, and representatives of Pillsbury
Madison & Sutro ("Pillsbury"), Viagene's legal counsel, participated in a
telephonic meeting at which the March 4 meeting with Chiron was discussed. The
Negotiating Committee reviewed at length various issues related to a potential
strategic business combination with Chiron. The Negotiating Committee also
reviewed the retention of Alex. Brown, noting Alex. Brown's reputation as a
nationally recognized investment banking firm with substantial experience in
mergers and acquisitions involving health care companies, including life
sciences companies, as well as Alex. Brown's familiarity with Viagene. The
Negotiating Committee determined at the meeting to engage Alex. Brown to,
among other things, assist Viagene in identifying and evaluating candidates
for potential business combinations and to assist Viagene in evaluating and
responding to any inquiries and proposals regarding business combinations that
might be received from Chiron or others. On March 6, 1995, Viagene entered
into an engagement letter with Alex. Brown to act as Viagene's exclusive
financial advisor other than in connection with specified potential merger
partners with respect to which Viagene had previously entered into an
arrangement with PaineWebber Incorporated ("PaineWebber").
Promptly following its engagement, Alex. Brown reviewed with Viagene a list
of 21 candidates for a potential strategic business combination and assisted
Viagene in preparing information for distribution to such candidates to
solicit their interest in pursuing a transaction involving Viagene. After
discussions with Viagene, Alex. Brown refined the list of 21 candidates and,
commencing on March 8, 1995, initiated contacts with 14 of such candidates. In
addition, PaineWebber contacted one of the specified companies with respect to
which it had previously been retained by Viagene.
On March 10, 1995, representatives of Chiron, Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), Chiron's financial advisor, Alex. Brown and
Pillsbury attended a due diligence session at Viagene with certain of
Viagene's officers and Viagene's patent counsel.
On March 12, 13 and 14, 1995, representatives of Viagene and Alex. Brown met
with representatives of several United States and foreign companies to discuss
potential business combinations. On the evening of March 12, 1995, the
Negotiating Committee held a telephonic meeting, together with representatives
of Viagene's management, Alex. Brown and Pillsbury, and discussed the outcome
of the first of these meetings and of various telephonic contacts with
potential strategic business combination candidates. In all, Viagene had
discussions with five of the 14 candidates contacted by Alex. Brown.
On March 15, 1995, the Negotiating Committee received from Viagene's
management and representatives of Alex. Brown an update on the discussions
which had been held with the various strategic business combination
candidates. A telephonic meeting of the Negotiating Committee, together with
representatives of Viagene's management, Alex. Brown and Pillsbury, was held
on the evening of March 16, 1995 at which Alex. Brown and Dr. Abbott updated
the Negotiating Committee as to the status of various contacts and meetings
with strategic business combination candidates. No acquisition or strategic
alliance proposals had been received from any party at that date.
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On the afternoon and evening of March 17, 1995, officers of Chiron and
Viagene and their respective financial and legal advisors met in San
Francisco. At the meeting, Chiron proposed an acquisition of Viagene through a
two-step transaction consisting of (i) a cash tender offer at $7.50 per share
for 41 percent of the outstanding shares of Viagene Common Stock, exclusive of
shares held by Chiron, followed by (ii) a stock-for-stock merger (for the
remaining 59 percent) with a stock exchange ratio of 0.127 shares of Chiron
Common Stock for each share of Viagene Common Stock. After discussion, Chiron
was advised by Viagene that its proposal was not sufficient.
Later in the evening, Chiron made an amended proposal to acquire Viagene
also by way of a two-step transaction consisting of (i) a cash tender offer at
$9.00 per share for 52 percent of the outstanding shares of Viagene Common
Stock, exclusive of shares held by Chiron, followed by (ii) a stock-for-stock
merger (for the remaining 48 percent) with a stock exchange ratio of 0.147
shares of Chiron Common Stock for each share of Viagene Common Stock. After
discussing Chiron's amended proposal, Viagene advised Chiron late in the
evening of March 17, 1995 that the Viagene Board would meet on the morning of
March 18, 1995 to discuss the proposal.
A meeting of the Viagene Board was held on the morning of March 18, 1995 to
discuss Chiron's acquisition proposal. The Viagene Board decided that the
proposal was not sufficiently attractive to cause Viagene to terminate its
ongoing survey of potential strategic business combination candidates and
determined that Viagene should not accept such proposal. Promptly following
the Viagene Board meeting, officers of Chiron were informed of the Viagene
Board's determination. Such officers of Chiron, after speaking with the Chiron
Board, met with and informed officers of Viagene that the discussions were
terminated and Chiron's proposal was withdrawn.
On March 20, 1995, Chiron filed with the SEC an amendment to its Schedule
13D which stated that representatives of Chiron and Viagene had discussed the
possibility of Chiron acquiring Viagene and that such discussions were
terminated without any agreement having been reached. Such amendment also
stated that Chiron might wish, among other possible courses of action, to
acquire some or all of the Viagene Common Stock not owned by it or to sell
some or all of its shares of Viagene Common Stock or the Chiron Warrant. Also
on March 20, 1995, Viagene issued a press release announcing that it had held
preliminary discussions with Chiron regarding a potential strategic merger and
that such discussions had terminated without any agreement having been
reached.
Over a period of several days following March 20, 1995, Alex. Brown
continued to have discussions with potential strategic business combination
candidates. However, no proposals were received by Viagene or Alex. Brown from
any party.
The Negotiating Committee held a telephonic meeting on March 22, 1995 at
which Alex. Brown reported on the status of discussions with potential
strategic business combination candidates. The Negotiating Committee discussed
having Alex. Brown contact Morgan Stanley about the possibility of increasing
the consideration to be received by Viagene's stockholders in a business
combination with Chiron. Alex. Brown contacted Morgan Stanley, but no
commitments were made by either party. During the morning of March 27, 1995,
Mr. Hale spoke with Dr. William J. Rutter, Chairman of the Chiron Board, by
telephone and indicated that it might be fruitful for the parties to re-
commence discussions if Chiron was willing to increase the consideration
previously proposed for receipt by Viagene's stockholders.
During the evening of March 27, 1995, the Negotiating Committee and
representatives of Viagene's management, Alex. Brown and Pillsbury held a
telephonic meeting. Alex. Brown reported on discussions with various potential
strategic business combination candidates and the Negotiating Committee
discussed strategies for continuing such discussions.
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At a regularly scheduled meeting on March 30, 1995, the Viagene Board
reviewed Viagene's prior discussions with Chiron and the status of discussions
with other potential strategic business combination candidates.
During the week of April 10, 1995, Mr. Hale and Dr. Rutter tentatively
scheduled a meeting between officers of Viagene and Chiron for April 21, 1995
with respect to the potential renewal of discussions regarding a possible
acquisition of Viagene by Chiron. The meeting was confirmed during the week of
April 17, 1995.
In anticipation of further meetings between the parties, during the
afternoon of April 19 and on April 20, 1995, Chiron's outside legal counsel
commenced a legal due diligence review of Viagene.
On the morning of April 21, 1995, officers of Viagene and Chiron met,
together with representatives of their respective legal and financial
advisors. During the afternoon of April 21, 1995, and after several
discussions between the parties with respect to potential structure and terms
of an acquisition of Viagene by Chiron, Chiron proposed the Merger, pursuant
to which Viagene would be merged into a wholly-owned subsidiary of Chiron and
the stockholders of Viagene would receive the Merger Consideration. As of
April 23, 1995, the blended value of the Merger Consideration was $8.85 per
share of Viagene Common Stock based on the closing sale price on April 21,
1995 of the Chiron Common Stock on the Nasdaq National Market of $56.50 per
share. Officers of Viagene, together with representatives from Alex. Brown and
Pillsbury, met with the Negotiating Committee to discuss Chiron's proposal. At
this meeting, the Negotiating Committee determined to recommend acceptance of
the terms of the proposal to the Viagene Board, subject to negotiation of a
definitive merger agreement.
On April 21, 1995, Viagene and Chiron executed a confidentiality agreement.
On April 22, 1995, Viagene and representatives from Alex. Brown and Pillsbury
conducted a due diligence review of Chiron. From the evening of April 21
through the evening of April 23, 1995, representatives of Chiron and Viagene
negotiated the terms of the Merger Agreement. During the course of these
negotiations, Chiron required, as a condition to its entering into the Merger
Agreement, that certain stockholders of Viagene enter into the Stockholders'
Agreement.
On the afternoon of April 23, 1995, the Viagene Board met to consider the
Merger Agreement and related arrangements (including the Stockholders'
Agreement). Viagene's senior management and representatives of Alex. Brown and
Pillsbury discussed with the Viagene Board their views and analyses of various
aspects of the Merger and its related effects. Representatives of Pillsbury
discussed the fiduciary duties of the directors in connection with the
proposed transaction. Representatives of Alex. Brown reviewed with the Viagene
Board the results of its due diligence review of Chiron as well as its inquiry
into the possibility of a potential strategic business combination with a
third party and the relative merits of the Chiron proposal compared with other
proposals in similar circumstances. Alex. Brown and the Viagene Board observed
that the prospects were remote for a present strategic business combination
with a candidate other than Chiron on terms as favorable as (or better than)
the terms of the Merger. Representatives from Alex. Brown delivered an oral
opinion that the consideration to be received by Viagene's stockholders
pursuant to the Merger Agreement was fair to such stockholders from a
financial point of view. By unanimous vote, the Viagene Board approved the
Merger Agreement and related arrangements and transactions and authorized
Viagene's management to enter into the Merger Agreement.
Following the Viagene Board meeting, officers of Viagene and Chiron signed
the Merger Agreement during the evening of April 23, 1995. Stockholders
holding approximately 21 percent of the outstanding shares of Viagene Common
Stock signed the Stockholders' Agreement during the evening of April 23 and
the morning of April 24, 1995. A public announcement of the transaction was
issued prior to the opening of the Nasdaq National Market on April 24, 1995.
Viagene's Reasons for the Merger.
The Viagene Board has carefully considered the advisability of the Merger
and believes that the terms of the Merger Agreement are fair and that the
Merger is in the best interests of Viagene's stockholders. The Viagene
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Board unanimously recommends that the Merger Agreement and the Merger be
approved and adopted by Viagene's stockholders.
At its April 23, 1995 meeting, the Viagene Board received presentations
from, and reviewed the proposed terms and conditions of the Merger with,
Viagene's management and representatives from Alex. Brown and Pillsbury. In
its deliberations concerning the Merger, the Viagene Board considered a number
of factors, including, among other things:
. The respective businesses, assets, management and prospects of Viagene
and Chiron;
. The complementary technologies of Viagene and Chiron, as well as the
strengths of Chiron as a strategic business partner (including Chiron's
interest in gene therapy and its relatively substantial financial
resources for research and development purposes);
. Information comparing certain financial and stock market information for
Viagene and Chiron with similar information for certain other life
sciences companies which are publicly traded;
. The conclusions of a review of the financial terms of certain recent
business combinations which were deemed comparable, in whole or in part,
to the proposed Merger (including the observation that the terms of the
proposed Merger fall within the range of terms for such combinations--see
"--Opinion of Financial Advisor");
. Information regarding historical market prices and other information with
respect to the common stock of each of Viagene and Chiron;
. The observations and conclusions of Alex. Brown and management of Viagene
that the prospects were remote for a present strategic business
combination with a candidate other than Chiron on terms as favorable as
(or better than) the terms of the Merger;
. The prospects for positive long-term performance of Chiron Common Stock
as well as the potential for undesirable volatility of such stock
(including volatility associated with Chiron's integration of recently
acquired businesses, including those formerly affiliated with Ciba);
. The prospects for obtaining additional financing for the proposed
activities of Viagene on terms acceptable to the Company (based, in part,
on the apparent revaluation of the biotechnology industry by the capital
markets during 1994 which resulted in a marked decrease in the prices of
biotechnology stocks, including Viagene's stock); and
. The terms and conditions of the proposed Merger, including the tax-
favored nature of the stock-for-stock component of the Merger
Consideration and the flexibility afforded Viagene's stockholders by the
election feature of the Merger.
The Viagene Board also considered carefully the opinion rendered by Alex.
Brown that the consideration to be received by Viagene's stockholders in the
Merger is fair from a financial point of view. The analysis and procedures
utilized in the opinion are described under "--Opinion of Financial Advisor to
Viagene." A copy of the opinion is included in Appendix C hereto.
The Viagene Board did not quantify, reach independent conclusions regarding
or otherwise assign relative weights to the individual factors considered in
its deliberations concerning the Merger.
Chiron's Reasons for the Merger.
At a meeting held on April 23, 1995, the Chiron Board unanimously approved
the Merger Agreement and the issuance of the Merger Shares in connection with
the Merger. The approval of Chiron's stockholders is not required for the
issuance of the Merger Shares.
In reaching its conclusion to approve the Merger Agreement, the Chiron Board
determined that the Merger is consistent with Chiron's long-term business
strategy and would strengthen and complement Chiron's existing gene therapy
programs, particularly in the areas of cancer and infectious disease, where
Chiron has longstanding programs. In addition, the Chiron Board considered
Chiron's existing ownership interest in Viagene, the status
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of the collaboration between Chiron and Viagene and the parties' respective
obligations under the Collaboration Agreement, the nature and status of
Viagene's gene therapy programs and the strategic importance to Chiron of
participating in the gene therapy market.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Viagene's management and the Viagene Board have interests
in the Merger in addition to their interests, if any, as stockholders of
Viagene generally. The Viagene Board was aware of these factors and considered
them, among other matters, in approving the Merger and the Merger Agreement.
Executive Compensation Agreements; Officers' Agreements. Viagene is a party
to certain Executive Compensation Agreements (the "Executive Compensation
Agreements") with the following officers: Robert T. Abbott, R. Jefferson
Works, Donald E. Longenecker, Steven Mento, David Hartnett, Douglas Jolly,
Kerry Kowal and James Merritt. Pursuant to the Executive Compensation
Agreements, if, within the first 12-month period after the occurrence of a
change in control of Viagene, the officer voluntarily resigns for "Good
Reason" or Viagene terminates the officer's employment for any reason other
than "Cause" or "Disability" (in each case as defined in the Executive
Compensation Agreements), the officer will be entitled to receive a severance
payment equal to a specified portion of the officer's annual base salary (1.0
times the officer's annual base salary, in the case of Messrs. Abbott,
Longenecker, Mento and Works, and 0.5 times the officer's annual base salary,
in the case of Messrs. Hartnett, Jolly, Kowal and Merritt). The Merger will
result in a change in control for purposes of the Executive Compensation
Agreements.
The Executive Compensation Agreements also provide that, in the event of a
change in control, the officer will become fully vested in all awards under
stock option plans of Viagene (regardless of whether such plans provide for
full vesting). However, the officers that are parties to the Executive
Compensation Agreements have agreed, pursuant to certain Officers' Agreements
entered into between such officers and Chiron in connection with the Merger
(the "Officers' Agreements"), that such officers will not exercise any options
the vesting of which has been accelerated as a result of the change in control
resulting from the Merger until such options would have become vested and
exercisable in accordance with their original terms without the effect of such
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acceleration. In addition, pursuant to the Officers' Agreements, Chiron has
agreed to take such action as may be necessary so that if any such officer's
employment is terminated other than for Cause, then all options to purchase
shares of Chiron Common Stock ("Chiron Options") acquired by such officer upon
consummation of the Merger in exchange for unexpired and unexercised options
("Viagene Options") outstanding pursuant to Viagene's 1989 Stock Plan or 1993
Incentive Stock Plan (collectively, the "Viagene Stock Option Plans") will be
automatically vested and remain exercisable for a period of one year
thereafter.
Stock Option Plans. The Merger Agreement provides that immediately prior to
the Effective Time, Viagene Options may be exercised in full in accordance
with their terms. Each Viagene Option not so exercised will be deemed to be
automatically converted into a Chiron Option to purchase a number of shares of
Chiron Common Stock equal to the number of shares of Viagene Common Stock that
could have been purchased under the Viagene Option multiplied by the Option
Adjustment Ratio (as defined below) at a price per share of Chiron Common
Stock equal to the option exercise price determined pursuant to the Viagene
Option divided by the Option Adjustment Ratio. In addition, the Merger
Agreement provides that as promptly as possible subsequent to the Effective
Time, Chiron will register the Chiron Common Stock underlying such Chiron
Options with the SEC on a Form S-8 and keep such registration effective until
the final exercise or termination of such Chiron Options. The "Option
Adjustment Ratio" is defined as (i) the average of the high and low price of a
share of Viagene Common Stock on the last trading day on which shares of
Viagene Common Stock are traded before the Effective Time divided by (ii) the
average of the high and low price of a share of Chiron Common Stock on the
first trading day after the Effective Time. Such Chiron Options will otherwise
be subject to the same terms and conditions as the Viagene Options; provided,
however, that the vesting schedule for each such Chiron Option will be the
vesting schedule of the corresponding Viagene Option in effect on the date of
the Merger Agreement as if no change in control had occurred; and provided,
further, that in the event the employment of any option holder is terminated
by Chiron or Viagene other than for cause, then all such Chiron Options issued
in exchange for Viagene Options held by such option holder will automatically
be vested in full.
Indemnification. The Merger Agreement provides that, from and after the
Effective Time, the Surviving Corporation will indemnify, defend and hold
harmless the present and former officers, directors and employees of Viagene
(the "Indemnified Parties") against all losses, expenses (including reasonable
attorneys' fees and other expenses of investigation or litigation, including
on appeal), claims, damages or liabilities arising out of actions or omissions
occurring at or prior to the Effective Time and shall also advance expenses as
incurred, provided that the person to whom expenses are advanced provides, if
requested, an undertaking to repay such advances under the circumstances
contemplated by the DGCL, all as required or permitted pursuant to Viagene's
Restated Certificate of Incorporation or Bylaws or indemnification agreements,
as in effect on the date of the Merger Agreement.
The Merger Agreement also provides that Viagene may, at its expense, acquire
directors' and officers' liability insurance with respect to liability
incurred as a result of matters occurring through the Effective Time so long
as the premium therefor is not in excess of $100,000 in the aggregate. In
addition, the Merger Agreement provides that Chiron will, for a period of at
least three years following the Effective Time, provide the Indemnified
Parties with an indemnity of Chiron with coverage similar or superior to that
provided under Viagene's directors' and officers' liability insurance policies
for the Indemnified Parties; provided, however, that such indemnity will apply
only in the event that Viagene and its directors, officers and representatives
shall have used their reasonable best efforts to perfect the rights to
continue in effect following the Effective Time coverage pursuant to the
directors' and officers' liability policy in effect on the date of the Merger
Agreement; provided, further, that Chiron will have no obligation to indemnify
with respect to any liability to the extent that such liability is paid by the
insurer in respect of any insurance policy or which would have been paid had
the Indemnified Party acted with reasonable diligence to assert or cooperate
in asserting a claim in respect thereof.
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