<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1995
REGISTRATION NO. 33-60503
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CHIRON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2834 94-2754624
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
4560 HORTON STREET
EMERYVILLE, CALIFORNIA 94608
(510) 655-8730
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
WILLIAM G. GREEN, ESQ.
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
CHIRON CORPORATION
4560 HORTON STREET
EMERYVILLE, CALIFORNIA 94608
(510) 655-8730
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS SHOULD BE SENT TO:
ALISON S. RESSLER THOMAS E. SPARKS, JR.
SULLIVAN & CROMWELL JO ANN TAORMINA
444 SOUTH FLOWER STREET PILLSBURY MADISON & SUTRO
LOS ANGELES, CALIFORNIA 90071 225 BUSH STREET
SAN FRANCISCO, CALIFORNIA 94120
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions under the Agreement and Plan of Merger, dated as of April 23, 1995,
between Viagene, Inc., a Delaware corporation, and Chiron Corporation, a
Delaware corporation, have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
CHIRON CORPORATION
CROSS REFERENCE SHEET
BETWEEN ITEMS IN PART I OF THE REGISTRATION STATEMENT (FORM S-4) AND
PROXY STATEMENT-PROSPECTUS PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT-PROSPECTUS
-------------------------------- --------------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Facing Page; Cross Reference Sheet;
Front Cover of Prospectus....... Outside Front Cover Page of Proxy
Statement-Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus....... Inside Front Cover Page; Table of
Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other Summary
Information.....................
4. Terms of the Transaction......... Summary; The Merger; Certain Related
Transactions; Description of Chiron
Capital Stock; Comparison of Certain
Provisions of the Certificates of
Incorporation and Bylaws of Chiron and
Viagene
5. Pro Forma Financial Information.. Summary; Unaudited Pro Forma Combined
Condensed Financial Statements
6. Material Contacts with the
Company Being Acquired.......... The Merger
7. Additional Information Required
for Re-offering by Persons and Not Applicable
Parties Deemed to be
Underwriters....................
8. Interests of Named Experts and Legal Matters; Experts
Counsel.........................
9. Disclosure of Commission Position
on Indemnification for Not Applicable
Securities Act Liabilities......
10. Information with respect to S-3 Incorporation of Certain Documents by
Registrants..................... Reference; Summary; Introduction
11. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference........ Reference
12. Information with respect to S-2 Not Applicable
or S-3 Registrants..............
13. Incorporation of Certain Not Applicable
Information by Reference........
14. Information with respect to
Registrants other than S-2 or S- Not Applicable
3 Registrants...................
15. Information with respect to S-3 Incorporation of Certain Documents by
Companies....................... Reference; Introduction
16. Information with respect to S-2 Not Applicable
or S-3 Companies................
17. Information with respect to
Companies other than S-2 or S-3 Not Applicable
Companies.......................
18. Information if Proxies, Consents
or Authorizations are to be Incorporation of Certain Documents by
Solicited....................... Reference; Cover Page of Proxy
Statement-Prospectus; Summary; The
Special Meeting; Certain Related
Transactions; Appraisal Rights
19. Information if Proxies, Consents
or Authorizations are not to be Not Applicable
Solicited or in an Exchange
Offer...........................
</TABLE>
<PAGE>
VIAGENE, INC.
, 1995
Dear Stockholder:
You are cordially invited to attend the Special Meeting (the "Special
Meeting") of Stockholders of Viagene, Inc. ("Viagene"), which will be held at
(Pacific Daylight Time) on , 1995, at , . At the Special
Meeting, you will be asked to consider and vote upon a proposal to approve and
adopt (a) an Agreement and Plan of Merger (the "Merger Agreement"), between
Viagene and Chiron Corporation, a Delaware corporation ("Chiron"), pursuant to
which Viagene will merge (the "Merger") with and into Viagene Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Chiron ("Merger
Sub"), with the surviving corporation thereafter being operated as a wholly-
owned subsidiary of Chiron and (b) the Merger. Upon consummation of the
Merger, 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, Merger Sub 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 ("Dissenting Shares")) will be converted
into, and become exchangeable for, (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 it may be increased in certain
circumstances at Chiron's option, the "Stock Consideration"), provided that
the number of shares of Viagene Common Stock to be exchanged for Cash
Consideration and the number of shares of Viagene Common Stock to be exchanged
for Stock Consideration will be adjusted, if necessary, on a pro rata basis so
that 40 percent of such shares (except for shares held directly or indirectly
by Chiron, Merger Sub or any other direct or indirect subsidiary of Chiron)
will be converted into the right to receive Cash Consideration and 60 percent
of such shares (except for shares held directly or indirectly by Chiron,
Merger Sub or any other direct or indirect subsidiary of Chiron and any
Dissenting Shares) will be converted into the right to receive Stock
Consideration. Viagene stockholders may elect to receive either Stock
Consideration or Cash Consideration in the Merger, but, regardless of such
election, may receive a combination thereof as a result of the foregoing
adjustments.
A form of election which you can use to make an election to receive Cash
Consideration or Stock Consideration is not enclosed with the Proxy Statement-
Prospectus, but will be sent to you shortly in a separate envelope. The
enclosed Proxy Statement-Prospectus describes in detail the procedures and
timing for properly submitting such form of election.
The proposed Merger has been approved by the Board of Directors of each
company. Your Board of Directors has determined that the Merger is fair to,
and in the best interests of, Viagene and its stockholders and recommends that
you vote FOR approval and adoption of the Merger Agreement and the Merger.
Consummation of the Merger is subject to certain conditions, including the
approval and adoption of the Merger Agreement by Viagene's stockholders, and
the qualification of the Merger as a tax-free reorganization for Viagene and
Chiron. Subject to the foregoing conditions, the Merger currently is expected
to close on or about 1995.
The enclosed Notice of Special Meeting of Stockholders and Proxy Statement-
Prospectus describe the Merger and provide specific information concerning the
Special Meeting. Please read these materials carefully and consider the
information contained in them.
It is very important that your shares be represented at the Special Meeting,
regardless of whether you plan to attend in person. The affirmative vote of a
majority of all of the outstanding shares of Viagene Common Stock is required
to approve the Merger Agreement. Consequently, a failure to vote will have the
same effect as a vote against the proposal. Therefore, I urge you to execute,
date and return the enclosed proxy card in the enclosed postage-paid envelope
as soon as possible to ensure that your shares will be voted at the Special
Meeting. You should not send in certificates for your shares of Viagene Common
Stock at this time.
Sincerely,
David F. Hale
Chairman of the Board
<PAGE>
VIAGENE, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1995
NOTICE IS HEREBY GIVEN that, pursuant to call of its Directors, a Special
Meeting (the "Special Meeting") of Stockholders of Viagene, Inc. ("Viagene")
will be held at (Pacific Daylight Time) on , 1995, at , for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt (a) an
Agreement and Plan of Merger, dated as of April 23, 1995 (the "Merger
Agreement"), between Viagene and Chiron Corporation, a Delaware Corporation
("Chiron"), pursuant to which Viagene will merge (the "Merger") with and
into Viagene Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Chiron, and (b) the Merger. A copy of the Merger Agreement is
set forth as Appendix A to the accompanying Proxy Statement-Prospectus.
2. To transact such other business as may properly be brought before the
meeting or any adjournments or postponements thereof.
Only those stockholders of record at the close of business on , 1995
shall be entitled to notice of and to vote at the Special Meeting or any
adjournments or postponements thereof.
A summary of certain provisions of Section 262 of the Delaware General
Corporation Law (the "DGCL") pertaining to the rights of dissenting
stockholders in connection with the Merger is included in the Proxy Statement-
Prospectus in the section entitled "Appraisal Rights." The complete text of
Section 262 of the DGCL is set forth as Appendix B to the Proxy Statement-
Prospectus.
By Order of the Board of Directors
R. Jefferson Works
Corporate Secretary
San Diego, California
, 1995
THE BOARD OF DIRECTORS OF VIAGENE RECOMMENDS THAT VIAGENE STOCKHOLDERS VOTE
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.
SINCE THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES
OF VIAGENE COMMON STOCK IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT
AND THE MERGER, WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE, WHETHER OR NOT YOU INTEND TO ATTEND THE SPECIAL MEETING IN
PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN THE
MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT-PROSPECTUS. ANY STOCKHOLDER
PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF, MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER
BROUGHT BEFORE THE SPECIAL MEETING.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 1, 1995
PROXY STATEMENT
VIAGENE, INC.
SPECIAL MEETING TO BE HELD ON
, 1995
PROSPECTUS
CHIRON CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
-----------
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, par value $0.001 per share ("Viagene Common Stock"), of Viagene, Inc., a
Delaware corporation ("Viagene"), in connection with the solicitation of
proxies by the Board of Directors of Viagene for use at the Special Meeting of
Viagene's stockholders to be held at (Pacific Daylight Time) on ,
1995, at , and at any adjournments or postponements thereof (the "Special
Meeting").
At the Special Meeting, the stockholders of record of Viagene Common Stock as
of the close of business on , 1995 (the "Record Date") will consider and
vote upon a proposal to approve and adopt (a) the Agreement and Plan of Merger,
dated as of April 23, 1995 (the "Merger Agreement"), between Viagene and Chiron
Corporation, a Delaware corporation ("Chiron"), pursuant to which Viagene will
merge (the "Merger") with and into Viagene Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Chiron ("Merger Sub"), with the
surviving corporation thereafter being operated as a wholly-owned subsidiary of
Chiron, and (b) the Merger. See "The Special Meeting." Upon consummation of the
Merger, each outstanding share of Viagene Common Stock (except for shares held
directly or indirectly by Chiron, Merger Sub 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 ("Dissenting Shares"))
will be converted into, and become exchangeable for, (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 it may be increased in certain
circumstances at Chiron's option, the "Stock Consideration"), provided that the
number of shares of Viagene Common Stock to be exchanged for Cash Consideration
and the number of shares of Viagene Common Stock to be exchanged for Stock
Consideration will be adjusted, if necessary, on a pro rata basis so that 40
percent of such shares (except for shares held directly or indirectly by
Chiron, Merger Sub or any other direct or indirect subsidiary of Chiron) will
be converted into the right to receive Cash Consideration and 60 percent of
such shares (except for shares held directly or indirectly by Chiron, Merger
Sub or any other direct or indirect subsidiary of Chiron and any Dissenting
Shares) will be converted into the right to receive Stock Consideration.
Viagene stockholders may elect to receive either Stock Consideration or Cash
Consideration in the Merger, but, regardless of such election, may receive a
combination thereof as a result of the foregoing adjustments. As discussed in
this Proxy Statement-Prospectus, it is a condition to consummation of the
Merger that the Merger be a tax-free reorganization for Viagene and Chiron,
and, pursuant to the Merger Agreement, Chiron may, at its option, increase the
Stock Consideration to the extent necessary to achieve such treatment. See "The
Merger--Basis for Converting Viagene Common Stock." For a description of the
Merger Agreement, which is included in its entirety as Appendix A to this Proxy
Statement-Prospectus, see "The Merger." Subject to stockholder approval and the
other conditions described herein, the Merger currently is expected to be
consummated on or about , 1995.
This Proxy Statement-Prospectus also constitutes a prospectus of Chiron in
respect of up to 1,003,776 shares of Chiron Common Stock to be issued upon
consummation of the Merger pursuant to the Merger Agreement.
The outstanding shares of Chiron Common Stock are included for quotation in
the Nasdaq National Market. The last reported sale price of Chiron Common Stock
on the Nasdaq National Market on July 27, 1995 was $75.5625 per share.
This Proxy Statement-Prospectus and the accompanying proxy cards are first
being mailed to stockholders of Viagene on or about , 1995.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-----------
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS , 1995
<PAGE>
AVAILABLE INFORMATION
Chiron and Viagene are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Copies of such reports,
proxy statements and other information can be obtained, upon payment of
prescribed fees, from the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its Regional Offices located at 7 World Trade
Center, 13th Floor, New York, New York 10048; and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the SEC, Washington, D.C. 20549, at
prescribed rates. Chiron Common Stock and Viagene Common Stock are quoted on
the Nasdaq National Market and such reports, proxy statements and other
information concerning Chiron and Viagene should be available for inspection
and copying at the offices of the National Association of Securities Dealers,
1735 K Street, N.W., Washington, D.C. 20006. Chiron has filed with the SEC a
Registration Statement on Form S-4 (together with any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Chiron Common Stock to be
issued in the Merger. This Proxy Statement-Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC. Such
additional information may be obtained from the SEC's principal office in
Washington, D.C.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are hereby incorporated by
reference in this Proxy Statement-Prospectus and made a part hereof: (i)
Chiron's registration statement on Form 8-A dated August 28, 1984;
(ii) Viagene's registration statement on Form 8-A dated November 29, 1993, as
amended on January 19, 1995; (iii) Chiron's Current Reports on Form 8-K, dated
January 4, 1995, March 6, 1995, March 10, 1995, April 24, 1995 and May 5,
1995, and on Form 8-K/A, dated March 17, 1995, and Viagene's Current Report on
Form 8-K, dated June 22, 1995; (iv) Viagene's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, and on Form 10-K/A dated May 1, 1995,
and Chiron's Annual Report on Form 10-K for the fiscal year ended December 31,
1994 and on Form 10-K/A dated April 24, 1995; (v) Chiron's Quarterly Report on
Form 10-Q for the quarter ended April 2, 1995 and Viagene's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995; and (vi) Chiron's Reports
on Form 10-C dated January 10, 1995 and on Form 10-C/A dated January 20, 1995.
Effective for fiscal year 1995, Chiron Corporation adjusted its fiscal year
end from December 31 to the 52 or 53-week period that ends on the Sunday
nearest December 31. As a result, the first quarter of 1995 represents the
thirteen-week period ended April 2, 1995. For presentation purposes, data used
with respect to Chiron in "Summary--Selected Historical Financial Data,"
"Summary--Selected Pro Forma Combined Financial Data," "Comparative Per Share
Information" and "Unaudited Pro Forma Combined Condensed Financial Statements"
below refer to the calendar month end.
All documents filed by Chiron and Viagene, respectively, pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement-Prospectus and prior to the Special Meeting shall be deemed
incorporated by reference in this Proxy Statement-Prospectus and a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed incorporated herein by reference will be
deemed to be modified or superseded for the purpose of this Proxy Statement-
Prospectus to the extent that a statement contained herein or in the other
subsequently filed document which also is, or is deemed to be, incorporated
herein by reference modifies or supersedes such statement. Any such statement
so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this Proxy
i
<PAGE>
Statement-Prospectus. Such incorporation by reference shall not be deemed to
specifically incorporate by reference the information referred to in Item
402(a)(8) of Regulation S-K.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS RELATING
TO CHIRON, OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM THE OFFICE OF THE SECRETARY,
CHIRON CORPORATION, 4560 HORTON STREET, EMERYVILLE, CALIFORNIA 94608,
TELEPHONE (510) 655-8730. COPIES OF SUCH DOCUMENTS RELATING TO VIAGENE, OTHER
THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM THE CORPORATE SECRETARY, VIAGENE, INC., 11055
ROSELLE STREET, SAN DIEGO, CALIFORNIA 92121, TELEPHONE (619) 452-1288. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING,
ANY REQUEST SHOULD BE MADE BY , 1995.
----------------
All information contained in this Proxy Statement-Prospectus with respect to
Chiron and its subsidiaries has been supplied by Chiron, and all information
with respect to Viagene has been supplied by Viagene.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS DOCUMENT NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CHIRON OR
VIAGENE SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROXY STATEMENT-PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITY OTHER THAN THE CHIRON COMMON STOCK TO
WHICH IT RELATES.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. i
SUMMARY..................................................................... 1
Parties to the Merger..................................................... 1
Special Meeting of Stockholders........................................... 2
Vote Required............................................................. 2
The Merger................................................................ 2
Reasons for the Merger; Recommendation of Viagene Board of Directors...... 5
Opinion of Financial Advisor.............................................. 5
Effective Time............................................................ 6
Procedures for Exchange of Certificates................................... 6
Conditions................................................................ 6
Regulatory Approvals...................................................... 6
Acquisition Proposals..................................................... 6
Termination of the Merger Agreement....................................... 7
Interests of Certain Persons in the Merger................................ 7
Certain Federal Income Tax Considerations................................. 8
Accounting Treatment...................................................... 8
Appraisal Rights.......................................................... 8
Comparative Stock Price Information....................................... 9
Selected Historical Financial Data........................................ 9
Selected Pro Forma Combined Financial Data................................ 10
COMPARATIVE PER SHARE INFORMATION........................................... 12
INTRODUCTION................................................................ 13
General................................................................... 13
Parties to the Merger..................................................... 13
THE SPECIAL MEETING......................................................... 14
General................................................................... 14
Votes Required............................................................ 15
Recommendation of Viagene Board of Directors.............................. 16
THE MERGER.................................................................. 16
Background of and Reasons for the Merger.................................. 16
Opinion of Financial Advisor.............................................. 22
Basis for Converting Viagene Common Stock................................. 26
Election Procedures; Proration............................................ 26
Fractional Shares......................................................... 28
Effective Time............................................................ 28
Procedures for Exchange of Certificates................................... 28
Transfer of Viagene Common Stock.......................................... 29
Conditions to Consummation of the Merger.................................. 29
Regulatory Approvals...................................................... 30
Interim Operations of Viagene............................................. 30
</TABLE>
<TABLE>
<S> <C>
Acquisition Proposals.................................................... 30
Termination; Termination Fee; Amendment and Waiver....................... 31
Interests of Certain Persons in the Merger............................... 32
Effect on Viagene Employee Benefit Plans................................. 33
Certain Federal Income Tax Considerations................................ 34
Accounting Treatment..................................................... 36
Expenses................................................................. 36
CERTAIN RELATED TRANSACTIONS............................................... 36
The Stockholders' Agreement.............................................. 36
Resales of Merger Shares; Affiliate Agreements........................... 36
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................ 37
DESCRIPTION OF CHIRON CAPITAL STOCK........................................ 43
Description of Chiron Common Stock....................................... 43
Description of Chiron Preferred Stock.................................... 43
Certain Charter Provisions; Rights Plan.................................. 43
Certain Rights of Ciba................................................... 45
Section 203 of the DGCL.................................................. 46
Limitation on Directors' and Officers' Liability......................... 46
APPRAISAL RIGHTS........................................................... 46
COMPARISON OF CERTAIN PROVISIONS OF THE CERTIFICATES OF INCORPORATION AND
BYLAWS OF CHIRON AND VIAGENE.............................................. 48
Authorized Capital....................................................... 48
Directors................................................................ 49
Voting Rights; Action by Written Consent................................. 49
Call of Special Meetings................................................. 49
Advance Notice of Stockholder Proposals.................................. 50
Amendments of Bylaws..................................................... 50
LEGAL MATTERS.............................................................. 50
EXPERTS.................................................................... 50
VIAGENE STOCKHOLDER PROPOSALS.............................................. 51
APPENDICES
Appendix A: Agreement and Plan of Merger................................. A-1
Appendix B: Delaware General Corporation Law, Section 262................ B-1
Appendix C: Opinion of Alex. Brown & Sons Incorporated................... C-1
</TABLE>
iii
<PAGE>
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 (Pacific Daylight Time) on , 1995
at . Only Viagene stockholders of record at the close of business on the
Record Date ( , 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
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 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 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, shares, or approximately
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")). 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 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.
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The Effective Time is currently expected to occur on or about , 1995.
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 , 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.
The number of Cash Election Shares cannot be determined until the Effective
Time. However, assuming hypothetically that the number of shares of Viagene
Common Stock outstanding (other than shares owned by Chiron, Merger Sub, or any
other direct or indirect subsidiary of Chiron) is 9,251,955, the number of Cash
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Election Shares is 5,000,000 and the remaining 4,251,955 shares are Stock
Election Shares, the number of Cash Election Shares converted to Stock Election
Shares would be 1,299,218. As to any Viagene stockholder, approximately 26%
(i.e., 1,299,218/5,000,000) of such stockholder's Cash Election Shares would be
converted into Stock 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 Cash Election Shares, Stock Election Shares or Cash Election Shares
that will be converted into Stock Election Shares, each of which will depend on
numerous factors and may be larger or smaller than the numbers assumed.
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 Stock Election Shares cannot be determined until the Effective
Time. However, assuming hypothetically that the number of shares of Viagene
Common Stock outstanding (other than shares owned by Chiron, Merger Sub, or any
other direct or indirect subsidiary of Chiron) is 9,251,955, the number of
Stock Election Shares is 7,000,000 and the remaining 2,251,955 shares are Cash
Election Shares, the number of Stock Election Shares converted to Cash Election
Shares would be 1,448,827. As to any Viagene stockholder, approximately 21%
(i.e., 1,448,827/7,000,000) of such stockholder's Stock Election Shares would
be converted into 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.
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 the date of this Proxy Statement-Prospectus
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 the date of this Proxy Statement-Prospectus 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.
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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 , 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."
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,
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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 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
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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 July 27, 1995, Chiron and certain stockholders of Viagene holding in
the aggregate 31.0 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
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."
8
<PAGE>
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 July 27, 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................... 10 3/8 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................... 75 9/16 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 July 27, 1995, the closing sales
prices per share reported on the Nasdaq National Market for Viagene Common
Stock and Chiron Common Stock were $10.375 and $75.5625, 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 three-month period ended March 31,
1995 and for the three-month period ended March 31, 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 three-month period ended March 31, 1995 and
for the three-month period ended March 31, 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 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>
THREE MONTHS
ENDED MARCH 31, 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......... $ 218,246 $91,381 $453,979 $317,535 $246,260 $ 141,498 $99,087
Other income (expense),
net................... (1,389) 282 (10,403) 7,949 6,973 12,997 5,305
Income (loss) before
extraordinary item.... (385,778) 4,817 18,325 18,384 (92,595) (444,650) 4,536
Net income (loss)...... (385,778) 4,817 18,325 18,384 (99,252) (444,650) 7,911
Income (loss) per share
before extraordinary
item.................. (9.64) 0.14 0.53 0.55 (3.07) (22.54) 0.26
Net income (loss) per
share................. (9.64) 0.14 0.53 0.55 (3.29) (22.54) 0.45
Shares used in
computing per share
amounts............... 40,013 34,606 34,293 33,681 30,200 19,724 17,675
Cash dividends paid.... -- -- -- -- -- -- --
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------------------------------------
1995 1994 1993 1992 1991 1990
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital........ $ 227,468 $ 314,174 $256,419 $250,874 $486,826 $156,279
Total assets........... 1,483,943 1,049,742 968,597 701,115 907,162 277,535
Long term debt,
excluding current
portion............... 405,994 338,061 332,991 110,681 247,466 126,116
Accumulated deficit.... (961,014) (575,236) (593,561) (611,945) (511,783) (67,133)
Stockholders' equity... 632,599 572,631 522,289 478,681 505,617 121,186
</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 three-month period ended March 31, 1995 and for the three-month period
ended March 31, 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 three-month period ended March 31, 1995 and
for the three-month period ended March 31, 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>
THREE MONTHS
ENDED MARCH 31, 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... $ 2,896 $ 3,016 $ 12,895 $ 9,448 $ 8,400 $ 4,501 $ --
Net loss............... (4,322) (1,505) (10,912) (5,685) (3,093) (1,950) (4,040)
Net loss per share..... (0.39) (0.14) (0.99) (0.80) (0.49) (0.37) (1.00)
Shares used in
computing per share
net loss.............. 11,137 10,903 10,979 7,136 6,272 5,326 4,039
Cash dividends declared
per share............. -- -- -- -- -- -- --
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------------------------------
1995 1994 1993 1992 1991 1990
--------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments... $24,114 $ 29,088 $38,350 $ 4,751 $ 3,661 $ 2,547
Total assets........... 36,785 41,250 42,649 8,171 6,526 3,350
Long-term portion of
obligations under
capital leases........ 4,631 4,965 943 618 -- --
Total stockholders'
equity................ 24,932 29,216 37,123 6,862 5,849 3,114
</TABLE>
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
10
<PAGE>
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>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, 1995 1994
-------------- ------------
(1) (1)
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues................................... $ 220,503 $968,568
Other expense, net............................... (1,414) (7,618)
Income (loss) before nonrecurring charges........ (390,293) 19,867
Income (loss) before nonrecurring charges per
share........................................... (9.52) 0.47
Shares used in computing per share amounts....... 40,988 41,868
<CAPTION>
MARCH 31, 1995
--------------
(1)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................. $ 212,833
Total assets..................................... 1,471,538
Long-term debt, excluding current portion........ 410,625
Accumulated deficit.............................. (1,065,526)
Stockholders' equity............................. 604,680
</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 three months ended
March 31, 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 March 31,
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 three months
ended March 31, 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 $104.5 million which is
a loss of $2.50 per share for the year ended December 31, 1994 and a loss
of $2.55 per share for the three months ended March 31, 1995.
11
<PAGE>
COMPARATIVE PER SHARE INFORMATION
(UNAUDITED)
The following table sets forth for Chiron Common Stock and Viagene Common
Stock certain historical, pro forma and pro forma equivalent per share
financial information. The pro forma data do not purport to be indicative of
the results of future operations or the results that would have occurred had
the Merger been consummated at the beginning of the periods presented. The
information presented herein should be read in conjunction with the historical
financial information of Chiron and Viagene incorporated by reference herein.
See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
HISTORICAL
--------------- PRO FORMA EQUIVALENT
PER SHARE CHIRON VIAGENE COMBINED PRO FORMA(3)
--------- ------ ------- --------- ------------
<S> <C> <C> <C> <C>
NET INCOME OR INCOME (LOSS) BEFORE
NONRECURRING CHARGES (1)
For the three months ended March 31,
1995............................... $(9.64) $(0.39) $(9.52) $(1.48)
For the year ended December 31,
1994............................... 0.53 (0.99) 0.47 0.07
CASH DIVIDENDS
For the three months ended March 31,
1995............................... $ -- $ -- $ -- $ --
For the year ended December 31,
1994............................... -- -- -- --
BOOK VALUE (2)
As of March 31, 1995................ $15.80 $ 2.24 $14.74 $ 2.28
</TABLE>
--------
(1) Net Income or Income (loss) before nonrecurring charges per share is based
on weighted average shares outstanding during the relevant periods.
Historical Chiron and Viagene amounts represent net income per share
whereas the pro forma amounts represent income (loss) before nonrecurring
charges per share. Excluded from Pro Forma Combined and Equivalent Pro
Forma per share amounts is the write-off of acquired in-process technology
of $104.5 million related to the Viagene acquisition as it represents a
nonrecurring item. Pro Forma Combined per share amounts for this
nonrecurring charge would be losses of $2.55 and $2.50 for the three months
ended March 31, 1995 and for the year ended December 31, 1994,
respectively. Equivalent Pro Forma per share amounts for this nonrecurring
charge would be losses of $0.40 and $0.39 for the three months ended March
31, 1995 and for the year ended December 31, 1994, respectively. See
"Summary--Selected Historical Financial Data."
(2) Book value per share is based on total period-end stockholders' equity and
number of outstanding shares.
(3) Equivalent pro forma per share amounts are computed by multiplying the pro
forma combined per share amounts by 0.155, which represents the number of
shares of Chiron Common Stock to be received per share of Viagene Common
Stock exchanged for Stock Consideration in the Merger.
12
<PAGE>
INTRODUCTION
GENERAL
This Proxy Statement-Prospectus is being furnished to the holders of Viagene
Common Stock in connection with the solicitation of proxies by the Viagene
Board for use at the Special Meeting to be held at (Pacific Daylight Time)
on , 1995 at , and at any adjournments or postponements thereof.
At the Special Meeting, the stockholders of record of Viagene Common Stock
as of the close of business on the Record Date ( , 1995), will consider and
vote upon a proposal to approve and adopt the Merger Agreement and the Merger
pursuant to which Viagene will merge with and into Merger Sub, a wholly-owned
subsidiary of Chiron, with Merger Sub surviving the Merger. Upon consummation
of the Merger, each outstanding share of Viagene Common Stock (other than the
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, Merger Consideration consisting of either (i) Cash
Consideration of $9.00 or (ii) Stock Consideration of 0.155 shares of Chiron
Common Stock (which may be increased in certain circumstances at Chiron's
option as described below). See "The Special Meeting." The Board of Directors
of Chiron (the "Chiron Board") has approved the issuance of the Chiron Common
Stock (the "Merger Shares") issuable upon consummation of the Merger. Approval
of the stockholders of Chiron is not required for the issuance of the Merger
Shares.
This Proxy Statement-Prospectus also constitutes a prospectus of Chiron in
respect of the Merger Shares.
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 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, 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.
Chiron augments its own research and development efforts with collaborations
with other companies, which in the field of gene therapy has included a
program with Viagene as well as agreements with Ribozyme Pharmaceuticals,
Inc., and Progenitor, Inc., a subsidiary of Interneuron Pharmaceuticals, Inc.
Chiron is developing platelet-derived growth factor to treat topical wounds in
collaboration with Johnson & Johnson. In cardiovascular disease, Chiron has
begun a collaboration with Searle to develop tissue factor pathway inhibitor,
a coagulation inhibitor with potential applications in thrombotic and
inflammatory diseases, trauma and critical care. Chiron is a partner with
Cephalon Corporation for the research, development and marketing of products
for the treatment of neurological disorders, including insulin-like growth
factor, which Cephalon has in Phase 2/3 clinical trials for treatment of
amyotrophic lateral sclerosis ("ALS" or "Lou Gehrig's Disease").
13
<PAGE>
In November 1994, Chiron entered into certain agreements with 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 Biocine S.p.A. 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 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.
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. The Company was founded
in February 1987 and was among the first biotechnology companies to enter the
field of gene therapy. Viagene continues to maintain a leadership position in
the development of gene transfer technology products for human therapy, having
initiated eight phase I clinical studies and, in late 1994, begun the first
phase II clinical study in the field of gene therapy.
Merger Sub. Merger Sub is a Delaware corporation and a wholly-owned
subsidiary of Chiron formed to effect the Merger.
Additional information about Chiron and its subsidiaries and Viagene is
included in documents incorporated by reference in this Proxy Statement-
Prospectus. See "Incorporation of Certain Documents by Reference."
THE SPECIAL MEETING
GENERAL
Each copy of this Proxy Statement-Prospectus mailed to holders of Viagene
Common Stock is accompanied by a proxy card furnished in connection with the
Viagene Board's solicitation of proxies for use at the Special Meeting. The
Special Meeting will be held at (Pacific Daylight Time) on , 1995,
at . Only holders of record of Viagene Common Stock at the close of
business on the Record Date ( , 1995) are entitled to receive notice of
and 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. On each matter to be considered at the Special Meeting,
stockholders will have one vote for each share of Viagene Common Stock held of
record on the Record Date.
Votes cast by proxy or in person at the Special Meeting will be tabulated by
the election inspectors appointed for the meeting who will determine whether
or not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval
of any matter submitted to the stockholders for a vote. If a broker indicates
on the proxy that it does not have discretionary authority as to certain
shares to vote on a particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter.
HOLDERS OF VIAGENE COMMON STOCK ARE REQUESTED PROMPTLY TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD TO VIAGENE IN THE ENCLOSED POSTAGE-PAID,
ADDRESSED ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY CARD OR TO
VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT AND THE MERGER.
14
<PAGE>
Any holder of Viagene Common Stock who has delivered a proxy may revoke it
any time before it is voted by giving notice of revocation in writing or
submitting a signed proxy card bearing a later date to Viagene, 11055 Roselle
Street, San Diego, California 92121, Attention: Corporate Secretary, provided
that such notice or proxy card is actually received by Viagene before the vote
of stockholders at the Special Meeting. A proxy will not be revoked by death
or supervening incapacity of the stockholder executing the proxy unless,
before the vote, notice of such death or incapacity is filed with the
Corporate Secretary or other person responsible for tabulating votes on behalf
of Viagene. The shares of Viagene Common Stock represented by properly
executed proxies received at or prior to the Special Meeting and not
subsequently revoked will be voted as directed in such proxies. If
instructions are not given, shares represented by properly executed proxies
received will be voted FOR approval and adoption of the Merger Agreement and
the Merger. It is not anticipated that any matter other than the matters
described above will be brought before the Special Meeting. However, if any
other matters are properly presented at the Special Meeting for consideration,
the persons named in the Viagene proxy card enclosed herewith will have
discretionary authority to vote on such matters in accordance with their best
judgment; provided, however, that such discretionary authority will only be
exercised to the extent permissible under applicable federal and state
securities and corporation laws.
The cost of soliciting proxies from holders of Viagene Common Stock will be
borne by Viagene. Such solicitation will be made by mail but also may be made
by telephone or in person by the directors, officers and employees of Viagene
(who will receive no additional compensation for doing so). In addition,
Viagene will make arrangements with brokerage firms and other custodians,
nominees and fiduciaries to send proxy materials to their principals.
VIAGENE STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
VOTES REQUIRED
Only Viagene stockholders of record at the close of business on the Record
Date ( , 1995) will be entitled to vote at the Special Meeting. The
affirmative vote of the holders of a majority of the shares of Viagene Common
Stock outstanding on such date is required to approve and adopt the Merger
Agreement and the Merger. Therefore, a failure to return a properly executed
proxy card or to vote in person at the Special Meeting will have the same
effect as a vote against the Merger Agreement and the Merger. As of the Record
Date, there were shares of Viagene Common Stock outstanding and entitled
to vote at the Special Meeting, with each share being entitled to one vote.
Pursuant to the Stockholders' Agreement, certain stockholders of Viagene,
together holding an aggregate of 3,497,575 shares of Viagene Common Stock, or
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 percent of the outstanding shares of Viagene
Common Stock. Chiron intends to vote such shares in favor of the Merger
Agreement and the Merger. In addition, the directors and executive officers of
Viagene owned, as of the Record Date, shares or approximately percent
of the outstanding shares of Viagene Common Stock.
For a description of certain rights which Chiron may have in the event the
Viagene Board withdraws its recommendation of the Merger or if the
stockholders of Viagene fail to vote in favor of the Merger, see "The Merger--
Acquisition Proposals" and "--Termination; Termination Fee; Amendment and
Waiver--Termination Fee."
15
<PAGE>
RECOMMENDATION OF 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. For a discussion
of the factors on which the Viagene Board's recommendation is based, see "The
Merger--Background of and Reasons for the Merger" and "--Opinion of Financial
Advisor."
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
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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 July 27, 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 1,170,773
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
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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. 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;
. The results of investigations 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;
. 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
about the prospects for a strategic business combination with a candidate
other than Chiron;
. The prospects for the long-term performance of Chiron Common Stock as
well as the potential 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, including accessing the public capital markets;
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 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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OPINION OF FINANCIAL ADVISOR
In March 1995, Viagene retained Alex. Brown to provide investment banking
services in connection with identifying and evaluating candidates for
potential business combinations and with respect to any proposal received from
Chiron or others to acquire Viagene pursuant to a merger or other transaction.
Viagene selected Alex. Brown because of Alex. Brown's reputation as a
nationally recognized investment banking firm with substantial experience in
mergers and acquisitions of health care companies, including life sciences
companies.
At the April 23, 1995 meeting of the Viagene Board, representatives of Alex.
Brown rendered an oral opinion to the Viagene Board, subsequently confirmed in
writing that, as of the date of such opinion, and subject to certain
assumptions, factors and limitations set forth in such opinion as described
below, the consideration to be received by Viagene stockholders in the Merger
was fair to such stockholders from a financial point of view. No limitations
were imposed by the Viagene Board upon Alex. Brown with respect to the
investigations made or procedures followed by it in rendering its opinion.
The full text of the written opinion of Alex. Brown dated the date of this
Proxy Statement-Prospectus 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. Viagene
stockholders are urged to read such opinion in its entirety. Alex. Brown's
opinion is directed to the Viagene Board, addresses only the fairness of the
Merger Consideration to Viagene stockholders from a financial point of view
and does not constitute a recommendation to any Viagene stockholder as to how
such stockholder should vote at the Special Meeting. The opinion was rendered
solely to the Viagene Board for its consideration in determining whether to
approve the Merger Agreement. The assumptions made, matters considered and
limitations of the review undertaken contained in Alex. Brown's oral opinion
delivered April 23, 1995 were substantially the same as those contained in the
opinion attached hereto.
In connection with its opinion, Alex. Brown reviewed certain publicly
available financial information concerning Viagene and Chiron and certain
internal financial analyses and other information furnished to it by Viagene
and Chiron. Alex. Brown also held discussions with members of the senior
managements of Viagene and Chiron regarding the business and prospects of
their respective companies. In addition, Alex. Brown (i) reviewed the reported
price and trading activity for the common stock of Viagene and Chiron, (ii)
compared certain financial and stock market information for Viagene and Chiron
with similar information for certain other life sciences companies whose
securities are publicly traded, (iii) reviewed the financial terms of certain
recent business combinations which it deemed comparable in whole or in part,
(iv) reviewed the terms of the Merger Agreement, and (v) performed such other
studies and analyses and considered such factors, including efforts to explore
an alternative transaction with third parties, as it deemed appropriate.
In conducting its review and arriving at its opinion, Alex. Brown assumed,
without independent verification, the accuracy and completeness of the
information that it reviewed and relied upon for purposes of rendering its
opinion. With respect to the financial projections of Viagene and other
information relating to the prospects of Viagene and Chiron, Alex. Brown
assumed that such information was reasonably prepared and reflected the best
currently available judgments and estimates of the senior managements of
Viagene and Chiron as to the likely future financial performance of their
respective companies. However, Chiron did not provide Alex. Brown with
financial projections because, at the time Alex. Brown rendered its opinion,
Chiron had not developed its own projections of its financial performance, in
part because it had not completed the integration of certain assets acquired
as a result of its strategic alliance with Ciba (see "Introduction--Parties to
the Merger--Chiron"). Alex. Brown did not make and it was not provided with an
independent evaluation or appraisal of the assets of Viagene or Chiron. Alex.
Brown's opinion was based on market, economic and other conditions as they
existed and could be evaluated as of the date of its opinion letter.
The following is a summary of the significant analyses performed, and
factors considered, by Alex. Brown in connection with its oral opinion
delivered to the Viagene Board on April 23, 1995 concerning the Merger. Except
where otherwise specified, in the analyses described below, the value of the
Merger Consideration was estimated based on the closing price of Chiron Common
Stock on April 21, 1995.
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Viagene Stock Price Premium Analysis. Alex. Brown reviewed and analyzed the
performance of the per share market price of Viagene Common Stock over the
period from April 21, 1994 to April 21, 1995. This analysis indicated a
closing price on April 21, 1995 of $5.38; an average trading price of $5.88
during the thirty days ended April 21, 1995; an average trading price of $5.87
during the sixty days ended April 21, 1995; and an average trading price of
$4.63 during the twelve months ended April 21, 1995. Alex. Brown noted that
the $8.85 blended per share value of the Merger Consideration as of April 23,
1995 represented a 64.7%, 50.6%, 50.6% and 91.1% premium to the April 21
closing price, the prior 30-day average, the prior 60-day average and the
prior twelve-month average, respectively.
Analysis of Certain Publicly Traded Companies. Alex. Brown compared certain
financial and clinical status information relating to Viagene to corresponding
data and ratios from a group of six selected gene therapy companies considered
by Alex. Brown to be comparable in certain respects to Viagene. This group
consisted of Cell Genesys, Inc., GeneMedicine, Inc., Genetic Therapy, Inc.,
Somatix Therapy Corporation, Targeted Genetics Corporation, and Vical, Inc.
Such financial information included, among other things, (i) market value,
(ii) technology value, defined as market value less cash plus debt, and (iii)
price to book value per share. This analysis indicated that the market values
of these companies as of April 21, 1995 ranged from $46.1 million to $120.9
million; the technology values of these companies ranged from ($2.2) million
to $69.9 million; and the price to book value per share ranged from 0.86x to
4.74x. Alex. Brown noted that the market value of Viagene implied by the
Merger Consideration was $111.9 million compared to Viagene's market value of
$62.3 million on April 21, 1995; the technology value implied by the Merger
Consideration was $83.8 million compared to Viagene's technology value of
$39.8 million on April 21, 1995; and the price to book value per share implied
by the Merger Consideration was 3.8x. Neither Viagene nor any of the selected
comparable companies was profitable over the prior twelve-month period either
on an operating income or net earnings basis; therefore no meaningful
comparison could be made for market value as a multiple of net income or
technology value as a multiple of revenues, earnings before interest and
taxes, or earnings before interest, taxes, depreciation and amortization.
Analysis of Selected Comparable Transactions. Alex. Brown reviewed the
terms, to the extent publicly available, of thirteen merger and acquisition
transactions in which 100% of the subject target company was acquired
(collectively, the "Acquisition Transactions") which Alex. Brown deemed
comparable based, generally, on business and industry comparability. The
thirteen Acquisition Transactions reviewed, in reverse chronological order of
public announcement, were the following: (1) Glycomed, Inc., acquired by
Ligand Pharmaceuticals, Inc.; (2) Affymax NV, acquired by Glaxo Holding PLC;
(3) Wellcome PLC, acquired by Glaxo Holding PLC; (4) Synergen, Inc., acquired
by Amgen, Inc.; (5) Vestar, Inc. ("Vestar"), acquired by NeXagen, Inc.
("NeXagen"); (6) Zenith Laboratories, Inc., acquired by IVAX Corporation; (7)
American Cyanamid Company, acquired by American Home Products Corporation; (8)
Syntex Corporation, acquired by Roche Holdings; (9) Sphinx Pharmaceuticals,
Inc., acquired by Eli Lilly & Company; (10) Armstrong Pharmaceuticals,
acquired by Medeva PLC; (11) Nova Pharmaceutical, acquired by Scios, Inc. to
form Scios Nova, Inc.; (12) Cetus Corporation, acquired by Chiron Corporation;
and (13) Gen-Probe Inc., acquired by Chugai Pharmaceutical Co. Alex. Brown,
for each Acquisition Transaction, calculated the premium of the price paid per
share to: (i) the price one day before announcement of a transaction; (ii) the
price four weeks before announcement; (iii) the average price during the
thirty days prior to announcement; and (iv) the highest trading price achieved
during the prior twelve months. Alex. Brown observed an average premium of
51.9% and a range of 2.0% to 108.3% with respect to the price one day prior to
announcement, as compared to a 64.7% premium in the Merger; an average premium
of 51.4% and a range of (24.4%) to 100.0% with respect to the price four weeks
prior to announcement, as compared to a 53.9% premium in the Merger; an
average premium of 58.0% and range of (12.8%) to 122.2% with respect to the
average price during the thirty days prior to announcement, as compared to a
50.0% premium in the Merger; and an average premium of 5.2% and a range of
(53.0%) to 64.2% with respect to the highest trading price achieved over the
prior twelve months, as compared to a 14.2% premium in the Merger. Alex. Brown
reviewed the terms of the Vestar/NeXagen transaction and determined that,
while similar from a business and industry standpoint, the transaction
differed significantly from the proposed
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transaction between Viagene and Chiron, primarily because it was a merger of
equals, and thus chose to exclude it from the aforementioned averages.
Alex. Brown also reviewed the terms, to the extent publicly available, of
eight partial acquisition transactions in the life sciences industry which
Alex. Brown deemed comparable based, generally, on business and industry
comparability. The eight partial acquisition transactions reviewed, in reverse
chronological order of public announcement, were the following: (i) Chiron,
partially acquired by Ciba; (ii) Copley Pharmaceuticals, Inc., partially
acquired by Hoechst Celanese Corp.; (iii) Applied Immune Sciences, partially
acquired by Rhone-Poulenc Rorer; (iv) Immunex Corp., partially acquired by
American Cyanamid Co.; (v) SyStemix Inc., partially acquired by Sandoz AG;
(vi) Genetics Institute, Inc., partially acquired by American Home Products;
(vii) Genentech Inc., partially acquired by Roche Holding AG; and (viii) Rorer
Group Inc., partially acquired by Rhone-Poulenc SA (France). Alex. Brown
observed (i) a range of premiums paid for shares tendered in the partial
acquisitions of 10.0% to 110.5% with respect to the trading price one day
prior to announcement, as compared to a 64.7% premium in the Merger, and (ii)
a range of premiums paid for shares tendered in the partial acquisitions of
26.0% to 122.2% with respect to the trading price four weeks prior to
announcement, as compared to a 53.9% premium in the Merger.
Alex. Brown also calculated the premium paid to the technology value four
weeks prior to the announcement date for the nine Acquisitions Transactions
that were announced after January 1, 1994. Alex. Brown calculated a median
premium of 84.8% for the selected Acquisition Transactions in comparison to an
88.0% premium implied by the Merger Consideration, a 95.3% premium implied by
adjusting the Merger Consideration to reflect the prior sixty day average per
share price of Chiron Common Stock, and a 104.1% premium implied by adjusting
the Merger Consideration to reflect the prior ninety day average per share
price of Chiron Common Stock. The Vestar/NeXagen transaction was excluded from
the median calculation for the reasons stated above.
Discounted Cash Flow Analysis. Alex. Brown analyzed Viagene based on a
discounted cash flow analysis of the projected, probability-adjusted unlevered
cash flows of Viagene without giving effect to the Merger. This analysis was
based upon projected financial information provided by the management of
Viagene. These projections were necessarily based on management's assumptions
with respect to Viagene's business, the life sciences and pharmaceutical
industries, general business and economic conditions, and other matters which
are inherently uncertain and involve numerous factors beyond management's
control. The projections were based on various estimates and forecasts,
including estimates of (i) the potential markets for products under
development; (ii) the cost of sales, research and development and general and
administrative expenses; (iii) the degree and timing of market penetration;
and (iv) the pricing, competition and reimbursement structure for Viagene's
products. The projections are also based on the assumptions that at all times
Viagene will have sufficient access to necessary funding for product
development programs and that all products currently under development will in
fact be developed, will be safe and effective, will obtain all necessary
government approvals, including approval by the Food and Drug Administration,
will have necessary patent protection and will be manufactured and introduced
into the market in accordance with management's plans.
To arrive at a technology value for Viagene, Alex. Brown (i) discounted to
June 30, 1995 the annual probability-adjusted unlevered free cash flows
forecasted for the June 30, 1995 to December 31, 2004 time period and (ii)
added thereto the terminal value for Viagene at December 31, 2004, which was
discounted from December 31, 2004 to June 30, 1995. Annual unlevered free cash
flows were calculated as operating income, less cash taxes (adjusted for net
operating loss carryforwards), plus depreciation and amortization, less net
increases in noncash working capital, less capital expenditures. To arrive at
operating income used in its discounted cash flow analysis, Alex. Brown
applied certain probability factors, based on management's assessment of
several factors that determine the level of success of certain product lines,
to the product lines that comprised Viagene's unadjusted revenue forecast.
These probability factors ranged from a low of 15% to a high of 25%. The
annual cash flows were discounted using discount rates ranging from 15% to 30%
reflecting both the cost of capital for mature pharmaceutical companies and
the incremental risk associated with maturing life sciences companies. The
terminal value was computed by multiplying Viagene's projected 2004 earnings
before
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interest and taxes by a terminal multiple ranging from 10.0x to 14.0x, and
then discounting the value back to June 30, 1995 using discount rates ranging
from 15% to 30%. The range of terminal multiples was based on the trading
characteristics of the common stock of selected mature pharmaceutical and life
sciences companies. The technology values calculated using the aforementioned
methodology were ultimately adjusted for Viagene's cash and debt and resulted
in equity values ranging from a low of $4.22 per share to a high of $18.84 per
share. Alex. Brown noted that the value per share implied by the Merger
Consideration falls within this range of values.
Chiron Stock Price Analysis. Alex. Brown reviewed certain financial and non-
financial information, and performed certain quantitative and qualitative
analyses relating to Chiron. These analyses included (i) an examination of
Chiron's current business, including the clinical status of its products
presently in development, (ii) a review of Chiron's stock price and trading
volume activity from April 21, 1994 to April 21, 1995, (iii) a review of
Chiron's stock price performance from May 1, 1994 through April 21, 1995
relative to an index of large market capitalization life sciences companies
(Amgen, Inc.; Biogen, Inc.; Genentech, Inc.; and Genzyme Corporation,
collectively the "First Tier Biotech Group"), Viagene, and the S&P 400, and
(iv) an analysis of the market capitalization to book value multiples for
Chiron and the First Tier Biotech Group. In its review of Chiron's stock price
trading over the April 21, 1994 to April 21, 1995 time period, Alex. Brown
observed a closing price on April 21, 1995 of $56.50 in comparison to a
twelve-month high price of $80.50, a twelve-month low price of $51.75, and an
average price over the twelve-month period of $63.79. In its review of
Chiron's stock price performance relative to the First Tier Biotech Group
index, Viagene, and the S&P 400, Alex. Brown observed that Chiron
underperformed both the First Tier Biotech Group index and the S&P 400, while
it outperformed Viagene's stock price by a small amount. Finally, in its
analysis of market capitalization to book value multiples as of April 12, 1995
for Chiron and the First Tier Biotech Group, Alex. Brown observed an average
multiple of 4.5x and a range of multiples of 2.5x to 7.1x for the First Tier
Biotech Group as compared to a 3.1x multiple for Chiron.
The summary set forth above does not purport to be a complete description of
the analyses performed and factors considered by Alex. Brown in arriving at
its opinion. Alex. Brown believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or selecting portions of the above
summary, without considering all factors and analyses, could create an
incomplete view of the process underlying the analyses performed, and factors
considered, by Alex. Brown in delivering its opinion. In performing its
analyses, Alex. Brown made numerous assumptions with respect to the life
sciences industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control
of Viagene and Chiron. The analyses performed by Alex. Brown are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than those suggested by such analyses.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. Additionally, analyses relating to the value of a business do not
purport to be appraisals or to reflect the prices at which the business may
actually be sold. Furthermore, no opinion is being expressed as to the prices
at which the Merger Shares may trade at any future time.
In connection with its opinion dated the date of this Proxy
Statement/Prospectus, Alex. Brown performed certain procedures to update
certain analyses made in connection with the delivery of its opinion and
reviewed with the managements of Viagene and Chiron the assumptions on which
such analyses were based. The results of such analyses were substantially the
same as those described above as having been arrived at in connection with the
April 23, 1995 oral opinion of Alex. Brown. Based upon such procedures and
review, Alex. Brown delivered to the Board of Directors of Viagene its opinion
that, as of the date of this Proxy Statement-Prospectus, the consideration to
be received by Viagene stockholders in the Merger is fair to such stockholders
from a financial point of view.
Alex. Brown is a nationally recognized investment banking firm, and, as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements and valuations for
corporate and other purposes. Alex. Brown has acted as lead manager of the
initial public offering of Viagene Common Stock in December of 1993 for which
Alex. Brown received a customary underwriting commission. Alex. Brown also has
acted as co-
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manager of several public offerings of Chiron Common Stock, the last of which
was completed in July 1986. Alex. Brown regularly publishes research reports
regarding the pharmaceutical and biotechnology industries and the businesses
and securities of publicly traded companies in those industries, including both
Viagene and Chiron. In the ordinary course of its business, Alex. Brown may
actively trade the equity securities of Viagene and Chiron for its own account
or for the account of its customers and accordingly may at any time hold a long
or short position in such securities.
Pursuant to the terms of an engagement letter dated March 6, 1995, Viagene
paid Alex. Brown a non-refundable fee of $50,000 as partial compensation for
services rendered in connection with the Merger. Viagene also agreed to pay
Alex. Brown a fee of $300,000 for rendering its fairness opinion, against which
the non-refundable fee of $50,000 will be credited, and which payment is not
conditioned upon the closing of the Merger. Upon consummation of the Merger,
Viagene will pay Alex. Brown a fee of 1.2% of the aggregate consideration as
compensation for financial advisory services, against which the non-refundable
and non-contingent fees will be credited. In addition, Viagene has also agreed
to reimburse Alex. Brown for its reasonable out-of-pocket expenses incurred in
connection with rendering financial and advisory services, including fees and
disbursements of its legal counsel. Viagene has agreed to indemnify Alex. Brown
and certain related persons against certain liabilities, including certain
liabilities under the federal securities laws, relating to, or arising out of,
its engagement.
BASIS FOR CONVERTING VIAGENE COMMON STOCK
Subject to the allocation and proration as described below, at the Effective
Time, each share of Viagene Common Stock issued and outstanding immediately
prior to the Effective Time (other than the 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, Merger Consideration
consisting of either (i) Cash Consideration of $9.00 or (ii) Stock
Consideration of 0.155 shares of Chiron Common Stock. As described below, 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 the Merger (see "--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. 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 "--Fractional Shares."
ELECTION PROCEDURES; PRORATION
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 subsidiary of
Chiron, and Dissenting Shares) issued and outstanding immediately prior to the
Election Deadline (5:00 p.m., Eastern Daylight Time, on the business day which
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) will be entitled to make a Cash
Election to receive Cash Consideration, a Stock Election to receive Stock
Consideration, or a Non-Election indicating that such record holder has no
preference as to receipt of Cash Consideration or Stock Consideration for such
shares. Shares in respect of which a Non-Election is made ("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 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 the Exchange Agent, either in writing to the Exchange Agent at 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
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
arrangement for an appropriate Guaranteed Delivery 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 the guarantee of delivery).
Holders of record of shares of Viagene Common Stock who hold such shares as
nominees, trustees or in other such representative capacities
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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 such
holder's shares fails to perfect, or effectively withdraws or loses, his or her
right to appraisal, as provided in 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 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 .
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 , 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 Cash Election Number (the maximum number of shares of Viagene
Common Stock 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 Stock Election Number (the number of shares of Viagene
Common Stock to be converted into the right to receive Stock Consideration in
the Merger) 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.
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In the event that the Cash Election Shares (the aggregate number of shares
of Viagene Common Stock in respect of which Cash Elections have been made)
exceeds the Cash Election Number, all Stock Election Shares (the shares of
Viagene Common Stock in respect of which Stock Elections have been made), 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 the 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.
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).
FRACTIONAL SHARES
No certificates or scrip representing less than one share of Chiron Common
Stock will be issued upon the surrender for exchange of certificates
representing shares of Viagene Common Stock. In lieu of any such fractional
shares, each holder of shares of Viagene Common Stock will be paid, upon
surrender of a certificate or certificates representing such shares of Viagene
Common Stock, an amount in cash determined by multiplying (i) the per share
closing sale price of the Chiron Common Stock on the Nasdaq National Market on
the date of the Effective Time by (ii) the fractional interest to which such
holder would otherwise be entitled (after taking into account all shares of
Viagene Common Stock held by such holder).
EFFECTIVE TIME
The Effective Time of the Merger will be the time and date when a
Certificate of Merger is filed with the Secretary of State of the State of
Delaware. 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 , 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.
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As of the Effective Time, Chiron will deposit or cause to be deposited with
the Exchange Agent the applicable amounts of shares 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
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.
TRANSFER OF VIAGENE COMMON STOCK
After the Effective Time, there will be no transfers on the stock transfer
books of Viagene of the shares of Viagene Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates are presented to the Surviving Corporation, they will be
cancelled and exchanged for any shares of Chiron Common Stock to be delivered,
and any cash to be paid, upon the due surrender of such certificates.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligation of Chiron to consummate the Merger is subject to the
following conditions, any or all of which may be waived in whole or in part by
Chiron to the extent permitted by applicable law: (i) the Merger Agreement
shall have been duly approved by the holders of a majority of the shares of
Viagene Common Stock in accordance with applicable law and the Restated
Certificate of Incorporation and Bylaws of Viagene; (ii) the waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and, except such as would not have a material
adverse effect on the financial condition, properties, business, prospects or
results of operations of Viagene (a "Viagene Material Adverse Effect") or a
material adverse effect on the financial condition, properties, business,
prospects or results of operations of Chiron and its subsidiaries, taken as a
whole (a "Chiron Material Adverse Effect"), all filings required to be made
prior to the Effective Time by Viagene with, and all consents, approvals and
authorizations required to be obtained prior to the Effective Time by Viagene
from, any governmental entity in connection with the execution and delivery of
the Merger Agreement and the consummation of the transactions contemplated
thereby shall have been made or obtained; (iii) no court or other governmental
entity of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree,
injunction or other order which is in effect and prohibits consummation of the
transactions contemplated by the Merger Agreement or imposes material
restrictions on Chiron or Viagene in connection with the consummation of the
Merger or with respect to their business operations (collectively, an
"Order"); (iv) the representations and warranties of Viagene in the Merger
Agreement shall be true in all material respects as of the Effective Time, and
Viagene shall have performed in all material respects all obligations required
to be performed by it under the Merger Agreement; (v) Chiron shall have
received a written opinion of Sullivan & Cromwell relating to certain tax
consequences of the Merger (see "--Certain Federal Income Tax
Considerations"); (vi) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been initiated or be threatened by the SEC;
and (vii) the number of Dissenting Shares shall not exceed 5 percent of the
total number of outstanding shares of Viagene Common Stock.
The obligations of Viagene to consummate the Merger are subject to the
following conditions, any or all of which may be waived in whole or in part by
Viagene to the extent permitted by applicable law: (i) the Merger Agreement
shall have been duly approved by the holders of a majority of the shares of
Viagene Common Stock (other than shares of Viagene Common Stock held by
Chiron, Merger Sub, any other subsidiary of Chiron or any affiliates of the
foregoing), in accordance with applicable law and the Restated Certificate of
Incorporation and Bylaws of Viagene; (ii) the waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and, except such as would not have a Viagene Material Adverse
Effect or a Chiron Material Adverse Effect, all filings required to be made
prior to the Effective Time by Chiron with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
by Chiron from, any governmental entity in connection with the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby shall have been made or obtained; (iii) there
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shall be in effect no Order; (iv) the representations and warranties of Chiron
in the Merger Agreement shall be true in all material respects as of the
Effective Time and Chiron shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement; and (v)
Viagene shall have received a written opinion from Pillsbury Madison & Sutro
relating to certain tax consequences of the Merger (see "--Certain Federal
Income Tax Considerations").
REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by 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 in respect of
the Merger were filed by Chiron and Viagene with 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.
INTERIM OPERATIONS OF VIAGENE
Prior to the Effective Time, the Merger Agreement requires Viagene (unless
Chiron consents in writing to waive any of the following requirements) (i) to
conduct its business only in the ordinary and usual course and, to the extent
consistent therewith, use its best efforts to preserve its business
organization intact and maintain its existing relations with customers,
suppliers, employees and business associates; (ii) not to create any
subsidiaries, amend its Restated Certificate of Incorporation or Bylaws or
amend, modify or terminate the Rights Agreement, dated as of November 25,
1994, between Viagene and First Interstate Bank of California, split, combine
or reclassify the shares of Viagene Common Stock or Viagene's shares of
preferred stock or declare, set aside or pay any dividend in cash, stock or
property; (iii) (A) subject to certain exceptions, not to issue, sell, pledge,
dispose of or encumber any additional shares of, or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights to
acquire, any shares of its capital stock, (B) transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any assets which it
owns or uses or enter into any collaboration, except for any such transaction
or collaboration involving the transfer of research materials in the ordinary
course of business consistent with past practice, (C) incur or modify any
indebtedness or other liability other than in the ordinary and usual course of
business, (D) acquire, directly or indirectly, any shares of its capital stock
or (E) except as previously disclosed to Chiron, authorize capital
expenditures in excess of $50,000 or, other than the acquisition of inventory
and supplies in the ordinary course of business consistent with past practice,
make any acquisition of, or investment in, assets or stock of any other person
or entity (including, subject to certain exceptions, any in-licensing of
technology); (iv) subject to certain exceptions, not to grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of Viagene and not establish, adopt,
enter into, make any new grants or awards under or amend, any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, employee stock ownership, deferred
compensation, employment, termination, severance or other plan or arrangement
for the benefit of any directors, officers or employees; (v) not to settle or
compromise any material claims or litigation or modify or terminate any of its
material contracts or waive, release or assign any material rights or claims;
(vi) not to make any tax election or permit any insurance policy naming it as
a beneficiary or loss payable payee to be cancelled or terminated without
notice to Chiron, except in the ordinary course of business; and (vii) not to
authorize or enter into an agreement to do any of the foregoing.
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 Acquisition Proposal (a merger, tender offer or
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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). 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 (as defined below) 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.
In addition, the Merger Agreement provides that the Viagene Board will not
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse
to Chiron, the approval or recommendation by the Viagene Board of the Merger,
(ii) solicit, approve or recommend, or propose to solicit, approve or
recommend, any Acquisition Proposal, or (iii) approve or authorize Viagene's
entering into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, however, the Merger Agreement provides that in
the event that the Viagene Board receives an Acquisition Proposal that, based
on the advice of outside counsel, the Viagene Board is required to consider in
the exercise of its fiduciary obligations and that it determines to be a
Superior Proposal, the Viagene Board may withdraw or adversely modify its
approval or recommendation of the Merger and approve or recommend any such
Superior Proposal, approve or authorize Viagene's entering into an agreement
with respect to such Superior Proposal, approve the solicitation of additional
Acquisition Proposals or terminate the Merger Agreement, in each case at any
time after the fourth business day following notice to Chiron advising Chiron
that the Viagene Board has received a Superior Proposal. Viagene may take any
of such actions only if an Acquisition Proposal that was a Superior Proposal
continues to be a Superior Proposal at the expiration of such four-business
day period. If the Viagene Board proposes to withdraw or adversely modify its
approval or recommendation of the Merger or to approve or recommend any
Acquisition Proposal or to authorize Viagene's entering into an agreement with
respect to any Acquisition Proposal, concurrently with withdrawing or
adversely modifying such approval or recommendation, approving or recommending
such Acquisition Proposal or authorizing or approving Viagene's entering into
such agreement, Viagene would become obligated to pay to Chiron the
Termination Fee (as defined below) upon the consummation of the transaction
contemplated by such agreement (see "--Termination; Termination Fee; Amendment
and Waiver--Termination Fee").
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.
TERMINATION; TERMINATION FEE; AMENDMENT AND WAIVER
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after the approval and adoption by holders
of Viagene Common Stock: (i) by the mutual consent of the Chiron and Viagene
Boards; (ii) by either Chiron or Viagene (A) if any court or any other
governmental entity of competent jurisdiction in the United States shall have
taken any action permanently restraining, enjoining or otherwise prohibiting
the Merger and such action shall have become final and non-appealable, or (B)
if the Merger shall not have been consummated by October 31, 1995 (or, in the
event that the only condition not satisfied is approval under the HSR Act,
December 31, 1995); (iii) by Viagene (A) if there should be any material
breach of Chiron's representations, warranties or covenants in the Merger
Agreement, which breach is not cured within 10 days of written notice thereof,
or (B) to allow Viagene to enter into an agreement which the Viagene Board
determines to be a Superior Proposal (provided that, upon such termination,
Viagene pays the Termination Fee as described below); (iv) by Chiron if the
Viagene Board shall have (A) withdrawn or modified, or proposed
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<PAGE>
to withdraw or modify, in a manner adverse to Chiron, its approval or
recommendation of the Merger Agreement or the Merger, (B) solicited, approved
or recommended, or proposed to solicit, approve or recommend any Acquisition
Proposal, or (C) approved or authorized Viagene's entering into any agreement
with respect to any Acquisition Proposal; or (v) by Chiron if Viagene fails to
comply in any material respect with the covenants described above under "--
Acquisition Proposals".
Termination Fee. The Merger Agreement provides that Viagene, if requested by
Chiron, will promptly, but in no event later than two business days after the
date of such request, pay Chiron a fee of $2,000,000 (the "Termination Fee")
in same day funds if, after the date, and during the term, of the Merger
Agreement any of the following occurs: (i) any corporation, partnership,
person, other entity or group other than Chiron or any of its subsidiaries or
affiliates shall have become the beneficial owner of 20 percent or more of the
outstanding shares of Viagene Common Stock; (ii) Chiron shall have terminated
the Merger Agreement for the reasons described in clause (iv) of the
immediately preceding paragraph; (iii) Viagene shall have terminated the
Merger Agreement pursuant to clause (iii)(B) of the immediately preceding
paragraph; or (iv) the stockholders of Viagene shall have failed to vote in
favor of, or consent to, the Merger, as applicable, except if such failure
results from the failure of Chiron to vote any of the shares of Viagene Common
Stock beneficially owned by it in favor of the Merger or to consent to the
Merger.
Amendment and Waiver. The Merger Agreement may be amended in writing by
Chiron and Viagene at any time before or after approval thereof by the
stockholders of Viagene, but, after any such approval, no amendment may be
made which reduces the amount or changes the form of consideration to be paid
in the Merger or in any way adversely affects the rights of holders of the
shares of Viagene Common Stock without the further approval of such holders.
In addition, at any time prior to the Effective Time, Chiron and Viagene may
extend the time for performance of any of the obligations or other acts of the
other party to the Merger Agreement, waive inaccuracies of representations and
warranties contained in the Merger Agreement and waive compliance with any of
the agreements or conditions contained therein, in each case by an instrument
in writing signed on behalf of the party granting such extension or 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. 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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<PAGE>
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.
EFFECT ON VIAGENE EMPLOYEE BENEFIT PLANS
Pursuant to the Merger Agreement, Chiron has agreed that, during the period
commencing at the Effective Time and ending on the first anniversary thereof,
the employees of Viagene will continue to be provided with
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<PAGE>
employee benefit plans (other than stock option or other plans involving the
potential issuance of securities of Viagene or Chiron) which in the aggregate
are substantially comparable to those provided by Chiron to employees of
Chiron holding comparable positions. The Merger Agreement also provides that
employees of Viagene will have the same rights as employees of Chiron to
participate in Chiron's stock option plans in accordance with the terms
thereof, but subject to appropriate transitional provisions to adjust to
Chiron's annual grant cycle. In addition, Chiron has agreed to honor without
modification all employee (or former employee) benefit obligations accrued as
of the Effective Time and all employee severance plans (or policies) and
employment or severance agreements.
For a description of the effect of the Merger on the Viagene Stock Option
Plans, see "--Interests of Certain Persons in the Merger--Stock Option Plans."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material United States Federal
income tax consequences of the Merger and is not intended to be a complete
discussion of all potential tax effects that might be relevant to the Merger.
It deals only with U.S. Holders. This summary assumes that the Viagene Common
Stock has been held as a capital asset. It may not be applicable to certain
classes of taxpayers, including, without limitation, insurance companies, tax-
exempt organizations, financial institutions, securities dealers, broker-
dealers, foreign persons, persons who acquired Viagene Common Stock pursuant
to an exercise of employee stock options or rights or otherwise as
compensation and persons who hold shares of Viagene Common Stock as part of a
straddle or conversion transaction. Moreover, the state, local, foreign and
estate tax consequences to Viagene stockholders of the Merger are not
discussed.
This summary is based on laws, regulations, rulings, practice and judicial
decisions in effect at the date of this Proxy Statement-Prospectus and the
opinion of Sullivan & Cromwell. However, legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences described herein to Viagene stockholders. The opinion of Sullivan
& Cromwell set forth in this summary is based, among other things, on
assumptions relating to certain facts and circumstances of, and the intentions
of the parties to, the Merger, which assumptions will have been made with the
consent of Viagene and Chiron. EACH VIAGENE STOCKHOLDER IS URGED TO CONSULT
WITH SUCH STOCKHOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
TO SUCH HOLDER OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF
CHANGES IN APPLICABLE TAX LAWS.
General. Consummation of the Merger is conditioned upon receipt by Chiron of
a tax opinion of Sullivan & Cromwell and receipt by Viagene of a tax opinion
of Pillsbury Madison & Sutro (collectively, the "Tax Opinions"), dated
immediately prior to the Effective Time, to the effect that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code,
that Viagene and Chiron will each be a party to the reorganization pursuant to
Section 368(b) of the Code and that neither Viagene nor Chiron will recognize
any income, gain or loss as a result of the Merger. The Tax Opinions will be
based, among other things, on assumptions relating to certain facts and
circumstances of, and the intentions of the parties to, the Merger, which
assumptions will have been made with the consent of Viagene and Chiron.
Exchange of Viagene Common Stock Solely for Cash. In the opinion of Sullivan
& Cromwell, a U.S. Holder of Viagene Common Stock who, pursuant to the Merger,
exchanges such U.S. Holder's Viagene Common 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.
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Exchange of Viagene Common Stock Solely for Chiron Common Stock. In the
opinion of Sullivan & Cromwell, 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.
The holding period of Chiron Common Stock received by each U.S. Holder of
Viagene Common Stock in the Merger will include the holding period of the
Viagene Common Stock surrendered therefor. The aggregate adjusted tax basis of
such Chiron Common Stock will equal the U.S. Holder's adjusted tax basis in
the Viagene Common Stock surrendered. Viagene's stockholders should consult
their own tax advisors as to the determination of their adjusted tax basis and
holding period in any one share of Chiron Common Stock, as several methods of
determination may be available.
Exchange of Viagene Common Stock for Cash and Chiron Common Stock. Under
certain circumstances, a U.S. Holder of Viagene Common Stock may, pursuant to
the Merger, exchange a portion of such Viagene Common Stock for Chiron Common
Stock and another portion of such Viagene Common Stock for cash (other than
cash received in lieu of a fractional share of Chiron Common Stock). In the
opinion of Sullivan & Cromwell, such a U.S. Holder 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 actually received by
such U.S. Holder. Under Section 302 of 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".
Under Internal Revenue Service guidelines, a hypothetical redemption involving
a minority Viagene stockholder whose relative stock interest in Viagene is
minimal, who exercises no control over the affairs of Viagene and who
experiences, pursuant to the Merger, a reduction in the stockholder's
proportionate stock interest will not receive dividend treatment of the cash
received in these circumstances under Section 302 (b) (1) of the Code. Because
the determination of whether a cash payment will be treated as having the
effect of the distribution of a dividend generally will depend in part upon
the facts and circumstances of each Viagene stockholder (e.g., whether or not
such stockholder also owns any Chiron Common Stock), such stockholders are
strongly advised to consult their own tax advisors regarding the tax treatment
of cash received in the Merger.
The holding period of Chiron Common Stock received by each U.S. Holder of
Viagene Common Stock in the Merger will include the holding period of the
Viagene Common Stock surrendered therefor. In general, the aggregate adjusted
tax basis of such Chiron Common Stock will equal the U.S. Holder's adjusted
tax basis in the Viagene Common Stock surrendered, decreased by the amount of
cash received and increased by the amount of gain recognized by such U.S.
Holder, if any.
Fractional Shares. No fractional shares of Chiron Common Stock will be
issued pursuant to the Merger. A U.S. Holder of Viagene Common Stock who,
pursuant to the Merger, receives cash in lieu of a fractional share of Chiron
Common Stock will be treated as having received such fractional share of
Chiron Common Stock pursuant to the Merger and then as having received such
cash in a redemption of such fractional share of Chiron Common Stock. Under
Section 302 of the Code, provided that such deemed distribution is
"substantially disproportionate" with respect to such U.S. Holder or is "not
essentially equivalent to a dividend" after giving effect to the constructive
ownership rules of the Code, the U.S. Holder will generally recognize capital
gain or loss on such deemed redemption equal to the difference between the
amount of cash received and the U.S. Holder's adjusted tax basis in the
fractional share of Chiron Common Stock.
Backup Withholding. Unless an exemption applies, the Exchange Agent will be
required to withhold, and will withhold, 31 percent of any cash payments to
which a Viagene stockholder is entitled pursuant to the
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Merger, unless such stockholder payee provides its taxpayer identification
number (i.e., a social security number or employer identification number) and
certifies that such number is correct. Each Viagene stockholder is required to
complete and sign the Substitute Form W-9 that will be included as part of the
Form of Election to avoid backup withholding (or a Form W-8 if the stockholder
is a nonresident alien or foreign entity), unless an applicable exemption
exists and is substantiated in a manner satisfactory to Chiron and the
Exchange Agent.
ACCOUNTING TREATMENT
If the Merger is consummated, Chiron intends to account for the Merger under
the purchase method of accounting.
EXPENSES
The Merger Agreement provides, in general, that Chiron and Viagene will each
pay its own expenses in connection with preparing for, entering into and
carrying out the Merger Agreement and consummation of the Merger.
CERTAIN RELATED TRANSACTIONS
THE STOCKHOLDERS' AGREEMENT
In connection with the Merger Agreement, Chiron and certain stockholders of
Viagene holding in the aggregate 3,497,575 shares of Viagene Common Stock (or
approximately percent of the shares of Viagene Common Stock outstanding on
the Record Date), executed the Stockholders' Agreement pursuant to which each
of such stockholders has agreed to vote (or cause to be voted) the shares of
Viagene Common Stock held of record or beneficially owned by such stockholder
in favor of the Merger and the Merger Agreement, against any action or
agreement that would result in a breach of any covenant, representation or
warranty or other obligation or agreement of Viagene under the Merger
Agreement and against extraordinary corporate transactions, sales of material
amounts of assets of Viagene, changes in the composition of the Viagene Board,
capitalization, corporate structure or business or other actions which are
intended, or could reasonably be expected, to interfere with or adversely
affect the Merger and the transactions contemplated by the Merger Agreement.
In addition, such stockholders have granted to Chiron irrevocable proxies to
vote the shares of such stockholders with respect to the matters described
above. Pursuant to the Stockholders' Agreement, such stockholders have also
agreed not to sell, transfer, tender, pledge or otherwise dispose of any of
such stockholders' shares of Viagene Common Stock.
Pursuant to the Stockholders' Agreement, and subject to the conditions set
forth therein, each stockholder party thereto has granted to Chiron the option
to purchase from such stockholder the shares of Viagene Common Stock owned 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), and cash in lieu of fractional shares for each such share of Viagene
Common Stock. Chiron's right to exercise such option is subject to the
conditions that (i) the representations and warranties of Chiron contained in
the Merger Agreement are true in all material respects as of the closing with
respect to such purchase and (ii) the Merger Agreement shall have been
terminated pursuant to its terms (other than by Viagene as a result of a
material breach of Chiron's representations, warranties or covenants therein).
RESALES OF MERGER SHARES; AFFILIATE AGREEMENTS
Merger Shares will be freely transferrable under the Securities Act, except
for Merger Shares issued to any person who may be deemed to be an "affiliate"
of Viagene within the meaning of Rule 145 under the Securities Act ("Rule
145"). In the Merger Agreement, Viagene has agreed to deliver to Chiron a
letter identifying all persons who, to Viagene's knowledge, are, at the time
the Merger Agreement is submitted to the stockholders of Viagene for approval,
affiliates of Viagene for purposes of Rule 145. In addition, Viagene has
agreed to use its reasonable best efforts to cause each such person to deliver
to Chiron on or prior to the Effective Time a written
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agreement in the form included in the Merger Agreement to the effect that such
person will not sell, pledge, transfer or otherwise dispose of Merger Shares
to be received by such person in the Merger other than pursuant to an
effective Registration Statement under the Securities Act, in compliance with
Rule 145 or in compliance with another exemption from the registration
requirements of the Securities Act.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
have been prepared to illustrate the effect of the acquisition of Viagene and
include an Unaudited Pro Forma Combined Condensed Balance Sheet as of March
31, 1995, and Unaudited Pro Forma Combined Condensed Statements of Operations
for the three months ended March 31, 1995, and for the year ended December 31,
1994. The pro forma financial statements are based on the historical
consolidated financial statements of Chiron and historical financial
statements of Viagene as well as the historical statements of operations for
the year ended December 31, 1994, of CCD, JV Vax B.V. and The Biocine Company
along with the pro forma adjustments and elimination entries as presented in
the Unaudited Pro Forma Combined Condensed Statement of Operations reported by
Chiron on Form 8-K/A dated March 17, 1995 (the "Form 8-K/A"), in connection
with Chiron's acquisition from Ciba of CCD and Ciba's interests in The Biocine
Company and JV Vax B.V. which was effective as of January 1, 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 three months ended March 31, 1995.
The Unaudited Pro Forma Combined Condensed Balance Sheet as of March 31,
1995 assumes that the acquisition was consummated on March 31, 1995, and the
Unaudited Pro Forma Combined Condensed Statements of Operations for the three
months ended March 31, 1995, and for the year ended December 31, 1994, assume
that the acquisition had been consummated as of the first day of the periods
presented.
The pro forma adjustments are based on the Merger Agreement and related
agreements, which provide for Viagene stockholders to receive Stock
Consideration and/or Cash Consideration. For purposes of preparing the
unaudited pro forma combined condensed financial information, the value of the
Chiron Common Stock to be issued is based upon Chiron's last reported sale
price per share of $75 9/16 on July 27, 1995 and on the total number of shares
outstanding of Viagene Common Stock on July 27, 1995 which are not owned by
Chiron (9,334,575) plus the number of shares of Viagene Common Stock assumed
to be issued upon exercise of options and warrants prior to the Effective Time
(1,145,701). The price per share of Chiron Common Stock and the number of
shares of Viagene Common Stock outstanding, other than shares owned by Chiron,
are subject to change. As a result, the actual purchase price may differ
significantly from that presented herein. The estimated aggregate amount to be
allocated to the assets acquired consists of (in thousands):
<TABLE>
<S> <C>
Chiron Common Stock issued to Viagene stockholders............... $ 73,648
Cash paid to Viagene stockholders................................ 37,729
Options to purchase Chiron Common Stock issued................... 3,437
Carrying value of Chiron's initial investment in Viagene......... 14,130
Estimated costs and expenses of the Merger....................... 3,250
--------
$132,194
========
</TABLE>
The actual allocation will be based on the estimated fair values of the
tangible and intangible assets and liabilities of Viagene at the Effective
Time. For purposes of the pro forma financial statements, such allocation has
been estimated as follows (in thousands):
<TABLE>
<S> <C>
Current assets................................................... $ 32,346
Property, plant and equipment.................................... 7,795
Liabilities...................................................... (12,853)
Other assets..................................................... 394
In-process technology............................................ 104,512
--------
$132,194
========
</TABLE>
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The pro forma adjustments are based on preliminary estimates, which are
derived from available information and certain assumptions. In accordance with
generally accepted accounting principles, the amount allocated to in-process
technology will be charged to expense in the quarter in which the Effective
Time occurs. This adjustment has been excluded from the Unaudited Pro Forma
Combined Condensed Statements of Operations as it is a nonrecurring item.
Although Chiron believes, based on available information, that the fair values
and allocation of the Merger Consideration included in the unaudited pro forma
combined condensed financial statements are reasonable estimates, final
purchase accounting adjustments will be made on the basis of evaluations and
estimates made after the Effective Time. As a result, the final allocation of
costs related to the Merger may differ significantly from that presented
herein.
The Unaudited Pro Forma Combined Condensed Statements of Operations exclude
any potential benefits that might result from the acquisition due to synergies
that may be derived and from the elimination of any duplicate efforts. The
unaudited pro forma combined condensed financial statements do not purport to
be indicative of the results that actually would have occurred if the Merger
occurred on the dates indicated or indicative of results which may be obtained
in the future. The unaudited pro forma combined condensed financial statements
should be read in conjunction with the historical consolidated financial
statements and accompanying notes for Chiron, Viagene, CCD, The Biocine
Company and JV Vax B.V.
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<PAGE>
CHIRON AND VIAGENE COMBINED
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHIRON VIAGENE, PRO FORMA PRO FORMA
CORPORATION INC. ADJUSTMENTS COMBINED
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.. $ 91,122 $ 9,987 $ (37,729)(4) $ 67,243
3,863 (6)
Short-term investments in
marketable debt
securities................ 109,807 14,127 -- 123,934
---------- -------- --------- -----------
Total cash and short-term
investments............. 200,929 24,114 (33,866) 191,177
Accounts receivable........ 221,189 3,158 (589)(1) 223,758
Inventories................ 159,229 -- -- 159,229
Other current assets....... 39,472 1,218 (7)(2) 40,683
---------- -------- --------- -----------
Total current assets..... 620,819 28,490 (34,462) 614,847
Noncurrent investments in
marketable debt
securities................ 135,783 -- -- 135,783
Property, equipment and
leasehold improvements,
net....................... 470,995 7,795 -- 478,790
Intangible assets, net..... 164,132 -- 104,512 (2) 164,132
(104,512)(3)
Investments in equity
securities and affiliated
companies................. 31,165 -- (14,622)(5) 16,543
Other assets............... 61,049 500 (106)(2) 61,443
---------- -------- --------- -----------
$1,483,943 $ 36,785 $ (49,190) $ 1,471,538
========== ======== ========= ===========
Current liabilities:
Accounts payable........... $ 74,349 $ 1,934 $ (589)(1) $ 75,694
Accrued compensation and
related expenses.......... 54,484 -- 1,000 (2) 55,484
Short-term borrowings...... 84,786 -- -- 84,786
Current portion of unearned
revenue................... 15,048 783 -- 15,831
Current portion of long-
term debt................. 3,478 1,798 -- 5,276
Taxes payable.............. 25,610 -- -- 25,610
Other current liabilities.. 135,596 487 3,250 (4) 139,333
---------- -------- --------- -----------
Total current
liabilities............. 393,351 5,002 3,661 402,014
Long-term debt............. 405,994 4,631 -- 410,625
Other noncurrent
liabilities............... 51,999 2,220 -- 54,219
Stockholders' equity:
Common stock and
additional paid-in
capital................. 1,597,857 60,930 103,399 (2) 1,674,942
77,085 (4)
(132,194)(5)
(35,998)(5)
3,863 (6)
Accumulated deficit...... (961,014) (35,998) 35,998 (5) (1,065,526)
(104,512)(3)
Cumulative foreign
currency translation
adjustment.............. 439 -- -- 439
Unrealized loss from
investments............. (4,683) -- (492)(5) (5,175)
---------- -------- --------- -----------
Total stockholders'
equity................ 632,599 24,932 (52,851) 604,680
---------- -------- --------- -----------
$1,483,943 $ 36,785 $ (49,190) $ 1,471,538
========== ======== ========= ===========
</TABLE>
See accompanying notes.
39
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED BALANCE SHEET
The Unaudited Pro Forma Combined Condensed Balance Sheet has been prepared
to reflect the acquisition of Viagene as if it occurred on March 31, 1995. The
acquisition has been accounted for under the purchase method of accounting.
The following is a summary of reclassifications and adjustments reflected in
the Unaudited Pro Forma Combined Condensed Balance Sheet:
1) Represents the elimination of intercompany receivables and payables as
of March 31, 1995.
2) Represents the adjustments of Viagene's assets and liabilities to
their estimated fair values at the date of the acquisition and the accrual
of acquisition-related liabilities.
3) Represents the write-off of acquired in-process technology at the
Effective Time. This adjustment is excluded from the Unaudited Pro Forma
Combined Condensed Statements of Operations as it is a nonrecurring item.
4) Represents the issuance of 974,666 shares of Chiron Common Stock at a
fair market value of approximately $73.6 million based on $75 9/16 per
share (the last reported sale price of the Chiron Common Stock on July 27,
1995), the payment of $37.7 million in cash to Viagene stockholders, the
issuance of options (valued at $3.4 million) to purchase Chiron Common
Stock to Viagene optionholders and the accrual of $3.3 million in costs and
expenses associated with the transaction.
5) Represents the elimination of Chiron's initial investment in Viagene
under the cost method and the elimination of Viagene's historical
accumulated deficit.
6) Represents the cash receipts from exercise of Viagene stock options
and warrants.
40
<PAGE>
CHIRON AND VIAGENE COMBINED
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 THREE MONTHS ENDED MARCH 31, 1995
--------------------------------------------- --------------------------------------------
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
CHIRON(1) VIAGENE ADJUSTMENTS COMBINED CHIRON VIAGENE ADJUSTMENTS COMBINED
--------- -------- ----------- --------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Product sales......... $779,767 $ -- $ -- $ 779,767 $ 183,909 $ -- $ -- $ 183,909
Equity in earnings of
unconsolidated joint
businesses........... 75,251 -- -- 75,251 18,178 -- -- 18,178
Collaborative
agreement revenues... 67,501 12,895 (1,454)(3) 78,942 5,567 2,896 (639)(3) 7,824
Other revenues........ 34,608 -- -- 34,608 10,592 -- -- 10,592
-------- -------- --------- --------- --------- ------- --------- ---------
Total revenues........ 957,127 12,895 (1,454) 968,568 218,246 2,896 (639) 220,503
EXPENSES:
Research and
development.......... 236,830 21,549 (1,454)(3) 256,925 99,055 6,544 (639)(3) 104,960
Cost of sales......... 348,965 -- -- 348,965 90,282 -- -- 90,282
Selling, general and
administrative....... 291,557 3,398 -- 294,955 84,894 946 -- 85,840
Write-off of purchased
in-process
technologies......... -- -- -- -- 230,657 -- -- 230,657
Costs related to Ciba
transaction.......... -- -- -- -- 49,520 -- -- 49,520
Restructuring and
reorganization costs. -- -- -- -- 37,641 -- -- 37,641
Other operating
expenses............. 19,201 -- -- 19,201 2,280 -- -- 2,280
Loss on divestiture... (3,757) -- -- (3,757) -- -- -- --
-------- -------- --------- --------- --------- ------- --------- ---------
Total expenses........ 892,796 24,947 (1,454) 916,289 594,329 7,490 (639) 601,180
-------- -------- --------- --------- --------- ------- --------- ---------
Income (loss) from
operations............ 64,331 (12,052) -- 52,279 (376,083) (4,594) -- (380,677)
Other income (expense),
net................... (7,363) 1,140 (1,395)(2) (7,618) (1,389) 272 (297)(2) (1,414)
-------- -------- --------- --------- --------- ------- --------- ---------
Income (loss) before
income taxes.......... 56,968 (10,912) (1,395) 44,661 (377,472) (4,322) (297) (382,091)
Provision for income
taxes................. 25,282 -- (488)(4) 24,794 8,306 -- (104)(4) 8,202
-------- -------- --------- --------- --------- ------- --------- ---------
Income (loss) before
nonrecurring charges.. $ 31,686 $(10,912) $ (907) $ 19,867 $(385,778) $(4,322) $ (193) $(390,293)
======== ======== ========= ========= ========= ======= ========= =========
Income (loss) before
nonrecurring charges
per share: $ 0.77 $ 0.47 (5) $ (9.64) $ (9.52)(5)
======== ========= ========= =========
Nonrecurring charges
(not included above).. -- -- $(104,512)(6) $(104,512) -- -- $(104,512)(6) $(104,512)
======== ======== ========= ========= ========= ======= ========= =========
Nonrecurring charges
per share............. -- -- $ (2.50)(5) -- -- $ (2.55)(5)
======== ======== ========= ========= ======= =========
Shares used in
calculation of per
share amounts......... 40,893 41,868 (5) 40,013 40,988 (5)
======== ========= ========= =========
</TABLE>
See accompanying notes.
41
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Combined Condensed Statements of Operations have
been prepared to reflect the acquisition of Viagene as if it occurred on
January 1, 1994 for the pro forma statement of operations for the year ended
December 31, 1994, and on January 1, 1995 for the pro forma statement of
operations for the three months ended March 31, 1995. The acquisition has been
accounted for under the purchase method of accounting.
The following is a summary of reclassifications and adjustments reflected in
the Unaudited Pro Forma Combined Condensed Statements of Operations:
1) Included in Chiron's December 31, 1994 pro forma results are the
historical statements of operations of CCD, JV Vax B.V. and The Biocine
Company along with the adjustments and elimination entries as presented in
the Unaudited Pro Forma Combined Condensed Statement of Operations reported
by Chiron on Form 8-K/A dated March 17, 1995 (incorporated herein by
reference), in connection with Chiron's acquisition from Ciba of CCD and
Ciba's interests in The Biocine Company and Biocine S.p.A.
2) Represents the reduction in interest income earned due to the $37.7
million cash payment made to Viagene stockholders in connection with the
Merger less cash received from exercise of Viagene stock options and
warrants.
3) Represents the elimination of revenues recorded by Chiron and expenses
recorded by Viagene in connection with research collaboration arrangements
between Viagene and Chiron.
4) Represents the tax effect, where applicable, of the Unaudited Pro
Forma Combined Condensed Statements of Operations adjustments based on the
statutory rate in effect for the periods shown.
5) Pro forma combined income (loss) before nonrecurring charges per share
amounts as presented in the accompanying Unaudited Pro Forma Combined
Condensed Statements of Operations are based on the weighted average number
of shares of Chiron Common Stock used in the calculation of income (loss)
before nonrecurring charges per share, adjusted to reflect the issuance of
974,666 new shares of Chiron Common Stock to Viagene stockholders.
6) As required under generally accepted accounting principles, amounts
allocated to acquired in-process technology have been written off in the
accompanying Unaudited Pro Forma Combined Condensed Balance Sheet. This
$104.5 million charge has been excluded from the Unaudited Pro Forma
Combined Condensed Statements of Operations as it represents a nonrecurring
item.
42
<PAGE>
DESCRIPTION OF CHIRON CAPITAL STOCK
DESCRIPTION OF CHIRON COMMON STOCK
The Certificate of Incorporation, as amended, of Chiron provides that Chiron
is authorized to issue up to 100,000,000 shares of Common Stock, par value
$0.01 per share, of which 500,000 shares have been specially designated
Restricted Common Stock. No shares of Restricted Common Stock are outstanding.
As used herein, "Chiron Common Stock" refers to the 99,500,000 shares
designated as such and not to the Restricted Common Stock.
Common Stock. As of July 27, 1995, there were 40,332,209 shares of Chiron
Common Stock outstanding held of record by 9,791 stockholders.
The holders of Chiron Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding preferred stock, holders
of Chiron Common Stock are entitled to receive ratably such dividends as may
be declared by the Chiron Board out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of Chiron, holders of
Chiron Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and the liquidation preference of any outstanding
preferred stock. Holders of Chiron Common Stock have no preemptive rights and
have no rights to convert their Chiron Common Stock into any other securities.
All of the outstanding shares of Chiron Common Stock are, and shares to be
issued pursuant to the Merger will be, nonassessable.
Restricted Common Stock. As of the date of this Proxy Statement-Prospectus,
there are no shares of Restricted Common Stock outstanding. The Chiron Board
is authorized to fix or alter the rights, preferences, privileges and
restrictions of any wholly unissued series of Restricted Common Stock,
including the number of shares constituting any such series, and the
designation thereof, and to increase or decrease the number of shares of such
series (but not below the number of shares of such series then outstanding).
Notwithstanding the foregoing, in no event may the amount of any dividend or
distribution on liquidation with respect to a share of Restricted Common Stock
be greater than the amount distributed with respect to each share of Chiron
Common Stock, nor shall the vote per share of Restricted Common Stock be
greater than the proportionate vote of the Chiron Common Stock into which such
Restricted Common Stock may be convertible.
DESCRIPTION OF CHIRON PREFERRED STOCK
Chiron is authorized to issue up to 5,000,000 shares of Preferred Stock, par
value $0.01 per share ("Chiron Preferred Stock"), none of which is
outstanding. Chiron Preferred Stock may be issued in series from time to time
with such designations, relative rights, priorities, preferences,
qualifications, limitations and restrictions thereof, to the extent that such
are not fixed in Chiron's Restated Certificate of Incorporation, as the Chiron
Board determines. The rights, preferences, limitations and restrictions of
different series of Chiron Preferred Stock may differ with respect to dividend
rates, amounts payable on liquidation, voting rights, conversion rights,
redemption provisions, sinking fund provisions and purchase funds and other
matters. The Chiron Board may authorize the issuance of Chiron Preferred Stock
which ranks senior to the Chiron Common Stock and Restricted Common Stock with
respect to the payment of dividends and the distribution of assets on
liquidation. In addition, the Chiron Board is authorized to fix the
limitations and restrictions, if any, upon the payment of dividends on Chiron
Common Stock and Restricted Common Stock to be effective while any shares of
Chiron Preferred Stock are outstanding. The authority of the Chiron Board to
issue Chiron Preferred Stock without further stockholder approval could have
the effect of delaying, deferring or preventing a change in control of Chiron.
Chiron has no present intention to issue any shares of Chiron Preferred Stock.
CERTAIN CHARTER PROVISIONS; RIGHTS PLAN
Certain Charter Provisions. Certain provisions of Chiron's Restated
Certificate of Incorporation and Bylaws may have the effect of delaying,
deferring or preventing attempts to acquire control of Chiron. The
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<PAGE>
Chiron Board is divided into three classes, with the terms of approximately
one-third of the incumbent directors expiring each year. A vote of 75 percent
of the directors is required to increase or decrease the number of directors.
Any vacancies on the Chiron Board and any newly created directorships may only
be filled by a two-thirds vote of the remaining directors. In addition,
business combinations involving Chiron and a Related Person (as defined below)
must be approved by holders of 66 2/3 percent or more of the outstanding
shares of voting stock considered as one class, provided that, unless certain
requirements concerning the form of consideration, minimum price and other
procedures are met, shares beneficially owned by the Related Person are not to
be counted in calculating such approval. These requirements do not apply to a
business combination that is approved by two-thirds or more of the Continuing
Directors (as defined below). "Related Person" is defined generally as any
person who is the beneficial owner of 10 percent or more of Chiron's voting
stock, and certain affiliates, associates and successors of such person.
"Continuing Director" is defined generally as a member of the Chiron Board who
(i) was a member of the Chiron Board on January 1, 1987, (ii) (A) is not a
Related Person or a representative of a Related Person who has been a Related
Person for less than the immediately preceding 24 months and (B) was a member
of the Chiron Board prior to the time any such Related Person became such or
(iii) a successor of a Continuing Director who (A) is not a Related Person or
a representative of a Related Person, and (B) was recommended to succeed a
Continuing Director by a majority of Continuing Directors.
Further, corporate action may be taken by the stockholders only at an annual
or special meeting, but not by written consent of stockholders in lieu of a
meeting. The provisions described above that are contained in Chiron's
Restated Certificate of Incorporation are subject to repeal or amendment only
upon the approval of 66 2/3 percent or more of the total voting power of all
outstanding shares excluding the shares beneficially owned by a Related Person
with respect to any repeal or amendment of the provisions relating to business
combinations.
Rights Plan. On August 25, 1994, the Chiron Board declared a dividend of one
preferred share purchase right (a "Chiron Right") for each outstanding share
of Chiron Common Stock to the holders of record on September 6, 1994 (the
"Chiron Rights Record Date") and authorized and directed the issuance of one
Chiron Right with respect to each share of Chiron Common Stock that shall
become outstanding after September 6, 1994 and before the earlier of (x) the
date the Chiron Rights are redeemed or (y) the Distribution Date (as defined
below).
The terms of the Chiron Rights are set forth in a Rights Agreement, dated
August 25, 1994, as amended on November 20, 1994 (the "Rights Agreement"),
between Chiron and Continental Transfer & Trust Company, as Rights Agent. The
following description of the Chiron Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement. Each Chiron
Right entitles the registered holder thereof to purchase from Chiron one one-
hundredth of a share of Series A Junior Participating Preferred Stock, par
value $0.01 per share (the "Series A Preferred Shares") of Chiron at a price
of $325.00, subject to adjustment. The Rights will expire on September 5,
2004, unless such date is extended or unless such Rights are redeemed earlier,
and will not be exercisable or transferable separately from shares of Chiron
Common Stock until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons
becomes the beneficial owner of 15 percent or more of the outstanding Chiron
Common Stock (an "Acquiring Person"), or (ii) 10 business days (or such later
date as may be determined by action of the Chiron Board prior to such time as
any person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15 percent or more of such outstanding Chiron Common Stock (the
earlier of such dates being called the "Distribution Date").
The Chiron Rights are not exercisable until the Distribution Date. The
Chiron Rights will expire at the close of business on September 5, 2004 (the
"Final Expiration Date"), unless the Final Expiration Date is extended or
unless the Rights are earlier redeemed by Chiron.
Series A Preferred Shares purchasable upon exercise of the Chiron Rights
will not be redeemable. Each Series A Preferred Share will be entitled to an
aggregate dividend of 100 times the dividend declared per share of Chiron
Common Stock. In the event of liquidation, the holders of the Series A
Preferred Shares will be entitled
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<PAGE>
to an aggregate payment of 100 times the payment made per share of Chiron
Common Stock. Each Series A Preferred Share will have 100 votes, voting
together with the shares of Chiron Common Stock. In the event of any merger,
consolidation or other transaction in which shares of Chiron Common Stock are
exchanged, each Series A Preferred Share will be entitled to receive 100 times
the amount received per share of Chiron Common Stock. Because of the nature of
such dividend, liquidation and voting rights, the value of the one one-
hundredth interest in a Series A Preferred Share purchasable upon exercise of
each Chiron Right should approximate the value of one share of Chiron Common
Stock.
In the event that, after the Chiron Rights become exercisable, Chiron is
acquired in a merger or other business combination transaction with an
Acquiring Person or an affiliate thereof, or 50 percent or more of its
consolidated assets or earning power are sold to an Acquiring Person or an
affiliate thereof, proper provision will be made so that each holder of a
Chiron Right will thereafter have the right to receive, upon exercise thereof
at the then current exercise price of the Chiron Right, that number of shares
of common stock of the acquiring company which at the time of such transaction
will have a market value of two times the exercise price of the Chiron Right.
In the event that any person or group of affiliated or associated persons
becomes the beneficial owner of 15 percent or more of the outstanding shares
of Chiron Common Stock, proper provision shall be made so that each holder of
a Chiron Right, other than Chiron Rights beneficially owned by the Acquiring
Person (which will thereafter be void), will thereafter have the right to
receive upon exercise that number of shares of Chiron Common Stock (or cash,
other securities or property) having a market value of two times the exercise
price of a Chiron Right.
In connection with Chiron's strategic alliance with Ciba and Ciba's
acquisition of approximately 49.5 percent of the outstanding shares of Chiron
Common Stock, Chiron amended the Rights Agreement to provide that Ciba would
not be deemed to be an Acquiring Person as a result of such acquisition.
Accordingly, the Rights did not become exercisable or transferrable separately
from the Chiron Common Stock as a result of such acquisition.
CERTAIN RIGHTS OF CIBA
In connection with its strategic alliance with Ciba (see "Introduction--
Parties to the Merger--Chiron"), Chiron has agreed that, so long as Ciba owns
40 percent of the outstanding Chiron Common Stock, Ciba would have the right
to designate three members of the Chiron Board (the "Ciba Directors") and
Ciba's approval would be required to effect a variety of transactions,
including but not limited to the following: (i) certain stock issuances; (ii)
a reclassification, combination, split, subdivision or redemption, purchase or
other acquisition, directly or indirectly, of any debt or equity securities or
other capital stock of Chiron; (iii) any amendment to Chiron's Restated
Certificate of Incorporation or any change in the size or composition of the
Chiron Board or any committee thereof; (iv) any amendment to the Chiron
Bylaws; (v) the incurrence, assumption or issuance by Chiron or any of its
subsidiaries of certain indebtedness; (vi) any transaction involving, or
action by, Chiron leading to the acquisition by an entity or group of equity
securities representing a percentage of the total voting power of Chiron, or
any equity interest in Chiron, greater than 15% or requiring the approval or
participation of holders of a majority of the voting stock or equity
securities of Chiron; (vii) certain acquisitions for cash and equity
securities of Chiron having a fair market value, when taken together with the
fair market value given by Chiron for all other acquisitions consummated
simultaneously therewith or prior thereto during the same fiscal year, which
equals or exceeds $125 million (a "Level II Acquisition"); (viii) any sale,
asset exchange, lease, exchange, mortgage, pledge, transfer or other
disposition by merger or otherwise by Chiron or any of its subsidiaries (in
one transaction or a series of related transactions) of all of the business or
assets of Chiron and its subsidiaries taken as a whole or of any part thereof
constituting a substantial part of Chiron; (ix) any change in the strategic
mission of Chiron and its subsidiaries from that of being a technology-driven
health care company; and (x) certain actions relating to the dissolution or
liquidation of Chiron or any significant subsidiary thereof and certain events
of bankruptcy and insolvency. The Merger will be a Level II Acquisition and
was approved by Ciba on April 23, 1995.
In addition, the approval of a majority of the Ciba Directors will be
required for the Chiron Board to approve or authorize, and for Chiron or any
of its subsidiaries to do, any of the following: (i) the declaration or
payment by Chiron of any extraordinary dividend; and (ii) subject to certain
exceptions, the issuance of any
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<PAGE>
equity securities or other capital stock (or any options, warrants or rights
with respect thereto) of Chiron or any of its subsidiaries to any of their
directors, officers or other employees as compensation.
SECTION 203 OF THE DGCL
Chiron is subject to Section 203 of the DGCL which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in a business
combination (as defined therein) with an "interested stockholder" (defined
generally as any person who beneficially owns 15 percent or more of the
outstanding voting stock of Chiron or any person affiliated with such person)
for a period of three years following the date that such stockholder became an
interested stockholder, unless (i) prior to such date the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85 percent
of the voting stock of the corporation at the time the transaction commenced
(excluding for purposes of determining the number of shares outstanding those
shares owned (x) by directors who are also officers of the corporation and (y)
by employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or (iii) on or subsequent to such
date 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 at least 66 2/3 percent of the outstanding voting stock of the
corporation not owned by the interested stockholder.
LIMITATION ON DIRECTORS' AND OFFICERS' LIABILITY
Chiron's Restated Certificate of Incorporation limits the liability of
directors to the fullest extent permitted by the DGCL. In addition, Chiron's
Bylaws provide that the Company shall indemnify directors and officers of
Chiron to the fullest extent permitted by such law.
APPRAISAL RIGHTS
Record holders of Viagene Common Stock are entitled to appraisal rights
under Section 262 of the DGCL ("Section 262"). The following discussion
represents a summary of the material provisions of Section 262. For additional
information, reference is made to the full text of Section 262, which is
reprinted in its entirety as Appendix B to this Proxy Statement-Prospectus. A
person having a beneficial interest in shares of Viagene Common Stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect the appraisal rights provided under
Section 262.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Special Meeting, not less than
20 days prior to the meeting, a constituent corporation must notify each of
the holders of its stock for which appraisal rights are available that such
appraisal rights are available and include in each such notice a copy of
Section 262. THIS PROXY STATEMENT-PROSPECTUS SHALL CONSTITUTE SUCH NOTICE TO
THE RECORD HOLDERS OF VIAGENE COMMON STOCK. ANY SUCH STOCKHOLDER WHO WISHES TO
EXERCISE SUCH APPRAISAL RIGHTS SHOULD REVIEW THE FOLLOWING DISCUSSION AND
APPENDIX B CAREFULLY, BECAUSE FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE
PROCEDURES SPECIFIED WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS UNDER THE
DGCL.
Under the DGCL, a record holder of shares of Viagene Common Stock who makes
the demand described below with respect to such shares, who continuously is
the record holder of such shares through the Effective Time, who otherwise
complies with the statutory requirements set forth in Section 262 and who
neither votes in favor of approval of the Merger Agreement and the Merger nor
consents thereto in writing will be entitled to have their shares of Viagene
Common Stock appraised by the Delaware Court of Chancery and to receive
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<PAGE>
payment of the "fair value" of such shares as described below. Such holders
are, in such circumstances, entitled to appraisal rights because they hold
stock of a constituent corporation to the Merger and may be required by the
Merger Agreement to accept Merger Consideration, at least in part, in the form
of Cash Consideration. Since holders of shares of Viagene Common Stock wishing
to exercise appraisal rights must not vote in favor of approval of the Merger
Agreement and the Merger, such holders should not deliver unmarked proxies
(i.e., proxies without instructions) to Viagene as such proxies will be voted
FOR such approval (see "The Special Meeting--General").
A holder of shares of Viagene Common Stock wishing to exercise his or her
appraisal rights must deliver to the Secretary of Viagene, before the vote on
the Merger Agreement at the Special Meeting, a written demand for appraisal of
his or her shares of Viagene Common Stock. Merely voting or delivering a proxy
directing a vote against approval of the Merger Agreement and the Merger will
not constitute a demand for appraisal. A written demand is essential. Such
written demand must reasonably inform Viagene of the identity of the holder
and that such holder intends thereby to demand appraisal of the holder's
shares. All written demands for appraisal of Viagene Common Stock should be
sent or delivered to Viagene, Inc., 11055 Roselle Street, San Diego,
California 92121, Attn: Corporate Secretary. In addition, a holder of shares
of Viagene Common Stock wishing to exercise his or her appraisal rights must
hold such shares of record on the date the written demand for appraisal is
made and must hold such shares continuously through the Effective Time.
Stockholders who hold their shares of Viagene Common Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights must
take all necessary steps in order that a demand for appraisal is made by the
record holder of such shares and are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal
by the record holder.
Within ten days after the Effective Time of the Merger, the Surviving
Corporation must send a notice as to the effectiveness of the Merger to each
person who has satisfied the appropriate provisions of Section 262 and who is
entitled to appraisal rights under Section 262. Within 120 days after the
Effective Time, any holder of record of shares of Viagene Common Stock who has
complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth (i) the aggregate number of shares of Viagene Common
Stock not voted in favor of the Merger Agreement and with respect to which
demands for appraisal have been received and (ii) the aggregate number of
holders of such shares. Any such statement must be mailed within ten days
after a written request therefor has been received by the Surviving
Corporation.
Within 120 days after the Effective Time, but not thereafter, the Surviving
Corporation or any holder of shares of Viagene Common Stock who has complied
with the foregoing procedures and who is entitled to appraisal rights under
Section 262 may file a petition in the Delaware Court of Chancery demanding a
determination of the "fair value" of such shares. The Surviving Corporation is
not under any obligation to file a petition with respect to the appraisal of
the "fair value" of the shares of Viagene Common Stock and neither Chiron nor
Viagene presently intends that the Surviving Corporation file such a petition.
Accordingly, it is the obligation of the stockholders to initiate all
necessary action to perfect their appraisal rights within the time prescribed
in Section 262. A holder of shares of Viagene Common Stock will fail to
perfect, or effectively lose, his or her right to appraisal if no petition for
appraisal of shares of Viagene Common Stock is filed within 120 days after the
Effective Time.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the holders of shares
of Viagene Common Stock entitled to appraisal rights and will appraise the
"fair value" of the shares of Viagene Common Stock, exclusive of any element
of value arising from the accomplishment or expectation of the Merger. Holders
considering seeking appraisal should be aware that the "fair value" of their
shares of Viagene Common Stock as determined under Section 262 could be more
than, the same as, or less than the value of the Merger Consideration they
would receive if they did not seek appraisal. The Delaware Supreme Court has
stated that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered in
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the appraisal proceedings. In addition, Delaware courts have decided that the
statutory appraisal remedy, depending on factual circumstances, may or may not
be a dissenter's exclusive remedy.
The Delaware Court of Chancery will determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose shares of
Viagene Common Stock have been appraised. The costs of the action may be
determined by such court and taxed upon the parties as the court deems
equitable. The Delaware Court of Chancery may also order that all or a portion
of the expenses incurred by any holder of shares of Viagene Common Stock in
connection with an appraisal, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the shares of
Viagene Common Stock entitled to appraisal.
If any holder of shares of Viagene Common Stock who demands appraisal of his
or her shares under Section 262 fails to perfect, or effectively withdraws or
loses, his or her right to appraisal, as provided in 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. A holder may withdraw his or
her demand for appraisal by delivering to the Surviving Corporation a written
withdrawal of his or her demand for appraisal and acceptance of the Merger,
except that any such attempt to withdraw made more than 60 days after the
Effective Time will require the written approval of the Surviving Corporation.
Failure to follow the steps required by Section 262 of the DGCL for perfecting
appraisal rights may result in the loss of such rights.
Any holder of shares of Viagene Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time,
be entitled to vote the shares of Viagene Common Stock subject to such demand
for any purpose or be entitled to the payment of dividends or other
distributions on those shares (except dividends or other distributions payable
to holders of record of shares of Viagene Common Stock as of a date prior to
the Effective Time).
COMPARISON OF CERTAIN PROVISIONS OF THE CERTIFICATES OF
INCORPORATION AND BYLAWS OF CHIRON AND VIAGENE
At present, the rights of Viagene's stockholders are governed by applicable
Delaware law, including the DGCL, the Restated Certificate of Incorporation of
Viagene (the "Viagene Certificate") and the Bylaws of Viagene (the "Viagene
Bylaws"). If the Merger is consummated, Viagene stockholders who receive
shares of Chiron Common Stock will, upon consummation of the Merger, become
stockholders of Chiron. The rights of such stockholders as stockholders of
Chiron will be governed by applicable Delaware law, including the DGCL, the
Restated Certificate of Incorporation of Chiron, as amended (the "Chiron
Certificate"), and the Bylaws of Chiron (the "Chiron Bylaws"). The following
is a summary of the material differences between the Viagene Certificate and
Bylaws, on the one hand, and the Chiron Certificate and Bylaws, on the other
hand, which may significantly affect the rights of Viagene stockholders. This
summary is qualified in its entirety by reference to the full text of such
documents. For information as to how such documents may be obtained, see
"Available Information."
AUTHORIZED CAPITAL
Chiron. The authorized capital stock of Chiron consists of 105,000,000
shares, 100,000,000 of which are shares of Common Stock, par value $0.01 per
share (of which 500,000 shares have been specially designated Restricted
Common Stock), and 5,000,000 of which are shares of Preferred Stock, par value
$0.01 per share. For a description of the Chiron capital stock, see
"Description of Chiron Capital Stock."
Viagene. The authorized capital stock of Viagene consists of 40,000,000
shares, 30,000,000 of which are shares of Common Stock, par value $0.001 per
share, and 10,000,000 of which are shares of Preferred Stock, par value $0.001
per share. Subject to the preferential rights of the Viagene Preferred Stock,
the holders of Viagene Common Stock are entitled to such dividends as may be
declared from time to time by the Viagene
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Board from funds legally available therefor, and upon liquidation are entitled
to receive pro rata all assets of Viagene available for distribution to such
holders. Holders of Viagene Common Stock do not have any preemptive rights. As
of the Record Date, shares of Viagene Common Stock were outstanding and
held of record by holders.
DIRECTORS
Chiron. Under the Chiron Bylaws, the Chiron Board consists of eleven
directors. The Chiron Board is divided into three classes, with the terms of
approximately one-third of the incumbent directors expiring each year. See
"Description of Chiron Capital Stock--Certain Charter Provisions; Rights
Plan--Certain Charter Provisions." On November 20, 1994, in connection with
its strategic alliance with Ciba, Chiron and Ciba agreed that of Chiron's
eleven directors, three will be Ciba Directors, three will be "Management
Directors", two of whom must be the two most senior executives of the Company,
and the remainder will be "Independent Directors". Each of the Management
Directors and the Independent Directors are nominated by the Nominating
Committee of Chiron. The number of directors designated by Ciba will be
reduced should Ciba's ownership of Chiron Common Stock decline below certain
levels. Neither the Chiron Certificate nor the Chiron Bylaws provides for
cumulative voting for the election of directors. The Chiron Bylaws provide
that any director may be removed with or without cause by the stockholders.
Viagene. Under the Viagene Bylaws, the Viagene Board consists of such number
of directors as is from time to time determined by resolution of the Viagene
Board or by the stockholders at an annual meeting or at any special meeting
called for that purpose. The Viagene Certificate provides that the Viagene
Board shall be divided into three classes, as nearly equal in number as
possible. The Viagene Board is currently fixed at seven directors, each
serving a term of three years. Neither the Viagene Certificate nor the Viagene
Bylaws provide for cumulative voting for the election of directors. The
Viagene Bylaws provide that any director may be removed by the affirmative
vote of the holders of a majority of the issued and outstanding shares of
stock at an annual meeting or at any special meeting of Viagene stockholders,
but only for cause. The vacancy on the Viagene Board created by such removal
may be filled by the stockholders at the meeting at which the removal
occurred, or, if the stockholders fail to fill such a vacancy, by the majority
of the directors then in office.
VOTING RIGHTS; ACTION BY WRITTEN CONSENT
Chiron. The Chiron Certificate contains certain supermajority vote
requirements with respect to certain business combinations involving a Related
Person (see "Description of Chiron Capital Stock--Certain Charter Provisions;
Rights Plan--Certain Charter Provisions"). Due to Ciba's ownership of a
significant percentage of Chiron's outstanding shares of Common Stock
(approximately 48.9 percent as of July 27, 1995), as a practical matter, Ciba
will be able to control the outcome of most actions requiring stockholder
approval. In addition, Ciba has contractual approval rights with respect to
certain specified matters. See "Description of Chiron Capital Stock--Certain
Rights of Ciba."
Pursuant to the Chiron Certificate and Bylaws, corporate action may be taken
by stockholders only at an annual or special meeting, but not by written
consent of stockholders in lieu of a meeting.
Viagene. The Viagene Certificate does not contain any provisions requiring a
supermajority vote with respect to certain business combinations, and Viagene
is not a party to any agreements with any Viagene stockholder granting such
stockholder approval rights comparable to those granted by Chiron to Ciba. The
Viagene Certificate and the Viagene Bylaws specifically deny the power of
Viagene stockholders to take action by written consent without a meeting.
CALL OF SPECIAL MEETINGS
Chiron. The Chiron Bylaws provide that a special meeting of stockholders may
be called by the President and shall be called by the President or Secretary
at the request in writing of a majority of the Chiron Board.
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Viagene. The Viagene Bylaws provide that a special meeting of stockholders
may be called by the Chairman of the Board or the Chief Executive Officer or
by resolution approved by a majority of the Viagene Board.
ADVANCE NOTICE OF STOCKHOLDER PROPOSALS
Chiron. The Chiron Bylaws provide that proposals regarding matters to be
acted upon at an annual meeting of stockholders, other than those made by the
Chiron Board, must be preceded by at least 20 days' prior written notice.
Viagene. The Viagene Bylaws provide that for business to be properly brought
before an annual meeting by a stockholder, the stockholder must give notice
thereof to Viagene not less than 50 days nor more than 75 days prior to the
meeting (provided that if less than 65 days' notice of the date of the meeting
is given to stockholders, notice by the stockholder must be given not later
than the 15th day following the mailing of the notice of the date of the
annual meeting).
AMENDMENTS OF BYLAWS
Chiron. The Chiron Bylaws may be amended by the Chiron Board by the approval
of a majority of the directors present at a meeting or by the stockholders by
the affirmative vote of the majority of shares present at any regular or
special meeting and entitled to vote.
Viagene. The Viagene Bylaws may be amended by the Viagene Board by the
approval of 66 2/3 percent of the total number of authorized directors or by
the affirmative vote of at least 66 2/3 percent of the voting power of the
outstanding shares of capital stock of Viagene entitled to vote generally in
the election of directors, voting together as a single class.
LEGAL MATTERS
The validity of the Chiron Common Stock that may be issued in connection
with the Merger is being passed upon for Chiron by William G. Green, Esq.,
General Counsel to Chiron. Opinions with respect to certain federal income tax
consequences of the Merger will be rendered to Chiron by Sullivan & Cromwell.
EXPERTS
The financial statements of Viagene included in Viagene's Annual Report on
Form 10-K for the year ended December 31, 1994, as amended on May 1, 1995,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such financial statements are incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Chiron at and for the year ended
December 31, 1994 included in Chiron's Annual Report on Form 10-K for the year
ended December 31, 1994 (the "Chiron 10-K") and the financial statements of
The Biocine Company included in the Form 8-K/A have been audited by KPMG Peat
Marwick LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference. The consolidated
financial statements of Chiron at December 31, 1993 and for the years ended
December 31, 1993 and December 31, 1992 included in the Chiron 10-K and the
consolidated financial statements of CCD included in the Form 8-K/A have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon included therein and incorporated herein by reference. The
consolidated financial statements of JV Vax B.V. included in the Form 8-K/A
have been audited by Reconta Ernst & Young, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
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Such financial statements are incorporated herein by reference in reliance
upon such reports given upon the authority of such firms as experts in
accounting and auditing.
VIAGENE STOCKHOLDER PROPOSALS
If the Merger is not consummated, proposals of stockholders of Viagene
intended to be presented at the 1996 annual meeting of Viagene must be
received no later than January 15, 1996, by the Secretary of Viagene at the
principal executive office of Viagene, 11055 Roselle Street, San Diego,
California 92121, in order to be eligible for consideration for inclusion in
Viagene's proxy statement for such meeting.
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APPENDIX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
VIAGENE, INC.,
A DELAWARE CORPORATION,
AND
CHIRON CORPORATION,
A DELAWARE CORPORATION
DATED AS OF APRIL 23, 1995
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
ARTICLE I The Merger; Closing; Effective Time........................ A-1
1.1 The Merger................................................. A-1
1.2 Closing.................................................... A-1
1.3 Effective Time............................................. A-1
Certificate of Incorporation and By-Laws of the Surviving
ARTICLE II Corporation................................................ A-2
2.1 The Certificate of Incorporation........................... A-2
2.2 The By-Laws................................................ A-2
ARTICLE III Officers and Directors of the Surviving Corporation........ A-2
3.1 Officers and Directors..................................... A-2
ARTICLE IV Conversion or Cancellation of Shares in the Merger......... A-2
4.1 Conversion or Cancellation of Shares....................... A-2
(a) Conversion of Shares................................... A-2
(b) Cancellation of Shares................................. A-2
(c) Merger Sub............................................. A-3
4.2 Allocation of Merger Consideration; Election Procedures.... A-3
(a) Allocation............................................. A-3
(b) Election Procedures.................................... A-3
(c) Transfers.............................................. A-5
(d) Termination of Exchange Fund........................... A-5
4.3 No Fractional Shares....................................... A-5
4.4 Dissenters' Rights......................................... A-5
4.5 Stock Option Plan.......................................... A-5
ARTICLE V Representations and Warranties............................. A-6
5.1 Representations and Warranties of the Company.............. A-6
(a) Corporate Organization and Qualification............... A-6
(b) Corporate Authority.................................... A-6
(c) Governmental Filings; No Violations.................... A-6
(d) Capital Structure...................................... A-7
(e) Company Reports; Financial Statements.................. A-7
(f) Absence of Certain Changes or Events................... A-8
(g) Litigation and Liabilities............................. A-9
(h) Employee Benefits...................................... A-9
(i) Brokers and Finders.................................... A-10
(j) Takeover Statutes...................................... A-10
(k) Subsidiaries........................................... A-10
(l) Invention and Secrecy.................................. A-10
(m) Patents and Trademarks................................. A-10
(n) Title to Property and Assets........................... A-10
(o) Tax Returns and Payments............................... A-11
(p) Insurance.............................................. A-11
(q) Labor Agreements and Actions........................... A-11
(r) Voting Arrangements.................................... A-11
(s) Environmental.......................................... A-11
(t) Minute Books........................................... A-12
(u) Real Property Holding Company.......................... A-12
(v) Information............................................ A-12
</TABLE>
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<CAPTION>
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<C> <S> <C>
5.2 Representations and Warranties of Purchaser............... A-13
(a) Corporate Organization and Qualification.............. A-13
(b) Corporate Authority................................... A-13
(c) Governmental Filings; No Violations................... A-13
(d) Capital Structure; Purchaser Shares................... A-13
(e) Purchaser Reports..................................... A-14
(f) Absence of Certain Changes or Events.................. A-14
(g) Brokers and Finders................................... A-15
(h) Information........................................... A-15
ARTICLE VI Covenants................................................. A-15
6.1 Interim Operations of the Company......................... A-15
6.2 Acquisition Proposals..................................... A-16
6.3 Meetings of Purchaser's Stockholders...................... A-17
6.4 Filings; Other Action..................................... A-17
6.5 Access.................................................... A-17
6.6 Notification of Certain Matters........................... A-17
6.7 Publicity................................................. A-18
6.8 Employee Benefits......................................... A-18
6.9 Other Actions by the Company.............................. A-18
(a) Rights................................................ A-18
(b) Takeover Statute...................................... A-18
6.10 Affiliates Agreements..................................... A-18
6.11 Letter of the Company's Accountants....................... A-18
6.12 Registration Statement.................................... A-19
6.13 Indemnification of Directors and Officers................. A-19
6.14 No Changes in Purchaser Shares............................ A-20
ARTICLE VII Conditions................................................ A-20
7.1 Conditions to Obligations of Purchaser.................... A-20
(a) Stockholder Approval.................................. A-20
(b) Governmental and Regulatory Consents.................. A-20
(c) Litigation............................................ A-20
(d) Representations and Warranties; Performance of
Obligations............................................... A-20
(e) Tax Free Reorganization............................... A-20
(f) Registration Statement................................ A-20
(g) Dissenting Shares..................................... A-20
7.2 Conditions to Obligations of the Company.................. A-20
(a) Stockholder Approval.................................. A-21
(b) Governmental and Regulatory Consents.................. A-21
(c) Order................................................. A-21
(d) Representations and Warranties; Performance of
Obligations............................................... A-21
(e) Tax Free Reorganization............................... A-21
ARTICLE VIII Termination, Amendment and Waiver......................... A-21
8.1 Termination............................................... A-21
8.2 Effect of Termination..................................... A-22
8.3 Amendment................................................. A-22
8.4 Waiver.................................................... A-22
ARTICLE IX Miscellaneous and General................................. A-22
9.1 Payment of Expenses....................................... A-22
9.2 Survival.................................................. A-22
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
9.3 Counterparts..................................................... A-23
9.4 Governing Law.................................................... A-23
9.5 Notices.......................................................... A-23
9.6 Entire Agreement, etc............................................ A-23
9.7 Definition of "Subsidiary"....................................... A-23
9.8 Captions......................................................... A-23
</TABLE>
EXHIBITS
Exhibit A Affiliates Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated as
of April 23, 1995, between Viagene, Inc., a Delaware corporation (the
"Company"), and Chiron Corporation, a Delaware corporation ("Purchaser"), the
Company and Purchaser sometimes being hereinafter collectively referred to as
the "Constituent Corporations."
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each have
determined that it is in the best interests of their respective stockholders
for the Company to merge with and into a wholly-owned subsidiary of Purchaser
("Merger Sub"), upon the terms and subject to the conditions set forth herein;
WHEREAS, for Federal income tax purposes, it is intended that the Merger (as
hereinafter defined) shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, the Company and Purchaser desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements contained herein, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3) the Company shall be merged
with and into Merger Sub and the separate corporate existence of the Company
shall thereupon cease (the "Merger"). Merger Sub 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, and the separate corporate existence of Merger Sub with all its
rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law (the "DGCL").
1.2 Closing. The closing of the Merger (the "Closing") shall take place (i)
at the offices of Pillsbury Madison & Sutro, 235 Montgomery Street, San
Francisco, CA at 9:00 A.M. on the first business day on which the last to be
fulfilled or waived of the conditions set forth in Article VII hereof shall be
fulfilled 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 Purchaser may
agree (the "Closing Date").
1.3 Effective Time. As soon as practicable following the Closing, and
provided that this Agreement shall not have been terminated or abandoned
pursuant to Article VIII hereof, the Company and Purchaser will cause a
Certificate of Merger (the "Delaware Certificate of Merger") to be executed
and filed with the Secretary of State of Delaware as provided in Section 251
of the DGCL. The Merger shall become effective at the time and on the date on
which the Delaware Certificate of Merger has been duly filed with the
Secretary of State of Delaware, and such time is hereinafter referred to as
the "Effective Time."
A-1
<PAGE>
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION
2.1 The Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub (the "Certificate") in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended
in accordance with the terms thereof and the DGCL.
2.2 The By-Laws. The By-Laws of Merger Sub in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL.
ARTICLE III
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1 Officers and Directors. The directors of Merger Sub and the officers of
the Company at the Effective Time shall, from and after the Effective Time, be
the directors and officers, respectively, 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 Surviving
Corporation's Certificate of Incorporation and By-Laws.
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1 Conversion or Cancellation of Shares. The manner of converting or
canceling shares of the Company and Purchaser in the Merger shall be as
follows:
(a) Conversion of Shares. Subject to Section 4.2, each share of the
Common Stock, par value $0.001 per share, of the Company (the "Shares")
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by Purchaser, Merger Sub or any other direct or indirect
subsidiary of Purchaser (collectively, the "Purchaser Companies") or Shares
("Dissenting Shares") that are held by stockholders exercising appraisal
rights pursuant to Section 262 of the DGCL (other than Dissenting Shares
deemed to be Non-Election Shares pursuant to Section 4.4) shall be
converted into, and become exchangeable for, (i) $9.00 in cash (the "Cash
Consideration") or (ii) 0.155 Purchaser Shares (as defined below) (as it
may be increased as described in this Section 4.1(a), the "Stock
Consideration," and, together with the Cash Consideration, the "Merger
Consideration"). In the event that the conditions set forth in Section
7.1(e) or 7.2(e) are not fulfilled or waived, Purchaser, at its option, may
increase the Stock Consideration to the extent necessary to permit such
conditions to be fulfilled. The term "Purchaser Shares" shall mean the
validly issued, fully paid and nonassessable shares of Common Stock, par
value $0.01 per share, of Purchaser. All references in this Agreement to
Purchaser Shares to be issued pursuant to the Merger shall be deemed to
include the corresponding Purchaser Rights (as defined in Section 5.2(d)
hereof), except where the context otherwise requires. All such Shares shall
no longer be outstanding and shall be canceled and retired and shall cease
to exist, and each certificate (each a "Certificate") representing any of
such Shares shall thereafter represent only the right to receive the Merger
Consideration (and the right, if any, to receive cash in lieu of fractional
shares) into which such Shares have been converted pursuant to this Article
IV, or the right, if any, to receive payment from the Surviving Corporation
of the "fair value" of such shares as determined in accordance with Section
262 of the DGCL.
(b) Cancellation of Shares. Each Share issued and outstanding at the
Effective Time and owned by any of the Purchaser Companies, and each Share
issued and held in the Company's treasury at the Effective Time, shall, by
virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist.
A-2
<PAGE>
(c) Merger Sub. At the Effective Time, each share of Common Stock, par
value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall remain outstanding and each certificate
therefor shall continue to evidence one share of Common Stock of the
Surviving Corporation.
4.2 Allocation of Merger Consideration; Election Procedures.
(a) Allocation. Notwithstanding anything in this Agreement to the contrary,
the maximum number of Shares (the "Cash Election Number") to be converted into
the right to receive Cash Consideration in the Merger shall be equal to the
product of (x) 0.40 times (y) the total number of Shares (other than the
number of Shares to be canceled in accordance with Section 4.1(b)) outstanding
at the Effective Time. The number of Shares to be converted into the right to
receive Stock Consideration in the Merger (the "Stock Election Number") shall
be equal to the number of Shares issued and outstanding immediately prior to
the Effective Time less the sum of (i) the Cash Election Number plus (ii) the
number of Shares to be canceled in accordance with Section 4.1(b) plus (iii)
the number of Dissenting Shares, if any, that are not to be treated as Non-
Election Shares pursuant to Section 4.4.
(b) Election Procedures.
(i) As of the Effective Time, Purchaser shall deposit, or shall cause to be
deposited, with an exchange agent selected by Purchaser (the "Exchange
Agent"), for the benefit of the holders of Shares, for exchange in accordance
with this Article IV, certificates representing Purchaser Shares and any cash
to be paid upon due surrender of the Certificates pursuant to the provisions
of this Article IV (such cash and certificates for Purchaser Shares, together
with the amount of any dividends or distributions payable with respect
thereto, being hereinafter referred to as the "Exchange Fund") to be paid and
issued pursuant to Section 4.1 hereof and paid pursuant to Section 4.3 hereof
in exchange for outstanding Shares. The Surviving Corporation shall pay all
charges and expenses, including those of the Exchange Agent, in connection
with the transactions contemplated in this Article IV, and Purchaser shall
reimburse the Surviving Corporation for such charges and expenses.
(ii) Subject to allocation and proration in accordance with the provisions
of this Section 4.2, each record holder of Shares (other than Dissenting
Shares, if any, that are not to be treated as Non-Election Shares pursuant to
Section 4.4 and Shares to be canceled in accordance with Section 4.1(b))
issued and outstanding immediately prior to the Election Deadline (as defined
below) shall 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 the
receipt of Cash Consideration or Stock Consideration for such Shares (a "Non-
Election"). Shares in respect of which a Non-Election is made (including
shares in respect of which such an election is deemed to have been made
pursuant to this Section 4.2 and Section 4.4 (collectively, "Non-Election
Shares") shall be deemed by the Purchaser, in its sole and absolute
discretion, to be Shares in respect of which Cash Elections or Stock Elections
have been made.
(iii) Elections pursuant to Section 4.2(b)(i) shall be made on a form to be
mutually agreed upon by the Company and Purchaser (a "Form of Election") to be
provided by the Exchange Agent for that purpose to holders of record of
Shares, together with appropriate transmittal materials, at the time of
mailing to holders of record of Shares of the Company's proxy or information
statement with respect to its meeting of stockholders (the "Proxy
Statement/Prospectus") to approve the transactions contemplated hereby.
Elections shall be made by mailing to the Exchange Agent a duly completed Form
of Election. To be effective, a Form of Election must be (x) properly
completed, signed and submitted to the Exchange Agent at its designated
office, by 5:00 p.m., on the business day that is two trading days prior to
the Closing Date (which date shall be publicly announced by Purchaser as soon
as practicable but in no event less than five trading days prior to the
Closing Date) (the "Election Deadline") and (y) accompanied by the
certificates representing the Shares 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 security 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). The Company shall use its
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best efforts to make a Form of Election available to all persons who become
holders of record of Shares between the date of mailing described in the first
sentence of this Section 4.2(b)(ii) and the Election Deadline. Purchaser shall
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
Purchaser (or the Exchange Agent, as the case may be) in such matters shall be
conclusive and binding. Neither Purchaser 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 that does not submit an
effective Form of Election prior to the Election Deadline shall be deemed to
have made a Non-Election.
(iv) An election may be revoked, but only by written notice received by the
Exchange Agent prior to the Election Deadline. Any Certificate(s) representing
Shares that have been submitted to the Exchange Agent in connection with an
election shall be returned without charge to the holder thereof in the event
such election is revoked as aforesaid and such holder requests in writing the
return of such Certificate(s). Upon any such revocation, unless a duly
completed Election Form is thereafter submitted in accordance with paragraph
(b)(ii), such Shares shall be Non-Election Shares. In the event that this
Agreement is terminated pursuant to the provisions hereof and any Shares have
been transmitted to the Exchange Agent pursuant to the provisions hereof, such
Shares shall promptly be returned without charge to the person submitting the
same.
(v) In the event that the aggregate number of Shares in respect of which
Cash Elections have been made (collectively, the "Cash Election Shares")
exceeds the Cash Election Number, all Shares in respect of which Stock
Elections have been made (the "Stock Election Shares") and all Non-Election
Shares in respect of which Stock Elections are deemed to have been made shall
be converted into the right to receive Stock Consideration, and all Cash
Election Shares shall be converted into the right to receive Stock
Consideration or Cash Consideration in the following manner:
(A) Cash Election Shares shall be deemed converted to Stock Election
Shares, on a pro-rata basis for each record holder of Shares with respect
to those Shares, 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, shall equal as closely as practicable
the Stock Election Number, and all such Cash Election Shares so converted
shall be converted into the right to receive Stock Consideration (and cash
in lieu of fractional interests); and
(B) any remaining Cash Election Shares shall be converted into the right
to receive Cash Consideration.
(vi) 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 shall
be converted into the right to receive Cash Consideration, and all Stock
Election Shares shall be converted into the right to receive Stock
Consideration or Cash Consideration in the following manner:
(A) Stock Election Shares shall be deemed converted into Cash Election
Shares, on a pro-rata basis for each record holder of Shares with respect
to those Shares, 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, shall equal as closely as
practicable the Cash Election Number, and all such Shares so converted
shall be converted into the right to receive the Cash Consideration; and
(B) the remaining Stock Election Shares shall be converted into the right
to receive the Stock Consideration (and cash in lieu of fractional
interests).
(vii) In the event that neither clause (v) nor clause (vi) of this Section
4.2(b) is applicable, all Cash Election Shares and all Non-Election Shares in
respect of which Cash Elections are deemed to have been made shall be
converted into the right to receive Cash Consideration, and all Stock Election
Shares and all Non-Election Shares in respect of which Stock Elections are
deemed to have been made shall be converted into the right to receive Stock
Consideration (and cash in lieu of fractional interests).
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(viii) The Exchange Agent, in consultation with Purchaser and the Company,
shall make all computations to give effect to this Section 4.2.
(c) Transfers. After the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the Purchaser Shares and any cash to be paid upon
the due surrender of and in respect of such Certificates pursuant to this
Agreement in accordance with the procedures set forth in this Article IV.
Certificates surrendered for exchange by any person constituting an
"affiliate" of the Company for purposes of Rule 145(c) under the Securities
Act of 1933, as amended (the "Securities Act"), shall not be exchanged until
Purchaser has received a written agreement from such person as provided in
Section 6.10 hereof.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Purchaser Shares)
that remains unclaimed by the stockholders of the Company for one year after
the Effective Time shall be paid to Purchaser. Any stockholders of the Company
who have not theretofore complied with this Article IV shall thereafter look
only to Purchaser for payment of their Purchaser Shares and cash payable upon
due surrender of their Certificates, and in each case, without any interest
thereon. Notwithstanding the foregoing, none of Purchaser, the Surviving
Corporation, the Exchange Agent or any other person shall be liable to any
former holder of Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
4.3 No Fractional Shares. No certificates or scrip representing less than
one Purchaser Share shall be issued upon the surrender for exchange of
Certificates representing Shares pursuant to Article IV. In lieu of any such
fractional shares, each holder of Shares shall be paid, upon surrender of a
Certificate or Certificates representing such Shares, an amount in cash,
rounded to the nearest cent, determined by multiplying (i) the per share
closing sale price of the Purchaser Shares on the Nasdaq National Market
("Nasdaq NMS") on the date of the Effective Time by (ii) the fractional
interest to which such holder would otherwise be entitled (after taking into
account all Shares held of record by such holder at the Effective Time).
4.4 Dissenters' Rights. Any Stockholder who shall have delivered a written
demand for appraisal of such Shares, as provided in Section 262 of the DGCL
(each a "Dissenting Stockholder"), shall not be entitled to Purchaser Shares
or cash pursuant to this Article IV, unless and until the holder thereof shall
have failed to perfect or shall have effectively withdrawn or lost such
holder's right to dissent from the Merger under the DGCL, and shall be
entitled to receive only the payment provided by Section 262 of the DGCL with
respect to such Shares. If any Dissenting Stockholder shall fail to perfect or
shall have effectively withdrawn or lost the right to dissent, the Dissenting
Shares held by such Dissenting Stockholder shall thereupon be treated as Non-
Election Shares. The Company shall give Purchaser (i) prompt notice of any
written demands for appraisal of any Dissenting Shares, attempted withdrawals
of such demands, and any other instruments served pursuant to applicable law
received by the Company relating to stockholders' rights of appraisal and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demand for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Purchaser, voluntarily make any payment with respect
to any demands for appraisals of Dissenting Shares, offer to settle or settle
any such demands or approve any withdrawal of any such demands.
4.5 Stock Option Plan. Immediately prior to the Effective Time each
unexpired and unexercised option to purchase Shares (each a "Company Option")
outstanding pursuant to the Company's 1989 Stock Plan or 1993 Incentive Stock
Plan (collectively, the "Company Stock Option Plan") may be exercised in full
in accordance with its terms. Each Company Option not so exercised shall be
deemed to be automatically converted into an option (a "Purchaser Option") to
purchase a number of Purchaser Shares equal to the number of Shares that could
have been purchased under the Company Option multiplied by the Option
Adjustment Ratio, as defined below (with the resulting number of shares
rounded down to the nearest whole share), at a price per Purchaser Share equal
to the option exercise price determined pursuant to the Company Option divided
by the Option Adjustment Ratio (with the resulting exercise price rounded up
to the nearest whole cent). As promptly as
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possible subsequent to the Effective Time, Purchaser shall register the shares
underlying the Purchaser Options with the SEC on a Form S-8 and shall keep
such registration effective until the final exercise or termination of all of
the Purchaser Options. The "Option Adjustment Ratio" shall be equal to (a) the
average of the high and low price of a share on the last trading day on which
Shares are traded before the Closing divided by (b) the average of the high
and low price of a Purchaser Share on the first trading day after the Closing.
Such Purchaser Option shall otherwise be subject to the same terms and
conditions as the Company Option; provided that the vesting schedule for such
Purchaser Option shall be the vesting schedule of the corresponding Company
Option in effect on the date hereof as if no "change of control" had occurred;
and provided further that in the event the employment of any option holder is
terminated by Purchaser or the Company other than for cause, then all
Purchaser Options held by such option holder shall automatically be vested in
full. Purchaser shall reserve for issuance a sufficient number of Purchaser
Shares for issuance upon exercise of such Purchaser Options.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser that:
(a) Corporate Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification,
except for such failure to so qualify or be in such good standing, which,
when taken together with all other such failures, would not have a material
adverse effect on the financial condition, properties, business, prospects
or results of operations of the Company taken as a whole (a "Company
Material Adverse Effect"). The Company has the requisite corporate power
and authority to carry on its business as it is now being conducted. The
Company has made available to Purchaser a complete and correct copy of the
Company's Restated Certificate of Incorporation and By-Laws, each as
amended to date. The Company's Restated Certificate of Incorporation and
By-Laws so delivered are in full force and effect.
(b) Corporate Authority. Subject only to approval of this Agreement by
the holders of a majority of the outstanding Shares, the Company has the
requisite corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally. As of the date of this Agreement, the board of directors of the
Company (i) has, without a negative vote, approved the Merger and this
Agreement and the transactions contemplated herein and (ii) has received
the opinion of its financial advisor, Alex. Brown & Sons Incorporated, to
the effect that the consideration to be received by the holders of the
Shares in the Merger is fair to such holders (other than Purchaser and its
affiliates) from a financial point of view, and such opinion (the "Fairness
Opinion"), a copy of which has been delivered to Purchaser, has not been
withdrawn, revoked or modified.
(c) Governmental Filings; No Violations.
(i) Other than the filings provided for in Section 1.3, and as required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") and the Securities Exchange Act of 1934 (the "Exchange Act," and all
such filings being herein referred to as the "Regulatory Filings"), no
notices, reports 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 or other entity,
domestic or foreign ("Governmental Entity"), in connection with the
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, the
failure to make or obtain any or all of which is
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reasonably likely to have a Company Material Adverse Effect, or could
prevent, materially delay or materially burden the transactions
contemplated by this Agreement.
(ii) The Company is not in violation of or default under any provisions
of its Restated Certificate of Incorporation or Bylaws or in any material
respect in violation of or default under any provision of any instrument,
agreement or contract to which it is a party or by which it is bound or, to
its knowledge, any provision of any federal or state judgment, order, writ,
decree, statute, rule or regulation applicable to the Company, which
violation or default would have a Company Material Adverse Effect. The
execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated by this
Agreement will not, constitute or result in (i) a breach or violation of,
or a default under, the Restated Certificate of Incorporation or Bylaws of
the Company, (ii) except as set forth on Schedule 5.1(c)(ii) hereto, a
breach or violation of, a default under or the triggering of any payment or
other material obligations pursuant to, any of the Company's existing
Compensation and Benefit Plans (as defined in Section 5.1(h)) or any grant
or award made under any of the foregoing, (iii) except as set forth on
Schedule 5.1(c)(ii), a breach or violation of, or a default under, the
acceleration of or the creation of a lien, pledge, security interest or
other encumbrance on assets (with or without the giving of notice or the
lapse of time) pursuant to, any provision of any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation (a
"Contract") to which the Company is a party or by or to which the Company
or any of its properties or assets is bound or subject or any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental
or non-governmental permit or license to which the Company is subject or
(iv) any change in the rights or obligations of any party under any of the
Contracts, except, in the case of clause (iii) or (iv) above, for such
breaches, violations, defaults, accelerations or changes that, alone or in
the aggregate, would not have a Company Material Adverse Effect or that
could not result in the creation of any material lien, charge or
encumbrance upon any assets of the Company or that could not prevent,
materially delay or materially burden the transactions contemplated by this
Agreement.
(d) Capital Structure. The authorized capital stock of the Company
consists of 30,000,000 Shares, of which 11,145,267 Shares were outstanding
at the close of business on April 17, 1995, and 10,000,000 shares of
Preferred Stock par value $.001 per share (the "Preferred Shares"), of
which no shares were outstanding on April 17, 1995. All of the outstanding
Shares have been duly authorized and are validly issued, fully paid and
nonassessable and not subject to preemptive rights. The Company has no
Shares or Preferred Shares reserved for issuance, except that, as of April
17, 1995, there were 2,772,222 Shares reserved for issuance upon exercise
of outstanding warrants (the "Company Warrants"), 1,571,685 Shares reserved
for issuance pursuant to options granted under the Company Stock Option
Plan, and 30,000 Preferred Shares reserved for issuance pursuant to the
Rights Agreement, dated as of November 25, 1994 (the "Company Rights
Agreement"), between the Company and First Interstate Bank of California.
As of the date of this Agreement, except for this Agreement, and as
disclosed in this Section 5.1(d), there are no options, warrants, calls,
rights, commitments or agreements of any character to which the Company is
a party or by which it is bound obligating the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
Immediately prior to the Effective Time, no Shares, Preferred Shares or any
other securities of the Company will be subject to issuance pursuant to the
Rights Agreement, and after the Effective Time the Surviving Corporation
will have no obligation to issue, transfer or sell any securities of the
Surviving Corporation pursuant to any Compensation and Benefit Plan (as
defined in Section 5.1(h)).
(e) Company Reports; Financial Statements.
(i) The Company has filed with the Securities and Exchange Commission
(the "SEC") and delivered to Purchaser the Company's Annual Report on Form
10-K for the year ended December 31, 1994 (the "1994 Form 10-K") and any
other registration statements, schedules, reports, proxy statements or
information statements (collectively, "Company Reports") filed or required
to be filed since December 31, 1994. As of their respective dates, the
Company Reports complied in all material respects with the
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requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder applicable to the Company Reports, and
the Company Reports did not, and any Company Reports filed with the SEC
subsequent to the date hereof 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. The financial
statements of the Company included in the Company Reports comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the financial
position of the Company as of the dates thereof and its results of
operations, stockholders equity and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). The Company has delivered to Purchaser a copy of the
financial statements included in the 1994 Form 10-K (including an auditor's
opinion). Except as set forth in the Company Reports, to the Company's
knowledge the Company has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a balance sheet of the
Company or in the notes thereto, other than liabilities and obligations
incurred in the ordinary course of business consistent with prior practice
and experience since December 31, 1994.
(ii) None of the information supplied or to be supplied by the Company
for inclusion in (A) the Proxy Statement/Prospectus and (B) the
registration statement on Form S-4 or other appropriate registration form
to be filed with the SEC by Purchaser in connection with the offer and
issuance of the Purchaser Shares in or as a result of the Merger (the
"Registration Statement") including the Proxy Statement/Prospectus included
therein will, in the case of the Proxy Statement/Prospectus, at the time of
mailing of the Proxy Statement/Prospectus to stockholders of the Company
and at the time of the meeting of such stockholders to be held in
connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements made, in light of the circumstances under
which they are made, not misleading or, in the case of the Registration
Statement, at the time the Registration Statement becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Proxy Statement/Prospectus
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by the Company with respect to information supplied
by Purchaser for inclusion in the Proxy Statement/Prospectus.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Company Reports filed with the SEC and publicly available prior to the date
hereof, since December 31, 1994, the Company has conducted its business
only in, and has not engaged in any material transaction other than
according to, the ordinary and usual course of such business and there has
not been (i) any change in the assets, liabilities, financial condition,
operating results or prospects of the Company from that reflected in the
financial statements contained in the 1994 Form 10-K, except changes in the
ordinary course of business, including losses from operations, which have
not been, in the aggregate, materially adverse; (ii) any damage,
destruction or loss, whether or not covered by insurance, having a Company
Material Adverse Effect; (iii) any waiver by the Company of a valuable
right or of a material debt owed to it; (iv) any satisfaction or discharge
of any lien, claim or encumbrance or payment of any obligation by the
Company, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating results
or business of the Company (as such business is presently conducted); (v)
any change or amendment to a material Contract by which the Company or any
of its assets or properties is bound or subject; (vi) except as set forth
on Schedule 5.1(f), any material change in any compensation arrangement or
agreement with any employee, director or consultant; (vii) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of the Company's capital
stock; or (viii) any split, combination or reclassification of any of its
capital stock or any issuance or
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the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock. Except as set
forth on Schedule 5.1(f) or in the Company Reports, since December 31,
1994, there has not been (x) any granting by the Company to any executive
officer of the Company of any increase in compensation, except in the
ordinary course of business consistent with prior practice or as was
required under employment agreements in effect on December 31, 1994, (y)
any granting by the Company to any such executive officer of any increase
in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect on December 31,
1994, or (z) any entry by the Company into any employment, severance or
termination agreement with any such executive officer.
(g) Litigation and Liabilities. Except as disclosed in the Company
Reports filed with the SEC prior to the date hereof and as set forth on
Schedule 5.1(g), as of the date of this Agreement, there is no action,
suit, proceeding or investigation pending or currently threatened against
the Company (i) which questions the validity of this Agreement or the right
of the Company to enter into it, or to consummate the transactions
contemplated hereby, or (ii) which might result, either individually or in
the aggregate, in a Company Material Adverse Effect or prevent, materially
delay or materially burden the transactions contemplated by this Agreement,
or any change in the current equity ownership of the Company, nor is the
Company aware that there is any reasonable basis for the foregoing. The
foregoing includes, without limitation, actions pending or threatened (or
any reasonable basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under
any agreements with prior employers. The Company is not a party or subject
to the provisions of any order (except as imposed by laws of general
application), writ, injunction, judgment or decree (except as imposed by
laws of general application) of any court or government agency or
instrumentality, except such as would not have a Company Material Adverse
Effect.
(h) Employee Benefits.
(i) To the extent required to be disclosed therein, the Company Reports
accurately describe all bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock and stock option plans, all employment or
severance contracts, other material employee benefit plans and any
applicable "change of control" or similar provisions in any plan, contract
or arrangement which cover employees or former employees of the Company
(the "Compensation and Benefit Plans"). The Compensation and Benefit Plans
and all other benefit plans, contracts or arrangements (regardless of
whether they are funded or unfunded) covering employees or former employees
of the Company (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 5.1(h). True and complete copies of all Compensation and Benefit
Plans and such other benefit plans, contracts 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 made available to Purchaser.
(ii) The Company does not have and has not had at any time any employee
benefit plan as described in Section 3(2)(A) or Section 3(2)(B) of ERISA.
All other employee benefit plans subject to the provisions of ERISA are in
material compliance with the provisions of ERISA.
(iii) The Company does not have any obligations for retiree health and
life benefits under any Compensation and Benefit Plan, except as set forth
on Schedule 5.1(h). There are no restrictions on the rights of the Company
to amend or terminate any such Compensation and Benefit Plan without
incurring any liability thereunder.
(iv) Except as set forth on Schedule 5.1(h) hereto, the Company is not a
party to any oral or written (A) agreements with any executive officer or
other key employee of the Company, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
transaction involving the Company of the nature contemplated by this
Agreement, (B) agreements with respect to any executive officer of the
Company providing any term of employment or compensation guarantee
extending for a period longer than one year and for the payment of in
excess of $150,000 per annum or (C) agreements or
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plans, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(i) Brokers and Finders. Neither the Company nor any of its 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 transactions contemplated herein, except that the
Company has employed Alex. Brown & Sons Incorporated as its financial
advisors, the arrangements with which have been disclosed in writing to
Purchaser prior to the date hereof.
(j) Takeover Statutes. No "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation (each a
"Takeover Statute") is applicable to the Merger, except for any such
statutes or regulations as to which all necessary action has been taken by
the Company and its Board of Directors to permit the consummation of the
Merger in accordance with the terms hereof.
(k) Subsidiaries. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, association,
partnership or other business entity.
(l) Invention and Secrecy. All current and to the best of its knowledge
all former key employees and officers of the Company have executed an
Employee's Invention and Proprietary Information Agreement in the form
previously furnished to Purchaser. The Company, after reasonable
investigation, is not aware that any of such key employees or officers is
in violation thereof, and the Company will use its best efforts to prevent
any such violation.
(m) Patents and Trademarks. To the best of its knowledge, the Company has
sufficient title and ownership of all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information, proprietary rights and
processes necessary for its business as now conducted and as proposed to be
conducted without any conflict with or infringement of the rights of
others. Except as disclosed in the Company Reports, there are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity used in or
necessary to the business of the Company as conducted and as proposed to be
conducted, in each case except such as would not have a Company Material
Adverse Effect. Except as set forth on Schedule 5.1(m), the Company has not
received any communication alleging that the Company has violated or, by
conducting its business as conducted or as proposed, would violate any of
the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity, in each
case except such as would not have a Company Material Adverse Effect. The
Company is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order (except as
imposed by laws of general application) of any court or administrative
agency, that would interfere with the use of his or her best efforts to
promote the interests of the Company or that would conflict with the
Company's business as conducted or as proposed to be conducted, in each
case except such as would not have a Company Material Adverse Effect.
Neither the execution nor the delivery of this Agreement, nor the carrying
on of the Company's business by the employees of the Company, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated,
which conflict or default would have a Company Material Adverse Effect.
(n) Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of
such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its
knowledge, holds a valid leasehold interest free of any material liens,
claims or encumbrances.
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(o) Tax Returns and Payments. The Company has timely filed all tax
returns and reports as required by law and paid all taxes shown as due
thereon. These returns and reports are true, correct and complete in all
material respects. The Company has paid all taxes and other assessments due
prior to the time penalties would accrue thereon. The provision for taxes
of the Company as set forth in the most recent balance sheet included in
the financial statements forming a part of the 1994 Form 10-K is adequate
for all taxes due or accrued as of the date thereof, whether or not shown
as being due on any returns or reports. No claim for unpaid taxes has
become a lien or encumbrance of any kind against the property of the
Company or is being asserted against the Company; no audit of any tax
return of the Company is being conducted by a tax authority; and no
extension of the statute of limitations for the assessment of any taxes has
been granted by the Company and is currently in effect. Except as set forth
on Schedule 5.1(o) hereto, the Company has not made, is not obligated to
make, and is not a party to any agreement that could reasonably be expected
to obligate it to make, any payments that are "parachute payments" within
the meaning of Section 280G of the Code (determined without regard to
whether any portion of such payment is reasonable compensation for personal
services actually rendered).
(p) Insurance. The Company has in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in amount (subject
to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
(q) Labor Agreements and Actions. The Company is not bound by or subject
to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge
of the Company, has sought to represent any of the employees of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
Company Material Adverse Effect, nor is the Company aware of any labor
organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing.
(r) Voting Arrangements. Except for the Voting Agreement, dated as of
November 12, 1993, among the Company, Purchaser and certain holders of
Shares, to the Company's knowledge there are no outstanding stockholder
agreements, voting trusts, proxies or other arrangements or understandings
among the stockholders of the Company relating to the voting of their
respective shares.
(s) Environmental. Except such as would not have a Company Material
Adverse Effect, (i) the businesses as presently or formerly engaged in by
the Company are and have been conducted in compliance in all material
respects with all applicable Environmental Laws (as defined below),
including, without limitation, having all required permits, licenses and
other approvals and authorizations, during the time the Company engaged in
such businesses, (ii) to the best of the Company's knowledge, the
properties presently or formerly owned or operated by the Company
(including, without limitation, soil, groundwater or surface water on,
under or adjacent to the properties, and buildings thereon) (the
"Properties") do not contain any Hazardous Substance (as defined below)
other than as permitted under applicable Environmental Law (provided,
however, that with respect to Properties formerly owned or operated by the
Company, such representation is limited to the period the Company owned or
operated such Properties), (iii) the Company has not received any notices,
demand letters or request for information from any Federal, state, local or
foreign governmental entity or any third party indicating that the Company
may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of the Company's businesses,
(iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or, to the
best of the Company's knowledge, threatened against the Company with
respect to the Company or the Properties relating to any violation, or
alleged violation, of any Environmental Law, (v) no reports have been
filed, or are required to be filed, by the Company concerning the release
of any Hazardous Substance or the threatened or actual violation of any
Environmental Law on or at the Properties, (vi) no Hazardous Substance has
been disposed of, transferred, released or transported from any of the
Properties during the time such Property was owned or operated by the
Company, other
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than as permitted under applicable Environmental Law, (vii) there have been
no environmental investigations, studies, audits, tests, reviews or other
analyses conducted by or which are in the possession of the Company
relating to the Company or the Properties which have not been delivered to
Purchaser prior to the date hereof, (viii) there are no underground storage
tanks on, in or under any of the Properties and no underground storage
tanks have been closed or removed from any Properties which are or have
been in the ownership of the Company (provided, however, that with respect
to Properties formerly owned or operated by the Company, the
representations in this subsection (viii) are limited to the period the
Company owned or operated such Properties), (ix) there is no asbestos
present in any Property presently owned or operated by the Company, and no
asbestos has been removed from any Property while such Property was owned
or operated by the Company, (x) none of the Properties has been used at any
time by the Company as a sanitary landfill or hazardous waste disposal site
and (xi) the Company has not incurred, and none of the Properties
(provided, however, that with respect to Properties formerly owned or
operated by the Company, such representation is limited to the period the
Company owned or operated such Properties) are presently subject to, any
material liabilities (fixed or contingent) relating to any suit,
settlement, court order, administrative order, judgment or claim asserted
or arising under any Environmental Law.
"Environmental Law" means (i) any federal, state and local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, judgment, decree, consent, legal
doctrine, order, judgment, decree, injunction, requirement or agreement
with any governmental entity, (x) relating to the protection, preservation
or restoration of the environment, (including, without limitation, air,
water vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as now or hereafter in effect, and
(ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass
and strict liability) that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Substance. The term Environmental Law includes,
without limitation, the federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
federal Clean Air Act, the federal Clean Water Act, the federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid
Waste Amendments thereto), the federal Solid Waste Disposal Act and the
federal Toxic Substances Control Act, the Federal Insecticide, Fungicide
and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970, each as amended and as now or hereafter in effect.
"Hazardous Substance" means any substance presently or hereafter listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether by
type or by quantity, including any substance containing any such substance
as a component. Hazardous Substance includes, without limitation, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
(t) Minute Books. The Company has made available to Purchaser all minutes
of meetings of directors, committees and stockholders since the time of
incorporation which reflect all transactions referred to in such minutes
accurately in all material respects.
(u) Real Property Holding Company. The Company is not a "United States
real property holding corporation" (as that term is defined in Section
897(c)(2) of the Code).
(v) Information. Neither this Agreement, any exhibit hereto, nor any
other written statements or certificates made or delivered in connection
herewith contains any untrue statement of a material fact made by the
Company or omits to state a material fact required to be stated herein or
therein by the Company or necessary to make the statements made by the
Company herein or therein, in light of the circumstances in which they were
made, not misleading.
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5.2 Representations and Warranties of Purchaser. Purchaser represents and
warrants to the Company that:
(a) Corporate Organization and Qualification. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification except for such
failure to so qualify or to be in such good standing, which, when taken
together with all other such failures, would not have a material adverse
effect on the financial condition, properties, business, prospects or
results of operations of Purchaser and its subsidiaries, taken as a whole
(a "Purchaser Material Adverse Effect"). The Purchaser has the requisite
corporate power and authority to carry on its business as it is now being
conducted. The Purchaser has made available to the Company a complete and
correct copy of the Purchaser's Certificate of Incorporation and By-laws,
each as amended to date. The Purchaser's Certificate of Incorporation and
By-laws so delivered are in full force and effect.
(b) Corporate Authority. Purchaser has the requisite corporate power and
authority and has taken all corporate action necessary in order to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement is a valid and binding agreement of Purchaser
enforceable against Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally.
(c) Governmental Filings; No Violations.
(i) Other than the Regulatory Filings, no notices, reports or other
filings are required to be made by Purchaser with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained
by Purchaser from, any Governmental Entity in connection with the execution
and delivery of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby, the failure to make or
obtain any or all of which could prevent, materially delay or materially
burden the transactions contemplated by this Agreement.
(ii) The execution and delivery of this Agreement by Purchaser do not,
and the consummation of the transactions contemplated hereby by Purchaser
will not, constitute or result in (i) a breach or violation of, or a
default under, the Certificate of Incorporation or By-Laws of Purchaser or
(ii) a breach or violation of, a default under, the acceleration of or the
creation of a lien, pledge, security interest or other encumbrance on
assets (with or without the giving of notice or the lapse of time) pursuant
to, any provision of any Contract of Purchaser or any law, ordinance, rule
or regulation or judgment, decree, order, award or governmental or non-
governmental permit or license to which Purchaser is subject, except, in
the case of clause (ii) above, for such breaches, violations, defaults or
accelerations that, alone or in the aggregate, could not prevent,
materially delay or materially burden the transactions contemplated by this
Agreement.
(d) Capital Structure; Purchaser Shares. The authorized capital stock of
Purchaser consists of 100,000,000 shares of Common Stock and 5,000,000
shares of preferred stock, par value $0.01 per share. At the close of
business on March 31, 1995, (i) 40,045,138 shares of Common Stock and no
shares of preferred stock of the Company were issued and outstanding, (ii)
no shares of Common Stock were held by Purchaser in its treasury, (iii)
4,832,457 shares of Common Stock were reserved for issuance pursuant to
outstanding stock options to purchase shares of Common Stock ("Stock
Options") and an additional 3,979,275 shares of Common Stock were available
for the grant of Stock Options pursuant to Purchaser's 1991 Stock Option
Plan, (iv) 1,092,952 shares of Common Stock were reserved for issuance
under Purchaser's 1988 Employee Stock Purchase Plan, (v) 2,195,529 shares
of Common Stock were reserved for issuance upon conversion of Purchaser's
1.9% Convertible Subordinated Notes Due 2000, (vi) 810,833 shares of Common
Stock were reserved for issuance upon conversion of Purchaser's 5 1/4%
Convertible Subordinated Debentures Due 2002, (vii) 442,815 shares of
Common Stock were reserved for issuance upon the exercise of outstanding
warrants, (viii) 400,451 shares of preferred stock were reserved for
issuance in connection with the rights (the "Purchaser Rights") to purchase
shares of Common Stock issued pursuant to the Rights Agreement dated as of
August 25, 1994 (as amended from time to time, the "Purchaser Rights
Agreement"), between Purchaser and Continental Stock Transfer & Trust
Company, as Rights Agent (the
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"Purchaser Rights Agent"). All outstanding shares of Purchaser Common Stock
are, and all Purchaser Shares to be issued as part of the Merger
Consideration will be, when so issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights.
Purchaser Shares will be approved for quotation on Nasdaq NMS. As of the
date of this Agreement, except for this Agreement, and as disclosed in this
Section 5.2(d), there are no options, warrants, calls, rights, commitments
or agreements of any character to which Purchaser is a party or by which it
is bound obligating Purchaser to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of Purchaser
or obligating Purchaser to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
(e) Purchaser Reports.
(i) Purchaser has filed with the SEC and delivered to the Company its
Form 10-K for the year ended December 31, 1994 and other reports,
schedules, forms, statements and other documents (collectively, "Purchaser
Reports") filed or required to be filed since December 31, 1994. As of
their respective dates, Purchaser Reports complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to Purchaser Reports, and Purchaser Reports did not,
and any Purchaser Reports filed with the SEC subsequent to the date hereof
will not, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Purchaser included in
Purchaser Reports comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of
Purchaser and its subsidiaries as of the dates thereof and their
consolidated statements of operations, stockholders equity and cash flows
for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Purchaser has delivered to Purchaser
a copy of the financial statements included in Purchaser's Annual Report on
Form 10-K for the year ended December 31, 1994 (including an auditor's
opinion). Except as set forth in Purchaser Reports, to Purchaser's
knowledge Purchaser has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a balance sheet of
Purchaser or in the notes thereto, other than liabilities and obligations
incurred in the ordinary course of business consistent with prior practice
and experience since December 31, 1994.
(ii) None of the information supplied or to be supplied by Purchaser for
inclusion in the Proxy Statement/Prospectus will at the time of mailing of
the Proxy Statement/Prospectus to stockholders of the Company or at the
time of the meeting of such stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omits or will
omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement/Prospectus will
comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder, except that no
representation is made by Purchaser with respect to information supplied by
the Company for inclusion therein.
(f) Absence of Certain Changes or Events. Except as disclosed in
Purchaser Reports filed with the SEC and publicly available prior to the
date hereof, since December 31, 1994, Purchaser has conducted its business
only in the ordinary course, and there has not been (i) any change in the
assets, liabilities, financial condition, operating results or prospects of
Purchaser from that reflected in the most recent financial statements filed
with the SEC as part of a Purchaser Reports and publicly available prior to
the date hereof, except changes in the ordinary course of business which
have not been, in the aggregate, materially adverse, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of Purchaser's capital stock,
(iii) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in
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respect of, in lieu of or in substitution for shares of its capital stock,
(iv) any damage, destruction or loss, whether or not covered by insurance,
which would have a Purchaser Material Adverse Effect or (v) any change in
accounting methods, principles or practices by Purchaser materially
affecting its assets, liabilities or business, except insofar as may have
been required by a change in generally accepted accounting principles.
(g) Brokers and Finders. Neither the Company nor any of its 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 transactions contemplated herein, except that the
Company has employed Morgan Stanley & Co. Incorporated as its financial
advisors.
(h) Information. Neither this Agreement nor any other statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact made by the Purchaser or omits to state a
material fact required to be stated herein or therein by the Purchaser or
necessary to make the statements made by the Purchaser herein or therein
not misleading.
ARTICLE VI
COVENANTS
6.1 Interim Operations of the Company. The Company covenants and agrees
that, prior to the Effective Time (unless Purchaser shall otherwise agree in
writing and except as otherwise contemplated by this Agreement):
(a) the business of the Company shall be conducted only in the ordinary
and usual course and, to the extent consistent therewith, the Company shall
use its best efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees and
business associates;
(b) the Company shall not (i) create any subsidiaries; (ii) amend its
Restated Certificate of Incorporation or By-Laws or amend, modify or
terminate the Rights Agreement; (iii) split, combine or reclassify the
outstanding Shares or Preferred Shares; or (iv) declare, set aside or pay
any dividend payable in cash, stock or property with respect to the Shares
or Preferred Shares;
(c) the Company shall not (i) issue, sell, pledge, dispose of or encumber
any additional shares of, or securities convertible or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of its capital stock of any class of the Company or any other
property or assets other than (w) Shares issuable under the Company's
Employee Stock Purchase Plan (as such plan is in effect on the date
hereof), (x) Shares issuable upon exercise of the Company Warrants
outstanding on the date hereof, (y) Shares issuable pursuant to options
outstanding on the date hereof under the Company Stock Option Plan and (z)
grants of additional options under the Company Stock Option Plan to (A)
employees of the Company hired after the date hereof for up to an aggregate
of 50,000 shares and (B) current employees of the Company for up to an
aggregate of 50,000 shares, in each case with an exercise price equal to
the fair market value thereof at the time of grant and consistent with past
practice and policies currently in effect (provided that no such options
shall provide for any increase in, or acceleration of, the benefits
provided thereby by the occurrence of any of the transactions contemplated
by this Agreement); (ii) transfer, lease, license, guarantee, sell,
mortgage, pledge, dispose of or encumber (each a "transaction") any assets,
including, without limitation, all intellectual property and technology
rights which it owns or uses, or enter into any collaboration, except for
any such transaction or collaboration involving the transfer of research
materials in the ordinary course of business consistent with past practice;
(iii) incur or modify any indebtedness or other liability other than in the
ordinary and usual course of business; (iv) acquire directly or indirectly
by redemption or otherwise any shares of the capital stock of the Company
or (v) except as provided in the Company's capital budget for the 1995
fiscal year heretofore provided to Purchaser, authorize capital
expenditures in excess of $50,000 or, other than the acquisition of
inventory and supplies in the ordinary course of business consistent with
past practice, make any acquisition of, or investment in, assets or stock
of any other person or entity (including any in-licensing of technology
except for any such
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in-licensing which involves aggregate consideration the net present value
of which is reasonably expected to be less than $50,000 and is in the
ordinary course of business consistent with past practice);
(d) except as otherwise provided herein, the Company shall not grant
(except pursuant to existing contractual arrangements disclosed in writing
to Purchaser prior to the date hereof) any severance or termination pay to,
or enter into any employment or severance agreement with, any director,
officer or other employee of the Company; and the Company shall not
establish, adopt, enter into, make any new grants or awards under or amend,
any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, employee stock
ownership, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(e) the Company shall 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;
(f) the Company shall not make any tax election or permit any insurance
policy naming it as a beneficiary or a loss payable payee to be canceled or
terminated without notice to Purchaser, except in the ordinary and usual
course of business; and
(g) except as expressly permitted hereunder, the Company shall not
authorize or enter into an agreement to do any of the foregoing.
6.2 Acquisition Proposals.
(a) The Company shall not (and the Company shall use its best efforts to
cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
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 (other than
Purchaser or any of its affiliates or representatives) concerning any merger,
tender offer or exchange offer, involving the Company or the sale of all or a
significant portion of the assets, or the sale of shares of capital stock or
debt securities of the Company, or any similar transaction involving the
Company (an "Acquisition Proposal"). The Company will immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Notwithstanding the
foregoing, the Company may (i) furnish information concerning its business,
properties or assets to any corporation, partnership, person or other entity
or group pursuant to appropriate confidentiality agreements (which request is
unsolicited after the date of this Agreement), and (ii) negotiate and
participate in discussions and negotiations with any such entity or group
concerning an Acquisition Proposal (x) if such entity or group has submitted a
bona fide written proposal to the Board of Directors of the Company relating
to any such transaction which the Board determines represents a Superior
Proposal (as defined in Section 6.2(b)) and (y) if, in the opinion of the
Board of Directors of the Company, only after receipt of advice from outside
legal counsel to the Company, the failure to engage in such discussions or
negotiations would cause the Board of Directors to violate its fiduciary
duties to the Company's stockholders under applicable law. The Company will
promptly communicate to Purchaser the terms of any proposal, discussion,
negotiation or inquiry (and will disclose the substance of any written
materials received by the Company in connection with such proposal,
discussion, negotiation, or inquiry) and the identity of the party making such
proposal or inquiry which it may receive in respect of any such transaction.
(b) Subject to the following sentence, the Board of Directors of the Company
shall not (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Purchaser, the approval or recommendation by such Board of
Directors of the Merger, (ii) solicit, approve or recommend, or propose to
solicit, approve or recommend, any Acquisition Proposal or (iii) approve or
authorize the Company's entering into any agreement with respect to any
Acquisition Proposal. Notwithstanding the foregoing, in the event the Board of
Directors of the Company receives an Acquisition Proposal that based on the
advice of outside counsel, the Board of Directors is required to consider in
the exercise of its fiduciary obligations and that it determines to be a
Superior Proposal, the Board of Directors may (subject to the following
sentences) withdraw or adversely modify its approval or recommendation of the
Merger and approve or recommend any such Superior Proposal, approve or
authorize the Company's entering into an agreement with respect to such
Superior Proposal, approve the
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solicitation of additional Acquisition Proposals or terminate this Agreement,
in each case at any time after the fourth business day following notice to
Purchaser (a "Notice of Superior Proposal") advising Purchaser that the Board
of Directors has received a Superior Proposal, specifying the material terms
of the structure of such Superior Proposal. The Company may take any of the
foregoing actions pursuant to the preceding sentence only if an Acquisition
Proposal that was a Superior Proposal at the time of delivery of a Notice of
Superior Proposal continues to be a Superior Proposal in light of any improved
transaction proposed by Purchaser prior to the expiration of the four business
day period specified in the preceding sentence. In addition, if the Board of
Directors proposes to withdraw or adversely modify its approval or
recommendation of the Merger or to approve or recommend any Acquisition
Proposal or to authorize the Company's entering into an agreement with respect
to any Acquisition Proposal, concurrently with withdrawing or adversely
modifying such approval or recommendation, approving or recommending such
Acquisition Proposal or authorizing or approving the Company's entering into
such agreement, the Company shall pay, or cause to be paid, to Purchaser the
Termination Fee (as defined in Section 8.2(b)) upon the consummation of the
transaction contemplated by such agreement. For purposes of this Agreement, a
"Superior Proposal" means any bona fide Acquisition Proposal to merge with the
Company or to acquire, directly or indirectly, a material equity interest in
or a significant amount of voting securities or assets of the Company for
consideration consisting of cash and/or securities, and otherwise on terms
which the Board of Directors of the Company determines in its good faith
reasonable judgment (based on the advice of a financial advisor of nationally
recognized reputation including, without limitation, Alex. Brown & Sons
Incorporated) to provide greater aggregate value to the Company's stockholders
than the Merger (or otherwise proposed by Purchaser as contemplated above).
Nothing contained herein shall prohibit the Company from taking and disclosing
to its stockholders a position contemplated by Rule 14d-9(e) under the
Exchange Act prior to the fourth business day following Purchaser's receipt of
a Notice of Superior Proposal provided that the Company does not withdraw or
modify its position with respect to the Merger or approve or recommend an
Acquisition Proposal.
6.3 Meetings of Purchaser's Stockholders. The Company will take, consistent
with applicable law and its Restated Certificate of Incorporation and By-laws,
all action necessary to convene a meeting of holders of Shares as promptly as
practicable to consider and vote upon the approval of this Agreement and the
Merger. Except as permitted pursuant to Section 6.2 and subject to its
fiduciary duties, as advised by outside counsel, the Board of Directors of the
Company shall recommend such approval and the Company shall take all lawful
action to solicit such approval. At any such meeting of the Company all of the
Shares then owned by Purchaser Companies and any affiliates thereof will be
voted in favor of this Agreement. The Company will promptly prepare and file
with the SEC, will use its reasonable best efforts to have cleared by the SEC
and will thereafter mail to its stockholders as promptly as practicable the
Proxy Statement/Prospectus.
6.4 Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Purchaser shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
and other Regulatory Filings with respect to the Merger; and (b) use their
best efforts to promptly take, or cause to be taken, all other action and do,
or cause to be done, all other things necessary, proper or appropriate under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
6.5 Access. Upon reasonable notice, the Company shall afford Purchaser's
officers, employees, counsel, accountants and other authorized representatives
("Representatives") access, during normal business hours throughout the period
prior to the Effective Time, to its properties, books, Contracts and records
and, during such period, the Company shall furnish promptly to Purchaser all
information concerning its business, properties and personnel as Purchaser or
its representatives may reasonably request.
6.6 Notification of Certain Matters. The Company shall give prompt notice to
Purchaser of any notice of, or other communication relating to, any default or
event that, with notice or lapse of time or both, would become a default,
received by the Company subsequent to the date of this Agreement and prior to
the Effective Time, under any Contract to which the Company is a party or by
which the Company or any of its properties or assets is subject or bound. Each
party shall give prompt notice to the other party of any change or the
occurrence
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of any event which, so far as reasonably can be foreseen at the time of its
occurrence, is reasonably likely to result in a Company Material Adverse
Effect or Purchaser Material Adverse Effect, as the case may be, and of any
notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
6.7 Publicity. The initial press release with respect to the transactions
contemplated hereby shall be a joint press release by the Company and
Purchaser and thereafter the Company and Purchaser shall consult with each
other prior to issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and prior to
making any filings with any Governmental Entity or with any national
securities exchange with respect thereto.
6.8 Employee Benefits. Purchaser agrees that, during the period commencing
at the Effective Time and ending on the first anniversary thereof, the
employees of the Company will continue to be provided with employee benefit
plans (other than stock option or other plans involving the potential issuance
of securities of the Company or Purchaser) which in the aggregate are
substantially comparable to those currently provided by Purchaser to employees
of Purchaser holding comparable positions. Employees of the Company will have
the rights set forth in Section 4.5 with respect to conversion of their
Company Options into options to purchase Purchaser Shares and will have the
same rights as existing employees of Chiron to participate in Purchaser's
stock option plans in accordance with the terms thereof, but subject to
appropriate transitional provisions to adjust to Purchaser's annual grant
cycle. Purchaser will honor without modification all employee (or former
employee) benefit obligations accrued as of the Effective Time and all
employee severance plans (or policies) and employment or severance agreements
set forth in the Company Reports or listed in Schedule 5.1(h).
6.9 Other Actions by the Company.
(a) Rights. The Company shall authorize and execute an amendment of the
Rights Agreement so that neither the Merger, the grant to Purchaser by certain
stockholders of the Company pursuant to that certain Stockholders' Agreement
dated the date hereof (the "Stockholders Agreement") nor the other
transactions contemplated hereby or thereby shall cause the certificates for
the Rights to be distributed or cause there to be any adjustment to the
exercise price.
(b) Takeover Statute. If any "fair price", "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the
members of the Board of Directors of the Company shall grant such approvals
and take such actions as are necessary so that the Merger and the transactions
contemplated hereby and by the Stockholders' Agreement may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby and thereby, except, in each such case, as
would not be consistent with the fiduciary obligations of the Board of
Directors as advised by outside counsel.
6.10 Affiliates Agreements. Prior to Closing, the Company shall deliver to
Purchaser a letter identifying all persons who, to the Company's knowledge,
are at the time this Agreement is submitted to the stockholders of the Company
for approval "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause
each such person to deliver to Purchaser on or prior to the Effective Time a
written agreement substantially in the form of Exhibit A hereto.
6.11 Letter of the Company's Accountants. The Company shall use its best
efforts to cause to be delivered to Purchaser a letter of Ernst & Young LLP,
the Company's independent auditors, dated a date within two business days
before the date on which the Registration Statement shall become effective and
addressed to Purchaser, in form and substance reasonably satisfactory to
Purchaser and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
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6.12 Registration Statement. Purchaser and the Company shall promptly
prepare and file with the SEC the Registration Statement. Each of the Company
and Purchaser shall use all reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing. Purchaser shall also use its reasonable effort
to obtain prior to the date the Registration Statement is declared effective
all necessary state securities law or "blue sky" permits and approvals
required to consummate the Merger and the other transactions contemplated by
this Agreement.
6.13 Indemnification of Directors and Officers.
(i) From and after the Effective Time, the Surviving Corporation shall, (i)
indemnify, defend and hold harmless the present and former officers, directors
and employees of the Company (collectively, 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 (ii) shall also advance expenses as incurred, provided that
the person to whom expenses are advanced provides, if requested, the
undertaking to repay such advances under the circumstances contemplated by the
DGCL, all as required or permitted pursuant to the Company's Certificate of
Incorporation or Bylaws or Indemnification Agreements, as in effect as of the
date hereof, (collectively, "The Company Indemnification Provisions"). With
respect to matters occurring through the Effective Time, the Company
Indemnification Provisions shall survive the Merger and shall continue in full
force and effect indefinitely.
(ii) The Company may, at its expense, acquire directors' and officers'
liability insurance ("D&O 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 $100,000.00 in the aggregate. Purchaser shall for
a period of at least three years following the Effective Time provide the
Indemnified Parties with an indemnity of Purchaser with coverage similar or
superior to that now provided under the Company's directors and officers
liability insurance policies for the Indemnified Parties; provided, however,
that such indemnity shall apply only in the event that the Company and its
directors, officers and representatives shall have used their reasonable best
efforts to perfect their rights to continue in effect following the Effective
Time coverage pursuant to the directors' and officers' liability policy in
effect on the date hereof; provided, further, that Purchaser shall 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 (including,
without limitation, the policy relating to the D&O Insurance, the Company's
existing directors' and officers' liability insurance policy and any other
insurance policy of the Company or the Surviving Corporation).
(iii) Any Indemnified Party intending to seek indemnification under this
Section 6.13 with respect to any loss, expense, claim, damage or liability
shall promptly notify Purchaser of such intent, and the nature of the claim,
action, suit, proceeding, investigation or other event that may give rise
thereto promptly after learning of the same, but the failure to so notify
Purchaser shall not relieve Purchaser of any liability it may have for any
such indemnity obligation if such failure does not materially prejudice
Purchaser or the Surviving Corporation. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) Purchaser or the Surviving Corporation shall have the
right to assume the defense thereof and neither Purchaser nor Surviving
Corporation shall be liable to any Indemnified Party hereunder for any legal
expenses of counsel or any other expenses subsequently incurred by such
indemnified party except, if Purchaser or the Surviving Corporation elects not
to assume such defense, any such Indemnified Parties may retain counsel
satisfactory to them, and Purchaser or Surviving Corporation shall pay all
reasonable fees and expenses of one firm of counsel for all such Indemnified
Parties, (ii) the Indemnified Parties shall cooperate in the defense of any
such matter and (iii) neither Purchaser nor Surviving Corporation shall be
liable for any settlement effected without its prior written consent.
(iv) This Section is intended to benefit the Indemnified Parties and shall
be binding on all successors and assigns of Purchaser, the Company and the
Surviving Corporation.
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6.14 No Changes in Purchaser Shares. If, between the date of this Agreement
and the Effective Time, Purchaser shall effect any reclassification,
recapitalization, split-up, amendment to the terms of, combination or
readjustment of Purchaser Shares, the consideration to be received by
Company's shareholders pursuant to this Agreement shall be appropriately
adjusted.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of Purchaser. The obligation of Purchaser to
consummate the Merger is subject to the fulfillment of each of the following
conditions, any or all of which may be waived in whole or in part by Purchaser
to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement shall have been duly approved by
the holders of a majority of the Shares, in accordance with applicable law
and the Restated Certificate of Incorporation and By-Laws of the Company;
(b) Governmental and Regulatory Consents. The waiting period applicable
to the consummation of the Merger under the HSR Act shall have expired or
been terminated and, except such as would not have a Company Material
Adverse Effect or a Purchaser Material Adverse Effect, all filings required
to be made prior to the Effective Time by the Company with, and all
consents, approvals and authorizations required to be obtained prior to the
Effective Time by the Company from, any Governmental Entity in connection
with the execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby by the Company and
Purchaser shall have been made or obtained (as the case may be);
(c) Litigation. No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this Agreement
or imposes material restrictions on Purchaser or the Company in connection
with the consummation of the Merger or with respect to their business
operations, either prior to or subsequent to the Merger (collectively, an
"Order");
(d) Representations and Warranties; Performance of Obligations. The
representations and warranties contained in Section 5.1 shall be true in
all material respects as of the Effective Time as though made at and as of
the Effective Time, except for changes contemplated by this Agreement, and
the Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date;
(e) Tax Free Reorganization. Purchaser shall have received a written
opinion of Sullivan & Cromwell, based upon appropriate representations of
the Company, Purchaser and stockholders of the Company in form and
substance satisfactory to Sullivan & Cromwell, to the effect that (i) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, (ii) each of the Company and Purchaser is a party to
the reorganization within the meaning of Section 368(b) of the Code, and
(iii) neither the Company nor Purchaser will recognize any income, gain or
loss as a result of the Merger.
(f) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been initiated or be
threatened by the SEC.
(g) Dissenting Shares. The number of Dissenting Shares, if any, that are
not to be treated as Non-Election Shares pursuant to Section 4.4 shall not
exceed 5% of the total number of outstanding Shares.
7.2 Conditions to Obligations of the Company. The obligations of the Company
to consummate the Merger are subject to the fulfillment of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable law:
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(a) Stockholder Approval. This Agreement shall have been duly approved by
the holders of a majority of the Shares (other than Shares held by
Purchaser, Purchaser Companies or any affiliates thereof), in accordance
with applicable law and the Restated Certificate of Incorporation and By-
Laws of the Company;
(b) Governmental and Regulatory Consents. The waiting period applicable
to the consummation of the Merger under the HSR Act shall have expired or
been terminated and, except such as would not have a Company Material
Adverse Effect or a Purchaser Material Adverse Effect, all filings required
to be made prior to the Effective Time by Purchaser with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time by Purchaser from, any Governmental Entity in connection
with the execution and delivery of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby by Purchaser and the
Company shall have been made or obtained (as the case may be);
(c) Order. There shall be in effect no Order;
(d) Representations and Warranties; Performance of Obligations. The
representations and warranties contained in Section 5.2 shall be true in
all material respects as of the Effective Time as though made at and as of
the Effective Time, except for changes contemplated by this Agreement; and
the Purchaser shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date; and
(e) Tax Free Reorganization. Company shall have received a written
opinion of Pillsbury Madison & Sutro, based upon appropriate
representations of the Company, Purchaser and stockholders of the Company
in form and substance satisfactory to Pillsbury Madison & Sutro, to the
effect that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, (ii) each of the Company and
Purchaser is a party to the reorganization within the meaning of Section
368(b) of the Code, and (iii) neither the Company nor Purchaser will
recognize any income, gain or loss as a result of the Merger.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the approval by holders of Shares, (a)
by the mutual consent of the boards of directors of Purchaser and the Company,
(b) by either Purchaser or the Company (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 approval under the HSR Act,
December 31, 1995), (c) by the Company (i) if there should be any material
breach of Purchaser's representations, warranties or covenants hereunder,
which breach shall not be cured within ten days of written notice thereof, or
(ii) to allow the Company to enter into an agreement which the Board of
Directors of the Company determines to be a Superior Proposal (provided that,
upon such termination, the Company shall pay to Purchaser the Termination Fee
described in Section 8.2(b)), (d) by Purchaser if the Board of Directors of
the Company shall have (i) withdrawn or modified, or proposed to withdraw or
modify, in a manner adverse to Purchaser, its approval or recommendation of
this Agreement or the Merger, (ii) solicited, approved or recommended, or
proposed to solicit, approve or recommend, any Acquisition Proposal or (iii)
approved or authorized the Company's entering into any agreement with respect
to any Acquisition Proposal, or (e) if the Company fails to comply in any
material respect with the covenants contained in Section 6.2.
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8.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided above, this
Agreement shall forthwith become void and there shall be no liability on the
part of any of Purchaser or the Company (except as set forth in Section 8.2(b)
hereof and except for any breach of this Agreement) or their respective
directors and officers.
(b) If after the date hereof and during the term of this Agreement (i) any
corporation, partnership, person, other entity or group (as defined in Section
13(d)(3) of the Exchange Act) other than Purchaser or any of its subsidiaries
or affiliates (collectively, a "Person") shall have become the beneficial
owner of 20% or more of the outstanding Shares or (ii) Purchaser shall have
terminated this Agreement pursuant to Section 8.1(d) or (iii) the Company
shall have terminated this Agreement pursuant to Section 8.1(c)(ii) or (iv)
the stockholders of the Company shall have failed to vote in favor of, or
consent to, the Merger, as applicable, except if such failure results from the
failure of Purchaser to vote any of the Shares beneficially owned by it in
favor of the Merger or to consent to the Merger, then the Company, if
requested by Purchaser, shall promptly, but in no event later than two days
after the date of such request, pay Purchaser a fee of $2,000,000 (the
"Termination Fee") which amount shall be payable in same day funds. The
Company acknowledges that the agreements contained in this Section 8.2(b) are
an integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Purchaser would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the amount due pursuant to
this Section 8.2(b), and, in order to obtain such payment, Purchaser commences
a suit which results in a judgment against the Company for the fee set forth
in this paragraph (b), the Company shall pay to Purchaser its costs and
expenses (including attorneys' fees) in connection with such suit, together
with interest on the amount of the fee at the prime rate of Bank of America
NT&SA on the date such payment was required to be made.
8.3 Amendment. This Agreement may be amended by the parties hereto by action
taken on behalf of their respective boards of directors at any time before or
after approval hereof by the stockholders of the Company, but, after any such
approval, no amendment shall be made which reduces the amount or changes the
form of consideration to be paid in the Merger or in any way adversely affects
the rights of holders of the Shares without the further approval of such
holders. This Agreement may not be amended except by an instrument in writing
signed by or on behalf of each of the parties hereto.
8.4 Waiver. At any time prior to the Effective Date, the parties hereto, by
action taken by their respective boards of directors may (a) extend the time
for performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any other document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Payment of Expenses. Whether or not the Merger shall be consummated,
each party hereto shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
Merger.
9.2 Survival. The agreements of the Company and Purchaser contained in
Sections 4.2 (but only to the extent that such Section expressly relates to
actions to be taken after the Effective Time), 6.8 and 6.13 shall survive the
consummation of the Merger. The agreements of the Company and Purchaser
contained in Sections 6.7, 8.2 and 9.1 shall survive the termination of this
Agreement. All other representations, warranties, agreements and covenants in
this Agreement shall not survive the consummation of the Merger or the
termination of this Agreement.
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9.3 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same agreement.
9.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
9.5 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, if to
Purchaser, addressed to Purchaser at 4560 Horton Street, Emeryville, CA 94563,
Attention: General Counsel (with a copy to Alison S. Ressler, Esq., Sullivan &
Cromwell, 444 South Flower Street, Los Angeles, California 90071); and if to
the Company, addressed to the Company at 11055 Roselle Street, San Diego,
California 92121, Attention: President (with a copy to Thomas E. Sparks, Jr.,
Esq., Pillsbury Madison & Sutro, 235 Montgomery Street, San Francisco,
California 94104, or to such other persons or addresses as may be designated
in writing by the party to receive such notice.
9.6 Entire Agreement, etc. This Agreement (including any exhibits, schedules
or Annexes hereto) (a) constitutes the entire agreement, and supersedes all
other prior agreements, understandings, representations and warranties both
written and oral, between the parties with respect to the subject matter
hereof, and (b) shall not be assignable by operation of law or otherwise and,
except as provided in Sections 6.8 and 6.13 is not intended to create any
obligations to, or rights in respect of, any persons other than the parties
hereto.
9.7 Definition of "Subsidiary". When a reference is made in this Agreement
to a subsidiary of a party, the word "subsidiary" means any corporation or
other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one or more of its
subsidiaries.
9.8 Captions. The Article, Section and paragraph captions 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.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the day and year
first above written.
Viagene, Inc.
By __________________________________
Chiron Corporation
By __________________________________
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AFFILIATE AGREEMENT
WHEREAS, Viagene, Inc., a Delaware corporation (the "Company"), and Chiron
Corporation, a Delaware corporation ("Purchaser"), have entered into an
Agreement and Plan of Merger, dated as of April 23, 1995 (the "Merger
Agreement"), pursuant to which, among other things, the Company will be merged
with and into Merger Sub (capitalized terms used herein and not defined herein
have the respective meanings ascribed to them in the Merger Agreement);
WHEREAS, pursuant to the Merger, each Share issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares and
Shares owned by any of the Purchaser Companies) shall be converted into Merger
Consideration;
WHEREAS, a registration statement covering the Purchaser Shares to be issued
pursuant to the Merger has been filed with the Securities and Exchange
Commission as required by the Securities Act of 1933, as amended, and the
rules and regulations thereunder (the "Securities Act");
WHEREAS, the issuance of Purchaser Shares pursuant to the Merger Agreement
constitutes a transaction subject to Rule 145 under the Securities Act; and
WHEREAS, the undersigned may be considered to be an "affiliate" of the
Company for the purpose of Rule 145 in connection with the Merger, and may be
subject to restrictions in connection with the sale or other disposition of
the Purchaser Shares which may be issued to the undersigned pursuant to the
Merger for the Shares which the undersigned then owns;
NOW, THEREFORE, the undersigned hereby agrees for the benefit of Purchaser
and the Company that: (i) the undersigned will not offer to sell, sell,
transfer or otherwise dispose of any of the Purchaser Shares which may be
issued to the undersigned in the Merger other than (a) pursuant to an
effective registration statement under the Securities Act covering such sale,
transfer or other disposition by the undersigned of such Purchaser Shares or
(b) in compliance with Rule 145 under the Securities Act or (c) in compliance
with another exemption from the registration requirements of the Securities
Act; (ii) the undersigned will not offer to sell, sell, transfer or otherwise
dispose of any of the Purchaser Shares which may be issued to the undersigned
in the Merger pursuant to clause (c) above without prior written notice to
Purchaser specifying the manner of compliance with this Agreement; and (iii)
neither Purchaser nor the Surviving Corporation is under any obligation to
register the sale, transfer or other disposition of the Purchaser Shares
received by the undersigned as a result of the Merger or to take any other
action necessary for the purpose of making an exemption from registration
available; provided, however, that in order to permit the undersigned to
effect sales pursuant to Rule 145, Purchaser will make available adequate
current public information with respect to Purchaser within the meaning of
paragraph (c) of Rule 144.
The undersigned understands and agrees that stop transfer instructions may
be given to Purchaser's transfer agents with respect to Purchaser Shares and
that there may be placed on the certificates for such shares, and any
certificates issued in exchange or substitution therefor, a legend to the
foregoing effect.
The undersigned represents and warrants that it has no plan or intention to
sell, exchange or otherwise dispose of the Purchaser Shares acquired by the
undersigned pursuant to the Merger. Furthermore, the undersigned hereby
represents and warrants that, to the best of the undersigned's knowledge,
there is no plan or intention on the part of any of the Company's stockholders
to sell, exchange or otherwise dispose of any of the Purchaser Shares to be
acquired pursuant to the Merger.
The undersigned has carefully read this agreement and the Merger Agreement
and has discussed their requirements and other applicable limitations upon the
undersigned's ability to sell, transfer or otherwise dispose of the Purchaser
Shares, to the extent that the undersigned felt necessary, with the
undersigned's personal counsel or counsel to the Company.
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This agreement constitutes the complete understanding of among undersigned,
the Company and Purchaser concerning the subject matter hereof.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed
this day of , 1995.
-------------------------------------
Acknowledged by:
Chiron Corporation
By: _________________________________
Name:
Title:
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APPENDIX B
DELAWARE GENERAL CORPORATION LAW
SECTION 262
APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
B-1
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or 253
of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested, addressed
to the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
B-2
<PAGE>
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of
B-3
<PAGE>
this section, or if such stockholder shall deliver to the surviving or
resulting corporation a written withdrawal of his demand for an appraisal and
an acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the corporation, then
the right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
B-4
<PAGE>
APPENDIX C
August , 1995
Board of Directors
Viagene, Inc.
11055 Roselle Street
San Diego, CA 92121
Dears Sirs:
Viagene, Inc. ("Viagene") and Chiron Corporation ("Chiron") have entered
into an Agreement and Plan of Merger dated as of April 23, 1995 (the
"Agreement"). Pursuant to the Agreement, Viagene will be merged with and into
a wholly-owned subsidiary of Chiron ("Merger Sub") (the "Merger"), and each
then outstanding share of Viagene common stock, $.001 par value per share (the
"Common Stock"), other than shares held by Chiron or Merger Sub, will become
exchangeable for (i) $9.00 in cash or (ii) 0.155 shares of Chiron common
stock, subject to the terms of Section 4.2(a) of the Agreement which sets a
limitation on the total number of shares which can be converted into the right
to receive cash. The amount of Chiron stock to be received in the Merger also
is subject to increase at Chiron's option pursuant of Section 4.1(a) of the
Agreement. You have requested our opinion as to whether the consideration to
be received by the holders of the Common Stock pursuant to the Agreement is
fair, from a financial point of view, to such holders.
Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and
other purposes. We have acted as financial advisor to the Board of Directors
of Viagene in connection with the transaction described above and will receive
a fee for our services, a portion of which is contingent upon the consummation
of the Merger. We also acted as lead manager of the initial public offering of
the Common Stock of Viagene in December 1993. We acted as co-manager of
several public offerings of the common stock of Chiron, the last of which was
completed in July 1986. Alex. Brown & Sons Incorporated maintains markets in
the common stock of Viagene and Chiron and regularly publishes research
reports regarding the life sciences industry and the businesses and securities
of publicly owned companies in that industry, including Viagene and Chiron.
In connection with our opinion, we have reviewed certain publicly available
financial information concerning Viagene and Chiron and certain internal
financial analyses and other information furnished to us by Viagene and
Chiron. We have also held discussions with members of the senior management of
Viagene and Chiron regarding the business and prospects of their respective
companies. In addition, we have (i) reviewed the reported price and trading
activity for the common stock of Viagene and Chiron, (ii) compared certain
financial and stock market information for Viagene and Chiron with similar
information for certain other life sciences companies whose securities are
publicly traded, (iii) reviewed the financial terms of certain recent business
combinations which we deemed comparable in whole or in part and (iv) performed
such other studies and analyses and considered such other factors as we deemed
appropriate.
We have not independently verified the information described above and, for
purposes of this opinion, have assumed the accuracy, completeness and fairness
thereof. With respect to information relating to the prospects of Viagene, we
have assumed that such information reflects the best currently available
estimates and judgments of management of Viagene as to the likely future
financial performance of Viagene. In addition, we have not made an independent
evaluation or appraisal of the assets of Viagene, nor have we been furnished
with any such evaluation or appraisal. With respect to information relating to
the prospects of Chiron, we understand that Chiron does not have a current
1995 budget and therefore have reviewed no projected financial information. We
have held discussions with Chiron management regarding Chiron's 1995 prospects
and assumed that such information reflects the best currently available
estimates and judgments of management of Chiron as to its likely future
financial performance. Our opinion is based on market, economic and other
conditions as they exist and can be evaluated as of the date of this letter.
C-1
<PAGE>
It is understood that this letter is for the information of the Board of
Directors of Viagene only and may not be used for any other purpose without
our written consent. We hereby consent, however, to the inclusion of this
opinion as an exhibit to any proxy or registration statement distributed in
connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the consideration to be received by the holders of the
Common Stock pursuant to the Agreement is fair, from a financial point of
view, to such holders.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
By:__________________________________
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Statutory Provisions
Section 102(b)(7) of the DGCL enables a corporation in its certificate of
incorporation to eliminate or limit the personal liability of members of its
board of directors to the corporation or its stockholders for monetary damages
for violations of a director's fiduciary duty of care. Such a provision would
have no effect on the availability of equitable remedies, such as an
injunction or rescission, for breach of fiduciary duty. In addition, no such
provision may eliminate or limit the liability of a director for breaching his
duty of loyalty, failing to act in good faith, engaging in intentional
misconduct or knowingly violating a law, paying an unlawful dividend or
approving an illegal stock repurchase, or obtaining an improper personal
benefit.
Section 145 of the DGCL empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. No indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Additionally, a
corporation is required to indemnify any director or officer against expenses
(including attorneys' fees) actually and reasonably incurred by him to the
extent that such director or officer has been successful on the merits or
otherwise in any action, suit or proceeding referred to above or in defense of
any claim, issue or matter therein.
Indemnification can be made by the corporation only upon a determination
that indemnification is proper in the circumstances because the party seeking
indemnification has met the applicable standard of conduct as set forth in the
DGCL. Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation. The indemnification provided by the DGCL is not exclusive of any
other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. A corporation also has the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation or other
enterprise, whether or not the corporation would have the power to indemnify
him against such liability. The indemnification provided by the DGCL shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Chiron's Certificate and Bylaw Provisions
The Chiron Certificate limits the directors' liability for monetary damages
to Chiron and its stockholders for breaches of fiduciary duty to the fullest
extent permitted by Section 102(b)(7) of the DGCL.
II-1
<PAGE>
The Chiron Bylaws extend indemnification rights to the fullest extent
authorized by the DGCL to directors and officers involved in any action, suit
or proceeding where the basis of such involvement is such person's alleged
action in an official capacity or in any other capacity while serving as a
director or officer of Chiron. In addition, the Chiron Bylaws permit the
Chiron Board, in its discretion, to indemnify any person, other than a
director, made a party to any action, suit or proceeding by reason of the fact
that such person is or was an officer or employee of Chiron.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of April 23, 1995 between
Viagene and Chiron (included as Appendix A to the Proxy Statement-
Prospectus).
3.1 Restated Certificate of Incorporation of Chiron, dated August 18, 1987
(incorporated by reference to Exhibit 3.01 to Chiron's Annual Report
on Form 10-K for the year ended December 31, 1991 (File No. 0-12798)).
3.2 Certificate of Amendment of Restated Certificate of Incorporation of
Chiron, dated December 12, 1991 (incorporated by reference to Exhibit
3.01 of Chiron's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 0-12798)).
3.3 Bylaws of Chiron, as amended (incorporated by reference to Exhibit
3.03 to Chiron's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 0-12798)).
4.1 Indenture, dated as of May 21, 1987, between Cetus Corporation and
Bankers Trust Company, as Trustee (incorporated by reference to
Exhibit 4.01 to Chiron's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 (File No. 0-12798)).
4.2 First Supplemental Indenture, dated as of December 12, 1991, by and
among Chiron, Cetus Corporation, and Bankers Trust Company, as Trustee
(incorporated by reference to Exhibit 4.02 to Chiron's Annual Report
on Form 10-K for the year ended December 31, 1992 (File No. 0-12798)).
4.3 Indenture, dated as of November 15, 1993, between Chiron and The First
National Bank of Boston, as Trustee (incorporated by reference to
Exhibit 4.03 to Chiron's Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 0-12798)).
4.4 Rights Agreement, dated as of August 25, 1994, between Chiron and
Continental Stock Transfer & Trust Company, as Rights Agent
(incorporated by reference to Exhibit 4.04 to Chiron's Current Report
on Form 8-K dated August 25, 1994 (File No. 0-12798)).
4.5 Amendment No. 1 to Rights Agreement dated as of November 20, 1994,
between Chiron and Continental Stock Transfer & Trust Company
(incorporated by reference to Exhibit 4.05 to Chiron's report on Form
8-K, dated November 20, 1994 (File No. 0-12798)).
5.1 Opinion of William G. Green, Esq. as to the legality of the securities
being registered.*
8.1 Opinion of Sullivan & Cromwell as to certain federal income tax
matters.**
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors, relating to
the 1994 consolidated financial statements of Chiron Corporation.
23.2 Consent of Ernst & Young LLP, Independent Auditors, relating to the
1993 and 1992 consolidated financial statements of Chiron Corporation.
23.3 Consent of Ernst & Young LLP, Independent Auditors, relating to the
financial statements of Viagene, Inc.
23.4 Consent of Ernst & Young LLP, Independent Auditors, relating to the
consolidated financial statements of Ciba Corning Diagnostics Corp.*
23.5 Consent of KPMG Peat Marwick LLP, Independent Auditors, relating to
the financial statements of The Biocine Company.*
23.6 Consent of Reconta Ernst & Young, Independent Auditors, relating to
the consolidated financial statements of JV Vax B.V.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
23.7 Consent of Alex. Brown & Sons Incorporated (included in the opinion of
Alex. Brown & Sons Incorporated attached to the Proxy-Statement
Prospectus as Appendix C).**
23.8 Consent of William G. Green (included in Exhibit 5.1).*
23.9 Consent of Sullivan & Cromwell (included in Exhibit 8.1).**
24 Power of Attorney.*
99.1 Stockholders' Agreement, dated as of April 23, 1995, among Chiron,
Viagene and certain stockholders parties thereto.*
99.2 Form of Proxy.*
99.3 Form of Election.*
</TABLE>
--------
* Previously Filed.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(c) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
II-3
<PAGE>
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(g) The undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in a form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum offering price set forth
in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(h) The undersigned registrant hereby undertakes to remove from registration
by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS
DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF EMERYVILLE,
STATE OF CALIFORNIA, ON THE 31ST DAY OF JULY, 1995.
CHIRON CORPORATION
By: /s/ Edward E. Penhoet*
-------------------------------------
EDWARD E. PENHOET, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Edward E. Penhoet* President and Chief July 31, 1995
------------------------------------- Executive Officer
EDWARD E. PENHOET, PH.D.
/s/ Dennis L. Winger* Senior Vice President, July 31, 1995
------------------------------------- Finance and
DENNIS L. WINGER Administration (Chief
Financial Officer,
and Principal
Accounting Officer)
/s/ William J. Rutter* Chairman of the Board July 31, 1995
------------------------------------- of Directors
WILLIAM J. RUTTER, PH.D.
/s/ Gilbert Amelio* Director July 31, 1995
-------------------------------------
GILBERT AMELIO, PH.D.
/s/ Lewis W. Coleman* Director July 31, 1995
-------------------------------------
LEWIS W. COLEMAN
Director , 1995
-------------------------------------
PIERRE DOUAZE
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald A. Glaser* Director July 31, 1995
-------------------------------------
DONALD A. GLASER, PH.D.
/s/ Alex Krauer* Director July 31, 1995
-------------------------------------
ALEX KRAUER, PH.D.
/s/ Francois L'Eplattenier, Ph.D* Director July 31, 1995
-------------------------------------
FRANCOIS L'EPLATTENIER, PH.D.
/s/ Henri Schramek* Director July 31, 1995
-------------------------------------
HENRI SCHRAMEK, PH.D.
/s/ Jack W. Schuler* Director July 31, 1995
-------------------------------------
JACK W. SCHULER
/s/ Pieter J. Strijkert* Director July 31, 1995
-------------------------------------
PIETER J. STRIJKERT, PH.D.
</TABLE>
*By /s/ William G. Green
-----------------------------
William G. Green
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of April 23, 1995
between Viagene and Chiron (included as Appendix A to
the Proxy Statement-Prospectus).
3.1 Restated Certificate of Incorporation of Chiron, dated
August 18, 1987 (incorporated by reference to Exhibit
3.01 to Chiron's Annual Report on Form 10-K for the
year ended December 31, 1991 (File No. 0-12798)).
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of Chiron, dated December 12, 1991
(incorporated by reference to Exhibit 3.01 of Chiron's
Annual Report on Form 10-K for the year ended December
31, 1991 (File No. 0-12798)).
3.3 Bylaws of Chiron, as amended (incorporated by reference
to Exhibit 3.03 to Chiron's Annual Report on Form 10-K
for the year ended December 31, 1994 (File No. 0-
12798)).
4.1 Indenture, dated as of May 21, 1987, between Cetus
Corporation and Bankers Trust Company, as Trustee
(incorporated by reference to Exhibit 4.01 to Chiron's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 (File No. 0-12798)).
4.2 First Supplemental Indenture, dated as of December 12,
1991, by and among Chiron, Cetus Corporation, and
Bankers Trust Company, as Trustee (incorporated by
reference to Exhibit 4.02 to Chiron's Annual Report on
Form 10-K for the year ended December 31, 1992 (File
No. 0-12798)).
4.3 Indenture, dated as of November 15, 1993, between
Chiron and The First National Bank of Boston, as
Trustee (incorporated by reference to Exhibit 4.03 to
Chiron's Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 0-12798)).
4.4 Rights Agreement, dated as of August 25, 1994, between
Chiron and Continental Stock Transfer & Trust Company,
as Rights Agent (incorporated by reference to Exhibit
4.04 to Chiron's Current Report on Form 8-K dated
August 25, 1994 (File No. 0-12798)).
4.5 Amendment No. 1 to Rights Agreement dated as of
November 20, 1994, between Chiron and Continental Stock
Transfer & Trust Company (incorporated by reference to
Exhibit 4.05 to Chiron's report on Form 8-K, dated
November 20, 1994 (File No. 0-12798)).
5.1 Opinion of William G. Green, Esq. as to the legality of
the securities being registered.*
8.1 Opinion of Sullivan & Cromwell as to certain federal
income tax matters.**
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors,
relating to the 1994 consolidated financial statements
of Chiron Corporation.
23.2 Consent of Ernst & Young LLP, Independent Auditors,
relating to the 1993 and 1992 consolidated financial
statements of Chiron Corporation.
23.3 Consent of Ernst & Young LLP, Independent Auditors,
relating to the financial statements of Viagene, Inc.
23.4 Consent of Ernst & Young LLP, Independent Auditors,
relating to the consolidated financial statements of
Ciba Corning Diagnostics Corp.*
23.5 Consent of KPMG Peat Marwick LLP, Independent Auditors,
relating to the financial statements of The Biocine
Company.*
23.6 Consent of Reconta Ernst & Young, Independent Auditors,
relating to the consolidated financial statements of JV
Vax B.V.*
23.7 Consent of Alex. Brown & Sons Incorporated (included in
the opinion of Alex. Brown & Sons Incorporated attached
to this Proxy Statement-Prospectus as Appendix C).**
23.8 Consent of William G. Green (included in Exhibit 5.1).*
23.9 Consent of Sullivan & Cromwell (included in Exhibit
8.1).**
24 Power of Attorney.*
99.1 Stockholders' Agreement, dated as of April 23, 1995,
among Chiron, Viagene and certain stockholders parties
thereto.*
99.2 Form of Proxy.*
99.3 Form of Election.*
</TABLE>
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* Previously filed
**To be filed by amendment
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
We consent to incorporation herein by reference of our report dated February
17, 1995, relating to the consolidated balance sheet of Chiron Corporation and
subsidiaries as of December 31, 1994, and the related consolidated statements
of operations, stockholders' equity and cash flows for the year then ended and
the related schedule, and to the reference to our firm under the heading
"Experts" in the prospectus.
KPMG PEAT MARWICK LLP
San Francisco, California
July 28, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Proxy Statement of Viagene, Inc. and related Prospectus of Chiron Corporation
which is made a part of Amendment No. 1 to the Registration Statement (Form S-
4) of Chiron Corporation for the registration of shares of its common stock
and to the incorporation by reference therein of our report dated February 25,
1994, with respect to the 1993 and 1992 consolidated financial statements and
schedule of Chiron Corporation included in the Annual Report (Form 10-K) of
Chiron Corporation for the year ended December 31, 1994, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
San Francisco, California
July 28, 1995
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Proxy Statement of Viagene, Inc. and related Prospectus of Chiron Corporation
which is made a part of Amendment No. 1 to the Registration Statement (Form S-
4) of Chiron Corporation for the registration of shares of its common stock,
and to the incorporation by reference therein of our report dated February 8,
1995, except for Note 7, as to which the date is April 26, 1995, with respect
to the financial statements of Viagene, Inc. included in the Annual Report
(Form 10-K/A) of Viagene, Inc. for the year ended December 31, 1994, filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
July 28, 1995
