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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CHIRON CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 2834 94-2754624
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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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
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
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 TO:
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ROBERT E. BUCKHOLZ, JR., ESQ. ABIGAIL ARMS, ESQ.
Sullivan & Cromwell Shearman & Sterling
125 Broad Street 801 Pennsylvania Avenue, N.W.
New York, New York 10004-2498 Washington, DC 20006-5805
(212) 558-4000 (202) 508-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT PRICE REGISTRATION FEE
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% Convertible Subordinated Notes due May ,
2007............................................. $243,800,000 100% $370,728,375(1) $97,873(2)
Common Stock, par value $0.01 per share............ (3) (3) (3) (3)
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(1) Pursuant to Rule 457(f)(1) under the Securities Act of 1933, this amount is
the market value as of April 5, 2000 of the maximum amount of 1.90%
Convertible Subordinated Notes due November 17, 2000 (the "existing notes")
that may be received by the Registrant from tendering holders in the
exchange offer.
(2) The registration fee has been calculated pursuant to Rule 457(f) under the
Securities Act of 1933.
(3) Includes such indeterminable shares of common stock as shall be issuable to
the extent the Registrant elects to pay in common stock instead of cash
under the terms of the exchange notes. Also includes such indeterminate
number of shares of common stock as shall be issuable upon conversion of the
exchange notes being registered hereunder. No additional registration fee is
required pursuant to Rule 457 under the Securities Act.
--------------------
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 6, 2000.
[LOGO]
--------------
EXCHANGE OFFER OF
% CONVERTIBLE SUBORDINATED NOTES DUE MAY , 2007 FOR OUR 1.90% CONVERTIBLE
SUBORDINATED NOTES DUE NOVEMBER 17, 2000
-----------
If you elect to participate in the exchange offer, you will receive from us
$1,000 principal amount of the % Convertible Subordinated Notes due May ,
2007 for each $1,000 principal amount at maturity of the 1.90% Convertible
Subordinated Notes due November 17, 2000. In addition, for each $1,000 principal
amount at maturity of the existing notes tendered, you will also receive a cash
payment in the amount equal to the difference between (i) the product of
(A) 34.5924 and (B) the average of the closing market prices of our common stock
for the five trading days immediately preceding the second trading day prior to
the expiration date and (ii) $1,000.
Any existing note that is validly tendered and accepted prior to an interest
payment date, May 17 and November 17 in the case of the existing notes, will not
be entitled to any payment or adjustment on account of accrued original issue
discount or accrued and unpaid interest on such note.
This exchange offer will expire at 12:01 a.m., Eastern Standard Time, on May
, 2000, unless we extend the offer. The exchange offer is conditional, among
other things, upon a minimum principal amount at maturity of 75% of the existing
notes being tendered and upon the average of the closing market prices of our
common stock for the five trading days immediately preceding the second trading
day prior to the expiration date remaining between $ and $ , which conditions
may be waived or amended by us.
Our common stock is traded on The Nasdaq National Market under the symbol
"CHIR". On April 5, 2000, the last reported sale price of our common stock on
The Nasdaq National Market was $44 1/8 per share.
We are mailing this prospectus and the letter of transmittal on April ,
2000.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF FACTORS
THAT YOU SHOULD CONSIDER BEFORE YOU DECIDE TO PARTICIPATE IN THIS EXCHANGE
OFFER.
We have retained Georgeson Shareholder Communications Inc. as our
information agent to assist you in connection with the exchange offer. You may
call Georgeson Shareholder Communications Inc. at (800) 233-2064, toll free, to
receive additional documents and to ask questions.
--------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY AND
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------
THE DEALER MANAGER FOR THE EXCHANGE OFFER:
GOLDMAN, SACHS & CO.
Prospectus dated , 2000.
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information provided by this
prospectus is accurate as of any date other than the date of this prospectus.
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 7
Special Note Regarding Forward Looking Statements........... 13
Use of Proceeds............................................. 13
Price Range of Common Stock................................. 13
Dividend Policy............................................. 13
Capitalization.............................................. 14
Selected Consolidated Financial Data........................ 15
The Exchange Offer.......................................... 16
Description of Exchange Notes............................... 25
Description of Existing Notes............................... 39
Description of Capital Stock................................ 47
Book-Entry System--The Depository Trust Company............. 49
Federal Income Tax Considerations........................... 51
Legal Matters............................................... 57
Experts..................................................... 57
Where You Can Find Additional Information................... 57
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i
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SUMMARY
THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER BEFORE
EXCHANGING YOUR EXISTING NOTES FOR THE EXCHANGE NOTES OR INVESTING IN ADDITIONAL
EXCHANGE NOTES. YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY. UNLESS
OTHERWISE INDICATED, "WE," "US," "OUR" AND SIMILAR TERMS REFER TO CHIRON
CORPORATION.
OUR COMPANY
We are a biotechnology company that participates in three global healthcare
businesses: biopharmaceuticals, vaccines and blood testing. We apply a broad and
integrated scientific approach to the development of innovative products for
preventing and treating cancer, infectious diseases and cardiovascular disease.
Our products include Proleukin-Registered Trademark- (aldesleukin), a
recombinant form of interleukin-2, which we market as a treatment for metastatic
renal cell carcinoma and metastatic melanoma. We manufacture recombinant human
platelet-derived growth factor, the active ingredient in
Regranex-Registered Trademark- (becaplermin) Gel, which is marketed by
Ortho-McNeil Pharmaceutical, Inc., a Johnson & Johnson company, as a treatment
for diabetic foot ulcers. We also manufacture Betaseron-Registered Trademark-
(interferon beta-1b) for Berlex Laboratories, Inc. and its parent company,
Schering AG, which is marketed by Berlex and Schering AG as a treatment for
multiple sclerosis. In addition, we sell a line of traditional pediatric and
adult vaccines. We also have an interest in a number of other products through
collaborations and joint businesses, including a joint immunodiagnostics
business with Ortho-Clinical Diagnostics, Inc., a Johnson & Johnson company,
which sells a full line of tests required to screen blood for hepatitis viruses
and retroviruses, and a separate collaboration with Gen-Probe Incorporated,
which develops products using nucleic acid testing technology to screen blood in
blood banks and plasma in the plasma industry for virus infections.
We have a strong commitment to research and development and focus our
research and development activities primarily on areas in which we have
particular strengths, including cancer, infectious diseases and cardiovascular
diseases. An important part of our research and development effort is undertaken
through collaborations with third parties who are able to contribute significant
enabling technologies and other resources to the development and
commercialization of the product, including in some cases, marketing and sales
expertise.
In January 1995, we established an alliance with Novartis AG, a life
sciences company headquartered in Basel, Switzerland. As of February 1, 2000,
Novartis held shares representing approximately 44% of our outstanding common
stock.
We were incorporated in California in 1981 and were merged into a Delaware
corporation in November 1986. Our principal executive offices are located at
4560 Horton Street, Emeryville, California 94608, and our telephone number at
that address is (510) 655-8730.
RECENT DEVELOPMENTS
In January 2000, we repaid an outstanding note payable to Novartis AG of
$67.8 million.
1
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
We have summarized the terms of the exchange offer in this section. Before
you decide whether to tender your existing notes in this offer, you should read
the detailed description of the offer under "The Exchange Offer" and of the
exchange notes under "Description of Exchange Notes" for further information.
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Terms of the exchange offer............... We are offering up to $243,800,000 aggregate principal
amount of new % Convertible Subordinated Notes due
May , 2007 for up to $243,800,000 aggregate principal
amount at maturity of 1.90% Convertible Subordinated
Notes due November 17, 2000. We are offering to exchange
$1,000 principal amount of exchange notes for each
$1,000 principal amount at maturity of existing notes.
In addition, for each $1,000 principal amount at
maturity of the existing notes tendered, you will also
receive a cash payment in the amount equal to the
difference between (i) the product of (A) 34.5924 and
(B) the average of the closing market prices of our
common stock for the five trading days immediately
preceding the second trading day prior to the expiration
date and (ii) $1,000. You may tender all, some or none
of your existing notes.
Any existing note that is validly tendered and accepted
prior to an interest payment date, May 17 and
November 17 in the case of the existing notes, will not
be entitled to any payment or adjustment on account of
accrued original issue discount or accrued and unpaid
interest on such note.
Conversion price.......................... You may convert the exchange notes at any time prior to
maturity at a conversion price that is equivalent to a
% premium over the average of the closing market
prices of our common stock for the five trading days
immediately preceding the second trading day prior to
the expiration date, subject to customary anti-dilution
adjustments.
Expiration date; extension; termination... The exchange offer and withdrawal rights will expire at
12:01 a.m., Eastern Standard Time, on May , 2000, or
any subsequent date to which we extend it. We may extend
the expiration date for any reason. In the case of any
extension, we will issue a press release or other public
announcement no later than 9:00 a.m., Eastern Standard
Time, on the next business day after the previously
scheduled expiration date. You must tender your existing
notes prior to this date if you wish to participate in
the offer. We have the right to:
- extend the expiration date of the exchange offer
and retain all tendered existing notes, subject to
your right to withdraw your tendered notes; or
- waive any condition or otherwise amend the terms
of the exchange offer in any respect.
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2
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Conditions to the exchange offer.......... The offer is conditioned upon 75% of the existing notes
being tendered in the exchange offer and upon the
average of the closing market prices of our common stock
for the five trading days immediately preceding the
second trading day prior to the expiration date
remaining between $ and $ . The exchange offer is also
subject to customary conditions, which we may waive.
Please read "The Exchange Offer--Conditions for
completion of the exchange offer" for more information.
Withdrawal rights......................... You may withdraw a tender of your existing notes at any
time before the exchange offer expires by delivering a
written notice of withdrawal to State Street Bank and
Trust Company of California, N.A., the exchange agent,
before the expiration date. If you change your mind, you
may retender your existing notes by again following the
exchange offer procedures before the exchange offer
expires.
Procedures for tendering existing notes... If you hold existing notes through a broker, dealer,
commercial bank, trust company or other nominee, you
should contact that person promptly if you wish to
tender your existing notes. Tenders of your existing
notes will be effected by book-entry transfers through
The Depository Trust Company.
If you hold your existing notes through a broker,
dealer, commercial bank, trust company or other nominee,
you may also tender your existing notes by complying
with the procedures for guaranteed delivery.
Please do not send letters of transmittal to us. You
should send those letters to State Street Bank and Trust
Company of California, N.A., the exchange agent. The
exchange agent can answer your questions regarding how
to tender your existing notes.
Interest.................................. Interest on the exchange notes will accrue from the
issue date at a rate of % per year, payable on May
and November of each year.
Exchange agent............................ State Street Bank and Trust Company of California, N.A.
Information agent......................... Georgeson Shareholder Communications Inc.
For information regarding the exchange offer, please
call (toll free (800) 223-2064; collect (212) 440-9800).
Dealer manager............................ Goldman, Sachs & Co.
To ascertain the conversion price to be used for the
exchange notes two days prior to the expiration date,
please call (212) 357-6221.
Accounting and tax treatment for the
exchange offer............................ In accordance with SFAS No. 125, "ACCOUNTING FOR
TRANSFER AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENT OF LIABILITIES," we will account for the
exchange offer as an extinguishment of debt and
recognize an extraordinary loss.
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3
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Substantially all of the cash consideration to be paid
by us in the exchange offer will not qualify as a
deduction for us for federal and state tax purposes.
Federal income tax consequences........... The exchange constitutes a recapitalization, and
therefore, if you are a U.S. Holder, it will generally
be tax-free to the extent that an exchange note is
received in exchange for an existing note. You will be
taxed on the exchange only in respect of (a) the amount
of any accrued but unpaid interest on your existing
notes that you have not already included in income and
(b) cash that you receive to the extent of your gain on
the exchange. Any loss on the exchange will not be
recognized. Your basis in the exchange notes will
generally equal your basis in your existing notes,
increased by the amount of gain you recognize on the
exchange, further increased by the amount of income you
recognize on the exchange that is attributable to
accrued interest, and decreased by the amount of cash
you receive in the exchange. Your holding period for the
exchange notes will include your holding period for the
existing notes, except to the extent that an exchange
note is deemed to be received in exchange for accrued
interest. See "Federal Income Tax Considerations".
Risk factors.............................. You should consider carefully the matters described
under "Risk Factors," as well as other information set
forth in this prospectus and in the letter of
transmittal.
Deciding whether to participate in the
exchange offer............................ Neither we nor our officers or directors make any
recommendation as to whether you should tender or
refrain from tendering all or any portion of your
existing notes in the exchange offer. Further, we have
not authorized anyone to make any such recommendation.
You must make your own decision whether to tender your
existing notes in the exchange offer and, if so, the
aggregate amount of existing notes to tender after
reading this prospectus and the letter of transmittal
and consulting with your advisers, if any, based on your
own financial position and requirements.
Consequences of not exchanging existing
notes..................................... The liquidity and trading market for existing notes not
tendered in the exchange could be adversely affected to
the extent existing notes are tendered and accepted in
the exchange offer.
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4
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COMPARISON OF EXCHANGE NOTES AND EXISTING NOTES
THE FOLLOWING IS A BRIEF SUMMARY OF THE TERMS OF THE EXCHANGE NOTES AND THE
EXISTING NOTES. FOR A MORE COMPLETE DESCRIPTION OF THE EXCHANGE NOTES, SEE
"DESCRIPTION OF EXCHANGE NOTES."
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EXCHANGE NOTES EXISTING NOTES
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SECURITIES.......... $243,800,000 aggregate principal $243,800,000 aggregate principal
amount of % Convertible amount at maturity of 1.90%
Subordinated Notes due May , Convertible Subordinated Notes due
2007. The exchange notes will be November 17, 2000.
issued in the principal amount of
$1,000 and integral multiples of
$1,000.
ISSUER.............. Chiron Corporation. Chiron Corporation.
MATURITY............ May , 2007. November 17, 2000.
INTEREST............ Interest on the exchange notes Interest on the existing notes is
will be payable in cash at a rate payable in cash at the rate of
of % per year, payable on 1.90% per year, payable on May 17
May and November of each and November 17 of each year.
year.
CONVERSION:
GENERAL........... The exchange notes will be The existing notes are convertible
convertible at any time prior to at any time prior to their
their maturity at a conversion maturity at a conversion rate of
price that is equivalent to a % 34.5924 shares for each $1,000
premium over the average of the principal amount at maturity of
closing market prices of our existing notes, subject to
common stock for the five trading customary anti-dilution
days immediately preceding the adjustments.
second trading day prior to the
expiration date of the exchange
offer, subject to customary
anti-dilution adjustments.
AUTO-
CONVERSION........ None. None.
RANKING............. The exchange notes will be The existing notes are
subordinated to all of our senior subordinated to all of our senior
debt and will rank equal in right debt and will rank equal in right
of payment to our existing notes. of payment with the exchange
The exchange notes also are notes. The existing notes also are
effectively subordinated to all effectively subordinated to all
indebtedness and other liabilities indebtedness and other liabilities
of our subsidiaries, including of our subsidiaries, including
trade payables but excluding trade payables but excluding
intercompany liabilities. intercompany liabilities. As of
December 31, 1999, we had
approximately $91.4 million of
outstanding senior debt.
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EXCHANGE NOTES EXISTING NOTES
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OPTIONAL
REDEMPTION.......... We may redeem the exchange notes We may redeem the existing notes
on or after May , 2003, in whole prior to their maturity, in whole
or in part, on not less than 30 or in part, on not less than 30
but no more than 60 days' notice, but no more than 60 days' notice,
at the redemption prices set forth at 100% of their principal amount
in this prospectus and the at maturity, plus accrued and
indenture, plus accrued and unpaid unpaid interest, if any, to the
interest, if any, to the redemption date.
redemption date.
REPURCHASE AT OPTION
OF HOLDERS.......... You may require us to repurchase You may require us to repurchase
all or part of your exchange notes all or part of your existing notes
upon a change in control at a upon a fundamental change at a
repurchase price equal to the repurchase price equal to 100% of
exchange notes being repurchased, the outstanding principal amount
plus any accrued and unpaid of the issue price plus accrued
interest. A change of control original issue discount to the
generally occurs if a person date of repurchase, plus any
acquires 50% or more of the total accrued and unpaid interest;
voting power of our capital stock provided that if the applicable
and certain other conditions are price (as defined below) is less
met, except that such threshold is than the reference market price
79.9% or more of the total voting (as defined below), we must
power if the acquiring person is repurchase the existing notes to
Novartis AG or any person be repurchased at a price equal to
affiliated therewith. the foregoing repurchase price
We have the option to pay the multiplied by the fraction
repurchase price in cash, common obtained by dividing the
stock or a combination of cash and applicable price by the reference
common stock. If we elect to pay market price, plus any accrued and
the repurchase price in common unpaid interest.
stock, the shares of common stock Depending on the type of
will be valued at 95% of the fundamental change, the applicable
average of the closing market price is either the amount of cash
prices of our common stock for the received by the holder of one
five trading days immediately share of our common stock or the
preceding the second trading day average of the last reported sale
prior to the repurchase date. price for our common stock during
the ten trading days prior to the
record date for the determination
of the holders of common stock in
connection with the change of
control. The reference market
price is $12.875, subject to
customary anti-dilution
adjustments.
LISTING............. The exchange notes are expected to The existing notes trade in the
trade in the over-the-counter over-the-counter market.
market.
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6
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO
EXCHANGE YOUR EXISTING NOTES FOR EXCHANGE NOTES. THE RISKS AND UNCERTAINTIES
DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY. ADDITIONAL RISKS AND
UNCERTAINTIES THAT WE DO NOT PRESENTLY KNOW OR THAT WE CURRENTLY DEEM IMMATERIAL
ALSO MAY IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THEY COULD HARM OUR BUSINESS,
FINANCIAL CONDITION OR OPERATING RESULTS. IN THAT CASE, THE TRADING PRICE OF OUR
COMMON STOCK AND THE EXCHANGE NOTES COULD DECLINE.
WE ARE FOCUSED ON RESEARCH AND DEVELOPMENT OF EMERGING TECHNOLOGIES THAT MAY NOT
ULTIMATELY RESULT IN COMMERCIAL PRODUCTS, WHICH WOULD HARM OUR BUSINESS.
We focus our research and development activities on unproven technologies
that appear promising. These technologies often are on the cutting edge of
modern science. As a result, the outcome of any research or development program
is highly uncertain. Only a very small fraction of our programs ultimately
result in commercial products or even product candidates. Product candidates
that initially appear promising often fail to yield successful products. In many
cases, preclinical or clinical studies will show that a product candidate does
not have the intended therapeutic or prophylactic effect, or that it raises
safety concerns or has other side effects which outweigh the intended benefit.
Success in preclinical or early clinical trials, which generally focus on safety
issues, may not translate into success in large-scale clinical trials, which are
designed to show efficacy, often for reasons that are not fully understood. Even
after a product is approved and launched, general usage or post-marketing
studies may identify safety or other previously unknown problems with the
product which may result in regulatory approvals being suspended, limited to
narrow indications or revoked, or which may otherwise prevent successful
commercialization. Any of these adverse results would seriously harm our
business.
IF WE FAIL TO OBTAIN AND MAINTAIN THE REGULATORY APPROVALS WE NEED TO MARKET OUR
PRODUCTS, OUR BUSINESS WILL SUFFER.
We are required to obtain and maintain regulatory approval in order to
market most of our products. If we cannot obtain and maintain the necessary
approvals, we will be unable to sell the affected products, which would cause
our business to suffer. Generally, these approvals are on a product-by-product
and country-by-country basis. In the case of therapeutic products, a separate
approval is required for each therapeutic indication. Product candidates that
appear promising based on early, and even large-scale, clinical trials may not
receive regulatory approval. The results of clinical trials often are
susceptible to varying interpretations that may delay, limit or prevent approval
or result in the need for post-marketing studies.
OUR PRODUCTS ARE COMPLEX AND DIFFICULT TO MANUFACTURE ON A LARGE-SCALE BASIS,
WHICH COULD CAUSE US TO DELAY PRODUCT LAUNCHES, EXPERIENCE SHORTAGES OF PRODUCTS
OR PREVENT US FROM OFFERING PRODUCTS ON A VOLUME BASIS.
Most of our products are biologics and are complex and difficult to
manufacture. Unlike chemical pharmaceuticals, a biologic product generally
cannot be sufficiently characterized in terms of its physical and chemical
properties to rely on assaying of the finished product alone to ensure that the
product will perform in the intended manner. Accordingly, it is essential to be
able to both validate and control the manufacturing process, that is, to show
that the process works and that the product is made strictly and consistently in
compliance with that process. Slight deviations in the manufacturing process may
result in unacceptable changes in the products that may result in failures of
entire lots. Manufacturing processes which are used to produce the smaller
quantities of
7
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material needed for research and development purposes may not be successfully
scaled up to allow production of commercial quantities at reasonable cost or at
all. All of these difficulties are compounded when dealing with novel biologic
products that require novel manufacturing processes. Further, our manufacturing
processes are subject to extensive government regulation. Even minor changes in
the manufacturing process require regulatory approval, which, in turn, may
require further clinical studies.
IF WE CANNOT OBTAIN NECESSARY LICENSES TO THIRD PARTY PATENTS FOR THE
MANUFACTURE OR SALE OF OUR PRODUCTS, WE MAY HAVE TO WITHDRAW FROM THE MARKET OR
DELAY THE INTRODUCTION OF THE AFFECTED PRODUCT.
Third parties, including competitors, have patents and patent applications
in the U.S. and other significant markets that may be useful or necessary for
the manufacture, use or sale of some of our products and products in
development. It is likely that third parties will obtain other such patents in
the future. Some of these patents may be sufficiently broad to prevent or delay
us from manufacturing or marketing products important to our current and future
business. The scope, validity and enforceability of these patents, if granted,
the extent to which we may wish or need to obtain licenses to these patents, and
the cost and availability of the licenses cannot be accurately predicted. If we
cannot obtain these necessary licenses, we may have to withdraw the affected
products from the market or we may experience delays in market introduction of
the affected products while an attempt is made to design around these patents.
Alternatively, we could find that the development, manufacture or sale of the
affected products is foreclosed. We could also incur substantial costs in
challenging the validity and scope of these patents.
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR
COMPETITORS MAY BE ABLE TO RAPIDLY INTRODUCE COMPETITIVE PRODUCTS BASED ON OUR
INVENTIONS WITHOUT HAVING TO PAY US ROYALTIES.
We seek to obtain patents on our inventions. Without the protection of
patents, competitors may be able to use our inventions to manufacture and market
competing products without being required to undertake the lengthy and expensive
development efforts made by us and without having to pay royalties or otherwise
compensate us for the use of the invention. Patents and patent applications
owned or licensed to us may not provide substantial protection. Important legal
questions remain to be resolved as to the extent and scope of available patent
protection for biotechnology products and processes in the U.S. and other
important markets. We do not know how many of our pending patent applications
will be granted, or the effective coverage of those that are granted. In the
U.S. and other important markets, the issuance of a patent is neither conclusive
as to its validity nor the enforceable scope of its claims. We have engaged in
significant litigation to determine the scope and validity of some of our
patents and expect to continue to do so in the future. Even if we are successful
in obtaining and defending patents, we cannot be sure that these patents will
provide substantial protection. The length of time necessary to successfully
resolve patent litigation may allow infringers of our patents to gain
significant market advantage. Third parties may also be able to design around
our patents and develop competitive products that do not infringe our patents.
Many countries, including some countries in Europe, have compulsory
licensing laws under which a patent owner may be compelled to grant licenses to
third parties. For example, we may be compelled to grant a license if the third
party's product is needed to meet a threat to public health or safety in a
country, or we failed to work the invention in that country, or a third party
has patented improvements. In addition, most countries limit the enforceability
of patents against government agencies or government contractors. In these
countries, we may be limited to monetary
8
<PAGE>
relief and may be unable to enjoin infringement, which could materially diminish
the value of our patent.
BECAUSE MOST OF OUR PRODUCTS ARE BASED ON TECHNOLOGIES THAT ARE UNFAMILIAR TO
THE HEALTHCARE COMMUNITY, THEY MAY NOT BE ACCEPTED BY HEALTHCARE PROVIDERS AND
PATIENTS, WHICH WOULD HARM OUR BUSINESS.
We may experience difficulties in launching new products, many of which are
novel products based on technologies that are unfamiliar to the healthcare
community. Healthcare providers and patients may not accept our products. In
addition, government agencies, as well as private organizations involved in
healthcare, from time to time publish guidelines or recommendations to
healthcare providers and patients. These guidelines or recommendations can be
very influential and may directly or indirectly adversely affect the usage of
our products. For example, these guidelines could recommend a decreased dosage
of our products in conjunction with a concomitant therapy or recommend a
competitive product over our product.
IF WE ARE UNABLE TO SUCCESSFULLY COMPETE IN THE HIGHLY COMPETITIVE HEALTHCARE
INDUSTRY, OUR BUSINESS COULD BE HARMED.
We operate in a highly competitive environment and competition is expected
to increase. Competitors include large pharmaceutical, chemical and blood
testing companies, as well as biotechnology companies. Some of these
competitors, particularly large pharmaceutical and blood testing companies, have
greater resources than we have. Accordingly, even if we are successful in
launching a product, we may find that a competitive product dominates the market
for any number of reasons, including the possibility that
- the competitor may have launched its product first,
- the competitor may have greater marketing capabilities; or
- the competitive product may have increased therapeutic or other
advantages.
The technologies applied by us and our competitors are also rapidly
evolving, and new developments frequently result in price competition and
product obsolescence, which would harm our business.
SALES OF OUR PRODUCTS MAY BE ADVERSELY AFFECTED BY THE AVAILABILITY AND AMOUNT
OF REIMBURSEMENT TO THE USER OF OUR PRODUCTS FROM THIRD PARTIES, SUCH AS THE
GOVERNMENT AND INSURANCE COMPANIES.
In the U.S. and other significant markets, sales of our products may be
affected by the availability of reimbursement from the government or other third
parties, such as insurance companies. It is difficult to predict the
reimbursement status of newly approved, novel biotechnology products such as
ours, and current reimbursement policies for existing products may change. In
some foreign markets, governments have issued regulations relating to the
pricing and profitability of pharmaceutical companies. There have been proposals
in the U.S. at both the federal and state level to implement these controls. The
growth of managed care in the U.S. also has placed pressure on the pricing of
healthcare products. These pressures can be expected to continue and could
decrease our margins on affected products.
WE EXPECT TO GROW OUR BUSINESS THROUGH TRANSACTIONS AND MAY INCUR COSTS WHICH
MAY IMPACT OUR PROFITABILITY.
Our management expects to grow our business in areas in which we can be most
competitive, either through licensing, collaborations or acquisitions of
products or companies. In connection with
9
<PAGE>
these efforts, we may incur significant charges, costs and expenses, which could
impact our profitability, including impairment losses, restructuring charges,
the write-off of purchased in-process technology, transaction-related expenses,
costs associated with integrating new businesses and the cost of amortizing
goodwill and other intangibles.
IF WE CANNOT INITIATE AND MAINTAIN REVENUE-GENERATING RELATIONSHIPS WITH THIRD
PARTIES, WE MAY NOT BE ABLE TO GROW OUR REVENUES IN THE NEAR TO MEDIUM TERM.
Many products in our current pipeline are in relatively early stages of
research or development. Our ability to grow earnings in the near to medium term
may depend, in part, on our ability to initiate and maintain other
revenue-generating relationships with third parties, such as licenses to some of
our technologies, and on our ability to identify and successfully acquire rights
to later-stage products from third parties. We cannot assure you that these
other sources of revenue will be established.
WE COLLABORATE WITH THIRD PARTIES TO DEVELOP AND COMMERCIALIZE NEW PRODUCTS;
CONFLICTS WITH OR DECISIONS BY OUR PARTNERS COULD HARM OUR BUSINESS.
An important part of our business strategy depends upon collaborations with
third parties, including research collaborations and joint efforts to develop
and commercialize new products. As circumstances change, we and our corporate
partners may develop conflicting priorities or other conflicts of interest. We
may experience significant delays and incur significant expenses in resolving
these conflicts and may not be able to resolve these matters on acceptable
terms. Even without conflicts of interest, the parties may differ in their views
as to how best to realize the value associated with a current product or a
product in development. In some cases, our corporate partner may have
responsibility for formulating and implementing key strategic or operational
plans. Decisions by our corporate partners on key clinical, regulatory,
marketing, pricing, inventory management and other issues may prevent successful
commercialization of the product or otherwise impact our profitability.
OUR FINANCIAL RESULTS ARE SENSITIVE TO INTEREST RATE AND FOREIGN CURRENCY
EXCHANGE RATE FLUCTUATIONS AS A RESULT OF OUR SIGNIFICANT CASH BALANCES AND
SHORT-TERM INVESTMENTS.
In 1998, we sold portions of our businesses for cash, including our IN VITRO
diagnostics and ophthalmics businesses, and as a result have significant cash
balances and short-term investments. Our financial results, therefore, are
sensitive to interest rate fluctuations in the U.S. In addition, we sell
products in many countries throughout the world, and our financial results could
be significantly affected by fluctuations in foreign currency exchange rates or
by weak economic conditions in foreign markets.
WE ARE SUBJECT TO TAXATION IN A NUMBER OF JURISDICTIONS AND CHANGES TO THE
CORPORATE TAX RATE AND LAWS OF ANY OF THESE JURISDICTIONS COULD INCREASE THE
AMOUNT OF CORPORATE TAXES WE HAVE TO PAY.
We are taxable principally in the U.S., Germany, Italy and The Netherlands.
All of these jurisdictions have in the past and may in the future make changes
to their corporate tax rates and other tax laws, which could increase our tax
provision in the future. We have negotiated a number of rulings regarding income
and other taxes that are subject to periodic review and renewal. If these
rulings are not renewed or are substantially modified, taxes payable in
particular jurisdictions could increase. While we believe that all material tax
liabilities are properly reflected in our balance sheet, we are presently under
audit in several jurisdictions, and we may not prevail in all cases in the event
the taxing authorities disagree with our interpretations of the tax law. In
addition and subject to some limitations, we have assumed liabilities for all
income taxes incurred prior to the sales of
10
<PAGE>
our former subsidiaries, Chiron Vision Corporation and Chiron Diagnostics
Corporation. Future levels of research and development spending, capital
investment and export sales will impact our entitlement to related tax credits
and benefits that lower our effective tax rate.
WE EXPECT TO EXPERIENCE VOLATILITY IN THE TRADING PRICE OF THE EXCHANGE NOTES
AND THE UNDERLYING COMMON STOCK, WHICH COULD ADVERSELY AFFECT THE VALUE OF YOUR
INVESTMENT.
The trading price of the exchange notes and the underlying common stock is
subject to significant volatility due to any number of events, both internal and
external us. These include, without limitation:
- results of clinical trials conducted by us or by our competitors;
- announcements by us or our competitors regarding product development
efforts, including the status of regulatory approval applications;
- the outcome of legal proceedings, including claims filed by us against
third parties to enforce our patents and claims filed by third parties
against us relating to patents held by the third parties;
- the launch of competing products;
- the resolution of or the failure to resolve disputes with collaboration
partners;
- our corporate restructuring activities;
- our licensing activities; and
- the acquisition or sale by us of products, products in development or
businesses.
In connection with our research and development collaborations, from time to
time we invest in equity securities of our corporate partners. The price of
these securities also is subject to significant volatility and may be affected
by, among other things, the types of events that affect our stock. Changes in
the market price of these securities may impact our profitability and the
trading price of our exchange notes and common stock.
THE EXCHANGE NOTES ARE SUBORDINATED TO OUR SENIOR DEBT; IN THE EVENT OF A
DEFAULT, WE MAY NOT HAVE ENOUGH ASSETS REMAINING TO PAY AMOUNTS DUE ON ANY OR
ALL OF THE EXCHANGE NOTES THEN OUTSTANDING AND YOU MAY LOSE ANY OR ALL OF YOUR
INVESTMENT.
The exchange notes will be unsecured and subordinated in right of payment to
our senior debt. As a result of such subordination, in the event of our
liquidation or insolvency, a payment default with respect to senior debt, a
covenant default with respect to designated senior debt or upon acceleration of
the exchange notes due to an event of default, our assets will be available to
pay obligations on the exchange notes only after all senior debt has been paid
in full, and there may not be sufficient assets remaining to pay amounts due on
any or all of the exchange notes then outstanding. Neither we nor our
subsidiaries are prohibited under the exchange note indenture from incurring
debt. As of December 31, 1999, we had approximately $91.4 million of outstanding
senior debt.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the exchange notes or to provide us
with funds for our payment obligations, whether by dividends, distributions,
loans or other payments. In addition, any payment of dividends, distributions,
loans or advances by our subsidiaries to us could be subject to statutory or
contractual restrictions. Payments to us by our subsidiaries also will be
contingent upon our subsidiaries' earnings and business considerations.
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<PAGE>
IF AN ACTIVE MARKET FOR THE EXCHANGE NOTES FAILS TO DEVELOP, THE TRADING PRICE
AND LIQUIDITY OF THE EXCHANGE NOTES COULD BE MATERIALLY ADVERSELY AFFECTED.
Prior to the offering there has been no trading market for the exchange
notes. The dealer manager has advised us that it currently intends to make a
market in the exchange notes. The liquidity of the trading market for the
exchange notes will depend in part on the level of participation of the holders
of existing notes in the exchange offer. The greater the participation in the
exchange offer, the greater the liquidity of the trading market for the exchange
notes and the lesser the liquidity of the trading market for the existing notes
not tendered in the exchange offer. However, Goldman, Sachs & Co. is not
obligated to make a market and may discontinue this market making activity at
any time without notice. In addition, market making activity by Goldman,
Sachs & Co. will be subject to the limits imposed by the Securities Act and the
Exchange Act. As a result, we cannot assure you that any market for the exchange
notes will develop or, if one does develop, that it will be maintained. If an
active market for the exchange notes fails to develop or be sustained, the
trading price and liquidity of the exchange notes could be materially adversely
affected.
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<PAGE>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus, including material incorporated into this prospectus by
reference, contains forward-looking statements. These include statements
concerning plans, goals, strategies, future events or performance and all other
statements which are other than statements of historical fact, including,
without limitation, statements containing words such as "believes,"
"anticipates," "expects," "estimates," "projects," "will," "may," "might" and
words of a similar nature. Actual results, performance or outcomes may differ
materially. Some of the important factors which, in our view, could cause actual
results to differ from those expressed in the forward-looking statements are
discussed under the heading "Risk Factors".
USE OF PROCEEDS
We will not receive any proceeds from the exchange of the existing notes for
the exchange notes pursuant to the exchange offer.
PRICE RANGE OF COMMON STOCK
The following table sets forth the high and low closing sales prices of a
share of our common stock reported on The Nasdaq National Market during the
indicated periods.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal year ending December 31, 1998
First Quarter......................................... $22 $16 9/16
Second Quarter........................................ 22 15 11/16
Third Quarter......................................... 21 1/16 13 3/4
Fourth Quarter........................................ 26 5/8 18 1/16
Fiscal year ending December 31, 1999
First Quarter......................................... $23 1/4 $20 7/8
Second Quarter........................................ 22 7/16 20
Third Quarter......................................... 33 5/16 20 3/4
Fourth Quarter........................................ 43 1/4 27 1/2
Fiscal year ending December 31, 2000
First Quarter......................................... $67 9/16 $39 7/16
Second Quarter (through April 5, 2000) 48 3/16 44
</TABLE>
On April 5, 2000, the last reported sales price of our common stock on The
Nasdaq National Market was $44 1/8 per share.
DIVIDEND POLICY
We do not pay any dividends on our common stock. We currently intend to
retain earnings, if any, for use in our business and do not anticipate paying
cash dividends to holders of our common stock.
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<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1999, (i) our actual
capitalization and (ii) our pro forma capitalization as adjusted after giving
effect to (a) the issuance of the exchange notes in the exchange offer on the
assumption that all of the outstanding existing 1.90% Convertible Subordinated
Notes due November 17, 2000 were validly tendered and accepted for exchange;
(b) to reflect an extraordinary loss of $ million on the assumed early
extinguishment of all outstanding existing notes and (c) the repayment in
January 2000 of an outstanding note payable to Novartis AG of $67.8 million.
To the extent that existing notes are not validly tendered or accepted in
the exchange offer, the amount attributed to the exchange notes would decrease
and the amount attributed to the existing notes would increase. This information
should be read in conjunction with our consolidated financial statements and
notes to consolidated financial statements which are incorporated by reference
herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN THOUSANDS,
EXCEPT FOR SHARE DATA)
<S> <C> <C>
Long-term debt, including current portion:
% Convertible Subordinated Notes due 2007 (exchange
notes).................................................. $ -- $
1.90% Convertible Subordinated Notes due 2000 (existing
notes).................................................. 238,371 --
Other long-term debt(1)(2)................................ 196,212 128,421
---------- ----------
Total long-term debt.................................... $ 434,583 $
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none outstanding............................ -- --
Common stock, $0.01 par value; 499,500,000 shares
authorized; 181,863,000 shares issued and outstanding... 1,819 1,819
Restricted common stock, $0.01 par value; 500,000 shares
authorized; none outstanding............................ -- --
Additional paid-in capital................................ 2,057,418 2,057,418
Accumulated deficit....................................... (323,037) ()
Accumulated other comprehensive income.................... 3,351 3,351
Treasury stock, at cost (1,230,000 shares)................ (46,714) (46,714)
---------- ----------
Total stockholders' equity.............................. 1,692,837
---------- ----------
Total capitalization.................................. $2,127,420 $
========== ==========
</TABLE>
- --------------
(1) Long-term debt includes a $67.8 million note payable to Novartis AG,
$20.3 million that was outstanding under certain credit facilities and
$9.8 million of the 1.90% Convertible Subordinated Notes due November 2000
held by Novartis AG that will not be included in the exchange offer. Also
see note 10 of the consolidated financial statements which are incorporated
by reference herein.
(2) In January 2000, we repaid an outstanding note payable to Novartis AG of
$67.8 million.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and the notes thereto.
The selected data presented below under captions "Consolidated Statement of
Operations Data" and "Consolidated Balance Sheet Data" for, and as of the end
of, each of the years in the five-year period ended December 31, 1999 are
derived from our audited consolidated financial statements. The consolidated
financial statements as of December 31, 1998 and 1999 and for each of the years
in the three-year period ended December 31, 1999, are incorporated by reference
in this prospectus.
The following transactions materially effect the comparability of the
information reflected below:
- On December 29, 1997, we completed the sale of our ophthalmics business to
Bausch & Lomb Incorporated. On November 30, 1998, we completed the sale of
our IN VITRO diagnostics business to Bayer Corporation. Our consolidated
statements of operations reflect the after-tax results of our ophthalmics
business and our IN VITRO diagnostics business as discontinued operations
for all periods presented; and
- On March 31, 1998, in an acquisition accounted for under the purchase
method of accounting, we acquired the remaining 51% interest in Chiron
Behring GmbH & Co from Hoechst AG. Beginning in the second quarter of
1998, the results of Chiron Behring were consolidated with our results.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
($ IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues............................ $ 393,566 $ 537,149 $ 574,599 $ 736,673 $ 762,646
Income (loss) from continuing
operations.............................. (469,802) 45,658 25,782 75,998 128,404
Income (loss) from continuing operations
per share (basic)....................... (2.89) 0.27 0.15 0.43 0.71
Income (loss) from continuing operations
per share (diluted)..................... (2.89) 0.26 0.14 0.42 0.69
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term and
long-term investments................... $ 224,217 $ 128,835 $ 258,472 $1,590,003 $1,554,787
Working capital........................... 268,408 223,599 298,866 1,073,507 726,369
Total assets.............................. 1,489,847 1,688,670 1,768,478 2,524,264 2,458,769
Long-term debt, including current
portion(1).............................. 470,224 560,072 556,172 421,309 434,583
Stockholders' equity...................... 672,061 764,855 873,945 1,545,802 1,692,837
RATIO OF EARNINGS TO FIXED CHARGES(2)..... $ (377.25) 1.94x 1.54x 3.38x 4.89x
</TABLE>
- ----------------
(1) Long-term debt includes a note payable to Novartis AG, amounts outstanding
under certain credit facilities and the 1.90% Convertible Subordinated Notes
due November 2000 held by Novartis AG.
(2) For purposes of this ratio, "earnings" consist of earnings before income
taxes and fixed charges. "Fixed charges" consist of interest on indebtedness
and capital lease obligations, the interest component of rental expense,
amortization of debt discount and issuance expenses.
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<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING EXISTING NOTES
We are offering to exchange $1,000 principal amount of exchange notes for
each $1,000 principal amount at maturity of existing notes that are validly
tendered on the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal. In addition, for each $1,000
principal amount at maturity of the existing notes tendered, you will also
receive a cash payment in the amount equal to the difference between (i) the
product of (A) 34.5924 and (B) the average of the closing market prices of our
common stock for the five trading days immediately preceding the second trading
day prior to the expiration date and (ii) $1,000.
Any existing note that is validly tendered and accepted prior to an interest
payment date, May 17 and November 17 in the case of the existing notes, will not
be entitled to any payment or adjustment on account of accrued original issue
discount or accrued and unpaid interest on such note.
Holders must tender existing notes in a principal amount of $1,000 and any
integral multiple of $1,000.
You may tender all, some or none of your existing notes.
The exchange offer is not being made to, and we will not accept tenders for
exchange from, holders of existing notes in any jurisdiction in which the
exchange offer or the acceptance of the offer would not be in compliance with
the securities or blue sky laws of that jurisdiction.
Our board of directors and officers do not make any recommendation to the
holders of existing notes as to whether or not to tender all or any portion of
their existing notes. In addition, we have not authorized anyone to make any
recommendation. You must make your own decision whether to tender your existing
notes and, if so, the amount of existing notes to tender.
EXPIRATION DATE
The expiration date for the offer is 12:01 a.m., Eastern Standard Time, on
May , 2000, unless we extend the offer. We may extend this expiration date for
any reason. The last date on which tenders will be accepted, whether on May ,
2000 or any later date to which the exchange offer may be extended, is referred
to as the expiration date.
EXTENSIONS; AMENDMENTS
We expressly reserve the right, in our discretion, for any reason to:
- delay the acceptance of existing notes for exchange;
- extend the time period during which the exchange offer is open, by giving
oral or written notice of an extension to the holders of existing notes in
the manner described below. During any extension, all existing notes
previously tendered and not withdrawn will remain subject to the exchange
offer; and
- amend the terms of the exchange offer.
If we consider an amendment to the exchange offer to be material, or if we
waive a material condition of the exchange offer, we will promptly disclose the
amendment in a prospectus supplement, and, if required by law, we will extend
the exchange offer for a period of five to ten business days.
We will give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the existing notes as promptly
as practicable. In the case of any extension, we will
16
<PAGE>
issue a press release or other public announcement no later than 9:00 a.m.,
Eastern Standard Time, on the next business day after the previously scheduled
expiration date.
PROCEDURES FOR TENDERING EXISTING NOTES
Your tender to us of existing notes and our acceptance of your tender will
constitute a binding agreement between you and us upon the terms and subject to
the conditions set forth in this prospectus and in the accompanying letter of
transmittal.
TENDER OF EXISTING NOTES HELD THROUGH A CUSTODIAN. If you are a beneficial
holder of the existing notes that are held of record by a custodian bank,
depository institution, broker, dealer, trust company or other nominee, you must
instruct the custodian to tender the existing notes on your behalf. Your
custodian will provide you with their instruction letter which you must use to
give these instructions. Any beneficial owner of existing notes held of record
by The Depository Trust Company or its nominee, through authority granted by The
Depository Trust Company, may direct The Depository Trust Company participant
through which the beneficial owner's existing notes are held in The Depository
Trust Company to tender on the beneficial owner's behalf.
TENDER OF EXISTING NOTES HELD THROUGH THE DEPOSITORY TRUST COMPANY. To
effectively tender existing notes that are held through The Depository Trust
Company, Depository Trust Company participants should transmit their acceptance
through the Automated Tender Offer Program ("ATOP"), for which the transaction
will be eligible, and The Depository Trust Company will then edit and verify the
acceptance and send an agent's message to the exchange agent for its acceptance.
Delivery of tendered existing notes must be made to the exchange agent pursuant
to the book-entry delivery procedures set forth below or the tendering
Depository Trust Company participant must comply with the guaranteed delivery
procedures set forth below.
In addition, the exchange agent must receive:
- a completed and signed letter of transmittal or an electronic confirmation
pursuant to The Depository Trust Company's ATOP system indicating the
principal amount of existing notes to be tendered and any other documents,
if any, required by the letter of transmittal, and
- prior to the expiration date, a confirmation of book-entry transfer of
such existing notes, into the exchange agent's account at The Depository
Trust Company, in accordance with the procedure for book-entry transfer
described below, or
- the holder must comply with the guaranteed delivery procedures described
below.
No letters of transmittal will be required to tender existing notes through
ATOP.
Your existing notes must be tendered by book-entry transfer. The exchange
agent will establish an account with respect to the existing notes at The
Depository Trust Company for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in The Depository Trust Company must make book-entry delivery of
existing notes by having The Depository Trust Company transfer such existing
notes into the exchange agent's account at The Depository Trust Company in
accordance with The Depository Trust Company's procedures for transfer. Although
your existing notes will be tendered through The Depository Trust Company
facility, the letter of transmittal, or facsimile, or an electronic confirmation
pursuant to The Depository Trust Company's ATOP system, with any required
signature guarantees and any other required documents, if any, must be
transmitted to and received or confirmed by the exchange agent at its address
set forth below under "Exchange agent," prior to 12:01 a.m. Eastern Standard
Time on the expiration date. You or your broker must ensure that the exchange
agent receives an agent's message from The Depository Trust Company confirming
the book-entry transfer of your existing notes. An agent's message is a message
transmitted by The Depository
17
<PAGE>
Trust Company and received by the exchange agent that forms a part of the
book-entry confirmation which states that The Depository Trust Company has
received an express acknowledgement from the participant in The Depository Trust
Company tendering the shares that such participant agrees to be bound by the
terms of the letter of transmittal. Delivery of documents to The Depository
Trust Company in accordance with its procedures does not constitute delivery to
the exchange agent.
If you are an institution which is a participant in The Depository Trust
Company's book-entry transfer facility, you should follow the same procedures
that are applicable to persons holding existing notes through a financial
institution.
Do not send letters of transmittal or other exchange offer documents to us,
Goldman Sachs & Co. or Georgeson Shareholder Communications Inc., the
information agent.
It is your responsibility that all necessary materials get to the exchange
agent before the expiration date. If the exchange agent does not receive all of
the required materials before the expiration date, your existing notes will not
be validly tendered.
Any existing notes not accepted for exchange for any reason will be returned
without expense to the tendering holder as promptly as practicable after the
expiration or termination of the exchange offer.
We will have accepted the validity of tendered existing notes if and when we
give oral or written notice to State Street Bank and Trust Company of
California, N.A., the exchange agent. The exchange agent will act as the
tendering holders' agent for purposes of receiving the exchange notes from us.
If we do not accept any tendered existing notes for exchange because of an
invalid tender or the occurrence of any other event, State Street Bank and Trust
Company of California, N.A. will return those existing notes to you, without
expense, promptly after the expiration date via book-entry transfer through The
Depository Trust Company.
OUR INTERPRETATIONS ARE BINDING
We will determine, in our sole discretion, all questions as to the validity,
form, eligibility and acceptance of existing notes tendered for exchange. Our
determination will be final and binding. We reserve the absolute right to reject
any and all tenders of any particular existing notes not properly tendered or to
not accept any particular existing note which acceptance might, in our judgment
or our counsel's judgment, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the exchange offer as to
any particular existing notes either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks to tender
existing notes in the exchange offer. Our interpretation of the terms and
conditions of the exchange offer as to any particular existing note either
before or after the expiration date, including the letter of transmittal and the
instructions to such letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of existing notes for exchange must be cured within such reasonable period of
time as we shall determine. Neither we, the exchange agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of existing notes for exchange, nor shall any of them
incur any liability for failure to give such notification.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Once all of the conditions to the exchange offer are satisfied or waived, we
will accept, promptly after the expiration date, all existing notes properly
tendered, and will issue the exchange notes promptly after acceptance of the
existing notes. The discussion under the heading "Conditions for completion of
the exchange offer" provides further information regarding the
18
<PAGE>
conditions to the exchange offer. For purposes of the exchange offer, we shall
be deemed to have accepted properly tendered existing notes for exchange when,
as and if we have given oral or written notice to the exchange agent, with
written confirmation of any oral notice to be given promptly after giving such
notice.
For each $1,000 principal amount of existing notes accepted for exchange,
you will receive an exchange note having a principal amount of $1,000 and you
will also receive a cash payment in the amount equal to the difference between
(i) the product of (A) 34.5924 and (B) the average of the closing market prices
of our common stock for the five trading days immediately preceding the second
trading day prior to the expiration date and (ii) $1,000. The exchange notes
will bear interest from the issue date, which is anticipated to be three
business days following acceptance of the existing notes.
Any existing note that is validly tendered and accepted prior to an interest
payment date, May 17 and November 17 in the case of the existing notes, will not
be entitled to any payment or adjustment on account of accrued original issue
discount or accrued and unpaid interest on such note.
In all cases, issuance of exchange notes for existing notes that are
accepted for exchange in the offer will be made only after timely receipt by the
exchange agent of:
- a timely book-entry confirmation of such existing notes into the exchange
agent's account at the book-entry transfer facility,
- a properly completed and duly executed letter of transmittal or an
electronic confirmation of the submitting holder's acceptance through The
Depository Trust Company's ATOP system, and
- all other required documents, if any.
If we do not accept any tendered existing notes for any reason set forth in
the terms and conditions of the exchange offer, or if existing notes are
submitted for a greater principal amount than the holder desires to exchange,
the unaccepted or non-exchanged existing notes tendered by book-entry transfer
into the exchange agent's account at the book-entry transfer facility will be
returned in accordance with the book-entry procedures described above, and the
existing notes that are not exchanged will be credited to an account maintained
with The Depository Trust Company, as promptly as practicable after the
expiration or termination of the exchange offer.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your existing notes and you cannot complete the
procedures for book-entry transfer set forth above on a timely basis, you may
still tender your existing notes if:
- your tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed letter of
transmittal, or a facsimile of such letter of transmittal or an electronic
confirmation pursuant to the Depository Trust Company's ATOP system, and
notice of guaranteed delivery, substantially in the form provided by us,
by facsimile transmission, mail or hand delivery, that:
(a) sets forth the name and address of the holder of existing notes and the
amount of existing notes tendered,
(b) states that the tender is being made thereby, and
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(c) guarantees that within three New York Stock Exchange trading days after
the expiration date a book-entry confirmation and any other documents
required by the letter of transmittal, if any, will be deposited by the
eligible institution with the exchange agent; and
- book-entry confirmation and all other documents, if any, required by the
letter of transmittal are received by the exchange agent within three New
York Stock Exchange trading days after the expiration date.
WITHDRAWAL RIGHTS
You may withdraw your tender of existing notes at any time prior to
12:01 a.m., Eastern Standard Time, on the expiration date.
For a withdrawal to be effective, the exchange agent must receive a written
notice of withdrawal at the address or, in the case of eligible institutions, at
the facsimile number, set forth below under the heading "Exchange agent" prior
to 12:01 a.m. Eastern Standard Time, on the expiration date. Any notice of
withdrawal must:
- specify the name of the person who tendered the existing notes to be
withdrawn;
- contain a statement that you are withdrawing your election to have your
existing notes exchanged;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the existing notes were tendered,
including any required signature guarantees; and
- if you have tendered your existing notes in accordance with the procedure
for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at The Depository Trust Company
to be credited with the withdrawn existing notes and otherwise comply with
the procedures of such facility.
Any existing notes that have been tendered for exchange, but which are not
exchanged for any reason, will be credited to an account maintained with the
book-entry transfer facility for the existing notes, as soon as practicable
after withdrawal, rejection of tender or termination of the exchange offer.
Properly withdrawn existing notes may be retendered by following the procedures
described under the heading "Procedures for tendering existing notes" above at
any time on or prior to 12:01 a.m., Eastern Standard Time, on the expiration
date.
CONDITIONS FOR COMPLETION OF THE EXCHANGE OFFER
The exchange offer is conditional upon a minimum principal amount of 75% of
the existing notes being tendered and upon the average of the closing market
prices of our common stock for the five trading days immediately preceding the
second trading day prior to the expiraton date remaining between $ and $ ,
which conditions may be waived or amended.
We may not accept existing notes for exchange and may terminate or not
complete the exchange offer if:
- any action, proceeding or litigation seeking to enjoin, make illegal or
delay completion of the exchange offer or otherwise relating in any manner
to the exchange offer is instituted or threatened;
- any order, stay, judgment or decree is issued by any court, government,
governmental authority or other regulatory or administrative authority and
is in effect, or any statute, rule, regulation, governmental order or
injunction shall have been proposed, enacted, enforced or deemed
applicable to the exchange offer, any of which would or might restrain,
prohibit or
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delay completion of the exchange offer or impair the contemplated benefits
of the exchange offer to us;
- any of the following occurs and the adverse effect of such occurrence
shall, in our reasonable judgment, be continuing:
- any general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in the United States;
- any extraordinary or material adverse change in U.S. financial markets
generally, including, without limitation, a decline of at least twenty
percent in either the Dow Jones Average of Industrial stocks or the
Standard & Poor's 500 Index from April 5, 2000;
- a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States;
- any limitation, whether or not mandatory, by any governmental entity
on, or any other event that would reasonably be expected to materially
adversely affect, the extension of credit by banks or other lending
institutions;
- a commencement of a war or other national or international calamity
directly or indirectly involving the United States, which would
reasonably be expected to affect materially and adversely, or to delay
materially, the completion of the exchange offer;
- if any of the situations described above existed at the time of
commencement of the exchange offer and that situation deteriorates
materially after commencement of the exchange offer;
- any tender or exchange offer, other than this exchange offer by us, with
respect to some or all of our outstanding common stock or any merger,
acquisition or other business combination proposal involving us shall have
been proposed, announced or made by any person or entity;
- any event or events occur that have resulted or may result, in our
judgment, in an actual or threatened change in our business condition,
income, operations, stock ownership or prospects and our subsidiaries,
taken as a whole;
- as the term "group" is used in Section 13(d)(3) of the Exchange Act,
- any person, entity or group acquires more than five percent of our
outstanding shares of common stock, other than a person, entity or
group which had publicly disclosed such ownership with the Securities
and Exchange Commission, or SEC, prior to April 5, 2000;
- any such person, entity or group which had publicly disclosed such
ownership prior to such date shall acquire additional common stock
constituting more than two percent of our outstanding shares; or
- any new group shall have been formed that beneficially owns more than
five percent of our outstanding shares of common stock which in our
judgment in any such case, and regardless of the circumstances, makes
it inadvisable to proceed with the exchange offer or with such
acceptance for exchange of shares.
If any of the above events occur, we may:
- terminate the exchange offer and as promptly as practicable return all
tendered existing notes to tendering note holders;
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- extend the exchange offer and, subject to the withdrawal rights described
in "--Withdrawal rights" on page 20, retain all tendered existing notes
until the extended exchange offer expires;
- amend the terms of the exchange offer; or
- waive the unsatisfied condition and, subject to any requirement to extend
the period of time during which the exchange offer is open, complete the
exchange offer.
The conditions are for our sole benefit. We may assert these conditions with
respect to all or any portion of the exchange offer regardless of the
circumstances giving rise to them. We may waive any condition in whole or in
part at any time in our discretion. Our failure to exercise our rights under any
of the above conditions does not represent a waiver of these rights. Each right
is an ongoing right which may be asserted at any time. Any determination by us
concerning the conditions described above will be final and binding upon all
parties.
If a stop order issued by the SEC is in effect with respect to the
registration statement of which this document is a part, we will not accept any
existing notes tendered and we will not issue exchange notes in exchange for any
existing notes.
NOVARTIS RELATIONSHIP AND WAIVER
Novartis AG, a life sciences company headquartered in Basel, Switzerland,
was formed as a result of the December 1996 merger between Ciba-Geigy Limited
and Sandoz Limited. Through a series of transactions that became effective in
January 1995, Ciba acquired shares of our common stock which, when combined with
shares already held by Ciba, represented 49.9% of our then-outstanding common
stock. As a result of dilution stemming primarily from the issuance of common
stock under our employee stock option and stock purchase plans and in connection
with certain acquisitions, as of February 1, 2000, Novartis held shares
representing approximately 44% of our outstanding common stock.
In connection with these transactions, we and Novartis entered into a series
of agreements which provide, among other things and subject to certain
conditions and exceptions, that:
- Novartis will not increase its ownership interest in us above 55% before
January 5, 2001 and thereafter will not increase its ownership above 55%
unless it acquires all of our outstanding capital stock in a "buy-out"
transaction;
- Novartis may not propose or consummate a "buy-out transaction" before
January 5, 2001;
- Novartis may exceed these standstill amounts and increase its ownership
interest up to 79.9% if the transaction is approved by a majority of the
independent members of our Board of Directors;
- Novartis has the right to nominate three members to our Board of
Directors, which will be reduced from twelve members to eleven members
after our year 2000 annual meeting;
- We may require Novartis to purchase shares of our common stock directly
from us at fair market value, up to a maximum subscription amount,
initially $500 million and subject to adjustment, as noted below;
- Novartis will provide certain funding to us for research services and has
agreed to guarantee up to a maximum amount of $402.5 million of our debt;
Chiron can increase the maximum borrowing amount under the guaranteed
credit facilities by up to $300 million. In exchange for this increase,
the amount of Chiron's common stock required to be purchased by Novartis
(as noted above) would be reduced by an equal amount. Under the Investment
Agreement, Novartis has guaranteed $172.6 million of Chiron's operating
lease commitments
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as of December 31, 1999. In addition, Novartis has guaranteed a
$100 million bank line of credit but there were no borrowings outstanding
at December 31, 1999.
- Novartis has an option to purchase newly issued shares of our common stock
directly from us at fair market value, subject to the standstill
restrictions described above; and
- We and Novartis will cooperate in research, development, manufacturing and
marketing of biotechnology products on an arm's-length basis while
remaining independent to pursue other opportunities.
Novartis has waived its subscription rights related to the issuance of the
exchange notes.
FEES AND EXPENSES
Goldman, Sachs & Co. is acting as the dealer manager in connection with the
exchange offer. Goldman, Sachs & Co. will receive a fee in the manner described
below for its services as dealer manager, in addition to being reimbursed for
its out-of-pocket expenses, including reasonable attorneys' fees, in connection
with the exchange offer. The fees below will be payable if and when the exchange
offer is completed.
The fee will be equal to the greater of (i) 0.75% of the principal amount at
maturity of the existing notes validly tendered and accepted for exchange in the
exchange offer or (ii) $500,000.
We have agreed to indemnify Goldman, Sachs & Co. against specified
liabilities relating to or arising out of the offer, including civil liabilities
under the federal securities laws, and to contribute to payments which Goldman,
Sachs & Co. may be required to make in respect thereof. However, in the opinion
of the SEC, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. Goldman, Sachs & Co. may from
time to time hold existing notes, exchange notes and our common stock in its
proprietary accounts, and to the extent it owns existing notes in these accounts
at the time of the exchange offer, Goldman, Sachs & Co. may tender these
existing notes.
We have retained Georgeson Shareholder Communications Inc. to act as the
information agent and State Street Bank and Trust Company of California, N.A. to
act as the exchange agent in connection with the exchange offer. The information
agent may contact holders of existing notes by mail, telephone, facsimile
transmission and personal interviews and may request brokers, dealers and other
nominee stockholders to forward materials relating to the exchange offer to
beneficial owners. The information agent and the exchange agent each will
receive reasonable compensation for their respective services, will be
reimbursed for reasonable out-of-pocket expenses and will be indemnified against
liabilities in connection with their services, including liabilities under the
federal securities laws.
Neither the information agent nor the exchange agent has been retained to
make solicitations or recommendations. The fees they receive will not be based
on the principal amount of existing notes tendered under the exchange offer.
We will not pay any fees or commissions to any broker or dealer or any other
person, other than Goldman, Sachs & Co., for soliciting tenders of existing
notes under the exchange offer. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by us for reasonable and necessary
costs and expenses incurred by them in forwarding materials to their customers.
LEGAL LIMITATION
The above conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition, or may be
waived by us in whole or in part at any
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time and from time to time in our sole discretion. Our failure at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, we will not accept for exchange any existing notes tendered,
and no exchange notes will be issued in exchange for any such existing notes, if
at such time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939, as
amended.
EXCHANGE AGENT
State Street Bank and Trust Company of California, N.A., has been appointed
as the exchange agent for the exchange offer. All executed letters of
transmittal should be directed to the exchange agent at the address set forth
below. Questions, requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the exchange agent addressed as
follows:
STATE STREET BANK
AND TRUST COMPANY
OF CALIFORNIA, N.A.
Exchange Agent
BY MAIL, OVERNIGHT DELIVERY OR HAND:
State Street Bank and Trust Company of California, N.A.
c/o State Street Bank and Trust Company
Avenue de Lafayette, 5th Floor
Corporate Trust
Boston, MA 02110
Attention: Susan Lavey
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(617) 662-1544
FACSIMILE TRANSMISSIONS:
(617) 662-1452
If you deliver the letter of transmittal to an address other than as set
forth above or transmission of instructions via facsimile other than as set
forth above, then such delivery or transmission does not constitute a valid
delivery of such letter of transmittal.
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptances of the exchange offer. The estimated expenses to be incurred in
connection with the exchange offer are customary and will be paid by us.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE EXISTING NOTES
Holders who tender their existing notes for exchange will not be obligated
to pay any related transfer taxes.
The existing notes that are not exchanged for exchange notes pursuant to the
exchange offer will be pari passu in payment to the exchange notes.
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DESCRIPTION OF EXCHANGE NOTES
We will issue the exchange notes under a document called the "Indenture."
The Indenture is a contract between us and State Street Bank and Trust Company
of California, N.A., as Trustee (the "Trustee"). The Indenture and the exchange
notes are governed by New York law. Because this section is a summary, it does
not describe every aspect of the exchange notes and the Indenture. This summary
is subject to and qualified in its entirety by reference to all of the
provisions of the Indenture, including definitions of certain terms used in the
Indenture. For example, in this section we use capitalized words to signify
defined terms that have been given special meaning in the Indenture. We describe
the meaning of only the more important terms. Wherever we refer to particular
defined terms, those defined terms are incorporated by reference herein. In this
section, references to "Chiron," "we," "our" or "us" refer solely to Chiron
Corporation and not its subsidiaries.
GENERAL
The exchange notes will be general, unsecured obligations of Chiron. The
exchange notes will be subordinated, which means that they will rank behind
certain of our indebtedness as described below. The exchange notes will be
limited to $243,800,000 aggregate principal amount. We are required to repay the
principal amount of the exchange notes in full on May , 2007. The exchange
notes will bear interest at the rate per annum shown on the front cover of this
prospectus from May , 2000. We will pay interest on the exchange notes on May
and November of each year, commencing on November , 2000. Interest payable
per $1,000 principal amount of exchange notes for the period from May , 2000
to November , 2000 will be $ .
You may convert the exchange notes into shares of our common stock initially
at the conversion rate stated on the front cover of this prospectus at any time
before the close of business on May , 2007, unless the exchange notes have
been previously redeemed or repurchased. The conversion rate may be adjusted as
described below.
We may redeem the exchange notes at our option at any time on or after May
, 2003, in whole or in part, at the redemption prices set forth below under
"--Optional Redemption by Chiron," plus accrued and unpaid interest to the
redemption date. If there is a Change in Control of Chiron, you may have the
right to require us to repurchase your exchange notes as described below under
"--Repurchase at Option of Holders Upon a Change in Control."
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The exchange notes will be issued:
- only in fully registered form;
- without interest coupons; and
- in denominations of $1,000 or multiples thereof.
The exchange notes will be evidenced by one or more global notes which will
be deposited with the Trustee as custodian for DTC and registered in the name of
Cede & Co. ("Cede"), as nominee of DTC. The global note and any notes issued in
exchange for the global note will be subject to restrictions on transfer and
will bear the legend regarding those restrictions set forth under "Notice to
Investors." Except as set forth below, record ownership of the global note may
be transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
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The global note will not be registered in the name of any person, or
exchanged for notes that are registered in the name of any person, other than
DTC or its nominee unless either of the following occurs:
- DTC notifies us that it is unwilling, unable or no longer qualified to
continue acting as the depositary for the global note; or
- an Event of Default with respect to the notes represented by the global
note has occurred and is continuing.
In those circumstances, DTC will determine in whose names any securities issued
in exchange for the global note will be registered.
DTC or its nominee will be considered the sole owner and holder of the
global note for all purposes, and as a result:
- you cannot get notes registered in your name if they are represented by
the global note;
- you cannot receive certificated (physical) notes in exchange for your
beneficial interest in the global notes;
- you will not be considered to be the owner or holder of the global note or
any note it represents for any purpose; and
- all payments on the global note will be made to DTC or its nominee.
The laws of some jurisdictions require that certain kinds of purchasers (for
example, certain insurance companies) can only own securities in definitive
(certificated) form. These laws may limit your ability to transfer your
beneficial interests in the global note to these types of purchasers.
Only institutions, such as a securities broker or dealer, that have accounts
with the DTC or its nominee, called participants, and persons that may hold
beneficial interests through participants can own a beneficial interest in the
global note. The only place where the ownership of beneficial interests in the
global note will appear and the only way the transfer of those interests can be
made will be on the records kept by DTC for their participants' interests, and
the records kept by those participants for interests of persons held by
participants on their behalf.
Secondary trading in bonds and notes of corporate issuers is generally
settled in clearinghouse, that is, next-day funds. In contrast, beneficial
interests in a global note usually trade in DTC's same-day funds settlement
system, and settle in immediately available funds. We make no representations as
to the effect that settlement in immediately available funds will have on
trading activity in those beneficial interests.
We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global note to Cede, the nominee for DTC,
as the registered owner of the global note. We will make these payments by wire
transfer of immediately available funds on each payment date.
We have been informed that DTC's practice is to credit participants'
accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the notes represented by the global note as
shown on DTC's records, unless DTC has reason to believe that it will not
receive payment on that payment date. Payments by participants to owners of
beneficial interests in notes represented by the global note held through
participants will be the responsibility of those participants, as is now the
case with securities held for the accounts of customers registered in "street
name".
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We will send any redemption notices to Cede. We understand that if less than
all the notes are being redeemed, DTC's practice is to determine by lot the
amount of the holdings of each participant to be redeemed.
We also understand that neither DTC nor Cede will consent or vote with
respect to the notes. We have been advised that under its usual procedures, DTC
will mail an "omnibus proxy" to us as soon as possible after the record date.
The omnibus proxy assigns Cede's consenting or voting rights to those
participants to whose accounts the notes are credited on the record date
identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge the
interest to persons or entities that do not participate in the DTC book-entry
system, or otherwise take actions in respect of that interest, may be affected
by the lack of a physical certificate evidencing its interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange) only at the
direction of one or more participants to whose account with DTC interests in the
global note are credited and only in respect of such portion of the principal
amount of the notes represented by the global note as to which such participant
or participants has or have given such direction.
DTC has also advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Some of these participants (or their
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
The policies and procedures of DTC, which may change periodically, will
apply to payments, transfers, exchanges and other matters relating to beneficial
interests in the global note. We and the Trustee have no responsibility or
liability for any aspect of DTC's or any participants' records relating to
beneficial interests in the global note, including for payments made on the
global note, and we and the Trustee are not responsible for maintaining,
supervising or reviewing any of those records.
CONVERSION RIGHTS
You may, at your option, convert any portion of the principal amount of any
exchange note that is an integral multiple of $1,000 into shares of our common
stock at any time on or prior to the close of business on the maturity date,
unless the exchange notes have been previously redeemed or repurchased, at a
conversion price equivalent to a % premium over the average of the closing
market prices of our common stock for the five trading days immediately
preceding the second trading day prior to the expiration date. Your right to
convert an exchange note called for redemption or delivered for repurchase will
terminate at the close of business on the redemption date or repurchase date for
that exchange note, unless we default in making the payment due upon redemption
or repurchase.
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You may convert all or part of any exchange note by delivering the exchange
note at the Corporate Trust Office of the Trustee in the Borough of Manhattan,
The City of New York, accompanied by a duly signed and completed notice of
conversion, a copy of which may be obtained by the Trustee. The conversion date
will be the date on which the exchange note and the duly signed and completed
notice of conversion are so delivered.
As promptly as practicable on or after the conversion date, we will issue
and deliver to the Trustee a certificate or certificates for the number of full
shares of our common stock issuable upon conversion, together with a cash
payment in lieu of any fraction of a share. The certificate will then be sent by
the Trustee to the conversion agent for delivery to the holder. The shares of
our common stock issuable upon conversion of the exchange notes will be fully
paid and nonassessable and will rank equally with the other shares of our common
stock.
If you surrender an exchange note for conversion on a date that is not an
Interest Payment Date, you will not be entitled to receive any interest for the
period from the next preceding Interest Payment Date to the conversion date,
except as described below in this paragraph. Any exchange note surrendered for
conversion during the period from the close of business on any Regular Record
Date to the opening of business on the next succeeding Interest Payment Date
(except exchange notes (or portions thereof) called for redemption on a
redemption date or to be repurchased on a repurchase date for which the right to
convert would terminate during such period) must be accompanied by payment of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of the exchange notes being surrendered for conversion. In the
case of any exchange note which has been converted after any Regular Record Date
but before the next succeeding Interest Payment Date, interest payable on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid to the holder
of such exchange note on such Regular Record Date.
No other payment or adjustment for interest, or for any dividends in respect
of our common stock, will be made upon conversion. Holders of our common stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of our common stock as of any record time or date before the close of
business on the conversion date. We will not issue fractional shares upon
conversion. Instead, we will pay cash based on the market price of our common
stock at the close of business on the conversion date.
You will not be required to pay any taxes or duties relating to the issue or
delivery of our common stock on conversion but you will be required to pay any
tax or duty relating to any transfer involved in the issue or delivery of our
common stock in a name other than yours. Certificates representing shares of our
common stock will not be issued or delivered unless all taxes and duties, if
any, payable by you have been paid.
The conversion rate will be subject to adjustment for, among other things:
- dividends (and other distributions) payable in our common stock on shares
of our capital stock,
- the issuance to all holders of our common stock of rights, options or
warrants entitling them to subscribe for or purchase our common stock at
less than the then Current Market Price of such common stock (determined
as provided in the Indenture) as of the record date for shareholders
entitled to receive such rights, options or warrants,
- subdivisions, combinations and reclassifications of our common stock,
- distributions to all holders of our common stock of evidences of
indebtedness of Chiron, shares of capital stock, cash or assets (including
securities, but excluding those dividends,
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rights, options, warrants and distributions referred to above, dividends
and distributions paid exclusively in cash and distributions upon mergers
or consolidations discussed below),
- distributions consisting exclusively of cash (excluding any cash portion
of distributions referred to in the immediately preceding clause, or cash
distributed upon a merger or consolidation to which the next succeeding
paragraph applies) to all holders of our common stock in an aggregate
amount that, combined together with (1) other such all-cash distributions
made within the preceding 365-day period in respect of which no adjustment
has been made and (2) any cash and the fair market value of other
consideration payable in connection with any tender offer by us or any of
our subsidiaries for our common stock concluded within the preceding
365-day period in respect of which no adjustment has been made, but not in
excess of the Tender Premium in such tender offer, exceeds 10% of our
market capitalization (being the product of the Current Market Price per
share of the common stock on the record date for such distribution and the
number of shares of common stock then outstanding), and
- the successful completion of a tender offer made by us or any of our
subsidiaries for our common stock (i) at a price per share in excess of
the average of the Current Market Prices of our common stock for the
twenty trading days immediately preceding the date of announcement of the
tender offer and (ii) which involves an aggregate consideration that,
together with (1) any cash and other consideration payable in a tender
offer by us or any of our subsidiaries for our common stock expiring
within the 365-day period preceding the expiration of such tender offer in
respect of which no adjustment has been made and (2) the aggregate amount
of any such all-cash distributions referred to in the immediately
preceding clause above to all holders of our common stock within the
365-day period preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 10% of our market
capitalization on the expiration of such tender offer (such adjustment
being limited, in respect of the excess over our market capitalization, to
the amount in excess of 10% of such market capitalization, but not in
excess of the Tender Premium).
The term "Current Market Price" of our common stock for any day means the
closing market price on such day, or if our common stock is not quoted or
admitted to trading on The Nasdaq National Market on such day, on the principal
quotation system or national securities exchange on which our common stock may
be listed or admitted to trading or quoted, or, if not listed or admitted to
trading or quoted on any national securities exchange or quotation system, the
average of the closing bid and ask prices of our common stock in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available in such manner, as furnished by any Nasdaq
National Market member firm selected from time to time by our board of directors
for that purpose or, if not available in such manner, as otherwise determined in
good faith by our board of directors.
The term "Tender Premium" means the amount equal to (i) the price per share
offered by us in the tender offer in excess of the average of the Current Market
Prices of our common stock for the twenty trading days immediately preceding the
date of announcement of the tender offer, multiplied by (ii) the number of
shares of our common stock accepted for tender in the tender offer.
We reserve the right to effect such increases in the conversion rate in
addition to those required by the foregoing provisions as we consider to be
advisable in order that any event treated for United States federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
recipients. We will not be required to make any adjustment to the conversion
rate until the cumulative adjustments amount to 1.0% or more of the conversion
rate. We will compute all adjustments to the conversion rate and will give
notice by mail to holders of the registered exchange notes of any adjustments.
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In case of any consolidation or merger of Chiron with or into another entity
or any merger of another entity into Chiron (other than a merger which does not
result in any reclassification, conversion, exchange or cancellation of our
common stock), or in case of any sale or transfer of all or substantially all of
our assets, each exchange note then outstanding will become convertible only
into the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer by a holder of the number of shares
of common stock into which the exchange notes were convertible immediately prior
to the consolidation or merger or sale or transfer.
We may increase the conversion rate for any period of at least 20 days, upon
at least 15 days' notice, if our Board of Directors determines that the increase
would be in our best interest. The Board of Directors' determination in this
regard will be conclusive. We will give holders of exchange notes at least
15 days' notice of such an increase in the conversion rate. Any increase,
however, will not be taken into account for purposes of determining whether the
closing price of our common stock equals or exceeds 105% of the conversion price
of the exchange notes in connection with an event which otherwise would be a
Change In Control as defined below.
If at any time we make a distribution of property to our stockholders that
would be taxable to such stockholders as a dividend for United States federal
income tax purposes, such as distributions of evidences of indebtedness or
assets of Chiron, but generally not stock dividends on common stock or rights to
subscribe for common stock, and, pursuant to the anti-dilution provisions of the
Indenture, the number of shares into which exchange notes are convertible is
increased, that increase may be deemed for United States federal income tax
purposes to be the payment of a taxable dividend to holders of exchange notes.
See "Federal Income Tax Considerations--United States Holders."
SUBORDINATION
The exchange notes are subordinated and, as a result, the payment of the
principal, any premium and interest (including Liquidated Damages) on the
exchange notes, including amounts payable on any redemption or repurchase, will
be subordinated to the prior payment in full, in cash or other payment
satisfactory to holders of Senior Debt, of all of our Senior Debt. The exchange
notes are also effectively subordinated to any debt or other liabilities of our
subsidiaries. On December 31, 1999 we had approximately $91.4 million of Senior
Debt.
"Senior Debt" is defined in the Indenture to mean: the principal of (and
premium, if any) and interest (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding) on, and
all fees and other amounts payable in connection with, the following, whether
absolute or contingent, secured or unsecured, due or to become due, outstanding
on the date of the Indenture or thereafter created, incurred or assumed:
- our indebtedness evidenced by a credit or loan agreement, note, bond,
debenture or other written obligation,
- all of our obligations for money borrowed,
- all of our obligations evidenced by a note or similar instrument given in
connection with the acquisition of any businesses, properties or assets of
any kind,
- our obligations (1) as lessee under leases required to be capitalized on
the balance sheet of the lessee under generally accepted accounting
principles or (2) as lessee under other leases for facilities, capital
equipment or related assets, whether or not capitalized, entered into or
leased for financing purposes,
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- all of our obligations under interest rate and currency swaps, caps,
floors, collars, hedge agreements, forward contracts or similar agreements
or arrangements,
- all of our obligations with respect to letters of credit, bankers'
acceptances and similar facilities (including reimbursement obligations
with respect to the foregoing),
- all of our obligations issued or assumed as the deferred purchase price of
property or services (but excluding trade accounts payable and accrued
liabilities arising in the ordinary course of business),
- all obligations of the type referred to in the above clauses of another
person and all dividends of another person, the payment of which, in
either case, we have assumed or guaranteed, or for which we are
responsible or liable, directly or indirectly, jointly or severally, as
obligor, guarantor or otherwise, or which are secured by a lien on our
property, and
- renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange for,
any such indebtedness or obligation described in the above clauses of this
definition.
Senior Debt will not include the existing notes or any other indebtedness or
obligation if its terms or the terms of the instrument under which or pursuant
to which it is issued expressly provide that it is not superior in right of
payment to the exchange notes.
We may not make any payment on account of principal, premium or interest
(including Liquidation Damages, if any) on the exchange notes, or redemption or
repurchase of the exchange notes, if we default in our obligations to pay
principal, premium, interest or other amounts on our Senior Debt, including a
default under any redemption or repurchase obligation, and the default continues
beyond any grace period that we may have to make those payments. However, any
amounts previously deposited by us with the Trustee or paying agent in
accordance with the subordination provisions of the Indenture at the time of the
deposit may be paid to the holders of the exchange notes.
We may resume payments on the exchange notes or redeem or repurchase the
exchange notes upon the date on which this payment default is cured or waived or
ceases to exist.
In addition, upon any acceleration of the principal due on the exchange
notes as a result of an Event of Default or payment or distribution of our
assets to creditors upon any dissolution, winding up, liquidation or
reorganization, whether voluntary or involuntary, marshaling of assets,
assignment for the benefit of creditors, or in bankruptcy, insolvency,
receivership or other similar proceedings, all principal, premium, if any,
interest and other amounts due on all Senior Debt must be paid in full before
you are entitled to receive any payment. By reason of such subordination, in the
event of insolvency, our creditors who are holders of Senior Debt are likely to
recover more, ratably, than the you are, and you will likely to experience a
reduction or elimination of payments on the exchange notes.
In addition, the exchange notes will be "structurally subordinated" to all
indebtedness and other liabilities, including trade payables and lease
obligations, of our subsidiaries. This occurs because any right of Chiron to
receive any assets of our subsidiaries upon their liquidation or reorganization,
and the right of the holders of the exchange notes to participate in those
assets, will be effectively subordinated to the claims of that subsidiary's
creditors, including trade creditors, except to the extent that Chiron itself is
recognized as a creditor of such subsidiary, in which case the claims of Chiron
would still be subordinate to any security interest in the assets of the
subsidiary and any indebtedness of the subsidiary senior to that held by Chiron.
The Indenture does not limit our ability to incur Senior Debt or our ability
or the ability of our subsidiaries to incur any other indebtedness.
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OPTIONAL REDEMPTION BY CHIRON
On or after May , 2003 we may redeem the exchange notes, in whole or in
part, at the prices set forth below. If we elect to redeem all or part of the
exchange notes, we will give at least 30, but no more than 60, days notice to
you.
The redemption price, expressed as a percentage of principal amount, is as
follows for the 12-month periods beginning on May of the following years (May
, 2003 through May , 2004 in the case of the first such period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ------------------
<S> <C>
2003........................................................ %
2004........................................................ %
2005........................................................ %
2006........................................................ %
</TABLE>
and thereafter is equal to 100% of the principal amount, in each case together
with accrued interest to the date of redemption.
No sinking fund is provided for the exchange notes, which means that the
Indenture does not require us to redeem or retire the exchange notes
periodically.
PAYMENT AND CONVERSION
Payments on any global note registered in the name of DTC or its nominee
will be payable by the Trustee to DTC or its nominee in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, we and
the Trustee will treat the persons in whose names the exchange notes, including
any global note, are registered as the owners for the purpose of receiving
payments and for all other purposes. Consequently, neither we, the Trustee nor
any of our agents or the Trustee's agents has or will have any responsibility or
liability for (1) any aspect of DTC's records or any participant's or indirect
participant's records relating to or payments made on account of beneficial
ownership interests in the global note, or for maintaining, supervising or
reviewing any of DTC's records or any participant's or indirect participant's
records relating to the beneficial ownership interests in the global note, or
(2) any other matter relating to the actions and practices of DTC or any of its
participants or indirect participants.
We will not be required to make any payment on the exchange notes due on any
day which is not a business day until the next succeeding business day. The
payment made on the next succeeding business day will be treated as though it
were paid on the original due date and no interest will accrue on the payment
for the additional period of time.
Exchange notes may be surrendered for conversion at the Corporate Trust
Office of the Trustee in the Borough of Manhattan, The City of New York.
Exchange notes surrendered for conversion must be accompanied by appropriate
notices and any payments in respect of interest or taxes, as applicable, as
described above under "--Conversion Rights."
We have initially appointed the Trustee as paying agent and conversion
agent. We may terminate the appointment of any paying agent or conversion agent
and appoint additional or other paying agents and conversion agents. However,
until the exchange notes have been delivered to the Trustee for cancellation, or
moneys sufficient to pay the principal of, premium, if any, and interest on the
exchange notes have been made available for payment and either paid or returned
to us as provided in the Indenture, the Trustee will maintain an office or
agency in the Borough of Manhattan, The City of New York for surrender of
exchange notes for conversion. Notice of any termination or appointment and of
any change in the office through which any paying agent or
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conversion agent will act will be given in accordance with the notice procedures
described under "--Repurchase at Option of Holders Upon a Change of Control"
below.
All moneys deposited with the Trustee or any paying agent, or then held by
us, in trust for the payment of principal of, premium, if any, or interest on
any exchange notes which remain unclaimed at the end of two years after the
payment has become due and payable will be repaid to us, and you will then look
only to us for payment.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control as defined below occurs, you will have the right, at
your option, to require us to repurchase all of your exchange notes not
previously called for redemption, or any portion of the principal amount
thereof, that is equal to $1,000 or an integral multiple of $1,000. The price we
are required to pay is 100% of the principal amount of the exchange notes to be
repurchased, together with interest accrued to, but excluding, the repurchase
date.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in our common stock valued at 95% of the average of the
closing prices of the our common stock for the five trading days immediately
preceding the second trading day prior to the repurchase date. We may only pay
the repurchase price in our common stock if we satisfy conditions provided in
the Indenture.
Within 30 days after the occurrence of a Change in Control, we are obligated
to give to you notice of the Change in Control and of the repurchase right
arising as a result of the Change of Control. We must also deliver a copy of
this notice to the Trustee. To exercise the repurchase right, you must deliver
on or before the 30th day after the date of our notice irrevocable written
notice to the Trustee of your exercise of your repurchase right, together with
the exchange notes with respect to which the right is being exercised. We are
required to repurchase the exchange notes on the date that is 45 days after the
date of our notice.
A Change in Control will be deemed to have occurred at the time after the
exchange notes are originally issued that any of the following occurs:
(1) any person, including any syndicate or group deemed to be a "person"
under Section 13(d)(3) of the Exchange Act, acquires beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of our
capital stock entitling the person to exercise 50% or more of the total
voting power of all shares of our capital stock that is entitled to vote
generally in elections of directors, other than an acquisition by us, any
of our subsidiaries or any of our employee benefit plans; provided,
however, that such threshold shall be 79.9% or more of the voting power
if the acquiring person is Novartis AG or any person affiliated
therewith; or
(2) we merge or consolidate with or into any other person, any merger of
another person into us, or we convey, sell, transfer or lease all or
substantially all of our assets to another person, other than (a) any
such transaction (i) that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of our capital
stock and (ii) pursuant to which the holders of our common stock
immediately prior to such transaction have the entitlement to exercise,
directly or indirectly, 50% or more of the total voting power of all
shares of capital stock entitled to vote generally in the election of
directors of the continuing or surviving corporation immediately after
such transaction; provided, however, that such threshold shall be more
than 20.1% of the total voting power if the acquiring person is Novartis
AG or any person affiliated therewith; and (b) any merger which is
effected solely to change our jurisdiction of incorporation and results
in a reclassification, conversion or exchange of outstanding shares of
our common stock into solely shares of common stock.
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However, a Change in Control will not be deemed to have occurred if the
closing price per share of our common stock for any five trading days within the
period of 10 consecutive trading days ending immediately after the later of the
Change in Control or the public announcement of the Change in Control, in the
case of a Change in Control relating to an acquisition of capital stock, or the
period of 10 consecutive trading days ending immediately before the Change in
Control, in the case of Change in Control relating to a merger, consolidation or
asset sale, equals or exceeds 105% of the conversion price of the exchange notes
in effect on each of those trading days.
For purposes of these provisions:
- the conversion price is equal to $1,000 divided by the conversion rate;
- whether a person is a "beneficial owner" will be determined in
accordance with Rule 13d-3 under the Exchange Act; and
- "person" includes any syndicate or group that would be deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
Rule 13e-4 under the Exchange Act requires the dissemination of prescribed
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to you. We will
comply with this rule to the extent it applies at that time.
We may, to the extent permitted by applicable law, at any time purchase
exchange notes in the open market, by tender at any price or by private
agreement. Any exchange note that we purchase may, to the extent permitted by
applicable law, be re-issued or resold or may, at our option, be surrendered to
the Trustee for cancellation. Any exchange notes surrendered for cancellation
may not be re-issued or resold and will be canceled promptly.
The definition of Change in Control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, your ability to require
us to repurchase your exchange notes as a result of conveyance, transfer, sale,
lease or other disposition of less than all of our assets may be uncertain.
The foregoing provisions would not necessarily provide you with protection
if we are involved in a highly leveraged or other transaction that may adversely
affect you.
Our ability to repurchase exchange notes upon the occurrence of a Change in
Control is subject to important limitations. Some of the events constituting a
Change in Control could result in an event of default under our Senior Debt.
Moreover, a Change in Control could cause an event of default under, or be
prohibited or limited by, the terms of our Senior Debt. As a result, unless we
were to obtain a waiver, a repurchase of the exchange notes in cash could be
prohibited under the subordination provisions of the Indenture until the Senior
Debt is paid in full. Although we have the right to repurchase the exchange
notes with our common stock, subject to certain conditions, we cannot assure you
that we would have the financial resources, or would be able to arrange
financing, to pay the repurchase price in cash for all the exchange notes that
might be delivered by holders of exchange notes seeking to exercise the
repurchase right. If we were to fail to repurchase the exchange notes when
required following a Change in Control, an Event of Default under the Indenture
would occur, whether or not such repurchase is permitted by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under our Senior Debt. See "--Subordination".
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MERGERS AND SALES OF ASSETS BY THE COMPANY
We may not consolidate with or merge into any other person or convey,
transfer, sell or lease our properties and assets substantially as an entirety
to any person, and we may not permit any person to consolidate with or merge
into us or convey, transfer, sell or lease such person's properties and assets
substantially as an entirety to us unless:
- the person formed by such consolidation or into or with which we are
merged or the person to which our properties and assets are so
conveyed, transferred, sold or leased, shall be a corporation, limited
liability company, partnership or trust organized and existing under
the laws of the United States, any State within the United States or
the District of Columbia and, if we are not the surviving person, the
surviving person assumes the payment of the principal of, premium, if
any, and interest on the exchange notes and the performance of our
other covenants under the Indenture, and
- immediately after giving effect to the transaction, no Event of
Default, and no event that, after notice or lapse of time or both,
would become an Event of Default, will have occurred and be continuing.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
- we fail to pay principal of or premium, if any, on any exchange note
when due, whether or not prohibited by the subordination provisions of
the Indenture;
- we fail to pay any interest on any exchange note when due, which
failure continues for 30 days, whether or not prohibited by the
subordination provisions of the Indenture;
- we fail to provide notice of a Change in Control, whether or not such
repurchase is prohibited by the subordination provisions of the
Indenture;
- we fail to perform any other covenant in the Indenture, which failure
continues for 60 days after written notice as provided in the
Indenture;
- any indebtedness under any bonds, debentures, notes or other evidences
of indebtedness for money borrowed (or any guarantee thereof) by us or
any of our significant subsidiaries in an aggregate principal amount in
excess of $10,000,000 is not paid when due either at its stated
maturity or upon acceleration thereof, and such indebtedness is not
discharged, or such acceleration is not rescinded or annulled, within a
period of 30 days after notice as provided in the Indenture; and
- certain events of bankruptcy, insolvency or reorganization involving us
or any of our significant subsidiaries.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any holder, unless the holder shall
have offered reasonable indemnity to the Trustee. Subject to providing
indemnification of the Trustee, the holders of a majority in aggregate principal
amount of the outstanding exchange notes will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee.
If an Event of Default other than an Event of Default arising from events of
insolvency, bankruptcy or reorganization with respect to Chiron occurs and is
continuing, either the Trustee or the holders of at least 25% in principal
amount of the outstanding exchange notes may, subject to the subordination
provisions of the Indenture, accelerate the maturity of all exchange notes.
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However, after such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of
outstanding exchange notes may, under certain circumstances, rescind and annul
the acceleration if all Events of Default, other than the non-payment of
principal of the exchange notes which have become due solely by such declaration
of acceleration, have been cured or waived as provided in the Indenture. If an
Event of Default arising from events of insolvency, bankruptcy or reorganization
with respect to Chiron occurs, then the principal of, and accrued interest on,
all the exchange notes will automatically become immediately due and payable
without any declaration or other act on the part of the holders of the exchange
notes or the Trustee. For information as to waiver of defaults, see--Meetings,
Modification and Waiver."
You will not have any right to institute any proceeding with respect to the
Indenture, or for any remedy under the Indenture, unless you give the Trustee
written notice of a continuing Event of Default and the holders of at least 25%
in aggregate principal amount of the outstanding exchange notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
proceedings, and the Trustee has not received from the holders of a majority in
aggregate principal amount of the outstanding exchange notes direction
inconsistent with the written request and shall have failed to institute such
proceeding within 60 days. However, these limitations do not apply to a suit
instituted by you for the enforcement of payment of the principal of, premium,
if any, or interest, including Liquidated Damages, on your exchange note on or
after the respective due dates expressed in your exchange note or your right to
convert your exchange note in accordance with the Indenture.
We will be required to furnish to the Trustee annually a statement as to our
performance of certain of our obligations under the Indenture and as to any
default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provision for convening meetings of the holders of
exchange notes to consider matters affecting their interests.
Certain limited modifications of the Indenture may be made without the
necessity of obtaining the consent of the holders of the exchange notes. Other
modifications and amendments of the Indenture may be made, and certain past
defaults by us may be waived, either (i) with the written consent of the holders
of not less than a majority in aggregate principal amount of the exchange notes
at the time outstanding or (ii) by the adoption of a resolution, at a meeting of
holders of the exchange notes at which a quorum is present, by the holders of at
least 66 2/3% in aggregate principal amount of the exchange notes represented at
such meeting. The quorum at any meeting called to adopt a resolution will be
persons holding or representing a majority in aggregate principal amount of the
exchange notes at the time outstanding and, at any reconvened meeting adjourned
for lack of a quorum, 25% of such aggregate principal amount.
However, a modification or amendment requires the consent of the holder of
each outstanding exchange note affected if it would:
- change the stated maturity of the principal or interest of an exchange
note;
- reduce the principal amount of, or any premium or interest on, any
exchange note;
- reduce the amount payable upon a redemption or mandatory repurchase;
- modify the provisions with respect to the repurchase rights of holders
of exchange notes in a manner adverse to the holders;
- change the place or currency of payment on an exchange note;
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- impair the right to institute suit for the enforcement of any payment
on any exchange note;
- modify our obligation to maintain an office or agency in New York City;
- modify the subordination provisions in a manner that is adverse to the
holders of the exchange notes;
- adversely affect the right to convert the exchange notes;
- modify our obligation to deliver information required under Rule 144A
to permit resales of the exchange notes and common stock issued upon
conversion of the exchange notes if we cease to be subject to the
reporting requirements under the Exchange Act;
- reduce the above-stated percentage of the principal amount of the
holders whose consent is needed to modify or amend the Indenture;
- reduce the percentage of the principal amount of the holders whose
consent is needed to waive compliance with certain provisions of the
Indenture or to waive certain defaults; or
- reduce the percentage required for the adoption of a resolution or the
quorum required at any meeting of holders of exchange notes at which a
resolution is adopted.
The holders of a majority in aggregate principal amount of the outstanding
exchange notes may waive compliance by us with certain restrictive provisions of
the Indenture by written consent. Holders of a majority of the principal amount
of exchange notes attending a meeting may also waive compliance by us with
certain restrictive provisions of the Indenture by the adoption of a resolution
at the meeting if a quorum of holders are present and certain other conditions
are met. The holders of a majority in aggregate principal amount of the
outstanding exchange notes also may waive by written consent any past default
under the Indenture, except a default in the payment of principal, premium, if
any, or interest.
REPLACEMENT OF EXCHANGE NOTES
We will replace any exchange note that becomes mutilated, destroyed, stolen
or lost at the expense of the holder upon delivery to the Trustee of the
mutilated notes or evidence of the loss, theft or destruction satisfactory to us
and the Trustee. In the case of a lost, stolen or destroyed exchange note,
indemnity satisfactory to the Trustee and us may be required at the expense of
the holder of the exchange note before a replacement exchange note will be
issued.
PAYMENT OF STAMP AND OTHER TAXES
We will pay all stamp and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or taxing authority thereof
or therein with respect to the issuance of the exchange notes. We will not be
required to make any payment with respect to any other tax, assessment or
governmental charge imposed by any government or any political subdivision
thereof or taxing authority thereof or therein.
GOVERNING LAW
The Indenture and the exchange notes will be governed by and construed in
accordance with the laws of the State of New York, United States of America.
THE TRUSTEE
If an Event of Default occurs and is continuing, the Trustee will be
required to use the degree of care of a prudent person in the conduct of his own
affairs in the exercise of its powers. Subject
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to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any of the holders of
exchange notes, unless they shall have offered to the Trustee reasonable
security or indemnity.
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DESCRIPTION OF EXISTING NOTES
We issued the existing notes under an indenture, dated as of November 15,
1993, between us and The State Street Bank and Trust Company of California,
N.A., as trustee. In this description, we refer to the indenture as the
"indenture." The following description is a summary of the material provisions
of the existing notes and the indenture. This summary is subject to and is
qualified by reference to all the provisions of the indenture.
As used in this "Description of Existing Notes" section, references to
"Chiron", "we", "our" or "us" refer solely to Chiron Corporation and not our
subsidiaries.
GENERAL
The existing notes are limited to $243,800,000 aggregate principal amount at
maturity. The existing notes mature on November 17, 2000 and are payable at a
price of 100% of the principal amount of the existing notes. The existing notes
bear interest at the rate of 1.90% per year. Interest is payable on May 17 and
November 17 of each year.
The existing notes are unsecured obligations of Chiron. The existing notes
are subordinated to all of our present and future senior debt. Neither we nor
our subsidiaries are restricted from incurring debt under the indenture. There
are no financial covenants in the indenture. The existing notes are effectively
subordinated in right of payment to all indebtedness and liabilities of our
subsidiaries.
The existing notes are convertible into common stock at the current
conversion rate of 34.5924 shares of common stock for each $1,000 principal
amount at maturity of existing notes, subject to adjustment as described under
"--Conversion Rights," at any time prior to maturity, unless previously redeemed
or repurchased.
We pay principal and premium, if any, on the existing notes, and you may
submit your existing notes for conversion, transfer or exchange, without service
charge, at our office maintained for that purpose in the Borough of Manhattan,
The City of New York, which shall initially be an office or agency of the
trustee.
BOOK-ENTRY SYSTEM
The existing notes were originally issued in the form of a global security
held in book-entry form. The Depository Trust Company or its nominee is the sole
registered holder of the existing notes represented by the global security for
all purposes under the indenture. Owners of beneficial interests in the existing
notes represented by the global security hold these interests pursuant to the
procedures and practices of The Depository Trust Company. Owners of beneficial
interest in the global security must exercise any rights in respect of their
interests, including any right to convert or require repurchase of their
interests, in accordance with The Depository Trust Company's procedures and
practices. At any time at the request of the beneficial holder of an interest in
the global security, the beneficial holder is entitled to obtain a definitive
note upon written request to the trustee in accordance with the procedures of
the Depository Trust Company for the issuance thereof. Upon receipt of any such
request, the trustee will cause the aggregate principal amount at maturity of
the global security to be reduced and, following such reduction, we will execute
and the trustee will authenticate and deliver to such beneficial holder a note
or notes in the name of such beneficial owner and with the appropriate aggregate
principal amount at maturity.
CONVERSION RIGHTS
You may convert your existing note, in whole or in part, into common stock
at any time prior to the close of business on the maturity date, unless
previously redeemed or repurchased. Your right
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to convert an existing note called for redemption or submitted for repurchase
terminates at the close of business on the last business day prior to the
redemption date or repurchase date.
To exercise your conversion right, you must surrender your existing note at
the office of any conversion agent. If you are a beneficial owner of existing
notes through the Depository Trust Company, you may exercise your conversion
right by delivering to The Depository Trust Company the appropriate conversion
instruction form pursuant to The Depository Trust Company's conversion program.
You can obtain this conversion notice from the office of any conversion agent.
The conversion date will be the date when you deliver your existing note and the
duly signed and completed notice of conversion to the conversion agent. As
promptly as practicable on or after the conversion date, we will issue and
deliver to the trustee a certificate or certificates for the number of full
shares of common stock issuable upon conversion, together with payment for any
fractional shares. These certificates will be sent by the trustee to the
conversion agent for delivery to the holder. The shares of common stock issuable
upon conversion of the existing notes will be fully paid and nonassessable and
will rank pari passu with our other shares of common stock.
If you surrender your existing note for conversion during the period from
the close of business on any regular record date to the opening of business on
the next succeeding interest payment date, your existing note must be
accompanied by payment of an amount equal to the interest payable on such
interest payment date on the principal amount of surrendered existing notes.
However, you will not be required to submit payment in this period if existing
notes, or portions of existing notes, are called for redemption on a redemption
date during the period beginning at the close of business on a regular record
date and ending on the opening of business on the first business day after the
next succeeding interest payment date, or if such interest payment date is not a
business day, the second succeeding business day. We will not make any payment
or adjustment for interest or dividends upon conversion. If you convert your
existing notes, you will not be entitled to receive any dividends payable to
holders of common stock as of any record time or date before the close of
business on the conversion date. We will not issue fractional shares but will
instead pay cash based on the market bid price of common stock at the close of
business on the last trading day prior to conversion.
You will not be required to pay any taxes or duties upon conversion but will
be required to pay any tax or duty if the common stock issued upon conversion of
the existing notes is in a name other than your name. Certificates representing
shares of common stock will not be issued or delivered unless all taxes and
duties, if any, payable by the holder have been paid.
We will adjust the conversion rate if the following events occur:
(1) we issue common stock as a dividend or distribution on our common stock;
(2) we issue to all holders of our common stock rights, options or warrants
entitling them to subscribe for or purchase common stock at less than the
current market price of our common stock, provided the conversion rate
will be readjusted if these rights, options or warrants are not exercised
prior to expiration;
(3) we subdivide, combine or reclassify our common stock;
(4) we distribute to all holders of our common stock evidences of
indebtedness of Chiron, shares of capital stock or assets, including
securities, but excluding:
- those dividends and distributions listed in (1) above,
- those rights, options and warrants listed in (2) above, and
- all-cash distributions listed in (5) below;
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(5) we make distributions consisting exclusively of cash to all holders of
our common stock, other than (i) any quarterly cash dividend on our
common stock to the extent the aggregate cash dividend per share in any
fiscal quarter does not exceed the greater of (A) the per share cash
dividend of the next preceding quarterly cash dividend on the common
stock to the extent the preceding quarterly dividend did not require any
adjustment of the conversion rate, and (B) 3.75% of the average of the
last reported sale price of our common stock during the ten trading days
next preceding the date of declaration of the dividend and (ii) any
dividend or distribution in connection with the liquidation, dissolution
or winding up of our business; and
(6) we or any of our subsidiaries successfully complete a tender offer for
common stock and the tender offer involves the payment by us or our
subsidiary of consideration per share of common stock having a fair
market value that exceeds the then current market price of our common
stock on the trading day next succeeding the expiration date of the
tender offer.
We reserve the right to make reductions in the conversion rate in addition
to those specified above as we consider advisable in order that any event
treated for United States federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the recipients. We will not make any
conversion rate adjustment until the cumulative adjustments amount to 1.0% or
more of the conversion rate. We will compute any adjustments to the conversion
rate pursuant to this paragraph and will give you notice by mail of any
adjustments.
If we consolidate or merge with or into another person or any person merges
into us, or in case of any sale, transfer or lease of all or substantially all
of our assets, each existing note then outstanding will, without the consent of
the holder of any existing note, become convertible only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or lease by a holder of number of shares
of common stock into which the existing note was convertible immediately prior
this event. However, this provision will not apply to any merger that does not
result in any reclassification, conversion, exchange or cancellation of our
common stock.
To the extent permitted by applicable law, we may from time to time increase
the conversion rate by any amount for any period of at least 20 days if our
board of directors has made a determination that such increase would be in the
best interests of Chiron, which determination shall be conclusive. We shall give
at least 15 days' notice of any proposed increase.
If we make a distribution of property to our stockholders that would be
taxable to such stockholders as a dividend for United States federal income tax
purposes and the number of shares into which existing notes are convertible is
increased as a result of above antidilution provisions, this increase may be
deemed to be a payment of a taxable dividend to holders. See "Federal Income Tax
Considerations."
SUBORDINATION
The existing notes are subordinate in right of payment to the prior payment
in full of all senior debt. In the event of:
- any insolvency or bankruptcy case or proceeding, or
- any receivership, liquidation, reorganization or debt restructuring, or
- any liquidation, dissolution or other winding up of Chiron, or
- any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of Chiron,
the holders of senior debt will be entitled to receive payment in full of all
senior debt in cash or other payment satisfactory to the holders of senior debt
before the holders of the existing notes are
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entitled to receive any payment. However, any amounts previously deposited by us
with the trustee or paying agent in accordance with the subordination provisions
of the indenture at the time of the deposit may be paid to the holders of the
existing notes (called "defeased payments").
In the event of our liquidation or insolvency, creditors of Chiron who are
not holders of senior debt may recover less, ratably, than holders of senior
debt and may recover more, ratably, than the holders of the existing notes.
In the event that any existing notes are declared due and payable before
their stated maturity as a result of an event of default, the holders of the
senior debt will be entitled to receive payment in full of all senior debt
before the holders of the existing notes are entitled to receive any payment by
us on the existing notes, other than defeased payments. If the payment of
existing notes is accelerated because of an event of default, we are required
under the indenture to promptly notify holders of senior debt of this
acceleration.
We may not make any payment on the existing notes or purchase, redeem or
acquire the existing notes or make any defeasance payment on the existing notes
to the trustee or paying agent, other than defeased payments, if a default in
the payment of senior debt occurs and is continuing beyond the applicable grace
period.
We may resume payments on the existing notes or purchase, redeem or
otherwise acquire the existing notes or make a defeasance payment upon the date
on which this payment default is cured or waived or ceases to exist.
DEFINITIONS
"senior debt" means the principal of, premium, if any, interest on, and any
other payment due under any of the following:
- all indebtedness for money borrowed;
- all indebtedness evidenced by notes, debentures, bonds or other
securities;
- all indebtedness or other obligations with respect to interest rate and
currency swap agreements, cap, floor and collar agreements, currency spot
and forward contracts and other similar agreements and arrangements;
- all lease obligations which are capitalized on our books in accordance
with generally accepted accounting principles;
- all indebtedness of others of the kinds previously described and all lease
obligations of others of the kind previously described assumed by or
guaranteed in any manner by us or in effect guaranteed by us through an
agreement to purchase, contingent or otherwise; and
- all renewals, extensions or refundings of indebtedness of the kinds
previously described and all renewals or extensions of lease obligations
of the kinds previously described;
unless in the case of any particular indebtedness, lease, renewal, extension or
refunding, the instrument or lease creating or evidencing the same or the
assumption or guarantee of the same expressly provides that such indebtedness,
lease, renewal, extension or refunding is subordinate to any other indebtedness
of ours or is not superior in right of payment to, or is pari passu with, the
existing notes. Notwithstanding the foregoing, senior debt does not include
(i) any of our indebtedness or lease obligation of any kind to any subsidiary, a
majority of the voting stock of which is owned by us and (ii) indebtedness for
trade payables or constituting the deferred purchase price of assets or services
incurred in the ordinary course of business.
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OPTIONAL REDEMPTION
We may redeem the existing notes, in whole or in part, upon not less than 30
nor more than 60 days' notice, at $974.85 per $1,000 principal amount at
maturity and $1,000 at November 17, 2000, in each case together with original
issue discount and accrued interest to, but excluding, the redemption date.
If fewer than all the existing notes are to be redeemed, the trustee will
select the existing notes to be redeemed in principal amounts of $1,000 or
multiples of $1,000 by lot or, in its discretion, on a pro rata basis. If any
existing note is to be redeemed in part, a new existing note or existing notes
in principal amount equal to the unredeemed principal portion thereof will be
issued. If a portion of a holder's existing notes is selected for partial
redemption and the holder converts a portion of this existing note, the
converted portion shall be deemed to be taken from the portion selected for
redemption.
No sinking fund is provided for the existing notes.
REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE
If a fundamental change occurs, you have the right, at your option, to
require us to repurchase all of your existing notes, in whole or in part, on the
repurchase date that is 30 days after the date of the company notice, at a price
equal to the issue price plus original issue discount on the note to the date of
repurchase, together with interest accrued to, but excluding, the repurchase
date; provided that if the applicable price is less than the reference market
price, we must repurchase the existing notes to be repurchased at a price equal
to the foregoing repurchase price multiplied by the fraction obtained by
dividing the applicable price by the reference market price, together with
interest accrued to, but excluding, the repurchase date. Depending on the type
of fundamental change, the applicable price is either the amount of cash
received by the holder of one share of our common stock or the average of the
last reported sale price for our common stock during the 10 trading days prior
to the fundamental change record date. The reference market price is currently
$12.875, subject to customary anti-dilution adjustments. The existing notes will
be repurchased in multiples of $1,000 principal amount.
We are obligated to give you notice of the fundamental change and your
repurchase right within 10 days after the occurrence of the fundamental change
(called the "company notice"). We must also promptly deliver a copy of the
company notice to the trustee. To exercise the repurchase right, you must
deliver on or before the 30th day after the date of the company notice
irrevocable written notice to the trustee of your decision to exercise your
repurchase right, together with your existing notes.
A "fundamental change" means the occurrence of any transaction or event in
connection with which all or substantially all our common stock is exchanged
for, converted into, acquired for or constitutes the right to receive
consideration which is not all or substantially all common stock listed on a
United States national securities exchange or approved for quotation in the
Nasdaq system or any similar United States system of automated dissemination of
quotations of securities prices, whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise.
Rule 13e-4 under the Exchange Act requires the dissemination of information
to security holders in the event of an issuer tender offer. These Exchange Act
rules may apply in the event that the repurchase option becomes available to
holders of the existing notes. We will comply with these rules to the extent
applicable at that time.
We may purchase existing notes in the open market or by tender at any price
or by private agreement. Any existing note so purchased by us may:
- be reissued or resold, to the extent permitted by applicable law, or
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- at our option, be surrendered to the trustee for cancellation.
Any existing notes surrendered to the trustee may not be reissued or resold and
will be canceled promptly.
The above provisions would not necessarily afford you protection in the
event of highly leveraged or other transactions involving us that may adversely
affect holders.
Our ability to repurchase existing notes upon the occurrence of a
fundamental change is subject to limitations. We may not have the financial
resources or be able to arrange financing to pay the repurchase price for all
the tendered existing notes. Our ability to repurchase existing notes may be
limited or prohibited by the terms of any future borrowing arrangements,
including senior debt existing at the time of a fundamental change. Our ability
to repurchase existing notes may also be limited by the terms of our
subsidiaries' then-existing borrowing arrangements due to dividend restrictions.
Any failure by us to repurchase the existing notes when required following a
fundamental change would result in an event of default under the indenture. Any
such default may, in turn, cause a default under our senior debt. In addition,
our repurchase of the existing notes as a result of the occurrence of a
fundamental change may be prohibited or limited by, or create an event of
default under, the terms of agreements related to other borrowings, including
agreements relating to senior debt.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person, in a transaction
in which we are not the surviving corporation, or convey, transfer or lease our
properties and assets substantially as an entirety to, any person (called a
"successor person"), unless:
- the successor person, if any, is a corporation, limited liability company,
partnership, trust or other entity organized and existing under the laws
of any domestic jurisdiction,
- assumes our obligations on the existing notes and under the indenture, and
- certain other conditions are met.
MODIFICATION AND WAIVER
The consent of the holders of not less than 66 2/3% in aggregate principal
amount at maturity of the outstanding existing notes is required to amend or
modify the indenture. However, a modification or amendment requires the consent
of the holder of each outstanding existing note if it would:
- change the stated maturity of the principal of, or any installment of
principal of or interest on, any existing note,
- reduce the principal amount at maturity of, or any premium or interest on,
any existing note,
- reduce the amount of principal payable upon acceleration of the maturity,
- change the rate of accrual or extend the time of payment in connection
with original issue discount,
- reduce any amount payable on redemption of the existing notes,
- change our obligation to make redemption of existing notes upon the
happening of any fundamental change,
- change the place or currency of payment of principal of, or any premium or
interest on, any existing note,
- impair the right to institute suit for the enforcement of any payment on
any existing note,
- impair the right to convert the existing notes into common stock,
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- modify the subordination provisions in a manner adverse to the holders of
the existing notes,
- reduce the percentage in principal amount of existing notes required for
modification or amendment,
- reduce the percentage in principal amount of existing notes necessary for
waiver of compliance with certain provisions of the indenture or for
waiver of certain defaults, or
- modify such provisions with respect to modification and waiver.
Holders of a majority in principal amount of the existing notes may waive
any past default under the indenture, except a default in the payment of
principal amount at maturity, issue price, accrued original issue discount,
redemption price or interest and certain covenants and provisions of the
indenture which cannot be amended without the consent of the holder of each
outstanding existing note.
EVENTS OF DEFAULT
The following are events of default under the indenture:
- we fail to pay the principal amount at maturity, issue price, accrued
original issue discount, or redemption price on any existing note when
due, whether or not such payment is prohibited by the subordination
provisions of the indenture;
- we fail to pay any interest on existing notes when due, continued for
30 days, whether or not such payment is prohibited by the subordination
provisions of the indenture;
- we fail to perform any of our other covenants in the indenture continued
for 45 days after written notice has been given by the trustee or the
holders of at least 25% in aggregate principal amount of the existing
notes as provided in the indenture; and
- our bankruptcy, insolvency or reorganization.
If an event of default shall occur and be continuing, either the trustee or
the holders of at least 25% in aggregate principal amount at maturity of the
outstanding existing notes may declare the principal amount of the existing
notes to be immediately due and payable. In case of certain events of
bankruptcy, insolvency or reorganization involving Chiron, the principal,
premium, if any, and interest on the existing notes will automatically become
immediately due and payable. Any payment by us on the existing notes following
any such acceleration will be subject to the subordination provisions of the
indenture. After any acceleration, but before a judgment or decree based on
acceleration, holders of a majority in aggregate principal amount at maturity of
the outstanding existing notes may, under certain circumstances, rescind and
annul such acceleration if all events of default, other than the non-payment of
accelerated principal, or other specified amount, have been cured or waived as
provided in the indenture.
Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default shall occur, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request or direction of any of the holders, unless such holders shall have
offered to the trustee reasonable indemnity. Subject to these indemnification
provisions, holders of a majority in aggregate principal amount at maturity of
the outstanding existing notes will have the right to:
- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee,
- or exercise any trust or power conferred on the trustee with respect to
the existing notes.
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No holder of an existing note of any series will have any right to institute
any proceeding with respect to the indenture unless:
- the holder has previously given to the trustee written notice of a
continuing event of default,
- the holders of at least 25% in aggregate principal amount at maturity of
the outstanding existing notes have made a written request and offered
reasonable indemnity to the trustee to institute this proceeding, and
- the trustee has failed to institute such proceeding, within 60 days after
this notice, request and offer.
However, these limitations do not apply to a suit instituted by a holder of
an existing note for the enforcement of payment of the principal amount at
maturity, issue price, accrued original issue discount, redemption price or
interest on the existing note on or after the applicable due date specified in
the existing note.
We are required to furnish to the trustee annually a statement by our
officers as to whether or not we are in default in the performance or observance
of any of the terms, provisions and conditions of the indenture and, if so,
specifying all such known defaults.
TRANSFER AND EXCHANGE
We have initially appointed the trustee as security registrar, transfer
agent and conversion agent, acting through its corporate trust office. We
reserve the right to vary or terminate the appointment of the security registrar
or any transfer agent or conversion agent. In addition, we may appoint other
transfer agents or conversion agents or approve any change in any security
registrar, transfer agent or conversion agent's office.
PURCHASE AND CANCELLATION
Either we or one of our subsidiaries may, to the extent permitted by
applicable law, purchase existing notes at any price in the open market or
otherwise.
All existing notes surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall be delivered to the
trustee. All existing notes delivered to the trustee shall be canceled promptly
by the trustee. No existing notes shall be authenticated in exchange for any
canceled existing notes.
REPLACEMENT OF EXISTING NOTES
We will replace existing notes that become mutilated, destroyed, stolen or
lost at your expense upon delivery to the trustee of the mutilated existing
notes or evidence of the loss, theft or destruction of the existing notes
satisfactory to us and the trustee. In the case of a lost, stolen or destroyed
existing note, indemnity satisfactory to the trustee and us may be required at
the expense of the holder of the existing note before a replacement existing
note will be issued.
GOVERNING LAW
The indenture and the existing notes are governed by and construed in
accordance with the laws of the State of New York.
TRUSTEE
In case an event of default shall occur and not be cured, the trustee will
be required to use the degree of care of a prudent person in the conduct of his
or her affairs in the exercise of his or her powers. Subject to this provision,
the trustee will be under no obligation to exercise any of its rights or powers
under the indenture at the request of any of the holders of existing notes,
unless they shall have offered to the trustee reasonable security or indemnity.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 499,500,000 shares of common stock,
$0.01 par value per share, 500,000 shares of restricted common stock, $0.01 par
value per share and 5,000,000 shares of preferred stock, $0.01 par value per
share. As of February 29, 2000, there were 180,590,023 shares of common stock
issued and outstanding and no shares of restricted common stock or preferred
stock issued and outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably dividends, if any, as may be declared from time to
time by our board of directors out of legally available funds. In the event of
our liquidation, dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to the prior liquidation rights of the preferred stock, if any, then
outstanding. The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.
RESTRICTED COMMON STOCK
The holders of restricted common stock are entitled to certain limited
voting, dividend and liquidation rights, as well as a limited right to convert
or exchange restricted common stock into common stock. The specific rights and
restrictions are to be determined and fixed by our board of directors in the
resolution providing for the issuance of any series of restricted common stock.
However, in determining and fixing these rights, the board of directors' power
is restricted in the following manner: (i) the board of directors can provide
that the restricted common stock may be converted or exchanged into common
stock, however, only at a conversion or exchange ratio not exceeding one share
common stock for each share of restricted common stock; (ii) the board of
directors can provide that the holders of restricted common stock may vote at
any meeting of our stockholders, however, the number of votes per share of
restricted common stock shall not exceed the proportionate vote of common stock
into which such restricted common stock is convertible or exchangeable;
(iii) the board of directors can provide that the holders of restricted common
stock may receive dividends, provided however, that dividends on each share of
restricted common stock shall be less than the proportionate dividend on each
share of common stock into which such restricted common stock is convertible or
exchangeable; and (iv) the board of directors can provide that the holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to the prior liquidation rights of the preferred stock,
if any, then outstanding; provided however, that the amount per share paid in
liquidation on each share of restricted common stock shall be less than the
proportionate amount per share paid on each share of common stock into which
such restricted common stock is convertible or exchangeable.
PREFERRED STOCK
The board of directors has the authority to issue any undesignated shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges, qualifications, limitations and restrictions of the preferred stock
including dividend rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any series
or the designation of such series, without any further vote or action by the
stockholders. The issuance of
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preferred stock may have the effect of delaying or preventing a change in
control of Chiron without further action by the stockholders. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others. We have no present plans to issue any of the preferred stock.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Under Section 203, we would generally be prohibited from
engaging in any business combination with any interested stockholder for a
period of three years following the time that this stockholder became an
interested stockholder unless:
(1) prior to this time, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
(2) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding shares owned:
- by persons who are directors and also officers, and
- 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
(3) at or subsequent to such time, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Under Section 203, a "business combination" includes:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholders;
- any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested
stockholders, subject to limited exceptions;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Norwest Bank
Minnesota, N.A.
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BOOK-ENTRY SYSTEM--THE DEPOSITORY TRUST COMPANY
The exchange notes will be evidenced by a global security initially
deposited with The Depository Trust Company, and registered in the name of
Cede & Co., as The Depository Trust Company's nominee. Except as set forth
below, the global security may be transferred only to another nominee of The
Depository Trust Company or to a successor of The Depository Trust Company or
its nominee.
Holders of exchange notes may hold their interests in the global security
directly through The Depository Trust Company or indirectly through
organizations which are participants in The Depository Trust Company (called
"participants"). Transfers between participants will be affected in the ordinary
way in accordance with The Depository Trust Company rules and will be settled in
clearinghouse funds. The laws of some states require that some persons take
physical delivery of securities in definitive form. As a result, holders may be
unable to transfer beneficial interests in the global security to those persons.
Holders that are not participants may beneficially own interests in the
global security held by The Depository Trust Company only through participants
or indirect participants, including banks, brokers, dealers, trust companies and
other parties that clear through or maintain a custodial relationship with a
participant. So long as Cede & Co., as the nominee of The Depository Trust
Company, is the registered owner of the global security, Cede & Co. will be
considered the sole holder of the global security for all purposes. Except as
provided below, owners of beneficial interests in the global security will not:
- be entitled to have certificates registered in their names.
- be entitled to receive physical delivery of certificates in definitive
form, and
- be considered registered holders.
We will make payments of interest on and principal of and the redemption or
repurchase price of the global security to Cede & Co., the nominee for The
Depository Trust Company, as the registered holder of the global security. We
will make these payments by wire transfer of immediately available funds.
Neither we, the trustee nor any paying agent will have any responsibility or
liability for:
- records or payments on beneficial ownership interests in the global
security; or
- maintaining, supervising or reviewing any records relating to those
beneficial ownership interests.
We have been informed that The Depository Trust Company's practice is to
credit participants' accounts on the payment date. These payments will be made
in amounts proportionate to participants' beneficial interests in the exchange
notes. Payments by participants to owners of beneficial interests in the
exchange notes represented by the global security held through participants will
be the responsibility of those participants.
We will send any redemption notices to Cede & Co. We understand that if less
than all of the exchange notes are being redeemed, The Depository Trust
Company's practice is to determine by lot the amount of the holdings of each
participant to be redeemed. We also understand that neither The Depository Trust
Company nor Cede & Co. will consent or vote with respect to the exchange notes.
We have been advised that under its usual procedures, The Depository Trust
Company will mail an "omnibus proxy" to us as soon as possible after the record
date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to
those participants to whose accounts the exchange notes are credited on the
record date identified in a listing attached to the omnibus proxy.
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A person having a beneficial interest in existing notes represented by the
global security may be unable to pledge that interest to persons or entities
that do not participate in The Depository Trust Company system, or to take other
actions in respect of that interest, because that interest is not represented by
a physical certificate.
The Depository Trust Company has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
The Depository Trust Company was created to hold securities for its
participants and to facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes to
accounts of its participants. Some of the participants, together with other
entities, own The Depository Trust Company. Indirect access to The Depository
Trust Company system is available to others such as banks, brokers, dealers and
trust companies that clear through, or maintain a custodial relationship with a
participant, either directly or indirectly.
The Depository Trust Company is under no obligation to perform or continue
to perform the above procedures. The Depository Trust Company may discontinue
these at any time. If The Depository Trust Company is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will cause existing notes to be issued in definitive form
in exchange for the global security.
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<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
This section describes the material United States federal income tax
consequences of the exchange and the ownership and disposition of exchange notes
and common stock received upon a conversion of the existing notes by persons
that receive their exchange notes in the exchange offer. This section does not
apply to you if you are a member of a class of holders subject to special rules,
such as:
- a dealer in securities or currencies,
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
- a bank,
- a life insurance company,
- a tax-exempt organization,
- a person that does not hold the existing notes, exchange notes or common
stock as a capital asset,
- a person that actually or constructively owns 10% or more by vote or value
of our voting stock,
- a person that owns notes that are a hedge or that are hedged against
interest rate risks,
- a person that owns notes as part of a straddle or conversion transaction
for tax purposes, or
- a person whose functional currency for tax purposes is not the U.S.
dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
- --------------------------------------------------------------------------------
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF OWNING THESE
NOTES IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE
LAWS OF ANY OTHER TAXING JURISDICTION.
- --------------------------------------------------------------------------------
UNITED STATES HOLDERS
This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of an existing note
and you are:
- a citizen or resident of the United States,
- a domestic corporation,
- an estate whose income is subject to United States federal income tax
regardless of its source, or
- a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this section does not apply to you
and you should refer to "United States Alien Holders" below.
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<PAGE>
TAX TREATMENT OF EXCHANGE
The exchange constitutes a recapitalization, and will therefore generally be
tax-free to the extent that an exchange note is received in exchange for an
existing note. You will be taxed on the exchange only in respect of (a) the
amount of any accrued but unpaid interest on your existing notes that you have
not already included in income and (b) cash that you receive to the extent of
your gain on the exchange.
You must allocate any accrued interest you have not included in income pro
rata between the exchange notes you receive and the cash you receive, based on
fair market value. The full amount of this accrued interest will be taxable as
ordinary income.
You will recognize gain on the exchange in an amount equal to the lesser of
(x) the cash you receive in the exchange, decreased by the amount of accrued
interest allocated to the cash, and (y) the total gain you realize on the
exchange. The total gain you realize on the exchange is equal to the difference
between (m) the sum of the fair market value of the exchange notes you receive
and the cash you receive, decreased by the amount attributable to accrued
interest as discussed above, and (n) your basis in your existing notes. Your
basis in your existing notes will generally equal your cost for those notes,
increased by the amount of original issue discount accrued on your existing
notes. Any loss on the exchange will not be recognized.
Any gain you recognize on the exchange will generally be capital gain and
will be long-term capital gain if you have held your existing notes for more
than one year. However, under the market discount rules, any gain that you
recognize will be ordinary income to the extent of the accrued market discount
which you have not previously included in income.
For tax purposes, the exchange should generally be considered to take place
on the expiration date.
TAX TREATMENT OF THE OWNERSHIP AND DISPOSITION OF EXCHANGE NOTES AND COMMON
STOCK
TAXATION OF INTEREST AND OID AND THE SALE, EXCHANGE OR REDEMPTION OF NOTES
You will be required to recognize as ordinary income any interest paid or
accrued on the notes, in accordance with your regular method of accounting.
An exchange note will be treated as a discount note issued at an original
issue discount if the amount by which the exchange note's stated redemption
price at maturity exceeds its issue price is more than a de minimis amount.
Generally, an exchange note's issue price will be the fair market value of the
exchange note on the day of the exchange. Your exchange note's stated redemption
price at maturity is equal to its stated principal amount. If your exchange
note's stated redemption price at maturity does not exceed its issue price, then
the following rules relating to original issue discount will not apply to you.
In general, your exchange note will not be a discount note if the amount by
which its stated redemption price at maturity exceeds its issue price is less
than the de minimis amount of 1/4 of 1 percent of its stated redemption price at
maturity multiplied by the number of complete years to its maturity. Your note
will have de minimis original issue discount if the amount of the excess is less
than the de minimis amount. If your note has de minimis original issue discount,
you must generally include the de minimis amount in income as stated principal
payments are made on the note.
Generally, you must include original issue discount in income before you
receive cash attributable to that income. The amount of OID that you must
include in income is calculated using a constant-yield method, and generally you
will include increasingly greater amounts of OID in income over the life of your
note. More specifically, you can calculate the amount of OID that you
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<PAGE>
must include in income by adding the daily portions of OID with respect to your
discount note for each day during the taxable year or portion of the taxable
year that you hold your discount note. You can determine the daily portion by
allocating to each day in any accrual period a pro rata portion of the OID
allocable to that accrual period. You may select an accrual period of any length
with respect to your discount note and you may vary the length of each accrual
period over the term of your discount note. However, no accrual period may be
longer than one year and each scheduled payment of interest or principal on the
discount note must occur on either the first or final day of an accrual period.
You can determine the amount of OID allocable to an accrual period by:
- multiplying your discount note's adjusted issue price at the beginning of
the accrual period by your note's yield to maturity, and then
- subtracting from this figure the sum of the payments of stated interest on
your note allocable to the accrual period.
You must determine the discount note's yield to maturity on the basis of
compounding at the close of each accrual period and adjusting for the length of
each accrual period. Further, you determine your discount note's adjusted issue
price at the beginning of any accrual period by adding your discount note's
issue price and any accrued OID for each prior accrual period.
If an interval between payments of stated interest on your discount note
contains more than one accrual period, then, when you determine the amount of
OID allocable to an accrual period, you must allocate the amount of stated
interest payable at the end of the interval, including any stated interest that
is payable on the first day of the accrual period immediately following the
interval, pro rata to each accrual period in the interval based on their
relative lengths. In addition, you must increase the adjusted issue price at the
beginning of each accrual period in the interval by the amount of any stated
interest that has accrued prior to the first day of the accrual period but that
is not payable until the end of the interval. You may compute the amount of OID
allocable to an initial short accrual period by using any reasonable method if
all other accrual periods, other than a final short accrual period, are of equal
length.
The amount of OID allocable to the final accrual period is equal to the
difference between:
- the amount payable at the maturity of your note, other than any payment of
stated interest, and
- your note's adjusted issue price as of the beginning of the final accrual
period.
You will generally recognize capital gain or loss if you dispose of a note
in a sale, redemption or exchange other than a conversion of the note into
common stock. Your gain or loss will equal the difference between the proceeds
you receive and your adjusted tax basis in the note. The proceeds you receive
will include the amount of any cash and the fair market value of any other
property received for your note. Your tax basis in your notes will generally
equal your tax basis in the existing notes which you exchanged for the exchange
notes, increased by the amount of gain you recognized on the exchange, further
increased by the amount of income you recognized on the exchange that was
attributable to accrued interest and decreased by the amount of cash you
received in the exchange. If your exchange notes are discount notes as described
above, you will adjust your tax basis by adding the amount of OID you have
already included in income. The portion of any proceeds that is attributable to
accrued interest on the exchange note will be recognized as ordinary interest
income to the extent that you have not previously included the accrued interest
in income. The gain or loss that you recognize on a disposition of the note will
be long-term capital gain or loss if your holding period for your exchange rate
is more than one year. Your holding period for the exchange notes will include
the period for which you held the existing
53
<PAGE>
notes, except to the extent an exchange note is received in exchange for accrued
interest. Long-term capital gains of non-corporate taxpayers are generally taxed
at a maximum rate of 20 percent. The deductibility of capital losses is subject
to limitation.
CONVERSION OF THE NOTES
You generally will not recognize any income, gain or loss on converting a
note into common stock. If you receive cash in lieu of a fractional share of
stock, however, you will be treated as if you received the fractional share and
then had the fractional share redeemed for the cash. You would recognize gain or
loss equal to the difference between the cash received and that portion of your
basis in the stock attributable to the fractional share. Your aggregate basis in
the common stock will equal your adjusted basis in the note. Your holding period
for the stock will include your holding period for your note.
DIVIDENDS
If, after you convert a note into common stock, we make a distribution in
respect of that stock, the distribution will be treated as a dividend which will
be taxable to you as ordinary income, to the extent it is paid from our current
or accumulated earnings and profits. If the distribution exceeds our current and
accumulated earnings and profits, the excess will be treated first as a tax-free
return of your investment up to your basis in the common stock. Any remaining
excess will be treated as capital gain. If you are a U.S. corporation, you would
generally be able to claim a deduction equal to a portion of any dividends
received.
The terms of the notes allow for changes in the conversion price of the
notes in certain circumstances. A change in conversion price that allows you to
receive more shares of common stock on conversion may increase your
proportionate interests in our earnings and profits or assets. In that case, you
would be treated as though you received a dividend in the form of our stock.
Such a constructive stock dividend could be taxable to you, although you would
not actually receive any cash or other property. A taxable constructive stock
dividend would result, for example, if the conversion price is adjusted to
compensate you for distributions of cash or property to our shareholders. Not
all changes in conversion price that allow noteholders to receive more stock on
conversion, however, increase your proportionate interest in the company. For
instance, a change in conversion price could simply prevent the dilution of your
interest upon a stock split or other change in capital structure. Changes of
this type, if made by a bona fide, reasonable adjustment formula, are not
treated as constructive stock dividends. Conversely, if an event occurs that
dilutes your interests and the conversion price is not adjusted, the resulting
increase in the proportionate interests of our shareholders could be treated as
a taxable stock dividend to them. Any taxable constructive stock dividends
resulting from a change to, or failure to change, the conversion price would be
treated like dividends paid in cash or other property. They would result in
ordinary income to you, to the extent of our current or accumulated earnings and
profits, with any excess treated as a tax-free return of capital or as capital
gain.
SALE OF COMMON STOCK
You will generally recognize capital gain or loss on a sale or exchange of
common stock. Your gain or loss will equal the difference between the proceeds
received by you and your adjusted tax basis in the stock. The proceeds received
by you will include the amount of any cash and the fair market value of any
other property received for the stock. The gain or loss recognized by you on a
sale or exchange of stock will be long-term capital gain or loss if your holding
period for the stock is more than one year.
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<PAGE>
UNITED STATES ALIEN HOLDERS
This subsection describes the tax consequences to a United States alien
holder. You are a United States alien holder if you are the beneficial owner of
a note and are, for United States federal income tax purposes:
- a nonresident alien individual,
- a foreign corporation,
- a foreign partnership, or
- an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a note.
If you are a United States holder, this section does not apply to you.
TAXATION OF INTEREST AND THE SALE, EXCHANGE OR REDEMPTION OF NOTES
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below, if you are a United States alien
holder of a note:
- we and other payors will not be required to deduct United States
withholding tax from payments of interest, including OID, to you if, in
the case of interest;
1. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Chiron entitled to
vote, and
2. you are not a controlled foreign corporation that is related to
Chiron through stock ownership, and
a. you certify to us or a U.S. payor, under penalties of perjury,
that you are not a United States holder and provide your name and
address, or
b. a non-U.S. securities clearing organization, bank or other
financial institution that holds customers' securities in the
ordinary course of its trade or business and holds the note
certifies to us or a U.S. payor under penalties of perjury that a
similar statement has been received from you by it or by a
similar financial institution between it and you and furnishes
the payor with a copy thereof, and
- no deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your note or
coupon unless:
1. you were a citizen or resident of the United States and thus are
subject to special rules that apply to expatriates, or
2. the rules of the Foreign Investment in Real Property Tax Act
("FIRPTA") (described below) treat the gain as effectively connected
with a U.S. trade or business.
The FIRPTA rules may apply to a sale, exchange or other disposition of
notes if we are, or were within five years before the transaction, a
"U.S. real property holding corporation" ("USRPHC"). In general, we would
be a USRPHC if interests in U.S. real estate comprised more than 50% of
our real estate and business assets. We do not believe that we are a
USRPHC or that we will become one in the future.
If you receive a payment after December 31, 2000, recently finalized Treasury
regulations will apply. Under these final withholding regulations, after
December 31, 2000, you may use an alternative method to satisfy the
certification requirement described above. Additionally, if you are a partner in
a foreign partnership, after December 31, 2000, you, in addition to the foreign
partnership, must
55
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provide the certification described above and the partnership must provide
certain information. The Internal Revenue Service will apply a look-through rule
in the case of tiered partnerships.
CONVERSION OF THE NOTES
You generally will not recognize any income, gain or loss on converting a
note into common stock. Any gain recognized as a result of your receipt of cash
in lieu of a fractional share of stock would also generally not be subject to
U.S. federal income tax. See "United States Alien Holders--Sale of Common
Stock," below.
DIVIDENDS
Dividends paid to you on common stock received on conversion of a note will
generally be subject to U.S. withholding tax at a 30 percent rate. The
withholding tax might not apply, however, or might apply at a reduced rate,
under the terms of a tax treaty between the United States and your country of
residence. You must demonstrate your entitlement to treaty benefits by
certifying your residency status.
SALE OF COMMON STOCK
You will generally not be subject to a U.S. federal income tax on any gains
realized on the sale, exchange, or other disposition of common stock. This
general rule, however, is subject to exceptions, some of which are described
under "United States Alien Holders--Taxation of Interest and the Sale, Exchange
or Redemption of Notes."
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, if you are a non-corporate United States holder, we and other
payors are required to report to the Internal Revenue Service all payments of
principal, any premium and interest on your note, and the accrual of OID on a
discount note. In addition, the proceeds of the sale of your note before
maturity within the United States will be reported to the Internal Revenue
Service. Additionally, backup withholding at a rate of 31% will apply to any
payments, including payments of OID, if you fail to provide an accurate taxpayer
identification number, or you are notified by the Internal Revenue Service that
you have failed to report all interest and dividends required to be shown on
your federal income tax returns.
UNITED STATES ALIEN HOLDERS
You are generally exempt from backup withholding and information reporting
with respect to any payments of principal, premium, dividends or interest, made
by us and other payors if you provide the certification described under "United
States Alien Holders" and the payor does not have actual knowledge that you are
a United States person. See "United States Alien Holders" above for a discussion
of the rules under the final withholding regulations. We and other payors,
however, may report payments of interest on your notes on Internal Revenue
Service Form 1042-S.
In general, payment of the proceeds from the sale of notes or common stock
to or through a United States office of a broker is subject to both United
States backup withholding and information reporting. If, however, you are a
United States alien holder, you will not be subject to information reporting and
backup withholding if you certify as to your non-United States status, under
penalties of perjury, or otherwise establish an exemption. Payments of the
proceeds from the sale by a United States alien holder of a note or common stock
made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding. However, information
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reporting, but not backup withholding, may apply to a payment made outside the
United States of the proceeds of a sale of a note or common stock through an
office outside the United States if the broker is:
- a United States person,
- a controlled foreign corporation for United States tax purposes,
- a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period, or
- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year:
- one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership, or
- such foreign partnership is engaged in a United States trade or
business
unless the broker has documentary evidence in its records that you are a
non-U.S. person and does not have actual knowledge that you are a U.S. person,
or you otherwise establish an exemption.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by William G.
Green, our Senior Vice President, General Counsel and Secretary. Customary legal
matters will be passed upon for the dealer manager by Shearman & Sterling,
Washington, D.C.
EXPERTS
The consolidated financial statements and consolidated financial statement
schedule of Chiron Corporation as of December 31, 1999 and 1998 and for each of
the years in the three-year period ended December 31, 1999, have been
incorporated by reference herein in reliance upon the report of KPMG LLP,
independent auditors, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file reports, proxy statements and other information with the Commission,
in accordance with the Securities Exchange Act of 1934, as amended. You may read
and copy our reports, proxy statements and other information filed by us at the
public reference facilities of the Commission in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Our reports, proxy
statements and other information filed with the Commission are available to the
public over the Internet at the Commission's World Wide Web site at
http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information we
filed with them, which means that we can disclose important information by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
by us with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until our offering is complete:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations Department
Chiron Corporation
4560 Horton Street
Emeryville, California 94608
(510) 655-8730
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law ("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 authorizes a court to award or a corporation's board
of directors to grant indemnification to directors and officers in terms
sufficiently broad to permit such indemnification under some circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended.
The registrant's certificate of incorporation limits the directors'
liability for monetary damages to the registrant and its stockholders for
breaches of fiduciary duty to the fullest extent permitted by Section 102(b)(7)
of the DGCL. The registrant's bylaws extend indemnification rights to the
fullest extent authorized by the DGCL to directors and officers involved in any
action, suitor 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 the registrant. In addition, the registrant's bylaws
permit the registrant's 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 the registrant.
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Dealer Manager Agreement.
3.01** Restated Certificate of Incorporation of the Registrant, as
filed with the Office of the Secretary of State of Delaware
on August 17, 1987, incorporated by reference to
Exhibit 3.01 of the Registrant's report on Form 10-K for
fiscal year 1996.
3.02** Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant, as filed with the Office of
the Secretary of State of Delaware on December 12, 1991,
incorporated by reference to Exhibit 3.02 of the
Registrant's report on Form 10-K for fiscal year 1996.
3.03** Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant, as filed with the Office of
the Secretary of State of Delaware on May 22, 1996,
incorporated by reference to Exhibit 3.04 of the
Registrant's report on Form 10-Q for the period ended June
30, 1996.
3.04** Bylaws of the Registrant, as amended, incorporated by
reference to Exhibit 3.04 of the Registrant's report on Form
10-Q for the period ended June 30, 1999.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1* Form of Indenture between the Registrant and State Street
Bank and Trust Company of California, N.A., as exchange
notes trustee.
4.2* Form of Exchange Note (included in Exhibit 4.1).
5.1* Opinion of William G. Green, Senior Vice President, General
Counsel and Secretary of Chiron Corporation.
12.1 Statement re: computation of ratio of earnings to fixed
charges.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2* Consent of William G. Green, Senior Vice President, General
Counsel and Secretary of Chiron Corporation (contained in
its opinion filed as Exhibit 5.1 to this registration
statement).
24.1 Power of Attorney (see page II-4).
25.1 Form T-1 Statement of Eligibility under the Trust indenture
Act of 1939, as amended, of State Street Bank and Trust
Company of California, N.A.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- --------------
* To be filed by amendment.
** Incorporated by reference
ITEM 22. UNDERTAKINGS
(a) The Company hereby undertakes to respond to requests for information
that is incorporated by reference into the Prospectus pursuant to Item 4, 10(b),
11 or 13 of Form S-4, within one business day of receipt of such request, and to
send the incorporated documents by first-class mail or equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement throughout the date responding to
the request.
(b) 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.
(c) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the existing notes Exchange Act (and,
where applicable, each filing of any employee benefit plan's
II-2
<PAGE>
annual report pursuant to Section 15(d) of the existing notes 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.
(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 provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities 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 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 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;
(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 the 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 percent change in the maximum aggregate
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(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.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF EMERYVILLE,
STATE OF CALIFORNIA ON APRIL 6, 2000.
<TABLE>
<S> <C> <C>
CHIRON CORPORATION
By: /s/ SEAN P. LANCE
-----------------------------------------
Name: Sean P. Lance
Title: PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Sean P. Lance and James R. Sulat as his or her
true and lawful attorneys-in-fact and agents, each acting alone, with full
powers of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement and any subsequent Registration Statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or his or her substitutes may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SEAN P. LANCE President, Chief Executive Officer and
--------------------------------- Chairman of the Board of Directors April 6, 2000
Sean P. Lance (Principal Executive Officer)
/s/ JAMES R. SULAT
--------------------------------- Vice President, Chief Financial Officer April 6, 2000
James R. Sulat (Principal Financial Officer)
/s/ DAVID V. SMITH
--------------------------------- Vice President, Controller (Principal April 6, 2000
David V. Smith Accounting Officer)
/s/ RAYMUND BREU
--------------------------------- Director April 6, 2000
Raymund Breu
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ VAUGHN D. BRYSON
--------------------------------- Director April 6, 2000
Vaughn D. Bryson
/s/ LEWIS W. COLEMAN
--------------------------------- Director April 6, 2000
Lewis W. Coleman
/s/ PIERRE E. DOUAZE
--------------------------------- Director April 6, 2000
Pierre E. Douaze
/s/ DONALD A. GLASER
--------------------------------- Director April 6, 2000
Donald A. Glaser
/s/ PAUL L. HERRLING
--------------------------------- Director April 6, 2000
Paul L. Herrling
/s/ EDWARD E. PENHOET
--------------------------------- Director April 6, 2000
Edward E. Penhoet
/s/ WILLIAM J. RUTTER
--------------------------------- Director April 6, 2000
William J. Rutter
/s/ JACK W. SCHULER
--------------------------------- Director April 6, 2000
Jack W. Schuler
/s/ PIETER J. STRIJKERT
--------------------------------- Director April 6, 2000
Pieter J. Strijkert
/s/ LEWIS T. WILLIAMS
--------------------------------- Director April 6, 2000
Lewis T. Williams
</TABLE>
II-5
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Dealer Manager Agreement.
3.01** Restated Certificate of Incorporation of the Registrant, as
filed with the Office of the Secretary of State of Delaware
on August 17, 1987, incorporated by reference to
Exhibit 3.01 of the Registrant's report on Form 10-K for
fiscal year 1996.
3.02** Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant, as filed with the Office of
the Secretary of State of Delaware on December 12, 1991,
incorporated by reference to Exhibit 3.02 of the
Registrant's report on Form 10-K for fiscal year 1996.
3.03** Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant, as filed with the Office of
the Secretary of State of Delaware on May 22, 1996,
incorporated by reference to Exhibit 3.04 of the
Registrant's report on Form 10-Q for the period ended June
30, 1996.
3.04** Bylaws of the Registrant, as amended, incorporated by
reference to Exhibit 3.04 of the Registrant's report on Form
10-Q for the period ended June 30, 1999.
4.1* Form of Indenture between the Registrant and State Street
Bank and Trust Company of California, N.A., as exchange
notes trustee.
4.2* Form of Exchange Note (included in Exhibit 4.1).
5.1* Opinion of William G. Green, Senior Vice President, General
Counsel and Secretary of Chiron Corporation.
12.1 Statement re: computation of ratio of earnings to fixed
charges.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2* Consent of William G. Green, Senior Vice President, General
Counsel and Secretary of Chiron Corporation (contained in
its opinion filed as Exhibit 5.1 to this registration
statement).
24.1 Power of Attorney (see page II-4).
25.1 Form T-1 Statement of Eligibility under the Trust indenture
Act of 1939, as amended, of State Street Bank and Trust
Company of California, N.A.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- --------------
* To be filed by amendment.
** Incorporated by reference
<PAGE>
Exhibit 1.1
DEALER MANAGER AGREEMENT
April 6, 2000
Goldman, Sachs & Co.,
As Dealer Manager,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Chiron Corporation, a Delaware corporation (the "Offeror"), proposes
to offer to exchange (such exchange offer, as it may from time to time be
amended and supplemented, the "Exchange Offer") up to $243,800,000 aggregate
principle amount of % Convertible Subordinated Notes due May , 2007
that are convertible into common stock, par value $0.01 per share, (the
"Shares") of the Offeror (the "Exchange Notes") in exchange for up to
$243,800,000 aggregate principle amount of maturity of 1.90% Convertible
Subordinated Notes due November 17, 2000 (the "Existing Notes") of the
Offeror and cash on the terms and subject to the conditions set forth in the
exchange offer materials (collectively, the "Exchange Offer Material"),
copies of which have been delivered to you, namely:
(a) The Registration Statement (as defined in Section 5(a)
hereof);
(b) The Prospectus (as defined in Section 5(a) hereof);
(c) The Schedule TO, filed April 6, 2000, including each
amendment or supplement thereto;
(d) The Form of Letter of Transmittal (the "Letter of
Transmittal") to be used by holders tendering Existing Notes pursuant to the
Exchange Offer and a specimen thereof to be sent by brokers, securities dealers,
commercial banks, trust companies and nominees to their clients for whom they
hold Existing Notes, including guidelines for certification of Taxpayer
Identification Number on Substitute Form W-9;
1
<PAGE>
(e) The form of letter, filed April 6, 2000, from you
to brokers, securities dealers, commercial banks, trust companies and
nominees, and form of letter, filed April 6, 2000, from brokers,
securities dealers, commercial banks, trust companies and nominees to clients
relating to the Exchange Offer;
(f) The form of any press release relating to the Exchange
Offer filed as an exhibit to the Schedule TO and any amendment or supplement
to the Schedule TO.
For each $1,000 principal amount of Existing Notes accepted for
exchange, the holder of such Existing Notes will receive $1,000 principal amount
of Exchange Notes plus an amount of cash to be set as described in the Exchange
Offer Material. Capitalized terms used herein without definition shall have
their respective meanings set forth in the Exchange Offer Material.
1. APPOINTMENT OF DEALER MANAGER. The Offeror hereby appoints you
exclusively, and you hereby accept appointment, as the Dealer Manager and
financial advisor in connection with the Exchange Offer and authorizes you to
act on its behalf in accordance with this Agreement and the terms of the
Exchange Offer Material, which Exchange Offer Material has been or will be
prepared by, or with the approval of, the Offeror and has been or will be filed
with the Securities and Exchange Commission (the "Commission") pursuant to the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Act"), and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"). You and any other broker or securities dealer or any commercial
bank or trust company are authorized to use the Exchange Offer Material in
connection with the solicitation of tenders along with such other offering
materials and information as the Offeror may prepare or approve ("Other
Material"). You agree to furnish no written material to holders in connection
with the Exchange Offer, other than the Exchange Offer Material and Other
Material. It is understood that nothing in this agreement nor the nature of your
services shall be deemed to create a fiduciary or agency relationship between
you and the Offeror.
2. SOLICITATION OF TENDERS. You agree to use your best efforts
to solicit tenders of Existing Notes pursuant to the Exchange Offer. Neither
you nor any of your affiliates, partners, directors, officers, agents,
employees or controlling persons (if any) shall have any liability to the
Offeror or any other person for any act or omission on the part of any
securities broker or dealer (other than yourselves), commercial bank or trust
company that solicits tenders, and neither you nor any of such other persons
or entities referred to above shall have any liability to the Offeror or any
person asserting claims on behalf of or in right of the Offeror in connection
with or as a result of either your engagement or any matter referred to in
this Agreement except to the extent that such liability results from your
gross negligence or bad faith in performing the services that are the subject
of this Agreement. In soliciting tenders, no securities broker or dealer
(other than yourselves), commercial bank or trust company shall be deemed to
act as your agent or the agent of the Offeror, and you, as Dealer Manager,
shall not be deemed the agent of any other securities broker or dealer or of
any commercial bank or trust company.
2
<PAGE>
3. COVENANTS OF THE OFFEROR. The Offeror covenants and agrees
with you that:
(a) The Offeror shall prepare the Prospectus in a form approved by
you, such approval not be to unreasonably withheld, and timely file such
Prospectus with the Commission following its preparation. The Offeror shall not
make any amendment or supplement to the Registration Statement or Prospectus
unless such amendment or supplement shall have been approved by you, such
approval not to be unreasonably withheld. The Offeror shall advise you, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or when any
supplement to the Prospectus or any amended Prospectus has been filed and shall
furnish you with copies thereof. The Offeror shall file timely all reports and
any definitive proxy or information statements required to be filed by the
Offeror with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for as long as the
delivery of a prospectus is required in connection with the offering or sale of
the Exchange Notes. The Offeror shall advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
Prospectus, of the suspension of the qualification of the Exchange Notes for
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
Prospectus or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order. The Offeror shall file timely
all Other Material required to be filed by the Offeror with the Commission
pursuant to Rule 13e-4(c)(2) of the Exchange Act and for so long as such filing
is required in connection with the Exchange Offer.
(b) The Offeror will cause to be delivered to each registered
holder of any Existing Notes, as soon as practicable, a copy of the Prospectus
and the Letter of Transmittal, together with a return envelope, and other
appropriate Exchange Offer Material and Other Material, if any. Thereafter, to
the extent practicable until two days prior to the expiration of the Exchange
Offer, the Offeror will use its best efforts to cause copies of such material
and a return envelope to be mailed to each person who becomes a registered
holder of any Existing Notes.
(c) The Offeror agrees to furnish you with copies of the Exchange
Offer Material and Other Material, including the Prospectus, in such quantities
as you may reasonably request for use by you in connection with the Exchange
Offer. The Offeror will not amend or supplement the Exchange Offer Material, or
prepare or approve any Other Material for use in connection with the Exchange
Offer, without your approval, such approval not to be unreasonably withheld.
(d) If the delivery of a prospectus is required at any time in
connection with the offering and sale of the Exchange Notes and if at such time
any event will have occurred as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made when such Prospectus was
delivered, not misleading or necessary to correct any material statement in any
earlier
3
<PAGE>
communication with respect to the Exchange Offer, or, if for any other reason it
will be necessary during such period to amend or supplement the Prospectus or to
file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act or the Exchange Act, to notify you
and upon your request to file such document and to prepare and furnish without
charge to you as many copies as you may from time to time reasonably request of
an amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance.
(e) The Offeror will promptly from time to time take such
action as you may reasonably request, after consultation with the Offeror, to
qualify the Exchange Notes for offering and sale under the securities laws of
such domestic jurisdictions as you may reasonably request, and to comply with
the laws of such jurisdiction so as to permit the continuance of sales and
dealings therein in these jurisdictions for so long as may be necessary to
complete the distribution of the Exchange Notes; provided that in connection
therewith the Offeror will not be required to qualify as a foreign
corporation or file a general consent to service of process in any
jurisdiction.
(f) The Offeror agrees to furnish to you, to the extent the same
is available to the Offeror, cards or lists or copies thereof showing the names
and addresses of, and numbers of Existing Notes held by, the registered holders
of Existing Notes as of a recent date, and will use its best efforts to advise
you from day to day during the period of the Exchange Offer as to any transfers
of record of Existing Notes. You agree to use such information only in
connection with the Exchange Offer and not to furnish such information to any
other person except in connection with the Exchange Offer.
(g) The Offeror will arrange for the Exchange Agent named in the
Letter of Transmittal to inform you during each business day during the Exchange
Offer (to be followed on a daily basis by written confirmation) as to the number
of Existing Notes that have been tendered pursuant to the Exchange Offer during
the interval since its previous daily report to you under this provision, and
the names and addresses of any registered holders tendering $50,000 aggregate
principle amount or more in Existing Notes.
(h) During a period of three years from the effective date of
the Registration Statement, the Offeror will furnish to you copies of all
reports or other communications (financial or other) furnished to
stockholders, except to the extent such material is made publicly available,
and deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the Offeror
is listed, except to the extent such material is made publicly available; and
(ii) such additional information concerning the business and financial
condition of the Offeror as you may from time to time reasonably request
(such financial statements to be on a consolidated basis to the extent the
accounts of the Offeror and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission).
4
<PAGE>
(i) The Offeror will make generally available to its
securityholders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Act) an earning statement of the Offeror and
its subsidiaries (which need not be audited) complying with Section 11(a) of
the Act (including, at the Offeror's option, Rule 158 thereunder).
(j) The Offeror will advise you promptly as soon as the Offeror
becomes aware of, and takes into consideration, the occurrence of any event
which would be reasonably likely to cause the Offeror to withdraw, rescind or
modify the Exchange Offer and, in any event and without limitation, the Offeror
will promptly advise you of any litigation or governmental action with respect
to the Exchange Offer.
(k) Neither the Offeror nor any entity controlled, directly or
indirectly, by the Offeror has taken, or will take, directly or indirectly, any
action which is designed to or which has constituted or which might reasonably
be expected to cause or result in stabilization or manipulation of the price of
any security of the Offeror to facilitate the sale or resale of the Exchange
Notes in connection with the Exchange Offer.
(l) The Offeror will use its best efforts to cause its executives,
officers and directors to agree not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder, any Common Stock (including
Common Stock from option exercises) during the five (5) day stock price
averaging period as described in the Exchange Offer Material, without your
consent; provided, however, any such individual may dispose of up to fifteen
percent (15%) of that individual's holdings up to an aggregate total of two
(2) million shares.
4. COMPENSATION AND EXPENSES.
(a) The Company shall pay to you, as compensation for your
services as Dealer Manager and financial advisor, the greater of (i) $500,000 or
(ii) 0.75% of the aggregate principle amount at maturity of all Existing Notes
tendered. Such fee shall be payable concurrently with the exchange of Existing
Notes for Exchange Notes under the Exchange Offer. If the Exchange Offer is not
completed for any reason, the Offeror shall not pay you any compensation for
your services as Dealer Manager and/or financial advisor.
(b) Whether or not any Existing Notes are acquired pursuant to the
Exchange Offer, the Offeror shall pay all expenses incident to the performance
of the Offeror's obligations hereunder and under the Exchange Offer, including,
without limiting the generality of the foregoing, all costs and expenses
(i) incurred by brokers and dealers (including yourselves), commercial banks,
trust companies and nominees for their customary mailing and handling
expenses incurred in forwarding the Exchange Offer Material and any Other
Material to their customers, (ii) incident to the preparation, issuance,
execution and delivery of the Exchange Notes to be delivered in connection
with the Exchange Offer, (iii) incident to the preparation, printing and
filing under the Act of the Registration Statement and the Prospectus and any
other Exchange Offer Materials or Other Materials (including all exhibits,
amendments and supplements thereto), (iv) incurred in connection with the
registration or qualification of the
5
<PAGE>
Exchange Notes under the laws of such domestic jurisdictions as you may
reasonably designate (including reasonable fees and disbursements of your
counsel), (v) related to the filing with the National Association of
Securities Dealers, Inc., (vi) in connection with the preparation and
printing (including word processing and duplication costs) and delivery of
all Exchange Offer Material and any Other Material (including this Agreement)
including mailing and shipping, as herein provided, (vii) incident to the
appointment of the Exchange Agent and the Information Agent, including the
fees and expenses of the Exchange Agent and the Information Agent, (x) all
advertising costs and (xi) any applicable transfer taxes payable in
connection with the Exchange Offer and the transactions contemplated thereby.
The Offeror will reimburse you for all your expenses incurred in connection
with your services under this Agreement including, without limitation, your
out-of-pocket expenses and the reasonable fees and disbursements of your
counsel and any expenses incurred as a result of presenting testimony or
evidence, or preparing to present testimony or evidence in connection with
any court or government proceeding arising out of the Exchange Offer.
5. CERTAIN REPRESENTATIONS AND WARRANTIES BY THE OFFEROR. The
Offeror represents and warrants to you that, except to the extent otherwise
disclosed in the Exchange Offer Material and Other Material:
(a) Prior to commencement, a registration statement on Form S-4
(Registration No. 333- (the "Initial Registration Statement") in respect
of the Exchange Notes will have been filed with the Commission; as of
Closing, the Initial Registration Statement (as may be amended before it
becomes effective) and any post-effective amendment thereto, each in the form
delivered to you prior to or at the Closing, and, including all exhibits
thereto and all documents incorporated by reference into the prospectus
contained therein will have been declared effective by the Commission in such
form; no other document with respect to such registration statement
(including all documents incorporated by reference into the prospectus
contained therein) will have been previously filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement or any post-effective amendment thereto, if any, will have been
issued and no proceeding for that purpose will have been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act, is
herein called a "Preliminary Prospectus"); the various parts of the Initial
Registration Statement, including all exhibits, annexes and schedules thereto
and including (i) the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 2(a) hereof and (ii) the documents incorporated by reference
into the prospectus contained in the Initial Registration Statement at the
time such part of the registration statement becomes effective, each as
amended at the time such part of the registration statement becomes
effective, is herein collectively called the "Registration Statement"; and
such final prospectus, in the form included in the Registration Statement at
the time it becomes effective or is first filed pursuant to Rule 424(b) under
the Act, is hereinafter called the "Prospectus"; and any reference herein to
any Preliminary Prospectus or the Prospectus will be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 11
of Form S-4 under the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any document filed after the date of such Preliminary
Prospectus or
6
<PAGE>
Prospectus, as the case may be, under the Exchange Act, and incorporated by
reference into such Preliminary Prospectus or Prospectus, as the case may be;
and any reference to any amendment to the Registration Statement shall be
deemed to refer to and include any annual report on Form 10-K of the Offeror
filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the
effective date of the Registration Statement that is incorporated by
reference into the Registration Statement;
(b) As of Closing, no order preventing or suspending the use of
any Initial Registration Statement (including any Preliminary Prospectus)
will have been issued by the Commission, and each Preliminary Prospectus, at
the time of filing thereof, will conform in all material respects to the
requirements of the Act, and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or necessary to
correct any material statement in any earlier communication made with respect
to the Exchange Offer; provided, however, that this representation and
warranty will not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Offeror by you
as Dealer Manager, expressly for use therein;
(c) The documents incorporated by reference into the
Prospectus, when they became effective or were filed with the Commission, as
the case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act , as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein , in light of the circumstances under which they were
made, not misleading or necessary to correct any material statement in any
earlier communication made with respect to the Exchange Offer; provided,
however, that this representation and warranty will not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Offeror by you as Dealer Manager,
expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder and do not and
will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto, and as of the applicable filing date as
to the Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in
7
<PAGE>
reliance upon and in conformity with information furnished in writing to the
Offeror by you as Dealer Manager, expressly for use therein;
(e) The Offeror and its subsidiaries, taken as a whole, have
not sustained since the date of the latest audited financial statements
included in, or incorporated by reference into, the Prospectus any material
loss or interference with their business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there
has not been any change in the capital stock or long-term debt of the Offeror
or its Material Subsidiary or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Offeror and its subsidiaries, taken as a whole, otherwise
than as set forth or contemplated in the Prospectus;
(f) The Offeror has a valid leasehold interest in, or ownership
of, all real property material to the conduct of its business as currently
conducted;
(g) The Offeror has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction
of incorporation, with the corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and has
been duly qualified as a foreign corporation for the transaction of business
in, and is in good standing under the laws of, each other jurisdiction in
which it owns or leases properties, or conducts any business so as to require
such qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and the
Material Subsidiary of the Offeror has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction
of incorporation;
(h) The Offeror has an authorized capitalization as set forth
under the caption "Capitalization" in the Prospectus, and all of the issued
shares of capital stock of the Offeror have been duly and validly authorized
and issued, and are fully paid and nonassessable and the Existing Notes
conform to the description under the caption "Description of Existing Notes"
and the Exchange Notes, when issued, will conform to the description under
the caption "Description of Exchange Notes," each description respectively
contained in, or incorporated by reference into, the Prospectus; and all of
the issued shares of capital stock of the Material Subsidiary of the Offeror
have been duly and validly authorized and issued, are fully paid and
nonassessable and (except for directors' qualifying shares and except as set
forth in, or incorporated by reference into, the Prospectus) are owned
directly or indirectly by the Offeror, free and clear of all liens,
encumbrances, equities or claims;
(i) The Exchange Notes have been duly authorized and, when
issued and delivered in exchange for the Existing Notes will be duly
authorized and validly issued;
(j) The execution and delivery of this Agreement by the Offeror
and the compliance by the Offeror with all of the provisions of this Agreement
and the consummation of the transactions
8
<PAGE>
contemplated herein and in the Exchange Offer Material do not and will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, material loan
agreement, material mortgage, material deed of trust or other material
agreement or instrument to which the Offeror or any of its subsidiaries is a
party or by which the Offeror or any of its subsidiaries is bound or to which
any of the property or assets of the Offeror or any of its subsidiaries is
subject (except such as will not materially affect the Offeror and its
subsidiaries as a whole), nor will such action result in any violation of the
provisions of the Certificate of Incorporation or Bylaws of the Offeror, the
provisions of any agreement among the stockholders of the Offeror, or any
statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Offeror or any of its subsidiaries or
any of their properties (except such as will not materially affect the
Offeror and its subsidiaries as a whole); and no consent, approval,
authorization, order, registration or qualification of or with any such court
or governmental agency or body is required for the execution and delivery by
the Offeror of this Agreement or the consummation by the Offeror of the
transactions contemplated by this Agreement or the consummation of the
Exchange Offer, including, but not limited to, the issuance and delivery of
the Exchange Notes by the Offeror, except for such consents or authorizations
which have been, or as of Closing will be, obtained (including registration
under the Act), or which, if not obtained, will not have a material affect on
the Offeror and its subsidiaries, taken as a whole, and such consents,
approvals, authorizations, registrations or qualifications as may be required
under state or foreign takeover statutes and securities or Blue Sky laws in
connection with the distribution of the Exchange Notes pursuant to the
Exchange Offer;
(k) Neither the Offeror nor its Material Subsidiary is in
violation of its Certificate of Incorporation or Bylaws, in any material
respect, or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
material loan agreement, material mortgage, material deed of trust, material
lease or other material agreement or instrument to which it is a party or by
which it or any of its properties may be bound;
(l) The statements set forth in the Prospectus under the
caption "Description of Exchange Notes," insofar as they purport to
constitute a summary of the terms of the Exchange Notes, and under the
captions "The Exchange Offer," "Description of the Existing Notes" and
"Certain Federal Income Tax Consequences," insofar as they purport to
describe the provisions of the laws and documents referred to therein, are
accurate and complete in all material respects;
(m) The Offeror is not and, after giving effect to the offering
and sale of the Exchange Notes and the consummation of the Exchange Offer,
will not be an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined under the Investment Company
Act of 1940, as amended (the "Investment Company Act");
(n) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the Offeror
or any of its subsidiaries is a party or of which any property of the Offeror
or any of its subsidiaries is the subject which, if determined adversely to
the Offeror or any of its subsidiaries, would, individually or in the
aggregate, be
9
<PAGE>
reasonably likely to have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of operations
of the Offeror and its subsidiaries, taken as a whole; and, to the best of the
Offeror's knowledge, no such proceedings have been threatened or, though not
threatened, are, to the Offeror's knowledge, imminent;
(o) The Offeror has duly taken all necessary corporate action to
authorize the making and consummation of the Exchange Offer and the execution,
delivery and performance of this Agreement; and this Agreement has been duly
authorized, executed and delivered;
(p) KPMG Peat Marwick, who have certified certain financial
statements of the Offeror and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(q) The Offeror has made or will make appropriate arrangements
with The Depository Trust Company and any other "qualified" registered
securities depository to allow for the book-entry transfer of tendered Existing
Notes between depository participants and the Exchange Agent.
(s) The Offeror has no subsidiaries which fall under the
definition contained in Regulation S-X Rule 1-02(w) (the definition of
"significant subsidiary"), except those listed on Schedule A, attached hereto
and referred to throughout this Agreement as "Material Subsidiary."
6. CONDITIONS OF OBLIGATION. Your obligation to act as Dealer
Manager hereunder will at all times be subject, in your discretion, to the
conditions that:
(a) All representations and warranties of the Offeror contained
herein are as of the date of this Agreement, and at all times during the
Exchange Offer through the Closing Date, will be true and correct in all
material respects.
(b) The Offeror at all times during the Exchange Offer will have
performed all of its obligations hereunder theretofore to be performed.
(c) The Prospectus will have been either (i) filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act in accordance with
Section 2(a) hereof or (ii) included in the Registration Statement; no stop
order suspending the effectiveness of the Registration Statement or any part
thereof will have been issued and no proceeding for that purpose will have been
10
<PAGE>
initiated or threatened by the Commission; and all requests for additional
information on the part of the Commission will have been complied with to
your reasonable satisfaction.
(d) On the Closing Date, general counsel to the Offeror,
William G. Green, will have furnished to you, as Dealer Manager, an opinion
in form and substance satisfactory to you.
(e) On the Closing Date, Shearman & Sterling will have furnished
to you, as Dealer Manager, an opinion in form and substance satisfactory to you.
(f) The Offeror will have furnished or caused to be furnished
to you, on each of the Commencement Date and the Closing Date, a certificate
or certificates of officers of the Offeror reasonably satisfactory to you as
to the accuracy of the representations and warranties of the Offeror at and
as of such dates, as to the performance by the Offeror of all of its
obligations hereunder to be performed at or prior to such date, as to the
matters set forth in subsections (c) and (d) of this Section and as to such
other matters as you may reasonably request.
(g) (i) Neither the Offeror nor its Material Subsidiary will
have sustained since the date of the latest audited financial statements
included in, or incorporated by reference into, the Prospectus any loss or
interference with their business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court of governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the latest date as of which
information is given in the Prospectus there will not have been any change in
the capital stock or long-term debt of the Offeror or its Material Subsidiary
or any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of the Offeror and its Material Subsidiary,
otherwise than as set forth or contemplated in the Prospectus, the effect of
which, in any such case described in clause (i) or (ii), is, in the judgment
of the Dealer Manager, so material and adverse as to make it impracticable or
inadvisable to proceed with the Exchange Offer or the delivery of Exchange
Notes on the terms and in the manner contemplated in the Exchange Offer
Material.
(h) On or after the date hereof (i) no downgrading will have
occurred in the rating accorded the Offeror's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization will have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Offeror's debt securities.
(j) On or after the Commencement Date there shall not have
occurred any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange or The NASDAQ
National Market; (ii) a suspension or material limitation in trading in the
Offeror's securities on The NASDAQ National Market; (iii) a general
moratorium on commercial banking activities declared by either Federal, or
New York or California State authorities; (iv) the outbreak or escalation of
hostilities involving the United
11
<PAGE>
States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this clause (iv) in the
judgment of the Dealer Manager makes it impracticable or inadvisable to
proceed with the Exchange Offer on the terms and in the manner contemplated
in the Exchange Offer Material; or (v) the occurrence of a material adverse
change in the existing financial, political or economic conditions in the
United States or elsewhere which, in the judgment of the Dealer Manager would
materially and adversely affect the financial markets or the success of the
Exchange Offer.
7. INDEMNITY.
(a) The Offeror agrees (i) to indemnify and hold you harmless
against any losses, damages, liabilities or claims (or actions in respect
thereof) to which you may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities to which you may become
subject, under the Act or otherwise (A) that arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact contained
in the Exchange Offer Material or any Other Material, including any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
of the documents incorporated by reference therein, or in any amendment or
supplement to any of the foregoing, or in any press release issued or
authorized by the Offeror, or in any other Written Communications relating to
the Exchange Offer made or authorized by the Offeror and provided to the
public, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein not
misleading, (B) that arise out of or are based upon any breach by the Offeror
of any representations or warranties or failure by the Offeror to comply with
any of its obligations set forth herein, or (C) that arise out of or are
based upon a withdrawal, rescission, termination or modification of or a
failure to make or consummate the Exchange Offer; (ii) to indemnify and hold
you harmless against any and all other losses, damages, liabilities or claims
(or actions in respect thereof) that otherwise arise out of or are based upon
or asserted against you by any person, including stockholders of the Offeror,
in connection with or as a result of your acting as Dealer Manager and
financial advisor in connection with the Exchange Offer or rendering
financial advisory services to the Offeror in connection with the Exchange
Offer or that arise in connection with any other matter in connection with
the Exchange Offer, except to the extent any such losses, damages,
liabilities or claims referred to in this clause (ii) result from your gross
negligence or bad faith in performing the services that are the subject of
this Agreement. In the event that you become involved in any capacity in any
action, proceeding or investigation brought by or against any person,
including stockholders of the Offeror, in connection with any matter referred
to in this Agreement, the Offeror also agrees periodically to reimburse you
for your reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith. The Offeror
also agrees that neither you nor any of your affiliates, nor any partners,
directors, officers, agents, employees or controlling persons (if any), as
the case may be, of you or any such affiliates, shall have any liability to
the Offeror or any person asserting claims on behalf of or in right of the
Offeror for or in connection with any matter referred to in this Agreement
except to the extent that any loss, damage, expense, liability or claim
incurred by the Offeror results from your gross negligence or bad faith in
performing the services that are the subject of this Agreement.
12
<PAGE>
(b) Promptly after receipt by you of notice of your involvement
in any action, proceeding or investigation, you shall, if a claim in respect
thereof is to be made against the Offeror under subsection (a) of this
Section 7, notify the Offeror in writing of such involvement, but the failure
so to notify the Offeror shall not relieve it from any liability which it may
otherwise have to you under subsection (a) of this Section 7 except and only
to the extent that the Offeror suffers actual prejudice as a result of such
failure, and in no event shall such failure relieve the Offeror from any
obligation to provide reimbursement and contribution to you, except and only
to the extent that the Offeror suffers actual prejudice as a result of such
failure.
(c) If for any reason the indemnification provided for in
subsection (a) of this Section 7 is unavailable or insufficient to hold you
harmless, then the Offeror shall contribute to the amount paid or payable by
you as a result of such loss, damage, expense, liability or claim (or action
in respect thereof) referred to therein in such proportion as is appropriate
to reflect the relative benefits of the Offeror and its stockholders on the
one hand and you on the other hand in the matters contemplated by this
Agreement as well as the relative fault of the Offeror and you with respect
to such loss, damage, expense, liability or claim (or action in respect
thereof) and any other relevant equitable considerations. The relative
benefits of the Offeror and its stockholders on the one hand and you on the
other hand in the matters contemplated by this Agreement shall be deemed to
be in the same proportion as the maximum aggregate value of the consideration
proposed to be paid by the Offeror to acquire Existing Notes pursuant to the
Exchange Offer bears to the maximum aggregate fee proposed to be paid to you
pursuant to Section 4(a) of this agreement as a result of such acquisition of
Existing Notes. The relative fault of the Offeror on the one hand and you on
the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by,
or relating to, the Offeror and its affiliates or you and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Offeror and you agree that it
would not be just and equitable if contribution pursuant to this subsection
(c) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to in this subsection (c).
(d) The agreements contained in Sections 2 and 3, Section 7 and
Section 8 and the representations and warranties of the Offeror set forth in
Section 3 hereof shall survive any termination or cancellation of this
Agreement, any completion of the engagement provided by this Agreement, any
investigation made by or on behalf of you, any of your officers or partners
or any person controlling you, any termination or expiration of the Exchange
Offer and any acquisition of Existing Notes, whether pursuant to the Exchange
Offer or otherwise.
(e) The reimbursement, indemnity and contribution obligations
of the Offeror under this Section 7 shall be in addition to any liability
that the Offeror may otherwise have, shall extend upon the same terms and
conditions to your affiliates and the partners, directors, officers, agents,
employees and controlling persons (if any), as the case may be, of you and
any such affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Offeror, you,
any such affiliate and any such other person referred to above. Prior to
entering into any agreement or arrangement with respect to, or effecting, any
13
<PAGE>
proposed sale, exchange, dividend or other distribution or liquidation of all or
a significant portion of its assets in one or a series of transactions or any
significant recapitalization or reclassification of its outstanding securities
that does not directly or indirectly provide for the assumption of the
obligations of the Offeror set forth in this Section 7, the Offeror will notify
you in writing thereof (if not previously so notified) and, if requested by you,
shall arrange in connection therewith alternative means of providing for the
obligations of the Offeror set forth in this Section 7, including the assumption
of such obligations by another party, insurance, surety bond or the creation of
an escrow, in each case in an amount and upon terms and conditions satisfactory
to you. In any event, if the obligations of the Offeror set forth in this
Section 7 are not assumed by operation of law or by contract by a party or
parties satisfactory to you, the Offeror agrees to arrange alternative means of
providing for such obligations, including providing insurance or creating an
escrow, in each case in an amount and upon terms and conditions satisfactory to
you.
8. MISCELLANEOUS.
(a) This Agreement is made solely for the benefit of you, the
Offeror and any partner, director, officer, agent, employee, affiliate or
controlling person referred to in Section 7 hereof, and their respective
successors, assigns, heirs and legal representatives, and no other person will
acquire or have any right under or by virtue of this Agreement, but, in any
event, nothing in this section shall be deemed to give any rights to an
individual in his individual capacity as an Existing Note holder.
(b) In the event that any provision hereof will be determined to
be invalid or unenforceable in any respect, such determination will not affect
such provision in any other respect or any other provision hereof, which will
remain in full force and effect.
(c) Except as otherwise expressly provided in this Agreement,
whenever notice is required by the provisions of this Agreement to be given to
(I) the Offeror, such notice will be in writing addressed to the Offeror at its
address set forth in the Registration Statement, Attention: Secretary; and (ii)
you, such notice will be in writing addressed to you, at 85 Broad Street, New
York, New York 10004, facsimile number (212) 902- 4103, Attention: Registration
Department.
(d) This Agreement contains the entire understanding of the
parties with respect to your acting as Dealer Manager of the Exchange Offer to
the Offeror, superseding all prior agreements, understandings and negotiations
with respect to such activities by you. This Agreement may be executed in any
number of separate counterparts, each of which will be an original, but all such
counterparts will together constitute one and the same agreement.
(e) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS. Any right to trial by jury with respect to any action or
proceeding arising in connection with or as a result of either your engagement
or any matter referred to in this Agreement is hereby waived by the parties
hereto. The Offeror agrees that any suit or proceeding arising in respect of
this Agreement or our
14
<PAGE>
engagement will be tried exclusively in the U.S. District Court for the Southern
District of New York or, if that court does not have subject matter
jurisdiction, in any state court located in The City of New York and the Offeror
agrees to submit to the jurisdiction of, and to venue in, such courts.
(f) Time will be of the essence of this Agreement. As used herein,
the term "business day" will mean any day when the Commission's office in
Washington, D.C. is open for business.
15
<PAGE>
Please sign and return to us a duplicate of this letter, whereupon it
will become a binding agreement.
Very truly yours,
Chiron Corporation
By___________________________
[Title]
The undersigned hereby confirms that the foregoing
letter agreement, as of the date thereof, correctly
sets forth the agreement between the Offeror
and the undersigned.
________________________________
Goldman, Sachs & Co.
16
<PAGE>
SCHEDULE A
Material Subsidiary
1. Chiron Investment Corporation
A-1
<PAGE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
DESCRIPTION 1995 1996 1997 1998 1999
- ----------- --------- -------- -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FIXED CHARGES
1 Interest expensed and capitalized.............. $ 30.21 $30.74 $33.26 $ 24.67 $ 23.89
2 Amortized premiums, discounts and capitalized
expenses related to debt...................... 6.76 7.03 7.30 7.60 7.90
3 An estimate of the interest factor in rental
expense....................................... 9.33 10.87 8.73 7.43 8.20
-------- ------ ------ ------- -------
Total Fixed Charges......................... $ 46.30 $48.64 $49.29 $ 39.70 $ 39.99
-------- ------ ------ ------- -------
EARNINGS
1 Pre-tax income from continuing operations
before income (loss) from equity investees.... $(469.86) $45.61 $26.73 $ 94.52 $155.42
2 Fixed charges.................................. 46.30 48.64 49.29 39.70 39.99
-------- ------ ------ ------- -------
Total Earnings.............................. $(423.56) $94.25 $76.02 $134.22 $195.41
-------- ------ ------ ------- -------
RATIO OF EARNINGS TO FIXED CHARGES.......... $(377.25) 1.94X 1.54X 3.38X 4.89X
======== ====== ====== ======= =======
</TABLE>
<PAGE>
EXHIBIT 23.1
The Board of Directors
Chiron Corporation:
We consent to incorporation by reference herein of our report dated January 31,
2000 relating to the consolidated balance sheets of Chiron Corporation and
subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, comprehensive income, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1999,
and the related schedule, which report appears in the December 31, 1999 Annual
Report on Form 10-K of Chiron Corporation.
/s/ KPMG LLP
San Francisco, California
April 5, 2000
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) /X/
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
UNITED STATES 06-1143380
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
633 WEST 5(TH) STREET, 12(TH) FLOOR,
LOS ANGELES, CALIFORNIA 90071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
LYNDA A. VOGEL, SENIOR VICE PRESIDENT AND MANAGING DIRECTOR
633 WEST 5(TH) STREET, 12(TH) FLOOR, LOS ANGELES, CALIFORNIA 90071
(213) 362-7399
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
CHIRON CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-2754624
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
4560 HORTON STREET, EMERYVILLE, CA 94608
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
CONVERTIBLE SUBORDINATED NOTES
(TYPE OF SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which it
is subject.
Comptroller of the Currency, Western District Office, 50 Fremont Street,
Suite 3900, San Francisco, California, 94105-2292
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent, State
Street Bank and Trust Company.
(See notes on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect.
A copy of the Articles of Association of the trustee, as now in effect,
is on file with the Securities and Exchange Commission as an Exhibit with
corresponding exhibit number to the Form T-1of Western Digital Corporation,
filed pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939, as
amended (the "Act"), on May 12, 1998 (Registration No. 333-52463), and is
incorporated herein by reference.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A Certificate of Corporate Existence (with fiduciary powers) from the
Comptroller of the Currency, Administrator of National Banks is on file with
the Securities and Exchange Commission as an Exhibit with corresponding
exhibit number to the Form T-1 of Western Digital Corporation, filed
pursuant to Section 305(b)(2) of the Act, on May 12, 1998 (Registration
No. 333-52463), and is incorporated herein by reference.
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified in
paragraph (1) or (2), above.
Authorization of the Trustee to exercise fiduciary powers (included in
Exhibits 1 and 2; no separate instrument).
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file with
the Securities and Exchange Commission as an Exhibit with corresponding
exhibit number to the Form T-1 of Western Digital Corporation, filed
pursuant to Section 305(b)(2) of the Act, on May 12, 1998 (Registration
No. 333-52463), and is incorporated herein by reference.
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
1
<PAGE>
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility, which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, State Street Bank and Trust Company of California, National
Association, a national banking association, organized and existing under the
laws of the United States of America, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Los Angeles, and State of California, on the 31st
day of March, 2000.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, NATIONAL
ASSOCIATION
By: /S/ Paula Oswald
-----------------------------------
NAME: Paula Oswald
TITLE: Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
PURSUANT TO THE REQUIREMENTS OF SECTION 321(B) OF THE TRUST INDENTURE ACT OF
1939, AS AMENDED, IN CONNECTION WITH THE PROPOSED ISSUANCE BY CHIRON CORPORATION
OF ITS CONVERTIBLE SUBORDINATED NOTES, WE HEREBY CONSENT THAT REPORTS OF
EXAMINATION BY FEDERAL, STATE, TERRITORIAL OR DISTRICT AUTHORITIES MAY BE
FURNISHED BY SUCH AUTHORITIES TO THE SECURITIES AND EXCHANGE COMMISSION UPON
REQUEST THEREFOR.
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, NATIONAL
ASSOCIATION
BY: /S/ PAULA OSWALD
-----------------------------------
NAME: PAULA OSWALD
TITLE: VICE PRESIDENT
Dated: March 31, 2000
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition and Income for A Bank With Domestic Offices
Only and Total Assets of Less Than $100 Million of State Street Bank and Trust
Company of California, a national banking association duly organized and
existing under and by virtue of the laws of the United States of America, at the
close of business December 31, 1999, published in accordance with a call made by
the Federal Deposit Insurance Corporation pursuant to the required law: 12
U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember
banks); and 12 U.S.C. Section 161 (National banks).
<TABLE>
<CAPTION>
THOUSANDS
OF DOLLARS
----------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........ 4,987
Interest-bearing balances................................. 0
Securities.................................................. 37
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and its Edge
subsidiary................................................ 0
Loans and lease financing receivables:
Loans and leases, net of unearned income.................. 0
Allowance for loan and lease losses....................... 0
Allocated transfer risk reserve........................... 0
Loans and leases, net of unearned income and allowances... 0
Assets held in trading accounts............................. 0
Premises and fixed assets................................... 34
Other real estate owned..................................... 0
Investments in unconsolidated subsidiaries.................. 0
Customers' liability to this bank on acceptances
outstanding............................................... 0
Intangible assets........................................... 0
Other assets................................................ 1,143
-----
Total assets................................................ 6,201
=====
LIABILITIES
Deposits:
In domestic offices....................................... 0
Noninterest-bearing..................................... 0
Interest-bearing........................................ 0
In foreign offices and Edge subsidiary.................... 0
Noninterest-bearing..................................... 0
Interest-bearing........................................ 0
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge subsidiary........................................... 0
Demand notes issued to the U.S. Treasury and Trading
Liabilities............................................... 0
Other borrowed money........................................ 0
Subordinated notes and debentures........................... 0
Bank's liability on acceptances executed and outstanding.... 0
Other liabilities........................................... 2,685
Total liabilities........................................... 2,685
-----
EQUITY CAPITAL
Perpetual preferred stock and related surplus............... 0
Common stock................................................ 500
Surplus..................................................... 750
Undivided profits and capital reserves/Net unrealized
holding gains (losses).................................... 2,266
Cumulative foreign currency translation adjustments......... 0
Total equity capital........................................ 3,516
-----
Total liabilities and equity capital........................ 6,201
=====
</TABLE>
4
<PAGE>
I, John J. Saniuk, Vice President and Comptroller of the above named bank do
hereby declare that this Report of Condition and Income for this report date
have been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best of my knowledge
and belief.
/S/ John J. Saniuk
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
/S/ Alan D. Greene
/S/ Bryan R. Calder
/S/ Lynda A. Vogel
5
<PAGE>
LETTER OF TRANSMITTAL
CHIRON CORPORATION
OFFER FOR ALL OUTSTANDING
1.90% CONVERTIBLE SUBORDINATED NOTES DUE NOVEMBER 17, 2000
IN EXCHANGE FOR THE
[ ]% CONVERTIBLE SUBORDINATED NOTES DUE MAY [ ], 2007
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 12:01 A.M., EASTERN STANDARD TIME, ON
MAY [ ], 2000 UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 12:01 A.M., EASTERN STANDARD TIME, ON THE EXPIRATION
DATE
- --------------------------------------------------------------------------------
DELIVERY TO:
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
EXCHANGE AGENT
BY MAIL OVERNIGHT DELIVERY OR HAND:
State Street Bank and Trust Company of California, N.A.
c/o State Street Bank Trust Company
2 Avenue de Lafayette, 5th Floor
Corporate Trust
Boston MA 02110
Attention: Susan Lavey
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(617) 662-1544
FACSIMILE TRANSMISSIONS:
(617) 662-1452
(Originals of all documents sent by facsimile should be sent promptly by
hand, overnight courier or registered or certified mail.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated April [ ], 2000 (the "Prospectus"), of Chiron Corporation, a
Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter"), which together constitute the Company's offer (the "Exchange Offer")
to exchange an aggregate principal amount of up to $243,800,000 of the Company's
[ ]% Convertible Subordinated Notes due May [ ], 2007 (the "Exchange Notes"),
for an aggregate principal amount of up to $243,800,000 of the Company's issued
and outstanding 1.90% Convertible Subordinated Notes due November 17, 2000 (the
"Existing Notes") from the registered holders thereof (the "Holders").
For each Existing Note accepted for exchange, the Holder of such Existing
Note will receive an Exchange Note having a principal amount equal to one
hundred percent (100%) of the principal amount at maturity of the surrendered
Existing Note. Each Holder will also receive, for each $1,000 principal amount
at maturity of the Existing Notes tendered, a cash payment in the amount equal
to the difference between (i) the product of (A) 34.5924 and (B) the average of
the last reported closing market prices of the Company's common stock for the
five trading days immediately preceding the second trading day prior to the
expiration date and (ii) $1,000. The Exchange Notes will bear interest from the
date of issuance. Accordingly, Holders of Exchange Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the date of issuance.
<PAGE>
The undersigned acknowledges and agrees that for any existing note that is
validly tendered and accepted prior to an interest payment date, May 17 and
November 17 in the case of existing notes, the undersigned will not be entitled
to any payment or adjustment on account of accrued original issue discount or
accrued and unpaid interest on such note.
This Letter is to be completed by a Holder of Existing Notes and tender is
to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in "The Exchange Offer--Procedures for
tendering existing notes" section of the Prospectus. Holders of Existing Notes
who are unable to deliver confirmation of the book-entry tender of their
Existing Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility (a "Book-Entry Confirmation") and all other documents required by this
Letter to the Exchange Agent on or prior to the Expiration Date, must tender
their Existing Notes according to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed delivery procedures" section of the
Prospectus. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer. List below the Existing Notes to which this Letter relates.
If the space provided below is inadequate, the certificate numbers and
principal amount of Existing Notes should be listed and attached on a separate
signed schedule.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
DESCRIPTION OF EXISTING NOTES
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(1) (2)
AGGREGATE
NAME(S) AND ADDRESS(ES) PRINCIPAL PRINCIPAL
OF REGISTERED HOLDER(S) AMOUNT OF AMOUNT
(PLEASE FILL IN, IF BLANKEXISTING NOTE(S) TENDERED*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
------------------------------------------
------------------------------------------
------------------------------------------
TOTAL
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Unless otherwise indicated in this column, a Holder will be deemed to have
tendered ALL of the Existing Notes represented by the Existing Notes
indicated in column 1. See Instruction 2. Existing Notes tendered hereby
must be in denominations of principal amount of $1,000 and any integral
multiple thereof. See Instruction 1.
/ / CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account Number _____________________ Transaction Code Number ______
/ / CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
For Book-Entry Transfer, Complete the Following:
Account Number _____________________ Transaction Code Number ______
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Existing Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Existing Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Existing Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Existing Notes, with full power of substitution, among
other things, to cause the Existing Notes to be assigned, transferred and
exchanged. The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the Existing
Notes, and to acquire Exchange Notes issuable upon the exchange of such tendered
Existing Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim when
the same are accepted by the Company.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Existing Notes tendered hereby. All
authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please credit the account indicated above maintained at the
Book-Entry Transfer Facility.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF EXISTING
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
EXISTING NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Exchange Notes not accepted for
exchange are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than
the account indicated above.
Issue: Exchange Notes and/or Existing Notes to:
Name(s)
(PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address
(ZIP CODE)
(Complete Substitute Form W-9)
/ / Credit unexchanged Existing Notes delivered by
book-entry transfer to the Book-Entry Transfer Facility
account set forth below.
(BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER, IF APPLICABLE)
- ------------------------------------------------------------
</TABLE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF, OR AN ELECTRONIC CONFIRMATION
PURSUANT TO THE DEPOSITORY TRUST COMPANY'S ATOP SYSTEM (TOGETHER WITH A
BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
12:01 A.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW)
<TABLE>
<S> <C>
- ---------------------------------------------
x , 2000
x , 2000
(SIGNATURE(S) OF OWNER) (DATE)
Area Code and Telephone Number
If a Holder is tendering any Existing Notes, this Letter must be signed by the registered
Holder(s) as the name(s) appear(s) on the certificate(s) for the Existing Notes or by any
person(s) authorized to become registered Holder(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person
acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.
Name(s):
(PLEASE TYPE OR PRINT)
Capacity:
Address:
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
(AUTHORIZED SIGNATURE)
(TITLE)
(NAME AND FIRM)
Dated: , 2000
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
1.90% CONVERTIBLE SUBORDINATED NOTES DUE NOVEMBER 17, 2000 OF CHIRON
CORPORATION IN EXCHANGE FOR THE [ ]% CONVERTIBLE SUBORDINATED
NOTES DUE MAY [ ], 2007 OF CHIRON CORPORATION
1. DELIVERY OF THIS LETTER; GUARANTEED DELIVERY PROCEDURES.
This Letter, or an electronic confirmation pursuant to the Depository Trust
Company's ATOP system, is to be completed by Holders of Existing Notes for
tenders that are made pursuant to the procedures for delivery by book-entry
transfer set forth in "The Exchange Offer--Procedures for tendering existing
notes" section of the Prospectus. Book-Entry Confirmation as well as a properly
completed and duly executed Letter (or manually signed facsimile hereof), or an
electronic confirmation pursuant to the Depository Trust Company's ATOP system,
and any other required documents, must be received by the Exchange Agent at the
address set forth herein on or prior to the Expiration Date, or the tendering
Holder must comply with the guaranteed delivery procedures set forth below.
Existing Notes tendered hereby must be in denominations of $1,000 principal
amount and any integral multiple thereof.
Holders who cannot complete the procedure for book-entry transfer on a
timely basis or who cannot deliver all other required documents to the Exchange
Agent on or prior to the Expiration Date may tender their Existing Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed delivery procedures" section of the Prospectus. Pursuant to
those procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to 12:01 A.M., Eastern Standard Time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or a facsimile thereof), or an electronic confirmation
pursuant to the Depository Trust Company's ATOP system, and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
Holder of Existing Notes and the amount of Existing Notes tendered, stating that
the tender is being made thereby and guaranteeing that within three New York
Stock Exchange ("NYSE") trading days after the Expiration Date a Book-Entry
Confirmation and any other documents requested by this Letter will be deposited
by the Eligible Institution with the Exchange Agent, and (iii) a Book-Entry
Confirmation and all other documents required by this Letter, must be received
by the Exchange Agent within three NYSE trading days after the Expiration Date.
The delivery of the Existing Notes and all other required documents will be
deemed made only when confirmed by the Exchange Agent.
See "The Exchange Offer" section of the Prospectus.
2. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered Holder of the Existing Notes
tendered hereby, the signature must correspond exactly with the name as it
appears on a security position listing as the Holder of such Existing Notes in
the Book-Entry Transfer Facility System without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Existing Notes are registered in different names, it will be
necessary to complete, sign and submit as many separate copies of this Letter as
there are different registrations.
When this Letter is signed by the registered Holder or Holders of the
Existing Notes specified herein and tendered hereby, no separate bond powers are
required. If, however, the Exchange Notes are to be issued to a person other
than the registered Holder, then separate bond powers are required.
If this Letter or any bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
Signatures on bond powers required by this Instruction 3 must be guaranteed
by a firm which is a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program (each an "Eligible
Institution").
<PAGE>
Signatures on this Letter need not be guaranteed by an Eligible Institution,
provided the Existing Notes are tendered: (i) by a registered Holder of Existing
Notes (including any participant in the Book-Entry Transfer Facility system
whose name appears on a security position listing as the Holder of such Existing
Notes) who has not completed the box entitled "Special Issuance Instructions" on
this Letter, or (ii) for the account of an Eligible Institution.
3. SPECIAL ISSUANCE INSTRUCTIONS.
Holders tendering Existing Notes by book-entry transfer may request that
Existing Notes not exchanged be credited to such account maintained at the
Book-Entry Transfer Facility as such Holder may designate hereon. If no such
instructions are given, such Existing Notes not exchanged will be credited to
the proper account maintained at The Depository Trust Company.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated.
4. TAXPAYER IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering Holder whose
Existing Notes are accepted for exchange must provide the Company (as payor)
with such Holder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 below, which in the case of a tendering Holder who is an individual, is
his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for an exemption from backup withholding, such
tendering Holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, the Exchange Agent may be required to withhold 31% of the
amount of any reportable payments made after the exchange to such tendering
Holder of Exchange Notes. If withholding results in an overpayment of taxes, a
refund may be obtained.
Exempt Holders of Existing Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering Holder of Existing Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying, under penalties of perjury, that the TIN provided is correct (or
that such Holder is awaiting a TIN) and that (i) the Holder is exempt from
backup withholding, or (ii) the Holder has not been notified by the Internal
Revenue Service that such Holder is subject to backup withholding as a result of
a failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified the Holder that such Holder is no longer subject to backup
withholding. If the tendering Holder of Existing Notes is a nonresident alien or
foreign entity not subject to backup withholding, such Holder must give the
Exchange Agent a completed Form W-8, Certificate of Foreign Status. These forms
may be obtained from the Exchange Agent. If the Existing Notes are in more than
one name or are not in the name of the actual owner, such Holder should consult
the W-9 Guidelines for information on which TIN to report. If such Holder does
not have a TIN, such Holder should consult the W-9 Guidelines for instructions
on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and
write "applied for" in lieu of its TIN. Note: Checking this box and writing
"applied for" on the form means that such Holder has already applied for a TIN
or that such Holder intends to apply for one in the near future. If the box in
Part 2 of the Substitute Form W-9 is checked, the Exchange Agent will retain 31%
of reportable payments made to a Holder during the sixty (60) day period
following the date of the Substitute Form W-9. If the Holder furnishes the
Exchange Agent with his or her TIN within sixty (60) days of the date of the
Substitute Form W-9, the Exchange Agent will remit such amounts retained during
such sixty (60) day period to such Holder and no further amounts will be
retained or withheld from payments made to the Holder thereafter. If, however,
such Holder does not provide its TIN to the Exchange Agent within such sixty
(60) day period, the Exchange Agent will remit such previously withheld amounts
to the Internal Revenue Service as backup withholding and will withhold 31% of
all reportable payments to the Holder thereafter until such Holder furnishes its
TIN to the Exchange Agent.
5. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Existing Notes to it or its order pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Existing Notes not exchanged are to be
registered or issued in the name of, any person other than the registered Holder
of the Existing Notes tendered hereby, or if tendered Existing Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the transfer of
Existing Notes to the Company or its order pursuant to the Exchange Offer, the
amount of any such transfer taxes (whether imposed on the registered Holder or
any other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering Holder.
<PAGE>
6. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders of Existing Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Existing
Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Existing
Notes nor shall any of them incur any liability for failure to give any such
notice.
8. WITHDRAWAL RIGHTS.
Tenders of Existing Notes may be withdrawn at any time prior to 12:01 A.M.,
Eastern Standard Time, on the Expiration Date.
For a withdrawal of a tender of Existing Notes to be effective, a written
notice of withdrawal must be received by the Exchange Agent at the address set
forth above prior to 12:01 A.M., Eastern Standard Time, on the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person having
tendered the Existing Notes to be withdrawn (the "Depositor"), (ii) specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Existing Notes and otherwise comply with the
procedures of such facility, (iii) contain a statement that such Holder is
withdrawing his election to have such Existing Notes exchanged, (iv) be signed
by the Holder in the same manner as the original signature on the Letter by
which such Existing Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer to have the Trustee with
respect to the Existing Notes register the transfer of such Existing Notes in
the name of the person withdrawing the tender and (v) specify the name in which
such Existing Notes are registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Existing Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer and no Exchange Notes will be issued with respect thereto unless the
Existing Notes so withdrawn are validly retendered. Any Existing Notes that have
been tendered for exchange but which are not exchanged for any reason will be
credited into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures set forth in "The Exchange
Offer--Procedures for tendering existing notes" section of the Prospectus. Such
Existing Notes will be credited to an account maintained with the Book-Entry
Transfer Facility for the Existing Notes as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Existing Notes may be retendered by following the procedures described
above at any time on or prior to 12:01 A.M., Eastern Standard Time, on the
Expiration Date.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, and requests for Notices of
Guaranteed Delivery and other related documents may be directed to the Exchange
Agent, at the address and telephone number indicated above.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME:
------------------------
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY TIN
Department of the Treasury BY SIGNING AND DATING BELOW. ---------------------------
Internal Revenue Service
----------------------------------------------------------------------------
Part 2--TIN Applied For / /
Payor's Request for Taxpayer
Identification Number ("TIN")
and Certification
- -------------------------------------------------------------------------------------------------------------------------
CERTIFICATION: Under the penalties of perjury, I certify that
(1) the number shown on this form is my correct TIN (or I am waiting for a number to be issued to me).
(2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding and
(3) any other information provided on this form is true and correct.
Signature
------------------------------------------------------------------------------------------------------------------------ Date
------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to
backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified
by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I
have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I provide a number.
Signature
------------------------------------------------------------------------------------------------------------------------ Date
------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone numbers listed below. Additional copies of
the the Letter of Transmittal and other tender offer materials may be obtained
from the Information Agent as set forth below, and will be promptly furnished at
the Offeror's expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concering the Offer.
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 STATE STREET
10TH FLOOR
NEW YORK, NEW YORK 10004
BANKS AND BROKERAGE FIRMS CALL COLLECT:
(212) 440-9800
ALL OTHERS CALL TOLL FREE:
(800) 223-2064
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
CHIRON CORPORATION
You must use this form or one substantially equivalent to this form to
accept the Exchange Offer of Chiron Corporation (the "Company") made pursuant to
the Prospectus, dated April [ ], 2000 (the "Prospectus"), if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach State Street Bank and Trust Company of
California, N.A., as exchange agent (the "Exchange Agent") prior to 12:01 A.M.,
Eastern Standard Time, on the Expiration Date of the Exchange Offer. Such form
may be delivered or transmitted by facsimile transmission, mail or hand delivery
to the Exchange Agent as set forth below. In addition, in order to utilize the
guaranteed delivery procedure to tender Existing Notes pursuant to the Exchange
Offer, a Letter of Transmittal (or facsimile thereof) or an electronic
confirmation pursuant to the Depository Trust Company's ATOP system, with any
required signature guarantees and any other required documents must also be
received by the Exchange Agent prior to 12:01 A.M., Eastern Standard Time, on
the Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
EXCHANGE AGENT:
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
BY MAIL OVERNIGHT DELIVERY OR HAND:
State Street Bank and Trust Company of California, N.A.
c/o State Street Bank Trust Company
2 Avenue de Lafayette, 5th Floor
Corporate Trust
Boston MA 02110
Attention: Susan Lavey
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(617) 662-1544
FACSIMILE TRANSMISSIONS:
(617) 662-1452
(Originals of all documents sent by facsimile should be sent promptly by
hand, overnight courier or registered or certified mail.)
INFORMATION AGENT:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 STATE STREET
10TH FLOOR
NEW YORK, NEW YORK 10004
BANKS AND BROKERAGE FIRMS CALL COLLECT:
(212) 440-9800
ALL OTHERS CALL TOLL FREE:
(800) 223-2064
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED
DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Existing Notes set forth below pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
<TABLE>
<S> <C>
Total Principal Amount of Existing Notes For book-entry transfer to The Depository Trust
Tendered:* Company, please provide account number.
$ Account Number
</TABLE>
- ------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof. __________________________________________________________
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
________________________________________________________________________________
PLEASE SIGN HERE
<TABLE>
<S> <C>
- ---------------------------------------------
x , 2000
x , 2000
SIGNATURE(S) OF OWNER(S) (DATE)
OR AUTHORIZED SIGNATORY
Area Code and Telephone Number
Must be signed by the Holder(s) of Existing Notes as their name(s)appear(s) on a security
position listing, or by person(s) authorized to become registered Holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary
or representative capacity, such person must set forth his or her full title below:
Please print name(s) and address(es)
Name(s):
Capacity:
Address(es):
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CHIRON CORPORATION
OFFER FOR ALL OUTSTANDING
1.90% CONVERTIBLE SUBORDINATED NOTES DUE NOVEMBER 17, 2000 IN EXCHANGE FOR
[ ]% CONVERTIBLE SUBORDINATED NOTES DUE MAY [ ], 2007
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Chiron Corporation (the "Company") is offering, upon and subject to the
terms and conditions set forth in the Prospectus, dated April [ ], 2000 (the
"Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its [ ]% Convertible
Subordinated Notes due May [ ], 2007 for its outstanding 1.90% Convertible
Subordinated Notes due November 17, 2000 (the "Existing Notes").
We are requesting that you contact your clients for whom you hold Existing
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Existing Notes registered in your name or in the
name of your nominee, or who hold Existing Notes registered in their own names,
we are enclosing the following documents:
1. Prospectus dated April [ ], 2000;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if time will not permit all required documents to reach the Exchange Agent prior
to the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account you
hold Existing Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to State Street Bank and Trust Company of
California, N.A., c/o State Street Bank Trust Company, 2 Avenue de Lafayette,
5th Floor, Corporate Trust, Boston, MA 02110, Attention: Susan Lavey, the
Exchange Agent for the Exchange Offer.
Your prompt action is requested. The Exchange Offer will expire at
12:01A.M., Eastern Standard Time, on May [ ], 2000, unless extended by the
Company (the "Expiration Date"). Existing Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly completed
Letter of Transmittal (or facsimile thereof), or an electronic confirmation
pursuant to the Depository Trust Company's ATOP system, with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent all in accordance with the instructions set forth in the Letter
of Transmittal and the Prospectus.
If a registered holder of Existing Notes desires to tender, but the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under "The Exchange Offer-- Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial banks
and trust companies for reasonable and necessary costs and expenses incurred by
them in forwarding the Prospectus and the related documents to the beneficial
owners of Existing Notes held by them as nominee or in a fiduciary capacity. The
Company will pay or cause to be paid all stock transfer taxes applicable to the
exchange of Existing Notes pursuant to the Exchange Offer, except as set forth
in Instruction 5 of the Letter of Transmittal.
<PAGE>
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to State
Street Bank and Trust Company of California, N.A., the Exchange Agent for the
Exchange Offer, at its address and telephone number set forth on the front of
the Letter of Transmittal.
Very truly yours,
CHIRON CORPORATION
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
<PAGE>
CHIRON CORPORATION
OFFER FOR ALL OUTSTANDING
1.90% CONVERTIBLE SUBORDINATED NOTES DUE NOVEMBER 17, 2000
IN EXCHANGE FOR
[ ]% CONVERTIBLE SUBORDINATED NOTES DUE MAY [ ], 2007
WHICH WILL BE REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, PRIOR TO CLOSING
To Our Clients:
Enclosed for your consideration is a preliminary Prospectus, dated April
[ ], 2000 (the "Prospectus"), and the related Letter of Transmittal (the
"Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Chiron
Corporation (the "Company") to exchange its [ ]% Convertible Subordinated Notes
due May [ ], 2007 (the "Exchange Notes"), for its outstanding 1.90% Convertible
Subordinated Notes due November 17, 2000 (the "Existing Notes"), upon the terms
and subject to the conditions described in the Prospectus and the Letter of
Transmittal.
This material is being forwarded to you as the beneficial owner of the
Existing Notes held by us for your account but not registered in your name. A
tender of such Existing Notes may only be made by us as the holder of record and
pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Existing Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in order
to permit us to tender the Existing Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 12:01 A.M.,
Eastern Standard Time, on May [ ], 2000, unless extended by the Company. Any
Existing Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Existing Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Conditions for
completion of the exchange offer."
3. Any transfer taxes incident to the transfer of Existing Notes from the
holder to the Company will be paid by the Company, except as otherwise provided
in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 12:01 A.M., Eastern Standard Time, on May
[ ], 2000, unless extended by the Company.
If you wish to have us tender your Existing Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. The Letter of Transmittal is furnished to you for information only
and may not be used directly by you to tender Existing Notes.
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Chiron
Corporation with respect to its Existing Notes.
This will instruct you to tender the Existing Notes indicated below (or, if
no number is indicated below, all Existing Notes) held by you for the account of
the undersigned, upon and subject to the terms and conditions set forth in the
Prospectus and the related Letter of Transmittal.
Please tender the Existing Notes held by you for my account as indicated
below:
1.90% Convertible Subordinated Notes due November 17, 2000
<PAGE>
$____________(Aggregate Principal Amount of Existing Notes)
[ ] Please do not tender any Existing Notes held by you for my account.
Dated: , 2000
Signature(s):
- ------------------------------------------------------------------------
Print name(s) here:
- -----------------------------------------------------------------
(Print Address(es)):
- -----------------------------------------------------------------
(Area Code and Telephone Number(s)):
- ------------------------------------------------
(Tax Identification or Social Security Number(s)):
- ---------------------------------------
None of the Existing Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. After receipt of
instructions to tender, unless we receive specific contrary instructions we will
tender all the Existing Notes held by us for your account.
2
