<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES A JUNIOR PREFERRED STOCK)
OF
PATHOGENESIS CORPORATION
AT
$38.50 NET PER SHARE
BY
PICARD ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CHIRON CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, SEPTEMBER 18, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE (THE "COMMON STOCK"),
TOGETHER WITH THE ASSOCIATED RIGHTS TO PURCHASE SERIES A JUNIOR PREFERRED STOCK
(THE "RIGHTS" AND, COLLECTIVELY WITH THE COMMON STOCK, THE "SHARES"), OF
PATHOGENESIS CORPORATION (THE "COMPANY") WHICH, WHEN ADDED TOGETHER WITH ALL
OTHER SHARES OWNED BY CHIRON CORPORATION AND ITS SUBSIDIARIES, WOULD REPRESENT
AT LEAST A MAJORITY OF THE OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED
BASIS FOR ALL OUTSTANDING STOCK OPTIONS AND OTHER RIGHTS (OTHER THAN THE RIGHTS,
IF SUCH RIGHTS ARE NOT AT THAT TIME EXERCISABLE) TO ACQUIRE SHARES OUTSTANDING
ON THE DATE OF PURCHASE), (II) ANY REQUISITE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, APPLICABLE TO
THE PURCHASE OF SHARES PURSUANT TO THE OFFER OR THE MERGER DESCRIBED HEREIN
HAVING BEEN TERMINATED OR HAVING EXPIRED, AND (III) THE APPLICABLE WAITING
PERIODS UNDER CERTAIN FOREIGN ANTITRUST AND COMPETITION LAWS HAVING BEEN
TERMINATED OR HAVING EXPIRED, EXCEPT FOR SUCH WAITING PERIODS THE FAILURE OF
WHICH TO TERMINATE OR EXPIRE IS NOT REASONABLY LIKELY TO HAVE A PARENT MATERIAL
ADVERSE EFFECT OR A COMPANY MATERIAL ADVERSE EFFECT (AS SUCH TERMS ARE DEFINED
IN THE OFFER TO PURCHASE) OR TO PROVIDE A REASONABLE BASIS TO CONCLUDE THAT
CHIRON CORPORATION, PICARD ACQUISITION CORP. OR THE COMPANY OR ANY OF ITS
DIRECTORS, OFFICERS, AGENTS, ADVISORS OR OTHER REPRESENTATIVES WOULD BE SUBJECT
TO THE RISK OF CRIMINAL LIABILITY. THE CONSUMMATION OF THE OFFER IS ALSO SUBJECT
TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 13.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF AUGUST 13, 2000 (THE "MERGER AGREEMENT"), AMONG CHIRON CORPORATION, PICARD
ACQUISITION CORP. AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE AND IN THE BEST INTERESTS
OF THE COMPANY'S STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should (1) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal,
including any required signature guarantees, and mail or deliver the Letter of
Transmittal or such facsimile with such stockholder's certificate(s) for the
tendered Shares and any other required documents to the Depositary named herein,
(2) follow the procedure for book-entry tender of Shares set forth in Section 3,
or (3) request such stockholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for such stockholder. Stockholders
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if they desire to tender Shares so registered.
Unless the context requires otherwise, all references to Shares herein shall
include the associated Rights.
The Rights are presently evidenced by the certificates for the Common Stock
and a tender by a stockholder of such stockholder's shares of Common Stock will
also constitute a tender of the associated Rights. A stockholder of the Company
who desires to tender Shares and whose certificates for such Shares are not
immediately available, or who cannot comply with the procedure for book-entry
transfer on a timely basis, may tender such Shares by following the procedures
for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other tender offer materials may be directed to the
Information Agent or the Dealer Manager. Stockholders may also contact their
broker, dealer, commercial bank, trust company or other nominee.
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
August 21, 2000
<PAGE>
SUMMARY TERM SHEET
This summary highlights important and material information from this Offer
to Purchase but does not purport to be complete. To fully understand the tender
offer described in this document and for a more complete description of its
terms, you should read carefully this entire Offer to Purchase and the Letter of
Transmittal (which together, as amended and supplemented, constitute the
"Offer"). We have included section references to direct you to a more complete
description of the topics contained in this summary.
- WHO IS OFFERING TO BUY MY SECURITIES?
Picard Acquisition Corp., a wholly owned subsidiary of Chiron Corporation, is
offering to buy your Shares as described in this document. See Section 9 of
this document for further information about Chiron Corporation and Picard
Acquisition Corp.
- WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
Picard Acquisition Corp. is offering to buy all of the outstanding Shares,
including the associated Rights, of PathoGenesis Corporation. For information
about the conditions to which the Offer is subject, see Section 13 of this
document.
- HOW MUCH IS PICARD ACQUISITION CORP. OFFERING TO PAY AND WHAT IS THE FORM OF
PAYMENT?
Picard Acquisition Corp. is offering to pay $38.50 in cash for each Share,
including the associated Rights, of PathoGenesis Corporation. See Section 1 of
this document for information about the terms of the Offer.
- DOES PICARD ACQUISITION CORP. HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Yes. Chiron Corporation, parent of Picard Acquisition Corp., will be financing
the Offer described in this document with existing cash. See Section 12 of
this document.
- ARE CHIRON CORPORATION'S FINANCIAL RESULTS RELEVANT TO MY DECISION AS TO
WHETHER TO TENDER IN THE OFFER?
Since the Offer is for cash and is not subject to any financing condition,
Chiron Corporation's financial results should not be relevant to your decision
on whether to tender your Shares in the Offer.
- HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE INITIAL OFFERING PERIOD?
You may tender your Shares into the Offer until 12:00 midnight, New York City
time, on Monday, September 18, 2000, which is the scheduled expiration date of
the offering period, unless Picard Acquisition Corp. decides to extend the
offering period or provide a subsequent offering period. See Section 3 of this
document for information about tendering your Shares.
- CAN THE OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES?
Yes, Chiron Corporation and Picard Acquisition Corp. have agreed that if all
of the conditions to the Offer described in this document are not satisfied on
any scheduled expiration date of the Offer, Picard Acquisition Corp. may (and
in certain circumstances will be required to) extend the Offer for a period of
time (which, without the written consent of PathoGenesis Corporation, will not
exceed ten days per extension) that Picard Acquisition Corp. reasonably
believes is necessary to cause the conditions to the Offer described in this
document to be satisfied, PROVIDED that so long as Chiron Corporation and
Picard Acquisition Corp. shall have complied with their obligations under the
Merger Agreement, Picard Acquisition Corp. will not be required to extend the
Offer beyond March 14, 2001 (as such date may be extended pursuant to the
Merger Agreement). In addition,
i
<PAGE>
Picard Acquisition Corp. may, without the consent of the Company, extend the
Offer (i) for any period required by any rule, regulation, interpretation or
position of the SEC or its staff applicable to the Offer, or (ii) on one or
more occasions for an aggregate period of not more than ten business days if a
number of Shares representing at least a majority of the total number of
outstanding Shares (calculated on a fully diluted basis) but fewer than 90% of
the total number of outstanding Shares shall have been validly tendered in the
Offer and not withdrawn. See Section 1 of this document for information about
extension of the Offer.
- WILL THERE BE A SUBSEQUENT OFFERING PERIOD?
Following the satisfaction of all the conditions to the Offer described in
this document and the acceptance of and payment for all the Shares tendered
during the offering period, Picard Acquisition Corp. may, with the written
consent of the Company, elect to provide a subsequent offering period,
although Picard Acquisition Corp. currently has no intention to do so.
- HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
Picard Acquisition Corp. will announce by press release any extension of the
Offer no later than 9:00 a.m., New York City time, on the next day after the
previously scheduled expiration date. See Section 1 of this document for more
information about extension of the Offer. If, with the consent of the Company,
Picard Acquisition Corp. determines to provide a subsequent offering period,
it will publicly disclose its intentions by issuing a press release no later
than 9:00 a.m., New York City time, on the next day after the expiration date
of the offering period. Any such press release will state the approximate
number of Shares tendered to date.
- WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
The Offer is conditioned upon, among other things, at least a majority of the
total number of outstanding Shares (calculated on a fully diluted basis) being
validly tendered in the Offer and not withdrawn, on the expiration or
termination of the applicable waiting period under United States federal
antitrust laws and on the expiration or termination of the applicable waiting
periods under certain foreign antitrust and competition laws. The Offer is
subject to certain other conditions. For a complete description of all of the
conditions to which the Offer is subject, see Section 13 of this document.
- HOW DO I TENDER MY SHARES?
If you hold the certificates for your Shares, you should complete the enclosed
Letter of Transmittal and enclose all the documents required by it, including
your certificates, and send them to the Depositary at the address listed on
the back cover of this document. If your broker holds your Shares for you in
"street name" you must instruct your broker to tender your Shares on your
behalf. In any case, the Depositary must receive all required documents prior
to 12:00 midnight, New York City time, on Monday, September 18, 2000, which is
the expiration date of the Offer, unless Picard Acquisition Corp. decides to
extend the Offer. If you cannot comply with any of these procedures, you still
may be able to tender your Shares by using the guaranteed delivery procedures
described in this document. See Section 3 of this document for more
information on the procedures for tendering your Shares.
- UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
The tender of your Shares may be withdrawn at any time prior to the expiration
date of the Offer. There will be no withdrawal rights during any subsequent
offering period. See Section 4 of this document for more information.
- HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
You (or your broker or bank, if your Shares were held in "street name") must
notify the Depositary at the address and telephone number listed on the back
cover of this document, and the notice must include the name of the
stockholder that tendered the Shares, the number of Shares to be withdrawn
ii
<PAGE>
and the name in which the tendered Shares are registered. For complete
information about the procedures for withdrawing your previously tendered
Shares, see Section 4 of this document.
- WHAT DOES MY BOARD OF DIRECTORS THINK OF THE OFFER?
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE ADVISABLE AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS,
AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
- IF PICARD ACQUISITION CORP. CONSUMMATES THE TENDER OFFER, WHAT ARE PICARD
ACQUISITION CORP.'S PLANS WITH RESPECT TO ALL THE SHARES THAT ARE NOT TENDERED
IN THE OFFER?
If Picard Acquisition Corp. purchases at least a majority of the Shares
pursuant to the Offer, it intends to cause a merger to occur between Picard
Acquisition Corp. and PathoGenesis Corporation in which stockholders who have
not previously tendered their Shares will also receive $38.50 in cash subject
to their right to dissent and demand the fair cash value of their Shares. If
Picard Acquisition Corp. does not receive at least a majority of the Shares,
it does not presently intend to acquire any Shares.
- IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
The purchase of the Shares by Picard Acquisition Corp. will reduce the number
of the Shares that might otherwise trade publicly and may reduce the number of
holders of the Shares, which could adversely affect the liquidity and market
value of the remaining Shares held by the public. The Shares may also cease to
be quoted on the Nasdaq Stock Market. Also, PathoGenesis Corporation may cease
making filings with the SEC or may otherwise cease being required to comply
with the SEC's rules relating to publicly held companies. See Section 7 of
this document for complete information about the effect of the Offer on your
Shares.
- WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On June 2, 2000, the last trading day prior to the public announcement by the
Company that it had engaged a financial advisor and other advisors to explore
strategic options for enhancing shareholder value, the reported closing price
of the Shares on the Nasdaq Stock Market was $18.125 per Share. On August 11,
2000, the last full trading day prior to the public announcement of the Offer,
the reported closing price of the Shares was $32.750 per Share. On August 18,
2000, the last full trading day for which prices were available before the
commencement of the Offer, the reported closing price of the Shares was
$37.938 per Share. You should obtain a recent market quotation for your Shares
in deciding whether to tender them. See Section 6 of this document for recent
high and low closing bid prices for the Shares.
- WHO IS RESPONSIBLE FOR THE PAYMENT OF TAXES AND BROKERAGE FEES?
Stockholders of record who tender Shares directly will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the purchase of the Shares by
Picard Acquisition Corp. pursuant to the Offer. However, any tendering
stockholder or other payee who fails to complete and sign the Substitute Form
W-9 included in the Letter of Transmittal may be subject to backup federal
income tax withholding of 31% of the gross proceeds payable to such
stockholder or other payee pursuant to the Offer. See Section 3. Stockholders
who hold their Shares through a broker, bank or other nominee should check
with such institution as to whether they charge any service fees.
- WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
If you have any questions you can call the Dealer Manager, Donaldson,
Lufkin & Jenrette Securities Corporation at (310) 282-7765 (call collect), or
the Information Agent, MacKenzie Partners, Inc. at (800) 322-2885 (toll free).
See the back cover of this Offer to Purchase.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
SUMMARY TERM SHEET................................................... i
INTRODUCTION......................................................... 1
1. Terms of the Offer.......................................... 2
2. Acceptance for Payment and Payment for the Shares........... 5
3. Procedure for Tendering Shares.............................. 6
4. Rights of Withdrawal........................................ 9
5. Certain Federal Income Tax Consequences of the Offer........ 10
6. Price Range of the Shares................................... 10
7. Effect of the Offer on the Market for the Shares; Stock
Quotation, Margin Regulations and Exchange Act
Registration................................................ 10
8. Certain Information Concerning the Company.................. 12
9. Certain Information Concerning Parent and Merger Sub........ 14
10. Background of the Offer; Contacts with the Company.......... 15
11. Purpose of the Offer; Plans for the Company; the Merger..... 24
12. Source and Amount of Funds.................................. 35
13. Certain Conditions of the Offer............................. 35
14. Dividends and Distributions................................. 36
15. Certain Legal Matters....................................... 36
16. Fees and Expenses........................................... 38
17. Miscellaneous............................................... 39
Schedule A Information Concerning the Directors and Executive
Officers of
Parent and Merger Sub............................................
A-1
</TABLE>
iv
<PAGE>
TO THE HOLDERS OF SHARES OF
PATHOGENESIS CORPORATION:
INTRODUCTION
Picard Acquisition Corp., a Delaware corporation ("Merger Sub") and a wholly
owned subsidiary of Chiron Corporation, a Delaware corporation ("Parent"),
hereby offers to purchase all of the outstanding shares of Common Stock, par
value $0.001 per share (the "Common Stock"), of PathoGenesis Corporation, a
Delaware corporation (the "Company"), together with the associated rights to
purchase Series A Junior Preferred Stock (the "Rights") issued pursuant to the
Rights Agreement, dated as of June 26, 1997, as amended (the "Rights
Agreement"), between the Company and Harris Trust and Savings Bank (the Common
Stock and the Rights together being referred to herein as the "Shares"), at
$38.50 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). Tendering
stockholders who are record holders of their Shares and tender directly to
Harris Trust Company of New York (the "Depositary") will not be obligated to pay
brokerage fees or commissions or, subject to Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of the Shares by Merger Sub
pursuant to the Offer. Stockholders who hold their Shares through a broker or
bank should consult such institution as to whether it charges any service fees.
Merger Sub will pay all charges and expenses of Donaldson, Lufkin & Jenrette
Securities Corporation, as dealer manager ("DLJ" or the "Dealer Manager"), the
Depositary and MacKenzie Partners, Inc. (the "Information Agent"). Unless the
context requires otherwise, all references to Shares herein shall include the
associated Rights, and all references to the Rights shall include all benefits
that may inure to the holders of the Rights pursuant to the Rights Agreement.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of August 13, 2000, among Parent, Merger Sub and
the Company, pursuant to which, upon the terms and subject to the conditions of
the Merger Agreement, at the Effective Time (as defined below) in accordance
with the Delaware General Corporation Law (the "DGCL"), Merger Sub shall be
merged with and into the Company and the separate existence of Merger Sub shall
thereupon cease (the "Merger"). The Company shall continue its existence under
the laws of the State of Delaware. As a result of the Merger, the Company
(sometimes referred to herein as the "Surviving Corporation") will become a
wholly owned subsidiary of Parent.
The Merger shall become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware or at such subsequent time
or date (not later than 90 days after the date of filing) as Parent and the
Company shall agree and specify in the certificate of merger. The time at which
the Merger becomes effective is referred to in this document as the "Effective
Time". In the Merger, each issued and outstanding Share (other than Shares, if
any, that are held by any stockholder who is entitled to demand and properly
demands appraisal of such shares pursuant to and who complies in all respects
with, the provisions of Section 262 of the DGCL ("Dissenting Stockholders") and
Shares that are owned by the Company (as treasury stock), Parent or any
subsidiary of Parent (including Merger Sub) immediately prior to the Effective
Time) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive from the Surviving
Corporation in cash, without interest, the Offer Price.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE ADVISABLE AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS,
AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
1
<PAGE>
GOLDMAN, SACHS & CO. ("GOLDMAN SACHS"), FINANCIAL ADVISOR TO THE COMPANY,
HAS DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY ITS OPINION, DATED
AUGUST 13, 2000 (THE "FINANCIAL ADVISOR OPINION"), TO THE EFFECT THAT, AS OF
SUCH DATE, AND BASED ON AND SUBJECT TO THE MATTERS SET FORTH THEREIN, THE $38.50
PER SHARE IN CASH TO BE RECEIVED BY HOLDERS OF THE SHARES IN THE OFFER AND THE
MERGER IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH HOLDERS. A COPY OF THE
FINANCIAL ADVISOR OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN IS ATTACHED AS
AN EXHIBIT TO THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE
14D-9 (THE "SCHEDULE 14D-9"), WHICH HAS BEEN FILED BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") IN CONNECTION WITH THE OFFER AND
WHICH IS BEING MAILED TO STOCKHOLDERS HEREWITH. STOCKHOLDERS ARE URGED TO, AND
SHOULD, READ THE FINANCIAL ADVISOR OPINION CAREFULLY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, WHEN ADDED TOGETHER WITH ALL OTHER SHARES OWNED BY PARENT AND ITS
SUBSIDIARIES, WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES
(DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS AND OTHER
RIGHTS (OTHER THAN THE RIGHTS, IF SUCH RIGHTS ARE NOT AT THAT TIME EXERCISABLE)
TO ACQUIRE SHARES OUTSTANDING ON THE DATE OF PURCHASE) (THE "MINIMUM
CONDITION"), (II) ANY REQUISITE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), APPLICABLE TO
THE PURCHASE OF SHARES PURSUANT TO THE OFFER OR THE MERGER DESCRIBED HEREIN
HAVING BEEN TERMINATED OR HAVING EXPIRED (THE "HSR CONDITION"), AND (III) THE
APPLICABLE WAITING PERIODS UNDER FOREIGN ANTITRUST AND COMPETITION LAWS HAVING
BEEN TERMINATED OR HAVING EXPIRED, EXCEPT FOR SUCH WAITING PERIODS THE FAILURE
OF WHICH TO TERMINATE OR EXPIRE IS NOT REASONABLY LIKELY TO HAVE A PARENT
MATERIAL ADVERSE EFFECT OR A COMPANY MATERIAL ADVERSE EFFECT (AS SUCH TERMS ARE
DEFINED IN SECTION 11) OR TO PROVIDE A REASONABLE BASIS TO CONCLUDE THAT THE
COMPANY, MERGER SUB OR PARENT OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
AGENTS, ADVISORS OR OTHER REPRESENTATIVES WOULD BE SUBJECT TO THE RISK OF
CRIMINAL LIABILITY (THE "FOREIGN ANTITRUST CONDITION"). THE OFFER IS ALSO
SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION
13. THE MINIMUM CONDITION, THE HSR CONDITION, THE FOREIGN ANTITRUST CONDITION
AND THE OTHER CONDITIONS TO THE OFFER SET FORTH IN SECTION 13 ARE COLLECTIVELY
REFERRED TO AS THE "OFFER CONDITIONS."
ACCORDING TO THE COMPANY, AS OF AUGUST 18, 2000 THERE WERE 16,627,661 SHARES
OUTSTANDING AND THERE WERE 2,295,438 SHARES RESERVED FOR ISSUANCE UNDER
THEN-EXERCISABLE STOCK OPTIONS PURSUANT TO THE COMPANY'S STOCK OPTION AND
INCENTIVE PLANS AND 3,375 SHARES RESERVED FOR ISSUANCE UPON THE EXERCISE OF
WARRANTS. BASED ON SUCH INFORMATION, THE MINIMUM CONDITION WOULD BE SATISFIED IF
9,463,238 SHARES WERE VALIDLY TENDERED AND NOT WITHDRAWN.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND THEY SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including the terms and conditions set forth in Section 13 and, if the Offer is
extended or amended, the terms and conditions of such extension or amendment),
Merger Sub will accept for payment, and pay for, all Shares validly tendered on
or prior to the Expiration Date (as defined herein) and not withdrawn as
permitted by Section 4. The term "Expiration Date" means 12:00 Midnight, New
York City time, on Monday, September 18, 2000, unless and until Merger Sub shall
have extended the period for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date on which the Offer, as so
extended by Merger Sub, shall expire. The period from the date hereof until
12:00 Midnight, New York City time, on Monday, September 18, 2000, as such
period may be extended, is referred to as the "Offering Period."
2
<PAGE>
The Rights presently are transferable only with the certificates for the
Shares and the surrender for transfer of certificates for any Shares will also
constitute the transfer of the Rights associated with the Shares represented by
such certificates. Pursuant to the terms of the Merger Agreement, the Company's
Board of Directors amended the Rights Agreement to provide that, for so long as
the Merger Agreement is in full force and effect, (i) none of Parent and its
subsidiaries (including Merger Sub) shall become an "Acquiring Person" (as
defined in the Rights Agreement) and no "Stock Acquisition Date" (as defined in
the Rights Agreement) shall occur as a result of the execution, delivery and
performance of the Merger Agreement and the consummation of the Offer or the
Merger, (ii) no "Distribution Date" (as defined in the Rights Agreement) shall
occur as a result of the announcement of or the execution of the Merger
Agreement or any of the transactions contemplated thereby and (iii) each of
Parent and Merger Sub will not be an "Acquiring Person" as a result of the
transactions contemplated by the Merger Agreement.
Subject to the terms of the Merger Agreement (see Section 11) and applicable
rules and regulations of the SEC, Merger Sub expressly reserves the right, in
its sole discretion, at any time or from time to time, to extend the Offering
Period by giving oral or written notice of such extension to the Depositary.
During any such extension of the Offering Period, all Shares previously tendered
and not withdrawn will remain subject to the Offer, subject to the right of a
tendering stockholder to withdraw such stockholder's Shares. See Section 4.
Notwithstanding any other term of the Offer or the Merger Agreement, Merger
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Merger Sub's obligation to pay for or return tendered Shares
promptly after the termination or withdrawal of the Offer), to pay for any
Shares tendered pursuant to the Offer, unless the Minimum Condition, the HSR
Condition and the Foreign Antitrust Condition have been satisfied. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, Merger Sub
shall not be required to accept for payment or, subject as aforesaid, to pay for
any Shares not theretofore accepted for payment or paid for, if, immediately
prior to the acceptance for payment of shares of Company Common Stock pursuant
to the Offer, any of certain specified conditions set forth in Section 13
exists, which, in the reasonable judgment of Merger Sub or Parent, in any such
case, and regardless of the circumstances giving rise to any such condition
(including any action or inaction by Parent or any of its affiliates), makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payment. Pursuant to the Merger Agreement, Merger Sub reserves the right to
waive any condition to the Offer or modify the terms of the offer, except that,
without the written consent of the Company, Merger Sub will not (i) reduce the
number of Shares subject to the Offer, (ii) reduce the price per Share to be
paid pursuant to the Offer, (iii) change or waive the Minimum Condition, add to
the Offer Conditions or modify any Offer Condition in any manner adverse to the
holders of Shares, (iv) except as described below, extend the Offer, (v) change
the form of consideration payable in the Offer or (vi) otherwise amend the Offer
in any manner adverse to the holders of Shares.
Notwithstanding the foregoing, Merger Sub may (but shall not be obligated
to), without the consent of the Company, (i) extend the Offer for one or more
periods of time (which, without the written consent of the Company, shall not
exceed ten days per extension) that Merger Sub reasonably believes are necessary
to cause the Offer Conditions to be satisfied, if at the scheduled expiration
date of the Offer any of the Offer Conditions are not satisfied, until such time
as such Offer Conditions are satisfied or waived, (ii) extend the Offer for any
period required by any rule, regulation, interpretation or position of the SEC
or the staff thereof applicable to the Offer, or (iii) extend the Offer on one
or more occasions for an aggregate period of not more than ten business days if
the Minimum Condition has been satisfied but fewer than 90% of the Shares have
been validly tendered and not withdrawn. Pursuant to the Merger Agreement, if
all of the Offer Conditions are not satisfied on any scheduled expiration date
of the Offer then Merger Sub will from time to time and on each such occurrence
3
<PAGE>
extend the Offer for a period of time (which, without the written consent of the
Company, shall not exceed ten days per extension) that Merger Sub reasonably
believes is necessary to cause the Offer Conditions to be satisfied until such
conditions are satisfied or waived, PROVIDED that, so long as Parent and Merger
Sub shall have complied with their obligations under the Merger Agreement,
Merger Sub shall not be required to extend the Offer beyond March 14, 2001 (the
"Drop Dead Date"), as may be extended pursuant to the Merger Agreement.
Upon the terms and subject to the conditions of the Offer (including the
Offer Conditions and, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Merger Sub will accept for
payment, and will purchase, all Shares validly tendered and not withdrawn
promptly after the expiration of the Offering Period. If there is a Subsequent
Offering Period, all Shares tendered during the Subsequent Offering Period will
be immediately accepted for payment and purchased as they are tendered.
Any extension, delay, termination or amendment of the Offer will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(d), 14d-6(c) and 14e-1 under
the Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change) and without limiting the manner in which Merger Sub
may choose to make any public announcement, Merger Sub shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release or other public announcement.
Merger Sub may (with the written consent of the Company) elect to provide a
subsequent offering period of three to 20 business days (the "Subsequent
Offering Period") following its acceptance for payment of Shares in the Offer.
For purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time. A Subsequent Offering Period, if one
is provided, is not an extension of the Offering Period. A Subsequent Offering
Period would be an additional period of time, following the expiration of the
Offering Period, in which stockholders may tender Shares not tendered during the
Offering Period. Any decision to provide a Subsequent Offering Period will be
announced no later than 9:00 a.m., New York City time, on the next business day
after the expiration of the Offering Period. Merger Sub will announce the
approximate number and percentage of the Shares deposited as of the expiration
of the Offering Period no later than 9:00 a.m., New York City time, on the next
business day following the expiration of the Offering Period, and such
securities will be immediately accepted and promptly purchased. All Offer
Conditions must be satisfied or waived prior to the commencement of any
Subsequent Offering Period.
Merger Sub confirms that if it makes a material change in the terms of the
Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, Merger Sub will extend the Offer to the extent required
by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act.
If, during the Offering Period, Merger Sub, with the written consent of the
Company, shall decrease the number of Shares sought pursuant to the Offer or the
Common Stock Price, such decrease shall be applicable to all holders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any decrease is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the tenth business day
from and including the date that such notice is first so published, sent or
given, the Offer will be extended until the expiration of such ten-business day
period.
In the event that Merger Sub waives any condition set forth in Section 13,
the SEC may, if the waiver is deemed to constitute a material change to the
information previously provided to the
4
<PAGE>
stockholders, require that the Offer remain open for an additional period of
time and/or that Merger Sub disseminate information concerning such waiver.
The Company has provided Merger Sub with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of the Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by Merger Sub to record holders of the
Shares and will be furnished by Merger Sub to brokers, dealers, banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of the Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR THE SHARES.
Upon the terms and subject to the conditions of the Offer (including the
Offer Conditions and, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Merger Sub will accept for
payment, and will pay for, all Shares validly tendered and not withdrawn
promptly after the expiration of the Offering Period. If there is a Subsequent
Offering Period, all Shares tendered during the Subsequent Offering Period will
be immediately accepted for payment and paid for as they are tendered.
For purposes of the Offer, Merger Sub will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when Merger Sub
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. Payment for any Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering stockholders for
the purpose of receiving payments from Merger Sub and transmitting such payments
to the tendering stockholders. In all cases, payment for any Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares (or a timely Book-Entry
Confirmation (as defined below) with respect thereto), (ii) the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal. Accordingly, payment may be
made to tendering stockholders at different times if delivery of the
certificates and other required documents occur at different times. The price
paid to any holder of the Shares pursuant to the Offer will be the highest price
per Shares paid to any other holder of Shares pursuant to the Offer.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR THE SHARES BE
PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased Shares will be
returned, without expense to the tendering stockholder, or such other person as
the tendering stockholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration or termination of the Offer. In
the case of any Shares delivered by book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility (as defined below) pursuant to the
procedures set forth in Section 3, such Shares will be credited to such account
maintained at the Book-Entry Transfer Facility as the tendering stockholder
shall specify in the Letter of Transmittal, as promptly as practicable following
the expiration or termination of the Offer. If no such instructions are given
with respect to any Shares delivered by book-entry transfer, any such Shares not
tendered or not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility designated in the Letter of Transmittal as the
account from which such Shares were delivered.
Merger Sub reserves the right to assign to any other wholly owned
subsidiaries of Parent the right to purchase all or any portion of the Shares
tendered pursuant to the Offer, but any such assignment
5
<PAGE>
will not relieve Merger Sub of its obligations under the Offer and will in no
way prejudice the rights of tendering stockholders to receive payment for any
Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. To tender Shares pursuant to the Offer, either (i) a Letter
of Transmittal (or a manually signed facsimile thereof) properly completed and
duly executed in accordance with the instructions of the Letter of Transmittal,
together with any required signature guarantees and certificates for the Shares
to be tendered, or, in the case of a book-entry transfer, an Agent's Message,
and any other required documents must be received by the Depositary prior to the
Expiration Date at one of its addresses set forth on the back cover of this
Offer to Purchase or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below.
BOOK-ENTRY DELIVERY. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility")
for purposes of the Offer within two business days after the date of this Offer
to Purchase. Any financial institution that is a participant in the Book-Entry
Transfer Facility's systems may make book-entry transfer of the Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of the Shares may be
effected through book-entry transfer, either the Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in lieu
of the Letter of Transmittal, and any other required documents, must, in any
case, be transmitted to and received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase by the Expiration Date, or
the tendering stockholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of the Shares into
the Depositary's account at the Book-Entry Transfer Facility as described above
is referred to herein as a "Book-Entry Confirmation." The term "Agent's Message"
means a message transmitted by the Book-Entry Transfer Facility to, and received
by, the Depositary and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the participant in the Book-Entry Transfer Facility tendering the Shares
which are the subject of such Book-Entry Confirmation, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Merger Sub may enforce such agreement against the participant. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF ANY SHARES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS
BY MAIL, IT IS REQUESTED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a financial institution (including
most commercial banks, savings and loan associations and brokerage houses) that
is a participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). Signatures on a Letter of
Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed by
the registered holder (which term, for purposes of this section, includes any
participant in the Book-Entry Transfer Facility's systems whose name appears on
a security position listing as the owner of the Shares) of the Shares tendered
therewith and such registered holder has not completed the box entitled "Special
Payment Instructions"
6
<PAGE>
or the box entitled "Special Delivery Instructions" on the Letter of Transmittal
or (b) if such Shares are tendered for the account of an Eligible Institution.
See Instructions 1 and 5 of the Letter of Transmittal. If the certificates for
any Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for any
Shares not tendered or not accepted for payment are to be returned to a person
other than the registered holder of the certificates surrendered, then the
tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holder or holders appear on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above. See Instructions 1
and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. A stockholder who desires to tender Shares pursuant to
the Offer and whose certificates for any Shares are not immediately available or
who cannot comply with the procedure for book-entry transfer on a timely basis,
or who cannot deliver all required documents to the Depositary prior to the
Expiration Date may tender such Shares by following all of the procedures set
forth below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Merger Sub, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message in
lieu of the Letter of Transmittal), and any other required documents, are
received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, telex, facsimile transmission, mail or a nationally
recognized overnight courier to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery.
OTHER REQUIREMENTS. Notwithstanding any other provision of this document,
payment for the Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of the instruments and
documents referred to in Section 2.
TENDER CONSTITUTES AN AGREEMENT. The valid tender of any Shares pursuant to
one of the procedures described above will constitute a binding agreement
between the tendering stockholder and Merger Sub upon the terms and subject to
the conditions of the Offer.
APPOINTMENT. By executing a Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of Merger Sub as such
stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by Merger Sub and with respect to any and
all non-cash dividends, distributions, rights, and other shares of Common Stock
or other securities issued or issuable in respect of such Shares on or after
August 13, 2000 (collectively, "Distributions"). All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Merger Sub deposits the
payment for such Shares with the Depositary. All such powers of attorney and
proxies will be irrevocable and will be deemed granted in consideration of the
acceptance for payment by Merger Sub of the Shares tendered in accordance with
the terms of the Offer. Upon the effectiveness of such appointment, all prior
powers of attorney, proxies and consents given by such stockholder will be
revoked, and no subsequent powers of attorney, proxies and consents may be given
7
<PAGE>
(and, if given, will not be deemed effective). Merger Sub's designees will be
empowered to exercise all voting and other rights of such stockholder with
respect to such Shares (and any and all Distributions) as they, in their sole
discretion, may deem proper at any annual, special or adjourned meeting of the
stockholders of the Company, actions by written consent in lieu of any such
meeting or otherwise. Merger Sub reserves the right to require that, in order
for any Shares to be deemed validly tendered, immediately upon Merger Sub's
depositing the payment for such Shares with the Depositary, Merger Sub must be
able to exercise full voting, consent and other rights with respect to such
Shares (and any and all Distributions).
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of the
Shares will be determined by Merger Sub in its sole discretion, which
determination will be final and binding. Merger Sub reserves the absolute right
to reject any and all tenders determined by it not to be in proper form or the
acceptance for payment of or payment for which may, in the opinion of Merger
Sub's counsel, be unlawful. Merger Sub also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
stockholder whether or not similar defects or irregularities are waived in the
case of other stockholders. No tender of any Shares will be deemed to have been
validly made until all defects and irregularities relating thereto have been
cured or waived. None of Parent, Merger Sub, the Depositary, the Information
Agent, the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Merger Sub's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and
Instructions thereto) will be final and binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders other than non-corporate foreign stockholders surrendering Shares
pursuant to the Offer should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to Merger Sub
and the Depositary). Certain stockholders (including, among others, all
corporations and certain foreign individuals and entities) are not subject to
backup withholding. Non-corporate foreign stockholders should complete and sign
the main signature form and a Form W-8, Certificate of Foreign Status, a copy of
which may be obtained from the Depositary, in order to avoid backup withholding.
See Instruction 10 to the Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL.
Tenders of the Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
expiration of the Offering Period and, unless theretofore accepted for payment
by Merger Sub pursuant to the Offer, may also be withdrawn at any time after
October 20, 2000. There will be no withdrawal rights during any Subsequent
Offering Period for any Shares tendered during any Subsequent Offering Period.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of the Shares to be withdrawn and the
names
8
<PAGE>
in which the certificate(s) evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry tender as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares. If certificates for the Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, the
name of the registered holder and the serial numbers of the particular
certificates evidencing the Shares to be withdrawn must also be furnished to the
Depositary as aforesaid prior to the physical release of such certificates. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by Merger Sub, in its sole discretion, which
determination shall be final and binding. None of Parent, Merger Sub, the Dealer
Manager, the Depositary, the Information Agent, or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification. Withdrawals of tendered Shares may not be rescinded, and any
Shares properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by following
one of the procedures described in Section 3 at any time prior to the Expiration
Date.
If Merger Sub extends the Offer, is delayed in its acceptance for payment of
any Shares, or is unable to accept for payment any Shares pursuant to the Offer,
for any reason, then, without prejudice to Merger Sub's rights under this Offer,
the Depositary may, nevertheless, on behalf of Merger Sub, retain tendered
Shares, but such Shares may be withdrawn to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4.
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<PAGE>
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER.
Sales of the Shares pursuant to the Offer and the exchange of the Shares for
cash pursuant to the Merger will be taxable transactions for Federal income tax
purposes and may also be taxable under applicable state, local and other tax
laws. For Federal income tax purposes, a stockholder whose Shares are purchased
pursuant to the Offer or who receives cash as a result of the Merger will
generally recognize gain or loss equal to the difference between the adjusted
basis of the Shares sold or exchanged and the amount of cash received therefor.
Any such recognized gain or loss will be capital gain or loss if the Shares are
held as capital assets by the stockholder, and will be long term capital gain or
loss if the shareholder has held the Shares for more than one year. Long-term
capital gain of a non-corporate stockholder is generally subject to a maximum
U.S. Federal income tax rate of 20%.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS
SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF STOCK
OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED STATES
PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
6. PRICE RANGE OF THE SHARES.
The Shares are listed on the Nasdaq Stock Market under the symbol "PGNS."
The following table sets forth, for the calendar quarters indicated, the high
and low closing prices for the Shares on the Nasdaq Stock Market based on public
sources:
<TABLE>
<CAPTION>
CLOSING COMPOSITE
PRICE
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
CALENDAR YEAR
1998:
First Quarter........................................... $39.938 $33.125
Second Quarter.......................................... 39.750 27.000
Third Quarter........................................... 36.250 22.500
Fourth Quarter.......................................... 59.375 32.125
1999:
First Quarter........................................... 56.875 10.750
Second Quarter.......................................... 15.375 11.875
Third Quarter........................................... 20.000 13.125
Fourth Quarter.......................................... 21.438 14.250
2000:
First Quarter........................................... 32.750 20.000
Second Quarter.......................................... 26.000 14.750
Third Quarter (through August 18, 2000)................. 38.000 24.625
</TABLE>
On June 2, 2000, the last full trading day prior to the public announcement
by the Company that it had engaged a financial advisor and other advisors to
explore strategic options for enhancing shareholder value, the reported closing
price of the Shares was $18.125 per Share. On August 11, 2000, the last full
trading day prior to the public announcement of the terms of the Offer and the
Merger, the reported closing price of the Shares was $32.750 per Share. On
August 18, 2000, the last full trading day prior to commencement of the Offer,
the reported closing price of the Shares was $37.938 per Share. The Company has
never paid any dividends. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION, MARGIN
REGULATIONS AND EXCHANGE ACT REGISTRATION.
10
<PAGE>
MARKET FOR THE SHARES. The purchase of any Shares by Merger Sub pursuant to
the Offer will reduce the number of the Shares that might otherwise trade
publicly and may reduce the number of holders of the Shares, which could
adversely affect the liquidity and market value of the remaining Shares held by
the public.
STOCK QUOTATION. The Shares are quoted on the Nasdaq Stock Market.
According to published guidelines of the Nasdaq Stock Market, the Shares would
no longer be quoted on the Nasdaq National Market if, among other things, the
number of publicly held Shares (excluding Shares held directly or indirectly by
officers, directors and any person who is a beneficial owner of more than 10% of
the Shares) were less than 500,000, the aggregate market value of publicly held
Shares were less than $1,000,000 or there were fewer than 300 holders of the
Shares in round lots. If these standards were not met, quotations might continue
to be published in the over-the-counter "additional list" or one of the "local
lists" unless, as set forth in published guidelines of the Nasdaq Stock Market,
the number of publicly held Shares was less than 100,000, or there were fewer
than 300 holders in total. According to information furnished to Parent by the
Company, as of the close of business on August 18, 2000, there were 371 holders
of record of shares of Common Stock not including beneficial holders of Common
Stock held in street name, and there were 16,627,661 Shares outstanding. If the
Common Stock were to cease to be quoted on the Stock National Market, the
associated Rights would be delisted as well.
If the Shares were to cease to be quoted on the Nasdaq Stock Market, the
market for the Shares could be adversely affected. It is possible that the
Shares would be traded or quoted on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by such
exchanges, or other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of the Shares remaining at such
time the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
MARGIN REGULATIONS. The Shares are presently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve Board (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such Shares. Depending upon factors
similar to those described above regarding listing and market quotations, the
Shares might no longer constitute "margin securities" for the purposes of the
Federal Reserve Board's margin regulations in which event the Shares would be
ineligible as collateral for margin loans made by brokers.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated by the Company upon
application to the SEC if the outstanding Shares are not listed on a national
securities exchange and if there are fewer than 300 holders of record of such
shares. Termination of registration of the Shares under the Exchange Act would
reduce the information required to be furnished by the Company to its
stockholders and to the SEC and would make certain provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b) and the
requirement to furnish a proxy statement in connection with stockholders'
meetings pursuant to Section 14(a) and the related requirement to furnish an
annual report to stockholders, no longer applicable with respect to the Shares.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 under the Securities Act of 1933, as amended, may be impaired or
eliminated. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be eligible for listing on the Nasdaq
Stock Market or for continued inclusion on the Federal Reserve Board's list of
"margin securities." Merger Sub intends to seek to cause the Company to apply
for termination of registration of the Shares as soon as possible after
consummation of the Offer if the requirements for termination of registration
are met. If registration of the Shares is not terminated
11
<PAGE>
prior to the Merger, then the registration of such Shares under the Exchange Act
and the listing of such Shares on the Nasdaq Stock Market will be terminated
following the completion of the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company was incorporated in 1991 as a Delaware corporation. Its
executive offices are located at 201 Elliott Avenue West, Seattle, Washington
98119. Its telephone number at such location is (206) 467-8100.
The Company develops and markets drugs to treat infectious
diseases--particularly serious lung infections--where there is a significant
need for improved therapy. The Company's drug TOBI-Registered Trademark-
(tobramycin solution for inhalation) was initially tested and approved for
cystic fibrosis (CF) patients with Pseudomonas aeruginosa lung infections. TOBI
has been on the market in the U.S. since January 1998. Sales are growing as
market penetration of the drug increases in the U.S. and other countries where
TOBI has been approved for sale. According to industry data, pseudomonal
bacteria infect the lungs of about 60% of the 70,000 people worldwide with CF.
Set forth below is certain summary consolidated financial information for
each of the Company's last three fiscal years for the period ended 1999 as
contained in the Company's Annual Report on Form 10-K (the "Form 10-K") as well
as unaudited financial information for the period ended June 30, 2000, as
contained in the Company's Quarterly Report on Form 10-Q. More comprehensive
financial information is included in such reports (including management's
discussion and analysis of financial condition and results of operation) and
other documents filed by the Company with the SEC, and the following summary is
qualified in its entirety by reference to such reports and other documents and
all of the financial information and notes contained therein. Copies of such
reports and other documents may be examined at or obtained from the SEC in the
manner set forth below.
PATHOGENESIS CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ------------------------------
JUNE 30, 2000 1999 1998 1997
---------------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues........................................ $39,937 $60,844 $61,052 $ 442
Income before income taxes (loss)............... (1,111) (8,195) 1,883 (33,038)
Net income (loss)............................... (1,111) (8,195) 1,883 (33,038)
Net income per common share:
Basic......................................... (0.07) (0.50) (0.12) (2.10)
Diluted....................................... (0.07) (0.50) (0.11) (2.10)
BALANCE SHEET DATA (AT PERIOD END):
Current assets.................................. 63,874 68,211 79,784 87,190
Total assets.................................... 97,830 100,837 112,766 97,596
Current liabilities............................. 8,410 14,422 14,631 8,107
Total stockholders' equity...................... 86,863 86,414 93,410 89,489
</TABLE>
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the SEC and other public sources
and is qualified in its entirety by reference thereto. Although Merger Sub,
Parent and the Dealer Manager have no knowledge that would indicate that any
statements contained herein based on such documents and records are untrue,
Parent, Merger Sub and the Dealer Manager cannot take responsibility for the
accuracy or completeness of the information contained in such documents and
records, or for any failure by the Company to disclose events which
12
<PAGE>
may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent, Merger Sub or the Dealer Manager.
OTHER FINANCIAL INFORMATION. During the course of the discussions and
information exchange between Parent and the Company that led to the execution of
the Merger Agreement, the Company provided Parent and its financial advisors
with certain information about the Company and its financial performance which
is not publicly available. The information provided included financial
projections for the Company as an independent company for 2000, 2001, 2002,
2003, 2004 and 2005 (i.e., without regard to the impact on the Company of a
transaction with Parent and Merger Sub) and the Company's budget for 2000. The
financial projections included, among other things, the following forecasts of
the Company's total revenue, operating income (loss), net income and net cash
flow, respectively (in millions): $88, ($1.26), $.05 and ($6) in 2000; $123,
$20, $20 and $18 in 2001; $187, $44, $43 and $38 in 2002; $265, $71, $63 and $55
in 2003, $347, $99, $64 and $54 in 2004; and $593, $192, $121 and $96 in 2005.
The Company has advised Parent and Merger Sub that it does not as a matter
of course make public any projections as to future performance or earnings, and
the aforementioned projections are included in this Offer to Purchase solely
because such information was provided to Parent and its financial advisors
during the course of Parent's evaluation of the Company. Parent and Merger Sub
did not rely on such information in their valuation of the Company. The
projections were not prepared with a view to public disclosure or compliance
with the published guidelines of the Commission or the guidelines established by
the American Institute of Certified Public Accountants regarding projections or
forecasts. The Company has advised Parent and Merger Sub that (i) its internal
operating projections are, in general, prepared solely for internal use and
capital budgeting and other management decisions and are subjective in many
respects and thus susceptible to various interpretations and periodic revision
based on actual experience and business developments and (ii) the projections
were based on a number of internal assumptions with respect to industry
performance, general business, economic, market and financial conditions and
other matters that are inherently subject to significant economic and
competitive uncertainties, all of which are difficult to predict and some of
which are beyond the control of the Company. Accordingly, there can be no
assurance, and no representation or warranty is or has been made by any of the
Company, Parent, Merger Sub or any of their representatives, that actual results
will not vary materially from those described above. The foregoing information
is forward-looking in nature and inherently subject to significant uncertainties
and contingencies, including industry performance, general business and economic
conditions, currency exchange rates, customer requirements, competition, adverse
changes in applicable laws, regulations or rules governing environmental, tax
and accounting matters and other matters. The inclusion of this information
should not be regarded as an indication that the Company, Parent, Merger Sub or
anyone who received this information then considered, or now considers, it a
reliable prediction of future events, and this information should not be relied
on as such. None of the Company, Parent, Merger Sub or any of their respective
financial advisors or the Dealer Manager assumes any responsibility for the
validity, reasonableness, accuracy or completeness of the projections described
above. None of the Company, Parent, Merger Sub or any of their respective
financial advisors or the Dealer Manager intends to, and each of them disclaims
any obligation to, update, revise or correct such projections if they are or
become inaccurate (even in the short term). The projections have not been
adjusted to reflect the effects of the Offer or the Merger.
AVAILABLE INFORMATION. The Company is subject to the information and
reporting requirements of the Exchange Act and in accordance therewith is
obligated to file reports and other information with the SEC relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning the Company's directors and officers, their remuneration,
stock options granted to them, the principal holders of the Company's
securities, any material interests of such persons in transactions with the
Company and other matters is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the SEC. Such reports,
proxy statements and
13
<PAGE>
other information should be available for inspection at the public reference
room at the SEC's offices at 450 Fifth Street, N.W., Washington, D.C., 20549 and
also should be available for inspection and copying at the regional offices of
the SEC located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611. Copies may be obtained, by mail, upon payment of the SEC's
customary charges, by writing to its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and can be obtained electronically on
the SEC's Website at http://www.sec.gov.
9. CERTAIN INFORMATION CONCERNING PARENT AND MERGER SUB.
Parent is a Delaware corporation with principal executive offices located at
4560 Horton Street, Emeryville, California 94608. Its telephone number at that
address is (510) 655-8730. Parent was incorporated in California in 1981 and was
merged into a Delaware corporation in November 1986. Parent is a biotechnology
company that participates in three global healthcare businesses;
biopharmaceuticals, vaccines and blood testing. The Company is applying a broad
and integrated scientific approach to the development of innovative products for
preventing and treating cancer, infectious diseases and cardiovascular disease.
Merger Sub is a Delaware corporation and to date has engaged in no
activities other than those incident to its formation and the commencement of
the Offer.
FINANCIAL INFORMATION OF PARENT. Parent is subject to the information
reporting requirements of the Exchange Act and in accordance therewith Parent is
obligated to file reports and other information with the SEC relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning Parent's directors and officers, their remuneration, stock
options granted to them, the principal holders of Parent's securities, any
material interests of such persons in transactions with Parent and other matters
is required to be disclosed in proxy statements distributed to Parent's
stockholders and filed with the SEC. Such reports, proxy statements and other
information are available from the SEC at the addresses and through the website
described in Section 8.
OTHER INFORMATION REGARDING PARENT AND MERGER SUB. The name, citizenship,
business address, business telephone number, current principal occupation
(including the name, principal business and address of the organization in which
such occupation is conducted), and material positions held during the past five
years (including the name, principal business and address of the organization in
which such occupation was conducted), of each of the directors and executive
officers of Parent and Merger Sub are set forth in Schedule A to this Offer to
Purchase.
Neither Parent nor Merger Sub, nor, to the best of their knowledge, any of
the persons listed in Schedule A hereto nor any associate or majority-owned
subsidiary of any of the foregoing, beneficially owns or has a right to acquire
any Shares or has engaged in any transactions in the Shares in the past 60 days.
Neither Parent nor Merger Sub has purchased any Shares during the past two
years.
Except as set forth in Section 10, there have been no negotiations,
transactions or material contacts between Parent or Merger Sub, or, to the best
of their knowledge, any of the persons listed in Schedule A hereto, on the one
hand, and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors, or a sale or other transfer of a material amount of
assets. Except as described in Section 10, neither Parent nor Merger Sub, nor,
to the best of their knowledge, any of the persons listed in Schedule A hereto,
had any transaction with the Company or any of its executive officers, directors
or affiliates that would require disclosure under the rules and regulations of
the SEC applicable to the Offer.
14
<PAGE>
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
On December 15, 1999, Parent and the Company entered into the Collaboration
Agreement described under Item 11 below to collaborate on drug discovery and
development, focusing on development of new antibiotics.
In early January 2000, Wilbur H. Gantz, Chairman and Chief Executive Officer
of the Company, was invited to a breakfast meeting with Sean Lance, Chairman and
Chief Executive Officer of Parent. At that meeting, Mr. Lance discussed Parent's
desire to expand into the antibiotic field and suggested to Mr. Gantz that the
Company would be a good strategic fit with Parent and that Parent was interested
in pursuing a combination of the two companies. Mr. Gantz explained to
Mr. Lance that while the Company valued Parent as a collaboration partner and
recognized that Parent's size and financial strength could be important
components in growth, particularly in research, at that time he believed that
the Company was not interested in pursuing a combination of the two companies
and that the Company's pursuit of its business plan was the best way for the
Company to maximize value for the Company's shareholders.
On January 18, 2000, Mr. Lance sent the following letter to Mr. Gantz:
[PARENT LETTERHEAD]
SEAN P. LANCE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
JANUARY 18, 2000
VIA FEDERAL EXPRESS
Mr. Wilbur H. Gantz
Chairman and Chief Executive Officer
PathoGenesis Corporation
5215 Old Orchard Road, Suite 900
Skokie, Illinois 60077
Dear Bill:
Thank you for making the time to meet with me on Tuesday and sharing
your thoughts on PathoGenesis so candidly.
The mutual respect of our research teams paved the way for Chiron's view
that a combination between our companies would be very compelling. As
you know, Chiron has taken several measures to focus its business on
three strategically important therapeutic areas: infectious disease,
cancer and cardiology. We have reviewed the idea with our Executive
Committee and key Board Members and believe an acquisition of
PathoGenesis would play a significant role in building a leading
franchise in infectious disease with powerful revenue and earnings
growth, fueled by a focused, significant product pipeline and research
engine.
Over the last twelve months, we have substantially increased our
financial resources and continued to strengthen our profit position,
while putting our strategic vision into practice. As a result, an
acquisition by Chiron would provide PathoGenesis with significant
financial and strategic resources to enable you to expand and accelerate
your company's commercial and clinical output. Access to Chiron's strong
balance sheet and financing capabilities and the combined companies'
strategic resources would fuel further growth, making us together an
attractive strategic partner for future licensing and acquisition
activities.
Bill, we thought that it might be helpful to put our proposal in writing
so that you can give our general economic outline careful consideration.
15
<PAGE>
As discussed, we are prepared to offer a significant premium to the
current trading price of PathoGenesis's stock. We are open to discuss
the form of consideration for the purchase including cash, stock or any
combination.
I am sure you will agree acquisitions of this kind must be undertaken on
a merger basis. Your key employees are critical to ensuring the future
success of this transaction for Chiron, particularly in the R&D and
sales and marketing functions. We would like to work with you to develop
an employment plan for the members of both organizations including
location and function. In addition, we would be open to discuss a plan
for the issuance of stock options to PathoGenesis employees. We believe
the support of PathoGenesis's senior management will be critical to the
successful integration of our two companies. We would like to create
combined integration teams, with significant contributions from you and
your management team.
In order to allow you an opportunity to consider this proposal
carefully, we want to emphasize that this letter does not constitute a
formal offer or a binding obligation of either party. I would appreciate
very much that this letter and our discussions would remain in your
confidence.
Bill, as you know, we are very excited about the prospect of combining
our two companies. Together, we believe we can aggressively build upon
the impressive accomplishments of PathoGenesis and Chiron to become a
major player in the anti-infective market. This is an important
strategic opportunity that we should not pass up.
As I discussed, I would very much like to get together to present our
strategic vision for the next 5 to 7 years. We could meet sometime in
early February, perhaps the week of February 7th to 11th. As I will be
out of the office for the next two weeks, I would suggest Joyce
Lonergan, our Vice President of Corporate Development, call you to
arrange a meeting. I look forward to speaking with you soon.
Sincerely,
/s/ Sean P. Lance
Sean P. Lance
Chairman and Chief Executive Officer
16
<PAGE>
A regularly scheduled meeting of the Board of Directors of the Company was
held on January 26, 2000, at which representatives from Goldman, Sachs & Co.
("Goldman Sachs"), the Company's financial advisor, and Wachtell, Lipton, Rosen
& Katz, the Company's legal advisors, were present. At this meeting, Mr. Gantz
advised the Board of the verbal and written overtures from Parent. Management
and the representatives from Goldman Sachs discussed with the Board certain
publicly available information concerning Parent, as well as potential
strategies that could be followed if the Board determined to pursue a sale of
the Company or a strategic business combination involving the Company, and the
Company's legal advisors reviewed with the directors their fiduciary duties
under Delaware law. After a discussion of alternatives, the Board unanimously
authorized Mr. Gantz to send the following letter to Mr. Lance:
[PATHOGENESIS LETTERHEAD]
JANUARY 27, 2000
WILBUR H. GANTZ
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
VIA FEDERAL EXPRESS
Mr. Sean P. Lance
Chairman and Chief Executive Officer
Chiron Corporation
4560 Horton Street
Emeryville, CA 94608-2916
Dear Sean:
I have received your letter of January 18, 2000. As I told you when we
had breakfast on January 11, PathoGenesis Corporation is not interested
in pursuing a combination of our two companies. We are confident that
pursuit of our business plan as an independent company is the best way
for us to maximize value for our shareholders. We are beginning to see
the results of our significant investments, and we do not believe that
this is the best time, from the perspective of our shareholders, to
engage in a process to sell the company. If and when we reach any
different conclusion, we would expect to explore the full range of
options available to us before engaging in any transaction. I have
discussed this matter and your letter with my board of directors. The
board fully supports this conclusion.
Let me note, however, that we at PathoGenesis view Chiron as an
important business partner. We are excited about the collaboration
agreement that we reached just last month, and we view our collaboration
as an important part of our efforts to increase shareholder value. We
trust that you place similar importance on our collaboration, and that
our mutual efforts contemplated by that agreement will result in a
fruitful relationship. In that regard, let me remind you of your
confidentiality obligations under that agreement, and specifically of
your obligations, among other things, to use information learned in
connection with the collaboration solely in connection with the
collaboration.
Sean, we have carefully considered your letter. From PathoGenesis'
perspective, this is simply not the time to engage in the type of
discussions that you suggested. I trust that this will conclude the
matter.
Sincerely yours,
/s/ Wilbur H. Gantz
Wilbur H. Gantz
17
<PAGE>
On February 7, 2000, Mr. Lance sent the following letter to Mr. Gantz:
[PARENT LETTERHEAD]
SEAN P. LANCE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
FEBRUARY 7, 2000
VIA FEDERAL EXPRESS
Mr. Wilbur H. Gantz
Chairman and Chief Executive Officer
PathoGenesis Corporation
5215 Old Orchard Road, Suite 900
Skokie, Illinois 60077
Dear Bill:
Thank you for your letter of last week, I appreciate your candor in
communicating PathoGenesis' view on a potential acquisition by Chiron.
Given your confident outlook, we understand your feeling that
PathoGenesis has significant potential as an independent company.
Indeed, we share the view that this is an exciting inflection point for
you and your team. We continue to feel that there is a strong rationale
for expanding our strategic partnership, perhaps in some other capacity.
In 1998, we carefully reviewed our businesses and the industry
environment and developed a statement of strategic intent that is the
unifying principle of our future business plan. In summary, our core
business will be novel therapeutics, vaccines, and blood testing,
focusing on three therapeutic areas--infectious disease, oncology, and
interventional cardiology. We will execute our strategy through an
increased commercial orientation for our operating businesses, clinical
candidates and research programs. We will focus our resources in areas
where we can be most competitive and optimally leverage our scientific
and technological assets. As you can see, infectious disease is a
cornerstone of our strategy. We would very much like to share our vision
and walk you through the thought process that drives our belief that a
strategic relationship could be extremely profitable for both our
companies.
Specifically, we have taken many important steps towards building an
Infectious Disease franchise over the last two years, including:
- Signing of our valued research collaboration for anti-infectives;
- Expanding our small molecule and chemistry research expertise to
leverage combinatorial chemistry and high-throughput screening
technologies;
- Further developing and leveraging of Chiron's U.S. and European sales
and marketing infrastructure to market and deliver Proleukin (IL-2) for
HIV therapy; and
- In-licensing of the MIV-150 compound for the treatment of HIV.
We believe all of these events will contribute greatly to our success in
infectious disease. As you can see, our research collaboration is an
important part of this strategy and we will continue to make every
effort to ensure its success. However, we recognize an on-going need to
combine strengths with companies that have a common strategic mission,
complementary technologies and capabilities.
18
<PAGE>
Bill, we are enthusiastic about the prospects to build on our
collaboration and maximize the shareholder value of both companies
through additional strategic partnerships. I would like to build on the
discussion we started at breakfast on January 11 and share in greater
detail Chiron's strategic vision. I look forward to speaking with you
soon.
Yours sincerely,
/s/ Sean P. Lance
Sean P. Lance
Chairman and Chief Executive Officer
On February 14, 2000, a telephonic meeting of the Executive Committee of the
Board of Directors of the Company was held, at which representatives from
Goldman Sachs and the Company's legal advisors were present. Mr. Gantz advised
the committee about the February 7, 2000 letter from Parent. The Executive
Committee discussed the exchange of correspondence and the advantages and
disadvantages of the proposed dialog and authorized Mr. Gantz to send the
following letter to Mr. Lance:
[COMPANY LETTERHEAD]
Wilbur H. Gantz
Chairman and Chief Executive Officer
February 15, 2000
VIA FEDERAL EXPRESS
Mr. Sean P. Lance
Chairman and Chief Executive Officer
Chiron Corporation
4560 Horton Street
Emeryville, CA 94608-2916
Dear Sean:
I have received your letter of February 7 and am pleased that you
acknowledge our significant potential as an independent company.
As I have previously expressed to you in person and by letter,
PathoGenesis is not interested in pursuing a combination of our two
companies or any other type of relationship beyond the collaboration
that we put in place last December.
Again, I trust that this exchange will conclude this matter.
Sincerely yours,
/s/ Wilbur H. Gantz
Wilbur H. Gantz
Chairman and Chief Executive
Officer
19
<PAGE>
At a regularly scheduled meeting on June 1, 2000, the Board of Directors of
the Company discussed the possibility of the Company undertaking a strategic
review of various options for enhancing shareholder value. The Board considered
the volatility of the prices of the Shares and the then-current market price of
the Shares; the difficulty of being a stand-alone company with only a single
drug in the marketplace but various promising drug candidates in its pipeline;
the resources and critical mass necessary to fully develop the Company's drug
pipeline, as well as the risks inherent in such development; and the potential
benefits of a combination with another company, including increased size and
resources. In light of all these factors, the Board decided to engage Goldman
Sachs and other advisors to explore strategic options for enhancing shareholder
value. The Company announced this decision publicly on June 5, 2000.
On June 23, 2000, Mr. Lance sent the following letter to Mr. Gantz:
[PARENT LETTERHEAD]
SEAN P. LANCE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
JUNE 23, 2000
VIA FACSIMILE: (847) 583-5409
Mr. Wilbur H. Gantz
Chairman and Chief Executive Officer
PathoGenesis Corporation
5215 Old Orchard Road, Suite 900
Skokie, Illinois 60077
Dear Bill:
Since you and I last corresponded, Chiron has watched with interest
PathoGenesis' progress and accomplishments over the past few months. We
continue to believe that a transaction between PathoGenesis and Chiron
represents a significant opportunity for both of our companies as well
as our respective shareholders. We note your June 5th announcement
regarding the hiring of Goldman, Sachs & Co. to explore strategic
options. We believe that the value of PathoGenesis may diminish
dramatically with the uncertainty and disruption to the Company's
employees and operations associated with the process apparently
contemplated by your announcement. In order to preserve this value for
the benefit of our respective shareholders, we are prepared to move
immediately to a definitive transaction.
Specifically, we propose a strategic merger between Chiron and
PathoGenesis. In the merger, PathoGenesis' shares would be valued at
$38.50 per share, which represents an aggregate value of approximately
$700 million on a fully diluted basis, and a significant premium over
PathoGenesis' current share price. The merger consideration would be
payable in cash, common stock of Chiron, or a combination of the two, at
your option.
As I mentioned, we believe that it is in our respective best interests
to move quickly. We propose to immediately commence negotiations with a
view toward entering into a definitive agreement by Friday, June 30. In
order to meet this timeline, our outside counsel have prepared a draft
agreement which we believe you will find quite favorable from your
perspective and very conducive to a prompt conclusion of these matters.
As we have indicated in prior letters, a merger transaction of this
nature requires support and contributions from key employees of both
companies to ensure long-term success. We are prepared to work in
partnership with you and your management team to form an optimal
integration plan for the members of both organizations, including
location and function.
20
<PAGE>
Of course, this letter is an expression of interest and does not
constitute a binding obligation of either party. Any transaction is
subject to negotiation of definitive agreements and final approval by
our Board of Directors. I would appreciate very much that this letter
and our discussions remain in the confidence of PathoGenesis and its
advisors.
We are enthusiastic about the prospects of a merger between PathoGenesis
and Chiron. We look forward to your response no later than the close of
business on Monday, June 26. This proposal will expire at that time
unless we have received your favorable response and commenced
negotiations.
Yours sincerely,
/s/ Sean P. Lance
Sean P. Lance
Chairman and Chief Executive Officer
On June 29, 2000, a special meeting of the Board of Directors of the Company
was held in New York. At this meeting the Board received a detailed presentation
from Goldman Sachs on the progress of the review of strategic options and a
presentation from the Company's legal advisors on the legal duties of directors
in considering a potential acquisition of the Company. The Board of Directors of
the Company discussed the status of the then ongoing evaluation of strategic
options for enhancing shareholder value, including the fact that a number of
other companies, or their financial advisors, had contacted Goldman Sachs to
express interest in a transaction with the Company, and that the Company was in
the process of developing material that it intended would be included in a
confidential information memorandum to be shared with parties potentially
interested in pursuing a transaction with the Company. Goldman Sachs reviewed
with the Board of Directors of the Company the companies that had expressed
interest in a potential transaction with the Company, and the Board of Directors
of the Company discussed the various strategic fits and risks associated with
these companies and various other companies that Goldman Sachs believed might be
interested in pursuing such a transaction. The Board of Directors of the Company
discussed the risks of proceeding with the process of reviewing strategic
options, including the risk that Parent might withdraw or reduce the valuation
of its proposal. The Board of Directors of the Company determined that the
consideration offered by Parent in its June 23rd letter was not sufficient for
the Company to forego completion of a process by which it would determine
whether other parties were interested in acquiring or combining with the
Company, and the value at which those potential transactions might proceed.
However, in light of the Offer, the Board of Directors of the Company decided
that such a process should be completed promptly, and should focus on those
parties that the Board of Directors of the Company, with the advice of
management and its financial advisors, believed were reasonably likely to be
interested in and capable of pursuing a transaction with the Company in which
the Company's shareholders would receive a premium for their Shares. The Board
of Directors of the Company also decided to appoint a Strategic Options
Committee to address issues that might arise in connection with the review of
strategic options being conducted by the Company, though approval of any
transactions would require approval by the entire Board of Directors of the
Company.
On June 30, 2000 representatives of Goldman Sachs informed representatives
of Parent that the consideration offered in the June 23rd letter was not
sufficient to persuade the Board of Directors of the Company to forego
completing the process to determine the level of interest of other potential
acquirors or transaction partners, that the Company intended to complete that
process promptly, and that Parent would be invited to join in that process.
21
<PAGE>
During the weeks of July 10 and July 17, several potentially interested
parties executed confidentiality agreements and were provided confidential
information concerning the Company, and those parties so requesting received a
presentation by the Company's management team.
On July 17, 2000, a concurrent telephonic meeting of the Executive Committee
and the Strategic Options Committee of the Company's Board of Directors was held
at which representatives from Goldman Sachs and the Company's legal advisors
were present. The representatives of Goldman Sachs updated the committees on the
companies that had been in contact with Goldman Sachs and the schedule for the
remainder of the process. The representatives from Goldman Sachs informed the
committees that they had contacted Parent regarding participation in the
Company's process but Parent declined to execute a confidentiality agreement,
had not been provided confidential information and had not received a
presentation from management.
During the week of July 24, certain potentially interested parties,
including Parent, were provided with forms of merger agreements, and were
requested to submit offers to acquire the Company, together with any changes
that the offeror would require to the form of merger agreement, on August 3,
2000. Interested parties, including Parent, submitted proposals on August 3.
Parent's proposal contemplated the acquisition of the outstanding Shares in a
cash tender offer for $38.25 per share. Parent's proposal was the only proposal
received by the Board of Directors of the Company that contemplated a cash
transaction, and was the only proposal that did not contemplate that additional
due diligence would be required to complete the transaction. In addition, no
proposal offered consideration in excess of that offered by Parent, based on the
value of the consideration offered on the date of the proposals.
On August 7, 2000, a special meeting of the Board was held to consider the
proposals submitted. Representatives of Goldman Sachs provided a detailed
presentation on the companies that were participating in the process and, along
with the Company's legal advisors, reviewed the financial and legal terms of the
written proposals. The Board discussed the relative merits of the proposals,
including the amount and type of consideration offered, the timing of the
proposed transactions and the likelihood of closing under each such proposal.
The Board decided to continue discussions with each party that had submitted a
written proposal and authorized Goldman Sachs to continue discussions with those
parties.
Following the meeting of the Board on August 7, 2000, representatives of
Goldman Sachs telephoned representatives of each party that had submitted a
written proposal, and their financial advisors, to inform them that no offer had
been selected by the Board as the winning offer, and to provide other feedback
on the offers that had been received, including with respect to the changes to
the merger agreement that had been provided by each party submitting a written
proposal. In addition, Mr. Gantz telephoned Mr. Lance and indicated that at that
time the Board of Directors of the Company was not willing to accept Parent's
proposed price of $38.25 per Share. Mr. Lance indicated that he believed that
Parent had offered a full price, though Parent had not seen confidential
information.
On August 8, 2000, Mr. Gantz telephoned Mr. Lance and discussed the
possibility of Parent entering into a confidentiality agreement in order to
facilitate the exchange of confidential information and the possibility of a
management presentation.
On August 10, 2000, Parent executed a confidentiality agreement (described
in Section 11 hereto) and was provided certain confidential information, and
members of Parent's management and representatives of DLJ received a
presentation concerning the Company from members of the Company's senior
management in San Francisco.
On August 10 and 11, Parent's General Counsel, along with Parent's legal
advisors, and the Company's General Counsel, along with the Company's legal
advisors, discussed and negotiated
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revisions to the form of contract that Parent had provided in its proposal. As a
result of those negotiations, Parent agreed that it would not require certain of
the proposed contractual changes that it had suggested in its original proposal.
In particular, Parent agreed that Parent would not have the right to terminate
the Merger Agreement solely as a result of the provision of confidential
information by the Company to third parties, or the taking of other actions by
the Company as permitted by the exception to the "no solicitation" provision of
the Merger Agreement (described in Section 11 of the Offer to Purchase) would
not permit Parent to terminate the Merger Agreement, and that in the event of
termination of the Merger Agreement by Parent as a result of the Company Board
of Directors changing its recommendation of the Offer, the "termination fee"
(described in Section 11 of the Offer to Purchase) would not be payable unless
the Company were to enter into or consummate another acquisition transaction
within twelve months of such termination.
In the evening of August 11, 2000, Mr. Lance informed Mr. Gantz that, after
evaluation of the information that had been made available, Parent's final offer
to acquire the Company was $38.50 in cash. Representatives of the Company
informed representatives of Parent that the Company's Board would meet on
Sunday, August 13, to evaluate all final offers, and that all comments to the
Merger Agreement would need to be resolved by that time. Negotiations on the
final language of the Merger Agreement continued on August 12 and the language
was substantially finalized early in the morning of Sunday, August 13.
During the period from August 7 to August 11, one other interested party
increased the consideration that it had originally proposed in a stock
transaction, but noted that its proposal remained conditioned on additional due
diligence. During that time, representatives of Goldman Sachs and senior members
of management met with that bidder, and the Company's General Counsel, along
with representatives from the Company's legal advisors, and that party's legal
advisors discussed the proposed revisions that had been made by that bidder to
the merger agreement that had been proposed by the Company. The increased value
of that bidder's proposal was not, as of August 13, 2000, in excess of $38.50
per share.
On August 11, 2000, the Board of Directors of Parent met at Parent's offices
in Emeryville, California, to consider the proposed transaction. Parents' Board
of Directors approved the Merger Agreement and the transactions contemplated by
the Merger Agreement.
On August 13, 2000, the Board of Directors of the Company met at the
Company's offices in Skokie, Illinois, to consider the proposals. Goldman Sachs,
along with the Company's legal advisors, gave a presentation on the financial
and legal aspects of the proposals that had been received. At this meeting,
Goldman Sachs orally delivered its opinion to the Board of Directors of the
Company that, as of such date, and based upon and subject to certain matters and
assumptions, the consideration to be received by holders of Shares pursuant to
the Offer and the Merger Agreement is fair from a financial point of view to
such holders. Following such presentations and the receipt of Goldman Sachs's
opinion, the Board of Directors of the Company unanimously approved the Offer,
the Merger, the Merger Agreement and the transactions contemplated by the Merger
Agreement and determined to recommend that the Company's stockholders accept the
Offer and tender their shares pursuant to the Offer.
Following such meeting, the definitive Merger Agreement was executed in the
afternoon of August 13, 2000, and a joint press release announcing the
transaction was issued on August 14, 2000 before the opening of trading.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER.
PURPOSE. The purpose of the Offer and the Merger is to enable Parent
indirectly to acquire control of, and the entire equity interest in, the
Company. The Offer is being made pursuant to the Merger Agreement and is
intended to increase the likelihood that the Merger will be effected. The
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purpose of the Merger is to acquire all of the outstanding Shares not purchased
pursuant to the Offer. The Company will, as of the Effective Time (as defined
herein), be a wholly owned subsidiary of Parent.
If Merger Sub acquires 90% or more of the outstanding Shares pursuant to the
Offer, it will have the votes necessary under Delaware law to approve the Merger
without a meeting of the Company's stockholders. Under the DGCL, if Merger Sub
owns at least 90% of the outstanding Shares, the Merger may be effected without
the vote of, or notice to, the Company's stockholders. Therefore, if at least
approximately 14,964,895 of the outstanding Shares are acquired pursuant to the
Offer or otherwise, Merger Sub will be able to, and intends to, effect the
Merger without a meeting of the Company's stockholders.
The DGCL requires that the adoption of any plan of merger or consolidation
of the Company must be approved by the holders of a majority of the Company's
outstanding Shares if the "short form" merger procedure described above is not
available. In such case, under the DGCL, the affirmative vote of holders of a
majority of the outstanding Shares (including any shares owned by Merger Sub) is
required to approve the Merger. If Merger Sub acquires, through the Offer or
otherwise, voting power with respect to at least a majority of the outstanding
Shares (which would be the case if the Minimum Condition were satisfied and
Merger Sub were to accept for payment, and pay for, Shares tendered pursuant to
the Offer), it would have sufficient voting power to effect the Merger
regardless of the vote of any other stockholder of the Company.
PLANS FOR THE COMPANY. Except as disclosed in this Offer to Purchase,
neither Parent nor Merger Sub has any present plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation, or sale or transfer of a material amount of assets,
involving the Company or any of its subsidiaries, or any material changes in the
Company's capitalization, corporate structure, business or composition of its
management or the Company Board. Parent will continue to evaluate and review the
Company and its business, assets, corporate structure, capitalization,
operations, properties, policies, management and personnel with a view towards
determining how to optimally realize any potential benefits which arise from the
relationship of the operations of the Company with those of Parent. Such
evaluation and review is ongoing and is not expected to be completed until after
the consummation of the Offer and the Merger. If, as and to the extent that
Parent acquires control of the Company, Parent will complete such evaluation and
review of the Company and will determine what, if any, changes would be
desirable in light of the circumstances and the strategic opportunities which
then exist. Such changes could include, among other things, restructuring Parent
and/or the Company through changes in Parent's and/or the Company's business,
corporate structure, articles of incorporation, by-laws, capitalization or
management or could involve consolidating and streamlining certain operations
and reorganizing other businesses and operations.
Assuming the Minimum Condition has been satisfied and Merger Sub purchases
all Shares tendered pursuant to the Offer, Merger Sub intends, subject to
Rule 14f-1 of the Exchange Act, promptly to exercise its rights under the Merger
Agreement to obtain majority representation on, and control of, the Board of
Directors of the Company. Under the Merger Agreement, the Company has agreed
that, promptly upon the purchase of and payment for Shares by Merger Sub or any
of its affiliates pursuant to the Offer, Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as is equal to the product obtained by multiplying the
total number of directors on such Board (giving effect to the directors
designated by Parent in accordance with this sentence) by the percentage that
the number of Shares so purchased and paid for, plus any shares beneficially
owned by Parent or its affiliates on the date of such purchase and payment,
bears to the total number of Shares then outstanding. Merger Sub presently
intends to select such designees to the Board of Directors from among
individuals (who are currently officers or directors of Parent or its
affiliates) identified in a list that Parent had provided to the Company and
that the Company has included in its Schedule 14D-9. The Merger Agreement also
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provides that the directors of the Company immediately prior to the Effective
Time shall be the directors of the Company after the consummation of the Merger
at and after the Effective Time. Merger Sub or an affiliate of Merger Sub may,
following the consummation or termination of the Offer, seek to acquire
additional Shares through open market purchases, privately negotiated
transactions, a tender offer or exchange offer or otherwise, upon such terms and
at such prices as it shall determine, which may be more or less than the price
paid in the Offer. The Company's Board of Directors has approved the Merger
Agreement and Merger Sub's acquisition of the Shares pursuant to the Offer and,
therefore, Section 203 of the DGCL is inapplicable. Merger Sub and its
affiliates also reserve the right to dispose of any or all Shares acquired by
them, subject to the terms of the Merger Agreement.
THE MERGER AGREEMENT. THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF
THE MERGER AGREEMENT. THIS SUMMARY IS NOT A COMPLETE DESCRIPTION OF THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE MERGER AGREEMENT WHICH IS FILED WITH THE SEC
AS AN EXHIBIT TO THE TENDER OFFER STATEMENT ON SCHEDULE TO FILED BY PARENT AND
MERGER SUB (THE "SCHEDULE TO") AND IS INCORPORATED HEREIN BY REFERENCE.
CAPITALIZED TERMS NOT OTHERWISE DEFINED BELOW SHALL HAVE THE MEANINGS SET FORTH
IN THE MERGER AGREEMENT. THE SCHEDULE TO MAY BE OBTAINED FROM PARENT AT THE
ADDRESS SET FORTH IN SECTION 9 OR FROM THE SEC AS SET FORTH IN SECTION 8. THE
MERGER AGREEMENT MAY BE OBTAINED FROM PARENT AT SUCH ADDRESS, OR FROM THE
COMPANY AS SET FORTH IN SECTION 8.
THE OFFER. The Merger Agreement provides that Merger Sub will commence the
Offer and that upon the terms and subject to prior satisfaction or waiver (to
the extent permitted to be waived) of the conditions of the Offer, promptly
after expiration of the Offer, Merger Sub will accept for payment, and pay for,
all Shares validly tendered and not withdrawn pursuant to the Offer that Merger
Sub is permitted to accept and pay for under applicable law (such date of
acceptance for payment, the "Acceptance Date"). Provisions of the Merger
Agreement relating to the modification of the terms and conditions of the Offer
are described in Section 13.
THE MERGER. The Merger Agreement provides that following the receipt of any
required approval by the Company's stockholders of the Merger Agreement and the
satisfaction or waiver of certain other conditions, at the Effective Time Merger
Sub will be merged into the Company. In the Merger, each issued and outstanding
Share (other than Shares held by Dissenting Stockholders and Shares that are
owned by the Company (as treasury stock), Parent or any subsidiary of Parent
(including Merger Sub) immediately prior to the Effective Time) shall be
converted into the right to receive from the Surviving Corporation in cash,
without interest, the Offer Price.
CONDITIONS TO THE MERGER. The respective obligations of each party to
effect the Merger are subject to the satisfaction or waiver prior to the
Effective Time of the following conditions:
(1) Merger Sub shall have purchased Shares pursuant to the Offer, except
that this condition shall not be a condition to Parent's and Merger Sub's
obligation to effect the Merger if Merger Sub shall have failed to purchase
Shares pursuant to the Offer in breach of (or as a result of Parent's
breach) the Merger Agreement.
(2) the Merger Agreement and the Merger shall have been adopted and
approved by the requisite vote of the stockholders of the Company, if
required by the DGCL;
(3) no judgment, injunction, order or decree of a court or governmental
agency or authority of competent authority shall be in effect which has the
effect of making the Merger illegal or otherwise restraining or prohibiting
the consummation of the Merger; PROVIDED, HOWEVER, that no party may rely on
this condition if it is in breach of its covenant to use all reasonable
efforts (including specific actions with respect to antitrust clearance) to
consummate and make effective the transactions contemplated by the Merger
Agreement and such breach has, directly or indirectly, resulted in such
judgment, order or decree being in effect; and
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(4) any waiting period applicable to the consummation of the Merger
under the HSR Act and any foreign antitrust and competition laws shall have
expired or been terminated and all approvals required under foreign
antitrust and competition laws before the consummation of the Merger shall
have been obtained, except for such waiting periods (other than the HSR Act)
or approvals the failure of which to expire or be obtained is not reasonably
likely to have a Parent Material Adverse Effect (as defined below) or a
Company Material Adverse Effect (as defined below) or to provide a
reasonable basis to conclude that the parties to the Merger Agreement or any
of their respective directors, officers, agents, advisors or other
representatives would be subject to the risk of criminal liability. "Parent
Material Adverse Effect" means any effect that is materially adverse to
(i) the business, financial condition or operations of Parent and its
subsidiaries, taken as a whole, or (ii) the ability of Parent or Merger Sub
to consummate the transactions contemplated by the Merger Agreement, except,
in the case of clause (i), for any such effect resulting from or arising out
of the condition of the United States economy or financial markets
generally, or from a condition generally affecting participants in the
industry in which Parent competes. "Company Material Adverse Effect" means
any effect that is materially adverse to (i) the business, financial
condition, operations or prospects of the Company and its subsidiaries,
taken as a whole, or (ii) the ability of the Company to consummate the
transactions contemplated by the Merger Agreement, except, in each case, for
any such effect resulting from or arising out of (x) any employee attrition,
including without limitation resignations or other terminations of
employment of any employees of the Company, whether or not in the ordinary
course of business, (y) the condition of the United States economy or
financial markets generally, or (z) a condition generally affecting
participants in the industry in which the Company competes.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
and the Offer and the Merger may be abandoned at any time prior to the Effective
Time (notwithstanding any approval of the Merger Agreement by the stockholders
of the Company):
(1) by mutual written consent of the Company and Parent;
(2) by either Parent or the Company:
- if Merger Sub shall not have accepted for payment any Shares pursuant
to the Offer prior to the Drop Dead Date, provided that (A) if at such
date the waiting period applicable to the consummation of the Offer or
the Merger under the HSR Act or any foreign antitrust and competition
laws shall not have expired or been terminated, or any approval
required under any foreign antitrust and competition laws shall not
have been obtained (except for such waiting periods (other than under
the HSR Act) or approvals the failure of which to expire or be obtained
is not reasonably likely to have a Parent Material Adverse Effect or a
Company Material Adverse Effect or to provide a reasonable basis to
conclude that Parent, Merger Sub to the Company or any of their
respective directors, officers, agents, advisors or other
representatives would be subject to the risk of criminal liability),
the Drop Dead Date may be extended to June 14, 2001 by Parent or the
Company by written notice to the other party, PROVIDED that the party
extending the Drop Dead Date has a reasonable expectation, assuming
that all other parties to the Merger Agreement comply with their
obligations thereunder that the applicable waiting period or approval
will have expired or been terminated or obtained, as the case may be,
on or prior to June 14, 2001 and (B) the right to terminate the Merger
Agreement pursuant to the provisions described in this paragraph will
not be available to any party whose breach of the Merger Agreement has
been the cause of, or resulted in, the failure of Shares to have been
purchased pursuant to the Offer by the Drop Dead Date; or
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Notwithstanding this restriction, the Company may in response to an
unsolicited bona fide written offer or proposal with respect to a potential or
proposed Acquisition Transaction which the Company's Board of Directors
determines, in good faith and after consultation with its independent financial
advisor and legal counsel, could reasonably be expected to lead to a Superior
Proposal (as defined below), furnish confidential or nonpublic information to,
and engage in discussions and negotiate with, such potential acquiror, PROVIDED
that the Company's Board of Directors determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their fiduciary duties under applicable law.
The Company is also required to pay Parent the $25,000,000 termination fee
in the event that the Merger Agreement is terminated by:
(1) the Company pursuant to the provision of the Merger Agreement
described in the second bullet point of clause (4) of "Termination of the
Merger Agreement" above (relating to the Board of Directors of the Company
authorizing the Company to enter into a binding written agreement concerning
a Superior Proposal (as defined below)); or
(2) Parent because the Company has entered into a definitive agreement
for a Superior Proposal (as defined below).
In each of the cases where the Company is required to pay the termination
fee, the Company shall pay all of the reasonable, documented charges and
expenses, including those of the paying agent, incurred by Parent or Merger Sub
in connection with the Merger Agreement and the transactions contemplated by the
Merger Agreement up to a maximum amount of $3,100,000.
ACQUISITION PROPOSALS. The Company has agreed that prior to the Effective
Time or earlier termination of the Merger Agreement, the Company shall not and
shall not permit its subsidiaries to, and the Company will use its reasonable
best efforts to cause any officer, director or employee, of the Company or any
of its subsidiaries, and any attorney, accountant, investment banker, financial
advisor or other agent retained by it or any of its subsidiaries, not to,
directly or indirectly, initiate, solicit, encourage or negotiate or provide
nonpublic or confidential information to facilitate, any proposal or offer
(other than any proposal or offer by Parent or any of its subsidiaries) to
acquire all or 15% or more of the business, properties or capital stock of the
Company, whether by merger, purchase of assets, tender offer or otherwise, and
whether for cash, securities or any other consideration or combination thereof
(an "Acquisition Transaction").
Notwithstanding this restriction, the Company may in response to an
unsolicited bona fide written offer or proposal with respect to a potential or
proposed Acquisition Transaction which the Company's Board of Directors
determines, in good faith and after consultation with its independent financial
advisor and legal counsel, could reasonably be expected to lead to a Superior
Proposal (as defined below), furnish confidential or nonpublic information to,
and engage in discussions and negotiate with, such potential acquiror, PROVIDED
that the Company's Board of Directors determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their fiduciary duties under applicable law.
Under the Merger Agreement, "Superior Proposal" means an Acquisition
Proposal which the Company's Board of Directors determines, in good faith and
after consultation with its independent financial advisor and legal counsel,
would, if consummated, likely provide consideration to the holders of Shares
with greater financial value than the consideration payable in the Offer and the
Merger.
The Company agreed that it would immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted prior to the date of the Merger Agreement with respect to any
Acquisition Proposal.
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The Company is required promptly to notify Parent after receipt of any
Acquisition Proposal, and such notice must indicate in reasonable detail the
identity of the offeror and the material terms and conditions of such proposal.
The Company must thereafter keep Parent informed, on a reasonably current basis,
on the status and terms of any such Acquisition Proposal and the status or any
discussion or negotiations with any potential acquiror related thereto.
Prior to the Effective Time, the Board of Directors of the Company may
withdraw or modify the recommendation by the Board of Directors of the Company
of the Merger Agreement, the Offer or the Merger, if the Board of Directors of
the Company determines in good faith, after consultation with outside counsel,
that its fiduciary obligations require it to do so.
The Merger Agreement specifically allows the Board of Directors of the
Company to take and disclose to the Company's stockholders a position
contemplated by Rules 14d-9 and 14e-2 under the Exchange Act with respect to a
tender or exchange offer by a third party and to make such disclosure to the
Company's stockholders as, in the good faith judgment of the Board of Directors
of the Company, with the advice of outside counsel, is required under applicable
law.
COVENANTS, REPRESENTATIONS AND WARRANTIES. The Merger Agreement also
contains certain other restrictions as to the conduct of business by the Company
pending the Merger, including, among other things, covenants restricting the
Company's ability to take actions that would change or affect the capital
structure of the Company, as well as representations and warranties of each of
the parties customary in transactions of this kind.
AMENDMENT OF THE MERGER AGREEMENT. The Merger Agreement may be amended by
Parent, Merger Sub and the Company by action taken or authorized by their
respective Boards of Directors at any time before or after the Company
stockholders approve the Offer; PROVIDED that after the Acceptance Date no
amendment may be made which decreases the Offer Price and any amendment will
require the concurrence of a majority of the directors of the Company then in
office who neither were designated by Parent nor are employees of the Company.
After the approval of the Company stockholders has been obtained, no amendment
may be made that by law requires the further approval of the Company
stockholders without the further approval of such stockholders.
TREATMENT OF OPTIONS AND WARRANTS. At the Effective Time, each holder of
outstanding and unexercised options to purchase Shares granted under any of the
Company's stock option plans or otherwise (each, a "Company Option"), whether or
not exercisable or vested, shall be entitled to receive, in full satisfaction of
such Company Option, cash in an amount equal to the product of (A) the excess,
if any, of the Offer Price over the exercise price per share thereof and
(B) the number of Shares subject to such Company Option (the "Option Cash-Out
Right"). Each option holder shall have the right to elect, in lieu of such
holder's Option Cash-Out Right, to cause each and every Company Option held by
such holder (but not fewer than all Company Options held by such holder) to be
converted, at the Effective Time, into options (each, a "Parent Option") to
purchase a number of shares of common stock, par value $0.01 per share ("Parent
Shares"), of Parent equal to the product, rounded down to the nearest whole
share, of (A) the number of Company Shares subject to the original Company
Option and (B) the Conversion Ratio (as defined below), at a per Parent Share
exercise price, rounded up to the nearest whole cent, equal to (I) the per share
exercise price for the Shares originally issuable pursuant to such Company
Option divided by (II) the Conversion Ratio; PROVIDED, HOWEVER, that (A) in the
case of any Company Option to which Section 422 of the Internal Revenue Code
(the "Code") applies, the exercise price, the number of Parent Shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in accordance with the foregoing, subject to
such adjustments as are necessary in order to satisfy the requirements of
Section 424(a) of the Code; (B) any holder making such election shall thereby
waive such holder's right to accelerated vesting of all of the Company Options
held by such holder on the Acceptance Date and the Effective Time or as a result
of any other event contemplated by this
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Agreement, and any Parent Options issued upon the conversion of Company Options
held by such holder that had not become vested and exercisable prior to the
Acceptance Date shall vest and become exercisable only in accordance with the
original terms of such Company Options; and (C) at the Effective Time Parent
shall grant to such holder making such election and granting the waiver
contemplated by clause (B) an option (each, a "New Parent Option") to purchase a
number of Parent Shares equal to the product or (x) the number of Parent Shares
subject to Parent Options issued upon conversion of all unvested and
unexercisable Company Options held by such holder, and (y) .30. The New Parent
Options shall have a vesting schedule and a per Parent Share exercise price
determined as of the Effective Time in accordance with the Chiron Corporation
1991 Stock Option Plan, as amended. The exercise price per share of the New
Parent Options shall be no more than the fair market value of Parent Common
Stock on the grant date and the vesting schedule for the New Parent Options
shall provide that such New Parent Options shall vest and become exercisable
with respect to no fewer than 25% of the shares subject to such New Parent
Option on each anniversary of the grant date. Each of the New Parent Options
shall be an incentive stock option to the extent permitted under applicable law.
The election to convert Company Options into Parent Options shall be made prior
to the Effective Time and shall be effective at the Effective Time. The term
"Conversion Ratio" means the ratio of (y) the Offer Price to (z) the average
(the "Parent Average Price") of the closing prices per Parent Share on the
Nasdaq Stock Market for the five consecutive trading days immediately preceding
the Effective Time.
In the event that any holder of a Company Option is terminated within twelve
months after the Effective Time other than for cause or terminates within 13
months following the Effective Time pursuant to "good reason" as defined in any
applicable employment or severance agreement, then each Parent Option received
upon conversion of a Company Option shall immediately become exercisable and
vested whether or not then exercisable or vested and shall be converted into the
right to receive cash in an amount equal to the product of (A) the amount, if
any, by which the Parent Average Price exceeds the exercise price per share
thereof for such Parent Option and (B) the number of shares of Parent Common
Stock subject to such Parent Option. All Parent Options and New Parent Options
issued pursuant to this provision of the Merger Agreement will have customary
"cashless exercise" provisions.
At the Effective Time, each outstanding warrant to purchase Shares shall be
converted into an obligation of Parent to pay, and a right of the holder thereof
to receive in full satisfaction of such warrant, cash in an amount in respect
thereof equal to the product of (A) the excess, if any, of the Offer Price over
the exercise price of such warrant and (B) the number of Shares subject to such
warrant.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. Parent has agreed that the
indemnification provisions of the Company's certificate of incorporation or
bylaws as in effect at the Acceptance Date shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of the Company.
From and after the Acceptance Date, Parent will assume, be jointly and severally
liable for, and honor, guaranty and stand surety for, and shall cause the
Company to honor, in accordance with their respective terms, each of the
covenants in the Merger Agreement pertaining to indemnification of officers and
directors, without limit as to time.
From and after the Acceptance Date, each of Parent and the Company and, from
and after the Effective Time, the Surviving Corporation, will, to the fullest
extent permitted under applicable law, indemnify and hold harmless each present
and former director, officer, employee and agent of the Company or any of its
subsidiaries against any costs or expenses, judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
actual or threatened claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring or alleged to occur prior to
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the Effective Time (including, without limitation, acts or omissions in
connection with such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the benefit of the
Company) or the Merger or the other transactions contemplated by the Merger
Agreement or arising out of or pertaining to the transactions contemplated by
the Merger Agreement to the fullest extent that the Company would have been
permitted under Delaware law and the Company's certificate of incorporation and
bylaws in effect on the date of the Merger Agreement.
For a period of six years after the Effective Time, Parent will cause to be
maintained in effect the current directors' and officers' liability insurance
coverage maintained by the Company and its subsidiaries with respect to matters
arising on or before the Effective Time; PROVIDED, HOWEVER, that if the existing
current policies expire, are terminated or cancelled during such six-year
period, Parent will use its reasonable efforts to obtain as much coverage as can
be obtained for the remainder of such period for a premium not in excess (on an
annualized basis) of two times the premiums paid the Company as of the date of
the Merger Agreement.
TREATMENT OF EMPLOYEE BENEFITS. Parent agrees that the Company will honor,
and following the Effective Time, Parent and its affiliates will honor, all
Company employee benefit plans in accordance with their terms as in effect
immediately before the Acceptance Date, subject to any amendment or termination
thereof that may be permitted by such terms and provided that nothing in the
provision of the Merger Agreement described in this sentence will prevent Parent
or the Surviving Corporation from replacing the Company's existing company
employee benefit plans as contemplated by and in accordance with the following
sentence. Through December 31, 2001, Parent shall provide, or shall cause to be
provided, to current and former employees of the Company and its subsidiaries
(the "Company Employees") compensation and employee benefits that are, in the
aggregate, not less favorable than those provided to Company Employees
immediately before the Acceptance Date, although this will not prevent the
termination of employment of any Company Employee or the amendment or
termination of any particular company employee benefit plans to the extent
permitted by its terms as in effect immediately before the Acceptance Date.
For purposes of eligibility and vesting and levels of benefits under the
employee benefit plans of Parent and its affiliates providing benefits to any
Company Employees after the Acceptance Date (the "New Plans"), each Company
Employee shall be credited with his or her years of service with the Company and
its affiliates before the Effective Time, to the same extent as such Company
Employee was entitled, before the Effective Time, to credit for such service
under any similar Company employee benefit plans, except to the extent such
credit would result in a duplication of benefits. In addition, and without
limiting the generality of the foregoing: (i) each Company Employee will be
immediately eligible to participate, without any waiting time, in any and all
New Plans to the extent coverage under such New Plan replaces coverage under a
comparable Company employee benefit plan in which such Company Employee
participated immediately before the Effective Time (such plans, collectively,
the "Old Plans"); and (ii) for purposes of each New Plan providing medical,
dental, pharmaceutical and/or vision benefits to any Company Employee, Parent
will cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and his or her
covered dependents, and Parent shall cause any eligible expenses incurred by
such employee and his or her covered dependents during the portion of the plan
year of the Old Plan ending on the date such employee's participation in the
corresponding New Plan begins to be taken into account under such New Plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year as if such amounts had been paid in accordance with
such New Plan.
In the Merger Agreement, Parent has acknowledged that the transactions
contemplated by the Merger Agreement shall constitute a "change of control"
under the Company's employee benefit plans, as applicable. Parent has further
acknowledged that certain executives shall have "Good Reason" under their
employment agreements as of the Acceptance Date and shall be eligible to
terminate employment
33
<PAGE>
and receive severance benefits for a "Good Reason" termination following the
Acceptance Date. Parent and the Company have acknowledged that none of such
executives is a participant on his own behalf with respect to the transaction
contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, the Company amended its Employee Stock
Purchase Plan to provide that participants in the plan will not be allowed to
make new deposits in their accounts following the Acceptance Date. Participants
will be deemed to have exercised their rights to purchase Shares with amounts
remaining in their accounts immediately prior to the Effective Time and the
Employee Stock Purchase Plan will terminate immediately prior to the Effective
Time.
COMPOSITION OF THE BOARD OF DIRECTORS. The directors of Merger Sub
immediately prior to the Effective Time, will be the directors of the Surviving
Corporation after the Effective Time until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
COLLABORATION AGREEMENT. On December 15, 1999, the Company and Parent
entered into a Collaboration Agreement (the "Collaboration Agreement") to
research, develop, manufacture and commercially utilize mutually selected novel
antibacterial drugs for human use. The research program contemplated by the
Collaboration Agreement runs for three years after the effective date, and is
thereafter extendable by joint consent of the parties. The work under the
Collaboration Agreement is directed and managed by a Collaboration Management
Team, composed of members selected in equal number by each Party. The
Collaboration Agreement contemplates joint development and co-commercialization
of products, with the costs and profits from such products divided equally by
the parties. The foregoing summary and description of the Collaboration
Agreement are qualified in their entirety by reference to the Collaboration
Agreement, which has been filed as an exhibit to the Schedule TO and is
incorporated herein by reference.
CONFIDENTIALITY AGREEMENT. On August 10, 2000, Parent executed a
confidentiality agreement, dated August 8, 2000 (the "Confidentiality
Agreement"), which provides that Parent will use certain information concerning
the Company solely for the purpose of evaluating a strategic transaction between
Parent and the Company and that Parent will keep such material confidential. The
foregoing summary of the Confidentiality Agreement is qualified in its entirety
by reference to the Confidentiality Agreement, which has been filed as an
exhibit to the Schedule TO and is incorporated herein by reference.
APPRAISAL RIGHTS. Holders of the Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, each holder of the
Shares who properly demands and perfects appraisal rights and who has neither
voted in favor of the Merger nor consented thereto in writing will be entitled
to an appraisal by the Delaware Court of Chancery of the fair value of his
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid. In determining such fair value, the Court may consider all relevant
factors. The value so determined could be more or less than the consideration to
be paid in the Offer and the Merger. Any judicial determination of the fair
value could be based upon considerations other than or in addition to the market
value of the Shares, including, among other things, asset values and earning
capacity.
If any holder of the Shares who demands appraisal under Section 262 of the
DGCL fails to perfect, or effectively withdraws or loses his right to appraisal
as provided in the DGCL, the Shares of such stockholder will be converted into
the Offer Price in accordance with the Merger Agreement. A stockholder may
withdraw his demand for appraisal by delivery to Parent of a written withdrawal
of his demand for appraisal and acceptance of the Merger.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
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<PAGE>
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
RULE 13E-3. The Merger would have to comply with any applicable Federal law
operative at the time of its consummation. Rule 13e-3 under the Exchange Act is
applicable to certain "going private" transactions. Merger Sub does not believe
that Rule 13e-3 will be applicable to the Merger unless the Merger is
consummated more than one year after the Acceptance Date. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger and the consideration offered to minority stockholders be filed with the
SEC and disclosed to minority stockholders prior to consummation of the Merger.
The Rights presently are transferable only with the certificates for the
Shares and the surrender for transfer of certificates for any Shares will also
constitute the transfer of the Rights associated with the Shares represented by
such certificates. Pursuant to the terms of the Merger Agreement, the Company's
Board of Directors amended the Rights Agreement to provide that, for so long as
the Merger Agreement is in full force and effect, (i) none of Parent and its
subsidiaries (including Merger Sub) shall become an "Acquiring Person" (as
defined in the Rights Agreement) and no "Stock Acquisition Date" (as defined in
the Rights Agreement) shall occur as a result of the execution, delivery and
performance of the Merger Agreement and the consummation or the Offer of the
Merger, (ii) no "Distribution Date" (as defined in the Rights Agreement) shall
occur as a result of the announcement of or the execution of the Merger
Agreement or any of the transactions contemplated thereby and (iii) each of
Parent and Merger Sub will not be an "Acquiring Person" as a result of the
transactions contemplated by the Merger Agreement.
12. SOURCE AND AMOUNT OF FUNDS.
Merger Sub estimates that the total amount of funds required to purchase all
of the outstanding Shares pursuant to the Offer and the Merger and to pay
related fees and expenses will be approximately $700 million. Parent will
finance the Offer and the Merger with existing cash.
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer or the Agreement, Merger Sub is
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC (including the rules relating to Merger Sub's obligation
to pay for or return tendered Shares promptly after the termination or
withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer,
unless:
- the Minimum Condition has been satisfied;
- the HSR Condition has been satisfied; and
- the Foreign Antitrust Condition has been satisfied.
Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, Merger Sub is not required to accept for payment or to pay for any
Shares not previously accepted for payment or paid for, if, immediately prior to
the acceptance for payment of Shares pursuant to the Offer, any of the following
conditions exists, which, in the reasonable judgment of Merger Sub or Parent and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payment:
(1) there shall have been entered, enforced or issued by any
governmental entity, any judgment, order, injunction or decree which:
- makes illegal, restrains or prohibits the making of the Offer, the
acceptance for payment of, or payment for, any Shares by Parent or
Merger Sub, or the consummation of the Merger; or
35
<PAGE>
- prohibits the ownership or operation by Parent or any of its
subsidiaries of the Company;
PROVIDED, in each case, that Parent has complied with its covenants to use all
reasonable efforts (including specific actions with respect to antitrust
clearance) to consummate and make effective the transactions contemplated by the
Merger Agreement;
(2) there shall have been any statute, rule, regulation, legislation or
interpretation enacted, enforced, promulgated, amended or issued by any
governmental entity or deemed by any governmental entity applicable to
Parent, the Company or any subsidiary or affiliate of Parent or the Company
or any transaction contemplated by the Merger Agreement, other than the HSR
Act and foreign antitrust and competition laws which would reasonably be
expected to result, directly or indirectly, in any of the consequences
referred to in clause (1) above;
(3) the representations and warranties of the Company contained in the
Merger Agreement shall not be true and correct as of such time, except for
such failures to be true and correct that, in the aggregate, are not
reasonably likely to have a Company Material Adverse Effect;
(4) the Company shall have failed to perform in any material respect any
material obligation required to be performed by it at or prior to such time
under the Merger Agreement; or
(5) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Merger Sub and Parent
and may be asserted by Merger Sub or Parent regardless of the circumstances
giving rise to such condition or may be waived by Merger Sub and Parent in whole
or in part at any time and from time to time in their reasonable discretion. The
failure by Parent, Merger Sub or any other affiliate of Parent at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A public announcement shall be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver. All Offer Conditions must be
satisfied or waived prior to the commencement of any Subsequent Offering Period.
14. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the Merger Agreement, the Company has agreed that during the
term of the Merger Agreement the Company may not declare, set aside or pay any
dividend or distribution with respect to the Shares payable in cash, stock,
property or otherwise, except for the payment of dividends or distributions to
the Company, or a subsidiary of the Company, by a subsidiary of the Company.
15. CERTAIN LEGAL MATTERS.
GENERAL. Except as otherwise disclosed herein, based upon an examination of
publicly available filings with respect to the Company, Parent and Merger Sub
are not aware of any licenses or other regulatory permits which appear to be
material to the business of the Company and which might be adversely affected by
the acquisition of the Shares by Merger Sub pursuant to the Offer or of any
approval or other action by any governmental, administrative or regulatory
agency or authority which would be required for the acquisition or ownership of
the Shares by Merger Sub pursuant to the Offer. Should any such approval or
other action be required, it is currently contemplated that such approval or
action would be sought or taken. There can be no assurance that any such
approval or action, if needed, would be obtained or, if obtained, that it will
be obtained without substantial conditions or that adverse consequences might
not result to the Company's or Parent's business or that certain parts of the
Company's or Parent's business might not have to be disposed of in the event
that such approvals
36
<PAGE>
are not obtained or such other actions are not taken, any of which might enable
Merger Sub to elect to terminate the Offer without the purchase of the Shares
thereunder, if the relevant conditions to termination are met. Merger Sub's
obligation under the Offer to accept for payment and pay for the Shares is
subject to the Offer Conditions certain conditions. See Section 13.
UNITED STATES ANTITRUST COMPLIANCE. Under the HSR Act and the rules that
have been promulgated thereunder by the Federal Trade Commission ("FTC"),
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. The acquisition of the Shares by Merger Sub is
subject to these requirements. See Section 2 of this Offer to Purchase as to the
effect of the HSR Act on the timing of Merger Sub's obligation to accept Shares
for payment.
Pursuant to the HSR Act, Parent filed a Notification and Report Form with
respect to the acquisition of the Shares pursuant to the Offer and the Merger
with the Antitrust Division and the FTC on August 21, 2000. Under the provisions
of the HSR Act applicable to the purchase of the Shares pursuant to the Offer,
such purchases may not be made until the expiration of a 15-calendar day waiting
period following the filing by Parent. Accordingly, the waiting period under the
HSR Act will expire at 11:59 p.m., New York City time, on September 5, 2000,
unless early termination of the waiting period is granted or Parent receives a
request for additional information or documentary material prior thereto.
Pursuant to the HSR Act, Parent will request early termination of the waiting
period applicable to the Offer. There can be no assurances given, however, that
the 15-day HSR Act waiting period will be terminated early. If either the FTC or
the Antitrust Division were to request additional information or documentary
material from Parent, the waiting period would expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance by
Parent with such request unless the waiting period is sooner terminated by the
FTC or the Antitrust Division. Thereafter, the waiting period could be extended
only by agreement or by court order. See Section 2. Only one extension of such
waiting period pursuant to a request for additional information is authorized by
the rules promulgated under the HSR Act, except by agreement or by court order.
Any such extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of the
Shares by Merger Sub pursuant to the Offer. At any time before or after Merger
Sub's purchase of the Shares, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of the Shares pursuant to
the Offer or seeking divestiture of the Shares acquired by Merger Sub or the
divestiture of substantial assets of Parent, the Company or any of their
respective subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if a challenge
is made, what the result will be. See Section 13 of this Offer to Purchase for
certain conditions to the Offer that could become applicable in the event of
such a challenge.
GERMAN ANTITRUST COMPLIANCE. Under the German Act against Restraints of
Competition (the "Act"), certain acquisition transactions may not be consummated
in Germany unless certain information has been furnished to the German Federal
Cartel Office (the "FCO" or BUNDESKARTELLAMT) and certain waiting period
requirements have been satisfied without issuance by the FCO of an order to
refrain. The purchase of the Shares by Merger Sub pursuant to the Offer and the
consummation of the Merger may be subject to such requirements. Under such laws,
the FCO has one month (unless earlier terminated by the FCO) from the date of
filing of such information with the FCO to clear the Offer and the Merger or to
advise the parties of its intention to investigate the Offer and the Merger in
depth, in which case the FCO has four months from the date of filing in which to
take steps to oppose
37
<PAGE>
the Offer and the Merger. According to the Act, the purchase of the Shares
pursuant to the Offer may not be consummated before the end of the one-month
period, or, if the FCO has informed the parties about the initiation of an
in-depth review within such period, before the end of the four-month period or
its agreed-upon extension, unless the FCO has given its clearance to the
proposed transaction in writing before the end of such periods. In the course of
its reviews, the FCO will examine whether the proposed acquisition of the Shares
by Merger Sub pursuant to the Offer would create a dominant market position or
strengthen an already-existing dominant position in Germany. If the FCO makes
such a finding, it will act to prohibit the transaction. While Parent and the
Merger Sub do not believe that there is any basis for the FCO to investigate the
Offer and the Merger in depth, there can be no assurance that the FCO will not
investigate or oppose the transactions or that the FCO will not seek to extend
the waiting period. Parent and the Company expects to file the information with
the FCO as soon as reasonably practicable following the date of this document.
OTHER FOREIGN FILINGS. Parent and the Company each conduct operations in a
number of foreign countries, and filings may have to be made with foreign
governments under their pre-merger notification statutes. The filing
requirements of various nations are being analyzed by the parties, and, where
necessary, the parties intend to make such filings.
STATE TAKEOVER LAWS. Section 203 of the DGCL limits the ability of a
Delaware corporation to engage in business combinations with "interested
stockholders" (defined generally as any beneficial owner of 15% or more of the
outstanding voting stock in the corporation) unless, among other things, the
corporation's board of directors has given its prior approval to either the
business combination or the transaction which resulted in the stockholder
becoming an "interested stockholder." The Company's Board of Directors has
approved the Merger Agreement and Merger Sub's acquisition of the Shares
pursuant to the Offer and, therefore, Section 203 of the DGCL is inapplicable to
the Offer and the Merger.
Based on information supplied by or on behalf of the Company, Merger Sub
does not believe that any state takeover laws purport to apply to the Offer or
the Merger. Neither Parent nor Merger Sub has currently complied with any state
takeover statute or regulation. Merger Sub reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger, and if an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Merger, Merger Sub might
be required to file certain information with, or to receive approvals from, the
relevant state authorities, and Merger Sub might be unable to accept for payment
or pay for any Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the Merger. Under such circumstances, Merger Sub may
not be obliged to accept for payment or pay for any Shares tendered pursuant to
the Offer.
CERTAIN LITIGATION. On August 15, 2000, an action was commenced against the
Company and its directors in the Superior Court of Washington in and for King
County by Neil Baldwin, purporting to bring suit as a shareholder on behalf of a
proposed class of shareholders of the Company. The complaint alleges, among
other things, that the defendants have breached their fiduciary duties of
undivided loyalty, independence and due care with respect shareholders in
connection with the Offer and the Merger, that individual defendants are engaged
in self-dealing in connection with the Offer and the Merger, and that individual
defendants have breached their fiduciary duty to "secure and obtain the best
price reasonable under the circumstances" in connection with the Offer and the
Merger. The plaintiff generally seeks declaratory and injunctive relief,
including directing the individual defendants to exercise their fiduciary duties
"to obtain a transaction which is in the best interests of [the Company's]
shareholders until the process for the sale or auction of the Company is
completed." The time for the defendants to respond has not yet elapsed.
38
<PAGE>
16. FEES AND EXPENSES.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") is acting as
Dealer Manager in connection with the Offer and has provided certain financial
advisory services to Parent in connection therewith. Parent has agreed to pay
DLJ reasonable and customary compensation for its services as Dealer Manager and
as financial advisors in connection with the Offer. Parent has agreed to
reimburse DLJ for its reasonable out-of-pocket expenses, including the fees and
expenses of its counsel, in connection with the Offer, and has agreed to
indemnify DLJ against certain liabilities and expenses in connection with the
Offer, including liabilities under the federal securities laws. At any time DLJ
and its affiliates may actively trade the Shares for their own account or for
the account of customers and, accordingly, may at any time hold a long or short
position in the Shares.
MacKenzie Partners, Inc. is acting as Information Agent in connection with
the Offer. The Information Agent may contact holders of the Shares by personal
interview, mail, telephone, telex, telegraph and other methods of electronic
communication and may request brokers, dealers, banks, trust companies and other
nominees to forward the Offer materials to beneficial holders. The Information
Agent will receive reasonable and customary compensation for its services, be
reimbursed for certain reasonable out-of-pocket expenses and be indemnified
against certain liabilities and expenses in connection with its services,
including certain liabilities under the Federal securities laws.
Merger Sub will pay the Depositary reasonable and customary compensation for
its services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Merger Sub for customary mailing and handling expenses incurred by
them in forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of the Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, Merger Sub may, in its sole discretion, take such action
as it may deem necessary to make the Offer in any such jurisdiction and extend
the Offer to holders of the Shares in such jurisdiction.
Neither Parent nor Merger Sub is aware of any jurisdiction in which the
making of the Offer or the acceptance of the Shares in connection therewith
would not be in compliance with the laws of such jurisdiction.
Parent and Merger Sub have filed the Schedule TO with the SEC pursuant to
Rule l4d-3 of the General Rules and Regulations under the Exchange Act,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. The Schedule TO and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the principal office
of the SEC in Washington, D.C. in the manner set forth in Section 8 and are
available from Parent at the address set forth in Section 9.
No person has been authorized to give any information or make any
representation on behalf of Parent or Merger Sub not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
PICARD ACQUISITION CORP.
August 21, 2000
39
<PAGE>
SCHEDULE A
INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS OF PARENT AND MERGER SUB
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
director and executive officer of Parent. Each such person is a citizen of the
United States of America, unless otherwise noted, and the business address of
each such person is c/o Chiron Corporation, 4560 Horton Street, Emeryville,
California 94608.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------------------
<S> <C>
Raymund Breu......................... Director of Chiron since May 1999. Chief Financial Officer and
a Member of the Executive Committee of Novartis AG since
December 1996. Citizen of Switzerland.
Vaughn D. Bryson..................... Director of Chiron since June 1997.
Lewis W. Coleman..................... Director of Chiron since 1991.
Rajen K. Dalal....................... Vice President of Chiron since 1991 and President of Chiron
Blood Testing since 1998. Citizen of India.
Pierre E. Douaze..................... Director of Chiron since 1995. From December 1996 through
December 1997, he was a member of the Executive Committee of
Novartis AG and Head of its Healthcare Division and Pharma
Sector. In December 1997, Mr. Douaze retired from Novartis AG.
Citizen of France.
William G. Green..................... Senior Vice President, Secretary and General Counsel of Chiron
since 1990 and Director, Vice President and Secretary of the
Purchaser.
Paul J. Hastings..................... Vice President of Chiron and President of Chiron
BioPharmaceuticals since 1999. Prior to joining Chiron, he was
the Presidient, Chief Executive Officer and member of the
board of LXR Biotechnology. From 1993 to 1998, Mr. Hastings
spent five years at Genzyme Corporation in Cambridge,
Massachusetts, as President of Genzyme Therapeutics.
Paul L. Herrling..................... Director of Chiron since 1997, is the Head of Research at
Novartis Pharma AG and a member of the Novartis Pharma
Executive Board. Citizen of Switzerland.
Peter K. Jensen...................... Vice President of Chiron and Head of Development since 1999.
Prior to joining Chiron, he was the Development Director and
Chief Medical Officer of British Biotech plc from 1998 to 1999
in Oxford, England, President in Annapolis, Maryland. From
1996 to 1998 he was Vice President, Clinical Research and Drug
Safety of the Schering-Plough Research Institute.
Sean P. Lance........................ President and Chief Executive Officer of Chiron since May 1998
and Chairman of the Board since May 1999. Citizen of South
Africa.
Edward E. Penhoet.................... Co-founder of Chiron and a Director since its inception in
1981, Chief Executive Officer of Chiron until May 1998.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------------------
<S> <C>
William J. Rutter.................... Director of Chiron, Co-founder of Chiron, served as Chairman
of the Board from Chiron's inception in 1981 until May 1999
when he became Chairman of the Board Emeritus. He served as
Director of Novartis AG from 1995 until April 1999.
Jack W. Schuler...................... Director of Chiron since 1990.
Linda W. Short....................... Vice President, Human Resources, of Chiron until 1999. In
1999, she was promoted to Vice President, Corporate Resources.
Prior to joining Chiron, she was the Director of Human
Resources of Industrial Indemnity from 1994 to 1997.
David V. Smith....................... Vice President, Controller of Chiron since 1999. Prior to
joining Chiron, he was the Vice President, Finance and Chief
Financial Officer of Anergen, Inc. from 1997 until he joined
Chiron. From 1988 to 1997, he held various financial
management positions with Genentech, Inc.
Pieter J. Strijkert.................. Director of Chiron since 1987. Citizen of The Netherlands.
James R. Sulat....................... Vice President and Chief Financial Officer of Chiron since
1998 and President of Purchaser.
Lewis T. Williams.................... Senior Vice President and President of Chiron Technologies
until 1998. In 1998, he was promoted to Chief Scientific
Officer of Chiron. In May 1999, he was appointed a Director of
Chiron.
</TABLE>
A-2
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB. The following table
sets forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Merger Sub. Each such person is a citizen of
the United States of America, unless otherwise noted, and the business address
of each such person is c/o Chiron Corporation, 4560 Horton Street, Emeryville,
California 94608.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------------------
<S> <C>
James R. Sulat....................... Director and President of Merger Sub. Vice President and Chief
Financial Officer of Parent.
William G. Green..................... Director, Vice President and Secretary of Merger Sub. Senior
Vice President, Secretary and General Counsel of Parent.
</TABLE>
A-3
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted properly completed and duly executed. The Letter of Transmittal,
certificates for the Shares and any other required documents should be sent or
delivered by each stockholder of the Company or his broker-dealer, commercial
bank, trust company or other nominee to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, NY 10268-1023 88 Pine Street, 19th Floor
New York, NY 10005
</TABLE>
BY FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(212) 701-7636
FOR INFORMATION (CALL COLLECT):
(212) 701-7624
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal, the Notice of Guaranteed Delivery and
related materials may be directed to the Information Agent at the telephone
numbers and location listed below. You may also contact your broker, dealer,
commercial bank or trust company or other nominee for assistance concerning the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
[LOGO]
2121 Avenue of the Stars
Los Angeles, California 90067
(310) 282-6161 (Call Collect)
A-4
