As filed with the Securities and Exchange Commission on May 5, 2000.
Registration No. 333-35080
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PE Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware 3826 06-1534213
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation
or Organization)
761 Main Avenue
Norwalk, Connecticut 06859
(203) 762-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
William B. Sawch, Esq.
Senior Vice President and General Counsel
PE Corporation
50 Danbury Road
Wilton, Connecticut 06897
(203) 761-2900
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
Copies to:
Richard A. Garvey, Esq. Kwang-I Yu Kendall R. Bishop, Esq.
Simpson Thacher & Bartlett Paracel, Inc. O'Melveny & Myers LLP
425 Lexington Avenue 80 South Lake Avenue 1999 Avenue of the Stars,
New York, New York 10017 Suite 650 Suite 700
(212) 455-2000 Pasadena, California 91101 Los Angeles, California
(626) 744-2000 90067
(310) 553-6700
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effectiveness of this registration statement and the
consummation of the merger described herein.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| __________________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _____________________________
The registrant amends this registration statement on the date or dates as
may be necessary to delay its effective date until the registrant files a
further amendment which specifically states that this registration statement
will become effective in accordance with Section 8(a) of the Securities Act or
until this registration statement becomes effective on a date that the SEC,
acting pursuant to Section 8(a), may determine.
<PAGE>
[GRAPHIC OMITTED]
[LOGO]PARACEL
YOUR VOTE ON OUR PROPOSED MERGER IS VERY IMPORTANT!
Dear Stockholder:
The boards of directors of PE Corporation and Paracel, Inc. have approved
the acquisition of Paracel by PE Corporation. As a result of the merger, Paracel
will become a wholly owned subsidiary of PE Corporation.
We believe that the merger is in the best interest of the Paracel
stockholders. This is based upon, among other things, our belief that the PE
Corporation--Celera Genomics group's leadership position in genomic content, its
brand name and its financial strength, combined with Paracel's genomic analysis
technology and competence in large-scale computing, will create a combined
business with greater potential to advance the fields of genomic research and
drug discovery, and their eventual clinical applications.
If we complete the merger, then Paracel stockholders will receive, for
each of their shares of Paracel common stock, a fraction of a share of PE
Corporation--Celera Genomics Group Common Stock determined on the basis of a
formula described in detail elsewhere in this prospectus.
We cannot complete the merger unless the stockholders of Paracel approve
the merger, adopt the merger agreement and form of escrow agreement, and approve
the appointment of Joseph T. Kingsley as the representative of Paracel
stockholders under the escrow agreement.
The board of directors of Paracel has scheduled a special meeting of its
stockholders to vote on this important matter.
The special meeting is being held on June 9, 2000, at 10:00 a.m. Pacific
Time, at the offices of Paracel, Inc., in Pasadena, California.
Paracel stockholders owning 4,460,417 shares, or approximately 53% of
Paracel's outstanding stock on the record date for the special meeting, have
entered into a voting agreement with PE Corporation and its merger subsidiary,
pursuant to which they have agreed to vote in favor of these items.
This document provides you with detailed information about the proposed
merger. It also contains information about Paracel and PE Corporation. We
encourage you to read this document carefully. In particular, you should read
the "Risk Factors" section for a description of the various risks you should
consider in evaluating the proposed transaction and "The Merger -- Consideration
to Be Received in the Merger; Treatment of Stock Options" for a description of
the exchange provisions.
We are very enthusiastic about this merger and the strength and
capabilities we expect from Paracel's combination with PE Corporation.
I join with the other members of the Paracel board of directors in
recommending that you vote in favor of the merger agreement, the form of escrow
agreement, the merger and the other related matters.
Sincerely,
Kwang-I Yu
Chairman of the Board,
President and Chief
Executive Officer
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Neither the SEC nor any state securities commission has approved the securities
to be issued under this document or determined if this document is accurate or
adequate. Any representation to the contrary is a criminal offense.
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This prospectus is dated May 9, 2000, and is first being mailed to the
stockholders of Paracel, Inc. on or about May 11, 2000.
<PAGE>
[GRAPHIC OMITTED]
[LOGO]PARACEL
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 2000
A special meeting of stockholders of Paracel, Inc. will be held at the
offices of Paracel, Inc., 80 South Lake Avenue, Suite 650, Pasadena, California,
on June 9, 2000, at 10:00 a.m. Pacific Time, to consider and vote on the
following matters described in this prospectus:
1. To approve and adopt together as one matter:
o an Agreement and Plan of Merger, dated as of March 20, 2000,
among PE Corporation, Paracel, Inc. and Umbrella Acquisition
Corp., a subsidiary of PE Corporation, and the merger
contemplated by that agreement;
o a form of Escrow Agreement, to be entered into among PE
Corporation, a representative of the Paracel stockholders and
an escrow agent, in connection with the merger; and
o the appointment of Joseph T. Kingsley, Chief Financial Officer
of Paracel, as representative of the Paracel stockholders
under the Escrow Agreement.
2. To transact other business that may properly come before the special
meeting.
The board of directors of Paracel, Inc. has fixed the close of business on
May 8, 2000, as the record date for the determination of stockholders entitled
to receive notice of and to vote at the special meeting. A list of the
stockholders entitled to vote will be open to the examination of stockholders at
Paracel, Inc., 80 South Lake Avenue, Suite 650, Pasadena, California during
ordinary business hours from May 8, 2000, to the date of the meeting.
By Order of the Board of Directors,
Kwang-I Yu
Chairman of the Board, President and
Chief Executive Officer
May 9, 2000
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, California 91101
Your Vote Is Important!
To be sure your shares are represented at the meeting,
please complete, date, sign and return your proxy card
in the enclosed postage-paid envelope as soon as possible.
You may vote in person at the meeting even if you
send in your proxy card.
<PAGE>
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE PE CORPORATION/PARACEL MERGER..................2
SUMMARY........................................................................4
RECENT STOCK PRICES............................................................9
RISK FACTORS..................................................................10
Risks Related to the Merger...............................................10
Risks Related to the Celera Genomics Group................................11
Risks Related to a Capital Structure with Two
Separate Classes of Common Stock......................................17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................21
THE SPECIAL MEETING...........................................................21
Date, Time and Place......................................................21
Matters to Be Considered at the Special Meeting...........................22
Record Date; Stock Entitled to Vote; Quorum...............................22
Vote Required.............................................................22
Share Ownership of Management and Others..................................22
Shares Subject to Voting Agreement........................................23
Voting of Proxies.........................................................23
Revoking Proxies..........................................................23
Proxy Solicitation........................................................24
THE COMPANIES.................................................................24
PE Corporation............................................................24
Paracel, Inc..............................................................24
Umbrella Acquisition Corp.--PE Corporation's Merger Subsidiary............25
THE MERGER....................................................................25
Background of the Merger..................................................25
Reasons for the Merger....................................................28
Recommendation of the Paracel Board of Directors..........................30
Opinion of Financial Advisor to Paracel...................................30
Structure of the Merger...................................................36
Closing Matters...........................................................36
Consideration to Be Received in the Merger; Treatment of Stock Options....36
Exchange of Certificates in the Merger....................................37
Fractional Shares.........................................................37
Representations and Warranties............................................38
Covenants.................................................................39
Conditions to the Merger..................................................41
Stock Exchange Listings...................................................42
Regulatory Approvals Required.............................................43
Termination of the Merger Agreement.......................................43
Amendment and Waiver of the Merger Agreement..............................43
Expenses..................................................................44
Effect on Employee Benefits, Stock Plan and Stock Options.................44
Material United States Federal Income Tax Consequences....................44
Anticipated Accounting Treatment..........................................46
Interests of Certain Persons in the Merger................................46
Resale of Celera Genomics Common Stock....................................47
Dissenters' Rights........................................................48
Voting Agreement..........................................................49
Escrow Agreement..........................................................50
Stockholder Representative................................................50
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF PE CORPORATION.................52
DESCRIPTION OF PE CORPORATION CAPITAL STOCK...................................54
General...................................................................54
Celera Genomics Common Stock..............................................54
PE Biosystems Common Stock................................................62
Rights Agreement..........................................................63
COMPARISON OF STOCKHOLDER RIGHTS..............................................65
Authorized Shares.........................................................65
Directors.................................................................65
Charter and Bylaw Amendments..............................................66
Stockholder Meeting Procedures............................................67
Transaction of Business...................................................67
Business Combinations with Interested Persons.............................68
Limitation on Directors' Liability........................................68
Indemnification of Directors and Officers.................................69
Dissenters' Rights........................................................70
Right to Examine Stockholder List; Right to Inspect Corporate Records.....70
Interested Director Transactions..........................................71
Sources of Dividends and Repurchases of Shares............................71
Application of the California Corporations Code to Delaware Corporations..72
EXPERTS.......................................................................72
LEGAL OPINIONS................................................................72
WHERE YOU CAN FIND MORE INFORMATION...........................................72
ANNEXES
Annex I Agreement and Plan of Merger
Annex II Voting Agreement
Annex III Form of Escrow Agreement
Annex IV Opinion of Thomas Weisel
Annex V Chapter 13 of the CCC
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE PE CORPORATION/PARACEL MERGER
Q: Why are the two companies proposing to merge?
A: The companies have complementary technologies, skills and markets. The PE
Corporation--Celera Genomics group has unique biological content, an
established brand name and substantial financial strength. Paracel has
technologies useful to the analysis of genomic content and a growing
worldwide technical sales and support organization. The merger will create
a combined business that can both generate and analyze genomic data on an
enhanced scale, and is expected to provide high value content and analysis
tools to the biotechnology, pharmaceutical and medical markets.
Q: What are the benefits of the merger?
A: By combining with the Celera Genomics group, we believe Paracel will
achieve greater competitiveness in the life sciences industry. It will
gain access to the Celera Genomics group's biological knowledge and
databases and it will be able to leverage the human and financial
resources of PE Corporation to help achieve critical mass more quickly in
a rapidly evolving field. We also believe Paracel will be able to provide
greater value to customers by developing products based on the combined
and complementary technologies of the Celera Genomics group and Paracel.
Q: How is this transaction being structured?
A: If all conditions to the merger are satisfied, Umbrella Acquisition Corp.,
a wholly owned subsidiary of PE Corporation, will merge with and into
Paracel, with Paracel continuing as the surviving corporation. Following
the merger, Paracel will be a wholly owned subsidiary of PE Corporation.
Q: What will Paracel stockholders receive for their Paracel shares?
A: Paracel stockholders will receive a fraction of a share of PE
Corporation-Celera Genomics Group Common Stock in exchange for each of
their shares of Paracel common stock. Except as discussed below, this
fraction will be derived by dividing $283 million (a mutually agreed
dollar value of Paracel), by 10,533,349 (the total number of shares of
Paracel common stock that would be outstanding if all Paracel stock
options outstanding on March 20, 2000 were exercised), by the 10-day
average closing price of a share of Celera Genomics common stock ending on
(and excluding) the second day prior to the closing date of the merger,
rounded to the nearest 1/10,000th of a share. We have agreed that this
fraction will in no event be less than .1472 nor more than .2146. If the
closing of the merger were to have occurred on May 4, 2000, each issued
and outstanding share of Paracel common stock would have been exchanged
for .2146 shares of Celera Genomics common stock, and the aggregate
consideration paid to Paracel stockholders would have been less than $283
million. See "The Merger -- Consideration to Be Received in the Merger;
Treatment of Stock Options," for more details of how this fraction is
calculated.
PE Corporation will not issue fractional shares in the merger. As a
result, the total number of shares of Celera Genomics common stock that
Paracel stockholders will receive in the merger will be rounded down to
the nearest whole number, and Paracel stockholders will receive a cash
payment for the value of the fraction of a share of Celera Genomics common
stock that they would otherwise receive, if any.
Q: Will PE Corporation stockholders receive any shares as a result of the
merger?
A: No. PE Corporation stockholders will continue to hold the PE Corporation
shares they currently own.
Q: Will PE Corporation receive any shares as a result of the merger?
A: The PE Corporation--PE Biosystems group is a stockholder of Paracel and
will receive its pro rata portion of the shares to be issued in the
merger.
Q: When do you expect the merger to be completed?
A: We expect the merger to be completed in June of 2000. The merger agreement
requires that the merger be completed by June 30, 2000. However, the
closing date may be extended to July 31, 2000, if every condition to the
merger other than the holding of the special meeting has been satisfied.
Q: What are the tax consequences of the merger to stockholders?
A: Paracel stockholders who exchange their shares of Paracel common stock
solely for shares of Celera Genomics common stock pursuant to the merger
will not recognize any gain or loss on the exchange for United States
federal income tax purposes, except with respect to the cash, if any,
2
<PAGE>
received instead of fractional share interests of Celera Genomics common
stock. The merger will not have any tax consequences for PE Corporation
stockholders. To review the tax consequences to stockholders in greater
detail, see "Material United States Federal Income Tax Consequences."
Q: What will Paracel stockholders' tax basis be in the Celera Genomics common
stock they receive in the merger?
A: Your tax basis in your total shares of Celera Genomics common stock will
equal your current tax basis in your Paracel common stock reduced by the
amount of basis allocable to fractional shares for which you receive a
cash payment.
Q: Will I be able to sell the shares of Celera Genomics common stock I
receive in the merger?
A: Yes. All stockholders of Paracel, other than those deemed to be affiliated
or controlling stockholders, will generally be free to sell their shares.
Affiliates of Paracel will be able to sell their shares of Celera Genomics
common stock within the limits permitted by Rule 145 under the Securities
Act.
Q: What do I need to do now?
A: After you have carefully read this document, indicate on your proxy card
how you want to vote and mail your signed proxy card in the enclosed
return envelope as soon as possible, so that your shares may be
represented at Paracel's special meeting. The Paracel special meeting will
take place on June 9, 2000.
Q: Can I change my vote after I have mailed my proxy card?
A: Yes. You can change your vote at any time before your proxy is voted at
Paracel's special meeting. You can do this in one of three ways. First,
you can send a written notice to the Chief Financial Officer of Paracel
stating that you would like to revoke your proxy. Second, you can complete
and submit a new proxy card by following the instructions on the proxy
card. Third, you can attend Paracel's special meeting and vote in person.
However, Paracel stockholders who are parties to the voting agreement with
PE Corporation and Umbrella Acquisition Corp. may not revoke the proxies
they granted to the officers of Umbrella Acquisition Corp. under that
agreement. The voting agreement is described in the section entitled
"Voting Agreement."
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, we will send Paracel stockholders
written instructions for exchanging their share certificates.
Q: Who can help answer questions?
A: If you have more questions about the merger or need assistance in voting
your shares, you should contact:
Joseph T. Kingsley
Chief Financial Officer
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, California 91101
(626) 744-2000
3
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SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. To better
understand the merger and for a more complete description of the legal terms of
the merger, you should read carefully this entire document and the documents we
have referred you to. See "Where You Can Find More Information."
The Companies (See Page 24)
PE CORPORATION
761 Main Avenue
Norwalk, Connecticut 06859
(203) 762-1000
Internet address: www.pecorporation.com
PE Corporation conducts its business through two groups: the Celera
Genomics group and the PE Biosystems group. Each of these two groups has its own
class of common stock.
The Celera Genomics group is engaged principally in the generation, sale
and support of genomic information and related information management and
analysis software; discovery, validation and licensing of proprietary gene
products, genetic markers and information concerning genetic variability; and
related consulting and contract research and development services.
The PE Biosystems group is a world leader in the development, manufacture,
sale and service of instrument systems and associated consumable products for
life science research and related applications. Its products are used in various
applications including the synthesis, amplification, purification, isolation,
analysis and sequencing of nucleic acids, proteins and other biological
molecules.
The information contained on PE Corporation's website is not incorporated
by reference in this prospectus.
PARACEL, INC.
80 South Lake Avenue, Suite 650
Pasadena, California 91101
(626) 744-2000
Internet address: www.paracel.com
Paracel, a privately held California corporation, is a producer of
advanced genomic and text analysis technologies. Its products include a hardware
accelerator for sequence comparison (GeneMatcher(TM)), a hardware accelerator
for text search (TextFinder(TM)), and sequence analysis software tools. Its
customers include pharmaceutical, biotechnology and genomic companies; research
centers; and government institutions worldwide.
The information contained on Paracel's website is not incorporated by
reference in this prospectus.
UMBRELLA ACQUISITION CORP.
c/o PE Corporation
761 Main Avenue
Norwalk, Connecticut 06859
(203) 762-1000
Umbrella Acquisition Corp. is a wholly owned subsidiary of PE Corporation
that was organized solely for purposes of completing the merger.
The Special Meeting (See Page 21)
Date, Time and Place. The special meeting of stockholders of Paracel will
be held at 10:00 a.m. Pacific Time, on June 9, 2000, at the offices of Paracel,
Inc., 80 South Lake Avenue, Suite 650, Pasadena, California 91101.
Matters to Be Considered at the Special Meeting. At the special meeting,
we will ask the holders of shares of Paracel common stock to:
o approve the merger and adopt the merger agreement providing for the
merger;
o approve the form of escrow agreement; and
o appoint Joseph T. Kingsley as the stockholder representative under the
escrow agreement.
Record Date; Stock Entitled to Vote; Quorum. The close of business in
Pasadena, California on May 8, 2000, is the record date for determining which
holders of Paracel common stock are entitled to vote at the special meeting. At
the record date, there were 8,450,329 shares of Paracel common stock entitled to
vote at the special meeting.
Holders of Paracel common stock as of the record date are entitled to one
vote per share on each matter to be voted on at the special meeting.
For purposes of the special meeting, a quorum consists of a majority of
the shares issued and outstanding and entitled to vote, represented in person or
by proxy.
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Vote Required (See Page 22)
The proposal to approve and adopt the merger, the merger agreement, the
form of escrow agreement, and the appointment of the stockholder representative
requires the affirmative vote of the holders of a majority of the outstanding
shares of Paracel common stock entitled to vote at the special meeting. Certain
stockholders of Paracel have already agreed to vote in favor of all items to be
presented at the special meeting pursuant to a voting agreement described below.
Share Ownership of Management and Others (See Page 22)
As of the record date, directors and executive officers of Paracel and
their affiliates beneficially owned and were entitled to vote 4,510,417
(excluding the PE Biosystems group) shares of Paracel common stock, representing
approximately 53% of the shares of Paracel common stock outstanding on the
record date.
As of the record date, the PE Biosystems group owned and was entitled to
vote 1,200,000 shares of Paracel common stock, representing approximately 14% of
the shares of Paracel common stock outstanding on the record date.
It is anticipated that the shares held by management of Paracel and the PE
Biosystems group will be voted in favor of the various matters to be considered
at the special meeting.
Shares Subject to Voting Agreement (See Page 22)
Pursuant to a voting agreement among PE Corporation, Umbrella Acquisition
Corp. and certain key stockholders of Paracel that was entered into in
connection with the merger agreement, officers of Umbrella Acquisition Corp.
hold proxies to vote 4,460,417 shares of Paracel common stock, representing
approximately 53% of the shares of Paracel common stock outstanding on the
record date.
Accordingly, the officers of Umbrella Acquisition Corp. currently hold
proxies sufficient to approve the proposed merger, adopt the merger agreement
and the form of escrow agreement, and appoint Joseph T. Kingsley as stockholder
representative under the escrow agreement, as described above under "--Vote
Required."
Recommendation of the Paracel Board of Directors (See Page 30)
The Paracel board of directors believes that the merger agreement, the
merger, and the form of escrow agreement are fair to and in the best interests
of Paracel and its stockholders and has approved and declared advisable the
merger agreement, the merger, the form of escrow agreement, and the appointment
of Joseph T. Kingsley as stockholder representative. The Paracel board of
directors recommends that Paracel stockholders vote FOR the approval of the
merger and adoption of the merger agreement and the form of escrow agreement,
and the appointment of Joseph T. Kingsley as stockholder representative under
the escrow agreement.
The Merger (See Page 25)
The merger agreement provides for the acquisition by PE Corporation of
Paracel. If the merger agreement and related matters are approved by Paracel
stockholders, Paracel will merge with Umbrella Acquisition Corp. and become a
wholly owned subsidiary of PE Corporation.
The merger agreement is attached as Annex I to this prospectus. We
encourage you to read the merger agreement carefully because it is the legal
document that governs the merger.
Consideration to Be Received in the Merger (See Page 36)
As a result of the merger, each share of Paracel common stock will be
converted into the right to receive a fraction of a share of PE
Corporation-Celera Genomics Group Common Stock. Except as discussed below, this
fraction will be derived by dividing $283 million (a mutually agreed dollar
value of Paracel), by 10,533,349 (the total number of shares of Paracel common
stock that would be outstanding if all Paracel stock options outstanding on
March 20, 2000, were exercised), by the 10-day average closing price of a share
of Celera Genomics common stock ending on (and excluding) the second day prior
to the closing date of the merger, rounded to the nearest 1/10,000th of a share.
We have agreed that this fraction will in no event be less than .1472 nor more
than .2146. We refer to this fraction as the "exchange ratio." If the closing of
the merger were to have occurred on May 4, 2000, each issued and outstanding
share of Paracel common stock would exchanged for .2146 shares of Celera
Genomics common stock, and the aggregate consideration paid to Paracel
stockholders would have been less than $283 million. See "The Merger --
Consideration to Be Received in Merger; Treatment of Stock Options," for more
details of how the exchange ratio is calculated.
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5
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PE Corporation will not issue fractional shares in the merger. As a
result, the total number of shares of Celera Genomics common stock that Paracel
stockholders will receive in the merger will be rounded down to the nearest
whole number, and Paracel stockholders will receive a cash payment for the value
of the fraction of a share of Celera Genomics common stock that they would
otherwise receive.
Reasons for the Merger (See Page 27)
We believe the combination of the businesses of Paracel and the Celera
Genomics group will provide many potential advantages, including, among others,
the following:
o The ability to combine the data resources of the Celera Genomics group
with Paracel's bioinformatics technology to help users to more rapidly
discover therapeutic and diagnostic candidates from genetic sequence
information;
o The ability to create and host an Internet-enabled portal that could
expand the market for genomics information, products and services by using
Paracel's technology and expertise;
o Accelerated product development through the integration of each company's
resources and capabilities; and
o Accelerated development of advanced systems for the large-scale analysis
of genetic variation.
Conditions to the Merger (See Page 41)
The completion of the merger depends upon the satisfaction of a number of
conditions, including the following:
o Paracel stockholders' approval of the merger, adoption of the merger
agreement and the form of escrow agreement, and appointment of a
stockholder representative;
o the absence of any injunction or legal restraint that prohibits the
merger;
o clearance of the merger under antitrust laws and the receipt of other
required regulatory approvals and authorizations;
o execution of the escrow agreement;
o the material accuracy as of the closing of each party's representations
and warranties contained in the merger agreement;
o the performance by each party of its obligations under the merger
agreement;
o the absence of litigation which seeks to prohibit the merger or limit PE
Corporation's operation of Paracel;
o receipt by PE Corporation of affiliate letters;
o receipt of legal opinions from counsel stating, among other things, that
the merger will qualify as a tax-free reorganization;
o exercise of dissenters' rights by holders of not more than 5% of the
Paracel common stock; and
o execution of an employment agreement between Kwang-I Yu and PE
Corporation.
Termination of the Merger Agreement (See Page 43)
Right to Terminate. We may mutually agree to terminate the merger
agreement at any time. In addition, either PE Corporation or Paracel may
terminate the merger agreement if specified events do or do not occur. These
include:
o if a court or government regulator permanently prohibits the merger; and
o if the merger is not completed by June 30, 2000; however, this deadline
will be extended to July 31, 2000, if the completion of the merger is
delayed only because the special meeting of Paracel stockholders to
approve the merger has not yet been held.
The merger agreement may also be terminated by PE Corporation if the
Paracel stockholders fail to approve the merger, adopt the merger agreement and
the form of escrow agreement, and appoint a stockholder representative at the
special meeting.
Effect of Termination. The merger agreement will become void and have no
effect upon its termination, without any liability or obligation on the part of
PE Corporation, Umbrella Acquisition Corp. or Paracel, except for certain
provisions which will survive on customary terms.
Material United States Federal Income Tax Consequences (See Page 44)
We have structured the merger so that neither PE Corporation nor Paracel,
nor their respective stockholders, will recognize any gain or loss for United
States federal income tax purposes as a result of the
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6
<PAGE>
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merger, except for tax that may be payable by Paracel stockholders because of
cash received for fractional shares. We have conditioned the merger on our
receipt of legal opinions that this is the case.
The tax consequences of the merger to Paracel stockholders will depend on
the particular facts of each Paracel stockholder's own situation. Therefore,
each Paracel stockholder should consult his or her own tax advisor for a full
understanding of the merger's tax consequences.
Anticipated Accounting Treatment (See Page 46)
The merger will be accounted for using the purchase method of accounting.
Opinion of Financial Advisor to Paracel (See Page 30)
In deciding to approve the merger, the board of directors of Paracel
considered an opinion from its financial advisor, Thomas Weisel Partners LLC, to
the effect that, as of the date of the opinion and based upon and subject to
various qualifications and assumptions described in the opinion, the "exchange
ratio" specified in the merger agreement was fair from a financial point of view
to the Paracel stockholders.
This opinion is attached as Annex IV to this prospectus. We encourage you
to read this opinion in its entirety.
Interests of Certain Persons in the Merger (See Page 46)
In connection with the merger, Kwang-I Yu, Chairman of the Board,
President and Chief Executive Officer of Paracel, will enter into an employment
agreement with PE Corporation under which he will become eligible for certain
benefits. In addition, PE Corporation and Paracel have agreed to indemnify, and
maintain directors' and officers' insurance covering, directors and officers of
Paracel following the merger.
Two members of PE Corporation's management have an interest in Paracel.
Michael W. Hunkapiller, President of the PE Biosystems group and Senior Vice
President of PE Corporation, is a member of Paracel's board of directors and
holds stock options in Paracel. Dr. Hunkapiller did not participate in the
Paracel board of directors' vote to approve the merger due to the potential
conflict of interest. Mark Adams, Vice President of Genome Programs for the
Celera Genomics group, is a member of Paracel's Scientific Advisory Board and
also holds stock options in Paracel. Vesting of stock options held by members of
Paracel's Scientific Advisory Board, including those held by Dr. Adams, will be
accelerated in connection with the merger. See "The Merger-- Background of the
Merger" for an expanded discussion of Dr. Hunkapiller's and Dr. Adams' interests
in the merger.
Voting Agreement (See Page 49)
In connection with the merger agreement, PE Corporation, Umbrella
Acquisition Corp. and certain holders of Paracel common stock have entered into
a voting agreement, dated March 20, 2000, pursuant to which those stockholders
have agreed to vote their shares for approval of the merger, adoption of the
merger agreement and the form of escrow agreement, and appointment of Joseph T.
Kingsley as stockholder representative under the escrow agreement, and have
granted irrevocable proxies to officers of Umbrella Acquisition Corp. to vote
their shares for this purpose. Such stockholders have also agreed to waive
certain rights in connection with the merger with respect to their shares under
agreements they entered into with Paracel; to terminate those agreements upon
consummation of the merger; not to demand their appraisal rights under
applicable California law in connection with the merger; and not to transfer
their shares or grant any other proxies except as contemplated by the merger
agreement. The voting agreement will remain in effect until the termination of
the merger agreement or the closing of the merger.
The voting agreement is attached as Annex II to this prospectus. We
encourage you to read the voting agreement carefully.
Escrow Agreement (See Page 49)
Before the effective time of the merger, PE Corporation, Joseph T.
Kingsley, as representative for the Paracel stockholders, and an escrow agent
will enter into an escrow agreement providing for 5% of the total Celera
Genomics common stock to be issued as merger consideration for Paracel common
stock in the merger to be delivered to the escrow agent upon the closing of the
merger. The escrowed shares of Celera Genomics common stock will be held in an
escrow account established as the exclusive source of indemnification to PE
Corporation for any losses arising from any breach by Paracel of its
representations and warranties in the merger agreement or any failure by Paracel
to perform its obligations under the merger agreement. Under the escrow
agreement, the Paracel stockholders will grant PE Corporation a first priority
security interest in the shares of Celera Genomics common stock held in the
escrow account to secure the performance of the obligations under the escrow
agreement. The escrow agreement is an integral part of the merger agreement.
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The escrow agreement will be terminated when the last share of Celera
Genomics common stock held in the escrow account is distributed to the
stockholders or used to satisfy claims.
The form of escrow agreement is attached as Annex III to this prospectus.
We encourage you to read the form of escrow agreement carefully.
Stockholder Representative (See Page 50)
Joseph T. Kingsley, Chief Financial Officer of Paracel, has been
recommended by the Paracel board of directors to serve as the stockholder
representative under the escrow agreement. As stockholder representative, Mr.
Kingsley would act on behalf of the Paracel stockholders on all matters under
the escrow agreement. At the special meeting, stockholders of Paracel will be
asked to appoint Mr. Kingsley as the stockholder representative under the escrow
agreement. Mr. Kingsley is expected to continue as an employee of the combined
business following the merger, which could lead to a conflict of interest.
Dissenters' Rights (See Page 47)
Under the California Corporations Code, Paracel stockholders may dissent
from the merger and demand the "fair market value" of their shares in cash. To
exercise this right, Paracel stockholders may not vote their shares in favor of
the merger and must take certain other actions that the CCC requires. The
chapter of the CCC that relates to dissenters' rights is set forth in Annex V to
this prospectus. If you wish to exercise your dissenters' rights, you should
read this chapter carefully.
Comparison of Stockholder Rights (See Page 65)
Paracel is a California corporation and, therefore, the rights of
stockholders of Paracel currently are determined by reference to the California
Corporations Code and Paracel's articles of incorporation and bylaws. At the
effective time of the merger, stockholders of Paracel will become stockholders
of PE Corporation, which is a Delaware corporation. As a result, their rights as
stockholders will then be determined by reference to the Delaware General
Corporation Law and PE Corporation's certificate of incorporation and bylaws.
The laws of these jurisdictions vary. There are also various differences between
Paracel's articles of incorporation and bylaws and PE Corporation's certificate
of incorporation and bylaws.
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RECENT STOCK PRICES
The Celera Genomics common stock is listed on the New York Stock Exchange
and the Pacific Stock Exchange (symbol: "CRA"). See "The Merger--Stock Exchange
Listings."
The following table sets forth the range of high and low sale prices of
the Celera Genomics common stock as reported on the NYSE since May 6, 1999, the
effective date of the change of PE Corporation's then outstanding common stock
into Celera Genomics common stock and PE Biosystems common stock, two new
classes of common stock. The table below gives effect to the two-for-one stock
split of the Celera Genomics common stock effected in the form of a 100% stock
dividend distributed on February 18, 2000.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1999 HIGH LOW
<S> <C> <C> <C> <C>
Fourth Quarter (from May 6, 1999)............................... 11 1/4 7 3/32
FISCAL YEAR ENDED JUNE 30, 2000
First Quarter................................................... 26 29/32 7 7/8
Second Quarter.................................................. 96 13/32 15 3/16
Third Quarter................................................... 276 73
Fourth Quarter (through May 4, 2000) .......................... 151 57
</TABLE>
On March 20, 2000, the last trading day before the public announcement of
the merger agreement, the closing price of the Celera Genomics common stock as
reported on the NYSE was $1021/8 per share.
On May 4, 2000, the closing price of the Celera Genomics common stock as
reported on the NYSE was $86 1/2 per share.
There is no established trading market for Paracel common stock.
Stockholders are urged to obtain current quotations for the market prices
of the Celera Genomics common stock. No assurance can be given as to the market
price of the Celera Genomics common stock at the effective time of the merger.
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RISK FACTORS
Paracel stockholders should carefully consider the following factors, in
addition to those factors discussed in the documents that PE Corporation has
filed with the SEC which we have incorporated by reference into this document,
and the other information included in this prospectus, before voting on the
proposal to approve and adopt the merger agreement, the merger, the form of
escrow agreement, and the appointment of the stockholder representative.
Risks Related to the Merger
The Structure of the Exchange Ratio Will Cause the Number of Shares of
Celera Genomics Common Stock to Be Received in the Merger to Vary. In addition,
At the Outer Limits of the Exchange Ratio, the Value of Celera Genomics Common
Stock to Be Received in the Merger Will Fluctuate and Will Cause the Value of
the Merger to the Paracel Stockholders to Vary. The fraction of a share of
Celera Genomics common stock to be received in the merger for each share of
Paracel common stock will vary, within limits, depending upon the 10-day average
closing price of a share of Celera Genomics common stock ending on (and
excluding) the second day prior to the closing date of the merger. The market
price of Celera Genomics common stock has been very volatile. For example,
during the period commencing May 6, 1999, (the effective date of the change of
the then outstanding common stock into Celera Genomics common stock and PE
Biosystems common stock) and ending on May 4, 2000, the most recent date prior
to the mailing of this prospectus, the closing price of Celera Genomics common
stock (adjusted for a stock split) varied from a low of $7 11/32 to a high of
$250 7/8 and ended that period at $86 1/2. See "Summary--Recent Stock Prices"
for more detailed Celera Genomics common stock share price information. These
variations may be the result of various factors including:
o changes in the business, operations or prospects of the Celera
Genomics group;
o changes in the business, operations or prospects of PE Corporation;
and
o general market and economic conditions.
At the time of the special meeting, Paracel stockholders will not necessarily
know the exact number or the exact value of the Celera Genomics common stock
that will be issued in connection with the merger. If the value of Celera
Genomics common stock prior to the closing of the merger causes the exchange
ratio to reach one of its outer limits, then the total value of the merger
consideration to be paid by PE Corporation will be higher or lower than $283
million, the mutually agreed value of Paracel for purposes of calculating the
exchange ratio. For example, if the closing of the merger were to have occurred
on May 4, 2000, the exchange ratio would have been at the limit of .2146, and
the aggregate consideration paid to Paracel stockholders would have been less
than the mutually agreed value of Paracel of $283 million. Stockholders of
Paracel are urged to obtain current market quotations for Celera Genomics common
stock prior to the date of the special stockholders meeting.
The Requirement for Regulatory Approvals May Delay Consummation of the
Merger, Increasing the Risk that the Value of the Celera Genomics Common Stock
Will Fluctuate over Time. Consummation of the merger is conditioned upon the
receipt of all material governmental authorizations, consents, orders and
approvals, including the expiration or termination of the applicable waiting
periods, and any extension of the waiting periods, under antitrust laws. PE
Corporation and Paracel intend to vigorously pursue all required regulatory
approvals. No assurance can be given, however, that these approvals will be
obtained, or, if they are obtained, as to the terms, conditions and timing of
these approvals. The requirement for these approvals could delay the
consummation of the merger after Paracel stockholders have approved the
proposals relating to the merger at the special meeting. See "The
Merger--Conditions to the Merger" for a discussion of the conditions to the
consummation of the merger and "The Merger--Regulatory Approvals Required" for a
description of the regulatory approvals necessary in connection with the merger.
The Interests of Management May Be Different From Those of Stockholders.
Some members of Paracel's management and board of directors, including
individuals who will be executive officers of the surviving corporation, have
various interests in the merger that may be different from, or in addition to,
the interests of Paracel stockholders. In addition, the merger will give rise to
various entitlements and benefits to Paracel's chief executive officer under an
employment agreement to be entered into in connection with the merger. See "The
Merger--Interests of Certain Persons in the Merger"
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for more information concerning matters relating to the employment and
compensation of the directors and executive officers of Paracel.
Celera Genomics May Encounter Difficulties in the Integration and
Development of the Business of Paracel. Celera Genomics' strategy to integrate
and develop the businesses of Celera Genomics and Paracel following the merger
involves a number of elements that management may not be able to implement as
expected. For example, Celera Genomics may encounter operational difficulties in
the integration of facilities of the two companies such that expected cost
savings may not be realized. In addition, technological advances resulting from
the integration of technologies of Celera Genomics and Paracel may not be
achieved as successfully or as rapidly as currently anticipated, if at all. The
consolidation of operations, technologies and marketing and distribution methods
present significant managerial challenges. There can be no assurance that these
actions will be accomplished as successfully or as rapidly as currently
anticipated.
Risks Related to the Celera Genomics Group
Celera Genomics Has Incurred Net Losses to Date and May Not Achieve
Profitability. The Celera Genomics group has accumulated net losses of $129.7
million as of December 31, 1999, and expects that it will continue to incur
additional net losses for the foreseeable future. These losses may increase as
Celera Genomics expands its investments in new technology and product
development, including the development of its functional genomics and
personalized health/medicine efforts. As an early stage business, the Celera
Genomics group faces significant challenges in simultaneously expanding its
operations, pursuing key scientific goals and attracting customers for its
information products and services. As a result, there is a high degree of
uncertainty that the Celera Genomics group will be able to achieve profitable
operations.
Celera Genomics' Business Plan Is Unique and Expanding. No organization
has ever attempted to combine in one business organization all of the Celera
Genomics group's businesses. In addition, as Celera Genomics nears completion of
the sequencing of the human genome, it is expanding its business plan to enter
into new markets: functional genomics and personalized health/medicine. The
creation of a genomics database and the offering of functional genomics and
personalized health/medicine capabilities targeted at a wide variety of
customers, from pharmaceutical companies to university researchers, has a number
of risks, including pricing and volume issues, technology and access concerns,
computer security, pursuit of key scientific goals and protection of
intellectual property. The addition of the functional genomics and personalized
health/medicine efforts will add further complexity and require additional
management attention and resources as these new markets are addressed.
Celera Genomics' Business Plan Depends Heavily on Timely Completion of the
Sequencing and Assembly of the Human Genome. The Celera Genomics group's efforts
to complete the sequencing and assembly of the human genome are not yet
complete. Some genomic scientists have criticized the Celera Genomics group's
sequencing strategy, known as "whole genome shotgun sequencing," as having
limitations when applied on a large scale in sequencing the human genome. Others
have stated that the human genome cannot be sequenced using whole genome shotgun
sequencing. Although scientists at The Institute for Genomic Research have used
the whole genome shotgun strategy to sequence the genomes of other organisms,
the strategy has not been used to sequence a genome with the size and complexity
of the human genome. Although the Celera Genomics group has been successful in
sequencing and assembling the Drosophila genome, once the human genome has been
fully sequenced, there can be no assurance that the Celera Genomics group will
be successful in its assembly of the human genome. Celera Genomics group's
ability to retain its existing customers and attract new customers is heavily
dependent upon the completion of the sequencing and assembly of the human genome
within the expected time frames. In addition, completion of the sequencing and
assembly of the human genome is essential to the functional genomics and
personalized health/medicine components of Celera Genomics' business strategy in
which Celera Genomics intends to make substantial investments in the near
future. As a result, failure to complete the sequencing and assembly effort in a
timely manner may have a material adverse effect on the Celera Genomics group's
business.
Celera Genomics' Revenue Growth Depends on Retaining Existing and Adding
New Customers. The Celera Genomics group has a small number of customers, the
revenues from which will offset only a small portion of its expenses. In order
to generate significant additional revenues, the Celera Genomics group must
obtain additional customers and retain its existing customers. Celera Genomics'
ability to retain existing and add new customers depends upon customers'
continued belief that Celera Genomics' products can help accelerate their drug
discovery and development efforts and fundamental discoveries in biology.
Although customer agreements typically have multi-year terms, there can be no
assurance that any will be renewed upon expiration. The Celera Genomics group's
future revenues are also affected by the
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extent to which existing customers expand their agreements to include new
services and database products. In some cases, the Celera Genomics group may
accept milestone payments or future royalties on products developed by its
customers as consideration for access to Celera Genomics' databases and products
in lieu of a portion of subscription fees. Such arrangements are unlikely to
produce revenue for the Celera Genomics group for a number of years, if ever,
and depend heavily on the research and product development, sales and marketing
and intellectual property protection abilities of the customer.
Use of Genomics Information to Develop or Commercialize Products Is
Unproven. The development of new drugs and the diagnosis of disease based on
genomic information is unproven. Few therapeutic or diagnostic products based on
genomic discoveries have been developed and commercialized and to date no one
has developed or commercialized any therapeutic, diagnostic or agricultural
products based on the Celera Genomics group's technologies. If the Celera
Genomics group's customers are unsuccessful in developing and commercializing
products based on the group's databases or other products or services, customers
and the group may be unable to generate sufficient revenues and its business may
suffer as a result. Development of such products will be subject to risks of
failure, including that such products will be found to be toxic, be found to be
ineffective, fail to receive regulatory approvals, fail to be developed prior to
the successful marketing of similar products by competitors or infringe on
proprietary rights of third parties.
The Genomics Industry Is Intensely Competitive and Evolving. There is
intense competition among entities attempting to sequence segments of the human
genome and identify genes associated with specific diseases and develop products
and services based on these discoveries. Celera Genomics faces competition in
these areas from genomic, pharmaceutical, biotechnology and diagnostic
companies, academic and research institutions and government or other
publicly-funded agencies, both in the United States and abroad. A number of
companies, other institutions and government-financed entities are engaged in
gene sequencing, gene discovery, gene expression analysis, positional cloning,
the study of genetic variation, and other genomic service businesses. Some of
these competitors are developing databases containing gene sequence,
gene-expression, genetic variation or other genomic information and are
marketing or plan to market their data to pharmaceutical companies. Additional
competitors may attempt to establish databases containing this information in
the future. The Celera Genomics group has licensed some of its key technology on
a non-exclusive basis, including the Human Genome Index licensed from The
Institute for Genomic Research, and therefore such technology may be available
for license by PE Corporation's competitors.
Competitors may also discover, characterize or develop important genes,
drug targets or leads, drug discovery technologies or drugs in advance of Celera
Genomics or its customers which are more effective than those developed by
Celera Genomics or its customers, or may obtain regulatory approvals of their
drugs more rapidly than Celera Genomics' customers do, any of which could have a
material adverse effect on any of Celera Genomics' similar programs. Moreover,
these competitors may obtain patent protection or other intellectual property
rights that would limit Celera Genomics' rights or its customers' ability to use
Celera Genomics' products to commercialize therapeutic, diagnostic or
agricultural products. In addition, a customer may use the Celera Genomics
group's services to develop products that compete with products separately
developed by the group or its other customers.
Future competition will come from existing competitors as well as other
companies seeking to develop new technologies for drug discovery based on gene
sequencing, target gene identification, bioinformatics and related technologies.
In addition, certain pharmaceutical and biotechnology companies have significant
needs for genomic information and may choose to develop or acquire competing
technologies to meet such needs. Celera Genomics also faces competition from
providers of software. A number of companies have announced their intent to
develop and market software to assist pharmaceutical companies and academic
researchers in managing and analyzing their own genomic data and publicly
available data.
Celera Genomics' Current and Potential Customers Are Primarily From, and
Are Subject to Risks Faced By, the Pharmaceutical and Biotechnology Industries.
The Celera Genomics group derives a substantial portion of its revenues from
fees paid by pharmaceutical companies and larger biotechnology companies for its
information products and services, including Amgen Inc., Novartis Pharma AG,
Pharmacia & Upjohn and Pfizer Inc. The Celera Genomics group expects that
pharmaceutical companies and larger biotechnology companies will continue to be
the Celera Genomics group's primary source of revenues for the foreseeable
future. As a result, the Celera Genomics group is subject to risks and
uncertainties that affect the pharmaceutical and biotechnology industries and to
reduction and delays in research and development expenditures by companies in
these industries.
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In addition, the Celera Genomics group's future revenues may be adversely
affected by mergers and consolidation in the pharmaceutical and biotechnology
industries, which will reduce the number of the group's potential customers.
Large pharmaceutical and biotechnology customers could also decide to conduct
their own genomics programs or seek other providers instead of using Celera
Genomics' products and services.
Celera Genomics Relies Heavily on Its Strategic Relationship with PE
Biosystems. The Celera Genomics group believes that its strategic relationship
with the PE Biosystems group has provided it with a significant competitive
advantage in its efforts to date to sequence the human genome. Celera Genomics'
timely completion of that work and successful extension of its business into the
functional genomics and personalized health/medicine arenas will depend heavily
on the PE Biosystems group's ability to continue to provide leading edge,
proprietary technology and products, including technologies relating to genetic
analysis, protein analysis and high-throughput screening. If PE Biosystems is
unable to supply these technologies, Celera Genomics will need to obtain access
to alternative technologies, which may not be available, or may only be
available on unfavorable terms. Any change in the relationship with the PE
Biosystems group that adversely affects the Celera Genomics group's access to PE
Biosystems' technology or failure by PE Biosystems to continue to develop new
technologies or protect its proprietary technology could adversely affect Celera
Genomics' business.
Introduction of New Products May Expose Celera Genomics to Product
Liability Claims. New products developed by Celera Genomics could expose Celera
Genomics to potential product liability risks which are inherent in the testing,
manufacturing and marketing of human therapeutic and diagnostic products.
Product liability claims or product recalls, regardless of the ultimate outcome,
could require Celera Genomics to spend significant time and money in litigation
and to pay significant damages.
Celera Genomics Could Incur Liabilities Relating to Hazardous Materials
that It Uses in Its Research and Development Activities. Celera Genomics'
research and development activities involve the controlled use of hazardous
materials, chemicals and various radioactive materials. In the event of an
accidental contamination or injury from these materials, Celera Genomics could
be held liable for damages in excess of its resources.
Celera Genomics' Sales Cycle Is Lengthy and It May Spend Considerable
Resources on Unsuccessful Sales Efforts or May Not Be Able to Complete Deals on
the Schedule Anticipated. The Celera Genomics group's ability to obtain new
customers for genomic information products and value-added programs depends on
its customers' belief that the group can help accelerate their drug discovery
efforts. The Celera Genomics group's sales cycle is typically lengthy because
the group needs to educate potential customers and sell the benefits of its
products and services to a variety of constituencies within such companies. In
addition, each agreement involves the negotiation of unique terms. Celera
Genomics may expend substantial funds and management effort with no assurance
that an agreement will be reached with a potential customer. Actual and proposed
consolidations of pharmaceutical companies have affected and may in the future
affect the timing and progress of the Celera Genomics group's sales efforts.
Scientific and Management Staff Have Unique Expertise Which Is Key to
Celera Genomics' Commercial Viability and Which Would Be Difficult to Replace.
The Celera Genomics group is highly dependent on the principal members of its
scientific and management staff, particularly J. Craig Venter, its President.
For the sequencing and assembly of the human genome, the Celera Genomics group
believes the following members of its staff are essential: Dr. Venter; Mark
Adams, Vice President for Genome Programs; and Eugene Myers, who is responsible
for the group assembling the genome. None of these individuals are party to
employment agreements, non-competition agreements or non-solicitation agreements
with the Celera Genomics group. Additional members of the Celera Genomics
group's medical, scientific and bioinformatics staff are important to the
development of information, tools and services required for implementation of
its business plan. The loss of any of these persons' expertise would be
difficult to replace and could have a material adverse effect on the Celera
Genomics group's ability to achieve its goals.
Celera Genomics' Competitive Position May Depend on Patent and Copyright
Protection, Which May Not Be Sufficiently Available. The Celera Genomics group's
ability to compete and to achieve profitability may be affected by its ability
to protect its proprietary technology and other intellectual property. While
Celera Genomics will be primarily dependent on revenues from access fees to its
discovery and information system, obtaining patent protection may also be
important to its business, in that Celera Genomics would be able to prevent
competitors from making, using or selling any of its technology for which it
obtains a patent. Patent law affecting Celera Genomics' business, particularly
gene sequences and polymorphisms, is uncertain, and as a result, the Celera
Genomics group is uncertain as to its ability to prevent competitors from
developing similar subject matter. Patents may not issue from patent
applications that the Celera Genomics group may
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own or license. In addition, because patent applications in the United States
are maintained in secrecy until patents issue, third parties may have filed
patent applications for technology used by Celera Genomics or covered by Celera
Genomics' pending patent applications without Celera Genomics being aware of
such applications.
Moreover, the Celera Genomics group may be dependent on protecting,
through copyright law or otherwise, its databases to prevent other organizations
from taking information from such databases and copying and reselling it.
Copyright law currently provides uncertain protection regarding the copying and
resale of factual data. As such, Celera Genomics is uncertain whether it could
prevent such copying or resale. Changes in copyright and patent law could either
expand or reduce the extent to which the Celera Genomics group and its customers
are able to protect their intellectual property.
Celera Genomics' Position May Depend on Its Ability to Protect Trade
Secrets. The Celera Genomics group relies on trade secret protection for its
confidential and proprietary information and procedures, including procedures
related to sequencing genes and to searching and identifying important regions
of genetic information. The Celera Genomics group currently protects such
information and procedures as trade secrets. The Celera Genomics group protects
its trade secrets through recognized practices, including access control,
confidentiality agreements with employees, consultants, collaborators, and
customers, and other security measures. These confidentiality agreements may be
breached, however, and the Celera Genomics group may not have adequate remedies
for any such breach. In addition, the Celera Genomics group's trade secrets may
otherwise become known or be independently developed by competitors.
Public Disclosure of Genomics Sequence Data Could Jeopardize Celera
Genomics' Intellectual Property Protection and Have an Adverse Effect on the
Value of Its Products and Services. The Celera Genomics group, the federally
funded Human Genome Project and others engaged in similar research have
committed to make available to the public basic human sequence data. Such
disclosures might limit the scope of the Celera Genomics group's claims or make
subsequent discoveries related to full-length genes unpatentable. While the
Celera Genomics group believes that the publication of sequence data will not
preclude it or others from being granted patent protection on genes, there can
be no assurance that such publication has not affected and will not affect the
ability to obtain patent protection. Customers may conclude that uncertainties
of such protection decrease the value of the Celera Genomics group's information
products and services and as a result, it may be required to reduce the fees it
charges for such products and services.
Celera Genomics May Infringe the Intellectual Property Rights of Third
Parties and May Become Involved in Expensive Intellectual Property Litigation.
The intellectual property rights of biotechnology companies, including Celera
Genomics, are generally uncertain and involve complex legal, scientific and
factual questions. Celera Genomics' success in the functional genomics field may
depend, in part, on its ability to operate without infringing on the
intellectual property rights of others and to prevent others from infringing on
its intellectual property rights.
There has been substantial litigation regarding patents and other
intellectual property rights in Celera Genomics' industry. The Celera Genomics
group may become a party to patent litigation or proceedings at the U.S. Patent
and Trademark Office to determine its patent rights with respect to third
parties which may include subscribers to Celera Genomics' database information
services. Interference proceedings may be necessary to establish which party was
the first to discover such intellectual property. Celera Genomics may become
involved in patent litigation against third parties to enforce the Celera
Genomics group's patent rights, to invalidate patents held by such third
parties, or to defend against such claims. The cost to Celera Genomics of any
patent litigation or similar proceeding could be substantial, and it may absorb
significant management time. If an infringement litigation against Celera
Genomics is resolved unfavorably to Celera Genomics, Celera Genomics may be
enjoined from manufacturing or selling certain of its products or services
without a license from a third party. Celera Genomics may not be able to obtain
such a license on commercially acceptable terms, or at all.
The U.S. Patent and Trademark Office has issued at least one patent to a
third party relating to a single nucleotide polymorphism (SNP). If other
important SNPs receive patents, Celera Genomics will need to obtain rights to
those important SNPs in order to develop, use and sell related assays. Such
licenses may not be available to Celera Genomics on commercially acceptable
terms, or at all.
Celera Genomics' Business Is Dependent on the Continuous, Effective,
Reliable and Secure Operation of Its Computer Hardware, Software and Internet
Applications and Related Tools and Functions. Because the Celera Genomics
group's business requires manipulating and analyzing large amounts of data, and
communicating the results of such analysis
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to customers via the Internet, the Celera Genomics group depends on the
continuous, effective, reliable and secure operation of its computer hardware,
software, networks, Internet servers and related infrastructure. To the extent
that the Celera Genomics group's hardware or software malfunctions or the Celera
Genomics group's customers' access to products through the Internet is
interrupted, its business could suffer. The Celera Genomics group's computer and
communications hardware is protected through physical and software safeguards.
However, it is still vulnerable to fire, storm, flood, power loss, earthquakes,
telecommunications failures, physical or software break-ins and similar events.
In addition, Celera Genomics' database products are complex and sophisticated,
and as such, could contain data, design or software errors that could be
difficult to detect and correct. Software defects could be found in current or
future products. If the Celera Genomics group fails to maintain and further
develop the necessary computer capacity and data to support its computational
needs and its customers' drug discovery efforts, it could result in loss of or
delay in revenues and market acceptance. In addition, any sustained disruption
in Internet access provided by third parties could adversely impact the Celera
Genomics group's business.
Celera Genomics' Research and Product Development Depends on Access to
Tissue Samples and Other Biological Materials. To continue to build its database
products, Celera Genomics will need access to normal and diseased human and
other tissue samples, other biological materials and related clinical and other
information, which may be in limited supply. Celera Genomics may not be able to
obtain or maintain access to these materials and information on acceptable
terms. In addition, government regulation in the United States and foreign
countries could result in restricted access to, or use of, human and other
tissue samples. If Celera Genomics loses access to sufficient numbers or sources
of tissue samples, or if tighter restrictions are imposed on its use of the
information generated from tissue samples, its business may be harmed.
Ethical, Legal and Social Issues Related to the Use of Genetic Information
and Genetic Testing May Cause Less Demand for Celera Genomics' Products. Genetic
testing has raised issues regarding confidentiality and the appropriate uses of
the resulting information. For example, concerns have been expressed towards
insurance carriers and employers using such tests to discriminate on the basis
of such information, resulting in barriers to the acceptance of such tests by
consumers. This could lead to governmental authorities calling for limits on or
regulation of the use of genetic testing or prohibit testing for genetic
predisposition to certain diseases, particularly those that have no known cure.
Any of these scenarios could reduce the potential markets for PE Corporation's
products.
Expected Rapid Growth in the Number of Its Employees Could Absorb Valuable
Management Resources and Be Disruptive to the Development of Celera Genomics'
Business. The Celera Genomics group expects to grow significantly, from
approximately 450 employees at December 31, 1999, to approximately 700 by June
30, 2000 (including Paracel employees). This growth will require substantial
effort to hire new employees and train and integrate them in the Celera Genomics
group's business and to develop and implement management information systems,
financial controls and facility plans. In addition, the Celera Genomics group
will be required to create a sales and marketing organization and expand
customer support resources as sales of its information products increase. The
Celera Genomics group's inability to manage growth effectively would have a
material adverse effect on its future operating results.
The Use of Celera Genomics' Products and Services By Its Customers May Be
Subject to Government Regulation. Within the field of functional genomics, the
use of Celera Genomics' database products by pharmaceutical and biotechnology
customers may be subject to certain U.S. Food and Drug Administration or other
regulatory approvals. For example, any new drug developed by the efforts of
Celera Genomics' customers as a result of their use of Celera Genomics'
databases must undergo an extensive regulatory review process. This process can
take many years and require substantial expense.
Within the field of personalized health/medicine, current and future
patient privacy and health care laws and regulations issued by the FDA may limit
the use of polymorphism data. To the extent that use of Celera Genomics'
databases is limited or additional costs are imposed on Celera Genomics'
customers due to regulation, Celera Genomics' business may be adversely
affected.
Furthermore, Celera Genomics may be directly subject to regulations as a
provider of diagnostic information. To the extent that such regulations restrict
the sale of Celera Genomics' products or impose other costs, Celera Genomics'
business may be materially adversely affected.
Future Acquisitions May Absorb Significant Resources and May Be
Unsuccessful. As part of the Celera Genomics group's strategy, it expects to
pursue acquisitions (in addition to the Paracel acquisition), investments and
other relationships
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and alliances. Acquisitions may involve significant cash expenditures, debt
incurrence, additional operating losses, dilutive issuances of equity
securities, and expenses that could have a material adverse effect on the Celera
Genomics group's financial condition and results of operations. For example, to
the extent that it elects to pay the purchase price for such acquisitions in
shares of Celera Genomics common stock, such issuance of additional shares of
Celera Genomics common stock may be dilutive to holders of Celera Genomics
common stock. Acquisitions involve numerous other risks, including:
o difficulties integrating acquired technologies and personnel into
the business of the Celera Genomics group;
o diversion of management from daily operations;
o inability to obtain required financing on favorable terms;
o entry into new markets in which the Celera Genomics group has little
previous experience;
o potential loss of key employees or customers of acquired companies;
o assumption of the liabilities and exposure to unforseen liabilities
of acquired companies; and
o amortization of the intangible assets of acquired companies.
It may be difficult for the Celera Genomics group to complete such transactions
quickly and to integrate such businesses efficiently into its current business.
Any such acquisitions or investments by the Celera Genomics group may ultimately
have a negative impact on its business and financial condition.
Celera Genomics Common Stock Price Is Highly Volatile. The market price of
Celera Genomics common stock has been and may continue to be highly volatile due
to the risks and uncertainties described in this section of the prospectus, as
well as other factors, including:
o conditions and publicity regarding the genomics or life sciences
industries generally;
o failure to complete the sequencing and assembly of the human genome
within expected time frames;
o price and volume fluctuations in the stock market at large which do
not relate to the Celera Genomics group's operating performance; and
o comments by securities analysts, or the Celera Genomics group's
failure to meet market expectations.
The stock market has from time to time experienced extreme price and
volume fluctuations that are unrelated to the operating performance of
particular companies. In the past, companies that have experienced volatility
have sometimes been the subject of securities class action litigation. If
litigation were instituted on this basis, it could result in substantial costs
and a diversion of management's attention and resources.
Pe Corporation is subject to purported class action lawsuits relating to its
recent offering of shares of Celera Genomics common stock which may be expensive
and time consuming. As of May 5, 2000, Pe Corporation and certain of its
officers had been served in two lawsuits purportedly on behalf of purchasers of
Celera Genomics common stock in Pe Corporation's offering of Celera Genomics
common stock completed on March 6, 2000. In the offering, PE Corporation sold an
aggregate of 4,370,000 shares of Celera Genomics common stock at a public
offering price of $225 per share. The complaints in these lawsuits generally
allege that the prospectus used in connection with the offering contained
inaccurate and misleading statements in violation of federal securities laws.
The complaints seek unspecified damages, rescission, costs and expenses, and
such other relief as the court deems proper. Athough PE Corporation believes the
asserted claims are without merit and intends to defend the actions vigorously,
the outcome of this or any other litigation is inherently uncertain. The defense
if these actions will require management attention and resources.
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Risks Related to a Capital Structure with Two Separate Classes of Common Stock
You Will Be Stockholders of One Company and, Therefore, Financial Effects
on One Group Could Adversely Affect the Other. The Celera Genomics group and the
PE Biosystems group are not separate legal entities. As a result, stockholders
will continue to be subject to all of the risks of an investment in PE
Corporation, including the PE Biosystems group. The risks and uncertainties that
may affect the operations, performance, development, and results of the PE
Biosystems group's businesses include but are not limited to rapidly changing
technology and dependence on new products, dependence of sales on customers'
capital spending policies and government-sponsored research, claims for patent
infringement, significant overseas operations, future growth strategy and
earthquakes. The assets attributed to the Celera Genomics group could be subject
to the liabilities of the PE Biosystems group, whether such liabilities arise
from lawsuits, contracts or indebtedness that are attributed to the PE
Biosystems group. If PE Corporation is unable to satisfy the PE Biosystems
group's liabilities out of the assets attributed to it, PE Corporation may be
required to satisfy those liabilities with assets attributed to the Celera
Genomics group.
Financial effects from the PE Biosystems group that affect PE
Corporation's consolidated results of operations or financial condition could,
if significant, affect the results of operations or financial condition of the
Celera Genomics group and the market price of the Celera Genomics common stock.
A portion of the Celera Genomics group's equity is represented by a $150 million
demand note of the PE Biosystems group. In addition, net losses of the PE
Biosystems group and dividends or distributions on, or repurchases of, PE
Biosystems common stock or repurchases of certain preferred stock will reduce
the funds PE Corporation can pay as dividends on the Celera Genomics common
stock under Delaware law. For these reasons, you should read PE Corporation's
consolidated financial information with the financial information it provides
for each group.
Holders of Celera Genomics Common Stock Will Have Limited Rights Related
to the Celera Genomics Group. Holders of Celera Genomics common stock have only
the rights customarily held by common stockholders. They will have only the
following rights related to the Celera Genomics group:
o certain rights with regard to dividends and liquidation;
o requirements for a mandatory dividend, redemption or conversion upon
the disposition of all or substantially all of the assets of the
Celera Genomics group; and
o a right to vote on matters as a separate voting class in the limited
circumstances provided under Delaware law, by stock exchange rules
or as determined by PE Corporation's board of directors.
PE Corporation will not hold separate meetings for holders of Celera Genomics
common stock and PE Biosystems common stock.
Limits Exist on the Voting Power of Group Common Stock.
o Celera Genomics Common Stock May Not Initially Have Any Influence on
the Outcome of Stockholder Voting. PE Biosystems common stock
currently has a substantial majority of the voting power of the
common stock of PE Corporation. Except in limited circumstances
requiring separate class voting, either class of common stock that
is entitled to more than the number of votes required to approve any
stockholder action could control the outcome of such vote-even if
the matter involves a divergence or conflict of the interests of the
holders of the Celera Genomics common stock and the PE Biosystems
common stock. These matters may include mergers and other
extraordinary transactions.
o A Class of Group Common Stock with Less than Majority Voting Power
Can Block Action if a Class Vote Is Required. If Delaware law, stock
exchange rules or the PE Corporation board of directors requires a
separate vote on a matter by the holders of either the Celera
Genomics common stock or the PE Biosystems common stock, those
holders could prevent approval of the matter-even if the holders of
a majority of the total number of votes cast or entitled to cast,
voting together as a class, were to vote in favor of it.
o Holders of Celera Genomics Common Stock Cannot Ensure that Their
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Voting Power Will Be Sufficient to Protect Their Interests. Since
the relative voting power per share of Celera Genomics common stock
and PE Biosystems common stock will fluctuate based on the market
values of the two classes of common stock, the relative voting power
of Celera Genomics common stock could decrease. As a result, holders
of shares of Celera Genomics common stock cannot ensure that their
voting power will be sufficient to protect their interests.
Stockholders May Not Have Any Remedies for Breach of Fiduciary Duties if
Any Action By Directors and Officers Has a Disadvantageous Effect on Either
Class of Common Stock. Stockholders may not have any remedies if any action or
decision of PE Corporation's directors or officers has a disadvantageous effect
on the Celera Genomics common stock or the PE Biosystems common stock compared
to the other class of common stock.
Recent cases in Delaware involving tracking stocks have established that
decisions by directors or officers involving differing treatment of tracking
stocks are judged under the principle known as "the business judgment rule"
unless self-interest is shown. In addition, principles of Delaware law
established in cases involving differing treatment of two classes of capital
common stock or two groups of holders of the same class of capital common stock
provide that a board of directors owes an equal duty to all stockholders
regardless of class or series. Under these principles of Delaware law, absent
abuse of discretion, a good faith business decision made by a disinterested and
adequately informed board of directors, board of directors' committee or officer
with respect to any matter having different effects on holders of Celera
Genomics common stock and holders of PE Biosystems common stock would be a
defense to any challenge to such determination made by or on behalf of the
holders of either class of common stock.
Stock Ownership Could Cause Directors and Officers to Favor One Group over
the Other. As a policy, PE Corporation's board of directors periodically
monitors the ownership of shares of Celera Genomics common stock and shares of
PE Biosystems common stock by PE Corporation's directors and senior officers as
well as their option holdings and other benefits so that their interests are not
misaligned with the two classes of common stock and with their duty to act in
the best interests of PE Corporation and its stockholders as a whole. However,
because the actual value of their interests in the Celera Genomics common stock
and PE Biosystems common stock is anticipated to vary significantly, it is
possible that they could favor one group over the other as a result of their
common stock holdings, options and other benefits.
Numerous Potential Conflicts of Interest Exist Between the Classes of
Common Stock Which May Be Difficult to Resolve By PE Corporation's Board or
Which May Be Resolved Adversely to One of the Classes.
o Allocation of Corporate Opportunities Could Favor One Group over the
Other. PE Corporation's board of directors may be required to
allocate corporate opportunities between the groups. In some cases,
PE Corporation's directors could determine that a corporate
opportunity, such as a business that it is acquiring or a new
business, should be shared by the groups or be allocated to one
group over the other. Any such decisions could favor one group to
the detriment of the other.
o The Groups May Compete with Each Other to the Detriment of Their
Businesses. The existence of two separate classes of common stock
will not prevent PE Biosystems group and the Celera Genomics group
from competing with each other. Any competition between the groups
could be detrimental to businesses of either or both of the groups.
Under a board of directors' policy, groups will generally not engage
in the principal businesses of the other, except for joint
transactions with each other. However, PE Corporation's Chief
Executive Officer or PE Corporation's board of directors will permit
indirect competition between the groups, such as one group doing
business with a competitor of the other group, based on his or its
good faith business judgment that such competition is in the best
interests of PE Corporation and all of PE Corporation's stockholders
as a whole. In addition, the groups may compete in a business that
is not a principal business of the other group.
o PE Corporation's Board of Directors May Pay More or Less Dividends
on Group Common Stock than if That Group Were a Separate Company.
Subject to the limitations referred to below, PE Corporation's board
of directors has the authority to declare and pay dividends on the
Celera Genomics common stock and the PE Biosystems common stock in
any amount and could, in its sole discretion, declare and pay
dividends exclusively on the Celera Genomics common stock,
exclusively on the PE Biosystems common stock, or on both, in equal
or unequal amounts. PE Corporation's board of directors is not
required to consider the amount of dividends previously declared on
each class, the respective voting or liquidation
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rights of each class or any other factor. The performance of one
group may cause PE Corporation's board of directors to pay more or
less dividends on the common stock relating to the other group than
if that other group was a stand-alone corporation. In addition,
Delaware law and PE Corporation's certificate of incorporation
impose limitations on the amount of dividends which may be paid on
each class of common stock.
o Proceeds of Mergers or Consolidations May Be Allocated Unfavorably.
PE Corporation's board of directors will determine how consideration
to be received by holders of common stock in connection with a
merger or consolidation involving PE Corporation is to be allocated
among holders of each class of common stock. Such percentage may be
materially more or less than that which might have been allocated to
such holders had PE Corporation's board of directors chosen a
different method of allocation.
o Holders of Either Class of Common Stock May Be Adversely Affected By
a Conversion of Group Common Stock. PE Corporation's board of
directors could, in its sole discretion and without stockholder
approval, determine to convert shares of PE Biosystems common stock
into shares of Celera Genomics common stock, or vice versa, at any
time, including when either or both classes of common stock may be
considered to be overvalued or undervalued. If PE Corporation's
board of directors chose to issue Celera Genomics common stock in
exchange for PE Biosystems common stock, such conversion would
dilute the interests in PE Corporation of the holders of Celera
Genomics common stock. If the board of directors were to choose to
issue PE Biosystems common stock in exchange for Celera Genomics
common stock, such conversion could give holders of shares of Celera
Genomics common stock a greater or lesser premium than any premium
that was paid or might be paid by a third-party buyer of all or
substantially all of the assets of the Celera Genomics group.
o Proceeds of Newly Issued Celera Genomics Common Stock in the Future
Could Be Allocated to the PE Biosystems Group. If and to the extent
the PE Biosystems group has an equity interest in the Celera
Genomics group in the form of "Celera Genomics Designated Shares" at
the time of any future sale of Celera Genomics common stock, PE
Corporation's board of directors could allocate some or all of the
proceeds of that sale to the PE Biosystems group. Any such decision
could favor one group over the other group. For example, the
decision to allocate the proceeds to the PE Biosystems group may
adversely affect the Celera Genomics group's ability to obtain funds
to finance its growth strategies. There are no Celera Genomics
Designated Shares outstanding as of the date of this prospectus;
however, the consummation of the Paracel merger will result in the
PE Biosystems group owning Celera Genomics Designated Shares.
PE Corporation's Board May Change Its Management and Allocation Policies
Without Stockholder Approval to the Detriment of Either Group. PE Corporation's
board of directors may modify or rescind PE Corporation's policies with respect
to the allocation of corporate overhead, taxes, debt, interest and other
matters, or may adopt additional policies, in its sole discretion without
stockholder approval. A decision to modify or rescind these policies, or adopt
additional policies, could have different effects on holders of Celera Genomics
common stock and holders of PE Biosystems common stock or could result in a
benefit or detriment to one class of stockholders compared to the other class.
PE Corporation's board of directors will make any such decision in accordance
with its good faith business judgment that the decision is in the best interests
of PE Corporation and all of its stockholders as a whole.
Either Group May Finance the Other Group on Terms Unfavorable to One of
the Groups. From time to time, PE Corporation anticipates that it will transfer
cash and other property between groups to finance their business activities.
When this occurs the group providing the financing will be subject to the risks
relating to the group receiving the financing. PE Corporation will account for
those transfers in one of the following ways:
o as a reallocation of pooled debt or preferred common stock;
o as a short-term or long-term loan between groups or as a repayment
of a previous borrowing;
o as an increase or decrease in the PE Biosystems group's equity
interest, if any, in the Celera Genomics group; or
o as a sale of assets between groups.
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PE Corporation's board of directors has not adopted specific criteria for
determining when it will transfer cash or other property as a loan or repayment,
an increase or decrease in equity interest or a sale of assets. These
determinations, including the terms of any transactions accounted for as debt,
may be unfavorable to either the group transferring or receiving the cash or
other property. PE Corporation's board of directors expects to make these
determinations, either in specific instances or by setting generally applicable
policies, after considering the financing requirements and objectives of the
receiving group, the investment objectives of the transferring group and the
availability, cost and time associated with alternative financing sources,
prevailing interest rates and general economic conditions.
PE Corporation cannot assure you that any terms that it fixes for debt
will approximate those that could have been obtained by the borrowing group if
it were a stand-alone corporation.
The Celera Genomics Group May Not Be Fully Reimbursed for the PE
Biosystems Group's Use of Its Tax Benefits and Could Be Charged with Higher
Future Taxes than if It Were a Stand-alone Taxpayer. PE Corporation's management
and allocation policies provide that tax benefits generated but not used by the
Celera Genomics group may be used by the PE Biosystems group. In accordance with
management policy, the aggregate amount reimbursed to the Celera Genomics group
for such use may not exceed $75 million. All subsequent tax benefits in excess
of this amount will not be credited to the Celera Genomics group and the Celera
Genomics group will not be reimbursed for those tax benefits, unless the Celera
Genomics group can use those tax benefits. Accordingly, any tax benefits that
cannot be used by the Celera Genomics group will not be carried forward to
reduce its future taxes. This could result in the Celera Genomics group being
charged a greater portion of the total corporate tax liability in the future
than would have been the case if the Celera Genomics group had retained its tax
benefits.
Holders of Celera Genomics Common Stock May Receive Less Consideration
upon a Sale of Assets than if the Celera Genomics Group Were a Separate Company.
PE Corporation's certificate of incorporation provides that if a disposition of
all or substantially all of the assets of the Celera Genomics group occurs, PE
Corporation must, subject to certain exceptions:
o distribute to holders of the Celera Genomics common stock an amount
equal to the net proceeds of such disposition; or
o convert at a 10% premium the Celera Genomics common stock into
shares of PE Biosystems common stock.
If the Celera Genomics group were a separate, independent company and its
shares were acquired by another person, certain costs of that disposition,
including corporate level taxes, might not be payable in connection with that
acquisition. As a result, stockholders of the Celera Genomics group as a
separate, independent company might receive a greater amount than the net
proceeds that would be received by holders of Celera Genomics common stock if
the assets of the Celera Genomics group were sold. In addition, PE Corporation
can not assure you that the net proceeds per share of Celera Genomics common
stock will be equal to or more than the market value per share of Celera
Genomics common stock prior to or after announcement of a disposition.
PE Corporation's Capital Structure and Variable Vote Per Share May
Discourage Acquisitions of the Celera Genomics Group or Celera Genomics Common
Stock. A potential acquiror could acquire control of PE Corporation by acquiring
shares of common stock having a majority of the voting power of all shares of
common stock outstanding. Such a majority could be obtained by acquiring a
sufficient number of shares of both classes of common stock or, if one class of
common stock has a majority of such voting power, only shares of that class.
Currently, the PE Biosystems common stock has a substantial majority of the
voting power. As a result, it might be possible for an acquiror to obtain
control by purchasing only shares of PE Biosystems common stock.
Decisions By Directors and Officers That Affect Market Values Could
Adversely Affect Voting and Conversion Rights. The relative voting power per
share of each class of common stock and the number of shares of one class of
common stock issuable upon the conversion of the other class of common stock
will vary depending upon the relative market values of the Celera Genomics
common stock and the PE Biosystems common stock. The market value of either or
both classes of common stock could be adversely affected by market reaction to
decisions by PE Corporation's board of directors or PE Corporation's management
that investors perceive as affecting differently one class of common stock
compared to the other.
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These decisions could involve changes to PE Corporation's management and
allocation policies, transfers of assets between groups, allocations of
corporate opportunities and financing resources between groups and changes in
dividend policies.
Investors May Not Value Celera Genomics Common Stock Based on Celera
Genomics Group's Financial Information and Policies. PE Corporation can not
assure you that investors will value the Celera Genomics common stock based on
the reported financial results and prospects of the Celera Genomics group or the
dividend policies established by PE Corporation's board of directors with
respect to the Celera Genomics group.
A Recent Clinton Administration Proposal Could Have Adverse Tax
Consequences for PE Corporation or for Holders of Celera Genomics Common Stock.
The Clinton Administration recently proposed legislation dealing with tracking
stock such as the Celera Genomics common stock. Such proposal would, among other
things, grant authority to the Internal Revenue Service to treat tracking stock
as something other than common stock or as common stock of another entity. If
this proposal is enacted, it could have adverse tax consequences for PE
Corporation or for holders of Celera Genomics common stock. A similar proposal
was made in 1999. Congress did not act on the 1999 proposal, and it is
impossible to predict whether Congress will act upon this proposal or any other
proposal relating to tracking stock.
If there are adverse U.S. federal income tax law developments, PE
Corporation may convert the Celera Genomics common stock or the PE Biosystems
common stock into shares of the other class without any premium. See
"Description of PE Corporation Capital Stock--Conversion and
Redemption--Conversion of Celera Genomics Common Stock at PE Corporation's
Option at Any Time." The proposal of the Clinton Administration would be such an
adverse development if it is implemented or receives certain legislative action.
Provisions Governing Common Stock Could Discourage a Change of Control and
the Payment of a Premium for Stockholders' Shares. PE Corporation's stockholder
rights plan could prevent stockholders from profiting from an increase in the
market value of their shares as a result of a change in control of PE
Corporation by delaying or preventing such change in control. The existence of
two classes of common stock could also present complexities and could, in
certain circumstances, pose obstacles, financial and otherwise, to an acquiring
person. In addition, certain provisions of Delaware law and PE Corporation's
certificate of incorporation and bylaws may also deter hostile takeover
attempts.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus are forward-looking and
are subject to a variety of risks and uncertainties. These statements may be
identified by the use of forward-looking words or phrases such as "believe,"
"expect," "anticipate," "should," "planned," "estimated," and "potential," among
others. These forward-looking statements are based on PE Corporation's current
expectations. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for such forward-looking statements. In order to comply with the
terms of the safe harbor, PE Corporation notes that a variety of factors could
cause PE Corporation's actual results and experience to differ materially from
the anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development and results of PE Corporation's businesses include, but
are not limited to, those described under "Risk Factors."
THE SPECIAL MEETING
We are furnishing this prospectus to stockholders of Paracel in connection
with the solicitation of proxies by the board of directors of Paracel for use at
the special meeting of its stockholders.
Date, Time and Place
The special meeting will be held at the offices of Paracel, Inc., 80 South
Lake Avenue, Suite 650, Pasadena, California 91101, at 10:00 a.m. Pacific Time,
on June 9, 2000.
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Matters to Be Considered at the Special Meeting
At the special meeting, holders of Paracel common stock will be asked to
consider and vote upon the approval and adoption of the merger agreement, the
merger, the form of escrow agreement, and the appointment of Joseph T. Kingsley
as the representative of the Paracel stockholders under the escrow agreement,
and such other matters as may properly be brought before the special meeting.
Except for Michael W. Hunkapiller who was not present during the vote due
to a potential conflict of interest, the Paracel board has, by unanimous vote,
approved the merger agreement, the merger, the form of escrow agreement, and the
transactions contemplated thereby, and recommends a vote FOR approval of the
merger, such agreements, and the appointment of Joseph T. Kingsley as
stockholder representative under the escrow agreement.
Record Date; Stock Entitled to Vote; Quorum
Only holders of record of Paracel common stock at the close of business on
May 8, 2000, the record date for Paracel's special meeting, are entitled to
receive notice of and to vote at Paracel's special meeting. Paracel common stock
constitutes the only issued and outstanding class of voting securities of
Paracel.
On the record date 8,450,329 shares of Paracel common stock were issued
and outstanding and were held by 50 holders of record. Holders of record of
shares of Paracel common stock on the record date are each entitled to one vote
per share on each matter to be considered at Paracel's special meeting.
A quorum is necessary to have a valid meeting of stockholders. A majority
of the shares of Paracel common stock issued and outstanding and entitled to
vote on the record date and represented in person or by proxy constitutes a
quorum.
Vote Required
As long as a quorum is present at the special meeting, the approval of the
merger agreement, the merger and the form of escrow agreement, and the
appointment of Joseph T. Kingsley as the stockholder representative under the
escrow agreement, requires the affirmative vote or written consent of holders of
a majority of the shares of Paracel common stock issued and outstanding at the
time of the special meeting, represented in person or by proxy.
Share Ownership of Management and Others
At the close of business on the record date, directors and executive
officers of Paracel and their affiliates (excluding the PE Biosystems group)
beneficially owned and were entitled to vote approximately 4,510,417 shares of
Paracel common stock, representing approximately 53% of the shares of Paracel
common stock issued and outstanding on the record date. Each of those directors
and executive officers has indicated his present intention to vote, or cause to
be voted, the Paracel common stock owned by him FOR the approval and adoption of
the merger agreement, the merger and the form of escrow agreement, and the
appointment of Joseph T. Kingsley as stockholder representative under the escrow
agreement. Kwang-I Yu, the Chairman of the Board, President and Chief Executive
Officer of Paracel, and certain other stockholders of Paracel, are parties to a
voting agreement with PE Corporation and Umbrella Acquisition Corp. and have
agreed to vote in favor of such matters.
At the close of business on the record date, the PE Biosystems group owned
and was entitled to vote 1,200,000 shares of Paracel common stock, representing
approximately 14% of the shares of Paracel common stock issued and outstanding
on the record date. These shares are not subject to the voting agreement among
PE Corporation, Umbrella Acquisition Corp. and certain stockholders of Paracel,
but PE Corporation has indicated its present intention to vote, or cause to be
voted, such shares for the approval and adoption of the merger agreement, the
merger and the form of escrow agreement, and the appointment of Joseph T.
Kingsley as stockholder representative under the escrow agreement.
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Shares Subject to Voting Agreement
As an incentive to PE Corporation to enter into the merger agreement,
certain key stockholders of Paracel entered into a voting agreement with PE
Corporation and Umbrella Acquisition Corp. to vote their shares of Paracel
common stock in favor of the merger agreement, the merger, the form of escrow
agreement, and the other related matters brought for a vote at the Paracel
special meeting. Pursuant to the voting agreement, officers of Umbrella
Acquisition Corp. hold proxies to vote 4,460,417 shares of Paracel common stock,
representing approximately 53% of the shares of Paracel common stock issued and
outstanding on the record date. Accordingly, the officers of Umbrella
Acquisition Corp. currently hold proxies to vote shares of Paracel common stock
pursuant to the voting agreement sufficient to approve and adopt the merger
agreement, the merger, the form of escrow agreement, and the appointment of
Joseph T. Kingsley as stockholder representative under the escrow agreement.
Voting of Proxies
Shares represented by all properly executed proxies received in time for
the special meeting will be voted at the special meeting in the manner specified
by the holders thereof. Properly executed proxies which do not contain voting
instructions will be voted in favor of the merger agreement, the merger, the
form of escrow agreement, and the appointment of Joseph T. Kingsley as
stockholder representative under the escrow agreement.
Paracel intends to count shares of Paracel common stock present in person
at the special meeting but not voting, and shares of Paracel common stock for
which PE Corporation has received proxies but with respect to which holders of
shares have abstained on any matter, as present at the special meeting for
purposes of determining the presence or absence of a quorum for the transaction
of business.
For voting purposes at the special meeting, only shares affirmatively
voted in favor of approval and adoption of the merger agreement, the merger, the
form of escrow agreement, and the appointment of Joseph T. Kingsley as
stockholder representative under the escrow agreement will be counted as
favorable votes for such approval and adoption. The failure to submit a proxy
(or to vote in person) or the abstention from voting with respect to such
approval and adoption will have the same effect as a vote against approval and
adoption of the merger agreement, the merger and the form of escrow agreement,
and the appointment of Joseph T. Kingsley as stockholder representative under
the escrow agreement.
It is not expected that any matter other than those referred to in this
prospectus will be brought before the special meeting. If, however, other
matters are properly presented for a vote, the persons named as proxies will
vote in accordance with their judgment with respect to those matters.
The persons named as proxies by a Paracel stockholder may propose and vote
for one or more adjournments of the special meeting to permit further
solicitations of proxies in favor of approval and adoption of the merger
agreement, the merger and the form of escrow agreement, and the appointment of
Joseph T. Kingsley as stockholder representative under the escrow agreement;
however, no proxy which is voted against the approval and adoption of the merger
agreement will be voted in favor of such an adjournment.
Revoking Proxies
Paracel stockholders of record may revoke their proxies at any time prior
to the time their proxies are voted at the special meeting. Proxies may be
revoked by written notice, including by telegram or facsimile, to the Chief
Financial Officer of Paracel, by a later-dated proxy signed and returned by
mail, or by attending the special meeting and voting in person. Attendance at
the special meeting will not in and of itself constitute a revocation of a
proxy. Any written notice of a revocation of a proxy must be sent so as to be
delivered before the taking of the vote at the special meeting as follows:
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, California 91101
Facsimile: (626) 744-2001
Attention: Chief Financial Officer
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Proxies for shares held by stockholders who are party to the voting
agreement with PE Corporation and Umbrella Acquisition Corp. may not be revoked
at any time or under any circumstances.
Proxy Solicitation
Paracel will bear the cost of the solicitation of proxies from its
stockholders, except that PE Corporation and Paracel will share equally the cost
of filing, printing and distributing the registration statement and this
prospectus. In addition to solicitation by mail, the directors, officers and
employees of Paracel may solicit proxies from stockholders of Paracel by
telephone or telegram or by other means of communication. Such directors,
officers and employees will not be additionally compensated but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation.
Do not send in any stock certificates with your proxy cards. PE
Corporation will instruct its exchange agent to send transmittal forms with
instructions for the surrender of certificates representing shares of Celera
Genomics common stock to former Paracel stockholders shortly after the merger is
completed.
THE COMPANIES
PE Corporation
PE Corporation was incorporated in 1998 under the laws of the state of
Delaware and conducts its business through two groups: the Celera Genomics group
and the PE Biosystems group. Each group has its own class of common stock. The
Celera Genomics common stock and the PE Biosystems common stock are intended to
provide stockholders of PE Corporation with separate securities reflecting the
relative performance of each separate group. For a fuller description of the
capital stock of PE Corporation, see "Description of PE Corporation Capital
Stock."
The Celera Genomics group is engaged principally in the generation, sale
and support of genomic information and related information management and
analysis software; discovery, validation and licensing of proprietary gene
products, genetic markers and information concerning genetic variability; and
related consulting and contract research and development services.
The Celera Genomics group was formed for the purpose of generating and
commercializing genomic, proteomic and related biological and medical
information to accelerate the understanding of biological processes and to
assist pharmaceutical, biotechnology and life science research entities in areas
of research, including new drugs and improved drug development processes, novel
genes and factors that regulate and control gene expression, understanding basic
biological processes, interrelationships between genetic variability, disease
and drug response, and personalized health and medicine.
The PE Biosystems group is a world leader in the development, manufacture,
sale and service of instrument systems and associated consumable products for
life science research and related applications. Its products are used in various
applications including the synthesis, amplification, purification, isolation,
analysis and sequencing of nucleic acids, proteins and other biological
molecules.
PE Corporation's principal executive offices are located at 761 Main
Avenue, Norwalk, Connecticut 06859 and its telephone number is (203) 762-1000.
Paracel, Inc.
Paracel, a privately held California corporation, is a producer of
advanced genomic and text analysis technologies. Its products include a hardware
accelerator for sequence comparison (GeneMatcher(TM)), a hardware accelerator
for text search (TextFinder(TM)), and sequence analysis software tools. Its
customers include pharmaceutical, biotechnology and genomic companies; research
centers; and government institutions worldwide.
A GeneMatcher(TM) compares genetic sequences in the form of character
strings using a particular class of string comparison algorithms. Each
GeneMatcher(TM) application-specific integrated circuit (ASIC) chip contains 48
parallel
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processors designed to run certain "dynamic programming" algorithms in parallel.
Since each GeneMatcher(TM) contains 144 ASIC chips, it is the equivalent of
6,912 parallel processors and can execute these algorithms up to a thousand
times faster than an ordinary single-CPU Pentium(R).
A TextFinder(TM) is nearly identical to a GeneMatcher(TM), but is used to
search high quantities of text in English and foreign languages to find words
and phrases. It uses different ASIC chips that execute a different class of
string comparison algorithms (principally "regular expressions" and "booleans").
Paracel's sequence analysis software tools focus on processing the output
of sequencing instruments through a series of steps. These software applications
improve the translation of sequencer signals into character strings suitable for
comparison, filter out contaminants and repetitious regions, cluster fragments
of sequences by their similarity with one another, and assemble fragments into
longer contiguous sequences. Primarily, they "reconstruct" the DNA sequences
from the fragments of a few hundred bases that are generated by sequencers and
compare them against databases to determine what are known about these
sequences.
Paracel had revenues of $5.9 million for the fiscal year ended December
31, 1998, and revenues of $14.2 million for the fiscal year ended December 31,
1999. Approximately $8 million of fiscal year 1999 sales were derived from text
analysis (sales of TextFinders(TM), large disk drives and maintenance contracts)
and $6.2 million were from bioinformatics ($5.2 million from sales of
GeneMatchers(TM) and $1 million from sales of sequence analysis and annotation
software tools and contract engineering). Paracel currently has approximately 87
employees, including 57 engineers and scientists.
Paracel's principal executive offices are located at 80 South Lake Avenue,
Suite 650, Pasadena, California 91101 and its telephone number is (626)
744-2000.
Umbrella Acquisition Corp.--PE Corporation's Merger Subsidiary
Umbrella Acquisition Corp. is a wholly owned subsidiary of PE Corporation
which was incorporated in California for the sole purpose of effecting the
merger by merging with and into Paracel. It engages in no other business. Its
principal executive offices are c/o PE Corporation at 761 Main Avenue, Norwalk,
Connecticut 06859 and its telephone number is (203) 762-1000.
THE MERGER
The following is a description of certain aspects of the proposed merger,
including the material terms of the merger agreement, the voting agreement and
the form of escrow agreement. The following summary is qualified in its entirety
by reference to the complete merger agreement, voting agreement and form of
escrow agreement, which are attached to this prospectus as Annex I, II and III,
respectively, and are incorporated in this prospectus by reference. All
stockholders of Paracel are urged to read the merger agreement, the voting
agreement and the form of escrow agreement in their entirety.
Background of the Merger
Relationship Between the Parties. Paracel has had a long-standing business
relationship with PE Corporation through both its Celera Genomics group and its
PE Biosystems group.
o Between 1992 and 1994, Applied Biosystems Inc., a predecessor to the
PE Biosystems group, distributed Paracel's Fast Data Finder
technology in the field of genetic sequence similarity searching.
o On June 10, 1996, The Perkin-Elmer Corporation, a wholly owned
subsidiary of PE Corporation, purchased 1,200,000 shares of Paracel
common stock (approximately 14% of the then-outstanding common
stock) for $4.5 million. At that time, Michael W. Hunkapiller,
President of the PE Biosystems group and Senior Vice President of PE
Corporation, joined Paracel's board of directors and continues to
serve as a director.
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o Mark Adams, Vice President of Genome Programs for the Celera
Genomics group, has served on Paracel's Scientific Advisory Board
since January 1999.
o Paracel is currently developing certain instrument systems software,
which Paracel and the PE Biosystems group intend to jointly market.
The PE Biosystems group provides funding for the development of this
software.
o The Celera Genomics group has purchased an aggregate of
approximately $1.9 million of products and services from Paracel
since July 1, 1998.
Events Leading to the Merger Agreement. Following is the sequence of
events leading to the signing of the definitive merger documents.
o On or about December 9, 1999, J. Craig Venter, President and Chief
Scientific Officer of the Celera Genomics group, invited Kwang-I Yu,
Chairman of the Board, President and Chief Executive Officer of
Paracel, to the headquarters of the Celera Genomics group in
Rockville, Maryland, to discuss expanding the existing business
relationship between the parties.
o On December 14, 1999, Dr. Yu described Paracel's business in a
presentation to members of the Celera Genomics group's senior
management, including Dr. Venter and Peter Barrett, the Executive
Vice President and Chief Business Officer of the Celera Genomics
group. As a result of the meeting, the parties agreed to explore a
possible strategic relationship.
o On January 12, 2000, a Celera Genomics group management team led by
Dr. Venter and Dr. Barrett met with Paracel's senior management team
at Paracel's headquarters in Pasadena, California, to learn more
about Paracel's business. The parties discussed a possible merger of
the two entities, and Paracel agreed to provide additional
information to enable the Celera Genomics group to better evaluate
such a merger.
o At Paracel's regularly scheduled meeting of its board of directors
on January 18, 2000, Paracel's board approved the engagement of
Thomas Weisel Partners LLC as the company's investment bankers to
represent Paracel with respect to a possible business combination
with PE Corporation. Dr. Hunkapiller did not attend the board
meeting due to the potential conflict of interest.
o On January 20, 2000, at a regularly scheduled meeting of PE
Corporation's board of directors, the board reviewed the Celera
Genomics group's strategic initiatives, including the Celera
Genomics group's potential interest in acquiring Paracel. No action
was taken by the board at this meeting.
o On January 24, 2000, Paracel and representatives of Thomas Weisel
met with representatives of Morgan Stanley Dean Witter, PE
Corporation's investment banking firm, and a Celera Genomics
management representative. At that meeting, Dr. Yu and Thomas Weisel
presented information on Paracel's technology, strategy and
financial condition. After the meeting, representatives of Thomas
Weisel discussed with Dr. Yu a summary of Paracel's strategic
alternatives.
o On February 8, 2000, at the invitation of PE Corporation, Dr. Yu and
Alden Munson, a Paracel board member, met with Tony White, Chairman
and Chief Executive Officer of PE Corporation, Dr. Venter, Dr.
Barrett and Dr. Hunkapiller. The parties discussed the possibility
of a merger of Paracel and PE Corporation and reviewed a preliminary
valuation analysis of Paracel prepared by Morgan Stanley.
o On February 12, 2000, PE Corporation submitted to Paracel a
non-binding proposal for the acquisition of Paracel by PE
Corporation.
o On February 13, 2000, Paracel convened a special meeting of its
board of directors to consider the proposal submitted by PE
Corporation on February 12, 2000. At that meeting, representatives
of Thomas Weisel presented several possible strategic alternatives
for Paracel, including a merger or sale of the company, a private
placement and an initial public offering. Paracel's board determined
that a combination with the Celera Genomics group offered the
greatest potential strategic synergy and the best balance of risk
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versus return, assuming that an equitable price could be agreed
upon. The board did not accept the PE Corporation proposal, but
authorized Dr. Yu to proceed in his discussions with the Celera
Genomics group while additional analysis and planning continued. Dr.
Hunkapiller did not attend this board meeting.
o Between February 13, 2000 and March 8, 2000, the parties continued
to discuss a potential merger and other business relationships but
were unable to reach agreement as to the merger consideration to be
received by Paracel's stockholders in a merger.
o On March 8, 2000, Dr. Barrett and Dr. Yu discussed a PE Corporation
proposal pursuant to which PE Corporation would exchange 1.55
million shares of Celera Genomics common stock for all outstanding
Paracel common stock and stock options.
o Paracel convened a special meeting of its board of directors on
March 11, 2000, to consider the proposal. Following a summary by Dr.
Yu and presentations by representatives of Thomas Weisel, the board
authorized Dr. Yu and Thomas Weisel to negotiate final transaction
terms along the lines of PE Corporation's proposal, subject to
satisfactory resolution of certain points and definitive
documentation. Dr. Hunkapiller did not attend this board meeting.
o Between March 13, 2000, and March 15, 2000, the price of Celera
Genomics common stock declined from approximately $200 per share to
approximately $140 per share at the close of business on March 15,
2000. On March 15, 2000, Dr. Yu held several discussions by phone
with Mr. White, Dr. Venter and Dr. Barrett regarding this decline in
price, equity valuations in the sector as a whole and implications
of the recent price volatility of Celera Genomics common stock on
the structure of the transaction. Dr. Yu also conferred with Paracel
board members and representatives of Thomas Weisel regarding the
reduction in implied Paracel valuation as a result of this change in
circumstances.
o On March 16, 2000, Paracel held a special meeting of its board of
directors to reevaluate the PE Corporation proposal in light of the
decline in the Celera Genomics common stock price. At that meeting,
representatives of Thomas Weisel advised the board that in light of
such decline, as well as the structure of the proposed transaction,
it could not recommend the PE Corporation proposal. Dr. Hunkapiller
did not attend the portion of the board meeting during which the
board voted whether to continue negotiations. Following this
meeting, Dr. Yu proposed to PE Corporation a merger pursuant to
which all outstanding Paracel common stock and stock options would
be exchanged for an aggregate number of shares equal to $283 million
divided by the closing price of Celera Genomics common stock on
March 17, 2000 (or approximately 2.26 million shares).
o On March 17, 2000, at a regularly scheduled meeting of the board of
directors of PE Corporation, the board discussed the status of
negotiations with Paracel and the terms of the merger agreement, the
voting agreement and the form of escrow agreement. At that meeting,
Dr. Barrett presented Paracel's most recent proposal regarding the
financial terms of the proposed merger. Members of the Board
discussed the proposal, and authorized Dr. Barrett to make a
counteroffer to Dr. Yu pursuant to which PE Corporation would
acquire Paracel for Celera Genomics common stock value at $283
million (as proposed by Dr. Yu) subject to the following
limitations: (i) the final number of shares issued would be
calculated at closing based on a trailing 10-day average ending on
the second day prior to closing and (ii) the number of shares issued
by the Celera Genomics group would not be less than 1.55 million nor
greater than 2.26 million. The PE Corporation board then unanimously
approved all aspects of the merger with Paracel, subject to final
resolution by management of all outstanding issues. Later on that
same day, Dr. Barrett met with Dr. Yu and presented PE Corporation's
counteroffer to Dr. Yu. Dr. Barrett and Dr. Yu discussed the
counteroffer and Dr. Yu then agreed to present this counteroffer to
the Paracel board of directors.
o On March 18, 2000, Paracel held a special meeting of its board of
directors. At that meeting, representatives of Thomas Weisel gave a
presentation to the board describing the merger consideration to be
received by Paracel stockholders (as of that date) from a financial
point of view, and legal counsel described the terms of the
transaction documents from a legal point of view. Members of the
board deliberated on the merits of the proposed transaction at
length. Except for Dr. Hunkapiller, who did not
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attend the meeting, the board unanimously voted to approve the
proposed merger and authorize Dr. Yu to complete the final
negotiations and to enter into an agreement of merger with PE
Corporation.
o On March 20, 2000, PE Corporation and Paracel executed a definitive
merger agreement and issued a press release announcing the
transaction.
Reasons for the Merger
PE Corporation. In evaluating the proposed merger, the PE Corporation
board of directors reviewed presentations from its management and advisors,
including the advice of its financial advisor, Morgan Stanley Dean Witter. In
reaching its determination to approve the merger agreement, the voting
agreement, the form of escrow agreement and the transactions contemplated
thereby, the PE Corporation board of directors considered a number of factors,
including the factors listed below.
o The board believes that the technology and expertise which would be
acquired in the proposed acquisition of Paracel would assist the
Celera Genomics group in achieving its strategic goal of becoming
the definitive source of genomic and related medical information for
drug discovery and development. Specifically, the board believes
that combining Celera Genomics' data resources with Paracel's
GeneMatcher(TM) and TextFinder(TM) technology could be a step
towards providing users with powerful analytical and data mining
tools to enable users to more rapidly discover therapeutic and
diagnostic candidates from genetic sequence information.
o The board believes that the complementary technology and products of
the Celera Genomics group and Paracel could be combined in a manner
that would expand the market for genomic information. Specifically,
the board believes that Paracel's technology could be used by the
Celera Genomics group to create and host an Internet-enabled
genomics portal. This portal would facilitate business-to-business
and business-to-consumer commerce related to genomic information and
services.
o The board believes that the combination of Paracel's products and
technologies with Celera Genomics' databases and sequencing
capabilities would provide increased opportunities for revenue
growth through new and accelerated product development.
o The board believes that a business combination with Paracel would
provide opportunities beyond those reasonably available through
internal growth by permitting the Celera Genomics group to acquire a
portfolio of products and technologies that provide a base from
which the combined business could accelerate development of advanced
systems for the large scale analysis of genetic variation.
o The board determined that the terms and conditions of the merger
agreement, the voting agreement and the form of escrow agreement,
including the form and amount of consideration and the
representations, warranties, covenants and conditions contained in
such agreements are in the best interests of PE Corporation.
None of the foregoing factors or groups of factors had particular
prominence in the decision of the PE Corporation board of directors to approve
the merger agreement, the voting agreement, the form of escrow agreement and the
other transactions contemplated thereby, and none was assigned any specific or
relative weight.
Paracel. The Paracel board of directors approved the terms and provisions
of the merger agreement, the form of escrow agreement and the transactions
contemplated thereby, including the merger, and the recommendation of Joseph T.
Kingsley as stockholder representative under the escrow agreement, at a special
meeting held on March 18, 2000. In evaluating the foregoing and arriving at its
approval, the Paracel board of directors considered a number of factors,
including the factors listed below:
o The board's belief that the merger would result in the creation of a
combined business with significantly greater resources, a more
integrated multi-technology product offering and greater management,
sales, service and marketing capabilities than those of Paracel
alone.
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o The board's belief that the merger would provide increased access to
capital needed for growth and technology development.
o The board's determination that the combined business's financial and
management resources would facilitate relationships and enhance
credibility with existing and prospective customers.
o The complementary nature of the product and technology offerings of
Paracel and the Celera Genomics group, which the board believed
would improve the combined business's competitive position by
offering its customers a more fully integrated portfolio of products
than either company could offer alone or than its competitors
currently offer, thereby potentially enabling customers to compress
the time and reduce the costs of genetic analysis in both the
research and clinical markets.
o The board's determination that the combination of the complementary
technologies and research and development teams of Paracel and the
Celera Genomics group could lead to more rapid product development
cycles and to product development improvements.
o The board's view that the combined business's greater financial
stability and improved long-term prospects would enable it to
attract and retain talented employees more easily than Paracel could
alone.
o The intent that the transaction qualify as a tax-free reorganization
so that no taxable gain or loss would be recognized by the Paracel
stockholders on the exchange of their shares of Paracel common stock
for Celera Genomics common stock.
o Current market conditions, historical market prices and trading
information with respect to the Celera Genomics common stock.
o The potential future appreciation in the value of the Celera
Genomics common stock that Paracel stockholders would receive in
exchange for their shares of Paracel common stock, although there
can be no assurance that any such appreciation will materialize, or
that the value of the Celera Genomics common stock would not
decline.
o Other long-term alternatives for Paracel, including the possibility
of selling shares of Paracel common stock in a public offering or
being acquired by another company.
o The board's belief that PE Corporation is a highly attractive
acquirer of Paracel, with the ability to complete the merger on a
timely basis.
o The extensive negotiation process undertaken before the signing of
the merger agreement, as described above under "--Background of the
Merger," and the board's belief, based on its assessment of the
negotiations, that a higher exchange ratio or better terms could not
be achieved through continued negotiations with PE Corporation.
o The opinion of Thomas Weisel to the effect that, as of the date of
such opinion, the merger consideration (as defined in the merger
agreement) is fair, from a financial point of view, to the holders
of Paracel common stock.
o The merger consideration of approximately $283 million (based on the
Celera Genomics common stock price as of the date of the board
approval), which represents a substantial premium over the price
paid by Paracel's stockholders for their shares of Paracel common
stock.
o The liquidity that the merger would provide to Paracel stockholders,
who would receive registered securities for which an active trading
market exists.
o The terms and conditions of the merger agreement and the form of
escrow agreement.
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None of the foregoing factors or groups of factors had particular
prominence in the decision of the Paracel board of directors to approve the
merger agreement, the merger, the form of escrow agreement and the other
transactions contemplated thereby, and the recommendation of Joseph T. Kingsley
as stockholder representative under the escrow agreement, and none was assigned
any specific or relative weight.
The Paracel board of directors also considered negative factors relating
to the merger, including:
o the risk that the benefits sought in the merger would not be fully
achieved;
o the risk that the merger would not be consummated;
o the risk that the value of the Celera Genomics common stock will not
appreciate or that it will decline;
o the effect of the public announcement of the merger on Paracel's
sales, operating results and ability to enter into arrangements with
certain third parties; and
o other risks described above under "Risk Factors."
The Paracel board of directors believes that these risks are outweighed by
the potential benefits to be gained by the merger.
Recommendation of the Paracel Board of Directors
The Paracel board of directors believes that the merger agreement, the
merger, the form of escrow agreement and the appointment of Joseph T. Kingsley
as stockholder representative under the escrow agreement are fair to and in the
best interests of Paracel and its stockholders and has approved and declared
advisable the merger agreement, the merger, the form of escrow agreement and the
appointment of Joseph T. Kingsley as stockholder representative under the escrow
agreement. The Paracel board of directors recommends that Paracel stockholders
vote FOR the proposal to approve and adopt the merger agreement, the merger, the
form of escrow agreement and the appointment of Joseph T. Kingsley as
stockholder representative under the escrow agreement.
Opinion of Financial Advisor to Paracel
On January 18, 2000, Paracel's board of directors engaged Thomas Weisel
Partners LLC to act as its exclusive financial advisor concerning the possible
sale of Paracel. On March 18, 2000, Thomas Weisel delivered to the board of
directors its verbal opinion that, as of that date, the consideration to be
received by Paracel's stockholders was fair to the stockholders from a financial
point of view. This opinion was confirmed in writing in an opinion letter dated
March 18, 2000.
Paracel's board of directors determined the consideration Paracel's
stockholders would receive in the transaction through negotiations with PE
Corporation. The board did not impose any limitations on Thomas Weisel with
respect to the investigations made or procedures followed in rendering its
opinion.
The full text of the written opinion that Thomas Weisel delivered to
Paracel's board of directors is attached as Annex IV. You should read this
opinion carefully and in its entirety. However, a summary of the Thomas Weisel
opinion is included below.
Thomas Weisel directed its opinion to Paracel's board of directors. The
opinion does not constitute a recommendation to you as to how you should vote
with respect to the transaction. The opinion addresses only the financial
fairness of the consideration to be received by Paracel's stockholders. It does
not address the relative merits of the transaction or any alternatives to the
transaction. Further, it does not address Paracel's underlying decision to
proceed with or effect the transaction. In furnishing its opinion, Thomas Weisel
did not admit that it is an expert within the meaning of the term "expert" as
used in the Securities Act, nor did it admit that its opinion constitutes a
report or valuation within the meaning of the Securities Act. The Thomas Weisel
opinion includes statements to this effect.
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In connection with its opinion, Thomas Weisel:
o reviewed certain publicly available financial and other data with
respect to Paracel and PE Corporation, including, with respect to
Paracel, audited financial statements for the three years ended
December 31, 1998, and preliminary unaudited financial statements
for the year ended December 31, 1999, and, with respect to the
Celera Genomics group, audited combined financial statements for the
three years ended June 30, 1999, unaudited combined financial
statements for the six months ended December 31, 1999, and PE
Corporation's final prospectus relating to an offering of the Celera
Genomics common stock dated February 29, 2000, certain other
relevant financial and operating data relating to Paracel and PE
Corporation made available to Thomas Weisel from published sources
and from Paracel's internal records and those of PE Corporation, and
certain materials prepared by PE Corporation and its investment
bankers in connection with the March 2000 offering of Celera
Genomics common stock;
o reviewed the financial terms and conditions of the merger agreement;
o reviewed certain publicly available information concerning the
trading of, and the trading market for, the Celera Genomics common
stock;
o compared Paracel and PE Corporation from a financial point of view
with certain other companies in the life sciences and genomics
industries that Thomas Weisel deemed to be relevant;
o considered the financial terms, to the extent publicly available, of
selected recent business combinations of companies in the life
sciences and genomics industries which Thomas Weisel deemed to be
comparable, in whole or in part, to the merger;
o reviewed and discussed with representatives of Paracel's management
certain information of a business and financial nature regarding
Paracel and PE Corporation, furnished by Paracel's management,
including financial forecasts and related assumptions prepared by
Paracel and financial forecasts for the Celera Genomics group
prepared by Thomas Weisel's research analyst as part of the
analyst's normal research activities;
o discussed with representatives of PE Corporation's management,
including management of the Celera Genomics group, certain
information regarding the Celera Genomics group's business;
o reviewed and discussed the following financial forecasts and related
assumptions of Paracel provided to Thomas Weisel by Paracel's
management for the purposes of Paracel's discounted cash-flow
analysis and pro forma contribution analysis:
o cash flow projections for Paracel through December 31, 2003; and
o income statement projections for Paracel through December 31, 2003;
o made inquiries of management of PE Corporation concerning the future
prospects of PE Corporation; and
o made inquiries regarding and discussed the merger and the merger
agreement and other matters related thereto with Paracel's counsel.
In preparing its opinion, Thomas Weisel did not assume any responsibility
to independently verify the information referred to above. Instead, with
Paracel's consent, Thomas Weisel relied on the information being accurate and
complete. Thomas Weisel also made the following assumptions, in each case with
Paracel's consent:
o with respect to the financial forecasts for Paracel provided to
Thomas Weisel by Paracel's management and for PE Corporation as
prepared by Thomas Weisel, Thomas Weisel assumed for purposes of its
opinion, upon the advice of the respective managements, that (a) the
forecasts for Paracel have been reasonably prepared on bases
reflecting the best available estimates and judgments of Paracel's
management at the time of preparation as to the future financial
performance of Paracel, (b) with PE Corporation's consent,
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the estimates and assumptions used by Thomas Weisel formed a
reasonable basis for Thomas Weisel's opinion and reflected the best
available estimates and judgments as to the future financial
performance of the Celera Genomics group, and (c) these forecasts
provide a reasonable basis upon which Thomas Weisel could form its
opinion;
o that there have been no material changes in the assets, financial
condition, results of operations, business or prospects of Paracel
or the Celera Genomics group since the respective dates of the last
financial statements made available to Thomas Weisel;
o that the transaction will be consummated in a manner that complies
in all respects with the applicable provisions of the Securities
Act, the Securities Exchange Act of 1934 and all other applicable
federal and state statutes, rules and regulations; and
o that the transaction will be consummated in accordance with the
terms described in the March 18, 2000, draft of the merger
agreement, without further amendment thereto, and without any waiver
by Paracel of any of the conditions to any party's obligations
thereunder.
In addition, for purposes of their opinion:
o Thomas Weisel acknowledged that Paracel does not publicly disclose
internal management forecasts of the type provided to Thomas Weisel
by Paracel's management in connection with the review by Thomas
Weisel of the transaction. These forecasts were not prepared with a
view toward public disclosure. In addition, these forecasts were
based upon numerous variables and assumptions that are inherently
uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results
could vary significantly from those set forth in these forecasts.
Thomas Weisel did not assume any responsibility for these forecasts
in rendering its opinion.
o Thomas Weisel relied on advice of Paracel's counsel and independent
accountants as to all legal and financial reporting matters with
respect to Paracel, the transaction and the merger agreement.
o Thomas Weisel did not assume responsibility for making an
independent evaluation, appraisal or physical inspection of the
assets or liabilities (contingent or otherwise) of Paracel, nor was
Thomas Weisel furnished with any of these appraisals.
o Paracel informed Thomas Weisel, and Thomas Weisel assumed, that the
transaction would be recorded as a purchase transaction under
generally accepted accounting principles ("GAAP").
o The Thomas Weisel opinion was based on economic, monetary, market
and other conditions as in effect on, and the information made
available to Thomas Weisel as of, the date of its opinion.
Accordingly, although subsequent developments may affect its
opinion, Thomas Weisel has not assumed any obligation to update,
revise or reaffirm its opinion.
The following represents a brief summary of the material financial
analyses performed by Thomas Weisel in connection with providing its opinion to
Paracel's board of directors. Some of the summaries of financial analyses
performed by Thomas Weisel include information presented in tabular format. In
order to fully understand the financial analyses performed by Thomas Weisel, you
should read the tables together with the text of each summary. The tables alone
do not constitute a complete description of the financial analyses. Considering
the data set forth in the tables without considering the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of the financial analyses performed by Thomas Weisel.
Comparable Company Analysis. Based on public and other available
information, Thomas Weisel calculated the multiples of aggregate value, which
Thomas Weisel defined as equity value plus debt less cash and cash equivalents
to estimated revenues for 1999, 2000, and 2001 for companies in the drug
discovery and high throughput screening industry. Thomas Weisel believes that
the following nine companies listed below have operations similar to some of the
operations of Paracel, but noted that none of these companies have the same
management, composition, size or combination of businesses
32
<PAGE>
as Paracel: Affymetrix Inc.; Aurora Biosciences Corp.; Caliper Technologies
Corp.; Invitrogen Corp.; Molecular Devices Corporation; PE Corporation--PE
Biosystems Group; Qiagen N.V.; Sequenom Inc.; Techne Corp.
The following table sets forth the multiples indicated by this analysis:
- --------------------------------------------------------------------------------
Aggregate Value to: Low Median Mean High
- --------------------------------------------------------------------------------
1999 Estimated Revenues 14.5x 26.8x 48.8x 82.9x
- --------------------------------------------------------------------------------
2000 Estimated Revenues 11.6 21.5 32.5 109.0
- --------------------------------------------------------------------------------
2001 Estimated Revenues 8.1 19.1 23.6 52.0
- --------------------------------------------------------------------------------
While the comparable company analysis compared Paracel to nine public
companies in the drug discovery/high throughput screening industry, Thomas
Weisel did not include every company that could be deemed to be a participant in
this same industry, or in the specific sectors of this industry.
Thomas Weisel noted that the aggregate value of the consideration to be
received by Paracel's stockholders in connection with the transaction implied
multiples of 19.4x , 14.5x, and 7.4x Paracel's estimated total revenues for
1999, 2000, and 2001, and 42.4x, 18.1x, and 8.7x Paracel's estimated
bioinformatics revenues for 1999, 2000 and 2001.
Comparable Transactions Analysis. Based on public and other available
information, Thomas Weisel calculated the multiples of aggregate value to LTM
(defined as the estimated 12 months ended December 31, 1999) and NTM (defined as
the estimated 12 months ended December 31, 2000) revenues, for Paracel implied
in the following 13 comparable transactions of comparable life sciences industry
companies that have been announced since July 1, 1996:
- --------------------------------------------------------------------------------
Announcement Date Name of Acquiror Name of Target Company
- --------------------------------------------------------------------------------
January 24, 2000 PE Corporation - PE Biosystems Third Wave Technologies
Group
- --------------------------------------------------------------------------------
January 10, 2000 Qiagen N.V. Rapigene
- --------------------------------------------------------------------------------
October 5, 1999 E.I. Dupont de Nemours Corp. CombiChem
- --------------------------------------------------------------------------------
September 22, 1999 MedImmune U.S. Bioscience
- --------------------------------------------------------------------------------
September 13, 1999 Affymetrix Generic Microsystems
- --------------------------------------------------------------------------------
April 27, 1999 Becton-Dickinson Clontech Laboratories
- --------------------------------------------------------------------------------
November 19, 1998 EM Industries CN Biosciences
- --------------------------------------------------------------------------------
August 10, 1998 Amersham Pharmacia Molecular Dynamics
- --------------------------------------------------------------------------------
December 23, 1997 Incyte Pharmaceuticals Sunteni
- --------------------------------------------------------------------------------
November 24, 1997 PE Corporation - PE Biosystems Molecular Informatics
Group
- --------------------------------------------------------------------------------
August 25, 1997 PE Corporation - PE Biosystems PerSeptive Biosystems
Group
- --------------------------------------------------------------------------------
April 10, 1997 Becton Dickinson Pharmingen
- --------------------------------------------------------------------------------
July 23, 1996 Incyte Pharmaceuticals Genome Systems
- --------------------------------------------------------------------------------
33
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The following table sets forth the multiples indicated by this analysis
and the multiples implied by the proposed transaction. This information is
presented for four relatively recent transactions that Thomas Weisel determined
to be relatively more comparable than some of the other transactions listed in
the preceding table:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PE
Corporation's
Transaction
PE Corporation's Value to
Transaction Value Paracel's PE Affymetrix/
Aggregate Value to Paracel's Total Bioinformatics Biosystems/ E.I. duPont/ MedImmune/ Genetic
to: Revenues Revenues Third Wave CombiChem US Bioscience Microsystems
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 Estimated 19.4x 42.4x 33.1x 6.6x 14.5x 12.5
Revenues
- ----------------------------------------------------------------------------------------------------------------
2000 Estimated 14.5 18.1 NA 3.0 8.1 NA
Revenues
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
No company or transaction used in the comparable company or comparable
transactions analyses is identical to Paracel or the Celera Genomics group or
the transaction. Accordingly, an analysis of the results of the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies to which Paracel, the Celera Genomics group and the transaction are
being compared.
Discounted Cash Flow Analysis. Thomas Weisel used financial cash flow
forecasts of Paracel for calendar years 2000 through 2004, as estimated by
Paracel's management to perform a discounted cash flow analysis. In conducting
this analysis, Thomas Weisel assumed that Paracel would perform in accordance
with these forecasts. Thomas Weisel first estimated the terminal value of the
projected cash flows by applying multiples to Paracel's estimated EBITDA, which
multiples ranged from 5.0x to 9.0x. Thomas Weisel then discounted the cash flows
projected through 2004 and the terminal values to present values using rates
ranging from 25% to 35%. This analysis indicated a range of aggregate values
from $180.9 million to $450.8 million. Thomas Weisel noted that the aggregate
value of the stock consideration to be received by Paracel's stockholders and
option holders was $283 million. (This amount does not take into account the
"collars" on the amount of Celera Genomics common stock issuable described under
"--Consideration to Be Received in the Merger; Treatment of Stock Options.")
This implies an aggregate value for Paracel of $280 million after accounting for
debt less cash.
Contribution Analysis. Thomas Weisel used the estimates and financial
forecasts prepared by Paracel's management with respect to Paracel and by Thomas
Weisel's research analysts with respect to the Celera Genomics group, as well as
the forward-looking information provided by management of PE Corporation in
their discussions with Thomas Weisel. On the basis of these estimates and
financial forecasts, Thomas Weisel reviewed the estimated contribution of each
of Paracel and the Celera Genomics group to estimated revenues for calendar
years 1999 through 2003 for the combined business.
This analysis indicated that Paracel and the Celera Genomics group would
each contribute:
34
<PAGE>
- --------------------------------------------------------------------------------
PE Corporation-
Paracel, Inc. Celera Genomics Group
- --------------------------------------------------------------------------------
Total Revenues
Calendar Year 2003 Estimated 10% 90%
Calendar Year 2002 Estimated 12 88
Calendar Year 2001 Estimated 19 81
Calendar Year 2000 Estimated 26 74
Calendar Year 1999 Estimated 38 62
- --------------------------------------------------------------------------------
Gross Profits
Calendar Year 2003 Estimated 9% 91%
Calendar Year 2002 Estimated 11 89
Calendar Year 2001 Estimated 19 81
Calendar Year 2000 Estimated 27 73
Calendar Year 1999 Estimated 27 73
- --------------------------------------------------------------------------------
The foregoing description is only a summary of the analyses and
examinations that Thomas Weisel deems material to its opinion. It is not a
comprehensive description of all analyses and examinations actually conducted by
Thomas Weisel. The preparation of a fairness opinion necessarily is not
susceptible to partial analysis or summary description. Thomas Weisel believes
that its analyses and the summary set forth above must be considered as a whole
and that selecting portions of its analyses and of the factors considered,
without considering all analyses and factors, would create an incomplete view of
the process underlying the analyses set forth in its presentation to Paracel. In
addition, Thomas Weisel may have given various analyses more or less weight than
other analyses, and may have deemed various assumptions more or less probable
than other assumptions. The fact that any specific analysis has been referred to
in the summary above is not meant to indicate that this analysis was given
greater weight than any other analysis. Accordingly, the ranges of valuations
resulting from any particular analysis described above should not be taken to be
the view of Thomas Weisel with respect to the actual value of Paracel.
In performing its analyses, Thomas Weisel made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Paracel and PE
Corporation. The analyses performed by Thomas Weisel are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than those suggested by these analyses. These analyses
were prepared solely as part of the analysis performed by Thomas Weisel with
respect to the financial fairness of the consideration to be received by
Paracel's stockholders pursuant to the transaction, and were provided to Paracel
in connection with the delivery of the Thomas Weisel opinion. The analyses do
not purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at any time in
the future.
As described above, Thomas Weisel's opinion and presentation were among
the many factors that Paracel took into consideration in making Paracel's
determination to approve, and to recommend that Paracel's stockholders approve,
the merger.
Paracel has agreed to pay Thomas Weisel a fee of $1.0 million plus 0.75%
of the amount of the merger consideration in excess of $100 million, or $3.25
million plus 0.50% of the amount of the merger consideration in excess of $400
million, for its financial advisory services, including delivery of this
opinion. Further, Paracel has agreed to indemnify Thomas Weisel, its affiliates,
and their respective, directors, officers, agents, consultants, employees and
controlling persons against specific liabilities, including liabilities under
the federal securities laws.
In the ordinary course of its business, Thomas Weisel actively trades the
equity securities of PE Corporation for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
these securities.
35
<PAGE>
Structure of the Merger
If all conditions to the merger are satisfied or waived in accordance with
the merger agreement, Umbrella Acquisition Corp., a direct, wholly owned
subsidiary of PE Corporation, will merge with and into Paracel, with Paracel
continuing as the surviving corporation. Following the merger, Paracel will be a
wholly owned subsidiary of PE Corporation.
Closing Matters
Closing. The closing of the merger will take place on the second business
day after all closing conditions have been satisfied or waived, unless the
merger agreement has been terminated or another time or date is agreed to in
writing by the parties. See "--Conditions to the Merger" for a more complete
description of the conditions that must be satisfied prior to closing.
Effective Time. As soon as practicable after the satisfaction of the
conditions to the merger, PE Corporation and Paracel will file a short-form
merger agreement in accordance with the California Corporations Code (the "CCC")
and make all other required filings or recordings. The merger will become
effective when the short-form merger agreement is duly filed or at such later
time as is permissible in accordance with the CCC and as Paracel and PE
Corporation agree and specify in the short-form merger agreement.
Consideration to Be Received in the Merger; Treatment of Stock Options
The merger agreement provides that, at the effective time of the merger:
o each share of Paracel common stock issued and outstanding
immediately prior to the effective time of the merger (excluding
dissenters' shares and shares canceled in connection with the
merger) will be converted into a fraction of a share of Celera
Genomics common stock and associated rights. This number is referred
to as the "exchange ratio." The exchange ratio will be derived by
dividing $283 million (a mutually agreed dollar value of Paracel),
by 10,533,349 (the total number of shares of Paracel common stock
that would be outstanding if all Paracel stock options outstanding
on March 20, 2000, were exercised), by the average of the closing
sales prices of a share of Celera Genomics common stock on the NYSE
Composite Transactions Tape on each of the 10 consecutive days
immediately preceding (and excluding) the second trading day prior
to the effective time of the merger, rounded to the nearest
1/10,000th, provided that the exchange ratio will not be less than
.1472 nor more than .2146; and
o each outstanding and unexercised option to purchase shares of
Paracel common stock granted under the Paracel stock option plan
will be assumed by PE Corporation and converted into an option to
purchase shares of Celera Genomics common stock under the same terms
and conditions as were applicable to the options as granted under
the Paracel stock option plan (except that the vesting of options
held by members of Paracel's Scientific Advisory Board will be
accelerated in connection with the merger). The number of shares of
Celera Genomics common stock that the converted options will be
exercisable for, and the exercise price of the option, will be
adjusted to reflect the exchange ratio.
o any shares of Paracel common stock owned by Umbrella Acquisition
Corp. or any subsidiary of Paracel will be automatically canceled,
and PE Corporation will not exchange those shares for any shares of
Celera Genomics common stock or other consideration.
At the time of the special meeting, Paracel stockholders will not
necessarily know the exact number or the exact value of the Celera Genomics
common stock that will be issued in connection with the merger. If the value of
Celera Genomics common stock prior to the closing of the merger causes the
exchange ratio to reach one of its outer limits, then the total value of the
merger consideration to be paid by PE Corporation will be higher or lower than
$283 million, the mutually agreed value of Paracel for purposes of calculating
the exchange ratio. For example, if the closing of the merger were to have
occurred on May 4, 2000, the exchange ratio would have been at the limit of
.2146, and the aggregate consideration paid to Paracel stockholders would have
been less than the mutually agreed value of Paracel of $283 million. If, on the
other hand, the value of Celera Genomics common stock at the effective time of
the merger causes the exchange ratio
36
<PAGE>
to reach .1472, then the aggregate consideration paid to Paracel stockholders
would be greater than $283 million. Stockholders of Paracel are urged to obtain
current market quotations for Celera Genomics common stock. No assurance can be
given as to the market price of the Celera Genomics common stock at the
effective time of the merger.
As soon as practicable after the effective time of the merger, PE
Corporation will deliver notices to the holders of Paracel stock options. Those
notices will set forth each holder's rights pursuant to the Paracel stock option
plan, including that, in connection with the merger and pursuant to the terms of
the Paracel stock option plan, the agreement evidencing the grants of the
Paracel stock options will continue in effect on the same terms and conditions,
except that, as indicated above, the options will be converted into options to
purchase shares of Celera Genomics common stock and, with respect to options
held by members of Paracel's Scientific Advisory Board , the vesting will be
accelerated. To the extent permitted by law, PE Corporation will comply with the
terms of the Paracel stock option plan and will take reasonable steps to ensure
that the stock options which qualified as incentive stock options prior to the
effective time of the merger continue to qualify as incentive stock options
after the merger.
For a further discussion of the treatment of Paracel stock options and
other employee benefit plans under the merger agreement, see "--Effect on
Employee Benefits, Stock Plan and Stock Options."
Exchange of Certificates in the Merger
BankBoston, N.A., in its capacity as exchange agent, will handle the
exchange of Paracel stock certificates for stock certificates of Celera Genomics
common stock and the payment of cash for fractional shares. Soon after the
closing of the merger, the exchange agent will send a letter of transmittal,
which is to be used to exchange Paracel stock certificates for stock
certificates of Celera Genomics common stock, to each former Paracel
stockholder. The letter of transmittal will contain instructions explaining the
procedure for surrendering Paracel stock certificates. You should not return
certificates with the enclosed proxy card.
Paracel stockholders who surrender their stock certificates, together with
a properly completed letter of transmittal, will receive stock certificates
representing 95% of the shares of Celera Genomics common stock into which the
shares of Paracel common stock were converted in the merger. Stock certificates
representing the other 5% of the shares of Celera Genomics common stock will be
withheld from the exchange amount and delivered to the escrow agent pursuant to
the escrow agreement. See "--Escrow Agreement."
After the merger, except with respect to dissenting shares, each
certificate that previously represented shares of Paracel common stock will only
represent the right to receive the shares of Celera Genomics common stock into
which those shares of Paracel common stock have been converted (and cash in lieu
of fractional shares).
PE Corporation will not pay dividends to holders of any Paracel stock
certificates until the Paracel stock certificates are surrendered. However, once
those certificates are surrendered, PE Corporation will pay to the holder,
without interest, any dividends that have been declared after the effective time
of the merger on the shares into which those Paracel shares have been converted.
After the effective time of the merger, Paracel will not register any
transfers of shares of Paracel common stock.
Fractional Shares
No fractional shares of Celera Genomics common stock will be issued in the
merger. Instead, PE Corporation will deposit with a designated bank or trust any
cash payable in lieu of fractional shares of Celera Genomics common stock. From
the deposited funds, the bank or trust will pay each of those stockholders who
would have otherwise been entitled to a fractional share of Celera Genomics
common stock an amount in cash determined by multiplying the fractional share
interest to which such holder would otherwise be entitled by the average of the
closing prices of a share of Celera Genomics common stock on the NYSE Composite
Transactions Tape on each of the 10 consecutive trading days immediately
preceding (and excluding) the second trading day prior to the effective time of
the merger.
37
<PAGE>
Representations and Warranties
The merger agreement contains substantially reciprocal customary
representations and warranties made by each of us to the other. These
representations and warranties relate to, among other things:
o due organization, qualification to conduct business and corporate
standing and power;
o capital structure;
o corporate authority to enter into, and carry out the obligations
under, the merger agreement, and enforceability of the merger
agreement;
o absence of a breach of the charter, bylaws, law or material
agreements as a result of the merger;
o accuracy of financial statements;
o absence of certain changes or events;
o litigation;
o compliance with laws;
o payment of fees to brokers in connection with the merger agreement;
o votes required for approval of the merger; and
o tax matters.
The merger agreement also contains representations and warranties of
Paracel relating to:
o ownership of subsidiaries;
o employee benefit plans and labor matters;
o real and personal property matters;
o insurance matters;
o environmental matters;
o maintaining private company status;
o material contracts with third parties;
o absence of affiliate transactions;
o opinion of financial advisor;
o board of directors recommendation;
o intellectual property matters; and
o powers of attorney.
The merger agreement also contains representations and warranties of PE
Corporation which relate to:
38
<PAGE>
o filings with the SEC; and
o operations of Umbrella Acquisition Corp. prior to closing.
The representations and warranties contained in the merger agreement do
not survive the effective time of the merger, other than as set forth in, and
for the purposes contemplated by, the escrow agreement.
Covenants
We have each undertaken certain covenants in the merger agreement. The
following summarizes the most significant of these covenants.
Conduct of Business by Paracel Pending Closing. Paracel and its
subsidiaries have undertaken a covenant that places restrictions on the conduct
of their businesses until either the effective time of the merger or the
termination of the merger agreement. In general, Paracel and its subsidiaries
are required to carry on their businesses in the ordinary course of business
consistent with past practice and use their reasonable best efforts to preserve
intact their present lines of business and relationships with third parties.
Paracel and its subsidiaries have agreed to some specific restrictions that
prohibit them from:
o declaring or paying dividends on, or making any other distributions
in respect of, any of their capital stock;
o making changes in their share capital, including, among other
things, stock splits, combinations or reclassifications;
o repurchasing or redeeming any of their capital stock;
o issuing, delivering or selling any shares of their capital stock or
other equity interests, other than in connection with the exercise
of stock options or the grant of up to 80,000 stock options at an
exercise price equal to the fair market value on the date of grant
to newly hired employees in the ordinary course of business and
consistent with past practice;
o amending their articles of incorporation or bylaws, other than as
contemplated by the merger agreement;
o making acquisitions of other entities;
o disposing of properties or assets, beyond specified amounts;
o incurring debt, except short term borrowings in specified amounts;
o making loans, advances or capital contributions to, or investments
in, any other person;
o acquiring or leasing assets, beyond specified amounts;
o making any capital expenditures, beyond specified amounts;
o paying, discharging or satisfying any claims, liabilities or
obligations, except as specified by the merger agreement;
o waiving, releasing or transferring any rights of material value in
any existing license, lease, contract or other document;
o adopting a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or
reorganization;
o entering into or amending any collective bargaining agreement;
39
<PAGE>
o changing any accounting principle used by them, except as required
by generally accepted accounting principles;
o settling or compromising any litigation or claim, other than those
within specified amounts that do not provide for injunctive or
similar relief;
o engaging in any transaction with, or entering into any agreement
with, any of Paracel's affiliates;
o selling, assigning or licensing any intellectual property;
o entering into, terminating or amending any agreement under which a
third party is granted exclusive rights with respect to any of their
products or technology;
o making or changing any material tax election;
o adopting or amending (except as required by law) any company benefit
plan or increasing the compensation of directors and executive
officers or increasing employee benefits other than in the ordinary
course of business and consistent with past practice;
o granting any new or modified severance or termination arrangement or
increasing or accelerating any benefits payable under their
severance or termination pay policies; and
o effectuating a "plant closing" or "mass layoff", within the meaning
of applicable law, affecting any site of employment, facility,
operating unit or employee of Paracel without notifying PE
Corporation and complying with regulatory requirements.
Conduct of Business by PE Corporation Pending Closing. PE Corporation has
undertaken a covenant that places restrictions on the conduct of its business
until either the effective time of the merger or the termination of the merger
agreement. PE Corporation has agreed to some specific restrictions that prohibit
it from:
o declaring or paying dividends on, or making any other distributions
in respect of, its Celera Genomics common stock, other than stock
splits in the form of a stock dividend;
o combining or reclassifying Celera Genomics common stock or issuing
or authorizing the issuance of any other securities in lieu of or in
substitution of shares of Celera Genomics common stock; and
o amending its certificate of incorporation or bylaws in a manner that
would be materially adverse to the holders of Celera Genomics common
stock.
Additional Reciprocal Covenants Relating to Conduct of Business Pending
the Merger. Both Paracel and PE Corporation have agreed to some specific
restrictions that prohibit them from:
o taking actions that would prevent or impede the merger from
qualifying as a reorganization for tax purposes;
o taking actions that, if taken on or prior to the date of the merger
agreement, would have resulted in any of the representations and
warranties set forth in the merger agreement being untrue;
o taking actions that would or reasonably might be expected to result
in any of the conditions to closing not being satisfied; and
o taking actions that could reasonably be expected to materially delay
or impair the ability of either party to consummate the transactions
contemplated by the merger agreement.
40
<PAGE>
No Solicitation. Paracel has agreed that it will not (whether directly or
indirectly through advisors, agents or other intermediaries), nor will it
authorize or permit any of its officers, directors, agents, representatives,
advisors or subsidiaries, to:
o solicit, initiate or take any action knowingly to facilitate the
submission of inquiries, proposals or offers with respect to a third
party "transaction proposal" of the type described below;
o agree to or endorse any transaction proposal;
o enter into or participate in any discussions or negotiations
regarding a transaction proposal;
o furnish to any third party any information with respect to its
business, properties or assets in connection with any transaction
proposal; or
o otherwise cooperate in any way with, or knowingly assist or
participate in, facilitate or encourage, any effort or attempt by
any third party to do any of the foregoing.
A "transaction proposal" is any proposal or offer with respect to:
o any acquisition or purchase of 15% or more of the consolidated
assets of Paracel or of over 15% of any class of equity securities
of Paracel;
o any tender offer, including a self tender offer, or exchange offer
that if consummated would result in any person beneficially owning
15% or more of any class of equity securities of Paracel;
o any merger, consolidation, business combination, sale of
substantially all of the assets, recapitalization, liquidation,
dissolution or similar transaction involving Paracel's assets,
individually or in the aggregate, constituting more than 15% of the
consolidated assets of Paracel, other than the transactions
contemplated by the merger agreement; or
o any other transaction the consummation of which would or could
reasonably be expected to impede, interfere with, prevent or
materially delay the merger.
Reasonable Best Efforts. PE Corporation and Paracel have agreed to
cooperate with each other and to use their reasonable best efforts to take all
actions and do all things advisable or necessary under applicable laws to
complete the merger and the other transactions contemplated by the merger
agreement. This cooperation may include obtaining all regulatory consents
necessary to complete the merger and defending any lawsuits challenging the
merger agreement.
Stock Options. Paracel has agreed to provide the requisite notice of the
merger to all holders of Paracel stock options under the terms of their
respective stock option agreements. Paracel has also agreed not to accelerate
vesting or exercisability of any Paracel stock options solely as a result of the
merger. The foregoing restrictions will not apply to options held by members of
Paracel's Scientific Advisory Board, the vesting of which will be accelerated
prior to the effective time of the merger.
Conditions to the Merger
Our respective obligations to complete the merger are subject to the
satisfaction or, to the extent permissible, the waiver of various conditions
which include, in addition to other customary closing conditions:
o the adoption and approval of the merger agreement, the merger and
the form of escrow agreement, and the appointment of Joseph T.
Kingsley as stockholder representative under the escrow agreement,
by the Paracel stockholders;
o the absence of any law, order, injunction or restraint prohibiting
completion of the merger;
41
<PAGE>
o the expiration or termination of the applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act;
o the SEC having declared effective the PE Corporation registration
statement, of which this prospectus forms a part, for the shares of
Celera Genomics common stock being issued in the merger;
o the approval for listing by the NYSE and the Pacific Stock Exchange
of the Celera Genomics common stock to be issued in the merger,
subject to official notice of issuance;
o the execution of the escrow agreement; and
o the absence of litigation pending or threatened by any governmental
entity relating to the merger.
In addition, each party's obligation to complete the merger is subject to
the satisfaction of the following conditions:
o the representations and warranties of the other party contained in
the merger agreement being true and correct in all material respects
as of the closing date of the merger as if they were made on that
date, except that any representation and warranty qualified as to
materiality will be true and correct in all respects as of the
closing date;
o the other party having performed or complied in all material
respects with its obligations contained in the merger agreement; and
o the receipt of an opinion of counsel to the effect that the merger
will qualify as a reorganization under the Internal Revenue Code and
that each of PE Corporation, Paracel and Umbrella Acquisition Corp.
will be a party to the reorganization.
Additionally, PE Corporation's obligation to effect the merger and the
other transactions contemplated by the merger agreement is conditioned upon:
o the receipt of all other governmental and regulatory consents,
approvals and authorizations necessary for the merger, except, in
the case of certain such consents, approvals and authorizations,
where failure to obtain those consents, approvals or authorizations
would not reasonably be expected to have a material adverse effect
on Paracel or prevent or materially delay the ability of Paracel to
complete the transactions contemplated by the merger agreement;
o the absence of any pending litigation or action which seeks to
restrain or prohibit the merger or limit PE Corporation's operation
of Paracel, as to which there is a reasonable possibility of success
or that could reasonably be expected to have a material adverse
effect with respect to Paracel;
o the receipt of affiliate letters from all people considered
affiliates of Paracel;
o the exercise of dissenters rights under the CCC by holders of not
more than 5% of Paracel common stock;
o the execution of an employment agreement between Kwang-I Yu and PE
Corporation; and
o the amendment or waiver of Paracel's by-laws rendering Article VII
thereof relating to stockholder rights of first refusal inapplicable
to the merger (which condition was satisfied on March 31, 2000,
pursuant to a written consent to amend the bylaws executed by
stockholders of Paracel holding approximately 78% of the issued and
outstanding shares of Paracel common stock as of such date).
Stock Exchange Listings
PE Corporation has agreed to use reasonable best efforts to cause the
shares of Celera Genomics common stock to be issued in the merger and the shares
of Celera Genomics common stock to be reserved for issuance upon exercise of
42
<PAGE>
Paracel stock options to be authorized for listing on the NYSE and the PSE
subject to official notice of issuance. Paracel is a privately owned company
whose stock is not registered under the Securities Exchange Act of 1934 or
listed on any stock exchange.
Regulatory Approvals Required
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits us from
completing the merger until after we have filed the required notification and
report forms and furnished additional information and materials to the Antitrust
Division of the United States Department of Justice and the United States
Federal Trade Commission, if requested, and the required waiting period has
expired or terminated. The required notification and report forms were filed
under the HSR Act with the FTC and the Antitrust Division on April 10, 2000.
Accordingly, the waiting period under the HSR Act will expire on May 10, 2000
unless, on or prior to that date, either the Antitrust Division or the FTC
requests additional information or documentary material from PE Corporation or
Paracel. There can be no assurance that a challenge to the merger on antitrust
grounds will not be made or, if a challenge is made, that it would not be
successful. A challenge could be brought by governmental or private parties, and
could seek to enjoin consummation of the merger or to compel the divestiture of
businesses conducted by Paracel or PE Corporation.
Termination of the Merger Agreement
Right to Terminate. We may mutually agree to terminate the merger
agreement at any time. In addition, either of us may terminate the merger
agreement if specified events do or do not occur. These include:
o if a court or government regulator permanently prohibits the merger;
or
o if the merger is not completed by June 30, 2000, except that a party
may not terminate the merger agreement if the cause of the merger
not being completed by that date is that party's failure to fulfill
its obligations under the merger agreement. This deadline will be
extended to July 31, 2000, if:
o the SEC has declared effective the PE Corporation registration
statement of which this prospectus is a part; and
o completion of the merger is delayed because the Paracel
special meeting of stockholders to approve the merger has not
yet been held; and
o neither PE Corporation nor Paracel is entitled to terminate
the merger agreement under any other provision.
The merger agreement may be also be terminated by PE Corporation if the
Paracel stockholders fail to approve the merger agreement, the merger, the form
of escrow agreement and the appointment of Joseph T. Kingsley as stockholder
representative under the escrow agreement.
Effect of Termination. Pursuant to the terms of the merger agreement, if
the merger agreement is terminated it will become void and have no effect,
except for certain provisions which will survive on customary terms.
Amendment and Waiver of the Merger Agreement
The merger agreement may be amended by the parties at any time before or
after approval of the merger agreement by Paracel's stockholders, but after
Paracel's stockholder approval is obtained, no amendment of the merger agreement
may be effected that legally requires further approval by Paracel's stockholders
without their subsequent approval. All amendments to the merger agreement must
be in a writing signed by PE Corporation, Umbrella Acquisition Corp. and
Paracel.
At any time prior to the effective time of the merger, the parties to the
merger agreement may, to the extent legally allowed:
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o extend the time for the performance of any of the obligations or
other acts of the other parties to the merger agreement;
o waive any inaccuracies in the representations and warranties of the
other parties contained in the merger agreement or in any document
delivered pursuant to the merger agreement; and
o waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement (subject to the same
conditions that apply to amendments).
All extensions and waivers must be in writing and signed by the party against
whom the waiver is to be effective.
Expenses
The parties to the merger agreement have agreed that all costs and
expenses incurred in connection with the merger will be paid by the party
incurring such expenses, including their respective brokers fees, except PE
Corporation and Paracel will equally share the cost of filing, printing and
distributing the registration statement and this prospectus.
Effect on Employee Benefits, Stock Plan and Stock Options
Benefit Plans. PE Corporation has agreed, during the one-year period
following the effective time of the merger, that employees of Paracel will
participate in PE Corporation's employee benefit plans on a basis no less
favorable, in the aggregate, than similarly situated employees of PE Corporation
hired after July 1, 1999. PE Corporation has also agreed to waive limitations as
to pre-existing conditions, exclusions and waiting periods with respect to
participation by Paracel's employees in applicable PE Corporation benefit plans
following the effective time of the merger and to provide credit for amounts
paid by Paracel employees prior to the effective time of the merger in
satisfying co-payments and deductibles under PE Corporation's welfare plans. PE
Corporation will give employees of Paracel at the effective time of the merger
and who remain employees thereafter full credit for service under each
comparable Paracel employee benefit plan maintained by Paracel immediately
before the effective time of the merger for purposes of eligibility and vesting
and entitlement to vacation and vacation pay, but not for purposes of benefit
accrual, under each PE Corporation employee benefit plan in which the employee
may participate.
Stock Options. The merger agreement provides that, after the effective
time of the merger, each outstanding option to purchase Paracel common stock
granted prior to the effective time of the merger pursuant to Paracel's stock
option plans, whether vested or unvested, will be deemed to constitute an option
to acquire the same number of shares of Celera Genomics common stock as the
holder of such option would have been entitled to receive pursuant to the merger
had such holder exercised such option in full immediately prior to the effective
time of the merger. Such options will be exercisable at a price per share equal
to the aggregate exercise price for the shares of Paracel common stock otherwise
purchasable pursuant to such option divided by the number of full shares of
Celera Genomics common stock deemed purchasable pursuant to such option, except
that in the case of incentive stock options, the option price, number of shares
purchasable and other terms and conditions of such option will be determined in
order to comply with applicable provisions of the Internal Revenue Code.
Material United States Federal Income Tax Consequences
The following is a description of the material United States federal
income tax consequences of the merger. This discussion is not a comprehensive
description of all of the tax consequences that may be relevant to you. For
example, we have not described tax consequences that arise from rules that apply
generally to all taxpayers or to some classes of taxpayers. We have also not
described tax consequences that we assume to be generally known by investors.
This discussion is based upon the Internal Revenue Code, Treasury regulations
and court and administrative rulings and decisions in effect on the date of this
prospectus. These laws may change, possibly retroactively, and any change could
affect the continuing validity of this discussion. In particular, legislation
was recently proposed by the Clinton Administration dealing with tracking stock
such as the Celera Genomics common stock. Such proposal would, among other
things, grant authority to the IRS to treat tracking stock as something other
than stock or as stock of another entity. If this proposal is enacted, it could
have adverse tax consequences for us or for holders of Celera Genomics common
stock. A similar proposal was made
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in 1999. Congress did not act on the 1999 proposal, and it is impossible to
predict whether Congress will act upon this proposal or any other proposal
relating to tracking stock.
PE Corporation may convert the Celera Genomics common stock or the PE
Biosystems common stock into shares of the other class without any premium if,
based on the legal opinion of its tax counsel, it is more likely than not as a
result of the enactment of legislative changes or administrative proposals or
changes that PE Corporation or its stockholders will be subject to tax upon
issuance of Celera Genomics common stock or PE Biosystems common stock or that
such stock will not be treated as stock of PE Corporation. See "Description of
PE Corporation Capital Stock--Conversion and Redemption--Conversion of Celera
Genomics Common Stock at PE Corporation's Option at Any Time."
This discussion assumes that you hold your shares of Paracel common stock
as a capital asset and does not address the tax consequences that may be
relevant to you in light of your particular circumstances. In addition, it does
not present a description of the United States federal income tax laws
applicable to you if you are subject to special treatment under the United
States federal income tax laws, including if you are:
o a bank;
o a tax-exempt organization;
o an S corporation or other pass-through entity;
o an insurance company;
o a dealer in securities or foreign currencies;
o a Paracel stockholder who received your Paracel common stock through
the exercise of employee stock options or otherwise as compensation;
o not a U.S. person; or
o a Paracel stockholder who holds Paracel common stock as part of a
hedge, straddle or conversion transaction.
This discussion also does not address any consequences arising under the
laws of any state, locality or foreign jurisdiction. PE Corporation and Paracel
have not and will not seek any ruling from the Internal Revenue Service
regarding any matters relating to the merger. The IRS has announced that it will
not issue advance rulings on the classification of an instrument similar to the
Celera Genomics common stock that has certain voting and liquidation rights in
an issuing corporation but whose dividend rights are determined by reference to
a segregated portion of the issuing corporation's assets, including assets held
by a subsidiary. In addition, there are no court decisions or other authorities
bearing directly on the classification of instruments with characteristics
similar to those of Celera Genomics common stock.
It is a condition to the merger that each of PE Corporation and Paracel
receive an opinion from its tax counsel that the merger qualifies as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and that PE Corporation, Umbrella Acquisition Corp. and Paracel will each
be a party to that reorganization within the meaning of Section 368(b) of the
Internal Revenue Code. The opinions will be based on customary assumptions and
factual representations and will assume that the merger will be completed
according to the terms of the merger agreement. The following discussion of
United States federal income tax consequences of the merger assumes that, if
completed, the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and that PE Corporation, Umbrella
Acquisition Corp. and Paracel will each be a party to that reorganization within
the meaning of Section 368(b) of the Internal Revenue Code for United States
federal income tax purposes. Accordingly, if we complete the merger:
o PE Corporation and Paracel will not recognize gain or loss;
o you will not recognize gain or loss when you exchange your Paracel
common stock solely for Celera Genomics common stock;
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o you will recognize capital gain or loss on any cash received in lieu
of a fractional share of Celera Genomics common stock equal to the
difference between the amount of cash received and the basis
allocated to such fractional share;
o the aggregate tax basis of Celera Genomics common stock you receive
will be the same as the aggregate tax basis of the Paracel common
stock you surrender in exchange, decreased by the tax basis
allocated to any fractional share interest exchanged for cash;
o the holding period of Celera Genomics common stock you receive will
include the holding period of shares of Paracel common stock you
surrender in the exchange; and
o you must retain records and file with your United States federal
income tax returns a statement setting forth certain facts relating
to the merger.
Backup Withholding. If you are a noncorporate holder of Paracel common
stock you may be subject to backup withholding at a 31% rate on any cash
payments received in lieu of a fractional share interest in Celera Genomics
common stock. You will not be subject to backup withholding, however, if you:
o furnish a correct taxpayer identification number and certify that
you are not subject to backup withholding on the substitute Form W-9
or successor form included in the letter of transmittal to be
delivered to you following the completion of the merger;
o provide a certification of foreign status on Form W-8 or a successor
form; or
o are otherwise exempt from backup withholding.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against your United States federal income tax liability,
provided you furnish the required information to the Internal Revenue Service.
Tax matters are very complicated, and the tax consequences of the merger
to you will depend upon the facts of your particular situation. We encourage you
to consult your own tax advisors regarding the specific tax consequences of the
merger, including tax return reporting requirements, the applicability of
federal, state, local and foreign tax laws and the effect of any proposed change
in the tax laws.
Anticipated Accounting Treatment
For accounting and financial reporting purposes, the merger will be
treated as a purchase by PE Corporation under generally accepted accounting
principles.
Interests of Certain Persons in the Merger
Some members of the Paracel board of directors and management have
interests in the merger in addition to their interests generally as stockholders
of Paracel. The Paracel board of directors was aware of these interests and
considered them, among other matters, in approving the merger agreement and the
transactions contemplated thereby.
Employment Agreement. It is a condition to the merger that Kwang-I Yu,
Chairman of the Board, President and Chief Executive Officer of Paracel, enter
into an employment agreement with PE Corporation prior to the effective time of
the merger.
Pursuant to the terms of the employment agreement, Dr. Yu will serve as a
Senior Vice President of the Celera Genomics group and a General Manager of the
Paracel Business Unit of the Celera Genomics group. In such capacity, Dr. Yu
will have such duties, consistent with his position, as may be assigned to him
from time to time. Dr. Yu's base salary will be $240,000 per year, payable in
regular installments and subject to increase in accordance with PE Corporation's
usual payment practices. Additionally, Dr. Yu will be eligible to earn an annual
bonus award of up to 40% of base salary, will be granted options to purchase
shares of Celera Genomics common stock in an amount to be determined by the PE
Corporation
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board of directors and to be priced at the fair market value of the stock on the
date of grant, and will receive other benefits as are generally granted to
senior employees of the Celera Genomics group. If Dr. Yu's employment is
terminated without cause prior to the end of his term, he will be entitled to
severance equal to one year's salary plus targeted bonus. During the term of the
employment agreement and for the longer of
o a period of three years following the date of commencement of the
term; or
o one year after the date that Dr. Yu ceases to be employed by PE
Corporation for any reason,
Dr. Yu will also be subject to customary non-compete/non-solicitation
restrictions and customary confidentiality restrictions.
Indemnification and Directors' and Officers' Insurance. The merger
agreement provides that the surviving corporation and PE Corporation will
indemnify each person who is or was or who becomes eligible for indemnification
pursuant to the Paracel articles of incorporation and bylaws pertaining to
events occurring prior to the effective time of the merger or to liabilities
arising out of the merger agreement, in each case to the extent that Paracel
would have been permitted under the Paracel articles of incorporation and bylaws
to provide such indemnification. PE Corporation has also agreed that, subject to
certain dollar restrictions, the surviving corporation will maintain in effect
for at least six years after the effective time of the merger, the current or
comparable policies of directors and officers' liability insurance maintained by
Paracel and its subsidiaries on March 20, 2000, providing coverage with respect
to matters existing or occurring prior to the effective time of the merger.
PE Corporation Management. Two members of PE Corporation's management have
an interest in Paracel. Michael W. Hunkapiller, President of the PE Biosystems
group and Senior Vice President of PE Corporation, has served as a member of the
Paracel board of directors since 1996. All non-employee board members of Paracel
are granted stock options in lieu of any director's fees. Dr. Hunkapiller was
granted an option on August 5, 1996, to purchase 50,000 shares of Paracel common
stock with an exercise price of $3.75 per share. See "--Background of the
Merger" for a discussion of Dr. Hunkapiller's role in the merger. Mark Adams,
Vice President of Genome Programs for the Celera Genomics group, has served on
Paracel's Scientific Advisory Board since January 1999. Dr. Adams has also been
granted an option to purchase 5,000 shares of Paracel common stock with an
exercise price of $3.75 per share. This grant is customary for all members of
Paracel's Scientific Advisory Board. Dr. Adams also receives a fee of $1,500 for
each Scientific Advisory Board meeting attended (which occurs twice a year). The
vesting of Dr. Adams' options will be accelerated in connection with the merger
along with the options of all other members of the Scientific Advisory Board.
See "--Covenants--Stock Options."
Resale of Celera Genomics Common Stock
The shares of Celera Genomics common stock to be issued to stockholders of
Paracel pursuant to the merger have been registered under the Securities Act, so
these shares may generally be freely traded without restriction by people who
will not be "affiliates" of PE Corporation after the merger and who were not
"affiliates" of Paracel on the date of the Paracel special meeting for purposes
of Rule 145 under the Securities Act. All directors and certain officers of
Paracel may be deemed to have been "affiliates" of Paracel within the meaning of
such rule. Those people may resell the Celera Genomics common stock received by
them in the merger only if the shares are registered for resale under the
Securities Act or an exemption from such registration under the Securities Act
is available. Those people may be permitted to effect resales under the safe
harbor provisions of Rule 145 under the Securities Act (or Rule 144 in the case
of such persons who become "affiliates" of PE Corporation) or as otherwise
permitted under the Securities Act. People who may be deemed to be affiliates of
Paracel or PE Corporation generally include individuals or entities that
control, are controlled by, or are under common control with, Paracel or PE
Corporation, as applicable, and may include certain officers and directors of
such party as well as principal stockholders of Paracel or PE Corporation, as
applicable. It is recommended that any such person obtain advice of securities
counsel prior to effecting any resales.
The merger agreement provides that, not less than 40 days before the
effective time of the merger, Paracel will deliver to PE Corporation a letter
identifying all people who are "affiliates" of Paracel for purposes of Rule 145
under the Securities Act and that, Paracel will use all reasonable efforts to
cause each of its "affiliates" to deliver a written agreement to PE Corporation
not less than 30 days before the effective time of the merger, to the effect
that such person will not offer or sell or otherwise dispose of any of the
Celera Genomics common stock received in the merger in violation of the
Securities Act or the rules and regulations thereunder.
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This prospectus does not cover resales of Celera Genomics common stock
received by any person who may be deemed to be an affiliate of PE Corporation or
Paracel.
Dissenters' Rights
If you hold Paracel common stock and you do not wish to accept the merger
consideration, as described in this prospectus, then Chapter 13 (Sections 1300
through 1312) of the CCC provides that you may elect instead to receive cash in
the amount of the "fair market value" of your shares (exclusive of any
appreciation or depreciation in connection with the proposed merger) determined
as of the day before the first announcement of the terms of the proposed merger
if dissenters' rights are available.
Chapter 13 of the CCC is set forth in its entirety in Annex V to this
prospectus. If you wish to exercise your dissenters' rights or to preserve the
right to do so, you should carefully review Annex V. If dissenters' rights are
available and you fail to comply with the procedures specified in Chapter 13 of
the CCC in a timely manner, you may lose your dissenters' rights. Because of the
complexity of these procedures, you should seek the advice of counsel if you are
considering exercising your dissenters' rights. If you wish to exercise your
dissenters' rights under Chapter 13 of the CCC, you must satisfy each of the
conditions described below:
o Demand for Purchase. You must deliver to Paracel a written demand
for purchase of your shares of Paracel common stock, and it must be
received not later than the date of Paracel's special meeting of
stockholders. This written demand is in addition to and separate
from any proxy or vote against the principal terms of the merger.
Merely voting against the approval of the principal terms of the
merger will not constitute a demand for purchase within the meaning
of Chapter 13 of the CCC. The demand for purchase must be made in
writing and must be mailed or delivered to: Paracel, Inc., 80 South
Lake Avenue, Suite 650, Pasadena, California 91101, Attention: Chief
Financial Officer. The demand must state the number and class of
shares you hold of record that you demand to be purchased and the
amount claimed to be the "fair market value" of those shares on
March 19, 2000, the day prior to announcement of the merger
(exclusive of any appreciation or depreciation in connection with
the proposed merger). The statement of the fair market value will
constitute an offer by you to sell such dissenting shares at that
price. You may not withdraw your demand for purchase unless Paracel
gives its consent.
o Vote Your Dissenting Shares Against the Merger. You must vote your
dissenting shares against the merger.
o Submission of Stock Certificates. You must deliver your shares for
endorsement (to be stamped or endorsed with a statement that the
shares are dissenting shares) within 30 days after the date on which
notice of stockholder approval of the merger is mailed to you by
Paracel. The notice will be mailed by Paracel within 10 days after
the approval of the merger and will contain a statement of the price
which Paracel has determined to be the fair market value of Paracel
common stock on the date prior to the first announcement of the
merger. The statement of price will constitute an offer to purchase
any dissenting shares at that price.
o Purchase of Shares. If you properly exercise your dissenters' rights
and you and Paracel agree that the shares are dissenting shares and
agree upon the price of the shares, you will be entitled to receive
the fair market value of your shares of Paracel common stock on the
date prior to the first announcement of the merger, plus interest at
the legal rate on judgments from the date on which the fair market
value of shares of Paracel common stock has been determined. Paracel
will pay that amount within 30 days after agreement on the price or
within 30 days after the statutory or contractual conditions to the
merger are satisfied, whichever is later.
o Disagreement Regarding Dissenting Shares or Fair Market Value. If
Paracel denies that the shares are dissenting shares or if you
disagree with Paracel as to the calculation of "fair market value,"
you must file a petition in the Superior Court of the appropriate
county demanding a determination of the fair market value of your
shares of Paracel common stock. This petition must be filed by
either you or Paracel within six months of the notice of approval of
the merger described above. If a suit is filed to determine the fair
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market value of the shares of Paracel common stock, the costs of the
action will be assessed or apportioned as the court concludes is
equitable, provided that Paracel must pay all such costs if the
value awarded by the court is more than 125% of the price offered by
Paracel. You will continue to have all the rights and privileges
incident to your shares until the fair market value of the shares is
agreed upon or determined or you lose your dissenters' rights.
If dissenters' rights are available and you properly demand appraisal of
your shares of Paracel common stock under Chapter 13 of the CCC, but you fail to
perfect or withdraw your right to appraisal, your shares of Paracel common stock
will be converted as described in "--Consideration to Be Received in the Merger;
Treatment of Stock Options." You will lose your right to require Paracel to
purchase your shares of Paracel common stock if:
o the merger agreement is terminated;
o you transfer the dissenting shares prior to submitting them for
endorsement as dissenting shares;
o you and Paracel do not agree upon the status of the shares as
dissenting shares or upon the purchase price, and neither files a
complaint or intervenes in a pending action within six months after
the date on which notice of approval of the merger was mailed to
stockholders; or
o with the consent of Paracel, you withdraw your demand for purchase.
Dissenters' rights cannot be validly exercised by persons other than
stockholders of record regardless of the beneficial ownership of the shares. If
you are a beneficial owner of shares that are held of record by another person,
such as a broker, a bank or a nominee, and you want to dissent from approval of
the merger, you should instruct the record holder to follow the procedures in
Annex V for perfecting your dissenters' rights.
If you are considering exercising your dissenters' rights, you should be
aware that the fair market value of your shares of Paracel common stock as
determined under Chapter 13 of the CCC could be greater than, the same as, or
less than the merger consideration. The opinion delivered by Thomas Weisel is
not an opinion as to fair market value under Chapter 13 of the CCC.
The foregoing is a summary of the provisions of Chapter 13 of the
California Corporations Code and is qualified in its entirety by reference to
the full text of Chapter 13, which is included as Annex V.
Voting Agreement
In connection with the merger agreement, PE Corporation, Umbrella
Acquisition Corp. and the holders of record of 4,460,417 shares of Paracel
common stock have entered into a voting agreement dated March 20, 2000, pursuant
to which those stockholders have agreed to vote their shares in favor of the
merger agreement, the merger, the form of escrow agreement and the appointment
of Joseph T. Kingsley as the stockholder representative under the escrow
agreement, and have granted irrevocable proxies to the officers of Umbrella
Acquisition Corp. to vote their shares for this purpose. Such stockholders have
also agreed not to directly or indirectly solicit or encourage any offer from
any other party concerning the possible disposition of any portion of Paracel's
business, assets or capital stock; to waive certain rights in connection with
the merger with respect to their shares under agreements they entered into with
Paracel; to terminate those agreements upon consummation of the merger; not to
demand their appraisal rights under applicable California law in connection with
the merger; and not to transfer their shares or grant any other proxies except
as contemplated by the merger agreement. Accordingly, the officers of Umbrella
Acquisition Corp. currently hold proxies sufficient to approve and adopt the
merger agreement, the merger, the form of escrow agreement and the appointment
of Joseph T. Kingsley as stockholder representative under the escrow agreement.
The voting agreement will remain in effect until the termination of the
merger agreement or the closing of the merger.
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Escrow Agreement
Before the effective time of the merger, PE Corporation, Joseph T.
Kingsley, as representative for the Paracel stockholders, and an escrow agent
will enter into an escrow agreement providing for 5% of the total Celera
Genomics common stock issued as merger consideration for Paracel common stock in
the merger to be delivered to the escrow agent upon the closing of the merger.
The escrowed shares of Celera Genomics common stock will be held in an escrow
account established as the exclusive source of indemnification to PE Corporation
for any losses arising from any breach by Paracel of its representations and
warranties in the merger agreement or any failure by Paracel to perform its
obligations under the merger agreement. None of the shares held in the escrow
account will be delivered to PE Corporation unless the aggregate amount of
claims from the escrow account exceeds $300,000, and then only to the extent of
such excess. Under the escrow agreement, the Paracel stockholders will grant PE
Corporation a first priority security interest in the shares of Celera Genomics
common stock held in the escrow account to secure the performance of the
obligations under the escrow agreement.
Holders of Celera Genomics common stock held in the escrow account:
o will receive payment of all cash dividends and other taxable
distributions made on such shares; and
o will be entitled to exercise all voting rights with respect to such
shares.
With the exception of shares reserved for claims still pending or used to settle
any claims, the escrowed shares will be released from escrow no later than one
year from the date of closing of the merger.
The escrow agreement is an integral part of the merger agreement and will
be terminated when the last share of Celera Genomics common stock held in the
escrow account is distributed to the stockholders.
Stockholder Representative
Joseph T. Kingsley, Chief Financial Officer of Paracel, has been
recommended by the Paracel board of directors to serve as the stockholder
representative under the escrow agreement. Mr. Kingsley has more than 20 years
of senior management experience in commercial, international and defense-related
industries. Prior to joining Paracel, Mr. Kingsley was Chief Financial Officer
and Senior Vice President of Operations for Pico Products Inc. Mr. Kingsley also
held similar positions with Kaiser Marquardt Inc. and Science Applications
International Corp. Mr. Kingsley is a certified public accountant and received a
B.A. in Economics from Ohio Wesleyan University and an M.B.A. from Northwestern
University. Mr. Kingsley is expected to continue as an employee of the combined
business following the merger, which could lead to a conflict of interest.
As stockholder representative, Mr. Kingsley would act on behalf of the
Paracel stockholders on all matters under the escrow agreement. These matters
include the power to:
o settle all claims against the escrow fund;
o waive any conditions of the escrow agreement;
o amend the escrow agreement under specified circumstances;
o receive notices or other communications;
o deliver any notices, certificates or other documents required; and
o retain professional advisors in connection with the performance of
his duties under the escrow agreement.
The stockholder representative will not have the power to vote on behalf of the
Paracel stockholders on matters that require a vote of the stockholders of PE
Corporation, and the stockholder representative's powers will be limited to
those necessary for the purposes of administering the escrow agreement.
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PE Corporation and the escrow agent will have the right to rely upon the
acts taken or omitted to be taken by the stockholder representative on behalf of
the Paracel stockholders. By voting in favor of the merger agreement, the form
of escrow agreement, the merger and the appointment of Joseph T. Kingsley as
stockholder representative under the escrow agreement, each of the stockholders
of Paracel is agreeing that:
o any act or omission by the stockholder representative will be deemed
an act or omission by such stockholder;
o all deliveries to the stockholder representative will be deemed
deliveries to such stockholder;
o PE Corporation and the escrow agent will not have any liability with
respect to any aspect of the distribution or communication of the
deliveries between the stockholder representative and any
stockholder or among stockholders; and
o any disclosure made to the stockholder representative by or on
behalf of PE Corporation will be deemed to be a disclosure made to
such stockholder.
All expenses of the stockholder representative will be paid out of the escrow
account.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION OF PE CORPORATION
The following selected consolidated financial information has been derived
from the consolidated financial statements of PE Corporation for each of the
five fiscal years in the period ended June 30, 1999, and the six month periods
ended December 31, 1998 and 1999. The information set forth below should be read
in conjunction with the PE Corporation consolidated financial statements and
notes thereto contained in the PE Corporation Annual Report to Stockholders for
the year ended June 30, 1999, and in the PE Corporation Quarterly Report on Form
10-Q for the quarterly period ended December 31, 1999, each incorporated herein
by reference. The data for the six month periods ended December 31, 1998 and
1999 have been derived from unaudited financial statements which, in the opinion
of management, reflect all adjustments necessary for a fair presentation of
results for the periods covered.
On May 6, 1999, PE Corporation recapitalized its former common stock into
PE Corporation--Celera Genomics Group Common Stock and PE Corporation--PE
Biosystems Group Common Stock. Therefore, neither the Celera Genomics common
stock nor the PE Biosystems common stock was issued or outstanding for the
periods prior to May 6, 1999.
On June 17, 1999, the board of directors announced a two-for-one split of
PE Biosystems common stock. The two-for-one stock split was effected in the form
of a 100% stock dividend paid to stockholders of record as of the close of
business on July 12, 1999. All PE Biosystems group share and per share data
reflect this split.
On January 20, 2000, the board of directors announced a two-for-one split
of PE Biosystems common stock and Celera Genomics common stock. The two-for-one
stock splits were effected in the form of 100% stock dividends distributed on
February 18, 2000, to stockholders of record as of the close of business on
February 4, 2000. All PE Biosystems group and Celera Genomics group share and
per share data reflect these splits.
A number of items affect the comparability of this information. Before-tax
amounts include:
o Restructuring and other special charges of $15.5 million for fiscal
1995, $17.5 million for fiscal 1996, $48.1 million for fiscal 1998,
$6.1 million for fiscal 1999, and $2.0 million for the six months
ended December 31, 1998 (unaudited);
o A restructuring reserve adjustment of $9.2 million for fiscal 1999
relating to excess fiscal 1998 restructuring liabilities;
o Gains on investments of $20.8 million for fiscal 1995, $11.7 million
for fiscal 1996, $64.9 million for fiscal 1997, $1.6 million for
fiscal 1998, $6.1 million for fiscal 1999, and $25.8 million for the
six months ended December 31, 1999 (unaudited);
o Acquired research and development charges of $33.9 million for
fiscal 1996, $26.8 million for fiscal 1997, and $28.9 million for
fiscal 1998;
o Charges for the impairment of assets of $9.9 million for fiscal
1996, $.7 million for fiscal 1997, and $14.5 million for fiscal
1999;
o Tax benefit and valuation allowance reductions of $22.2 million for
fiscal 1999;
o A charge of $3.5 million for a donation to PE Corporation's
charitable foundation for fiscal 1999;
o Charges of $9.2 million relating to the recapitalization of PE
Corporation for fiscal 1999 and $1.2 million for the six months
ended December 31, 1998 (unaudited); and
o Charges relating to the acceleration of certain long-term
compensation programs as a result of the attainment of performance
targets of $10.1 million for fiscal 1999 and $21.6 million for the
six months ended December 31, 1999 (unaudited).
52
<PAGE>
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS-ENDED
FOR THE FISCAL YEARS ENDED JUNE 30, DECEMBER 31,
(DOLLAR AMOUNTS IN ----------------------------------------------------------- ----------------------
THOUSANDS EXCEPT PER
SHARE AMOUNTS) 1995 1996 1997 1998 1999 1998 1999
-------- -------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net revenues.............................. $543,945 $642,218 $768,368 $944,306 $1,216,897 $543,238 $616,207
Income from continuing operations......... 38,569 1,310 102,492 15,694 96,797 36,095 29,254
Per share of common stock
Basic......................... .87 .03 2.16 .32 .73
Diluted....................... .85 .03 2.07 .31 .71
Income (loss) from discontinued
operations (net of income taxes).. 7,738 (37,833) 27,906 40,694 79,058 (4,037) --
Net income (loss)......................... 46,307 (36,523) 130,398 56,388 175,855 32,058 29,254
Per share of common stock
Basic......................... 1.04 (.80) 2.74 1.16 .65
Diluted....................... 1.02 (.77) 2.63 1.12 .63
Dividends per share....................... .68 .68 .68 .68 .51 .34
PE BIOSYSTEMS GROUP
Income from continuing operations......... $148,365 $73,541
Per share of common stock
Basic......................... .74 .36
Diluted....................... .72 .34
Income from discontinued
operations (net of income taxes).. 79,058 --
Net income................................ 227,423 73,541
Per share of common stock
Basic......................... 1.13 .36
Diluted....................... 1.10 .34
Dividends per share....................... .0425 .085
CELERA GENOMICS GROUP
Net loss.................................. $(44,894) $(43,676)
Per share of common stock
Basic and Diluted............. (.89) (.84)
OTHER INFORMATION
Cash and short-term investments........... $103,826 $121,145 $217,222 $84,091 $308,021 $75,479 $349,481
Working capital........................... 256,607 229,639 354,742 287,991 471,350 330,015 467,966
Capital expenditures...................... 33,891 28,198 58,057 71,820 176,035 49,984 51,107
Total assets.............................. 797,970 809,856 1,006,793 1,135,276 1,519,307 1,241,051 1,681,244
Long-term debt............................ 64,524 33,694 59,152 33,726 31,452 35,548 37,102
Total debt................................ 123,224 89,801 89,068 45,825 35,363 66,839 118,351
Stockholders' equity...................... 369,807 373,727 504,270 564,248 821,525 622,229 906,264
</TABLE>
53
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DESCRIPTION OF PE CORPORATION CAPITAL STOCK
The following is a description of the terms of the capital stock of PE
Corporation. This description does not purport to be complete and is qualified
in its entirety by reference to PE Corporation's certificate of incorporation
which has been incorporated by reference as an exhibit to the registration
statement of which this prospectus is a part.
General
PE Corporation's certificate of incorporation authorizes it to issue
735,000,000 shares of stock as follows: 500,000,000 shares of a class of common
stock, designated as PE Corporation-PE Biosystems Group Common Stock,
225,000,000 shares of a class of common stock, designated as PE
Corporation-Celera Genomics Group Common Stock, and 10,000,000 shares of
preferred stock. Shares of each class of stock have a par value of $.01 per
share. PE Corporation will be able to issue shares of preferred stock in series,
without stockholder approval. Of the 10,000,000 authorized shares of preferred
stock, PE Corporation's board of directors has designated a total of 80,000
shares of two series of participating junior preferred stock for use in
connection with PE Corporation's stockholder rights plan. See "-Rights
Agreement."
As of May 3, 2000, there were no shares of preferred stock, 57,101,089
shares of Celera Genomics common stock and 208,234,197 shares of PE Biosystems
common stock issued and outstanding.
Celera Genomics Common Stock
Dividends
Dividends on the Celera Genomics common stock will be limited to an amount
not greater than the Available Dividend Amount for the Celera Genomics group.
The Available Dividend Amount for the Celera Genomics group is intended to be
similar to the amount that would be legally available for the payment of
dividends on the Celera Genomics common stock if the group were a separate
company. In calculating the Available Dividend Amount for the Celera Genomics
group, the amount of net income or loss of PE Corporation that is attributed to
the Celera Genomics group in accordance with generally accepted accounting
principles will be reduced by federal tax benefits in excess of $75 million
generated by the Celera Genomics group from July 1, 1998 and used by the PE
Biosystems group.
Delaware law limits the amount of distributions on PE Corporation's
capital stock to its legally available funds, which are determined on the basis
of the entire company, and not only the respective groups. As a result, the
amount of legally available funds will reflect the amount of any net losses of
each group, any distributions on Celera Genomics common stock, PE Biosystems
common stock or any preferred stock and any repurchases of Celera Genomics
common stock, PE Biosystems common stock or certain preferred stock. Dividend
payments on the Celera Genomics common stock could be precluded because legally
available funds of PE Corporation are not available under Delaware law, even
though the Available Dividend Amount test for the Celera Genomics group was met.
PE Corporation can not assure you that there will be an Available Dividend
Amount for the Celera Genomics group or, if met, that PE Corporation will have
available funds to pay such a dividend.
Subject to the prior payment of dividends on any outstanding shares of
preferred stock and the limitations described above, PE Corporation's board of
directors will be able, in its sole discretion, to declare and pay dividends
exclusively on the PE Biosystems common stock, exclusively on the Celera
Genomics common stock or on both, in equal or unequal amounts. In making its
dividend decisions, PE Corporation's board of directors will not be required to
take into account the relative available dividend amounts for the two groups,
the amount of prior dividends declared on either class, the respective voting or
liquidation rights of either class or any other factor.
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<PAGE>
Conversion and Redemption
Mandatory Dividend, Redemption or Conversion of Common Stock if
Disposition of Celera Genomics Group Assets Occurs. If PE Corporation sells,
transfers, assigns or otherwise disposes of, in one transaction or a series of
related transactions, all or substantially all of the properties and assets
attributed to the Celera Genomics group (a "disposition"), PE Corporation is
required, except as described below, to:
o pay a dividend in cash and/or securities or other property to the
holders of shares of Celera Genomics common stock having a fair
value equal to the net proceeds of the disposition;
o if the disposition involves all, but not merely substantially all,
of such properties and assets, redeem all outstanding shares of
Celera Genomics common stock in exchange for cash and/or securities
or other property having a fair value equal to the net proceeds of
the disposition;
o if the disposition involves substantially all, but not all, of such
properties and assets, redeem that number of whole shares of Celera
Genomics common stock as have in the aggregate an average market
value, during the period of ten consecutive trading days beginning
on the 26th trading day immediately succeeding the consummation
date, closest to the net proceeds of the disposition; and the
redemption price will be cash and/or securities or other property
having a fair value equal to such net proceeds; or
o convert each outstanding share of Celera Genomics common stock into
a number of shares of PE Biosystems common stock equal to 110% of
the ratio of the average market value of one share of Celera
Genomics common stock to the average market value of one share of PE
Biosystems common stock during the 10-trading day period beginning
on the 26th trading day following the disposition date.
PE Corporation may only pay a dividend or redeem shares of Celera Genomics
common stock as set forth above if it has legally available funds under Delaware
law and the amount to be paid to holders is less than or equal to the Available
Dividend Amount for the Celera Genomics group. PE Corporation is required to pay
such dividend or complete such redemption or conversion on or prior to the 95th
trading day following the disposition.
For purposes of determining whether a disposition has occurred,
"substantially all of the properties and assets" attributed to the Celera
Genomics group means a portion of such properties and assets:
o that represents at least 80% of the then fair value of the
properties and assets attributed to the Celera Genomics group; or
o from which were derived at least 80% of the aggregate revenues of
the Celera Genomics group for the immediately preceding twelve
fiscal quarterly periods.
The "net proceeds" of a disposition means an amount equal to what remains
of the gross proceeds of the disposition after any payment of, or reasonable
provision is made as determined by PE Corporation's board of directors for:
o any taxes payable by PE Corporation, or which would have been
payable but for the utilization of tax benefits attributable to the
PE Biosystems group, in respect of the disposition or in respect of
any resulting dividend or redemption;
o any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses; and
o any liabilities of or attributed to the Celera Genomics group,
including, without limitation, any liabilities for deferred taxes,
any indemnity or guarantee obligations incurred in connection with
the disposition or otherwise, any liabilities for future purchase
price adjustments and any preferential amounts plus any accumulated
and unpaid dividends in respect of the preferred stock attributed to
the Celera Genomics group.
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<PAGE>
PE Corporation may elect to pay the dividend or redemption price in
connection with a disposition either in the same form as the proceeds of the
disposition were received or in any other combination of cash, securities or
other property that PE Corporation's board of directors or, in the case of
securities that have not been publicly traded for a period of at least 15
months, an independent investment banking firm, determines will have an
aggregate market value of not less than the fair value of the net proceeds.
The Following Illustration Demonstrates the Provisions Requiring a
Mandatory Dividend, Redemption or Conversion if a Disposition Occurs. If:
o 50 million shares of Celera Genomics common stock and 200 million
shares of PE Biosystems common stock were outstanding,
o the net proceeds of the disposition of substantially all, but not
all, of the assets of the Celera Genomics group equals $500 million,
and
o the average market values of the Celera Genomics common stock and
the PE Biosystems common stock during the 10-trading day valuation
period were $100 and $75 per share, respectively, then PE
Corporation could do any of the following:
(1) pay a dividend to the holders of shares of Celera Genomics common stock
equal to:
net proceeds
-------------------------------------- =
number of outstanding shares of Celera
Genomics common stock
$500 million
-------------------------------------- = $10 per share
50 million shares
(2) redeem for $100 per share a number of shares of Celera Genomics common
stock equal to:
net proceeds
-------------------------------------- =
average market value
of Celera Genomics common stock
$500 million
-------------------------------------- = 5,000,000 shares
$100 per share
(3) convert each outstanding share of Celera Genomics common stock into a
number of shares of PE Biosystems common stock equal to:
average market value of Celera
Genomics common stock
1.1x ------------------------------------- =
average market value of PE Biosystems
common stock
$100 per share
1.1x ------------------------------------- = 1.46667 shares
$75 per share
Exceptions to the Dividend, Redemption or Conversion Requirement if a
Disposition Occurs. PE Corporation is not required to take any of the above
actions for any disposition of all or substantially all of the properties and
assets
56
<PAGE>
attributed to the Celera Genomics group in a transaction or series of related
transactions that results in PE Corporation's receiving for such properties and
assets primarily equity securities of any entity which:
o acquires such properties or assets or succeeds to the business
conducted with such properties or assets or controls such acquirer
or successor; and
o is primarily engaged or proposes to engage primarily in one or more
businesses similar or complementary to the businesses conducted by
the Celera Genomics group prior to the disposition, as determined by
PE Corporation's board of directors.
The purpose of this exception is to enable PE Corporation technically to
"dispose" of properties or assets of the Celera Genomics group to other entities
engaged or proposing to engage in businesses similar or complementary to those
of the Celera Genomics group without requiring a dividend on, or a conversion or
redemption of, the Celera Genomics common stock, so long as PE Corporation holds
an equity interest in that entity. A joint venture in which PE Corporation owns
a direct or indirect equity interest is an example of such an acquirer. PE
Corporation is not required to control that entity, whether by ownership or
contract provisions.
PE Corporation is also not required to effect a dividend, redemption or
conversion if the disposition is:
o of all or substantially all of PE Corporation's properties and
assets in one transaction or a series of related transactions in
connection with its dissolution, liquidation or winding up and the
distribution of its assets to stockholders;
o on a pro rata basis, such as in a spin-off, to the holders of all
outstanding shares of the Celera Genomics common stock; or
o made to any person or entity controlled by PE Corporation, as
determined by PE Corporation's board of directors.
Notices if Disposition of Celera Genomics Group or PE Biosystems Group
Assets Occurs. Not later than the 20th trading day after the consummation of a
disposition, PE Corporation will announce publicly by press release:
o the estimated net proceeds of the disposition;
o the number of shares outstanding of Celera Genomics common stock;
and
o the number of shares of Celera Genomics common stock into or for
which convertible securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof.
Not earlier than the 36th trading day and not later than the 40th trading
day after the consummation of the disposition, PE Corporation will announce
publicly by press release whether it will pay a dividend or redeem shares of
common stock with the net proceeds of the disposition or convert the shares of
Celera Genomics common stock into PE Biosystems common stock.
PE Corporation is required to cause to be mailed to each holder of shares
of Celera Genomics common stock the additional notices and other information
required by PE Corporation's certificate of incorporation.
Conversion of Celera Genomics Common Stock at PE Corporation's Option at
Any Time. PE Corporation's board of directors may at any time convert each share
of Celera Genomics common stock into a number of shares of PE Biosystems common
stock equal to 110% of the ratio of the average market values of the Celera
Genomics common stock to the PE Biosystems common stock over a 20-trading day
period. PE Corporation will calculate the ratio as of the fifth trading day
prior to the date it mails the conversion notice to holders. However, if a Tax
Event occurs at any time, a factor of 100% rather than 110% will be applied to
the ratio of the average market values. This means that the holders of Celera
Genomics common stock will not receive any premium in such conversion.
"Tax Event" means the receipt by PE Corporation of an opinion of its tax
counsel that, as a result of:
57
<PAGE>
o any amendment to, or change in, the laws or regulations interpreting
such laws of the United States or any political subdivision or
taxing authority, including any announced proposed change by an
applicable legislative committee or its chair in such laws or by an
administrative agency in such regulations, or
o any official or administrative pronouncement, action or judicial
decision interpreting or applying such laws or regulations,
it is more likely than not that for United States federal income tax purposes:
o PE Corporation or its stockholders are, or, at any time in the
future, will be subject to tax upon the issuance of shares of either
Celera Genomics common stock or PE Biosystems common stock, or
o either Celera Genomics common stock or PE Biosystems common stock is
not or, at any time in the future, will not be treated solely as
stock of PE Corporation.
For purposes of rendering such an opinion, tax counsel will assume that any
legislative or administrative proposals will be adopted or enacted as proposed.
These provisions allow PE Corporation the flexibility to recapitalize the
two classes of common stock into one class of common stock that would, after
such recapitalization, represent an equity interest in all of PE Corporation's
businesses. The optional conversion or redemption could be exercised at any
future time if PE Corporation's board of directors determines that, under the
facts and circumstances then existing, an equity structure consisting of two
classes of common stock was no longer in the best interests of all of PE
Corporation's stockholders. Such exchange could be exercised, however, at a time
that is disadvantageous to the holders of one of the classes of common stock.
See "Risk Factors-Stockholders May Not Have Any Remedies for Breach of Fiduciary
Duties if Any Action By Directors and Officers Has a Disadvantageous Effect on
Either Class of Common Stock" and "-Numerous Potential Conflicts of Interest
Exist Between the Classes of Common Stock Which May Be Difficult to Resolve By
PE Corporation's Board or Which May Be Resolved Adversely to One of the
Classes."
Many factors could affect the market values of the Celera Genomics common
stock or the PE Biosystems common stock, including PE Corporation's results of
operations and those of each of the groups, trading volume and general economic
and market conditions. Market values could also be affected by decisions by PE
Corporation's board of directors or its management that investors perceive to
affect differently one class of common stock compared to the other. These
decisions could include changes to PE Corporation's management and allocation
policies, transfers of assets between groups, allocations of corporate
opportunities and financing resources between the groups and changes in dividend
policies.
The Following Illustration Demonstrates the Calculation of the Number of
Shares Issuable upon Conversion of Celera Genomics Common Stock into Shares of
PE Biosystems Common Stock at PE Corporation's Option. If:
o a Tax Event has not occurred,
o 50 million shares of Celera Genomics common stock and 200 million
shares of PE Biosystems common stock were outstanding immediately
prior to a conversion, and
o the average market value of one share of Celera Genomics common
stock and of one share of PE Biosystems common stock over the
20-trading day valuation period was $100 and $75, respectively,
then each share of Celera Genomics common stock could be converted into 1.46667
shares of PE Biosystems common stock based on the following calculation:
$100 per share
1.1x --------------------------------- = 1.46667 shares
$75 per share
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<PAGE>
Redemption in Exchange for Stock of Subsidiary. PE Corporation's board of
directors may redeem on a pro rata basis all of the outstanding shares of Celera
Genomics common stock for shares of the common stock of one or more of PE
Corporation's wholly owned subsidiaries which own all of the assets and
liabilities attributed to the Celera Genomics group. PE Corporation may redeem
shares of common stock for subsidiary stock only if it has legally available
funds under Delaware law.
These provisions are intended to give PE Corporation increased flexibility
with respect to spinning-off the assets of the Celera Genomics group by
transferring the assets of that group to one or more wholly owned subsidiaries
and redeeming the shares of Celera Genomics common stock in exchange for stock
of such subsidiary or subsidiaries. As a result of any such redemption, or a
redemption of the PE Biosystems common stock under a similar provision for that
stock, holders of each class of common stock would hold securities of separate
legal entities operating in distinct lines of business. Such a redemption could
be authorized by PE Corporation's board of directors at any time in the future
if it determines that, under the facts and circumstances then existing, an
equity structure comprised of the Celera Genomics common stock and the PE
Biosystems common stock is no longer in the best interests of all of PE
Corporation's stockholders as a whole.
Selection of Shares for Redemption. If less than all of the outstanding
shares of Celera Genomics common stock are to be redeemed, PE Corporation will
redeem such shares proportionately from among the holders of outstanding shares
of Celera Genomics common stock or by such method as may be determined by PE
Corporation's board of directors to be equitable.
Fractional Interests; Transfer Taxes. PE Corporation will not be required
to issue fractional shares of any capital stock or any fractional securities to
any holder of Celera Genomics common stock upon any conversion, redemption,
dividend or other distribution described above. If a fraction is not issued to a
holder, PE Corporation will pay cash instead of such fraction.
PE Corporation will pay all documentary, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of any
shares of capital stock and/or other securities on conversion or redemption of
shares.
Voting Rights
The entire voting power of PE Corporation's stockholders will be vested in
the holders of common stock, who will be entitled to vote on any matter on which
PE Corporation's stockholders are entitled to vote, except as otherwise required
by PE Corporation's board of directors or provided by law or stock exchange
rules, by the terms of any outstanding preferred stock or by any provision PE
Corporation's certificate of incorporation restricting the power to vote on a
specified matter to other stockholders.
Holders of Celera Genomics common stock and PE Biosystems common stock
will vote as a single class on each matter on which holders of common stock are
generally entitled to vote.
On all matters as to which both Celera Genomics common stock and PE
Biosystems common stock will vote together as a single class, each share of
Celera Genomics common stock will have a number of votes equal to the quotient
of the average market value of a share of Celera Genomics common stock over the
20-trading day period ending on the 10th trading day prior to the record date
for determining the holders of common stock entitled to vote, divided by the
average market value of a share of PE Biosystems common stock over the same
period, while each share of PE Biosystems common stock will have one vote.
Accordingly, the relative per share voting rights of the PE Biosystems
common stock and the Celera Genomics common stock will fluctuate depending on
changes in the relative market values of shares of such classes of common stock.
The PE Biosystems common stock currently has a substantial majority of the
voting power because the aggregate market value of the outstanding shares of PE
Biosystems common stock is substantially greater than the aggregate market value
of the outstanding shares of Celera Genomics common stock.
PE Corporation will set forth the number of outstanding shares of PE
Biosystems common stock and Celera Genomics common stock in its Annual Report on
Form 10-K and its Quarterly Reports on Form 10-Q filed under the
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<PAGE>
Securities Exchange Act of 1934. PE Corporation will disclose in any proxy
statement for a stockholders' meeting the number of outstanding shares and per
share voting rights of the Celera Genomics common stock.
If shares of only Celera Genomics common stock are outstanding, each share
will have one vote. If Celera Genomics common stock is entitled to vote as a
separate class with respect to any matter, each share will, for purpose of such
vote, have one vote on such matter.
Fluctuations in the relative voting rights of the Celera Genomics common
stock and the PE Biosystems common stock could influence an investor interested
in acquiring and maintaining a fixed percentage of the voting power of PE
Corporation's stock to acquire such percentage of both classes of common stock,
and would limit the ability of investors in one class to acquire for the same
consideration relatively more or less votes per share than investors in the
other class.
The holders of Celera Genomics common stock and PE Biosystems common stock
will not have any rights to vote separately as a class on any matter coming
before PE Corporation's stockholders, except for certain limited class voting
rights provided under Delaware law. In addition to the approval of the holders
of a majority of the voting power of all shares of common stock voting together
as a single class, the approval of a majority of the outstanding shares of the
Celera Genomics common stock or the PE Biosystems common stock, voting as a
separate class, would be required under Delaware law to approve any amendment to
PE Corporation's certificate of incorporation that would change the par value of
the shares of the class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. As permitted
by Delaware law, PE Corporation's certificate of incorporation provides that an
amendment to PE Corporation's certificate of incorporation that increases or
decreases the number of authorized shares of Celera Genomics common stock or PE
Biosystems common stock will only require the approval of the holders of a
majority of the voting power of all shares of common stock, voting together as a
single class, and will not require the approval of the holders of the class of
common stock affected by such amendment, voting as a separate class.
The Following Illustration Demonstrates the Calculation of the Number of
Votes Each Share of Celera Genomics Common Stock Would Be Entitled on All
Matters on Which Holders of Celera Genomics Common Stock and PE Biosystems
Common Stock Vote as a Single Class. If the average market value for the
20-trading day valuation period was $100 for the Celera Genomics common stock
and $75 for the PE Biosystems common stock, each share of PE Biosystems common
stock would have one vote and each share of Celera Genomics common stock would
have 1.333 votes based on the following calculation:
$100
--------------------------------- = 1.333 votes
$75
Assuming 200 million shares of PE Biosystems common stock and 50 million shares
of Celera Genomics common stock were outstanding, the shares of PE Biosystems
common stock would represent approximately 75% of PE Corporation's total voting
power and the shares of Celera Genomics common stock would represent
approximately 25% of PE Corporation's total voting power.
Liquidation
Under PE Corporation's certificate of incorporation, in the event of its
dissolution, liquidation or winding up, after payment or provision for payment
of the debts and other liabilities and full preferential amounts to which
holders of any preferred stock are entitled, regardless of the group to which
such shares of preferred stock were attributed, the holders of Celera Genomics
common stock and PE Biosystems common stock will be entitled to receive PE
Corporation's assets remaining for distribution to holders of common stock on a
per share basis in proportion to the liquidation units per share of such class.
Each share of Celera Genomics common stock has .0725 liquidation units and each
share of PE Biosystems common stock has 0.25 liquidation units.
The number of liquidation units to which each share of Celera Genomics
common stock is entitled will not be changed without the approval of holders of
the class of common stock adversely affected except as described below. As a
result, the liquidation rights of the holders of the respective classes of
common stock may not bear any relationship to the relative market values or the
relative voting rights of the two classes.
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<PAGE>
No holder of PE Biosystems common stock will have any special right to
receive specific assets of the PE Biosystems group and no holder of Celera
Genomics common stock will have any special right to receive specific assets of
the Celera Genomics group in the case of PE Corporation's dissolution,
liquidation or winding up.
Neither a merger nor consolidation of PE Corporation into or with any
other corporation, nor any sale, transfer or lease of all or any part of PE
Corporation's assets, will, alone, be deemed a liquidation or winding up of PE
Corporation, or cause the dissolution of PE Corporation, for purposes of these
liquidation provisions.
Determinations By the Board of Directors
Any determinations made in good faith by PE Corporation's board of
directors under any provision described above and any determinations with
respect to any group or the rights of holders of shares of Celera Genomics
common stock or PE Biosystems common stock, will be final and binding on all of
PE Corporation's stockholders, subject to the rights of stockholders under
applicable Delaware law and under the federal securities laws.
Preemptive Rights
The holders of the Celera Genomics common stock will not have any
preemptive rights or any rights to convert their shares into any other
securities of PE Corporation.
Celera Genomics Designated Shares
The PE Biosystems group may hold in the future an equity interest in the
Celera Genomics group in the form of "Celera Genomics Designated Shares" as a
result of future contributions of cash or property to the Celera Genomics group
described below. PE Corporation's board of directors could create Celera
Genomics Designated Shares if it determines that, among other things,
o the Celera Genomics group requires additional equity capital to
finance its business and
o the PE Biosystems group should supply that capital.
Celera Genomics Designated Shares are authorized shares of Celera Genomics
common stock that are not issued and outstanding, but which PE Corporation's
board of directors, pursuant to the management and allocation policies, may from
time to time issue without allocating the proceeds or other benefits of such
issuance to the Celera Genomics group. The Celera Genomics Designated Shares are
not eligible to receive dividends and can not be voted.
The number of Celera Genomics Designated Shares are currently zero but
from time to time will be:
o increased by a number equal to the quotient obtained by dividing
o the fair value of all cash or other property that the PE
Biosystems group contributes to the Celera Genomics group by
o the average market value of Celera Genomics common stock over
the 20-trading day period immediately prior to the date of
contribution;
o decreased by a number equal to the quotient obtained by dividing
o the fair value of all cash or other property that the Celera
Genomics group transfers to the PE Biosystems group to reduce
the number of Celera Genomics Designated Shares by
o the average market value of Celera Genomics common stock over
the 20-trading day period immediately prior to the date of
transfer;
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o decreased by the number of newly issued shares of Celera Genomics
common stock, the proceeds of which have been allocated to the PE
Biosystems group, or issued as a dividend or distribution or by
reclassification, exchange or otherwise to holders of PE Biosystems
common stock; and
o adjusted as appropriate to reflect subdivisions and combinations of
the Celera Genomics common stock and dividends or distributions of
shares of Celera Genomics common stock to holders of Celera Genomics
common stock and other reclassifications of Celera Genomics common
stock.
Although there are no Celera Genomics Designated Shares outstanding as of the
date of this prospectus, upon consummation of the Paracel merger, the PE
Biosystems group will own Celera Genomics Designated Shares. The number of
Celera Genomics Designated Shares owned by the PE Biosystems group will
initially be equal to the number of shares of Celera Genomics common stock
received by it in the merger.
PE Biosystems Common Stock
Dividends
Dividends on the PE Biosystems common stock are limited to an amount not
greater than the Available Dividend Amount for the PE Biosystems group. The
Available Dividend Amount for the PE Biosystems group is intended to be similar
to the amount that would be legally available for the payment of dividends on
the PE Biosystems common stock if the group were a separate company. In
calculating the Available Dividend Amount for the PE Biosystems group, the
amount of net income or loss of PE Corporation that is attributed to the PE
Biosystems group in accordance with generally accepted accounting principals
will be increased by any federal tax benefits in excess of $75 million generated
but not used by the Celera Genomics group from July 1, 1998 and used by the PE
Biosystems group.
Conversion and Redemption
The holders of shares of PE Biosystems common stock will have conversion
and redemption rights similar to those described above under "-Celera Genomics
Common Stock-Conversion and Redemption," except as noted below.
Redemption for Stock of a Subsidiary. As discussed above, PE Corporation's
board of directors may redeem on a pro rata basis all of the outstanding shares
of PE Biosystems common stock or Celera Genomics common stock for shares of
common stock of one or more of PE Corporation's wholly owned subsidiaries which
own all of the assets or liabilities attributed to the relevant group. If at the
time of any such redemption of PE Biosystems common stock, the PE Biosystems
group is entitled to Celera Genomics Designated Shares, PE Corporation will also
issue an equal number of shares of Celera Genomics common stock either to
o the holders of PE Biosystems common stock or
o one or more of those PE Biosystems group subsidiaries.
Voting Rights
The holders of shares of PE Biosystems common stock have the voting rights
described above under the caption "-Celera Genomics Common Stock-Voting Rights,"
except that each share of PE Biosystems common stock will have one vote on all
matters as to which both classes of common stock vote together as a simple
class.
Liquidation
In the event of PE Corporation's liquidation, dissolution or termination,
the holders of shares of PE Biosystems common stock are entitled to receive
funds in the amounts described above under "-Celera Genomics Common
Stock-Liquidation," except that each share of PE Biosystems common stock will
have 0.25 liquidation units.
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Rights Agreement
PE Corporation has issued participating preferred stock purchase rights
(the "existing rights") to all holders of Celera Genomics common stock under PE
Corporation's rights agreement dated as of April 28, 1999, with PE Corporation's
rights agent, BankBoston, N.A. Each existing right entitles the holder to
purchase shares of participating junior preferred stock as follows:
o one right for every four shares of PE Biosystems common stock (a "PE
Biosystems Right"), which will allow holders to purchase shares of a
newly designated Series A participating junior preferred stock of PE
Corporation if a "distribution date" occurs; and
o one right for every two shares of Celera Genomics common stock (a
"Celera Genomics Right"), which will allow holders to purchase
shares of a newly designated Series B participating junior preferred
stock of PE Corporation if a "distribution date" occurs.
PE Corporation refers to the PE Biosystems Rights and the Celera Genomics
Rights as the "Rights."
A "distribution date" will occur upon the earlier of:
o the tenth day after a public announcement that a person or group of
affiliated or associated persons other than PE Corporation or PE
Corporation's employee benefit plans (an "acquiring person") has
acquired beneficial ownership of
o 15% or more of the shares of PE Biosystems common stock then
outstanding or
o 15% or more of the shares of Celera Genomics common stock then
outstanding; or
o the tenth business day or a later day determined by PE Corporation's
board of directors following the commencement of a tender or
exchange offer that would result in such person or group
beneficially owning such number of shares.
Until the distribution date, the Rights will be transferred only with the common
stock.
Following the distribution date, holders of Rights will be entitled to
purchase from PE Corporation:
o in the case of a PE Biosystems Right, one one-thousandth of a share
of Series A participating junior preferred stock at a purchase price
of $425, subject to adjustment (the "Series A Purchase Price"); and
o in the case of a Celera Genomics Right, one one-thousandth of a
share of Series B participating junior preferred stock at a purchase
price of $125, subject to adjustment (the "Series B Purchase
Price").
If any person or group becomes an acquiring person:
o a PE Biosystems Right will entitle its holder to purchase, at the
Series A Purchase Price, a number of shares of PE Biosystems common
stock with a market value equal to twice the Series A Purchase
Price; and
o a Celera Genomics Right will entitle its holder to purchase, at the
Series B Purchase Price, a number of shares of Celera Genomics
common stock with a market value equal to twice the Series B
Purchase Price.
In certain circumstances after the Rights have been triggered, PE
Corporation may exchange the Rights, other than Rights owned by an acquiring
person, at an exchange ratio of one share of PE Biosystems common stock per PE
Biosystems Right and one share of Celera Genomics common stock per Celera
Genomics Right.
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If, following the time a person becomes an acquiring person:
o PE Corporation is acquired in a merger or other business combination
transaction and PE Corporation is not the surviving corporation;
o any person consolidates or merges with PE Corporation and all or
part of the common stock is converted or exchanged for securities,
cash or property of any other person; or
o 50% or more of PE Corporation's assets or earnings power is sold or
transferred,
then each PE Biosystems Right and each Celera Genomics Right will entitle its
holder to purchase, for the Series A Purchase Price or Series B Purchase Price,
as applicable, a number of shares of common stock of the surviving entity in any
such merger, consolidation or other business combination or the purchaser in any
such sale or transfer with a market value equal to twice the Series A Purchase
Price or Series B Purchase Price, as applicable.
The Rights will expire on April 28, 2009 unless extended or terminated as
described below.
At any time until a person becomes an acquiring person, PE Corporation's
board of directors may redeem all of the Rights at a price of $.01 per Right. On
the redemption date, the right to exercise the Rights will terminate and the
only right of the holders of Rights will be to receive this price.
A holder of a Right will not have any rights as a stockholder of PE
Corporation, including the right to vote or to receive dividends, until a Right
is exercised.
At any time prior to the time that any person becomes an acquiring person,
PE Corporation may, without the approval of any holders of Rights, supplement or
amend any provision of the rights agreement in any manner, whether or not such
supplement or amendment is adverse to any holders of the Rights. From and after
the time a person becomes an acquiring person, PE Corporation may, without the
approval of any holders of Rights, supplement or amend the rights agreement:
o to cure any ambiguity;
o to correct or supplement any provision that may be defective or
inconsistent; or
o in any manner that PE Corporation may deem necessary or desirable
and which does not adversely affect the interests of the holders of
Rights, other than an acquiring person.
PE Corporation's rights agreement contains provisions designed to prevent
the inadvertent triggering of the Rights. For example, it gives a person who has
inadvertently acquired 15% or more of the outstanding shares of a class of
common stock and does not have any intention of changing or influencing the
control of PE Corporation the opportunity to sell a sufficient number of shares
so that such acquisition would not trigger the Rights. In addition, the Rights
will not be triggered and a divestiture of shares will not be required by PE
Corporation's repurchase of shares of common stock outstanding which could raise
the proportion of shares held by a person to over the applicable 15% threshold.
However, any person who exceeds such threshold as a result of PE Corporation's
stock repurchases will trigger the Rights if such person subsequently acquires
any additional shares of common stock.
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COMPARISON OF STOCKHOLDER RIGHTS
If the merger is completed, all holders of Paracel common stock will
become holders of shares of Celera Genomics common stock. The rights of a holder
of Celera Genomics common stock are similar in some respects and different in
other respects from the rights of a holder of Paracel common stock. The rights
of PE Corporation stockholders are currently governed by the Delaware General
Corporation Law and the certificate of incorporation and bylaws of PE
Corporation. The rights of Paracel stockholders are currently governed by the
California Corporations Code and the articles of incorporation and bylaws of
Paracel. The following are summaries of the material differences between the
current rights of Paracel stockholders and the rights they will have as holders
of Celera Genomics common stock following the merger.
The following comparison of stockholders' rights is necessarily a summary,
is not intended to be complete or to identify all differences that may, under
given situations, be material to stockholders and is subject, in all respects,
and is qualified by reference, to the Delaware General Corporation Law, the PE
Corporation certificate of incorporation, the PE Corporation bylaws, the
California Corporations Code, the Paracel articles of incorporation and the
Paracel bylaws.
Authorized Shares
PE Corporation. The total number of authorized shares of capital stock of
PE Corporation is 735,000,000, consisting of 500,000,000 shares of PE Biosystems
common stock, 225,000,000 shares of Celera Genomics common stock and 10,000,000
shares of PE Corporation preferred stock, each having a par value of $.01 per
share. PE Corporation's certificate of incorporation authorizes the PE
Corporation board of directors to issue shares of preferred stock in one or more
series, the terms of which will be determined by the board, as well as PE
Biosystems common stock and Celera Genomics common stock.
Paracel. The total number of authorized shares of capital stock of Paracel
is 20,060,000, consisting of 20,000,000 shares of common stock, and 60,000
shares of preferred stock, each having no par value. Paracel's certificate of
incorporation authorizes the Paracel board of directors to issue shares of
preferred stock in one or more series, the terms of which will be determined by
the board as well as Paracel common stock.
Directors
Number of Directors. The PE Corporation certificate of incorporation
provides that the number of directors on the PE Corporation board will be fixed
by the board of directors but will not be less than three and not more than
thirteen. The Paracel articles of incorporation provide that the number of
directors on the Paracel board will not be less than five and not more than
nine, and Paracel's bylaws currently set the number of directors at seven, until
changed by amendment of the bylaws by the affirmative vote of 75% of the
stockholders.
Classification of Board of Directors. The PE Corporation board of
directors is not divided into separate classes but consists of a single class
elected annually. The Paracel board of directors also consists of a single class
elected annually.
Number of Directors Necessary to Constitute a Quorum. Under the PE
Corporation bylaws, a majority of the entire board of directors then in office
constitutes a quorum for the transaction of business by the PE Corporation
board. Under the Paracel bylaws, the presence of a majority of the total
authorized number of directors constitutes a quorum for the transaction of
business by the Paracel board.
Removal of Directors. Under Delaware law and the PE Corporation bylaws,
stockholders may remove any director with or without cause by the vote of the
holders entitled to cast a majority of the votes entitled to be cast by all
outstanding shares entitled to vote at an election of directors. Under
California law and the Paracel bylaws, any director or the entire board of
directors may be removed, with or without cause, by approval of a majority of
the outstanding shares entitled to vote; however, no individual director may be
removed (unless the entire board is removed) if the number of votes cast against
such removal would be sufficient to elect the director under cumulative voting.
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Filling Newly Created Directorships and Vacancies. Under Delaware law and
the PE Corporation bylaws, a majority of the directors then in office, even if
less than a quorum, may fill vacancies and newly created directorships. Under
California law and the Paracel bylaws, vacancies on the board of directors,
including those existing as a result of a removal of a director, may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director. A majority of the stockholders may elect a director at
any time to fill any vacancy not filled by the directors.
Cumulative Voting. Cumulative voting rights in the election of directors
entitle a stockholder to give one nominee as many votes as are equal to the
number of directors to be elected multiplied by the number of shares owned by
the stockholder, or to distribute such votes among two or more nominees, as the
stockholder sees fit. In the absence of cumulative voting, the holder or holders
of a majority of the shares present or represented at a meeting has the power to
elect each director to be elected at such meeting.
Delaware law provides that a corporation's certificate of incorporation
may provide for cumulative voting. However, PE Corporation's stockholders may
not cumulatively vote their shares for the election of directors, because PE
Corporation's certificate of incorporation does not provide for cumulative
voting. California law requires corporations to provide for cumulative voting in
the election of directors unless the articles of incorporation specifically
provide that cumulative voting will not apply in the election of directors.
Paracel's stockholders may cumulatively vote their shares for the election of
directors, because the articles of incorporation do not provide otherwise.
Charter and Bylaw Amendments
Amendments to Certificate of Incorporation. Under Delaware law, the board
of directors must propose an amendment to the certificate of incorporation and
then a majority of all outstanding shares entitled to vote must approve it.
Under Delaware law and the PE Corporation certificate of incorporation,
amendments which make changes regarding the capital stock by increasing or
decreasing the par value or the aggregate number of authorized shares of a
class, or otherwise adversely affecting the rights of a class, must be approved
by the majority vote of each class or series of stock affected, even if such
stock would not otherwise have such voting rights.
Amendments to Articles of Incorporation. Under California law, amendments
to a corporation's articles of incorporation generally require approval by vote
of the directors and the holders of a majority of outstanding shares entitled to
vote thereon, and where their rights are affected, by the holders of a majority
of the outstanding shares of a class, whether or not such class is entitled to
vote thereon by the provision of the articles of incorporation.
Amendment of Bylaws. Under Delaware law and the PE Corporation certificate
of incorporation and bylaws, the PE Corporation bylaws can be amended or
repealed by the affirmative vote of either
o holders of a majority of the outstanding shares of capital stock
entitled to vote and present in person or by proxy at the meeting,
or
o a majority of the members of the PE Corporation board of directors.
Under California law, bylaws may be adopted, amended or repealed either by
the vote of a majority of the outstanding shares or by the approval of the board
of directors except:
o if the number of directors is set forth in the charter, in which
case this number may be changed only by an amendment to the charter,
and
o if, after the issuance of shares, a bylaw is proposed specifying or
changing a fixed number of directors, a maximum or minimum number of
directors, or changing from a fixed to a variable board or vice
versa, in which case such bylaw may only be adopted by approval of
the outstanding shares.
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The Paracel bylaws provide that the bylaws may be amended or repealed either by
approval of the outstanding shares or by the approval of the Paracel board;
however, certain sections may be changed only by the vote of at least 75% of the
shares entitled to vote.
Stockholder Meeting Procedures
Special Meetings of Stockholders. Under Delaware law, special meetings of
stockholders may be called by the board of directors or by such person or
persons as may be authorized by the certificate of incorporation or bylaws.
Under the PE Corporation certificate of incorporation and bylaws, only the PE
Corporation board of directors or its chairman, president or secretary may call
a special meeting of the stockholders.
California law and Paracel's articles of incorporation and bylaws provide
that a special meeting of stockholders may be called by the board of directors,
the chairman of the board, the president or the holders of shares entitled to
cast not less than 10% of the votes at the meeting.
Provisions for Notices. Under the PE Corporation bylaws, PE Corporation
must give personally or by mail, not less than ten and not more than sixty days
before the date of any meeting of stockholders, to each stockholder entitled to
vote at such meeting, written notice stating the place, date, hour and purpose
or purposes of the meeting. Any and all notices of a meeting may be waived by a
stockholder by submitting a signed waiver either before or after the meeting.
The attendance of any stockholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, will constitute a waiver of notice.
Under the Paracel bylaws, Paracel must give personally or by mail, not
less than ten and not more than sixty days before the date of any meeting of
stockholders, to each stockholder entitled to vote at such meeting, written
notice stating the place, date, hour and purpose or purposes of the meeting. Any
and all notices of a meeting may be waived by a stockholder by submitting a
signed waiver of notice or a consent to the holding of the meeting or an
approval of the minutes thereof, either before or after the meeting. The
attendance of any stockholder at a meeting, in person or by proxy, without
protesting at the beginning of the meeting the lack of notice of such meeting,
will constitute a waiver of notice.
Stockholders Necessary to Constitute a Quorum. Under the PE Corporation
bylaws, the holders of record of a majority of the outstanding shares of Celera
Genomics common stock and PE Biosystems common stock entitled to cast a majority
of the votes entitled to be cast by the holders of all outstanding shares of
capital stock entitled to vote at such meeting, whether present in person or
represented by proxy, constitutes a quorum for the purposes of transacting
business at any stockholder meeting. Under the Paracel bylaws, the presence in
person or by proxy of the holders of record of a majority of shares entitled to
vote at a meeting of stockholders constitutes a quorum for the transaction of
business at such meeting.
Stockholder Action Without a Meeting. Under Delaware law, unless a
corporation's certificate of incorporation states otherwise, stockholders may
take action without a meeting if such action is authorized by the written
consents of stockholders having not less than the minimum number of votes
necessary to take such action at a meeting at which all shares were present and
voting. Under PE Corporation's certificate of incorporation, the written consent
of all stockholders entitled to vote on an action must be obtained for the
consent to be effective.
Under California law, unless otherwise provided in the articles of
incorporation, any action which may be taken at a meeting of stockholders may
also be taken by the written consent of the holders of at least the same number
of outstanding shares as would be necessary to take such action at a meeting at
which all shares entitled to vote were present and voted. Neither Paracel's
bylaws nor its articles of incorporation prevent action by written consent of
the stockholders.
Transaction of Business
Combinations and Certain Other Transactions. Under Delaware law, the
affirmative vote of a majority of the outstanding shares entitled to vote is
required to approve mergers, consolidations, dissolutions and sales of all or
substantially all of a corporation's assets. Under California law, a majority of
all of the votes entitled to be cast on the transaction by each voting group of
outstanding shares entitled to vote thereon is generally required for certain
significant
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corporate actions, including a merger or share exchange with another
corporation, sale of all or substantially all of the corporate property and
assets or voluntary liquidation. Special voting requirements apply to certain
business combinations.
Issuance of Rights or Options to Directors. Under both Delaware law and
California law, the issuance by a corporation to its directors, officers or
employees of rights or options to purchase from the corporation any of its
shares, as an incentive to service or continued service with the corporation, or
the adoption of a plan providing for such issuance, does not require
authorization by vote of its stockholders.
Loans to Directors. Under Delaware law, a corporation may make loans to or
guarantees on behalf of, or otherwise assist officers and employees of a
Delaware corporation, including those officers and employees who are also
directors of the corporation, without the authorization by vote of its
stockholders, if the board determines that the loan, guarantee or assistance may
reasonably be expected to benefit the corporation. Under California law, a
corporation may make loans to, or guarantees for the benefit of, directors and
officers if such loans or guarantees are approved by a majority of the
corporation's stockholders or, for corporations with 100 or more stockholders of
record, by its board of directors acting under a stockholder-approved bylaw.
Business Combinations with Interested Persons
PE Corporation. Under Section 203 of the Delaware General Corporation Law,
an "interested stockholder" is defined as a holder of 15% or more of the
outstanding voting stock. An interested stockholder may engage in a business
combination transaction with PE Corporation only if:
o PE Corporation's board of directors approved the transaction before
the stockholder became an interested stockholder or approved the
transaction in which the stockholder became an interested
stockholder;
o the interested stockholder acquired at least 85% of the voting stock
in the transaction in which it became an interested stockholder; or
o PE Corporation's board of directors and the holders of shares
entitled to cast two-thirds of the votes entitled to be cast by all
of the outstanding voting shares held by all disinterested
stockholders approve the transaction.
Paracel. California law provides generally that if a tender offer or a
written proposal for certain business combinations is made to some or all of a
corporation's stockholders by an "interested party," an affirmative written
opinion as to the fairness of the consideration to such stockholders must be
delivered. An "interested party" is generally a control person of the target
corporation, an entity directly or indirectly controlled by an officer or
director of such corporation or an entity in which a material financial interest
is held by any director or executive officer of such corporation.
Limitation on Directors' Liability
As permitted by Delaware law, PE Corporation's certificate of
incorporation eliminates or limits the personal liability of a director of PE
Corporation to PE Corporation or its stockholders for money damages based upon
his or her breach of fiduciary duty. However, a director's liability is not
eliminated or limited for:
o any breach of the director's duty of loyalty to PE Corporation or
its stockholders;
o any acts or omissions made not in good faith;
o any acts which involve intentional misconduct or a knowing violation
of law;
o any transactions from which the director derived an improper
personal benefit; or
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o any liability arising under Delaware law relating to unlawful
payment of dividends or unlawful stock purchase or redemption.
Under California law and Paracel's articles of incorporation and bylaws, a
director is not liable to the corporation or its stockholders for monetary
damages or liabilities arising from a breach of any duty resulting solely from
his or her status as a director, unless the breach constitutes:
o intentional misconduct or knowing and culpable violation of law;
o acts or omissions that a director believes to be contrary to the
best interests of Paracel or its stockholders or that involve the
absence of good faith;
o receipt of an improper personal benefit;
o acts or omissions that show reckless disregard for the director's
duty to Paracel or its stockholders;
o acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to
Paracel and its stockholders;
o transactions between Paracel and a director who has a material
financial interest in such transaction; or
o liability for improper distributions, loans or guarantees.
Indemnification of Directors and Officers
Delaware law permits a company's board of directors to indemnify any
person against expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement, actually incurred by him or her in connection with any
threatened, pending or completed action (except settlements or judgments in
derivative suits), suit or proceeding in which such person is made a party by
reason of his or her being or having been a director, officer, employee or agent
of the company, in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. Delaware law provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise.
PE Corporation's certificate of incorporation and bylaws provide for
indemnification of PE Corporation's directors and officers to the fullest extent
permitted by law. The directors and officers of PE Corporation are covered by
insurance policies indemnifying against certain liabilities, including certain
liabilities arising under the Securities Act which might be incurred by them in
such capacities and against which they cannot be indemnified by PE Corporation.
Under California law, a corporation has the power to indemnify, with
certain exceptions, any agent who is a party to any action, other than an action
by or in the right of the corporation to procure a judgment in its favor,
against expenses, judgments, fines and settlements if that person acted in good
faith and in a manner that person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In addition, a
corporation has the power to indemnify, with certain exceptions, any agent who
is a party to any action by or in the right of the corporation, against expenses
actually and reasonably incurred by that person in connection with the defense
or settlement of the action if that person acted in good faith and in a manner
that person believed to be in the best interests of the corporation and its
stockholders. An agent of a corporation for purposes of California law includes
directors, officers and employees of such corporation. The indemnification
authorized by California law is not exclusive and a corporation may grant its
directors certain additional rights to indemnification.
The Paracel articles of incorporation and bylaws provide that Paracel may
indemnify to the maximum extent of the law each of its directors against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with a proceeding arising by reason that such
person is a director of Paracel. The indemnification rights are not exclusive of
other indemnification rights to which a director or officer may be entitled.
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Dissenters' Rights
PE Corporation. Generally, stockholders of a Delaware corporation who
object to certain mergers or a consolidation of the corporation are entitled to
appraisal rights, requiring the surviving corporation to pay the fair value of
the dissenting shares. There are, however, no statutory rights of appraisal with
respect to stockholders of a Delaware corporation whose shares of stock are
either:
o listed on a national securities exchange or designated as a national
market system by the National Association of Securities Dealers,
Inc.; or
o held of record by more than 2,000 stockholders.
However, appraisal rights will be available to holders of shares if they are
required by the merger terms to accept anything other than shares of the
survivor, listed or quoted shares or cash in lieu of fractional shares.
In addition, no appraisal rights are available for any shares of stock of
a surviving corporation in a merger if the merger did not require the approval
of the stockholders of such corporation. Further, Delaware law does not provide
appraisal rights to stockholders who dissent from the sale of all or
substantially all of the corporation's assets unless the certificate of
incorporation provides otherwise. PE Corporation's certificate of incorporation
does not provide for appraisal rights upon the sale of all or substantially all
of its assets.
Under Delaware law, the meaning of "fair value" in payment for shares upon
exercise of dissenters' rights does not include any element of value arising
from the completion or expectation of the transaction.
Paracel. Stockholders of a California corporation whose shares are not
listed on a national securities exchange generally have appraisal rights if the
holders of at least 5% of the class of outstanding shares claim the right or the
corporation or any law restricts the transfer of such shares. Appraisal rights
are not available if the stockholders of a corporation or the corporation
itself, or both, immediately prior to the reorganization will own immediately
after the reorganization equity securities constituting more than 831/3% (or
five-sixths) of the voting power of the surviving or acquiring corporation or
its parent entity.
Pursuant to California law, appraisal rights are available to stockholders
of Paracel with respect to the merger. California law relating to dissenters'
rights of appraisal are described in more detail under the caption "The
Merger--Dissenters' Rights."
Right to Examine Stockholder List; Right to Inspect Corporate Records
Under Delaware law, each stockholder has the right:
o during normal business hours, for a period of at least ten days
prior to any stockholder meeting and during such meeting, to examine
an alphabetical list of stockholders for any purpose germane to the
meeting. The list will show the address of each stockholder and the
number of shares held by each stockholder; and
o following a written request, to inspect for any proper purpose a
corporation's books and records, including the stockholder list,
during usual business hours.
Under California law, each stockholder has the right:
o to inspect and copy the record of stockholders at any time during
usual business hours upon written demand on the corporation, for a
purpose reasonably related to such stockholder's interests as a
stockholder; and
o to inspect the accounting books and records and minutes of
proceedings of the stockholders and the board and committees
thereof, upon the written demand on the corporation of any
stockholder at any
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reasonable time during usual business hours, for a purpose
reasonably related to a stockholder's interest as a stockholder.
Interested Director Transactions
Under Delaware law, certain contracts or transactions in which a director
has an interest are not void or voidable solely by reason of that interest if
the contract or transaction:
o is approved by the stockholders or by a majority of the
disinterested directors if the material facts are disclosed in good
faith or known; or
o was fair and reasonable to the corporation at the time of approval.
Similarly, under California law, certain contracts or transactions in
which a director has an interest are not void or voidable solely by reason of
that interest if the contract or transaction:
o is approved in good faith by the stockholders if the material facts
of the transaction and the director's interest are fully disclosed
or known to the stockholders; or
o is approved in good faith by a majority of the board if the material
facts of the transaction and the director's interest are fully
disclosed or known to the board and the contract or transaction is
just and reasonable to the corporation at the time of approval; or
o was not approved by the stockholders or the board, but the person
asserting the validity of the contract or transaction proves it was
just and reasonable to the corporation at the time of approval.
Sources of Dividends and Repurchases of Shares
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired (meaning that the value of the assets of the
corporation is less than the amount represented by the aggregate outstanding
shares of the capital stock of the corporation) and such redemption or
repurchase would not impair the capital of the corporation. The ability of a
Delaware corporation to pay dividends on, or to make repurchases or redemptions
of, its shares is dependent on the financial status of the corporation standing
alone and not on a consolidated basis. In determining the amount of surplus of a
Delaware corporation, the assets of the corporation, including stock of
subsidiaries owned by the corporation, may be valued at their fair market value
as determined by the board of directors, regardless of their historical book
value. See "Description of PE Corporation Capital Stock--Celera Genomics Common
Stock--Dividends", for a discussion of how the Celera Genomics group values its
assets for purposes of dividends.
California law dispenses with the concepts of par value of shares as well
as statutory definitions of capital and surplus. Generally, a California
corporation may pay dividends or repurchase shares out of retained earnings.
Dividends or repurchases of shares may also be made if, immediately after giving
effect thereto, the sum of
o the assets (excluding goodwill and certain other assets) of the
corporation are at least equal to 1.25 times its liabilities
(excluding certain deferred credits) and
o the current assets of the corporation are at least equal to its
current liabilities or, if the average of the earnings of the
corporation before taxes and interest expense for the two preceding
fiscal years were less than the average of the interest expense of
such corporation for such fiscal years, at least equal to 1.25 times
its current liabilities. There are exceptions to the foregoing rules
for repurchases of shares in connection with certain rescission
actions or pursuant to certain employee stock plans.
71
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Application of the California Corporations Code to Delaware Corporations
Under Section 2115 of the California Corporations Code, certain foreign
corporations (that is, corporations not organized under California law) which
have significant contacts with California are subject to a number of key
provisions of the California Corporations Code. However, an exemption from
Section 2115 is provided for a corporation whose shares are listed on the New
York Stock Exchange.
EXPERTS
The consolidated financial statements of PE Corporation, the combined
financial statements of the PE Biosystems group and the combined financial
statements of the Celera Genomics group as of June 30, 1999, and 1998 and for
each of the three years in the period ended June 30, 1999, incorporated in this
prospectus by reference to the Annual Report on Form 10-K for the year ended
June 30, 1999, have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
LEGAL OPINIONS
The legality of the shares of Celera Genomics common stock to be issued to
holders of shares of Paracel common stock pursuant to the merger will be passed
upon for PE Corporation by Simpson Thacher & Bartlett, New York, New York.
Certain federal income tax matters related to the merger will be passed
upon for PE Corporation by Simpson Thacher & Bartlett, New York, New York, and
for Paracel by O'Melveny & Myers LLP, Los Angeles, California.
WHERE YOU CAN FIND MORE INFORMATION
PE Corporation files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information PE Corporation files at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. PE Corporation's SEC filings are also available to the
public from commercial document retrieval services and at the world wide web
site maintained by the SEC at http://www.sec.gov.
PE Corporation has filed a Form S-4 to register with the SEC the Celera
Genomics common stock to be issued to Paracel stockholders in the merger. This
document is a part of the Form S-4 and constitutes a prospectus of PE
Corporation in addition to being a proxy statement for the Paracel special
meeting. As allowed by SEC rules, this document does not contain all the
information you can find in the Form S-4 or the exhibits to the Form S-4.
The SEC allows PE Corporation to "incorporate by reference" information
into this document, which means that PE Corporation can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
document, except for any information superseded by information in this document.
PE Corporation incorporates by reference its documents listed below and any
future filings it makes with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, prior to the termination of this offering:
(a) Annual Report on Form 10-K for the fiscal year ended June 30, 1999;
(b) Quarterly Reports on Form 10-Q for the quarters ended September 30,
1999, and December 31, 1999;
(c) the descriptions of PE Corporation's common stock and rights to
purchase participating junior preferred stock set forth in its registration
statements filed pursuant to Section 12 of the Exchange Act and any amendment or
report filed for the purpose of updating any of those descriptions.
72
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If you are a stockholder of Paracel, PE Corporation may have sent you some
of the documents incorporated by reference, but you can obtain any of them
through PE Corporation or the SEC. Documents incorporated by reference are
available from PE Corporation without charge, excluding all exhibits unless PE
Corporation has specifically incorporated by reference an exhibit in this
document. Stockholders of Paracel may obtain documents incorporated by reference
in this document by requesting them in writing or by telephone from PE
Corporation at the following address:
PE Corporation
761 Main Avenue
Norwalk, Connecticut 06897
Attention: Secretary
(203) 762-1000
If you would like to request documents from PE Corporation, please do so
by June 2, 2000, to receive them prior to the special meeting.
You should rely only on the information contained or incorporated by
reference in this document to vote on the proposals included in this document.
PE Corporation has not authorized anyone to provide you with information that is
different from what is contained in this document. This document is dated May 9,
2000. You should not assume that the information contained in this document is
accurate as of any date other than such date, and neither the mailing of this
document to stockholders of Paracel nor the issuance of Celera Genomics common
stock in the merger will create any implication to the contrary.
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<PAGE>
PE CORPORATION
AND
PARACEL, INC.
Annexes to the Prospectus
I. Agreement and Plan of Merger
II. Voting Agreement
III. Form of Escrow Agreement
IV. Opinion of Thomas Weisel
V. Chapter 13 of the CCC
<PAGE>
Annex I
================================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of March 20, 2000
Among
PE Corporation
Umbrella Acquisition Corp.
and
Paracel, Inc.
================================================================================
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TABLE OF CONTENTS
ARTICLE I
The Merger...........................................................I-6
SECTION 1.01. The Merger............................................I-6
SECTION 1.02. Closing...............................................I-6
SECTION 1.03. Effective Time of the Merger..........................I-7
SECTION 1.04. Effects of the Merger.................................I-7
SECTION 1.05. Articles of Incorporation; Bylaws.....................I-7
SECTION 1.06. Directors.............................................I-7
SECTION 1.07. Officers..............................................I-7
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations.............................................I-7
SECTION 2.01. Effect on Capital Stock...............................I-7
SECTION 2.02. Exchange of Certificates..............................I-9
SECTION 2.03. Treatment of Options.................................I-11
ARTICLE III
Representations and Warranties......................................I-12
SECTION 3.01. Representations and Warranties of the Company........I-12
SECTION 3.02. Representations and Warranties of Parent and Sub.....I-23
ARTICLE IV
Covenants Relating to Conduct of Business Prior to Merger...........I-27
SECTION 4.01. Conduct of Business..................................I-27
ARTICLE V
Additional Agreements...............................................I-30
SECTION 5.01. Preparation of Form S-4; Stockholder Meeting.........I-30
SECTION 5.02. Access to Information; Confidentiality...............I-31
SECTION 5.03. Reasonable Best Efforts..............................I-31
SECTION 5.04. Indemnification......................................I-31
SECTION 5.05. Directorships........................................I-32
SECTION 5.06. Public Announcements.................................I-32
SECTION 5.07. Affiliates...........................................I-33
SECTION 5.08. No Solicitation......................................I-33
SECTION 5.09. Benefit Matters......................................I-33
SECTION 5.10. Stock Exchange Listing...............................I-34
SECTION 5.11. Stock Options........................................I-34
ARTICLE VI
Conditions Precedent................................................I-34
SECTION 6.01. Conditions to Each Party's Obligation to
Effect the Merger...................................I-34
SECTION 6.02. Conditions to Obligations of Parent and Sub..........I-35
SECTION 6.03. Conditions to Obligation of the Company..............I-36
I-2
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ARTICLE VII
Termination, Amendment and Waiver...................................I-37
SECTION 7.01. Termination..........................................I-37
SECTION 7.02. Effect of Termination................................I-37
SECTION 7.03. Amendment............................................I-38
SECTION 7.04. Extension; Waiver....................................I-38
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver.................................I-38
ARTICLE VIII
General Provisions..................................................I-38
SECTION 8.01. Survival.............................................I-38
SECTION 8.02. Expenses.............................................I-38
SECTION 8.03. Notices..............................................I-39
SECTION 8.04. Definitions..........................................I-40
SECTION 8.05. Interpretation.......................................I-42
SECTION 8.06. Counterparts.........................................I-42
SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries.......I-42
SECTION 8.08. GOVERNING LAW........................................I-42
SECTION 8.09. Assignment...........................................I-42
SECTION 8.10. Enforcement..........................................I-42
SECTION 8.11. Severability of Provisions...........................I-42
SECTION 8.12. Exclusive Jurisdiction...............................I-42
SECTION 8.13. Waiver of Jury Trial.................................I-43
SECTION 8.14. Affiliate............................................I-43
SECTION 8.15. No Recourse..........................................I-43
SCHEDULES
Company Disclosure Schedule
EXHIBITS
Exhibit A Voting Agreement
Exhibit B Escrow Agreement
Exhibit C Form of Company Affiliate Letter
Exhibit D-1 Form of Opinion of Counsel to the Company
Exhibit D-2 Form of Opinion of Counsel to Parent and Sub
Exhibit E Short-Form Merger Agreement
I-3
<PAGE>
GLOSSARY OF DEFINED TERMS
affiliate............................................................ss.8.04(a)
By-laws..............................................................ss.3.01(a)
CCC.....................................................................ss.1.01
Certificates.........................................................ss.2.01(d)
Closing.................................................................ss.1.02
Closing Date............................................................ss.1.02
Code...................................................................Preamble
Company................................................................Preamble
Company Common Stock...................................................Preamble
Company Disclosure Schedule.............................................ss.3.01
Company IP........................................................ss.3.01(u)(i)
Company Real Property Lease Agreements............................ss.3.01(j)(i)
Company Owned Real Property.......................................ss.3.01(j)(i)
Company Permits.................................................ss.3.01(g)(iii)
Company Plans.....................................................ss.3.01(h)(i)
Company Preferred Stock...........................................ss.3.01(c)(i)
Company Stock Option.................................................ss.2.03(a)
Company Stock Plan...................................................ss.2.03(a)
Company Stockholder Approval...........................................Preamble
Confidentiality Agreements...........................................ss.5.02(a)
Controlled Group................................................ss.3.01(h)(iii)
Dissenting Shares.................................................ss.2.01(e)(i)
Effective Time of the Merger............................................ss.1.03
Environmental Claim..................................................ss.8.04(b)
Environmental Laws...................................................ss.8.04(c)
Environmental Permits................................................ss.8.04(d)
ERISA.............................................................ss.3.01(h)(i)
Escrow Agent.........................................................ss.2.02(i)
Escrow Agreement.....................................................ss.2.02(i)
Exchange Act.....................................................ss.3.02(c)(ii)
Exchange Agent.......................................................ss.2.02(a)
Exchange Fund........................................................ss.2.02(a)
Exchange Ratio.......................................................ss.8.04(e)
Financial Statements..............................................ss.3.01(e)(i)
Form S-4.........................................................ss.3.01(d)(ii)
GAAP..............................................................ss.3.01(e)(i)
Governmental Entity..............................................ss.3.01(d)(ii)
Hazardous Materials..................................................ss.8.04(f)
HSR Act..........................................................ss.3.01(d)(ii)
incentive stock options..............................................ss.2.03(a)
indebtedness.........................................................ss.8.04(g)
Indemnified Liabilities.................................................ss.5.04
Indemnitees.............................................................ss.5.04
Intellectual Property................................................ss.8.04(h)
I-4
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<PAGE>
IP Agreements..................................................ss.3.01(n)(i)(I)
knowledge............................................................ss.8.04(i)
Liens................................................................ss.3.01(b)
Litigation........................................................ss.3.01(g)(i)
Material Adverse Change..............................................ss.8.04(j)
Material Adverse Effect..............................................ss.8.04(j)
Material Contract.................................................ss.3.01(n)(i)
Merger.................................................................Preamble
Merger Consideration.................................................ss.2.01(c)
NYSE.............................................................ss.3.02(c)(ii)
Order............................................................ss.3.01(d)(ii)
Parent.................................................................Preamble
Parent Common Stock..................................................ss.2.01(c)
Parent Common Stock Price............................................ss.8.04(k)
Parent Common Stock Warrants......................................ss.3.02(b)(i)
Parent Preferred Stock............................................ss.3.02(b)(i)
Parent SEC Reports................................................ss.3.02(d)(i)
Parent Stock Plans................................................ss.3.02(b)(i)
Parent Subsidiaries..................................................ss.3.02(a)
PE Biosystems Stock...............................................ss.3.02(b)(i)
Permitted Liens......................................................ss.8.04(l)
person...............................................................ss.8.04(m)
Reference Balance Sheet..........................................ss.3.01(e)(ii)
SEC..............................................................ss.3.01(d)(ii)
Securities Act..................................................ss.3.01(c)(iii)
Short-Form Merger Agreement.............................................ss.1.03
Stockholders Meeting.................................................ss.5.01(c)
Sub....................................................................Preamble
Subsidiaries.........................................................ss.3.01(b)
subsidiary...........................................................ss.8.04(n)
Surviving Corporation...................................................ss.1.04
Taxes................................................................ss.3.01(i)
Tax Return...........................................................ss.3.01(i)
Thomas Weisel........................................................ss.3.01(p)
Transaction Proposals...................................................ss.5.08
Voting Agreement.......................................................Preamble
Voting Debt.....................................................ss.3.01(c)(iii)
WARN.............................................................ss.3.01(g)(ii)
I-5
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of March 20, 2000, among PE
Corporation, a Delaware corporation ("Parent"), Umbrella Acquisition Corp., a
California corporation and a direct wholly owned subsidiary of Parent ("Sub"),
and Paracel, Inc., a California corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have determined that the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair and in the best interests of their respective
stockholders;
WHEREAS, such Boards of Directors have approved the Merger, pursuant
to which each share of Common Stock, no par value, of the Company (the "Company
Common Stock"), other than shares owned, directly or indirectly, by any
Subsidiary of the Company or by Sub, will be converted into the right to receive
the Merger Consideration;
WHEREAS, approval of the Merger and this Agreement require the vote
of the holders of a majority of the outstanding shares of the Company Common
Stock (the "Company Stockholder Approval");
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition of, and inducement to, Parent's willingness to
enter into this Agreement, Parent and holders of Company Common Stock sufficient
in amount to provide the Company Stockholder Approval are entering into a voting
agreement, dated as of the date hereof, in the form of Exhibit A hereto (the
"Voting Agreement"), pursuant to which such holders of Company Common Stock are
agreeing, among other things, to vote their shares of Company Common Stock in
favor of the Merger;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows: ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the California
Corporations Code (the "CCC"), Sub shall be merged with and into the Company at
the Effective Time of the Merger. At the Effective Time of the Merger, the
separate existence of Sub shall cease, and the Company shall continue as the
surviving corporation.
SECTION 1.02. Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.01, and subject to the satisfaction or waiver of the
conditions set forth in Article VI, the closing of the Merger (the "Closing")
will
I-6
<PAGE>
take place at 10:00 a.m. Pacific Time on the second business day after
satisfaction of the conditions set forth in Section 6.01 (or as soon as
practicable thereafter following satisfaction or waiver of the conditions set
forth in Sections 6.02 and 6.03) (the "Closing Date"), at the offices of
O'Melveny & Myers LLP, 1999 Avenue of the Stars, Suite 700, Los Angeles,
California 90067, unless another date, time or place is agreed to in writing by
the parties hereto.
SECTION 1.03. Effective Time of the Merger. As soon as practicable
after the satisfaction or waiver of the conditions set forth in Article VI, the
parties hereto shall cause the Merger to be consummated by filing a short form
merger agreement in the form of Exhibit E hereto (the "Short-Form Merger
Agreement") together with an officer's certificate of each of Sub and the
Company, with the Secretary of State of the State of California, in such form as
required by and executed in accordance with the relevant provisions of the CCC
(the date and time of the filing of such Agreement and such officers'
certificates with the Secretary of State of the State of California being the
"Effective Time of the Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have the
effects set forth in this Agreement and in the applicable provisions of the CCC.
As used herein, "Surviving Corporation" shall mean and refer to the Company, at
and after the Effective Time of the Merger, as the surviving corporation in the
Merger.
SECTION 1.05. Articles of Incorporation; Bylaws. (a) At the
Effective Time of the Merger, and without any further action on the part of the
Company or Sub, the articles of incorporation of the Company as in effect at the
Effective Time of the Merger, shall be the articles of incorporation of the
Surviving Corporation; provided, that immediately following the Effective Time
of the Merger, the articles of incorporation of the Surviving Corporation shall
be amended and restated to be the same in substance as the articles of
incorporation of Sub immediately before the Effective Time of the Merger.
(b) At the Effective Time of the Merger, and without any further
action on the part of the Company or Sub, the bylaws of Sub as in effect at the
Effective Time of the Merger shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub at the Effective Time
of the Merger shall be the directors of the Surviving Corporation, until the
earlier of their death, resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company at the Effective
Time of the Merger shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their death, respective
successors are duly elected or appointed and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations
SECTION 2.01. Effect on Capital Stock. At the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the
Company, Sub or any holder of any shares of Company Common Stock or any shares
of capital stock of Sub:
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<PAGE>
(a) Common Stock of Sub. Each share of common stock of Sub issued
and outstanding immediately prior to the Effective Time of the Merger shall be
converted into one share of the common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) Cancellation of Parent-Owned Company Common Stock. Each share of
Company Common Stock that is owned by any Subsidiary of the Company, and each
share of Company Common Stock that is owned by Sub shall automatically be
canceled and retired and shall cease to exist, and no cash, Parent Common Stock
or other consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Sections 2.02(c),
2.02(e) and 2.02(g), each issued and outstanding share of Company Common Stock
(other than shares canceled pursuant to Section 2.01(b) or Dissenting Shares),
including shares owned by any subsidiary of Parent other than Sub, shall be
converted into the right to receive a fraction equal to the Exchange Ratio of a
share of PE Corporation--Celera Genomics Common Stock, par value $0.01 per share
(including the rights associated with such shares pursuant to Parent's
Shareholder Protection Rights Plan and as adjusted for stock splits in the form
of stock dividends as contemplated by Section 4.01(b)(i), the "Parent Common
Stock") (the amount of Parent Common Stock into which each such share of Company
Common Stock is converted being referred to herein as the "Merger
Consideration").
(d) Cancellation and Retirement of Company Common Stock. At the
Effective Time of the Merger, all shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Company Common Stock (collectively, the "Certificates") shall, to the extent
such Certificate represents such shares, cease to have any rights with respect
thereto, except the right to receive the Merger Consideration (and cash in lieu
of fractional shares of Parent Common Stock) to be issued or paid in
consideration therefor upon surrender of such Certificate in accordance with
Section 2.02, other than as provided in Section 2.01(e) or by law.
(e) Dissenting Shares. (i) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock which were outstanding
on the date for the determination of stockholders entitled to vote on the
Merger, and which were not voted in favor of or were voted against the Merger,
and the holders of which have demanded that the Company purchase such shares at
their fair market value in accordance with Section 1301 of the CCC and submitted
such shares for endorsement in accordance with Section 1302 of the CCC, and the
holders of which shall not have otherwise failed to perfect or shall not have
effectively withdrawn or lost their rights to appraisal and payment under the
CCC (the "Dissenting Shares"), shall not be converted into the right to receive
the Merger Consideration, but, instead, the holders thereof shall be entitled to
have their shares purchased by the Company for cash at the fair market value of
such Dissenting Shares as agreed upon or determined in accordance with the
provisions of Section 1300 et seq. of the CCC; provided, however, that if any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost his, her or its right to appraisal and payment under the CCC, such holder's
shares of Company Common Stock shall thereupon be deemed to have been converted,
at the Effective Time of the Merger, into the right to receive the Merger
Consideration set forth in Section 2.01(c) of this Agreement, without any
interest thereon. If a holder of any shares of Company Common Stock shall become
entitled to receive payment for such shares pursuant to Section 1300 et seq. of
the CCC, then such payment shall be made by the Surviving Corporation.
(ii) The Company shall give Parent (A) prompt notice of any
demands pursuant to Section 1300 et seq. of the CCC received by the Company,
withdrawals of such demands and any other instruments served pursuant to the CCC
and received by the Company and (B) the opportunity to direct all
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<PAGE>
negotiations and proceedings with respect to demands under Section 1300 et seq.
of the CCC. The Company shall not, except with the prior written consent of
Parent or as otherwise required by applicable law, make any payment with respect
to any such demands for appraisal or offer to settle or settle any such demands.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. At the
Effective Time of the Merger, Parent shall enter into an agreement with such
bank or trust company as may be designated by Parent (the "Exchange Agent")
which shall provide that Parent shall deposit with the Exchange Agent, for the
benefit of the holders of Certificates, for exchange in accordance with this
Article II, certificates representing the shares of Parent Common Stock issuable
pursuant to Section 2.01 in exchange for outstanding shares of Company Common
Stock, together with any dividends or distributions with respect thereto with a
record date after the Effective Time of the Merger, and any cash payable in lieu
of any fractional shares of Parent Common Stock (such shares and cash being
hereinafter referred to as the "Exchange Fund"); provided, however, that Parent
shall withhold from the Exchange Fund the amount of Parent Common Stock
delivered to the Escrow Agent pursuant to the Escrow Agreement.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of Certificates immediately prior to the Effective Time of the Merger
whose shares were converted into the right to receive shares of Parent Common
Stock pursuant to Section 2.01(c) (other than any holder of Dissenting Shares),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, and which shall be in such
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Exchange Agent together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article II (after taking into
account all shares of Company Common Stock then held by such holder), certain
dividends or other distributions in accordance with Section 2.02(c) and cash in
lieu of any fractional share in accordance with Section 2.02(e), and the
Certificate so surrendered shall forthwith be canceled; provided, however, that
the holders shall not receive from the Exchange Agent the pro rata amount of
Parent Common Stock delivered to the Escrow Agent on behalf of such holder
pursuant to the Escrow Agreement. In the event of a transfer of ownership of
shares of Company Common Stock which is not registered in the transfer records
of the Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02 each Certificate
shall be deemed at any time after the Effective Time of the Merger to represent
only the right to receive upon such surrender the Parent Common Stock into which
the shares of Company Common Stock represented by such Certificate have been
converted as provided in this Article II and the right to receive upon such
surrender cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Section 2.02, other than as provided in Section 2.01(e) or
by law.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Parent Common Stock with a record date
after the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.02(e), until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
distributed to any such holder (i) the certificate or certificates representing
whole shares of Parent Common Stock issued in exchange therefor
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without interest, (ii) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and the amount of any dividends
or other distributions with a record date after the Effective Time of the Merger
theretofore paid (but withheld pursuant to the immediately preceding sentence)
with respect to such whole shares of Parent Common Stock, and (iii) at the
appropriate payment date, the amount of any dividends or other distributions
with a record date after the Effective Time of the Merger but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued upon conversion of shares of Company Common Stock
in accordance with the terms hereof, and all cash paid pursuant to Sections
2.01(e), 2.02(c) and 2.02(e), shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock which
were outstanding prior to the Effective Time of the Merger. If, after the
Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent. In lieu
of such issuance of fractional shares, the Exchange Agent shall pay from the
Exchange Fund each holder of Certificates an amount in cash equal to the product
obtained by multiplying (a) the fractional share interest to which such holder
(after taking into account all shares of Company Common Stock held immediately
prior to the Effective Time of the Merger by such holder) would otherwise be
entitled by (b) the Parent Common Stock Price.
(ii) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates with respect to
any fractional share interests, the Exchange Agent shall make available such
amounts to such holders of Certificates, subject to and in accordance with the
terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
deposited with the Exchange Agent pursuant to this Section 2.02 which remains
undistributed to the holders of the Certificates for six months after the
Effective Time of the Merger shall be delivered to Parent, upon demand, and any
holders of Certificates prior to the Merger who have not theretofore complied
with this Article II shall thereafter look only to Parent and only as general
creditors thereof for payment of their claim for Parent Common Stock, cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock to which such holders may be
entitled.
(g) No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to three years after the Effective Time of the Merger, or
immediately prior to such earlier date on which any Merger Consideration, any
cash in lieu of fractional shares of Parent Common Stock or any dividends or
distributions with respect to Parent Common Stock would otherwise escheat to or
become the property of any Governmental Entity, any such Merger Consideration or
cash shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
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(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(i) Merger Consideration Held in Escrow. Prior to the Closing Date,
Parent and Joseph T. Kingsley, as representative for the holders of Company
Common Stock, shall enter into an escrow agreement (the "Escrow Agreement"), a
form of which is attached hereto as Exhibit B and the terms of which shall be
deemed to be part of and shall be read in conjunction with this Agreement, with
a qualified escrow agent (the "Escrow Agent") reasonably acceptable to Parent
providing for 5% of the aggregate Merger Consideration to be delivered by the
Exchange Agent into escrow at the Closing and held for disbursement as provided
in the Escrow Agreement.
SECTION 2.03. Treatment of Options. (a) At the Effective Time of the
Merger, each outstanding option to purchase Company Common Stock (a "Company
Stock Option") issued pursuant to the Paracel, Inc. Stock Option Plan (the
"Company Stock Plan"), whether vested or unvested, shall be deemed to constitute
an option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, the same number of shares of Parent Common Stock as
the holder of such Company Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time of the Merger, at a price per share equal to (y) the
aggregate exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Stock Option divided by (z) the number of
full shares of Parent Common Stock deemed purchasable pursuant to such Company
Stock Option; provided, however, that in the case of any option to which Section
421 of the Code applies by reason of its qualification under Section 422 of the
Code ("incentive stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with Section 424(a) of the
Code.
(b) As soon as practicable after the Effective Time of the Merger,
Parent shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the Company Stock Plan and the
agreements evidencing the grants of such Company Stock Options shall continue in
effect on the same terms and conditions (subject to adjustments required by this
Section 2.03 after giving effect to the Merger and the provisions set forth
above and until otherwise determined). If necessary, Parent shall comply with
the terms of the Company Stock Plan and ensure, to the extent required by, and
subject to the provisions of, the Company Stock Plan, that Company Stock Options
that qualified as incentive stock options prior to the Effective Time of the
Merger continue to qualify as incentive stock options after the Effective Time
of the Merger.
(c) Prior to the Effective Time of the Merger, Parent shall have
taken all corporate action necessary to reserve for issuance a sufficient number
of shares of Parent Common Stock for delivery upon exercise of Company Stock
Options. As soon as practicable after the Effective Time of the Merger, Parent
shall file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate forms), or another appropriate form, with
respect to the shares of Parent Common Stock subject to such options and shall
use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
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ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company. Except
as set forth in the disclosure schedule of the Company dated as of the date
hereof and delivered herewith to Parent (the "Company Disclosure Schedule"),
which identifies the section and subsection to which each disclosure therein
relates, the Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and each Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of the Company and each Subsidiary is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) could
not reasonably be expected to have a Material Adverse Effect with respect to the
Company. Complete and correct copies of the Articles, as amended, and the
Company's By-laws, as amended (the "By-laws"), as currently in effect have
previously been provided to Parent and Sub. The Company has made available to
Parent and Sub complete and correct copies of the articles of incorporation and
bylaws (or other organizational documents) of each Subsidiary, in each case as
amended to the date of this Agreement.
(b) Subsidiaries. The only direct or indirect subsidiaries of the
Company are those listed in Section 3.01(b) of the Company Disclosure Schedule
(the "Subsidiaries"). All of the outstanding shares of capital stock of each
Subsidiary have been validly issued and are fully paid and nonassessable and,
are owned (of record and beneficially) by the Company, by another wholly owned
Subsidiary or by the Company and another such wholly owned Subsidiary, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") other than
Permitted Liens. The Company does not own, directly or indirectly, any capital
stock or other ownership interest or any indebtedness in any corporation,
limited liability company, partnership, business association, joint venture or
other entity.
(c) Capital Structure. (i) The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock, and 60,000 shares
of Preferred Stock, no par value (the "Company Preferred Stock"). As of the date
hereof, there are: (A) 8,426,516 shares of Company Common Stock issued and
outstanding; (B) 2,106,833 shares of Company Common Stock reserved for issuance
upon exercise of outstanding Company Stock Options (which Company Stock Options
have exercise prices as specified in Section 3.01(c) of the Company Disclosure
Schedule), and 347,001 shares of Company Common Stock reserved for issuance
pursuant to the Company Stock Plan upon the exercise of authorized but unissued
Company Stock Options; and (C) no shares of Company Preferred Stock issued and
outstanding. Except as set forth above, as of the date hereof, there are no
shares of capital stock or other equity securities of the Company issued,
reserved for issuance or outstanding.
(ii) All outstanding shares of capital stock of the Company
were not issued in violation of preemptive rights, and all shares of Company
Common Stock which may be issued pursuant to the Company Stock Plan will be,
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. All securities issued by the Company were
issued in compliance in all material respects with all applicable federal and
state securities laws and all applicable rules and regulations promulgated
thereunder. No shares of Company Common Stock are owned by any Subsidiary.
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(iii) There are no outstanding bonds, debentures, notes or
other indebtedness or debt securities of the Company or any Subsidiary having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may vote
(collectively, "Voting Debt"). Except as set forth above, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
Subsidiary is a party or by which any of them is bound obligating the Company or
any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity or voting securities of
the Company or of any Subsidiary or obligating the Company or any Subsidiary to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations, commitments, understandings or arrangements
of the Company or any Subsidiary to repurchase, redeem or otherwise acquire or
make any payment in respect of any shares of capital stock of the Company or any
Subsidiary, and to the knowledge of the Company, there are no proxies with
respect to shares of capital stock of the Company or any Subsidiary, except as
contemplated by the Voting Agreement. There are no agreements or arrangements
pursuant to which the Company is or could be required to register shares of
Company Common Stock or other securities under the Securities Act of 1933, as
amended (the "Securities Act"), or other agreements or arrangements with or, to
the knowledge of the Company, among any securityholders of the Company with
respect to the Company, or its Subsidiaries, or their business or their
securities.
(iv) Since December 31, 1999, the Company has not (A) issued
or permitted to be issued any shares of capital stock, or securities exercisable
for or convertible into shares of capital stock, of the Company or any
Subsidiary, other than (x) the grant of any employee stock options prior to the
date of this Agreement pursuant to the Company Stock Plan, (y) the issuance of
Company Common Stock upon exercise of the options granted pursuant to the
Company Stock Plan prior to the date of this Agreement; (B) repurchased,
redeemed or otherwise acquired, directly or indirectly through one or more
Subsidiaries, any shares of capital stock of the Company or any Subsidiary; or
(C) declared, set aside, made or paid to the stockholders of the Company
dividends or other distributions on the outstanding shares of capital stock of
the Company.
(d) Authority; Noncontravention. (i) The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
Company Stockholder Approval, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to the Company Stockholder Approval. This Agreement has been duly
executed and delivered by the Company and (assuming due authorization, execution
and delivery by Parent and Sub) constitutes the valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement do not, and
the consummation by the Company of the transactions contemplated by this
Agreement and compliance by the Company with the provisions hereof will not,
conflict with, or result in any breach or violation of, or any default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of, or a "put" right with respect to
any obligation under, or to a loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary under, (A) the Articles or By-laws or the comparable charter or
organizational documents of any Subsidiary, (B) any loan or credit agreement,
note, note purchase agreement, bond, mortgage, indenture, lease or other
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agreement, instrument, permit, concession, franchise or license applicable to
the Company or any Subsidiary or their respective properties or assets or any
Material Contract or (C) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule, regulation, settlement or arbitration award ("Order")
applicable to the Company or any Subsidiary or their respective properties or
assets, other than, in the case of clauses (B) and (C), any such conflicts,
breaches, violations, defaults, rights, losses or Liens that individually or in
the aggregate could not reasonably be expected to have a Material Adverse Effect
with respect to the Company or prevent or materially delay the ability of the
Company to consummate the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
the Company or any Subsidiary in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby or the performance by the Company of its
obligations hereunder, except for (x) the filing of a premerger notification and
report form by the Company under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (y) the filing of the registration
statement on Form S-4 to be filed with the Securities and Exchange Commission
(the "SEC") by Parent in connection with the issuance of Parent Common Stock in
the Merger (the "Form S-4") and (z) the filing of the Short-Form Merger
Agreement, together with an officer's certificate of each of Sub and the
Company, with the Secretary of State of the State of California and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business.
(e) Financial Statements; Undisclosed Liabilities. (i) Set forth in
Section 3.01(e) of the Company Disclosure Schedule are complete, true and
correct copies of: (A) the audited consolidated balance sheet of the Company and
the Subsidiaries as of December 31, 1998, including the notes thereto, (B) the
audited consolidated statement of income and cash flows of the Company and the
Subsidiaries for the fiscal year ended December 31, 1998, including the notes
thereto, (C) the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of December 31, 1999, and (D) the unaudited consolidated
statement of income and cash flows of the Company and the Subsidiaries for the
fiscal year ended December 31, 1999 (collectively, the "Financial Statements").
Except as set forth in the notes thereto and except, in the case of the
unaudited Financial Statements, which do not contain footnotes, for normal
year-end audit adjustments and disclosures (none of which is material), the
audited Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP"), as in effect on
the date of such audited Financial Statements, and the unaudited Financial
Statements have been prepared on a basis consistent with the audited Financial
Statements, and the Financial Statements fairly present, in all material
respects, the consolidated financial position and results of operations and cash
flows of the Company and the Subsidiaries, in each case as of the dates
indicated and for the periods covered, as the case may be.
(ii) Other than the liabilities set forth in the unaudited
consolidated balance sheet of the Company and the Subsidiaries as of December
31, 1999, included in the Financial Statements (the "Reference Balance Sheet"),
neither the Company nor any Subsidiary has liabilities or obligations of any
nature (whether absolute, accrued, contingent or otherwise) that are of a nature
required to be set forth on a balance sheet (or in the notes thereto) in
accordance with GAAP as in effect on the date of this Agreement, except
liabilities or obligations incurred subsequent to the date of the Reference
Balance Sheet in the ordinary course of business consistent with past practice,
none of which has had or could reasonably be expected to have a Material Adverse
Effect with respect to the Company.
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(f) Absence of Certain Changes or Events. Since December 31, 1999,
the Company and each Subsidiary has conducted its business only in the ordinary
course consistent with past practice, and there is not and has not been: (1) any
Material Adverse Change with respect to the Company; (2) any condition, event or
occurrence which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect or give rise to a Material Adverse Change with
respect to the Company; (3) any action which, if it had been taken or occurred
after the execution of this Agreement, would have required the consent of Parent
pursuant to this Agreement; or (4) any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to prevent or
materially delay the ability of the Company to consummate the transactions
contemplated by this Agreement or perform its obligations hereunder. Neither the
Company nor any Subsidiary has since December 31, 1999:
(i) encumbered, transferred, leased, licensed or otherwise
disposed of, or authorized or committed to the sale, encumbrance, transfer,
lease, license or other disposition of any material assets other than in the
ordinary course of business;
(ii) (A) acquired (by merger, consolidation or acquisition of
stock or assets) any corporation, limited liability company, partnership or
other business organization or division thereof or substantially all of the
assets thereof or (B) incurred any indebtedness for borrowed money or issued any
debt securities or assumed, guaranteed or endorsed, or otherwise become
responsible for, the obligations of any person, or made any loans, advances or
capital contributions to, or investments in, any other person;
(iii) increased the compensation or fringe benefits of any of
its directors, officers or employees, except for increases in salary or wages of
employees of the Company or any Subsidiary who are not executive officers of the
Company in the ordinary course of business consistent with past practice, or
entered into, or amended, any employment, severance, or consulting agreement or
arrangement with any present or former director, officer or other employee of
the Company or any Subsidiary; or
(iv) changed, in any material respect, any of the accounting
practices or principles used by it.
(g) Litigation; Labor Matters; Compliance with Laws. (i) There is
(A) no suit, action, claim, arbitration, inquiry, complaint, charge or other
proceeding ("Litigation") pending before any court, governmental agency,
administrative agency or commission, and (B) to the knowledge of the Company, no
Litigation threatened against or investigation or inquiry pending with respect
to the Company or any Subsidiary that in either case, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect with
respect to the Company or prevent or materially delay the ability of the Company
to consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder, nor is there any judgment, decree, citation, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against the
Company or any Subsidiary which, individually or in the aggregate, has or could
reasonably be expected to have, any such effect.
(ii) (A) Neither the Company nor any Subsidiary is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization nor is any such contract
or agreement presently being negotiated; (B) neither the Company nor any
Subsidiary is the subject of any proceeding asserting that the Company or any
Subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment nor
is any such proceeding threatened; (C) there is no strike, work stoppage,
slowdown or other similar labor dispute involving it or any Subsidiary pending
or, to the Company's knowledge, threatened; (D) no grievance is pending or, to
the Company's knowledge, threatened against the Company or
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any Subsidiary; (E) no representation question exists or has been raised
respecting any of the Company's employees within the past five years, nor to the
knowledge of the Company are there any campaigns being conducted to authorize
representation by any labor organization; (F) the Company and each Subsidiary is
in compliance with all applicable laws, agreements, contracts, and policies
relating to employment, employment practices, wages, hours, and terms and
conditions of employment except for failures so to comply, if any, that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect with respect to the Company; (G) the Company is not a
party to, or otherwise bound by, any consent decree with, or citation by, any
government agency relating to employees or employment practices; (H) the Company
has complied in all material respects with its payment obligations to all
employees of the Company and each Subsidiary in respect of all wages, salaries,
commissions, bonuses, benefits and other compensation due and payable to such
employees under any Company policy, practice, agreement, plan, program or any
statute or other law; (I) the Company is not liable for any severance pay or
other payments to any employee or former employee arising from the termination
of employment under any benefit or severance policy, practice, agreement, plan,
or program of the Company, nor will the Company have any liability which exists
or arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or as a result of the termination by the Company of any persons
employed by the Company or any Subsidiary on or prior to the Effective Time of
the Merger; (J) the Company has not closed any plant or facility, effectuated
any layoffs of employees or implemented any early retirement, separation or
window program within the past five years, nor has the Company planned or
announced any such action or program for the future; and (K) the Company is in
compliance with its obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988, as amended ("WARN"), to the extent applicable, and all
other employee notification and bargaining obligations arising under any
collective bargaining agreement or statute.
(iii) The Company and each Subsidiary holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities which are material to the operation of the businesses of the Company
and each Subsidiary, taken as a whole (the "Company Permits"). The Company and
each Subsidiary is in compliance in all material respects with the terms of the
Company Permits. The business of the Company and each Subsidiary is not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for any such violation, if any, that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect
with respect to the Company.
(h) Employee Benefit Plans. (i) Section 3.01(h) of the Company
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (including, without limitation,
multiemployer plans within the meaning of Section 3(37) of ERISA)), stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements relating to employment, benefits or entitlements, whether or not
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transactions contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not under which any employee or former employee of the Company or any
Subsidiary has any present or future right to benefits or under which the
Company or any Subsidiary has any present or future liability. All such plans,
agreements, programs, policies and arrangements are herein collectively referred
to as the "Company Plans".
(ii) With respect to each Company Plan, the Company has
delivered to Parent a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement, annuity contract or other funding
instrument; (B) the most recent determination letter; (C) the current summary
plan description and other written
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communications (or a description of any oral communications) by the Company to
its employees concerning the extent of the benefits provided under a Company
Plan; and (D) for the three most recent years (w) the Form 5500 and attached
schedules; (x) audited financial statements; (y) actuarial valuation reports;
and (z) attorney's responses to auditors' requests for information.
(iii) (A) Each Company Plan has been established and
administered in compliance with its terms and with the applicable provisions of
ERISA, the Code and other applicable laws, rules and regulations, in each case,
in all material respects; (B) each Company Plan which is intended to be
qualified within the meaning of Code Section 401(a) is so qualified and has
received a favorable determination letter as to its qualification and nothing
has occurred, whether by action or failure to act, which would cause the loss of
such qualification; (C) with respect to any Company Plan, no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of the Company, threatened; to the knowledge of the
Company no facts or circumstances exist which could give rise to any such
actions, suits or claims and the Company will promptly notify Parent in writing
of any pending claims or, to the knowledge of the Company, any threatened claims
arising between the date hereof and the Effective Time of the Merger; (D)
neither the Company nor, to the knowledge of the Company, any other party has
engaged in a prohibited transaction, as such term is defined under Code Section
4975 or ERISA Section 406, which would subject the Company or Parent or their
respective subsidiaries to any material taxes, penalties or other liabilities
under the Code or ERISA; (E) no event has occurred and no condition exists that
would subject the Company, either directly or by reason of its affiliation with
any member of its "Controlled Group" (defined as any organization which is a
member of a controlled group of organizations within the meaning of Code
Sections 414(b), (c), (m) or (o)), to any material tax, fine or penalty imposed
by ERISA, the Code or other applicable laws, rules and regulations; (F) all
insurance premiums required to be paid and all contributions required to be made
under the terms of any Company Plan, the Code, ERISA or other applicable laws,
rules and regulations as of the Effective Time of the Merger have been or will
be timely paid or made prior thereto and adequate reserves have been provided
for on the Company's balance sheet for any premiums (or portions thereof) and
for all benefits attributable to service on or prior to the Effective Time of
the Merger; (G) for each Company Plan with respect to which a Form 5500 has been
filed, no material change has occurred with respect to the matters covered by
the most recent Form since the date thereof, except for changes in plan
participants or plan assets in the ordinary course of operation of such Company
Plans; (H) no Company Plan provides for an increase in benefits at or after the
Effective Time of the Merger; (I) neither the Company nor any member of its
Controlled Group has engaged in, or is a successor or parent corporation to an
entity that has engaged in, a transaction described in Sections 4069 or 4212(c)
of ERISA; and (J) neither the Company nor any Subsidiary has any current or
projected liability in respect of post- employment or post-retirement health or
medical or life insurance benefits for retired, former or current employees of
the Company, except as required to avoid excise tax under Section 4980B of the
Code.
(iv) No Company Plan is subject to Title IV of ERISA, and no
Company Plan is a multiemployer plan as defined in Section 4001(A)(3) of ERISA.
Neither the Company nor any member of its Controlled Group has ever contributed
to or sponsored any multiemployer plan or any plan subject to Title IV of ERISA.
(v) The Company has no unfunded Company Plan that must be
accounted for in accordance with SFAS No. 87 or 112.
(vi) No Company Plan exists which could result in the payment
to any Company employee of any money or other property or rights or accelerate
or provide any other rights or benefits to any Company employee as a result of
the transaction contemplated by this Agreement. There is no contract, plan or
arrangement (written or otherwise) covering any employee or former employee of
the Company that,
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individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
(i) Taxes.( the Company and each Subsidiary has timely filed all Tax
Returns required to be filed by it and all such Tax Returns are true, complete
and correct, or, requests for extensions to file such Tax Returns have been
timely filed, granted and have not expired;
(ii) the Company and each Subsidiary has timely paid all Taxes
due whether or not shown on such Tax Returns, and has provided adequate reserves
in its financial statements (to the extent required by, and in accordance with,
GAAP) for any Taxes that have not been paid, whether or not shown on such Tax
Returns;
(iii) no claim for unpaid Taxes has been asserted by a tax
authority or has become a Lien against the property of the Company or any
Subsidiary;
(iv) there are no outstanding agreements, waivers or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due from or
with respect to the Company or any Subsidiary for any taxable period, and no
power of attorney granted relating to Taxes by or with respect to the Company or
any Subsidiary is currently in force;
(v) no audit or other proceeding by any Governmental Entity
has commenced and no notification has been given to the Company or any
Subsidiary that such an audit or other proceeding is pending or threatened with
respect to any Taxes due from or with respect to the Company or any Subsidiary
or any Tax Return filed by or with respect to the Company or any Subsidiary; no
assessment of Tax has been proposed in writing to the Company or any Subsidiary
or against any of their assets or properties;
(vi) neither the Company nor any Subsidiary is a party to, is
bound by or has any obligation under, any Tax sharing agreement or similar
contract or arrangement;
(vii) neither the Company nor any Subsidiary (A) is currently
or has ever been a member of an affiliated group (other than a group the common
parent of which is the Company) filing a consolidated federal income tax return,
and (B) has any liability for the Taxes of any person under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local or foreign law), or
as a transferee or successor, by contract or otherwise;
(viii) no consent under Section 341(f) of the Code has been
filed with respect to the Company or any Subsidiary;
(ix) all Taxes required to be withheld, collected or deposited
by or with respect to the Company and each Subsidiary have been timely withheld,
collected or deposited, as the case may be, and, to the extent required, have
been paid to the relevant taxing authority;
(x) neither the Company nor any Subsidiary has agreed to make
or is required to make any adjustment under Section 481(a) of the Code, by
reason of a change in accounting method or otherwise, except as might be
required as a result of any transaction contemplated by this Agreement;
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(xi) no closing agreement pursuant to Section 7121 of the Code
(or any similar provision of state, local or foreign law) has been entered into
by or with respect to the Company or any Subsidiary;
(xii) the Company and each Subsidiary has collected
substantially all sales and use taxes required to be collected, and has remitted
on a timely basis such amounts to the appropriate taxing authorities, or has
been furnished properly completed exemption certificates;
(xiii) neither the Company nor any Subsidiary has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(a)(ii) of the Code. None of the assets of the Company or any
Subsidiary constitutes "United States real property interests" within the
meaning of Section 897(c)(1)(A) of the Code;
(xiv) none of the assets or properties of the Company or any
Subsidiary is an asset or property that is or will be required to be treated as
described in Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and as in effect immediately before the enactment of the Tax Reform Act of 1986,
or tax-exempt use property within the meaning of Section 168(h)(1) of the Code;
and
(xv) neither the Company nor any Subsidiary has been a party
to any distribution occurring during the last two years in which the parties to
such distribution treated the distribution as one to which Section 355 of the
Code is applicable.
As used herein, "Taxes" shall mean all taxes of any kind, including,
without limitation, those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority. As
used herein, "Tax Return" shall mean any return, declaration, report or similar
statement required to be filed with any governmental authority with respect to
Taxes (including any attached schedules) including, without limitation, any
information return, notice, form, claim for refund, amended return and
declaration of estimated Tax.
(j) Real Property. Section 3.01(j) of the Company Disclosure
Schedule lists all material real property leases to which the Company or any
Subsidiary is a party as a lessee (the "Company Real Property Lease
Agreements"). Neither the Company nor any Subsidiary owns any real property.
Each of the Company and each Subsidiary has a valid and binding leasehold
interest in, the property that is the subject of the Company Real Property Lease
Agreements free and clear of all Liens, except for Permitted Liens. The Company
has made available to Parent true, correct and complete copies of each Company
Real Property Lease Agreement.
(k) Personal Property. (i) The Company and each Subsidiary has good
title to, or in the case of leased property and assets has valid leasehold
interests in, all of their respective personal property and assets (whether real
(immovable), personal (movable), tangible or intangible). None of such property
or assets (whether real (immovable) or personal (movable)) is subject to any
Liens, except for Permitted Liens.
(ii) The equipment owned or used by the Company or any
Subsidiary is in good operating condition and repair, ordinary wear and tear
excepted, and is adequate and suitable for its present and intended uses.
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(l) Insurance. Section 3.01(l) of the Company Disclosure Schedule
contains a summary, as of the date hereof, of all insurance policies and
fidelity bonds maintained by or for the benefit of the Company or any
Subsidiary. There is no material claim by the Company or any Subsidiary pending
under any of such policies or bonds relating to the assets, business,
operations, employees, officers or directors of the Company or any Subsidiary as
to which coverage has been questioned, denied or disputed by the underwriters of
such policy or bond or in respect of which such underwriters have reserved their
rights. To the knowledge of the Company, there has been no occurrence that may
form the basis for a material claim by or on behalf of the Company or any
Subsidiary under any such policy or bond. All premiums payable under all such
policies and bonds have been paid timely in all material respects, and the
Company and each Subsidiary has otherwise complied in all material respects with
the terms and conditions of all such policies and bonds.
(m) Environmental Matters. Except as could not reasonably be
expected to result in any liability or obligation under Environmental Laws to
the Company or any Subsidiary:
(i) the Company and each Subsidiary holds and is in compliance
with all Environmental Permits, and the Company and each Subsidiary is, and has
been, otherwise in compliance with all Environmental Laws and, to the knowledge
of the Company, there are no conditions that might prevent or interfere with
such compliance in the future;
(ii) neither the Company nor any Subsidiary has received any
written Environmental Claim or has knowledge of any other Environmental Claim or
threatened Environmental Claim;
(iii) neither the Company nor any Subsidiary has entered into
any consent decree, order or agreement under any Environmental Law;
(iv) there are no (A) underground storage tanks, (B)
polychlorinated biphenyls, (C) asbestos or asbestos-containing materials, (D)
sumps, (E) surface impoundments, (F) landfills or (G) sewers or septic systems
present at any facility currently or formerly owned, leased, operated or
otherwise used by the Company or any Subsidiary;
(v) no modification, revocation, reissuance, alteration,
transfer, or amendment of the Environmental Permits, or any review by, or
approval of, any third party of the Environmental Permits is required in
connection with the execution or delivery of this Agreement or the consummation
of the transactions contemplated hereby or the continuation of the business of
the Company or any Subsidiary following such consummation; and
(vi) Hazardous Materials have not been generated, transported,
treated, stored, disposed of, arranged to be disposed of, released or threatened
to be released at, on, from or under any of the properties or facilities
currently or formerly owned, leased or otherwise used by the Company or any
Subsidiary, in violation of, or so as could result in liability under, any
Environmental Laws.
Neither the Company nor any Subsidiary has contractually assumed any liabilities
or obligations under any Environmental Laws.
(n) Material Contracts. (i) There have been made available for
reasonable review by Parent correct and complete copies of each of the written
contracts (or a written description of oral contracts) fitting a description
below to which the Company or any Subsidiary is a party or by which any of them
or their properties or assets is bound as of the date hereof (each such
contract, a "Material Contract"):
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(A) leases of personal property providing for annual rentals of
$5000 or more and all Company Real Property Lease Agreements;
(B) agreements (or series of related agreements) for the purchase of
materials, supplies, goods, services, equipment or other assets pursuant
to which (x) the Company and each Subsidiary has made aggregate annual
payments of $50,000 or more in the preceding twelve months, other than
purchase orders entered into in the ordinary course consistent with past
practice, (y) the Company and each Subsidiary has made aggregate payments
of $50,000 or more that continue to be agreements that require payment or
the furnishing of goods or services, or (z) which by their terms currently
require annual payments of $50,000 or more;
(C) agreements providing for the sale by the Company or any
Subsidiary of services, equipment or other assets pursuant to which (x)
the Company and the Subsidiaries have received $50,000 or more in the
aggregate during the preceding twelve calendar months, (y) the Company and
the Subsidiaries have received in the aggregate payments of $50,000 or
more, or (z) which by their terms provide for annual payments of $50,000
or more;
(D) partnership, limited partnership, limited liability company,
joint venture or other similar agreements or arrangements relating to the
formation, creation, operation, management or control of any corporation,
company, partnership or joint venture;
(E) agreements relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(F) contracts for joint development of products, services or other
assets;
(G) agreements to market, promote, sell or distribute the Company's
products;
(H) agreements relating to indebtedness for borrowed money or the
deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset) or the guarantee of
indebtedness of any other person;
(I) any agreements concerning Intellectual Property ("IP
Agreements")
(J) material licenses, franchise or similar agreements which relate
to the Company or any Subsidiary or are necessary for the Company or any
Subsidiary to conduct their respective businesses;
(K) any agreement that limits the freedom of the Company or any
Subsidiary to compete in any line of business or with any person or in any
area or which would so limit the freedom of the Company, Parent or any of
their respective subsidiaries after the Effective Time of the Merger;
(L) employment, severance or consulting agreements; and
(M) any other contract or agreement, written or oral, which is
material to the business of the Company and not otherwise described in
this Section 3.01(n)(i), other than those with vendors, suppliers and
customers entered into in the ordinary course of business consistent with
past practice.
Section 3.01(n) of the Company Disclosure Schedule sets forth a list of each of
the Material Contracts.
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(ii) Neither the Company nor any Subsidiary is, or has
received any notice or has any knowledge that any other party is or is alleged
to be, in breach or default in any material respect under any Material Contract,
or any other agreement, commitment, arrangement, lease, policy or other
instrument to which it or any Subsidiary is a party or by which it or any such
Subsidiary is bound; and, to the knowledge of the Company, there has not
occurred any event that with the lapse of time or the giving of notice or both
would constitute such a default. (A) Each Material Contract constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing, (B) the Company is not in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default by the Company or any Subsidiary or permit termination,
modification or acceleration by any third party thereunder, and (C) no person
has the right to terminate or repudiate on less than 30 days notice or, to the
knowledge of the Company, has repudiated (except for the termination rights set
forth in the contract) any provision thereof.
(o) Private Company. On the date of this Agreement and at all times
prior to the effective Time of the Merger, the Company did not and will not have
a class of voting stock registered or traded on a national securities exchange
or registered under Section 12(g) of the Exchange Act.
(p) Brokers. No broker, investment banker, financial advisor or
other person, other than Thomas Weisel Partners LLC ("Thomas Weisel"), the fees
and expenses of which will be paid by the Company (pursuant to fee agreements,
copies of which have been provided to Parent), is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of its affiliates.
(q) Affiliate Transactions. There are no contracts, commitments,
agreements, arrangements or other transactions between the Company or any
Subsidiary, on the one hand, and any (i) officer or director of the Company
(other than employment, severance or consulting contracts, commitments,
agreements, or arrangements disclosed on Section 3.01(n) of the Company
Disclosure Schedule) or any Subsidiary, (ii) record or beneficial owner of 5% or
more of any of the voting securities of the Company or (iii) other affiliate of
the Company or any such officer, director or beneficial owner (or any family
member thereof), on the other hand.
(r) Opinion of Financial Advisor. The Company has received as of the
date of this Agreement the opinion of Thomas Weisel to the effect that, as of
such date, the Merger Consideration is fair, from a financial point of view, to
the holders of Company Common Stock (other than Parent and its affiliates).
(s) Board Recommendation; State Antitakeover Law. The Board of
Directors of the Company, at a meeting duly called and held, has by majority
vote of a quorum of directors present (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are fair to and in the
best interests of the stockholders of the Company and has taken all actions
necessary on the part of the Company to comply with, or render inapplicable to
this Agreement and the Merger the restrictions on business combinations
contained in Section 1203 of the CCC, and (ii) resolved to recommend that the
holders of the shares of Company Common Stock approve this Agreement and the
transactions contemplated herein, including the Merger.
(t) Required Company Vote. The Company Stockholder Approval is the
only vote of the holders of any class or series of the Company's securities
necessary to approve this Agreement, the Merger and the other transactions
contemplated hereby.
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(u) Intellectual Property. (i) Section 3.01(u) of the Company
Disclosure Schedule sets forth, with respect to all Intellectual Property owned,
licensed or otherwise controlled or used by the Company or any Subsidiary
(including, but not limited to, any Intellectual Property embodied within any
products or services of the Company or any Subsidiary) ("Company IP"), any and
all Company IP that is registered or filed with any Governmental Entity
(including any Company IP subject to pending applications) and all material
unregistered Company IP.
(ii) The Company or a Subsidiary owns or has the valid right
to use all Intellectual Property necessary for the Company and each Subsidiary
to conduct their business substantially as it is currently conducted and
consistent with past practice.
(iii) (A) All of the Company IP is subsisting and unexpired,
has not been abandoned and, to the knowledge of the Company, does not infringe,
dilute or otherwise impair the Intellectual Property rights of any third party;
(B) none of the Company IP is the subject of any license, security interest,
Lien (other than Permitted Liens) or other agreement granting rights therein to
any third party; (C) to the knowledge of the Company, the Company has not
misappropriated the Intellectual Property of any third party; (D) no Litigation
or Order is pending or outstanding, or to the knowledge of the Company,
threatened or imminent which would limit, cancel or question the validity,
enforceability, ownership or use of any Company IP, and to the Company's
knowledge, there is no valid basis for the same; and (E) the Company and each
Subsidiary has taken all reasonable steps to protect, maintain and safeguard the
Company IP (including any confidential Intellectual Property), and has executed
all appropriate assignments or nondisclosure agreements, made all appropriate
filings and registrations (including disclosures to the U.S. Patent and
Trademark Office with regard to all material prior art) and taken all
appropriate actions in connection with the foregoing, except for any failure
that individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect with respect to the Company.
(v) Tax Matters. To the Company's knowledge, neither the
Company nor any of its affiliates has taken or agreed to take any action that
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
(w) Powers of Attorney. There are no persons, firms,
associations, corporations or business organizations or entities holding general
or special powers of attorney from the Company.
SECTION 3.02. Representations and Warranties of Parent and Sub.
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
(a) Organization, Standing and Corporate Power. Each of Parent, Sub
and each of Parent's "significant subsidiaries" (within the meaning of Rule 1-02
of Regulation S-X of the SEC) (collectively, the "Parent Subsidiaries") is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent, Sub
and the Parent Subsidiaries is duly qualified or licensed to do business and is
in good standing in each jurisdiction (domestic or foreign) in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) could
not reasonably be expected to have a Material Adverse Effect with respect to
Parent. Parent has made available to the Company complete and correct copies of
its certificate of incorporation and bylaws and the articles of incorporation
and bylaws of Sub.
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(b) Capital Structure. (i) As of the date of this Agreement, the
authorized capital stock of Parent consists of 725,000,000 shares of common
stock of Parent (consisting of 500,000,000 shares of PE Corporation--PE
Biosystems Group Common Stock, par value $0.01 per share (the "PE Biosystems
Stock"), and 225,000,000 shares of Parent Common Stock) and 10,000,000 shares of
preferred stock of Parent, par value $0.01 per share (the "Parent Preferred
Stock"). As of March 17, 2000, there were: (A) 207,879,066 shares of PE
Biosystems Stock issued and outstanding; (B) no shares of PE Biosystems Stock
held in the treasury of Parent; (C) 34,963,822 shares of PE Biosystems Stock
reserved for issuance pursuant to Parent's stock option plans, Parent's employee
stock purchase plans and Parent's Director Stock Purchase and Deferred
Compensation Plan (such plans, the "Parent Stock Plans"); (D) 23,310,263 shares
of PE Biosystems Stock issuable upon exercise of awarded but unexercised stock
options; (E) 220,597 shares of PE Biosystems Stock issuable upon exercise of
currently outstanding warrants to purchase PE Biosystems Stock; (F) 56,932,142
shares of Parent Common Stock issued and outstanding; (G) 99 shares of Parent
Common Stock held in the treasury of Parent; (H) 15,754,464 shares of Parent
Common Stock reserved for issuance pursuant to the Parent Stock Plans; (I)
11,597,337 shares of Parent Common Stock issuable upon exercise of awarded but
unexercised stock options; (J) 2,584,700 shares of Parent Common Stock issuable
upon exercise of an option held by a third party; (K) 57,787 shares of Parent
Common Stock issuable upon exercise of currently outstanding warrants to
purchase Parent Common Stock ("Parent Common Stock Warrants"); and (L) no shares
of Parent Preferred Stock outstanding.
(ii) Except as set forth above and except for shares of
participating junior preferred stock issuable pursuant to the Shareholder
Protection Rights Plan, dated as of April 28, 1999, between Parent and
BankBoston, N.A., as of March 17, 2000 there were no shares of capital stock or
other equity securities of Parent issued, reserved for issuance or outstanding.
All outstanding shares of capital stock of Parent are, and all shares which may
be issued as described above will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
is no outstanding Voting Debt of Parent. Except as set forth above, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Parent is a party
or by which it is bound obligating Parent to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of Parent Common Stock or
obligating Parent to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
(iii) There are no outstanding contractual obligations,
commitments, understandings or arrangements of Parent to repurchase, redeem or
otherwise acquire or make any payment in respect of any shares of Parent Common
Stock. Since December 31, 1999, Parent did not (A) issue or permit to be issued
any shares of Parent Common Stock (other than the offering of 4,370,000 shares
of Parent Common Stock pursuant to a Registration Statement on Form S-3, which
transaction closed on March 6, 2000), or securities exercisable for or
convertible into shares of Parent Common Stock, other than pursuant to or as
permitted by the terms of the Parent Stock Plans and Parent Common Stock
Warrants; (B) repurchase, redeem or otherwise acquire, directly or indirectly
through one or more Parent Subsidiaries, any shares of Parent Common Stock; or
(C) declare, set aside, make or pay to the stockholders of Parent dividends or
other distributions on the outstanding shares of Parent Common Stock (other than
stock splits in the form of a stock dividend).
(iv) As of the date hereof, the authorized capital stock of
Sub consists of 1,000 shares of common stock, par value $.01 per share, all of
which have been validly issued, are fully paid and nonassessable and are owned
by Parent, free and clear of any Lien, and at the Effective Time of the Merger,
all the issued and outstanding shares of the common stock of Sub will be owned
by Parent free and clear of any Lien.
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(c) Authority; Noncontravention. (i) Parent and Sub have all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by each of Parent and Sub and (assuming due
authorization, execution and delivery by the Company) constitutes the valid and
binding obligations of Parent and Sub, enforceable against each of them in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(ii) The execution and delivery of this Agreement do not, and
the consummation by Parent and Sub of the transactions contemplated by this
Agreement and compliance by Parent and Sub with the provisions of this Agreement
will not, conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of, or a "put" right with
respect to any obligation under, or to a loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Parent, Sub or any Parent Subsidiary under, (A) the certificate of incorporation
(or similar organizational document) or bylaws of Parent, Sub or such Parent
Subsidiary, (B) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Parent, Sub, such Parent Subsidiaries or any of their respective
properties or assets or (C) subject to the governmental filings and other
matters referred to in the following sentence, any Order applicable to Parent,
Sub, any Parent Subsidiary or their respective properties or assets, other than,
in the case of clauses (B) and (C), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect with respect to
Parent or prevent or materially delay the ability of Parent and Sub to
consummate the transactions contemplated by this Agreement or perform their
respective obligations hereunder. No consent, approval, order or authorization
of, or registration, declaration or filing with, or notice to, any Governmental
Entity is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement or the consummation by Parent and Sub
of any of the transactions contemplated hereby, except for (u) the applications
required pursuant to Section 5.10, (v) the filing of a premerger notification
and report form under the HSR Act, (w) the filing with the SEC, the New York
Stock Exchange ("NYSE") and the Pacific Stock Exchange of (1) the Form S-4 and
(2) such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated hereby, (x) the filing of the Short-Form Merger
Agreement, together with an officer's certificate of each of Sub and the
Company, with the Secretary of State of the State of California and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (y) such other consents, approvals, orders,
authorizations, registrations, declarations, filings or notices as may be
required under the "takeover" or "blue sky" laws of various states and (z) such
other consents, approvals, orders, authorizations, registrations, declarations,
filings or notices the failure of which to make or obtain, individually or in
the aggregate, could not reasonably be expected to (1) prevent or materially
delay consummation of the Merger or the other transactions contemplated hereby
or performance of Parent's and Sub's obligations hereunder or (2) have a
Material Adverse Effect with respect to Parent.
(d) Parent SEC Reports; Financial Statements. (i) Parent has filed
all forms, reports, statements and documents required to be filed with the SEC
since July 1, 1997 (collectively with all exhibits and schedules thereto and
documents incorporated by reference therein, the "Parent SEC Reports"). Except
to the extent revised or superseded by a subsequent filing with the SEC, none of
the Parent SEC Reports filed prior to the date hereof, as of their respective
dates, contained any untrue statement of
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a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(ii) Each of the financial statements (including any related
notes thereto) included in the Parent SEC Reports complies as to form in all
material respects with the published rules and regulations of the SEC, has been
prepared in accordance with GAAP, as in effect on the date of such financial
statements (except, in the case of unaudited consolidated quarterly statements,
as permitted by Form 10-Q under the Exchange Act and GAAP) applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and fairly presents in all material respects the consolidated
financial position of Parent and the Parent Subsidiaries at the respective dates
thereof and the consolidated results of its operations and changes in cash flows
for the periods indicated (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
(e) Absence of Certain Changes or Events. Since December 31, 1999,
there is not and has not been: (i) any Material Adverse Change with respect to
Parent; (ii) any condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect or
give rise to a Material Adverse Change with respect to Parent; (iii) any action
which, if it had been taken or occurred after the execution of this Agreement,
would have required the consent of the Company pursuant to this Agreement; or
(iv) any condition, event or occurrence which, individually or in the aggregate,
could reasonably be expected to prevent or materially delay the ability of
Parent and Sub to consummate the transactions contemplated by this Agreement or
perform their obligations hereunder.
(f) Litigation; Compliance with Laws. (i) Except as disclosed in the
Parent SEC Reports filed prior to the date hereof, there is (A) no Litigation
pending before any court, governmental agency or regulatory authority, and (B)
to the knowledge of Parent, no Litigation threatened against or investigation
pending with respect to Parent or any Parent Subsidiary that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect
with respect to Parent or prevent or materially delay the ability of Parent and
Sub to consummate the transactions contemplated by this Agreement or to perform
their obligations hereunder, nor is there any judgment, decree, citation,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any Parent Subsidiary which, individually or in the aggregate,
has or could reasonably be expected to have, any such effect.
(ii) The businesses of Parent and the Parent Subsidiaries are
not being conducted in violation of any applicable law (domestic or foreign),
ordinance or regulation of any Governmental Entity, except for possible
violations which, individually or in the aggregate, do not and could not
reasonably be expected to have a Material Adverse Effect with respect to Parent.
(g) Brokers. No broker, investment banker, financial advisor or
other person, other than Morgan Stanley Dean Witter, the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
(h) Interim Operations of Sub. Sub was formed on March 15, 2000
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby.
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(i) Tax Matters. To Parent's knowledge, neither Parent nor any of
its affiliates has taken or agreed to take any action that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
(j) Required Vote. This Agreement has been approved by Parent, as
the sole stockholder of Sub. No other vote of holders of any class or series of
securities of Parent or Sub is necessary to approve this Agreement, the Merger
and the transactions contemplated hereby.
ARTICLE IV
Covenants Relating to Conduct of Business Prior to Merger.
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective Time
of the Merger (except as otherwise expressly contemplated by the terms of this
Agreement), and except as approved by Parent, which approval shall not be
unreasonably withheld or delayed, the Company shall, and shall cause the
Subsidiaries to, act and carry on their respective businesses in the ordinary
course of business consistent with past practice and use its and their
respective reasonable best efforts to preserve substantially intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having significant
business dealings with them. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time of the
Merger, the Company shall not, and shall not permit any of the Subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly owned domestic
Subsidiary to its parent, (B) split, combine or reclassify any capital stock of
the Company or any Subsidiary or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock of the Company or any Subsidiary, other than any issuance permitted by
Section 4.01(a)(ii), or (C) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Subsidiary or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) authorize for issuance, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock or the capital stock of any
Subsidiary, any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible securities or any other securities or equity equivalents
(including without limitation stock appreciation rights), other than the
issuance of Company Common Stock upon (A) the exercise of Company Stock Options
awarded prior to the date of this Agreement but unexercised on the date of this
Agreement in accordance with their present terms and (B) the grant of up to
80,000 Company Stock Options to newly hired employees in the ordinary course of
business and consistent with past practice; provided, however, that such Company
Stock Options shall be priced at the fair market value of the Company Common
Stock on the date of grant;
(iii) amend the Articles or By-laws or comparable charter or
organizational documents of any Subsidiary (other than as contemplated by
Section 6.02(m));
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(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or by
any other manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization or
division thereof;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien (other than Permitted Liens) or otherwise dispose of any of
its properties or assets other than any such properties or assets the value of
which do not exceed $5,000 individually and $25,000 in the aggregate;
(vi) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings (not
exceeding $25,000 in the aggregate) and intercompany indebtedness between the
Company and its wholly owned Subsidiaries or between such wholly owned
Subsidiaries, or (B) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect wholly owned Subsidiary;
(vii) (A) acquire or lease, or agree to acquire or lease, any
assets, other than in the ordinary course of business consistent with past
practice not to exceed $25,000 in the aggregate and assets acquired pursuant to
clause (B), or (B), or make or agree to make any capital expenditures, except
capital expenditures which, individually do not exceed $25,000 or in the
aggregate, do not exceed $150,000;
(viii) pay, discharge or satisfy any claims (including claims
of stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction of claims settled or compromised to the extent permitted by Section
4.01(a)(xii), or waive, release, grant, or transfer any rights of material value
or modify or change in any material respect any existing license, lease,
contract or other document;
(ix) other than in connection with the transactions
contemplated by this Agreement, adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization;
(x) enter into or amend any collective bargaining agreement;
(xi) change any accounting principle used by it, except as
required by GAAP;
(xii) settle or compromise any litigation or claim (whether or
not commenced prior to the date of this Agreement), other than settlements or
compromises of litigation or claims that do not provide for injunctive or
similar relief and where the amount paid (after giving effect to insurance
proceeds actually received) in settlement or compromise does not exceed $25,000,
provided that the aggregate amount paid in connection with the settlement or
compromise of all such litigation matters shall not exceed $100,000;
(xiii) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
the Company's affiliates, other than as contemplated by this Agreement and the
Voting Agreement;
(xiv) sell, assign, transfer, convey or license to any person
or entity, in whole or in part, any Intellectual Property;
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(xv) enter into, terminate or amend any agreement pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or technology;
(xvi) make or change any Tax election, change any annual Tax
accounting period, change any method of Tax accounting, file any amended Tax
Return, enter into any closing agreement relating to any Tax, settle any Tax
claim or assessment, surrender any right to claim a Tax refund or consent to any
extension or waiver of the limitations period applicable to any Tax claim or
assessment;
(xvii) (A) adopt or amend (except as may be required by law)
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any employee,
director or former director or employee, or (B) other than increases for
individuals (other than officers and directors) in the ordinary course of
business consistent with past practice, increase the compensation or fringe
benefits of any director, employee or former director or employee or pay any
benefit not required by any existing plan, arrangement or agreement;
(xviii) grant any new or modified severance or termination
arrangement or increase or accelerate any benefits payable under its severance
or termination pay policies in effect on the date hereof;
(xix) effectuate a "plant closing" or "mass layoff", as those
terms are defined in WARN, affecting in whole or in part any site of employment,
facility, operating unit or employee of the Company or any Subsidiary, without
notifying Parent or its affiliates in advance and without complying with the
notice requirements and other provisions of WARN or any comparable state
statute; or
(xx) authorize, or commit or agree to take, any of the
foregoing actions.
(b) Conduct of Business by Parent. During the period from the date
of this Agreement to the Effective Time of the Merger (except as otherwise
expressly contemplated by the terms of this Agreement), and except as approved
by the Company, which approval shall not be unreasonably withheld or delayed,
Parent shall not:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, Parent Common Stock, other than stock
splits in the form of a stock dividend, or (B) combine or reclassify the Parent
Common Stock or issue or authorize the issuance of any other securities in lieu
of or in substitution for shares of Parent Common Stock;
(ii) amend Parent's certificate of incorporation or bylaws in
a manner that would be materially adverse to the holders of Parent Common Stock
(it being understood that an amendment to the certificate of incorporation of
Parent increasing the number of authorized shares of Parent Common Stock or
other capital stock of Parent shall not be deemed to be materially adverse to
the holders of Parent Common Stock); or
(iii) authorize, or commit or agree to take, any of the
foregoing actions.
(c) Tax-Free Reorganization Treatment. The Company and Parent shall
not, and shall not permit any of their respective subsidiaries to, intentionally
take or cause to be taken any action which would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code.
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(d) Other Actions. The Company and Parent shall not, and shall not
permit any of their respective subsidiaries to, (i) intentionally take any
action that, if taken on or prior to the date of this Agreement, would have
resulted in any of its representations and warranties set forth in this
Agreement being untrue, (ii) intentionally take any action that would or
reasonably might be expected to result in any of the conditions set forth in
Article VI not being satisfied, or (iii) intentionally take any action that
could reasonably be expected to materially delay or impair the ability of such
party to consummate the transactions contemplated by this Agreement. The Company
and Parent shall promptly advise the other party orally and in writing of (A)
any action of the type set forth in clause (i) above, (B) the failure by such
party to comply with any covenant, condition or agreement hereunder and (C) any
event which could reasonably be expected to cause the conditions set forth in
Article VI not being satisfied; provided, however, that no such notice shall
affect the representations, warranties, covenants and agreement of the parties
or the conditions to their obligations hereunder.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of Form S-4; Stockholder Meeting. (a)
Promptly following the date of this Agreement, Parent shall prepare and file
with the SEC the Form S-4. Parent and the Company shall each use its reasonable
best efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Parent shall also take any action
(other than qualifying to do business in any state in which it is not now so
qualified or filing a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the
registration and qualification of the Parent Common Stock to be issued in the
Merger, and the Company shall furnish all information relating to the Company
and its stockholders as may be reasonably requested in connection with any such
action. The information provided and to be provided by Parent, Sub and the
Company, respectively, for use or incorporation by reference in the Form S-4, at
the time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented, and at the time it becomes effective, shall be true and accurate
in all material respects and shall not omit to state a material fact required to
be stated therein or necessary to make such information not misleading, and the
Company and Parent each agree to correct any information provided by it for use
in the Form S-4 which shall have become false or misleading.
(b) The information provided and to be provided by the Company,
Parent and Sub, respectively, for use or incorporation by reference in any
mailing to the Company's stockholders in connection with the Merger, at the time
of such mailing, shall be true and accurate in all material respects and shall
not omit to state a material fact required to be stated therein or necessary to
make such information not misleading, and the Company and Parent each agrees to
correct any information provided by it for use in any such mailing which shall
have become false or misleading. All mailings to the Company's stockholders in
connection with the Merger shall be subject to the prior review, comment and
approval of Parent (such approval not to be unreasonably withheld or delayed).
(c) The Company will, as promptly as practicable following the date
of this Agreement and in consultation with Parent, duly call, give notice of,
and subject to the last sentence of this Section 5.03(c) convene and hold a
meeting of its stockholders (the "Stockholders Meeting") for the purpose of
approving this Agreement and the transactions contemplated by this Agreement to
the extent required by the CCC. The Company will, through its Board of
Directors, recommend to its stockholders approval of the foregoing matters, as
set forth in Section 3.01(s). The Company will use its reasonable best efforts
to hold such meeting as soon as practicable after the Form S-4 shall have been
declared effective.
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SECTION 5.02. Access to Information; Confidentiality. (a) Each of
the Company and Parent shall, and shall cause its respective subsidiaries,
officers, employees, counsel, financial advisors and other representatives to,
afford to the other party and its representatives reasonable access during
normal business hours, during the period prior to the Effective Time of the
Merger, to its properties, books, contracts, commitments, personnel and records,
and, during such period, each of the Company and Parent shall, and shall cause
its respective subsidiaries, officers, employees and representatives to, furnish
promptly to the other party (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws, and (ii) all other information
concerning its business, properties, financial condition, operations and
personnel as such other party may from time to time reasonably request. Without
limiting the generality of the foregoing, the Company shall make available to
Parent, as soon as reasonably practicable after they are available, all
unaudited monthly financial statements prepared in accordance with past
practice. Each of the Company and Parent will hold, and will cause its
respective directors, officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information in confidence.
(b) No investigation pursuant to this Section 5.02 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 5.03. Reasonable Best Efforts. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (a) obtaining all consents, approvals, waivers, licenses,
permits or authorizations as are required to be obtained (or, which if not
obtained, would result in an event of default, termination or acceleration of
any agreement or any "put" right under any agreement) under any applicable law
or regulation or from any Governmental Entities or third parties in connection
with the transactions contemplated by this Agreement, (b) defending any lawsuits
or other proceedings challenging this Agreement and (c) accepting and delivering
additional instruments necessary to consummate the transactions contemplated by
this Agreement. The Company agrees that Parent shall have the opportunity to
negotiate and consult directly with all applicable Governmental Entities in
connection with their consideration of the transactions contemplated by this
Agreement; provided, however, that Parent will consult with the Company before
submitting, and will afford the Company the opportunity to review and comment
upon, any materials or other statements with respect to such transaction to such
Governmental Entities.
SECTION 5.04. Indemnification. (i) From and after the Effective Time
of the Merger, Parent and the Surviving Corporation shall indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time of the Merger eligible for
indemnification pursuant to the Articles and By-laws (the "Indemnitees") against
(a) all losses, claims, damages, costs, expenses, liabilities or judgments or
amounts that are paid in settlement of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of the Company, arising as a result of any act, or failure to act,
at or prior to the Effective Time of the Merger, whether asserted or claimed
prior to, or at or after, the Effective Time of the Merger ("Indemnified
Liabilities") and (b) all Indemnified Liabilities based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the extent the Company would
have been permitted under the Articles and By-laws to indemnify such person.
Nothing contained herein shall limit any rights to indemnification which any
director or officer of the Company may have under any indemnification agreement
or the Articles or By-laws. In the event any such claim, action, suit,
proceeding
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or investigation is brought against any Indemnitees (whether arising before or
after the Effective Time of the Merger), (A) any counsel retained by the
Indemnitees for any period after the Effective Time of the Merger shall be
reasonably satisfactory to Parent and the Surviving Corporation (it being
understood that O'Melveny & Myers LLP is acceptable to Parent and the Surviving
Corporation); (B) after the Effective Time of the Merger, the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnitees promptly as statements therefor are received; and (C) after the
Effective Time of the Merger, the Surviving Corporation will cooperate in the
defense of any such matter; provided, that the Surviving Corporation shall not
be liable for any settlement of any claim effected without its written consent,
which consent, however, shall not be unreasonably withheld. Any Indemnitee
wishing to claim indemnification under this Section 5.04(i), upon learning of
any such claim, action, suit, proceeding or investigation, shall notify Parent
and the Surviving Corporation (but the failure so to notify the Surviving
Corporation shall not relieve Parent or the Surviving Corporation from any
liability which they may have under this Section 5.04(i) except to the extent
such failure materially prejudices Parent and the Surviving Corporation), and
shall deliver to Parent and the Surviving Corporation the undertaking, if any,
required by Section 317 of the CCC. Parent and the Surviving Corporation shall
be liable for the reasonable fees and expenses hereunder with respect to only
one law firm to represent the Indemnitees as a group with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict between the positions of any two or more Indemnitees that would
preclude or render inadvisable joint or multiple representation of such parties.
(ii) Parent shall cause the Surviving Corporation to maintain
in effect for not less than six years after the Effective Time of the Merger the
current policies of directors' and officers' liability insurance maintained by
the Company and its Subsidiaries on the date of this Agreement providing
coverage with respect to matters existing or occurring prior to the Effective
Time of the Merger; provided, that (x) Parent may substitute therefor policies
containing terms and conditions that, taken as a whole, are no less advantageous
to the persons covered by such current insurance policies and (y) if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 200% of the per annum rate of premiums paid by the Company and its
Subsidiaries for such insurance on the date of this Agreement, then Parent shall
cause the Surviving Corporation to, and the Surviving Corporation shall, provide
the maximum coverage that shall then be available at an annual premium equal to
200% of such rate, and, in addition to the indemnification provided above in
this Section 5.04(ii), shall indemnify the Indemnitee for the balance of such
insurance coverage on the same terms and conditions as though Parent were the
insurer under those policies.
SECTION 5.05. Directorships. Prior to the Effective Time of the
Merger, the Company shall deliver to Parent evidence satisfactory to Parent of
the resignation of all directors of the Company and the Subsidiaries as of the
Closing Date.
SECTION 5.06. Public Announcements. Neither Parent and Sub, on the
one hand, nor the Company, on the other hand, will issue any press release or
public statement with respect to the transactions contemplated by this Agreement
and the Voting Agreement, including the Merger, without the other party's prior
consent (such consent not to be unreasonably withheld or delayed), except as may
be required by applicable law, court process or by obligations pursuant to any
agreement with, or rules of, any securities exchange or quotation system on
which securities of the disclosing party are listed or quoted. In addition to
the foregoing, Parent, Sub and the Company will, if practicable under the
circumstances, consult with each other before issuing, and provide each other
the opportunity to review and comment upon, any such press release or other
public statements with respect to such transactions that may be required by the
exception in the preceding sentence. The parties agree that the initial press
release or releases to be issued with respect to the transactions contemplated
by this Agreement shall be mutually agreed upon prior to the issuance thereof.
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SECTION 5.07. Affiliates. At least 40 days prior to the Closing
Date, the Company shall deliver to Parent a letter identifying all persons who
are, at the time this Agreement is submitted for approval to the stockholders of
the Company, executive officers and directors of the Company and all other
persons that, to the knowledge of the Company, are "affiliates" of the Company
(as that term is used in Rule 145 under the Securities Act) and shall use all
reasonable efforts to cause each person named on the letter delivered by it to
deliver to Parent at least 30 days prior to the Closing Date a written
agreement, substantially in the form attached as Exhibit C.
SECTION 5.08. No Solicitation. Neither the Company nor any
Subsidiary shall (whether directly or indirectly through advisors, agents or
other intermediaries), nor shall the Company or any Subsidiary authorize or
permit any of its or their officers, directors, agents, representatives,
advisors or subsidiaries to, (a) solicit, initiate or take any action knowingly
to facilitate the submission of inquiries, proposals or offers from any person
(other than Sub or Parent) relating to (i) any acquisition or purchase of 15% or
more of the consolidated assets of the Company and the Subsidiaries or of over
15% of any class of equity securities of the Company or any Subsidiary, (ii) any
tender offer (including a self tender offer) or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of the Company or any Subsidiary, (iii) any merger,
consolidation, business combination, sale of substantially all of the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any Subsidiary whose assets, individually or in the aggregate,
constitute more than 15% of the consolidated assets of the Company other than
the transactions contemplated by this Agreement, or (iv) any other transaction
the consummation of which would or could reasonably be expected to impede,
interfere with, prevent or materially delay the Merger (collectively,
"Transaction Proposals"), or agree to or endorse any Transaction Proposal, or
(b) enter into or participate in any discussions or negotiations regarding any
of the foregoing, or furnish to any other person any information with respect to
its business, properties or assets in connection with any of the foregoing, or
otherwise cooperate in any way with, or knowingly assist or participate in,
facilitate or encourage, any effort or attempt by any other person (other than
Sub or Parent) to do or seek any of the foregoing. The Company will immediately
cease and cause its advisors, agents and other intermediaries to cease any and
all existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and shall use its reasonable
best efforts to cause any such parties in possession of confidential information
about the Company that was furnished by or on behalf of the Company to return or
destroy all such information in the possession of any such party or in the
possession of any agent or advisor of any such party.
SECTION 5.09. Benefit Matters. (a) During the period from the
Effective Time of the Merger until the first anniversary of the Effective Time
of the Merger, employees of the Company or the Subsidiaries shall participate in
employee benefit plans maintained by Parent on a basis no less favorable, in the
aggregate, than similarly situated employees of Parent hired after July 1, 1999.
(b) Parent will cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the employees
of the Company under any Parent welfare plan that such employees may be eligible
to participate in after the Effective Time of the Merger and (ii) provide each
employee of the Company with credit for any co-payments and deductibles paid
prior to the Effective Time of the Merger in satisfying any applicable
deductible or out-of-pocket requirements under any Parent welfare plans that
such employees are eligible to participate in after the Effective Time of the
Merger.
(c) On and after the Effective Time of the Merger, Parent shall
cause the Surviving Corporation and any employee benefit plans maintained by
Parent or the Surviving Corporation in which employees of the Company and
Subsidiaries participate to recognize the service with the Company and
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Subsidiaries of each such employee for purposes of determining entitlement to
vacation and vacation pay and for purposes of vesting and eligibility under any
employee benefit plan, but not for purposes of benefit accrual under any
"employee pension benefit plan" as defined in Section 3(2) of ERISA. Such
service shall be determined in accordance with the practices and procedures of
the Company and the Company Plans in effect immediately prior to the Effective
Time of the Merger, as if such service had been rendered to Parent.
SECTION 5.10. Stock Exchange Listing. Parent shall use reasonable
best efforts to cause the shares of Parent Common Stock to be issued in the
Merger and the shares of Parent Common Stock to be reserved for issuance upon
exercise of Company Stock Options to be approved for listing on the NYSE and the
Pacific Stock Exchange, subject to official notice of issuance.
SECTION 5.11. Stock Options. The Company shall (i) provide the
notice to holders of Company Stock Options required in their respective stock
option agreements (ii) shall not deem any Company Stock Option exercisable
pursuant to the terms of Section 8 of the Company Stock Plan as a result of the
Merger, and (iii) shall not permit the holder of any Company Stock Option to
exercise such option pursuant to Section 6 of such holder's stock option
agreement as a result of the Merger; provided, however, that the Company shall
accelerate the rights of members of the Company's scientific advisory board to
exercise such members' Company Stock Options prior to the Effective Time of the
Merger. All Company Stock Options shall be treated pursuant to the terms of
Section 2.03 hereof
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been duly obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the
parties hereto shall use their best efforts to have any such injunction, order,
restraint or prohibition vacated.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and any material "blue sky" and other state securities
laws applicable to the registration and qualification of the Parent Common Stock
issuable or required to be reserved for issuance pursuant to this Agreement
shall have been complied with.
(e) Stock Exchange Listing. The shares of Parent Common Stock
issuable to Company stockholders pursuant to this Agreement and such other
shares of Parent Common Stock required to be reserved for issuance in connection
with the Merger shall have been authorized for listing on the NYSE and the
Pacific Stock Exchange upon official notice of issuance.
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(f) Escrow Agreement. The Escrow Agreement shall have been executed
by all the parties thereto.
(g) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or the Voting Agreement or seeking
to obtain from the Company, Parent, Sub or any of their affiliates any damages
that could reasonably be expected to have a Material Adverse Effect with respect
to the Company, (ii) seeking to prohibit or limit the ownership or operation by
the Company, Parent or any of their respective subsidiaries of any material
portion of the business or assets of the Company and the Subsidiaries taken as a
whole or to dispose of or hold separate any material portion of the business or
assets of the Company and the Subsidiaries taken as a whole, as a result of the
Merger or any of the other transactions contemplated by this Agreement, (iii)
seeking to impose limitations on the ability of Parent to acquire or hold, or
exercise full rights of ownership of, any shares of the common stock of the
Surviving Corporation, including, without limitation, the right to vote such
common stock on all matters properly presented to the stockholders of the
Surviving Corporation or (iv) seeking to prohibit Parent from effectively
controlling in any material respect the business or operations of the Company
and the Subsidiaries taken as a whole.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and also shall be true and correct in all
material respects as of the Closing Date, except that any representation or
warranty qualified as to materiality shall be true and correct in all respects
as of the Closing Date. Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer, the president and the
chief financial officer of the Company to the effect set forth in this
paragraph.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date. Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer, the president and the chief financial officer of the Company to the
effect set forth in this paragraph.
(c) Consents, etc. Parent and Sub shall have received evidence, in
form and substance reasonably satisfactory to them, that such licenses, permits,
consents, approvals, authorizations, qualifications and orders of (i) any United
States federal or state governmental authorities or (ii) any other governmental
authorities or third parties as are set forth on Section 3.01(d) of the Company
Disclosure Schedule have been obtained and are in effect.
(d) No Litigation. No suit, action or proceeding by any other person
shall be pending that seeks any of the relief or remedies described in clauses
(i) through (iv) of Section 6.01(g) as to which there is a reasonable
possibility of success and that otherwise could reasonably be expected to have a
Material Adverse Effect with respect to the Company.
(e) Affiliate Letters. Parent shall have received the agreements
referred to in Section 5.07.
(f) Tax Opinion. Parent shall have received the opinion of Simpson
Thacher & Bartlett, counsel to Parent, dated the Closing Date, to the effect
that (i) the Merger will be treated for federal income
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tax purposes as a reorganization within the meaning of Section 368(a) of the
Code and (ii) Parent, Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. The parties to
this Agreement agree to make reasonable representations as requested by counsel
for the purpose of rendering such opinion.
(g) Good Standing. Parent shall have received a certificate issued
by the Secretary of State of the State of California evidencing the good
standing of the Company in such jurisdiction as of a date not more than 10 days
prior to the Closing Date.
(h) Secretary's Certificate. The Company shall have delivered to
Parent a certificate of the Secretary of the Company as to the incumbency of
officers executing this Agreement and the certificates set forth in paragraphs
(a) and (b) above, in form and substance reasonably satisfactory to Parent.
(i) Tax Certificate. The Company shall have delivered to Parent a
certificate or certificates, in form and substance satisfactory to Parent, duly
executed and acknowledged, certifying any facts that would exempt the
transactions contemplated hereby from withholding pursuant to Section 1445 of
the Code.
(j) Legal Opinion. Parent shall have received the opinion of
O'Melveny & Myers LLP, counsel to the Company, dated the Closing Date, in the
form attached hereto as Exhibit D-1.
(k) Dissenting Shares. The holders of not more than 5% of the
Company Common Stock shall have demanded payment for their shares of Company
Common Stock pursuant to Section 1301 of the CCC.
(l) Employment Agreement. The Surviving Corporation and Kwang-I Yu
shall have entered into an employment agreement on the terms set forth in
Section 6.02 of the Company Disclosure Schedule.
(m) Amendment or Waiver of By-law Provision. The Company shall have
amended the By- laws to render Article VII thereof inapplicable to the Merger,
or shall have obtained the waiver of all of the Company's stockholders of such
stockholders' rights under Article VII of the By-laws as they relate to the
Merger.
SECTION 6.03. Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement shall be true and
correct as of the date of this Agreement and also shall be true and correct in
all material respects as of the Closing Date, except that any representation or
warranty qualified as to materiality shall be true and correct in all respects
as of the Closing Date. The Company shall have received a certificate signed on
behalf of Parent and Sub by an authorized officer of Parent and Sub to the
effect set forth in this paragraph.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by each of them under this Agreement at or prior to the Closing Date.
The Company shall have received a certificate signed on behalf of Parent and Sub
by an authorized officer of Parent and Sub to the effect set forth in this
paragraph.
(c) Tax Opinion. The Company shall have received the opinion of
O'Melveny & Myers LLP, counsel to the Company, dated the Closing Date, to the
effect that (i) the Merger will be treated for
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federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code and (ii) Parent, Sub and the Company will each be a party to
that reorganization within the meaning of Section 368(b) of the Code. The
parties to this Agreement agree to make reasonable representations as requested
by counsel for the purpose of rendering such opinion.
(d) Legal Opinion. The Company shall have received the opinions of
Simpson Thacher & Bartlett and Paul, Hastings, Janofsky & Walker, counsel to
Parent and Sub, dated the Closing Date, in the form attached hereto as Exhibit
D-2.
(e) Good Standing. The Company shall have received a certificate
issued by the Secretary of State of the states of Delaware and California
evidencing the good standing of Parent and Sub, respectively, in such
jurisdictions as of a date not more than 10 days prior to the Closing Date.
(f) Secretary's Certificate. Parent and Sub shall have delivered to
the Company a certificate of the Secretaries of Parent and Sub as to the
incumbency of officers executing this Agreement and the certificate set forth in
paragraphs (a) and (b) above, and in form and substance satisfactory to the
Company.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time of the Merger, whether before
or after the Company Stockholder Approval:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; or
(c) by either Parent or the Company if the Merger shall not have
been consummated on or before June 30, 2000 (other than due to the failure of
the party seeking to terminate this Agreement to perform its obligations under
this Agreement required to be performed at or prior to the Effective Time of the
Merger); provided, however, that in the event that the Merger has not been
consummated by such time due to the failure to satisfy the condition specified
in Section 6.01(a), and as of such time (A) the condition specified in Section
6.01(d) shall have been satisfied, (B) the Stockholders Meeting shall not have
been held, and (C) neither Parent nor the Company shall be entitled to terminate
this Agreement under any other paragraph of this Section 7.01, then such date
shall be extended, without any action on the part of any party hereto, until
July 31, 2000; or
(d) by Parent if at the Stockholders Meeting (including any
adjournment thereof), the holders of the requisite percentages of the
outstanding shares of Company Common Stock shall not have approved the Merger,
this Agreement and the consummation of the transactions contemplated hereby.
SECTION 7.02. Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than as set forth
in Section 8.01.
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SECTION 7.03. Amendment. This Agreement may be amended by the
parties at any time before or after any required approval of matters presented
in connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
SECTION 7.04. Extension; Waiver. At any time prior to the Effective
Time of the Merger, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.01, an amendment
of this Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require in the case of Parent, Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors.
ARTICLE VIII
General Provisions
SECTION 8.01. Survival. (a) The representations and warranties of
the Company, Parent and Sub contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith shall not
survive the Closing Date, other than as set forth in, and for the purposes
contemplated by, the Escrow Agreement.
(b) The covenants and agreements in this Agreement shall terminate
upon the termination of this Agreement pursuant to Section 7.01 or at the
Closing Date, except for those covenants and agreements contained herein that by
their terms apply or are to be performed in whole or in part after the Closing
Date or such termination, including Section 3.01(p), Section 3.02(g), the last
sentence of Section 5.02(a), Section 7.02, this Section 8.01, Section 8.02 and
Section 8.07.
(c) Nothing in this Section 8.01 shall relieve any party for any
breach of any representation, warranty, covenant or other agreement in this
Agreement occurring prior to termination.
SECTION 8.02. Expenses. (a) In the event that the Merger is
consummated, Parent shall pay, or shall cause the Surviving Corporation to pay,
all out-of-pocket costs, fees and expenses otherwise payable by the Surviving
Corporation (other than in respect of fees and expenses incurred by stockholders
of the Company, all of which shall be borne by such stockholders) in connection
with the transactions contemplated by this Agreement and the Voting Agreement
including, but not limited to the fees contemplated by Section 3.01(p).
(b) Except as provided otherwise in paragraph (a) above, all costs
and expenses incurred in connection with this Agreement and the Voting Agreement
and the transactions contemplated hereby and
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thereby shall be paid by the party incurring such expenses, except that the cost
of filing, printing and distributing the Form S-4 shall be borne equally by
Parent and the Company.
SECTION 8.03. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by facsimile or by overnight
courier (providing proof of delivery) to the parties at the following addresses
and facsimile numbers (or at such other address or facsimile number for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to
PE Corporation
761 Main Avenue
Norwalk, Connecticut 06859-0313
Facsimile: (203) 761-2893
Attention: Secretary
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Facsimile: (212) 455-2502
Attention: Richard A. Garvey, Esq.
(b) if to the Company, to
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, California 91101-2616
Facsimile: (626) 744-2001
Attention: Kwang-I Yu
with a copy to:
O'Melveny & Myers LLP
1999 Avenue of the Stars, Suite 700
Los Angeles, California 90067-6035
Facsimile: (310) 246-6779
Attention: Kendall R. Bishop, Esq.
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SECTION 8.04. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise;
(b) "Environmental Claim" means any written or oral notice, claim,
demand, action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based on or resulting
from (i) the presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, whether or not owned, leased or operated by
the Company or any Subsidiary or (ii) circumstances forming the basis of any
violation or alleged violation of any Environmental Law or Environmental Permit
or (C) otherwise relating to obligations or liabilities under any Environmental
Laws;
(c) "Environmental Laws" means all applicable federal, state and
local statutes, rules, regulations, ordinances, orders, decrees and common law
relating in any manner to contamination, pollution or protection of human health
or the environment, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act, the Solid Waste Disposal Act, the
Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state laws;
(d) "Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required under Environmental
Laws for the Company and the Subsidiaries to conduct their operations and
businesses on the date hereof and consistent with past practices;
(e) "Exchange Ratio" means $283 million divided by 10,533,349 shares
of Company Common Stock divided by the Parent Common Stock Price, rounded to the
nearest 1/10,000th, provided that the Exchange Ratio shall not be less than
.1472 nor more than .2146.
(f) "Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing materials,
pollutants, contaminants and all other materials, and substances regulated
pursuant to, or that could reasonably be expected to provide the basis of
liability under, any Environmental Law;
(g) "indebtedness" means, with respect to any person, without
duplication, (i) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (ii) all obligations
of such person evidenced by bonds, debentures, notes or similar instruments,
(iii) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (iv) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
such person's business), (v) all capitalized lease obligations of such person,
(vi) all obligations of others secured by any Lien on property or assets owned
or acquired by such person, whether or not the obligations secured thereby have
been assumed, (vii) all
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obligations of such person under interest rate or currency hedging transactions
(valued at the termination value thereof), (viii) all letters of credit issued
for the account of such person and (ix) all guarantees and arrangements having
the economic effect of a guarantee of such person of any indebtedness of any
other person;
(h) "Intellectual Property" means all rights, privileges and
priorities provided under federal, state, foreign and multinational law relating
to intellectual property, including without limitation all (i) (A) patents and
patent applications, inventions, discoveries, machines, processes, formulae,
designs, methods, techniques, procedures, concepts, developments, technology,
new and useful improvements thereof and know-how relating thereto, whether or
not patented or patentable; (B) copyrights and works of authorship, including
computer applications, programs, software, hardware, files, mask works,
compilations, databases, documentation and related items; (C) trademarks,
service marks, trade names, domain names, URLs, email addresses, brand names,
corporate names, logos and trade dress and the goodwill of any business
symbolized thereby; (D) trade secrets, drawings, lists and all other
proprietary, nonpublic or confidential information, documents or materials in
any media; and (ii) all registrations, applications, recordings and other legal
protections or rights related to the foregoing;
(i) "knowledge" means, with respect to any matter, (i) in the case
of Parent, the knowledge of any director, executive officer or the General
Counsel of Parent after due inquiry into such matter (and if there was no due
inquiry, then knowledge as if due inquiry were made) and (ii) in the case of the
Company, the knowledge of any director or executive officer after due inquiry
into such matter (and if there was no due inquiry, then knowledge as if due
inquiry were made);
(j) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company or Parent, any change, effect, event or
occurrence that either individually or in the aggregate with all other such
changes, effects, events and occurrences is materially adverse to the business,
properties, financial condition or results of operations of the Company or
Parent, as the case may be, and its respective subsidiaries taken as a whole;
(k) "Parent Common Stock Price" means the average of the closing
sales prices of a share of Parent Common Stock on the NYSE Composite Transaction
Tape on each of the 10 consecutive trading days immediately preceding (and
excluding) the second trading day prior to the Effective Time of the Merger.
(l) "Permitted Liens" means, collectively, with respect to any of
the Company and the Subsidiaries, (A) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings, (B) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar persons and other Liens
imposed by applicable Law of any Governmental Entity incurred in the ordinary
course of business for sums not yet delinquent or being contested in good faith,
(C) Liens relating to deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, (D) Liens on the real or personal property of the Company or
any Subsidiary that do not in the aggregate materially interfere with or impair
the use or operation of any such real or personal property for the purposes for
which it is or may reasonably be expected to be used, (E) Liens disclosed on the
Financial Statement or securing liabilities disclosed on the Financial
Statements, and (F) other Liens approved by Parent and Sub in writing.
(m) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
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(n) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
SECTION 8.05. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 8.06. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other agreements referred to herein constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
(other than the Nondisclosure Agreement between the parties dated April 5,
1999). This Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies, other than Section 2.03, Section 5.04,
and Section 5.09 which will be binding on Parent and the Surviving Corporation
and their respective successors and assigns, and will be enforceable by the
officers and directors of the Company.
SECTION 8.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
SECTION 8.09. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.10. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
SECTION 8.11 Severability of Provisions. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.
SECTION 8.12 Exclusive Jurisdiction. Each party, and each express
beneficiary as a condition to its right to enforce or defend its rights under or
in connection with this Agreement, (a) agrees that any action with respect to
this Agreement or the Merger shall be brought exclusively in the courts of the
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State of California or of the United States of America for the Central District
of California, in each case sitting in the County of Los Angeles, State of
California, (b) accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of those courts and (c) irrevocably waives any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any action in those jurisdictions; provided, however,
that any party may assert in an action in any other jurisdiction or venue each
mandatory defense, third-party claim or similar claim that, if not so asserted
in such action, may thereafter not be asserted by such party in an original
action in the courts referred to in clause (a) above.
SECTION 8.13 Waiver of Jury Trial. Each party, and each express
beneficiary, as a condition to its right to enforce or defend its rights under
or in connection with this Agreement waives any right to a trial by jury in any
action to enforce or defend any right under this Agreement and agrees that any
action shall be tried before a court and not before a jury.
SECTION 8.14 Affiliate. Nothing contained in this Agreement shall
constitute Parent or Sub an "affiliate" of any of the Company and its
Subsidiaries within the meaning of Rule 13e-3 under the Exchange Act.
SECTION 8.15 No Recourse. No recourse under this Agreement shall be
had against any "controlling person" (within the meaning of Section 20 of the
Exchange Act) of any party or the stockholders, directors, officers, employees,
agents and affiliates of the party or such controlling persons, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any regulation, it being expressly agreed and acknowledged that no
personal liability whatsoever shall attach to, be imposed on or otherwise be
incurred by such controlling person, stockholder, director, officer, employee,
agent or affiliate, as such, for any obligations of the party under this
Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation. This provision shall not be construed to effect
the liability of any stockholder of the Company under the Voting Agreement.
[Rest of page intentionally left blank.]
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PE CORPORATION
By: /s/ J. Craig Venter
-----------------------------
Name: J. Craig Venter
Title: Senior Vice President
By: /s/ Thomas P. Livingston
-----------------------------
Name: Thomas P. Livingston
Title: Secretary
UMBRELLA ACQUISITION CORP.
By: /s/ Thomas P. Livingston
-----------------------------
Name: Thomas P. Livingston
Title: Vice President
By: /s/ Thomas P. Livingston
-----------------------------
Name: Thomas P. Livingston
Title: Secretary
PARACEL, INC.
By: /s/ Kwang-I Yu
-----------------------------
Name: Kwang-I Yu
Title: Chief Executive Officer
By: /s/ Joseph T. Kingsley
-----------------------------
Name: Joseph T. Kingsley
Title: Secretary
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Exhibit A
VOTING AGREEMENT
Included as Annex II to the prospectus
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<PAGE>
Exhibit B
ESCROW AGREEMENT
Included as to the prospectus
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Exhibit C
FORM OF COMPANY AFFILIATE LETTER
PE Corporation
761 Main Street
Norwalk, Connecticut 06859
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, California 91101-2616
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be
an "affiliate" of Paracel, Inc., a California corporation (the "Company"), as
the term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule
145 of the Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger
dated as of March 20, 2000 (the "Agreement"), among PE Corporation, a Delaware
corporation ("Parent"), Umbrella Acquisition Corp., a California corporation and
a direct wholly owned subsidiary of Parent ("Sub"), and the Company, Sub will be
merged with and into the Company (the "Merger"). Capitalized terms used herein
and not defined have the meanings assigned to them in the Merger Agreement.
As a result of the Merger, each outstanding share of Company Common
Stock would be converted into the right to receive shares of Parent Common
Stock.
I represent, warrant and covenant to Parent and the Company that in
the event I receive any Parent Common Stock as a result of the Merger:
a) I shall not make any sale, transfer or other disposition of the
Parent Common Stock in violation of the Act or the Rules and
Regulations.
b) I have carefully read this letter and the Agreement and discussed
its requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of Parent Common Stock to the
extent I felt necessary, with my counsel or counsel for the Company.
c) I have been advised that the issuance of Parent Common Stock to me
pursuant to the Merger has been registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have
also been advised that, because at the time the Merger was submitted
for a vote of the stockholders of the Company, (a) I may be deemed
to have been an affiliate of the Company and (b) the distribution by
me of the Parent Common Stock has not been registered under the Act,
I may not sell, transfer or otherwise dispose of Parent Common Stock
issued to me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale,
transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145
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promulgated by the Commission under the Act, or (iii) in the opinion
of counsel reasonably acceptable to Parent, such sale, transfer or
other disposition is otherwise exempt from registration under the
Act.
d) I understand that, except as provided in the Agreement in Sections
2.03(c), Parent is under no obligation to register the sale,
transfer or other disposition of the Parent Common Stock by me or on
my behalf under the Act or to take any other action necessary in
order to make compliance with an exemption from such registration
available.
e) I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Common Stock and
that there will be placed on the certificates for the Parent Common
Stock issued to me in the Merger, or any substitutions therefor, a
legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933, as amended, applies. The shares represented by
this certificate may only be transferred in accordance with
the terms of a letter agreement dated , 2000 between the
registered holder hereof and PE Corporation, a copy of which
agreement is on file at the principal offices of PE
Corporation."
f) I also understand that unless the transfer by me of my Parent Common
Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Parent reserves the
right to put the following legend on the certificates issued to my
transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
were acquired from a person who received such shares in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933, as amended, applies. The shares have been
acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended, and may not be
sold, pledged or otherwise transferred except in accordance
with an exemption from the registration requirements of the
Securities Act of 1933, as amended."
It is understood and agreed that the legends set forth in paragraphs
(e) or (f) above, as the case may be, shall be removed by delivery of substitute
certificates without such legend (i) if I shall have delivered to Parent a copy
of a letter from the staff of the Commission, or an opinion of counsel in form
and substance reasonably satisfactory to Parent, to the effect that such legend
is not required for purposes of the Act or (ii) if one year shall have elapsed
from the Effective Time of the Merger and the provisions of Rule 145(d)(2) under
the Securities Act are then available to me.
For a period of 2 years after the Effective Time of the Merger,
Parent shall (i) file, on a timely basis, all reports and data required to be
filed with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (together with the rules the rules and
regulations thereunder the "Exchange Act"), and furnish to me upon request a
written statement as to whether Parent has compiled with such reporting
requirements during the 12 months preceding any proposed sale of the shares by
me under Rule 145, and (ii) otherwise use its reasonable best efforts to permit
such sales pursuant
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<PAGE>
to Rule 145 and Rule 144. Parent has filed reports required to be filed with the
Commission under Section 13 of the Exchange Act during the preceding 12 months.
I-49
<PAGE>
By signing this letter, without limiting or abrogating my agreements
set forth above, I do not admit that I am an "affiliate" of the Company within
the meaning of the Act or the Rules and Regulations, and I do not waive any
right I may have to object to any assertion that I am such an affiliate.
Very truly yours,
-------------------------
Name:
Accepted this day of
, 2000, by
Paracel, Inc.
By:_____________________
Name:
Title:
PE Corporation
By:_____________________
Name:
Title:
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<PAGE>
Exhibit D-1
FORM OF OPINION OF COUNSEL TO THE COMPANY
[Terms are as defined in the Merger Agreement]
The following substantive opinion paragraphs will be subject to assumptions and
limitations customary with respect to transactions of this nature:
1. The Company is a corporation validly existing under the laws of the
State of California with corporate power to enter into the Merger Agreement and
to perform its obligations under the Merger Agreement. Paracel Online Systems,
Inc., a California corporation and the wholly-owned subsidiary of the Company,
is a corporation validly existing under the laws of the State of California.
2. The execution, delivery, and performance of the Merger Agreement have
been duly authorized by all necessary corporate action on the part of the
Company, and the Merger Agreement has been duly executed and delivered by the
Company.
3. The Merger Agreement constitutes the legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditor's rights generally
(including, without limitation, fraudulent conveyance laws) and by general
principals of equity, including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law.
4. The execution and delivery by the Company of the Merger Agreement do
not, and the Company's performance of its obligations under the Merger Agreement
will not, (a) violate the Company's articles of incorporation or bylaws, (b)
breach or otherwise violate any existing obligation of or restriction on the
Company under any order, judgment or decree of any California or federal court
or governmental authority binding on the Company known to us, and (c) violate
the current California Corporations Code or any current California or federal
statute, rule or regulation that we have, in the exercise of ordinary customary
professional diligence, recognized as applicable to the Company or to
transaction of the type contemplated by the Merger Agreement.
5. No order, consent, permit, or approval of any California or federal
governmental authority that we have, in the exercise of ordinary customary
professional diligence, recognized as applicable to the Company or to
transactions of this type contemplated by the Merger Agreement is required on
the part of the Company for the execution and delivery of, and performance of
its obligations under, the Merger Agreement, except for those identified in
Section 3.01(d)(ii) of the Merger Agreement.
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<PAGE>
Exhibit D-2
FORM OF OPINION OF COUNSEL TO PARENT AND SUB
[Terms are as defined in the Merger Agreement]
The following substantive opinion paragraphs will be subject to assumptions and
limitations customary with respect to transactions of this nature; opinions as
to California law shall be provided by California counsel:
1. Parent has been duly incorporated and is validly existing and in good
standing as a corporation under the laws of the State of Delaware.
2. Sub has been duly incorporated and is validly existing and in good
standing as a corporation under the laws of the State of California.
3. Each of Parent and Sub has the requisite corporate power and authority
to enter into the Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Merger Agreement by
Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub. The Merger Agreement has been duly executed and
delivered by Parent and Sub and (assuming that the Merger Agreement is a valid
and binding obligation of the Company) constitutes the valid and binding
obligation of Parent and Sub, enforceable against them in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
4. The execution and delivery by Parent and Sub of the Merger Agreement
and compliance by Parent and Sub with all of the provisions of the Merger
Agreement will not violate the certificate of incorporation or bylaws, or
similar organizational documents, of Parent or Sub, any federal or California
statute, including the CCC, or the Delaware General Corporation Law (the
"DGCL"), or any rule or regulation issued pursuant to any California or federal
statute, including the CCC, or the DGCL, or any order known to us issued by any
Delaware, California or federal court or governmental agency or body.
5. No consent, approval, authorization, order, registration or
qualification of or with any federal or California governmental agency or body,
including any California body acting pursuant to the CCC, or any Delaware
governmental agency or body acting pursuant to the DGCL, is required for the
execution and delivery by Parent or Sub of the Merger Agreement and compliance
by Parent and Sub with all of the provisions of the Merger Agreement, except
filings and consents, waivers, approvals, filings and registrations described in
Section 3.02(c)(ii) of the Merger Agreement.
6. The Parent Common Stock to be issued in the Merger has been duly
authorized and, upon surrender of the Company Common Stock and delivery of the
Parent Common Stock in accordance with the Merger Agreement, such Parent Common
Stock will be validly issued, fully paid and nonassesable.
I-52
<PAGE>
Exhibit E
AGREEMENT OF MERGER
This Agreement of Merger is among PE Corporation, a Delaware corporation
("Parent"), Umbrella Acquisition Corp., a California corporation and a direct
and wholly owned subsidiary of Parent ("Sub"), and Paracel, Inc., a California
corporation (the "Company").
1. Sub shall be merged into the Company, which will be the surviving
corporation in the merger (the "Surviving Corporation").
2. At the effective time of the merger, the articles of incorporation
of the Company shall be the articles of incorporation of the
Surviving Corporation; provided, that immediately following the
merger, the articles of incorporation of the Surviving Corporation
shall be amended and restated to be the same in substance as the
articles of incorporation of Sub immediately before the merger.
3. Each share of common stock of Sub issued and outstanding immediately
prior to the merger shall be converted into one share of the common
stock, par value $0.01 per share, of the Surviving Corporation.
4. Each share of common stock of the Company that is owned by Sub shall
automatically be canceled and retired and shall cease to exist, and
no cash, common stock of Parent or other consideration shall be
delivered or deliverable in exchange therefor.
5. Each issued and outstanding share of common stock of the Company
(other than shares cancelled pursuant to Section 4), including
shares owned by any subsidiary of Parent other than Sub, shall be
converted into the right to receive a fraction equal to the Exchange
Ratio (defined below) of a share of PE Corporation--Celera Genomics
Common Stock, par value $0.01 per share (including the rights
associated with such shares pursuant to Parent's Shareholder
Protection Rights Plan and as adjusted for stock splits in the form
of stock dividends) (the "Parent Common Stock") and cash in lieu of
fractional shares. Thereafter, all shares of common stock of the
Company issued and outstanding immediately prior to the merger shall
no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist.
"Exchange Ratio" means $283 million divided by 10,533,349 shares of
Company Common Stock divided by the Parent Common Stock Price,
rounded to the nearest 1/10,000th, provided that the Exchange Ratio
shall not be less than .1472 nor more than .2146.
"Parent Common Stock Price" means the average of the closing sales
prices of a share of Parent Common Stock on the New York Stock
Exchange Composite Transaction Tape on each of the 10 consecutive
trading days immediately preceding (and excluding) the second
trading day prior to the effective time of the merger.
5. The effect of the merger and the effective date of the merger are as
prescribed by law.
[Remainder of page intentionally left blank.]
I-53
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement as of , 2000.
PE CORPORATION
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title: Secretary
UMBRELLA ACQUISITION CORP.
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title: Secretary
PARACEL, INC.
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title: Secretary
I-54
<PAGE>
Annex II
VOTING AGREEMENT
Voting Agreement, dated as of March 20, 2000 (the "Agreement"),
among the undersigned holders (the "Holders") of shares of the common stock, no
par value (the "Company Common Stock"), of Paracel, Inc., a California
corporation (the "Company"), PE Corporation, a Delaware corporation ("Parent"),
and Umbrella Acquisition Corp., a California corporation and a direct wholly
owned subsidiary of Parent ("Sub").
The Company, Parent and Sub propose to enter into an Agreement and
Plan of Merger dated as of the date hereof (the "Merger Agreement"; capitalized
terms not otherwise defined herein being used herein as therein defined),
pursuant to which Sub would be merged (the "Merger") with and into the Company,
and each outstanding share of Company Common Stock would be converted into the
right to receive shares of Parent Common Stock.
As a condition of its entering into the Merger Agreement, Parent has
requested each Holder to agree, and each Holder has agreed, to enter into this
Agreement.
Prior to the date hereof, Parent and the Holders had no agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of shares of Company Common Stock.
AGREEMENT
Accordingly, the parties hereto agree as follows:
1. Representations and Warranties of the Holders. Each Holder
represents and warrants, severally and not jointly, to Parent and Sub as
follows:
(a) Ownership of Securities. Such Holder is the record and
beneficial owner of the number of shares of Company Common Stock (the "Existing
Securities") (together with any shares of Company Common Stock or other
securities hereafter acquired by such Holder, the "Subject Securities") set
forth on the signature page to this Agreement. Such Holder does not own any
securities of the Company on the date hereof other than such Holder's Existing
Securities. Such Holder has sole voting power and sole power to issue
instructions with respect to the voting of such Holder's Existing Securities,
sole power of disposition and sole power to demand appraisal rights, in each
case with respect to all of such Holder's Existing Securities and, on the date
of the Company Stockholder Approval, will have sole voting power and sole power
to issue instructions with respect to the voting of all of such Holder's Subject
Securities, sole power of disposition and sole power to demand appraisal rights,
in each case with respect to all of such Holder's Subject Securities.
(b) Power; Binding Agreement. Such Holder has full power and
authority to enter into and perform all of such Holder's obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
such Holder and constitutes a valid and binding agreement of such Holder,
enforceable against such Holder in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting
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<PAGE>
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(c) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary by the Holder for the execution of this Agreement by such Holder and
the consummation by such Holder of the transactions contemplated hereby (other
than the filing of a premerger notification and report form by the Holder, to
the extent necessary, under the Hart- Scott-Rodino Antitrust Improvements Act of
1976, as amended) and neither the execution and delivery of this Agreement by
such Holder nor the consummation by such Holder of the transactions contemplated
hereby nor compliance by such Holder with any of the provisions hereof shall
conflict with or result in any breach of any organizational documents applicable
to such Holder, result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third-party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
such Holder is a party or by which such Holder's properties or assets may be
bound or violate any order, writ, injunction, decree, judgment, order, statute,
rule or regulation applicable to such Holder or any of such Holder's properties
or assets.
(d) No Liens. Such Holder's Existing Securities are now and, at all
times during the term hereof the Subject Securities will be, held by such
Holder, or by a nominee or custodian for the exclusive benefit of such Holder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any encumbrances arising hereunder.
(e) Receipt of 1934 Act Documents. To the full satisfaction of such
Holder, such Holder has been furnished any materials such Holder has requested
relating to Parent, including copies of each of the documents filed by Parent
prior to the date hereof under the Securities Exchange Act of 1934, as amended,
with respect to Parent's most recently completed fiscal year and any subsequent
interim fiscal periods, and such Holder has been afforded the opportunity to ask
questions of representatives of Parent concerning Parent's business.
2. Agreement to Vote Shares. At every meeting of the stockholders of
the Company called with respect to any of the following, and at every
adjournment thereof, and on every action or approval by written consent of the
stockholders of the Company with respect to any of the following, each Holder
agrees that it shall vote all the Subject Securities that it beneficially owns
on the record date of any such vote: (i) for approval of the Merger, the Merger
Agreement and the terms thereof, each of the other transactions contemplated by
the Merger Agreement (including, without limitation, the transactions
contemplated by the Escrow Agreement and appointment of the Stockholder
Representative) and any matter that could reasonably be expected to facilitate
the Merger, and (ii) against the following actions (other than the Merger and
the transactions contemplated by the Merger Agreement): (1) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any of its subsidiaries; (2) a sale, lease
or transfer of a material amount of assets of the Company or any of its
subsidiaries or a reorganization, recapitalization, dissolution or liquidation
of the Company or any of its subsidiaries; (3) (a) any change in the board of
directors of the Company; (b) any change in the present capitalization of the
Company or any amendment of the Articles or the By-laws; (c) any other material
change in the Company's corporate structure or business; or (d) any other action
which is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, discourage or
II-2
<PAGE>
materially adversely affect the contemplated economic benefits to Parent of the
Merger or the transactions contemplated by the Merger Agreement or this
Agreement. Each Holder further agrees to use such Holder's reasonable good faith
efforts to cause the stockholders of the Company to approve the Merger and the
transactions and matters contemplated in connection therewith and not, directly
or indirectly, to solicit or encourage any offer from any party concerning the
possible disposition of all or any substantial portion of the Company's
business, assets or capital stock. In the event the Company's board of directors
does not call a meeting of the Company's stockholders to approve the Merger and
the transactions and matters contemplated in connection therewith, each Holder
agrees to take all action permitted under the Articles and Bylaws and under
California law necessary to call a meeting of the Company's stockholders to
approve the Merger and the transactions and matters contemplated in connection
therewith or to approve the Merger and the transactions and matters contemplated
in connection therewith by written consent.
3. Agreement to Waive Certain Rights with Respect to Shares. Each
Holder, to the extent applicable, agrees that from the date of this Agreement
through the earlier of the Effective Time of the Merger or the termination of
this Agreement and the Merger Agreement, (a) RMS Limited Partnership, a Nevada
limited partnership ("RMS"), hereby agrees to waive any pre-emptive,
registration or similar rights it may have with respect to Company Common Stock
pursuant to that certain Stock Purchase Agreement dated as of June 12, 1995, by
and between the Company and RMS (the "RMS Agreement"), and (b) TRW Inc., an Ohio
corporation ("TRW"), hereby agrees to waive any pre-emptive, registration or
similar rights it may have with respect to Company Common Stock pursuant to that
certain Shareholders' Agreement dated as of June 5, 1992, by and among the
Company, Kwang-I Yu, Paul O. Scheibe, Michael Ullner and TRW (the "TRW
Agreement").
4. Agreement to Terminate Certain Stockholder Agreements. In the
event that the Merger is consummated, (a) RMS hereby agrees to terminate the RMS
Agreement, and (b) TRW hereby agrees to terminate the TRW Agreement, and in each
case effective as of the Effective Time of the Merger.
5. Appraisal Rights. Each Holder hereby agrees not to demand its
appraisal rights under Section 1300 et seq. of the CCC with respect to any of
the Subject Securities.
6. IRREVOCABLE PROXY. EACH HOLDER HEREBY GRANTS TO, AND APPOINTS SUB
AND THE PRESIDENT OF SUB AND THE TREASURER OF SUB, IN THEIR RESPECTIVE
CAPACITIES AS OFFICERS OF SUB, AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO
ANY SUCH OFFICE OF SUB, AND ANY OTHER DESIGNEE OF SUB, EACH OF THEM
INDIVIDUALLY, SUCH HOLDER'S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE OR ACT BY WRITTEN CONSENT WITH RESPECT TO SUCH HOLDER'S
SUBJECT SECURITIES IN ACCORDANCE WITH THIS AGREEMENT. THIS PROXY IS COUPLED WITH
AN INTEREST AND SHALL BE IRREVOCABLE, AND EACH HOLDER WILL TAKE SUCH FURTHER
ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE
INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY IT WITH
RESPECT TO THE SUBJECT SECURITIES. THIS PROXY SHALL CONTINUE UNTIL THE
CONSUMMATION OF THE MERGER OR UNTIL THIS AGREEMENT IS TERMINATED, WHICHEVER IS
EARLIER.
7. Representations and Warranties of Parent and Sub. Parent and Sub
jointly and severally represent and warrant to the Holders as follows:
(a) Power; Binding Agreement. Parent and Sub have full corporate
power and authority to enter into and perform all of their respective
obligations under this Agreement. This
II-3
<PAGE>
Agreement has been duly and validly executed and delivered by Parent and Sub and
constitutes a valid and binding agreement of Parent and Sub, enforceable against
each of them in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) No Conflicts. No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by Parent or Sub and the
consummation by Parent or Sub of the transactions contemplated hereby and
neither the execution and delivery of this Agreement by Parent or Sub nor the
consummation by Parent or Sub of the transactions contemplated hereby nor
compliance by Parent or Sub with any of the provisions hereof shall conflict
with or result in any breach of any organizational documents applicable to
Parent or Sub, as the case may be, result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third-party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which Parent or Sub is a party or by which Parent's or Sub's properties
or assets may be bound or violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to Parent or Sub or any of
Parent's or Sub's properties or assets.
8. Restriction on Transfer, Proxies and Noninterference. Each Holder
hereby agrees and covenants that such Holder shall not, directly or indirectly:
(i) except pursuant to the Merger Agreement, offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to or
consent to the offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of such Holder's Subject
Securities (or any interest therein); (ii) except pursuant to this Agreement,
grant any proxies or powers of attorney, deposit any such Subject Securities
into a voting trust or enter into a voting agreement with respect to any of such
Holder's Subject Securities; or (iii) take any action that would make any
representation or warranty contained herein untrue or incorrect or have the
effect of preventing or disabling such Holder from performing its obligations
under this Agreement.
9. Assignment; Benefits. The rights (but not the obligations) of
Parent hereunder may be assigned, in whole or in part, to Sub or any other
direct wholly owned subsidiary of Parent, to the extent and for so long as it
remains a direct wholly owned subsidiary of Parent. Other than as permitted in
the preceding sentence, this Agreement may not be assigned (i) by any Holder
without the prior written consent of Parent, or (ii) by Parent without the prior
written consent of Holders entitled to receive at least two-thirds of the
aggregate number of shares of Parent Common Stock all Holders are entitled to
receive pursuant to the Merger Agreement. This Agreement shall be binding upon,
and shall inure to the benefit of, the Holders, Parent, Sub and their respective
successors and permitted assigns.
10. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by facsimile or by overnight courier
(providing proof of delivery) to the parties at the following addresses and
facsimile numbers (or to such other address or facsimile number for a party as
shall be specified by like notice):
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<PAGE>
(a) if to any Holder, to it at the address set forth below such
Holder's name on the signature pages hereto,
with copies to:
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, California 91101-2616
Facsimile: (626) 744-2001
Attention: Kwang-I Yu
- and -
O'Melveny & Myers LLP
1999 Avenue of the Stars, Suite 700
Los Angeles, California 90067-6035
Facsimile: (310) 246-6779
Attention: Kendall R. Bishop, Esq.
(b) if to Parent or Sub, to
PE Corporation
761 Main Avenue
Norwalk, Connecticut 06859-0313
Facsimile: (203) 761-2893
Attention: Secretary
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Facsimile: (212) 455-2502
Attention: Richard A. Garvey, Esq.
11. Specific Performance. The parties hereto agree that irreparable
harm would occur in the event that any of the provisions of this Agreement were
not performed in accordance with its specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
12. Amendment. This Agreement may not be amended or modified, except
by an instrument in writing signed by or on behalf of each of the parties
hereto. This Agreement may not be
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<PAGE>
waived by any party hereto, except by an instrument in writing signed by or on
behalf of the party granting such waiver.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
14. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
15. Termination. This Agreement shall terminate upon the termination
of the Merger Agreement pursuant to its terms. The date and time at which this
Agreement is terminated in accordance with this Section 15 is referred to herein
as the "Termination Date". Upon any termination of this Agreement, this
Agreement shall thereupon become void and of no further force and effect, and
there shall be no liability in respect of this Agreement or of any transactions
contemplated hereby on the part of any party hereto or any of its directors,
officers, partners, members, stockholders, employees, agents, advisors,
representatives or affiliates; provided, however, that nothing herein shall
relieve any party from any liability for such party's breach of this Agreement;
and provided further, that nothing in this Section 15 shall limit, restrict,
impair, amend or otherwise modify the rights, remedies, obligations or
liabilities of any person under any other contract or agreement, including,
without limitation, the Merger Agreement.
16. Miscellaneous. All of the recitals to this Agreement are true
and correct and are specifically incorporated by reference herein.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by or on behalf
of each of the parties hereto, all as of the date first above written.
PE CORPORATION
By: /s/ J. Craig Venter
------------------------
Name: J. Craig Venter
Title: Senior Vice President
UMBRELLA ACQUISITION CORP.
By: /s/ Thomas P. Livingston
------------------------
Name: Thomas P. Livingston
Title: Vice President
KWANG-I YU
Address: 1180 Oak Grove Avenue
San Marino, California
Number of Shares of
Company Common Stock: 1,490,000 (including
40,000 shares under the
name of a minor child)
/s/ Kwang-I Yu
-----------------------------
Kwang-I Yu
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<PAGE>
RMS LIMITED PARTNERSHIP
Address: 650 Liberty Street, Suite 250
Reno, Nevada
Number of Shares of
Company Common Stock: 1,845,417
By: /s/ Richard W. Baker
-------------------------------
Name: Richard W. Baker
Title: Secretary/Treasurer of Crystal Diamond
Inc. and General Partner of RMS
Limited Partnership
TRW INC.
Address: 12011 Sunset Hills Road
Reston, Virginia
Number of Shares of
Company Common Stock: 1,125,000
By: /s/ Donald C. Winter
-------------------------------
Name: Donald C. Winter
Title: Executive Vice President and
General Manager
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<PAGE>
Annex III
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of June __, 2000 (this "Escrow
Agreement") among PE Corporation, a Delaware corporation ("Parent"), Joseph T.
Kingsley, as representative of the former stockholders of Paracel, Inc., a
California corporation and the surviving corporation in the merger referred to
below (the "Company"), and State Street Bank and Trust Company, a Massachusetts
trust company, as escrow agent (the "Escrow Agent").
Parent, the Company and Umbrella Acquisition Corp., a California
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), entered into
an Agreement and Plan of Merger dated as of March 20, 2000 (the "Merger
Agreement"), pursuant to which, effective as of the date hereof, Merger Sub is
being merged with and into the Company, which thereupon shall become a wholly
owned subsidiary of Parent.
As required by the Merger Agreement, the parties are entering into this
Escrow Agreement for the purpose of establishing a means by which a portion of
the shares of PE Corporation - Celera Genomics Group Common Stock, par value
$0.01 per share (including the rights associated therewith pursuant to Parent's
Shareholder Protection Rights Plan) ("Parent Common Stock"), otherwise payable
to former stockholders of the Company (the "Stockholders") pursuant to the
Merger Agreement shall serve, subject to the terms and conditions hereof, as the
exclusive source of indemnification to Parent and its affiliates (including the
Company) and their respective directors and officers and employees
(collectively, the "Indemnified Parties") with respect to "Losses," which, as
used herein, shall mean all liabilities (including liabilities for Taxes),
obligations, losses, damages, penalties, claims, actions, suits, judgments,
settlements, out-of-pocket costs, expenses and disbursements (including costs of
investigation and fees and expenses of attorneys, accountants and expert
witnesses) that may be imposed on or incurred by any of the
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<PAGE>
Indemnified Parties as a consequence of or in connection with (i) any inaccuracy
or breach of any representation or warranty of the Company contained in or made
pursuant to the Merger Agreement (a "Representation Loss") or (ii) the breach of
or failure by the Company to perform or discharge any obligation under the
Merger Agreement required to be performed or discharged at or prior to the
Effective Time of the Merger (a "Covenant Loss"); provided, that Losses shall
not be limited to matters asserted by third parties against an Indemnified Party
and shall include Losses incurred or sustained by an Indemnified Party in the
absence of third party claims; and provided further, that Losses of any
Indemnified Party shall be net of insurance proceeds or indemnity payments
received by such Indemnified Party from third parties.
By virtue of the approval by the Stockholders of the Merger
Agreement and the transactions contemplated thereby, the Stockholders have
approved and authorized the execution, delivery and performance of this Escrow
Agreement, the provisions of which shall be deemed to be an integral part of the
Merger Agreement to the same extent as if fully set forth therein.
Accordingly, the parties hereby agree as follows:
1. ESCROW FUND
1.1 Establishment of Escrow Fund. Simultaneously with the execution and
delivery of this Escrow Agreement, Parent is causing to be delivered to the
Escrow Agent, to be held in an escrow fund (the "Escrow Fund") in accordance
with the provisions of this Escrow Agreement, an aggregate number of shares of
Parent Common Stock representing 5 percent of the number of shares of Parent
Common Stock (rounded down, to the nearest whole share) into which all of the
Stockholders' shares of Company Common Stock, no par value ("Company Common
Stock"), were converted pursuant to Section 2.01 of the Merger Agreement, which
aggregate number of shares is allocated among the Stockholders as set forth on
Schedule A to this Escrow Agreement. Such shares of Parent Common Stock, and any
other property distributable with respect thereto or in exchange therefor and
held in the Escrow Fund as provided in Section 5.2 hereof, are herein
collectively referred to as the "Escrow Property". The shares of Parent
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Common Stock constituting Escrow Property shall be held by the Escrow Agent in
book entry form in a Depository Trust Company ("DTC") account of its nominee.
The Escrow Fund shall be held by the Escrow Agent and shall be dealt with by the
Escrow Agent in accordance with the terms and conditions of this Escrow
Agreement. All references in this Escrow Agreement to a Stockholder's
proportionate interest in the Escrow Fund or Escrow Property shall mean such
Stockholder's proportionate beneficial interest therein based on the ratio
(rounded to the nearest 1/10,000th) of (i) the number of shares of Parent Common
Stock initially constituting the Escrow Fund which are allocated to such
Stockholder in accordance with Schedule A, to (ii) the total number of shares of
Parent Common Stock initially constituting the Escrow Fund.
1.2 Grantor Trust. Parent, the Stockholder Representative and the
Stockholders shall treat the escrow of Parent Common Stock as a grantor trust
for tax purposes, of which each of the Stockholders is the grantor. Subject to
the withholding contemplated by Section 5.1, each Stockholder shall be solely
responsible for the payment of taxes imposed on or measured by income that are
attributable to income from the Escrow Property that is distributed to such
Stockholder for the time it is held in escrow hereunder, and shall be solely
responsible for the filing of all tax and information returns applicable
thereto.
1.3 Tax Matters. Parent and the Stockholder Representative shall jointly
instruct the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding any taxes, assessments or other governmental
charges, and shall jointly instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Escrow Agreement; provided, that the Escrow Agent shall promptly
provide Parent and the Stockholder Representative with any information received
by it with respect to any Stockholder which would affect such instructions.
Parent agrees to indemnify and hold harmless the Escrow Agent from any liability
or obligation on account of taxes, assessments, additions for late payment,
interest, penalties, expenses and other governmental charges that may be
assessed or asserted against the Escrow Agent in connection with or relating to
any payment made or other activities performed
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under the terms of this Escrow Agreement, including, without limitation, any
liability for failure to obtain proper certifications from or to report properly
to governmental authorities in connection with this Escrow Agreement, including
costs and expenses (including reasonable legal fees and expenses), interest and
penalties; provided, that the foregoing shall not be applicable to any liability
or obligation arising from or in connection with (i) the Escrow Agent's failure
to obtain proper certifications or authorizations as are necessary for it to
conduct its business and perform its obligations hereunder, (ii) the Escrow
Agent's failure to act in accordance with the written instructions provided to
it in accordance with this Section 1.3, or the Escrow Agent's failure to notify
Parent and the Stockholder Representative of changes relating to any Stockholder
in accordance with this Section 1.3, or (iii) the Escrow Agent's gross
negligence or willful misconduct. The foregoing indemnification and agreement to
hold harmless shall survive the termination of this Escrow Agreement.
2. PROCEDURES WITH RESPECT TO CLAIMS
2.1 Claims by Indemnified Parties. (a) Any claims against the Escrow Fund
are herein collectively called "Claims", and individually a "Claim". If an
Indemnified Party has a Claim, including a Claim arising from a suit, action,
proceeding or investigation by a third party, that may result in any Losses,
Parent shall promptly give notice thereof (the "Claims Notice") to the
Stockholder Representative and to the Escrow Agent; provided, however, that any
failure to promptly notify the Stockholder Representative and the Escrow Agent
of any such Claim will not prejudice the rights of the Indemnified Party under
this Escrow Agreement unless (i) such notice is not delivered prior to the Final
Distribution Date as provided in Section 2.3 or (ii) the Stockholder
Representative's ability to defend such Claim is adversely affected thereby, and
then only to the extent thereof. The Claims Notice, which shall be signed by an
officer of Parent, shall describe the Claim in reasonable detail, and shall
indicate the amount (estimated, if necessary, and to the extent feasible) of the
Losses that have been or may be suffered by Parent and/or any other applicable
Indemnified Party, as the case may be. The Claims Notice shall also include a
statement of the
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amount of Losses that Parent requests be satisfied by distribution to it of
Escrow Property from the Escrow Fund. The Losses shall be reimbursed solely out
of the Escrow Fund.
(b) Within 30 days after Parent shall give the Stockholder
Representative and the Escrow Agent a Claims Notice, the Stockholder
Representative, by notice to Parent with a copy to the Escrow Agent (the
"Stockholders' Notice"), either shall (i) concede liability in whole with
respect to such Claim (it being understood that assumption by the Stockholder
Representative or an Indemnified Party of the defense of a third-party claim as
described in subsections (c) and (d) below shall be considered a concession of
indemnification liability in whole with respect to the underlying third party
claim), (ii) demand arbitration of the matter pursuant to the provisions of
Section 10 hereof or (iii) concede liability in part and demand such arbitration
in part. The failure by the Stockholder Representative to deliver such a
Stockholders' Notice to Parent and the Escrow Agent within the specified period
shall be deemed a concession of liability in whole. The Stockholder
Representative shall be afforded reasonable access by Parent to the
documentation relating to any Losses included in a Claims Notice as may under
the circumstances reasonably be required by the Stockholder Representative to
make a determination required to be made by the Stockholder Representative under
this Section 2.1.
(c) (i) In connection with any Claim giving rise to indemnity under
this Escrow Agreement resulting from or arising out of any claim or legal
proceeding by a party who is not a party to this Escrow Agreement (including any
governmental entity), the Stockholder Representative at its sole cost and
expense (subject to Section 8.3) shall be entitled to assume the defense of any
such claim or legal proceeding in such manner as it may deem reasonably
appropriate, including settling such claim or legal proceeding, after giving
notice of the same to Parent and the Indemnified Parties, on such terms as the
Stockholder Representative may deem appropriate (within the exercise of
reasonable discretion); provided, that the Stockholder Representative (A) shall
not admit to any liability on the part of Parent or any other Indemnified Party
in respect of a claim, without the written consent of Parent or such other
Indemnified Party, (B) shall only settle claims for fixed monetary damages, (C)
shall not settle a claim for an amount in
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excess of the amount (valued in accordance with Section 4.1) then remaining in
the Escrow Fund and available for distribution in respect of the applicable
Claim, and (D) shall not settle any claim unless the terms of such settlement
involve a full and unconditional release of Parent and the other Indemnified
Parties from all liability in respect thereof. The Indemnified Parties will be
entitled to participate in (but not control) the defense of any such action,
with their own counsel and at their own expense. If the Stockholder
Representative undertakes the defense of any claim or legal proceeding under
this Section 2.1(c), then the amount of the Claim to which any Indemnified Party
is entitled to indemnification hereunder with respect to such claim or legal
proceeding shall include, conclusively, the amount of any judgment in any
judicial proceeding, arbitration or other proceeding or, if applicable, any
settlement agreed to by the Stockholder Representative (it being understood that
such amount will be deemed to be the amount of the Indemnified Parties' Final
Claim for Reimbursement hereunder with respect to such Claim).
(ii) Notwithstanding paragraph (i) above, the Stockholder
Representative shall not be entitled to assume the defense of any claim or legal
proceeding resulting from a Claim if, after giving effect to such assumption,
the aggregate amount of all claims and legal proceedings in respect of which the
Stockholder Representative has assumed the defense exceeds the amount (valued in
accordance with Section 4.1 and excluding amounts that are then subject to
Pending Claims and Final Claims for Reimbursement) then remaining in the Escrow
Fund.
(iii) As promptly as practicable following the distribution of
all of the Escrow Fund, the defense of any claim or legal proceeding resulting
from a Claim then being defended by the Stockholder Representative pursuant to
paragraph (i) shall be assumed by Parent, and the Stockholder Representative
shall cooperate in good faith with Parent in connection with all matters
pertaining to such assumption.
(d) If, after notification thereof in accordance with Section
2.1(a), the Stockholder Representative chooses not to assume the defense of any
such claim or litigation resulting from a Claim pursuant to Section 2.1(c)
within a timely manner so as not to prejudice the rights of the Indemnified
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Parties, the Indemnified Parties may defend against such claim or litigation, in
such manner as they may deem reasonably appropriate, including settling such
claim or legal proceeding, after giving notice of the same to the Stockholder
Representative, on such terms as the Indemnified Parties may deem appropriate
(within the exercise of reasonable discretion). If the Indemnified Parties
undertake the defense of any claim or legal proceeding under this Section
2.1(d), then the amount of the Claim to which any Indemnified Party is entitled
to indemnification hereunder with respect to such claim or legal proceeding
shall include, conclusively, the amount of any judgment in any judicial
proceeding, arbitration or other proceeding or, if applicable, any settlement
agreed to by the Indemnified Parties (it being understood that such amount will
be deemed to be the amount of the Indemnified Parties' Final Claim for
Reimbursement hereunder with respect to such Claim).
2.2 Final Claims for Reimbursement. All Claims for which the Stockholder
Representative shall have conceded liability, or shall have been deemed to have
conceded liability pursuant to the provisions of Section 2.1, or as to the
disposition of which the Stockholder Representative and Parent shall have agreed
in writing, shall be final and binding upon the Stockholders, the Stockholder
Representative and Parent. If the Stockholder Representative shall demand
arbitration or assume the defense of any third-party claim as provided in
Section 2.1, the Claim that was objected to or the claim that was assumed shall
become final and binding upon the Stockholders, the Stockholder Representative
and Parent upon a final decision in arbitration as provided in Section 10
hereof, (b) a final decision or settlement of a third-party claim, or (c) upon
the matter being otherwise agreed to in writing by Parent and the Stockholder
Representative. A Claim which is final and binding upon the Stockholders, the
Stockholder Representative and Parent as of any given time is hereinafter called
a "Final Claim for Reimbursement".
2.3 Limitation of Clai(a) Notwithstanding anything to the contrary herein,
none of the Escrow Fund will be released and delivered to Parent pursuant to any
Claim in respect of which a Claims Notice is given after the First Distribution
Date, as hereinafter defined, it being agreed by the parties hereto that the
indemnification obligations of the Stockholders hereunder shall be limited to
Claims in respect of which Claims Notices have been received by the Stockholder
Representative and the Escrow Agent on or before the First Distribution Date.
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(b) Notwithstanding anything to the contrary herein, none of the
Escrow Fund will be released and delivered to Parent pursuant to any Claim
relating to a Representation Loss except to the extent that the aggregate amount
of all Final Claims for Reimbursement relating to Representation Losses exceeds
the sum of $300,000, and then only to the extent of such excess.
(c) As a Claim becomes a Final Claim for Reimbursement, Parent (if
no arbitration is commenced in respect of the Claim) or the arbitrator (if
arbitration is commenced in respect of the Claim) shall provide the Escrow Agent
with a certificate with respect to the compliance of the Final Claim for
Reimbursement with this Section 2.3.
2.4 Termination of Escrow Agreement. This Escrow Agreement shall remain in
full force and effect until, and shall terminate upon, the release of all of the
Escrow Fund pursuant to this Escrow Agreement.
3. DISTRIBUTIONS FROM ESCROW FUND
3.1 Definitions. As used herein: "First Distribution Date" shall mean
[Note: Insert first anniversary of the Effective Time of the Merger.], 2001; and
"Final Distribution Date" shall mean the first business day on which all matters
reserved against in respect of Claims shall have been finally determined or
settled. If no matters are or remain reserved against on the First Distribution
Date, the First Distribution Date shall also be the Final Distribution Date.
3.2 Reimbursement of Final Claims for Reimbursement Before or On First
Distribution Date. From the date of this Escrow Agreement to and including the
First Distribution Date, the Escrow Agent from time to time shall (subject to
Section 2.3) transfer and deliver to Parent such amount of Escrow Property as
shall have a value (computed in accordance with Section 4.1 hereof) equal to the
Final Claims for Reimbursement which have not previously been paid to Parent.
3.3 Reservation of Amounts at First Distribution Date. As of the First
Distribution Date, the Escrow Agent shall reserve in the Escrow Fund such amount
of Escrow Property as shall have a value (computed in accordance with Section
4.1 hereof and subject to Section 2.3 hereof) equal to the sum of (i) the
aggregate amount claimed in all Claims Notices given pursuant to Section 2.1
hereof which have not become Final Claims for Reimbursement, but which are still
asserted by Parent and are then pending and
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undecided ("Pending Claims") (notwithstanding that any matter in any Claims
Notice may then be the subject of arbitration as permitted by Section 2.1); and
(ii) the aggregate amount of all Final Claims for Reimbursement not
theretofore paid to Parent.
3.4 Distribution at First Distribution Date. Within 10 business days
following the First Distribution Date, the Escrow Agent shall deliver to Parent
from the Escrow Fund any amount of Escrow Property reserved pursuant to Section
3.3(ii) and shall deliver to the Stockholders in accordance with their
respective interests that portion of the Escrow Fund equal to the entire amount
of the Escrow Fund as of the First Distribution Date, less the amount of the
Escrow Fund reserved pursuant to Section 3.3(i) hereof. If the foregoing
calculation results in a negative amount, no portion of the Escrow Fund shall be
delivered to the Stockholders at the First Distribution Date.
3.5 Distributions as to Pending Claims After the First Distribution Date.
After the First Distribution Date, as each Pending Claim reserved for on the
First Distribution Date becomes a Final Claim for Reimbursement, the Escrow
Agent shall, subject to Section 2.3, deliver to Parent, such amount of Escrow
Property as shall have a value (computed in accordance with Section 4.1 hereof)
equal to the Final Claim for Reimbursement which results from the final
determination of such Pending Claim (and not previously paid to Parent), and to
the Stockholders in accordance with their respective interests, such amount of
Escrow Property as shall have a value (computed in accordance with Section 4.1
hereof) equal to the amount, if any, of the excess of the reserve for such
Pending Claim over the Final Claim for Reimbursement, if any, with respect to
such Pending Claim; provided, however, that no delivery shall be made hereunder
to the Stockholders unless the aggregate amount reserved (after giving effect to
such delivery) for all Pending Claims is at least equal to the aggregate amount
of such Pending Claims.
3.6 Distribution at Final Distribution Date. On the Final Distribution
Date, the Escrow Agent shall deliver to Parent such amount of Escrow Property as
shall have a value (computed in accordance with Section 4.1 hereof and subject
to Section 2.3 hereof) equal to the Final Claims for Reimbursement which have
not previously been paid to Parent, and shall deliver to the Stockholders in
accordance with their respective interests the balance, if any, of the Escrow
Fund.
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4. PROCEDURES WITH RESPECT TO DISTRIBUTION
4.1 Valuation. For all purposes of this Escrow Agreement, each share of
Parent Common Stock shall be valued at $[ ] [Note: Insert Parent Common Stock
Price.]. If, at any time after the Effective Time of the Merger and prior to the
date of any distribution of Escrow Property, Parent shall effect a stock
dividend, stock split or combination of Parent Common Stock, or other
recapitalization affecting Parent Common Stock, or shall effect a distribution
(other than a distribution of cash dividends as described in Section 5.1 hereof)
with respect to the Parent Common Stock, or if Parent shall fix a record date
falling on or prior to the date of any distribution of the Escrow Property from
the Escrow Fund for any such stock dividend, stock split, combination,
recapitalization, or distribution to take place after the date of such
distribution, the foregoing valuation shall be adjusted appropriately by Parent
(but subject to arbitration in accordance with Section 10 in the event of a
dispute) and upon written notice to the Stockholder Representative and the
Escrow Agent of such an event and re-valuation, the Escrow Agent shall utilize
the new value for purposes of this Escrow Agreement.
4.2 Fractional Shares. No fractional shares of Parent Common Stock shall
be delivered pursuant to any provision of this Escrow Agreement. In making
delivery of Parent Common Stock to Parent or the Stockholders, the Escrow Agent
shall round off (up or down) any fractional share resulting from any calculation
hereunder to the nearest whole share.
4.3 Allocation. To the extent practicable all distributions made under
this Escrow Agreement, whether payable to Parent or to the Stockholders, shall
be taken proportionately from the Parent Common Stock registered in the name of
each Stockholder as specified on Schedule A hereto.
4.4 Distribution Consent. Any other provision of this Escrow Agreement to
the contrary notwithstanding, the Escrow Agent shall distribute the Escrow Fund
in such manner at such time or times as Parent and the Stockholder
Representative may, in writing, jointly direct.
4.5 No Recourse. Anything contained in this Escrow Agreement to the
contrary notwithstanding, none of the Indemnified Parties shall have any
recourse for any Losses against past, present or future directors, officers or
employees of the Company or the Stockholders, nor shall any of such persons be
personally liable for any such Losses, it being expressly understood that the
sole remedy of the
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Indemnified Parties for such Losses shall be against the Escrow Fund in
accordance with this Escrow Agreement.
4.6 Distribution Mechanics. The Escrow Agent shall effect distributions of
shares of Parent Common Stock constituting the Escrow Fund by effecting a book
entry transfer of shares from the DTC account of the Escrow Agent's nominee to
the Parent's transfer agent (the "Transfer Agent") and concurrently directing
the Transfer Agent in writing to effect transfer and delivery of such escrowed
shares to the Stockholders in accordance with their respective proportionate
interest in the shares being distributed (which instructions shall include such
information that Parent's transfer agent may reasonably require in order to
effect such distribution).
5. DIVIDENDS AND OTHER DISTRIBUTIONS; VOTING RIGHTS
5.1 Cash Dividends. All cash dividends in respect of the Parent Common
Stock still then held in escrow, and all other distributions in respect of the
Parent Common Stock still then held in escrow that are taxable dividends for
federal income tax purposes (net of any taxes required to be withheld from such
cash dividends or other distributions by Parent), shall be paid to the Escrow
Agent or its nominee for the account of the Stockholders, and the Escrow Agent
shall thereupon distribute (or cause the distribution of) such funds to the
Stockholders in accordance with their respective proportionate interests in the
Escrow Fund. The Escrow Agent shall distribute (or cause the distribution of)
funds received by it as provided in this Section 5.1 in a timely manner in
accordance with its normal practice. Except as expressly provided in this
Section 5.1 and as provided in Section 5.4 below, the Escrow Agent shall have no
duty, liability or obligation whatsoever with respect thereto.
5.2 Distributions. Distributions of any kind, other than those described
in Section 5.1, shall be made by Parent to the Escrow Agent or its nominee to be
held as Escrow Property in the Escrow Fund for the account of each Stockholder.
All such distributions shall be held in escrow as Escrow Property pursuant to
the provisions of this Escrow Agreement and be part of the Escrow Fund
5.3 Voting. Each Stockholder shall be entitled to exercise all voting
rights with respect to its proportionate interest in the Parent Common Stock
constituting the Escrow Fund so long as such Parent
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Common Stock continues to be held in escrow. For this purpose, the Escrow Agent
shall timely deliver (or cause to be delivered) to each Stockholder, in
accordance with its normal practices, any proxies with respect thereto which the
Escrow Agent receives together with customary voting instructions, and the
Escrow Agent shall vote (or cause to be voted) such Stockholder's shares in
accordance with the instructions received from such Stockholder.
5.4 Other Matters. The Escrow Agent shall timely deliver (or cause to be
delivered) to each Stockholder in accordance with its normal practices a copy of
each other document that is distributed to the Escrow Agent or its nominee as a
holder of Parent Common Stock. Subject to Parent and the Stockholder
Representative complying with Section 1.3, the Escrow Agent shall also prepare,
file with the appropriate authorities and distribute to the Stockholders all
legally required tax information forms covering such dividend payments.
6. SECURITY INTEREST IN ESCROW FUND
6.1 Grant of Security Interest. The Stockholders hereby grant, and shall
be deemed to have granted, to Parent a first priority perfected security
interest in the Escrow Property to secure the performance of the indemnification
obligations under this Escrow Agreement. The Escrow Agreement shall constitute a
security agreement under applicable law.
6.2 Attachment; Perfection. This security interest shall attach as of the
execution of this Escrow Agreement. For the purpose of perfecting Parent's
security interest in the above designated Escrow Property held by the Escrow
Agent pursuant to this Escrow Agreement, Parent designates the Escrow Agent to
acquire and maintain possession of the Escrow Property and act as bailee for
Parent with notice of Parent's security interest in said property under the
California Uniform Commercial Code. By possession of the Escrow Property, the
Escrow Agent acknowledges that it holds the Escrow Property for Parent for
purposes of perfecting the security interest. The Stockholder Representative and
the Escrow Agent shall take all other reasonable actions requested by Parent (at
Parent's sole expense) to maintain the perfection and priority of the security
interest in the Escrow Property; provided, that the Escrow Agent and the
Stockholder Representative do not make any representation or warranty with
regard to the creation or
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perfection, hereunder or otherwise, of any such security interest, and shall
have no responsibility at any time to ascertain whether or not any security
interest exists.
6.3 Release. Parent shall release the security interest herein granted and
the security interest shall be terminated to the extent of any disbursement of
the Escrow Property hereunder by the Escrow Agent in accordance with the terms
of this Escrow Agreement. Upon final disbursement of the Escrow Property to
Parent or the Stockholders, Parent shall do all acts and things reasonably
necessary to release and extinguish such security interest. The grant of this
security interest pursuant to this Section 6 shall not in any way modify the
procedures the parties hereto must follow with respect to the release of Escrow
Property from the Escrow Fund.
7. ESCROW AGENT'S DUTIES AND FEES
7.1 Duties Limited. Each of the other parties hereto acknowledges and
agrees that the Escrow Agent (a) shall not be responsible for compliance with
any obligations set forth in the agreements referred to or described herein
(including, without limitation, the Merger Agreement), or for determining or
compelling compliance therewith, and shall not otherwise be bound thereby, (b)
shall be obligated only for the performance of such duties as are expressly and
specifically set forth in this Escrow Agreement on its part to be performed,
each of which are ministerial (and shall not be construed as fiduciary) in
nature, and no implied duties or obligations of any kind shall be read into this
Escrow Agreement against or on the part of the Escrow Agent, (c) shall not be
obligated to take any legal or other action hereunder, other than as expressly
and specifically set forth in this Escrow Agreement, which might in its judgment
involve or cause it to incur any expense or liability unless it shall have been
furnished with acceptable indemnification, (d) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), instrument,
statement, certificate, request or other document furnished to it hereunder and
believed by it in good faith to be genuine and to have been signed or presented
by the proper person (and shall have no responsibility for determining the
accuracy thereof), provided that the directions given in such notice,
instruction, instrument, statement, certificate, request or other document are
on their
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face consistent with the terms of this Escrow Agreement, (e) may consult counsel
satisfactory to it, including in-house counsel, and the written opinion of such
counsel in any instance shall be full and complete authorization and protection
in respect of any such action or omission by it hereunder in good faith and in
accordance with such written opinion of such counsel, and (f) shall have no duty
or responsibility with regard to any loss resulting from the decline in the
market value of the Escrow Fund in accordance with the terms of this Escrow
Agreement. The Escrow Agent need not maintain any insurance with respect to the
Escrow Fund.
7.2 Reliance. The Escrow Agent, acting (or refraining from acting) in good
faith, shall not be liable for any mistake of fact or error of judgment by it or
for any acts or omissions by it of any kind unless caused by gross negligence or
willful misconduct, and the Escrow Agent may rely, and shall be protected in
acting or refraining from acting, upon any written notice, instruction or
request furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper party or parties; provided, that, as set
forth below, any modification of this Escrow Agreement shall be signed by all of
the parties hereto. The Escrow Agent is hereby authorized to comply with any
judicial order or legal process which stays, enjoins, directs or otherwise
affects the transfer or delivery of any part of the Escrow Fund to any party
hereto and shall incur no liability for any delay or loss which may occur as a
result of such compliance.
7.3 Indemnification. Parent agrees to indemnify the Escrow Agent, its
officers, directors, agents or employees for, and to hold the Escrow Agent
harmless against, any loss, liability, expense (including reasonable attorneys'
fees and expenses), third party claim and demand, incurred by it without gross
negligence or willful misconduct on its part, arising out of or in connection
with its entering into this Escrow Agreement and the carrying out of its duties
hereunder. Anything in this Escrow Agreement to the contrary notwithstanding, in
no event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever. The Escrow Agent may consult with counsel
of its own choice, and shall have full and complete authorization and protection
for any action taken or suffered by it hereunder in good faith and in accordance
with the opinion of such counsel. The foregoing
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indemnification shall survive the resignation of the Escrow Agent or the
termination of this Escrow Agreement.
7.4 Successor Escrow Agents. The Escrow Agent may resign and be discharged
from its duties or obligations hereunder at any time by giving 30 days' notice
in writing of such resignation to Parent and the Stockholder Representative.
Parent and the Stockholder Representative, together, shall have the right to
terminate the appointment of the Escrow Agent hereunder by giving to it notice
in writing of such termination specifying the date upon which such termination
shall take effect. In either such event, Parent and the Stockholder
Representative hereby agree to promptly appoint a successor escrow agent; if
Parent and the Stockholder Representative are unable to appoint a successor
escrow agent within 25 days after the Escrow Agent's notice of resignation, the
Escrow Agent may petition a court of competent jurisdiction to appoint a
successor. The parties hereto agree that, upon demand of such successor escrow
agent, all property held by the Escrow Agent hereunder shall be turned over and
delivered to such successor escrow agent, which thereupon shall become bound by
all of the provisions hereof and shall be deemed the "Escrow Agent" for all
purposes of this Escrow Agreement thereafter.
7.5 Fees and Expenses. Parent agrees to pay to the Escrow Agent the fees
determined in accordance with, and payable as specified in, the Schedule of Fees
attached hereto as Schedule B (the "Fee Schedule") as compensation for the
services to be rendered by it hereunder and to pay to or reimburse the Escrow
Agent for all reasonable attorneys' fees incurred or made by it in connection
with the acceptance and performance of its duties hereunder.
8. STOCKHOLDER REPRESENTATIVE
8.1 Appointment. By virtue of the Company Stockholder Approval, each
Stockholder shall be deemed to have irrevocably constituted and appointed Joseph
T. Kingsley (the "Stockholder Representative") as its agent and true and lawful
attorney in fact with full power and discretion, in the name of and for and on
behalf of each Stockholder, in connection with all matters arising from,
contemplated by or relating to this Escrow Agreement or the transactions
contemplated hereby; provided, that the Stockholder Representative shall only
have the powers and be authorized to carry out the duties
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described in this Escrow Agreement. The Stockholder Representative may resign as
such at any time by giving notice to Parent of such resignation. Upon such
resignation, a majority in interest of the Stockholders shall appoint a
replacement Stockholder Representative.
8.2 Powers. The powers of the Stockholder Representative shall include,
without limitation, the power to represent each Stockholder with respect to all
aspects of this Escrow Agreement and the transactions contemplated hereby, which
power shall include, without limitation, the power to (i) waive any conditions
of this Escrow Agreement, (ii) amend this Escrow Agreement and any agreement
(other than the Merger Agreement) executed in connection herewith; provided,
that no amendment that by law requires approval of the Stockholders may be made
by the Stockholder Representative without the approval of the Stockholders,
(iii) receive notices or other communications, (iv) deliver any notices,
certificates or other documents required, (v) retain professional advisors in
connection with the performance of its duties hereunder and (vi) take all such
other actions and to do all such other things as the Stockholder Representative
deems necessary or advisable with respect to this Escrow Agreement and the
transactions contemplated hereby; provided, that the Stockholder Representative
shall not have the power to vote on behalf of the Stockholders on matters that
require a vote of the stockholders of Parent; and provided further, that the
Stockholder Representative's powers shall be limited to those necessary in
connection with and for the purposes of administering this Escrow Agreement.
Parent and the Escrow Agent shall have the right to rely upon the acts taken or
omitted to be taken by the Stockholder Representative on behalf of Stockholders,
and shall have no duty to inquire as to the acts and omissions of the
Stockholder Representative. By virtue of the Company Stockholder Approval, each
Stockholder shall be deemed to have acknowledged and agreed that (i) any act
taken or omitted to be taken by the Stockholder Representative pursuant to the
authority granted in this Escrow Agreement shall be deemed to have been taken or
omitted to be taken by such Stockholder, (ii) delivery of all communications by
Parent or the Escrow Agent to the Stockholder Representative shall be deemed
deliveries to the Stockholders, (iii) Parent and the Escrow Agent shall not have
any liability with respect to any aspect of the distribution or communication of
such deliveries between the Stockholder Representative and any Stockholder or
among Stockholders, and (iv) any disclosure made to the Stockholder
Representative by or on behalf of Parent
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<PAGE>
shall be deemed to be a disclosure made to each Stockholder. The provisions of
this appointment shall be binding upon the successors and permitted assigns of
each Stockholder. Neither the Stockholder Representative nor any of its
employees, partners, agents, affiliates or other representatives shall incur any
liability to any Stockholder or any employees, partners, agents, affiliates or
other representatives of any Stockholder for any reason relating to the
performance of its duties hereunder, except for actions or omissions
constituting gross negligence or willful misconduct. Each Stockholder agrees to
indemnify the Stockholder Representative, its employees, partners, agents,
affiliates or other representatives for, and to hold the Stockholder
Representative harmless against, any loss, liability, expense (including
reasonable attorneys' fees and expenses), third-party claim and demand, incurred
by it without gross negligence or willful misconduct on its part, arising out of
or in connection with its entering into this Escrow Agreement and the carrying
out of its duties hereunder. The Stockholder Representative may consult with
counsel of its own choice, and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. The foregoing indemnification shall
survive the resignation of the Stockholder Representative or the termination of
this Escrow Agreement.
8.3 Fees and Expenses. All expenses of the Stockholder Representative
(including the fees and expenses of the Stockholder Representative's attorneys
and other professional advisors) borne by the Stockholders but, subject to the
availability of adequate amounts in the Escrow Fund, shall be submitted to
Parent for payment; provided, that each such payment by Parent shall
automatically be deemed a Final Claim for Reimbursement pursuant to the terms of
Section 2.2 and Section 3.2 hereof.
9. NOTICES
Unless otherwise provided herein, any notice, request, instruction
or other document to be given hereunder shall be in writing and (unless
otherwise specifically provided herein) shall be deemed to have been given (i)
upon personal delivery, if delivered by hand, (ii) three days after the date of
deposit in the mails, postage prepaid, if mailed by certified or registered
mail, or (iii) the next business day if sent by facsimile transmission (if
receipt is electronically confirmed) or by a prepaid overnight courier service,
and
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<PAGE>
in each case at the respective addresses or numbers specified below or such
other address or number as such party may have fixed by notice:
If to Parent, to it at:
PE Corporation
761 Main Avenue
Norwalk, Connecticut 06859-0313
Attention: Secretary
Facsimile: (203) 761-2888
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard A. Garvey, Esq.
Facsimile: (212) 455-2502
If to the Stockholder Representative, to:
Joseph T. Kingsley
c/o Paracel, Inc.
80 South Lake Avenue, Suite 650
Los Angeles, California 90067-6035
Facsimile: 626-744-2001
with a copy to:
O'Melveny & Myers LLP
1999 Avenue of the Stars, Suite 700
Los Angeles, California 90067-6035
Attention: Kendall R. Bishop, Esq.
Facsimile: (310) 246-6779
If to the Stockholders, to them
as set forth on Schedule A hereto
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<PAGE>
And if to the Escrow Agent, to:
If by courier:
State Street Bank and Trust Company
Global Investor Services Group - Corporate Trust
2 Avenue de Lafayette - 6th Floor
Boston, Massachusetts 02111
Attention: Christina Mullen re: PE Corporation - Paracel Escrow
Telephone: (617) 662-1807
Facsimile: (617) 662-1463
Or, if by U.S. mail:
State Street Bank and Trust Company
Global Investor Services Group - Corporate Trust
P.O. Box 778
Boston, Massachusetts 02102-0778
Attention: Christina Mullen re: PE Corporation - Paracel Escrow
Telephone: (617) 662-1807
Facsimile: (617) 662-1463
Any party may change the persons and addresses to which notices,
payments, instructions or other communications are to be sent to such party by
giving written notice of any such change in the manner provided herein for
giving notice. Notices sent by facsimile transmission shall be confirmed in
writing by registered or certified mail, return receipt requested.
10. ARBITRATION
If any demand shall be made for arbitration hereunder in respect of
any Claim or other matter in dispute hereunder between the Stockholder
Representative and Parent, such Claim or matter shall be settled by arbitration
in Los Angeles, California, before one arbitrator chosen from the Commercial
Panel in accordance with the Rules then pertaining of the American Arbitration
Association. The arbitrator shall consider only the items in dispute, must act
within the bounds of this Escrow Agreement, and shall be instructed to act
within thirty days to resolve all items in dispute. The "final decision" of the
arbitrator shall be a conclusive determination of the matter and shall be
binding upon the Stockholders, the Stockholder Representative, Parent and the
Escrow Agent, and shall not be contested by any of them. The arbitrator shall
determine the party (Parent or the Stockholder Representative, as the case may
be) whose asserted positions before the arbitrator are in the aggregate further
from the aggregate resolutions determined by the arbitrator, which
non-prevailing party shall pay the costs and expenses of the arbitrator. Any
such costs or expenses to be paid by the Stockholder Representative hereunder
will be paid in accordance with Section 8.3.
11. JURY WAIVER
All parties to this Escrow Agreement waive any rights they may have
to a jury trial.
12. MISCELLANEOUS
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<PAGE>
12.1 Governing Law. This Escrow Agreement shall be governed by, and
construed in accordance with, the laws of the State of California applicable to
agreements made and to be performed entirely within such State.
12.2 Assignment. This Escrow Agreement shall be binding upon, and inure to
the benefit of, each of the Stockholders (or such Stockholder's successor), the
Stockholder Representative, Parent, the Escrow Agent and the successors and
assigns of the Stockholder Representative, Parent and the Escrow Agent, but no
delegation of any obligations provided for herein may be made by any party
hereto without the express written consent of the other parties hereto. No
interest of any Stockholder in this Escrow Agreement or in the Escrow Fund
(including any Parent Common Stock comprising any portion of the Escrow Fund)
may be assigned, transferred, encumbered or otherwise disposed of otherwise than
pursuant to the laws of descent and distribution and any purported disposition
in violation of this provision shall be null and void.
12.3 Headings. The section headings contained in this Escrow Agreement are
inserted for convenience of reference only, and shall not affect the meaning or
interpretation of this Escrow Agreement.
12.4 Parties in Interest. This Escrow Agreement shall inure to the benefit
of all indemnified Parties, who shall have the rights, both legal and equitable,
necessary to enforce this Escrow Agreement in all respects.
12.5 Counterparts. This Escrow Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same agreement.
12.6 Force Majeure. The Escrow Agent shall not be responsible for delays
or failures in performance resulting from acts beyond its control. Such acts
shall include, but not be limited to, acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures, computer viruses, power failures, earthquakes
or other disasters.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
WITNESS the execution of this Escrow Agreement as of the date first
above written.
PE CORPORATION
__________________________________________
Joseph T. Kingsley, as Stockholder Representative
By:______________________________________
STATE STREET BANK AND TRUST COMPANY, as Escrow Agent
By:______________________________________
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<PAGE>
Schedule A
Shares Initially Constituting Escrow Fund
Name and Address of Shares in Escrow Fund Tax Identification Numbers
Stockholder Beneficially Owned
[To Be Supplied at Closing]
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<PAGE>
Schedule B
Escrow Agent Fee Schedule
[Intentionally Omitted]
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<PAGE>
Annex IV
OPINION OF THOMAS WEISEL
[Thomas Weisel Letterhead]
March 18, 2000
Board of Directors
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, CA 91101-2616
Gentlemen:
We understand that Paracel, Inc., a California corporation (the
"Company"), PE Corporation, a Delaware corporation (the "Parent"), and Umbrella
Acquisition Corp, a California corporation and direct wholly owned subsidiary of
PE Corp. ("Sub"), have entered into a Agreement and Plan of Merger dated March
20, 2000 (the "Merger Agreement"), pursuant to which Merger Company will be
merged with and into Seller, which will be the surviving entity (the "Merger").
Pursuant to the Merger, as more fully described in the Merger Agreement and as
further described to us by management of the Company, we understand that the
outstanding shares of common stock of the Company ("Company Common Stock") will
be converted into the right to receive such number of shares of PE Corporation -
Celera Genomics Common Stock, par value $0.01 per share (including the rights
associated with such shares pursuant to Parent's Shareholder Protection Rights
Plan and as adjusted for stock splits in the form of stock dividends, the
"Parent Common Stock"), equal to the quotient obtained by dividing $283 million
by the average of the closing prices of the Parent Common Stock on the New York
Stock Exchange Composite Transaction Tape on each of the 10 consecutive trading
days immediately preceding (and excluding) the second trading day prior to the
effective time of the Merger, subject to certain adjustments (the "Merger
Consideration"); provided that the number of shares of Parent Common Stock
issued at closing will not be more than 2.26 million nor less than 1.55 million.
The terms and conditions of the Merger are set forth in more detail in the
Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
Merger Consideration to be received by the shareholders of the Company pursuant
to the Merger is fair to such shareholders from a financial point of view, as of
the date hereof. We were not requested to nor did we solicit or assist the
Company in soliciting indications of interest from third parties for all or any
part of the Company.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company
and Parent's Celera Genomics Group, including, with respect to the Company,
audited financial statements for the three years ended December 31, 1998, and
preliminary unaudited financial statements for the year ended December 31, 1999,
and, with respect to Parent's Celera Genomics Group audited combined financial
statements for the three years ended June 30, 1999, unaudited combined financial
statements for the six months ended December 31, 1999, and Parent's final
prospectus relating to an offering of Parent Common Stock dated February 29,
2000, and certain other relevant financial and operating data relating to the
Company and Parent made available to us from published sources and from the
internal records of the Company and Parent, including certain materials prepared
in connection with the February 2000 offering of Parent Common Stock, (ii)
reviewed the financial terms and conditions of the Merger Agreement; (iii)
reviewed certain publicly available information concerning the trading of, and
the trading market for, Parent Common Stock; (iv) compared the Company and
Parent's Celera Genomics Group from a financial point of view with certain other
companies
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<PAGE>
in the life sciences and genomics industries which we deemed to be relevant; (v)
considered the financial terms, to the extent publicly available, of selected
recent business combinations of companies in the life sciences and genomics
industries which we deemed to be comparable, in whole or in part, to the Merger;
(vi) reviewed and discussed with representatives of the management of the
Company and Parent certain information of a business and financial nature
regarding the Company and Parent's Celera Genomics Group, furnished to us by
them, including financial forecasts and related assumptions for the Company and
Parent's Celera Genomics Group which, in the case of the Company and with the
Company's consent, included financial forecasts for Parent's Celera Genomics
Group prepared by the Thomas Weisel Partners research analyst; (vii) made
inquiries regarding and discussed the Merger and the Merger Agreement and other
matters related thereto with the Company's counsel; and (viii) performed such
other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for the Company and Parent's Celera Genomics Group provided to us as
described in the preceding paragraph, upon their advice and with your consent we
have assumed for purposes of our opinion that the forecasts have been reasonably
prepared on bases reflecting the best available estimates and judgments of their
respective managements at the time of preparation as to the future financial
performance of the Company and Parent and that they provide a reasonable basis
upon which we can form our opinion.
We have assumed that there have been no material changes in the Company's
or Parent's assets, financial condition, results of operations, business or
prospects since the respective dates of their last financial statements made
available to us. We have relied on advice of counsel and independent accountants
to the Company as to all legal and financial reporting matters with respect to
the Company, the Merger and the Merger Agreement. We have assumed that the
Merger will be consummated in a manner that complies in all respects with the
applicable provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Securities Exchange Act of 1934 and all other applicable federal and
state statutes, rules and regulations. In addition, we have not assumed
responsibility for making an independent evaluation, appraisal or physical
inspection of any of the assets or liabilities (contingent or otherwise) of the
Company or Parent, nor have we been furnished with any such appraisals. You have
informed us, and we have assumed, that the Merger will be recorded as a purchase
under generally accepted accounting principles. Finally, our opinion is based on
economic, monetary and market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Accordingly, although
subsequent developments may affect this opinion, we have not assumed any
obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by the Company of any
of the conditions of its obligations thereunder.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, including rendering this
opinion, all of which is contingent upon the consummation of the Merger. In the
ordinary course of our business, we actively trade the equity securities of
Parent for our own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Merger Consideration to be received by the
shareholders of the Company pursuant to the Merger is fair to such shareholders
from a financial point of view, as of the date hereof.
We are not expressing an opinion regarding the price at which Parent Common
Stock may trade at any future time. The Merger Consideration to be received by
the shareholders of the Company pursuant to the
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<PAGE>
Merger is based upon an exchange ratio that varies with the market price of
Parent Common Stock and, accordingly, the actual number of shares of Parent
Common Stock to be issued in the Merger and, in certain circumstances, the
market value of the Merger Consideration issuable at the time of Closing, may
vary significantly.
This opinion is directed to the Board of Directors of the Company in its
consideration of the Merger and is not a recommendation to any shareholder as to
how such shareholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to the
shareholders and does not address the relative merits of the Merger and any
alternatives to the Merger, the Company's underlying decision to proceed with or
effect the Merger, or any other aspect of the Merger. This opinion may not be
used or referred to by the Company or Parent, or quoted or disclosed to any
person in any manner, without our prior written consent, which consent is hereby
given to the inclusion of this opinion in any proxy statement, tender offer
statement or prospectus filed with the Securities and Exchange Commission in
connection with the Merger. In furnishing this opinion, we do not admit that we
are experts within the meaning of the term "experts" as used in the Securities
Act and the rules and regulations promulgated thereunder, nor do we admit that
this opinion constitutes a report or valuation within the meaning of Section 11
of the Securities Act.
Very truly yours,
THOMAS WEISEL PARTNERS LLC
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<PAGE>
Annex V
CHAPTER 13 OF THE CCC
Section
1300. Reorganization or short-form merger; dissenting shares; corporate purchase
at fair market value; definitions
1301. Notice to holders of dissenting shares in reorganizations; demand for
purchase; time; contents
1302. Submission of share certificates for endorsement; uncertificated
securities
1303. Payment of agreed price with interest; agreement fixing fair market value;
filing; time of payment
1304. Action to determine whether shares are dissenting shares or fair market
value; limitation; joinder, consolidation; determination of issues;
appointment of appraisers
1305. Report of appraisers; confirmation; determination by court; judgment;
payment; appeal; costs
1306. Prevention of immediate payment; status as creditors; interest
1307. Dividends on dissenting shares
1308. Rights of dissenting shareholders pending valuation; withdrawal of demand
for payment
1309. Termination of dissenting share and shareholder status
1310. Suspension of right to compensation or valuation proceedings; litigation
of shareholders' approval
1311. Exempt shares
1312. Right of dissenting shareholder to attack, set aside or rescind merger or
reorganization; restraining order or injunction; conditions
ss.1300. Reorganization or short-form merger; dissenting shares; corporate
purchase at fair market value; definitions
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) of (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the National Market System of the NASDAQ Stock Market,
and the notice of meeting of shareholders to act upon the reorganization
summarizes this section and Sections 1301, 1302, 1303 and 1304; provided,
however, that this provision does not apply to any shares with respect to which
there exists any restriction on transfer imposed by the corporation or by any
law or regulation; and provided, further, that this provision does not apply to
any class of shares described
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<PAGE>
in subparagraph (A) or (B) if demands for payment are filed with respect to 5
percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with Section
1301.
(4) Which the dissenting shareholder has submitted for endorsement,
in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
ss.1301. Notice to holders of dissenting shares in reorganizations; demand for
purchase; time; contents
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
ss.1302. Submission of share certificates for endorsement; uncertificated
securities
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<PAGE>
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b)if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
ss.1303. Payment of agreed price with interest; agreement fixing fair market
value; filing; time of payment
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
ss.1304. Action to determine whether shares are dissenting shares or fair market
value; limitation; joinder, consolidation; determination of issues;
appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
ss.1305. Report of appraisers; confirmation; determination by court; judgment;
payment; appeal; costs
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the
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<PAGE>
report shall be submitted to the court and considered on such evidence as the
court considers relevant. If the court finds the report reasonable, the court
may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
ss.1306. Prevention of immediate payment; status as creditors; interest
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
ss. 1307. Dividends on dissenting shares
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
herefore.
ss.1308. Rights of dissenting shareholders pending valuation; withdrawal of
demand for payment
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
ss.1309. Termination of dissenting share and shareholder status
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
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(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
ss.1310. Suspension of right to compensation or valuation proceedings;
litigation of shareholders' approval
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
ss. 1311. Exempt shares
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
ss.1312. Right of dissenting shareholder to attack, set aside or rescind merger
or reorganization; restraining order or injunction; conditions
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice
V-5
<PAGE>
to the corporation and upon a determination by the court that clearly no other
remedy will adequately protect the complaining shareholder or the class of
shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2)a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
V-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") permits
PE Corporation's board of directors to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with any
threatened, pending or completed action (except settlements or judgments in
derivative suits), suit or proceeding in which such person is made a party by
reason of his or her being or having been a director, officer, employee or agent
of the company, in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The DGCL provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise.
Our certificate of incorporation and bylaws provide for indemnification of
our directors and officers to the fullest extent permitted by law.
As permitted by sections 102 and 145 of the DGCL, our certificate of
incorporation eliminates a director's personal liability for monetary damages to
PE Corporation and its stockholders arising from a breach or alleged breach of a
director's fiduciary duty except for liability under section 174 of the DGCL,
for liability for any breach of the director's duty of loyalty to PE Corporation
or its stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or for any transaction
which the director derived an improper personal benefit.
The directors and officers of PE Corporation are covered by insurance
policies indemnifying against certain liabilities, including certain liabilities
arising under the Securities Act which might be incurred by them in such
capabilities and against which they cannot be indemnified by the company.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger, dated as of March 20, 2000, among PE
Corporation, Umbrella Acquisition Corp. and Paracel, Inc.
(included as Annex I to the Prospectus).
2.2 Voting Agreement, dated as of March 20, 2000, among Certain
Stockholders of Paracel, Inc., PE Corporation and Umbrella
Acquisition Corp. (included as Annex II to the Prospectus).
2.3 Form of Escrow Agreement among PE Corporation, Joseph T. Kingsley,
as Representative of the Former Stockholders of Paracel, Inc., and
the Surviving Corporation (included as Annex III to the
Prospectus).
3.1 Certificate of Incorporation of PE Corporation (incorporated by
reference to Exhibit 3.1 to PE Corporation's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1999 (Commission
file number 1-4389)).
3.2 Bylaws of PE Corporation (incorporated by reference to Exhibit 3.2
to PE Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999 (Commission file number 1-4389)).
4 Shareholder Protection Rights Agreement, dated as of April 28,
1999, between PE Corporation and BankBoston, N.A. (incorporated by
reference to Exhibit 4.1 to PE Corporation's Registration
Statement on Form S-4 (No. 333-67797)).
5.1* Opinion of Simpson Thacher & Bartlett as to the legality of the
securities.
8.1* Opinion of Simpson Thacher & Bartlett regarding tax matters.
8.2* Opinion of O'Melveny & Myers LLP regarding tax matters.
23.1* Consent of PricewaterhouseCoopers LLP.
<PAGE>
Exhibit
Number Description
------- -----------
23.2 Consent of Simpson Thacher & Bartlett (included in Exhibits 5.1
and 8.1).
23.3 Consent of O'Melveny & Myers LLP (included in Exhibit 8.2).
23.4 Consent of Thomas Weisel Partners LLC (included in Exhibit 99.1).
24.1** Powers of Attorney.
99.1 Opinion of Thomas Weisel Partners LLC (included as Annex IV to the
Prospectus).
99.4* Form of Proxy for Special Meeting of Stockholders of Paracel, Inc.
- ----------------------------
* Filed herewith.
** Filed previously.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission that such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registrant statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act will be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus will be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time will be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Norwalk, State of Connecticut, on May
5, 2000.
Pursuant to the requirements of the Securities Act, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
PE CORPORATION
By: /s/ WILLIAM B. SAWCH
--------------------------------
Name: William B. Sawch
Title: Senior Vice President and
General Counsel
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ TONY L. WHITE * Chairman of the Board of Directors, May 5, 2000
- --------------------------------- President-and-Chief-Executive-Officer
Tony L. White (principal executive officer)
/s/ DENNIS L. WINGER * Senior Vice President and Chief May 5, 2000
- --------------------------------- Financial-Officer-(principal-financial
Dennis L. Winger officer)
/s/ VIKRAM JOG * Corporate Controller (principal May 5, 2000
- --------------------------------- accounting-officer)
Vikram Jog
/s/ RICHARD H. AYERS * Director May 5, 2000
- ---------------------------------
Richard H. Ayers
/s/ ROBERT H. HAYES * Director May 5, 2000
- ---------------------------------
Robert H. Hayes
/s/ ARNOLD J. LEVINE * Director May 5, 2000
- ---------------------------------
Arnold J. Levine
/s/ THEODORE E. MARTIN * Director May 5, 2000
- ---------------------------------
Theodore E. Martin
/s/ GEORGES C. ST. LAURENT, JR. * Director May 5, 2000
- ---------------------------------
Georges C. St. Laurent, Jr.
/s/ CAROLYN W. SLAYMAN * Director May 5, 2000
- ---------------------------------
Carolyn W. Slayman
/s/ ORIN R. SMITH * Director May 5, 2000
- ---------------------------------
Orin R. Smith
/s/ JAMES R. TOBIN * Director May 5, 2000
- ---------------------------------
James R. Tobin
</TABLE>
* By William B. Sawch, as attorney-in-fact
EXHIBIT 5.1
[Simpson Thacher & Bartlett Letterhead]
May 5, 2000
PE Corporation
761 Main Avenue
Norwalk, Connecticut 06859
Ladies and Gentlemen:
We have acted as counsel to PE Corporation, a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), relating to
the proposed issuance by the Company of up to 2,277,625 shares of PE
Corporation-Celera Genomics Group Common Stock, par value $0.01 per share (the
"Celera Common Stock"), upon consummation of the merger (the "Merger")
contemplated by the Agreement and Plan of Merger, dated as of March 20, 2000
(the "Merger Agreement"), among the Company, Umbrella Acquisition Corp., a
California corporation and a direct wholly owned subsidiary of the Company
("Merger Sub"), and Paracel, Inc., a California corporation ("Paracel"). Upon
consummation of the Merger, Merger Sub will be merged with and into Paracel and
each outstanding share of common stock, no par value, of Paracel will be
converted into shares of the Celera Common Stock (the "Shares"), all as more
fully described in the Registration Statement.
We have examined the Registration Statement and the Merger Agreement
and the originals, or duplicates or certified or conformed copies, of such
records, agreements, instruments and other documents and have made such other
and further investigations as we have deemed relevant and necessary in
connection with the opinions expressed herein. As to questions of fact material
to this opinion, we have relied upon certificates of public officials and of
officers and representatives of the Company.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as duplicates or certified or conformed copies,
and the authenticity of the originals of such latter documents.
<PAGE>
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that the Shares have been duly
authorized and, when the Shares shall have been issued in accordance with the
terms of the Merger Agreement, the Shares will be validly issued, fully paid and
nonassessable.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the Delaware General
Corporation Law.
We hereby consent to the filing of this opinion letter as Exhibit
5.1 to the Registration Statement and to the use of our name under the caption
"Legal Opinions" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
Exhibit 8.1
[Simpson Thacher & Bartlett Letterhead]
May 5, 2000
PE Corporation
761 Main Avenue
Norwalk, Connecticut 06859
Ladies and Gentlemen:
We are acting as your counsel in connection with the proposed
acquisition by PE Corporation, of Paracel, Inc. pursuant to the proposed merger
(the "Merger") of Umbrella Acquisition Corp., a direct wholly owned subsidiary
of PE Corporation, into Paracel, Inc., whereupon Paracel, Inc. will be the
surviving corporation and the separate existence of Umbrella Acquisition Corp.
will cease. The Merger will be consummated pursuant to the Agreement and Plan of
Merger dated as of March 20, 2000 by and among PE Corporation, Umbrella
Acquisition Corp., and Paracel, Inc. (the "Agreement").
At your request, in connection with the filing of the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission, as
amended through the date hereof, in connection with the Merger (the
"Registration Statement"), we are rendering our opinion with regard to certain
material United States federal income tax consequences of the Merger. All
capitalized items used but not defined herein shall have the same meanings as in
the Agreement.
In arriving at the opinion expressed below, we have examined and
relied upon the accuracy and completeness of the facts, information, covenants
and representations contained in originals, or copies certified or otherwise
identified to our satisfaction, of the Agreement and the Registration Statement.
We have assumed with your consent that (i) the Merger will be effected in
accordance with the Agreement (and exhibits thereto) and the California
Corporations Code and as described in the Registration Statement, (ii) the
representations made by Parent, Sub and the Company in letters provided to us
and O'Melveny & Myers LLP, counsel to the Company, dated as of the date hereof
(the "Tax Certificates") are true, correct and complete, and will be true,
correct and
<PAGE>
complete as of the Effective Time (as if made as of the Effective Time), and
(iii) any representations made in such letters "to the best knowledge of" or
similarly qualified are true, correct and complete without such qualification.
In arriving at the opinion expressed below, we also have assumed,
without making any independent investigation, that all such documents as
furnished to us are complete and authentic, that the signatures on all documents
are genuine, and that all such documents have been, or in the case of drafts,
will be, duly authorized, executed and delivered. We have further assumed that
the transactions will be consummated and the parties will act in accordance with
these documents.
Based on and subject to the foregoing and subject to the
qualifications, limitations, representations and assumptions contained in the
portion of the Registration Statement captioned "THE MERGER -- Material United
States Federal Income Tax Consequences," the discussion contained in the
Registration Statement under the caption "THE MERGER -- Material United States
Federal Income Tax Consequences," insofar as such discussion purports to
constitute a summary of matters of United States federal income tax law and
regulations or legal conclusions with respect thereto, constitutes an accurate
summary of the matters described therein in all material respects.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the federal law of the
United States.
We hereby consent to the filing of this opinion letter as Exhibit
8.1 to the Registration Statement and to the use of our name under the caption
"LEGAL OPINIONS" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
Exhibit 8.2
[O'Melveny & Myers LLP Letterhead]
May 5, 2000
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, CA 91101-2616
Ladies and Gentlemen:
We are acting as your counsel in connection with the proposed
acquisition by PE Corporation, of Paracel, Inc. pursuant to the proposed merger
(the "Merger") of Umbrella Acquisition Corp., a direct wholly owned subsidiary
of PE Corporation, into Paracel, Inc., whereupon Paracel, Inc. will be the
surviving corporation and the separate existence of Umbrella Acquisition Corp.
will cease. The Merger will be consummated pursuant to the Agreement and Plan of
Merger dated as of March 20, 2000 by and among PE Corporation, Umbrella
Acquisition Corp., and Paracel, Inc. (the "Agreement").
At your request, in connection with the filing of the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission, as
amended through the date hereof, in connection with the Merger (the
"Registration Statement"), we are rendering our opinion with regard to certain
material United States federal income tax consequences of the Merger. All
capitalized items used but not defined herein shall have the same meanings as in
the Agreement.
In arriving at the opinion expressed below, we have examined and
relied upon the accuracy and completeness of the facts, information, covenants
and representations contained in originals, or copies certified or otherwise
identified to our satisfaction, of the Agreement and the Registration Statement.
We have assumed with your consent that (i) the Merger will be effected in
accordance with the Merger Agreement (and exhibits thereto) and the California
Corporations Code and as described in the Registration Statement, (ii) the
representations made by Parent, Sub and the Company in letters provided to us
and Simpson Thacher & Bartlett, counsel to the Company, dated as of the date
hereof (the "Tax Certificates") are true, correct and complete, and will be
true, correct and
<PAGE>
complete as of the Effective Time (as if made as of the Effective Time), and
(iii) any representations made in such letters "to the best knowledge of" or
similarly qualified are true, correct and complete without such qualification.
In arriving at the opinion expressed below, we also have assumed,
without making any independent investigation, that all such documents as
furnished to us are complete and authentic, that the signatures on all documents
are genuine, and that all such documents have been, or in the case of drafts,
will be, duly authorized, executed and delivered. We have further assumed that
the transactions will be consummated and the parties will act in accordance with
these documents.
Based on and subject to the foregoing and subject to the
qualifications, limitations, representations and assumptions contained in the
portion of the Registration Statement captioned "THE MERGER -- Material United
States Federal Income Tax Consequences," the discussion contained in the
Registration Statement under the caption "THE MERGER -- Material United States
Federal Income Tax Consequences," insofar as such discussion purports to
constitute a summary of matters of United States federal income tax law and
regulations or legal conclusions with respect thereto, constitutes an accurate
summary of the matters described therein in all material respects.
We hereby consent to the filing of this opinion letter as Exhibit
8.2 to the Registration Statement and to the use of our name under the caption
"LEGAL OPINIONS" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ O'MELVENY & MYERS LLP
O'MELVENY & MYERS LLP
Exhibit 23.1
CONSENT OF PRICEWATERHOUSECOOPERS LLP
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of PE Corporation of our reports dated July 30, 1999
relating to the combined financial statements of PE Biosystems Group, the
combined financial statements of Celera Genomics Group and the consolidated
financial statements of PE Corporation, which appear in the 1999 Annual Report
to Stockholders of PE Corporation, which is incorporated by reference in PE
Corporation's Annual Report on Form 10-K for the year ended June 30, 1999. We
also consent to the incorporation by reference of our reports dated July 30,
1999 relating to the Financial Statement Schedules, which appear in such Annual
Report on Form 10-K. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Stamford, Connecticut
May 4, 2000
Exhibit 99.4
[GRAPHIC OMITTED]
[LOGO]PARACEL
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF PARACEL, INC.
================================================================================
The undersigned hereby appoints Kwang-I Yu and Joseph T. Kingsley, and each of
them, with full power of substitution and resubstitution, as attorneys, agents
and proxies to vote his, her or its shares of Paracel common stock on behalf of
the undersigned at the special meeting of stockholders of Paracel, called by the
Paracel board of directors, to be held at Paracel's offices at 80 South Lake
Avenue, Suite 650, Pasadena, California 91101, on June 9, 2000, at 10 a.m.
Pacific Time, or any postponement or adjournment thereof, for the following
purposes:
1. To approve and adopt together as one matter:
(a) an Agreement and Plan of Merger, dated as of March 20, 2000, among
PE Corporation, Paracel, Inc. and Umbrella Acquisition Corp., a
subsidiary of PE Corporation, and the merger contemplated by that
agreement;
(b) a form of Escrow Agreement, to be entered into among PE Corporation,
a representative of the Paracel stockholders and an escrow agent, in
connection with the merger; and
(c) the appointment of Joseph T. Kingsley, Chief Financial Officer of
Paracel, as representative of the Paracel stockholders under the
Escrow Agreement.
2. To transact other business that may properly come before the special
meeting.
The Paracel board of directors recommends that Paracel stockholders vote
FOR the proposal to approve and adopt the Agreement and Plan of Merger,
the merger, the form of Escrow Agreement and the appointment of Joseph T.
Kingsley as stockholder representative under the Escrow Agreement.
FOR |_| AGAINST |_| ABSTAIN |_|
This proxy, when properly executed and duly returned, will be voted in the
manner directed herein. If no direction is made, this proxy will be voted FOR
the approval and adoption of the Agreement and Plan of Merger, the merger, the
form of Escrow Agreement and the appointment of Joseph T. Kingsley as
stockholder representative under the Escrow Agreement.
This proxy may be revoked at any time by the undersigned. Unless revoked, this
proxy shall terminate on the first business day after the stockholders meeting
or, if the meeting is adjourned, postponed or continued, the first business day
after the adjournment, postponement or continuation.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE LABEL AFFIXED TO THIS PROXY.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH JOINT TENANTS MUST SIGN THIS PROXY.
WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE THE FULL TITLE OF SUCH. IF THIS PROXY IS SIGNED ON BEHALF OF A
PARTNERSHIP OR CORPORATION, AN AUTHORIZED PERSON MUST SIGN IN THE PARTNERSHIP OR
CORPORATION NAME.
Dated: ____________________________________________, 2000
Signature: ______________________________________________
Name: ___________________________________________________
Signature (if held jointly): ____________________________
- --------------------------------------------------------------------------------
Please sign and date this proxy card and return it in the enclosed postage
prepaid envelope or fax it to (626) 744-2001 by no later than 5:00 p.m.
Pacific Time, on June 8, 2000
(unless such date and/or time is extended in the sole discretion of the
board of directors).
- --------------------------------------------------------------------------------
