As filed with the Securities and Exchange Commission on May 16, 2002
Registration No. 333-83582
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3
to
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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CYTYC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 3826 02-0407755
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial
incorporation or Classification Code
organization) Number) Identification Number)
85 Swanson Road
Boxborough, Massachusetts 01719
(978) 263-8000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Patrick J. Sullivan
Chief Executive Officer, Vice Chairman and Chairman-Elect
Cytyc Corporation
85 Swanson Road
Boxborough, Massachusetts 01719
(978) 263-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Jonathan M. Moulton, Esq. Morris Cheston, Jr., Esq.
Lawrence A. Gold, Esq. Raymond D. Agran, Esq.
Testa, Hurwitz & Ballard Spahr Andrews &
Thibeault, LLP Ingersoll, LLP
125 High Street 1735 Market Street, 51st
Boston, Massachusetts Floor
02110 Philadelphia,
(617) 248-7000 Pennsylvania 19103
(215) 665-8500
Approximate date of commencement of proposed sale of the securities to the
public: As promptly as practicable after this registration statement becomes
effective and upon consummation of the transactions described in the enclosed
prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
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. [_]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. We may
not complete the offer and issue these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and Cytyc Corporation is
not soliciting offers to buy these securities in any state where the offer is
not permitted.
Preliminary prospectus, subject to completion, dated May 16, 2002
[LOGO] CYTYC
Offer to Exchange
1.1969 Shares of Common Stock
of Cytyc Corporation
And Cash in the Amount of $4.00
For
Each Outstanding Share
of Common Stock
of Digene Corporation
THE OFFER COMMENCED ON FRIDAY, MARCH 1, 2002. THE OFFER AND WITHDRAWAL
RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 23,
2002, UNLESS EXTENDED. SHARES TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER, BUT NOT DURING ANY SUBSEQUENT
OFFERING PERIOD.
On February 19, 2002, we entered into an Agreement and Plan of Merger with
Digene Corporation to acquire all of the outstanding shares of Digene common
stock. The Digene board of directors has approved the merger agreement,
determined that this offer is fair to, and in the best interests of Digene
stockholders and recommended that Digene stockholders accept this offer and
tender their shares pursuant to this offer to purchase and exchange.
Through a wholly owned subsidiary, we are offering to exchange 1.1969 shares
of Cytyc common stock and cash in the amount of $4.00 for each outstanding
share of Digene common stock that is validly tendered and not properly
withdrawn.
Our obligation to pay for and to exchange Cytyc common stock for Digene
common stock is subject to the conditions listed under "The Offer--Conditions
of the Offer." Cytyc's common stock is quoted on the Nasdaq National Market
under the symbol "CYTC" and Digene's common stock is quoted on the Nasdaq
National Market under the symbol "DIGE." You are urged to obtain current market
quotations for the shares of Cytyc common stock and Digene common stock.
See "Risk Factors" beginning on page 14 for a discussion of important factors
that you should consider in connection with the offer and determining whether
to tender your Digene shares.
We are not asking for a proxy and you are requested not to send us a proxy.
Any solicitation of proxies will be made only pursuant to separate proxy
solicitation materials complying with the requirements of Section 14(a) of the
Securities Exchange Act of 1934.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER
THIS PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May , 2002
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION.................. 1
WHERE YOU CAN FIND MORE INFORMATION................................... 6
SUMMARY............................................................... 8
The Proposed Combination........................................... 8
The Companies...................................................... 8
Reasons for the Offer and the Merger............................... 9
Recommendation of Digene's Board of Directors...................... 9
The Offer.......................................................... 9
Approval of the Merger............................................. 12
The Stockholders Agreement......................................... 12
Appraisal Rights................................................... 12
Material Federal Income Tax Consequences........................... 13
Opinion of Financial Advisor to Digene............................. 13
Interests of Certain Persons....................................... 13
Comparison of Rights of Stockholders of Cytyc and Digene........... 13
Accounting Treatment of the Merger................................. 13
RISK FACTORS.......................................................... 14
Risks Related to the Proposed Offer and Merger..................... 14
Risks Related to Our Business...................................... 17
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA...................... 23
Selected Historical Financial Data of Cytyc Corporation............ 23
Selected Historical Financial Data of Digene Corporation........... 24
Selected Unaudited Pro Forma Combined Condensed Financial Data..... 25
Comparative Per Share Data......................................... 26
Comparative Market Price Information............................... 27
INTRODUCTION TO PRO FORMA COMBINED CODENSED FINANCIAL INFORMATION..... 28
Unaudited Pro Forma Combined Condensed Financial Statements........ 30
Basis of Presentation.............................................. 33
THE COMPANIES......................................................... 35
Cytyc Corporation.................................................. 35
Cruiser, Inc....................................................... 35
Digene Corporation................................................. 35
BACKGROUND OF THE OFFER............................................... 36
REASONS FOR THE OFFER AND THE MERGER.................................. 39
Recommendation of Digene's Board of Directors...................... 39
THE OFFER............................................................. 42
Timing of Our Offer................................................ 42
Extension, Termination and Amendment............................... 42
Exchange of Digene Shares; Delivery of Cytyc Common Stock and Cash. 43
-i-
Page
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Cash Instead of Fractional Shares of Cytyc Common Stock................. 44
Withdrawal Rights....................................................... 44
Procedure for Tendering................................................. 45
Guaranteed Delivery..................................................... 46
Appointment of Attorney................................................. 46
Purpose of the Offer; The Merger; Appraisal Rights...................... 47
Conditions of the Offer................................................. 48
Regulatory Clearances................................................... 50
Certain Effects of Our Offer............................................ 50
Relationships between Cytyc and Digene.................................. 52
Opinion of Financial Advisor to Digene.................................. 53
Accounting Treatment.................................................... 60
Source of Funds......................................................... 60
Fees and Expenses....................................................... 60
Stock Exchange Listing.................................................. 60
THE MERGER AGREEMENT....................................................... 61
The Offer............................................................... 61
The Merger.............................................................. 61
Digene Board of Directors............................................... 62
Treatment of Digene Stock Options....................................... 62
Covenants and Representations and Warranties............................ 62
Conditions of the Offer................................................. 64
Conditions of the Merger................................................ 64
Termination of the Merger Agreement..................................... 65
Termination Fees........................................................ 66
Amendments.............................................................. 66
THE STOCKHOLDERS AGREEMENT................................................. 66
THE TRANSACTION OPTION AGREEMENT........................................... 67
INTERESTS OF CERTAIN PERSONS............................................... 68
Treatment of Stock Options.............................................. 68
Exployment Agreements................................................... 68
Indemnification of Directors and Officers............................... 70
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................... 70
Generally............................................................... 70
Gain Recognition........................................................ 71
Tax Basis............................................................... 71
Holding Period.......................................................... 71
Fractional Shares....................................................... 71
Limitations on Opinion.................................................. 71
Consequences if the Offer and Merger Do Not Qualify as a Reorganization. 72
Backup Withholding...................................................... 72
MARKET PRICES AND DIVIDENDS................................................ 73
DESCRIPTION OF CYTYC CAPITAL STOCK......................................... 74
General................................................................. 74
Common Stock............................................................ 74
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Page
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Preferred Stock....................................... 74
Rights Plan........................................... 74
Transfer Agent and Registrar.......................... 74
COMPARISON OF RIGHTS OF STOCKHOLDERS OF CYTYC AND DIGENE. 75
General............................................... 75
Capitalization........................................ 75
Voting................................................ 75
Number and Classification of Directors................ 75
Removal of Directors.................................. 76
Filling Vacancies on the Board of Directors........... 76
Amendments to Certificate of Incorporation............ 76
Amendments to By-laws................................. 76
Action by Written Consent............................. 77
Notice of Stockholder Actions......................... 77
Right to Call Special Meeting of Stockholders......... 77
Limitation of Personal Liability of Directors......... 77
Dividends............................................. 78
Conversion and Redemption............................. 78
Liquidation........................................... 78
Rights Plans.......................................... 78
LEGAL MATTERS............................................ 79
EXPERTS.................................................. 79
TRADEMARKS............................................... 80
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS 80
SCHEDULE I Information Concerning Directors and Executive Officers of Cytyc and Cruiser, Inc....... S-1
SCHEDULE II Compensation and Other Information Concerning Named Executive Officers of Cytyc......... S-6
SCHEDULE III Certain Relationships and Related Transactions.......................................... S-9
ANNEX A Agreement and Plan of Merger............................................................ A-1
ANNEX B Stockholders Agreement.................................................................. B-1
ANNEX C Transaction Option Agreement............................................................ C-1
ANNEX D Opinion of Goldman, Sachs & Co.......................................................... D-1
ANNEX E Section 262 of the General Corporation Law of the State of Delaware ("Appraisal Rights") E-1
-iii-
This prospectus incorporates important business and financial information
about Cytyc and Digene that is not included in or delivered with this document.
This information is available at the Internet Web site that the SEC maintains
at http://www.sec.gov, as well as from other sources. See "Where You Can Find
More Information" on page 6.
You may also request copies of these documents from us, without charge, upon
written or oral request to the information agent for the offer.
The information agent for the offer is:
[LOGO] Innisfree
M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Bankers and brokers call collect: (212) 750-5833
All others call toll free: (888) 750-5834
You must make your request for information no later than 5 business days
prior to the expiration of the offer.
-iv-
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION
Q: Who is offering to exchange my Digene securities?
A: We are Cytyc Corporation. We develop, manufacture and market products for
medical diagnostic applications primarily focused on women's health.
Cruiser, Inc. is a newly-formed Delaware corporation and our wholly owned
subsidiary. Cruiser, Inc. has been organized in connection with this offer
and has not carried on any activities other than in connection with this
offer.
Q: What are Cytyc and Digene proposing?
A: We are proposing to acquire all of the outstanding shares of Digene common
stock. We have entered into a merger agreement with Digene pursuant to which
we are offering, through Cruiser, Inc., our wholly owned subsidiary, to
exchange cash and shares of Cytyc common stock for each outstanding share of
Digene common stock, determined as described in the answer to the next
question below. After the offer is completed, subject to approval by the
stockholders of Digene if necessary, Cruiser, Inc. will merge with and into
Digene. As a result of the offer and the merger, Digene will become a wholly
owned subsidiary of Cytyc. If necessary for the offer and merger to qualify
as a tax-free reorganization, Digene will be merged with and into Cytyc,
with Cytyc surviving.
Q: What would I receive in exchange for my Digene shares?
A: We are offering to exchange 1.1969 shares of Cytyc common stock and cash in
the amount of $4.00 for each outstanding share of common stock of Digene
that is validly tendered and not properly withdrawn. Assuming successful
completion of the offer and satisfaction of other conditions specified in
the merger agreement, each Digene share not tendered into the offer will be
exchanged for 1.1969 shares of Cytyc common stock and cash in the amount of
$4.00. This ratio will remain the same regardless of changes in the values
of Cytyc and Digene Stock.
You will not receive any fractional shares of Cytyc common stock in the
offer. Instead, you will receive additional cash in an amount equal to the
market value of any fractional shares you would otherwise have been entitled
to receive.
Q: How long will it take to complete the offer and the merger?
A: We hope to complete the offer and the merger in the second quarter of 2002,
or soon thereafter. We expect to complete the merger shortly after we
complete the offer if we acquire 90% or more of the outstanding Digene
shares in the offer. If less than 90% of the Digene shares are tendered in
the offer, then the merger will require approval of Digene's stockholders
and we will complete the merger shortly after a special meeting of Digene
stockholders to approve the merger (subject to such approval). We must also
obtain regulatory clearances prior to completion of the offer and the merger.
Q: Will I have to pay any fees or commissions?
A: If you are the record owner of your Digene shares and you tender your Digene
shares directly to the exchange agent, you will not have to pay brokerage
fees or incur similar expenses. If you own your shares through a broker or
other nominee, and your broker tenders the shares on your behalf, your
broker may charge you a fee for doing so. You should consult with your
broker or nominee to determine whether any charges will apply to you.
Q: Does Digene support the offer and the merger?
A: Yes. Digene's board of directors has determined that the merger agreement
and the transactions contemplated thereby, including the offer and the
merger, are fair to and in the best interests of Digene and Digene's
stockholders, has approved, adopted and declared the advisability of the
merger agreement and the transactions contemplated thereby, including the
offer and the merger, and recommends that Digene's stockholders accept the
offer and tender their shares pursuant to the offer. Information about the
1
recommendation of Digene's board of directors is more fully set forth under
"Reasons for the Offer and the Merger-- Recommendation of Digene's Board of
Directors" beginning on page 38 and in Digene's Solicitation/Recommendation
Statement on Schedule 14D-9, which is being mailed to Digene's stockholders
together with this prospectus.
Q: Had Digene received a fairness opinion in connection with the offer and the
merger?
A: Yes. Digene has received an opinion from its financial advisor, Goldman,
Sachs & Co., dated February 19, 2002 to the effect that, as of such date,
the consideration to be received in the offer and the merger was fair, from
a financial point of view, to the holders of Digene common stock. You should
read the opinion carefully and in its entirety. The opinion does not
constitute a recommendation as to whether or not Digene stockholders should
tender shares pursuant to the offer or as to how any Digene stockholders
should vote in the merger. The full text of the opinion, which sets forth
assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion is included as Annex D to this
prospectus and attached as Annex B to, and summarized in, Digene's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being
mailed to Digene's stockholders together with this prospectus.
Q: Have any Digene stockholders agreed to tender their shares?
A: Yes. Certain stockholders of Digene, including officers and directors, have
agreed to tender into the offer 4,721,871 outstanding shares representing
approximately 26.4% of the outstanding shares of Digene as of February 27,
2002, plus any additional shares of Digene common stock issued or issuable
upon exercise of options held by such stockholders.
Q: What percentage of Cytyc common stock will Digene stockholders own after the
offer and the merger?
A: After completion of the merger, former Digene stockholders would own
approximately 15% of the outstanding shares of Cytyc common stock, based on
the number of outstanding shares of Cytyc common stock and Digene common
stock on February 27, 2002.
Q: What are the most significant conditions to the acceptance of Digene shares
in the offer?
A: We are not obligated to exchange any Digene shares unless, among other
things:
. at least a majority of the outstanding Digene shares, on a fully diluted
basis, are validly tendered and not properly withdrawn, which we refer to
as the minimum condition;
. all waiting periods under applicable antitrust laws have expired or have
been terminated;
. the registration statement, of which this prospectus is a part, has been
declared effective by the SEC;
. the shares of Cytyc common stock to be issued in the offer shall have been
approved for listing on the Nasdaq National Market;
. Digene has not breached or failed to perform or comply with any
obligation, covenant or agreement or, if they have breached or failed to
perform or comply, such action or inaction is not likely to result,
individually or in the aggregate, in a material adverse effect (as
described in the merger agreement) on Digene; and
. Digene's representations and warranties are true or, if they are not true,
they are not reasonably likely to, individually or in the aggregate,
result in a material adverse effect (as described in the merger agreement
and the offer) on Digene.
These conditions and other conditions to the offer are discussed in this
prospectus under "The Offer--Conditions of the Offer" beginning on page 47.
Q: How long do I have to decide whether to tender in the offer?
A: You will have at least until 12:00 midnight, New York City time, on
Thursday, May 23, 2002, to decide whether to tender your shares in the
offer. If you cannot deliver everything that is required in order to make a
valid tender by that time, you may be able to use a guaranteed delivery
procedure which is described under "The Offer -- Procedure for Tendering"
beginning on page 44.
2
Q: Can the offer be extended, and under what circumstances?
A: We may, without the consent of Digene, but subject to the terms of the
merger agreement and applicable law, extend the period of time during which
the offer remains open. We have agreed in the merger agreement that we may
extend the offer in our discretion, and Digene may require us to extend the
offer, in each case for successive extension periods of not more than 10
business days each if, at the scheduled expiration date of the offer or any
extension thereof, any of the conditions of the offer have not been
satisfied. In addition, we may, although we do not currently intend to,
extend the offer for a subsequent offering period of not more than 20
business days. You will have withdrawal rights during any extension period
but not during any subsequent offering period. See "The Offer -- Extension,
Termination and Amendment" beginning on page 41.
Q: How will I be notified if the offer is extended?
A: If we decide or are required to extend the offer, or if we decide to provide
for a subsequent offering period, we will inform the exchange agent of that
fact and we will make a public announcement of the results of the exchange
offer, and give the new expiration date no later than 9:00 a.m., New York
City time, on the next business day after the day on which the offer was
previously scheduled to expire. See "The Offer -- Extension, Termination and
Amendment" beginning on page 41.
Q: How do I participate in the offer?
A: To tender your shares, you should do the following:
. If you hold Digene shares in your own name, complete and sign the enclosed
letter of transmittal and return it with your physical share certificates
to EquiServe Trust Company, N.A., the exchange agent for the offer, at the
appropriate address specified on the back cover page of this prospectus
before the expiration date of the offer.
. If you hold your shares in "street name" through a broker, instruct your
broker to tender your shares before the expiration date.
. If your Digene share certificates are not immediately available or if you
cannot deliver your Digene share certificates and other documents to the
exchange agent prior to the expiration of the offer, or you cannot
complete the procedure for delivery by book-entry transfer on a timely
basis, you may still tender your Digene shares if you comply with the
guaranteed delivery procedures described under "The Offer -- Procedure for
Tendering" beginning on page 44.
For more information on the timing of the offer, extensions of the offer
period and your rights to withdraw your shares from the offer before the
expiration date, please refer to "The Offer" beginning on page 41.
Q: How do I withdraw previously tendered shares?
A: To withdraw previously tendered Digene shares, you must deliver a written or
facsimile notice of withdrawal with the required information to the exchange
agent while you still have the right to withdraw. If you tendered shares by
giving instructions to a broker or bank, you must instruct the broker or
bank to arrange for the withdrawal of your shares. See "The Offer --
Withdrawal Rights" on page 43.
Q: Until what time can I withdraw previously tendered shares?
A: You may withdraw previously tendered Digene shares any time prior to the
expiration of the offer, and, unless we have accepted the shares pursuant to
the offer, you may also withdraw any tendered shares at any time after April
29, 2002. Any Digene shares tendered during the subsequent offering period
may not be withdrawn. Also, once we have accepted shares for exchange
pursuant to the offer, all tenders become irrevocable. See "The Offer --
Withdrawal Rights" on page 43.
3
Q: Will I be taxed on the Cytyc common stock and cash that I receive?
A: The transaction has been structured to qualify as a tax-free reorganization.
Assuming the transaction is a tax-free reorganization, a Digene stockholder
who exchanges Digene shares for cash and Cytyc common stock in the offer or
the merger generally will recognize gain (but not loss) in an amount equal
to the lesser of:
. the excess (if any) of (i) the amount of cash and the fair market value of
the Cytyc common stock received in the exchange over (ii) the
stockholder's adjusted tax basis in the Digene shares; and
. the amount of cash received in the exchange.
For more information on the tax consequences of the offer and the merger,
please refer to "Material Federal Income Tax Consequences" beginning on page
69. We encourage you to consult your tax advisor as to the consequences to
you of participation in the offer or the merger.
Q: If I decide not to tender, how will the offer affect my shares?
A: If you decide not to tender your shares in the offer and the merger occurs,
you will receive in the merger the same number of Cytyc shares and the same
amount of cash per Digene share you would have received if you had tendered
your shares in the offer, without interest, unless you choose to demand
appraisal of your Digene shares. In connection with the merger, Digene
stockholders shall have a right under state law to demand appraisal of their
Digene shares.
Q: Do the statements on the cover page regarding this prospectus being subject
to change and the registration statement filed with the Securities and
Exchange Commission not yet being effective mean that the offer has not yet
been commenced?
A: No. The offer has commenced and completion of this prospectus and
effectiveness of the registration statement are not necessary for you to
tender your shares of Digene common stock. SEC rules permit exchange offers
to begin before the related registration statement has become effective and
we are taking advantage of those rules with the goal of combining Cytyc and
Digene as quickly as possible. We cannot, however, accept for exchange any
shares tendered in the offer until our registration statement is declared
effective by the SEC and the other conditions to our offer have been
satisfied or, where permissible, waived.
Q: Is Cytyc's financial condition relevant to my decision to tender shares in
the offer?
A: Yes. Shares of Digene common stock accepted in the offer will be exchanged
for both shares of Cytyc common stock and cash, so you should consider our
financial condition before you decide to become one of our stockholders
through the offer. In considering Cytyc's financial condition, you should
review information contained in this prospectus and the documents
incorporated by reference in this prospectus, because they contain detailed
business, financial and other information about us.
Q: Will Digene continue as a public company?
A: If the merger occurs, Digene will no longer be publicly owned. Additionally,
even if the merger does not occur, if we purchase all the Digene shares
tendered, there may be so few remaining Digene stockholders and publicly
held Digene shares that the Digene common stock may no longer be eligible
for quotation on the Nasdaq National Market or other securities markets. As
a result, there may not be a public trading market for the shares and Digene
may cease making filings with the SEC or otherwise cease to be required to
comply with SEC rules relating to publicly held companies.
Q: Where can I find more information about Cytyc and Digene?
A: You can find out information about Cytyc and Digene from sources described
under "Where You Can Find More Information" on page 6.
4
Q: Who can I call with questions about the offer and the merger?
A: You can contact our information agent using the following contact
information:
[LOGO] Innisfree
M&A Incorporated
501 Madison Avenue, 20/th/ Floor
New York, NY 10022
Bankers and brokers call collect: (212) 750-5833
All others call toll free: (888) 750-5834
5
WHERE YOU CAN FIND MORE INFORMATION
Cytyc and Digene file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
under the Securities Exchange Act of 1934. You may read and copy this
information at the SEC's public reference room, located at 450 Fifth Street,
N.W., Room 1024 Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. You may also obtain copies of this
information by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates, or from
commercial document retrieval services.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like Cytyc and
Digene, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
You may also obtain information about Cytyc and Digene, including copies of
their SEC reports, through their websites at http://www.cytyc.com and
http://www.digene.com. These website addresses are not active links to this
prospectus, and any documents, references, links or other materials of any kind
contained or referred to on such websites are not part of this prospectus.
We filed a registration statement on Form S-4 to register with the SEC the
Cytyc common stock to be issued pursuant to the offer and the merger. This
prospectus is a part of that registration statement. As allowed by SEC rules,
this prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement. In
addition, we also filed with the SEC a statement on Schedule TO pursuant to
Rule 14d-3 under the Exchange Act to furnish certain information about the
offer. You may obtain copies of the Form S-4 and the Schedule TO, and any
amendments to those documents, in the manner described above.
Digene has filed with the SEC a Solicitation/Recommendation on Schedule
14D-9 regarding the offer. You may obtain a copy of the Schedule 14D-9, and any
amendments to that document, from any of the sources described above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed a part of this prospectus,
except for any information superseded by information contained directly in this
prospectus. This prospectus incorporates by reference the documents set forth
below that Cytyc and Digene have previously filed with the SEC. These documents
contain important information about Cytyc and Digene and their financial
condition.
The following documents listed below that Cytyc and Digene have previously
filed with the SEC are incorporated by reference:
Cytyc SEC Filings Period
----------------- ------
Annual Report on Form 10-K Year ended December 31,
2001,
as filed on March 1, 2002
Current Report on Form 8-K Filed on February 5, 2002
Current Report on Form
8-K/A Filed on February 12, 2002
Current Report on Form 8-K Filed on February 20, 2002
Current Report on Form 8-K Filed on March 15, 2002
Current Report on Form 8-K Filed on March 22, 2002
Quarterly Report on Form
10-Q Filed on May 14, 2002
The description of Filed on January 16, 1996
Cytyc's common stock and August 29, 1997
set forth in Cytyc's
registration statements
on Form 8-A
6
Digene SEC Filings Period
------------------ ------
Annual Report on Form 10-K Year ended June 30, 2001,
as filed on September 27, 2001
Quarterly Report on Form Quarter ended September
10-Q 30, 2001,
as filed on November 14,
2001
Quarterly Report on Form Quarter ended December
10-Q 31, 2001,
as filed on February 14,
2002
Current Report on Form 8-K Filed on February 19, 2002
Current Report on Form
8-K/A Filed on February 21, 2002
Current Report on Form 8-K Filed on March 15, 2002
Current Report on Form 8-K Filed on March 22, 2002
Current Report on Form 8-K Filed on March 27, 2002
Current Report on Form 8-K Filed on April 11, 2002
Current Report on Form 8-K Filed on April 24, 2002
Current Report on Form 8-K Filed on April 25, 2002
Current Report on Form 8-K Filed on May 9, 2002
Quarterly Report on Form
10-Q Filed on May 15, 2002
The description of
Digene's common stock
set forth in Digene's
registration statement
on Form 8-A Filed on April 11, 1996
All documents filed by Cytyc and Digene pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities and Exchange Act of 1934 from the date of this
prospectus to the date that shares are accepted for exchange pursuant to our
offer, or the date that our offer is terminated, shall also be deemed to be
incorporated by reference into this prospectus.
Information that we file later with the SEC and that is incorporated by
reference into this prospectus will automatically update and supersede
information provided in this prospectus including information on previously
filed documents or reports that have been incorporated by reference in this
prospectus, to the extent that the new information differs from or is
inconsistent with the old information.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE FROM US WITHOUT CHARGE
UPON REQUEST TO OUR INFORMATION AGENT, INNISFREE M&A INCORPORATED, 501 MADISON
AVENUE, 20TH FLOOR, NEW YORK, NY 10022, COLLECT: (212) 750-5833, TOLL FREE:
(888) 750-5834. IN ORDER TO ENSURE TIMELY DELIVERY, ANY REQUEST SHOULD BE
SUBMITTED NO LATER THAN 5 BUSINESS DAYS PRIOR TO THE EXPIRATION OF THE OFFER.
IF YOU REQUEST ANY INCORPORATED DOCUMENTS FROM US, WE WILL MAIL THEM TO YOU BY
FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT MEANS, WITHIN ONE BUSINESS DAY
AFTER WE RECEIVE YOUR REQUEST.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT OUR OFFER THAT IS DIFFERENT FROM, OR IN ADDITION TO, WHAT
IS CONTAINED IN THIS PROSPECTUS OR IN ANY OF THE MATERIALS THAT WE HAVE
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. THEREFORE, IF ANYONE DOES GIVE
YOU ANY SUCH INFORMATION, YOU SHOULD NOT RELY ON IT. IF YOU ARE IN A
JURISDICTION WHERE OFFERS TO EXCHANGE OR SELL, OR SOLICITATIONS OF OFFERS TO
EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS DOCUMENT ARE UNLAWFUL, OR
IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE TYPES OF ACTIVITIES,
THEN THE OFFER PRESENTED IN THIS DOCUMENT DOES NOT EXTEND TO YOU. THE
INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE OF THIS
DOCUMENT UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE
APPLIES.
7
SUMMARY
This summary highlights selected information from this prospectus that
appears in more detail elsewhere and may not contain all the information that
is important to you. To better understand the offer and the merger, you should
read this entire document carefully, as well as those additional documents to
which we refer you. See "Where You Can Find More Information" on page 6.
The Proposed Combination
We are proposing a business combination of Cytyc and Digene under which
Cytyc will acquire all of the outstanding shares of Digene common stock. We are
offering to exchange 1.1969 shares of Cytyc common stock and cash in the amount
of $4.00 for each share of Digene common stock validly tendered and not
properly withdrawn on or prior to the expiration date of the offer. The
expiration date is currently May 23, 2002 but the offer may be extended under
limited circumstances as described in "The Offer -- Extension, Termination and
Amendment" on page 41.
We intend, promptly after completion of the offer, to merge Cruiser, Inc.,
our wholly owned subsidiary and the purchaser in the offer, with and into
Digene. Each share of Digene common stock that has not been exchanged or
accepted for exchange in the offer would be converted in the merger into 1.1969
shares of Cytyc common stock and cash in the amount of $4.00. Following the
merger of Cruiser, Inc. with and into Digene, we intend to merge Digene, as the
surviving entity, with and into Cytyc, which will be the surviving entity,
although we might defer that merger if we are advised by our tax counsel that
the offer and merger of Cruiser, Inc. with and into Digene, standing alone,
constitute a valid tax-free reorganization.
The Companies
Cytyc Corporation
85 Swanson Road
Boxborough, Massachusetts 01719
(978) 263-8000
We design, develop, manufacture and market a sample preparation system for
medical diagnostic applications. Our ThinPrep(R) System allows for the
automated preparation of cervical cell specimens on microscope slides for use
in cervical cancer screening, as well as for the automated preparation of other
cell specimens on microscope slides for use in non-gynecological testing
applications. We believe that the ThinPrep System improves accuracy in the
detection of cervical cancer and precancerous lesions by making the slide more
representative of the patient's clinical condition, improving preservation of
the sample, standardizing the presentation of cells on the slide, and reducing
the presence of mucus, blood and other obscuring debris. On November 30, 2001,
we acquired Pro Duct Health, Inc., a privately-held company that has developed
an innovative, FDA-approved ductal lavage device designed to enhance the
evaluation of risk for breast cancer.
8
Cruiser, Inc.
c/o Cytyc Corporation
85 Swanson Road
Boxborough, Massachusetts 01719
(978) 263-8000
Cruiser, Inc. is a wholly-owned subsidiary of Cytyc. Cruiser, Inc. and was
organized on February 14, 2002 for the purpose of acquiring the Digene shares
tendered in response to our offer and merging with Digene in the merger. It has
not carried on any activities other than in connection with the merger
agreement.
Digene Corporation
1201 Clopper Road
Gaithersburg, Maryland 20878
(301) 944-7000
Digene develops, manufactures and markets proprietary gene-based testing
systems for the screening, monitoring and diagnosis of human diseases. Its
primary focus is in women's cancers and infectious diseases. It has applied its
proprietary Hybrid Capture(R) technology to develop a successful diagnostic
test for human papillomavirus, or HPV, which is believed to be the primary
cause of cervical cancer and is found in greater than 99% of all cervical
cancer cases. In addition to its HPV Test, Digene's business is focused on two
areas: diagnostic testing and genomics research.
Reasons for the Offer and the Merger
The reasons for the offer and the merger are set forth on page 38 of this
prospectus under the heading "Reasons for the Offer and the Merger."
Recommendation of Digene's Board of Directors
The Digene board of directors has determined that the offer is fair to, and
in the best interests of, Digene and its stockholders and unanimously
recommends that Digene's stockholders accept the offer and tender their shares
pursuant to the offer. Information about the recommendation of Digene's board
of directors is more fully set forth on page 38 and in Digene's
Solicitation/Recommendation Statement on Schedule 14D-9.
The Offer
Summary of the Offer
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related letter of transmittal, to acquire each
outstanding share of Digene common stock validly tendered and not properly
withdrawn, on or prior to the expiration of the offer, at a price per share of
(i) $4.00 in cash and (ii) 1.1969 shares of Cytyc common stock.
The expiration date shall refer to 12:00 midnight, New York City time, on
May 23, 2002, unless we extend the period of time for which the offer is open,
in which case the term expiration date means the latest time and date on which
the offer, as so extended, expires. See "The Offer--Extension, Termination and
Amendment" beginning on page 41.
9
We are making this offer in order to acquire all of the outstanding shares
of Digene common stock. We intend, as soon as possible after completion of the
offer, to have Cruiser, Inc., the purchaser in the offer, merge with Digene.
The purpose of the merger is to acquire all Digene shares not tendered and
exchanged pursuant to the offer. In the merger, each then outstanding share of
Digene common stock, except for treasury shares of Digene and shares that we
hold for our own account, would be converted into the same number of Cytyc
shares and cash per Digene share as is paid in the offer.
Conditions of the Offer
Our obligation to exchange shares of Cytyc common stock and cash for Digene
shares pursuant to the offer is subject to several conditions referred to under
"The Offer -- Conditions of the Offer" beginning on page 47, including
conditions that require the tender of at least a majority of the total number
of outstanding Digene shares on a fully diluted basis, which we refer to as the
minimum tender condition, and receipt of all required regulatory approvals. The
number of shares of Digene common stock outstanding as of February 27, 2002 was
17,907,947.
Timing of the Offer
Our offer is scheduled to expire at 12:00 midnight, New York City time, on
May 23, 2002, but we may, with some exceptions, extend our offer from time to
time as necessary until all the conditions to the offer have been satisfied or,
where permissible, waived. See "The Offer -- Extension, Termination and
Amendment" beginning on page 41.
Extension, Termination and Amendment
We expressly reserve the right to, in our sole discretion (subject to the
provisions of the merger agreement), at any time or from time to time, extend
the period of time during which our offer remains open, (i) for one or more
periods of not more than 10 business days until all conditions to the offer are
satisfied or waived, (ii) after acceptance of shares in the initial offering
period, as it may be extended, for a further period of time by means of a
subsequent offering period not to exceed 20 business days for the purpose of
obtaining at least 90% of the outstanding shares of Digene common stock and
(iii) for any period required by any rule, regulation, interpretation or
position of the SEC or its staff applicable to the offer or any period required
by applicable law. We have agreed, pursuant to the merger agreement, if any of
the conditions to the offer is not satisfied or waived on any scheduled
expiration date of the offer, at the request of Digene, to extend the offer for
successive extension periods of not more than 10 business days until all
conditions to the offer are satisfied or waived; provided that we are not
required to extend the offer beyond April 15, 2002 (or June 28, 2002 if such
delay is a result of a second request for information under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")).
We can extend our offer by giving oral or written notice of such extension
to the exchange agent. If we decide to extend our offer, we will make an
announcement to that effect no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date. During any
such extension, all Digene shares previously tendered and not properly
withdrawn will remain tendered, subject to your right to withdraw your Digene
shares. An extension of the offer is different than a subsequent offering
period. The consequences of a subsequent offering period are described below.
Subject to the SEC's applicable rules and regulations, we also reserve the
right, in our sole discretion, but subject to the provisions of the merger
agreement, at any time or from time to time, (a) to delay acceptance for
exchange of or, regardless of whether we previously accepted Digene shares for
exchange, exchange of any Digene shares pursuant to our offer or to terminate
our offer and not accept or exchange any Digene shares not previously accepted,
or exchanged, upon the failure of any of the conditions of the offer to be
satisfied and
10
(b) to waive any condition, other than the regulatory clearance condition and
the conditions relating to the absence of an injunction and the effectiveness
of the registration statement for the Cytyc shares to be issued in our offer or
otherwise amend the offer in any respect, by giving oral or written notice of
the waiver or amendment to the exchange agent and by making a public
announcement.
We will follow any termination, amendment or delay, as promptly as
practicable, with a public announcement. We will follow any extension with a
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. Subject to
applicable law, including Rules 14d-4(d) and 14d-6(c) under the Securities
Exchange Act of 1934 (the "Exchange Act"), which require that any material
change in the information published, sent or given to stockholders in
connection with the offer be promptly sent to stockholders in a manner
reasonably designed to inform stockholders of the change, and without limiting
the manner in which we may choose to make any public announcement, we assume no
obligation to publish, advertise or otherwise communicate any public
announcement other than by making a release to the Dow Jones News Service.
Exchange of Shares
Upon the terms and subject to the conditions of the offer (including, if the
offer is extended or amended, the terms and conditions of any extension or
amendment), we will accept for exchange, and will exchange, Digene shares
validly tendered and not properly withdrawn promptly after the expiration date
and promptly after they are tendered during any subsequent offering period.
Withdrawal Rights
Digene shares tendered pursuant to the offer may be withdrawn at any time
prior to the expiration date, and, unless we previously accepted them pursuant
to the offer, may also be withdrawn at any time after April 29, 2002. Once we
have accepted shares for exchange pursuant to the offer, all tenders not
previously withdrawn become irrevocable.
You will not have the right to withdraw Digene shares tendered in any
subsequent offering period.
Subsequent Offering Period
We may, although we do not currently intend to, elect to provide a
subsequent offering period of three to 20 business days after the acceptance of
Digene shares pursuant to the offer if the requirements under Exchange Act Rule
14d-11 have been met. In contrast to your rights during the offering period
prior to the initial acceptance of Digene shares, you will not have the right
to withdraw Digene shares that you tender during a subsequent offering period.
Procedure for Tendering
For you to validly tender your Digene shares pursuant to our offer, you must
either:
. properly complete a duly executed letter of transmittal (or manually
executed facsimile of that document), along with any required signature
guarantees, or an agent's message, which is explained below, in connection
with a book-entry transfer, and any other required documents, and the
transmittal letter must be transmitted to and received by EquiServe Trust
Company, N.A., the exchange agent for the offer,
11
at one of its addresses set forth on the back cover of this prospectus,
and certificates for tendered Digene shares must be received by the
exchange agent at such address, or those Digene shares must be tendered
pursuant to the procedures for book-entry tender set forth in "The Offer
-- Procedure for Tendering" beginning on page 44 (and a confirmation of
receipt of such tender received), in each case before the expiration date,
or
. comply with the guaranteed delivery procedures set forth in "The Offer --
Procedure for Tendering" beginning on page 44.
Any Digene shares properly withdrawn prior to completion of the offer will
not be considered validly tendered.
Approval of the Merger
If at the end of the offer we have received 90% or more of the outstanding
Digene shares, we will effect a short-form merger as permitted under Delaware
law, which does not require notice to or approval by Digene stockholders. If,
however, at the end of the offer we have received more than the majority, but
less than 90%, of the outstanding Digene shares, we will effect a long-form
merger as permitted under Delaware law. A long-form merger would require notice
to and approval by Digene stockholders and would take considerably longer to
complete.
Cytyc's shareholders do not have to, and will not, vote on the approval of
the merger.
The Stockholders Agreement
Concurrently with entering into the merger agreement, the current directors,
executive officers and certain stockholders of Digene entered into a
stockholders agreement pursuant to which such persons have agreed, among other
things, to validly tender (and not withdraw) their Digene shares into the
offer, and to vote their Digene shares in favor of the merger, if applicable.
On February 19, 2002, these persons beneficially owned (determined in
accordance with SEC rules) approximately 6,074,701 shares of Digene common
stock, representing approximately 31.6% of the then outstanding shares of
Digene common stock (including all outstanding options held by such holders
exercisable within 60 days of such date). For a more detailed description of
the terms and conditions of the stockholders agreement, see "The Stockholders
Agreement" beginning on page 65.
Appraisal Rights
The offer does not entitle you to appraisal rights. However, the merger may
entitle you to appraisal rights with respect to your Digene shares. See "The
Offer -- Purpose of the Offer, the Merger, Appraisal Rights" beginning on page
46.
12
Material Federal Income Tax Consequences
The transaction has been structured to qualify as a tax-free reorganization.
Assuming the transaction is a tax-free reorganization, a Digene stockholder who
exchanges Digene shares for cash and Cytyc common stock in the offer or the
merger generally will recognize gain (but not loss) in an amount equal to the
lesser of:
. the excess (if any) of (i) the amount of cash and the fair market value of
the Cytyc common stock received in the exchange over (ii) the
stockholder's adjusted tax basis in the Digene shares; and
. the amount of cash received in the exchange.
For more information on the tax consequences of the offer and the merger,
please refer to "Material Federal Income Tax Consequences" beginning on page
69. Digene stockholders are urged to consult their tax advisors as to the
consequences of participation in the offer or the merger.
Opinion of Financial Advisor to Digene
On February 19, 2002, Goldman, Sachs & Co. ("Goldman Sachs") delivered its
written opinion to the board of directors of Digene Corporation that, as of
that date, the consideration to be received in the offer and the merger by the
holders of Digene common stock was fair from a financial point of view to such
holders. The full text of the written opinion of Goldman Sachs, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex D to this
prospectus and a description of the financial analyses underlying such opinion
is included in this prospectus under "The Offer--Opinion of Financial Advisor
to Digene."
The advisory services and opinion of Goldman Sachs were provided for the
information and assistance of the Board of Directors of Digene in connection
with its consideration of the transaction contemplated by the merger agreement,
and its opinion does not constitute a recommendation as to whether or not any
holder of Digene common stock should tender such shares in the offer or as to
how any holder of Digene common stock should vote with respect to the merger.
The opinion of Goldman Sachs is not intended to, and may not be, relied upon by
Cytyc. We encourage you to read the opinion in its entirety.
Interests of Certain Persons
Some directors and executive officers of Digene may have interests in the
offer and merger that are different from or in addition to your interests. As a
result of the offer and merger, options that certain of these directors and
executive officers hold will accelerate and become exercisable. In addition,
certain executive officers of Digene are parties to employment agreements which
provide for severance and other benefits. See "Interests of Certain Persons"
beginning on page 67.
Comparison of Rights of Stockholders of Cytyc and Digene
The rights of investors as stockholders of Cytyc after the merger will be
governed by Cytyc's charter and by-laws. Those rights differ from rights of
Digene stockholders under Digene's charter and by-laws. See "Comparison of
Rights of Stockholders of Cytyc and Digene" beginning on page 74.
Accounting Treatment of the Merger
Cytyc will account for the merger under the purchase method of accounting
for business combinations.
13
RISK FACTORS
In deciding whether to tender your Digene shares pursuant to the offer, you
should carefully read this prospectus, the accompanying Schedule 14D-9 of
Digene and the other documents to which we refer you. You should also carefully
consider the following risk factors relating to the offer and the merger and
with respect to ownership of Cytyc shares and the tender of Digene shares.
Risks Related to the Proposed Offer and Merger
The Cytyc shares to be received by Digene stockholders in the offer and the
merger will fluctuate in value.
In the offer and subsequent merger, each Digene share will be exchanged for
1.1969 Cytyc shares plus $4.00 in cash. This is a fixed exchange ratio and we
will not adjust the exchange ratio due to any decrease in the market price of
the Cytyc common stock between the date of this prospectus and the date you
receive Cytyc shares in exchange for Digene shares. The market price of the
shares of our common stock to be issued in the offer and the merger for the
shares of Digene common stock may change as a result of changes in our or
Digene's business, operations or prospects, market assessments of the impact
and likelihood of closing of the offer and the merger and general market
conditions. Our results of operations, as well as the market price of our
common stock, may be affected by factors different from those affecting
Digene's results of operations and the market price of Digene shares. The value
of the Cytyc shares to be received by Digene stockholders in the offer or the
merger will depend upon the market price of Cytyc shares at the time they are
received pursuant to the offer or the merger. The actual value of the Cytyc
shares to be received by Digene stockholders will not be known at the time the
Digene stockholders tender their Digene shares. We do not know what this value
will be. Additionally, since the market price of our common stock fluctuates
and could decline prior to the time Cytyc shares are received pursuant to the
offer and the merger, the value of the Cytyc shares to be received could
decline between the time Digene shares are tendered in the offer and the time
Cytyc shares are received by the tendering stockholders, and the amount by
which the value of the consideration that you actually receive in the offer or
the merger could decline is not limited.
The benefits of the proposed combination may not be realized, which would
likely cause Cytyc's stock price to decline.
If we complete the merger, we may be unable to realize the expected benefits
of combining Cytyc and Digene, which would cause Cytyc's business, financial
condition, and prospects to be materially and adversely affected. A principal
difficulty the combined company will face will be attempting to integrate two
companies that have previously operated independently. Integrating Cytyc's
operations and personnel with those of Digene will be a complex process. We may
not be able to integrate the operations of Digene with our operations rapidly
or without encountering difficulties. The successful integration of Cytyc with
Digene will require, among other things, integration of Digene's and Cytyc's
research and development efforts, product offerings, sales and marketing
operations and information and software systems, the coordination of employee
retention and hiring, and training operations. The diversion of management's
attention to the integration efforts, the costs of such efforts, and any
difficulties encountered in combining operations could adversely affect the
combined company's businesses and results of operations. Further, the process
of combining Cytyc and Digene could negatively affect employee morale and the
ability of Cytyc to retain some of Digene's key personnel after the merger.
Also, we could face additional risks inherent in Digene's business that we were
not previously subject to. For example, the additional requirements that we may
have in the future to fund our operations could be significantly increased due
to the capital requirements of Digene's business. We also may be subject to
increased liability with respect to intellectual property matters or other
matters relating to the prior business of Digene.
Other factors that could cause the combined company not to realize the
benefits described in "Reasons for the Offer and the Merger" on page 38 include
the following:
. potentially incompatible cultural differences between the two companies;
14
. geographic dispersion of operations;
. expected synergy benefits from the merger, such as lower costs, may not be
realized or may be realized more slowly than anticipated;
. difficulties in integrating Digene's products with Cytyc's business,
because Cytyc does not have manufacturing experience with respect to
Digene's products;
. some of Digene's suppliers, distributors, customers and licensors are
Cytyc's competitors or work with Cytyc's competitors, and as a result may
seek to terminate their business relationships with the combined company;
. some of Cytyc's and Digene's collaborative partners may feel that the
combined company poses new competitive threats to their business, and as a
result may seek to limit or terminate their relationships with Digene and
us; and
. the difficulty of leveraging Digene's and Cytyc's combined technologies
and capabilities across all product lines and customer bases.
Officers and directors of Digene have potential conflicts of interest in the
offer and the merger.
Digene stockholders should be aware of potential conflicts of interest and
the benefits available to Digene officers and directors when considering the
adoption and approval of the merger agreement by the Digene board of directors
and its recommendation to Digene stockholders to tender their Digene shares in
the offer. For example, certain Digene executive officers have employment
agreements that provide them with interests in Digene that are different from,
and in addition to, interests of Digene stockholders generally, including under
certain circumstances the right to severance benefits in the event the
employment of such officers is terminated. The merger agreement also provides
for continuing indemnification of officers and directors of Digene after the
effective date of the merger. In addition, the current directors and certain
executive officers of Digene have entered into a stockholders agreement with
Cytyc that, among other things, requires these directors and executive officers
to tender their Digene shares in the offer and support the offer and the
merger. As a result, Digene officers and directors may have interests in the
transaction that are different from, or in addition to, the interests of other
Digene stockholders. See "Interests of Certain Persons" beginning on page 67.
Third parties may terminate or alter existing contracts with Digene.
Digene has contracts with some of its suppliers, distributors, customers,
licensors and other business partners. Certain of these contracts may require
Digene to obtain consent from these other parties in connection with the offer
or the merger. If their consent cannot be obtained, these contracts may be
terminated and Digene may suffer a loss of potential future revenue and may
lose rights to facilities or intellectual property that are material to
Digene's business and the business, prospects, and financial condition of the
combined company.
Third parties may seek to invalidate or circumvent Digene's patents and
other proprietary rights, which could cause Digene to lose rights to its
products.
Digene may not have rights under some patents or patent applications related
to its products or product candidates that are held by third parties. Digene
may discover that it needs to obtain rights to a patent in order to begin or
continue selling a product. Digene may be unable to obtain such rights on
commercially reasonable terms or at all. Digene has in-licensed patents to a
number of cancer-causing human papillomavirus types, which, together with the
patents to cancer-causing human papillomavirus types that it owns, may provide
it with a competitive advantage. Digene may lose any such competitive advantage
if these licenses terminate or if the patents licensed thereunder expire or are
declared invalid.
15
Digene may infringe the intellectual property rights of third parties and
the combined company may become involved in expensive intellectual property
litigation. This could impose a significant strain on the combined company's
resources and could prevent the development and marketing of current or
proposed products.
There have been substantial litigation and other proceedings regarding
patent and other intellectual property rights in the pharmaceutical and
biotechnology industries because of the uncertainties and complex legal,
scientific and factual questions related to the protection of intellectual
property. Digene has received inquiries regarding possible patent infringements
claims relating to, among other things, aspects of its Hybrid Capture
technology. As a result of certain of these inquiries, on March 15, 2002 Digene
filed a declaratory judgment action against Enzo Biochem, Inc. in the United
States District Court for the District of Delaware, seeking a declaratory
judgment that Digene's Hybrid Capture products do not infringe any valid claims
of Enzo's United States patent no. 6,221,581 B1, and that the claims of the
'581 patent are invalid. On March 21, 2002, Enzo filed an answer to the
declaratory judgment action, and Enzo Diagnostics, Inc., its wholly owned
subsidiary, filed a complaint against Digene seeking an injunction and monetary
damages for alleged infringement by Digene of the '581 patent. Based upon
information provided by Digene, we believe that the patents of others to which
these inquiries relate, including the '581 patent of Enzo, are either not
infringed by Digene's Hybrid Capture technology or are invalid. There can be no
assurance, however, as to the outcome of the Enzo litigation, nor can we assure
you that claims won't be asserted against Digene or the combined company in the
future in connection with the Enzo litigation or other matters. As a result of
any such claims, Digene or the combined company may be required to enter into a
royalty-bearing or other license or may be prevented from developing and
marketing current or proposed products. In addition, Digene has licenses to
various patents covering intellectual property that it uses in conjunction with
applications of its Hybrid Capture technology. Third parties may have claims to
these patents. An adverse outcome to such claims could subject Digene or the
combined company to significant liabilities to third parties or require it to
obtain royalty-bearing or other licenses from third parties, cease sales of
related products or revise the applications or products which employ the
patented technology. Any licenses required for any such third party patents or
proprietary rights may not be made available to Digene or the combined company
on commercially reasonable terms, if at all. Furthermore, Digene or the
combined company may be unable to make the necessary revisions to its
applications or products. Digene or the combined company may also be forced to
initiate legal proceedings to protect their patent position or other
proprietary rights. These proceedings are often expensive and time-consuming,
even if Digene or the combined company were to prevail.
Digene may not obtain necessary regulatory approval for its primary cervical
cancer screening products.
Digene filed a PMA Supplement with the FDA in October 2001 for approval to
use Digene's Hybrid Capture 2 HPV DNA Test in conjunction with the Pap smear as
a primary screen for cervical cancer and its precursors in women age 30 and
older. The FDA panel hearing on Digene's PMA supplement was held on March 8,
2001. Following the hearing, the FDA panel recommended that the FDA approve,
with conditions, Digene's PMA Supplement. However, we do not know whether the
FDA will approve Digene's PMA Supplement. If the PMA Supplement is not approved
or if such approval is substantially delayed, Digene's business may be
adversely affected.
Cytyc and Digene have experienced losses in the past, and the combined
company may experience losses in the future.
Cytyc and Digene have experienced losses in the past, and Cytyc expects that
the combined company will continue to incur significant sales and marketing,
product development and administrative expenses. As a result, the combined
company will need to generate significant revenue to maintain profitability.
Cytyc cannot be certain that the combined company will sustain or increase
profitability in the future. Any failure to significantly increase revenue as
the combined company implements its product and distribution strategies would
adversely affect its business.
16
The receipt of Digene shares could be taxable to you, depending on facts
surrounding the offer and the merger.
We and Digene have structured the offer and the merger to qualify as a
tax-free reorganization for U.S. federal income tax purposes (except with
respect to the cash to be received by Digene stockholders as consideration for
the exchange of their shares). Digene has received an opinion from its counsel,
Ballard Spahr Andrews & Ingersoll, LLP, to the effect that, subject to the
assumptions set forth therein, the offer and the merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended. If, however, among other things, the merger is not
consummated or the fair market value of the Cytyc shares received by Digene
stockholders pursuant to the offer and merger were to represent less than 50
percent of the aggregate consideration received by Digene stockholders in the
transaction, then Digene stockholders would not be able to rely on the opinion
of Ballard Spahr Andrews & Ingersoll, LLP, and the entire transaction
potentially would be treated as a taxable exchange. You are urged to read
carefully the discussion under "Material Federal Income Tax Consequences"
beginning on page 69, and to consult your tax advisor as to the consequences of
participation in the offer and/or the merger.
Need for Governmental Clearances May Delay Consummation of the Offer and the
Merger.
The offer is conditioned upon the expiration or termination of the
applicable waiting period under the HSR Act. In addition, other filings with,
notifications to and authorizations and approvals of, other governmental
agencies with respect to the offer, the merger and other transactions
contemplated by the merger agreement and the stockholder agreement, relating
primarily to antitrust issues, must be made and received prior to the
consummation of the offer and merger. We and Digene are seeking to obtain all
required regulatory clearances prior to the scheduled completion of these
transactions. You should be aware that all required regulatory clearances may
not be obtained on that timetable, restrictions on our combined operations may
be sought by governmental agencies as a condition to obtaining these
clearances, and operating restrictions imposed could adversely affect the value
of the combined company. Please refer to "The Offer--Conditions of the Offer"
and "--Regulatory Clearances" for more information.
Failure to Complete the Merger Could Negatively Impact Digene's Stock Price
and Future Business and Operations.
If the merger is not completed for any reason, Digene may be subject to a
number of material risks, including the following:
. Digene may be required under certain circumstances to pay Cytyc a
termination fee up to $19,793,000;
. the price of Digene common stock may decline to the extent that the
current market price of Digene common stock reflects a market assumption
that the merger will be completed; and
. costs incurred by Digene related to the merger, such as legal and
accounting fees as well as a portion of the financial advisor fees that
would be payable upon completion of the merger, must be paid by Digene
even if the merger is not completed.
Risks Related to Our Business
We depend principally on the sale of a single product.
To date, we have derived most of our revenues from sales of our ThinPrep
2000 Processor, related instruments, filters, and other supplies for use in
gynecological and non-gynecological testing applications. If we are unable to
successfully develop and commercialize other products, our business, sales and
profits will be materially impaired. Although we have begun marketing our
next-generation ThinPrep 3000 Processor and we have submitted a PMA application
to the Food and Drug Administration ("FDA") for approval to sell our ThinPrep
Imaging System, neither product has generated significant revenues yet. We
cannot guarantee that the
17
development of our ThinPrep Imaging System will be successfully completed, or
that we will obtain necessary regulatory approval to market the ThinPrep
Imaging System in the United States or in other countries. We also cannot
guarantee that we will be able to obtain adequate reimbursement from insurance
companies and other third party payors for the ductal lavage device for the
detection of breast cancer that we obtained in our acquisition of Pro Duct, or
that we will otherwise be able to generate significant revenue from sales of
the Pro Duct device. We may be required to obtain FDA approval and secure
adequate reimbursement from insurance companies and other third party payors
for any other new products that we are able to develop or acquire, and we may
not be able to do so.
We cannot guarantee we will obtain necessary regulatory approvals for our
products.
If we do not obtain all necessary regulatory approvals for any new products
we are able to successfully develop or acquire, our ability to generate sales
from new product offerings will materially suffer. The governments of the
United States and other countries extensively regulate the manufacture and sale
of medical diagnostic devices intended for commercial use. For example, United
States commercial sales of medical diagnostic devices require FDA approval
before selling may commence. Obtaining FDA and other required regulatory
approvals can be time-consuming, expensive and uncertain. Regulatory approval
frequently requires several years from the commencement of clinical trials to
the receipt of regulatory approval. After any approvals, we remain subject to
pervasive regulation and inspection for compliance with regulatory
requirements. In January 2002, we submitted a PMA Application to the FDA for
the ThinPrep Imaging System to aid in cervical cancer screening. We do not know
whether the FDA will approve the product for commercial use. We may also need
to obtain FDA approval for any other new products we are able to develop or
acquire, and we cannot guarantee that we will be able to do so.
Our success depends on the market acceptance of our products and their cost.
Our success and growth depends primarily on market acceptance of our
ThinPrep System, including any follow-on applications of ThinPrep technology
for cervical cancer screening and any other new products we are able to
successfully develop or acquire, including the ductal lavage device we obtained
in our acquisition of Pro Duct. The laboratory cost of using the ThinPrep
System for cervical cancer screening is higher than that of a conventional Pap
smear. Due in part to increased competitive pressures in the healthcare
industry to reduce costs, our ability to gain market acceptance of the ThinPrep
System and follow-on products depends on our ability to demonstrate that the
higher cost of using the ThinPrep System is offset by a reduction in costs
often associated with conventional Pap smears, such as inaccurate diagnoses and
the need for repeat Pap tests. In particular, for all of our products,
including our ThinPrep System products and the Pro Duct ductal lavage device,
we need to convince healthcare providers, insurance companies and other third
party payors, and clinical laboratories of the clinical benefits and
cost-effectiveness of our products.
We have limited marketing and sales experience, which could cause our sales
to suffer.
In order to effectively market our products and increase our sales and
profits, we will need to continue to increase our marketing and sales
capabilities both within the United States and in foreign countries. We
received clearance from the FDA to market our ThinPrep System for cervical
cancer screening in May 1996, and initiated full-scale marketing and sales
efforts for the ThinPrep System in the United States beginning in the first
quarter of 1997. We currently utilize both direct sales and strategic marketing
relationships with large clinical laboratories and health care companies to
market our products in the United States. We cannot guarantee that our direct
sales force or strategic marketing relationships will succeed in promoting the
ThinPrep System, or any other products we are able to develop or acquire, to
healthcare providers, third-party payors or clinical laboratories, or that we
will sufficiently establish additional marketing and sales channels. While we
are currently evaluating marketing and sales channels outside of the United
States, including contract sales organizations, distributors and marketing
partners, we have established very limited foreign sales channels. We may not
be able to establish successful marketing and distribution agreements or other
channels for sales outside of the United States. We also cannot guarantee that
we will be able to recruit and retain skilled marketing, sales, service and
support personnel for our domestic and foreign sales and marketing efforts.
18
Our sales are dependent on third-party reimbursement.
We cannot sell our ThinPrep System for cervical cancer screening in the
United States and other countries unless we are able to secure adequate
reimbursement from third-party payors such as private insurance plans, managed
care organizations, and Medicare and Medicaid. Although a number of managed
care organizations in the United States have added the ThinPrep Pap Test to
their coverage, we cannot guarantee that reimbursement will increase or
continue to be available, or that reimbursement levels will be adequate to
enable healthcare providers and clinical laboratories in the United States and
other countries to use the ThinPrep System for cervical cancer screening
instead of the conventional Pap smear method. We also will be required to
secure adequate reimbursement for any new products we develop or obtain,
including the Pro Duct ductal lavage device, and we may not be able to do so
successfully.
We have a limited number of customers and a lengthy sales process to
generate new customers, which may adversely impact our sales.
We are dependent on a relatively small number of large clinical laboratory
customers in the United States for a significant portion of our sales of the
ThinPrep System, and our business may materially suffer if we are unable to
increase sales to our existing customers and establish new customers both
within and outside the United States. Due in part to a trend toward
consolidation of clinical laboratories in recent years and the relative size of
the largest United States laboratories, it is likely that a significant portion
of ThinPrep System sales will continue to be concentrated among a relatively
small number of large clinical laboratories. To generate demand for the
ThinPrep Pap Test among clinical laboratories, we must educate physicians and
healthcare providers about the clinical benefits and cost-effectiveness of the
ThinPrep System. We also need to demonstrate the availability of adequate
levels of reimbursement for the ThinPrep Pap Test. This process requires a
lengthy sales effort, which makes it difficult and expensive for us to obtain
new customers.
We have a limited operating history.
We have a limited operating history, which may make it difficult for you to
evaluate our business and prospects. We received initial pre-market approval
from the FDA to market our ThinPrep System as a replacement for the
conventional pap smear in May 1996 and commenced full-scale commercial launch
in the United States in 1997. Since that time, we have focused on follow-on
product development, obtaining additional regulatory approvals, expanding our
manufacturing capabilities, and establishing our marketing and sales
capabilities and channels in the United States and internationally. Our future
revenues and profitability depend significantly on our ability to successfully
market and sell the ThinPrep System and any follow-on products both within and
outside of the United States. Due in part to our limited operating history, you
should not rely on our historical results of operations as an indication of our
prospects for future revenues and profitability.
We may engage in acquisitions that may harm our operating results, dilute
our stockholders, divert management's attention from other important business
concerns, and potentially create other difficulties for us.
On November 30, 2001, we completed the acquisition of Pro Duct, a
privately-held company that has developed an FDA approved ductal lavage device
designed to improve the evaluation of risk for breast cancer. On February 19,
2002, we signed a definitive agreement to acquire Digene by means of an
exchange offer. We may in the future pursue additional acquisitions that we
believe could provide us with new technologies, products or service offerings,
or enable us to obtain other competitive advantages.
Acquisitions by us, including our acquisition of Pro Duct and our
acquisition of Digene (if we are able to complete it), may involve some or all
of the following financial risks:
. use of significant amounts of cash;
. potential dilutive issuances of equity securities;
19
. incurrence of debt or amortization expenses related to certain
intangible assets; and
. future impairment charges related to diminished fair value of
businesses acquired as compared to their net book value.
Such acquisitions also may involve numerous other risks, including:
. diversion of management's attention from other business concerns;
. difficulties associated with assimilating and integrating the
personnel, operations and technologies of the acquired companies;
. failure to retain key personnel;
. loss of key customers, customer dissatisfaction or performance
problems with the acquired company;
. the costs associated with the integration of acquired operations; and
. assumption of unknown liabilities.
We may not be successful in overcoming the risks described above or any
other problems associated with our acquisition of Pro Duct or any other
acquisitions. Any of these risks and problems could materially harm our
business, prospects, and financial condition. Additionally, we cannot guarantee
that Pro Duct or any other companies we acquire will achieve anticipated
revenues and operating results.
Our success depends on our ability to manage growth effectively.
The scope of our operations and facilities, the number of our employees and
the geographic area of our operations are growing rapidly, including as a
result of acquisitions. If we are not able to manage our growth effectively,
our business and financial condition will materially suffer. Our growth may
significantly strain our managerial, operational and financial resources and
systems. To manage our growth effectively, we will have to continue to
implement and improve additional management and financial systems and controls,
and to expand, train and manage our employee base. These difficulties will be
increased if we are able to complete our acquisition of Digene.
We have intense competition from other companies.
We face direct competition from a number of publicly-traded and
privately-held companies, including at least one other manufacturer of a
thin-layer slide preparation system. The development, FDA approval and
commercial marketing of competitive systems for cervical cancer screening could
have a material adverse effect on our business and financial condition. Many of
our existing and potential competitors have substantially greater financial,
marketing, sales, distribution and technical resources than we do, as well as
more experience in research and development, clinical trials, regulatory
matters, manufacturing and marketing.
Our quarterly operating results may vary.
We expect that our operating results will fluctuate significantly in the
future. Our quarterly results will depend on a number of factors, many of which
are outside our control. These factors include:
. the extent to which our products gain market acceptance;
. the rate and size of expenditures incurred as we expand our domestic
and establish our international sales and distribution networks;
. the timing of approvals of the ThinPrep System and any other new
products, including the Pro Duct Health ductal lavage device, for
reimbursement by third-party payors;
. the timing and size of sales;
. the likelihood and timing of FDA approval of PMA supplements related
to the ThinPrep System and any other new products;
. the timing and size of expenditures incurred in the research and
development of new products; and
. the introduction and market acceptance of competing products or
technologies.
20
We currently have limited foreign sales capabilities and cannot guarantee
success in foreign markets.
Although we commenced sales of our ThinPrep System in countries outside the
United States in 1998, only a small percentage of our sales to date have been
outside of the United States. If we fail to increase our revenues from sales
outside of the United States, our business and financial condition may suffer
materially. While we continue to evaluate possibilities for new foreign
marketing and sales channels, including contract sales organizations,
distributors and marketing partners, our current foreign sales channels are
very limited. We cannot guarantee that we will successfully develop foreign
sales channels or capabilities that will enable us to generate significant
revenue from sales outside of the United States. Even if we are able to
establish foreign sales capabilities, we may not be able to obtain required
third-party reimbursements and regulatory approvals in foreign countries.
We are uncertain if additional applications of our ThinPrep System will be
successful.
In late 2000 and early 2001, we entered into separate co-promotion
agreements for the co-promotion of RDC's COBAS(R) AMPLICOR(R) CT/NG test for
the detection of chlamydia and gonorrhea and Digene's Hybrid Capture(R) II HPV
DNA Assay for the detection of the human papillomavirus. Each test utilizes our
ThinPrep collection vial. We intend to continue to evaluate additional uses of
our ThinPrep technology in testing for the presence of other types of cancers
and sexually transmitted diseases. We have not yet determined which of these
additional applications we will seek to develop, commercialize or promote,
alone or with other companies. We cannot guarantee that our agreements with
Roche or Digene will be successful, or that we will be able to successfully
promote, commercialize or develop additional uses of our technology in
connection with testing for other cancers or sexually transmitted diseases.
We are highly dependent on key personnel.
We are highly dependent on the principal members of our management and
scientific staff. Loss of our key personnel would likely impede achievement of
our research and development, operational, or strategic objectives. To be
successful, we must retain key employees and attract additional qualified
employees.
Our success depends on our ability to protect our intellectual property
rights.
We rely on a combination of patents, trade secrets, copyrights, trademarks
and confidentiality agreements to protect our proprietary technology, rights
and know-how. We pursue patent protection in the United States and files
corresponding patent applications in certain foreign jurisdictions. We hold
seventeen issued United States patents, eleven pending United States patent
applications, and corresponding foreign patents or patent applications relating
to various aspects of its ThinPrep technology. As part of our acquisition of
Pro Duct, we acquired an interest in certain United States patents and patent
applications, together with certain corresponding foreign counterparts, owned
or licensed by Pro Duct, relating to various aspects of the Pro Duct ductal
lavage technology. There can be no assurance, however, that pending patent
applications will ultimately issue as patents or that the claims allowed in any
of our existing or future patents will provide competitive advantages for our
products or will not be successfully challenged or circumvented by competitors.
Under current law, certain patent applications filed with the United States
Patent and Trademark Office before November 29, 2000 may be maintained in
secrecy until a patent is issued. Patent applications filed with the United
States Patent and Trademark Office on or after November 29, 2000, as well as
patent applications filed in foreign countries, may be published some time
after filing but prior to issuance. The right to a patent in the United States
is attributable to the first to invent, not the first to file a patent
application. We cannot be sure that our products or technologies do not
infringe patents that may be granted in the future pursuant to pending patent
applications or that our products do not infringe any patents or proprietary
rights of third parties. In the event that any relevant claims of third-party
patents are upheld as valid and enforceable, we could be prevented from selling
our products or could be required to obtain licenses from the owners of such
patents or be required to redesign our products to avoid infringement. There
can be no assurance that such licenses would be available or, if available,
would be on terms
21
acceptable to us or that we would be successful in any attempts to redesign our
products or processes to avoid infringement. Our failure to obtain these
licenses or to redesign our products would have a material adverse effect on
our business.
Litigation may be necessary to defend against claims of infringement, or to
enforce our patents, copyrights, trademarks or trade secrets which could result
in substantial cost to, and diversion of effort by us. In addition, the laws of
some foreign countries do not protect our proprietary rights to the same extent
as do the laws of the United States.
Our reliance on sole source suppliers could harm our business.
We currently obtain certain key components of the ThinPrep System, including
our propriety filter material, from single sources. We have been increasing our
inventory of these components in an effort to reduce this risk. If we are
unable to obtain sufficient quantities of these components at reasonable prices
and in a timely manner, we will not be able to manufacture our products on a
timely and cost-competitive basis, which would materially and adversely affect
our business and financial condition.
22
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
Selected Historical Financial Data of Cytyc Corporation
The selected consolidated financial data set forth below for each of the
years ended December 31, 1997, 1998, 1999, 2000 and 2001 and at December 31,
1997, 1998, 1999, 2000 and 2001 are derived from consolidated financial
statements of Cytyc audited by Arthur Andersen LLP, independent public
accountants. The financial data for the three month periods ended March 31,
2001 and 2002 are derived from Cytyc's unaudited consolidated financial
statements. The selected consolidated financial data set forth below is
qualified in its entirety by, and should be read in conjunction with these
consolidated financial statements and related notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Cytyc's Annual Report on Form 10-K filed for the fiscal
year ended December 31, 2001 and included in Cytyc's Quarterly Report on Form
10-Q filed for the quarter ended March 31, 2002, incorporated by reference in
this prospectus.
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------------ ---------------------
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- -------- -------- ------------ --------
(in thousands, except per share data)
Statements of Operations Data:
Net sales............................ $ 26,347 $ 44,264 $ 81,100 $142,065 $220,993 $ 47,467 $ 68,035
Cost of sales........................ 8,006 11,211 15,815 24,565 40,168 8,841 12,610
-------- -------- -------- -------- -------- -------- --------
Gross profit......................... 18,341 33,053 65,285 117,500 180,825 38,626 55,425
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Research and development......... 6,048 8,419 13,372 14,171 18,975 4,788 4,190
In-process research and
development..................... -- -- -- -- 56,000 -- --
Sales and marketing.............. 31,761 35,332 44,017 55,162 59,161 13,871 17,084
General and administrative....... 7,746 8,372 6,765 13,872 16,987 3,451 6,715
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses.................. 45,555 52,123 64,154 83,205 151,123 22,110 27,989
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations........ (27,214) (19,070) 1,131 34,295 29,702 16,516 27,436
Other income, net.................... 5,142 7,341 4,639 4,721 8,006 4,497 948
-------- -------- -------- -------- -------- -------- --------
Income (loss) before provision for
income taxes........................ (22,072) (11,729) 5,770 39,016 37,708 21,013 28,384
Provision for income taxes........... -- -- 130 853 25,073 5,463 10,786
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................... $(22,072) $(11,729) $ 5,640 $ 38,163 $ 12,635 $ 15,550 $ 17,598
======== ======== ======== ======== ======== ======== ========
Net income (loss) per common and
potential common share:
Basic............................ $ (0.22) $ (0.11) $ 0.05 $ 0.34 $ 0.11 $ 0.14 $ 0.14
======== ======== ======== ======== ======== ======== ========
Diluted.......................... $ (0.22) $ (0.11) $ 0.05 $ 0.32 $ 0.10 $ 0.13 $ 0.14
======== ======== ======== ======== ======== ======== ========
Weighted average common and
potential common shares
outstanding:
Basic............................ 101,358 105,858 107,346 110,754 115,396 113,615 121,780
Diluted.......................... 101,358 105,858 112,530 117,960 120,776 119,207 126,017
At December 31, At March 31,
------------------------------------------------ ------------
1997 1998 1999 2000 2001 2002
Balance Sheet Data: -------- -------- -------- -------- -------- ------------
Cash, cash equivalents and short-term
investments......................... $ 85,402 $ 69,908 $ 70,368 $ 88,845 $153,242 $178,344
Total assets......................... 108,377 97,737 112,328 170,886 386,760 419,202
Accumulated deficit.................. (69,179) (80,908) (75,268) (37,105) (24,470) (6,872)
Total stockholders' equity........... 96,187 85,807 94,991 147,046 350,308 379,388
23
Selected Historical Financial Data of Digene Corporation
The selected consolidated financial data set forth below with respect to
Digene's Consolidated Statements of Operations for the fiscal years ended June
30, 1997, 1998, 1999, 2000, and 2001 and with respect to Digene's Consolidated
Balance Sheets at June 30, 1997, 1998, 1999, 2000 and 2001 are derived from the
audited Consolidated Financial Statements of Digene which have been audited by
Ernst & Young LLP, independent auditors. The financial data for the nine month
periods ended March 31, 2001 and 2002 are derived from Digene's unaudited
consolidated financial statements. The selected consolidated financial data set
forth below is qualified in its entirety by, and should be read in conjunction
with, the consolidated financial statements, the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Digene's Annual Report on Form 10-K for the fiscal year
ended June 30, 2001 and included in Digene's Quarterly Report on Form 10-Q
filed for the quarter ended March 31, 2002, incorporated by reference in this
prospectus.
Nine Months Ended
Fiscal Year Ended June 30, March 31,
-------------------------------------------- ----------------
1997 1998 1999 2000 2001 2001 2002
------- -------- ------- ------- ------- ------- -------
(in thousands, except per share loss)
Consolidated Statement of Operations
Data:
Revenues:
Product sales..................... $ 9,434 $ 11,980 $17,014 $22,287 $33,544 $23,396 $35,722
Research and development
contracts....................... 626 29 453 757 653 541 457
------- -------- ------- ------- ------- ------- -------
Total revenues................ 10,060 12,009 17,467 23,044 34,197 23,937 36,179
Costs and expenses:
Cost of product sales............. 3,441 3,848 6,112 7,641 12,089 8,916 9,441
Research and development.......... 4,131 5,285 4,643 6,123 8,120 5,934 6,655
Selling and marketing............. 5,236 11,972 10,531 10,930 13,012 8,725 14,489
General and administrative........ 4,412 5,690 5,957 6,346 8,336 6,211 8,351
Amortization of intangible assets. 241 386 150 150 150 113 112
Abbot termination fee............. -- -- -- -- -- -- 2,500
------- -------- ------- ------- ------- ------- -------
Loss from operations................. (7,401) (15,172) (9,926) (8,146) (7,510) (5,962) (5,369)
Other income (expense)............... (36) (83) (184) 513 (37) -- 85
Interest expense..................... (84) (164) (30) -- (11) (7) (11)
Interest income...................... 1,527 1,378 985 1,050 1,194 924 533
------- -------- ------- ------- ------- ------- -------
Loss from operations before income
taxes.............................. (5,994) (14,041) (9,155) (6,583) (6,364) (5,045) (4,762)
Provision for income taxes........... -- 48 149 184 117 94 166
------- -------- ------- ------- ------- ------- -------
Net loss............................. $(5,994) $(14,089) $(9,304) $(6,767) $(6,481) $(5,139) $(4,928)
======= ======== ======= ======= ======= ======= =======
Basic and diluted net loss per share. $ (0.53) $ (1.06) $ (0.65) $ (0.44) $ (0.39) $ (0.31) $ (0.29)
======= ======== ======= ======= ======= ======= =======
Weighted average shares outstanding.. 11,394 13,236 14,354 15,296 16,557 16,498 17,162
======= ======== ======= ======= ======= ======= =======
At
At June 30, March 31,
------------------------------------------------ ---------
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- ---------
(in thousands)
Consolidated Balance Sheet Data:
Working capital........................ $ 21,299 $ 28,428 $ 20,499 $ 24,268 $ 26,905 $ 44,067
Total assets........................... 30,207 35,440 28,108 35,785 48,195 68,039
Long-term debt, less current maturities 553 -- -- -- 1,000 1,000
Accumulated deficit.................... (25,327) (39,416) (48,720) (55,487) (61,968) (66,896)
Total stockholders' equity............. 24,266 31,099 23,687 29,425 26,334 43,878
24
Selected Unaudited Pro Forma Combined Condensed Financial Data
The following selected pro forma combined condensed financial data of Cytyc
has been derived from the pro forma combined condensed financial information
included elsewhere in this registration statement and should be read in
conjunction with the pro forma combined condensed financial information and
related notes and present the effect of the pending acquisition of Digene by
Cytyc, which is to be accounted for as a purchase.
The following unaudited pro forma statement of operations data for the year
ended December 31, 2001 gives effect to the acquisition of Pro Duct, which
Cytyc completed in November 2001, and the Digene merger as if the transactions
had occurred at January 1, 2001. The unaudited pro forma statement of
operations data for the three months ended March 31, 2002 gives effect to the
Digene merger as if the transaction had occurred on January 1, 2002. The
following unaudited pro forma balance sheet data as of March 31, 2002 gives
effect to the acquisition of Digene as if it had occurred on March 31, 2002.
The unaudited pro forma condensed combined financial data are based on the
estimates and assumptions set forth in the notes to such statements, which are
preliminary and have been made solely for purposes of developing such pro forma
information. The unaudited pro forma condensed financial data are not
necessarily an indication of the results that would have been achieved had the
transaction been consumated as of the dates indicated or that may be achieved
in the future.
Year Ending Three
December 31, Months Ending
2001 March 31, 2002
------------ --------------
Pro Forma Combined Condensed Statement of Operations Data:
Total net sales........................................... $262,155 $ 81,568
Income from operations.................................... 60,502 22,286
Net income................................................ 51,583 14,371
Net income per share basic................................ 0.36 0.10
Net income per share diluted.............................. 0.35 0.10
Shares used in computed basic income per share............ 143,881 145,265
Shares used in computed diluted income per share.......... 149,261 149,502
As of
March 31,
2002
---------
Pro Forma Combined Condensed Balance Sheet Data:
Cash, cash equivalents, and short term investments $167,898
Working capital................................... 183,647
Total assets...................................... 928,139
Long-term debt, less current portion.............. 2,165
Stockholders' equity.............................. 842,853
25
Comparative Per Share Data
The following table sets forth (1) certain historical per share data of
Cytyc and Digene, and (2) Cytyc and Digene combined per share data on an
unaudited pro forma basis after giving effect to the business combination on a
purchase basis of accounting. This data should be read in conjunction with the
selected historical financial data, the unaudited pro forma combined condensed
financial information of Cytyc included elsewhere in this prospectus and the
historical financial statements of Cytyc and Digene and notes, which are
incorporated by reference in this prospectus. The pro forma combined condensed
financial data are not necessarily indicative of the operating results that
would have been achieved had the business combination been consummated as of
the beginning of the periods presented and should not be construed as
representative of the results for any future period.
Three Months Nine Months
Year Ended Ended Year Ended Ended
December 31, March 31, June 30, March 31,
2001 2002 2001 2002
------------ ------------ ---------- -----------
Cytyc Digene Cytyc Digene Digene Digene
----- ------ ----- ------ ---------- -----------
Historical:
Basic net income (loss) per share.............. $0.11 * $0.14 $0.19 $(0.39) $(0.29)
Diluted net income (loss) per share............ $0.10 * $0.14 $0.19 $(0.39) $(0.29)
Book value per common share (1)................ $2.89 * $3.10 $2.44 $ 1.57 $ 2.44
Dividends declared per common share............ None * None None None None
Pro Forma Combined:
Basic net income per share (2)................. $0.36 * $0.10 * * *
Diluted net income per share (2)............... $0.35 * $0.10 * * *
Book value per common share.................... $5.42 * $5.38 * * *
Equivalent basic net income loss per share (3). * $0.43 * $0.12 * *
Equivalent diluted net income per share (3).... * $0.42 * $0.12 * *
Equivalent book value per common share (3)..... * $6.72 * $6.44 * *
- --------
* Not applicable.
(1) The historical book value per common share is computed by dividing
stockholders' equity by the number of shares of common stock outstanding as
of December 31, 2001 and March 31, 2002 for Cytyc and as of June 30, 2001
and March 31, 2002 for Digene.
(2) The pro forma combined per share information of Cytyc is shown in the Cytyc
column by combining Digene's financial data for the same year, including
the effects of pro forma adjustments described elsewhere in this
registration statement.
(3) The equivalent pro forma combined net income per share amounts and
equivalent pro forma combined book value per share amounts for Digene are
calculated by multiplying the Cytyc pro forma combined amounts by the
exchange ratio of 1.1969 shares of Cytyc common stock for each share of
Digene common stock.
26
Comparative Market Price Information
The following table sets forth the per share closing price of Cytyc common
stock and Digene common stock as reported on the Nasdaq National Market on
February 15, 2002, the last trading day prior to the public announcement of the
proposed transaction, and on February 27, 2002, the most recent practicable
date for which the closing prices were available prior to the date of this
prospectus. The table also sets forth the pro forma equivalent market value
which was determined based on an exchange ratio of 1.1969 shares of Cytyc
common stock per share of Digene common stock, plus cash in the amount of $4.00
per share of Digene common stock. The actual value of the Cytyc stock that a
Digene stockholder will receive upon consummation of the offer and the merger
may be higher or lower than the prices set forth below. Digene stockholders are
advised to obtain current market quotations for Cytyc common stock and Digene
common stock.
Last Sale Price of Last Sale Price of Digene Merger
Cytyc Common Stock Digene Common Stock Equivalent
------------------ ------------------- -------------
February 15, 2002 $20.73 $25.51 $28.81
February 27, 2002 $23.46 $31.87 $32.08
See "Market Prices and Dividends" on page 72 for additional market price
information.
27
INTRODUCTION TO PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
On February 19, 2002, Cytyc entered into an Agreement and Plan of Merger to
acquire Digene (Digene), by means of an exchange offer and subsequent merger of
Cruiser, Inc. a wholly-owned subsidiary of Cytyc, with and into Digene
Corporation. Digene develops, manufactures and markets proprietary gene-based
tests for the screening, monitoring and diagnosis of human diseases. Digene's
primary focus is women's cancer and infectious diseases. Cytyc intends to
substantially combine and conduct the business operations of Digene as
conducted prior to the acquisition.
The following description relates to the assumptions made and methodology
used for the purposes of preparing this pro forma combined condensed financial
information. In connection with the offer and the merger, Cytyc will issue up
to an aggregate of 23.5 million shares of Cytyc common stock, par value $0.01
per share, and $78.5 million cash in exchange for all of the outstanding
capital stock and shares of Digene common stock issuable upon exercise of
vested options of Digene. In addition, all remaining outstanding unvested
common stock options of Digene will immediately become exercisable for cash and
shares of Cytyc common stock. The fair value of these unvested options of
approximately $28.4 million as determined using the Black Scholes Option
Pricing Model, will be recorded as additional purchase price. Cytyc will also
accrue $6.5 million related to the cash to be paid upon the exercise of the
unvested options. The source of funds for the merger will come from the
authorized capital stock of Cytyc and from Cytyc's cash on hand.
The purchase price and terms for the transaction were determined in
arms-length negotiations. The acquisition of Digene is intended to qualify as a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended. The aggregate purchase price for Digene is estimated to be
approximately $622.0 million of which $78.5 million will be paid in cash,
approximately $499.9 million relates to the value of approximately 23.5 million
shares of Cytyc common stock, $28.4 million relates to the value of assumed
unvested options, $6.5 million to be accrued for the cash to be paid upon the
exercise of the assumed unvested options, and approximately $8.7 million is for
acquisition related fees and expenses. The aquisition will be accounted for as
a purchase in accordance with Statement of Financial Accounting Standard (SFAS)
No. 141, "Business Combinations" and accordingly, the purchase price will be
allocated to the assets and liabilities of Digene based on their fair value.
The results of operations of Digene will be included in the results of
operations of the combined company upon the effectiveness of the merger.
The pro forma condensed consolidated financial statements reflect the
preliminary purchase price allocation based on Cytyc's best estimate of the
fair value of assets to be acquired and the liabilities to be assumed.
Cytyc engaged a third party appraiser to conduct a preliminary valuation of
the intangible assets and to assist in the determination of useful lives for
such assets. Based on the preliminary appraisal, the Company allocated
approximately $50,000,000 of the purchase price to developed technology and
approximately $65,000,000 to in-process research and development, which will be
expensed upon closing of the transaction. Due to the non-recurring nature of
the in-process research and development charge, the amount has not been
included in the pro forma statement of operations. The amount allocated to
developed technology is expected to be amortized over its estimated useful life
of 8.5 years. As the appraisal is only preliminary, the assumed allocations and
estimated lives used in the pro forma combined condensed financial information
may differ materially from those recorded by the Company upon the final
valuation.
The preliminary valuation of in-process research and development was
determined using the income method. Revenue and expense projections for the
in-process research and development project were prepared by Cytyc's
management. The preliminary value was determined using the present value of the
cash flows from the projections using a range of discount rates of 30-40%. The
technologies under development were assessed based on costs incurred to date
under the projects and the likelihood of success. In the event that the project
is not completed and technological feasibility is not achieved, there is no
alternative future use for the in-process technology. The assumptions used for
the valuation of the in-process research and development are the responsibility
of management and are subject to change.
28
In accordance with recently issued SFAS No. 142 "Goodwill and Other
Intangible Assets," the goodwill resulting from the acquisition of Digene,
estimated to be $412.2 million as of March 31, 2002, will not be amortized but
rather will be tested at least annually for impairment.
Based on the timing of the closing of the transaction, finalization of the
integration plans and other factors, the final purchase adjustments may differ
materially from those presented in the pro forma financial information. A final
appraisal of the intangibles will be performed as of the closing date and the
allocation adjusted accordingly. The effect of the adjustments on the results
of operations will depend on the nature and amount of assets or liabilities
adjusted.
The unaudited pro forma financial information does not purport to represent
what the consolidated financial position or results of operations actually
would have been if the merger, in fact, had occurred on March 31, 2002 or at
the beginning of the period presented or to project the consolidated financial
position or results of operations as of any future date or any future period.
29
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Cytyc Corporation
Unaudited Pro Forma Combined Condensed Balance Sheet
As of March 31, 2002
(Amounts in thousands)
Historical
------------------
Pro Forma Pro Forma
Cytyc Digene Adjustments Combined
-------- -------- ----------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 91,753 $ 18,448 $ (78,487) (L) $ 54,807
23,093 (N)
Short term investments 86,591 26,500 -- 113,091
Accounts receivable, net 59,393 9,475 (1,224) (W) 67,644
Inventories 9,913 6,029 3,213 (T) 19,155
Prepaid expenses and other current assets 5,623 1,448 -- 7,071
-------- -------- --------- --------
TOTAL CURRENT ASSETS 253,273 61,900 (53,405) 261,768
Property and equipment, net 26,963 4,088 -- 31,051
Note receivable -- 406 -- 406
Patented technology 209 -- -- 209
Acquired developed technology and know-how 18,513 -- 50,000 (M) 68,513
Goodwill and other intangibles 95,350 938 412,151 (M) 508,439
Other assets, net 6,695 707 -- 7,402
Deferred tax asset, net 18,199 -- 32,152 (S) 50,351
-------- -------- --------- --------
165,929 6,139 494,303 666,371
-------- -------- --------- --------
TOTAL ASSETS $419,202 $ 68,039 $ 440,898 $928,139
======== ======== ========= ========
CURRENT LIABILITIES
Accounts payable $ 8,620 $ 6,345 $ -- $ 14,965
Accrued expenses 28,217 6,784 6,561 (L) 56,312
8,683 (L)
1,500 (O)
3,500 (Q)
2,500 (U)
(1,433) (W)
Deferred revenue 2,140 4,704 -- 6,844
-------- -------- --------- --------
TOTAL CURRENT LIABILITIES 38,977 17,833 21,311 78,121
Notes payable, net of current portion -- 1,000 -- 1,000
Deferred liability -- 5,000 -- 5,000
Other long-term liabilities 837 328 -- 1,165
-------- -------- --------- --------
TOTAL LIABILITIES 39,814 24,161 21,311 85,286
STOCKHOLDERS' EQUITY
Common stock 1,224 179 235 (L) 1,459
(179) (R)
Additional paid-in capital 387,931 110,635 528,021 (L) 915,952
(110,635) (R)
Accumulated deficit (6,872) (66,896) (65,000) (I) (71,663)
66,896 (R)
338 (V)
(129) (W)
Deferred stock compensation (782) (40) 40 (R) (782)
Accumulated other comprehensive loss (2,113) -- -- (2,113)
-------- -------- --------- --------
TOTAL STOCKHOLDERS' EQUITY 379,388 43,878 419,587 842,853
-------- -------- --------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $419,202 $ 68,039 $ 440,898 $928,139
======== ======== ========= ========
30
Cytyc Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations
For the year ended December 31, 2001
(Amounts in thousands, except per share data)
Historical
---------------------------------------------------
Pro Duct Digene
Pro Forma Pro Forma Pro Forma Pro Forma
Cytyc Pro Duct Adjustments Cytyc Digene Adjustments Combined
-------- -------- ----------- --------- ------- ----------- ---------
Net sales $220,993 $ 508 $ -- $221,501 $41,235 $ (581) (V) $262,155
Cost of sales 40,168 604 -- 40,772 11,792 -- 52,564
-------- -------- ------- -------- ------- -------- --------
Gross profit 180,825 (96) -- 180,729 29,443 (581) 209,591
Operating Expenses
Research and development 18,975 3,485 --- 22,460 8,589 -- 31,049
Inprocess research and
development 56,000 -- 56,000 (C) -- -- 65,000 (I) --
-- -- -- -- -- (65,000) (J) --
Sales and marketing 59,161 4,438 -- 63,599 16,406 (919) (V) 79,086
General and administrative 16,987 4,134 1,520 (A) 22,641 9,767 5,882 (G) 38,290
Stock-based compensation -- -- 664 (D) 664 -- -- 664
-------- -------- ------- -------- ------- -------- --------
Total Operating Expenses 151,123 12,057 53,816 109,364 34,762 4,963 149,089
Income (loss) from operations 29,702 (12,153) 53,816 71,365 (5,319) (5,544) 60,502
Interest income (expense), net 5,412 1,282 (1,863) (B) 4,831 993 (2,681) (H) 3,143
Other income (expense), net (493) 390 -- (103) (22) -- (125)
Litigation settlement 3,087 -- -- 3,087 -- -- 3,087
-------- -------- ------- -------- ------- -------- --------
Income (loss) before income taxes 37,708 (10,481) 51,953 79,180 (4,348) (8,225) 66,607
Provision (benefit) for income taxes 25,073 -- (5,521) (E) 19,552 249 (4,778) (P) 15,023
-------- -------- ------- -------- ------- -------- --------
Net income (loss) $ 12,635 $(10,481) $57,474 $ 59,628 $(4,597) $ (3,447) $ 51,584
======== ======== ======= ======== ======= ======== ========
Net income per common and per
potential common share
Basic $ 0.11 $ 0.50 $ 0.36
======== ======== ========
Diluted $ 0.10 $ 0.47 $ 0.35
======== ======== ========
Weighted Average Shares Outstanding
Basic 115,396 5,000 (F) 120,396 -- 23,485 (K) 143,881
======== ======== ========
Diluted 120,776 5,000 (F) 125,776 -- 23,485 (K) 149,261
======== ======== ========
31
Cytyc Corporation
Unaudited Pro Forma Combined Condensed Statement of Operations
For the three months ended March 31, 2002
(Amounts in thousands, except per share data)
Historical
----------------
Digene
Pro Forma Pro Forma
Cytyc Digene Adjustments Combined
-------- ------- ----------- ---------
Net sales $ 68,035 $14,213 $ (680) (W) $ 81,568
Cost of sales 12,610 3,713 -- 16,323
-------- ------- -------- --------
Gross profit 55,425 10,500 (680) 65,245
Operating Expenses
Research and development 4,190 2,239 -- 6,429
Inprocess research and development -- -- 65,000 (I) --
-- -- (65,000) (J) --
Sales and marketing 17,084 5,812 (551) (W) 22,345
General and administrative 6,715 3,499 1,471 (G) 11,685
Abbott termination fee -- 2,500 -- 2,500
-------- ------- -------- --------
Total Operating Expenses 27,989 14,050 920 42,959
Income (loss) from operations 27,436 (3,550) (1,600) 22,286
Interest income (expense), net 899 135 (300) (H) 734
Other income (expense), net 49 72 -- 121
-------- ------- -------- --------
Income (loss) before income taxes 28,384 (3,343) (1,900) 23,141
Provision (benefit) for income taxes 10,786 (24) (1,992) (P) 8,770
-------- ------- -------- --------
Net income (loss) $ 17,598 $(3,319) $ 92 $ 14,371
======== ======= ======== ========
Net income per common and per potential common share
Basic $ 0.14 $ 0.10
======== ========
Diluted $ 0.14 $ 0.10
======== ========
Weighted Average Shares Outstanding
Basic 121,780 -- 23,485 (K) 145,265
======== ========
Diluted 126,017 -- 23,485 (K) 149,502
======== ========
32
BASIS OF PRESENTATION
The unaudited pro forma combined condensed statement of operations for the
year ended December 31, 2001 gives effect to the acquisition of Pro Duct, which
Cytyc completed in November 2001 and the aquisition of Digene as if each
transaction had occurred on January 1, 2001. The unaudited pro forma combined
condensed statement of operations includes the results of Cytyc for the year
ended December 31, 2001, the results of Pro Duct for the period from January 1,
2001 through the date of acquisition and the results of Digene for the twelve
months ended December 31, 2001. The unaudited pro forma combined condensed
statement of operations for the three months ended March 31, 2002 includes the
results of Cytyc and Digene for the three months ended March 31, 2002. The
unaudited pro forma combined condensed balance sheet as of March 31, 2002 gives
effect to the aquisition of Digene as if it had occurred on March 31, 2002.
The estimated purchase price of the merger is $622.0 million, which is
composed of $78.5 million in cash, the issuance of 23.5 million shares of Cytyc
common stock in exchange for all the outstanding capital stock and vested
common stock options of Digene, valued at $499.9 million, and $8.7 million in
acquisition related fees and expenses. In addition, the purchase price includes
the value of the remaining outstanding unvested common stock options of Digene
that will vest under their original terms due to the change in control and will
convert into options of Cytyc based on the conversion ratio in the merger
agreement. The fair value of these unvested options of approximately $28.4
million, as determined using the Black Sholes Option Pricing model will be
recorded as additional purchase price. Cytyc will also accrue $6.5 million
related to the cash to be paid upon the exercise of the unvested options. Below
is a table of the estimated purchase price allocation for the Digene
acquisition as of March 31, 2002. The purchase price allocation is subject to
further changes based on final integration plans and final valuations and
appraisals.
Tangible net assets acquired, at fair value $ 94,836
In-process research and development........ 65,000
Developed technology and know-how.......... 50,000
Goodwill and other intangibles............. 412,151
---------
Total............................... $621,987
Adjustments to record the acquisition of Pro Duct:
A Gives effect to amortization of developed technology and know-how from the Pro Duct
acquisition 1,520
B Gives effect to a reduction in interest income related to the utilization of $38,500,000 in cash for
the acquisition of Pro Duct 1,863
C To reverse the write-off of in-process research and development costs recorded in connection
with the Pro Duct acquisition, as required by Article 11 of S-X, the unaudited pro forma
combined condensed statements of operations excludes material non-recurring charges which
result within twelve months following an acquisition (56,000)
D To record the amortization of stock-based compensation related to unvested options to purchase
common stock assumed in the Pro Duct acquisition 664
E To reflect the income tax effects assuming a 38% effective rate 5,521
F To record the issuance of shares to the Pro Duct shareholders 5,000
Adjustments to record acquisition of Digene:
G Gives effect to the amortization of development technology and know-how related to the merger
Twelve months ended December 31, 2001 5,882
Three months ended March 31, 2002 1,471
H Gives effect to a reduction in interest income related to the utilization of $78.5 million in cash
for the acquisition of Digene net of cash received from common stock options exercised of
$23.1 million
Twelve months ended December 31, 2001 2,681
Three months ended March 31, 2002 300
33
I To record write-off of in-process research and development costs in connection with the
merger 65,000
J As required by Article 11 of S-X, the unaudited pro forma combined condensed statements of
operations excludes material non-recurring charges which result within twelve months
following an acquisition (65,000)
K To record the issuance of shares in relation to the merger 23,485
L To record purchase price, including cash paid, issuance of common stock, value of unvested
stock options, accrued cash to be paid to holders of unvested stock options and accrued
estimated acquisition related fees and expenses 621,987
M To record developed technology and know-how 50,000
412,151
To record goodwill and other intangibles ------
462,151
N To record cash received upon exercise of vested common stock options 23,093
O To record reserve for termination of a distribution agreement as a result of the merger 1,500
P To reflect the income tax effects assuming a 38% effective rate
Twelve months ended December 31, 2001 4,778
Three months ended March 31, 2002 1,992
Q To record reserve for relocation and other personnel related costs 3,500
R To eliminate Digene stockholders' equity as of March 31, 2002:
Common stock 179
Additional paid-in capital 110,635
Accumulated deficit (66,896)
Deferred compensation (40)
S To record net deferred tax asset in accordance with SFAS No. 109 32,152
T To state acquired inventory at its estimate fair value 3,213
U To record reserve for lease loss 2,500
V Eliminate transactions between Digene and Cytyc under a co-promotion agreement for the year
ended December 31, 2001:
Revenue 581
Marketing expense 919
W Eliminate transactions between Digene and Cytyc under a co-promotion agreement for the
three months ended March 31, 2002:
Revenue 680
Marketing expense 551
Accounts receivable 1,224
Accrued expenses 1,433
34
THE COMPANIES
Cytyc Corporation
We design, develop, manufacture and market a sample preparation system for
medical diagnostic applications. Our ThinPrep System allows for the automated
preparation of cervical cell specimens on microscope slides for use in cervical
cancer screening, as well as for the automated preparation of other cell
specimens on microscope slides for use in non-gynecological testing
applications. We believe that the ThinPrep System improves accuracy in the
detection of cervical cancer and precancerous lesions by making the slide more
representative of the patient's clinical condition, improving preservation of
the sample, standardizing the presentation of cells on the slide, and reducing
the presence of mucus, blood and other obscuring debris.
We received initial pre-market approval from the FDA to market our ThinPrep
System as a replacement for the conventional pap smear in May 1996. We
commenced the full-scale commercial launch of the ThinPrep System for cervical
cancer screening in the United States in 1997 and in selected international
markets in 1998. In May 2000, the FDA approved the ThinPrep(R) 3000 Processor,
our next-generation processor for automated sample preparation. In January
2002, we submitted a PMA Application to the FDA for the ThinPrep Imaging System
to aid in cervical cancer screening.
On November 30, 2001, Cytyc acquired Pro Duct Health, Inc., a privately-held
company that has developed an innovative, FDA-approved ductal lavage device
designed to enhance the evaluation of risk for breast cancer.
Cytyc was incorporated in Delaware in 1987. Its principal offices are
located at 85 Swanson Road, Boxborough, Massachusetts 01719, (978) 263-8000.
Cruiser, Inc.
Cruiser, Inc. is a Delaware corporation and a wholly-owned subsidiary of
Cytyc. Cruiser, Inc. was organized on February 14, 2002 solely for the purposes
of acquiring the Cytyc shares tendered in the offer and merging with Digene in
the merger. It has not carried on any activities other than in connection with
the merger agreement.
Cruiser, Inc. is headquartered at 85 Swanson Road, Boxborough, Massachusetts
01719, (978) 263-8000.
Digene Corporation
Digene develops, manufactures and markets a proprietary gene-based testing
system for the screening, monitoring and diagnosis of human diseases. Its
primary focus is in women's cancers and infectious diseases. Digene has applied
its Hybrid Capture technology to develop a successful diagnostic test for human
papillomavirus, or HPV, which is the primary cause of cervical cancer and is
found in greater than 99% of cervical cancer cases. In addition to its HPV Test
marketing efforts, Digene is focusing its commercialization strategy in two
areas: diagnostic testing and genomics research.
Digene was incorporated in Delaware in 1987. Its principal executive offices
are located at 1201 Clopper Road, Gaithersburg, Maryland 20878, (301) 944-7000.
35
BACKGROUND OF THE OFFER
Because of the complementary nature of the respective businesses and
technologies of Cytyc and Digene, the two companies have periodically engaged
in discussions concerning potential strategic transactions between the
companies for several years. Many of the initial discussions, though tentative
in nature, were driven principally by the companies' perception that they could
realize strategic synergies if they were to combine and leverage their product
offerings and marketing and distribution channels.
In February 2000, Cytyc's Board of Directors discussed the financial and
strategic aspects of potential strategic transactions involving Digene,
including a business combination. Patrick Sullivan and Daniel Levangie of Cytyc
met with Evan Jones and Charles Fleischman of Digene in early March 2000 to
explore the possibility of a potential business combination transaction between
the companies. Shortly after that meeting, Charles Fleischman contacted
Goldman, Sachs & Co. ("Goldman Sachs") regarding possible representation of
Digene with respect to any discussions with Cytyc, but Digene did not enter
into an engagement letter with Goldman Sachs. Limited discussions between
Patrick Sullivan and Evan Jones continued until April 2000 when discussions
were terminated without any agreement having been reached.
In May 2000, Cytyc and Digene briefly engaged in discussions concerning the
co-promotion of Digene's human papillomavirus product from Cytyc's ThinPrep
vial.
Beginning in early June 2000, Cytyc and Digene renewed discussions regarding
a possible business combination between the parties. Digene executed an
engagement letter with Goldman Sachs as of June 24, 2000 with respect to the
proposed business combination with Cytyc. Senior members of Cytyc management
and representatives of Morgan Stanley Dean Witter ("Morgan Stanley"), whom
Cytyc had asked to assist in its discussions with Digene, met later that month
with senior members of Digene management and representatives of Goldman Sachs
at Morgan Stanley's offices in New York City to discuss the terms of a possible
transaction. The parties also began the preliminary exchange of due diligence
materials relating to the proposed transaction, and began to negotiate the
terms of a confidentiality agreement and limited exclusivity arrangement with
respect to their negotiations.
In early July 2000, Morgan Stanley and Goldman Sachs exchanged financial
models relating to the proposed acquisition. At two meetings in July 2000,
Digene's board of directors discussed a possible strategic transaction between
Digene and Cytyc. Cytyc and Digene held two additional meetings with their
respective financial advisors to discuss the proposed terms, including issues
relating to valuation and transition. In mid-July 2000, the parties executed a
confidentiality agreement that included a no-shop provision providing for a
limited period of exclusive negotiations between the parties with respect to
the proposed transaction. In early August 2000, the parties formally terminated
these discussions, with no agreement having been reached, and Digene terminated
its engagement of Goldman Sachs.
Beginning in October 2000, representatives of Cytyc and Digene began
discussions regarding a possible agreement between the parties to co-promote
the benefits of testing for human papillomavirus using Digene's Hybrid Capture
2 HPV DNA Assay directly from Cytyc's ThinPrep collection vial. Negotiations
continued throughout the fall of 2000. The parties executed a Co-Promotion
Agreement in January 2001.
In April 2001, Evan Jones and Charles Fleischman participated as presenters
at Cytyc's national sales meeting related to the Co-Promotion Agreement.
Messrs. Sullivan and Levangie of Cytyc met with Messrs. Jones and Fleischman at
that time and discussed the possibility of restarting discussions regarding a
broader strategic relationship between the companies. Those discussions ended
without any agreement having been reached.
In May 2001, Patrick Sullivan contacted Evan Jones regarding renewing
discussions, but Mr. Jones informed Mr. Sullivan that Digene had recently
signed a letter agreement with another potential collaborative partner, which,
according to Mr. Jones, provided for a period of exclusivity that would prevent
Digene from engaging in further discussions with Cytyc at that time.
36
Between June and September 2001, discussions between Cytyc and Digene were
limited to the subject of the companies' existing Co-Promotion Agreement.
In September 2001, Digene's Board of Directors again discussed the level of
interest in a transaction between Digene and Cytyc. In early October 2001, Evan
Jones contacted Patrick Sullivan concerning Digene's interest in renewing
discussions concerning a business combination. Patrick Sullivan and Daniel
Levangie met with Evan Jones to discuss potential terms, including with respect
to valuation. Mr Jones promptly updated the Digene Board of Directors with
respect to the results of that meeting, including the terms of the proposal
made by Cytyc. Beginning on or about October 3, 2001, principals of Digene and
Cytyc and their respective investment banking and legal advisors, met at the
offices of Cytyc's outside legal counsel, Testa, Hurwitz & Thibeault, LLP
("Testa, Hurwitz & Thibeault"), to negotiate the terms of a potential
acquisition of Digene by Cytyc. Cytyc and Digene executed a confidentiality
agreement that included a no-shop provision providing for a limited period of
exclusive negotiations between the parties with respect to the proposed
transaction. The parties engaged in negotiations of the terms of the proposed
acquisition over the following three days, including with respect to valuation,
deal protective devices, and employee transition and compensation issues. The
companies also exchanged and discussed due diligence. Testa, Hurwitz &
Thibeault presented a draft of a merger agreement to Digene and its advisors on
or about October 6, 2001. The discussions were formally terminated on or about
October 7, 2001, with no agreement having been reached.
Between October 8, 2001 and the beginning of February 2002, the only
discussions between Cytyc and Digene related to their existing Co-Promotion
Agreement.
On Friday, February 8, 2002, Patrick Sullivan contacted Evan Jones to
indicate that Cytyc would be interested in renewing discussions regarding an
acquisition of Digene by Cytyc. Mr. Sullivan spoke to Mr. Jones two times
during the evening of February 8, during which time they discussed valuation
and basic deal terms.
The transaction presented was a cash and stock exchange offer followed by a
merger, which was to be effected as a tax-free reorganization. On February 9
and 10, Mr. Sullivan had several discussions by telephone with Mr. Jones and
Mr. Fleischman concerning the proposed transaction, including discussions of
the proposed valuation and other detailed business and legal terms. The parties
discussed in detail the timing and nature of any future negotiations and the
expected due diligence process that would be undertaken in the event the
companies were to decide to move forward with the transaction. U.S. Bancorp
Piper Jaffray ("Piper Jaffray") assisted Cytyc in these negotiations and
engaged in discussions with Goldman Sachs.
On February 11 and 12, 2002, representatives of Digene conducted internal
meetings to review the proposed transaction. These reviews reinforced Digene's
belief that an excellent strategic and tactical fit between the two companies
existed.
Digene's board of directors conducted a telephonic meeting on February 13,
2002, at which time Digene management and representatives of Digene's outside
counsel, Ballard Spahr Andrews & Ingersoll, LLP ("Ballard Spahr"), reported to
the directors on the status of discussions with Cytyc. Representatives of
Goldman Sachs, which previously had provided financial advice to Digene, were
also present at the meeting and led a preliminary oral discussion of the
proposed transaction, including an oral discussion of the potential premium to
stockholders and a review of comparable recent transactions. Goldman Sachs also
briefed the Digene board of directors on the current status of discussions with
Cytyc and its investment bankers and legal advisors. After discussing the
proposed transaction, the Digene board of directors authorized senior
management to continue discussions with Cytyc with the goal of completing
definitive acquisition documentation consistent with the parameters discussed
by the board. The Digene board of directors instructed management to present
the final documents, together with any other material agreements related to the
proposed transaction, as finally negotiated, to the Digene board of directors
for its consideration and action at a future meeting. The board of directors
also authorized management to formally engage Goldman Sachs as Digene's
financial advisor as of February 10, 2002 and to enter into a confidentiality
and no-shop agreement with Cytyc.
37
On or about February 13, 2002, Cytyc and Digene executed a confidentiality
agreement that included a no-shop provision providing for a limited period of
exclusive negotiations between the parties with respect to the proposed
transaction. Over the next two days, representatives of both companies and
their financial and legal advisors conducted several telephonic meetings to
negotiate the terms of the proposed transaction. On February 14, Piper Jaffray
presented an overview of the contemplated proposal and preliminary valuation
analysis of Digene to the finance committee of the Cytyc board of directors.
On Saturday, February 16, representatives of Cytyc and Digene management and
the companies' respective financial and legal advisors met telephonically, met
at the offices of Testa, Hurwitz & Thibeault, and met at Digene, to begin
detailed due diligence discussions and move forward with negotiations and
finalizing the definitive acquisition agreements. Each company responded to
detailed due diligence requests of the other company and began the exchange of
due diligence information and documentation. Also on February 16, Cytyc
provided Digene with a draft agreement and plan of merger.
On February 17, the parties continued detailed due diligence discussions and
information exchanges and began negotiating the merger agreement. Testa,
Hurwitz & Thibeault also presented Digene and its counsel with drafts of the
stockholders agreement and transaction option agreement.
The parties continued negotiating the merger agreement over the remainder of
the holiday weekend. By the morning of February 19, the terms and conditions of
the merger agreement and related agreements were substantially final.
Late in the evening of February 18, Cytyc convened a special meeting of its
Board of Directors by telephone and, after detailed presentations by and
discussions with Cytyc management, Piper Jaffray and Testa, Hurwitz & Thibeault
with respect to the terms of the proposed offer and merger and the results of
Cytyc's due diligence investigation, the Cytyc Board unanimously approved the
offer and merger on the terms set forth in the merger agreement and related
definitive agreements and subject to the satisfactory completion of due
diligence and the definitive documentation prior to the opening of U.S. markets
on the following morning of February 19.
Late in the evening of February 18, Digene convened a special telephonic
meeting of the Digene Board of Directors at which Digene management and
representatives of Ballard Spahr and Goldman Sachs reported on the status of
negotiations. Early in the morning of February 19, Digene convened another
special telephonic meeting of the Digene Board of Directors at which Digene
management and representatives of Ballard Spahr and Goldman Sachs presented the
Board with the final merger agreement and related agreements. Representatives
of Ballard Spahr and members of Digene's management then delivered reports as
to the results of their due diligence investigation of Cytyc. Representatives
of Ballard Spahr also reviewed the proposed terms of the merger agreement and
the related agreements with the Digene Board of Directors. Goldman Sachs
reviewed its financial analysis with respect to the proposed offer and merger
and delivered an oral opinion, subsequently confirmed in writing, that as of
February 19, 2002, and subject to the assumptions made, matters considered and
based upon the review undertaken in connection with its opinion, the
consideration proposed to be paid by Cytyc in the offer and the merger pursuant
to the merger agreement is fair from a financial point of view to the holders
of Digene common stock. After consideration of these presentations and its
prior deliberations, the directors unanimously approved the offer, the merger
and the merger agreement and the other agreements contemplated thereby,
authorized management to complete and execute the merger agreement and related
agreements and recommended that Digene's stockholders accept the offer to
tender their shares of Digene common stock and approve the merger.
Later in the morning on February 19, 2002, upon the conclusion of the Digene
board meeting, Cytyc and Digene executed the merger agreement and related
definitive agreements and, shortly thereafter, publicly announced the
transaction.
38
REASONS FOR THE OFFER AND THE MERGER
. Leverage Complementary Products, Technologies and Business Models to
Drive Product Development, Grow Revenues and Improve Standard of Care
o We believe the combination of Digene's and Cytyc's product offerings
will provide the women's healthcare market with an integrated
solution for cervical cancer screening and testing for infectious
diseases, including HPV, Chlamydia and Gonorrhea, which we expect
will improve the standard of care in screening and prevention of
those diseases in the United States and abroad.
o We believe the acquisition will enable the more rapid and
cost-effective development of additional diagnostic tests from our
ThinPrep Pap Test vial through the use of Digene's molecular
diagnostics capabilities and its Hybrid Capture technology platform.
o We believe the potential exists for HPV testing as a primary cervical
cancer screening tool in conjunction with the ThinPrep Pap Test.
o The acquisition creates the potential for more readily combining
Digene's molecular testing capabilities with Cytyc's newly-acquired
ductal lavage procedure for the screening and diagnosis of breast
cancer.
. Leverage Cytyc's Sales and Marketing Experience
o We expect that Cytyc's established sales and marketing organization
will be able to accelerate the commercial adoption of Digene's
molecular diagnostic technology.
. Cost Savings and Synergies
o We believe we may realize significant sales and marketing and
manufacturing cost synergies due to the complementary nature of
Cytyc's and Digene's products and business models.
. Leverage Intellectual Property Across Product Lines
o We believe the combination of Cytyc and Digene will allow for a
broader portfolio of intellectual property to be leveraged across the
combined company's portfolio of products, which we expect to enhance
the capabilities, protection, and price performance of existing
products and those in development by both companies.
Recommendation of Digene's Board of Directors
In approving the offer, the merger agreement and the transactions
contemplated by the merger agreement, and recommending that all holders of
Digene common stock accept the offer to tender their shares of Digene common
stock pursuant to the offer, Digene's board of directors considered a number of
factors, including:
. the complementary nature of the respective businesses of Digene and
Cytyc, including their product focus on cervical cancer screening and
women's health, and their technical capabilities and research programs,
as well as the potential for growth and new product offerings in the
diagnostic testing market;
. the present business, assets, technology, financial condition and
prospects of Digene both in the absence of the merger and if the
transaction were to occur, and the enhanced ability of Digene to grow
and expand its business through consolidation with Cytyc;
. the opportunity for the holders of Digene common stock to participate in
a larger and more diversified company and, as stockholders of the
combined company, to benefit from any future growth of the combined
company;
. the desire to afford Digene's stockholders the opportunity to obtain the
best possible value for their shares in light of Digene's present
financial condition and circumstances;
39
. the likelihood that the combination of Digene and Cytyc would create a
leading company in the field of women's cancers and infectious diseases
diagnostics for the following reasons:
o as a result of the combination, Cytyc would have two leading products
in the field of women's cancer diagnostics in the ThinPrep(R) Pap
Test(TM) and the Hybrid Capture(R) 2 HPV Test;
o the views of Digene's management that Cytyc represents an attractive
strategic merger partner because of Cytyc's familiarity with Digene's
technology; and
o the combination could significantly improve the long-term financial
profile of both companies through synergies and by accelerating the
combined company's growth prospects;
. historical information concerning Cytyc's and Digene's respective
businesses, financial performance and condition, operations, technology,
management and competitive position;
. current financial market conditions and historical market prices,
volatility and trading information with respect to Cytyc's common stock
and Digene common stock;
. the implied offer price of $28.81 as of February 19, 2002 representing a
premium of 12.9% over the closing price of Digene common stock on the
Nasdaq National Market on February 15, 2002, the last full trading day
prior to the board of directors' approval of the merger agreement, as
well as 23.4%, 14.5% and 1.9% premiums over the average of the closing
prices for the one week, one month and three months, respectively,
ending on February 15, 2002;
. the financial and other terms of the offer, the merger and the merger
agreement, including the benefits of the transaction being structured as
a first-step tender offer and second-step merger, which may provide
Digene stockholders with an opportunity to receive shares of Cytyc
common stock and cash on an accelerated basis;
. the belief that the terms of the merger agreement, including the
parties' representations, warranties and covenants, and the conditions
to the parties' respective obligations, are fair and reasonable;
. the likelihood that the offer and merger would be consummated, including
the limited conditions to the Offer, as well as the experience,
reputation and financial condition of Cytyc;
. the stockholders agreement to be entered into between Cytyc, Cruiser,
Digene and Digene's directors and officers and certain beneficial
holders of Digene's common stock, employment and other agreements
between Digene and its executive offices and the resulting potential
conflicts of interest of management with respect thereto;
. the transaction option agreement pursuant to which Digene shall, if
required, issue sufficient shares to Cruiser to permit a "short-form"
merger under Delaware law;
. Cytyc's willingness to move quickly to consummate the transaction and
Digene's and Cytyc's familiarity with each other's product offerings and
business generally, including due to prior discussions regarding a
strategic transaction;
. reports from management, legal advisors and financial advisors as to the
results of their due diligence investigation of Cytyc;
. the presentation of Goldman Sachs and the opinion of Goldman Sachs to
the effect that, as of February 19, 2002, and subject to the assumptions
made, matters considered and limitations on the review undertaken in
connection with the opinion, the consideration proposed to be paid by
Cytyc in the offer and the merger pursuant to the merger agreement is
fair from a financial point of view to the holders of Digene common
stock. The full text of the written opinion of Goldman Sachs, which sets
forth the assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as Annex D
to this prospectus and a description of the financial analyses
underlying such opinion is included in this prospectus under "The
Offer--Opinion of Financial Advisor to Digene."
. potential conflicts of interest of management in general with respect to
the merger and the offer.
40
Digene's board of directors also considered the terms of the merger
agreement regarding Digene's rights to consider and negotiate other acquisition
proposals, as well as the possible effects of the provisions regarding
termination fees that might be payable by Digene in certain circumstances in
the merger agreement were to be terminated. In addition, the Digene board of
directors was advised that the offer and the merger, together, will qualify as
a reorganization for United States federal income tax purposes, in which case
Digene's stockholders who are U.S. taxpayers and who participate in the offer
of the merger (without considering any stockholder's unique circumstances)
generally will recognize gain (but not loss) in an amount equal to the lesser
of (a) the excess (if any) of (i) the amount of cash and the fair market value
of the Cytyc common stock received in the exchange over (ii) the stockholder's
adjusted tax basis in the Digene common stock, and (b) the amount of cash
received in the exchange. Digene's board of directors also considered various
alternatives to the offer and the merger, including remaining as an independent
company. Digene's board of directors believed that these factors supported the
board's recommendation of the offer and the merger when viewed together with
the risks and potential benefits of the offer and the merger. Digene's board of
directors also identified and considered a variety of other important factors
in their deliberations concerning the offer and the merger, including, but not
limited to:
. the risk that the potential benefits sought in the offer and the merger
might not be fully realized;
. certain risks applicable to Cytyc's business (see the information
contained under the caption "Risk Factors" in the prospectus);
. the risks and uncertainties associated with the FDA licensure process
and the possibility that developments in the licensure process could
have a significant impact on Digene's stock price and a destabilizing
effect on the offer and the merger;
. the possibility that the offer and the merger might not be completed,
and the effect of public announcement of the offer and the merger on
Digene's collaborative arrangements and on the prospects for FDA
approval of the DNA Pap for which a PMA supplement is presently pending;
. the loss of the potential benefits to Digene of remaining independent,
including realizing the benefits of the successful commercialization of
the DNA Pap and other products if FDA approval were received;
. the uncertainties and potential disadvantages of alternatives to the
proposed merger, including Digene continuing to operate as an
independent company, attempting to raise additional capital, selling all
or a portion of its assets, merging with a different strategic partner,
as well as the impact, short-term and long-term, of such alternatives on
the value of Digene; and
. the effect of the merger on Digene's employees, including the existing
employment contracts between Digene and Evan Jones, Charles M.
Fleischman, Donna Marie Seyfried and Joseph P. Slattery, which provide
for certain payments to them in the event they are terminated without
cause.
Digene's board of directors believed that these risks were outweighed by the
potential benefits of the offer and the merger.
The foregoing discussion of the information and factors considered by the
Digene board of directors is not intended to be exhaustive but is believed to
include the material factors considered by the board of directors. In view of
the wide variety of factors, both positive and negative, considered by the
board of directors, the board of directors did not find it practical to, and it
did not, quantify or otherwise assign relative weight to the specific factors
considered. Rather, the board of directors viewed their positions and
recommendations as being based on the totality of the information presented to
and considered by the board of directors. In addition, individual members of
the board of directors may have given different weight to different factors.
41
THE OFFER
We are offering to acquire each outstanding share of Digene common stock
validly tendered and not properly withdrawn at a price per share of (i) $4.00
in cash and (ii) 1.1969 shares of Cytyc common stock, subject to the terms and
conditions described in this prospectus and the related letter of transmittal.
You will not receive any fractional shares of Cytyc common stock. Instead,
you will receive cash in an amount equal to the market value of any fractional
shares you would otherwise have been entitled to receive as described below.
The expiration date shall refer to 12:00 midnight, New York City time, on
May 23, 2002, unless we extend the period of time for which the offer is open,
in which case the term expiration date means the latest time and date on which
the offer, as so extended, expires.
If you are the record owner of your shares and you tender your shares
directly to the exchange agent, you will not be obligated to pay any charges or
expenses of the exchange agent or any brokerage commissions. If you own your
shares through a broker or other nominee, and your broker tenders the shares on
your behalf, your broker may charge you a fee for doing so. You should consult
your broker or nominee to determine whether any charges will apply. Any
transfer taxes on the exchange of Digene common shares pursuant to the offer
will be paid by you.
We are making this offer in order to acquire all of the outstanding shares
of Digene common stock. We intend, as soon as possible after completion of the
offer, to have Cruiser, Inc., the purchaser in the offer, merge with Digene.
The purpose of the merger is to acquire all Digene shares not tendered and
exchanged pursuant to the offer. In the merger, each then outstanding share of
Digene common stock, except for treasury shares of Digene and shares that we
hold for our own account, would be converted into the same number of Cytyc
shares and cash per Digene share as is paid in the offer.
Our obligation to exchange shares of Cytyc common stock and cash for Digene
shares pursuant to the offer is subject to several conditions referred to below
under "Conditions of the Offer," including the minimum tender condition, the
regulatory clearance condition and other conditions that are discussed below.
Timing of Our Offer
Our offer is scheduled to expire at 12:00 midnight, New York City time, on
May 23, 2002, but we are obligated, with some exceptions, to extend our offer
from time to time as necessary until all the conditions to the offer have been
satisfied or, where permissible, waived. For more information, you should read
the discussion under the caption "Extension, Termination and Amendment."
Extension, Termination and Amendment
We expressly reserve the right to, in our sole discretion, and shall at the
request of Digene (subject to the provisions of the merger agreement), at any
time or from time to time, extend the period of time during which our offer
remains open, and we can do so by giving oral or written notice of the
extension to the exchange agent. If we decide to so extend our offer, we will
make an announcement to that effect no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date.
Subject to the provisions of the merger agreement, we are not making any
assurance that we will exercise our right to extend our offer, although
pursuant to the merger agreement, subject to exceptions, at the request of
Digene, we will be obligated to do so until all conditions to the offer have
been satisfied or waived. During an extension, all Digene shares
42
previously tendered and not properly withdrawn will remain subject to the
offer, subject to your right to withdraw your Digene shares. You should read
the discussion under the caption "Withdrawal Rights" for more details.
Subject to the SEC's applicable rules and regulations, we also reserve the
right, in our sole discretion, but subject to the provisions of the merger
agreement, at any time or from time to time, (a) to delay acceptance for
exchange of or, regardless of whether we previously accepted Digene shares for
exchange, exchange of any Digene shares pursuant to our offer or to terminate
our offer and not accept for exchange any Digene shares not previously
accepted, or exchanged, upon the failure of any of the conditions of the offer
to be satisfied and (b) to waive any condition, other than the regulatory
clearance condition and the conditions relating to the absence of an injunction
and the effectiveness of the registration statement for the Cytyc shares to be
issued in our offer or otherwise amend the offer in any respect, by giving oral
or written notice of the waiver or amendment to the exchange agent and by
making a public announcement. We will follow any termination, amendment or
delay, as promptly as practicable, with a public announcement. We will follow
any extension with a public announcement no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date.
Subject to applicable law, including Rules 14d-4(d) and 14d-6(c) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the offer be
promptly sent to stockholders in a manner reasonably designed to inform
stockholders of the change, and without limiting the manner in which we may
choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any public announcement other than by making
a release to the Dow Jones News Service.
We confirm to you that if we make a material change in the terms of our
offer or the information concerning the offer, or if we waive a material
condition of the offer, we will extend the offer to the extent required under
the Exchange Act. If, prior to the expiration date, we change the percentage of
Digene shares being sought or the consideration offered to you, that change
will apply to all holders whose Digene shares are accepted for exchange
pursuant to our offer. If at the time notice of that change is first published,
sent or given to you, the offer is scheduled to expire at any time earlier than
the tenth business day from and including the date that the notice is first so
published, sent or given, we will extend the offer until the expiration of that
ten business day period. For purposes of our offer, a business day means any
day other than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
We may, although we do not currently intend to, elect to provide a
subsequent offering period of three to 20 business days after the acceptance of
Digene shares in the offer if the requirements under Exchange Act Rule 14d-11
have been met. You will not have the right to withdraw Digene shares that you
tender in the subsequent offering period, if any.
Exchange of Digene Shares; Delivery of Cytyc Common Stock and Cash
Upon the terms and subject to the conditions of our offer including, if the
offer is extended or amended, the terms and conditions of the extension or
amendment, we will accept for exchange, and will exchange, Digene shares
validly tendered and not properly withdrawn promptly after the expiration date
and promptly after they are tendered during any subsequent offering period. In
all cases, exchange of Digene shares tendered and accepted for exchange
pursuant to the offer will be made only after timely receipt by the exchange
agent of certificates for those Digene shares (or a confirmation of a
book-entry transfer of those Digene shares in the exchange agent's account at
The Depository Trust Company, which we refer to as the DTC), a properly
completed and duly executed letter of transmittal or a manually signed
facsimile of that document and any other required documents.
For purposes of the offer, we will be deemed to have accepted for exchange
Digene shares validly tendered and not properly withdrawn as, if and when we
notify the exchange agent of our acceptance of the tenders of
43
those Digene shares pursuant to the offer. The exchange agent will deliver
Cytyc common stock and cash (including cash instead of any fractional shares of
Cytyc common stock) in exchange for Digene shares pursuant to the offer
promptly after receipt of our notice. The exchange agent will act as agent for
Cytyc for the purpose of receiving Cytyc common stock and cash (including cash
to be paid instead of any fractional shares of Cytyc common stock) and
transmitting the stock and cash to you. You will not receive any interest on
any cash that we pay you, even if there is a delay in making the exchange.
If we do not accept any tendered Digene shares for exchange pursuant to the
terms and conditions of the offer for any reason, or if certificates are
submitted for more Digene shares than are tendered, we will return certificates
for the unexchanged Digene shares to the tendering stockholder or, in the case
of Digene shares tendered by book-entry transfer of unexchanged Digene shares
into the exchange agent's account at DTC pursuant to the procedures set forth
below under the discussion entitled "Procedure for Tendering," those Digene
shares will be credited to an account maintained within DTC, promptly following
expiration or termination of the offer.
Exchange for Shares Tendered. In all cases (including during any subsequent
offering period), we will exchange Digene shares tendered and accepted for
exchange pursuant to our offer only after timely receipt by the exchange agent
of certificates for Digene shares (or timely confirmation of a book-entry
transfer of tendered securities into the exchange agent's account at DTC as
described above), properly completed and duly executed letter(s) of transmittal
(or a manually signed facsimile(s) thereof), or an agent's message in
connection with a book-entry transfer, and any other required documents.
Cash Instead of Fractional Shares of Cytyc Common Stock
We will not issue certificates representing fractional shares of our common
stock pursuant to the offer. Instead, each tendering stockholder who would
otherwise be entitled to a fractional share of our common stock will receive
cash in an amount equal to that fraction multiplied by the average of the last
sales prices of one share of our common stock as reported on the Nasdaq
National Market during the ten consecutive trading days ending on (and
including) the third trading day immediately preceding the date of the
effective time, rounded up to the nearest whole cent.
Withdrawal Rights
Your tender of Digene shares pursuant to the offer is irrevocable, except
that, other than during a subsequent offering period, Digene shares tendered
pursuant to the offer may be withdrawn at any time prior to the expiration
date, and, unless we previously accepted them for exchange pursuant to the
offer, may also be withdrawn at any time after April 29, 2002. If we elect to
provide a subsequent offering period under Exchange Act Rule 14d-11, you will
not have the right to withdraw Digene shares that you tender in the subsequent
offering period.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telex or facsimile transmission notice of withdrawal at one of
its addresses set forth on the back cover of this prospectus, and your notice
must include your name, address, social security number, the certificate
number(s) and the number of Digene shares to be withdrawn as well as the name
of the registered holder, if it is different from that of the person who
tendered those Digene shares.
A financial institution must guarantee all signatures on the notice of
withdrawal unless those Digene shares have been tendered for the account of any
eligible institution. Most banks, savings and loan associations and brokerage
houses are able to provide these signature guarantees for you. The financial
institution must be a participant in the Securities Transfer Agents Medallion
Program (an "eligible institution"), unless those Digene shares have been
tendered for the account of any eligible institution. If Digene shares have
been tendered pursuant to the procedures for book-entry tender discussed under
the caption entitled "Procedure for Tendering," any notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
44
withdrawn Digene shares and must otherwise comply with DTC's procedures. If
certificates have been delivered or otherwise identified to the exchange agent,
the name of the registered holder and the serial numbers of the particular
certificates evidencing the Digene shares withdrawn must also be furnished to
the exchange agent, as stated above, prior to the physical release of the
certificates.
WE WILL DECIDE ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF
RECEIPT) OF ANY NOTICE OF WITHDRAWAL, IN OUR SOLE DISCRETION, AND OUR DECISION
SHALL BE FINAL AND BINDING. NEITHER WE, THE EXCHANGE AGENT, THE INFORMATION
AGENT NOR ANY OTHER PERSON WILL BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY
DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL OR WILL INCUR ANY
LIABILITY FOR FAILURE TO GIVE ANY NOTIFICATION.
Any Digene shares properly withdrawn will be deemed not to have been validly
tendered for purposes of our offer. However, you may retender withdrawn Digene
shares by following one of the procedures discussed under the captions entitled
"Procedure for Tendering" or "Guaranteed Delivery" at any time prior to the
expiration date.
Procedure for Tendering
For you to validly tender Digene shares pursuant to the offer, (a) the
enclosed letter of transmittal, properly completed and duly executed (or
manually executed facsimile of that document), along with any required
signature guarantees, or an agent's message in connection with a book-entry
transfer, and any other required documents, must be transmitted to and received
by the exchange agent at one of its addresses set forth on the back cover of
this prospectus, and certificates for tendered Digene shares must be received
by the exchange agent at one of these addresses or those Digene shares must be
tendered pursuant to the procedures for book-entry tender set forth below (and
a confirmation of receipt of the tender received, which confirmation we refer
to below as a "book-entry confirmation"), in each case before the expiration
date, or (b) you must comply with the guaranteed delivery procedures set forth
below.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the participant in DTC tendering the Digene shares which are the subject of the
book-entry confirmation, that the participant has received and agrees to be
bound by the terms of the letter of transmittal and that we may enforce that
agreement against the participant.
The exchange agent will establish accounts with respect to the Digene shares
at DTC for purposes of the offer within two business days after the date of
this prospectus, and any financial institution that is a participant in DTC may
make book-entry delivery of the Digene shares by causing DTC to transfer
tendered Digene shares into the exchange agent's account in accordance with
DTC's procedure for the transfer. However, although delivery of Digene shares
may be effected through book-entry at DTC, the letter of transmittal (or a
manually signed facsimile thereof), with any required signature guarantees, or
an agent's message in connection with a book-entry transfer, and any other
required documents, must, in any case, be transmitted to and received by the
exchange agent at one or more of its addresses set forth on the back cover of
this prospectus prior to the expiration date, or the guaranteed delivery
procedures described below must be followed. DELIVERY OF DOCUMENTS TO DTC DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signatures on all letters of transmittal must be guaranteed by an eligible
institution, except in cases in which Digene shares are tendered either by a
registered holder of Digene shares who has not completed the box entitled
"Special Issuance Instructions" on the letter of transmittal or for the account
of an eligible institution.
If the certificates for Digene shares are registered in the name of a person
other than the person who signs the letter of transmittal, or if certificates
for unexchanged Digene shares are to be issued to a person other than the
registered holder(s), the certificates must be endorsed or accompanied by
appropriate stock powers, in either
45
case signed exactly as the name or names of the registered owner or owners
appear on the certificates, with the signature(s) on the certificates or stock
powers guaranteed in the manner we have described above.
THE METHOD OF DELIVERY OF DIGENE SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ENSURE TIMELY DELIVERY.
TO PREVENT BACKUP U.S. FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH
RECEIVED PURSUANT TO OUR OFFER AND IN LIEU OF FRACTIONAL SHARES, YOU MUST
PROVIDE THE EXCHANGE AGENT WITH YOUR CORRECT TAXPAYER IDENTIFICATION NUMBER AND
CERTIFY THAT YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING OF U.S. FEDERAL INCOME
TAX BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL. SOME STOCKHOLDERS (INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND
SOME NON-U.S. INDIVIDUALS) ARE NOT SUBJECT TO THESE BACKUP WITHHOLDING AND
REPORTING REQUIREMENTS. TO QUALIFY AS AN EXEMPT RECIPIENT, THE STOCKHOLDER MUST
SUBMIT A FORM W-8BEN (TOGETHER WITH OTHER REQUIRED DOCUMENTATION, IF ANY),
SIGNED UNDER PENALTIES OF PERJURY, ATTESTING TO THAT RECIPIENT'S EXEMPT STATUS.
Guaranteed Delivery
If you wish to tender Digene shares pursuant to our offer and your
certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the exchange agent prior to
the expiration date or cannot complete the procedure for book-entry transfer on
a timely basis, your Digene shares may nevertheless be tendered, so long as all
of the following conditions are satisfied:
. You make your tender by or through an eligible institution;
. The notice of guaranteed delivery, properly completed and duly executed,
substantially in the form enclosed with this prospectus, is received by
the exchange agent as provided below on or prior to the expiration date;
and
. The certificates for all tendered Digene shares (or a confirmation of a
book-entry transfer of tendered securities into the exchange agent's
account at DTC as described above), in proper form for transfer, together
with a properly completed and duly executed letter of transmittal (or a
manually signed facsimile thereof), with any required signature guarantees
(or, in the case of a book-entry transfer, an agent's message) and all
other documents required by the letter of transmittal are received by the
exchange agent within three Nasdaq trading days after the date of
execution of the notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
facsimile transmission or mail to the exchange agent and you must include a
signature guarantee by an eligible institution in the form set forth in that
notice.
Appointment of Attorney
By executing a letter of transmittal as set forth above, you irrevocably
appoint Cruiser, Inc., its officers and designees, and each of them, as your
attorneys-in-fact and proxies, each with full power of substitution, to the
full extent of your rights with respect to your Digene shares tendered and
accepted for exchange by us and with respect to any and all other Digene shares
and other securities (other than the shares of Cytyc common stock) issued or
issuable in respect of the Digene shares on or after February 19, 2002. That
appointment is effective, and voting rights will be affected, when and only to
the extent that we deposit the cash and shares of our common stock (including
any cash in lieu of fractional shares of our common stock) for Digene shares
that you have tendered with the exchange agent. All of these proxies shall be
considered coupled with an interest in the tendered Digene shares and therefore
shall not be revocable. Upon the effectiveness of the appointment, all prior
proxies that you have given will be revoked, and you may not give any
subsequent proxies (and, if given,
46
they will not be deemed effective). Our designees will, with respect to the
Digene shares for which the appointment is effective, be empowered, among other
things, to exercise all of your voting and other rights as they, in their sole
discretion, deem proper at any annual, special or adjourned meeting of Digene's
stockholders or otherwise. We reserve the right to require that, in order for
Digene shares to be deemed validly tendered, immediately upon our exchange of
those Digene shares, we must be able to exercise full voting rights with
respect to the tendered Digene shares.
Determination of Validity. We will determine questions as to the validity,
form, eligibility (including time of receipt) and acceptance for exchange of
any tender of Digene shares, in our sole discretion, and our determination
shall be final and binding. We reserve the absolute right to reject any and all
tenders of Digene shares that we determine are not in proper form or the
acceptance of or exchange for which may, in the opinion of our counsel, be
unlawful. No tender of Digene shares will be deemed to have been validly made
until all defects and irregularities in tenders of Digene shares have been
cured or waived. Neither we, the exchange agent, the information agent nor any
other person will be under any duty to give notification of any defects or
irregularities in the tender of any Digene shares or will incur any liability
for failure to give notification. Our interpretation of the terms and
conditions of our offer (including the letter of transmittal and instructions
thereto) will be final and binding.
Binding Agreement. The tender of Digene shares pursuant to any of the
procedures described above will constitute a binding agreement between us and
you upon the terms and subject to the conditions of the offer.
THE METHOD OF DELIVERY OF DIGENE SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ENSURE TIMELY DELIVERY.
Purpose of the Offer; The Merger; Appraisal Rights
Purpose. We are making the offer in order to acquire all of the outstanding
shares of Digene common stock. We intend, as soon as practicable after
completion of the offer, to have Cruiser, Inc., our wholly owned subsidiary,
merge with Digene. The purpose of the merger is to acquire all Digene shares
not tendered and exchanged pursuant to the offer. In the merger, each then
outstanding Digene share (except for Digene shares held in Digene's treasury
and Digene shares owned by Cytyc or Cruiser, Inc.) would be converted into the
right to receive the same number of Cytyc shares and cash as is paid in the
offer.
Approval of the Merger. Under applicable provisions of Delaware General
Corporate Law, which we refer to as the DGCL, the approval of the board of
directors of a company and the affirmative vote of the holders of a majority of
its outstanding shares are required to approve and adopt a merger and a merger
agreement. The Digene board of directors has previously approved the merger.
Accordingly, if we complete the offer (and the minimum tender condition is
satisfied), we would have a sufficient number of Digene shares to approve the
merger without the affirmative vote of any other holder of Digene shares.
Therefore, unless the merger is consummated in accordance with the short-form
merger provisions under the DGCL described below (in which case no action by
the stockholders of Digene, other than Cytyc, will be required to consummate
the merger), the only remaining corporate action of Digene will be the approval
and adoption of the merger agreement by the affirmative vote of a majority of
the outstanding Digene shares and we would hold such majority.
47
Possible Short-Form Merger. Section 253 of the DGCL would permit the merger
to occur without a vote of Digene's stockholders (a short-form merger) if Cytyc
were to acquire at least 90% of the outstanding Digene shares in the offer or
otherwise (including as a result of purchases by Cytyc during any subsequent
offering period or the exercise of its rights under the transaction option
agreement). If, however, Cytyc does not acquire at least 90% of the then
outstanding Digene shares pursuant to the offer or otherwise, and a vote of
Digene's stockholders is required under the DGCL, a longer period of time will
be required to effect the merger.
Appraisal Rights. Digene stockholders do not have appraisal rights in
connection with the offer.
Digene stockholders who have not exchanged their Digene shares in the offer
will have the right under Section 262 of the DGCL to dissent and demand
appraisal of their Digene shares at the time of either the long form merger or
the short-form merger, as applicable. Under Section 262, dissenting
stockholders who comply with the applicable statutory procedures will be
entitled to receive a judicial determination of the fair value of their Digene
shares (exclusive of any element of value arising from the accomplishment or
expectation of the merger) and to receive payment of such fair value in cash,
together with a fair rate of interest, if any. We cannot assure you as to the
methodology a court would use to determine fair value or how a court would
select which of the elements of value are to be included in such a
determination.
The foregoing discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by the full text of Section
262 of the DGCL, which is reprinted in its entirety after the summary in Annex
E to this prospectus and incorporated herein by reference.
Conditions of the Offer
The offer is subject to a number of conditions, which are described below:
Minimum Tender Condition. There must be validly tendered and not properly
withdrawn prior to the expiration of the offer a number of Digene shares which
will constitute at least a majority of the total number of outstanding Digene
shares on a fully diluted basis (as though all options or other securities
convertible into or exercisable or exchangeable for Digene shares prior to the
merger had been so converted, exercised or exchanged) as of the date that we
accept the Digene shares pursuant to our offer. Based on information supplied
by Digene, the number of Digene shares needed to satisfy the minimum tender
condition would have been approximately 8,971,881 as of February 27, 2002.
Antitrust Condition. The waiting period and any extension applicable to the
offer under the HSR Act shall have expired or been terminated.
Other Conditions to the Offer. The offer is also subject to the conditions
that, at the time of acceptance for exchange of Digene shares pursuant to the
offer, there will not be existing and continuing any of the following events or
circumstances:
(1) There shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by or before any court or governmental,
regulatory or administrative agency, authority or tribunal, domestic, foreign
or supranational (other than actions, proceedings, applications or
counterclaims filed or initiated by us), which (i) seeks to challenge the
acquisition by Cruiser, Inc. of Digene common stock, restrain, prohibit or
delay the making or consummation of the offer or the merger with Cruiser, Inc.
or any other merger or business combination involving Cruiser, Inc. or any of
its affiliates and Digene or any of its subsidiaries, prohibit the performance
of any of the contracts or other agreements entered into by Cruiser, Inc. or
any of its affiliates in connection with the acquisition of Digene or the
Digene common stock, or obtain any damages in connection with any of the
foregoing, (ii) seeks to make the purchase of or payment for, some or all of
the Digene common stock pursuant to the offer, the merger or otherwise,
illegal, (iii) seeks to impose limitations on the ability of
48
Cruiser, Inc. or Digene or any of our respective affiliates or subsidiaries
effectively to acquire or hold, or requiring Cruiser, Inc. or Digene or any of
our respective affiliates or subsidiaries to dispose of or hold separate, any
portion of the assets or the business of Cruiser, Inc. or Digene or any of our
respective affiliates or subsidiaries, or impose limitations on the ability of
Cruiser, Inc. or Digene or any of our respective affiliates or subsidiaries to
continue to conduct, own or operate all or any portion of their businesses and
assets as heretofore conducted, owned or operated, (iv) seeks to impose or may
result in material limitations on the ability of Cruiser, Inc. or any of its
affiliates to exercise full rights of ownership of the Digene common stock
purchased by Cruiser, Inc., including, without limitation, the right to vote
the Digene common stock purchased by Cruiser, Inc. on all matters properly
presented to the stockholders of Digene, or the right to vote any shares of
capital stock of any subsidiary directly or indirectly owned by us, (v) is
reasonably likely to result in a material diminution in the benefits expected
to be derived by us as a result of the transactions contemplated by the offer,
including the merger, or (vi) seeks to impose voting, procedural, price or
other requirements in addition to those under DGCL and federal securities laws
(each as in effect on the date of the offer to Purchase) or any material
condition to the offer that is unacceptable (in its reasonable judgment) to us;
(2) There shall have been proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to the offer or the merger by any domestic,
foreign or supranational government or any governmental, administrative or
regulatory authority or agency or by any court or tribunal, domestic, foreign
or supranational, any statute, rule, regulation, judgment, decree, order or
injunction that might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vi) of paragraph (1) above;
(3) There shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the Nasdaq National Market, (ii) any
significant adverse change in securities or financial markets in the United
States or abroad, for example a decline of at least 20 percent in either the
Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from
that existing at the close of business on February 19, 2002, or (iii) in the
case of any of the foregoing, a material acceleration or worsening thereof;
(4) (i) The representations and warranties of Digene contained in the merger
agreement that are qualified by reference to a Digene material adverse effect
(as defined in the merger agreement) shall not have been true and correct in
all respects when made or at any time prior to the consummation of the offer as
if made at or at and as of such time (other than representations and warranties
which by their terms address matters only as of another specified date, which
shall be true and correct in all respects only as of such date), or (ii) the
representations and warranties of Digene contained in the merger agreement that
are not so qualified shall not have been true and correct when made or at any
time prior to the consummation of the offer as if made at and as of such time
(other than representations and warranties which by their terms address matters
only as of another specified date, which shall be true and correct only as of
such date), and such failures to be true and correct are reasonably likely to
result, individually or in the aggregate, in Digene material adverse effect;
(5) (i) Digene shall have breached or failed to perform or comply with any
of its obligations, agreements or covenants under the merger agreement and such
breach or failure to perform or comply is likely to result, individually or in
the aggregate, in a Digene material adverse effect; or (ii) the obligations of
any holders of Digene common stock under the stockholders' agreement (which is
attached as an exhibit to the merger agreement) (without giving effect to any
material adverse effect, materiality or similar qualifications contained
therein) shall not have been performed or complied with by such holder or
holders in all respects and such failure to perform or comply is reasonably
likely to result, individually or in the aggregate, in a Cytyc material adverse
effect;
(6) The merger agreement shall have been terminated in accordance with its
terms;
(7) The registration statement of which this prospectus is a part shall have
not become effective under the Securities Act or shall be the subject of any
stop order or proceedings seeking a stop order;
49
(8) The shares of Cytyc common stock to be issued in the offer shall not
have been approved for listing on the Nasdaq National Market, subject to
official notice of issuance; or
(9) Digene shall have entered into, or shall have publicly announced its
intention to enter into, an agreement or agreement in principle other than the
offer or the merger with respect to any acquisition proposal (as defined in the
merger agreement).
The conditions of the offer described above are solely for our benefit and
we may assert or waive them in whole or in part at any time and from time to
time prior to the expiration of the offer, other than the minimum tender
condition, which we may waive only with Digene's consent. The determination as
to whether any condition has been satisfied shall be made in our good faith
judgment and will be final and binding on all parties. The failure by us at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
that right and each right shall be deemed a continuing right which may be
asserted at any time and from time to time prior to the expiration of the
offer. We cannot assert any of the conditions to the offer, other than
regulatory conditions, at any time after the expiration date of the offer.
Regulatory Clearances
Cytyc and Digene have agreed pursuant to the merger agreement to promptly
prepare and file all such documents that are required to obtain necessary
regulatory approvals with respect to the offer and the merger. Other than
clearance under the antitrust laws applicable to the offer and the merger which
are described below, the SEC declaring the effectiveness of the registration
statement of which this prospectus is a part and the filing of a certificate of
merger under the DGCL with respect to the merger, we do not believe that any
additional material governmental filings are required with respect to the offer
and the merger.
U.S. Antitrust. Under the Hart-Scott-Rodino Act and the related rules, the
merger may not be completed until Cytyc and Digene notify and furnish
information to the FTC and the Antitrust Division of the United States
Department of Justice and specified waiting period requirements have been
satisfied. In connection with the merger, on February 21, 2002, Cytyc filed
with the FTC and the Antitrust Division the required notification and report
form under the HSR Act. Digene filed its required notification and report form
on February 26, 2002. The applicable waiting period under the HSR Act relating
to the merger is scheduled to expire at midnight on
May 28, 2002 unless it is earlier terminated or extended by a request for
additional information.
At any time before or after the completion of the merger, either the
Antitrust Division or the FTC could take any action under U.S. antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the completion of the merger or seeking the divestiture of substantial
assets of Cytyc or Digene. Private parties and state attorneys general may also
bring actions under U.S. antitrust laws depending on the circumstances.
Although we believe that the merger does not raise serious concerns under U.S.
antitrust laws, we can give no assurance that a challenge to the merger on
antitrust grounds will not be made or, if this challenge is made, that it would
not be successful.
Certain Effects of Our Offer
Reduced Liquidity. The tender of Digene shares pursuant to the offer will
reduce the number of holders of Digene shares and the number of Digene shares
that might otherwise trade publicly and could adversely affect the liquidity
and market value of the remaining Digene shares held by the public.
Possibly no Longer Included for Quotation in Nasdaq National Market. Digene
shares are included for quotation and principally traded on the Nasdaq National
Market. Depending on the number of Digene shares acquired pursuant to the
offer, following consummation of the offer, Digene shares may no longer meet the
50
requirements of the Nasdaq National Market for continued quotation. The NASD's
requirements for continued inclusion in the Nasdaq National Market, among other
things, require that an issuer have either:
. At least 750,000 publicly held shares, held by at least 400 stockholders
of round lots, with a market value of at least $5 million and net tangible
assets of at least $4 million and at least two registered and active
market makers for the shares or
. At least 1,100,000 publicly held shares, held by at least 400 stockholders
of round lots, with a market value of at least $15 million and at least
four registered and active market markers, and either
. A market capitalization of at least $50 million or
. Total assets and total revenue of at least $50 million each for the most
recently completed fiscal year or two of the last three most recently
completed fiscal years.
The shares might nevertheless continue to be included in the Nasdaq National
Market with quotations published in the Nasdaq additional list or in one of the
local lists, but if the number of holders of the shares were to fall below 300,
the number of publicly held shares were to fall below 500,000 or there were not
at least two registered and active market makers for the shares, the NASD's
rules provide that the shares would no longer be qualified for Nasdaq reporting
and the Nasdaq would cease to provide any quotations. Shares held directly or
indirectly by directors, officers or beneficial owners of more than 10% of the
shares are not considered as being publicly held for this purpose. If,
following the closing of offer, the shares of Digene no longer meet the
requirements of the NASD for continued inclusion in the Nasdaq National Market
or in any other tier of the Nasdaq and the shares were no longer included in
the Nasdaq National Market or in any other tier of the Nasdaq, the market for
shares could be adversely affected.
If the shares no longer meet the requirements of the NASD for continued
inclusion in any tier of the Nasdaq, it is possible that the shares would
continue to trade in the over-the-counter market and that price quotations
would be reported by other sources. The extent of the public market for the
Digene shares and the availability of quotations for Digene shares would,
however, depend upon the number of holders of shares remaining at that time,
the interest in maintaining a market in Digene shares on the part of securities
firms, the possible termination of registration of the shares under the
Exchange Act, as described below, and other factors. We cannot predict whether
the reduction in the number of Digene shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for, or
marketability of, the Digene shares.
Registration Under the Exchange Act. Digene shares are currently registered
under the Exchange Act. Digene can terminate that registration upon application
to the SEC if the outstanding shares are not listed on a national securities
exchange, quoted on an automated inter-dealer quotation system or if there are
fewer than 300 holders of record of Digene shares. Termination of registration
of the Digene shares under the Exchange Act would reduce the information that
Digene must furnish to its stockholders and to the SEC and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirement of furnishing a proxy statement
in connection with stockholders meetings pursuant to Section 14(a) and the
related requirement of furnishing an annual report to stockholders, no longer
applicable with respect to Digene shares. In addition, if Digene shares are no
longer registered under the Exchange Act, the requirements of Rule 13e-3 under
the Exchange Act with respect to going-private transactions would no longer be
applicable to Digene. Furthermore, the ability of affiliates of Digene and
persons holding restricted securities of Digene to dispose of these securities
pursuant to Rule 144 under the Securities Act may be impaired or eliminated. If
registration of the shares under the Exchange Act were terminated, they would
no longer be eligible for Nasdaq reporting or for continued inclusion on the
Federal Reserve Board's list of margin securities.
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We may seek to cause Digene to apply for termination of registration of the
shares of Digene common stock under the Exchange Act as soon after the
expiration of the offer as the requirements for such termination are met. If
the Nasdaq National Market listing and the Exchange Act registration of the
shares of Digene common stock are not terminated prior to the merger, then the
shares of Digene common stock will be delisted from the Nasdaq National Market
and the registration of such shares under the Exchange Act will be terminated
following the consummation of the merger.
Status as Margin Securities. The Digene shares are presently margin
securities under the regulations of the Federal Reserve Board, which has the
effect, among other things, of allowing brokers to extend credit on the
collateral of Digene shares. Depending on the factors similar to those
described above with respect to market quotations, following consummation of
the offer, the Digene shares may no longer constitute margin securities for the
purposes of the Federal Reserve Board's margin regulations, in which event the
Digene shares would not be eligible as collateral for margin loans made by
brokers.
Going Private Transactions. The SEC has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain going private transactions and
which may under certain circumstances apply to the merger or another business
combination following the purchase of Digene shares pursuant to the offer, in
which we seek to acquire the remaining Digene shares not held by us. We believe
that Rule 13e-3 will not apply to the merger. Rule 13e-3 would require, among
other things, that certain financial information concerning Digene and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed
with the SEC and disclosed to shareholders prior to consummation of the merger
or other business combination.
Relationships between Cytyc and Digene
In September 1997, the FDA approved our supplemental PMA application for the
testing for the human papillomavirus (HPV) directly from a single vial of
patient specimen collected in a ThinPrep solution using Digene's Hybrid Capture
HPV DNA Assay. In March 1999, the FDA approved the use of Digene's Hybrid
Capture II HPV DNA Assay from a single vial of patient specimen collected in
ThinPrep Solution. In January 2001, we entered into an agreement with Digene,
exclusive in the United States and Puerto Rico, to co-promote the benefits of
testing for HPV using Digene's Hybrid Capture II HPV DNA Assay directly from
the ThinPrep collection vial.
Except as set forth herein or in the Information Statement included in the
Schedule 14D-9 of Digene dated March 1, 2002, which is being mailed to the
stockholders of Digene together with this prospectus, neither we nor, to the
best of our knowledge, any of our directors, executive officers or other
affiliates has any contract, arrangement, understanding or relationship with
any other person with respect to any securities of Digene, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies. Except as described herein, there
have been no contacts, negotiations or transactions since March 2000, between
us or, to the best of our knowledge, any of our directors, executive officers
or other affiliates on the one hand, and Digene or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets.
Except as provided below, neither we nor, to the best of our knowledge, any
of our directors, executive officers or other affiliates beneficially owns or
has any right to acquire, directly or indirectly, any Digene shares and neither
we nor, to the best of our knowledge, any of our directors, executive officers
or other affiliates has effected any transaction in the Digene shares during
the past 60 days.
52
Pursuant to the stockholders agreement and transaction option agreement,
Cytyc may be deemed to beneficially own approximately 9,638,383 shares of
Digene common stock, constituting approximately 42% of the voting power of
Digene. See "The Stockholders Agreement" and "The Transaction Option Agreement."
Opinion of Financial Advisor to Digene
On February 19, 2002, Goldman Sachs delivered its oral opinion to the Board
of Directors of Digene that, as of such date, the consideration to be received
in the Offer and the Merger was fair from a financial point of view to the
holders of Digene common stock. Goldman Sachs subsequently confirmed its oral
opinion by delivery of its written opinion, dated February 19, 2002.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED FEBRUARY 19, 2002,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX D TO
THIS PROSPECTUS. THE ADVISORY SERVICES AND OPINION OF GOLDMAN SACHS WERE
PROVIDED FOR THE INFORMATION AND ASSISTANCE OF THE BOARD OF DIRECTORS OF DIGENE
IN CONNECTION WITH ITS CONSIDERATION OF THE TRANSACTION CONTEMPLATED BY THE
MERGER AGREEMENT, AND ITS OPINION DOES NOT CONSTITUTE A RECOMMENDATION AS TO
WHETHER OR NOT ANY HOLDER OF DIGENE COMMON STOCK SHOULD TENDER SUCH SHARES IN
CONNECTION WITH THE OFFER OR AS TO HOW ANY HOLDER OF DIGENE COMMON STOCK SHOULD
VOTE WITH RESPECT TO THE MERGER. THE OPINION OF GOLDMAN SACHS IS NOT INTENDED
TO, AND MAY NOT BE, RELIED UPON BY CYTYC. WE ENCOURAGE YOU TO READ THE OPINION
IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
. the merger agreement;
. Annual Reports to Stockholders and Annual Reports on Form 10-K of Digene
for the three fiscal years ended June 30, 2001 and of Cytyc for the
three years ended December 31, 2000;
. certain interim reports to stockholders and Quarterly Reports on Form
10-Q of Digene and Cytyc;
. certain other communications from Digene and Cytyc to their respective
stockholders;
. certain internal financial analyses and forecasts for Cytyc prepared by
the management of Cytyc;
. certain financial analyses and forecasts for Digene approved by Digene
for use by Goldman Sachs for purposes of its opinion; and
. certain cost savings, operating synergies and revenue enhancements
projected by the managements of Digene and Cytyc to result from the
transaction contemplated by the merger agreement.
Goldman Sachs also held discussions with members of the senior managements
of Digene and Cytyc regarding their assessment of the strategic rationale for,
and the potential benefits of, the transaction contemplated by the merger
agreement and the past and current business operations, financial condition and
future prospects of their respective companies. In addition, Goldman Sachs:
. reviewed the reported price and trading activity for the Digene common
stock and the Cytyc common stock;
. compared certain financial and stock market information for Digene and
Cytyc with similar information for certain other publicly-traded
companies;
53
. reviewed the financial terms of certain recent business combinations in
the medical technology industry specifically and in other industries
generally; and
. performed such other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial, accounting and other information discussed with or reviewed by it
and assumed such accuracy and completeness for purposes of rendering its
opinion. Goldman Sachs assumed, with Digene's consent, that the financial
analyses and forecasts for Digene approved by Digene for use by Goldman Sachs
for purposes of its opinion, the internal financial analyses and forecasts for
Cytyc prepared by the management of Cytyc and the cost savings, operating
synergies and revenue enhancements projected by the managements of Digene and
Cytyc to result from the transaction were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of Digene and
Cytyc, and that such projected cost savings, operating synergies and revenue
enhancements will be realized in the amounts and time periods contemplated
thereby. In addition, Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of Digene or Cytyc or any of their
respective subsidiaries and was not furnished with any such evaluation or
appraisal. Goldman Sachs was not requested to solicit, and did not solicit,
interest from other parties with respect to an acquisition of or other business
combination with Digene.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion described above. The
following summary, however, does not purport to be a complete description of
the analyses performed by Goldman Sachs. The order of the analyses described
and the results of these analyses do not represent relative importance or
weight given to those analyses by Goldman Sachs. Except as otherwise noted, the
following quantitative information, to the extent that it is based on market
data, is based on market data as it existed on or before February 15, 2002, and
is not necessarily indicative of current market conditions.
THE FOLLOWING SUMMARY OF FINANCIAL ANALYSES INCLUDE INFORMATION PRESENTED IN
TABULAR FORMAT. YOU SHOULD READ THESE TABLES TOGETHER WITH THE TEXT OF EACH
SUMMARY.
Analysis of Transaction Premium and Multiples
Goldman Sachs reviewed the premiums, multiples and other information derived
from the 1.3898 exchange ratio implied by the merger consideration provided in
the merger agreement as of February 15, 2002, the last trading day prior to the
date of its opinion. The 1.3898 implied exchange ratio represents the sum of
(1) the 1.1969 shares of Cytyc common stock that each outstanding share of
Digene common stock will be exchanged for under the merger agreement and (2)
0.1929 shares of Cytyc common stock, calculated by taking the $4.00 that each
share of Digene common stock will also receive under the merger agreement and
determining the number of shares of Cytyc common stock that $4.00 would buy
based on the closing price of Cytyc common stock of $20.73 on February 15,
2002. Based on the closing price of Cytyc common stock of $20.73 and the
closing price of Digene common stock of $25.51 on February 15, 2002, Goldman
Sachs calculated an implied offer price of $28.81 per share, representing an
implied premium of 12.9% over the closing price of Digene common stock on
February 15, 2002. Goldman Sachs then calculated the implied premium based on
the implied offer price of $28.81 using the closing prices of Digene common
stock on February 15, 2001, and on other selected dates and over selected
periods.
54
The results of these calculations are as follows:
Implied Premium (Discount) Based on
Closing Digene Price the $28.81 per Share of Offer Price
Trading Period ($/Share) (%)
-------------- -------------------- -----------------------------------
February 15, 2002.. $25.51 12.9%
1 Week Average (a). 24.20 23.4
1 Month Average (b) 25.17 14.5
3 Month Average (c) 28.28 1.9
6 Month Average (d) 29.19 (1.3)
9 Month Average (e) 30.26 (4.8)
1 Year Average (f). 28.06 2.7
52-Week High....... 40.80 (29.4)
52-Week Low........ 12.81 124.9
- --------
(a) 1 week represents trading days from 2/11/2002 through 2/15/2002.
(b) 1 month represents trading days from 1/15/2002 through 2/15/2002.
(c) 3 months represents trading days from 11/15/2001 through 2/15/2002.
(d) 6 months represents trading days from 8/15/2001 through 2/15/2002.
(e) 9 months represents trading days from 5/15/2001 through 2/15/2002.
(f) 1 year represents trading days from 2/16/2001 through 2/15/2002.
Based on a Cytyc closing price of $20.73 on February 15, 2002 and using the
implied Cytyc offer price per share of $28.81, Goldman Sachs calculated that
the fully diluted equity consideration in the merger would be $553.7 million,
assuming exercise of 3.4 million outstanding Digene options with a weighted
average exercise price of $20.48. Goldman Sachs also determined that the
enterprise value would be $517.9 million, based on the implied offer price and
approximately $35.8 million of cash on Digenes' balance sheet and no debt as of
December 31, 2001. Using Digene public filings, Digene management projections
for the calendar year 2002 and financial analyses and forecasts for Digene for
calendar years 2003, 2004 and 2005, approved by Digene management, Goldman
Sachs derived the following transaction multiples for calendar years 2001
through 2003:
. enterprise value as a multiple of calendar year 2001 and estimated
calendar years 2002 and 2003 sales;
. enterprise value as a multiple of calendar year 2001 and estimated
calendar years 2002 and 2003 earnings before interest and taxes, or
EBIT; and
. equity consideration on a fully-diluted basis as a multiple of calendar
year 2001 and estimated calendar years 2002 and 2003 net income.
The results of these analyses are as follows:
Implied Transaction Multiple at
Enterprise Value/Sales Implied Offer Price of $28.81 per Share
---------------------- ---------------------------------------
2001 (actual)(LTM).......... 12.1x
2002 (estimated)............ 8.3x
2003 (estimated)............ 5.4x
Enterprise Value/EBIT
---------------------
2001 (actual)(LTM).......... NM
2002 (estimated)............ NM
2003 (estimated)............ 36.7x
Fully Diluted Equity Value/Net Income
-------------------------------------
2001 (actual)(LTM).......... NM
2002 (estimated)............ NM
2003 (estimated)............ 53.4x
- --------
NM: Data not meaningful because the EBIT and net income values for year 2001
and estimated year 2002 were negative numbers.
55
Historical Stock Trading Analysis
Goldman Sachs reviewed and compared the historical daily trading prices of
Digene common stock during the three periods of (i) February 12, 1999 --
February 15, 2002, (ii) February 16, 2001 -- February 15, 2002, and (iii)
November 16, 2001-- February 15, 2002, with the following: (1) the Cytyc common
stock; (2) the NASDAQ Biotech Composite Index; (3) the S&P 500 Index; and (4)
the NASDAQ Composite Index.
Goldman Sachs also reviewed and compared the historical daily trading prices
of Cytyc common stock during the same periods with the following: (1) the
Digene common stock; (2) the NASDAQ Biotech Composite Index; (3) the S&P 500
Index; and (4) the NASDAQ Composite Index.
Selected Public Companies Analysis
Goldman Sachs reviewed and compared selected financial information relating
to Digene and Cytyc to corresponding financial information, ratios and public
market multiples for comparable companies whose securities are publicly traded.
Goldman Sachs reviewed the following selected molecular and sample diagnostics
companies in the medical technology industry:
. Myriad Genetics
. IMPATH
. Innogenetics
. TriPath Imaging
. Transgenomic
. Visible Genetics
Where applicable, the financial multiples and ratios for Digene and Cytyc
and the selected companies were calculated using (1) the closing prices of
their common stock on February 15, 2002 and (2) their respective equity market
capitalizations. Goldman Sachs' analyses of the selected companies compared,
among other things, the following to the results for Digene and Cytyc:
. market price on February 15, 2002 as a percentage of the 52-week high;
. enterprise value, which is the equity market capitalization plus debt
minus cash, as a multiple of latest twelve month sales;
. enterprise value as a multiple of latest twelve month earnings before
interest, taxes, research, depreciation, and amortization or EBITRDA;
. enterprise value as a multiple of latest twelve month earnings before
interest and taxes, or EBIT;
. ratio of enterprise value to forward sales for calendar years 2002 and
2003;
. five-year earnings per share growth rate; and
. ratio of PE multiple to five-year earnings per share growth rate for
calendar year 2003.
The results of these analyses are summarized as follows:
Selected Companies
----------------- Digene Cytyc
Mean Median Actual Actual
---- ------ ------ ------
Market Price as a % of 52-Week High..... 54.2% 57.5% 62.5% 68.6%
Enterprise Value/LTM Sales/(1)/......... 8.4x 7.1x 9.9x 10.7x
Enterprise Value/LTM EBITRDA/(1)/....... 28.9x 30.2x NM 21.4x
Enterprise Value/LTM EBIT/(1)/.......... 25.9x 27.7x NM 27.7x
Enterprise Value/Forward Sales 2002/(2)/ 5.3x 3.9x 6.7x 7.9x
Enterprise Value/Forward Sales 2003/(2)/ 4.4x 3.9x 4.4x 6.1x
5-Year EPS Growth Rate/(3)/............. 43.3% 45.0% 45.0% 45.0%
2003 PE/5-Year Growth................... 0.6x 0.5x 1.7x 0.5x
- --------
(1) Source: Latest publicly available financial statements. Equity Market
Capitalization based on basic shares outstanding.
(2) Source of sales projections: Digene and Cytyc managements' projections and
research analysts' projections.
(3) Source: IBES median estimates and research analysts' projections.
NM: Data not meaningful because the EBITRDA and EBIT values for Digene were
negative numbers.
56
Discounted Cash Flow Analysis
Goldman Sachs performed analyses to compare the present value per share of
Digene common stock on a stand-alone basis, using discounted cash flow
methodologies, to the pro forma value per share of Cytyc common stock following
the transaction contemplated by the merger agreement. These analyses were based
on projections for Digene and Cytyc that were approved for use or prepared by
the managements of Digene and Cytyc.
In its analysis of the present value per share of Digene common stock on a
stand-alone basis, Goldman Sachs applied discount rates ranging from 15.0% to
25.0% and terminal value multiples of estimated 2006 price to earnings ranging
from 20.0x to 40.0x. Based on these discount rates and terminal value
multiples, Goldman Sachs calculated theoretical equity reference ranges per
share ranging from $20.17 to $57.09.
In its analysis of the pro forma present value per share of Cytyc common
stock following the transaction contemplated by the merger agreement, Goldman
Sachs applied discount rates ranging from 10.0% to 15.0% and terminal value
multiples of estimated 2006 price to earnings ranging from 20.0x to 40.0x.
Based on these discount rates and terminal value multiples, Goldman Sachs
calculated theoretical equity reference ranges per share ranging from $22.82 to
$51.59.
Give/Get Analysis
Goldman Sachs performed an analysis to compare the implied value per share
of Digene common stock on a stand-alone basis, calculated from the discounted
cash flow analysis, to the pro forma present value per Digene share implied by
the transaction contemplated by the merger agreement. Goldman Sachs multiplied
the pro forma present value per share of Cytyc common stock derived from the
discounted cash flow analysis by the 1.1969 shares of Cytyc common stock that
each outstanding share of Digene common stock will be exchanged for under the
merger agreement, and added $4.00 in cash that each outstanding share of Digene
common stock will also receive as part of the merger agreement. Based on the
discount rates ranging from 10% to 15% and terminal value multiples of
estimated 2006 price to earnings ranging from 20.0x to 40.0x used in the
analysis of the pro forma present value of Cytyc common stock, Goldman Sachs
calculated pro forma theoretical equity value ranges per Digene share, implied
by the merger transaction, ranging from $31.32 to $65.76.
Pro Forma Merger Analysis
Goldman Sachs, using projections for Digene that were approved for use by
Digene management for purposes of preparing Goldman Sachs' opinion and
projections for Cytyc prepared by Cytyc management, also prepared pro forma
analysis of the financial impact of the merger on Cytyc for the two calendar
years ending December 31, 2002 and 2003. For the calendar years 2002 and 2003,
Goldman Sachs compared, among other financial items, fully diluted earnings per
share for the combined company on a pro forma basis, taking into account
certain cost savings, operating synergies and revenue enhancements projected by
the managements of Digene and Cytyc to result from the transaction contemplated
by the merger agreement. The pro forma analysis was calculated based on pro
forma GAAP earnings per share, which includes the impact of non-cash charges
associated with identifiable intangible asset amortization, as well as based on
pro forma cash earnings per share, which excludes the impact of non-cash
charges associated with identifiable intangible asset amortization. Goldman
Sachs' analysis indicated that the proposed merger, when taking the cost
savings, operating synergies and revenue enhancements into account, and both
including and excluding identifiable intangible asset amortization, as
identified by Cytyc management, would be moderately dilutive to the combined
company's fully diluted earnings per share in estimated calendar year 2002 and
moderately accretive to the combined company's fully diluted earnings per share
in estimated calendar year 2003, assuming a closing date for the merger in
March 2002.
Contribution Analysis
Goldman Sachs reviewed the historical and estimated future operating and
financial information, including, among other things, revenue and net income,
for Digene, Cytyc and the pro forma combined entity resulting from the merger
prepared or approved for use by the managements of Digene and Cytyc. Goldman
Sachs calculated the relative income statement contribution of Digene and
Cytyc, assuming no synergies to the combined
57
company, on a pro forma basis based on financial data and on the assumptions
provided to Goldman Sachs by the managements of Digene and Cytyc for calendar
year 2001 and estimated calendar year 2002. Goldman Sachs calculated the
relative contributions of Digene and Cytyc with respect to: (1) sales, (2)
earnings before interest and taxes, or EBIT, (3) net income, (4) fully diluted
enterprise value, assuming cash of $35.8 million and no debt for Digene and
cash of $152.0 million and no debt for Cytyc, as of December 31, 2001 (5) fully
diluted equity market capitalization based on the closing price of Digene
common stock of $25.51 and the closing price of Cytyc common stock of $20.73 on
February 15, 2001, and on 3.4 million options outstanding for Digene with a
weighted average strike price of $20.48, assuming that all options are
tax-deductible and assuming a 40% marginal tax rate, and (6) Digene's and
Cytyc's implied pro forma ownership in Cytyc, following the transaction
contemplated by the merger agreement.
The results of these analyses for 2001 and 2002 are as follows:
% Contribution
-------------
Sales ($) Digene Cytyc
--------- ------ -----
FY2001 (actual)(LTM)........ 16.4 % 83.6%
FY2002 (estimated).......... 17.3 % 82.7%
EBIT
----
FY2001 (actual)(LTM)........ (6.6)% 106.6%
FY2002 (estimated).......... 0.4 % 99.6%
Net Income ($)
--------------
FY2001 (actual)(LTM)........ (11.9)% 111.9%
FY2002 (estimated).......... 0.1 % 99.9%
Enterprise Value............
---------------------------- 15.7 % 84.3%
Equity Market Capitalization
---------------------------- 15.8 % 84.2%
Implied Pro Forma Ownership.
---------------------------- 15.6 % 84.4%
Selected Transactions Analysis
Using the implied value of $28.81 per share for Digene common stock derived
from the merger consideration provided in the merger agreement and the closing
price of Digene common stock on February 15, 2002, Goldman Sachs calculated the
implied enterprise value as multiple of actual calendar year 2001 and estimated
calendar years 2002 and 2003 sales. The actual calendar year 2001 and estimated
calendar years 2002 and 2003 sales multiples were 12.1x, 8.3x and 5.4x,
respectively.
Goldman Sachs compared the results with publicly available information for
seven completed merger and acquisition transactions during 1999 through 2001 in
the life science tools and diagnostics industry segment of the medical
technology industry.
The results of the analyses are as follows:
Mean Median
Years 1999 to 2001 ----- ------
LTM Sales Multiple..... 11.8x 11.7x
LTM EBIT Multiple...... 37.6x 37.6x
LTM Net Income Multiple 83.6x 83.6x
58
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary described above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all the analyses and did not attribute
any particular weight to any factor or analysis considered by it; rather,
Goldman Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the results of all the
analyses. No company used in the above analyses as a comparison is directly
comparable to Digene or Cytyc, and no transaction used is directly comparable
to the proposed transaction contemplated by the merger agreement.
Goldman Sachs prepared these analyses for the purpose of providing an
opinion to the Digene board of directors as to the fairness from a financial
point of view of the consideration to be received in the offer and the merger
by the holders of Digene common stock. The analyses do not purport to be
appraisals or to necessarily reflect the prices at which the business or
securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by these analyses. Because
these analyses are inherently subject to uncertainty and are based upon
numerous factors or events beyond the control of the parties or their
respective advisors, none of Digene, Cytyc or Goldman Sachs assumes
responsibility if future results are materially different from those forecast.
As described above, the opinion of Goldman Sachs to the Digene board of
directors was one of many factors taken into consideration by the Digene board
in making its determination to approve the merger agreement. The foregoing
summary does not purport to be a complete description of the analyses performed
by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in performing financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities and private placements as well as for estate, corporate and
other purposes. Goldman Sachs is familiar with Digene having provided
investment banking services to Digene from time to time, including having acted
as its financial advisor in connection with, and having participated in certain
of the negotiations leading to, the merger agreement. Goldman Sachs may also
provide investment banking services to Cytyc and its subsidiaries in the future.
Digene selected Goldman Sachs as its financial advisor because Goldman Sachs
is an internationally recognized investment banking firm that has substantial
experience in transactions similar to the transaction contemplated by the
merger agreement. In addition, Goldman Sachs provides a full range of financial
advisory and securities services and, in the course of its normal trading
activities, may from time to time effect transactions and hold positions in
securities, including derivative securities, of Digene or Cytyc for its own
account and for the accounts of customers.
Pursuant to a letter agreement, dated February 10, 2002, Digene engaged
Goldman Sachs to act as its financial advisor in connection with a potential
transaction involving Cytyc. Pursuant to this letter agreement, Digene agreed
to pay Goldman Sachs a customary transaction fee, the principal portion of
which is payable upon completion of the merger. Digene has also agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorneys' fees and disbursements, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities under the federal securities
laws.
59
Accounting Treatment
We will account for the merger in accordance with Statement of Financial
Accounting Standard No. 141, "Business Combinations" using the purchase method
of accounting. The total purchase price paid by us in connection with the
merger, together with the acquisition related fees and expenses, will be
allocated to assets and liabilities of Digene based on their fair value. In
addition, all intangible assets of the merger will be identified and valued.
The results of operations of Digene will be included in Cytyc's results upon
the effectiveness of the merger.
Source of Funds
Cytyc will finance the offer and the merger with internally available funds.
Fees and Expenses
We have retained U.S. Bancorp Piper Jaffray Inc. and Morgan Stanley Dean
Witter & Co. to provide certain financial advisory services to us in connection
with the offer and the merger. U.S. Bancorp Piper Jaffray Inc. rendered a
financial opinion in connection with the offer and the merger, and Morgan
Stanley Dean Witter & Co. will, if we so request at or prior to the closing of
the tender offer or merger, render a financial opinion in connection with the
offer and the merger. U.S. Bancorp Piper Jaffray Inc. and Morgan Stanley Dean
Witter & Co. will receive customary compensation for these services, and we
have agreed to indemnify them and related persons against certain liabilities
and expenses in connection with their services as financial advisors, including
certain liabilities and expenses under the federal securities laws.
We have retained Innisfree M&A Incorporated as information agent in
connection with the offer. The information agent may contact holders of Digene
shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee stockholders to forward material
relating to the offer to beneficial owners of Digene shares. We will pay the
information agent reasonable and customary compensation for these services in
addition to reimbursing the information agent for its reasonable out-of-pocket
expenses. We have agreed to indemnify the information agent against certain
liabilities and expenses in connection with the offer, including certain
liabilities under the U.S. federal securities laws.
In addition, we have retained EquiServe Trust Company, N.A. as the exchange
agent. We will pay the exchange agent reasonable and customary compensation for
its services in connection with the offer, will reimburse the exchange agent
for its reasonable out-of-pocket expenses and will indemnify the exchange agent
against certain liabilities and expenses, including certain liabilities under
the U.S. federal securities laws.
Except as set forth above, we will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Digene shares pursuant
to the offer. We will reimburse brokers, dealers, commercial banks and trust
companies and other nominees, upon request, for customary clerical and mailing
expenses incurred by them in forwarding offering materials to their customers.
Stock Exchange Listing
Cytyc's common stock is quoted on the Nasdaq National Market under the
symbol "CYTC".
Digene's common stock is quoted on the Nasdaq National Market under the
symbol "DIGE".
60
THE MERGER AGREEMENT
The following description of the merger agreement describes the material
terms of the agreement but does not purport to describe all the terms of the
agreement. The complete text of the merger agreement is attached as Annex A to
this prospectus. All Digene stockholders are urged to read the merger agreement
in its entirety because it is the legal document that governs the offer and the
merger.
The Offer
Terms of the Offer. The merger agreement provides for the commencement by us
of this offer to exchange all outstanding shares of Digene common stock for
shares of Cytyc common stock and cash. The merger agreement provides for the
consideration that we will pay in the offer, including (i) $4.00 in cash and
(ii) 1.1969 shares of Cytyc common stock for each share of Digene common stock.
For a description of those matters, refer to the discussion under "The Offer"
beginning on page 41.
The merger agreement prohibits us, without the consent of Digene, from
decreasing the number of shares of Digene common stock sought in the offer,
changing the form or amount of consideration to be paid, waiving or increasing
the minimum condition or imposing material conditions to the offer in addition
to those set forth in Annex A to the merger agreement, extending the expiration
date of the offer except as described below or making any other change which is
materially adverse to the holders of the shares of Digene common stock.
Mandatory Extensions of the Offer. If any of the conditions to the offer are
not satisfied or waived on any scheduled expiration date of the offer, at the
request of Digene, we will extend the offer for successive extension periods of
not more than 10 business days until all conditions to the offer are satisfied
or waived; provided that we are not required to extend the offer beyond April
15, 2002 (or June 28, 2002 if such delay is a result of a second request for
information under the HSR Act).
Optional Extensions of the Offer. We will have the right to extend the offer
(i) for one or more periods of not more than 10 business days until all
conditions to the offer are satisfied or waived, (ii) after acceptance of
shares in the initial offering period, as it may be extended, for a further
period of time by means of a subsequent offering period not to exceed 20
business days for the purpose of obtaining at least 90% of the outstanding
shares of Digene common stock and (iii) for any period required by any rule,
regulation, interpretation or position of the SEC or its staff applicable to
the offer or any period required by applicable law.
Prompt Payment for Digene Shares after the Closing of the Offer. Subject to
the conditions of the offer, we will accept for payment and pay for, promptly
after the expiration of the offer, all shares of Digene common stock validly
tendered and not properly withdrawn pursuant to the offer.
The Merger
The Merger. The merger agreement provides that Cruiser, Inc., Cytyc's wholly
owned subsidiary, will be merged with and into Digene as soon as practicable
following the satisfaction or waiver of the conditions set forth in the merger
agreement unless the parties agree to another date. Following the merger of
Cruiser, Inc. with and into Digene, we intend to merge Digene, as the surviving
entity, with and into Cytyc, which will be the surviving entity, although we
might defer that merger if we are advised by our tax counsel that the offer and
merger of Cruiser, Inc. with and into Digene, standing alone, constitute a
valid tax-free reorganization. Under the terms of the merger agreement, at the
effective time of the merger, each share of Digene common stock will be
converted into the right to receive from Cruiser, Inc. the same per share
consideration paid to holders of Digene common stock who exchanged their Digene
shares in the offer; provided that no fractional Cytyc shares will be issued
and subject to any applicable appraisal as described below. Notwithstanding the
foregoing, the merger consideration will not be payable in respect of Digene
shares held by Digene, Cytyc or Cruiser, Inc.
61
Effective Time of the Merger. The merger will become effective upon the
filing of a certificate of merger with the Secretary of State of Delaware or
such later time as is agreed by Digene and Cytyc and specified in the
certificate of merger. The filing of the certificate of merger will take place
as soon as practicable on or after the satisfaction of the conditions to the
merger.
Digene Board of Directors
Upon the acceptance for exchange of shares of Digene common stock pursuant
to the offer, Cytyc will be entitled to designate a number of directors of
Digene (rounded up to the next whole number) that equals the product of (i) the
total number of directors on Digene's board of directors and (ii) the
percentage that the number of shares beneficially owned by Cytyc and Cruiser,
Inc. bears to the total number of shares of Digene common stock outstanding.
The merger agreement provides that, prior to the effective time of the merger,
the affirmative vote of a majority of the continuing Digene directors then in
office will be required to
. amend or terminate the agreement on behalf of Digene;
. extend the time for performance of Cytyc's or Cruiser, Inc.'s obligations
under the merger agreement; or
. waive any rights of Digene under the merger agreement.
The merger agreement defines a continuing director as member of the Board of
Directors of Digene on the date of the merger agreement (February 19, 2002) and
(ii) any successor to any such director that was recommended to succeed such
director by a majority of the continuing directors then on the Board of
Directors of Digene.
Treatment of Digene Stock Options
At the effective time of the merger, each outstanding Digene option,
regardless of the extent vested and exercisable, shall be deemed to constitute
an option to acquire, on the same terms and conditions as were applicable under
the Digene stock option, the same number of shares of Cytyc common stock and
cash as the holder of the Digene option would have been entitled to receive
pursuant to the merger agreement had the holder exercised the Digene option in
full immediately prior to the effective time of the merger, rounded down to the
nearest whole number. The exercise price per share shall equal the per share
exercise price at which the Digene option was exercisable immediately prior to
the effective time divided by 1.1969, rounded up to the nearest cent.
Cytyc has agreed to take all action necessary to implement the above,
including the reservation, issuance and listing of a sufficient number of
shares of Cytyc common stock for delivery upon exercise of these substitute
options. Cytyc shall prepare and file a registration statement on an
appropriate form with respect to the shares of Cytyc common stock subject to
the above options and, where applicable, shall use its reasonable efforts to
have the registration statement declared effective as soon as is reasonably
practicable after the effective time of the merger, to maintain its
effectiveness and to maintain the current status of the prospectus contained in
it for so long as the options remain outstanding.
In general, all Digene options will have accelerated and will be fully
exercisable as a result of the consummation of the offer and the merger.
Covenants and Representations and Warranties
Conduct of Business Pending the Merger. The merger agreement obligates
Digene and its subsidiaries, among other things, until the effective time of
the merger, unless we otherwise consent, to conduct their business in the
ordinary course of business and in a manner consistent with past practice. The
merger agreement also expressly restricts the ability of Digene to engage in
certain material transactions, such as certain purchases and sales of assets or
the sale or redemption of outstanding securities of Digene, without our prior
written consent.
62
No Solicitation of Acquisition Proposal. The merger agreement precludes
Digene, its subsidiaries, officers, directors, employees, investment bankers,
attorneys, accountants, consultants and other agents or advisors from directly
or indirectly soliciting, knowingly encouraging, participating in any
discussions regarding, furnishing any non-public information with respect to,
or assisting or facilitating any takeover proposal. The merger agreement
provides that these restrictions do not prohibit Digene from furnishing
information pursuant to an appropriate confidentiality agreement and
negotiating with a third party if the Digene board of directors determines in
good faith, after considering applicable state law and consulting with outside
counsel, that a failure to do so would reasonably be expected to constitute a
breach of its fiduciary duties to its stockholders. Even if Digene is allowed
to provide information and begin negotiations with another party in accordance
with the terms of the merger agreement, Digene may only terminate the merger
agreement (subject to the termination fees as discussed below) and enter into
another alternative transaction if:
. Digene receives an unsolicited bona fide written proposal from a third
party for the acquisition of at least a majority of the equity securities
of Digene;
. the board of directors of Digene, after consultation with its financial
advisors, determines that such a proposal is more favorable from a
financial point of view than the offer or the merger and the transactions
contemplated by the merger agreement, taking into account all the terms
and conditions of such proposal and the ability of the person making such
superior proposal to consummate such takeover proposal based upon, among
other things, the availability of financing; and
. the board of directors of Digene determines in good faith that failure to
accept the third party's proposal would reasonably be expected to be a
breach of its fiduciary duties to Digene's stockholders under applicable
law, after considering the advice of outside counsel.
Digene is required to promptly advise us if it receives any proposal, offer,
inquiry, request for information, or if any discussions or negotiations are
sought to be initiated or continued with Digene in respect of any takeover
proposal. Digene is obligated to keep us informed of all material developments
affecting the status and terms of any takeover proposals or offers or the
status of any such discussions or negotiations. Digene may not release any
person from, or waive any provision of, any confidentiality or standstill
agreement entered into as of February 13, 2002.
Antitrust Laws. Each of the parties to the merger agreement will take those
lawful actions that are necessary to make the filings required under any
applicable antitrust laws in connection with the merger agreement and the
transactions contemplated by the merger agreement. The merger agreement
provides that each of Cytyc and Digene will otherwise act to eliminate or
minimize the effects of these statutes on the offer and the merger.
Certain Employee Benefits. We will provide for each employee of Digene who
becomes an employee of Cytyc in connection with the merger health, prescription
drug, long-term disability, short-term disability, life insurance, dental and
other welfare benefits that are substantially similar in the aggregate to such
benefits in effect for similarly situated employees of Cytyc. We will take
appropriate action to waive any waiting period, pre-existing condition or
requirement for evidence of insurability otherwise imposed under any Cytyc
employee plan for any Digene employee who becomes a Cytyc employee and who was
covered by a Digene employee plan providing similar benefits prior to the
merger. Each such employee will receive credit for the accrued vacation and
sick or other paid leave under the Digene employee plans as of the merger. We
will provide severance benefits to Digene employees that become Cytyc employees
with terms no less favorable than the severance benefits currently offered by
Cytyc to its employees of similar status. We will take appropriate steps to
permit participation as soon as practicable in the Cytyc Corporation 401(k)
Retirement Plan, by Digene employees who, immediately prior to the merger, were
eligible to participate in the Digene 401(k) Plan.
Election of Director. Promptly following the effective time of the merger,
we shall have elected Evan Jones (or a nominee of Mr. Jones, mutually agreeable
to Mr. Jones and us) to our board of directors. We shall be obligated to
nominate Mr. Jones to serve on our board of directors until the third
anniversary of the effective time of the merger.
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Representations and Warranties. The merger agreement contains various
customary representations and warranties made by each party to the other,
relating to each of the parties and their ability to consummate the offer and
the merger. The representations and warranties contained in the merger
agreement do not survive the effective time of the merger. Such representations
and warranties of Digene include its organization and subsidiaries; its
capitalization; obligations with respect to its capital stock; its authority to
enter into this transaction and any needed governmental or other approvals; its
SEC filings and financial statements; absence of certain changes or events;
taxes; properties; intellectual property; compliance with laws; litigation;
employee benefit plans; certain agreements; brokers' and finders' fees;
insurance; disclosure issues; fairness opinion; related party transactions;
joint ventures, partnerships and similar arrangements; and clinical trials.
Such representations and warranties of Cytyc include its organization and
subsidiaries; its capitalization; obligations with respect to its capital
stock; its authority to enter into this transaction and any needed governmental
or other approvals; its SEC filings and financial statements; absence of
certain changes or events; compliance with laws; litigation; disclosure issues;
recommendation of Cytyc's board of directors; brokers' and finders' fees; and
clinical trials.
Certain representations and warranties in the merger agreement are qualified
as to "materiality" or "material adverse effect" as defined in the merger
agreement, which means (subject to the precise deportation of such term set
forth in the merger agreement attached as Annex A to this prospectus) any
change, event, circumstance, occurrence or effect that either individually or
in the aggregate with all other such changes, effects, events and recurrences
is materially adverse to the business, properties, financial condition, assets,
including intangible assets, capitalization or results of operations of Digene
or Cytyc, as the case may be, taken as a whole, but excluding changes or
conditions relating to disruption in business caused by the offer or the
prospect of the merger, changes in general economic conditions or general
changes in the industries in which Cytyc and Digene operate and certain
specific other items set forth in a schedule to the merger agreement.
All representations and warranties of each party expire at the effective
time of the merger.
Conditions of the Offer
See "The Offer--Conditions of the Offer."
Conditions of the Merger
The obligations of Cytyc, Cruiser, Inc. and Digene to consummate the merger
are subject to the satisfaction of among others, the following conditions:
. to the extent required by applicable law, the merger agreement shall have
been approved and adopted by the Digene stockholders;
. Cruiser, Inc. shall have purchased shares of Digene common stock in the
offer.
. no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the merger;
. Any waiting period (and any extension thereof) applicable to the
consummation of the merger under the HSR Act shall have expired or been
terminated;
. the registration statement on Form S-4 relating to the merger, of which
this prospectus is a part, shall have become effective under the
Securities Act and not be the subject of any stop order or proceedings
seeking a stop order; and
. the shares of Cytyc common stock to be issued in the merger shall have
been approved for listing on the Nasdaq National Market, subject to
official notice of issuance.
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Termination of the Merger Agreement
The merger agreement may be terminated and the offer and the merger may be
abandoned at any time prior to the completion of the merger as follows:
(a) by mutual consent of our board of directors and that of Digene;
(b) by either us or Digene if:
(i) the offer has expired or terminated pursuant to its terms without any
Digene shares being purchased, provided that we cannot terminate the
merger for this reason if the failure to purchase shares is a result
of our breach of the merger agreement; or
(ii) the offer is not consummated on or before April 15, 2002 (or June 28,
2002 if the delay is a result of a second request for information
under the HSR Act), unless the party seeking to terminate the merger
agreement has caused the failure of the offer to be consummated by
failing to perform any of its obligations under the merger agreement;
or
(iii) there shall be any applicable law or regulation that makes
consummation of the offer or the merger illegal or otherwise
prohibited or any judgment, injunction, order or decree of any court
or governmental body having competent jurisdiction enjoining Digene
or us from consummating the offer or the merger is entered and such
judgment, injunction, or order shall have become final and
nonappealable;
(c) by us if a triggering event (as defined in the merger agreement) shall
have occurred, namely:
(i) the Board of Directors of Digene or a committee shall have approved
or recommended to Digene stockholders any acquisition proposal (as
defined in the merger agreement),
(ii) the Board of Directors of Digene or a committee shall for any reason
have withdrawn or shall have amended or modified in a manner adverse
to Digene's recommendation for the offer and the merger;
(iii) Digene shall have failed to include the recommendations of its Board
of Directors in the Schedule TO to be filed by us or the Schedule
14D-9 to be filed by Digene in connection with the offer; or
(iv) a tender or exchange offer relating to 15% or more of the shares of
Digene common stock shall have been commenced by a person
unaffiliated with us or Cruiser, Inc. and Digene shall not have sent
to its stockholders within seven (7) business days after such tender
or exchange offer is first published, a statement disclosing that
Digene recommends rejection of such tender or exchange offer;
(d) by us if the representations and warranties of Digene contained in the
merger agreement are not true and correct (except where failure to be true and
correct would not reasonably be expected to have a material adverse effect on
Digene as defined in the merger agreement), or Digene has breached or failed in
any material respect to perform or comply with any material obligation,
agreement or covenant contained in the merger agreement (except where such
inaccuracy or breach would not reasonably be expected to have a material
adverse effect on Digene);
(e) by Digene if the representations and warranties of Cytyc or Cruiser,
Inc. contained in the merger agreement are not true and correct (except where
failure to be true and correct would not reasonably be expected to have a
material adverse effect on us as defined in the merger agreement), or if we
have breached or failed in any material respect to perform or comply with any
material obligation, agreement or covenant contained in the merger agreement
(except where such inaccuracy or breach would not reasonably be expected to
have a material adverse effect on us);
(f) by Digene if the board of directors of Digene, after consultation with
its financial advisors and legal counsel, determines that an aquisition
proposal (as defined in the merger agreement) is more favorable from a
financial point of view than the offer or the merger and the transactions
contemplated by the merger agreement, taking into account all the terms and
conditions of such proposal and the ability of the person making such superior
proposal to consummate such aquisition proposal based upon, among other things,
the availability of
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financing, provided that Digene otherwise has complied with its covenants
against solicitation of acquisition proposals, paid to us the requisite
termination fee and provided to us three (3) days advanced notice of the
relevant proposal, all as set forth in the merger agreement.
Termination Fees
If the merger agreement is terminated by either Digene or us pursuant to
Sections (b)(i) or (ii) under "Termination of the Merger Agreement," and within
12 months following the termination Digene consummates an acquisition resulting
in the sale of 15% or more of the assets or stock of Digene or a merger of
other type of consolidation discussed in the merger agreement or enters into an
agreement for such an acquisition that is later consummated, Digene will pay us
a fee of $19,793,000. If the merger agreement is terminated by Digene or us
pursuant to Sections (d) or (e) under "Termination of the Merger Agreement,"
then the breaching party will pay to the non-breaching party a fee of
$19,793,000. If the merger agreement is terminated by us pursuant to
Section (c) under "Termination of the Merger Agreement," Digene will pay us
$19,793,000. If the merger agreement is terminated by Digene pursuant to (f)
under "Termination of the Merger Agreement," Digene will pay us a fee of
$19,793,000.
Amendments
The merger agreement may be amended by action taken by Cytyc, Cruiser, Inc.
and Digene at any time prior to the closing of the merger.
THE STOCKHOLDERS AGREEMENT
The following is a summary description of the material provisions of the
stockholders agreement. This summary is qualified in its entirety by reference
to the complete text of the stockholders agreement, which is attached as Annex
B to this prospectus and incorporated by reference into this prospectus. All
Digene stockholders are urged to read the stockholders agreement in its
entirety.
Concurrently with the execution and delivery of the merger agreement, Cytyc
and Cruiser, Inc. entered into a stockholders agreement with Evan Jones,
Charles M. Fleischman, Wayne T. Hockmeyer, Ph.D., John H. Landon, Joseph M.
Migliara, John J. Whitehead, Attila T. Lorincz, Ph.D., Robert McG. Lilley,
Belinda O. Patrick, Greg Brown, Jeanmarie P. Curley, Susan M. Keese, William J.
Payne, Ph.D., Donna Marie Seyfried, Joseph P. Slattery, Larry Wellman and
Armonk Partners. As of February 19, 2002, those stockholders beneficially owned
(determined in accordance with SEC rules) approximately 31.6% of the then
outstanding shares of Digene common stock (including all then outstanding
options held by such stockholders exercisable within 60 days of such date).
Each such stockholder agreed to validly tender (and not to withdraw)
pursuant to and in accordance with the terms of the offer, not later than the
fifth (5th) business day after commencement of the offer (i) all of the shares
of Digene common stock beneficially owned by such stockholder on the date of
the stockholders agreement, and (ii) any additional shares acquired by such
stockholder after the date of the stockholders agreement and prior to the
termination of the offer. The stockholders agreement shall not be binding upon
any stockholder in the event that the merger agreement is amended by the
parties to lower or change the form of offer price.
Each stockholder that is a party to the stockholders agreement has agreed
that, until the first to occur of the effective time of the merger or
termination of the merger agreement, such stockholder will vote all shares
beneficially owned by such stockholder (a) in favor of the merger and the
merger agreement and in favor of any actions required in furtherance thereof;
(b) against any action or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation of
Digene under the merger agreement or the stockholders agreement; and (c)
against (i) any action or agreement which would impede,
66
interfere with or attempt to discourage the offer or the merger, (ii) any
change in a majority of the persons who constitute the board of directors of
Digene, (iii) any change in the capitalization or dividend policy of Digene, or
(iv) any other material change in Digene's corporate structure or business.
Also, each stockholder that is a party to the stockholders agreement has
granted to us a proxy to vote the shares beneficially owned by such stockholder
at any meeting of stockholders or with respect to any action of the
stockholders by written consent as set forth above. The foregoing proxy revokes
any prior proxy granted by the stockholders with respect to their shares of
Digene common stock.
The stockholders agreement provides that no stockholder that is a party to
such agreement shall, directly or indirectly: (i) 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 stockholder's shares of
Digene common stock or Digene options or any interest therein; (ii) grant any
proxies or powers of attorney, deposit any shares of Digene common stock into a
voting trust or enter into a voting agreement with respect to any shares of
Digene common stock; or (iii) take any action that would make any
representation or warranty of such stockholder contained in the stockholders
agreement untrue or incorrect or have the effect of preventing or disabling
such stockholder from performing such stockholder's obligations under the
stockholders agreement.
In addition, each stockholder that is a party to the stockholders agreement
agreed that during the 90 day period commencing immediately upon the effective
time of the merger such stockholder will not dispose of any shares of Cytyc
capital stock beneficially owned by such stockholder excluding Cytyc shares
issued or issuable upon the exercise of any Digene options assumed by Cytyc
pursuant to the Merger.
The stockholders agreed not to, directly or indirectly, solicit or respond
to any inquiries or the making of any proposal that constitutes any acquisition
proposal (as defined in the merger agreement).
The stockholders made customary representations and warranties to us,
including with respect to (i) their record or beneficial ownership of, and
right to vote, the shares of Digene common stock, (ii) their power and
authority to execute and deliver the stockholders agreement without obtaining
third-party consents, (iii) the noncontravention and nonviolation of the other
agreements of the stockholders and of judgments, decrees, orders and laws
applicable to them, (iv) the valid, binding and enforceable effect of the
stockholders agreement, and (v) the shares of Digene common stock being free of
all other liens, claims, voting or disposition arrangements or other
encumbrances. In addition, we made representations and warranties to the
stockholders, including with respect to (i) our organization, standing and
corporate power, (ii) our authority to enter into the stockholders agreement,
and (iii) the noncontravention and nonviolation of the other agreements of the
stockholders and of judgments, decrees, orders and laws applicable to them.
THE TRANSACTION OPTION AGREEMENT
The following is a summary description of the material provisions of the
transaction option agreement. This summary is qualified in its entirety by
reference to the complete text of the transaction option agreement, which is
attached as Annex C to this prospectus and incorporated by reference into this
prospectus. All Digene stockholders are urged to read the transaction option
agreement in its entirety.
Concurrently with the execution and delivery of the merger agreement, we
entered into the transaction option agreement with Digene pursuant to which
Digene granted us an irrevocable option, exercisable after we have purchased
shares of Digene common stock pursuant to the offer, to purchase up to 19.9% of
the total shares of Digene common stock outstanding if, after giving effect to
the exercise of the option and as a result of such exercise, the number of
shares then owned by us represents at least 90.1% of the shares of Digene
common stock outstanding. The transaction option agreement will terminate upon
the earlier of the effective time of the merger or termination of the merger
agreement for any reason. As a result of entering into the transaction option
agreement, we may be deemed to beneficially own (determined in accordance with
SEC rules) approximately 16.6% of the then outstanding shares of Digene common
stock (calculated as of February 19, 2002 and assuming the purchase by us of
the maximum amount of shares of Digene common stock permitted by such
agreement).
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INTERESTS OF CERTAIN PERSONS
Some directors and executive officers of Digene may have interests in the
offer and the merger that are different from or in addition to your interests.
Information about these interests is more fully set forth in Digene's
Solicitation/Recommendation Statement on Schedule 14D-9, including the
Information Statement attached as Annex A to the Schedule 14D-9, dated March 1,
2002, which is being mailed to Digene stockholders with this preliminary
prospectus and which is incorporated into this prospectus by reference.
Each material agreement, arrangement or understanding and any actual or
potential conflict of interest between Digene or its affiliates and Digene, its
executive officers, directors or affiliates, or between Digene or its
affiliates and Cytyc or Cruiser, Inc. or their respective executive officers,
directors or affiliates, is incorporated into this prospectus by reference as a
result of the previous sentence.
Treatment of Stock Options
Each outstanding option to purchase shares of Digene common stock, including
options granted to officers and directors, will accelerate in connection with
the transactions contemplated by the merger agreement. Further, the merger
agreement provides that each option to purchase shares of Digene common stock
outstanding after the consummation of the merger will be assumed by us, and
shall be exercisable in accordance with the terms of such option for:
- a number of whole shares of Cytyc common stock equal to the product of
the number of shares of Digene common stock that were issuable upon
exercise of such option immediately prior to the transactions
contemplated by the merger agreement, multiplied by 1.1969, rounded down
to the nearest whole number of shares of Cytyc common stock; and
- an amount in cash equal to the product of the number of shares of Digene
common stock that were issuable upon exercise of such option immediately
prior to the transactions contemplated by the merger agreement,
multiplied by $4.00, rounded down to the nearest cent.
The effective exercise price per share applicable to each option will be
equal to a number equal to the quotient of the exercise price per share of such
option immediately prior to the transactions contemplated by the merger
agreement divided by 1.1969, rounded up to the nearest cent.
As of February 27, 2002, executive officers and directors of Digene held
options to purchase a total of 2,260,496 shares of Digene common stock, with an
average exercise price of approximately $19.15.
Employment Agreements
On February 19, 2002, Digene entered into written employment agreements and
noncompetition, nondisclosure and developments agreements with each of Evan
Jones, the Chief Executive Officer and Chairman of the Board of Digene; Charles
M. Fleischman, the President, Chief Operating Officer, Chief Financial Officer
and a Director of Digene; Joseph P. Slattery, the Vice President, Finance of
Digene; and Donna Marie Seyfried, the Vice President, Business Development of
Digene. None of these persons had employment agreements with Digene prior to
February 19, 2002.
The following is a summary of some of the rights, privileges, restrictions
and conditions relating to the these employment agreements and noncompetition,
nondisclosure and developments agreements. The specific provisions of the
agreements are contained in the individual officer's agreement which are
included as exhibits to the Solicitation/Recommendation Statement on Schedule
14D-9 filed by Digene on March 1, 2002, and is incorporated herein by
reference. You should read the individual officer agreements for a more
complete understanding of their terms.
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Each of the officer's employment agreements and noncompetition agreements
have substantially similar terms except for each officer's title and base
salary. The employment agreements provide for annual base salaries of $305,000
for Mr. Jones, $305,000 for Mr. Fleischman, $200,000 for Ms. Seyfried and
$176,000 for Mr. Slattery. Each employment agreement provides that the officer
is eligible to participate in Digene's benefit plans, practices and policies to
the same extent as Digene employees of similar rank and tenure, will be
reimbursed by Digene for reasonable business expenses and is eligible to
receive an annual discretionary bonus based upon the attainment of certain
goals set by the Digene board of directors.
Under the terms of each employment agreement, Digene may terminate any of
the officers with or without cause. Each employment agreement provides that if
such officer is terminated by Digene without cause or terminates his or her own
employment based on the occurrence of certain events described as "good
reason," he or she will receive, subject to compliance with certain conditions:
(i) salary continuation at such officer's base salary for twelve (12) months;
(ii) monthly premium payments for medical and dental coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") for the
earlier of: (A) twelve (12) months; (B) the date the officer obtains other
employment; or (C) the date the officer's COBRA continuation would terminate in
accordance with the provisions of COBRA; and (iii) a payment equal to the bonus
paid to the officer for the fiscal year prior to the fiscal year in which the
employment of the officer is terminated to be paid in a lump-sum within thirty
(30) days after the date of such officer's termination.
Each noncompetition agreement provides that, among other things, during the
term of his or her employment and continuing for a period of one (1) year after
the termination thereof, each officer agrees that he or she will not alone or
as a partner, officer, director, employee, consultant, agent, joint venturer,
lender, independent contractor or stockholder of any company or business: (i)
directly or indirectly engage in any commercial activity involving: (A)
diagnostic testing or gene-based testing systems for women's cancers and/or
infectious diseases; or (B) other products or services conceived, researched,
designed, developed, actively marketed, manufactured, distributed or sold by
Digene during the officer's employment with Digene of which the officer was
aware; (ii)(A) solicit for any such business any customers, partners or
investors of Digene; or (B) interfere with or disrupt any existing
relationships between Digene and an entity that is a customer, licensee,
supplier, vendor, distributor, dealer, partner or investor of Digene.
Each officer further agrees that he or she will not: (i) reveal to any
person or entity any non-public information concerning the organization,
business or finances of Digene; or (ii) make, use or permit to be used any
property of Digene other than for the benefit of Digene. Upon termination of an
officer, such officer will not use, or allow any other party to use the
property of Digene, and all non-public information and property of Digene in
such officer's possession will be returned to Digene at the time of the
officer's termination of employment; (A) hire or engage any person who is or
was an employee, agent, representative, contractor or consultant of Digene
within the one year period immediately prior to the last date of the officer's
employment, except for any person terminated by Digene without cause and any
officer's administrative assistant ("Company Person"), or (B) solicit, recruit
or induce any Company Person to cease his or her relationship with Digene.
Each officer further agrees that he or she will not: (i) reveal to any
person or entity any non-public information concerning the organization,
business or finances of Digene; or (ii) make, use or permit to be used any
property of Digene other than for the benefit of Digene. Upon termination of an
officer's employment, such officer will not use, or allow any other party to
use the property of Digene and all non-public information and property of
Digene in such officer's possession will be returned to Digene.
Each noncompetition agreement further provides that all inventions,
developments and other intellectual property rights made, conceived, created,
discovered, invented, reduced to practice or otherwise obtained by an officer
during his or her employment with Digene, which relate to Digene's business,
result from tasks assigned to or performed by the officer, or result from use
of Digene's property, time or confidential information, are assigned to and are
the sole and absolute property of, Digene. Each officer also agreed to
cooperate fully to ensure the Company's ownership and preservation of all such
intellectual property rights.
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Indemnification of Directors and Officers
Pursuant to the merger agreement, subject to applicable law, we and our
wholly-owned subsidiary Cruiser, Inc. have agreed to indemnify and hold
harmless the current and former directors and officers of Digene in respect of
acts and omissions occurring prior to the consummation of the merger to the
extent currently provided in Digene's certificate of incorporation. In
addition, we have agreed to maintain for a period of 6 years from the
consummation of the merger Digene's current directors' and officers' insurance
and indemnification policy to the extent it provides coverage for events
occurring prior to the consummation of the merger for all of Digene's current
officers and directors. If the existing directors' and officer's insurance and
indemnification policy cannot be maintained, expires or is terminated or
canceled during such six-year period, we have agreed to use reasonable efforts
to cause to be obtained as much comparable insurance as can be obtained for the
remainder of such period on terms and conditions substantially similar to the
existing policy.
In addition, in the event we consolidate with or merge into any other
company and shall not be the continuing or surviving company of such
consolidation or merger, or if we transfer or convey all or substantially all
of our properties and assets to any other company, then, and in each such case,
we have agreed that proper provision shall be made so that any these successors
and assigns assume these indemnification obligations.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Generally
The following discussion addresses the material U.S. federal income tax
consequences of the offer and the merger that generally are applicable to
Digene stockholders. The following discussion does not deal with all U.S.
federal income tax consequences that may be relevant to Digene stockholders in
light of their particular circumstances, such as stockholders who are dealers
in securities, banks, insurance companies, tax-exempt organizations, subject to
alternative minimum tax, holding their shares as part of a hedge, straddle, or
other risk reduction transaction, non-U.S. persons, dissenting from the merger,
or who acquired their Digene shares through stock option or stock purchase
programs or otherwise as compensation. In addition, it does not address the tax
consequences of the offer and merger under state, estate, local, or foreign tax
laws or the tax consequences of transactions completed before or after the
offer and merger, such as the exercise of options or rights to purchase Digene
shares in anticipation of the offer and merger.
Furthermore, this discussion is limited to Digene stockholders that hold
their Digene shares as capital assets and does not consider the tax treatment
of Digene stockholders that hold Digene shares through a partnership or other
pass-through entity. Digene stockholders are urged to consult their own tax
advisors regarding the tax consequences to them of the offer and merger based
on their own circumstances, including the applicable U.S. federal, state,
estate, local, and foreign tax consequences to them of the offer and merger.
The following discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), applicable Treasury Regulations, judicial decisions, and
administrative rulings and practice, all as of the date of this Registration
Statement, all of which are subject to change. Any such change could be applied
to transactions that were completed before the change, and could affect the
accuracy of the statements and conclusions in this discussion and the tax
consequences of the offer and merger to Digene, Cytyc, and/or their respective
stockholders.
Neither Digene nor Cytyc has requested nor will request a ruling from the
Internal Revenue Service with regard to any of the tax consequences of the
offer and merger. Ballard Spahr Andrews & Ingersoll, LLP, counsel to Digene,
will render its opinion, subject to certain qualifications and limitations, to
Digene, that, among other things, the offer and merger will constitute a
reorganization under Section 368(a) of the Code.
Based on the assumption that the offer and merger will constitute a
reorganization, and subject to the limitations and qualifications referred to
in this discussion, the following U.S. federal income tax consequences will
result from the offer and merger:
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Gain Recognition
A Digene stockholder who exchanges Digene shares for cash and Cytyc common
stock in the offer or the merger generally will recognize gain (but not loss)
in an amount equal to the lesser of:
. the excess (if any) of (i) the amount of cash (other than cash received in
lieu of fractional shares) and the fair market value of the Cytyc common
stock (including fractional shares) received in the exchange over (ii) the
stockholder's adjusted tax basis in the Digene shares; and
. the amount of cash received in the exchange (other than cash received in
lieu of fractional shares).
Such gain generally will be capital gain, and will be long-term capital gain
with respect to any Digene shares that have been held by the Digene stockholder
for more than one year as of the time of the exchange. Nevertheless, any gain
recognized by a Digene stockholder pursuant to the offer or merger may be taxed
as an ordinary dividend if such stockholder actually or constructively owns a
sufficient amount of Cytyc shares after the offer or merger so as not to
qualify for exchange treatment under the rules set forth in Section 302 of the
Code. A Digene stockholder who exchanges Digene shares for cash and Cytyc
common stock pursuant to the offer or merger will not be permitted to recognize
a loss in the exchange, except with respect to cash received in lieu of
fractional shares, as discussed below.
Tax Basis
The aggregate tax basis of the Cytyc common stock received by Digene
stockholders in the offer and merger (including any fractional shares of Cytyc
common stock for which cash is received) will be equal to the aggregate tax
basis of the Digene shares exchanged for Cytyc common stock, decreased by the
aggregate amount of cash (other than cash in lieu of fractional shares)
received in the exchange, and increased by the aggregate amount of gain (if
any) recognized in the exchange (other than with respect to gain or loss
realized as a result of cash received in lieu of fractional shares).
Holding Period
The holding period of the Cytyc common stock received by a Digene
stockholder in the offer or merger will include the holding period of the
Digene shares that were exchanged for those Cytyc shares.
Fractional Shares
A Digene stockholder who receives cash in lieu of a fractional share of
Cytyc common stock will be treated as if the fractional share were received
pursuant to the offer or merger and as if the fractional share were redeemed by
Cytyc for cash. A Digene stockholder who receives cash in lieu of a fractional
share of Cytyc common stock generally will recognize gain or loss in an amount
equal to the difference between (i) the amount of cash received in lieu of a
fractional share and (ii) the portion of the stockholder's adjusted tax basis
in its Digene shares that is allocated to the fractional share. Such gain or
loss will be capital gain or loss, and will be long-term capital gain or loss
with respect to any Digene shares held by the Digene stockholder for more than
one year as of the time of the exchange.
Limitations on Opinion
The opinion of Ballard Spahr Andrews & Ingersoll, LLP will assume the truth
and accuracy of certain factual representations made by Digene, Cytyc and
Cruiser, Inc., which representations customarily are given in transactions of
this kind. Whether the transaction qualifies as a "reorganization" within the
meaning of Section 368(a) of the Code will depend, among other requirements,
upon whether the fair market value of the Cytyc common stock received by Digene
stockholders pursuant to the offer and merger represents at least 50 percent of
the total consideration received by Digene stockholders pursuant to the offer
and merger. If the fair market value
71
of the Cytyc common stock received by Digene stockholders represents, less than
50 percent of the total consideration in the transaction, then the opinion of
Ballard Spahr Andrews & Ingersoll, LLP cannot be relied upon and the tax
consequences of the offer and/or the merger likely would be as described below
under "Consequences if the Offer and Merger Do Not Qualify as a
Reorganization." In addition, an opinion of counsel is not binding on the
Internal Revenue Service, and Ballard Spahr Andrews & Ingersoll, LLP cannot
assure Digene that the Internal Revenue Service will not successfully challenge
the qualification of the offer and the merger as a "reorganization" within the
meaning of Section 368(a) of the Code.
Consequences if the Offer and Merger Do Not Qualify as a Reorganization
If the offer and merger fail to qualify as a "reorganization" for U.S.
federal income tax purposes, a Digene stockholder would recognize the full
amount of its capital gain (or loss) realized on the exchange, computed by
reference to the amount by which the sum of the value of the Cytyc common stock
on the date of the exchange and the amount of cash received exceeds (or is less
than) the stockholder's adjusted tax basis in the Digene shares exchanged. A
Digene stockholder's initial tax basis in its Cytyc common stock received in
the offer or merger would be equal to the fair market value of that stock on
the date of the offer or merger, and that stockholder's holding period in the
Cytyc common stock received in the offer or merger would begin on the day after
the date of the exchange.
Backup Withholding
Cash payments made to Digene stockholders pursuant to the offer or the
merger may, under certain circumstances, be subject to backup withholding at a
rate of 30 percent. However, backup withholding will not apply to a Digene
stockholder who either (i) furnishes a correct taxpayer identification number
and certifies that he or she is not subject to backup withholding by completing
the requisite forms that will be included as part of the letter of transmittal,
or (ii) otherwise proves to Cytyc and the exchange agent that the Digene
stockholder is exempt from backup withholding.
THE FOREGOING DISCUSSION IS INTENDED TO PROVIDE ONLY A SUMMARY OF THE
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND MERGER, AND IS
NOT INTENDED TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL U.S.
FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND MERGER. AS DESCRIBED ABOVE,
THIS DISCUSSION DOES NOT ADDRESS CERTAIN CATEGORIES OF SHAREHOLDERS, NOR DOES
IT ADDRESS STATE, ESTATE, LOCAL OR FOREIGN TAX CONSEQUENCES. IN ADDITION, THIS
DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR ARE
CONTINGENT UPON, INDIVIDUAL CIRCUMSTANCES. DIGENE STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISERS TO DETERMINE THEIR PARTICULAR U.S. FEDERAL INCOME,
STATE, ESTATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES RESULTING FROM THE
OFFER AND MERGER, IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
72
MARKET PRICES AND DIVIDENDS
Our common shares are listed on the Nasdaq National Market under the symbol
"CYTC." Digene common shares are listed on the Nasdaq National Market under the
symbol "DIGE."
The following table sets forth, for the full calendar quarters ended on the
dates indicated, the high and low last reported prices per Cytyc share and
Digene share, in each case as reported on the Nasdaq National Market. Cytyc
share price data reflect the two-for-one stock split in the form of a stock
dividend paid in January 2000 to holders of record of the Company's Common
Stock on January 14, 2000 and the three-for-one stock split in the form of a
stock dividend paid in March 2001 to holders of record of the Company's Common
Stock on February 16, 2001.
Cytyc Digene
Common Stock Common Stock
------------- -------------
High Low High Low
------ ------ ------ ------
2000:
First Quarter............................. $19.25 $ 7.94 $58.50 $15.75
Second Quarter............................ 22.58 9.83 51.63 25.25
Third Quarter............................. 23.48 11.25 44.88 32.50
Fourth Quarter............................ 22.38 12.67 45.00 31.19
2001:
First Quarter............................. $22.67 $13.63 $44.50 $10.63
Second Quarter............................ 26.03 14.50 41.00 12.88
Third Quarter............................. 27.01 18.67 39.50 22.00
Fourth Quarter............................ 30.22 21.65 39.00 24.76
2002:
First Quarter (through February 27, 2002). $26.49 $19.24 $32.30 $21.45
On February 15, 2002, the last full trading day prior to the public
announcement of the offer and the merger, the last sale price per Cytyc common
share on the Nasdaq National Market was $20.73 and the last sale price per
Digene common share on the Nasdaq National Market was $25.51. On February 27,
2002, the most recent practicable date prior to the printing of this document,
the last sale price per share of our common stock was $23.46 and the last sale
price per Digene common share was $31.87.
Neither we nor Digene has ever declared or paid any cash dividends on its
common stock or other securities and neither anticipates paying cash dividends
in the foreseeable future.
73
DESCRIPTION OF CYTYC CAPITAL STOCK
The following is a summary of certain matters with respect to the capital
stock of Cytyc. Because it is only a summary, it does not contain all
information that may be important to you. Therefore, you should read the more
detailed provisions of Cytyc's certificate of incorporation and by-laws
carefully, which are incorporated as exhibits to this registration statement to
which this Prospectus is a part.
General
As of the date of this prospectus, Cytyc's authorized capital stock consists
of 200,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share. No other classes of
capital stock are authorized under the Cytyc certificate of incorporation. The
issued and outstanding shares of Cytyc common stock are duly authorized,
validly issued, fully paid and nonassessable.
Common Stock
Holders of common stock have no preemptive, redemption or conversion rights.
The holders of common stock are entitled to receive dividends when and as
declared by the Cytyc board of directors out of funds legally available
therefor and subject to any preferential dividend rights of any then
outstanding preferred stock. Upon Cytyc's liquidation, dissolution or winding
up, the holders of common stock may share ratably in Cytyc's net assets after
payment of liquidating distributions to holders of preferred stock, if any.
Each holder of common stock is entitled to one vote per share of common stock
held of record by such holder.
Preferred Stock
The Cytyc board of directors has the power, without further vote of
stockholders, to authorize the issuance of up to 5,000,000 shares of preferred
stock and to fix and determine the terms, limitations and relative rights and
preferences of any shares of preferred stock. This power includes the authority
to establish voting, dividend, redemption, conversion, liquidation and other
rights of any such shares. There are no shares of preferred stock currently
outstanding.
Rights Plan
On August 27, 1997, Cytyc issued to holders of common stock rights to
purchase preferred stock pursuant to a rights agreement of the same date
between Cytyc and Fleet National Bank (f/k/a BankBoston, N.A.) as rights agent,
as amended June 22, 1998 (as amended, the "rights agreement"). Under the terms
of the rights agreement, the preferred stock purchase rights will become
exercisable upon the occurrence of certain triggering events, including the
acquisition by an acquiring person of 15% of the outstanding shares of Cytyc
common stock. The existence of the rights agreement may discourage or render
more difficult an acquisition of Cytyc that is deemed undesirable by Cytyc's
board of directors. See "Comparison of Rights of Stockholders of Cytyc and
Digene-- Rights Plan."
Transfer Agent and Registrar
The registrar and transfer agent for the Cytyc common stock is EquiServe
Trust Company, N.A.
74
COMPARISON OF RIGHTS OF STOCKHOLDERS OF CYTYC AND DIGENE
General
This section of the prospectus describes the material differences between
the rights of holders of Cytyc common stock and holders of Digene common stock
under their respective certificates of incorporation and by-laws. While we
believe that the description covers the material differences between the two,
this summary is not intended to be a complete discussion of the respective
certificates of incorporation and by-laws of Cytyc and Digene and it is
qualified in its entirety to applicable Delaware law as well as to Cytyc's and
Digene's respective certificates of incorporation and by-laws. You should
carefully read this entire summary and the other documents we refer to for a
more complete understanding of the differences between being a stockholder of
Cytyc and being a stockholder of Digene. Cytyc's and Digene's respective
certificates of incorporation and by-laws are on file with the SEC and will
also be sent to you upon request. For more information, see "Where You Can Find
More Information" on page 6.
Both Cytyc and Digene are incorporated under the laws of the state of
Delaware. Accordingly, the rights of their stockholders are currently governed
by Delaware law and by their respective certificates of incorporation and
by-laws. After the completion of the merger, stockholders of Digene exchanging
their shares in the offer will become stockholders of Cytyc and their rights as
such will be governed by Delaware law, the Cytyc certificate of incorporation
and the Cytyc by-laws. The following summarizes differences in the certificates
of incorporation of Cytyc and Digene that could materially affect the rights of
stockholders of Digene after completion of the merger.
Capitalization
Cytyc. Cytyc is authorized to issue 200,000,000 shares of $.01 par value
common stock and 5,000,000 shares of preferred stock. As of February 27, 2002,
121,709,382 shares of Cytyc common stock were issued and outstanding and no
shares of preferred stock were issued and outstanding. Cytyc's board has the
authority, without stockholder approval, to issue shares of authorized
preferred stock from time to time in one or more series and to fix the rights
and preferences, including voting rights, of each series of preferred stock,
which rights and preferences may be superior to that of Cytyc common stock.
Digene. Digene is authorized to issue 50,000,000 shares of $0.01 par value
common stock and 1,000,000 shares of $0.10 par value preferred stock. As of
February 27, 2002, 17,907,947 shares of Digene common stock were issued and
outstanding and no shares of preferred stock were issued and outstanding.
Digene's board has the authority, without stockholder approval, to issue shares
of authorized preferred stock from time to time in one or more series and to
fix the rights and preferences, including voting rights, of each series of
preferred stock, which rights and preferences may be superior to that of Digene
common stock.
Voting
Cytyc. Each holder of Cytyc common stock is entitled to one vote for each
share and may not cumulate votes. Except as otherwise required by law or
provided in the Cytyc certificate of incorporation, the holders of Cytyc common
stock and Cytyc preferred stock vote together as a single class on all matters
voted on by the Cytyc stockholders, subject to any special or preferential
voting rights of any then outstanding preferred stock.
Digene. Each holder of Digene's common stock is entitled to vote on all
matters to be voted upon by stockholders as may be specifically required by law
or in Digene's by-laws, including the election of directors. Each holder of
common stock is entitled to one vote per share.
Number and Classification of Directors
Cytyc. Cytyc's certificate of incorporation and by-laws provide that the
number of directors may not be less than three. Cytyc's certificate of
incorporation and by-laws also provide that its board of directors will be
comprised of three classes with no one class having more than one director more
than any other class. Each class is elected for three years and a different
class of directors stands for election each year.
Digene. Digene's by-laws provide that the number of directors which
constitute the entire board of directors may not be less than one nor more than
ten, and that the number of directors constituting the whole Board may be
increased or decreased from time to time by action of the Board. Digene's
by-laws also provide
75
that its board of directors will be comprised of three classes with no one
class having more than one director more than any other class. Each class is
elected for three years and a different class of directors stands for election
each year.
Removal of Directors
Cytyc. Cytyc's certificate of incorporation and by-laws provide that the
stockholders may remove a director for cause by the affirmative vote of the
holders of at least a majority of the shares of the capital stock of Cytyc
outstanding and entitled to vote or without cause by the affirmative vote of
holders of at least 75% of the shares of the capital stock of Cytyc outstanding
and entitled to vote.
Digene. Digene's by-laws provide that any director or the entire Board may
be removed, only for cause, by the holders of a majority of shares entitled to
vote at an election of directors.
Filling Vacancies on the Board of Directors
Cytyc. Cytyc's certificate of incorporation and by-laws provide that the
directors will fill a vacancy on the board, including a vacancy caused by an
enlargement of the board, by a vote of the majority of the directors then in
office, even if they constitute less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy will be elected to hold office
until the next election of the class for which the director was elected and
until a successor is elected and qualified.
Digene. Digene's by-laws provide that vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by the sole remaining director. Directors who are elected to fill
vacancies and newly created directorships shall hold office until the next
election of the class for which such directors shall have been chosen, and
until their successors are elected and qualified.
Amendments to Certificate of Incorporation
Cytyc. Cytyc's certificate of incorporation provides that the company
reserves the right to amend or repeal any provision of its certificate of
incorporation in the manner prescribed by the laws of the State of Delaware.
However, Cytyc's certificate of incorporation also provides that any proposal
amending Cytyc's certificate of incorporation to reduce or eliminate the number
of its authorized shares of common stock or preferred stock, or relating to
Cytyc's perpetual existence, the board of directors generally, stockholder
action and special meetings of stockholders, personal liability of directors,
indemnification, factors the board may consider in connection with mergers and
acquisitions or amending the certificate of incorporation requires the
affirmative vote of at least 75% of the shares of capital stock of Cytyc
outstanding and entitled to vote.
Digene. Digene's certificate of incorporation provides that Digene reserves
the right to amend, alter, change or repeal any provision of its certificate of
incorporation in the manner prescribed by statute, and that all rights granted
to stockholders are subject to this reservation.
Amendments to By-laws
Cytyc. Cytyc's by-laws provide that the directors may amend the by-laws by
the affirmative vote of a majority of the directors present at any regular or
special meeting at which a quorum is present. In addition, Cytyc's by-laws also
provide that the stockholders may amend the by-laws by the affirmative vote of
66 2/3% of the shares of Cytyc capital stock outstanding and entitled to vote
at any regular or special meeting of stockholders.
Digene. Digene's by-laws provide that the stockholders or the directors,
when such power is conferred upon the board by Digene's certificate of
incorporation, may alter, amend or repeal the by-laws at any meeting of the
stockholders or directors, provided that notice of such alteration, amendment
or repeal is given.
76
Action by Written Consent
Cytyc. Cytyc's certificate of incorporation and by-laws provide that the
stockholders may not take any action by written consent in lieu of a meeting.
Digene. Any action required or permissible to be taken any annual or
special meeting of the stockholders may be taken without a meeting if a consent
in writing is signed by holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action had a meeting actually taken place.
Notice of Stockholder Actions
Cytyc. Cytyc's by-laws provide that to nominate directors or bring business
before an annual meeting, stockholders must give written notice to the
secretary of Cytyc at least 120 days, but not more than 150 days, prior to the
first anniversary of the date of the proxy statement delivered to stockholders
in connection with the preceding year's annual meeting. However, if the annual
meeting is more than 30 days before or 60 days after the anniversary date or if
no proxy statement was delivered to stockholders in connection with the
preceding year's annual meeting, stockholders must give written notice not more
than 90 days prior to the annual meeting and not less than the later of 60 days
prior to the annual meeting and 10 days after Cytyc makes the first public
announcement of the date of the meeting.
Digene. Digene's by-laws provide that written notice of a stockholder
proposal must be given to the secretary of Digene not later than 120 days in
advance of the anniversary date of Digene's proxy statement for Digene's annual
stockholders meeting in the previous calendar year.
Right to Call Special Meeting of Stockholders
Cytyc. Cytyc's by-laws provide that the chairman of the board of directors,
a majority of the board of directors or the President may call a special
meeting of stockholders at any time.
Digene. Digene's by-laws provide that the a special meeting of the
stockholders may be called by the Chairman of the Board, and shall be called by
the chairman of the board at the request in writing of a majority of the
directors or at the request in writing of the holders of a majority of the
Digene issued and outstanding capital stock then entitled to vote.
Limitation of Personal Liability of Directors
The DGCL provides that a corporation's certificate of incorporation may
include a provision limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. However, no provision can eliminate or limit the liability
of a director for:
. any breach of the director's duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law;
. willful or negligent violation of the laws governing the payment of
dividends or the purchase or redemption of stock; or
. any transaction from which the director derived an improper personal
benefit.
77
Cytyc. The Cytyc certificate of incorporation provides that no director
shall be personally liable to Cytyc or its stockholders for monetary damages
for breach of fiduciary duty as director, notwithstanding any provision of law
imposing liability, except:
. for any breach of the director's duty of loyalty to Cytyc or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the General Corporation Law of the State of Delaware;
or
. for any transaction from which the director derived an improper personal
benefit.
Digene. Digene's certificate of incorporation provides that, except as
otherwise required by the DGCL, no director will be personally liable to Digene
or its stockholders for monetary damages for breach of fiduciary duty as a
director.
Dividends
Cytyc. Cytyc's certificate of incorporation provides that Cytyc's board may
declare and pay dividends upon shares of Cytyc common stock, but only out of
funds available for the payment of dividends as provided by law, and subject to
any preferential rights of any outstanding preferred stock.
Digene. As permitted by the DGCL, Digene's board may declare and pay
dividends upon shares of Digene's common stock, but only out of funds available
for the payment of dividends as provided by law. Dividends on outstanding
shares of preferred stock shall be paid and declared and set apart for payment
before any dividends are paid or declared and set apart for payment on the
common stock with respect to the same dividend period.
Conversion and Redemption
Cytyc. Holders of Cytyc common stock have no right to convert their shares
into any other shares of capital stock of Cytyc or any other securities.
Holders of Cytyc common stock are not entitled to any redemption rights.
Digene. In accordance with the DGCL, holders of Digene's common stock have
no right to convert their shares into any other shares of capital stock of
Digene or any other securities, and are not entitled to any redemption rights.
Liquidation
Cytyc. Cytyc's certificate of incorporation provides that upon the
dissolution or liquidation of Cytyc, holders of Cytyc common stock will be
entitled to receive all assets of Cytyc available for distribution to Cytyc's
stockholders, subject to any preferential rights of any then outstanding
preferred stock.
Digene. In accordance with the DGCL, upon the dissolution or liquidation of
Digene, holders of Digene common stock will be entitled to receive all assets
of Digene available for distribution to Digene's stockholders.
Rights Plans
Cytyc. On August 27, 1997, Cytyc issued to holders of common stock rights
to purchase preferred stock pursuant to a Rights Agreement of the same date
between Cytyc and Fleet National Bank (f/k/a BankBoston, N.A.) as rights agent,
as amended June 22, 1998. Under the terms of the Rights Agreement, the
preferred stock purchase rights will become exercisable upon the occurrence of
certain triggering events, including the acquisition by an acquiring person of
15% of the outstanding shares of Cytyc common stock. The existence of the
Rights Agreement may discourage or render more difficult an acquisition of
Cytyc that is deemed undesirable by Cytyc's board of directors. Upon
consummation of the merger, Digene's stockholders will also obtain such rights.
Digene. Digene does not have a rights agreement.
78
LEGAL MATTERS
The validity of the Cytyc common stock offered hereby will be passed upon
for Cytyc by Testa, Hurwitz & Thibeault, LLP, counsel to Cytyc. Attorneys at
Testa, Hurwitz & Thibeault, LLP beneficially own an aggregate of 6,934 shares
of Cytyc common stock as of the date of this prospectus. Ballard Spahr Andrews
& Ingersoll, LLP, counsel to Digene, has delivered an opinion concerning
certain U.S. federal income tax consequences of the offer and the merger.
EXPERTS
Cytyc's audited consolidated financial statements as of December 31, 2001
and 2000 and for each of the three years in the period ended December 31, 2001
included in Cytyc's annual report on Form 10-K have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto. This prospectus incorporates these financial statements and
report by reference in reliance upon the authority of said firm as experts in
giving said reports.
The consolidated financial statements of Digene Corporation appearing in
Digene Corporation's Annual Report (Form 10-K) for the year ended June 30,
2001, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statement are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
79
TRADEMARKS
This document contains trademarks of Cytyc and Digene and may contain
trademarks of others.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including information included or incorporated by reference
in this document, contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, concerning the
financial condition, results of operations and business of Cytyc following the
consummation of its proposed acquisition of Digene, the anticipated financial
and other benefits of such proposed acquisition and the plans and objectives of
Cytyc's management following such proposed acquisition, including, without
limitation, statements relating to the cost savings expected to result from the
proposed acquisition, anticipated results of operations of the combined company
following the proposed acquisition, projected earnings per share of the
combined company following the proposed acquisition and the restructuring
charges estimated to be incurred in connection with the proposed acquisition.
Generally, the words "will," "may," "should," "continue," "believes,"
"expects," "intends," "anticipates" or similar expressions identify
forward-looking statements.
These forward-looking statements involve certain risks and uncertainties.
Factors that could cause actual results to differ materially from those
contemplated by the forward-looking statements include, among others, the
following factors:
. failure of the offer and the merger to be consummated;
. cost savings expected to result from the proposed acquisition may not be
fully realized or realized within the expected time frame;
. operating results following the proposed acquisition may be lower than
expected;
. competitive pressure among companies in our industry may increase
significantly;
. costs or difficulties related to the integration of the businesses of
Cytyc and Digene may be greater than expected;
. adverse changes in the interest rate environment may reduce interest
margins or adversely affect asset values of the combined company;
. general economic conditions, whether nationally or in the market areas in
which Cytyc and Digene conduct business, may be less favorable than
expected;
. legislation or regulatory changes may adversely affect the businesses in
which Cytyc and Digene are engaged; or
. adverse changes may occur in the securities markets.
See "Where You Can Find More Information" beginning on page 6.
80
Schedule I
Information Concerning Directors and Executive Officers
of Cytyc Corporation and Cruiser, Inc.
1. Directors and Executive Officers of Cytyc Corporation. The following
table sets forth the name and present principal occupation or employment, and
material occupations, positions, offices or employments for the past five
years, of each director and executive officer of Cytyc. Each such person is a
citizen of the United States and the business address of each such person is
c/o Cytyc Corporation, 85 Swanson Road, Boxborough, Massachusetts 01719.
Name and Present Principal Occupation or Employment and
Business Address Age Office(s) Five-Year Employment History
- ------------------- --- --------------- ---------------------------------------------------------------
Patrick J. Sullivan 50 Chief Executive Mr. Sullivan has served as President and Chief Executive
Officer, Vice Officer and as a director of Cytyc since March 1994. In January
Chairman and 2001 he was named Vice Chairman of the Board of Directors.
Chairman-Elect From January 1991 to March 1994, Mr. Sullivan served as Vice
President of Sales and Marketing of Cytyc. Prior to joining
Cytyc, Mr. Sullivan was employed in several marketing
positions for five years by Abbott Laboratories, a diversified
healthcare company, and was a consultant with McKinsey and
Company, an international management consulting firm. Mr.
Sullivan is a graduate of the United States Naval Academy and
received an M.B.A. from Harvard University.
Daniel J. 51 President and Mr. Levangie joined Cytyc in June 1992 as Director of Sales,
Levangie Chief Operating North America and has served as Executive Vice President and
Officer Chief Operating Officer since February 2001. From February
2000 to February 2001, Mr. Levangie served as Senior Vice
President, and from December 1997 to February 2000 he
served as Vice President, Commercial Operations. Prior to
December 1997, Mr. Levangie served in various positions with
Cytyc, including Vice President of Sales. Prior to joining
Cytyc, from 1975 through 1992, Mr. Levangie held a variety of
sales and marketing positions with Abbott Laboratories, a
diversified health care company. Mr. Levangie received a B.S.
degree in Pharmacy from the College of Pharmacy & Allied
Health Sciences of Northeastern University.
Robert L. Bowen 52 Vice President, Mr. Bowen joined Cytyc in December 2000 as Vice President,
Chief Financial Chief Financial Officer and Treasurer. Prior to joining Cytyc,
Officer and from October 1993 to June 2000, Mr. Bowen served as Chief
Treasurer Financial Officer--Europe for Case Corporation, a global
supplier of agriculture equipment, construction equipment and
financial services. From October 1993 to October 1997, Mr.
Bowen was Senior Vice President and Chief Financial Officer
for A.W. Chesterton Company, a privately held global
manufacturer of fluid sealing products. From 1972 to 1993, Mr.
Bowen held various positions with General Electric Company,
including Director Finance, GE Lighting Europe, Director
Finance, GE Medical Systems Asia, and Senior Vice President
Finance, GE Trading Company. Mr. Bowen received an M.B.A.
degree from New York University and a B.B.A. (Bachelor of
Business Administration) degree from Ohio University.
S-1
Name and Present Principal Occupation or Employment and
Business Address Age Office(s) Five-Year Employment History
- ------------------ --- ---------------- -----------------------------------------------------------
A. Suzanne 49 Vice President, Ms. Meszner-Eltrich joined Cytyc as Vice President, Human
Meszner-Eltrich Human Resources, Resources and General Counsel in September 1997. Prior to
General Counsel joining Cytyc, Ms. Meszner-Eltrich was an independent
and Secretary general counsel and human resources executive for a number
of private and public high technology companies in New
England, including Pilot Software, Inc. and PC Connection,
Inc. From April 1992 through June 1995 she was Vice
President, Human Resources and General Counsel of Easel
Corporation of Burlington, Massachusetts. Ms. Meszner-
Eltrich received her Doctor of Jurisprudence from New
England School of Law and a B.A. from Ohio State
University.
James Linder, M.D. 47 Chief Medical Dr. Linder became Cytyc's Chief Medical Officer in January
Officer 2002. From May 1996 through January 2002, he served as
Consulting Medical Director of Cytyc. Dr. Linder has been
Professor of Pathology and Microbiology at the University
of Nebraska Medical Center since 1990 to the present, and
was the Interim Dean for the College of Medicine from 1998
through 2000. Dr. Linder trained in Pathology at Duke
University and the University of Nebraska, earned his M.D.
from the University of Nebraska Medical Center and a B.S.
in Biochemistry and Microbiology from Iowa State
University. He serves on numerous editorial boards of
scientific journals, and as a member of the Council of the
United States and Canadian Academy of Pathology.
Christopher A. 44 Vice President, Mr. Bleck joined Cytyc in December 2001 as Vice
Bleck Commercial President, Commercial Operations. From 1999 to 2001, Mr.
Operations Bleck served as Corporate Vice President/General Manager
Pediatric Products for Ross Products/Abbott Labs. From
1983 to 1999, Mr. Bleck held several positions with Abbott
Labs, including Vice President Managed Care, Vice
President Business Development for Abbott International,
and President/General Manager Abbott Canada. Mr. Bleck
received an M.B.A. from the University of Connecticut, and
a B.S. in Pharmacy from the University of Connecticut.
Monroe E. Trout, 71 Chairman of the Dr. Trout became a director of Cytyc in 1993 and was
M.D. Board elected Chairman of the Board of Directors of Cytyc in
January 1998. Following his retirement from American
Healthcare Systems (''AmHS''), a major national
consortium of more than 1,000 hospitals, in January 1995,
Dr. Trout was named Chairman Emeritus of AmHS. Prior to
his retirement, from 1986 to January 1995, Dr. Trout held
various positions with AmHS, including Chairman, Chief
Executive Officer and President. From March 1996 until
July 1996, Dr. Trout served as President and Chief
Executive Officer of Cytran Inc. Prior to his employment at
AmHS, Dr. Trout was a Senior Vice President and a member
of the Board of Directors of Sterling Drug, Inc. Dr. Trout
serves as a director of Baxter International Inc., West
Pharmaceutical Services, Inc., the University of California
San Diego Foundation, SAIC and Ineedmd, Inc.
S-2
Name and Present Principal Occupation or Employment and
Business Address Age Office(s) Five-Year Employment History
- ----------------- --- ---------------- ------------------------------------------------------------------
Sally W. 48 Director Ms. Crawford became a director of Cytyc in January 1998. From
Crawford April 1985 until January 1997, Ms. Crawford served as Chief
Operating Officer of Healthsource, Inc., a publicly-held managed
care organization headquartered in New Hampshire. During her
tenure at Healthsource, Inc., Ms. Crawford held a variety of
positions and responsibilities, including leading that company's
Northern Region operations and marketing efforts. Since January
1997, Ms. Crawford has been a health care consultant in New
Hampshire. Ms. Crawford serves as a director of Exact Sciences
Corporation and Chittendon Corporation.
Anna S. Richo 41 Director Ms. Richo became a director of Cytyc in January 1998. She is
currently Vice President, Law at Baxter Healthcare Corporation,
BioScience Division. Ms. Richo has worked in various legal
positions with Baxter for the past ten years, including serving as
their Chief Litigation Counsel from 1994-1998. She is a member
of the Baxter Senior Management Team and serves as an
examiner for the Baxter Award for Operational Excellence. Prior
to joining Baxter, Ms. Richo was an attorney for The NutraSweet
Company.
William G. Little 59 Director Mr. Little became a director of Cytyc in January 1998. He is
currently the Chairman and Chief Executive Officer of West
Pharmaceutical Services, Inc. Prior to joining West, Mr. Little
served as President of Kendall's Health Care Division, as well as
Senior Group Vice President for C.R. Bard, Inc.'s United States
Operations, Managing Director and Area Vice President for
Bard's European Operations and General Manager of Johnson &
Johnson's Patient Care Division in England. Mr. Little currently
serves on the Board of Directors for Fox Chase Cancer Center.
Walter E. Boomer 63 Director Mr. Boomer became a director of Cytyc in February 2000. Since
March 1997 he has served as President and Chief Executive
Officer of Rogers Corporation, a specialty materials
manufacturer. Prior to joining Rogers, Mr. Boomer was
Executive Vice President of McDermott International, Inc., and
President of their Babcock and Wilcox Power Generation
Group. Mr. Boomer joined the Marine Corps in 1960, where he
served until August 1994, achieving the rank of General in
August 1986. From August 1992 to August 1994, General
Boomer served as Assistant Commandant, the second highest
position in the Marine Corps. Mr. Boomer serves as a director of
Baxter International Inc., Connecticut Business and Industry
Association and Rogers Corporation.
C. William 61 Vice Chairman of Mr. McDaniel became a director of Cytyc in April 1987 and
McDaniel the Board served as a consultant to Cytyc from March 1995 to February
1997. In January 2001 he was named Vice Chairman of the
Board of Directors. Mr. McDaniel served as a consultant to and
a director of CP Ventures, Inc., a venture capital firm, from
April 1995 to April 1996 and June 1996, respectively. From
1987 to March 1995, Mr. McDaniel was the President and a
director of CP Ventures, Inc.
S-3
Name and Present Principal Occupation or Employment and
Business Address Age Office(s) Five-Year Employment History
- -------------------- --- --------- -----------------------------------------------------------------
William H. Longfield 63 Director Mr. Longfield became a director of Cytyc in June 2001. He is
currently the Chairman and Chief Executive Officer of C.R.
Bard, Inc., and serves as a member of their board of directors
as well as a member of their Executive Committee and
Governance Committee. He is also a director of Manor Care,
Inc., West Pharmaceutical Services, Inc. and Horizon Health
Corporation.
Joseph B. Martin, 63 Director Dr. Martin became a director of Cytyc in January 2002. He is
M.D., Ph.D. currently the Dean, Faculty of Medicine, Harvard University.
Prior to joining Harvard University, Dr. Martin was the
Chancellor for the University of California, San Francisco. Dr.
Martin serves as a director of Scientific Learning Corporation
and Baxter International, Inc.
Marc C. Breslawsky 59 Director Mr. Breslawsky became a Director of Cytyc in January 2002.
He is currently the Chairman and Chief Executive Officer of
Imagistics International Inc. Prior to joining Imagistics, he was
President and Chief Operating Officer of Pitney Bowes Inc.
and a member of the Corporate Management Committee. Mr.
Breslawsky is a director for Imagistics International Inc., C.R.
Bard, Inc., United Illuminating Company The Pittston
Company, and the Connecticut Business and Industry
Association.
2. Directors and Executive Officers of Cruiser, Inc. The following table
sets forth the name and present principal occupation or employment, and
material occupations, positions, offices or employments for the past five
years, of each director and executive officer of Cruiser, Inc. Each such person
is a citizen of the United States and the business address of each such person
is c/o Cytyc Corporation, 85 Swanson Road, Boxborough, Massachusetts 01719.
Name and Present Principal Occupation or Employment and
Business Address Age Office(s) Five-Year Employment History
- ------------------ --- --------- -------------------------------------------------------------
Daniel J. Levangie 51 President Mr. Levangie joined Cytyc in June 1992 as Director of Sales,
North America and has served as Executive Vice President and
Chief Operating Officer since February 2001. From February
2000 to February 2001, Mr. Levangie served as Senior Vice
President, and from December 1997 to February 2000 he
served as Vice President, Commercial Operations. Prior to
December 1997, Mr. Levangie served in various positions with
Cytyc, including Vice President of Sales. Prior to joining
Cytyc, from 1975 through 1992, Mr. Levangie held a variety of
sales and marketing positions with Abbott Laboratories, a
diversified health care company. Mr. Levangie received a B.S.
degree in Pharmacy from the College of Pharmacy & Allied
Health Sciences of Northeastern University.
S-4
Name and Present Principal Occupation or Employment and
Business Address Age Office(s) Five-Year Employment History
- ----------------- --- ------------------ ----------------------------------------------------------
Robert L. Bowen 52 Vice President and Mr. Bowen joined Cytyc in December 2000 as Vice
Treasurer President, Chief Financial Officer and Treasurer. Prior to
joining Cytyc, from October 1993 to June 2000, Mr. Bowen
served as Chief Financial Officer--Europe for Case
Corporation, a global supplier of agriculture equipment,
construction equipment and financial services. From
October 1993 to October 1997, Mr. Bowen was Senior Vice
President and Chief Financial Officer for A.W. Chesterton
Company, a privately held global manufacturer of fluid
sealing products. From 1972 to 1993, Mr. Bowen held
various positions with General Electric Company, including
Director Finance, GE Lighting Europe, Director Finance,
GE Medical Systems Asia, and Senior Vice President
Finance, GE Trading Company. Mr. Bowen received an
M.B.A. degree from New York University and a B.B.A.
(Bachelor of Business Administration) degree from Ohio
University.
A. Suzanne 49 Vice President and Ms. Meszner-Eltrich joined Cytyc as Vice President, Human
Meszner-Eltrich Secretary Resources and General Counsel in September 1997. Prior to
joining Cytyc, Ms. Meszner-Eltrich was an independent
general counsel and human resources executive for a number
of private and public high technology companies in New
England, including Pilot Software, Inc. and PC Connection,
Inc. From April 1992 through June 1995 she was Vice
President, Human Resources and General Counsel of Easel
Corporation of Burlington, Massachusetts. Ms. Meszner-
Eltrich received her Doctor of Jurisprudence from New
England School of Law and a B.A. from Ohio State
University.
S-5
Schedule II
Compensation and Other Information Concerning
Named Executive Officers of Cytyc
Executive Compensation Summary
The following table sets forth the annual and long-term compensation for
fiscal years ended December 31, 2001, 2000 and 1999 for (i) Cytyc's Chief
Executive Officer, and (ii) each of Cytyc's three other most highly compensated
executive officers who were serving as executive officers as of December 31,
2001 and whose salary and bonus exceeded $100,000 for fiscal year 2001
(collectively, the ''Named Executive Officers'').
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation(1) Compensation Awards(2)
---------------------- ------------------------
Restricted Securities
Stock Underlying
Awards Options
Name and Principal Position Year Salary($) Bonus($)(3) ($)(4) (# of Shares)
--------------------------- ---- --------- ----------- ---------- -------------
Patrick J. Sullivan............... 2001 $375,000 $599,989 $18,908 750,000
Chief Executive Officer, 2000 275,000 514,438 18,739 110,100
Vice Chairman and Chairman-Elect 1999 212,000 417,579 20,157 360,000
Daniel J. Levangie................ 2001 $250,000 $350,005 $11,349 600,000
President and Chief 2000 190,019 277,664 11,178 205,500
Operating Officer 1999 166,000 166,489 7,868 180,000
Robert L. Bowen................... 2001 $236,923 $249,996 $6,849 30,000
Vice President, Chief Financial 2000(5) 0 25,223 986 120,000
Officer and Treasurer
A. Suzanne Meszner-Eltrich........ 2001 $175,000 $150,010 $3,596 150,000
Vice President, Human Resources, 2000 155,000 125,954 3,945 75,900
General Counsel and Secretary 1999 144,167 93,528 4,317 90,000
(1) The compensation described in this table does not include medical, group
life insurance and other benefits received by the Named Executive Officers
which are available generally to all salaried employees of Cytyc and
certain perquisites and other personal benefits received by the Named
Executive Officers which do not exceed the lesser of $50,000 or 10% of any
such officer's total salary and bonus reported in this table.
(2) Cytyc did not grant any stock appreciation rights or make any long term
incentive plan payouts to the Named Executive Officers during the fiscal
years ended December 31, 2001, 2000 and 1999.
(3) Includes the value of cash bonus and non-cash bonus in the form of
unrestricted bonus shares (''Bonus Shares''), but excludes the value of
restricted stock awards, which shares are included in the Restricted Stock
Awards column. Bonuses are reported in the year earned even if paid in a
subsequent year. Twenty-five percent (25%) of the net bonus amount awarded
to each Named Executive Officer for fiscal 1999, 2000 and 2001 was awarded
in Bonus Shares (the ''Bonus Share Amount''). The number of Bonus Shares
awarded was determined by dividing the Bonus Share Amount by the average
closing market price of Cytyc's Common Stock on the Nasdaq National Market
over the last ten business days of the fiscal year in which such Bonus
Shares were earned, which was $9.22 for Bonus Shares awarded for fiscal
1999, $20.6133 for Bonus Shares awarded for fiscal 2000 and $26.442 for
Bonus Shares awarded for fiscal 2001.
S-6
Bonus shares for fiscal 2001 were awarded in January 2002 to the Named
Executive Officers as follows: Mr. Sullivan (3,093), Mr. Levangie (1,856),
Mr. Bowen (1,118) and Ms. Meszner-Eltrich (588). The value of Bonus Shares
as disclosed in this table is determined by multiplying the number of shares
awarded by the closing market price of Cytyc's Common Stock on the Nasdaq
National Market on the date such Bonus Shares were granted, which was
$11.604 for Bonus Shares awarded for fiscal 1999, $21.917 for Bonus Shares
awarded for fiscal 2000, and $24.46 for Bonus Shares awarded for fiscal 2001.
(4) The number of shares of restricted stock awarded to the Named Executive
Officers for fiscal 1999, 2000 and 2001 was equal to 25% of the number of
Bonus Shares awarded to such person for such year. Restricted stock awards
for fiscal 2001 were awarded in January 2002 to the Named Executive
Officers as follows: Mr. Sullivan (773), Mr. Levangie (464), Mr. Bowen
(280) and Ms. Meszner-Eltrich (147). Such restricted stock awards are
subject to transfer and forfeiture restrictions and vest over a three-year
period. Dividends will be paid on such shares when and if declared by the
Board of Directors. The value of restricted stock awards as disclosed in
this table is determined by multiplying the number of shares awarded by the
closing market price of Cytyc's Common Stock on the Nasdaq National Market
on the date such restricted shares were granted, which was $11.604 for
restricted shares awarded for fiscal 1999, $21.917 for restricted shares
awarded for fiscal 2000 and $24.46 for restricted shares awarded for fiscal
2001. Restricted stock awards are reported in the year earned even if paid
in a subsequent year. The following table contains information on the
restricted stock held by the Named Executive Officers at December 31, 2001.
Number of Restricted Market Value
Shares Held at of Restricted
Name December 31, 2001 Shares Held
---- -------------------- -------------
Patrick J. Sullivan.... 2,592 $67,651
Daniel J. Levangie..... 1,188 31,007
Robert L. Bowen........ 325 8,483
Suzanne Meszner-Eltrich 552 14,407
The market values disclosed in this footnote are determined by multiplying
the number of shares by the closing market price of Cytyc's Common Stock on
the Nasdaq National Market on December 31, 2001, which was $26.10.
(5) Mr. Bowen joined Cytyc on December 4, 2000.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of
stock options to the Named Executive Officers during the fiscal year ended
December 31, 2001. The options, which were granted under Cytyc's 1995 Stock
Plan, become exercisable over a four year period, at a rate of 2.083% per
month, until such options are exercisable in full. Options are subject to the
employee's continued employment. Cytyc did not grant any stock appreciation
rights during the fiscal year ended December 31, 2001.
S-7
Potential Realizable Value
Number of Percent of Exercise at Assumed Annual Rates of
Securities Total Options or Base Stock Price Appreciation for
Underlying Granted to Price Option Term(2)
Options Employees in ($/ Expiration ----------------------------
Name Granted(#) Fiscal Year (%) Share)(1) Date 5% 10%
---- ---------- --------------- --------- ---------- ---------- -----------
Patrick J. Sullivan....... 375,000 6.3% $ 20.75 01/23/11 $4,893,586 $12,401,309
375,000 6.3% $21.9167 01/30/11 5,168,737 13,098,592
Daniel J. Levangie........ 300,000 5.1% $ 20.75 01/23/11 3,914,869 9,921,047
300,000 5.1% $21.9167 01/30/11 4,134,988 10,478,873
Robert L. Bowen........... 30,000 0.5% $21.9167 01/30/11 413,499 1,047,887
A. Suzanne Meszner-Eltrich 150,000 2.5% $21.9167 01/30/11 2,067,494 5,239,436
(1) The exercise price per share of each option was determined by the Board of
Directors to be equal to the fair market value per share of Common Stock on
the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These assumptions are not intended to forecast
future appreciation of Cytyc's stock price. The potential realizable value
computation does not take into account any federal or state tax
consequences of option exercises or sales of appreciated stock. This table
does not take into account any appreciation in the price of the Common
Stock since the date of grant.
Aggregate Option Exercises and Year-End Values
The following table sets forth certain information with respect to options
to purchase Cytyc's Common Stock granted to the Named Executive Officers,
including (i) the number of shares of Common Stock purchased upon exercise of
options in the fiscal year ended December 31, 2001; (ii) the net value realized
upon such exercise; (iii) the number of unexercised options outstanding at
December 31, 2001; and (iv) the value of unexercised options at exercise prices
equal to or less than the market value of the Common Stock at December 31, 2001
(''In-the-Money'').
Number of Securities
Underlying Unexercised Value of Unexercised, In- the-
Options at Money Options at
Shares Value December 31, 2001 December 31, 2001 ($)(2)
Acquired on Realiz\ed ------------------------- ------------------------------
Name Exercise (#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ---------- ------------------------- ------------------------------
Patrick J. Sullivan....... -- -- 1,039,143 760,887 $20,462,933 $6,451,026
Daniel J. Levangie........ 94,653 $1,629,709 500,924 660,685 7,983,840 5,193,476
Robert L. Bowen........... -- -- 36,876 113,124 234,264 713,235
A. Suzanne Meszner-Eltrich 64,613 923,255 55,759 195,486 730,060 1,784,271
(1) Amounts calculated by subtracting the aggregate exercise price of the
options from the market value of the underlying Common Stock on the date of
exercise, and do not reflect amounts actually received by the Named
Executive Officers.
(2) Amounts calculated by subtracting the exercise price of the options from
the fair market value of the underlying Common Stock (adjusted for stock
splits) as quoted on The Nasdaq Stock Market on December 31, 2001 of $26.10
per share, multiplied by the number of shares underlying the options, and
do not reflect amounts that may be actually received by the Named Executive
Officers upon exercise of options.
S-8
Schedule III
Certain Relationships and Related Transactions
We have adopted a policy that all transactions between us and our officers,
directors, principal stockholders and their affiliates shall be on terms no
less favorable to us than could be obtained by us from unrelated third parties,
and shall be approved by a majority of the outside independent and
disinterested directors.
S-9
Annex A
FINAL EXECUTED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CYTYC CORPORATION,
CRUISER, INC.
AND
DIGENE CORPORATION
FEBRUARY 19, 2002
A-1
TABLE OF CONTENTS
Page
- ----
ARTICLE I............................................................ 5
SECTION 1.1 The Offer.............................................. 5
SECTION 1.2 Offer Documents........................................ 6
SECTION 1.3 Company Actions........................................ 6
SECTION 1.4 Directors.............................................. 7
ARTICLE II The Merger............................................. 8
SECTION 2.1 The Merger............................................. 8
SECTION 2.2 Effective Time; Closing................................ 8
SECTION 2.3 Effect of the Merger................................... 8
SECTION 2.4 Certificate of Incorporation; Bylaws................... 8
SECTION 2.5 Directors and Officers................................. 9
SECTION 2.6 Effect on Capital Stock................................ 9
SECTION 2.7 Exchange of Certificates............................... 10
SECTION 2.8 Stock Transfer Books................................... 12
SECTION 2.9 Stock Options.......................................... 12
SECTION 2.10 Roche Conversion....................................... 13
SECTION 2.11 Dissenting Shares...................................... 13
SECTION 2.12 No Further Ownership Rights in Company Common Stock.... 13
SECTION 2.13 Taking All Necessary Action; Further Action............ 14
ARTICLE III Representations and Warranties of Company.............. 14
SECTION 3.1 Organization; Subsidiaries............................. 14
SECTION 3.2 Company Capitalization................................. 14
SECTION 3.3 Obligations With Respect to Capital Stock.............. 15
SECTION 3.4 Authority; Non-Contravention........................... 16
SECTION 3.5 SEC Filings; Company Financial Statements.............. 17
SECTION 3.6 Absence of Certain Changes or Events................... 18
SECTION 3.7 Taxes.................................................. 18
SECTION 3.8 Properties............................................. 20
SECTION 3.9 Intellectual Property.................................. 21
SECTION 3.10 Compliance with Laws................................... 23
SECTION 3.11 Litigation............................................. 24
SECTION 3.12 Employee Benefit Plans................................. 24
SECTION 3.13 Certain Agreements..................................... 27
SECTION 3.14 Brokers' and Finders' Fees............................. 28
SECTION 3.15 Insurance.............................................. 28
SECTION 3.16 Disclosure............................................. 28
SECTION 3.17 Fairness Opinion....................................... 29
SECTION 3.18 Related Party Transactions............................. 29
SECTION 3.19 Joint Ventures; Partnerships and Similar Arrangements.. 29
SECTION 3.20 Clinical Trials........................................ 29
ARTICLE IV Representations and Warranties of Parent and Merger Sub 29
SECTION 4.1 Organization, Standing and Power....................... 29
SECTION 4.2 Parent Capitalization.................................. 30
SECTION 4.3 Obligations With Respect to Capital Stock.............. 30
SECTION 4.4 Authority; Non-Contravention........................... 30
SECTION 4.5 SEC Filings............................................ 31
SECTION 4.6 Absence of Certain Changes or Events................... 32
SECTION 4.7 Compliance with Laws................................... 32
A-2
Page
----
SECTION 4.8 Litigation..................................................................... 33
SECTION 4.9 Disclosure..................................................................... 33
SECTION 4.10 Board Recommendation........................................................... 33
SECTION 4.11 Brokers' and Finders' Fees..................................................... 33
ARTICLE V Conduct Prior to the Effective Time............................................ 34
SECTION 5.1 Conduct of Business by the Company............................................. 34
ARTICLE VI Additional Agreements.......................................................... 36
SECTION 6.1 Preparation of Registration Statement and Proxy Statement; Company Stockholders
Meeting; Merger without a Company Stockholders Meeting......................... 36
SECTION 6.2 Antitrust Filings; Other Filings............................................... 38
SECTION 6.3 No Solicitation................................................................ 39
SECTION 6.4 Obligations of Merger Sub...................................................... 40
SECTION 6.5 Voting of Shares............................................................... 40
SECTION 6.6 Confidentiality; Access to Information......................................... 40
SECTION 6.7 Public Disclosure.............................................................. 41
SECTION 6.8 Reasonable Efforts; Notification............................................... 41
SECTION 6.9 Indemnification................................................................ 42
SECTION 6.10 Nasdaq Listing................................................................. 42
SECTION 6.11 Letters of Accountants......................................................... 42
SECTION 6.12 Takeover Statutes; Rights Plan................................................. 43
SECTION 6.13 Certain Employee Benefits...................................................... 43
SECTION 6.14 Employment, Consulting, Noncompetition, and Other Agreements................... 44
SECTION 6.15 Tax Matters.................................................................... 44
SECTION 6.16 Change of Control.............................................................. 44
SECTION 6.17 Limitation of the Company's Investment Banking Fees............................ 44
SECTION 6.18 Registration Statement......................................................... 45
SECTION 6.19 Matters........................................................................ 45
ARTICLE VII Conditions to the Merger....................................................... 45
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger................... 46
ARTICLE VIII Termination, Amendment and Waiver.............................................. 46
SECTION 8.1 Termination.................................................................... 46
SECTION 8.2 Notice of Termination; Effect of Termination................................... 47
SECTION 8.3 Fees and Expenses.............................................................. 48
SECTION 8.4 Amendment...................................................................... 49
ARTICLE IX General Provisions............................................................. 49
SECTION 9.1 Non-Survival of Representations and Warranties................................. 49
SECTION 9.2 Notices........................................................................ 49
SECTION 9.3 Interpretation; Certain Defined Terms.......................................... 50
SECTION 9.4 Counterparts................................................................... 50
SECTION 9.5 Entire Agreement; Third Party Beneficiaries.................................... 50
SECTION 9.6 Severability................................................................... 51
SECTION 9.7 Other Remedies; Specific Performance........................................... 51
SECTION 9.8 Governing Law.................................................................. 51
SECTION 9.9 Rules of Construction.......................................................... 51
SECTION 9.10 Assignment..................................................................... 51
SECTION 9.11 Waiver of Jury Trial........................................................... 51
Annex A
Exhibit A Stockholders' Agreement
Exhibit B Transaction Option Agreement
Disclosure Schedules (Intentionally Omitted)
A-3
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of February 19, 2002, among Cytyc Corporation, a Delaware corporation
("Parent"), Cruiser, Inc., a Delaware corporation and a wholly owned subsidiary
of Parent ("Merger Sub"), and Digene Corporation, a Delaware corporation
("Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have unanimously approved the acquisition of the Company by Parent, by
means of the merger of Merger Sub with and into the Company, upon the terms and
subject to the conditions set forth in the Agreement;
WHEREAS, to effectuate the acquisition, Parent and the Company each desire
that Merger Sub commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), within ten (10) days of
execution of this Agreement, a cash and stock tender offer (the "Offer") to
acquire all of the issued and outstanding shares of common stock, par value
$0.01 per share of the Company (the "Shares" or "Company Common Stock") at a
price per Share (such price being referred to herein as the "Offer Price") of
(i) $4.00 in cash (the "Cash Portion of the Offer Price"), and (ii) 1.1969
shares of common stock, par value $0.01 per share, of Parent ("Parent Common
Stock") (the "Stock Portion of the Offer Price"), upon the terms and subject to
the conditions set forth in this Agreement and the Offer Documents (as defined
in Section 1.2), and the Board of Directors of the Company has unanimously
approved such Offer and agreed to recommend to its stockholders that they
accept the Offer and tender their Shares pursuant thereto;
WHEREAS, for federal income tax purposes, it is intended that (a) the
exchange of Shares for cash and Parent Common Stock pursuant to the Offer and
the Merger shall be treated as an integrated transaction and such transactions
together shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and the
rules and regulations promulgated thereunder, (b) this Agreement constitutes a
plan of reorganization, and (c) Parent, Merger Sub and the Company will each be
a party to such reorganization within the meaning of Section 368(b) of the Code;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition of and inducement to Parent and Merger Sub entering into this
Agreement (i) certain beneficial and record holders of the Company Common Stock
are entering into an agreement, dated as of the date hereof, in the form of
Exhibit A hereto (the "Stockholders' Agreement") providing for the tender of
the Shares held by such stockholders pursuant to the Offer (as defined in
Section 1.1) and certain other matters with respect to their Shares and (ii)
the Company has approved the execution and delivery of the Stockholders'
Agreement by the parties thereto;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a further condition of and inducement to Parent and Merger Sub entering into
this Agreement (i) Parent and the Company are entering into an agreement, dated
as of the date hereof, in the form of Exhibit B hereto (the "Transaction Option
Agreement"), pursuant to which the Company is granting Parent an option to
purchase shares of Company Common Stock, solely to the extent and for the
purposes set forth in the Transaction Option Agreement and (ii) the Company has
approved the execution and delivery of the Transaction Option Agreement by the
parties thereto; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger (as defined in Section 2.1) and also to prescribe various
conditions to consummation thereof.
A-4
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in this Agreement, the
Stockholders' Agreement and the Transaction Option Agreement, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer.
(a) Provided that (i) this Agreement shall not have been terminated in
accordance with Section 8.1 and the other terms of this Agreement and (ii)
none of the events set forth in Annex A attached hereto shall have occurred
and are continuing, unless otherwise agreed by Parent and the Company,
within ten (10) days after the date hereof, Parent shall cause Merger Sub to
commence the Offer. Each Share accepted by Merger Sub pursuant to the Offer
shall be exchanged for the right to receive from Merger Sub the Merger
Consideration (defined in Section 2.6(a) below). The initial expiration date
of the Offer shall be the twentieth business day following commencement of
the Offer. The Offer shall be subject to the condition that there shall be
validly tendered in accordance with the terms of the Offer prior to the
expiration date of the Offer and not withdrawn at least a number of shares
of Company Common Stock that represents a majority of the shares of Company
Common Stock outstanding on a Fully Diluted Basis (the "Minimum Condition"),
and to the other conditions set forth in Annex A hereto. As used herein,
"Fully Diluted Basis" shall mean after taking into account all currently
outstanding shares of Company Common Stock and assuming the exercise or
conversion of all options, warrants, convertible securities and similar
rights and the issuance of all shares of Company Common Stock that the
Company is obligated to issue thereunder other than pursuant to the
Transaction Option Agreement.
(b) Parent and Merger Sub expressly reserve the right to waive any of
the conditions to the Offer and to amend or modify the terms of the Offer,
except that, without the prior written consent of the Company, Merger Sub
shall not (and Parent shall not cause Merger Sub to) (i) decrease the number
of Shares sought in the Offer, (ii) change the form of consideration to be
paid, (iii) waive or increase the Minimum Condition or impose material
conditions to the Offer in addition to those set forth in Annex A, (iv)
extend the Offer (except as set forth herein or in the Offer), or (v) make
any other change to any of the terms and conditions to the Offer which is
materially adverse to the holders of Shares. Subject only to the terms of
the Offer and this Agreement and the satisfaction (or waiver to the extent
permitted by this Agreement) of the conditions to the Offer, Merger Sub
shall accept for payment and pay for all Shares validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the applicable
expiration date of the Offer and shall pay for all such Shares promptly
after acceptance; provided that, unless this Agreement is terminated
pursuant to Article VIII, (x) Merger Sub may in its sole discretion, without
the consent of the Company and shall, at the request of the Company, extend
the Offer for successive extension periods not in excess of 10 business days
each if, at the scheduled expiration date of the Offer or any extension
thereof, any of the conditions to the Offer shall not have been satisfied or
waived, until such times as such conditions are satisfied or waived, and (y)
Merger Sub may extend the Offer for any period if and to the extent required
by the applicable rules and regulations of the United States Securities and
Exchange Commission ("SEC"). In addition, Merger Sub may extend the Offer
after the acceptance of Shares thereunder for a further period of time
beyond the latest expiration date that would otherwise be permitted under
this Section by means of a subsequent offering period under Rule 14d-11
promulgated under the Exchange Act, of not more than 20 business days to
meet the objective (which is not a condition to the Offer) that there be
validly tendered, in accordance with the terms of the Offer, prior to the
expiration date of the Offer (as so extended) and not withdrawn a number of
Shares, which together with Shares then owned by Parent and Merger Sub,
represents at least 90% of the Shares outstanding on a Fully Diluted Basis.
A-5
SECTION 1.2 Offer Documents. As soon as practicable on the date of
commencement of the Offer, Parent shall prepare and file with the SEC a
registration statement on Form S-4 to register the offer and sale of Parent
Common Stock pursuant to the Offer (the "Registration Statement"). The
Registration Statement will include a preliminary prospectus containing the
information required under Rule 14d-4(b) promulgated under the Exchange Act
(the "Preliminary Prospectus"). As soon as practicable on the date of
commencement of the Offer, Parent and Merger Sub shall (i) file or cause to be
filed with the SEC a Tender Offer Statement on Schedule TO promulgated under
Section 14(d)(1) of the Exchange Act (the "Schedule TO") with respect to the
Offer which shall contain the offer to purchase and related letter of
transmittal and other ancillary Offer documents and instruments pursuant to
which the Offer will be made (collectively with any supplements or amendments
thereto, the "Offer Documents"), which Offer Documents shall contain (or shall
be amended in a timely manner to contain) all information which is required to
be included therein in accordance with the Exchange Act and the rules and
regulations thereunder and any other applicable law, and shall conform in all
material respects with the requirements of the Exchange Act and any other
applicable law, including that the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading; provided,
however, that no agreement or representation hereby is made or shall be made by
Parent or Merger Sub with respect to information supplied by the Company
expressly for inclusion in, or with respect to Company information derived from
the Company's public filings with the SEC that is included or incorporated by
reference in, the Offer Documents, (ii) deliver a copy of the Schedule TO to
the Company at its principal executive office, (iii) give telephonic notice and
mail to the National Association of Securities Dealers, Inc. (the "NASD") a
copy of the Schedule TO in accordance with Rule 14d-3 promulgated under the
Exchange Act, and (iv) mail or otherwise cause the Offer Documents to be
disseminated to the holders of Company Common Stock. The Company shall provide
Parent and Merger Sub all information reasonably requested by Parent or Merger
Sub for inclusion in the Offer Documents. Parent, Merger Sub and the Company
each agree promptly to correct any information provided by them for use in the
Offer Documents if and to the extent that it shall have become false or
misleading in any material respect and Merger Sub further agrees to take all
lawful action necessary to cause the Offer Documents as so corrected to be
filed promptly with the SEC and to be disseminated to holders of Company Common
Stock, in each case as and to the extent required by applicable law. In
conducting the Offer, Parent, Merger Sub and the Company shall comply in all
material respects with the provisions of the Exchange Act and any other
applicable law. The Company and its counsel shall be given the opportunity to
review and comment on the Offer Documents and any amendments thereto prior to
the filing thereof with the SEC. Parent and Merger Sub agree to provide the
Company and its counsel any comments Parent, Merger Sub or their counsel may
receive from the SEC with respect to the Offer Documents promptly after the
receipt of such comments.
SECTION 1.3 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that (1) its Board of Directors (at a meeting duly called and
held) unanimously (i) determined that each of this Agreement, the
Transaction Option Agreement, the Stockholders' Agreement, and the
transactions contemplated hereby and thereby, including the Offer and the
Merger, are advisable and are fair to and in the best interests of the
stockholders of the Company, (ii) approved the execution, delivery and
performance of this Agreement, the Transaction Option Agreement, and the
Stockholders' Agreement and the consummation of the transactions
contemplated hereby and thereby, including the Offer and the Merger and the
acquisition of Shares pursuant thereto, and such approval constitutes
approval of the foregoing for purposes of Section 203 of the Delaware
General Corporation Law (as amended, the "DGCL") such that the Offer, the
Merger, this Agreement, the Transaction Option Agreement and the
Stockholders' Agreement are not and shall not be subject to any restriction
pursuant to Section 203 of the DGCL, and (iii) resolved to recommend
acceptance of the Offer and approval and adoption of this Agreement and the
Merger by the holders of Company Common Stock (the recommendations referred
to in this clause (iii) are collectively referred to in this Agreement as
the "Recommendations"), and (2) Goldman Sachs & Co. has delivered to the
Board of Directors of the Company its written opinion that, as of the date
hereof, the consideration to be received by the holders of
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Company Common Stock in the Offer pursuant to this Agreement is fair, from a
financial point of view, to such holders. The Company hereby consents to the
inclusion in the Offer Documents of the Recommendations, subject to the
withdrawal or modification thereof as provided in Section 6.3(b). The
Company has been advised that all of its directors and executive officers
presently intend to tender their Shares pursuant to the Offer.
(b) The Company hereby agrees to file with the SEC simultaneously with
the filing by Parent and Merger Sub of the Schedule TO, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing such
Recommendations of the Board of Directors of the Company in favor of the
Offer and the Merger and otherwise complying with Rule 14d-9 under the
Exchange Act. The Schedule 14D-9 shall comply in all material respects with
the Exchange Act and any other applicable law and shall contain (or shall be
amended in a timely manner to contain) all information which is required to
be included therein in accordance with the Exchange Act and the rules and
regulations thereunder and any other applicable law and shall be
disseminated to the stockholders of the Company and shall not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading. The Company, Parent and Merger Sub each agree promptly to
correct any information provided by them for use in the Schedule 14D-9 if
and to the extent that it shall have become false or misleading in any
material respect and the Company further agrees to take all lawful action
necessary to cause the Schedule 14D-9 as so corrected to be filed promptly
with the SEC and disseminated to the holders of Company Common Stock, in
each case as and to the extent required by applicable law. Parent, Merger
Sub and their counsel shall be given an opportunity to review and comment on
the Schedule 14D-9 and any amendments thereto prior to the filing thereof
with the SEC. Company agrees to provide Parent and Merger Sub and their
respective counsel any comments the Company or its counsel may receive from
the SEC with respect to the 14D-9 promptly after the receipt of such
comments.
(c) In connection with the Offer, the Company shall promptly furnish, or
cause its transfer agent to furnish, Parent with mailing labels, security
position listings and all available listings or computer files containing
the names and addresses of the record holders of the Company Common Stock as
of the latest practicable date and shall furnish, or cause its transfer
agent to furnish, Parent with such information and assistance (including
updated lists of stockholders, mailing labels and lists of security
positions) as Parent or its agents may reasonably request in communicating
the Offer to the record and beneficial holders of Company Common Stock.
Subject to the requirements of applicable law, and except for such actions
as are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Offer and the Merger, Parent and Merger Sub and
each of their affiliates, associates, partners, employees, agents and
advisors shall hold in confidence the information contained in such labels
and lists, shall use such information only in connection with the Offer and
the Merger, and, if this Agreement is terminated, in accordance with its
terms, shall deliver promptly to the Company all copies of such information
then in their possession or under their control.
SECTION 1.4 Directors.
(a) Promptly following the acceptance for payment by Merger Sub pursuant
to the Offer of such number of shares of Company Common Stock which
represents at least a majority of the outstanding shares of Company Common
Stock (on a Fully Diluted Basis), and from time to time thereafter (the
"Appointment Time"), Parent shall be entitled to designate such number of
directors, rounded up to the next whole number as will give Parent, subject
to compliance with Section 14(f) of the Exchange Act, representation on the
Board of Directors of the Company equal to the product of (x) the number of
directors on the Board of Directors of the Company (giving effect to any
increase in the number of directors pursuant to this Section 1.4) and (y)
the percentage that such number of Shares so purchased bears to the
aggregate number of Shares then outstanding (such number being, the "Board
Percentage"), and the Company shall promptly satisfy the Board Percentage by
(i) increasing the size of the Board of Directors of the Company or (ii)
using its best efforts to secure the resignations of such number of
directors as is necessary to enable Parent's
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designees to be elected to the Board of Directors of the Company and shall
cause Parent's designees promptly to be so elected. At the request of
Parent, the Company shall take, at the Company's expense, all lawful action
necessary to effect any such election, including, without limitation,
mailing to its stockholders the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, unless such information
has previously been provided to the Company's stockholders in the Schedule
14D-9. Parent will supply the Company and be solely responsible for any
information with respect to Parent, its designees and its nominees,
officers, directors and affiliates required by such Section 14A and Rule
14-f-1
(b) Following the election or appointment of Parent's designees pursuant
to this Section 1.4 and prior to the Effective Time (as defined in Section
2.2) of the Merger, any (i) amendment or termination of this Agreement, (ii)
extension for the performance or waiver of the obligations or other acts of
Parent or Merger Sub, or (iii) waiver of the Company's rights hereunder
shall require the concurrence of a majority of directors of the Company then
in office who are "Continuing Directors". The term "Continuing Director"
shall mean (i) each member of the Board of Directors of the Company on the
date hereof and (ii) any successor to any Continuing Director that was
recommended to succeed such Continuing Director by a majority of the
Continuing Directors then on the Board of Directors.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions of
this Agreement and the applicable provisions of the DGCL, at the Effective
Time, Merger Sub shall be merged (the "Merger") with and into the Company, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation of the Merger (Merger Sub and the Company
are sometimes hereinafter referred to as "Constituent Corporations" and, as the
context requires, the Company is sometimes hereinafter referred to as the
"Surviving Corporation"). Following the Merger, Parent intends to cause the
Surviving Corporation to be merged with and into Parent, the separate corporate
existence of the Surviving Corporation shall cease, and Parent shall continue
as the surviving entity.
SECTION 2.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the Company and Merger Sub will file a certificate of merger, in
such appropriate form as determined by the parties and in accordance with the
requirements of the DGCL, with the Secretary of State of the State of Delaware
in accordance with the relevant provisions of the DGCL (the "Certificate of
Merger") (the date and time of such filing (or such later time as may be agreed
in writing by Company and Parent and specified in the Certificate of Merger)
being the "Effective Time") as soon as practicable on or after the Closing
Date. The closing of the Merger (the "Closing") shall take place at the offices
of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts, at
a time and date to be specified by the parties, which shall be as soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article VII (other than these that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of these conditions, or at
such other time, date and location as the parties hereto agree in writing (the
"Closing Date").
SECTION 2.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the DGCL. Without limiting the generality of the foregoing, at the Effective
Time, the Surviving Corporation shall possess all the property, rights,
privileges, powers and franchises of Company and Merger Sub, and shall be
subject to all debts, liabilities and duties of Company and Merger Sub.
SECTION 2.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided therein or by applicable law; provided, however, that at
the Effective Time Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read: "The name of the
corporation is 'Digene Corporation'".
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(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided therein or by
applicable law.
SECTION 2.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until the earlier of their resignation or removal or until
their respective successors are duly elected or appointed and qualified. The
initial officers of the Surviving Corporation shall be the officers of the
Company immediately prior to the Effective Time, until the earlier of their
resignation or removal or until their respective successors are duly appointed.
SECTION 2.6 Effect on Capital Stock. Subject to the terms and conditions
of this Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of Merger Sub, the Company or the holders of any of the
following securities:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time, other
than any shares of Company Common Stock to be canceled pursuant to Section
2.6(b) and Dissenting Shares (as defined in Section 2.10), will be canceled
and extinguished and automatically converted (subject to Section 2.6(e))
into the right to receive an amount in cash and whole shares of Parent
Common Stock equal to the Offer Price (together with the amount of cash in
lieu of fractional shares payable pursuant to Section 2.7(e)), without any
interest thereon, upon surrender of the certificate representing such share
of Company Common Stock in the manner provided in Section 2.7 (the "Merger
Consideration"). All such shares of Company Common Stock, when so converted,
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 shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon
the surrender of such certificate in accordance with Section 2.7 hereof,
without interest.
(b) Cancellation of Company-Owned and Parent-Owned Stock. Each share of
Company Common Stock held by Company or owned by Parent or Merger Sub
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Options; Roche Conversion. At the Effective Time, all options to
purchase Company Common Stock then outstanding (each a "Company Option"),
whether (i) under the Company's Amended and Restated 1999 Incentive Plan,
Digene Omnibus Plan, 1997 Stock Option Plan, Directors' Stock Option Plan
(the "Company Stock Option Plans") or option agreements, or (ii) otherwise,
shall be treated in accordance with Section 2.9 of this Agreement. The
Company has no outstanding warrants. At the Effective Time, the conversion
of the Roche Diagnostic up front payment in the amount of $5,000,000 (the
"Roche Conversion") shall be treated in accordance with Section 2.10 of this
Agreement.
(d) Capital Stock of Merger Sub. Each share of common stock, par value
$0.01 per share, of Merger Sub (the "Merger Sub Common Stock"), issued and
outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of common stock,
$0.01 par value per share, of the Surviving Corporation. Following the
Effective Time, each certificate evidencing ownership of shares of Merger
Sub common stock shall evidence ownership of such shares of capital stock of
the Surviving Corporation.
(e) Adjustments to Number of Shares of Parent Common Stock. If, during
the period between the date of this Agreement and the Effective Time, any
change in the outstanding shares of capital stock of the Company or Parent
shall occur, including, without limitation, by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date
during such period, the number of shares of Parent Common Stock paid in the
Offer and the Merger and other items dependent thereon shall be
appropriately adjusted.
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SECTION 2.7 Exchange of Certificates.
(a) Exchange Agent. On or prior to the Closing Date, Parent shall
select an institution reasonably acceptable to the Company to act as
exchange agent make the payments of the cash and shares of Parent Common
Stock to which holders of shares of Company Common Stock shall become
entitled pursuant to Section 2.6(a) hereof in the Merger (the "Exchange
Agent").
(b) Exchange Fund. As of the Effective Time, Parent shall make
available to the Exchange Agent for payment in accordance with this Article
the cash and shares of Parent Common Stock (such cash and shares of Parent
Common Stock are hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.6 in exchange for outstanding shares of Company Common
Stock. All cash deposited with the Exchange Agent shall be invested by the
Exchange Agent, as Parent directs, in (i) direct obligations of the United
States of America, (ii) obligations for which the full faith and credit of
the United States of America is pledged to provide for the payment of
principal and interest, (iii) commercial paper rated the highest quality by
either Moody's Investors Service, Inc., or Standard and Poor's Ratings
Services, or (iv) money market funds investing solely in a combination of
the foregoing. Any net profit resulting from, or interest or income produced
by, such investments will be payable to Merger Sub or Parent, as Parent
directs.
(c) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates ("Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
the Merger Consideration pursuant to Section 2.6, (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of such Certificates to the
Exchange Agent and shall contain such other provisions as Parent may
reasonably specify), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of Certificates for cancellation to the
Exchange Agent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent or Parent, the holder of such Certificates shall be entitled
to receive in exchange therefor the Merger Consideration and any dividends
or distributions payable pursuant to Section 2.7(d), and the Certificates so
surrendered shall be canceled. Until so surrendered, outstanding
Certificates shall be deemed, from and after the Effective Time, for all
corporate purposes, to evidence only the right to receive in exchange
therefor the Merger Consideration and any dividends or distributions payable
pursuant to Section 2.7(d). No interest will be paid or accrued on any cash
in lieu of fractional shares of Parent Common Stock included in the Merger
Consideration or on any unpaid dividends or distributions payable to holders
of Certificates. If payment is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall be promptly
endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
surrendered Certificate or established to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made with respect to Parent Common Stock
with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the Merger Consideration that
such holder has the right to receive in the Merger until such holder
surrenders such Certificate in accordance with this Section 2.7 (at which
time such holder shall be entitled, subject to the effect of applicable
escheat or similar laws, to receive all such dividends and distributions,
without interest). Subject to applicable law, following surrender of any
such Certificates, the Exchange Agent shall deliver to the holders of
certificates representing whole shares of Parent Common Stock included in
the Merger Consideration, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Parent Common Stock to
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which such holder is entitled pursuant to Section 2.7(e) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect
to such whole shares of Parent Common Stock.
(e) Fractional Shares. No certificate or scrip representing fractional
Parent Common Stock will be issued in the Merger upon the surrender for
exchange of Certificates, and such fractional Parent Common Stock will not
entitle the owner thereof to vote or to any rights of a holder of Parent
Common Stock. In lieu of any such fractional share of Parent Common Stock,
each holder of Certificates who would otherwise have been entitled to a
fraction of a share of Parent Common Stock in exchange for such Certificate
(after taking into account all Certificates delivered by such holder)
pursuant to this Section 2.7(e) shall receive from the Exchange Agent, as
applicable, a cash payment rounded up to the nearest whole cent, determined
by multiplying (A) the fractional share interest to which such holder would
otherwise be entitled by (B) the average of the last sales prices of one
share of Parent Common Stock as reported on the Nasdaq National Market
during the ten consecutive trading days ending on (and including) the third
trading day immediately preceding the date of the Effective Time.
(f) Withholding Rights. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from the
consideration otherwise payable or deliverable pursuant to this Agreement to
any holder or former holder of shares of Company Common Stock such amounts
as it is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving Corporation or
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent.
(g) Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall pay in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, the Merger
Consideration into which the shares of Company Common Stock represented by
such Certificates were converted and any dividends or distributions payable
pursuant to Section 2.7(d); provided, however, that Parent may, in its
discretion and as a condition precedent to the payment of such Merger
Consideration and other dividends or distributions, require the owner of
such lost, stolen or destroyed Certificates to deliver a bond in such sum as
it may reasonably direct as indemnity against any claim that may be made
against Parent, the Surviving Corporation or the Exchange Agent with respect
to the Certificates alleged to have been lost, stolen or destroyed.
(h) No Liability. Neither the Parent nor the Surviving Corporation
shall be liable to any holder of shares of Parent Common Stock or Company
Common Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(i) Termination of Exchange Fund; Interest. Any portion of the
ExchangeFund (including any interest received with respect thereto) which
remains undistributed to the holders of Company Common Stock for 180 days
after the Effective Time shall be delivered to the Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with
this Article II and the instructions set forth in the letter of transmittal
mailed to such holder after the Effective Time shall thereafter look only to
the Parent for Merger Consideration and any dividends or other distributions
with respect to Parent Common Stock to which they are entitled pursuant to
Section 2.7(d). Any portion of the Exchange Fund remaining unclaimed by
holders of Company Common Stock five (5) years after the Effective Time (or
such earlier date which is immediately prior to such time as such amounts
would otherwise escheat to or become property of any government entity)
shall, to the extent permitted by applicable law, become the property of
Parent free and clear of any claims or interest of any person previously
entitled thereto.
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SECTION 2.8 Stock Transfer Books. Subject to Section 2.9, at the Effective
Time, the stock transfer books of the Company shall be closed and there shall
be no further registration of transfers of shares of Company Common Stock
thereafter on the records of the Company. On or after the Effective Time, any
certificates presented to the Exchange Agent or Parent for any reason shall be
converted into the Merger Consideration.
SECTION 2.9 Stock Options.
(a) At the Effective Time, each outstanding Company Option will be
assumed by Parent, and shall be exercisable in accordance with the terms of
such Company Option for (i) a number of whole shares of Parent Common Stock
(rounded down to the nearest whole number) equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by a
number equal to the Stock Portion of the Offer Price and (together with the
number of shares determined in accordance with clause (i)) (ii) an amount of
cash (rounded down to the nearest cent) equal to the product of the number
of shares of Company Common Stock that were issuable upon exercise of such
Company Option immediately prior to the Effective Time multiplied by a
number equal to the Cash Portion of the Offer Price. The exercise price per
share applicable to each Company Option and immediately after the Effective
Time will be equal to a number (rounded up to the nearest cent) equal to the
quotient of the exercise price per share of such Company Option immediately
prior to the Effective Time divided by a number equal to the Stock Portion
of the Purchase Price.
(b) As soon as reasonably practicable after the Effective Time, Parent
shall deliver to the participants in the Company Stock Option Plans
appropriate notice setting forth such participants' rights pursuant thereto
and the outstanding Company Options shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section
2.9 and required by the Company Stock Option Plans after giving effect to
the Merger). Consistent with the terms of the Company Stock Option Plans and
the documents governing the outstanding options under those plans, the
Merger shall not result in the termination of any outstanding Company
Options under the Company Stock Option Plans that are so assumed by Parent
or the shares of Parent Common Stock that will be subject to those options
upon Parent's assumption of the Company Options in the Merger. All holders
of Company Options shall have the right to exercise such options following
the Effective Time, with full credit given to all of the provisions of the
existing stock option agreements and the Company Stock Option Plans,
including provisions regarding vesting and service relating to any
predecessor corporation acquired by the Company. It is the intention of the
parties that the options so assumed by Parent qualify following the
Effective Time as incentive stock options as defined in Section 422 of the
Code to the extent such options qualified as incentive stock options prior
to the Effective Time. Within 15 business days after the Effective Time,
provided that the Parent has received within 10 business days after the
Effective Time all option documentation it requires relating to the
outstanding Company Options, Parent will issue to each person who,
immediately prior to the Effective Time, is a holder of an outstanding
Company Option under the Company Stock Option Plans that is to be assumed by
Parent hereunder, a document evidencing the foregoing assumption of such
option by Parent.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
under the Company Stock Option Plans assumed in accordance with this
Section. As soon as practicable and in no event more than fifteen (15)
business days after the Effective Time, provided that the Parent has
received within 10 business days after the Effective Time all option
documentation it requires relating to the outstanding Company Options,
Parent shall file a registration statement on Form S-8 (or any successor
forms), with respect to such options and shall use commercially reasonable
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 Company Options under
the Company Stock Option Plans remain outstanding. The Company shall
cooperate with and assist Parent in the preparation of such registration
statements.
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(d) The Board of Directors of the Company shall, prior to or as of the
Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of the Company Stock Option Plans and the instruments
evidencing the Company Options, to provide for the conversion of the Company
Options into options to acquire Parent Common Stock in accordance with this
Section, and that no consent of the holders of the Company Options is
required in connection with such conversion.
(e) The Board of Directors of the Company shall, prior to or as of the
Effective Time, take appropriate action to approve the deemed cancellation
of the Company Options for purposes of Section 16(b) of the Exchange Act.
The Board of Directors of Parent shall, prior to or as of the Effective
Time, take appropriate action to approve the deemed grant of options to
purchase Parent Common Stock under the Company Options (as converted
pursuant to this Section) for purposes of Section 16(b) of the Exchange Act.
SECTION 2.10 Roche Conversion. At the Effective Time, the obligation of
the Company under its letter agreement dated April 29, 2001, as amended to
date, with Roche Molecular Systems, Inc. to convert the $5,000,000 up front
payment by Roche Diagnostics into Company Common Stock (if not previously
converted) will be assumed by Parent and such payment, when converted, shall be
converted into (a) the number of whole shares of Parent Common Stock (rounded
down to the nearest whole number) equal to the product of the number of shares
of Company Common Stock that were issuable upon such conversion immediately
prior to the Effective Time multiplied by a number equal to the Stock Portion
of the Offer Price and (together with the number of shares determined in
accordance with clause (a)), and (b) an amount of cash (rounded down to the
nearest cent) equal to the product of the number of shares of Company Common
Stock that were issuable upon such conversion immediately prior to the
Effective Time multiplied by a number equal to the Cash Portion of the Offer
Price. The conversion price per share immediately after the Effective Time will
be equal to a number (rounded up to the nearest cent) equal to the quotient of
the conversion price per share immediately prior to the Effective Time divided
by a number equal to the Stock Portion of the Purchase Price.
SECTION 2.11 Dissenting Shares. Shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal
for such shares in accordance with the DGCL (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such stockholders instead shall be entitled to receive
payment of the appraised value of such shares of Company Common Stock held by
them in accordance with the provisions of the DGCL, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such shares of
Company Common Stock under the DGCL shall thereupon be deemed to have been
converted into and to have become exchangeable, as of the Effective Time, for
the right to receive, without any interest thereon, the Merger Consideration
upon surrender in the manner provided in Section 2.7, of the Certificate or
Certificates that, immediately prior to the Effective Time, evidenced such
shares of Company Common Stock. Company shall give Parent prompt notice of any
demands received by Company for appraisal of Shares, and Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demands. Company shall not, except with the prior written consent of Parent,
make any payment with respect to, or settle or offer to settle, any such
demands. Any amounts paid to a holder pursuant to a right of appraisal will be
paid by Company. The existence of Dissenting Shares, so long as the conditions
in Annex A are met (and the Agreement is not otherwise terminated), shall have
no effect on the obligations of Parent and Merger Sub under the Offer and the
Merger.
SECTION 2.12 No Further Ownership Rights in Company Common Stock. All
Merger Consideration paid in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 2.7(d) and (e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to the
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
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SECTION 2.13 Taking All Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Company and Merger Sub, the officers and directors of
Company, Merger Sub and the Surviving Corporation will take all such lawful and
necessary action in the name of the Surviving Corporation, Company or Merger
Sub, as appropriate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date of this Agreement and as of the Closing Date, except as
disclosed in the disclosure schedule delivered by the Company to Parent dated
as of the date hereof and certified by a duly authorized officer of the Company
(the "Company Disclosure Schedule"), the Company represents and warrants to
Parent and Merger Sub as follows:
SECTION 3.1 Organization; Subsidiaries.
(a) The Company and each of its subsidiaries identified in Section 3.1(a)
of the Company Disclosure Schedule is duly organized, validly existing and
in good standing (or other applicable concept of maintenance of corporate
existence, if any) 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. The Company and each of its
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 would not reasonably be expected
to have a Material Adverse Effect (as defined in Section 9.3) on the
Company. Section 3.1(a) of the Company Disclosure Schedule indicates the
jurisdiction of organization of each U.S. subsidiary of the Company and the
Company's direct or indirect equity interest therein. Complete and correct
copies of the Certificate of Incorporation and By-laws of the Company and
copies of similar governing instruments of each of its subsidiaries
(collectively, the "Company Charter Documents") have been delivered to
Parent, and each such instrument is in full force and effect.
(b) Neither Company nor any of its subsidiaries identified in Section
3.1(a) of the Company Disclosure Schedule owns any capital stock of, or any
equity interest of any nature in, any corporation, partnership, joint
venture arrangement or other business entity, except for passive investments
in equity interests of public companies as part of the cash management
program of the Company or as disclosed in the Company's SEC Reports. Neither
the Company nor any of its subsidiaries has agreed or is obligated to make,
or is bound by any material written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit
plan or legally binding commitment or undertaking of any nature, as in
effect as of the date hereof or as may hereinafter be in effect under which
it may become obligated to make any future material investment in or
material capital contribution to any other entity. Neither the Company, nor
any of its subsidiaries, is a general partner of any general partnership,
limited partnership or other similar entity.
SECTION 3.2 Company Capitalization.
(a) The authorized capital stock of the Company consists solely of
50,000,000 shares of Company Common Stock, of which there were 17,881,594
shares issued and outstanding as of February 18, 2002, and 1,000,000 shares
of preferred stock, $0.10 per share (the "Company Preferred Stock"), of
which there are no shares issued and outstanding. As of the date of this
Agreement, there are no shares of Company Common Stock and no shares of
Company Preferred Stock held in treasury by the Company.
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(b) As of the close of business on February 15, 2002, 3,398,162 shares
of Company Common Stock and no shares of Company Preferred Stock are subject
to issuance pursuant to outstanding options to purchase Company Common Stock
under the Company Stock Option Plans, option agreements, or otherwise
(collectively, the "Company Options") and upon the Roche Conversion. Section
3.2(b) of the Company Disclosure Schedule sets forth the following
information with respect to each Company Option outstanding as of the date
of this Agreement: (i) the name of the optionee; (ii) the number of shares
of Company Common Stock subject to such Company Option; (iii) the exercise
price of such Company Option; (iv) the date on which such Company Option was
granted or assumed; and (v) the date on which such Company Option expires.
The Company has made available to Parent an accurate and complete copy of
the Company Stock Option Plans and the standard forms of stock option
agreements evidencing Company Options. There are no options or warrants
outstanding to purchase shares of Company Common Stock or shares of Company
Preferred Stock other than pursuant to the Transaction Option Agreement and
the Company Stock Option Plans.
(c) All outstanding shares of Company Common Stock and Company
Preferred Stock, all shares of Company Common Stock which may be issued
pursuant to the exercise of the Company Options and upon the Roche
Conversion will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement or document to which the Company is a party or by which it is
bound. All outstanding shares of Company Common Stock and Company Preferred
Stock, and all outstanding shares of capital stock of each U.S. subsidiary
of the Company have been issued and granted in compliance in all material
respects with (i) all applicable securities laws and other applicable Legal
Requirements and (ii) all requirements set forth in applicable agreements or
instruments. For the purposes of this Agreement, "Legal Requirements" means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the
authority of any Governmental Entity (as defined in Section 3.4). There are
no outstanding bonds, debentures, notes or other indebtedness or debt
securities of the Company which require consent for any actions contemplated
by this Agreement, the Transaction Option Agreement or the Stockholders'
Agreement or which have the right to vote (or are convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote.
SECTION 3.3 Obligations With Respect to Capital Stock. Except as set
forth in Section 3.2 hereof, there are no equity securities, partnership
interests or similar ownership interests of any class of Company equity
security, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth on Section
3.3 of the Company Disclosure Schedule, the Company owns all of the securities
of its subsidiaries identified in Section 3.1 of the Company Disclosure
Schedule, free and clear of all claims and Encumbrances (as defined below), and
there are no other equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. For purposes of this Agreement,
"Encumbrances" means any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, infringement, interference, option,
right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset). Except
pursuant to the Transaction Option Agreement, the Stockholders' Agreement,
Company Option Plans, Company Options and Roche Conversion, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of its
subsidiaries is a party or by which it is bound obligating the Company or any
of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, or repurchase,
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redeem or otherwise acquire, or cause the repurchase, redemption or acquisition
of, any shares of capital stock, partnership interests or similar ownership
interests of the Company or any of its subsidiaries or obligating the Company
or any of its subsidiaries to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. Except as set forth on Section 3.3 of the Company
Disclosure Schedule, there are no registration rights with respect to any
equity security of any class of the Company or with respect to any equity
security, partnership interest or similar ownership interest of any class of
any of its subsidiaries.
SECTION 3.4 Authority; Non-Contravention.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement, the Transaction Option Agreement and the
Stockholders' Agreement and, subject to the Company Stockholder Approvals
(as defined below), to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the Transaction
Option Agreement and the Stockholders' Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company, subject only to
the approval and adoption of this Agreement and the approval of the Merger
by Company's stockholders (the "Company Stockholder Approvals") pursuant to
the DGCL and the filing of the Certificate of Merger pursuant to the DGCL.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company Common Stock is sufficient for the Company's stockholders to
approve and adopt this Agreement and approve the Merger, and no other
approval of any holder of any securities of the Company is required in
connection with the consummation of the transactions contemplated hereby.
This Agreement and the Transaction Option Agreement have been duly executed
and delivered by the Company and, assuming the due execution and delivery by
Parent and Merger Sub, constitute the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.
There is no vote of the holders of any class or series of the Company's
securities necessary to approve the Transaction Option Agreement.
(b) The execution and delivery of this Agreement, the Transaction Option
Agreement and the Stockholders' Agreement by the Company do not, and the
performance of this Agreement, the Transaction Option Agreement and the
Stockholders' Agreement by the Company will not, (i) conflict with or
violate any Company Charter Documents, (ii) subject to obtaining the Company
Stockholder Approvals and compliance with the requirements set forth in
Section 3.4(c), conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or
by which the Company or any of its subsidiaries or any of their respective
properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of the Company
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
agreement, lease, license, permit, franchise, concession or other instrument
or obligation to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or its or any of their
respective assets are bound or affected, except, in the case of clauses (ii)
and (iii), for such conflicts, violations, breaches, defaults, impairments,
or rights which could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
(c) No action by or in respect of, or filing with any court,
administrative agency or commission or other governmental authority or
instrumentality, foreign, domestic or supranational ("Governmental Entity")
or other person, is required to be obtained or made by the Company in
connection with the execution and delivery by the Company of this Agreement,
the Transaction Option Agreement or the Stockholders' Agreement or the
consummation by the Company of the transactions contemplated hereby and
thereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which Company is
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qualified to do business, (ii) filing with the SEC of Schedule 14D-9 and, if
necessary, a Company Proxy Statement (as defined in Section 6.1), (iii)
further compliance with any applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act, and any other
applicable securities law, whether state or foreign, (iv) such filings as
may be required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and (v) such other consents,
authorizations, filings, approvals and registrations which if not obtained
or made could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or the Surviving
Corporation or have a Material Adverse Effect on the ability of the Company
to consummate the transactions contemplated by this Agreement and the
Transaction Option Agreement.
SECTION 3.5 SEC Filings; Company Financial Statements.
(a) The Company has filed all forms, reports and documents required to
be filed by Company with the SEC since June 30, 1999 and has made available
to Parent such forms, reports and documents in the form filed with the SEC.
All such required forms, reports and documents (including those that the
Company may file subsequent to the date hereof) are referred to herein as
the "Company SEC Reports." As of their respective dates, the Company SEC
Reports (i) were prepared in accordance with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Reports and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected prior to the date of
this Agreement by a subsequently filed Company SEC Report. None of the
Company's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements of the Company
(including, in each case, any related notes thereto) contained in the
Company SEC Reports (the "Company Financials"), including each Company SEC
Report filed after the date hereof until the Closing, (i) comply as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, (ii) are prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC under Form 10-Q, 8-K or any successor form under
the Exchange Act) and (iii) fairly present in all material respects the
consolidated financial position of Company and its subsidiaries as at the
respective dates thereof and the consolidated results of Company's
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or
are subject to normal and recurring year-end adjustments.
The balance sheet of the Company contained in the Company SEC Reports as of
December 31, 2001 is hereinafter referred to as the "Company Balance Sheet."
Except as disclosed in the Company Financials or in the Company SEC Documents
filed, in each case, prior to the date hereof, neither Company nor any of its
subsidiaries has any liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are, individually or in the aggregate,
material to the business, results of operation or financial condition of the
Company or its subsidiaries taken as a whole except (i) for liabilities
incurred since the date of the Company Balance Sheet in the ordinary course of
business consistent with past practice and (ii) liabilities incurred in
connection with this Agreement, the Transaction Option Agreement or the
Stockholders' Agreement.
(c) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by the
Company with the SEC pursuant to the Securities Act or the Exchange Act.
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SECTION 3.6 Absence of Certain Changes or Events.
(a) Since the date of the Company Balance Sheet, the business of the
Company and its subsidiaries has been conducted in the ordinary course
consistent with past practices (other than the transactions contemplated by
this Agreement and the Transaction Option Agreement) and there is not and
has not been (i) any event, occurrence, development or state of
circumstances or facts that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company
or give rise to a Material Adverse Change (as defined in Section 9.3(c)) on
the Company, (ii) any declaration, setting aside or payment of any dividend
on, or other distribution (whether in cash, stock or property) in respect
of, any of the Company's or any of its subsidiaries' capital stock, or any
purchase, redemption or other acquisition by the Company of any of the
Company's capital stock or any other securities of the Company or its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases which are not,
individually or in the aggregate, material in amount from employees
following their termination pursuant to the terms of their pre-existing
stock option or purchase agreements, (iii) any material change by the
Company in its accounting methods, principles or practices, except as
required by concurrent changes in GAAP, (iv) any revaluation by the Company
of any of its material assets, other than in the ordinary course of
business, or (v) 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 and the Transaction Option Agreement or perform its
obligations hereunder or thereunder.
(b) Except as set forth in Section 3.6(b) of the Company Disclosure
Schedule, since the date of the Company Balance Sheet and through the date
of this Agreement, there has not been (i) any amendment of any material term
of any outstanding security of the Company or any of its subsidiaries, (ii)
any incurrence, assumption or guarantee by the Company or any of its
subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices, (iii) any split, combination or reclassification of any of the
Company's or any of its subsidiaries' capital stock, (iv) any granting by
the Company or any of its subsidiaries of any increase in compensation or
fringe benefits to any Employee, or any payment by the Company or any of its
subsidiaries of any severance, termination pay or benefits or bonus to any
Employee, or any granting by the Company or any of its subsidiaries of any
increase in severance or termination pay, other than in the ordinary course,
consistent with past practice, or any entry by the Company or any of its
subsidiaries into, or material modification or amendment of, any Employee
Agreement, or any agreement the benefits of which are contingent or the
terms of which are materially altered upon the occurrence of a transaction
involving the Company of the nature contemplated hereby, (v) any labor
dispute or any activity or proceeding by a labor union or representative
thereof to organize any Employees, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any Employees, (vi)
except as set forth in Section 3.6(b) of the Company Disclosure Schedule any
layoffs of Employees or any Employee terminations other than for poor
performance or cause, and the Company and its subsidiaries have preserved
intact and kept available the services of present Employees in accordance
with past practice, (vii) any creation or other incurrence by the Company or
any of its subsidiaries of any lien on any material asset other than in the
ordinary course of business consistent with past practices, (viii) any
making of any material loan, advance or capital contributions to or
investment in any Person other than loans, advances or capital contributions
to or investments in its wholly-owned subsidiaries (or advances to
employees) in the ordinary course of business consistent with past
practices, (ix) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Company or
any of its subsidiaries that has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company, (x) any agreement, commitment, arrangement or undertaking by the
Company or any of its subsidiaries to perform any action described in (i)
through (ix) above.
SECTION 3.7 Taxes.
(a) The Company and each of its subsidiaries have timely filed or
caused to be filed all federal, state, local, foreign and other returns,
estimates, information statements and reports ("Returns") relating to Taxes
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(as defined in Section 3.7(r)) required to be filed by or on behalf of the
Company and each of its subsidiaries with any Tax authority. Such Returns
are true, correct and complete in all material respects, and the Company and
each of its subsidiaries have timely paid all Taxes due, whether or not such
Taxes have been shown to be due on such Returns. Neither the Company nor any
of its subsidiaries has requested an extension of time within which to file
any Return.
(b) The Company and each of its subsidiaries have withheld with respect
to its employees and other persons all federal and state income Taxes, Taxes
pursuant to the Federal Insurance Contribution Act ("FICA"), Taxes pursuant
to the Federal Unemployment Tax Act ("FUTA") and other Taxes required to be
withheld.
(c) The Company and its subsidiaries have not executed any unexpired
waiver of any statute of limitations on or extended the period for the
assessment or collection of any Tax, and no power of attorney with respect
to Tax matters has been executed or filed with any Tax authority.
(d) No audit or other examination of any Return of the Company or any
of its subsidiaries by any Tax authority is presently in progress, nor has
the Company or any of its subsidiaries been notified of any request for such
an audit or other examination that is reasonably likely to result in any
adjustment.
(e) No adjustment relating to any Returns filed by the Company or any
of its subsidiaries has been proposed formally or informally by any Tax
authority to the Company or any of its subsidiaries or any representative
thereof.
(f) The unpaid Taxes of the Company and its subsidiaries did not, as of
the date of the Company Balance Sheet, exceed the reserve for actual Taxes
(as opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) as shown on the Company Balance
Sheet, and will not exceed such reserve as adjusted for the passage of time
through the Closing Date in accordance with reasonable past custom and
practice of the Company.
(g) Assuming no significant appreciation in the value of Parent Common
Stock from the date hereof, there is no agreement, plan or arrangement to
which the Company or any of its subsidiaries is a party, including this
Agreement and the agreements entered into in connection with this Agreement,
that, individually or collectively, would give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m)
of the Code, or which would impose a withholding Tax obligation on Parent,
the Company or any of its subsidiaries or the Surviving Corporation for
amounts described in Section 4999 of the Code.
(h) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries.
(i) Neither the Company nor any of its subsidiaries is party to or has
any obligation under any Tax-sharing, Tax indemnity or Tax allocation
agreement or arrangement (including but not limited to any advance pricing
agreement, closing agreement or other agreement relating to Taxes with a Tax
authority).
(j) Neither the Company nor any of its subsidiaries has been or will be
required (either as a result of the transactions contemplated by this
Agreement or otherwise) to include in taxable income attributable to, or
that accrued in, a prior taxable period but was not recognized in a prior
taxable period as a result of the installment method of accounting, the
completed contract method of accounting, the cash method of accounting or
under Section 481 of the Code or any comparable provision of any other Tax
law or for any other reason.
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(k) Neither the Company nor any of its subsidiaries has been distributed
in a transaction qualifying under Section 355 of the Code within the last
two (2) years, nor has the Company or any of its subsidiaries distributed
any corporation in a transaction qualifying under Section 355 of the Code
within the last two years.
(l) There are no outstanding rulings of, or requests for rulings with,
any Tax authority addressed to the Company or any of its subsidiaries that
are, or if issued would be, binding on the Company or any of its
subsidiaries.
(m) Neither the Company nor any of its subsidiaries has ever been a
member of a group filing a consolidated federal income tax return (other
than a group the common parent of which was the Company), and neither the
Company nor any of its subsidiaries has any liability for the Taxes of any
person under Treasury Regulations Section 1.1502-6 (or any corresponding
provision of state, local or foreign Tax law), as a transferee or successor,
by contract, or otherwise.
(n) Except as set forth on Section 3.7(n) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has, or has had, a
permanent establishment in (or would otherwise be treated as having engaged
in business in), any foreign country.
(o) None of the shares of Company Common Stock outstanding are subject
to a "substantial risk of forfeiture" within the meaning of Section 83 of
the Code.
(p) There are no encumbrances for Taxes (except for encumbrances for
Taxes not yet due and payable) on any of the assets of the Company or any of
its subsidiaries.
(q) Except as set forth on Section 3.7(n) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries owns or has owned,
directly, indirectly or by attribution, any interest in an entity that would
be treated as a "passive foreign investment company" within the meaning of
Section 1297 of the Code. Neither the Company nor any of its subsidiaries is
a party to any joint venture, partnerships, limited liability company or
other arrangement which could be treated as a partnership for Tax purposes.
(r) For the purposes of this Agreement, "Tax" or "Taxes" refers to (i)
any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities relating to taxes,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes,
together with all interest, penalties and additions imposed with respect to
such amounts, (ii) any liability for payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated
consolidated, combined or unitary group, and (iii) any liability for amounts
of the type described in clauses (i) and (ii) as a result of any express or
implied obligation to indemnify another person or as a result of any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a
predecessor entity.
SECTION 3.8 Properties.
(a) Except as set forth on Section 3.8 of the Company Disclosure
Schedule, the Company or one of its subsidiaries (i) has good and marketable
title to all the properties and assets (A) reflected in the Company Balance
Sheet, in each case, as being owned by the Company or one of its
subsidiaries (other than any such properties or assets sold or disposed of
since such date in the ordinary course of business consistent with past
practice) or (B) acquired after the date of the Company Balance Sheet which
are material to the Company's business on a consolidated basis, free and
clear of all Encumbrances, except statutory Encumbrances securing payments
not yet due and such Encumbrances as do not materially affect the use of the
properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (ii) is the
lessee of all leasehold estates (x) reflected in the Company Balance Sheet or
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(y) acquired after the date of the Company Balance Sheet, in each case,
which are material to its business on a consolidated basis (except for
leases that have expired by their terms since the date thereof) and is in
possession of the properties purported to be leased thereunder, and each
such lease is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, the respective
parties thereto, and there is no material default thereunder by the lessee
or, to the Company's knowledge, as of the date hereof, the lessor.
(b) The Company has not received notice and does not otherwise have
knowledge of any pending, threatened or contemplated condemnation proceeding
affecting any premises owned or leased by the Company or any of its
subsidiaries or any part thereof or of any sale or other disposition of any
such owned or leased premises or any part thereof in lieu of condemnation.
The Company has filed in the Company SEC Reports copies of material
agreements representing all of its material leasehold estates. The Company
does not own any real property. The consummation by the Company of the
transactions contemplated by this Agreement without the consent of any
lessor under any lease by the Company will not cause a default under any
lease except as set forth in Section 3.8(a) of the Company Disclosure
Schedule.
(c) Except as set forth on Section 3.8 of the Company Disclosure
Schedule or otherwise provided in writing to Parent, there are no conditions
on any property currently or previously owned, leased, occupied or used by
the Company, or any of its subsidiaries, that could reasonably be expected
to result in any material claim or liability, whether accrued, contingent,
arising under or related to environmental law.
SECTION 3.9 Intellectual Property.
(a) Except as set forth in Section 3.9 of the Company Disclosure
Schedule, the Company and its subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, trade secrets, and any applications
therefor, maskworks, formulae, net lists, designs, schematics, technology,
know-how, computer software programs or applications (in both source code
and object code form), and tangible or intangible proprietary information or
material that are used or proposed to be used in the business of the Company
as currently conducted or as proposed to be conducted by the Company
(excluding any of the foregoing validly licensed or purchased from third
parties as set forth on Section 3.9(b) to the Company Disclosure Schedule)
(the "Company Intellectual Property Rights"). Section 3.9(a) to the Company
Disclosure Schedule sets forth a list of all material trademarks, service
marks, trade names, registered copyrights (and any applications for the
registration thereof), patents, and patent applications owned or licensed
and used or held for use by the Company that relate to or are part of the
Company's products or proposed products or are used in the business of the
Company, specifying as to each, as applicable: (i) identifying such right as
a patent, trademark, etc.; (ii) the registrant or applicant of such right;
and (iii) the jurisdictions by or in which such right has been issued or
registered or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers.
The Company has received properly executed assignments for each of the
Company's patents and patent applications listed in Section 3.9(a) to the
Company Disclosure Schedule, and has properly recorded the assignments for
each of Company's United States patents and patent applications in the
United States Patent and Trademark Office. Where required, the Company has
received properly executed assignments for all other Company Intellectual
Property Rights and has properly recorded such assignments with the
appropriate domestic or foreign filing offices.
(b) Section 3.9(b) to the Company Disclosure Schedule sets forth a
complete list of (i) all material licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which any person is
authorized to use any Company Intellectual Property Right or any trade
secret material to the Company, including the identity of all parties
thereto; and (ii) all material licenses, sublicenses and other agreements as
to which the Company is a party and pursuant to which the Company is
authorized to use (1) any third party patents, trademarks, trade secrets or
copyrights (including software) (the "Company Third Party Intellectual
Property Rights") which are incorporated in, are, or form a part of, or were
utilized in the
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development of, any Company product or proposed product, or (2) any trade
secret of a third party in or as to any Company product or proposed product,
including in each instance the identity of all parties thereto excepting (A)
non-exclusive license agreements to commercially available software that are
embodied in "click-wrap" or "shrink-wrap" license agreements and (B)
non-exclusive licenses of commercially available software under
non-negotiated agreements that, in the case of each of (ii)(2)(A) and (B),
would not result in the payment of any royalty, fee or other compensation to
any other person or limit, impair or alter the Company's methods or manner
of licensing or distribution. The Company Third Party Intellectual Property
Rights have been duly and validly assigned to or licensed by the licensor of
such right to Company, and each such assignment or license is in full force
and effect, and is enforceable in accordance with its terms. Except as set
forth in Section 3.9(b) of the Company Disclosure Schedule, none of the
sale, license, lease, transfer, use, distribution, modification or other
exploitation by the Company, any subsidiary of the Company or any of their
respective successors or assigns of any product included in or incorporating
any of the Company Intellectual Property obligates or will obligate the
Company, any subsidiary of the Company or any of their respective successors
or assigns to pay any royalty, fee or other compensation to any other person.
(c) The Company is not, nor will it be as a result of the execution and
delivery of this Agreement, the Transaction Option Agreement or the
Stockholders' Agreement or the performance of its obligations hereunder or
thereunder, in breach or violation of any license, sublicense or agreement
described on Section 3.9(b) to the Company Disclosure Schedule. No claims
with respect to the Company Intellectual Property Rights or the Company
Third Party Intellectual Property Rights (to the extent arising out of any
use, reproduction or distribution of such Company Third Party Intellectual
Rights by or through the Company), have been asserted or are threatened by
any person. The Company does not know of any valid grounds for any bona fide
claims (i) to the effect that the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for use, sale or license
by the Company infringes on any copyright, patent, trademark, service mark
or trade secret; (ii) against the use by the Company of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in the Company's business
as currently conducted or as proposed to be conducted by the Company; (iii)
challenging the ownership, validity, enforceability or effectiveness of any
of the Company Intellectual Property Rights or other trade secret material
to the Company; or (iv) challenging the Company's license or legally
enforceable right to use, or the validity, enforceability or effectiveness
of, the Company Third Party Intellectual Property Rights.
(d) To the knowledge of the Company, all registered trademarks, service
marks, and copyrights held by the Company are valid and subsisting. All
patents held by the Company are valid, enforceable, and subsisting, and all
patent applications held by Company are pending in their respective patent
office, and the Company is unaware of any facts that would form the basis
for a refusal of, or of any defects in the prosecution of any such
application that would irrevocably foreclose, the grant of patent rights
under such application. To the knowledge of the Company, except as set forth
on Section 3.9 of the Company Disclosure Schedule, there has been and is no
unauthorized use, disclosure, infringement or misappropriation of any of the
Company Intellectual Property Rights or any Company Third Party Intellectual
Property Right to the extent licensed by or through the Company, by any
third party, including any employee or former employee of the Company.
Neither the Company nor any of its subsidiaries (i) has been sued or charged
in writing as a defendant in any claim, suit, action or proceeding which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or violation of any trade secret or other proprietary right of
any third party; (ii) has been threatened or charged in writing, orally or
otherwise with infringement or violation of any patents, trademarks, service
marks, copyrights or trade secrets or other proprietary right of any third
party; and (iii) has knowledge of valid grounds for any such threat or claim.
(e) No Company Intellectual Property Right or Company Third Party
Intellectual Property Right is subject to any outstanding order, judgment,
decree, legal or governmental proceeding (other than pending
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applications for patent, trademark registration or copyright registration)
or stipulation restricting in any manner the licensing thereof by Company.
Except for agreements listed on the Company Disclosure Schedule, the Company
has not entered into any agreement to indemnify any other person against any
charge of infringement of any Company Third Party Intellectual Property
Right.
(f) The Company has taken reasonable measures consistent with industry
practice to protect and preserve (i) the validity and enforceability of
trademarks included in the Company Intellectual Property Rights, (ii) the
confidentiality, validity and enforceability of copyrights and pending
patent applications included in the Company Intellectual Property Rights,
(iii) the validity and enforceability of patents included in the Company
Intellectual Property Rights, and (iv) the confidentiality, validity and
enforceability of its trade secrets and other confidential information. All
employees, contractors, agents and consultants of the Company have executed
a nondisclosure and assignment of inventions agreement to protect the
confidentiality and to vest in the Company exclusive ownership of such
intellectual property rights substantially in the form attached to Section
3.9(f) of the Company Disclosure Schedule, and to the Company's knowledge,
no such person has violated such agreement. Moreover, the individuals listed
on Section 3.9(f) of the Company Disclosure Schedule have entered into
noncompetition and consulting agreements in the form attached to such
disclosure as appropriate. To the knowledge of the Company, no material
trade secret or confidential information of the Company has been used,
divulged, appropriated or misappropriated for the benefit of any person
other than the Company or otherwise to the detriment of the Company. To the
knowledge of the Company, no employee, contractor, agent or consultant of
the Company has used any trade secrets or other confidential information of
any other person in the course of their work for the Company. The Company
has no written or oral agreements with employees, contractors, agents or
consultants with respect to the ownership of inventions, trade secrets or
other works created by them as a result of which any such employee,
contractor, agent or consultant may have nonexclusive rights to any portion
of the Company Intellectual Property Rights so created by such individual.
(g) To the Company's knowledge, no officer, employee, contractor, agent
or consultant of the Company is, or is now expected to be, in violation of
any term of any employment contract, patent disclosure agreement,
proprietary information agreement, noncompetition agreement, nonsolicitation
agreement, confidentiality agreement, or any other similar contract or
agreement or any restrictive covenant relating to the right of any such
officer, employee, contractor, agent or consultant to be employed or engaged
by the Company because of the nature of the business conducted or to be
conducted by the Company or relating to the use of trade secrets or
proprietary information of others, and to the Company's knowledge belief the
continued employment or retention of its officers, employees, contractors,
agents or consultants does not subject the Company to any liability with
respect to any of the foregoing matters.
SECTION 3.10 COMPLIANCE WITH LAWS.
(a) Except as set forth in Section 3.10(a) of the Company Disclosure
Schedule, to the knowledge of the Company, neither the Company nor any of
its subsidiaries is in conflict with, or has violated or is in violation of
(i) any law, rule, regulation, order, judgment or decree applicable to the
Company or any of its subsidiaries or by which the Company or any of its
subsidiaries or any of their respective properties is bound or affected, or
(ii) any note, bond, mortgage, indenture, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of
its subsidiaries is a party or by which Company or any of its subsidiaries
or its or any of their respective properties is bound or affected, except
for conflicts, violations and defaults that would not be reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company. Except as set forth on Section 3.10(a) of the Company
Disclosure Schedule to the Company's knowledge, no compliance investigation
or review by the United States Food and Drug Administration (the "FDA") or
any other Governmental Entity is pending or, has been threatened in a
writing delivered to the Company against the Company or any of its
subsidiaries, nor, to the Company's knowledge, has the FDA or any other
Governmental Entity indicated an intention to conduct an investigation of
the Company or any of its subsidiaries. There is no judgment, injunction,
order
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or decree binding upon the Company or any of its subsidiaries which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any material business practice of the Company or any of its
subsidiaries, or any acquisition of material property by Company or any of
its subsidiaries.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities
(including, without limitation, all such permits required under
environmental laws or required by the FDA) that are material to or required
for the operation of the business of the Company as currently conducted
(collectively, the "Company Permits"), and are in compliance with the terms
of the Company Permits, except where the failure to hold or be in compliance
with such Company Permits, could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(c) Except as set forth on Section 3.10(c) of the Company Disclosure
Schedule or otherwise provided in writing to Parent, no written notice,
notification, demand, request for information, citation, summons or order
has been received, no complaint has been served, no notice of a penalty
assessment has been received, and no written notice of any pending
investigation, action, claim, suit, proceeding or review has been received
or, to the knowledge of the Company, is threatened by any governmental
entity or other Person relating to or arising out of any environmental law
or environmental condition. There are no material liabilities of or relating
to the Company or any of its subsidiaries of any kind whatsoever, whether
accrued or contingent, arising under or relating to any environmental law.
For purposes of this Section, the terms "Company" and "subsidiaries" shall
include any entity that is, in whole or in part, a predecessor of the
Company or any of its subsidiaries for which the Company or the subsidiaries
have assumed by contract or through operation of law the liabilities of any
such predecessor entity or entities.
SECTION 3.11 LITIGATION.
Except as set forth in Section 3.11 of the Company Disclosure Schedule
there are no claims, suits, actions, arbitrations, investigations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting the Company, any of its subsidiaries, any officer,
director or employee of the Company or any of its subsidiaries or any person
for whom the Company or any subsidiary may be liable or any of their
respective properties, before any Governmental Entity or any arbitrator that
seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or the Transaction Option Agreement or which
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or prevent or delay the ability of
the parties hereto to consummate the transactions contemplated by this
Agreement or the Transaction Option Agreement or for the Company to perform
its obligations hereunder or thereunder. As of the date hereof, no director,
officer or employee of the Company has asserted a claim to seek
indemnification from the Company under any of the Company Charter Documents
or any indemnification agreement between the Company and such person.
SECTION 3.12 EMPLOYEE BENEFIT PLANS.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, deferred compensation, severance, termination pay,
performance awards, stock or stock-related awards, medical benefits,
fringe benefits or other employee benefits or remuneration of any kind,
whether written or unwritten or otherwise, funded or unfunded, including
without limitation, each "employee benefit plan," within the meaning of
Section 3(3) of ERISA which is or has been maintained, contributed to,
or required to be contributed to, by the Company or any ERISA Affiliate
for the benefit of any Employee;
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(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "Co-Employment Agreement" shall mean an agreement between the
Company and another organization (a "Professional Employer") under which
individuals are simultaneously employed by the Company and the
Professional Employer such that some or all payroll and human resource
functions for Company's employees are performed by the Professional
Employer.
(iv) "DOL" shall mean the United States Department of Labor;
(v) "Employee" shall mean any current, former, or retired employee,
officer, or director of Company or any subsidiary of the Company;
(vi) "Employee Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas,
work permit or similar agreement or contract between the Company or any
subsidiary of the Company, on the one hand, and any Employee or
consultant of the Company or any subsidiary of the Company, on the other
hand;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(viii) "ERISA Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b),
(c), (m) or (o) of the Code and the regulations issued thereunder;
(ix) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(x) "International Employee Plan" shall mean each Company Employee
Plan that has been adopted or maintained by the Company, whether
informally or formally, for the benefit of Employees outside the United
States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xiii) "PBGC" shall mean the Pension Benefit Guaranty Corporation;
and
(xiv) "Pension Plan" shall mean each Company Employee Plan which is
an" employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Section 3.12 of the Company Disclosure Schedule contains
an accurate and complete list of each Company Employee Plan, Co-Employment
Agreement, and each Employee Agreement The Company does not have any plan or
commitment to establish any new Company Employee Plan, to modify any Company
Employee Plan or Employee Agreement (except to the extent required by law or
to the extent such Company Employee Plan is intended to be tax-qualified
within the meaning of Section 401(a) of the Code to conform such Company
Employee Plan to satisfy the tax-qualification requirements) or to enter
into any Employee Agreement.
(c) Documents. The Company has made or will make available to Parent:
(i) correct, complete and executed copies of all documents embodying each
Company Employee Plan, each Employee Agreement and each Co-Employment
Agreement including all amendments thereto; (ii) the two (2) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), filed in connection with each Company Employee Plan;
(iii) the most recent summary plan description together with the summary of
material modifications thereto, if any, required under ERISA with respect to
each Company Employee Plan; (iv) the most recent IRS determination or
opinion letter issued with respect to each Company Employee Plan; (v) all
material written agreements and contracts (if any) relating to each Company
Employee Plan, including, but not limited to, ERISA fiduciary bonds,
administrative service agreements, group annuity contracts and group
insurance contracts; (vi) all registration statements and prospectuses
currently effective prepared in connection with each Company Employee Plan.
A-25
(d) Employee Plan Compliance. Except as disclosed in Section 3.12(d) of
the Company Disclosure Schedule: (i) each Company Employee Plan that is an
employee benefit plan (as defined in Section 3(3) of ERISA) complies in all
material respects with ERISA (ii) each Company Employee Plan has been
established and maintained in all material respects in accordance with its
terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA or the Code; (iii) no
non-exempt "prohibited transaction," within the meaning of Section 4975 of
the Code or Sections 406 and 407 of ERISA that could result in the
imposition of an excise tax under Section 4975 of the Code that would have a
Material Adverse Effect, has occurred with respect to any Company Employee
Plan; (iv) there are no actions, suits or claims pending, or, to the
knowledge of the Company, threatened (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any
Company Employee Plan; (v) each Company Employee Plan (other than currently
outstanding stock options) can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent, the Company or any of its ERISA Affiliates (other than
expenses typically incurred in a termination event); (vi) there are no
audits, inquiries or proceedings pending or, to the knowledge of the
Company, threatened by the IRS or DOL with respect to any Company Employee
Plan; and (vii) all contributions due from Company or any ERISA Affiliate
(including employee contributions withheld from pay) with respect to any of
Company Employee Plans have been timely made as required under ERISA or have
been accrued on the Company Balance Sheet, and all tax returns including
annual reports (Form 5500) have been timely filed.
(e) Pension Plans. Neither the Company nor any ERISA Affiliate of the
Company has now, nor has it within the previous six (6) years, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any ERISA
Affiliate of the Company contributed to or had an obligation to contribute
to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan provides,
or has any liability to provide, retiree health benefits to any person for
any reason, except as may be required by COBRA or other applicable statute,
and the Company has never represented, promised or contracted (whether in
oral or written form) to any Employee (either individually or to Employees
as a group) or any other person that such Employee(s) or other person would
be provided with retiree health benefits, except to the extent required by
statute.
(h) Effect of Merger. Except as set forth on Section 3.12(h) of the
Company Disclosure Schedule the execution of this Agreement and the
Transaction Option Agreement and (except with respect to the Company Stock
Option Plans,) the consummation of the transactions contemplated hereby and
thereby will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Co-Employment Agreement,
Company Employee Plan (other than the Company Stock Option Plans), Employee
Agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting (other than full vesting as a result of partial or full plan
termination of a Pension Plan that is intended to satisfy the
tax-qualification requirements of Section 401(a) of the Code), distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
(i) Employment Matters. The Company and each of its subsidiaries are in
compliance in all material respects with all applicable foreign, federal,
state and local laws, rules and regulations, agreements, contracts, promises
and policies respecting employment, employment practices, employee benefits,
immigration matters, terms and conditions of employment and wages and hours,
in each case, with respect to Employees. Except as set forth on Section
3.12(i) of the Company Disclosure Schedule, there are no claims pending, or,
to the knowledge of the Company, threatened to be brought, in any court or
administrative agency by any Employee for compensation, severance benefits,
vacation time, vacation pay
A-26
or pension benefits, workers' compensation benefits, or other benefits, or
any other claim threatened or pending in any court or administrative agency
from any Employee or any other person arising out of the status of the
Company or any of its subsidiaries as employer, whether in the form of
claims for employment discrimination, harassment, unfair labor practices,
grievances, wrongful discharge, breach of contract, tort, unfair competition
or otherwise.
(j) Labor. Neither the Company nor any of its subsidiaries is a party
to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. To the
knowledge of the Company, neither the Company nor any of its subsidiaries is
the subject of any actual or threatened proceeding asserting that it or any
subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization or labor union as to wages or conditions
of employment. There is no strike, slowdown, work stoppage, labor dispute or
union organizing activity or any similar activity or dispute involving the
Company or any of its subsidiaries pending or, to the Company's knowledge,
threatened, nor has any event occurred, nor does any condition or
circumstance exist, that likely would give rise to or provide a basis for
the commencement of any such slowdown, work stoppage, labor dispute, union
organizing activity or any similar activity or dispute. No grievance is
pending or, to the knowledge of the Company, threatened against the Company
or any of its subsidiaries. To the knowledge of the Company, the Company is
not the subject of any claims, pending or threatened asserting that
employees have not been properly classified under the Fair Labor Standards
Act of 1938, as amended, and under any applicable state law, and the Company
and each of its subsidiaries has timely paid in full to all Employees all
wages, salaries, commissions, bonuses, benefits and other compensation or
reimbursement due and payable to such Employees under any policy, practice,
agreement, plan, program, statute or other applicable law except to the
extent that would not cause a Material Adverse Effect. Except as set forth
on Section 3.12(j) of the Company Disclosure Schedule, the Company and its
subsidiaries are not liable for any material severance pay, bonus
compensation, acceleration of payment (other than accrued salary, vacation,
or other paid time off in accordance with policies) or other payments to any
Employee arising from the termination of employment under any benefit or
severance policy, practice, agreement, plan, or program of the Company or
any of its subsidiaries, applicable law or otherwise, nor to the knowledge
of the Company will the Company or any of its subsidiaries have any
liability which exists or arises, or may be deemed to exist or arise, under
any applicable law or benefit or severance policy, practice, agreement,
plan, or program, as a result of or in connection with the transactions
contemplated hereunder or as a result of the termination by the Company or
any of its subsidiaries of any of their employees on or prior to the
Effective Time. The Company and each of its subsidiaries is in compliance
with the obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), and all other employee notification and
bargaining obligations arising under any collective bargaining agreement,
statute or otherwise.
SECTION 3.13 Certain Agreements. As of the date hereof, except as
disclosed in the Company's SEC Reports and the documents filed as exhibits
thereto, neither the Company nor any of its subsidiaries is a party to or is
bound by:
(a) Except as set forth on Section 3.13 of the Company Disclosure
Schedule, any employment or consulting agreement or commitment with any
officer, employee or member of the Board of Directors of the Company or any
of its subsidiaries, that is not terminable by Company or any of its
subsidiaries on no more than 30 days notice without liability or financial
obligation, except to the extent general principles of law may limit the
Company's or any of its subsidiaries' ability to terminate employees at will;
(b) Except as set forth on Section 3.13 of the Company Disclosure
Schedule, any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement,
the Transaction Option Agreement or the Stockholders' Agreement or the value
of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, the Transaction Option
Agreement or the Stockholders' Agreement;
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(c) Except as set forth on Section 3.13 of the Company Disclosure
Schedule, any material guaranty or any instrument evidencing indebtedness
for borrowed money by way of direct loan or sale of debt securities;
(d) Any material agreement, obligation or commitment containing
covenants purporting to limit or which effectively limit the Company's or
any of its subsidiaries' freedom to compete in any line of business or in
any geographic area or which would so limit the Company or the Surviving
Corporation or any of its subsidiaries after the Effective Time;
(e) Any agreement or commitment currently in force relating to the
disposition or acquisition by the Company or any of its subsidiaries after
the date of this Agreement of a material amount of assets or pursuant to
which the Company has any material ownership or participation interest in
any corporation, partnership, joint venture, strategic alliance or other
business enterprise other than the Company's subsidiaries;
(f) Any agreement or commitment currently in force providing for capital
expenditures by the Company or its subsidiaries in excess of $250,000; or
(g) Any agreement or commitment with respect to the payment of legal,
accounting or other third-party fees, other than on a time and disbursements
basis and payable on a current month-to-month basis.
The agreements required to be disclosed in the Company Disclosure Schedule
pursuant to clauses (a) through (g) above or pursuant to Section 3.9 or that
are required to be filed with any Company SEC Report ("Company Contracts") are
valid and in full force and effect, except to the extent that such invalidity
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect to the Company. Neither the Company nor any of its
subsidiaries, nor to the Company's knowledge, any other party thereto, is in
breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice that it has breached, violated or
defaulted, any of the terms or conditions of any Company Contract in such a
manner as could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
SECTION 3.14 Brokers' and Finders' Fees. Except for fees payable to
Goldman Sachs & Co. pursuant to an engagement letter, a copy of which has been
provided to Parent, neither the Company nor any subsidiary has incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement, the Transaction Option Agreement, or the Stockholders' Agreement or
any transaction contemplated hereby or thereby.
SECTION 3.15 Insurance. The Company and each of its subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting business or owning assets similar to those of the Company
and its subsidiaries. There is no material claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies have been paid and the Company and its subsidiaries are
otherwise in compliance in all material respects with the terms of such
policies and bonds. Except as set forth on Section 3.15 of the Company
Disclosure Schedule, to the knowledge of the Company, there has been no
threatened termination of, or material premium increase with respect to, any of
such material policies.
SECTION 3.16 Disclosure. Neither the Schedule 14D-9, nor any of the
information supplied or to be supplied by the Company or its subsidiaries or
representatives for inclusion or incorporation by reference in the Registration
Statement, the Post-Effective Amendment (as defined below) or the Offer
Documents will, at the respective times any such documents or any amendments or
supplements thereto are filed with the SEC, are first published, sent or given
to stockholders or become effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Schedule 14D-9 will comply as to form in all material respects
with the requirements of all applicable laws, including the Exchange Act and
the rules and regulations thereunder. No
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representation or warranty is made by the Company with respect to statements
made or incorporated by reference in any such documents based on information
supplied by Parent or Merger Sub specifically for inclusion or incorporation by
reference therein.
SECTION 3.17 Fairness Opinion. The Company has received the opinion of
Goldman Sachs & Co. to the effect that, as of the date thereof, the
consideration to be received by the holders of Company Common Stock in the
Offer and the Merger is fair, taken as a unitary transaction, from a financial
point of view to such holders.
SECTION 3.18 Related Party Transactions. Except as set forth on Section
3.18 of the Company Disclosure Schedule, no director, officer, partner,
employee, "affiliate" or "associate" (as such terms are defined in Rule 12b-2
under the Exchange Act) of the Company or any of its subsidiaries (i) has
outstanding any indebtedness or other similar obligations to the Company or any
of its subsidiaries; (ii) to the knowledge of the Company, owns any direct or
indirect interest of any kind in, or is a director, officer, employee, partner,
affiliate or associate of, or consultant or lender to, or borrower from, or has
the right to participate in the management, operations or profits of, any
person or entity which is (1) a competitor, supplier, customer, distributor,
lessor, tenant, creditor or debtor of the Company or any of its subsidiaries,
(2) engaged in a business related to the business of the Company or any of its
subsidiaries or (3) participants in any transaction to which the Company or any
of its subsidiaries is a party or (iii) is otherwise a party to any contract,
arrangement or understanding with the Company or any of its subsidiaries.
SECTION 3.19 Joint Ventures; Partnerships and Similar Arrangements.
Except as set forth on Section 3.19 of the Company Disclosure Schedule. The
Company has no ownership or partnership interests in and no other economic
rights to any joint venture, partnership or similar arrangement and is not a
party to any agreement relating to a joint venture, partnership or similar
arrangement. There are no agreements, orally or in writing, obligating the
Company to discuss, consider or form any joint venture, partnership or similar
arrangement.
SECTION 3.20 Clinical Trials. The clinical trials conducted by the
Company and its subsidiaries, and, to the Company's knowledge, the clinical
trials conducted by third parties on behalf of or sponsored by the Company or
in which the Company or its subsidiaries has participated were and, if still
pending, are being conducted in all material respects in accordance with
medical and scientific research procedures appropriate to the design of such
trials. The descriptions of the results of such trials and other pre-clinical
studies and tests that have been published by the Company are accurate in all
material respects and fairly present the data derived from such trials, studies
and tests. The Company has no knowledge of any other trials, studies or tests
the results of which are inconsistent with or otherwise call into question the
results that have been published by the Company and which, in the reasonable
judgment of the Company, would be required to be disclosed in or filed as an
exhibit to a report of the Company under the Exchange Act (if filed on and as
of the date hereof). The Company has not received any notices or other
correspondence from the FDA or any other governmental agency requiring the
termination, suspension or modification of any clinical trials or other studies
and there is no FDA enforcement action outstanding or, to the Company's best
knowledge, threatened, against the Company or any of its subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in the disclosure schedule delivered by Parent to the
Company dated as of the date hereof and certified by a duly authorized officer
of Parent (the "Parent Disclosure Schedule"), Parent and Merger Sub represents
and warrants to the Company as follows:
SECTION 4.1 Organization, Standing and Power. Parent and each of its
subsidiaries set forth on Section 4.1 of the Parent Disclosure Schedule is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has the requisite power
and authority to carry on its business as now being conducted, and is duly
qualified or licensed to 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,
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makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed could not be
reasonably expected to have a Material Adverse Effect on Parent. Parent and
Merger Sub have heretofore made available to the Company complete and correct
copies of their respective Certificates of Incorporation and Bylaws.
SECTION 4.2 Parent Capitalization. The Parent Common Stock to be
delivered as part of the Offer Price and Merger Consideration has been duly
authorized and, when issued and delivered in accordance with the terms of this
Agreement, will have been validly issued and will be fully paid and
nonassessable, will be listed on the NASDAQ National Market System and the
issuance thereof is not subject to any preemptive or similar right. All
outstanding shares of Parent Common Stock and preferred stock, $0.10 per share
in Parent, and all shares of Parent Common Stock which may be issued pursuant
to the exercise of options to purchase Parent Common Stock will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and are
not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Parent or any agreement or document to which Parent
is a party or by which it is bound. There are no outstanding bonds, debentures,
notes or other indebtedness or debt securities of Parent which require consent
for any actions contemplated by this Agreement, the Transaction Option
Agreement or the Stockholders' Agreement or which have the right to vote (or
are convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of Parent may vote.
SECTION 4.3 Obligations With Respect to Capital Stock. Except as set
forth in Section 4.2 hereof, there are no equity securities, partnership
interests or similar ownership interests of any class of Parent equity
security, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except pursuant to the Company
Options and Company Warrants, there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any
character to which Parent or any of its subsidiaries is a party or by which it
is bound obligating Parent or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests
of Parent or any of its subsidiaries or obligating Parent or any of its
subsidiaries to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement.
SECTION 4.4 Authority; Non-Contravention.
(a) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into this Agreement, the Transaction Option Agreement and
the Stockholders' Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery and performance of this
Agreement, the Transaction Option Agreement and the Stockholders' Agreement
and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of
Parent and Merger Sub. This Agreement, the Transaction Option Agreement and
the Stockholders' Agreement have been duly executed and delivered by each of
Parent and Merger Sub and, assuming the due execution and delivery by the
Company, constitute the valid and binding obligations of Parent and Merger
Sub enforceable in accordance with their terms. There is no vote of the
holders of any class or series of Parent's securities necessary to approve
this Agreement, the Offer (including the issuance of Parent Shares
thereunder) the Transaction Option Agreement or the Stockholders' Agreement
or to satisfy Parent's obligations under any of the foregoing.
(b) The execution and delivery of this Agreement, the Transaction
Option Agreement, the Stockholders' Agreement and the consummation of the
transactions contemplated hereby and thereby by each of Parent and Merger
Sub do not and will not result in any violation pursuant to any provision of
the
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respective Articles or Certificates of Incorporation or Bylaws of Parent or
Merger Sub or, except as to which requisite waivers or consents have been
obtained and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in paragraph (c) of this Section 4.4
are duly and timely obtained or made and, if required, the Company
Stockholder Approval has been obtained, result in any violation of any loan
or credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or
Merger Sub or their respective properties or assets, which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect on Parent.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any Governmental
Entity, is required by or with respect to Parent or Merger Sub in connection
with the execution and delivery of this Agreement, the Offer, the
Transaction Option Agreement or the Stockholders' Agreement by each of
Parent and Merger Sub or the consummation by each of Parent or Merger Sub of
the transactions contemplated hereby or thereby, except for: (A) filings
under the HSR Act; (B) the filing with the SEC of (x) the Offer Documents,
the Registration Statement and, if necessary, a Post-Effective Amendment (as
defined in Section 6.1), and (y) such reports under and such other
compliance with the Exchange Act and the rules and regulations thereunder,
as may be required in connection with this Agreement, the Transaction Option
Agreement and the Stockholders' Agreement and the transactions contemplated
hereby and thereby; (C) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware; (D) the notice to and mailing
of the Schedule TO to the NASD pursuant to Rule 14d-3 under the Exchange
Act; and (E) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover laws.
SECTION 4.5 SEC Filings.
(a) Parent has filed all forms, reports and documents required to be
filed by Parent with the SEC since December 31, 1998 and has made available
to the Company such forms, reports and documents in the form filed with the
SEC. All such required forms, reports and documents (including those that
Parent may file subsequent to the date hereof) are referred to herein as the
"Parent SEC Reports." As of their respective dates, Parent SEC Reports (i)
were prepared in accordance with the requirements of the Securities Act, or
the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such Parent SEC Reports and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except to the extent corrected prior to the date of this Agreement by a
subsequently filed Parent SEC Report. None of the Parent's subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements of Parent (including,
in each case, any related notes thereto) contained in Parent SEC Reports
(the "Parent Financials"), including each Parent SEC Report filed after the
date hereof until the Closing, (i) comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) are prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, as may be
permitted by the SEC under Form 10-Q, 8-K or any successor form under the
Exchange Act) and (iii) fairly present the consolidated financial position
of Parent and its subsidiaries as at the respective dates thereof and the
consolidated results of Parent's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may not
contain footnotes and were or are subject to normal and recurring year-end
adjustments.
The balance sheet of Parent contained in Parent SEC Reports as of September
30, 2001 is hereinafter referred to as the "Parent Balance Sheet." Except as
disclosed in the Parent Financials or in the Parent SEC
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Documents filed, in each case, prior to the date hereof, neither Parent nor any
of its subsidiaries has any liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are, individually or in the aggregate,
material to the business, results of operation or financial condition of Parent
or its subsidiaries taken as a whole except (i) for liabilities incurred since
the date of the Parent Balance Sheet in the ordinary course of business
consistent with past practice and (ii) liabilities incurred in connection with
this Agreement, the Transaction Option Agreement or the Stockholders' Agreement.
(c) Parent has heretofore furnished to the Company a complete and
correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by Parent
with the SEC pursuant to the Securities Act or the Exchange Act.
SECTION 4.6 Absence of Certain Changes or Events.
(a) Since the date of the Parent Balance Sheet, the business of Parent
and its subsidiaries has been conducted in the ordinary course consistent
with past practices (other than the transactions contemplated by this
Agreement and the Transaction Option Agreement) and there is not and has not
been (i) any event, occurrence, development or state of circumstances or
facts that has had or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent or give rise to a
Material Adverse Change on Parent, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of Parent's or any of its subsidiaries' capital
stock, or any purchase, redemption or other acquisition by Parent of any of
Parent's capital stock or any other securities of Parent or its subsidiaries
or any options, warrants, calls or rights to acquire any such shares or
other securities except for repurchases which are not, individually or in
the aggregate, material in amount from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any material change by Parent in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP,
(iv) any revaluation by Parent of any of its material assets, other than in
the ordinary course of business, or (v) any condition, event or occurrence
which, individually or in the aggregate, could reasonably be expected to
prevent or materially delay the ability of Parent to consummate the
transactions contemplated by this Agreement and the Transaction Option
Agreement or perform its obligations hereunder or thereunder.
(b) Since the date of the Parent Balance Sheet and through the date of
this Agreement, there has not been (i) any amendment of any material term of
any outstanding security of Parent or any of its subsidiaries, (ii) any
incurrence, assumption or guarantee by Parent or any of its subsidiaries of
any indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices, or
(iii) any split, combination or reclassification of any of Parent's or any
of its subsidiaries' capital stock.
SECTION 4.7 Compliance with Laws. Neither Parent nor any of its
subsidiaries is in conflict with, or has violated or is in violation of (i) any
law, rule, regulation, order, judgment or decree applicable to Parent or any of
its subsidiaries or by which Parent or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which Company or any of its subsidiaries or its or any of their respective
properties is bound or affected, except for conflicts, violations and defaults
that would not be reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Except as set forth on Section
4.7 of the Parent Disclosure Schedule, to Parent's knowledge, no compliance
investigation or review by the United States Food and Drug Administration (the
"FDA") or any other Governmental Entity is pending or, has been threatened in a
writing delivered to Parent against Parent or any of its subsidiaries, nor, to
Parent's knowledge, has the FDA or any other Governmental Entity indicated an
intention to conduct an investigation of Parent or any of its subsidiaries.
There is no judgment, injunction, order or decree binding upon Parent or any of
its subsidiaries which has or could
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reasonably be expected to have the effect of prohibiting or materially
impairing any material business practice of Parent or any of its subsidiaries,
or any acquisition of material property by Parent or any of its subsidiaries.
Parent and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities (including, without
limitation, all such permits required under environmental laws or required by
the FDA) that are material to or required for the operation of the business of
Parent as currently conducted (collectively, the "Parent Permits"), and are in
compliance with the terms of the Parent Permits, except where the failure to
hold or be in compliance with such Parent Permits, could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
SECTION 4.8 Litigation. There are no claims, suits, actions,
arbitrations, investigations or proceedings (or any basis therefor) pending or,
to the knowledge of Parent, threatened against, relating to or affecting
Parent, any of its subsidiaries, any officer, director or employee of Parent or
any of its subsidiaries or any person for whom Parent or any subsidiary may be
liable or any of their respective properties, before any Governmental Entity or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or the Transaction Option Agreement
or which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or prevent or delay the ability
of the parties hereto to consummate the transactions contemplated by this
Agreement or the Transaction Option Agreement or for Parent to perform its
obligations hereunder or thereunder. As of the date hereof, no director,
officer or employee of Parent has asserted a claim to seek indemnification from
Parent under either the Certificate of Incorporation or Bylaws of Parent or any
indemnification agreement between Parent and such person.
SECTION 4.9 Disclosure. Neither the Offer Documents or the Registration
Statement or the Post-Effective Amendment, nor any of the information supplied
or to be supplied by Parent or Merger Sub for inclusion or incorporation by
reference in (i) the Schedule 14D-9 will, at the time the Schedule 14D-9 is
filed with the SEC, and at any time it is amended or supplemented, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading, and (ii) in the
case of a Company Proxy Statement (as defined in Section 6.1) will, at the date
it is first mailed to the Company's stockholders or at the time of the Company
Stockholders Meeting (as defined in Section 6.1), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Offer Documents,
the Registration Statement and the Post-Effective Amendment will comply as to
form in all material respects with the requirements of all applicable laws,
including the Securities Act and the Exchange Act, as applicable, and the rules
and regulations thereunder. No representations or warrant is made by Parent or
Merger Sub with respect to statements made or incorporated by reference in any
such documents based on information supplied by the Company specifically for
inclusion or incorporation by reference therein.
SECTION 4.10 Board Recommendation. The Boards of Directors of the Parent
and Merger Sub at meetings duly called and held, has by the unanimous vote of
their directors determined that each of the Offer and the Merger is fair to and
in the best interests of Parent and Merger Sub and has approved the same.
SECTION 4.11 Brokers' and Finders' Fees. Except for fees payable to U.S.
Bancorp Piper Jaffray, Parent has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement, the Transaction
Option Agreement or the Stockholders' Agreement or any transaction contemplated
hereby or thereby.
SECTION 4.12 Clinical Trials. The clinical trials conducted by Parent
and its subsidiaries, and, to Parent's knowledge, the clinical trials conducted
by third parties on behalf of or sponsored by Parent or in which the Parent or
its subsidiaries has participated were and, if still pending, are being
conducted in all material respects in accordance with medical and scientific
research procedures appropriate to the design of such trials. The descriptions
of the results of such trials and other pre-clinical studies and tests that
have been published by Parent are accurate in all material respects and fairly
present the data derived from such trials, studies and tests.
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Parent has no knowledge of any other trials, studies or tests the results of
which are inconsistent with or otherwise call into question the results that
have been published by Parent and which, in the reasonable judgment of the
Parent, would be required to be disclosed in or filed as an exhibit to a report
of Parent under the Exchange Act (if filed on and as of the date hereof).
Parent has not received any notices or other correspondence from the FDA or any
other governmental agency requiring the termination, suspension or modification
or any clinical trials or other studies and there is no FDA enforcement action
outstanding or, to Parent's best knowledge, threatened, against Parent or any
of its subsidiaries.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
SECTION 5.1 Conduct of Business by the Company. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Effective Time, the Company and
each of its subsidiaries shall, except to the extent that Parent shall
otherwise consent in writing, carry on its business in the ordinary course
consistent with past practice and in compliance in all material respects with
all applicable laws and regulations, pay its debts and Taxes when due, subject
to good faith disputes over such debts or Taxes, pay or perform other material
obligations when due, and use its reasonable best efforts to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and employees and (iii) preserve its relationships with
customers, suppliers, licensors, licensees and others with which it has
business dealings so that no Material Adverse Effect shall have occurred at or
prior to the Effective Time. In addition, during that period the Company will
promptly notify Parent of any material event involving its business or
operations consistent with the agreements contained herein.
In addition, except as permitted by the terms of this Agreement, the
Transaction Option Agreement or the Stockholders' Agreement, and except as
contemplated by this Agreement, the Transaction Option Agreement or the
Stockholders' Agreement, without the prior written consent of Parent during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time, the
Company shall not do any of the following and shall not permit its subsidiaries
to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans except to the extent otherwise required by such plans or option
documents in their current form;
(b) Grant any severance or termination pay or benefits to any
directors, officers or employee except pursuant to written agreements in
effect, or policies existing, on the date hereof (or as required by
applicable law), copies of which have been made available to Parent, or
adopt any new severance plan, practice or policy;
(c) Enter into or amend any existing material licensing or other
agreement with regard to the acquisition, distribution or licensing of any
Company Intellectual Property Rights, or transfer or license to any person
or entity any Company Intellectual Property Rights, other than non-exclusive
licenses, distribution or other similar agreements entered in the ordinary
course of business consistent with past practice;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock of the Company other than dividends or
distributions by a direct or indirect wholly-owned subsidiary to its parent,
or split, combine or reclassify any capital stock of the Company or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock of the Company;
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(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of the Company or its subsidiaries, except
repurchases of unvested shares at cost in connection with the termination of
the employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares
of capital stock or any securities convertible into shares of capital stock,
or enter into other agreements or commitments of any character obligating it
to issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of shares of Company Common Stock pursuant to the
exercise of Company Options, except for the issuance of shares of Company
Common Stock upon the Roche Conversion;
(g) Cause, permit or propose any amendments to the Company Charter
Documents other than to implement the transaction with Parent and Merger Sub
contemplated by this Agreement;
(h) Acquire or agree to acquire by merging or consolidating with, or,
by purchasing any equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division thereof; or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of the Company (except for purchases of raw
materials, equipment, supplies or investment securities in the ordinary
course of business consistent with past practice) or enter into any material
joint ventures, strategic relationships or alliances;
(i) Except as permitted under Sections 5.1(c) and (h), sell, lease,
license, encumber or otherwise dispose of any properties or assets which are
material, individually or in the aggregate, to the business of the Company;
(j) Except as set forth on Section 5.1(j) of the Company Disclosure
Schedule, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
the Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing, other than in the ordinary course
of business consistent with past practice;
(k) Except as required to comply with any Legal Requirement, adopt or
amend any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment, deferred compensation, consulting
or other similar agreement (or any amendment to any such existing agreement)
or collective bargaining agreement, pay any bonus or other remuneration to
any Employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of any Employee other
than with respect to employees and consultants (other than officers) in the
ordinary course of business consistent with past practice, or change any
management policies, practices or procedures;
(1) Make any material capital expenditures, except an expenditure of up
to $250,000 per capital project;
(m) Modify, amend or terminate any Company Contract to which the
Company or any subsidiary thereof is a party or waive, release or assign any
material rights or claims thereunder other than in the ordinary course of
business consistent with past practice;
(n) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
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(o) Extend, amend or modify the terms of, or any rights to, any
material Company Intellectual Property Rights;
(p) Pay, discharge or satisfy any claims (including claims of
stockholders), indebtedness, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), except for the payment,
discharge or satisfaction of liabilities, indebtedness or obligations
recorded in the most recent consolidated financial statements (or notes
thereto) of the Company included in the Company SEC Reports, or incurred in
the ordinary course of business consistent with past practice or in
accordance with their terms as in effect on the date hereof 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;
(q) 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;
(r) Enter into or amend any collective bargaining agreement;
(s) Except as set forth on Section 5.1(s) of the Company Disclosure
Schedule, settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement), other than settlements or compromises
of litigation 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 $50,000, provided that
the aggregate amount paid in connection with the settlement or compromise of
all such litigation matters shall not exceed $250,000;
(t) Take any action that would materially delay the consummation of the
transactions contemplated hereby;
(u) Other than in the ordinary course of business and consistent with
past practice, make or change any material Tax election, amend any Return or
take any other action (or fail to take any other action) in respect of
Taxes, in each case, if such action (or failure to take action) could
reasonably be expected to have the effect of increasing the Tax liability of
Parent or any of its affiliates (including the Company and its subsidiaries)
for periods ending on or after the Closing Date;
(v) Enter into any joint venture, partnership or other similar
arrangement; or
(w) Agree in writing or otherwise to take any of the actions described
in Section 5.1 (a) through (v) above.
SECTION 5.2 Conduct of Business by the Parent. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Effective Time, the Parent and
each of its subsidiaries shall, except to the extent that Company shall
otherwise consent in writing, carry on its business in the ordinary course
consistent with past practice and in compliance in all material respects with
all applicable laws and regulations.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of Registration Statement and Proxy Statement;
Company Stockholders Meeting; Merger without a Company Stockholders Meeting.
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(a) If approval of Company's stockholders is required by applicable law
in order to consummate the Merger other than pursuant to Section 253 of
Delaware Law, as soon as reasonably practicable following the acceptance for
payment of Shares pursuant to the Offer, (i) the Company and Parent shall
prepare and the Company shall file with the SEC a proxy statement (if
required by applicable law) in definitive form relating to a meeting of the
holders of Company Common Stock to approve the Merger (such proxy statement
as amended or supplemented from time to time being hereinafter referred to
as the "Company Proxy Statement") and (ii) the Company and Parent shall
prepare and Parent shall file with the SEC a post-effective amendment to the
Registration Statement (the "Post-Effective Amendment") for the offer and
sale of the Parent Common Stock portion of the Merger Consideration pursuant
to the Merger and in which the Company Proxy Statement will be included as a
prospectus. Each of the Company and Parent shall use all reasonable efforts
to have the Post-Effective Amendment declared effective under the Securities
Act as promptly as practicable after such filing. The Company shall use its
reasonable best efforts to respond to all SEC comments with respect to the
Company Proxy Statement and to cause the Company Proxy Statement to be
mailed to the Company's stockholders at the earliest practicable date after
the Post-Effective Amendment is declared effective under the Securities Act.
Parent shall also take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Common Stock
in the Offer and the Merger and Company shall furnish all information
concerning Company and the holders of capital stock of Company as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Company Proxy Statement. No filing of, or
amendment or supplement to, or correspondence to the SEC or its staff with
respect to, the Post-Effective Amendment will be made by Parent, or the
Company Proxy Statement will be made by Company, without providing the other
party a reasonable opportunity to review and comment thereon. Parent will
advise Company, promptly after it receives notice thereof, of the time when
the Post-Effective Amendment has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of
the qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC
for amendment of the Post-Effective Amendment or comments thereon and
responses thereto or requests by the SEC for additional information. Company
will advise Parent, promptly after it receives notice thereof, of any
request by the SEC for the amendment of the Company Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time any information
relating to Company or Parent, or any of their respective affiliates,
officers or directors, should be discovered by Company or Parent which
should be set forth in an amendment or supplement to either of the
Post-Effective Amendment or the Company Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties
hereto and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required
by law, disseminated to the stockholders of Company.
(b) If approval of Company's stockholders is required by applicable law
in order to consummate the Merger, the Company will, prior to or as soon as
reasonably practicable following the date upon which the Post-Effective
Amendment becomes effective, establish a record date for, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Company
Stockholders Meeting") for the purpose of approving this Agreement, the
Merger and the transactions contemplated hereby. Once the Company
Stockholders Meeting has been called and noticed, Company shall not postpone
or adjourn the Company Stockholders Meeting (other than for the absence of a
quorum) without the consent of Parent. Subject to Company's right, pursuant
to Section 6.3(b) hereof, to withdraw or modify the Recommendations, the
Board of Directors of Company shall include in the Post-Effective Amendment
and the Company Proxy Statement a copy of the Recommendations as such
Recommendations pertain to the Merger and this Agreement. Notwithstanding
the foregoing, if approval of the Company's stockholders is required by
applicable law in order to consummate the Merger, the Board of Directors of
Company shall submit this Agreement and the Merger
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for approval to the Company's stockholders whether or not the Board of
Directors of Company determines in accordance with Section 6.3(b) after the
date hereof that this Agreement and the Merger are no longer advisable and
recommends that the stockholders of Company reject it. Unless the Board of
Directors of Company has withdrawn its recommendation of this Agreement and
the Merger in compliance with Section 6.3(b), Company shall use its
reasonable best efforts to solicit from stockholders of Company proxies in
favor of this Agreement and the Merger and shall take all other actions
necessary or advisable to secure the vote or consent of stockholders
required by Delaware Law to effect the Merger.
(c) Notwithstanding the foregoing clauses (a) and (b), in the event
that Merger Sub shall acquire at least 90% of the outstanding shares of
Company Common Stock in the Offer, the parties hereto agree to take all
necessary and appropriate action to cause the Merger to become effective, as
soon as practicable after the expiration of the Offer, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
(d) Parent shall (i) cause Merger Sub promptly to submit this
Agreement, the Transaction Option Agreement and the Stockholders' Agreement
and the transactions contemplated hereby and thereby for approval and
adoption by Parent by written consent of sole stockholder; (ii) cause the
shares of capital stock of Merger Sub to be voted for adoption and approval
of this Agreement, the Transaction Option Agreement and the Stockholders'
Agreement and the Merger and the Offer and the other transactions
contemplated hereby and thereby; and (iii) cause to be taken all additional
actions necessary for Merger Sub to adopt and approve this Agreement, the
Transaction Option Agreement and the Stockholders' Agreement and the
transactions contemplated hereby and thereby.
SECTION 6.2 Antitrust Filings; Other Filings.
(a) Promptly after the date of this Agreement, each of the Company and
Parent will prepare and file (i) with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice Notification and Report Forms relating to the transactions
contemplated herein as required by the HSR Act, as well as comparable
pre-merger notification forms required by the merger notification or control
laws and regulations of any applicable jurisdiction, as agreed to by the
parties (the "Antitrust Filings") and (ii) any other filings required to be
filed by it under the Exchange Act, the Securities Act or any other federal,
state or foreign laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). The Company and Parent
each shall promptly supply the other with any information which may be
required in order to effectuate any filings pursuant to this Section 6.2.
(b) Each of the Company and Parent will notify the other promptly upon
the receipt of any comments from the SEC or its staff or any other
government officials in connection with any filing made pursuant hereto and
of any request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, Post-Effective
Amendment, Offer Documents, Schedule 14D-9, Company Proxy Statement or any
Antitrust Filings or Other Filings or for additional information and will
supply the other with copies of all correspondence between such party or any
of its representatives, on the one hand, and the SEC, or its staff or any
other government officials, on the other hand, with respect to the
Registration Statement, Post-Effective Amendment, Offer Documents, Schedule
14D-9, Company Proxy Statement, the Merger or any Antitrust Filing or Other
Filing. Each of the Company and Parent will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under
Section 6.1 and this Section 6.2 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in
an amendment or supplement to the Registration Statement, Post-Effective
Amendment, Offer Documents, Schedule 14D-9, Company Proxy Statement or any
Antitrust Filing or Other Filing, Company or Parent, as the case may be,
will promptly inform the other of such occurrence and cooperate in filing
with the SEC or its staff or any other government officials, and/or mailing
to stockholders of the Company and/or Parent such amendment or supplement.
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SECTION 6.3 No Solicitation.
(a) Neither the Company nor any of its subsidiaries shall, nor shall
the Company or any of its subsidiaries authorize or permit any of its or
their officers, directors, employees, investment bankers, attorneys,
accountants, consultants or other agents or advisors to, directly or
indirectly, (i) solicit, initiate or knowingly take any action to facilitate
or encourage any Acquisition Proposal (as defined below) or any inquiries or
the making of any proposal that constitutes or could reasonably be expected
to lead to an Acquisition Proposal, (ii) enter into, continue or participate
in any discussions or negotiations with, furnish any information relating to
the Company or any of its subsidiaries or afford access to the business,
properties, assets, books or records of the Company or any of its
subsidiaries to, otherwise cooperate in any way with, or knowingly assist,
participate in, facilitate or encourage any effort by any third party to do
or seek to make, or that has made an Acquisition Proposal, (iii) approve,
endorse or recommend any Acquisition Proposal or (iv) enter into any letter
of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal.
(b) Notwithstanding the foregoing, the Board of Directors of the
Company, directly or indirectly through advisors, agents or other
intermediaries, may (i) engage in negotiations or discussions with any third
party that, subject to the Company's compliance with Section 6.3(a), has
made (and not withdrawn) a bona fide Acquisition Proposal that the Board of
Directors of the Company reasonably determines (after consultation with the
Company's financial advisor) constitutes a Superior Proposal, (ii) furnish
to such third party nonpublic information relating to the Company or any of
its subsidiaries pursuant to a confidentiality agreement with terms no less
favorable to the Company than those contained in the Confidentiality
Agreement, (iii) take and disclose to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act or otherwise
make disclosure to them, (iv) following receipt of such an Acquisition
Proposal, withdraw, modify in a manner adverse to Parent, or fail to make
the Recommendations, or (v) take any action ordered to be taken by the
Company by any court of competent jurisdiction if, in each case (1) neither
the Company nor any representative of Company and its subsidiaries shall
have violated any of the restrictions set forth in this Section 6.3, (2) the
Board of Directors of the Company determines in good faith (after
consultation with its outside legal counsel) that the failure to take such
action would be reasonably likely to result in a breach of its fiduciary
obligations to the Company's stockholders under applicable law, (3) prior to
furnishing any such nonpublic information to, or entering into any such
discussions with, such person or group, the Company gives Parent written
notice of the identity of such person or group and all of the material terms
and conditions of such Acquisition Proposal and of the Company's intention
to furnish nonpublic information to, or enter into discussions with, such
person or group, and the Company receives from such person or group an
executed confidentiality agreement containing terms at least as restrictive
with regard to the Company's confidential information as the Confidentiality
Agreement (as defined in Section 6.6), (4) gives Parent prompt advance
notice of its intent to furnish such nonpublic information or enter into
such discussions (which notice shall in no event be given less than one (1)
business day prior to furnishing such information or entering into such
discussions), and (5) contemporaneously with furnishing any such nonpublic
information to such person or group, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). The Company and its
subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal, and shall use its reasonable 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. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth
in the preceding two sentences by any officer, director or employee of the
Company or any of its subsidiaries or any investment banker, attorney or
other advisor or representative of the Company or any of its subsidiaries
shall be deemed to be a breach of this Section 6.3 by the Company.
(c) In addition to the obligations of the Company set forth in paragraph
(a) of this Section 6.3, the Company shall promptly advise Parent orally and
in writing of any Acquisition Proposal, or any inquiry
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with respect to or which the Company reasonably should believe would lead to
any Acquisition Proposal, the material terms and conditions of such
Acquisition Proposal or inquiry, and the identity of the person or group
making any such Acquisition Proposal or inquiry. The Company will keep
Parent informed promptly of any amendments of any such Acquisition Proposal
or inquiry.
For purpose of this Agreement, "Superior Proposal" means any bona fide,
unsolicited written Acquisition Proposal for at least a majority of the
outstanding shares of Company Common Stock on terms that the Board of
Directors of Company determines in good faith by a majority vote, after
consultation with its financial advisor of nationally recognized reputation
and taking into account all the terms and conditions of the Acquisition
Proposal, are more favorable to the Company's stockholders than as provided
hereunder, is reasonably capable of being consummated and for which
financing, to the extent required, is then committed; provided, however,
that any such offer shall not be deemed to be a "Superior Proposal" if any
financing required to consummate the transaction contemplated by such offer
is not likely in the good faith judgment of the Company Board (after having
received the advice of a financing advisor of nationally recognized
reputation) to be obtained by such third party on a timely basis.
For purposes of this Agreement, "Acquisition Proposal" shall mean any
offer or proposal by a third party, other than Parent, Merger Sub or any
affiliate thereof, relating to: (A) any acquisition or purchase from the
Company by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a 15%
interest in the outstanding voting securities of the Company or any of its
subsidiaries or any tender offer or exchange offer that if consummated would
result in any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning
15% or more of the outstanding voting securities of the Company or any of
its subsidiaries or any merger, consolidation, business combination or
similar transaction involving the Company pursuant to which the stockholders
of the Company immediately preceding such transaction would hold less than
85% of the equity interests in the surviving or resulting entity of such
transaction; (B) any sale, lease, exchange, transfer, license, acquisition,
or disposition of more than 15% of the consolidated assets of the Company;
(C) any liquidation or dissolution of the Company or (D) any other
transaction the consummation of which would or could reasonably be expected
to impede, interfere with, prevent or materially delay the consummation of
the transactions contemplated hereby.
SECTION 6.4 Obligations of Merger Sub. Parent will take all reasonable
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Offer and the Merger on the terms and subject
to the conditions set forth in this Agreement.
SECTION 6.5 Voting of Shares. Parent and Merger Sub agree to vote all
Shares acquired in the Offer or otherwise beneficially owned by them or any of
their subsidiaries in favor of approval and adoption of this Agreement and the
Merger at the Company Stockholders Meeting or pursuant to Section 253 of the
DGCL, on the terms and subject to the conditions set forth in this Agreement.
SECTION 6.6 Confidentiality; Access to Information.
(a) The parties acknowledge that the Company and Parent have previously
executed the Confidentiality Agreement, dated as of February 13, 2002,
between the Company and Parent (the "Confidentiality Agreement") which
Confidentiality Agreement will continue in full force and effect in
accordance with its terms.
(b) The Company will afford Parent and its accountants, counsel and
other representatives reasonable access during normal business hours to the
properties, books, records and personnel of the Company during the period
prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of the Company, as Parent may reasonably
request, including without limitation copies of working papers of
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accountants, contracts, and other corporate documents, and access to other
parties with whom it has business dealings. Parent will afford the Company
and its accountants, counsel and other representatives reasonable access
during normal business hours to the properties, books, records and personnel
of Parent during the period prior to the Effective Time to obtain all
information concerning the business, as Company may reasonably request. No
information or knowledge obtained in any investigation pursuant to this
Section will affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Offer and the Merger.
SECTION 6.7 Public Disclosure. Parent and the Company will consult with
each other, and to the extent practicable, agree, before issuing any press
release or otherwise making any public statement with respect to the Offer,
Merger, this Agreement, the Transaction Option Agreement or the Stockholders'
Agreement or an Acquisition Proposal and will not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with a national securities exchange;
provided, however, that this Section 6.7 shall terminate in the event the Board
of Directors of the Company shall withdraw its Recommendations. The parties
have agreed to the text of the joint press release announcing the signing of
this Agreement.
SECTION 6.8 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, the Transaction Option Agreement and the Stockholders' Agreement,
each of the parties agrees to use all reasonable 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 to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, the Transaction Option Agreement and the Stockholders' Agreement,
including using reasonable efforts to accomplish the following: (i) the
taking of all reasonable acts necessary to cause the conditions precedent
set forth in the Annex A and Article VII to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders
and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking
of all reasonable steps as may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all necessary consents, approvals or waivers from third
parties, (iv) the defending of any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement,
the Transaction Option Agreement or the Stockholders' Agreement or the
consummation of the transactions contemplated hereby and thereby, including
seeking to have any stay or temporary restraining order entered by any court
or other Governmental Entity vacated or reversed and (v) the execution or
delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to carry out fully the purposes of, this
Agreement. Notwithstanding anything in this Agreement to the contrary,
except pursuant to the Transaction Option Agreement and the Stockholders'
Agreement, neither Parent nor any of its affiliates shall be under any
obligation to make proposals, execute or carry out agreements or submit to
orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or
categories of assets of Parent, any of its affiliates or the Company or its
subsidiaries or the holding separate of the shares of Company Common Stock
(or shares of stock of the Surviving Corporation) or imposing or seeking to
impose any limitation on the ability of Parent or any of its subsidiaries or
affiliates to conduct their business or own such assets or to acquire, hold
or exercise full rights of ownership of the shares of Company Common Stock
(or shares of stock of the Surviving Corporation).
(b) Each of the Company and Parent will give prompt notice to the other
of (i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated hereby, (ii) any notice or other communication
from any Governmental Entity in connection with the transactions
contemplated hereby, (iii) any litigation relating to, involving or
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otherwise affecting Company, Parent or their respective subsidiaries that
relates to the consummation of the transactions contemplated hereby. The
Company shall give prompt notice to Parent of any representation or warranty
made by it contained in this Agreement, the Transaction Option Agreement or
the Stockholders' Agreement becoming untrue or inaccurate, or any failure of
the Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, the Transaction Option Agreement or the Stockholders' Agreement,
in each case, such that the conditions set forth in the Annex A or Article
VII would not be satisfied, provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement, the Transaction Option Agreement or the Stockholders' Agreement.
Parent shall give prompt notice to the Company of any representation or
warranty made by it or Merger Sub contained in this Agreement, the
Transaction Option Agreement or the Stockholders' Agreement becoming untrue
or inaccurate, or any failure of Parent or Merger Sub to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, the Transaction
Option Agreement or the Stockholders' Agreement, in each case, such that the
conditions set forth in the Annex A or Article VII would not be satisfied,
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement, the
Transaction Option Agreement or the Stockholders' Agreement.
SECTION 6.9 Indemnification
(a) Parent and the Surviving Corporation will indemnify and hold
harmless (including advancement of expenses) the current and former
directors and officers of the Company in respect of acts or omissions
occurring on or prior to the Effective Time to the extent provided in the
Company Charter Documents in effect on the date hereof; provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable law. Parent will cause to be maintained for a period of not
less than six (6) years from the Effective Time the Company's current
directors' and officers' insurance and indemnification policy to the extent
that it provides coverage for events occurring prior to the Effective Time
(the "D&O Insurance") for all persons who are directors and officers of the
Company on the date of this Agreement, or shall purchase a "tail" on the
Company's existing policy to cover such period. If the existing D&O
Insurance cannot be maintained, expires or is terminated or canceled during
such three-year period, Parent will use reasonable efforts to cause to be
obtained as much D&O Insurance as can be obtained for the remainder of such
period on terms and conditions substantially similar to the existing D&O
Insurance. It is understood that, unless made by a court, any determination
as to whether a person seeking indemnification pursuant to this Section 6.9
has met any applicable legal standard for indemnification shall be made by a
committee consisting of at least two of Parent's independent directors.
(b) In the event Parent of the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case,
to the extent necessary to effectuate the purposes of this Section 6.9,
proper provision shall be made so that the successors and assigns of Parent
and the Surviving Corporation assume the obligations set forth in this
Section 6.9; provided that, in the case of any such assignment by Parent or
the Surviving Corporation, Parent and the Surviving Corporation shall remain
liable for all of their respective obligations under this Agreement.
SECTION 6.10 Nasdaq Listing. Parent agrees to authorize for listing on
NASDAQ National Market System the shares of Parent Common Stock issuable, and
those required to be reserved for issuance, in connection with the Offer and
the Merger, effective upon official notice of issuance.
SECTION 6.11 Letters of Accountants. Company and Parent shall use their
respective reasonable efforts to cause to be delivered to Parent letters of
Company's and Parent's independent accountants, respectively, dated no more
than two business days before the date on which the Registration Statement
becomes effective (and
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satisfactory in form and substance to Parent), that is customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
SECTION 6.12 Takeover Statutes; Rights Plan. If any takeover statute or
"poison pill" shareholder rights plan is or may become applicable to the Offer
or Merger or the other transactions contemplated by this Agreement, the
Transaction Option Agreement or the Stockholders' Agreement, each of Parent and
the Company and their respective Boards of Directors shall grant such approvals
and take such lawful actions as are necessary to ensure that such transactions
may be consummated as promptly as practicable on the terms contemplated by this
Agreement, the Transaction Option Agreement and the Stockholders' Agreement and
otherwise act to eliminate or minimize the effects of such statute and any
regulations promulgated thereunder on such transactions or to make such rights
plan inapplicable to Parent and Merger Sub in connection with the transactions
contemplated by this Agreement, the Transaction Option Agreement and the
Stockholders' Agreement. The Company agrees that on and after the date hereof,
it will not adopt any "poison pill" rights plan or any similar antitakeover
plan or take any other action that would impede or prevent completion of the
Offer, the Merger, this Agreement, the Transaction Option Agreement or the
Stockholders' Agreement.
SECTION 6.13 Certain Employee Benefits.
(a) As of the Effective Time, Parent shall make available or cause to be
made available to each individual who was an employee of the Company
immediately before the Effective Time and who is an employee of the
Surviving Corporation immediately after the Effective Time (a "Transferred
Employee") health, prescription drug, long-term disability, short-term
disability, life insurance, dental and other welfare benefits that are
substantially similar in the aggregate to such benefits in effect at the
Effective Time for similarly situated employees of Parent. Such benefits may
be provided by Parent, at its option, through the employee plans maintained
by Parent (or one or more of its ERISA Affiliates) or through Company
Employee Plans providing such benefits. Thereafter, with respect to such
benefits, Parent and its ERISA Affiliates shall not discriminate against
Transferred Employees in relation to similarly situated employees of Parent
and its ERISA Affiliates by reason of their status as Transferred Employees.
(b) To the extent that Parent wishes to provide the benefits described
in Section 6.13(a) to Transferred Employees through a Parent employee plan
providing such benefits (a "Replacement Plan"), Parent shall take
appropriate action to waive any waiting period, pre-existing condition or
requirement for evidence of insurability otherwise imposed under any such
Parent employee plan with respect to any Transferred Employee who was
covered by a Company Employee Plan providing similar benefits prior to the
Effective Time. To the extent that the benefits described in Section 6.13(a)
for Transferred Employees are provided pursuant to a Replacement Plan at any
time other than during a general open enrollment applicable to all employees
of Parent and Surviving Corporation, Parent (i) shall take appropriate
action to waive any actively at work requirements, and (ii) shall give
credit under such Replacement Plan to all Transferred Employees and their
covered dependents for all deductibles and out-of-pocket expense limitations
incurred by the Transferred Employees and their covered dependents under the
Company Employee Plans. Parent's obligations under this paragraph are
conditioned upon the approval of the insurance providers of applicable
benefit plans.
(c) Parent shall not reduce the accrued vacation and sick or other paid
leave of each Transferred Employee under the Company Employee Plans as of
the Effective Time. After the Effective Time, Parent shall provide severance
benefits to all Transferred Employees with terms no less favorable than the
severance benefits currently offered by Parent to its employees of similar
status.
(d) Unless the parties otherwise agree in writing, the Company shall
take all action necessary to terminate, or cause to terminate, before the
Effective Time, any Company Employee Plan that is a defined contribution /
Section 401(k) savings plan (the "Company 401(k) Plan").
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(e) Parent shall take appropriate steps to permit participation as soon
as practicable in any defined contribution / 401(k) savings plan, maintained
by Parent immediately following the Effective Time by Transferred Employees
who, immediately prior to the Effective Time, were eligible to participate
in the Company 401(k) Plan. For purposes of eligibility (including
eligibility for early retirement) and vesting under any such Parent employee
pension benefit plan, Parent shall credit Transferred Employees for their
length of service with the Company, its ERISA Affiliates, and any
predecessor of the Company or its ERISA Affiliates as of the Effective Time.
(f) After the Effective Time, Parent shall provide severance benefits
to employees of the Company with terms no less favorable than the severance
benefits currently offered by Parent to its employees of similar status.
(g) No provision of this Section 6.13 shall create any third party
beneficiary or other rights in any Transferred Employee or former employee
(including any beneficiary or dependent thereof) of the Company in respect
of continued employment (or resumed employment) with Parent, and no
provision of this Section 6.13 shall create any such rights in any such
individuals in respect of any benefits that may be provided, directly or
indirectly, under any Company Employee Plan or any plan or arrangement that
may be established by Parent. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate after the
Effective Time any such plans or arrangements of Parent. No provision of
this Agreement shall cause any Transferred Employee to be a third party
beneficiary of any rights herein.
SECTION 6.14 Employment, Consulting, Noncompetition, and Other
Agreements. The Company agrees to cooperate with Parent in its efforts to
negotiate employment, consulting, noncompetition or other agreements with any
key employees or individuals identified by Parent between the date hereof and
the Effective Time.
SECTION 6.15 Tax Matters. Each of Parent, Merger Sub and the Company
agrees that it will not take any action (including the failure to merge the
Surviving Corporation with and into Parent) which would reasonably be expected
to cause the exchange of Shares for cash and Parent Common Stock pursuant to
the Offer or the Merger to fail to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code. The Company, Merger Sub and Parent shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes which become payable in connection with the transactions contemplated by
this Agreement. None of Parent, Merger Sub or Company shall be liable for any
transfer taxes imposed on the transfer of the Company Common Stock pursuant to
this Agreement (including, but not limited to, stock transfer taxes, stamp
taxes and any transfer or recording fees (together with any related interest,
penalties or additions to tax)).
SECTION 6.16 Change of Control. Except as contemplated by Section 2.9 and
in the Company Option Plans and Benefit Plans, the execution and delivery of
this Agreement, the Transaction Option Agreement and the Stockholders'
Agreement and the consummation of the transactions contemplated hereby and
thereby will not, except as set forth in Section 6.16 of the Company Disclosure
Schedule, (i) result in any payment (including severance, unemployment
compensation, tax gross-up, bonus or otherwise) becoming due to any Employee,
from the Company or any of its subsidiaries under any Stock Plan, Benefit Plan,
agreement or otherwise, (ii) materially increase any benefits otherwise payable
under any Stock Plan, Benefit Plan, agreement or otherwise or (iii) result in
the acceleration of the time of payment, exercise or vesting of any such
benefits.
SECTION 6.17 Limitation on the Company's Investment Banking Fees'. The
Company covenants and agrees that the investment banking and/or consulting fees
incurred or to be incurred by the Company in connection with the transactions
contemplated by this Agreement, the Transaction Option Agreement and the
Stockholders' Agreement shall be based upon (and not in excess of) the
engagement letter between the Company and Goldman, Sachs & Co. dated February
13, 2002.
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SECTION 6.18 Registration Statement. Parent shall promptly prepare and
file with the SEC under the Securities Act the Registration Statement and shall
use all reasonable efforts to cause the Registration Statement to be declared
effective by the SEC as promptly as practicable. Parent shall promptly take any
action required to be taken under foreign or state securities laws in
connection with the issuance of Parent Common Stock in the Merger. Company
shall cause Ballard, Spahr, Andrews & Ingersoll, LLP, or such other counsel
chosen by Company and reasonably acceptable to Parent, to provide a Tax opinion
regarding the tax consequences to the Company and its shareholders of the Offer
and the Merger in the form required by the SEC in connection with the filing of
the Registration Statement. Each of Parent, Merger Sub and Company shall
provide reasonable and customary representations to Ballard, Spahr, Andrews &
Ingersoll, LLP (or such other counsel) in connection with the rendering of such
Tax opinion.
SECTION 6.19 Section 16 Matters. Prior to the expiration date of the
Offer, Parent and the Company shall take all such reasonable steps (including
appropriate actions by their respective Board of Directors) as may be required
or advisable, to the extent permitted, under and in accordance with applicable
law, to cause any disposition of Shares or acquisitions of Parent Shares
(including derivative securities with respect to Parent Shares) resulting from
the transactions contemplated by Article I and Article II of this Agreement, by
each individual or entity that is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to the Parent or the Company, to
be exempt under Rule 16b-3 promulgated under the Exchange Act.
SECTION 6.20 Election of Director to Parent Board. Promptly following the
Effective Time, Parent shall have elected Evan Jones (or a nominee of Mr.
Jones, mutually agreeable to Mr. Jones and Parent) to its Board of Directors.
Parent shall be obligated to nominate Mr. Jones to serve on Parent's Board of
Directors until the third anniversary of the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Obligations of Each Party to Effect the
Merger. The obligations of Company, Parent and Merger Sub to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) if required by the DGCL, this Agreement and the Merger shall have
been approved and adopted by the stockholders of Company;
(b) Merger Sub shall have accepted for exchange and exchanged all of the
Shares tendered pursuant to the Offer and Merger Sub shall have delivered
the Merger Consideration to the holders of the Shares tendered;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
(d) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated;
(e) the Registration Statement or the Post-Effective Amendment, as the
case may be, shall have been declared effective and no stop order suspending
effectiveness shall be in effect and no proceedings for such purpose shall
be pending before or threatened by the SEC; and
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(f) the shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing on the NASDAQ National Market System, subject
to official notice of issuance.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of Company or otherwise):
(a) by mutual written agreement of Company and Parent (duly authorized
by their respective Boards); or
(b) by either the Company or Parent, if:
(i) the Offer shall have expired or been terminated in accordance
with the terms of this Agreement without Parent or Merger Sub having
accepted for exchange any Shares pursuant to the Offer, provided that
Parent and Merger Sub shall not be permitted to terminate this Agreement
pursuant to this Section 8.1(b)(i) if the Offer is terminated or expires
without Shares having been accepted for exchange as a result of a breach
by Parent or Merger Sub of this Agreement; or
(ii) the Offer has not been consummated on or before April 15, 2002
(or June 28, 2002 if such delay is a result of a second request for
information under the HSR Act) (the "End Date"); provided, however, that
the right to terminate this Agreement under this Section 8.1(b)(ii)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the principal cause of or
resulted in the failure of the Offer to have been consummated on or
before the End Date and such action or failure to act constitutes a
material breach of this Agreement; or
(iii) there shall be any applicable law or regulation that makes
consummation of the Offer or the Merger illegal or otherwise prohibited
or any judgment, injunction, order or decree of any court or
governmental body having competent jurisdiction enjoining the Company or
Parent from consummating the Offer or the Merger is entered and such
judgment, injunction, or order shall have become final and
nonappealable; or
(c) by Parent if a Triggering Event shall have occurred; or
For purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if: (i) the Board of Directors of the Company or any committee
thereof shall have approved or recommended to the Company stockholders any
Acquisition Proposal, (ii) the Board of Directors of the Company or any
committee thereof shall for any reason have withdrawn or shall have amended
or modified in a manner adverse to Parent its Recommendations; (iii) the
Company shall have failed to include the Recommendations in the Offer
Documents or the Schedule 14D-9; or (iv) a tender or exchange offer relating
to 15% or more of the Shares shall have been commenced by a person
unaffiliated with Parent or Merger Sub and the Company shall not have sent
to its security holders pursuant to Rule 14e-2 under the Securities Act,
within seven (7) business days after such tender or exchange offer is first
published, a statement disclosing that the Company recommends rejection of
such tender or exchange offer.
(d) by Parent if (i) any of the representations and warranties of the
Company contained in this Merger Agreement that are qualified by reference
to a Company Material Adverse Effect shall not have been true and correct in
all respects as of the date of determination or the date hereof (other than
representations and warranties which by their terms address matters only as
of another specified date, which shall be true and correct in all respects
only as of such date), or (ii) the representations and warranties of the
Company
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contained in this Merger Agreement that are not so qualified shall not have
been true and correct as of the date of determination or the date hereof as
if made at and as of such time (other than representations and warranties
which by their terms address matters only as of another specified date,
which shall be true and correct only as of such date); and such failures to
be true and correct are reasonably likely to result, individually or in the
aggregate, in a Company Material Adverse Effect; or (iii) the Company shall
have breached or failed to perform or comply with any of its obligations,
agreements or covenants under this Agreement and such breach or failure to
perform or comply is likely to result, individually or in the aggregate, in
a Company Material Adverse Effect; or (iv) Company shall have failed to
perform all of its obligations, agreements or covenants under this Agreement
required to be performed at or prior to the date of determination (a
"Terminating Company Breach"); provided, however, that such Terminating
Company Breach must be reasonably likely to materially adversely affect the
consummation of the Offer and the Merger; or
(e) by Company if (i) any of the representations and warranties of
Parent or Merger Sub contained in this Merger Agreement that are qualified
by reference to a Parent Material Adverse Effect shall not have been true
and correct in all respects as of the date of determination or the date
hereof (other than representations and warranties which by their terms
address matters only as of another specified date, which shall be true and
correct in all respects only as of such date), or (ii) the representations
and warranties of Parent and Merger Sub contained in the Agreement that are
not so qualified shall not have been true and correct as of the date of
determination or the date hereof as if made at and as of such time (other
than representations and warranties which by their terms address matters
only as of another specified date, which shall be true and correct only as
of such date); and such failures to be true and correct are reasonably
likely to result, individually or in the aggregate, in a Parent Material
Adverse Effect; or (iii) either Parent or Merger Sub shall have breached or
failed to perform or comply with any of its obligations, agreements or
covenants under this Agreement and such breach or failure to perform or
comply is likely to result, individually or in the aggregate, in a Parent
Material Adverse Effect; or (iv) Parent or Merger Sub shall have failed to
perform all of their obligations, agreements or covenants under this
Agreement required to be performed at or prior to the date of determination
(a "Terminating Parent Breach"); provided, however, that such Terminating
Parent Breach must be reasonably likely to materially adversely affect the
consummation of the Offer and the Merger; or
(f) by the Company if, pursuant to the requirements and procedures in
Section 6.3(b) and solely in connection with the Company's receipt from a
third party of a bona fide Acquisition Proposal that the Board of Directors
of the Company reasonably determines (after consultation with the Company's
financial advisor) constitutes a Superior Proposal, the Board of Directors
of the Company concludes in good faith after consultation with its outside
legal counsel that to satisfy its fiduciary obligations to the stockholders
of the Company under applicable law, the Board of Directors must not make or
must withdraw or modify the Recommendations and the Board of Directors in
fact withdraws or modifies the Recommendations; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(f) shall not
be available (i) if the Company has breached any of its obligations under
Section 6.3, or (ii) if, within two (2) business days after any purported
termination pursuant to this Section 8.1(f), the Company shall not have paid
the Termination Fee contemplated by Section 8.3(b), or (iii) if the Company
has not provided Parent and Merger Sub with three (3) business days prior
written notice of its intent to so terminate this Agreement and delivered to
Parent and Merger Sub a copy of the writing embodying the Acquisition
Proposal in its then most definitive form.
The party desiring to terminate this Agreement pursuant to this Section
8.1(other than pursuant to Section 8.1(a)) shall give notice of such
termination to the other party.
SECTION 8.2 Notice of Termination; Effect of Termination. Subject to
Section 8.1(b)(iii), any proper termination of this Agreement under Section 8.1
above will be effective immediately upon the delivery of written notice of the
terminating party to the other parties hereto. In the event of the termination
of this Agreement under
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Section 8.1, this Agreement shall be of no further force or effect without
liability of any party (or any stockholder, director, officer, employee, agent,
consultant or representative of such party) to the other parties hereto, except
(i) as set forth in this Section 8.2, Section 8.3 and/or Article IX, each of
which shall survive the termination of this Agreement, and (ii) that nothing
herein shall relieve any party from liability for any willful breach of this
Agreement. No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
SECTION 8.3 Fees and Expenses.
(a) General. Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the Transaction
Option Agreement and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses whether or not the Merger is
consummated.
(b) Termination Fee. If this Agreement is terminated by Parent or the
Company, as applicable, pursuant to Sections 8.1(b)(i) or (ii) and, in
either case, within 12 months following the termination of this Agreement
either a Company Acquisition (as defined below) is consummated or the
Company enters into an agreement providing for a Company Acquisition and
such Company Acquisition is later consummated, the Company shall promptly,
but in any event no later than two (2) business days after the date of such
consummation, pay Parent a fee equal to $19,793,000, in immediately
available funds (the "Termination Fee"). If this Agreement is terminated by
Parent or the Company, as applicable, pursuant to Section 8.1(d) or (e),
then the breaching party shall promptly, but in any event no later than two
(2) business days after the date of such termination, pay to the
non-breaching party the Termination Fee. If this Agreement is terminated by
Parent pursuant to Section 8.1(c), the Company shall promptly, but in any
event no later than two (2) business days after the date of such
termination, pay Parent the Termination Fee. If this Agreement is terminated
by Company pursuant to Section 8.1(f), the Company shall promptly, but in
any event no later than two (2) business days after the date of such
termination, pay Parent the Termination Fee.
Each party acknowledges that the agreements contained in this Section
8.3(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the other party would not
enter into this Agreement. Accordingly, if a party fails to pay in a timely
manner the amounts due pursuant to this Section 8.3(b), and, in order to
obtain such payment, the other party makes a claim that results in a
judgment or settlement for the fee set forth in this Section 8.3(b), the
liable party shall pay to the party making such claim its reasonable costs
and expenses (including reasonable attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set forth
in this Section 8.3(b) at the prime rate of The Chase Manhattan Bank in
effect on the date such payment was required to be made. Payment of the fees
described in this Section 8.3(b) shall be in lieu of damages incurred in the
event of breach of this Agreement, except for willful or intentional
breaches or breaches caused by the gross negligence of the breaching party.
For the purposes of this Agreement, "Company Acquisition" shall mean any
of the following transactions (other than the transactions contemplated by
this Agreement): (i) a sale or other disposition by the Company of a
business or assets representing 15% or more of the consolidated net
revenues, net income or assets of the Company immediately prior to such
sale; (ii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by the Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing 15% or more of any class of equity
securities of the Company; or (iii) a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company (other than a transaction in which the
Company is the acquiror and in which the current Company stockholders retain
more than 85%, directly or indirectly, of the surviving or successor
corporation).
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SECTION 8.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent and the Company.
SECTION 8.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations and Warranties. The
representations and warranties of Company, Parent and Merger Sub contained in
this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
SECTION 9.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Cytyc Corporation
85 Swanson Road
Boxborough, MA 01719
Attention: Patrick J. Sullivan, Chief Executive Officer
Facsimile No.: (978) 635-1033
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Attention: Jonathan M. Moulton, Esq.
Facsimile No.: 617-248-7100
(b) if to Company, to:
Digene Corporation
1201 Clopper Road
Gaithersburg, MD 20878
Attention: Evan Jones,
Chief Executive Officer
Facsimile No.: 301-944-7017
with a copy to:
Ballard, Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Morris Cheston, Jr., Esq.
Fax: (215) 864-8999
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SECTION 9.3 Interpretation; Certain Defined Terms.
(a) When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation." 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. When reference is made herein to "the
business of" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference
to the subsidiaries of an entity shall be deemed to include all direct and
indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the terms "knowledge" or "knows"
mean with respect to a party hereto, with respect to any matter in question,
that any of the executive officers of such party has actual knowledge of
such matter, after reasonable inquiry of such matter. For purposes of this
definition, the "executive officers" of Company shall be those person listed
on Section 9.3(b) of the Company Disclosure Schedule.
(c) For purposes of this Agreement, the terms "Material Adverse Change"
or "Material Adverse Effect" when used in connection with an entity means
any change, event, circumstance, occurrence or effect 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, assets, including intangible assets, capitalization or
results of operations of such entity taken as a whole but shall exclude the
effects of (i) any material adverse change in the Company's business,
properties, financial condition, assets, including intangible assets,
capitalization or results of operations for any fiscal period prior to the
Closing Date that is directly attributable to a disruption in the conduct of
the Company's business arising from the transactions contemplated by this
Agreement or the public announcement thereof, (ii) changes in general
economic conditions, (iii) changes affecting the industry generally in which
the Company operates (provided that such changes do not affect the Company
in a substantially disproportionate manner), and (iv) the matters set forth
on Section 9.3(c) of the Company Disclosure Schedule.
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
(e) For purposes of this Agreement, "subsidiary" of a specified entity
will be any corporation, partnership, limited liability company, joint
venture or other legal entity of which the specified entity (either alone or
through or together with any other subsidiary) owns, directly or indirectly,
50% or more of the stock or other equity or partnership interests the
holders of which are generally entitled to vote for the election of the
Board of Directors or other governing body of such corporation or other
legal entity.
SECTION 9.4 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 party, it being understood that all
parties need not sign the same counterpart.
SECTION 9.5 Entire Agreement; Third Party Beneficiaries. This Agreement
and the documents and instruments and other agreements among the parties hereto
as contemplated by or referred to herein, including the Transaction Option
Agreement, the Stockholders' Agreement, the Confidentiality Agreement, the
Company Disclosure Schedule and the Annex A (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing Date and shall survive any termination of this Agreement;
and (b) are not intended to confer upon any other person any rights or
remedies hereunder, other than the Continuing Directors, and except as
specifically provided in Section 6.9.
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SECTION 9.6 Severability. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
SECTION 9.7 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto 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 seek 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 having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.9 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
SECTION 9.10 Assignment. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written consent of the other parties hereto. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Any
purported assignment in violation of this Section shall be void.
SECTION 9.11 Waiver of Jury Trial. EACH OF PARENT, COMPANY AND MERGER
SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY
OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement and
Plan of Merger to be executed by their duly authorized respective officers as
of the date first written above.
CYTYC CORPORATION
By: /s/ Patrick J. Sullivan
Name: Patrick J. Sullivan
Title: Chief Executive Officer
CRUISER, INC.
By: /s/ Daniel J. Levangie
Name: Daniel J. Levangie
Title: President
DIGENE CORPORATION
By: /s/ Charles M. Fleischman
Name: Charles M. Fleischman
Title: President
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ANNEX A
The capitalized terms used in this Annex A shall have the respective
meanings given to such terms in the Agreement and Plan of Merger, dated as of
February 19, 2002, among Parent, Merger Sub and the Company (the "Merger
Agreement") to which this Annex A is attached.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, subject to the terms of
this Agreement, Merger Sub shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to Merger Sub's obligation to pay for
or return tendered Shares promptly after expiration or termination of the
Offer), to pay for any Shares tendered, and may postpone the acceptance for
payment or, subject to the restriction referred to above, payment for any
Shares tendered, and may amend or terminate the Offer (whether or not any
Shares have theretofore been purchased or paid for) if, by the expiration of
the Offer (as it may be extended in accordance with Section 1.1 of this
Agreement) (i) the Minimum Condition shall not have been satisfied; (ii) any
applicable waiting periods under the HSR Act shall not have expired or been
terminated; or (iii) at any time on or after the date of the Merger Agreement
and before acceptance for payment of, or payment for, such Shares any of the
following events shall occur:
(A) There shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by or before any court or
governmental, regulatory or administrative agency, authority or tribunal,
domestic, foreign or supranational (other than actions, proceedings,
applications or counterclaims filed or initiated by Merger Sub), which (i)
seeks to challenge the acquisition by Merger Sub of the Shares, restrain,
prohibit or delay the making or consummation of the Offer or the Merger or
any other merger or business combination involving Merger Sub or any of its
affiliates and the Company or any of its subsidiaries, prohibit the
performance of any of the contracts or other agreements entered into by
Parent, Merger Sub or any of its affiliates in connection with the
acquisition of the Company or the Shares, or obtain any damages in
connection with any of the foregoing, (ii) seeks to make the purchase of or
payment for, some or all of the Shares pursuant to the Offer, the Merger or
otherwise, illegal, (iii) seeks to impose limitations on the ability of
Merger Sub or the Company or any of their respective affiliates or
subsidiaries effectively to acquire or hold, or requiring Merger Sub, the
Company or any of their respective affiliates or subsidiaries to dispose of
or hold separate, any portion of the assets or the business of Merger Sub or
its affiliates or the Company or its subsidiaries, or impose limitations on
the ability of Merger Sub, the Company or any of their respective affiliates
or subsidiaries to continue to conduct, own or operate all or any portion of
their businesses and assets as heretofore conducted, owned or operated, (iv)
seeks to impose or may result in material limitations on the ability of
Merger Sub or any of its affiliates to exercise full rights of ownership of
the Shares purchased by them, including, without limitation, the right to
vote the Shares purchased by them on all matters properly presented to the
stockholders of the Company, or the right to vote any shares of capital
stock of any subsidiary directly or indirectly owned by the Company, (v) is
reasonably likely to result in a material diminution in the benefits
expected to be derived by Parent and Merger Sub as a result of the
transactions contemplated by the Offer, including the Merger, or (vi) seeks
to impose voting, procedural, price or other requirements in addition to
those under DGCL and federal securities laws (each as in effect on the date
of the Offer to Purchase) or any material condition to the Offer that is
unacceptable (in its reasonable judgment) to Parent and Merger Sub;
(B) There shall have been proposed, sought, promulgated, enacted,
entered, enforced or deemed applicable to the Offer or the Merger by any
domestic, foreign or supranational government or any governmental,
administrative or regulatory authority or agency or by any court or
tribunal, domestic, foreign or supranational, any statute, rule, regulation,
judgment, decree, order or injunction that might, directly or indirectly,
result in any of the consequences referred to in clauses (i) through (vi) of
paragraph (A) above;
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(C) There shall have occurred (1) any general suspension of trading in,
or limitation on prices for, securities on the Nasdaq National Market, (2)
any significant adverse change in securities or financial markets in the
United States or abroad, for example a decline of at least 20 percent in
either the Dow Jones Average of Industrial Stocks or the Standard & Poor's
500 Index from that existing at the close of business on February 19, 2002,
or (3) in the case of any of the foregoing, a material acceleration or
worsening thereof;
(D) (i) The representations and warranties of the Company contained
in the Merger Agreement that are qualified by reference to a Company
Material Adverse Effect shall not have been true and correct in all respects
when made or at any time prior to the consummation of the Offer as if made
at or at and as of such time (other than representations and warranties
which by their terms address matters only as of another specified date,
which shall be true and correct in all respects only as of such date), or
(ii) the representations and warranties of the Company contained in the
Agreement that are not so qualified shall not have been true and correct
when made or at any time prior to the consummation of the Offer as if made
at and as of such time (other than representations and warranties which by
their terms address matters only as of another specified date, which shall
be true and correct only as of such date), and such failures to be true and
correct are reasonably likely to result, individually or in the aggregate,
in a Company Material Adverse Effect;
(E) (i) the Company shall have breached or failed to perform or
comply with any of its obligations, agreements or covenants under the
Agreement and such breach or failure to perform or comply is likely to
result, individually or in the aggregate, in a Company Material Adverse
Effect; or (ii) the obligations of any holders of Company Common Stock under
the Stockholders' Agreement (without giving effect to any "Material Adverse
Effect"; materiality or similar qualifications contained therein) shall not
have been performed or complied with by such holder or holders in all
respects and such failure to perform or comply is reasonably likely to
result, individually or in the aggregate, in a Parent Material Adverse
Effect;
(F) The Merger Agreement shall have been terminated in accordance with
its terms;
(G) The Registration Statement shall have not become effective under
the Securities Act or shall be the subject of any stop order or proceedings
seeking a stop order;
(H) The shares of Parent Common Stock to be issued in the Offer shall
not have been approved for listing on the NASDAQ National Market System,
subject to official notice of issuance; or
(I) The Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or agreement in
principle with respect to any Acquisition Proposal.
The foregoing conditions are for the sole benefit of Parent and Merger Sub
and their respective affiliates and may be asserted by Parent and/or Merger Sub
regardless of the circumstances giving rise to any such condition or may be
waived by Parent and/or Merger Sub, in whole or in part, from time to time in
its or their sole discretion, except as otherwise provided in the Agreement.
The failure by Parent or Merger Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right and may be asserted at any time and from
time to time. Any reasonable determination by Parent and/or Merger Sub
concerning any of the events described herein shall be final and binding.
A-54
Annex B
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated February 19, 2002, is made and entered
into by and among Cytyc Corporation, a Delaware corporation ("Parent"),
Cruiser, Inc., a Delaware corporation and wholly-owned subsidiary of Parent
("Merger Sub"), each stockholder who is a signatory hereto (each a
"Stockholder", and collectively, the "Stockholders") and Digene Corporation, a
Delaware corporation (the "Company") (being a party solely with respect to
Section 6 hereof).
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, Merger Sub and the Company are entering into an Agreement and Plan of
Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"; capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement), pursuant to
which Merger Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company have agreed
that, within seven (7) days after the execution and delivery of the Merger
Agreement, Merger Sub shall commence a cash and stock tender offer to purchase
all outstanding shares of Company Common Stock (as defined in Section 1),
including all of the Shares (as defined in Section 2) owned beneficially by the
Stockholders; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement.
WHEREAS, the Stockholders believe that it is in the best interests of the
Company and its stockholders to induce Parent and Merger Sub to enter into the
Merger Agreement and, therefore, the Stockholders are willing to enter into
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all other
Persons with whom such Person would constitute a "group" as within the
meanings of Section 13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean at any time the common stock, $.01
par value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
SECTION 2. Tender of Shares.
(a) Each Stockholder hereby agrees, severally but not jointly, to
validly tender (and not to withdraw) pursuant to and in accordance with the
terms of the Offer, not later than the fifth (5/th/) business day after
commencement of the Offer pursuant to Section 1.1 of the Merger Agreement
and Rule 14d-2 under the
B-1
Exchange Act, (i) all of the shares of Company Common Stock Beneficially
Owned by such Stockholder on the date hereof (the "Existing Shares"), and
(ii) any additional shares of Company Common Stock acquired by such
Stockholder after the date hereof and prior to the termination of the Offer,
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise Beneficially Owned by such Stockholder
(the "Additional Shares" and, together with the Existing Shares, the
"Shares"). Schedule I hereto sets forth opposite such Stockholder's name the
aggregate number of Existing Shares and the aggregate number of shares of
Company Common Stock subject to options, warrants or other securities
convertible into or exercisable for shares of Company Common Stock (the
"Options") Beneficially Owned by such Stockholder on the date hereof. Each
Stockholder hereby acknowledges and agrees that the Merger Sub's obligation
to accept for payment and pay for Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and
conditions of the Offer. Each of Parent and Merger Sub acknowledges and
agrees that this Agreement shall not be binding upon such Stockholder in the
event that the Merger Agreement shall be amended by the parties thereto to
lower or change the form of consideration set forth in the definition of
Offer Price (as defined in the Merger Agreement).
(b) Upon full payment by Parent or Merger Sub for Shares tendered, the
transfer by each Stockholder of such Stockholder's Shares to Merger Sub in
the Offer shall pass to and unconditionally vest in Merger Sub good and
valid title to the number of Existing Shares set forth opposite such
Stockholder's name on Schedule I hereto and to any Additional Shares, free
and clear of all claims, liens, restrictions, security interests, pledges,
limitations and encumbrances whatsoever.
(c) Each Stockholder hereby agrees to permit Parent and Merger Sub to
publish and disclose in the Offer Documents and, if Company Stockholder
Approval is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) such Stockholder's identity
and ownership of Company Common Stock and the nature of such Stockholder's
commitments, arrangements and understandings under this Agreement.
SECTION 3. Provisions Concerning Company Common Stock.
(a) Each Stockholder hereby agrees that during the period commencing on
the date hereof and continuing until the first to occur of the Effective
Time or termination of the Merger Agreement in accordance with its terms, at
any meeting of the holders of Company Common Stock, however called, or in
connection with any written consent of the holders of Company Common Stock,
such Stockholder shall vote (or cause to be voted) the Shares held of record
or Beneficially Owned by such Stockholder, whether issued, heretofore owned
or hereafter acquired, (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the
terms thereof and each of the other actions contemplated by the Merger
Agreement and this Agreement and any actions required in furtherance thereof
and hereof; (ii) except as otherwise agreed to in writing in advance by
Parent in its sole discretion, against any action or agreement on which
Company Stockholders are to vote that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or this Agreement;
and (iii) except as otherwise agreed to in writing in advance by Parent in
its sole discretion, against the following actions (other than the Merger
and the transactions contemplated by the Merger Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or its subsidiaries; (B) a
sale, lease or transfer of a material amount of assets of the Company or its
subsidiaries, or a reorganization, recapitalization, dissolution or
liquidation of the Company or its subsidiaries; (C) (1) any change in a
majority of the persons who constitute the board of directors of the Company
other than as contemplated under Section 1.4 of the Merger Agreement; (2)
any change in the present capitalization of the Company or any amendment of
the Company's Certificate of Incorporation or Bylaws; (3) any other material
change in the Company's corporate structure or business; or (4) any other
action which, in the case of each of the matters referred to in clauses C
(1), (2), or (3), is intended, or could reasonably be expected, to impede,
B-2
interfere with, delay, postpone, or materially adversely affect the Merger
and the transactions contemplated by this Agreement and the Merger
Agreement. Such Stockholder shall not enter into any agreement or
understanding with any person or entity the effect of which would be
inconsistent or violative of the provisions and agreements contained in this
Section 3.
(b) Each Stockholder hereby grants to Parent a proxy to vote the Shares
of such Stockholder solely as to the matters set forth in Section 3(a) (i)
through (iii); provided, however, that without limiting the foregoing, in
any such vote or other action pursuant to such proxy, the Parent shall not
in any event have the right (and such proxy shall not confer the right) to
vote against the Merger; and provided, further, that the proxy granted
pursuant to this Section 3(b) shall irrevocably cease and shall be of no
further force or effect upon the termination of the Merger Agreement, the
Offer or this Agreement in accordance with their respective terms. Each
Stockholder intends such proxy to be irrevocable and coupled with an
interest and 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 Stockholder with respect to such
Shares.
SECTION 4. Other Covenants, Representations and Warranties. Each
Stockholder, severally, but not jointly, hereby represents and warrants to
Parent as follows:
(a) Ownership of Shares and Options. Such Stockholder is either (i)
the record and Beneficial Owner of, or (ii) the Beneficial Owner but not the
record holder of, the number of Existing Shares and Options set forth
opposite such Stockholder's name on Schedule I hereto. On the date hereof,
the Existing Shares and Options set forth opposite such Stockholder's name
on Schedule I hereto constitute all of the Shares and Options owned of
record or Beneficially Owned by such Stockholder. Except for those Shares
for which the Stockholder shares voting and investment control with another
Stockholder, as set forth on Schedule I, such Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set
forth in Sections 2 and 3 hereof, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights and sole power to agree to
all of the matters set forth in this Agreement, in each case with respect to
all of the Existing Shares and Options set forth opposite such Stockholder's
name on Schedule I hereto, with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. Such Stockholder has the legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party. This Agreement has been duly
and validly executed and delivered by such Stockholder and constitutes a
valid and binding agreement of such Stockholder, enforceable against such
Stockholder in accordance with its terms. There is no beneficiary or holder
of a voting trust certificate or other interest of any trust of which such
Stockholder is trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such stockholder of the
transactions contemplated hereby.
(c) No Consents. 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 such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby,
except (i) for applicable requirements, if any, or the Exchange Act, and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
(d) No Conflicts. None of the execution and delivery of this Agreement
by such Stockholder, the consummation by such Stockholder of the
transactions contemplated hereby or compliance by such Stockholder with any
of the provisions hereof shall (A) conflict with or result in any breach of
any applicable organizational documents applicable to such Stockholder, (B)
result in a breach of, or constitute
B-3
(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 Stockholder is a party or by which such Stockholder or any of
such Stockholder's properties or assets may be bound, or (C) to the
knowledge of the Stockholder violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to such Stockholder
or any of such Stockholder's properties or assets, except, in the case of
clauses (B) and (C), for violations, breaches or defaults that individually
or in the aggregate would not impair the ability of the Stockholder to
perform such Stockholder's obligations under this Agreement.
(e) No Encumbrances. Except as applicable in connection with the
transactions contemplated by Section 2 hereof, such Stockholder's Shares and
the certificates representing such Shares and such Stockholder's Options are
now, and at all times during the term hereof will be, held by such
Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, 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 such encumbrances or proxies
arising hereunder.
(f) No Finder's Fees. No broker, investment banker, financial adviser
or other person is entitled to any broker's, finder's, financial adviser's
or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(g) No Solicitation. No Stockholder shall, in such Stockholder's
capacity as such, directly or indirectly, solicit (including by way of
furnishing information) or respond to any inquiries or the making of any
proposal by any person or entity (other than Parent or any affiliate of
Parent) with respect to the Company that constitutes an Acquisition
Proposal. If any Stockholder receives any such inquiry or proposal, then
such Stockholder shall promptly inform Parent of the terms and conditions,
if any, of such inquiry or proposal and the identity of the person making
such proposal. Each Stockholder will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(h) Restriction on Transfer, Proxies and Non-Interference. Except as
applicable in connection with the transactions contemplated by Sections 2
and 3 hereof, no Stockholder shall, directly or indirectly: (i) offer for
sale, sell, transfer, dispose of, tender, loan, pledge, hedge, 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, disposition, tender, loan, pledge, hedge, encumbrance,
assignment or other disposition of (collectively, "Dispose Of"), any or all
of such Stockholder's Shares or Options or any interest therein; (ii) grant
any proxies or powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained herein untrue or incorrect or have the effect of preventing or
disabling such Stockholder from performing such Stockholder's obligations
under this Agreement.
(i) Waiver of Appraisal Rights. Each Stockholder hereby waives any
rights of appraisal or rights to dissent from the Merger that such
Stockholder may have.
(j) Reliance by Parent. Such Stockholder understands and acknowledges
that Parent and Merger Sub are entering into the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
(k) Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute
and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by
this Agreement.
B-4
SECTION 5. Representations and Warranties of Parent and Merger Sub. Each
of Parent and Merger Sub hereby represents and warrants to the Stockholders as
follows:
(a) Organization, Standing and Corporate Power. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Each of the Parent and Merger Sub has the corporate power and
authority to enter into perform all of their respective obligations under
this Agreement.
(b) Power: Binding Agreement. The execution, delivery and performance
of this Agreement has been duly authorized by all necessary corporate action
on the part of each of Parent and Merger Sub. This Agreement has been duly
and validly executed and delivered by each of Parent and Merger Sub
constitutes a valid and binding agreement of each of them, enforceable
against each of them in accordance with its terms.
(c) No Conflicts. (i) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for execution of this Agreement by Parent or Merger Sub and the
consummation by Parent or Merger Sub of the transactions contemplated hereby
(other than filings that Parent and Merger Sub may be required to make under
the Exchange Act) and (ii) none of the execution and delivery of this
Agreement by Parent or Merger Sub, the consummation by Parent or Merger Sub
of the transactions contemplated hereby or compliance by Parent or Merger
Sub with any of the provisions hereof shall (A) conflict with or result in
any breach of any applicable organizational documents applicable to Parent
or Merger Sub, (B) result in a 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 Merger Sub is a party or by which Parent or Merger Sub or
any of their respective properties or assets may be bound, or (C) to the
knowledge of Parent or Merger Sub, violate any order, writ injunction,
decree, judgment, order, statute, rule or regulation applicable to Parent or
Merger Sub, or any of their respective properties or assets, except, in the
case of clauses (B) and (C), for violations, breaches or defaults that
individually or in the aggregate could not impair the ability of Parent or
Merger Sub to perform their respective obligations under this Agreement or
the Merger Agreement.
SECTION 6. Stop Transfer. Each Stockholder agrees with, and covenants
to, Parent that such Stockholder shall not request that the Company, and the
Company agrees that it will not, register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any of
such Stockholder's Shares, unless such transfer is made in compliance with this
Agreement (including, without limitation, the provisions of Section 2 hereof).
In the event of a stock dividend or distribution, or any change in the Company
Common Stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged.
SECTION 7. Additional Restrictions. Each Stockholder agrees that, during
the period commencing immediately upon the Effective Time and ending at 5:00
p.m. on the 90/th/ day after the Effective Time (the "Lock-Up Period"), such
Stockholder shall not, directly or indirectly, Dispose Of any shares of Parent
Common Stock Beneficially Owned by such Stockholder at any time or from time to
time during the Lock-Up Period (the "90-Day Lock-Up"); provided, however, that
the 90-Day Lock-Up shall not apply to any shares of Parent Common Stock issued
or issuable upon the exercise of any Company Options assumed by Parent pursuant
to the Merger. Each Stockholder agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Parent Common Stock except in compliance with the
foregoing restrictions.
B-5
SECTION 8. Termination. This Agreement shall terminate, and no party
shall have any rights or obligations hereunder and this Agreement shall become
null and void and have no further effect upon the earlier to occur of (i) such
date and time as the Merger Agreement shall have been validly terminated
pursuant to Article VIII thereof and (ii) except with respect to Section 7,
which shall continue in effect after the Effective Time in accordance with its
terms, the Effective Time (the "Expiration Date"). Nothing in this Section 8
shall relieve any party of liability for any willful breach of this Agreement.
Parent and Merger Sub acknowledge that, in the event of termination of this
Agreement in accordance with its terms, the Stockholders shall no longer have
the obligation to tender, and may withdraw, their Shares. Except as otherwise
provided herein, the covenants and agreements contained in Sections 2, 3, 4,
and 5 shall terminate upon the termination of the Merger Agreement in
accordance with its terms.
SECTION 9. Stockholder Capacity. No person executing this Agreement who
is or becomes during the term hereof a director of the Company makes any
agreement or understanding herein in his or her capacity as such director. Each
Stockholder signs solely in such Stockholder's capacity as the record and
Beneficial Owner of, or the trustee of a trust whose beneficiaries are the
Beneficial Owners of, such Stockholder's Shares and Options. In the case of any
Stockholder who is a director of the Company, no provision of this Agreement,
including Section 4(g) hereof, shall prevent, or interfere with such
Stockholder's performance of such Stockholder's obligations, if any, solely in
such Stockholder's capacity as a director of the Company, including, without
limitation, the fulfillment of such Stockholder's fiduciary duties.
SECTION 10. Confidentiality. The Stockholders recognize that successful
consummation of the transactions contemplated by this Agreement may be
dependent upon confidentiality with respect to the matters referred to herein.
In this connection, pending public disclosure thereof, each Stockholder hereby
agrees not to disclose or discuss such matters with anyone not a party to this
Agreement (other than such Stockholder's counsel and advisors, if any) without
the prior written consent of Parent, except for filings required pursuant to
the Exchange Act and the rules and regulations thereunder or disclosures such
Stockholder's counsel advises are necessary in order to fulfill such
Stockholder's obligations imposed by law, in which event such Stockholder shall
give notice of such disclosure to Parent as promptly as practicable so as to
enable Parent to seek a protective order from a court of competent jurisdiction
with respect thereto.
SECTION 11. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof.
(b) Certain Events. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to such Stockholder's Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholders' heirs,
guardians, administrators or successors. Notwithstanding the foregoing or
any transfer of Shares or Options, the transferor shall remain liable for
the performance of all obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party,
provided that Parent may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, with
respect to any one or more Stockholders, except upon the execution and
delivery of a written agreement executed by the parties hereto; provided
that Schedule I hereto may be supplemented by Parent by adding the name and
other relevant information concerning any stockholder of the Company who
agrees to be bound by the terms of this Agreement without the agreement of
any other party hereto, and thereafter such added stockholder shall be
treated as a "Stockholder" for all purposes of this Agreement.
B-6
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such
as Federal Express, providing proof of delivery. All communications
hereunder shall be delivered to the respective parties at the following
addresses:
If to Stockholder: At the addresses set forth on Schedule I hereto
Copies to: Ballard, Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Morris Cheston, Jr., Esq.
Telecopy: (215) 864-8999
If to Parent: Cytyc Corporation
85 Swanson Road
Boxborough, MA 01719
Telephone: (978) 263-8000
Telecopy: (978) 266-2266
copies to: Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: Jonathan M. Moulton, Esq.
Telephone: (617) 248-7000
Telecopy: (617) 248-7100
If to Company: Digene Corporation
1201 Clopper Road
Gaithersburg, MD 20878
Telephone: (301) 944-7000
copies to: Ballard, Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Morris Cheston, Jr., Esq.
Telecopy: (215) 864-8999
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that (i) Parent will be irreparably damaged if for any reason
any Stockholder failed to tender, and not to withdraw, such Stockholder's
Shares in the Offer in accordance with this Agreement and (ii) a breach by
the other party of any covenants or agreements contained in this Agreement,
in each case, will cause the non-breaching party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
B-7
(h) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by
any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity
who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in
any action, suit or proceeding arising in connection with this Agreement,
and agrees that any such action, suit or proceeding shall be brought only in
such court (and waives any objection based on forum non conveniens or any
other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (l) and
shall not be deemed to be a general submission to the jurisdiction of said
court or in the State of Delaware other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any
such action, suit or proceeding.
(m) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Stockholders
Agreement to be executed as of the date first written above in their individual
capacity or by their respective officers thereunto duly authorized, as
applicable.
CYTYC CORPORATION
By: /s/ Patrick J. Sullivan
------------------------------------
Name: Patrick J.
Sullivan
Title: Chief Executive
Officer
CRUISER, INC.
By: /s/ Daniel J. Levangie
------------------------------------
Name: Daniel J.
Levangie
Title: President
[SIGNATURES CONTINUE ON NEXT PAGE]
B-8
SIGNATURES CONTINUED FROM PRIOR PAGE]
DIGENE CORPORATION
(Solely with respect to Section 6)
By: /s/ CHARLES M.
FLEISCHMAN
-----------------------------------
Name: Charles M.
Fleischman
Title: President
STOCKHOLDERS:
/s/ Evan Jones
------------------------------
Evan Jones
/s/ Charles M. Fleischman
------------------------------
Charles M. Fleischma
/s/ Evan Jones
------------------------------
Evan Jones
/s/ Wayne T. Hockmeyer,
Ph.D.
------------------------------
Wayne T. Hockmeyer, Ph.D
/s/ John H. Landon
------------------------------
John H. Landon
/s/ Joseph M. Migliara
------------------------------
Joseph M. Migliara
/s/ John J. Whitehead
------------------------------
John J. Whitehead
/s/ Attila T. Lorincz, Ph.D.
------------------------------
Attila T. Lorincz, Ph.D.
/s/ Robert McG. Lilley
------------------------------
Robert McG. Lilley
/s/ Belinda O. Patrick
------------------------------
Belinda O. Patrick
[SIGNATURES CONTINUE ON NEXT PAGE]
B-9
SIGNATURES CONTINUED FROM PRIOR PAGE]
/s/ Greg Brown
-----------------------------
Greg Brown
/s/ Jeanmarie P. Curley
-----------------------------
Jeanmarie P. Curley
/s/ Susan M. Keese
-----------------------------
Susan M. Keese
/s/ William J. Payne, Ph.D.
-----------------------------
William J. Payne, Ph.D.
/s/ Donna Marie Seyfried
-----------------------------
Donna Marie Seyfried
/s/ Joseph P. Slattery
-----------------------------
Joseph P. Slattery
/s/ Larry Wellman
-----------------------------
Larry Wellman
ARMONK PARTNERS
By: /s/ Evan Jones
---------------------------------------
Name: Evan Jones
Title: Partner
B-10
SCHEDULE I TO
STOCKHOLDERS AGREEMENT
Number of Beneficially Number of Beneficially
Name and Address of Stockholder(1) Owned Existing Shares Owned Options
---------------------------------- ---------------------- ----------------------
Evan Jones(2)....................... 4,643,212 363,347
Charles M. Fleischman(2)............ 4,411,739 263,347
Wayne T. Hockmeyer, Ph.D............ 0 10,000
John H. Landon...................... 0 10,000
Joseph M. Migliara.................. 0 30,000
John J. Whitehead................... 5,149 30,000
Attila T. Lorincz, Ph.D............. 16,672 115,285
Robert McG. Lilley.................. 16,000 142,000
Belinda O. Patrick.................. 500 0
Greg Brown.......................... 0 15,000
Jeanmarie P. Curley................. 0 14,333
Susan M. Keese...................... 0 16,666
William J. Payne, Ph.D.............. 0 136,000
Donna Marie Seyfried................ 0 101,000
Joseph P. Slattery.................. 0 97,518
Larry Wellman....................... 0 8,334
Armonk Partners..................... 4,371,401 0
Aggregate Number of Existing Shares: 4,721,871
- --------
(1) The address for each Stockholder is 1201 Clopper Road, Gaithersburg, MD
20878.
(2) Includes 4,371,401 shares owned by Armonk Partners as to which the
Stockholder shares voting and investment power as a general partner.
B-11
Annex C
TRANSACTION OPTION AGREEMENT
THIS TRANSACTION OPTION AGREEMENT (this "Agreement") is entered into as of
February 19, 2002, by and between Cytyc Corporation, a Delaware corporation
("Parent"), and Digene Corporation, a Delaware corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement, the
Company, Parent and Merger Sub, a Delaware corporation and a newly-formed,
wholly-owned direct subsidiary of Parent ("Merger Sub"), are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for a business combination
between Parent and the Company to be effected by the merger of Merger Sub with
and into the Company upon the terms and subject to the conditions of the Merger
Agreement; and
WHEREAS, as a condition to Parent's willingness to enter into the Merger
Agreement, Parent has requested that the Company agree, and the Company has
agreed, to grant the Option (as hereinafter defined) to Parent upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein and in the Merger Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereby
agree as follows:
SECTION 1. Grant of Option. The Company hereby grants to Parent an
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to a number of shares (the "Option Shares") of fully paid and nonassessable
common stock, par value $0.01 per share, of the Company ("Company Common
Stock"), equal to 19.9% of the number of shares of Company Common Stock issued
and outstanding (before giving effect to the exercise of the Option) in
accordance with Section 2 of this Agreement at a purchase price per share in
cash equal to $28.81 (the "Option Price"). The number and type of Option Shares
and the Option Price are subject to adjustment as set forth herein.
SECTION 2. Exercise of Option.
(a) Parent may exercise the Option, in whole or in part and from time to
time on or after the Appointment Time if, but only if, after giving effect
to the exercise of the Option and as a result of such exercise, the number
of shares of the Company Common Stock then owned by Parent and Merger Sub
will represent at least 90.1% of the shares of the Company Common Stock then
outstanding.
(b) In the event that Parent desires to exercise the Option, it shall
deliver to the Company a written notice (such notice being herein referred
to as an "Exercise Notice" and the date of issuance of an Exercise Notice
being herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it desires to purchase pursuant to such exercise and
(ii) a place and date, not earlier than three (3) business days nor later
than ten (10) business days from the Notice Date, for the closing of such
purchase (the "Option Closing Date"); provided, that if the closing of the
purchase and sale pursuant to the Option (the "Option Closing") cannot be
consummated, by reason of any applicable decree, injunction or order, the
period of time that otherwise would run pursuant to this Section 2(b) shall
run instead from the date on which such restriction on consummation has
expired or been terminated; and provided further, without limiting the
foregoing, that if, in the reasonable opinion of Parent, prior notification
to or approval of any regulatory agency is required in connection with such
purchase, the Company or Parent, as the case may be, shall promptly file the
required notice or application for approval and shall expeditiously process
the same and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained
and any requisite waiting period or periods shall have passed.
C-1
(c) At the Option Closing, Parent shall pay to the Company the aggregate
Option Price for the number of shares of Company Common Stock or other
securities being purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
the Company; provided that failure or refusal of the Company to designate
such a bank account shall not preclude Parent from exercising the Option;
and provided, further, that failure or refusal of the Company to designate
such a bank account shall not preclude Parent from exercising the Option by
delivering a bank check in the amount of the aggregate Option Price to the
Company at the address set forth in the Merger Agreement for the Company no
later than Option Closing Date.
(d) At the Option Closing, simultaneously with the delivery of
immediately available funds or bank check as provided in Section 2(c)
hereof, the Company shall deliver to Parent a certificate or certificates
representing the number of Option Shares purchased by Parent and, if the
Option should be exercised in part only, a new agreement substantially
similar to this Agreement evidencing the rights of Parent thereof to
purchase the balance of the Option Shares purchasable hereunder. If at the
time of issuance of any Option Shares pursuant to an exercise of all or part
of the Option hereunder, the Company shall have issued any rights or other
securities which are attached to or otherwise associated with the Company
Common Stock, then each Option Share issued pursuant to such exercise shall
also represent such rights or other securities with terms substantially the
same as and at least as favorable to Parent as are provided to stockholders
generally and, if applicable, under any stockholder rights agreement or
similar agreement of the Company then in effect.
(e) Certificates for Option Shares delivered at an Option Closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM."
It is understood and agreed that the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the
above legend shall be removed by delivery of substitute certificate(s)
without such reference if Parent shall have delivered to the Company a copy
of a letter from the staff of the Securities and Exchange Commission (the
"SEC"), or an opinion of counsel reasonably satisfactory to the Company, to
the effect that such legend is not then required for purposes of the
Securities Act.
(f) Upon the delivery by Parent to the Company of the Exercise Notice,
and the tender of the applicable Option Price in immediately available funds
or by bank check, Parent shall be deemed to be the holder of record of the
Option Shares issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Option Shares shall not then be actually delivered to
Parent or the Company shall have failed or refused to designate the bank
account described in Section 2(d). The Company shall pay all expenses that
may be payable in connection with the preparation, issuance and delivery of
stock certificates under this Section 2 in the name of Parent. Parent shall
pay all expenses that may be payable in connection with the issuance and
delivery of stock certificates or a substitute option agreement in the name
of any assignee, transferee or designee of Parent.
SECTION 3. Covenants of the Company. In addition to its other agreements
and covenants herein, the Company agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Company Common Stock (and other securities of the Company)
issuable pursuant to this Agreement so that the Option may be exercised without
additional authorization of Company Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Company Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of
any of the covenants, stipulation or conditions to be observed or performed
hereunder by the
C-2
Company; (iii) promptly to take any and all action as may from time to time be
required (including complying with all premerger notification, reporting and
waiting requirements under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder) in
order to permit Parent to exercise the Option and the Company to duly and
effectively issue Option Shares pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of Parent against dilution in
accordance with Section 5 hereof.
SECTION 4. Exchange; Replacement. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Parent, upon
presentation and surrender of this Agreement at the principal office of the
Company, for other agreements providing for Options of different denominations
entitling the holder thereof to purchase, on the same terms and subject to the
same conditions as are set forth herein, in the aggregate the same number of
shares of Company Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any agreements and related options for which
this Agreement (and the Option granted hereby) may be exchanged. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, the Company will execute and
deliver a new Agreement of like tenor and date.
SECTION 5. Adjustments. The number of shares of Company Common Stock
purchasable upon the exercise of the Option shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, Company Common Stock by reason of stock dividends,
splits, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares or other similar transactions, then that which is then
purchasable upon exercise hereof shall be appropriately adjusted so that Parent
shall receive upon exercise of the Option and payment of the aggregate Option
Price hereunder the number and class of shares or other securities or property
(including cash) that Parent would have owned or been entitled to receive after
the happening of any of the events described above if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. Whenever the number of shares of Company Common Stock subject to
this Option is adjusted pursuant to this Section 5, the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits provided hereunder and proper provision shall be made in any agreement
governing any such transaction to provide for such proper adjustment and the
full satisfaction of the Company's obligations hereunder.
SECTION 6. Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent as follows:
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized
by the board of directors of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by the Company.
(b) The Company has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Company Common Stock equal to the maximum number of shares of
Company Common Stock at any time and from time to time issuable hereunder,
and all such shares of Company Common Stock, upon issuance pursuant hereto,
will be duly authorized, validly issued, fully paid, nonassessable, and will
be delivered free and clear of all liens and not subject to any preemptive
rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation pursuant to any provisions of the
certificate of incorporation or bylaws of the Company or any subsidiary of
the Company, or of any loan or
C-3
credit agreement, note, mortgage, indenture, lease, plan or other agreement,
contractual obligation, instrument, permit, concession, franchise or license
applicable to the Company or any subsidiary of the Company or their
respective properties or assets.
(d) No "fair price", "moratorium", "control share acquisition" or other
similar anti-takeover statute or regulation enacted under state or federal
laws applicable to the Company or any of its subsidiaries will apply to this
Agreement or the transactions contemplated hereby. The Company has taken,
and will in the future take, all steps necessary to irrevocably exempt the
transactions contemplated by this Agreement from any other applicable state
takeover law and from any applicable charter provision containing change of
control or anti-takeover provisions.
SECTION 7. Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company as follows:
(a) Parent has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by
the board of directors of Parent and no other corporate proceedings on the
part of Parent are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Parent.
(b) Parent is entering into this Agreement and is acquiring and/or will
acquire the Option Shares for its own account and not with a view to resale
or distribution of all or any part of the Option Shares in violation of
applicable law.
SECTION 8. Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder to
any other person without the express written consent of the other party.
SECTION 9. Best Efforts. Each of Parent and the Company will use its
reasonable best efforts to make all filings with, and to obtain consents of,
all third parties and Governmental Entities necessary to the consummation of
the transactions contemplated by this Agreement, including without limitation,
if applicable, making application to list the shares of Company Common Stock
issuable hereunder on the Nasdaq National Market of The Nasdaq Stock Market
upon official notice of issuance.
SECTION 10. Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement by either
party hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other equitable relief.
SECTION 11. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule or law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in a mutually acceptable manner in order
that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.
SECTION 12. Notices. All notices, claims, demands and other
communications hereunder shall be deemed to have been duly given or made when
delivered in person, by registered or certified mail (postage prepaid, return
receipt requested), by overnight courier or by facsimile at the respective
addresses of the parties set forth in the Merger Agreement,
SECTION 13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
C-4
SECTION 14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 15. Definitions. Capitalized terms used and not defined herein
shall have the meanings set forth in the Merger Agreement.
SECTION 16. Expenses. Notwithstanding anything to the contrary in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder.
SECTION 17. Termination. This Agreement shall terminate upon the earlier
of the Effective Time or termination of the Merger Agreement for any reason in
accordance with its terms.
SECTION 18. Entire Agreement. Except as otherwise expressly provided
herein or in the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto,
and their successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein. Any provision of this Agreement may be waived only in writing
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto.
SECTION 19. Further Assurances. In the event of any exercise of the Option
by Parent, the Company and Parent shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary to
the fullest extent permitted by law in order to consummate the transactions
provided for by such exercise. Nothing contained in this Agreement shall be
deemed to authorize the Company or Parent to breach any provision of the Merger
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Transaction
Option Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CYTYC CORPORATION
By: /s/ Patrick J. Sullivan
Name: Patrick J. Sullivan
Title: Chief Executive Officer
DIGENE CORPORATION
By: /s/ Charles M. Fleischman
Name: Charles M. Fleischman
Title: President
C-5
Annex D
PERSONAL AND CONFIDENTIAL
February 19, 2002
Board of Directors
Digene Corporation
1201 Clopper Road
Gaithersburg, Maryland 20878
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.01
per share (the "Shares"), of Digene Corporation (the "Company") of the
Consideration (as defined below) proposed to be paid by Cytyc Corporation
("Cytyc") in the Offer and the Merger (as defined below) pursuant to the
Agreement and Plan of Merger, dated as of February 19, 2002, among Cytyc,
Cruiser, Inc., a wholly-owned subsidiary of Cytyc ("Merger Sub"), and the
Company. The Agreement provides for a cash and stock tender offer for all of
the issued and outstanding Shares (the "Offer") pursuant to which Merger Sub
will pay $4.00 in cash and exchange 1.1969 shares of common stock, par value
$0.01 per share ("Cytyc Common Stock"), of Cytyc for each Share accepted (the
"Offer Consideration"). The Agreement further provides that following
completion of the Offer, Merger Sub will be merged with and into the Company
(the "Merger") and each outstanding Share (other than Shares to be canceled
pursuant to Section 2.6(b) of the Agreement and Dissenting Shares (as defined
in the Agreement)) will be converted into the right to receive an amount in
cash and whole shares of Cytyc Common Stock equal to the Offer Consideration
(the "Merger Consideration" and together with the Offer Consideration, the
"Consideration").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in performing financial analyses with respect to businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities and private placements as well as for estate, corporate and
other purposes. We are familiar with the Company having provided certain
investment banking services to the Company from time to time, including having
acted as its financial advisor in connection with, and having participated in
certain of the negotiations leading to, the Agreement. We also may provide
investment banking services to Cytyc and its subsidiaries in the future.
Goldman, Sachs & Co. provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold positions in securities, including derivative
securities, of the Company or Cytyc for its own account and for the accounts of
customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the three fiscal years ended June 30, 2001 and of Cytyc for the
three years ended December 31, 2000; certain interim reports to stockholders
and Quarterly Reports on Form 10-Q of the Company and Cytyc; certain other
communications from the Company and Cytyc to their respective stockholders;
certain internal financial analyses and forecasts for Cytyc prepared by the
management of Cytyc (the "Cytyc Forecasts"); certain financial analyses and
forecasts for the Company approved by the Company for use by us for purposes of
our opinion (the "Company Forecasts"); and certain cost savings, operating
synergies and revenue enhancements projected by the managements of the Company
and Cytyc to result from the transaction contemplated by the Agreement (the
"Synergies"). We also have held discussions with members of the senior
management of the Company and Cytyc regarding their assessment of the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement and the past and current business operations, financial condition
and future prospects of their respective companies. In addition, we have
reviewed the reported price and trading activity for the Shares and the Cytyc
Common Stock, compared certain financial and stock market information for the
Company and Cytyc with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the medical technology industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
D-1
Board of Directors
Digene Corporation
February 19, 2002
Page Two
We have relied upon the accuracy and completeness of all of the financial,
accounting and other information discussed with or reviewed by us and have
assumed such accuracy and completeness for purposes of rendering this opinion.
In that regard, we have assumed with your consent that the Company Forecasts,
the Cytyc Forecasts and the Synergies have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the Company
and Cytyc, and that such Synergies will be realized in the amounts and time
periods contemplated thereby. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or Cytyc
or any of their subsidiaries and we have not been furnished with any such
evaluation or appraisal. We also were not requested to solicit, and did not
solicit, interest from other parties with respect to an acquisition of or other
business combination with the Company. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board
of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to whether or not or as to how any holder of Shares should
tender such Shares in connection with, or as to any holder of Shares should
vote with respect to, such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
Consideration proposed to be paid by Cytec in the Offer and the Merger pursuant
to the Agreement is fair from a financial point of view to the holders of
Shares.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- ---------------------
(GOLDMAN, SACHS & CO.)
D-2
Annex E
Section 262 of the General Corporation Law of the State of Delaware ("Appraisal
Rights")
262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S)228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
E-1
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or (S)253
of this title, then either a constituent corporation, before the
effective date of the merger or consolidation, or the surviving or
resulting corporation within ten days thereafter, shall notify each of
the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available for any
or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section.
Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled
to appraisal rights may, within 20 days after the date of mailing of
such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer
agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining
the stockholders entitled to receive
E-2
either notice, each constituent corporation may fix, in advance, a
record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
E-3
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
E-4
The Information Agent:
[LOGO] Innisfree
M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Bankers and brokers call collect: (212) 750-5833
All others call toll free: (888) 750-5834
The Exchange Agent:
[LOGO] EQUISERVE
EquiServe Trust Company, N.A.
By Mail:
EquiServe Trust Company, N.A.
Corporate Actions
Post Office Box 43014
Providence, RI 02940-3014
By Hand:
Securities Transfer & Reporting
c/o EquiServe Trust Company, N.A.
100 William's Street, Galleria
New York, NY 10038
By Overnight Delivery:
EquiServe Trust Company, N.A.
Corporate Actions
150 Royall Street
Canton, MA 02021
By Facsimile Transmission:
(For Eligible Institutions Only)
781-575-2233
Confirm Facsimile Transmission:
By Telephone Only:
781-575-3120
Until the expiration of the offer or any subsequent offering period, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Exculpation. Section 102(b)(7) of the Delaware General Corporation Law
permits a corporation to include in its certificate of incorporation a
provision eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision may not eliminate or limit the
liability of a director for any breach of the director's duty of loyalty to the
corporation or its stockholders, for acts or omissions that are not in good
faith or that involve intentional misconduct or a knowing violation of law, for
the payment of unlawful dividends, or for any transaction from which the
director derived an improper personal benefit. The Cytyc certificate of
incorporation limits the personal liability of a director to Cytyc and its
stockholders for monetary damages for a breach of fiduciary duty as a director
to the fullest extent permitted by law.
Indemnification. Section 145 of the Delaware Law permits a corporation to
indemnify any of its directors, officers, employees or agents who was or is a
party, or is threatened to be made a party to any third party proceeding by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
firm, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner such person reasonably believed to be in and not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reason to believe that such person's conduct was
unlawful. In a derivative action, i.e., one by or in the right a corporation,
the corporation is permitted to indemnify any of its directors, officers,
employees or agents against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of an action or suit if the person acted in good faith and in a manner that he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent
that the court in which the action or suit was brought shall determine upon
application that such person is fairly and reasonably entitled to indemnity for
such expenses despite the adjudication of liability. The Cytyc certificate of
incorporation provide for indemnification of directors, officers, employees or
agents for any liability incurred in their official capacity to the fullest
extent permissible under Delaware Law.
Insurance. The directors and officers of Cytyc are insured under a policy of
directors' and officers' liability insurance.
Merger Agreement Provisions Relating to Digene Directors and Officers.
Pursuant to the merger agreement, subject to applicable law, we and our
wholly-owned subsidiary Cruiser, Inc. have agreed to indemnify and hold
harmless the current and former directors and officers of Digene in respect of
acts and omissions occurring prior to the consummation of the merger to the
extent currently provided in Digene's certificate of incorporation. In
addition, we have agreed to maintain for a period of 6 years from the
consummation of the merger Digene's current directors' and officers' insurance
and indemnification policy to the extent it provides coverage for events
occurring prior to the consummation of the merger for all of Digene's current
officers and directors. If the existing directors' and officer's insurance and
indemnification policy cannot be maintained, expires or is terminated or
canceled during such six-year period, we have agreed to use reasonable efforts
to cause to be obtained as much comparable insurance as can be obtained for the
remainder of such period on terms and conditions substantially similar to the
existing policy. In addition, in the event we consolidate with or merge into
any other company and shall not be the continuing or surviving company of such
consolidation or merger, or if we transfer or convey all or substantially all
of our properties and assets to any other company, then, and in each such case,
we have agreed that proper provision shall be made so that these successors and
assigns shall assume these indemnification obligations.
II-1
Item 21. Exhibits and Financial Statement Schedules.
(A) Exhibits
Exhibit Description
Number -----------
2.1 Agreement and Plan of Merger, dated February 19, 2002, by and among Cytyc Corporation, Digene
Corporation, and Cruiser, Inc. (included as Annex A to the prospectus contained in this registration statement).
3.1*.. Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Cytyc's
Registration Statement on Form S-1, as amended, file no. 333-19367).
3.2*.. Amended and Restated By-Laws of Cytyc (incorporated by reference to Cytyc's Registration Statement on Form
S-1, as amended, file no. 333-19367).
3.3*.. Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of Cytyc (incorporated
by reference to Cytyc's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed August 14,
2000, file no. 000-27558).
4.1*.. Specimen certificate representing the Common Stock of Cytyc (incorporated by reference to Cytyc's
Registration Statement on Form S-1, as amended, file no. 333-19367).
4.2*.. Rights Agreement, dated as of August 27, 1997, between Cytyc Corporation and BankBoston, N.A (the "Rights
Agreement") which includes as Exhibit A the Form of Certificate of Designations, as Exhibit B the Form of
Rights Certificate, and as Exhibit C the Summary of Rights to Purchase Preferred Stock. (incorporated by
reference Cytyc's Current Report on Form 8-K, filed August 29, 1997, file no. 000-27558).
4.3* Amendment No. 1 to Rights Agreement, dated as of June 22, 1998, between Cytyc Corporation and
BankBoston, N.A., amending the Rights Agreement (incorporated by reference to Cytyc's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, filed August 13, 1998, file no. 000-27558).
5.1* Opinion of Testa, Hurwitz & Thibeault, LLP regarding the validity of the securities being registered (incorporated
by reference to Cytyc's Registration Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
8.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding material federal income tax consequences of the
offer and the merger (incorporated by reference to Cytyc's Registration Statement on Form S-4, filed March 1,
2002, file no. 333-83582).
21.1* Subsidiaries of Cytyc Corporation (incorporated by reference to Cytyc's Registration Statement on Form S-4,
filed March 1, 2002, file no. 333-83582).
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Ernst & Young LLP
23.4* Consent of Testa, Hurwitz & Thibeault, LLP (included in the opinion filed as Exhibit 5.1 to Cytyc's Registration
Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
23.5* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in the opinion filed as Exhibit 8.1 to Cytyc's
Registration Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
24.1* Power of Attorney (included on the signature page to Cytyc's Registration Statement on Form S-4, filed March
1, 2002, file no. 333-83582).
99.1 Stockholders Agreement, dated February 19, 2002, by and among Cytyc Corporation, Cruiser, Inc. and certain
stockholders of Digene Corporation (included as Annex B to the prospectus contained in this registration
statement).
99.2 Transaction Option Agreement, dated February 19, 2002, by and between Cytyc Corporation and Digene
Corporation (included as Annex C to the prospectus contained in this registration statement).
99.3* Form of Letter of Transmittal (incorporated by reference to Cytyc's Registration Statement on Form S-4, filed
March 1, 2002, file no. 333-83582).
99.4* Form of Notice of Guaranteed Delivery (incorporated by reference to Cytyc's Registration Statement on Form
S-4, filed March 1, 2002, file no. 333-83582).
99.5* Form of Letter to Brokers, Dealers, etc. (incorporated by reference to Cytyc's Registration Statement on Form
S-4, filed March 1, 2002, file no. 333-83582).
99.6* Form of Letter to Clients (incorporated by reference to Cytyc's Registration Statement on Form S-4, filed March
1, 2002, file no. 333-83582).
99.7* Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (incorporated
by reference to Cytyc's Registration Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
99.8* Consent of Goldman, Sachs & Co. (incorporated by reference to Cytyc's Registration Statement on Form S-4,
filed March 1, 2002, file no. 333-83582).
99.9 Opinion of Goldman, Sachs & Co. (included as Annex D to the prospectus contained in this registration
statement).
99.10* Letter to Commission Pursuant to Temporary Note 3T (incorporated by reference to Amendment No. 2 to
Cytyc's Registration Statement on Form S-4, filed on March 28, 2002, file no. 333-83582).
- --------
* Incorporated by reference.
II-2
(b) Financial Statement Schedules
Not applicable.
(c) Item 4(b) Information.
The opinion of Goldman Sachs & Co. is included as Annex D to this prospectus
included in this registration statement.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) 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 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 shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time be deemed to be the
initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
undersigned registrant undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed
II-3
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) 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 such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(f) 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.
(g) 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.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boxborough, Commonwealth
of Massachusetts, on this 16th day of May, 2002.
CYTYC CORPORATION
/s/ Patrick J. Sullivan
By:________________________________
Patrick J. Sullivan
Chief Executive Officer, Vice
Chairman
and Chairman-Elect
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below:
Signature Title(s) Date
--------- -------- ----
/s/ Patrick J. Sullivan Chief Executive Officer, Vice May 16, 2002
- ----------------------------- Chairman and Chairman-Elect
Patrick J. Sullivan (Principal Executive
Officer)
/s/ Robert L. Bowen Vice President, Chief May 16, 2002
- ----------------------------- Financial Officer and
Robert L. Bowen Treasurer (Principal
Financial and Accounting
Officer)
* Chairman of the Board May 16, 2002
- -----------------------------
Monroe E. Trout, M.D.
* Vice Chairman of the Board May 16, 2002
- -----------------------------
C. William McDaniel
* Director May 16, 2002
- -----------------------------
Sally W. Crawford
* Director May 16, 2002
- -----------------------------
William G. Little
* Director May 16, 2002
- -----------------------------
Anna S. Richo
* Director May 16, 2002
- -----------------------------
Walter E. Boomer
II-5
* Director May 16, 2002
- -----------------------------
Joseph B. Martin
* Director May 16, 2002
- -----------------------------
William H. Longfield
* Director May 16, 2002
- -----------------------------
Marc C. Breslawsky
*By: /s/ Patrick J. Sullivan
- -----------------------------
Partrick J. Sullivan
Attorney-in-Fact
II-6
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger, dated February 19, 2002, by and among Cytyc Corporation, Digene
Corporation, and Cruiser, Inc. (included as Annex A to the prospectus contained in this registration statement).
3.1* Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Cytyc's
Registration Statement on Form S-1, as amended, file no. 333-19367).
3.2* Amended and Restated By-Laws of Cytyc (incorporated by reference to Cytyc's Registration Statement on Form
S-1, as amended, file no. 333-19367).
3.3* Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of Cytyc (incorporated
by reference to Cytyc's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed August 14,
2000, file no. 000-27558).
4.1* Specimen certificate representing the Common Stock of Cytyc (incorporated by reference to Cytyc's
Registration Statement on Form S-1, as amended, file no. 333-19367).
4.2* Rights Agreement, dated as of August 27, 1997, between Cytyc Corporation and BankBoston, N.A (the "Rights
Agreement") which includes as Exhibit A the Form of Certificate of Designations, as Exhibit B the Form of
Rights Certificate, and as Exhibit C the Summary of Rights to Purchase Preferred Stock. (incorporated by
reference Cytyc's Current Report on Form 8-K, filed August 29, 1997, file no. 000-27558)
4.3* Amendment No. 1 to Rights Agreement, dated as of June 22, 1998, between Cytyc Corporation and
BankBoston, N.A., amending the Rights Agreement (incorporated by reference to Cytyc's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, filed August 13, 1998, file no. 000-27558).
5.1* Opinion of Testa, Hurwitz & Thibeault, LLP regarding the validity of the securities being registered (incorporated
by reference to Cytyc's Registration Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
8.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding material federal income tax consequences of the
offer and the merger (incorporated by reference to Cytyc's Registration Statement on Form S-4, filed March 1,
2002, file no. 333-83582).
21.1* Subsidiaries of Cytyc Corporation (incorporated by reference to Cytyc's Registration Statement on Form S-4,
filed March 1, 2002, file no. 333-83582).
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Ernst & Young LLP
23.4* Consent of Testa, Hurwitz & Thibeault, LLP (included in the opinion filed as Exhibit 5.1 to Cytyc's Registration
Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
23.5* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in the opinion filed as Exhibit 8.1 to Cytyc's
Registration Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
24.1* Power of Attorney (included on the signature page to Cytyc's Registration Statement on Form S-4, filed March
1, 2002, file no. 333-83582).
99.1 Stockholders Agreement, dated February 19, 2002, by and among Cytyc Corporation, Cruiser, Inc. and certain
stockholders of Digene Corporation (included as Annex B to the prospectus contained in this registration
statement).
99.2 Transaction Option Agreement, dated February 19, 2002, by and between Cytyc Corporation and Digene
Corporation (included as Annex C to the prospectus contained in this registration statement).
99.3* Form of Letter of Transmittal (incorporated by reference to Cytyc's Registration Statement on Form S-4, filed
March 1, 2002, file no. 333-83582).
99.4* Form of Notice of Guaranteed Delivery (incorporated by reference to Cytyc's Registration Statement on Form
S-4, filed March 1, 2002, file no. 333-83582).
99.5* Form of Letter to Brokers, Dealers, etc. (incorporated by reference to Cytyc's Registration Statement on
Form S-4, filed March 1, 2002, file no. 333-83582).
99.6* Form of Letter to Clients (incorporated by reference to Cytyc's Registration Statement on Form S-4, filed
March 1, 2002, file no. 333-83582).
99.7* Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (incorporated
by reference to Cytyc's Registration Statement on Form S-4, filed March 1, 2002, file no. 333-83582).
99.8* Consent of Goldman, Sachs & Co. (incorporated by reference to Cytyc's Registration Statement on Form S-4,
filed March 1, 2002, file no. 333-83582).
99.9 Opinion of Goldman, Sachs & Co. (included as Annex D to the prospectus contained in this registration
statement).
99.10*. Letter to Commission Pursuant to Temporary Note 3T (incorporated by reference to Amendment No. 2 to
Cytyc's Registration Statement on Form S-4, filed on March 28, 2002, file no. 333-83582).
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* Incorporated by reference.