Exhibit 10.701
EXECUTION COPY
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INVESTMENT AGREEMENT
Among
CIBA-GEIGY LIMITED,
a Swiss corporation
CIBA-GEIGY CORPORATION,
a New York corporation
CIBA BIOTECH PARTNERSHIP, INC.
a Delaware corporation
and
CHIRON CORPORATION,
a Delaware corporation
Dated as of November 20, 1994
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TABLE OF CONTENTS
Page
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ARTICLE I
The Offer and the Transfer of Contributed Businesses
SECTION 1.01. The Offer. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Company Actions. . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.03. Purchase and Sale of the Ciba Biocine Business and the
Diagnostics Shares . . . . . . . . . . . . . . . . . . 6
SECTION 1.04. Closing. . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
Conditions to Closing
SECTION 2.01. Obligations of Ciba, CCorp and Holdings with respect
to the Closing . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. Obligations of the Company with respect to the
Closing. . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company. . . . . . 12
SECTION 3.02. Representations and Warranties of Ciba, CCorp and
Holdings. . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.03. Representations and Warranties of Ciba Relating to
Diagnostics. . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.04. Representations and Warranties of Ciba and CCorp
Relating to Biocine. . . . . . . . . . . . . . . . . . 39
SECTION 3.05. Survival of Representations regarding Diagnostics. . . . 41
SECTION 3.06. Indemnification by Ciba with regard to Diagnostics
Representations. . . . . . . . . . . . . . . . . . . . 41
SECTION 3.07. Indemnification Procedures . . . . . . . . . . . . . . . 42
SECTION 3.08. Tax Indemnity regarding Diagnostics. . . . . . . . . . . 43
ARTICLE IV
Covenants Relating to Conduct of Business
of the Company and Diagnostics
SECTION 4.01. Conduct of Business. . . . . . . . . . . . . . . . . . . 44
SECTION 4.02. No Solicitation. . . . . . . . . . . . . . . . . . . . . 50
(i)
SECTION 5.01. Consolidation. . . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.02. Access to Information; Confidentiality . . . . . . . . . 54
SECTION 5.03. Reasonable Efforts; Notification . . . . . . . . . . . . 55
SECTION 5.04. Rights Agreement . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.05. Fees and Expenses. . . . . . . . . . . . . . . . . . . . 56
SECTION 5.06. Public Announcements . . . . . . . . . . . . . . . . . . 58
SECTION 5.07. Stockholder Litigation . . . . . . . . . . . . . . . . . 58
SECTION 5.08. CCD Employment Arrangements. . . . . . . . . . . . . . . 58
SECTION 5.09. Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . 60
SECTION 5.10. 1988 Agreement . . . . . . . . . . . . . . . . . . . . . 60
SECTION 5.11. Ongoing Diagnostics Arrangements . . . . . . . . . . . . 60
SECTION 5.12. Ciba Guarantee; Revolving Credit Facility. . . . . . . . 61
SECTION 5.13. Stockholder Approval of Share Issuances. . . . . . . . . 62
SECTION 5.14. Employee Stock Option Arrangements . . . . . . . . . . . 63
SECTION 5.15. Diagnostics Balance Sheet. . . . . . . . . . . . . . . . 65
SECTION 5.16. Research and Development Agreement . . . . . . . . . . . 65
SECTION 5.17. Excess Parachute Payments. . . . . . . . . . . . . . . . 65
ARTICLE VI
Termination, Amendment and Waiver
SECTION 6.01. Termination. . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.02. Effect of Termination. . . . . . . . . . . . . . . . . . 67
SECTION 6.03. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.04. Extension; Waiver. . . . . . . . . . . . . . . . . . . . 67
SECTION 6.05. Procedure for Termination, Amendment, Extension
or Waiver. . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE VII
General Provisions
SECTION 7.01. Nonsurvival of Representations and Warranties. . . . . . 68
SECTION 7.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.03. Definitions. . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.04. Interpretation . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.05. Counterparts . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.06. Entire Agreement; No Third-Party Beneficiaries . . . . . 71
SECTION 7.07. Governing Law. . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 7.09. Enforcement. . . . . . . . . . . . . . . . . . . . . . . 71
(ii)
INVESTMENT AGREEMENT dated as of November 20, 1994 (this
"Agreement"), among CIBA-GEIGY LIMITED, a Swiss corporation
("Ciba"), CIBA-GEIGY CORPORATION, a New York corporation and a
wholly-owned subsidiary of parent ("CCorp"), CIBA BIOTECH
PARTNERSHIP, INC., a Delaware corporation and an indirectly
wholly-owned subsidiary of Ciba ("Holdings"), and CHIRON
CORPORATION, a Delaware corporation (the "Company").
WHEREAS the respective Boards of Directors of Ciba and the Company
have determined to enter into a strategic partnership in the area of
biotechnology under which the two companies will enter into various
collaborations, the Company will remain an autonomous and entrepreneurial
business and Ciba will make substantial investments in the Company so as to
enhance its capabilities for growth and strategic success;
WHEREAS the respective Boards of Directors of Holdings and the Company
have approved the strategic partnership, including an initial minority equity
investment in the Company by Holdings on the terms and subject to the conditions
set forth in this Agreement in furtherance of such strategic partnership;
WHEREAS Ciba and CCorp propose to cause Holdings to make a tender
offer (as it may be amended from time to time as permitted under this Agreement
with the Company's consent if required hereby, the "Offer") to purchase
11,860,467 shares of Common Stock, par value $.01 per share, of the Company (the
"Common Stock"), at a price per share of Common Stock of $117 net to the seller
in cash (such price, as may hereafter be increased, the "Offer Price") (such
11,860,467 shares representing approximately 37.33% (the "Percentage Factor") of
the outstanding shares of Common Stock, excluding any shares of Common Stock
held by Ciba or its Affiliates, before giving effect to the transactions
contemplated by this Agreement), upon the terms and subject to the conditions
set forth in this Agreement; and the Board of Directors of the Company has
approved the Offer and the other transactions contemplated hereby and is
recommending that the Company's stockholders who wish to receive cash for their
shares of Common Stock accept the Offer;
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WHEREAS Ciba and CCorp further propose to cause Holdings to transfer
to the Company the Ciba Biocine Business and the Diagnostics Shares (each as
defined below) as consideration for 6,600,000 newly issued shares of Common
Stock (the "New Shares") to be purchased by Holdings in accordance with the
terms hereof;
WHEREAS Ciba, CCorp, Holdings and the Company desire to make certain
representations, warranties, covenants and agreements and also to prescribe
various conditions in connection with the transactions contemplated hereby; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, each of Ciba, CCorp, Holdings and the Company has entered into the
Ancillary Agreements to which it is a party.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and in the Ancillary
Agreements, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
THE OFFER AND THE TRANSFER OF CONTRIBUTED BUSINESSES
SECTION 1.01. THE OFFER. (a) Subject to the provisions of this
Agreement, as promptly as practicable, but in no event later than five business
days after the date of this Agreement, Holdings shall, and Ciba and CCorp shall
cause Holdings to, commence the Offer. The obligation of Holdings to, and of
Ciba and CCorp to cause Holdings to, commence the Offer and accept for payment,
and pay for, any shares of Common Stock tendered pursuant to the Offer shall be
subject to the conditions set forth in Exhibit A (any of which may be waived by
Holdings in its sole discretion) and to the terms and conditions of this
Agreement. Holdings expressly reserves the right to modify the terms of or
extend the Offer, except that, without the consent of the Company (such consent
to be authorized by the Board of Directors of the Company), unless the Company
exercises any of its rights under the second sentence of Section 4.02(b),
Holdings shall not (i) change the number of shares of Common
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Stock subject to the Offer, (ii) reduce the Offer Price, (iii) modify or add to
the conditions set forth in Exhibit A, (iv) change the form of consideration
payable in the Offer, (v) waive the Minimum Tender Condition set forth in
Exhibit A or (vi) otherwise amend the Offer in any manner adverse to the
Company's stockholders. Subject to the terms and conditions thereof, the Offer
shall expire at midnight New York City time on the date that is 20 business days
from the date the Offer is first published or sent to holders of Common Stock;
PROVIDED, HOWEVER, that (i) unless the Company otherwise agrees, Holdings shall
extend the Offer for an additional 10 business days if on the last day of such
20 business day period (or, if later, on the first day that all conditions to
Holding's obligation to accept for payment, and pay for, shares of Common Stock
have been satisfied or waived), fewer than 95% of the outstanding shares of
Common Stock (other than outstanding shares of Common Stock which cannot be
tendered because of restrictions under Section 16(b) of the Exchange Act and
shares of Common Stock that are beneficially owned by Ciba or its Affiliates)
have been tendered pursuant to the Offer and (ii) without the Company's consent,
Holdings may (A) extend the Offer, if at the scheduled expiration date of the
Offer any of the conditions to Holding's obligation to accept for payment, and
pay for, shares of Common Stock shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived, (B) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission or the staff thereof (the "SEC") applicable
to the Offer and (C) extend the Offer for any reason on one or more occasions
for an aggregate period of not more than 5 business days beyond the latest
expiration date that would otherwise be permitted under clause (A) or (B) of
this sentence.
(b) On the date of commencement of the Offer, Ciba and Holdings shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). Ciba and Holdings
agree that the Offer Documents shall comply as to form in all material respects
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder, and that the Offer
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Documents on the date first published, sent or given to the Company's
stockholders 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 under which they
were made, not misleading, except that no representation is made by Ciba or
Holdings with respect to information supplied by the Company specifically for
inclusion in the Offer Documents. Each of Ciba, Holdings and the Company agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and each of Ciba and Holdings further
agrees to take all steps necessary to amend or supplement the Offer Documents
and to cause the Offer Documents as so amended or supplemented to be filed with
the SEC and to be disseminated to the Company's stockholders, in each case as
and to the extent required by applicable Federal securities laws. The Company
and its counsel shall be given a reasonable opportunity to review the Offer
Documents and all amendments and supplements thereto prior to their filing with
the SEC or dissemination to stockholders of the Company. Ciba and Holdings agree
to provide the Company and its counsel any comments Ciba, Holdings or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Ciba and CCorp shall provide or cause to be provided to Holdings
on a timely basis the funds necessary to accept for payment, and pay for, any
shares of Common Stock that Holdings becomes obligated to accept for payment,
and pay for, pursuant to the Offer.
SECTION 1.02. COMPANY ACTIONS. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
at a meeting duly called and held, duly and unanimously adopted resolutions
approving this Agreement, the Ancillary Agreements, the Offer and the sale of
the New Shares to Holdings as contemplated hereby, determining subject to
Section 4.02(b) that this Agreement and the transactions contemplated hereby and
by the Ancillary Agreements, including the Offer and the transfer of the Ciba
Biocine Business and the Diagnostics Shares, are fair to, and in the best
interests of, the Company's stockholders and recommending that those
stockholders who wish to receive cash for their shares of Common Stock accept
the Offer and
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tender their shares pursuant to the Offer; PROVIDED that the Board of Directors
may withdraw such recommendation as provided in Section 4.02(b). The Company
represents that its Board of Directors has received the opinions of Morgan
Stanley & Co. and Robertson, Stephens & Co. that the transactions contemplated
by this Agreement, when taken together, are fair to the Company's stockholders,
other than Ciba and its Affiliates, from a financial point of view, and that a
complete and correct signed copy of each such opinion has been delivered by the
Company to Ciba.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
paragraph (a) and shall mail the Schedule 14D-9 to the stockholders of the
Company. The Company agrees that the Schedule 14D-9 shall comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder and, on the date filed with the SEC
and on the date first published, sent or given to the Company's stockholders,
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 under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by Ciba, CCorp or Holdings specifically for
inclusion in the Schedule 14D-9. Each of the Company, Ciba, CCorp and Holdings
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. Ciba and its counsel shall be
given a reasonable opportunity to review the Schedule 14D-9 and all amendments
and supplements thereto prior to their filing with the SEC or dissemination to
stockholders of the Company. The Company agrees to provide Ciba and its counsel
in writing with any comments the Company or its counsel may receive from the SEC
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments.
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(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Holdings promptly with mailing labels containing the
names and addresses of the record holders of Common Stock as of a recent date
and of those persons becoming record holders subsequent to such date, together
with copies of all lists of stockholders, security position listings and
computer files and all other information in the Company's possession or control
regarding the beneficial owners of Common Stock, and shall furnish to Holdings
such information and assistance (including updated lists of stockholders,
security position listings and computer files) as Ciba may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents, Ciba, CCorp and Holdings and their agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the other
transactions contemplated hereby and, if this Agreement shall be terminated,
will deliver, and will use their beat efforts to cause their agents to deliver,
to the Company all copies of such information then in their possession or
control.
SECTION 1.03. PURCHASE AND SALE OF THE CIBA BIOCINE BUSINESS AND THE
DIAGNOSTICS SHARES. (a) On the terms and subject to the conditions of this
Agreement, subject to Section 1.03(b), the Company shall purchase from Ciba,
CCorp or a subsidiary of Ciba, and Ciba, CCorp or a subsidiary of Ciba shall
transfer and deliver to the Company, the Ciba Biocine Business and the
Diagnostics Shares collectively, the "Contributed Businesses"), in consideration
for which the Company shall issue, sell, transfer and deliver to Holdings
6,600,000 New Shares, in each case as described below in Section 1.04. As used
herein "Ciba Biocine Business" shall mean the JV US Holdings Shares, the JV Vax
Shares and all right, title and interest of Ciba, CCorp and Ciba's subsidiaries
in any intangible assets held for the benefit of such entities by Ciba and its
subsidiaries. At the Closing, Ciba and the Company shall enter into an
agreement, in form and substance reasonably satisfactory to Ciba and the
Company, pursuant to which Ciba will agree to indemnify the Company and its
affiliates and hold then harmless from all liability for taxes of Ciba or any
other person which is or has been affiliated with Ciba (other than JV US
Holdings or the Biocine Company or any subsidiary of the Biocine Company)
resulting from JV US Holdings or any subsidiary thereof having been a member of
a
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combined, consolidated or unitary group on or prior to the Closing Date.
(b) Notwithstanding anything herein to the contrary, if any of the
representations and warranties of Ciba, CCorp or Holdings set forth in Section
3.03 of this Agreement that are qualified as to materiality are not true and
correct as of the date hereof or as of the date five business days prior to the
Closing, and are not reasonably expected by Ciba, CCorp or Holdings as of the
fifth business day prior to the Closing to be true and correct as of the
Closing, or any of the representations and warranties of Ciba, CCorp or Holdings
set forth in such Section 3.03 that are not so qualified are not true and
correct in all material respects as of the date hereof or as of the date five
business days prior to the Closing, and are not reasonably expected by Ciba,
CCorp or Holdings as of the fifth business day prior to the Closing to be true
and correct as of the Closing (or, in each case, with respect to representations
and warranties that expressly relate to an earlier date, as of such date) (any
such occurrence being a "Diagnostics Revaluation Event"), then Ciba shall so
notify the Company in writing on or prior to such fifth business day prior to
the Closing. Upon delivery to the Company of a notice to such effect, Ciba and
the Company shall negotiate in good faith concerning the value of the loss or
damage to the Diagnostics business resulting from the Diagnostics Revaluation
Event (the "Diagnostics Makeup Amount"). If Ciba and the Company are not able to
agree on such Diagnostics Makeup Amount prior to the Closing, either party may
initiate arbitration of the Diagnostics Makeup Amount, in which event Ciba and
the Company shall promptly agree upon an internationally recognized investment
banking or appraisal firm (the "Diagnostics Arbitrator"), and the Diagnostics
Arbitrator shall consider submissions of both parties and then determine the
amount of the Diagnostics Makeup Amount, which may be zero (the "Diagnostics
Makeup Determination"). The Diagnostics Makeup Determination shall be final and
binding upon all the parties hereto.
SECTION 1.04. CLOSING. The closing of the purchase and sale of the
Diagnostics Shares and the Ciba Biocine Business (the "Closing") shall be held
at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue,
New York, New York or such other place as the parties shall agree, immediately
following the acceptance for payment of shares of Common Stock pursuant to the
Offer. The date on which the Closing shall occur is
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hereinafter referred to as the "Closing Date". At the Closing,
(i) Ciba and CCorp shall deliver or cause to be delivered to the
Company certificates representing the Diagnostics Shares, duly endorsed in
blank or accompanied by stock powers duly endorsed in blank in proper form
for transfer, with appropriate transfer stamps, if any, affixed; PROVIDED,
HOWEVER, that if (x) a Diagnostics Revaluation Event shall have occurred
and Ciba and the Company shall have agreed upon the Diagnostics Makeup
Amount, in addition to delivering the Diagnostics Shares, in accordance
with Section 1.03(b) Ciba and CCorp shall promptly after reaching such
agreement pay to the Company an amount in cash equal to the Diagnostics
Makeup Amount by wire transfer of immediately available funds to an account
designated at least two business days prior to the Closing by the Company
or (y) a Diagnostics Revaluation Event shall have occurred and Ciba and the
Company shall not have agreed upon the Diagnostics Makeup Amount, in
addition to delivering the Diagnostics Shares, Ciba and CCorp shall deliver
a written undertaking to pay or to cause Holdings promptly after
determination of the Diagnostics Makeup Amount (by the Diagnostics
Arbitrator, if applicable) to pay to the Company an amount in cash equal
to the Diagnostics Makeup Amount by wire transfer of immediately available
funds to an account designated at the Closing by the Company; and
(ii) Ciba and CCorp shall deliver or cause to be delivered to the
Company (x) certificates representing the JV US Holdings Shares and the JV
Vax Shares, in each case duly endorsed in blank or accompanied by stock
powers duly endorsed in blank in proper form for transfer, with appropriate
transfer stamps, if any, affixed and (y) appropriate transfer documentation
for all other property within the definition of Ciba Biocine Business;
(iii) the Company shall deliver or cause to be delivered to Holdings
certificates representing 6,600,000 New Shares; and
(iv) Ciba and the Company shall execute, or cause one or more
wholly owned subsidiaries to execute, on or before the Closing, an
agreement in form and substance
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reasonably satisfactory to Ciba and the Company which provides as follows:
(1) Ciba and its subsidiaries will be released from all
liabilities and obligations (the "Ciba Biocine Liabilities") with
respect to (x) their equity interests in the Biocine Company and JV
Vax and their subsidiaries, including with respect to any general
partner liability, and (y) existing agreements related to the Biocine
Venture except for existing licenses and as otherwise set forth on
Schedule 1.04(1);
(2) the Company, or a subsidiary thereof immediately after the
Closing, shall assume or retain, as applicable, the Ciba Biocine
Liabilities;
(3) the Biocine Company and JV Vax and their subsidiaries shall
not be obligated to repay any amounts contributed to them by Ciba or
its subsidiaries whether designated as capital contributions,
advances, excess funding of research and development or otherwise
except that the amounts funded by Ciba or its subsidiaries (with
respect to which equal payments were not made by the Company or its
subsidiaries) to the Biocine Venture in accordance with the Amendment
to the Biocine Joint Venture Agreement effective as of January 1, 1992
(the "1992 Biocine Amendment"), between Chiron Biocine Corporation and
Ciba-Geigy Biocine Corporation shall be repaid by the Company or its
subsidiaries at Closing, and Ciba and its subsidiaries shall be
relieved of any obligation to contribute, advance or fund any such
amounts after the Closing Date. The Company shall not draw any such
additional amounts under the 1992 Biocine Amendment after the date
hereof.
ARTICLE II
CONDITIONS TO CLOSING
SECTION 2.01. OBLIGATIONS OF CIBA, CCORP AND HOLDINGS WITH RESPECT TO
THE CLOSING. The obligation of Ciba, CCorp and Holdings to consummate the
transactions contemplated to occur at the Closing are subject to the
10
satisfaction (or waiver by Ciba) as of the Closing of the following conditions:
(a) Holdings shall have accepted for payment shares of Common Stock
pursuant to the Offer in accordance with this Agreement.
(b) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order enacted,
entered, promulgated, enforced or issued by any Federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity") or other legal restraint or prohibition
preventing the purchase and sale of the Diagnostics Shares or the Ciba Biocine
Business or any of the other transactions contemplated hereby or by the
Ancillary Agreements to occur by the Closing shall be in effect.
(c) The Commissioner of Corporations of the State of California shall
have issued a permit qualifying the offer and sale to Holdings of the New Shares
or such offer and sale shall be exempt from such qualification under the
California Corporate Securities Law of 1968, as amended.
(d) The Company shall have furnished to Ciba the opinion of counsel,
who may be the general counsel of the Company, in form and substance reasonably
satisfactory to Ciba, to the effect that the New Shares have been duly
authorized and validly issued and, when issued and delivered to Ciba, will be
fully paid and nonassessable.
SECTION 2.02. OBLIGATIONS OF THE COMPANY WITH RESPECT TO THE CLOSING.
The obligation of the Company to consummate the transactions contemplated to
occur at the Closing are subject to the satisfaction (or waiver by the Company)
as of the Closing of the following conditions:
(a) Holdings shall have accepted for payment shares of Common Stock
pursuant to the Offer in accordance with this Agreement.
(b) The representations and warranties of Ciba, CCorp and Holdings
set forth in this Agreement (other than with respect to the representations and
warranties set forth in Section 3.03 hereof) and in the Ancillary Agreements
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qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, as of the date
hereof and as of the time of the Closing as though made as of such time, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date) and the
Company shall have received a certificate to such effect dated the Closing Date
and executed by a duly authorized officer of Ciba. Each of Ciba, CCorp and
Holdings shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement and the Ancillary
Agreements to be performed or complied with by Ciba, CCorp and Holdings by the
time of the Closing.
(c) There shall not be threatened or pending by any Governmental
Entity any suit, action or proceeding, which has a reasonable likelihood of
success, and there shall not be pending by any other Person any suit, action or
proceeding, which has a substantial likelihood of success, (i) seeking to
restrain or prohibit the purchase and sale of the Ciba Biocine Business, or
seeking to obtain from the Company any damages that are material in relation to
the Company and its subsidiaries taken as whole, (ii) seeking to prohibit or
limit the ownership or operation by the Company or any of its respective
subsidiaries of a material portion of the business or assets of the Company and
its subsidiaries, taken as a whole, or to compel the Company or Ciba to dispose
of or hold separate any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, as a result of the Offer or any
of the other transactions contemplated by this Agreement or the Ancillary
Agreements or (iii) seeking to prohibit the Company from effectively exercising
any of its material rights under this Agreement or any Ancillary Agreement.
(d) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order enacted,
entered, promulgated, enforced or issued by any Governmental Entity or other
legal restraint or prohibition preventing the consummation of any of the
transactions contemplated hereby or by the Ancillary Agreements or having any of
the other consequences described in clauses (i), (ii), or (iii) of Section
2.02(c) shall be in effect.
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(e) Each of Ciba, CCorp and Holdings shall have executed and
delivered to the Company each Ancillary Agreement to which it is a party. Each
Ancillary Agreement shall be in full force and effect.
(f) The Commissioner of Corporations of the State of California shall
have issued a permit qualifying the offer and sale to Holdings of the New Shares
or such offer and sale shall be exempt from such qualification under the
California Corporate Securities Law of 1968, as amended.
(g) The waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any foreign antitrust
and competition laws and regulations applicable to the purchase and sale of the
Ciba Biocine Business and the Diagnostics Shares in each case shall have expired
or been terminated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
disclosed by the Company in a letter, dated the date hereof, to Ciba, CCorp and
Holdings setting forth additional exceptions specified therein to the
representations and warranties contained in this Section 3.01, the Company
represents and warrants to Ciba, CCorp and Holdings as follows (PROVIDED that
the Company makes no representation or warranty with respect to the Biocine
Venture, including the Biocine Company, JV Vax and their subsidiaries, except
with respect to the 1992 Biocine Amendment):
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company
and its Significant Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. The Company and each of its Significant
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) could not
13
reasonably be expected to have a material adverse effect on the Company. The
Company has made available to Ciba for its review complete and correct copies of
its Certificate of Incorporation and By-laws and the certificates of
incorporation and by-laws or other constitutive documents of its Significant
Subsidiaries, in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "Significant Subsidiary" means any subsidiary of
the Company that constitutes a significant subsidiary within the meaning of Rule
1-02 of Regulation S-X of the SEC.
(b) SUBSIDIARIES AND JOINT VENTURES. Schedule 3.01(b) lists each
subsidiary of the Company. All the outstanding shares of capital stock of each
Significant Subsidiary that is a corporation have been validly issued and are
fully paid and nonassessable. Except as set forth in Schedule 3.01(b), the
entire equity interest in each subsidiary of the Company is owned by the
Company, by another subsidiary of the Company or by the Company and another such
subsidiary, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens").
Schedule 3.01(b) lists each corporation, partnership, joint venture or other
entity with respect to which the Company or any subsidiary of the Company holds
or has the right to acquire 5% or more of the common stock, partnership or other
equity interests of such corporation, partnership, joint venture or other
entity, other than any such interest held by the Company or one of its
subsidiaries as a cash equivalent, in each case which is material to the Company
(each such corporation, partnership, joint venture or other entity, a "Joint
Venture"), and a list of all agreements relating thereto or to third party
research and development arrangements ("Research and Development Contracts") to
which the Company or any subsidiary of the Company is a party and which (i) are
material to the business or prospects of the Company or (ii) relate to any
project that is material to the Company's currently existing financial
projections (but excluding immaterial Research and Development Contracts)
(collectively, the "Joint Venture Agreements"); and Schedule 3.01(b)
specifically identifies each such Joint Venture Agreement that contains a
"change of control" provision. Each Joint Venture that is more than 40% owned or
controlled by the Company is duly formed and validly existing in the
jurisdiction of its formation except where the failure to be so duly formed and
validly existing could not reasonably be expected to have a material adverse
effect on the Company. The Company and each subsidiary of the
14
Company is in compliance in all respects with all the terms, conditions and
obligations applicable to it in respect of each Joint Venture Agreement to which
it is a party except where the failure to be in compliance therewith could not
reasonably be expected to have a material adverse effect on the Company, and
each Joint Venture Agreement is in full force and effect except to the extent it
has expired in accordance with its terms. The interests of the Company and its
subsidiaries in each Joint Venture are owned by the Company or the applicable
subsidiary of the Company free and clear of any Liens, other than any Lien
created pursuant to the express terms of any Joint Venture Agreement. The amount
of payments made by Ciba or its subsidiaries under the 1992 Biocine Agreement
as of the date hereof is approximately $30,000,000.
(c) CAPITAL STRUCTURE; NEW SHARES. The authorized capital stock of
the Company consists of 100,000,000 shares of Common Stock and 5,000,000 shares
of preferred stock, par value $0.01 per share. At the close of business on
November 18, 1994, (i) 33,212,864 shares of Common Stock (none of which were
shares of "Restricted Common Stock") and no shares of preferred stock of the
Company were issued and outstanding, (ii) no shares of Common Stock were held by
the Company in its treasury, (iii) 4,932,117 shares of Common Stock were
reserved for issuance pursuant to outstanding stock options to purchase shares
of Common Stock ("Stock Options") and an additional 3,670,739 shares of Common
Stock were available for the grant of Stock Options pursuant to the Company's
1991 Stock Option Plan, (iv) 1,126,783 shares of Common Stock were reserved for
purchase pursuant to outstanding purchase rights granted under the Company's
1988 Employee Stock Purchase Plan and an additional 1,126,783 shares of Common
Stock were reserved for the grant of additional purchase rights thereunder, (v)
2,195,480 shares of Common Stock were reserved for issuance pursuant to the
Company's 1.9% Convertible Subordinated Notes Due 2000, (vi) 810,810 shares of
Common Stock were reserved for issuance pursuant to the 5-1/4% Convertible
Subordinated Debentures Due 2002 of Chiron Corporation, (vii) 592,815 shares of
Common Stock were reserved for issuance upon the exercise of outstanding
warrants, (viii) 332,129 shares of preferred stock were reserved for issuance in
connection with the rights (the "Rights") to purchase shares of Common Stock
issued pursuant to the Rights Agreement dated as of August 25, 1994 (as amended
from time to time, the "Rights Agreement"), between the Company and Continental
Stock Transfer & Trust Company,
15
as Rights Agent (the "Rights Agent"). The average exercise price of the
outstanding employee Stock Options is approximately $51.05. Except as set forth
above or as otherwise expressly provided herein, at the close of business on
November 20, 1994, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding and except as set
forth on Schedule 3.01(c), there are not any phantom stock or other contractual
rights the value of which is determined in whole or in part by the value of any
capital stock of the Company ("Stock Equivalents"). There are no outstanding
stock appreciation rights ("SARs") with respect to Common Stock that were not
granted in tandem with a related employee Stock Option. The issuance of the New
Shares pursuant to the terms of this Agreement shall have been duly authorized
and validly issued, and no further approval of the stockholders or the directors
of the Company or of any Governmental Entity will be required by the Company for
the issuance and sale of the New Shares as contemplated by this Agreement. When
issued and sold to Holdings, the New Shares will be duly authorized, validly
issued, fully paid and nonassessable. Other than this Agreement and the
Ancillary Agreements, the New Shares are not subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting or disposition of
the New Shares. All outstanding shares of capital stock of the Company are, and
all shares that may be issued pursuant to the Stock Plans and the other
agreements and instruments listed above will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in clauses (v) and (vi) above, there are not any
outstanding bonds, debentures, notes or other indebtedness of the Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above and in Schedule 3.01(c), and as otherwise expressly
set forth in this Agreement, and except for changes since November 20, 1994
resulting from the exercise of warrants and the conversion of debentures, as of
the date of this Agreement, there are not any securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its Significant Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Significant
Subsidiaries to issue, deliver or sell or create, or cause
16
to be issued, delivered or sold or created, additional shares of capital stock
or other voting securities or Stock Equivalents of the Company or of any of its
Significant Subsidiaries or obligating the Company or any of its Significant
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. As of
the date of this Agreement, there are not any outstanding contractual
obligations of the Company or any of its Significant Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its Significant Subsidiaries except pursuant to existing employee arrangements.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate power and authority to enter into this Agreement and the Ancillary
Agreements and to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements. Except as set forth on Schedule 3.01(d), the execution
and delivery by the Company of this Agreement and each Ancillary Agreement by
the Company to which it is a party and the consummation by the Company of the
transactions contemplated by this Agreement and the Ancillary Agreements have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement and the Ancillary Agreements to which it is a party have
been duly executed and delivered by the Company and constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms. Except as set forth on Schedule 3.01(d), the execution
and delivery of this Agreement and the Ancillary Agreements by the Company did
not, and the consummation of the transactions contemplated by this Agreement and
the Ancillary Agreements and compliance with the provisions of this Agreement
and the Ancillary Agreements without obtaining the consent of any third party
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss by the
Company or any of its Significant Subsidiaries, or Joint Ventures which are the
subject of Joint Venture Agreements ("Material Joint Ventures"), of a material
benefit under, or the creation of any material additional benefit to any third
party under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its subsidiaries under, (i) the Certificate of
Incorporation or By-laws of the Company or the comparable charter or
17
organizational documents of any of its Significant Subsidiaries, (ii) any
research and development venture or arrangement or any other joint venture
(whether or not a Joint Venture) to which the Company or any of its subsidiaries
is a party, (iii) any loan or credit agreement, note, bond, mortgage, indenture
lease or other agreement, instrument, permit or license applicable to the
Company or any of its subsidiaries or their respective properties or assets or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii), (iii)
and (iv), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate could not reasonably be expected to (x) have a
material adverse effect on the Company, (y) materially impair the ability of the
Company to perform its obligations under this Agreement or any Ancillary
Agreement to which it is a party or (z) prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Ancillary Agreements.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity or any party to a Material Contract (as
defined in Section 3.01(f)) is required by or with respect to the Company or any
of its Significant Subsidiaries or its subsidiaries that are parties to such a
Material Contract in connection with the execution and delivery of this
Agreement and the Ancillary Agreements or the consummation by the Company of the
transactions contemplated by this Agreement and the Ancillary Agreements, except
for (i) the filing of a premerger notification and report form by the Company
under the HSR Act and any filings required pursuant to foreign antitrust and
competition law statutes and regulations listed on Schedule 2.01, (ii) the
filing with the SEC of (x) a solicitation/recommendation statement on Schedule
14D-9 and (y) such reports under Sections 12 and 13(a) of the Exchange Act as
may be required in connection with this Agreement, the Ancillary Agreements and
the transactions contemplated by this Agreement and the Ancillary Agreements,
(iii) the filing of a notice pursuant to Section 721 of the Defense Production
Act of 1950 (the "Exon-Florio Amendment") and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
are set forth on Schedule 3.01(d).
18
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES. The Company has filed all
required reports, schedules, forms, statements and other documents with the SEC
since December 31, 1992 (the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its subsidiaries as of the
dates thereof and their consolidated statements of operations, stockholders
equity and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set forth
in the Filed SEC Documents, to the Company's knowledge neither the Company nor
any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a consolidated balance sheet
of the Company and its subsidiaries or in the notes thereto, other than
liabilities and obligations incurred in the ordinary course of business
consistent with prior practice and experience since September 30, 1994.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 3.01(f) or in the SEC Documents filed and publicly available prior to
the date of this Agreement (the Filed SEC Documents"), since December 31, 1993,
the Company has conducted its business only in the ordinary course, and there
has not been (i) any material adverse change in the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of
19
the Company's capital stock, other than the distribution of the Rights, (iii)
any split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, other than
the authorization and issuance of the Rights and the authorization of the
issuance of securities upon exercise of the Rights, (iv) any damage, destruction
or loss, whether or not covered by insurance, that has had or could reasonably
be expected to have a material adverse effect on the Company or (v) any change
in accounting methods, principles or practices by the Company materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in generally accepted accounting principles. Except as set
forth on Schedule 3.01(f) or in the Filed SEC Documents, since June 30, 1994,
there has not been (i)(x) any granting by the Company or any of its subsidiaries
to any executive officer of the Company or any of its subsidiaries of any
increase in compensation, except in the ordinary course of business consistent
with prior practice or as was required under employment agreements in effect on
December 31, 1993, (y) any granting by the Company or any of its subsidiaries to
any such executive officer of any increase in severance or termination pay,
except as was required under any employment, severance or termination agreements
in effect on December 31, 1993, or (z) any entry by the Company or any of its
subsidiaries into any employment, severance or termination agreement with any
such executive officer, or (ii) any other action that would require the approval
of Ciba or a majority of the Investor Directors under any Ancillary Agreement
after the Closing.
(g) LITIGATION. Except as disclosed in the Filed SEC Documents or as
set forth on Schedule 3.01(g), there is no suit, action or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries that, individually or in the aggregate, could reasonably be
expected to (i) have a material adverse effect on the Company, (ii) materially
impair the ability of the Company to perform its obligations under this
Agreement or any Ancillary Agreement or (iii) prevent the consummation of any of
the transactions contemplated by this Agreement or any Ancillary Agreement, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of its subsidiaries
having, or that could reasonably be expected to have, any such effect.
20
(h) ABSENCE OF CHANGES IN BENEFIT PLANS. Except as set forth on
Schedule 3.01(h) or disclosed in the Filed SEC Documents, since June 30, 1994,
there has not been any adoption or amendment by the Company or any of its
subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, providing
benefits to any current or former employee, officer or director of the Company,
any of its subsidiaries or any other person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c), (m) or (o)
of the Internal Revenue Code of 1986, as amended (the "Code") (each a "Commonly
Controlled Entity") (collectively, "Benefit Plans"), that could reasonably be
expected to have a material adverse effect on the Company. Except as set forth
on Schedule 3.01(h) or disclosed in the Filed SEC Documents, there exist no
employment, consulting, severance, termination or indemnification agreements
between the Company or any of its subsidiaries and any current or former
employee, officer or director of the Company or any of its subsidiaries which
are material to the Company.
(i) TAXES. The Company and each of its subsidiaries has timely filed
all tax returns and reports required to be filed by them either on a separate or
combined or consolidated basis except where failure to timely file could not
reasonably be expected to have a material adverse effect on the Company. All
such returns are complete and accurate except where the failure to be complete
or accurate could not reasonably be expected to have a material adverse effect
on the Company. Each of the Company and its subsidiaries has paid or caused to
be paid all taxes shown as due on such returns and all material taxes for which
no return was filed except where the failure to do so could not reasonably be
expected to have a material adverse effect on the Company. No deficiencies for
any taxes have been asserted, proposed or assessed against the Company or any of
its subsidiaries that have not been paid or otherwise settled except for
deficiencies the assertion, proposing or assessment of which could not
reasonably be expected to have a material adverse effect on the Company, and no
requests for waivers of the time to assess any such taxes are pending. The
Federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have been examined by and settled with the United
21
States Internal Revenue Service or are closed under the statute of limitations
for all years through 1986 (except for Cetus Oncology Corporation, whose returns
are closed through 1985). The Company has made available to Ciba for its review
the Federal and California income tax returns of the Company and each of its
subsidiaries consolidated in such returns in each case that are open under the
applicable statute of limitations. As used in this Agreement, "taxes" shall
include all Federal, state, local and foreign income, property, sales, excise,
withholding and other taxes, tariffs or governmental charges of any nature
whatsoever.
(j) NO EXCESS PARACHUTE PAYMENTS. Except as disclosed in Schedule
3.01(j), no amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements by any employee, officer or
director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.28OG-1) under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect would be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(k) VOTING REQUIREMENTS. No vote of the holders of any class or
series of the Company's capital stock is necessary to approve this Agreement,
the Ancillary Agreements or the transactions contemplated by this Agreement and
the Ancillary Agreements. This Agreement and the Ancillary Agreements and the
transactions contemplated by this Agreement and the Ancillary Agreements have
been approved by a two-thirds vote of the "Continuing Directors" (as defined in
Article ELEVENTH of the Company's Certificate of Incorporation).
(l) RIGHTS AGREEMENT; 1988 AGREEMENT. The Company has taken all
necessary action, subject to ministerial action by the Rights Agent, to (i)
render the Rights inapplicable to the transactions contemplated by this
Agreement and the Ancillary Agreements and (ii) amend the Rights Agreement such
that (y) neither Ciba nor any of its affiliates is or will be an "Acquiring
Person" (as defined in the Rights Agreement) as a result of the transactions
contemplated by this Agreement and the Ancillary Agreements and (z) a
"Distribution Date" (as defined in the Rights Agreement) does not and shall not
occur by reason of the
22
announcement or consummation of any transaction contemplated by this Agreement
or any Ancillary Agreement. The Company has hereby effectively waived the
provisions of Section 9 of the Stock Purchase Agreement dated as of November 14,
1988 between the Company and Ciba (the "1988 Agreement") to the extent necessary
to permit the purchase by Holdings of shares of Common Stock pursuant to the
Offer and the consummation of the Share Issuances and the other transactions
contemplated hereby and by the Ancillary Agreements. The 1988 Agreement, except
for Section 10.01 thereof, will terminate as of the Closing Date.
(m) BROKERS. No broker, investment banker, financial advisor or other
person, other than Morgan Stanley & Co. and Robertson, Stephens & Co., the fees
and expenses of each of which will be paid by the Company, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements based upon arrangements made by or on behalf of the
Company. A complete and correct copy of each of the Company's engagement letters
with Morgan Stanley & Co. and Robertson, Stephens & Co. has been made available
by the Company to Ciba for its review prior to the execution of this Agreement.
(n) COMPLIANCE WITH LAWS. (i) The Company and each of its
subsidiaries has in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and there
has not occurred any default under any Permit, except for absence of Permits and
for defaults under Permits which absence or defaults that, individually or in
the aggregate, have not had and could not reasonably be expected to have a
material adverse effect on the Company. Except as disclosed in the Filed SEC
Documents, the Company and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, regulations, rules, judgments, decrees or
orders of any Governmental Entity except where failures to so comply,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the Company. Except as disclosed in the Filed SEC
Documents, neither the United States Food and Drug Administration (the "FDA")
nor any corresponding foreign Governmental Entity has alleged that the Company
or any of its subsidiaries is in violation
23
of or, to the best knowledge of the Company, threatened to withdraw or revoke,
any Permit granted by it to the Company or any of its subsidiaries except for
violations, withdrawals or revocations that, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
Company, nor is the FDA or any corresponding foreign Governmental Entity
currently investigating or, to the best knowledge of the Company, planning to
investigate any alleged violation of any such Permit, any of which
investigations, individually or in the aggregate, could reasonably be expected
to have a material adverse effect on the Company, nor has the FDA or any
corresponding foreign Governmental Entity requested that the Company or any of
its subsidiaries cease to investigate, test or market any product for which the
Company or such subsidiary has a Permit from the FDA or such corresponding
foreign Governmental Entity to investigate, test or market, as the case may be,
except for cessations that, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the Company.
(ii) Except as set forth in Schedule 3.01(n), (A) neither the
Company nor any of its subsidiaries has received any written communication
from a Governmental Entity that alleges that the Company or any subsidiary is
not in compliance with any Environmental Law (as defined below) if such
non-compliance could reasonably be expected to have a material adverse effect
on the Company and (B) the Company has no knowledge of any environmental
materials or information, other than as listed in the Schedule 3.01(n),
including on-site or off-site disposal or releases of Hazardous Materials (as
defined below), that could reasonably be expected to have a material adverse
effect on the Company. The Company has provided Ciba with access to all
material records and reports of the Company related to any actual or
potential material liability of the Company under Environmental Laws. As
used in this Agreement, the term "Environmental Laws" means any applicable
treaties, laws, regulations, enforceable requirements, orders, decrees or
judgments issued, promulgated or entered into by any Governmental Entity,
which relate to (A) pollution or protection of the environment or (B) the
generation, storage, use, handling, disposal or transportation of or exposure
to Hazardous Materials, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601,
ET SEQ. ("CERCLA"), the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Sections 6901 ET SEQ., the Federal Water Pollution Control
24
Act, as amended, 33 U.S.C. Sections 1251 ET SEQ., the Clean Air Act of 1970,
as amended, 42 U.S.C. Sections 7401 ET SEQ., the Toxic Substances Control Act
of 1976, 15 U.S.C. Sections 2601 ET SEQ., the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and any similar or
implementing state or local law, and all amendments or regulations
promulgated thereunder. As used in this Agreement, the term "Hazardous
Materials" means all explosive or regulated radioactive materials or
substances, biological hazards, genotoxic or mutagenic hazards, hazardous or
toxic substances, medical wastes or other wastes or chemicals, petroleum or
petroleum distillates, asbestos or asbestos-containing materials, and all
other materials or chemicals regulated pursuant to any Environmental Law,
including materials listed in 49 C.F.R. Section 172.101 and materials defined
as hazardous pursuant to Section 101(14) of CERCLA.
(o) INTELLECTUAL PROPERTY. (i) The Company has made available to Ciba
a list of all material patents and applications therefor and licenses to use, in
each case that are owned or used by the Company or any subsidiary thereof and
are material to the business, condition (financial or otherwise), results of
operations or prospects of the Company and each of its subsidiaries, taken as a
whole (collectively, the "Intellectual Property Rights"). To the best knowledge
of the Company, except as disclosed in the SEC Documents or Schedule 3.01(o), no
Intellectual Property Right (I) has been declared invalid, in whole or in part,
or abandoned, dedicated, disclaimed or allowed to lapse for nonpayment of fees
or taxes or for any other reason or (II) is being infringed by any third party,
in each case if the result thereof could reasonably be expected to have a
material adverse effect on the Company.
(ii) To the best knowledge of the Company, except as disclosed in the
SEC Documents or in Schedule 3.01(o), (A) neither the Company nor any of its
subsidiaries during the five years preceding the date of this Agreement has been
sued or charged in writing with respect to, or been a defendant in, any claim,
suit, action or proceeding including a claim of infringement by the Company or
such subsidiary of any intellectual property rights which, if successful, could
reasonably be expected to have a material adverse effect on the Company and (B)
to the best knowledge of the Company, the conduct by the Company and its
subsidiaries of their respective businesses does not infringe the valid
intellectual property rights of any other
25
person in any way that could reasonably be expected to have a material adverse
effect on the Company.
(p) MATERIAL CONTRACTS. All contracts, leases and other agreements to
which the Company or any of its subsidiaries is a party that would be required
to be filed as Exhibits to the SEC Documents (the "Material Contracts") have
been filed as Exhibits to the SEC Documents. Except as disclosed in Schedule
3.01(p), (i) each Material Contract is in full force and effect except as the
same may have expired in accordance with its terms; (ii) the Company and its
subsidiaries have performed all the obligations required to be performed thereby
under each Material Contract; (iii) neither the Company nor any of its
subsidiaries has received any written assertion of default under any Material
Contract; (iv) neither the Company nor any of its subsidiaries expects or has
received any notice related to any termination or material change to, or
proposal with respect to, any of the Material Contracts as a result of the
transactions contemplated by this Agreement and the Ancillary Agreements
(including, without limitation, the exercise of any right to purchase the assets
of or otherwise alter any Joint Venture or terminate any Joint Venture
Agreement); and (v) neither the Company nor any of its subsidiaries has
knowledge of any material breach or anticipated material breach by any other
party to any Material Contract; in each case except where the result of a
failure of a representation contained in clauses (i), (ii), (iii), (iv) or (v)
above could not reasonably be expected to have a material adverse effect on the
Company. The Company has filed as an exhibit to an SEC Document or has made
available to Ciba for its review true, complete and unredacted copies of each
Material Contract and each Joint Venture Agreement, together with all
amendments, waivers or other changes thereto.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF CIBA, CCORP AND
HOLDINGS. Ciba, CCorp and Holdings represent and warrant to the Company as
follows:
(a) AUTHORITY; NONCONTRAVENTION. Each of Ciba, CCorp, Holdings and
JV Holdings is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated. Each
of Ciba, CCorp and Holdings has all requisite corporate power and authority
to enter into this Agreement and the Ancillary Agreements to which it is a
party and to consummate the transactions contemplated by this Agreement
26
and the Ancillary Agreements. The execution and delivery by each of Ciba, CCorp
and Holdings of this Agreement and the Ancillary Agreements to which it is a
party and the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements have been duly authorized by all necessary
corporate action on the part of each of Ciba, CCorp and Holdings, as applicable,
except, in the case of CCorp, any required Board of Directors resolutions
ratifying any such actions by CCorp will be adopted within three business days
after the date hereof. This Agreement and the Ancillary Agreements have been
duly executed and delivered by each of Ciba, CCorp and Holdings, as applicable,
and constitute valid and binding obligations of such party, enforceable against
such party in accordance with their respective terms subject, in the case of
CCorp, to such notification. The execution and delivery by each of Ciba, CCorp
and Holdings of this Agreement and the Ancillary Agreements to which it is a
party did not, and the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements and compliance with the provisions of
this Agreement and the Ancillary Agreements to which it is a party without
obtaining the consent of any third party will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss by Ciba or any of its subsidiaries of a material
benefit under, or the creation of any material additional benefit to any third
party under, or result in the creation of any Lien upon any of the properties or
assets of Ciba or any of its Significant Subsidiaries under, (i) the certificate
of incorporation or by-laws of Ciba, CCorp or Holdings, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit or license applicable to Ciba or its subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Ciba, CCorp or
Holdings or their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate could not reasonably be expected to
impair the ability of Ciba, CCorp and Holdings to perform their respective
obligations under this Agreement and the Ancillary Agreements or (z) prevent the
consummation of any of the transactions contemplated by this Agreement and the
27
Ancillary Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any
other third party is required by or with respect to Ciba, CCorp or Holdings
in connection with the execution and delivery of this Agreement and the
Ancillary Agreements or the consummation by Ciba, CCorp or Holdings, as the
case may be, of any transaction contemplated by this Agreement or any
Ancillary Agreement, except for (i) the filing of a premerger notification
and report form under the HSR Act and any filings required pursuant to the
foreign antitrust and competition law statutes and regulations, (ii) the
filing with the SEC of the Offer Documents, and such statements and reports
under Sections 12, 13 and 16(a) of the Exchange Act as may be required in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated by this Agreement and the Ancillary Agreements, (iii) the filing
of a notice pursuant to the Exon-Florio Amendment and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the "takeover" or "blue sky" laws of various
states.
(b) BROKERS. No broker, investment banker, financial advisor or other
person, other than CS First Boston Corporation, the fees and expenses of which
will be paid by Ciba, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements based upon
arrangements made by or on behalf of Ciba, CCorp or Holdings.
(c) OWNERSHIP OF COMMON STOCK. Ciba is the beneficial owner of
1,367,372 shares of Common Stock as measured for purposes of Schedule 13D under
the Exchange Act. Except for such ownership, as of the date of this Agreement,
Ciba does not beneficially own shares of Common Stock.
(d) INVESTMENT INTENT. Holdings is purchasing or acquiring the New
Shares for its own account for investment and not with a present view to, or for
sale in connection with, any distribution thereof in violation of the Securities
Act. The certificates evidencing the New Shares and any other shares issued
pursuant to the Share Issuances (together, with the New Shares, the "Holdings
Shares") shall bear substantially the following legend under a sale or
28
transfer in accordance with this Agreement and the Ancillary Agreements or the
termination thereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. THE TRANSFER OF SUCH SHARES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE INVESTMENT AGREEMENT DATED AS OF NOVEMBER
20, 1994, AMONG THE COMPANY, CIBA-GEIGY LIMITED, CIBA-GEIGY CORPORATION
AND CIBA BIOTECH PARTNERSHIP, INC. AND THE GOVERNANCE AGREEMENT DATED AS
OF NOVEMBER 20, 1994, AMONG THE COMPANY, CIBA-GEIGY LIMITED AND
CIBA-GEIGY CORPORATION, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF SUCH SHARES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED EXCEPT IN ACCORDANCE THEREWITH."
(e) ACQUISITION FOR INVESTMENT AND RULE 144. Holdings understands
that the Holdings Shares will not be registered under the Securities Act by
reason of a specific exemption from the registration provision of the Securities
Act which depends upon, among other things, the bona fide nature of Holdings'
investment intent as expressed herein. Holdings acknowledges that the Holdings
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. Holdings
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions. Holdings is aware
that the certificates representing the Holdings Shares will bear such legends
relating to restrictions on resale under the Securities Act as provided in
Section 3.01(e) and the Company under certain conditions may issue stop transfer
instructions to its stock transfer agent with respect to the Holdings Shares.
(f) LEGAL INVESTMENT. The purchase of the New Shares by Holdings
hereunder is legally permitted by all laws and regulations to which Holdings is
subject and all consents, approvals, authorizations of or designations,
declarations or filings in connection with the valid
29
execution and delivery of this Agreement by Holdings or the purchase of the New
Shares by Holdings have been obtained, or will be obtained prior to the Closing
Date.
(g) PURCHASE ENTIRELY FOR OWN ACCOUNT. The New Shares will be
acquired for investment for Holdings' own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and
Holdings has no present intention of selling, granting any participation in, or
otherwise distributing the same. Holdings does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the New Shares.
SECTION 3.03. REPRESENTATIONS AND WARRANTIES OF CIBA RELATING TO
DIAGNOSTICS. Ciba represents and warrants to the Company as follows:
(a) ORGANIZATION AND STANDING. Each of Ciba Corning Diagnostics
Corp. ("Diagnostics") and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and authority to
carry on its business an now being conducted. Diagnostics and each of the
Diagnostics Significant Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
material adverse effect on Diagnostics. Ciba has made available to the Company
for its review complete and correct copies of the Certificate of Incorporation
and By-laws of Diagnostics and the certificates of incorporation and bylaws or
other constitutive documents of the Diagnostics Significant Subsidiaries, in
each case as amended to the date of this Agreement. For purposes of this
Agreement, a "Diagnostics Significant Subsidiary" means any subsidiary of
Diagnostics that constitutes a significant subsidiary within the meaning of Rule
1-02 of Regulation S-X of the SEC.
(b) SUBSIDIARIES AND JOINT VENTURES. Schedule 3.03(b) lists each
subsidiary of Diagnostics. All the outstanding shares of capital stock of each
Diagnostics Significant Subsidiary that is a corporation have been
30
validly issued and are fully paid and nonassessable. Except as set forth in
Schedule 3.03(b) and except for directors' qualifying shares, the entire equity
interest in each subsidiary of Diagnostics is owned by Diagnostics, by another
subsidiary of Diagnostics or by Diagnostics and another such subsidiary, free
and clear of all Liens. Schedule 3.03(b) lists each corporation, partnership,
joint venture or other entity with respect to which Diagnostics or any
subsidiary of Diagnostics holds or has the right to acquire 5% or more of the
common stock, partnership or other equity interests of such corporation,
partnership, joint venture or other entity, other than any such interest held by
Diagnostics or one of its subsidiaries as a cash equivalent, in each case which
is material to Diagnostics (each such corporation, partnership, joint venture or
other entity, a "Diagnostics Joint Venture"), and a list of all agreements
relating thereto and to third party research and development arrangements to
which Diagnostics or any subsidiary of Diagnostics is a party and which (i) are
material to the business or prospects of Diagnostics or (ii) relate to any
project that is material to Diagnostic's currently existing financial
projections (collectively, the "Diagnostics Joint Venture Agreements"); and
Schedule 3.03(b) specifically identifies each such Diagnostics Joint Venture
that contains a "change of control" provision. Each Diagnostics Joint Venture
that is more than 40% owned or controlled by Diagnostics is duly formed and
validly existing in the jurisdiction of its formation except where the failure
to be so duly formed and validly existing could not reasonably be expected to
have a material adverse effect on Diagnostics. Diagnostics and each subsidiary
of Diagnostics is in material compliance with each Diagnostics Joint Venture
Agreement that is material to the business of Diagnostics to which it is a
party, and each Diagnostics Joint Venture Agreement is in full force and effect.
Except as set forth in Schedule 3.03(b), the interests of Diagnostics and its
subsidiaries in each Diagnostics Joint Venture are owned by Diagnostics or the
applicable subsidiary of Diagnostics free and clear of any Liens, other than any
Lien created pursuant to the express terms of any Diagnostics Joint Venture
Agreement.
(c) DIAGNOSTICS SHARES. The authorized capital stock of
Diagnostics consists of 10,000 shares of Common Stock, par value $10 per share,
all of which shares are issued and outstanding (the "Diagnostics Shares"). All
of the Diagnostics Shares are beneficially owned by Ciba and CCorp, free and
clear of any Liens. Except for the
31
Diagnostics Shares, no shares of capital stock or other voting securities of
Diagnostics were issued, reserved for issuance or outstanding and except as set
forth on Schedule 3.03(c), there are not any phantom stock or other contractual
rights the value of which is determined in whole or in part by the value of any
capital stock of Diagnostics ("Diagnostics Stock Equivalents"). When sold to the
Company, the Diagnostics Shares will be duly authorized, validly issued, fully
paid and non-assessable by Ciba, CCorp or a subsidiary thereof. The Diagnostics
Shares are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividing or distribution of the Diagnostics Shares.
There are no outstanding bonds, debentures, notes or other indebtedness of
Diagnostics having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
Diagnostics may vote. Except as set forth above, as of the date of this
Agreement, there are not any securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Diagnostics is a party or by which Diagnostics is bound obligating Diagnostics
to issue, deliver or sell or create, or cause to be issued, delivered or sold or
created, additional shares of capital stock or other voting securities or
Diagnostics Stock Equivalents or obligating Diagnostics or any of its
subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking.
(d) FINANCIAL STATEMENTS. The audited balance sheet (the
"Diagnostics Balance Sheet") of Diagnostics at January 2, 1994, which is
attached as Annex A-1 hereto, including the notes thereto and information
relating thereto set forth in such Annex A-1, and the unaudited balance sheet of
Diagnostics at July 3, 1994, which is attached as Annex A-1A hereto, including
the notes thereto and information relating thereto set forth in such Annex A-1A,
in each case (i) was prepared substantially as described in Annex A-3 hereto and
(ii) fairly presents in all material respects the financial condition of
Diagnostics as of such date, in accordance with United States generally accepted
accounting principles except as otherwise described in Annex A-3. The audited
income statement of Diagnostics for the one-year period ended January 2, 1994,
which is attached
32
as Annex A-2 hereto, including the notes thereto and information relating
thereto set forth in such Annex A-2, and the unaudited income statement of
Diagnostics for the six-month period ended July 3, 1994, which is attached as
Annex A-2A hereto, including the notes thereto and information relating thereto
set forth in such Annex A-2A, in each case (i) was prepared substantially as
described in Annex A-3 hereto and (ii) fairly presents in all material respects
the results of operations of Diagnostics for such period, in accordance with
United States generally accepted accounting principles except as otherwise
described in Annex A-3.
(e) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 3.03(e), since June 30, 1994, Diagnostics has conducted its business
only in the ordinary course, and there has not been (i) any material adverse
change in Diagnostics, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) or any
change in stockholder's equity with respect to any of Diagnostics' capital
stock, (iii) (x) any granting by Diagnostics or any of its subsidiaries to any
executive officer of Diagnostics or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect on June 30,
1994, (y) any granting by Diagnostics or any of its subsidiaries to any such
executive officer of any increase in severance or termination pay, except as was
required under any employment, severance or termination agreements in effect on
June 30, 1994, or (z) any entry by Diagnostics or any of its subsidiaries into
any employment, severance or termination agreement with any such executive
officer, (iv) any damage, destruction or loss, whether or not covered by
insurance, that has had or could reasonably be expected to have a material
adverse effect on Diagnostics or (v) any change in accounting methods,
principles or practices by Diagnostics materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles.
(f) LITIGATION. Except as disclosed in Schedule 3.03(f), there is
no suit, action or proceeding pending or, to the knowledge of Ciba or CCorp,
threatened against Diagnostics that, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on Diagnostics, nor is
there any judgment, decree,
33
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Ciba or any of its subsidiaries related to Diagnostics and having or
that could reasonably be expected to have any such effect.
(g) ABSENCE OF CHANGES IN BENEFIT PLANS. Except as disclosed on
Schedule 3.03(g), since June 30, 1994, there has not been any adoption or
amendment in any material respect by Diagnostics or any of its subsidiaries
of any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, severance, disability or
death benefit plan providing benefits to any current or former employee,
officer or director of Diagnostics, any of its subsidiaries or any other
person or entity that, together with Diagnostics, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each a
"Diagnostics Commonly Controlled Entity") (collectively, "Diagnostics Benefit
Plans") which adoption or amendment is material to the business of
Diagnostics. Except as disclosed on such Schedule 3.03(g), there exist no
employment, consulting, severance, termination or indemnification agreements
between Diagnostics or any of its subsidiaries and any current or former
officer or director of Diagnostics or any of its subsidiaries which are
material to Diagnostics.
(h) ERISA COMPLIANCE. (i) Schedule 3.03(h) contains a list and
brief description of all Pension Plans, "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) and all other Diagnostics Benefit Plans, other
than plans maintained outside the United States, that are maintained, or
contributed to, by Diagnostics, any of its subsidiaries or any Diagnostics
Commonly Controlled Entity for the benefit of any current or former employees,
officers or directors of Diagnostics or any of its subsidiaries. Ciba has made
available to the Company for its review true, complete and correct copies of (A)
each Diagnostics Benefit Plan (or, in the case of any unwritten Diagnostics
Benefit Plans, descriptions thereof), (B) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Diagnostics
Benefit Plan (if any such report was required), (C) the most recent summary plan
description for each Diagnostics Benefit Plan for which such summary plan
description is required and (D) each trust agreement and group annuity contract
relating to any Diagnostics Benefit Plan.
34
(ii) Each Diagnostics Benefit Plan has been administered in all
material respects in accordance with its terms. Diagnostics, its subsidiaries
and all the Diagnostics Benefit Plans are in compliance in all material respects
with the applicable provision of ERISA and the Code. Except as disclosed in
Schedule 3.03(h), all reports, returns and similar documents with respect to the
Diagnostics Benefit Plans required to be filed with any governmental agency or
distributed to any Diagnostics Benefit Plan participant have been duly and
timely filed or distributed. Except as disclosed in Schedule 3.03(h), there are
no investigations by any governmental agency, termination proceedings or other
claims (except claims for benefits payable in the normal operation of the
Diagnostics Benefit Plans), suits or proceedings against or involving any
Diagnostics Benefit Plan or asserting any rights or claims to benefits under any
Diagnostics Benefit Plan that could give rise to any material liability, and
there are not any facts that could give rise to any material liability in the
event of any such investigation, claim, suit or proceeding.
(iii) Except as disclosed in Schedule 3.03(h), (1) all contributions
to, and payments from, the Diagnostics Benefit Plans that may have been required
to be made in accordance with the terms of the Diagnostics Benefit Plans, any
applicable collective bargaining agreement and, when applicable, Section 302 of
ERISA or Section 412 of the Code, have been timely made, (2) there has been no
application for or waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Benefit Plan that is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) (each, a "Diagnostics
Pension Plan") and (3) no Diagnostics Pension Plan had an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code as of the end of
the most recently completed plan year.
(iv) Except as disclosed in Schedule 3.03(h), all Pension Plans of
Diagnostics have been the subject of determination letters from the Internal
Revenue Service to the effect that such Pension Plans are qualified and exempt
from Federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, and no such determination letter has been revoked nor, to the knowledge of
Ciba or CCorp, has revocation been threatened, nor has any such Pension Plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would
35
adversely affect its qualification or materially increase its costs or require
security under Section 307 of ERISA. Ciba has made available to the Company for
its review a copy of the most recent determination letter received with respect
to Diagnostics Pension Plan for which such a letter has been issued, as well as
a copy of any pending application for a determination letter. Ciba has also
provided to the Company a list of all Diagnostics Pension Plan amendments as to
which a favorable determination letter has not yet been received. No event has
occurred that could subject any Diagnostics Pension Plan to tax under
Section 511 of the Code.
(v) Except as disclosed on Schedule 3.03(h), no Pension Plan that
Diagnostics or any of its subsidiaries maintains, or to which Diagnostics or any
of its subsidiaries is obligated to contribute, other than any Pension Plan that
is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of
ERISA; collectively, the "Diagnostics Multiemployer Pension Plans"), had, as of
the respective last annual valuation date for each such Pension Plan, an
"unfunded benefit liability" (as such term is defined in Section 4001(a)(18) of
ERISA), based on actuarial assumptions that have been furnished to the Company
by Ciba and neither Ciba nor CCorp is aware of any facts or circumstances that
would materially change the funded status of any such Pension Plan. Ciba has
furnished to the Company the most recent actuarial report or valuation with
respect to each Diagnostics Pension Plan. The information supplied to the
actuary by the Ciba and any subsidiary thereof for use in preparing those
reports or valuations was complete and accurate in all material respects and
neither Ciba nor CCorp has any reason to believe that the conclusions expressed
in those reports or valuations are incorrect. None of such Pension Plans has an
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived. None of Diagnostics,
any of its subsidiaries, any officer of Diagnostics or any of its subsidiaries
or any of the Diagnostics Benefit Plans that is subject to ERISA, including any
Pension Plan, any trusts created thereunder or any trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject Diagnostics, any of its subsidiaries
or any officer of Diagnostics or any of its subsidiaries to any tax or penalty
under ERISA, the Code or any other applicable law. Neither
36
any of such Diagnostics Benefit Plans nor any of such trusts has been
terminated, nor has there been any "reportable event" (as that term is defined
in Section 4043 of ERISA) with respect to any of the Diagnostics Benefit Plans
during the last five years.
(vi) Except as disclosed in Schedule 3.03(h), no Diagnostics
Commonly Controlled Entity has incurred any liability to a Pension Plan (other
than for contributions not yet due) or to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums not yet due) that, when
aggregated with other such liabilities, would result in a material liability to
Diagnostics, which liability has not been fully paid as of the date hereof.
(vii) Except as disclosed in Schedule 3.03(h), no Diagnostics
Commonly Controlled Entity has (a) engaged in a transaction described in Section
4069 of ERISA that could subject Diagnostics to liability at any time after the
date hereof or (b) acted in a manner that could, or failed to act so as to,
result in fines, penalties, taxes or related charges under (x) Section 502(c)(i)
or (l) of ERISA, (y) Section 4071 of ERISA or (z) Chapter 43 of the Code.
(viii) Neither Diagnostics nor any subsidiary of Diagnostics
maintains or is obligated to contribute to any Multiemployer Plan.
(ix) With respect to any Diagnostics Benefit Plan that is an
employee welfare benefit plan, except as disclosed in Schedule 3.03(h), (A) no
such Diagnostics Benefit Plan is unfunded or funded through a "welfare benefits
fund", as such term is defined in Section 419(e) of the Code, (B) each such
Diagnostics Benefit Plan that is a "group health plan", as such term is defined
in Section 5000(b)(1) of the Code, complies with the applicable requirements of
Section 498OB(f) of the Code and (c) each such Diagnostics Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to Diagnostics or any of its
subsidiaries on or at any time after the Closing.
(i) TAXES. Diagnostics and each of its subsidiaries has timely
filed all tax returns and reports required to be filed by them except where
failure to timely file would not result in additional material tax liability to
Diagnostics. All such returns are complete and accurate except with respect to
omissions or inaccuracies the value
37
of which are not material to the business of Diagnostics. Each of Diagnostics
and its subsidiaries has paid or caused to be paid all taxes shown as due on
such returns and all taxes in each case the amount of which is material to the
business of Diagnostics for which no return was filed. No deficiencies for any
taxes have been asserted, proposed or assessed against Diagnostics or any of its
subsidiaries that have not been paid or otherwise settled, and no requests for
waivers of the time to assess any such taxes are pending. The Federal income tax
returns of Diagnostics and each of its subsidiaries consolidated in such returns
have been examined by and settled with the United States Internal Revenue
Service or are closed under the statute of limitations for all years through
1990. Diagnostics has not been included in any Federal or state consolidated tax
return of another entity.
(j) NO EXCESS PARACHUTE PAYMENTS. No amount that could be
received (whether in cash or property or the vesting of property) as a result
of any of the transactions contemplated by this Agreement or any of the
Ancillary Agreements by any employee, officer or director of Diagnostics or
any of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Diagnostics Benefit Plan currently in effect would be
characterized as an "excess parachute payment" (as such term is defined in
Section 28OG(b)(1) of the Code).
(k) INTELLECTUAL PROPERTY. (i) Ciba has made available to the
Company a list of all material patents and applications therefor and licenses to
use, in each case that are owned or used by Diagnostics and are material to the
business, condition (financial or otherwise), results of operations or prospects
of Diagnostics, taken as a whole (collectively, the "Diagnostics Intellectual
Property Rights"). To the best knowledge of Ciba, except as disclosed in
Schedule 3.03(k), no Diagnostics Intellectual Property Right (A) has been
declared invalid, in whole or in part, or abandoned, dedicated, disclaimed or
allowed to lapse for nonpayment of fees or taxes or for any other reason or (B)
is being infringed by any third party, in each case which could reasonably be
expected to have a material adverse effect on Diagnostics.
(ii) To the best knowledge of Ciba, except as disclosed in Schedule
3.03(f) or 3.03(k), (A) neither
38
Diagnostics nor any of its subsidiaries during the five years preceding the date
of this Agreement has been sued or charged in writing with respect to, or been a
defendant in, any claim, suit, action or proceeding including a claim of
infringement by Diagnostics or such subsidiary of any intellectual property
rights which, if successful, could reasonably be expected to have a material
adverse effect on Diagnostics and (B) to the best knowledge of Ciba and CCorp,
the conduct by Diagnostics and its subsidiaries of their respective businesses
does not infringe the valid intellectual property rights of any other person in
any way that could reasonably be expected to have a material adverse effect on
Diagnostics.
(l) MATERIAL CONTRACTS. Schedule 3.03(l) lists all contracts,
leases and other agreements to which Diagnostics or any of its subsidiaries
is a party that are material to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of Diagnostics
and its subsidiaries, taken as a whole (the "Diagnostics Material
Contracts"). Except as disclosed in Schedule 3.03(l), Schedule 3.03(f) or
Schedule 3.03(k), (i) each Diagnostics Material Contract is in force and in
effect except for Material Contracts that have expired in accordance with
their terms; (ii) Diagnostics and its subsidiaries have performed all
material obligations required to be performed thereby under each Diagnostics
Material Contract; (iii) neither Ciba nor any of its subsidiaries has
received any written assertion of default under any Diagnostics Material
Contract; (iv) neither Ciba nor any of its subsidiaries expects or has
received any notice related to any termination or material change to, or
proposal with respect to, any of the Diagnostics Material Contracts as a
result of the transactions contemplated by this Agreement and the Ancillary
Agreements; and (v) neither Ciba nor any of its subsidiaries has knowledge of
any material breach or anticipated material breach by any other party to any
Diagnostics Material Contract. Ciba has made available to the Company for its
review true and complete copies of each Diagnostics Material Contract and
each Diagnostics Joint Venture Agreement, together with all amendments,
waivers or other changes thereto.
(m) COMPLIANCE WITH LAWS. (i) Diagnostics and each of its
subsidiaries has in effect all Permits necessary for it to own, lease or operate
its properties and assets and to carry on its business as now conducted, and
there has not occurred any default under any Permit, except for
39
absence of Permits and for defaults under Permits which absence or defaults
that, individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Diagnostics. Except as disclosed
on Schedule 3.03(m), Diagnostics and its subsidiaries are in compliance in all
material respects with all applicable statutes, laws, ordinances, regulations,
rules, judgments, decrees or orders of any Governmental Entity. Except as
disclosed on Schedule 3.03(m), neither the FDA nor any corresponding foreign
Governmental Entity has alleged that Diagnostics or any of its subsidiaries is
in violation of or, to the best knowledge of Ciba and CCorp, threatened to
withdraw or revoke, any Permit granted by it to Diagnostics or any of its
subsidiaries that is material to the business of Diagnostics, nor is the FDA or
any corresponding foreign Governmental Entity currently investigating or, to the
best knowledge of Ciba and CCorp, planning to investigate any alleged violation
of any such Permit that is material to the business of Diagnostics, nor has the
FDA or any corresponding foreign Governmental Entity requested that Diagnostics
or any of its subsidiaries cease to investigate, test or market any product that
is material to the business of Diagnostics for which Diagnostics or such
subsidiary has a Permit from the FDA or such corresponding foreign Governmental
Entity to investigate, test or market, as the case may be.
(ii) Except as not forth in Schedule 3.03(m), (A) neither Ciba nor
any of its subsidiaries has received any written communication from a
Governmental Entity that alleges that Diagnostics or any subsidiary is not in
compliance in any material respect with any Environmental Law and (B) Ciba and
CCorp have no knowledge of any environmental materials or information, other
than as listed in Schedule 3.03(m), that could reasonably be expected to have a
material adverse effect an Diagnostics. Ciba has made available to the Company
for its review to all material records and reports of Diagnostics related to any
actual or potential material liability of Diagnostics under Environmental Laws.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES OF CIBA AND CCORP
RELATING TO BIOCINE. Ciba and CCorp represent and warrant to the Company as
follows:
(a) JV US HOLDINGS SHARES. All of the issued and outstanding
shares of capital stock (the "JV US Holdings Shares") of Ciba-Geigy Biocine
Corporation ("JV US
40
Holdings") are owned by Ciba, CCorp or a wholly owned subsidiary of Ciba, free
and clear of any Liens. Except for the JV US Holdings Shares, no shares of
capital stock or other voting securities of JV US Holdings were issued,
reserved for issuance or outstanding and there are not any phantom stock or
other contractual rights the value of which is determined in whole or in part
by the value of any capital stock of the JV US Holdings ("JV US Holdings Stock
Equivalents"). When sold to the Company, the JV US Holdings Shares will be duly
authorized, validly issued, fully paid and non-assessable. Other than this
Agreement and the Ancillary Agreements, the JV US Holdings Shares are not
subject to any voting trust agreement or other contract, agreement, arrangement,
commitment or understanding, including any such agreement, arrangement,
commitment or understanding restricting or otherwise relating to the voting,
dividing or distribution of the JV US Holdings Shares. There are no outstanding
bonds, debentures, notes or other indebtedness of JV US Holdings having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of JV US Holdings may vote.
Except as set forth above, as of the date of this Agreement, there are not any
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which JV US Holdings is a party or
by which JV US Holdings is bound obligating JV US Holdings to issue, deliver or
sell or create, or cause to be issued, delivered or sold or created, additional
shares of capital stock or other voting securities or JV US Holdings Stock
Equivalents or obligating JV US Holdings or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Ciba has made available to
the Company for its review complete and correct copies of the Certificate of
Incorporation and By-laws of JV US Holdings as amended to the date of this
Agreement.
(b) JV US Holdings has good, legal and valid title to a 50%
general partnership interest (the "Biocine US Equity") in the Biocine Company, a
Delaware general partnership (the "Biocine Company"), free and clear of any
Liens. Other than the Biocine US Equity, JV US Holdings has no material assets,
and JV US Holdings has no material liabilities (whether absolute, accrued,
contingent or otherwise) unrelated to its being a general partner in the Biocine
Company. JV US Holdings has not engaged in any
41
activities other than in connection with the business of the Biocine Venture.
(c) Ciba has good, legal and valid title to 50% equity interest
(the "JV Vax Shares") in JV Vax, B.V. ("JV Vax", and together with the Biocine
Company, the "Biocine Venture"), free and clear of any Liens.
SECTION 3.05. SURVIVAL OF REPRESENTATIONS REGARDING DIAGNOSTICS. The
representations and warranties of Ciba contained in Section 3.03 of this
Agreement and all claims and causes of action with respect thereto shall
terminate upon expiration of 12 months after the Closing Date. In the event
notice of any claim for indemnification under Section 3.06 hereof shall have
been given (within the meaning of Section 7.02) within the one-year survival
period, the representations and warranties that are the subject of such
indemnification claim shall survive, solely with respect to such claim, until
such time as such claim is finally resolved.
SECTION 3.06. INDEMNIFICATION BY CIBA WITH REGARD TO DIAGNOSTICS
REPRESENTATIONS. (a) Ciba hereby agrees that it shall indemnify, defend and hold
harmless the Company, its subsidiaries and, if applicable, their respective
directors, officers, shareholders, partners, attorneys, accountants, agents and
employees and their heirs, successors and assigns (the "Indemnified Parties")
from, against and in respect of any damages, claims, losses, charges, actions,
suits, proceedings, deficiencies, taxes, interest, penalties, and reasonable
costs and expenses (including reasonable attorneys' fees) (collectively, the
"LOSSES") imposed on, sustained, incurred or suffered by or asserted against
any of the Indemnified Parties, directly or indirectly relating to or arising
out of, subject to Section 3.06(b), any breach of any representation or warranty
made by Ciba contained in this Agreement for the period such representation or
warranty survives.
(b) Ciba shall not be liable to the Indemnified Parties for any
Losses with respect to the matters contained in Section 3.06(a) except to the
extent (and then only to the extent) the Losses therefrom exceed an aggregate
amount equal to $2,500,000 and then only for all such Losses in excess thereof
up to an aggregate amount equal to $100,000,000.
42
SECTION 3.07. INDEMNIFICATION PROCEDURES. With respect to third party
claims arising under Section 3.06, all such claims for indemnification by any
Indemnified Party hereunder shall be asserted and resolved as set forth in this
Section 3.07. In the event that any written claim or demand for which Ciba would
be liable to any Indemnified Party under Section 3.06 is asserted against or
sought to be collected from any Indemnified Party by a third party, such
Indemnified Party shall promptly, but in no event more than 15 days following
such Indemnified Party's receipt of such claim or demand, notify Ciba of such
claim or demand and the amount or the estimated amount thereof to the extent
then feasible (which estimate shall not be conclusive of the final amount of
such claim and demand) (the "CLAIM NOTICE"). Ciba shall promptly but in no event
more than 45 days from the personal delivery or mailing of the Claim Notice (the
"NOTICE PERIOD") notify the Indemnified Party (a) whether or not Ciba disputes
the liability of Ciba to the Indemnified Party hereunder with respect to such
claim or demand and (b) whether or not it desires to defend the Indemnified
Party against such claim or demand. All reasonable costs and expenses incurred
by Ciba in defending such claim or demand shall be a liability of, and shall be
paid by, Ciba; PROVIDED, HOWEVER, that the amount of such costs and expenses
that shall be a liability of Ciba hereunder shall be subject to the limitations
set forth in Section 3.06(b) hereof. Except as hereinafter provided, in the
event that Ciba notifies the Indemnified Party within the Notice Period that it
desires to defend the Indemnified Party against such claim or demand, Ciba shall
have the right to defend the Indemnified Party by appropriate proceedings and
shall have the sole power to direct and control such defense. If any Indemnified
Party desires to participate in any such defense it may do so at its sole cost
and expense; PROVIDED that if the claim or demand could involve the imposition
of a consent order, injunction or decree against the Company, then such
reasonable costs and expenses of the Indemnified Party shall constitute amounts
indemnifiable under Section 3.06. The Indemnified Party shall not settle a claim
or demand for which it is indemnified by Ciba without the written consent of
Ciba, which will not be unreasonably withheld. Ciba shall not, without the prior
written consent of the Indemnified Party, which will not be unreasonably
withheld, settle, compromise or offer to settle or compromise any such claim or
demand on a basis which would result in the imposition of a consent order,
injunction or decree or any other limitation which would materially restrict the
future activity or conduct of the Indemnified
43
Party or any subsidiary or Affiliate thereof. If Ciba elects not to defend the
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the amount
of any such claim or demand, or, if the same be contested by the Indemnified
Party, then that portion thereof as to which such defense is unsuccessful (and
the reasonable costs and expenses pertaining to such defense) shall be the
liability of Ciba hereunder, subject to the limitations set forth in Section
3.06(b) hereof. To the extent Ciba shall direct, control or participate in the
defense or settlement of any third party claim or demand, the Indemnified Party
shall give Ciba and its counsel access to, during normal business hours, the
relevant business records and other documents, shall permit then to consult with
the employees and counsel of the Indemnified Party and shall provide such other
assistance as is reasonably requested by Ciba.
SECTION 3.08. TAX INDEMNITY REGARDING DIAGNOSTICS. (a) Ciba shall
indemnify the Company for any taxes imposed on Diagnostics with respect to any
taxable period, or portion thereof, ending on or prior to the Closing Date,
except (i) to the extent such taxes are reflected on the July 3, 1994 Balance
Sheet and (ii) to the extent any such taxes are paid by Ciba, Diagnostics or any
of their affiliates on or prior to the Closing Date. With respect to any taxes
for a taxable period that includes but does not end on the Closing Date, the
amount of taxes subject to indemnification hereunder shall be calculated as if
such taxable period ended as of the close of business on the Closing Date,
except that property taxes calculated on an annual basis shall be prorated based
on the number of days in the annual period elapsed through the Closing Date
compared to the number of days in the annual period elapsing after the Closing
Date.
(b) Ciba represents to the Company that the amount of "net
operating losses" ("NOLs") available to Diagnostics for Federal income tax
purposes immediately prior to the Closing is equal to at least $42,000,000. If
the amount of NOLs so available as of such time is actually less than the amount
set forth in the preceding sentence, Ciba shall indemnify the Company to the
extent that the liability of Diagnostics for Federal income taxes for any
taxable period beginning on or after the Closing Date is actually increased by
reason of the inaccuracy of such representation. Ciba makes no representation
with respect
44
to the ability of Diagnostics or any such Federal consolidated group to use
after the Closing Date any NOLs available immediately prior to the Closing Date,
and Ciba shall not have any indemnity obligation hereunder to the extent that
Diagnostics (or any such Federal consolidated group) is unable to use after the
Closing Date NOLs available immediately prior to the Closing Date.
(c) Ciba shall control all aspects of any audit or examination by
any taxing authority, and any administrative or judicial proceedings relating to
or resulting from any such audit or examination, that might result in Ciba's
being required to make an indemnity payment pursuant to paragraph (a) or (b)
(any such audit; examination, administrative proceeding or judicial proceeding,
a "Relevant Proceeding"). The Company and its affiliates (including Diagnostics)
shall promptly notify Ciba in writing upon their learning of the pendency of a
Relevant Proceeding and shall fully cooperate with Ciba in the conduct of such
Relevant Proceeding. Without the prior written consent of Ciba, neither the
Company nor any of its affiliates (including Diagnostics) shall settle or
compromise any claim for taxes that might result in Ciba's being required to
make an indemnity payment pursuant to paragraph (a) or (b).
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
OF THE COMPANY AND DIAGNOSTICS
SECTION 4.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY THE
COMPANY. During the period from the date of this Agreement to the first day on
which each of the three persons designated on Schedule 2.01 of the Governance
Agreement shall have become Directors of the Company, the Company shall, and
shall cause its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, keep available
the services of their current officers, scientists and other employees and
preserve their relationships with customers, suppliers, licensors, licensees,
distributors, joint ventures and others having business dealings with them
except to the extent that the failure to do so could not reasonably be
45
expected to have an adverse effect on the Company. Without limiting the
generality of the foregoing, the Company shall not take or permit any of its
subsidiaries to take any action (including any omission to take an action) that
would require the approval of Ciba or a majority or all of the Investor
Directors (as defined in the Governance Agreement) after the Closing (assuming
solely for this purpose that Ciba's Percentage Interest (as defined in the
Governance Agreement) is at least 40%. During the period from the date of this
Agreement to the first day on which each of the three persons designated on
Schedule 2.01 of the Governance Agreement shall have become Directors of the
Company, the Company shall not, and shall not permit any of its subsidiaries to,
without first consulting with Ciba (which consultation shall include providing
Ciba with prior opportunity to meet with management of the Company and, if
requested by Ciba, to meet with the Company's Board of Directors in the event it
has acted or is acting on such matter):
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly owned subsidiary
of the Company or any of its subsidiaries to its parent, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its subsidiaries or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other equity securities, except for shares repurchased
or redeemed pursuant to any existing employment arrangements;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares
of capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities (other than (x) the issuance of
new employee Stock Options under existing employee benefit plans or Common
Stock upon the exercise or conversion of Stock Options, warrants or
convertible securities outstanding on the date of this Agreement and in
accordance with their present terms, (y) the purchase of Common Stock
pursuant to the 1988 Employee Stock Purchase Plan, in
46
accordance with its present terms and (z) the issuance and sale of the New
Shares in accordance with the terms hereof);
(iii) in the case of the Company amend its certificate of
incorporation, by-laws or other comparable charter or organizational
documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or
by any other manner, any material business or any corporation, partnership,
joint venture, association or other business organization or division
thereof or (y) any assets that are material, individually or in the
aggregate, to the Company and its subsidiaries taken as a whole, except
purchases of inventory in the ordinary course of business consistent with
past practice;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its material
Intellectual Property or any other material properties or assets, except
sales of inventory in the ordinary course of business consistent with past
practice;
(vi) enter into any material research and development Joint
Ventures or other research and development arrangements with third parties
or enter into any agreement that would materially restrict Ciba's potential
access to the Company's current or future Intellectual Property or products
of the Company or its subsidiaries;
(vii) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (y) make any loans, advances or capital contributions to, or
investments in, any other person, other than (1) to the Company or any
direct or indirect wholly owned subsidi-
47
ary of the Company, (2) pursuant to existing contractual rights and (3)
non-material loans or advances to employees in the ordinary cause of
business consistent with past practice;
(viii) make or agree to make any new capital expenditure or
expenditures (other than capital expenditures which are contained in a duly
approved budget of the Company as of the date hereof, which, individually,
is in excess of $5,000,000 or, in the aggregate, are in excess of
$10,000,000;
(ix) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of the
Company included in the Filed SEC Documents or incurred in the ordinary
course of business consistent with past practice;
(x) change any accounting policy or procedure;
(xi) withdraw any application, pending or granted, for a Permit to
investigate, test or market, or for the governmental license of, any
product; or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions;
IT BEING UNDERSTOOD that nothing in this sentence shall in any way constitute an
exception to the Company's obligations under the first two sentences of this
Section 4.01(a).
(b) CONDUCT OF DIAGNOSTICS BUSINESS. During the period from the
date of this Agreement to the Closing, Ciba and CCorp shall cause Diagnostics
and its subsidiaries to carry on their business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers, scientists and other employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors,
joint ventures and others having
48
business dealings with them except to the extent that the failure to do so could
not reasonably be expected to have an adverse effect on Diagnostics. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Closing, Ciba and CCorp shall cause Diagnostics and its
subsidiaries to not:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned subsidiary of
Diagnostics to its parent except as contemplated by this Agreement;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(iii) amend its certificate of incorporation, bylaws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y) any
assets that are material, individually or in the aggregate, to Diagnostics
and its subsidiaries taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any material Diagnostics
Intellectual Property or any other material properties or assets, except
sales of inventory in the ordinary course of business consistent with past
practice;
(vi) enter into any material research and development Diagnostic
Joint Ventures or other material research and development arrangements with
third parties or enter into any agreement that would materially restrict
the Company's potential access to
49
current or future Diagnostics Intellectual Property or products of
Diagnostics or its subsidiaries;
(vii) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Diagnostics or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (y) make any loans, advances or capital contributions to, or
investments in, any other person, other than (1) to Diagnostics or any
direct or indirect wholly owned subsidiary of Diagnostics, (2) pursuant to
existing contractual rights and (3) non-material loans or advances to
employees in the ordinary course of business consistent with past practice;
(viii) make or agree to make any new capital expenditure or
expenditures (other than capital expenditures which are contained in a duly
approved budget of Diagnostics as of the date hereof) which, individually,
is in excess of $1,000,000 or, in the aggregate, are in excess of
$5,000,000;
(ix) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the
Diagnostics Balance Sheet or incurred in the ordinary course of business
consistent with past practice;
(x) change any accounting policy or procedure;
(xi) withdraw any application, pending or granted, for a Permit to
investigate, test or market, or for the governmental license of, any
product; or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
50
(c) OTHER ACTIONS. The Company, Ciba, CCorp and Holdings shall
not, and shall not permit any of their respective subsidiaries to, take any
action that would, or that could reasonably be expected to, result in (i) any of
the representations and warranties of such party set forth in this Agreement or
the Ancillary Agreements that are qualified as to materiality becoming untrue,
(ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect or (iii) any of the conditions set forth
in Article II not being satisfied.
(d) ADVICE OF CHANGES. The Company and Ciba shall promptly notify
the other of any change or event having, or that, insofar as can reasonably be
foreseen, would have, a material adverse effect on such party.
SECTION 4.02. NO SOLICITATION. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, (i) solicit or
initiate, or encourage the submission of, any takeover proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to expedite any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any takeover proposal; PROVIDED, HOWEVER, that to the
extent required by the fiduciary obligations of the Board of Directors of the
Company, as determined in good faith by the Board of Directors based on the
advice of outside counsel, the Company may, (A) in response to an unsolicited
request therefor, furnish information with respect to the Company to any person
pursuant to a customary confidentiality agreement and discuss such information
(but not the terms of any possible takeover proposal) with such person and (B)
upon receipt by the Company of a takeover proposal, following delivery to Ciba
of the notice required pursuant to Section 4.02(c), participate in negotiations
regarding such takeover proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any executive officer 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, whether or not such person is purporting to
act on behalf of the Company or any of its subsidiaries or otherwise, shall
51
be deemed to be a breach of this Section 4.02(a) by the Company. For purposes of
this Agreement, "takeover proposal" means any proposal for a tender or exchange
offer, a merger or other business combination or a sale of securities,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Significant Subsidiaries or any proposal or offer to
acquire in any manner, directly or indirectly, a material equity interest in or
a material amount of voting securities or assets of, the Company or any of its
Significant Subsidiaries, other than the transactions contemplated by this
Agreement and the Ancillary Agreements or any other transaction the consummation
of which would or could reasonably be expected to impede, interfere with,
prevent or materially delay, or which would or could reasonably be expected to
materially dilute the benefits to Ciba of, the transactions contemplated hereby
or by the Ancillary Agreements.
(b) Subject to the following sentence, the Board of Directors of
the Company shall not (i) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to Ciba, CCorp or Holdings, the approval or recommendation
by such Board of Directors of the Offer or the other transactions contemplated
hereby, (ii) approve or recommend, or propose to approve or recommend, any
takeover proposal or (iii) approve or authorize the Company's entering into any
agreement with respect to any takeover proposal. Notwithstanding the foregoing,
in the event the Board of Directors of the Company receives a takeover proposal
that, in the exercise of its fiduciary obligations (as determined in good faith
by the Board of Directors based on the advice of outside counsel), it determines
to be a superior proposal, the Board of Directors may (subject to the following
sentences) withdraw or adversely modify its approval or recommendation of the
Offer and the other transactions contemplated hereby and approve or recommend
any such superior proposal, approve or authorize the Company's entering into an
agreement with respect to such superior proposal, approve the solicitation of
additional takeover proposals or terminate this Agreement, in each case at any
time after the fourth business day following notice to Ciba (a "Notice of
Superior Proposal") advising Ciba that the Board of Directors has received a
superior proposal, specifying the material term of the structure of such
superior proposal. The Company may take any of the foregoing actions pursuant
to the preceding sentence only if a takeover proposal that was a superior
proposal at the time
52
of delivery of a Notice of Superior Proposal continues to be a superior proposal
in light of any improved transaction proposed by Ciba prior to the expiration of
the four business day period specified in the preceding sentence. In addition,
if the Company proposes to withdraw or adversely modify its approval or
recommendation of the Offer and the other transactions contemplated hereby or to
solicit additional takeover proposals or to enter into an agreement with respect
to any takeover proposal, concurrently with withdrawing or adversely modifying
such approval or recommendation, approving such solicitation or entering into
such agreement, the Company shall pay, or cause to be paid, to Ciba the Expense
Fee (as defined in Section 5.05(b)) and, in the event the Company shall enter
into such an agreement, the agreement shall provide for the payment to Ciba of
the Termination Fee (as defined in Section 5.05(c)) upon the consummation of the
transaction contemplated by such agreement. For purposes of this Agreement, a
"superior proposal" means any bona fide takeover proposal to acquire, directly
or indirectly, a material equity interest in or a material amount of voting
securities or assets of the Company or any of its Significant Subsidiaries for
consideration consisting of cash and/or securities, and otherwise on terms which
the Board of Directors of the Company determines in its good faith reasonable
judgment (based on the advice of a financial advisor of nationally recognized
reputation) to provide greater aggregate value to the Company's stockholders
than the transactions contemplated by this Agreement and the Ancillary
Agreements (or otherwise proposed by Ciba as contemplated above). Nothing
contained herein shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act
prior to the fourth business day following Ciba's receipt of a Notice of
Superior Proposal provided that the Company does not withdraw or modify its
position with respect to the Offer or the other transactions contemplated hereby
or approve or recommend a takeover proposal.
(c) In addition to the obligations of the Company set forth in
paragraph (b), the Company shall promptly advise Ciba of the existence of any
request for information or of any takeover proposal, or any inquiry with respect
to, or which could reasonably be expected to lead to, any takeover proposal.
(d) If the Company shall have determined to solicit additional
takeover proposals as permitted by this
53
Section 4.02, Ciba shall be allowed to submit a bid or proposal, which need not
contemplate the structure or business contributions provided for by this
Agreement or the terms of the Governance Agreement or any other Ancillary
Agreement (a "Ciba Alternative Transaction"), and Ciba otherwise shall have the
right to participate in the solicitation and have its bid or proposal evaluated
on a basis no less than favorable as any other participant in the solicitation.
Without limiting the foregoing, the Company shall not condition Ciba's ability
to submit a bid or proposal on a waiver of any rights of Ciba or its Affiliates
pursuant to any collaboration agreement, including the agreements related to the
Biocine Venture.
(e) If the material terms of any takeover proposal are publicly
announced or otherwise become publicly available and as a result the Offer and
the other the transactions contemplated hereby are not reasonably likely to be
consummated, and the Company shall not have determined to solicit additional
takeover proposals, the Company shall not take, or omit to take, any action if
as a result of such action or omission the ability of Ciba to improve the terms
of the transactions contemplated hereby, or the ability of Ciba to propose,
obtain any necessary stockholder approval of and consummate any Ciba
Alternative Transaction that offers value to the Company's stockholders at least
as great as the value available from the transactions contemplated hereby would
be adversely affected as compared to the ability of any other Person proposing a
takeover proposal to obtain the approval of the Company's stockholders thereof
or to otherwise consummate such takeover proposal. Without limiting the
generality of the foregoing, the Company shall not take any action that would
enhance the ability of any other Person proposing a takeover proposal to obtain
the approval of the Company's stockholders or otherwise consummate such takeover
proposal (including taking any action with respect to amending, modifying or
waiving any provision of the Rights Plan or granting any approval pursuant to
Section 203 of the Delaware General Corporation Law) without also taking a
comparable action that would similarly enhance the ability of Ciba to obtain any
necessary approval of the Company's stockholders of, and otherwise to
consummate, a Ciba Alternative Transaction and concurrently withdrawing any
impediments to a Ciba Alternative Transaction that do not similarly impede such
other Person; PROVIDED, HOWEVER, that nothing in this Section 4.02 shall prevent
the Company from entering into a
54
binding agreement with respect to a takeover proposal if the Company is
otherwise in compliance with this Article IV.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. CONSOLIDATION. Ciba and CCorp agree that, unless
otherwise required by applicable accounting standards, neither Ciba nor CCorp
shall cause the Company's accounts to be consolidated with its accounts for
financial accounting purposes for any period in which Ciba does not own or
control at least 50% of the outstanding Common Stock or the Voting Power (as
defined in the Governance Agreement).
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. Each of the
Company and Ciba shall, and shall cause each of its respective subsidiaries to,
afford to the other party and to the officers, employees, accountants, counsel,
financial advisors and other representatives of such other party, reasonable
access during normal business hours during the period prior to the Closing to
all their respective properties, books, contracts, commitments, personnel and
records (in the case of Ciba, only to the extent it relates to Diagnostics or
the Biocine Venture and, during such period, each of the Company and Ciba shall,
and shall cause each of its respective subsidiaries to, furnish promptly to the
other party (a) a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements of
Federal or state securities laws and (b) all other information concerning its
business, properties and personnel (in the case of Ciba, only to the extent it
relates to Diagnostics or the Biocine Venture) as such other party may
reasonably request. Except as required by law, each of the Company and Ciba
shall hold, and shall cause its respective officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to hold, in
confidence any nonpublic information obtained from the other pursuant to this
Section 5.02 until such time as such information becomes publicly available
(otherwise than through the wrongful act of any such person) and shall use its
best efforts to cause such persons not to disclose such information to others
without the prior written consent of the Company or Ciba, as the case may be. In
the event of the termination of this Agreement for any reason, the
55
Company and Ciba shall promptly return or destroy all documents containing
nonpublic information so obtained from the other party or any of its
subsidiaries and any copies made of such documents.
SECTION 5.03. REASONABLE EFFORTS; NOTIFICATION. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties shall
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 transactions
contemplated by this Agreement and the Ancillary Agreements, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or any of the Ancillary
Agreements or the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement and the Ancillary Agreements. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall (i) take all action requested by Ciba reasonably necessary so
that no state takeover statute or similar statute or regulation is or becomes
applicable to this Agreement, the Ancillary Agreements or any transaction
contemplated by this Agreement or the Ancillary Agreements and (ii) if any state
takeover statute or similar statute or regulation becomes applicable to this
Agreement, any Ancillary Agreement or any transaction contemplated by this
Agreement or any Ancillary Agreement, take all action reasonably requested by
Ciba and within the Company's power to permit the transactions contemplated by
this Agreement and the Ancillary Agreements to be consummated as promptly as
practicable on the terms contemplated by this Agreement
56
and the Ancillary Agreements and otherwise take such actions as are reasonably
requested by Ciba and within the Company's power to minimize the effect of such
statute or regulation on the transactions contemplated by this Agreement and the
Ancillary Agreements. Notwithstanding the foregoing, the Board of Directors of
the Company shall not be prohibited from taking any action permitted by Section
4.02(b).
(b) The Company shall give prompt notice to Ciba, and Ciba shall
give prompt notice to the Company, of (i) any representation or warranty made by
it contained in this Agreement or any Ancillary Agreement that is qualified as
to materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it 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 or any Ancillary
Agreement; 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 or the
Ancillary Agreements.
SECTION 5.04. RIGHTS AGREEMENT. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section
3.01(l)) requested in writing by Ciba in order to render the Rights inapplicable
to Ciba, CCorp and Holdings in connection with consummation of the transactions
contemplated hereby and by the Ancillary Agreements. Except as requested in
writing by Ciba, the Board of Directors of the Company shall not (i) amend the
Rights Agreement in a manner adverse to Ciba or Holdings or (ii) take any action
with respect to, or make any determination under, the Rights Agreement
(including a redemption of the Rights); in each case except as otherwise
expressly permitted under Section 4.02(b).
SECTION 5.05. FEES AND EXPENSES. (a) Except as provided below, all
fees and expenses incurred in connection with the Offer, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees
or expenses, whether or not the Offer or the sale of the New Shares on the terms
contemplated hereby is consummated.
(b) The Company shall pay, or cause to be paid, to Ciba a fee of
$5,000,000 in same day funds (the "Expense
57
Fee"), payable as partial reimbursement of Ciba's out-of-pocket expenses:
(i) upon demand, unless this Agreement is terminated by the
Company and Ciba, CCorp or Holdings shall have failed to perform in any
material respect any of its obligations under this Agreement, if this
Agreement is terminated pursuant to Section 6.01(a)(ii) as a result of the
failure of any condition set forth in clauses (i), (ii) or (iv) of
paragraph (e), or paragraph (f) or (g) of Exhibit A; or
(ii) upon demand, unless this Agreement is terminated by the
Company and Ciba, CCorp or Holdings shall have failed to perform in any
material respect any of its obligations under this Agreement if, (x) at any
time on or after the date of this Agreement until one year following any
termination of this Agreement, any person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) (other than Ciba or any of its
affiliates) shall have acquired, directly or indirectly, the Company, all
or substantially all its assets or more than 33-1/3% of the shares of
Common Stock then outstanding or entered into any agreement providing for
such a transaction, and (y)(A) on or after the date of this Agreement and
prior to the expiration of the Offer, any person or group shall have made a
takeover proposal, (B) the Offer, if required to have been commenced, shall
have remained open until the scheduled expiration date immediately
following the date such takeover proposal was first publicly announced and
(C) this Agreement shall have been terminated pursuant to Section
6.01(a)(ii).
Notwithstanding the foregoing, if the transactions contemplated by this
Agreement as a Ciba Alternative Transaction involving the transfer Diagnostics
or the Ciba Biocine Business to the Company is thereafter consummated, Ciba
shall in connection therewith refund the Expense Fee, together with interest at
the prime rate of Chemical Bank in New York City, to the Company.
(c) The Company shall pay, or cause to be paid, to Ciba an
additional fee of $50,000,000 in same day funds (the "Termination Fee"), unless
this Agreement is terminated by the Company and Ciba, CCorp or Holdings shall
have failed to perform in any material respect any of its obligations
under this Agreement, concurrently with the consummation of
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(i) any transaction pursuant to an agreement entered into in accordance with
Section 4.02(b), (ii) any other transaction within the definition of a "takeover
proposal" that is consummated at any time on or after the date of this Agreement
until one year following any termination of this agreement with any party to
such agreement or any other person that made a takeover proposal prior to
termination of the Agreement or (iii) any other transaction with respect to
which the Expense Fee is (or if already paid would have been) paid under
paragraph (b) (ii) above.
SECTION 5.06. PUBLIC ANNOUNCEMENTS. Ciba, CCorp and Holdings, on the
one hand, and the Company, on the other hand, shall consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement and the Ancillary Agreements and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 5.07. STOCKHOLDER LITIGATION. The Company shall give Ciba the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement and the Ancillary Agreements; PROVIDED, HOWEVER,
that no such settlement shall be agreed to until the Company has consulted with
Ciba.
SECTION 5.08. CCD EMPLOYMENT ARRANGEMENTS. (a) CCorp and Diagnostics
shall take such actions as shall be necessary to cease, effective on the Closing
Date, accrual of benefits under each U.S. Diagnostics Benefit Plan that is a
defined benefit pension plan and each supplemental retirement plan covering U.S.
employees of Diagnostics and its subsidiaries. CCorp shall assume full
sponsorship of, and all liability under, each such plan effective on the Closing
Date. Neither Diagnostics nor the Company shall at any time after the Closing
Date have any responsibility for the administration of, or liability under,
those plans; provided that Diagnostics shall reimburse CCorp for the cost of
benefits under each supplemental plan to the extent that such benefits are
attributable to contributions that would have been made to Diagnostics'
Investment Plan but for limitations of the Internal Revenue Code.
59
(b) CCorp and Diagnostics shall take such actions as shall be
necessary to terminate, effective on the Closing Date, retiree health, dental
and life benefit coverage for all Diagnostics and subsidiaries employees not
then receiving those benefits and shall assume all liability for any such
benefits, whether for current or future retirees, and full sponsorship of any
plan providing such a benefit. Neither Diagnostics nor the Company shall at
any time after the Closing Date have any responsibility for the
administration of, or liability under, those plans. However, if the Company
so elects within ten (10) days of the date hereof, the termination date shall
be extended to the end of a period (not to exceed ninety (90) days following
the Closing), which notice shall be given as soon as practicable following
the date of such election, in which case Diagnostics shall reimburse CCorp
for fifty percent of the cost of such benefits provided with respect to
eligible employees who give notice to retire and retire during such part of
such extension period as falls after the Closing Date.
(c) As soon as practicable following the Closing Date, U.S.
Diagnostics employees shall be eligible to participate in the Company's 401(k)
Plan in accordance with its terms and the assets (in cash) and liabilities of
the Diagnostics Investment Plan shall be transferred to the Company's 401(k)
Plan. Diagnostics employees shall be credited with their period of service with
Diagnostics for purposes of eligibility and vesting under the Company's 401(k)
Plan.
(d) On or as soon as practicable following the Closing Date,
U.S. Diagnostics employees shall generally be entitled to participate in the
welfare benefit plans and stock option plans generally made available to
similarly situated employees of the Company and shall be treated no less
favorably than similarly situated employees of the Company and such employees
shall cease to participate in Diagnostics welfare benefit plans, except to
the extent that the Company determines to continue the Diagnostics benefits
(other than retiree benefits). CCorp and Diagnostics shall cooperate with the
Company in facilitating such change in benefits. If such change occurs other
than on the first day of a plan year, Diagnostics employees' credits for
expenses incurred toward deductibles and co-payments under Diagnostics' plans
before the change shall be credited to them under the Company's plans for the
remainder of the year of change.
60
(e) The Company shall negotiate in good faith, after consulting
with Ciba, regarding appropriate terms pursuant to which the Company or a
subsidiary thereof shall employ C. William Zadel as the chief operating officer
of the businesses constituting Diagnostics for a period of five years following
the Closing, which terms shall be reasonably satisfactory to Ciba. If the
Company does not employ C. William Zadel after the Closing, it shall provide him
with severance payments in an amount which shall be at least equal to the
aggregate salary and other compensation that he would have received over the
three year period following the Closing based on his current salary and other
compensation.
SECTION 5.09. NASDAQ LISTING. The Company shall use its best efforts
to cause the Common Stock to continue to be included in The Nasdaq National
Market ("NASDAQ") after the Closing.
SECTION 5.10. 1988 AGREEMENT. The Company hereby waives the
provisions of Section 9 of the 1988 Agreement to the extent necessary to
permit the purchase by Holdings of shares of Common Stock pursuant to the
Offer and the consummation of the Share Issuances and the other transactions
contemplated hereby and by the Ancillary Agreements. The parties hereto
hereby agree that the 1988 Agreement will terminate as of the Closing Date,
PROVIDED that Section 10.01 thereof shall continue in effect with respect
only to information disclosed by the Company to Ciba after November 14, 1988,
and prior to October 18, 1994, in accordance with the terms of such agreement.
SECTION 5.11. ONGOING DIAGNOSTICS ARRANGEMENTS. Notwithstanding
anything in Section 4.01 to the contrary, all agreements between Diagnostics
or any of the its subsidiaries on the one hand and Ciba or any of its other
subsidiaries on the other hand shall terminate at or prior to the Closing
Date; PROVIDED that the cross-licenses between such persons shall remain in
place with respect to intellectual property that is owned by either party as
of the date hereof, but shall not remain in place with respect to
intellectual property of the parties developed or acquired on or after the
Closing Date. Ciba agrees that it and its subsidiaries shall provide to
Diagnostics and its subsidiaries at cost any administrative services,
trademark support services and other services, including incidental research
and development services, which they currently provide to Diagnostics for a
reasonable period after the Closing Date. The parties shall negotiate in good
faith
61
regarding an agreement to continue some or all of the arrangements contained in
such agreements including with respect to research and development agreements.
SECTION 5.12. CIBA GUARANTEE; REVOLVING CREDIT FACILITY. (a) At or
as soon as practicable after the Closing, but in no event prior to the
Company's execution and delivery of the Reimbursement Agreement (as defined
below), Ciba shall issue to a bank selected by Ciba and reasonably acceptable
to the Company (the "Selected Bank") a guarantee for the benefit of the
Company (the "Ciba Guarantee") pursuant to which Ciba shall guarantee the
obligations of the Company under a revolving credit facility denominated in
U.S. dollars (the "Credit Facility") provided by the Selected Bank. The Ciba
Guarantee shall be reasonably satisfactory in form and substance to Ciba and
to the Selected Bank (it being understood that Ciba will agree to customary
terms for guarantees of the type contemplated hereby). The Ciba Guarantee
shall expire on the eighth anniversary of the date hereof (the "Guarantee
Termination Date").
(b) Simultaneously with the issuance of the Ciba Guarantee and
subject to the Company's execution and delivery of the Reimbursement Agreement,
Ciba shall cause the Selected Bank to enter into appropriate agreements with the
Company setting forth the terms and conditions of the Credit Facility. The
Credit Facility will be provided to the Company on the following terms and
conditions and on such other terms and conditions that are customary to
revolving credit facilities of its type: (i) the principal amount of the Credit
Facility that may be outstanding at any time is $425,000,000 (as the same may
be reduced in accordance with the next sentence, the "Maximum Borrowing
Amount"). The Maximum Borrowing Amount shall be reduced by $1.50 for each $1.00
in additional funding (up to $50,000,000 in such additional funding) requested
by the Company under the Research and Development Agreement in accordance with
Exhibit B hereto; and PROVIDED FURTHER that the Company shall thereupon repay
any outstanding amounts under the Credit Facility to the extent such amounts
exceed the Maximum Borrowing Amount; (ii) the Company may not borrow or reborrow
any amounts under the Credit Facility after the fifth anniversary of the Closing
unless Ciba and the Company otherwise agree; (iii) the Company shall if the
Index Debt could reasonably be expected to be rated Investment Grade by Moody's
or S&P (each as defined in the Governance Agreement) in the event that the Ciba
Guarantee
62
immediately terminated (the "Investment Grade Condition") as of the fifth
anniversary hereof, then the Company shall promptly repay or refinance (without
the benefit of the Ciba Guarantee) all principal amounts outstanding under the
Credit Facility and the Credit Facility and the Ciba Guarantee shall thereupon
terminate; PROVIDED, HOWEVER, that if the Investment Grade Condition is not then
satisfied, then the Credit Facility and the Ciba Guarantee shall remain in place
and the principal amount of the Credit Facility shall be repaid in equal
installments on a quarterly basis over the period from such fifth anniversary to
the Guarantee Termination Date; and (iv) the interest rate payable under the
Credit Facility shall be equal to the applicable cost of funds of CCorp.
(c) Simultaneously with the issuance of the Ciba Guarantee, the
Company shall execute and deliver a reimbursement agreement (the "Reimbursement
Agreement") in form and substance satisfactory to Ciba and the Company pursuant
to which the Company shall agree to reimburse Ciba for any payments made by Ciba
pursuant to the Ciba Guarantee as well as all reasonable out-of-pocket costs and
expenses incurred by Ciba in connection with the Ciba Guarantee. The Company's
obligations under the Reimbursement Agreement shall be fully collateralized by
the Reimbursement Agreement Collateral. The "Reimbursement Agreement Collateral"
shall mean any collateral, including equity securities of the Company, that are
reasonably acceptable to Ciba. The Reimbursement Agreement shall contain a
negative pledge covenant with respect to the Reimbursement Agreement Collateral
and such other terms and conditions as are customary to reimbursement agreements
of its type.
SECTION 5.13. STOCKHOLDER APPROVAL OF SHARE ISSUANCES. The Company
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously adopted a resolution recommending that if the
approval of the stockholders is required under the NASDAQ rules for the issuance
of any shares of Common Stock issuable in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements (the "Share
Issuances"), the Company's stockholders approve such Share Issuances. The
Company agrees that a vote of its stockholders to approve such Share Issuances
will be held at the next regularly schedule stockholders meeting if such
approval is so required under the NASDAQ rules.
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SECTION 5.14. EMPLOYEE STOCK OPTION ARRANGEMENTS. Each of Ciba and
the Company shall take all actions necessary to implement the arrangements
regarding employee Stock Options of the Company agreed upon by the parties
hereto and set forth in Sections 5.14(a) through (f) below.
(a) Each holder listed on Schedule 5.14(a) of outstanding employee
Stock Options which may be exercised as of the date hereof in accordance with
their terms, the number of which options held by such holder and the expiration
dates and exercise prices thereof being listed on Schedule 5.14(a) ("Vested
Options"), shall have the right, (the "Vested Option Payment Right") but not the
obligation to receive from the Company, and the Company shall pay to such holder
upon the exercise of the Vested Option Payment Right, the Option Participation
Payment on the number of Vested Options with respect to which the Vested Option
Payment Right is exercised by such holder; PROVIDED that such holder may only so
exercise the number of Vested Options held by such holder in any Options Tranche
equal to the product of (x) the entire number of options held by such holder in
such Options Tranche and (y) the Percentage Factor, rounded to the nearest whole
number. The Vested Option Payment Right shall be exercisable by a holder of
Vested Options at any time prior to the expiration date thereof by written
notice to the Company, who shall then promptly notify Ciba of such exercise;
PROVIDED that upon the exercise of the Vested Option Payment Right with respect
to any Vested Options, such Vested Options with respect to which the Vested
Option Payment Right was exercised shall be immediately cancelled, and the
Company shall have no obligation to make the Option Participation Payment with
respect to such Vested Options until they have been cancelled. "Option
Participation Payment" shall mean, with respect to any options of the same
Options Tranche, a cash payment by Ciba in an amount equal to the Offer Price
MINUS the exercise price of such options. An "Options Tranche" shall mean any
series of options with the same expiration date and exercise price.
(b) Each holder listed on Schedule 5.14(b) of outstanding employee
Stock Options (other than Type B Non-Vested Options (as defined below)) which
may not be exercised as of the date hereof in accordance with their terms, the
number of which options held by such holder and the expiration dates and
exercise prices thereof being listed on Schedule 5.14(b) ("Type A Non-Vested
Options"), shall have the right (the "Type A Non-Vested Option Payment
64
Right") but not the obligation to receive from the Company, and the
Company shall pay to such holder upon the exercise of the Type A Non-Vested
Option Payment Right, the Option Participation Payment on the number of Type
A Non-Vested Options with respect to which the Type A Non-Vested Option
Payment Right is exercised by such holder; PROVIDED that such holder may only
so exercise the number of Type A Non-Vested Options held by such holder in
any Options Tranche equal to the product of (x) the entire number of options
held by such holder in such options Tranche and (y) the Percentage Factor,
rounded to the nearest whole number. The Type A Non-Vested Option Payment
Right shall be exercisable by a holder of Type A Non-Vested Options at any
time after such options became exercisable in accordance with their terms and
prior to the expiration date of such options by written notice to the
Company, who shall then promptly notify Ciba of such exercise; PROVIDED that
upon the exercise of the Type A Non-Vested Option Payment Right with respect
to any Type A Non-Vested Options, such Type-A Non-Vested Options with respect
to which the Type A Non-Vested Option Payment Right was exercised shall be
immediately cancelled, and the Company shall have no obligation to make the
Option Participation Payment with respect to such Type A Non-Vested Options
until they have been cancelled.
(c) At or as soon as practicable after the Closing, the Company
shall make a cash payment to each holder listed on Schedule 5.13(c) of
employee Stock Options with respect to which the holder's exercise right is
not vested as of the date hereof, the number of which options held by each
holder and the expiration dates and exercise prices thereof being listed on
Schedule 5.13(c) (the "Type B Non-Vested Options") equal to, with respect to
each series of options with the same exercise price, the product of (x) the
Offer Price MINUS the exercise price of such options and (y) the Percentage
Factor, rounded to the nearest whole number.
(d) If the Company determines that shareholder approval of any
right to a payment under this Section 5.14 is required or desirable for
regulatory purposes, the grant of such right shall be subject to such
approval and no grant of such right or payment under such right shall be made
before such approval. The Company may impose such further conditions upon any
such right as it shall deem appropriate or necessary to assure compliance
with regulatory rules.
65
Ciba agrees to vote any shares owned or controlled by Ciba or any affiliate in
favor of such approval.
(e) The Company shall notify Ciba of each payment made by it
pursuant to Sections 5.14(a) through (d) and Ciba shall promptly reimburse
the Company for the amount of each such payment, PROVIDED that in the case of
Sections 5.14(c) and 5.14(b) the options with respect to which such payments
were made shall have been canceled at the time of such notice.
(f) At or immediately after the Closing, the Company shall issue
employee Stock Options to purchase shares of Common Stock not to exceed
1,000,000 such employee Stock Options; PROVIDED that the exercise price of such
options shall be the fair market value of the options as defined in the
applicable stock options plan.
SECTION 5.15. DIAGNOSTICS BALANCE SHEET. (a) At the Closing, Ciba
shall cause Diagnostics to have net shareholder's equity (in the determination
of which pensions and other post retirement benefit liabilities will be deemed
to be zero) of not less than $188,651,000 and no indebtedness except as set
forth in Section 5.15 (b) below.
(b) At the Closing, Diagnostics shall continue to be obligated
under indebtedness to third parties in accordance with the terms thereof. In
addition, at Closing Diagnostics shall have a debt obligation to Ciba or its
subsidiaries in principal amount equal to $100,000,000 LESS such third party
indebtedness with the following terms: (i) the principal and accrued interest
will be due and payable on the fifth anniversary of the Closing Date; (ii)
interest will accrue and not be payable until such fifth anniversary, at which
time it will be payable in full; and (iii) the interest rate will be the
applicable cost of funds of CCorp.
SECTION 5.16. RESEARCH AND DEVELOPMENT AGREEMENT. As soon as
practicable after the Closing, Ciba and the Company shall negotiate in good
faith the terms of a Research and Development Agreement, which shall contain the
terms set forth on Exhibit B hereto as well as such other terms as may be
reasonably agreed by Ciba and the Company.
SECTION 5.17. EXCESS PARACHUTE PAYMENTS. If any payments made under
Section 5.14, alone or when aggregated with other compensation payable to any
individual,
66
constitute an "excess parachute payment" within the meaning of Section 280G of
the Code and/or would subject such individual to a tax under Section 4999 of the
Code (or successor or similar provisions, to the extent identified in Schedule
3.01(j) the Company may pay such individual such additional amount or amounts as
shall be necessary to assure that, on any date, the net after-tax amount
realized by Executive from the compensation paid hereunder plus such additional
amount shall equal the net-after tax amount that such individual would have
realized from the compensation payable hereunder if such additional tax were not
imposed; PROVIDED that, notwithstanding anything in Section 5.14 to the
contrary, neither Ciba nor any of its subsidiaries shall have any obligation to
reimburse the Company for any such payments.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01. TERMINATION. (a) Anything contained herein to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(i) by mutual written consent of Ciba and the Company;
(ii) by either Ciba or the Company if (x) as the result of the
failure of any of the conditions set forth in paragraphs (a) through (h) of
Exhibit A to this Agreement, Holdings shall have failed to commence the
Offer in the time required by this Agreement or (y) as a result of the
failure of any of the conditions set forth in Exhibit A to this Agreement
the Offer shall have terminated or expired in accordance with its terms
without Holdings having accepted for payment any shares of Common Stock
pursuant to the Offer;
(iii) by Ciba if any of the conditions set forth in Section 2.01
shall have been incapable of fulfillment, and shall not have been waived by
Ciba;
(iv) by the Company if any of the conditions set forth in Section
2.02 shall have become incapable of
67
fulfillment, and shall not have been waived by the Company; or
(v) by the Company in accordance with the provisions of Section
4.02(b).
PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) is not in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement.
(b) In the event of termination by the Company or Ciba pursuant to
this Section 6.01, written notice thereof shall forthwith be given to the other
and the transactions contemplated by this Agreement shall be terminated, without
further action by either party.
SECTION 6.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Ciba as provided in Section 6.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Ciba, CCorp, Holdings or the Company, other than
the provisions of Section 3.01(n), Section 3.02(b), Sections 4.02 (c) and (d),
the last two sentences of Section 5.02, Section 5.05, this Section 6.02 and
Article VII and except to the extent that such termination results from the
wilful and material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement or any of the Ancillary
Agreements.
SECTION 6.03. AMENDMENT. This Agreement may be amended by the parties
at any time before or after any required approval of matters, if any, presented
in connection with this Agreement by the stockholders of the Company; PROVIDED,
HOWEVER, that, after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
SECTION 6.04. EXTENSION; WAIVER. At any time prior to the Closing, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or
68
(c) subject to the proviso of Section 6.03, waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 6.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 6.02, an amendment
of this Agreement pursuant to Section 6.03 or an extension or waiver pursuant to
Section 6.04 shall, in order to be effective, require in the case of Ciba,
CCorp, Holdings or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing except as and to
the extent otherwise expressly provided in Section 3.05. This Section 7.01 shall
not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing.
SECTION 7.02. 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 given upon receipt) by delivery in person, by cable,
facsimile transmission, telegram or telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as
69
shall be specified in a notice given in accordance with this Section 7.02):
If to Ciba, to:
CIBA-GEIGY LIMITED
CH 4002
Basel, Switzerland
Attention: Chief Legal Officer
Facsimile: 41-61-696-5419
with a copy to:
Attention: Herbert Art
Facsimile: 41-61-696-5419
If to the Company, to:
CHIRON CORPORATION
4560 Horton Street
Emeryville, CA 94563
Attention: President
Facsimile: (510) 655-3282
with a copy to:
Attention: General Counsel
Facsimile: (510) 654-5360
If to CCorp or Holdings, to
CIBA-GEIGY CORPORATION
444 Saw Mill River Road
Ardsley, NY 10502
Attention: Mr. Stan Sherman
Facsimile: (914) 479-2844
with a copy to:
Attention: John J. McGraw, Esq.
Facsimile: (914) 479-2111
SECTION 7.03. DEFINITIONS. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more
70
intermediaries, controls, is controlled by, or is under common control with,
such first person.
"Ancillary Agreements" means the Governance Agreement dated as of the
date hereof (the "Governance Agreement") among the parties hereto, the Market
Price Option Agreement dated as of the date hereof among the parties hereto, the
Subscription Agreement dated as of the date hereof, the Registration Rights
Agreement dated as of the date hereof between Holdings and the Company and the
Cooperation and Collaboration Agreement dated as of the date hereof between Ciba
and the Company.
"material adverse change" or "material adverse effect" means, when
used in connection with the Company, Ciba or Diagnostics, any change or effect
(or any development that, insofar as can reasonably be foreseen, is likely to
result in any change or effect) that is materially adverse to the business,
properties, assets, condition (financial or otherwise), results of operations or
prospects of the Company and each of its subsidiaries, Ciba and its
subsidiaries, or Diagnostics and its subsidiaries, as applicable.
"person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
A "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
SECTION 7.04. INTERPRETATION. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". For purposes of this Agreement, the knowledge of
any party shall mean the
71
knowledge of such party and its subsidiaries after due inquiry.
SECTION 7.05. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 7.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the Ancillary Agreements (a) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and the
Ancillary Agreements and (b) are not intended to confer upon any person other
than the parties and their permitted successors and assigns any rights or
remedies.
SECTION 7.07. 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 7.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned or
transferred, in whole or in part (including by operation of law in connection
with a merger, or sale of substantially all the assets, of the Company, Ciba,
CCorp or Holdings or otherwise), by any of the parties without the prior written
consent of the other parties, except that each of Ciba, CCorp and Holdings may
assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct or indirect wholly owned
subsidiary of Ciba and, in the case of CCorp and Holdings, to Ciba, but no such
assignment shall relieve either of Ciba, CCorp or Holdings of any of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns. Any attempted
assignment in violation of this Section 7.08 shall be void.
SECTION 7.09. ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or any of
the Ancillary Agreements were not performed in accordance with their
72
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and the Ancillary Agreements and to enforce specifically the
terms and provisions of this Agreement and the Ancillary Agreements in any
Federal or state court located in the State of Delaware, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any Federal or state court located in the State of Delaware in
the event any dispute arises out of this Agreement, any of the Ancillary
Agreements, or any of the transactions contemplated by this Agreement or any of
the Ancillary Agreements, (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court and (c) agrees that it will not bring any action relating to this
Agreement, any of the Ancillary Agreements or any of the transactions
contemplated by this Agreement or any of the Ancillary Agreements in any court
other than a Federal or state court sitting in the State of Delaware.
73
IN WITNESS WHEREOF, Ciba, CCorp, Holdings and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
CIBA-GEIGY LIMITED,
by /s/ Alex Krauer
-----------------------------
Name:
Title:
/s/ John Cheesmond
-----------------------------
Name:
Title:
CIBA-GEIGY CORPORATION,
by /s/ McGraw
-----------------------------
Name:
Title:
CIBA BIOTECH PARTNERSHIP, INC.,
by /s/ McGraw
-----------------------------
Name:
Title:
CHIRON CORPORATION,
by /s/ William J. Rutter
-----------------------------
Name:
Title:
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement,
Holdings 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 Holdings' obligation to pay for or return tendered
shares of Common Stock after the termination or withdrawal of the Offer), to pay
for any shares of Common Stock tendered pursuant to the offer unless (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the offer 11,860,467 shares of Common Stock (the "Minimum Tender Condition");
(ii) any waiting period under the HSR Act and any foreign competition and
antitrust statutes and regulations applicable to the purchase of shares of
Common Stock pursuant to the Offer and to the sale and purchase of the Ciba
Biocine Business and the Diagnostics Shares and the related issuance of New
Shares shall have expired or been terminated (the "HSR Condition"); (iii) the
transactions contemplated by this Agreement shall have been jointly notified by
the parties hereto to the appropriate Governmental Entity in accordance with the
Exon-Florio Amendment and (A) an investigation shall not have been commenced
within 30 days of such notification or (B) if an investigation shall have been
so commenced, an announcement on the part of the President of the United States
to take remedial action pursuant to the Exon-Florio Amendment with respect
thereto shall have been made within 60 days after such commencement; (iv) the
conditions to the obligations of Ciba, C Corp, Holdings and the Company to
consummate the transactions contemplated to occur at the Diagnostics Closing
(other than the conditions relating to the acceptance for payment of shares of
Common Stock pursuant to the Offer) shall have been satisfied or waived; and (v)
the Company shall have executed and delivered each Ancillary Agreement and each
Ancillary Agreement shall be in full force and effect. Furthermore,
notwithstanding any other term of the Offer or this Agreement, Holdings shall
not be required to accept for payment or, subject as aforesaid, to pay for any
shares of Common Stock not theretofore accepted for payment or paid for, and may
terminate or amend the Offer, with the consent of the Company or if, at any time
on or after the date of this
2
Agreement and before the acceptance of such shares for payment or the payment
therefor, any of the following conditions exists:
(a) there shall be threatened or pending by any Governmental Entity
any suit, action or proceeding, which has a reasonable likelihood of
success, or there shall be pending by any other person any suit, action or
proceeding, which has a substantial likelihood of success, (i) challenging
the acquisition by Ciba or Holdings of any shares of Common Stock, seeking
to restrain or prohibit the making or consummation of the Offer or the
Share Issuances as contemplated by this Agreement of the performance of any
of the other transactions contemplated by this Agreement, or seeking to
obtain from the Company, Ciba, CCorp or Holdings any damages that are
material in relation to the Company and its subsidiaries taken as whole,
(ii) seeking to prohibit or limit the ownership or operation by the
Company, Ciba or any of their respective subsidiaries of a material portion
of the business or assets of the Company and its subsidiaries, taken as a
whole, or Ciba and its subsidiaries, taken as a whole, or to compel the
Company, Ciba or CCorp to dispose of or hold separate any material portion
of the business or assets of the Company and its subsidiaries, taken as a
whole or Ciba and its subsidiaries, taken as a whole, as a result of the
Offer or any of the other transactions contemplated by this Agreement and
the Ancillary Agreements, (iii) seeking to impose limitations on the
ability of Ciba, CCorp or Holdings to acquire or hold, or exercise full
rights of ownership of, any shares of Common Stock accepted for payment
pursuant to the Offer or any New Shares including, without limitation, the
right to vote such Common Stock and New Shares on all matters properly
presented to the stockholders of the Company, (iv) seeking to prohibit Ciba
or any of its subsidiaries from exercising any of their respective material
rights under this Agreement or any Ancillary Agreement;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Share Issuances, or any other action shall be taken by any
Governmental Entity or court, other than the application to the Offer or
the Share Issuances of applicable waiting periods under the HSR Act, that
is
3
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
(c) there shall have occurred any material adverse change in the
Company;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities (excluding any coordinated
trading halt triggered solely as a result of a specified decrease in a
market index), (ii) any extraordinary change in the financial markets in
the United States or Switzerland, (iii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or Switzerland, (iv) any limitation (whether or not mandatory) by
any Governmental Entity on, or other event that materially affects, the
extension of credit by banks or other lending institutions, (v) a
commencement of a war directly involving the armed forces of the United
States (other than in Haiti or the Middle East), or (vi) in case of any of
the foregoing existing on the date of this Agreement, material acceleration
or worsening thereof;
(e) (i) the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to Ciba or Holdings its approval or
recommendation of the Offer or the other transactions contemplated by this
Agreement or the Ancillary Agreements, or approved or recommended any
takeover proposal or approved the solicitation of additional takeover
proposals, (ii) the Company shall have entered into any agreement with
respect to any superior proposal in accordance with Section 4.02(b) of this
Agreement, (iii) six business days shall have elapsed following Ciba's
receipt of a Notice of Superior Proposal from the Company without the Board
of Directors of the Company having reaffirmed its recommendation of the
Offer and the Share Issuances, as the terms thereof may be modified or
improved by Ciba in accordance with the terms of this Agreement or (iv) the
Board of Directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions referred to in (i) or (ii)
above;
(f) any of the representations and warranties of the Company set
forth in this Agreement that are
4
qualified as to materiality shall not be true and correct and any such
representations and warranties that are not so qualified shall not be true
and correct in any material respect, in each case as of the date of this
Agreement and as of the Expiration Date as though made on and as of the
Expiration Date (or any other date as of which such representations and
warranties expressly speak), and Ciba shall have received a certificate to
such effect dated the Closing Date and executed by a duly authorized
officer of the Company;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement; or
(h) this Agreement shall have terminated in accordance with its
terms;
which, in the reasonable good faith judgment of Ciba or Holdings, in any such
case, and regardless of the circumstances giving rise to any such condition
(other than any action or inaction by Ciba or any of its subsidiaries which
constitutes a breach of this Agreement), makes it inadvisable to proceed with
such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Ciba and Holdings
and may be asserted by Ciba or Holdings regardless of the circumstances giving
rise to such condition or may be waived by Ciba or Holdings in whole or in part
at any time and form time to time in their sole discretion. The failure by Ciba,
Holdings or any other affiliate of Ciba at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
EXHIBIT B
RESEARCH AND DEVELOPMENT SUPPORT
TERM SHEET
The material terms of the Research and Development Support Agreement shall be as
follows:
PRESENTATION OF PROPOSED R&D PROGRAMS.
During the period commencing on January 1, 1995 (the "Effective Date") and
ending on December 31, 1999 (such period, the "Funding Period"), Chiron shall be
entitled to present from time to time proposals for research and development
programs ("Proposed R&D Programs") that Chiron shall desire CGL to fund or
partially fund. Such Proposed R&D Programs shall include funding of vaccine
programs that previously had been funded through The Biocine Company and taken
together shall constitute the research and development program (the "R&D
Venture") of the parties under the Research and Development Support Agreement.
No limitation shall be placed upon the number of Proposed R&D Programs that may
be presented by Chiron to CGL during the Funding Period and included in the R&D
Venture.
FUNDING OBLIGATION.
Subject to the limitations set forth below, CGL shall fund its share of all
Development Costs of the R&D Venture, which shall be 100%, or such lesser
amount as the parties may agree, of the projects included in the R&D Venture
(but not in excess of the maximum funding provided for hereunder).
"Development Costs" for any Proposed R&D Program, shall mean the fully
burdened, fairly allocated internal costs of Chiron, on a consolidated basis,
including reasonable and customary allocations of indirect and overhead
expense and charges in the nature of depreciation and amortization of
capitalized cost, and out-of-pocket expenses, to the extent any of the
foregoing were or are to be incurred in connection with activities performed
pursuant to a Proposed R&D Program.
FUNDING OBLIGATION LIMITATIONS.
The obligation of CGL to fund the R&D Venture shall be subject to the following
limitations:
(a) In no event shall CGL be obligated to provide to Chiron in
any calendar year during the Funding Period funding for the R&D Venture in
an amount in excess of U.S. $75,000,000 in 1995 and for calendar years
thereafter, in equal
annual portions of the remaining unexpended aggregate amount under (b) below;
and
(b) In no event shall the Aggregate Amount of Funding (as
hereinafter defined) provided by CGL to Chiron for the R&D Venture at any
time during the Funding Period exceed U.S. $250,000,000; provided, however,
that such amount may be increased, at Chiron's request, to $300,000,000 in
consideration of a reduction in the amount of the committed debt facility
under the Investment Agreement at the rate of $1.00 of increased research
and development funding for each $1.50 reduction of the debt facility.
"Aggregate Amount of Funding" shall mean, at any time, the aggregate amount of
funding provided to Chiron by CGL reduced by the aggregate amount of any
payments to or profits paid or earned by CGL in connection with any product(s)
developed in any Proposed R&D Program.
PAYMENT OF FUNDING OBLIGATION.
Based upon the Annual Budgets prepared by Chiron (which budgets shall be subject
to periodic review and adjustment by Chiron in consultation with CGL) for the
R&D Venture, CGL shall make monthly payments, payable in U.S. dollars, on the
first day of each month for its portion of all Development Costs estimated to be
incurred by Chiron for the ensuing month. Within 30 days after the end of each
calendar quarter, Chiron shall prepare and deliver to CGL a summary of the
actual Development Costs incurred by Chiron during the preceding calendar
quarter and a reconciliation with the estimated monthly payments by CGL during
the calendar quarter. Overpayments of Development Costs shall be applied by CGL
against subsequent monthly payments of estimated Development Costs due to
Chiron. CGL shall make an appropriate payment to Chiron of underpayments within
30 days of receipt of Chiron's summary of costs.
ACTIVITIES OF CHIRON.
Chiron agrees to spend the sums made available to it by CGL and its portion of
Development Costs to conduct the R&D Venture.
INVENTIONS.
Chiron will own any new inventions developed solely by it or its employees,
agents or assignors in connection with the R&D Venture.
2.
MARKET OPPORTUNITIES.
In consideration of the funding provided by CGL for the R&D Venture and subject
to Chiron's buy-out right described below, Chiron shall offer CGL the
opportunity to share in the market opportunities with respect to the product(s)
resulting from the R&D Venture. The definitive Research and Development Support
Agreement shall set forth various structures that Chiron may offer CGL. The
parties agree that the final terms selected for the R&D Venture shall be
structured to assure that Chiron will be entitled to recognize the funding
payments made by CGL as revenue in Chiron's profit and loss statement consistent
with U.S. generally accepted accounting principles. The structures that Chiron
may propose include:
(a) SHARING OF PRE-TAX PROFITS. Chiron may offer CGL the right
to receive a stated percentage of pre-tax profits and losses from the sale
of all product(s) developed, manufactured and marketed by Chiron pursuant
to the R&D Venture in return for an upfront cash payment to Chiron in an
amount to be mutually agreed between the parties at the commencement of
funding by CGL of the program (such stated percentage, the "Base
Percentage"). Funding payments made by CGL to Chiron with respect to the
R&D Venture would increase the Base Percentage at a rate mutually agreed to
by the parties. The Base Percentage and rate of increase of such percentage
will be intended to represent a commercially reasonable allocation of the
profits based on each party's contribution to the R&D Venture. Profits
would be calculated by deducting from net sales the fully burdened cost of
manufacturing (including depreciation, amortization and a fair allocation
for idle plant), royalties to third parties and/or one of the parties,
marketing, distribution and promotion costs.
(b) GRANT OF ROYALTY INTEREST. Chiron may grant to CGL the right
to receive a royalty on net sales of product(s) developed and sold by
Chiron pursuant to the R&D Venture. The royalty rate shall be as mutually
agreed to by the parties and shall represent a commercially reasonable
rate.
(c) GRANT OF MARKETING RIGHTS. Chiron may grant to CGL the
right to participate in the marketing and/or selling of product(s) in
selected markets. In such event, Chiron and CGL would agree upon a supply
arrangement under which Chiron would manufacture products for sale through
CGL under commercially reasonable terms.
BUYOUT RIGHT.
Chiron shall have the right with respect to the R&D Venture to repurchase all of
the rights granted to CGL upon tender by Chiron to CGL of payment in the amount
of the Buyout Amount (as hereinafter defined) in effect at the time of such
payment for the R&D
3.
Venture; provided that such right shall expire if such tender is not made prior
to January 1, 2002. The "Buyout Amount" shall equal an amount equal to (i) the
sum of all funding payments made by CGL to Chiron prior to such time for the R&D
Venture, PLUS (ii) a reasonable return on such payments which shall be agreed to
by the parties upon commencement of the R&D Venture and which shall represent
the time value of money, LESS (iii) the aggregate amount of all payments or
profits received by CGL in connection with the R&D Venture, LESS (iv) a
reasonable return on such payments which shall represent the time value of
money.
Chiron shall be entitled to make the payment of the Buyout Amount in the form of
cash or Common Stock, or a combination of the two. If Chiron shall elect to
employ Common Stock for purposes of making such payment, such Common Stock shall
be valued at its Fair Market Value as of the date immediately preceding the date
on which such payment shall be made.
NEGOTIATION OF THE DEFINITIVE RESEARCH AND DEVELOPMENT AGREEMENT.
The obligations of each party are subject to the negotiation and execution of a
definitive agreement, which shall be mutually satisfactory to each of the
parties.
4.