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Exhibit 2.01
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
NOVARTIS CORPORATION,
NOVARTIS BIOTECH PARTNERSHIP, INC., a subsidiary of Novartis Corporation,
CHIRON CORPORATION
and, for purposes of Section 10.14 only, NOVARTIS AG
Dated as of October 30, 2005
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of October 30, 2005, by and among Novartis Corporation, a New York corporation (“ Novartis ”) and an indirect wholly owned subsidiary of Novartis AG, a stock corporation organized under the laws of Switzerland (“ Parent ”), Novartis Biotech Partnership, Inc., a Delaware corporation and a subsidiary of Novartis (“ Merger Sub ”), Chiron Corporation, a Delaware corporation (the “ Company ”), and, for purposes of Section 10.14 only, Parent.
RECITALS
WHEREAS, as of the date hereof, Parent, together with certain of its direct and indirect Subsidiaries (as defined below), owns 79,320,078 shares of the common stock, par value $0.01 par share, of the Company (“ Common Stock ”);
WHEREAS, the Independent Directors (as defined in the Governance Agreement, dated as of November 20, 1994, as amended, by and among Parent (as successor in interest to Ciba-Geigy Limited), Novartis, and the Company (the “ Governance Agreement ”)) of the board of directors of the Company (the “ Company Board ”) have recommended to the Company Board that the Company Board adopt this Agreement;
WHEREAS, the Company Board has duly approved and declared advisable this Agreement and the merger of Merger Sub with and into the Company (the “ Merger ”) upon the terms and conditions set forth in this Agreement;
WHEREAS, the boards of directors of each of Parent, Novartis and Merger Sub have adopted this Agreement;
WHEREAS, Novartis, as the sole shareholder in Merger Sub, has approved the Merger; and
WHEREAS, the Company, Parent, Novartis and Merger Sub desire to make those representations, warranties, covenants and agreements specified herein in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Parent, Novartis, Merger Sub and the Company agree as follows:
ARTICLE IThe Merger; Closing; Effective Time1.1. The Merger . Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined below), Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease. The
Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “ Surviving Corporation ”), and the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger, except as set forth in Article II of this Agreement. The Merger shall have the effects specified in the Delaware General Corporation Law, as amended (the “ DGCL ”).
1.2. Closing . Unless otherwise mutually agreed in writing between Novartis and the Company, the closing for the Merger (the “ Closing ”) shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, at 9:00 A.M. local time on the third Business Day (the “ Closing Date ”) following the day on which the last to be satisfied or waived of the conditions set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement. For purposes of this Agreement, “ Business Day ” means any day other than a Saturday, Sunday, Federal holiday or any other day on which banking institutions in New York City are authorized or obligated by Law to be closed.1.3. Effective Time . As soon as practicable following the Closing, Novartis and the Company will cause a Certificate of Merger (the “ Certificate of Merger ”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in Section 251 of the DGCL. The Merger shall become effective at the time when the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by the parties in writing and specified in the Delaware Certificate of Merger (the “ Effective Time ”).ARTICLE II
Certificate of Incorporation and By-Lawsof the Surviving Corporation
2.1. The Certificate of Incorporation . The certificate of incorporation of Merger Sub in effect at the Effective Time shall be the certificate of incorporation of the Surviving Corporation (the “ Charter ”), until thereafter amended as provided therein or by applicable Law.2.2. The By-Laws . The by-laws of Merger Sub in effect at the Effective Time shall be the by-laws of the Surviving Corporation (the “ By-Laws ”), until thereafter amended as provided therein or in accordance with the Charter and applicable Law.ARTICLE III
Officers and Directorsof the Surviving Corporation
3.1. Directors . The directors of Merger Sub at the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors
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have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and the By-Laws.3.2. Officers . The officers of the Company at the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and the By-Laws.ARTICLE IVEffect of the Merger on Capital Stock;Exchange of Certificates
4.1. Effect on Capital Stock . At the Effective Time, as a result of the Merger and without any action on the part of the holder of any capital stock of the Company:(a) Merger Consideration . Each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock (i) owned by Parent or any direct or indirect Subsidiary of Parent (collectively, the “ Novartis Companies ”), (ii) owned by the Company or any direct or indirect Subsidiary of the Company (except, in the case of clauses (i) and (ii), for any such shares held on behalf of third parties), or (iii) shares of Common Stock (the “ Dissenting Shares ”) that are owned by stockholders (the “ Dissenting Stockholders ”) properly exercising appraisal rights pursuant to Section 262 of the DGCL (each, an “ Excluded Share ” and collectively, “ Excluded Shares ”)) shall be converted into the right to receive $45.00 in cash (the “ Merger Consideration ”). At the Effective Time, all shares of Common Stock shall no longer be outstanding and all shares of Common Stock shall be cancelled and retired and shall cease to exist, and each certificate (a “ Certificate ”) formerly representing any such shares of Common Stock (other than Excluded Shares) shall thereafter represent only the right to the Merger Consideration and any Dissenting Shares shall thereafter represent only the right to receive the applicable payments set forth in Section 4.3.(b) Cancellation of Shares . Each share of Common Stock issued and outstanding immediately prior to the Effective Time and owned by any of the Novartis Companies, the Company, or any direct or indirect Subsidiary of the Company (in each case, other than such shares of Common Stock that are held on behalf of third parties) shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, shall be cancelled and retired without payment of any consideration therefor and shall cease to exist.(c) Merger Sub . At the Effective Time, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation.4.2. Surrender of Certificates for Payment .(a) Paying Agent . At or promptly after the Effective Time but in no event more than 5 Business Days after the Effective Time, Novartis shall deposit, or shall cause to be
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deposited, with a paying agent appointed by Novartis and approved in advance by the Company (such approval not to be unreasonably withheld or delayed) (the “ Paying Agent ”), for the benefit of the holders of shares of Common Stock, cash sufficient to pay the aggregate Merger Consideration in exchange for shares of Common Stock outstanding immediately prior to the Effective Time (other than Excluded Shares), deliverable upon due surrender of the Certificates pursuant to the provisions of this Article IV (such cash being hereinafter referred to as the “ Exchange Fund ”).(b) Payment Procedures . Promptly after the Effective Time, Novartis and the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of shares of Common Stock (i) a letter of transmittal (which shall be in a form approved by Novartis and the Company prior to the Effective Time) specifying that delivery shall be effected, and risk of loss and title to Certificates shall pass, only upon delivery of Certificates to the Paying Agent and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon the surrender of a Certificate to the Paying Agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a check in the amount (after giving effect to any required tax withholdings) of (x) the number of shares of Common Stock represented by such Certificate multiplied by (y) the Merger Consideration, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any amount payable upon due surrender of the Certificates. In the event of a transfer of ownership of shares of Common Stock that is not registered in the transfer records of the Company, a check for any cash to be paid upon due surrender of the Certificate may be paid to such a transferee if the Certificate formerly representing such shares of Common Stock is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.(c) Transfers . At or after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or Novartis for transfer, they shall be cancelled and exchanged for a check in the proper amount pursuant to this Article IV.(d) Termination of Exchange Fund . Any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains unclaimed by the stockholders of the Company for 180 days after the Effective Time shall be delivered to the Surviving Corporation. Any holders of shares of Common Stock (other than Excluded Shares) who have not theretofore complied with this Article IV shall thereafter look only to the Surviving Corporation for payment of (after giving effect to any required tax withholdings) the Merger Consideration, upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, none of Novartis, Merger Sub, the Surviving Corporation, the Company, the Paying Agent or any other Person shall be liable to any former holder of shares of Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws. For the purposes of this Agreement, the term “ Person ” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.
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(e) Lost, Stolen or Destroyed Certificates . In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and the posting by such Person of a bond in such amount and upon such terms as may be required by Novartis as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue a check in the amount (after giving effect to any required tax withholdings) of the number of shares of Common Stock represented by such lost, stolen or destroyed Certificate multiplied by the Merger Consideration in exchange for such lost, stolen or destroyed Certificate. Any affidavit of loss presented pursuant to this Article IV, to be deemed effective, must be in form and substance reasonably satisfactory to the Surviving Corporation.4.3. Dissenters’ Rights . Any Person who otherwise would be deemed a Dissenting Stockholder shall not be entitled to receive the Merger Consideration with respect to the shares of Common Stock owned by such Person unless and until such Person shall have failed to perfect or shall have effectively withdrawn or lost such holder’s right to dissent from the Merger under the DGCL. Each Dissenting Stockholder shall be entitled to receive only the payment provided by Section 262 of the DGCL with respect to shares of Common Stock owned by such Dissenting Stockholder and as to which dissenters’ rights have been properly perfected. The Company shall give Novartis (i) prompt notice of any written demands for appraisal, attempted withdrawals of such demands, and any other instruments served pursuant to applicable Law received by the Company relating to stockholders’ rights of appraisal, and (ii) the opportunity to direct all negotiations and proceedings with respect to demand for appraisal under the DGCL. The Company shall not, except with the prior written consent of Novartis, voluntarily make any payment with respect to any demands for appraisals of Dissenting Shares, offer to settle or settle any such demands or approve any withdrawal of any such demands.4.4. Adjustments to Prevent Dilution . In the event that the Company changes the number of shares of Common Stock, or securities convertible or exchangeable into or exercisable for shares of Common Stock, issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the Merger Consideration shall be equitably adjusted to reflect such change.4.5. Treatment of Company Options/Other Equity Awards .(a) Immediately prior to the Effective Time, each stock option to purchase shares of Common Stock then outstanding (each, a “ Company Option ”) shall (i) if unvested, become fully vested and (ii) be converted into the right to receive, upon the exercise thereof, an amount in cash (without interest) equal to the Merger Consideration multiplied by each share of Common Stock subject to such Company Option. Each outstanding Company Option so converted shall, immediately following such conversion, be cancelled and the holder thereof shall be entitled to receive, as soon as practicable thereafter but in any event within 20 days after the Effective Time, an amount of cash (without interest) equal to the product of (x) the total number of shares of Common Stock subject to such Company Option multiplied by (y) the excess, if any, of the amount of the Merger Consideration over the exercise price per share of Common Stock under such Company Option (with the aggregate amount of such payment
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rounded to the nearest cent), less applicable Taxes, if any, required to be withheld with respect to such payment.(b) Immediately prior to the Effective Time, each outstanding restricted stock unit or restricted share right (each outstanding restricted stock unit and restricted share right hereinafter referred as a “ Share Right ”) shall become fully vested and shall entitle the holder thereof to receive, as soon as practicable thereafter but in any event within 20 days after the Effective Time, an amount in cash (without interest) equal to the product of (x) the Merger Consideration and (y) the total number of shares of Common Stock subject to such Share Right, subject to any deferral election in effect immediately prior to the Effective Time made by such holder under the Company’s deferred compensation plans, less applicable Taxes, if any, required to be withheld with respect to such payment.(c) The compensation committee of the Company Board shall make such adjustments and amendments to or make such determinations with respect to the Company Options, restricted stock units, and restricted share right and any other Benefit Plans to implement the foregoing provisions of this Section 4.5 and Section 7.1(a).ARTICLE VRepresentations and Warranties of the Company
Except as set forth in (i) the Company Reports (as defined below) filed prior to the date hereof or (ii) the applicable section of the disclosure schedule delivered by the Company to Novartis on the date hereof (the “ Company Disclosure Schedule ”) (it being understood that any matter disclosed pursuant to any section or subsection of the Company Disclosure Schedule shall be deemed to be disclosed for all purposes of this Agreement and the Company Disclosure Schedule, as long as the relevance of such disclosure is reasonably apparent), the Company hereby represents and warrants to Novartis and Merger Sub as follows:
5.1. Organization, Good Standing and Qualification . Each of the Company and its Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and has all requisite corporate or other business entity power and authority to own, lease and operate its properties and assets and to carry on its businesses as now being conducted and is qualified to do business and is in good standing as a foreign corporation or other business entity in each jurisdiction where the ownership, leasing or operation of its properties or assets or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing or to have such power or authority, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect (as defined below) or to prevent, impede or materially delay the ability of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder. The Company has heretofore made available to Novartis accurate and complete copies of the certificate of incorporation and by-laws and other organizational documents, as currently in effect, of the Company and each of its Significant Subsidiaries.
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As used in this Agreement, “ Subsidiary ” shall mean, with respect to any party, any corporation or other organization, whether incorporated or unincorporated or domestic or foreign to the United States, of which (x) such party or any other Subsidiary of such party is a general partner or (y) at least a majority of the securities (or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization) is, directly or indirectly, owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.
As used in this Agreement, “ Significant Subsidiary ” shall mean, with respect to any party, any corporation or other organization, whether incorporated or unincorporated or domestic or foreign to the United States, which is a “significant subsidiary” within the meaning of Regulation S-X promulgated under the Securities Act.
As used in this Agreement, “ Company Material Adverse Effect ” shall mean any material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole; provided , however , that Company Material Adverse Effect shall not include any effect to the extent resulting from (1) any change, development, circumstance, event, or occurrence generally affecting the industries in which the Company or its Subsidiaries operate, except to the extent the Company or its Subsidiaries are affected in a disproportionate manner as compared to other similar companies in the industries in which the Company or its Subsidiaries operate, (2) any change in general economic or political conditions, (3) any change in Law or GAAP or interpretations thereof, (4) the direct impact of the announcement or performance of this Agreement and the transactions contemplated hereby (including the direct impact of this Agreement on relationships with employees, customers, suppliers and distributors), (5) any change, development, circumstance, event or occurrence relating to the revenues to be derived from sales of Fluvirin for the 2005-2006 influenza season, or (6) any change, development, circumstance, event or occurrence relating to the research and development relating to Tifacogin.
As used in this Agreement, “ Knowledge of the Company ” shall mean the knowledge, after reasonable inquiry, of the following employees of the Company: the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the General Counsel, the heads of each of the blood testing segment, vaccines segment and biopharmaceuticals segment of the Company, Chief Scientific Officer of the Company, the Vice President, Head of Corporate Business Development, the Vice President, Tax of the Company, and, solely for the purposes of Section 5.13, Alisa Harbin.
5.2. Capitalization of the Company and its Subsidiaries .(a) The authorized stock of the Company consists of 5,000,000 shares of preferred stock, par value $0.01 per share (“ Preferred Stock ”), and 500,000,000 shares of Common Stock, 500,000 of which are designated as restricted common stock (“ Restricted Common Stock ”). As of September 30, 2005, 188,526,033 shares of Common Stock were issued and outstanding and no shares of Preferred Stock or Restricted Common Stock were outstanding. All shares of Common Stock have been duly authorized, validly issued, and are fully paid, nonassessable and free of preemptive rights or other similar rights. The Company has
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no commitments to issue or deliver any shares of Common Stock, except that, as of September 30, 2005, a total of 29,338,396 shares of Common Stock are reserved for issuance pursuant to outstanding Company Options and 13,625,549 shares of Common Stock are issuable as of the date hereof upon conversion and in accordance with the terms of the Company’s 1 5/8% Convertible Debentures due 2033, 2 3/4% Convertible Debentures due 2034 and Zero-Coupon Liquid Yield Option Notes due 2031 (and without consideration of any change in control provisions thereof) (collectively, the “ Debentures ”). Since September 30, 2005, no shares of Common Stock or Preferred Stock have been issued other than pursuant to Company Options granted on or prior to such date, and no Company Options have been granted. Each of the outstanding shares of capital stock or other securities of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and owned by the Company or by a direct or indirect wholly-owned Subsidiary of the Company, free and clear of any Lien; provided that certain Subsidiaries that are not Significant Subsidiaries are not wholly owned by the Company and its Subsidiaries. Except as set forth above, there are no shares of capital stock authorized, reserved, issued or outstanding and there are no preemptive or other outstanding rights, subscriptions, options, warrants, stock appreciation rights, redemption rights, repurchase rights, convertible, exercisable, or exchangeable securities or other agreements, arrangements or commitments of any character relating to the issued or unissued share capital or other ownership interest of the Company or any of its Subsidiaries or any other securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or its Subsidiaries, and no securities evidencing such rights are authorized, issued or outstanding. Except as set forth above, the Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. For purposes of this Agreement, “ Lien ” means, with respect to any asset (including any security) any option, claim, mortgage, lien, pledge, charge, security interest or encumbrance or restrictions of any kind in respect of such asset, other than: (a) statutory Liens of landlords, statutory Liens of banks and statutory rights of set-off of banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of such amounts overdue for a period in excess of 30 days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts; (b) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; (c) Liens in favor of customs and revenue authorities arising as a matter of Law to secure payment of custom duties in connection with the importation of goods (d) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; and (e) Liens that do not either adversely affect the value of the real property subject to such Lien or prohibit or interfere with the operations of that real property or the business of the Company or the Subsidiaries.(b) Section 5.2(b) of the Company Disclosure Schedule sets forth the name of each Person (other than direct and indirect wholly-owned Subsidiaries) that the Company considers material to its business in which the Company or any of its Subsidiaries owns any
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equity or similar interest in or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business as of the date of this Agreement, and the percentage interest owned.(c) There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of any of the capital stock of the Company. None of the Company or any of its Subsidiaries is obligated under any registration rights or similar agreements to register any shares of capital stock of the Company or any of its Subsidiaries on behalf of any Person.5.3. Corporate Authority; Approval and Fairness .(a) The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and, subject only to adoption of this Agreement by its stockholders by the Company Requisite Vote, and to consummate the Merger. The affirmative vote of a majority of the outstanding shares of Common Stock (such affirmative vote, the “ Company Requisite Vote ”) is the only vote of the holders of any class or series of capital stock of the Company necessary to adopt, approve or authorize this Agreement and the Merger. This Agreement has been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by Novartis and Merger Sub, constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to affecting creditors’ rights and to general equity principles.(b) The Company Board has (A) upon recommendation by the Independent Directors, duly approved and declared advisable this Agreement and the Merger; (B) received the opinions of its financial advisors, Credit Suisse First Boston Corporation and Morgan Stanley & Co. Incorporated (the “ Financial Advisors ”), to the effect that the Merger Consideration to be received by the holders of shares of Common Stock (other than the Novartis Companies) is fair from a financial point of view to such holders (it being agreed and understood that such opinions are for the benefit of the Independent Directors and the Company Board and may not be relied on by Novartis or Merger Sub); (C) resolved, as of the date hereof, to recommend adoption of this Agreement, the Merger and the other transactions contemplated hereby to the holders of shares of Common Stock (such recommendations being the “Recommendation”); and (D) directed, as of the date hereof, that this Agreement be submitted to the holders of shares of Common Stock for their adoption. All actions necessary to satisfy the requirements set forth in Article Eleventh, Section 1(b) of the Company’s Restated Certificate of Incorporation have been satisfied.5.4. Consents and Approvals; No Violations . No filing with or notice to, and no permit, authorization, registration, consent or approval of, any court or tribunal or administrative, governmental or regulatory body, agency, authority or other entity (a “ Governmental Entity ”) is required on the part of the Company or any of its Subsidiaries for the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby, except (i) pursuant to the applicable requirements of the Securities Act of 1933, as amended (including the rules and regulations
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promulgated thereunder the “ Securities Act ”) and the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder the “ Exchange Act ”), (ii) the filing of the Certificate of Merger pursuant to the DGCL, (iii) compliance with Section 721 of the Defense Production Act of 1950, as amended (“ Exon-Florio ”), (iv) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (v) compliance with any applicable requirements of Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the “ EC Merger Regulation ”), (vi) compliance with any applicable requirements of Laws in other foreign jurisdictions governing antitrust or merger control matters, (vii) as may be required by the Nasdaq National Market or (viii) where the failure to obtain such permits, authorizations, consents or approvals or to make such filings or give such notice would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or would not prevent, impair or materially delay the consummation of the Merger and the transactions contemplated hereby. Neither the execution, delivery and performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (A) conflict with or result in any breach, violation or infringement of any provision of the respective certificate of incorporation or by-laws (or similar governing documents) of the Company or of any its Subsidiaries, (B) result in a breach, violation or infringement of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to the creation of any Lien or any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation, whether written or oral (each a “ Contract ”), to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound that is required to be described in, or filed as an exhibit to, any Company Report (as defined below) (each, a “ Material Contract ”), or (C) violate or infringe any order, writ, injunction, judgment, arbitration award, agency requirement, decree, law, statute, ordinance, rule or regulation, concession, franchise, permit, license or other governmental authorization or approval (each a “ Law ”) applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, except in the case of (B) or (C) for breaches, violations, infringements, defaults or changes which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect (excluding, for purposes of this Section 5.4, clause (4) of the definition of Company Material Adverse Effect) or to prevent, impede or materially delay the ability of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder.5.5. Compliance with Laws; Licenses . The Company and its Subsidiaries operate their respective businesses in substantial compliance with any federal, state, local or foreign Laws applicable to such businesses (other than any Laws relating to the subject matters covered in Section 5.12 or 5.14), except for such violations that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or to prevent, impede or materially delay the ability of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder. No investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the Knowledge of the Company, threatened, nor has any Governmental Entity indicated an intention to conduct the same, except for such investigations or reviews that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The
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Company and its Subsidiaries each has all governmental permits, licenses, franchises, variances, exemptions, orders issued or granted by a Governmental Entity and all other authorizations, consents and approvals issued or granted by a Governmental Entity necessary to conduct its business as presently conducted, except those the absence of which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.5.6. No Default . Neither the Company nor any of its Subsidiaries is in default or violation (and no event has occurred which with notice or the lapse of time or both would constitute a default or violation) of any term, condition or provision of (i) its certificate of incorporation or by-laws (or similar governing documents) or (ii) any Material Contract, except in the case of clause (ii) of this sentence for violations, breaches or defaults that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.5.7. Company Reports; Financial Statements .(a) The Company has made available to Novartis each registration statement, report, proxy statement or information statement filed by it since December 31, 2004 (the “ Audit Date ”), including (x) the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, and (y) the Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2005 and June 30, 2005, each in the form (including exhibits, annexes and any amendments thereto) filed with the Securities and Exchange Commission (“ SEC ”), which, together with any such reports filed subsequent to the date hereof, are referred to as the “Company Reports”. The Company has filed and furnished all forms, statements, reports and documents required to be filed or furnished by it with the SEC pursuant to applicable securities statutes, regulations, policies and rules since January 1, 2004. The Company Reports were prepared in all material respects in accordance with the applicable requirements of the Securities Act and the Exchange Act and complied in all material respects with the then applicable accounting standards. As of their respective dates (and, if amended, as of the date of such amendment) the Company Reports did not, and any Company Reports filed with the SEC subsequent to the date of this Agreement will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. To the Knowledge of the Company, there are no outstanding comment letters or requests for information from the SEC with respect to any Company Report.(b) Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) filed on or prior to the date of this Agreement fairly presents, and if filed after the date of this Agreement, will fairly present, the consolidated financial position of the Company and its Subsidiaries, as of its date, and each of the consolidated statements of operations, cash flows and of changes in stockholders’ equity included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents, and if filed on or after the date of this Agreement, will fairly present, the results of operations, retained earnings and changes in financial position, as the case may be, of the Company and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end audit adjustments), in each case in accordance with U.S. generally accepted accounting principles
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(“ GAAP ”) consistently applied during the periods involved, except as may be noted therein. The Company has designed and maintains a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company (A) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure, and (B) has disclosed, based on its most recent evaluation of such disclosure controls and procedures prior to the date hereof, to the Company’s auditors and the audit committee of the Company Board (1) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.(c) Since December 31, 2004, (x) through the date hereof, to the Knowledge of the Company neither the Company nor any of its Subsidiaries nor any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (y) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to the General Counsel or Chief Executive Officer of the Company.5.8. No Undisclosed Material Liabilities . Except: (i) liabilities disclosed and provided for on the balance sheets (including the notes thereto) included in the Company Reports filed by the Company prior to the date hereof; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices since December 31, 2004; (iii) liabilities and obligations incurred under contracts to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound, other than liabilities or obligations arising from a breach or default under any such contract; or (iv) liabilities or obligations that would not be reasonably expected, either individually or in the aggregate, to have a Company Material Adverse Effect, there are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, fixed, matured or otherwise, and whether or not required to be disclosed.
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5.9. Litigation . There is no civil, criminal or administrative suit, claim, hearing, inquiry, action, proceeding or investigation (each an “ Action ”) pending to which the Company or any of its Subsidiaries is a party or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or to prevent, impede or materially delay the ability of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder. Neither the Company nor any of its Subsidiaries is subject to any outstanding order, writ, injunction or decree, except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or to prevent, impede or materially delay the ability of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder.5.10. Material Contracts . To the Knowledge of the Company and its Subsidiaries, all of the Material Contracts of the Company and its Subsidiaries are in full force and effect, except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.5.11. Absence of Certain Changes or Events . Since September 30, 2005 and through the date hereof, there has not been any Company Material Adverse Effect or any event, occurrence, discovery or development which would, individually or in the aggregate, reasonably be expected to have or result in a Company Material Adverse Effect or to prevent, impede or materially delay the ability of the Company to consummate the transactions contemplated hereby or to perform its obligations hereunder.5.12. Employee Benefit Plans .(a) Section 5.12(a) of the Company Disclosure Schedule sets forth a list of all material Benefit Plans. “Benefit Plans” means each “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and other employee benefit or compensation plans, policies, agreements, programs, and arrangements, that are maintained by the Company, any Subsidiary of the Company or to which the Company or any Subsidiary of the Company is party thereto or obligated to contribute thereunder for current or former employees or directors of the Company or any Subsidiary of the Company other than Benefit Plans maintained outside of the United States primarily for the benefit of Employees (the “ non-U.S. Employees ”) working outside of the United States (such plans hereinafter referred to as “ non-U.S. Benefit Plans ”), a list of which will be provided no later than thirty (30) days following the date of this Agreement. True, correct and complete copies of the following documents, with respect to each Benefit Plan listed on Section 5.12(a) of the Company Disclosure Schedule, have been delivered or made available to Novartis by the Company: (i) the Benefit Plan and related trust documents, and amendments thereto; (ii) the most recent Form 5500, if applicable and (iii) summary plan descriptions, if applicable. Following the date of this Agreement, the Company will provide all other material documents relating to Benefit Plans reasonably requested by Novartis, within ten (10) days following such request, to the extent permitted by Law.(b) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect (i) no Benefit Plan is subject to Title IV of
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ERISA, and no circumstances exist that could result in liability to the Company or any Subsidiary of the Company under Title IV or Section 302 of ERISA, and (ii) neither the Company nor any Subsidiary of the Company maintains, is or will be required to provide, medical or other welfare benefits to employees, directors, former employees, former directors, or retirees after their termination of employment or service, other than pursuant to applicable Law.(c) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, each Benefit Plan that is intended to qualify under Section 401 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and each trust maintained pursuant thereto, has received a favorable determination letter from the Internal Revenue Service, and nothing has occurred with respect to the operation of any such Benefit Plan that could cause the loss of such qualification.(d) Except where a failure to comply would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) all Benefit Plans have been maintained and administered, in all material respects, in accordance with their terms and in accordance with all applicable Laws, (ii) there are no pending or, to the Knowledge of the Company, threatened claims against the Benefit Plans, any related trusts, any Benefit Plan sponsor or plan administrator, or any fiduciary of the Benefit Plans with respect to the operation of such plans (other than routine benefit claims), and (iii) all non-U.S. Benefit Plans (a) if they are intended to qualify for special tax treatment meet all requirements for such treatment, and (b) if they are intended to be funded and/or book-reserved are fully funded and/or book reserved, as appropriate, based upon reasonable actuarial assumptions.(e) Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby (either alone of in conjunction with another event, such as a termination of employment) will (i) result in any payment becoming due to any current or former director or current or former employee of the Company or any of its Subsidiaries under any Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Company Benefit Plan, (iii) result in any acceleration of the time of payment or vesting of any such benefits , or (iv) result in an “excess parachute payment” under Section 280G of the Code .5.13. Intellectual Property .(a) For purposes of this Agreement, “ Intellectual Property ” means all U.S. and foreign (i) trademarks, service marks, trade names, Internet domain names, designs, slogans, and general intangibles of like nature, together with all goodwill related to the foregoing and including any registrations, renewals and applications for any of the foregoing ; (ii) patents (including any registrations, renewals and applications therefor, (iii) copyrights (including any registrations, renewals and applications therefor), and (iv) inventions, trade secrets and other confidential information, know-how, proprietary processes, formulae, algorithms, models, and methodologies (collectively, “ Trade Secrets ”), in each case to the | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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