Exhibit 4.8


 


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


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  The Merger; Closing; Effective Time

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1.

  	
  The Merger

  	
  1

  
	
   

  	
  1.2.

  	
  Closing

  	
  2

  
	
   

  	
  1.3.

  	
  Effective Time

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  Certificate of Incorporation and By-Laws of
  the Surviving Corporation

  	
  2

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1.

  	
  The Certificate of Incorporation

  	
  2

  
	
   

  	
  2.2.

  	
  The By-Laws

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  Officers and Directors of the Surviving
  Corporation

  	
  2

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1.

  	
  Directors

  	
  2

  
	
   

  	
  3.2.

  	
  Officers

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  Effect of the Merger on Capital Stock;
  Exchange of Certificates

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1.

  	
  Effect on Capital Stock

  	
  3

  
	
   

  	
  4.2.

  	
  Surrender of Certificates for Payment

  	
  3

  
	
   

  	
  4.3.

  	
  Dissenters’ Rights

  	
  5

  
	
   

  	
  4.4.

  	
  Adjustments to Prevent Dilution

  	
  5

  
	
   

  	
  4.5.

  	
  Treatment of Company Options/Other Equity Awards

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  Representations and Warranties of the
  Company

  	
  6

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1.

  	
  Organization, Good Standing and Qualification

  	
  6

  
	
   

  	
  5.2.

  	
  Capitalization of the Company and its Subsidiaries

  	
  7

  
	
   

  	
  5.3.

  	
  Corporate Authority; Approval and Fairness

  	
  9

  
	
   

  	
  5.4.

  	
  Consents and Approvals; No Violations

  	
  9

  
	
   

  	
  5.5.

  	
  Compliance with Laws; Licenses

  	
  10

  
	
   

  	
  5.6.

  	
  No Default

  	
  11

  
	
   

  	
  5.7.

  	
  Company Reports; Financial Statements

  	
  11

  
	
   

  	
  5.8.

  	
  No Undisclosed Material Liabilities

  	
  12

  
	
   

  	
  5.9.

  	
  Litigation

  	
  13

  
	
   

  	
  5.10.

  	
  Material Contracts

  	
  13

  
	
   

  	
  5.11.

  	
  Absence of Certain Changes or Events

  	
  13

  
	
   

  	
  5.12.

  	
  Employee Benefit Plans

  	
  13

  
	
   

  	
  5.13.

  	
  Intellectual Property

  	
  14

  
	
   

  	
  5.14.

  	
  Taxes

  	
  15

  
	
   

  	
  5.15.

  	
  Takeover Statutes; Charter Provisions

  	
  16

  
	
   

  	
  5.16.

  	
  Opinions of Financial Advisors

  	
  16

  
	
   

  	
  5.17.

  	
  Brokers

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  Representations and Warranties of Novartis
  and Merger Sub

  	
  16

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1.

  	
  Organization, Good Standing and Qualification

  	
  16

  
	
   

  	
  6.2.

  	
  Authority Relative to This Agreement

  	
  17

  
	
   

  	
  6.3.

  	
  Consents and Approvals; No Violations

  	
  17

  
	
   

  	
  6.4.

  	
  Merger Sub

  	
  17

  
	
   

  	
  6.5.

  	
  Financing

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  Covenants

  	
  18

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1.

  	
  Interim Operations

  	
  18

  
	
   

  	
  7.2.

  	
  Acquisition Proposals

  	
  20

  
	
   

  	
  7.3.

  	
  Stockholder Meeting; Proxy Material; Recommendation

  	
  22

  
	
   

  	
  7.4.

  	
  Commercially Reasonable Efforts; Cooperation

  	
  23

  
	
   

  	
  7.5.

  	
  Access

  	
  25

  
	
   

  	
  7.6.

  	
  Consents

  	
  26

  
	
   

  	
  7.7.

  	
  Public Announcements

  	
  26

  
	
   

  	
  7.8.

  	
  Employee Benefits

  	
  26

  
	
   

  	
  7.9.

  	
  Indemnification; Directors’ and Officers’ Insurance

  	
  28

  
	
   

  	
  7.10.

  	
  Takeover Statutes

  	
  29

  
	
   

  	
  7.11.

  	
  Retention of Shares; Voting of Shares at Stockholders Meeting

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  Conditions

  	
  29

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1.

  	
  Conditions to the Obligations of the Company, Novartis and Merger Sub
  to Effect the

  Merger

  	
  29

  
	
   

  	
  8.2.

  	
  Conditions to Obligations of Novartis and Merger Sub

  	
  30

  
	
   

  	
  8.3.

  	
  Conditions to Obligation of the Company

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  Termination

  	
  32

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1.

  	
  Termination by Mutual Consent

  	
  32

  
	
   

  	
  9.2.

  	
  Termination by Either Novartis or the Company

  	
  32

  
	
   

  	
  9.3.

  	
  Termination by the Company

  	
  32

  
	
   

  	
  9.4.

  	
  Termination by Novartis

  	
  32

  
	
   

  	
  9.5.

  	
  Effect of Termination and Abandonment

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  Miscellaneous and General

  	
  33

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1.

  	
  Non-Survival of Representations and Warranties and Agreements

  	
  33

  
	
   

  	
  10.2.

  	
  Modification or Amendment

  	
  33

  
	
   

  	
  10.3.

  	
  Waiver of Conditions

  	
  33

  
	
   

  	
  10.4.

  	
  Definitions

  	
  33

  
	
   

  	
  10.5.

  	
  Counterparts

  	
  33

  
	
   

  	
  10.6.

  	
  Governing Law and Venue; Waiver
  of Jury Trial

  	
  33

  
	
   

  	
  10.7.

  	
  Notices

  	
  34

  
	
   

  	
  10.8.

  	
  Entire Agreement

  	
  35

  
	
   

  	
  10.9.

  	
  No Third Party Beneficiaries

  	
  36

  
	
   

  	
  10.10.

  	
  Severability

  	
  36

  



 


ii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  10.11.

  	
  Interpretation; Absence of Presumption

  	
  36

  
	
   

  	
  10.12.

  	
  Expenses

  	
  36

  
	
   

  	
  10.13.

  	
  Assignment

  	
  37

  
	
   

  	
  10.14.

  	
  Parent Guarantee

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  ANNEX A

  	
  Defined Terms

  	
   

  



 


iii

















 


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 I



The Merger; Closing; Effective Time


 


1.1.                              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-Laws

of 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 Directors

of 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


 


2

















 


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 IV



Effect 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


 


3

















 


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.


 


4

















 


(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


 


5

















 


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 V



Representations 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.


 


6

















 


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


 


7

















 


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


 


8

















 


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


 


9

















 


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


 


10

















 


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


 


11

















 


(“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.


 


12

















 


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


 


13

















 


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 extent recognized as intellectual property
under applicable Law.


 


14

















 


(b)                                 The
Intellectual Property owned by the Company and its Subsidiaries is free and
clear of all Liens except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.


 


(c)                                  To
the Knowledge of the Company, the conduct of the business of the Company and
its Subsidiaries does not in any material respect infringe upon the Intellectual
Property of any third party.  There are
no claims pending or, to the Knowledge of the Company, threatened, and neither
the Company nor any of its Subsidiaries has received any written notice of a
material third-party claim, in each case alleging that the conduct of the
business of the Company and its Subsidiaries infringes upon the Intellectual
Property of any third party or challenging the ownership, use, validity or
enforceability of any Intellectual Property, except in each case as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.


 


(d)                                 To
the Knowledge of the Company, no third party is infringing or otherwise
violating any Intellectual Property owned by the Company or any of its
Subsidiaries, and no such claims have been brought against any third party by
the Company or any of its Subsidiaries, except for such infringements and
claims as would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.


 


(e)                                  Except
as would not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect, (i) the Company and its Subsidiaries
have taken reasonable steps to protect the confidentiality of material Trade
Secrets and (ii) to the Knowledge of the Company, there have been no
breaches of confidentiality or loss of trade secret rights with respect to any
material Intellectual Property.


 


5.14.                        Taxes.  Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse
Effect:  (i) the Company and each of
its Subsidiaries have prepared in good faith and duly and timely filed (taking
into account any extension of time within which to file) all Tax Returns
required to be filed by any of them and all such filed Tax Returns are complete
and accurate in all respects; (ii) the Company and each of its
Subsidiaries have paid all Taxes that are required to be paid by any of them
and the Company and all of its Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, stockholder, creditor or other
third party; (iii) the Company and each of its Subsidiaries have not
waived any statute of limitations with respect to Taxes which has not since
expired or agreed to any extension of time with respect to a Tax assessment or
deficiency which has not since expired; (iv) the Tax Returns referred to
in clause (i) of this Section 5.14 have been examined by the IRS or
the appropriate state, local or foreign taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required to
be filed has expired, and all deficiencies asserted or assessments made as a
result of such examinations have been paid in full, settled, or adequately
provided for, in accordance with GAAP, in the financial statements contained in
the Company Reports filed on or prior to the date of this Agreement; and (v) as
of the date of this Agreement, there are not pending or, to the Knowledge of
the Company, threatened in writing, any audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters with respect to the Company
or any of its Subsidiaries.  For purposes
of this Agreement (i) the term “Tax” (including, with correlative
meaning, the term “Taxes”)


 


15

















 


includes all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severances, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any interest
in respect of such penalties and additions, whether disputed or not and
including any obligations to indemnify or otherwise assume or succeed to the
Tax liability of any other Person and (ii) the term “Tax Return”
includes all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns) required to be filed
with, or supplied to, any federal, state, local or foreign tax authority with
respect to Taxes.


 


5.15.                        Takeover
Statutes; Charter Provisions .  The Company
Board, upon recommendation by the Independent Directors, has
approved the Merger and this Agreement, and such approval is sufficient to
render inapplicable to the Merger and this Agreement the limitations on business
combinations contained in any restrictive provision of any “fair price,” “moratorium,”
“control share acquisition,” “interested stockholder” or other similar
anti-takeover statute or regulation (including, without limitation, Section 203
of the DGCL to the extent applicable) (“Takeover Statute”) or
restrictive provision of any applicable anti-takeover provision in the Company’s
certificate of incorporation or by-laws. 
No other state takeover statute or similar statute or regulation or
other comparable takeover provision of the Company’s certificate of incorporation
or by-laws applies to the Merger, this Agreement or any of the transactions
contemplated by this Agreement.


 


5.16.                        Opinions
of Financial Advisors.  The Financial
Advisors have delivered their written opinions (the “Fairness Opinions”)
to the Independent Directors and the Company Board to the effect that, as of
the date of such opinions, the Merger Consideration to be received by the
holders of shares of Common Stock (other than the Novartis Companies) pursuant
to the Merger pursuant to Article IV hereof is fair from a financial point
of view to such holders.  It is 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.


 


5.17.                        Brokers.  No broker, finder or investment banker (other
than the Financial Advisors) is entitled to any brokerage, finders’ or other
fee or commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of the Company.


 


ARTICLE VI



Representations and Warranties

of Novartis and Merger Sub


 


Novartis and Merger Sub hereby represent and warrant
to the Company as follows:


 


6.1.                              Organization,
Good Standing and Qualification. 
Each of Parent, Novartis and Merger Sub 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


 


16

















 


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 prevent or
materially delay or materially impair the ability of Novartis or Merger Sub to
consummate the Merger and the other transactions contemplated by this
Agreement.  Novartis has heretofore
delivered or made available to the Company accurate and complete copies of the
certificate of incorporation and by-laws (or similar governing documents), as
currently in effect, of Novartis and Merger Sub.


 


6.2.                              Authority
Relative to This Agreement.  Each of Parent,
Novartis and Merger Sub has all necessary corporate power and authority, and
has taken all action necessary, to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby in
accordance with the terms hereof.  This
Agreement has been duly and validly executed and delivered by each of Parent, Novartis
and Merger Sub and, assuming due authorization, execution and delivery hereof
by the Company, constitutes a valid and binding agreement of each of Parent, Novartis
and Merger Sub, enforceable against each of Parent, Novartis and Merger Sub 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.


 


6.3.                              Consents
and Approvals; No Violations.  No
filing with or notice to, and no permit, authorization, registration, consent
or approval of, any Governmental Entity is required on the part of Parent, Novartis
or Merger Sub or any of their Subsidiaries for the execution, delivery and
performance by Parent, Novartis and Merger Sub of this Agreement or the consummation
by Parent, Novartis or Merger Sub of the transactions contemplated hereby, other
than (i) as set forth in Schedule 6.3, (ii) pursuant to the
applicable requirements of the Securities Act and the Exchange Act, (iii) the
filing of the Certificate of Merger pursuant to the DGCL, (iv) compliance
with Exon-Florio, the HSR Act and the EC Merger Regulation, (v) compliance
with any applicable requirements of laws, rules and regulations in other
foreign jurisdictions governing antitrust or merger control matters or (vi) where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings or give such notice would not reasonably be expected to prevent,
impair or materially delay the consummation of the Merger and the transactions
contemplated hereby.


 


6.4.                              Merger
Sub.  All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective Time will be,
owned by Novartis or a direct or indirect wholly-owned Subsidiary of Novartis.  Merger Sub has not conducted any business
prior to the date hereof and has no, and prior to the Effective Time will have
no, assets, liabilities or obligations of any nature other than those incident
to its formation and pursuant to this Agreement and the Merger and the other
transactions contemplated by this Agreement.


 


6.5.                              Financing.  The Novartis Companies have, as of the date
hereof, and will have, as of the Closing Date, available cash or other liquid
assets to pay the aggregate Merger Consideration in full.


 


17

















 


ARTICLE VII



Covenants


 


7.1.                              Interim
Operations.


 


(a)                                  Except
as set forth in the corresponding section of the Company Disclosure Schedule or
otherwise as expressly contemplated hereby, subject to applicable Law, the
Company covenants and agrees as to itself and its Subsidiaries that, from the
date of this Agreement until the Effective Time, the business of it and its
Subsidiaries shall be conducted only in the ordinary course and, to the extent
consistent therewith, it and its Subsidiaries shall use their respective commercially
reasonable efforts to preserve its business organization intact and maintain
its existing relations and goodwill with customers, suppliers, distributors,
creditors, lessors, employees and business associates and keep available the
services of the present key employees and agents of the Company and its
Subsidiaries.  Without limiting the
generality of the foregoing and in furtherance thereof, except as set forth in
the corresponding section of the Company Disclosure Schedule or as
otherwise expressly contemplated hereby, from the date of this Agreement until
the Effective Time, the Company will not and will not permit its Subsidiaries
to (unless Novartis shall otherwise approve in writing, which approval shall
not be unreasonably withheld or delayed and shall be subject to the procedures
set forth on Schedule 7.1(a) of the Company Disclosure Schedule):


 


(i)                                     adopt
or propose any change in its certificate of incorporation or by-laws (or
similar governing documents);


 


(ii)                                  merge
or consolidate the Company or any of its Subsidiaries with any other Person,
except for any such transactions among wholly-owned Subsidiaries of the
Company;


 


(iii)                               acquire
assets outside of the ordinary course of business from any Person with a purchase price in the aggregate in
excess of $2,000,000 individually, other than acquisitions pursuant to any
Contract in effect as of the date of this Agreement and described in or filed
as an exhibit to the Company Reports filed prior to the date of this Agreement;


 


(iv)                              other
than in the ordinary course of business consistent with past practice (excluding
for this purpose the activities of the Company and its Subsidiaries in 2005) or
pursuant to Contracts in effect as of the date of this Agreement as set forth
on Section 7.1(a)(iv) of the Company Disclosure Schedule, and other
than the issuance of shares of Common Stock upon the exercise of outstanding
Company Options, pursuant to other equity-based awards granted under other Company equity-based compensation plans
prior to the date of this Agreement consistent with the terms thereof or pursuant
to the terms of the Debentures (to the extent required by such terms),
in each case, in accordance with their terms, issue, sell, pledge, dispose of,
grant, transfer, lease, license, guarantee, encumber, or authorize the
issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee
or encumbrance of, any shares of capital stock of the Company or any of its
Subsidiaries (other than the issuance of shares by a wholly-owned Subsidiary


 


18

















 


of the Company to the
Company or another wholly-owned Subsidiary), or securities convertible or
exchangeable or exercisable for any shares of such capital stock, or any
options, warrants or other rights of any kind to acquire any shares of such
capital stock or such convertible or exchangeable securities;


 


(v)                                 other
than pursuant to Contracts in effect as of the date of this Agreement and
described in or filed as an exhibit to the Company Reports filed prior to the
date of this Agreement, make any loan, advance or capital contribution to or
investment in any Person (other than a wholly-owned Subsidiary of the Company) outside
the ordinary course of business (other than loans to employees not to exceed,
in the aggregate, $2,500,000 in principal amount);


 


(vi)                              declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital stock (except
for dividends or other distributions by any direct or indirect wholly-owned
Subsidiary of the Company to the Company or to any other direct or indirect
wholly-owned Subsidiary of the Company and periodic dividends and other
periodic distributions by non-wholly-owned Subsidiaries in the ordinary course
of business);


 


(vii)                           reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock or securities convertible or exchangeable
into or exercisable for any shares of its capital stock;


 


(viii)                        incur any third-party
indebtedness for borrowed money or guarantee such indebtedness of another
Person, except for unsecured indebtedness
for borrowed money incurred in the ordinary course of business repayable within
180 days without penalty;


 


(ix)                                except
as set forth in Section 7.1(a)(ix) of the Company Disclosure
Schedule, make or authorize any capital expenditure;


 


(x)                                   enter
into any Contract that would have been a Material Contract had it been entered
into prior to the execution of this Agreement, other than any Contract (A) for
the sale of products in the ordinary course of business or (B) providing
for any capital expenditure to the extent permitted by Section 7.1(a)(ix);


 


(xi)                                other
than in the ordinary course of business, amend or modify in any material
respect, or terminate or waive any material right or benefit under, any
Material Contract;


 


(xii)                             make
any significant changes with respect to accounting policies or practices,
except as required by changes in GAAP or by Law;


 


(xiii)                          settle
any litigation or other proceedings before or threatened to be brought before a
Governmental Entity or arbitral proceeding for an amount payable by or on
behalf of the Company or any Subsidiary in excess of $2,500,000 (exclusive of
any amounts to be received by the Company in reimbursement of such settlement
amount, whether under any insurance policy or indemnity, other than such
amounts that are


 


19

















 


contested) or which would
be reasonably likely to have any adverse impact on the operations of the
Company or any of its Subsidiaries or on any current or future litigation or
other proceeding of the Company or any of its Subsidiaries;


 


(xiv)                         except as
required by Law, make any material Tax election or take any material position
on any material Tax Return filed on or after the date of this Agreement or
adopt any material method therefor that is inconsistent with elections made,
positions taken or methods used in preparing or filing similar Tax Returns in
prior periods;


 


(xv)                            sell,
lease, license or otherwise dispose of any assets of the Company or its
Subsidiaries except for (i) sales of (A) products or services
provided in the ordinary course of business or (B) other assets in
aggregate amount not to exceed $5,000,000, or (ii) licenses of
Intellectual Property of the Company or its Subsidiaries in the ordinary course
of business (but excluding (x) any licenses of programs, projects or products
or (y) any licenses with up-fronts or milestones in excess of $5,000,000 in the
aggregate), and other than pursuant to Contracts in effect as of the date of
this Agreement as set forth on Section 7.1(xv) of the Company Disclosure
Schedule;


 


(xvi)                         other
than pursuant to Contracts in effect as of the date of this Agreement as set
forth on Section 7.1(xvi) of the Company Disclosure Schedule, or as
otherwise required by Law, (i) enter into any new employment or
compensatory agreements with, or increase the compensation and employee
benefits of, any employee, consultant, or director of the Company or any of its
Subsidiaries (including entering into any bonus, severance, change of control,
termination, reduction-in-force or consulting agreement or other employee
benefits arrangement or agreement pursuant to which such person has the right
to any form of compensation from the Company or any of its Subsidiaries), (ii) hire
any employee to fill a position at the level of (A) executive committee
member or other executive officer or (B) vice president or above who reports
directly to an executive committee member, or (iii) adopt or amend in any
respect, or accelerate vesting or payment under, any Benefit Plan in the case
of clauses (i) and (iii) above other than in the ordinary course of
business consistent with past practice;


 


(xvii)                      engage in
the conduct of any new line of business, other than as expressly permitted by Section 7.1(a)(iii) of
the Company Disclosure Schedule; or


 


(xviii)                   agree, resolve
or commit to do any of the foregoing.


 


7.2.                              Acquisition
Proposals.


 


(a)                                  The
Company agrees that neither it nor any of its Subsidiaries nor any of the
officers and directors (other than any directors designated by any of the
Novartis Companies) of it or its Subsidiaries shall, and that it shall use its
commercially reasonable efforts to cause its and its Subsidiaries’ employees,
agents and representatives (including any investment banker, attorney,
consultant or accountant (collectively, “Representatives”) retained by
it) not to, directly or indirectly, initiate, solicit or knowingly encourage or
facilitate any inquiries or the making of any proposal or offer with respect to:
(i) a merger, reorganization, share exchange, consolidation


 


20

















 


or similar transaction involving the Company; (ii) any purchase of
any material portion of the equity interest in the Company or of 30% or more of
the assets of the Company and its Subsidiaries, taken as a whole; (iii) the
adoption by the Company of a plan of liquidation or recapitalization; or (iv) any
combination of the foregoing  (any such
proposal or offer being hereinafter referred to as an “Acquisition Proposal”).  The Company further agrees that neither it
nor any of its Subsidiaries nor any of the officers and directors (other than
any directors designated by any of the Novartis Companies) of it or its
Subsidiaries shall, and that it shall use its commercially reasonable efforts
to cause its and its Subsidiaries’ Representatives not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an Acquisition
Proposal, or otherwise knowingly encourage or facilitate any effort or attempt
to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent the Company or the Independent
Directors or the Company Board from (x) complying with its disclosure
obligations under Sections 14d-9 and 14e-2 of the Exchange Act with regard to
an Acquisition Proposal; provided that if such disclosure has the effect
of withdrawing, modifying or qualifying the Recommendation in a manner adverse
to Novartis or the approval of this Agreement by the Independent Directors or
the Company Board, Novartis shall have the right to terminate this Agreement to
the extent set forth in Section 9.4 of this Agreement; and (y) at any time
prior to, but not after, the conditions set forth in Section 8.1(a) have
been satisfied, (A) providing information in response to a request
therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal (provided, that for purposes of this Section 7.2(a)(y) an
Acquisition Proposal must involve the acquisition of in excess of 50% of the
shares of Common Stock) if the Company receives from the Person so requesting
such information an executed confidentiality agreement on customary terms; (B) engaging
in any negotiations or discussions with any Person who has made an unsolicited
bona fide written Acquisition Proposal if the Company receives from such Person
an executed confidentiality agreement as described in (A) above; or (C) withdrawing,
modifying or qualifying the Recommendation, or recommending such an Acquisition
Proposal, in each case if and only to the extent that (I) in each such
case referred to in clause (A), (B) or (C) above, the Company Board or
the Independent Directors, as applicable, determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their fiduciary duties under applicable Law
and (II) in each case referred to in clause (B) or (C) above,
the Company Board or the Independent Directors, as applicable, determines in
good faith (after consultation with its financial advisor and counsel) that
such Acquisition Proposal, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial, regulatory and other aspects of the
proposal, the likelihood of obtaining financing, and the Person making the
proposal and would, if consummated, result in a transaction more favorable to
the Company’s stockholders from a financial point of view than the transaction
contemplated by this Agreement taking into account any change in the proposal
proposed by Novartis; and (III) in the case of clause (C), Novartis shall have
had written notice of the Company Board’s or the Independent Directors’, as
applicable, intention to take the action referred to in clause (C) at
least three Business Days prior to the taking of such action by the Company
Board or the Independent Directors, as applicable (any such more favorable
Acquisition Proposal is referred to in this Agreement as a “Superior
Proposal”).


 


(b)                                 The
Company agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Person conducted


 


21

















 


heretofore with respect to any Acquisition Proposal.  The Company agrees that it will take the
necessary steps to promptly inform its and its Subsidiaries’ officers and
directors (other than any directors designated by any of the Novartis
Companies) and their respective Representatives of the obligations undertaken
in this Section 7.2.  The Company
agrees that it will notify Novartis promptly, but in any event within 24 hours,
if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, it or any of its Representatives
indicating, in connection with such notice, the name of such Person and the
material terms and conditions of any proposals or offers, and thereafter shall
keep Novartis informed, on a current basis, of any significant changes in the status
and terms of any such proposals or offers. 
The Company agrees promptly to request the return or destruction of all
information and materials provided prior to the date of this Agreement by it,
its affiliates (other than the Novartis Companies) or their respective
Representatives with respect to the consideration or making of any Acquisition
Proposal.


 


7.3.                              Stockholder
Meeting; Proxy Material; Recommendation.


 


(a)                                  The
Company shall duly call and hold a meeting of its stockholders (the “Stockholders Meeting”) for the
purpose of obtaining the adoption of this Agreement by the Company stockholders
required to satisfy the conditions set forth in Section 8.1(a) as
promptly as practicable after the SEC clears the Company Proxy Statement and
the Schedule 13E-3.  In connection
with the Stockholders Meeting, the Company will (i) as promptly as
practicable, prepare and file with the SEC the proxy statement (the “Company
Proxy Statement”) relating to the Merger and the other transactions
contemplated hereby, (ii) respond as promptly as reasonably practicable to
any comments received from the SEC with respect to such filing and will provide
copies of such comments to Novartis and Merger Sub promptly upon receipt, (iii) as
promptly as reasonable practicable, prepare and file (after Novartis and Merger
Sub have had a reasonable opportunity to review and comment on) any amendments
or supplements necessary to be filed in response to any SEC comments or as
required by Law, (iv) use its commercially reasonable efforts to have
cleared by the SEC, and will thereafter mail to its stockholders as promptly as
reasonably practicable, the Company Proxy Statement and all other customary
proxy or other materials for meetings such as the Stockholders Meeting, (v) to
the extent required by applicable Law, as promptly as reasonably practicable
prepare, file and distribute to the Company stockholders any supplement or
amendment to the Company Proxy Statement if any event shall occur which
requires such action at any time prior to the Stockholders Meeting and (vi) otherwise
use commercially reasonable efforts to comply with all requirements of Law
applicable to the Stockholders Meeting and the Merger.  Novartis and Merger Sub shall cooperate with
the Company in connection with the preparation and filing of the Company Proxy
Statement, including furnishing the Company upon request with any and all
information regarding Novartis, Merger Sub or their respective affiliates, the
plans of such Persons for the Surviving Corporation after the Effective Time,
and all other matters and information as may be required to be set forth in the
Company Proxy Statement under the Exchange Act or the rules and
regulations promulgated thereunder.  The Company
will provide Novartis and Merger Sub a reasonable opportunity to review and
comment upon the Company Proxy Statement, or any amendments or supplements
thereto, or any SEC comments received with respect thereto, prior to filing the
same with the SEC.  In connection with the
filing of the Company Proxy Statement, the Company, Novartis and Merger Sub will
cooperate to (i) concurrently with the preparation and filing of the Company
Proxy Statement, jointly prepare and file with the SEC the Schedule


 


22

















 


13E-3 (the “Schedule 13E-3”) relating to the Merger and the
other transactions contemplated hereby and furnish to each other all
information concerning such party as may be reasonably requested in connection
with the preparation of the Schedule 13E-3, (ii) respond as promptly
as reasonably practicable to any comments received from the SEC with respect to
such filings and will consult with each other prior to providing such response,
(iii) as promptly as reasonable practicable after consulting with each
other, prepare and file any amendments or supplements necessary to be filed in
response to any SEC comments or as required by Law, (iv) to have cleared
by the SEC the Schedule 13E-3 and (v) to the extent required by
applicable Law, as promptly as reasonably practicable prepare, file and
distribute to the Company stockholders any supplement or amendment to the Schedule 13E-3
if any event shall occur which requires such action at any time prior to the
Stockholders Meeting.


 


(b)                                 Subject
to Sections 7.2 and 7.3(c), the Company Board shall recommend adoption of this
Agreement to the holders of shares of Common Stock (such recommendation being
the “Recommendation”), the Recommendation shall be included in the
Company Proxy Statement and the Schedule 13E-3, and the Company Board
shall take all lawful action to solicit the adoption of this Agreement by the
holders of shares of Common Stock.  The
Company shall call the Stockholders Meeting and submit the Agreement and the
transactions contemplated hereby to the holders of shares of Common Stock for
adoption even in the event that the Company Board or the Independent Directors
shall have withdrawn, modified or qualified the Recommendation.


 


(c)                                  Notwithstanding
Section 7.3(a) or (b), (i) the Company Board may withdraw or
modify the Recommendation and (ii) the Company shall not be required to
include the Recommendation in the Company Proxy Statement or the Schedule 13E-3,
in each case to the extent that the Company Board, based on the recommendation
of the Independent Directors, determines in good faith, after receiving the
advice of outside counsel, that making the Recommendation would no longer be
consistent with its fiduciary duties to the Company’s stockholders under
applicable Law.


 


7.4.                              Commercially
Reasonable Efforts; Cooperation.


 


(a)                                  Upon
the terms and subject to the conditions of this Agreement, each of Novartis, Merger
Sub and the Company agrees to use its commercially reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable on its part under this Agreement and any
applicable Laws to consummate and make effective the transactions contemplated
hereby as promptly as practicable including, but not limited to, (i) the preparation
and filing of all forms, registrations, notifications and notices required to
be filed to consummate the transactions contemplated hereby (including making
or causing to be made the filings required under the HSR Act, the EC Merger
Regulation or any applicable Laws in other foreign jurisdictions governing
antitrust or merger control matters as promptly as practicable and in any event,
with respect to the filings required under the HSR Act, within ten Business Days
after the date of this Agreement) and the taking of such actions as are
necessary to obtain any requisite approvals, consents, orders, exemptions or
waivers by any third party or Governmental Entity, (ii) cooperating with
the other in connection with the preparation and filing of any such forms,
registrations and notices (including, with respect to the party hereto making a
filing, providing copies of all such documents to the non-filing party and its
advisors


 


23

















 


prior to filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith) and in connection with
obtaining any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity, (iii) the satisfaction of the
conditions to the consummation of the Merger set forth in Article VIII,
and (iv) the execution of any additional instruments, including the Certificate
of Merger, necessary to consummate the transactions contemplated hereby.  Subject to the terms and conditions of this
Agreement and the applicable provisions of the DGCL, each party hereto agrees
to use commercially reasonable efforts to cause the Effective Time to occur as
soon as practicable after the adoption by the stockholders of the Company of this
Agreement at the Stockholders Meeting. 
In case at any time after the Effective Time any further action is necessary
to carry out the purposes of this Agreement, the proper officers and directors
of each party hereto shall use commercially reasonable efforts to take all such
necessary action.


 


(b)                                 The
Company and Novartis each shall, upon request by the other, furnish the other
with all information concerning itself, its Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Company Proxy Statement, the Schedule 13E-3
or any other statement, filing, notice or application made by or on behalf of Novartis,
the Company or any of their respective Subsidiaries to any third party and/or
any Governmental Entity in connection with the Merger and the transactions
contemplated by this Agreement.


 


(c)                                  Subject
to applicable Law, the Company and Novartis each shall keep the other apprised
of the status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other with copies of
notices or other communications between Novartis or the Company, as the case
may be, or any of their respective Subsidiaries, and any third party and/or any
Governmental Entity with respect to such transactions.  The Company shall give prompt notice to Novartis
of any change, fact or condition, that would be reasonably likely to result in
a Company Material Adverse Effect or of any failure of any condition to Novartis’
obligations to effect the Merger, and Novartis shall give prompt notice to the
Company of any change, fact or condition, that would be reasonably likely to result
in a failure of any condition to the Company’s obligations to effect the Merger.  No party hereto shall independently
participate in any meeting, or engage in any substantive conversation, with any
Governmental Entity with respect to the transactions contemplated hereby
without giving the other party hereto prior notice of the meeting and, to the
extent permitted by such Governmental Entity, the opportunity to attend and/or
participate.  The parties hereto shall
consult and cooperate with one another in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted to any Governmental Entity by or on behalf of any
party hereto in connection with the transactions contemplated hereby.  The Company and Novartis may, as each deems
advisable and necessary, reasonably designate any competitively sensitive
material provided to the other under this Section 7.4 as “outside counsel
only.”  Such materials and the
information contained therein shall be given only to the outside legal counsel
of the recipient and will not be disclosed by such outside counsel to
employees, officers or directors of the recipient unless express permission is
obtained in advance from the source of the materials (the Company or Novartis,
as the case may be) or its legal counsel. 
Notwithstanding anything to the contrary in this Section 7.4,
materials provided to the other party or its counsel may be redacted to remove
references concerning the valuation of the Company and its Subsidiaries.


 


24

















 


(d)                                 Without
limiting the generality of, and notwithstanding any qualifications, other than
those in this Section 7.4(d), affecting, the undertakings pursuant to this
Section 7.4, each of the Company (in the case of clause (i) only) and
Novartis (in all cases set forth below) agrees to take or cause to be taken the
following actions:  (i) provide
promptly to any and all federal, state, local or foreign court or Government
Entity with jurisdiction over enforcement of any applicable antitrust and
merger control laws (“Government
Antitrust Entity”) information and documents requested by any
Government Antitrust Entity or necessary, proper or advisable to permit
consummation of the Merger and the transactions contemplated by this Agreement;
(ii) use its commercially reasonable efforts to avoid the entry of any
permanent or preliminary injunction or other order, decision, decree or
judgment that would restrain, prevent or delay consummation of the Merger or
the other transactions contemplated by this Agreement, including, without
limitation, defending through litigation on the merits any claim asserted in
any court or other proceeding by any party and the commercially reasonable good
faith proffer by the Novartis Companies of their willingness to sell, license or
otherwise dispose of, or hold separate and agree to sell, license or otherwise
dispose of, such assets, categories of assets or businesses of the Company or its Subsidiaries (and to offer
undertakings and enter into agreements with the relevant Government Antitrust
Entity giving effect thereto); and (iii) use commercially reasonable
efforts to take promptly, in the event that any permanent or preliminary
injunction or other order is entered or decision is adopted in any proceeding
that would make consummation of the Merger in accordance with the terms of this
Agreement unlawful or that would restrain, prevent or materially delay
consummation of the Merger or the other transactions contemplated by this
Agreement, any and all steps (including
the appeal thereof, the posting of a bond or the taking of the steps
contemplated by clause (ii) of this paragraph) necessary to vacate, modify, annul and, if necessary, suspend
such injunction or order so as to permit such consummation on a schedule as
close as possible to that contemplated by this Agreement.  The Company shall cooperate with the efforts
of the Novartis Companies in accordance with this Section 7.4(d).  Notwithstanding anything to the contrary in
this Agreement, the Novartis Companies shall not be obligated to take or proffer
to take any action that would, individually or in the aggregate, reasonably be
expected to have or result in a Company Material Adverse Effect; provided that
for purposes of this Section 7.4(d), the exclusion in clause (4) from
the definition of a “Company Material Adverse Effect” does not apply.


 


7.5.                              Access.  Subject to applicable Laws relating to the
sharing of information, upon reasonable notice, the Company shall, and shall
cause its Subsidiaries to, afford Novartis, and its officers, employees,
counsel, accountants and other authorized Representatives, reasonable access,
during normal business hours throughout the period prior to the Effective Time,
to its properties, books, contracts and records and, during such period, the
Company shall, and shall cause its Subsidiaries to, furnish promptly to
Novartis all information concerning its business, properties and personnel as
may reasonably be requested (including by taking the actions set forth on Section 7.5
of the Company Disclosure Schedule); provided, however, that no
investigation pursuant to this Section 7.5 shall affect or be deemed to
modify any representation or warranty made by the Company; provided, further,
that the foregoing shall not require the Company to permit any inspection, or
to disclose any information, that in the reasonable judgment of the Company
would result in the disclosure of any trade secrets of third parties or violate
any of its obligations with respect to confidentiality.  At the request of Novartis, throughout the
period prior to the Effective Time, the Company shall use its commercially
reasonable efforts to obtain waivers from Persons who are parties to Contracts
with the Company


 


25

















 


or its Subsidiaries that contain confidentiality provisions in order
for Novartis to be provided reasonable access to such Contracts.  All such information shall be governed by the
terms of the Confidentiality Agreement referred to in Section 10.8.


 


7.6.                              Consents.  Subject to other provisions contained in this
Agreement, Novartis, Merger Sub and the Company each will use commercially
reasonable efforts to obtain consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of the transactions
contemplated hereby.


 


7.7.                              Public
Announcements.  The initial press
release regarding this Agreement shall be a joint press release mutually agreed
upon, and thereafter Novartis and the Company will consult with one another
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated hereby, including the Merger, 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 or by
obligations pursuant to any listing agreement with any national securities
exchange, as determined in good faith by such party.


 


7.8.                              Employee
Benefits.


 


(a)                                  Novartis
agrees that it shall honor and cause the Surviving Corporation to honor, fulfill
and discharge the Company’s obligations under each Benefit Plan in accordance
with its terms as in effect immediately before the Effective Time, subject to
any amendment or termination thereof that may be permitted by such terms.  For a
period from the Effective Time through at least December 31, 2006, Novartis
shall provide, or shall cause to be provided, to those individuals who as of
the Effective Time were employees (other than employees subject to collective
bargaining agreements) of the Company and its Subsidiaries (the “Affected
Employees”) benefits under employee benefit plans, programs, policies and
arrangements, and compensation (including base salary, bonus and other
incentive compensation, other than equity compensation (provided that Novartis
shall provide value substantially equivalent to the Company’s proposed equity
compensation for 2006 (the “Equity Replacement”) if the Effective Time
occurs prior  to the grant of such equity
compensation)) that are no less favorable in the aggregate than the benefits
and compensation provided to the Affected Employees immediately before the
Effective Time.  Notwithstanding
the foregoing, nothing contained herein shall obligate Novartis, the Surviving
Corporation or any of their affiliates to maintain any particular Benefit Plan (other
than the severance plans and agreements referred to in Section 7.8(c)) or
retain the employment of any Affected Employee.


 


(b)                                 Each Affected Employee shall receive credit
for his or her service with the Company and its Subsidiaries before the
Effective Time under the employee benefit plans, programs, policies and
arrangements of Novartis and its affiliates  providing benefits to any Affected Employees
after the Effective Time (the “New Plans”) for purposes of eligibility,
vesting and benefit accrual (but not for purposes of benefit accrual under
defined benefit pension plans or for any new program for which credit for
service prior to the effective date of such program is not given to similarly
situated employees of Novartis other than the Affected Employees) to the same
extent as such Affected Employee was entitled, before the Effective Time, to
credit for such service under any parallel Benefit Plans (except to the extent
such credit would result in a duplication of accrual of benefits).  In addition, and without limiting the


 


26

















 


generality of the foregoing:  (i) at the Effective Time, each Affected
Employee immediately shall be eligible to participate, without any waiting time,
in any and all New Plans to the extent coverage under such New Plan replaces
coverage under a similar or comparable Company Compensation and Benefit Plans
in which such Affected Employee participated immediately before the Effective
Time (each such plan, an “Old Plan”); and (ii) for purposes of each
New Plan providing welfare benefits to any Affected Employee (a) Novartis
shall cause all pre-existing condition exclusions of such New Plan to be waived
for such Affected Employee and his or her covered dependents to the extent such
pre-existing condition exclusions were inapplicable to or had been satisfied by
such Affected Employee and his or her covered dependants immediately prior to
the Effective Time under the relevant Old Plan and (b) Novartis shall cause
the Surviving Corporation and any successor thereto to give full credit for
deductibles satisfied under the Company’s and its Subsidiaries’ Benefit Plans
with respect to the current plan year toward any deductibles for the remainder
of the plan year during which the Closing occurs.


 


(c)                                  For a period of one year from the Effective
Time, Novartis shall honor and cause the Surviving Corporation and any successor
thereto to continue in effect, and honor, fulfill and discharge the Company’s
obligations under, all severance plans and agreements and employment agreements
which are listed on Section 7.8(c) of the Company Disclosure Schedule without
any change that is adverse to the Affected Employees.  During the period specified above, severance
benefits offered to Affected Employees shall be determined without taking into
account any reduction after the Effective Time in the compensation paid to
Affected Employees and used to determine severance benefits.


 


(d)                                 Novartis acknowledges that consummation of the
Merger constitutes a “change in control” for purposes of the plans and
agreements listed on Section 7.8(d) of the Company Disclosure
Schedule.  The Company agrees to the
adoption of a resolution substantially in the form described on Section 7.8(d) of
the Company Disclosure Schedule.


 


(e)                                  Novartis shall cause the Surviving
Corporation to honor (i) all determinations with respect to bonus payments
for the 2005 calendar year (provided, that the aggregate amount of such
bonuses shall not exceed $60,000,000) made by the Company’s compensation
committee in the ordinary course of business consistent with past practice, to
the extent such bonus amounts are based on performance meeting previously set
targets, and (ii) to the extent permitted by Section 7.1, all salary
increases based on merit reviews for the 2006 calendar year made by the Company
in the ordinary course of business consistent with past practice, to the extent
not in effect at the Effective Time.


 


(f)                                    Without limiting the generality of Section 10.9,
nothing herein expressed or implied shall confer upon any current or former
employee of the Company or any of its Subsidiaries or upon any representative
of any such person, or upon any collective bargaining agent, any rights or
remedies, including any third party beneficiary rights or any right to
employment or continued employment for any specified period, of any nature or kind
whatsoever under or by reason of this Agreement.


 


(g)                                 Except with respect to employees whose
primary place of employment is located in the United Kingdom or the United
States, the provisions of Sections 7.8(a) – (c) (other than the first
sentence of Section 7.8(a) and provided that Novartis shall provide
the Equity


 


27

















 


Replacement to all employees of the Company)
shall not apply with respect to any jurisdiction providing statutory severance
and benefits.


 


7.9.                              Indemnification;
Directors’ and Officers’ Insurance.


 


(a)                                  From and after the Effective Time, Novartis and
the Surviving Corporation shall jointly and severally, to the fullest extent
permitted by applicable Law, indemnify, defend and hold harmless all individuals
who at the Effective Time were directors or officers of the Company (each, an “Indemnified
Person” and, collectively, the “Indemnified Persons”) against any costs or expenses (including
reasonable attorneys’ fees and expenses), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
actual or threatened claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of, relating to
or in connection with (i) any acts or omissions occurring or alleged to
occur prior to the Effective Time in their capacities as officers or directors
of the Company or any of its Subsidiaries or taken by them at the request of
the Company or any of its Subsidiaries (including, without limitation, acts or
omissions in connection with such persons serving as an officer, director or
other fiduciary in any entity if such service was at the request or for the
benefit of the Company or any of its Subsidiaries) or (ii) the adoption
and approval of this Agreement, the Merger or the other transactions
contemplated by this Agreement or arising out of or pertaining to the
transactions contemplated by this Agreement. 
Without limiting the foregoing, Novartis and the Surviving Corporation shall
(A) cause the certificate of incorporation and by-laws of the Surviving
Corporation to include for a period of six years, at a minimum, the
indemnification and exculpation provisions of the certificate of incorporation
and by-laws of the Company as in effect at the Effective Time and shall cause
such provisions not to be amended, repealed or otherwise modified for a period
of six years from the Effective Time in any manner that would adversely affect
the rights thereunder of any Indemnified Person who was entitled to rights
thereunder as of the Effective Time and (B) for a period of six years after the Effective Time, honor, continue in effect and discharge the Company’s
obligations under all indemnification agreements of the Company and its Subsidiaries
with any Indemnified Persons in effect as of the date hereof without any change that is adverse to such
Indemnified Persons.


 


(b)                                 The
Surviving Corporation shall, and Novartis shall cause the Surviving Corporation
to, maintain the Company’s and its Subsidiaries’ existing directors’ and officers’
liability insurance (“D&O Insurance”) (including for acts or
omissions described in clauses (i) and (ii) in Section 7.9(a))
covering each such Indemnified Person covered immediately prior to the
Effective Time by the Company’s officers’ and directors’ liability insurance
policy on terms with respect to coverage and amount no less favorable than
those of such policy in effect on the date hereof for a period of six years
after the Effective Time; provided, however, that in no event
shall the Surviving Corporation be required to expend in any one year an amount
in excess of 250% of the current annual premium paid by the Company for such
insurance (such 250% amount, the “Maximum Annual Premium”); provided,
further, that if the annual premiums of such insurance coverage exceed
such amount, the Surviving Corporation shall be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding the Maximum
Annual Premium.  For the avoidance of
doubt, Novartis and the Surviving Corporation may satisfy their foregoing
obligations under this Section 7.9(b) by including the coverage required
by the foregoing sentence in Parent’s or Novartis’ existing group insurance
policies.  In addition,


 


28

















 


at Novartis’ request and sole expense, the Company will purchase a
six-year “tail” prepaid policy to take effect as of the Effective Time on terms
and conditions no less favorable to the Indemnified Persons than those of the
existing directors’ and officers’ liability insurance maintained by the Company
as of the date hereof.  If such “tail”
prepaid policies have been obtained by the Company prior to the Closing, the
Surviving Corporation shall, and Novartis shall cause the Surviving Corporation
to, maintain such policies in full force and effect for a period of six years
after the Effective Time, and continue to honor the respective obligations
thereunder, and all other obligations under this Section 7.9(b) shall
be deemed satisfied.


 


(c)                                  If
the Surviving Corporation or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such consideration or
merger or (ii) shall transfer all or substantially all of its properties
and assets to any individual, corporation or other entity, then, and in each
such case, proper provisions shall be made so that the successors and assigns of
the Surviving Corporation shall assume all of the obligations set forth in this
Section 7.9.


 


(d)                                 The
provisions of this Section 7.9 are intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their heirs and
legal representatives.


 


7.10.                        Takeover
Statutes.  If any Takeover Statute is
or may become applicable to the Merger or the other transactions contemplated
by this Agreement, the Company and the Company Board (or the Independent
Directors or any other appropriate committee of the Company Board) shall grant
all approvals and take all actions as are necessary so that such transactions
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects of such
Takeover Statute on such transactions.


 


7.11.                        Retention
of Shares; Voting of Shares at Stockholders Meeting.  Other than as contemplated herein, none of the
Novartis Companies have any intention of disposing of, nor will any of the
Novartis Companies dispose of, any shares of Common Stock owned by any of them
as of the date hereof.  Novartis shall,
and shall cause the other Novartis Companies, to vote all shares of Common
Stock owned by each of them in favor of adopting this Agreement at the
Stockholders Meeting.


 


ARTICLE VIII



Conditions


 


8.1.                              Conditions
to the Obligations of the Company, Novartis and Merger Sub to Effect the Merger.  The respective obligation of each of the
Company, Novartis and Merger Sub to effect the Merger is subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:


 


(a)                                  Stockholder Approval.  This Agreement shall have been duly adopted by
holders of shares of Common Stock constituting (i) the Company Requisite
Vote in accordance with applicable Law and the Company’s certificate of incorporation
and by-laws


 


29

















 


and (ii) the affirmative
vote of a majority of the outstanding shares of Common Stock excluding shares of
Common Stock owned by the Novartis Companies.


 


(b)                                 Regulatory
Consents.  (i) The waiting
period applicable to the consummation of the Merger under the HSR Act shall
have expired or been earlier terminated, 
(ii) if applicable, the European Commission shall have issued a
decision under the EC Merger Regulation declaring the Merger compatible with
the Common Market, and (iii) all other Governmental Consents shall have been
made or obtained other than those as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.  For purposes of this Agreement, the term “Governmental
Consents” shall mean all notices, reports, and other filings required to be
made prior to the Effective Time by the Company or Novartis or any of their
respective Subsidiaries with, and all consents, registrations, approvals,
permits, clearances and authorizations required to be obtained prior to the Effective
Time by the Company or Novartis or any of their respective Subsidiaries from,
any Governmental Entity in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby.


 


(c)                                  No
Injunction.  No Governmental Entity
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law, rule, regulation, judgment, determination, decree, injunction
or other order (whether temporary, preliminary or permanent) that is in effect
and restrains, enjoins or otherwise prohibits the consummation of the Merger or
the other transactions contemplated by this Agreement (collectively, an “Injunction”).


 


8.2.                              Conditions
to Obligations of Novartis and Merger Sub. 
The obligation of Novartis and Merger Sub to effect the Merger is also
subject to the satisfaction or waiver by Novartis at or prior to the Closing of
the following conditions:


 


(a)                                  Representations
and Warranties.  (i) The
representations and warranties of the Company set forth in Section 5.2 and
Section 5.15 of this Agreement shall be true and correct in all material
respects (A) on the date of this Agreement and (B) on the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date (except to the extent that any such
representation and warranty expressly speaks as of an earlier date, in which
case such representation and warranty shall be true and correct as of such
earlier date); (ii) all other representations and warranties of the
Company set forth in this Agreement shall be true and correct (A) on the
date of this Agreement and (B) on the Closing Date with the same effect as
though such representations and warranties had been made on and as of the
Closing Date (except to the extent that such representation and warranty
expressly speaks as of an earlier date, in which case such representation and
warranty shall be true and correct as of such earlier date); provided, however,
that notwithstanding anything herein to the contrary, the condition set forth
in this Section 8.2(a)(ii) shall be deemed to have been satisfied
even if any of the applicable representations and warranties of the Company are
not true and correct unless the failure of such representations and warranties
of the Company to be true and correct (read for purposes of this Section 8.2(a)(ii) only
without any materiality or Company Material Adverse Effect or similar qualification),
individually or in the aggregate, has had or is reasonably expected to have a Company
Material Adverse Effect; and (iii) Novartis shall have received at the
Closing a certificate signed on behalf of the Company


 


30

















 


by the Chief Executive
Officer or Chief Financial Officer of the Company to the effect that the
condition set forth in this Section 8.2(a) has been satisfied.


 


(b)                                 Performance
of Obligations of the Company.  The
Company shall have performed in all material respects all agreements and
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and Novartis shall have received a certificate signed on
behalf of the Company by the Chief Executive Officer or Chief Financial Officer
of the Company to the effect that the condition set forth in this Section 8.2(b) has
been satisfied.


 


(c)                                  Governmental
Consents.  All Governmental Consents
that have been obtained shall have been obtained without the imposition of any
term, condition or consequence that would, individually or in the aggregate,
reasonably be expected to have or result in a Company Material Adverse Effect
or a material adverse effect on Novartis’ ability to operate the business of
the Company and its Subsidiaries as currently operated.  For purposes of this Section 8.2(c), the
exclusion in clause (4) from the definition of a “Company Material Adverse
Effect” does not apply and “Company Material Adverse Effect” includes any
effect on Novartis, which, if aggregated with any effect on the Company and its
Subsidiaries, would be of such magnitude that it would constitute a Company
Material Adverse Effect if it had occurred with respect to the Company and its
Subsidiaries only.


 


(d)                                 No
Company Material Adverse Effect.  No
Company Material Adverse Effect shall have occurred on or after the date
hereof.


 


(e)                                  Exon-Florio
Clearance.  The United States
Government shall have (i) completed its national security review and, if
necessary, investigation, under Exon-Florio, and (ii) concluded that no
adverse action with respect to the transactions contemplated hereby, including
any action to suspend or prohibit the transactions contemplated hereby, is
warranted.


 


8.3.                              Conditions
to Obligation of the Company.  The
obligation of the Company to effect the Merger is also subject to the satisfaction
or waiver by the Company at or prior to the Effective Time of the following
conditions:


 


(a)                                  Representations
and Warranties.  (i) The
representations and warranties of Novartis and Merger Sub set forth in this
Agreement shall be true and correct in all material respects (A) on the
date of this Agreement and (B) on the Closing Date with the same effect as
though such representations and warranties had been made on and as of the
Closing Date (except to the extent that any such representation and warranty
expressly speaks as of an earlier date, in which case such representation and
warranty shall be true and correct as of such earlier date) and (ii) the
Company shall have received at the Closing a certificate signed on behalf of each
of Novartis and Merger Sub by a senior executive officer of each to the effect
that the condition set forth in this Section 8.3(a) as applicable has
been satisfied.


 


(b)                                 Performance
of Obligations of Novartis and Merger Sub. 
Each of Novartis and Merger Sub shall have performed in all material
respects all agreements and obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of each of Novartis and


 


31

















 


Merger Sub by a senior executive officer of each to the effect that the
condition set forth in this Section 8.3(b) as applicable has been
satisfied.


 


ARTICLE IX



Termination


 


9.1.                              Termination by Mutual Consent.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the adoption by the stockholders of the Company referred to in Section 8.1(a),
by mutual written consent of the Company, by action of the Company Board
(approved by the Independent Directors), and Novartis, by action of its board
of directors.


 


9.2.                              Termination
by Either Novartis or the Company. 
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time by Novartis, by action of its board of
directors, or by the Company, by action of the Company Board (approved by the Independent
Directors), if (a) the Merger shall not have been consummated by the date
that is nine months from the date hereof, provided, however, that
if (x) the Effective Time has not occurred by such date by reason of
nonsatisfaction of any of the conditions set forth in Sections 8.1(b), 8.1(c), 8.2(c) or
8.2(e) and (y) all other conditions in Article 8 have theretofore
been satisfied or (to the extent legally permissible) waived or are then
capable of being satisfied, then the Company may extend the Termination Date to
a date not beyond twelve months from the date hereof (the “Termination Date”), (b) the adoption
by the Company’s stockholders required by Section 8.1(a) shall not
have been obtained at the Stockholders Meeting (after giving effect to all adjournments
or postponements thereof), or (c) any Injunction permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger shall have become
final and non-appealable; provided, however, that the right to
terminate this Agreement pursuant to Section 9.2(a) or Section 9.2(c) shall
not be available to any party that has breached its obligations under this Agreement
in any manner that shall have proximately contributed to the occurrence of the
failure of the Merger to be consummated (in the case of Section 9.2(a), by
the Termination Date).


 


9.3.                              Termination
by the Company.  This Agreement may
be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the adoption by stockholders of the Company
referred to in Section 8.1(a), by action of the Company Board (approved by
the Independent Directors) if there has been a breach of any
representations, warranties, covenants or agreements made by Novartis or Merger
Sub in this Agreement, or any such representations, warranties, covenants or
agreements shall have become untrue or incorrect after the execution of this
Agreement, such that (i) the condition set forth in either Section 8.3(a) or
8.3(b) would not be satisfied and (ii) such breach or failure to be
true and correct is not curable by the Termination Date.


 


9.4.                              Termination
by Novartis.  This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, by action of the board of directors of Novartis, if (a) the Company
Board or the Independent Directors shall have withdrawn or adversely qualified
or modified the Recommendation or (b) there has been a breach of any
representations, warranties, covenants or agreements made by the Company in
this


 


32

















 


Agreement, or any such representations, warranties, covenants or
agreements shall have become untrue or incorrect after the execution of this
Agreement, such that (i) the condition set forth in either Section 8.2(a) or
8.2(b) would not be satisfied and (ii) such breach or failure to be
true or correct is not curable by the Termination Date.


 


9.5.                              Effect
of Termination and Abandonment.  In
the event of a termination of this Agreement and the abandonment of the Merger
pursuant to this Article IX, this Agreement (other than as set forth in Section 10.1)
shall become void and of no effect with no liability on the part of any party
hereto (or of any of its directors, officers, employees, agents, legal and
financial advisors or other representatives); provided, however, that,
except as otherwise provided herein, no such termination shall relieve any
party hereto of any liability or damages resulting from any willful or
intentional breach of this Agreement.


 


ARTICLE X



Miscellaneous and General


 


10.1.                        Non-Survival
of Representations and Warranties and Agreements.  None of the representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time or, except as set forth in Section 9.5 hereof,
the termination of this Agreement pursuant to the terms hereof.  This Section 10.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.


 


10.2.                        Modification
or Amendment.  Subject to the
provisions of applicable Law, at any time prior to the Effective Time, (i) this
Agreement may be amended, modified or supplemented only in writing executed by
each of the parties hereto by action of the board of directors of each such
party (in the case of the Company, approved by the Independent Directors), and (ii) any
provisions herein may be waived only in writing executed by the party or
parties against whom such waiver is asserted by action of such party or parties’
board of directors (in the case of the Company, approved by the Independent
Directors).


 


10.3.                        Waiver
of Conditions.  The conditions to
each of the parties’ obligations to consummate the Merger are for the sole
benefit of such party and may be waived by such party in whole or in part to
the extent permitted by applicable Law, in such party’s sole discretion.


 


10.4.                        Definitions.  Each of the terms set forth in Annex A
is defined in the Section of this Agreement set forth opposite such term.


 


10.5.                        Counterparts.  This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.


 


10.6.                        GOVERNING LAW AND VENUE;
WAIVER OF JURY TRIAL.


 


(a)                                  THIS AGREEMENT SHALL BE DEEMED TO
BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY


 


33

















 


AND IN ACCORDANCE WITH THE LAW OF
THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.  The parties hereto (other than,
for the avoidance of doubt, Parent) hereby irrevocably submit exclusively to
the jurisdiction of the courts of the State of Delaware and the Federal courts
of the United States of America located in the State of Delaware solely in
respect of the interpretation and enforcement of the provisions of this Agreement
and of the documents referred to in this Agreement, and in respect of the
transactions contemplated hereby, and hereby waive, and agree not to assert, as
a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and
the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a Delaware State or
Federal court.  The parties hereto (other
than, for the avoidance of doubt, Parent) hereby consent to and grant any such
court jurisdiction over the person of such parties for purposes of the
foregoing.


 


(b)                                 EACH PARTY HERETO ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.  EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III)
EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.6.


 


10.7.                        Notices.  Any notice, request, instruction or other
document to be given hereunder by any party to the others shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid, facsimile or by overnight courier:


 


If to Parent, Novartis or Merger Sub:



Novartis Corporation

508 Fifth Avenue


New York, New York 10020

Attention:  General Counsel

Facsimile:  (212) 830-2416


 


34

















 


with a copy, which will not constitute notice, to:


 


Novartis AG


WSJ-200.195


4002 Basel


Switzerland


Attention:  General Counsel


Facsimile:  011-41-61-324-7826


 


and to:


 


Wachtell, Lipton, Rosen & Katz


51 West 52nd Street


New York, New York 
10019


Attention:                 Andrew
R. Brownstein, Esq.


Trevor S. Norwitz, Esq.


Facsimile:     (212) 403-2000


 


If to the Company:


 


Chiron Corporation

4560 Horton Street

Emeryville, CA  94608

Attention:  Vice President, Head of
Corporate Business Development 

Facsimile Number:  (510) 610-5360


 


with a copy, which will not constitute notice, to:


 


Sullivan & Cromwell LLP

1888 Century Park East, Suite 2100

Los Angeles, California 90067


Attention:                 Alison
S. Ressler, Esq.


Patrick S. Brown, Esq.


Facsimile:     (310) 712-8800


 


or to such other persons or addresses as may be
designated in writing by the Person to receive such notice as provided
above.  Any
notice, request, instruction or other document given as provided above shall be
deemed given to the receiving party upon actual receipt, if delivered
personally; three Business Days after deposit in the mail, if sent by
registered or certified mail; upon confirmation of successful transmission if
sent by facsimile (provided that if given by facsimile such notice, request,
instruction or other document shall be followed up within one Business Day by
delivery pursuant to one of the other methods described herein); or on the next
Business Day after deposit with an internationally recognized overnight
courier, if sent by such a courier.


 


10.8.                        Entire
Agreement.  This Agreement, together
with the schedules, Annex A hereto, and
the Confidentiality Agreement, dated as of May 26, 2005, by and between
the Company and Parent, constitute the entire agreement between the
parties hereto with respect to


 


35

















 


the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.


 


10.9.                        No
Third Party Beneficiaries.  Except as
expressly set forth in Section 7.9 (Indemnification;
Directors’ and Officers’ Insurance) of this Agreement, this Agreement is not intended to, and does not, confer upon any
Person other than the parties who are signatories hereto any rights or remedies
hereunder.


 


10.10.                  Severability.  The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.  If any provision of this Agreement, or the
application thereof to any Person or any circumstance is determined by a court
of competent jurisdiction to be invalid, void or unenforceable the remaining
provisions hereof, shall, subject to the following sentence, remain in full
force and effect and shall in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to either party.  Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and
equitable provision to effect the original intent of the parties.


 


10.11.                  Interpretation;
Absence of Presumption.


 


(a)                                  For
the purposes hereof, (1) words in the singular shall be held to include
the plural and vice versa and words of one
gender shall be held to include the other gender as the context requires, (2) the
terms “hereof”, “herein”, and “herewith” and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including the schedules and annexes hereto) and not to
any particular provision of this Agreement, and Article, Section, paragraph,
Schedule, and Annex references are to the Articles, Sections, paragraphs,
Schedules and Annexes to this Agreement unless otherwise specified, (3) the
word “including” and words of similar import when used in this Agreement
shall mean “including without limitation” unless the context otherwise
requires or unless otherwise specified, (4) the word “or” shall not
be exclusive, and (5) all references to any period of days shall be deemed
to be to the relevant number of calendar days unless otherwise specified.


 


(b)                                 The
parties have participated jointly in negotiating and drafting this
Agreement.  In the event that an
ambiguity or a question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.


 


10.12.                  Expenses.  The Surviving Corporation shall pay all
charges and expenses, including those of the Paying Agent, in connection with
the transactions contemplated in Article IV.  Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the Merger
and the other transactions contemplated by this Agreement shall be paid by the
party incurring such expense, except that expenses incurred in connection with
the filing fee for the Schedule 13E-3 and printing and mailing the Company
Proxy Statement and the Schedule 13E-3 shall be shared equally by Novartis
and the Company.


 


36

















 


10.13.                  Assignment.  This Agreement shall not be assignable by any
party hereto; provided, however, that Novartis may designate, by
written notice to the Company, another Subsidiary of Novartis to be a
constituent corporation in lieu of Merger Sub, whereupon all references herein
to Merger Sub shall be deemed references to such other Subsidiary, except that
all representations and warranties with respect to Merger Sub as of the date of
this Agreement shall be deemed representations and warranties with respect to
such other Subsidiary as of the date of such designation.  Any purported assignment in violation of this
Agreement will be void ab initio.


 


10.14.                  Parent
Guarantee.  Whenever in this
Agreement performance of or compliance with a covenant or obligation is
expressed to be required by Novartis or Merger Sub, Parent shall cause Novartis
or Merger Sub to perform or comply with such covenant or obligation, such that
any failure of Novartis or Merger Sub to perform or comply with any such
covenant or obligation shall be deemed to be a breach of such covenant or
obligation by Parent.


 


37

















 


IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officers of the parties hereto as
of the date first written above.


 


	
   

  	
  CHIRON CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ HOWARD PIEN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Howard Pien

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NOVARTIS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARTIN HENRICH

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Martin Henrich

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NOVARTIS BIOTECH
  PARTNERSHIP,

  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARTIN FRIEDMAN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Martin Friedman

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NOVARTIS AG, for purposes of Section

  10.14 only

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ FREDERIC KROHN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frederic Krohn

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
					



 


 


[Chiron Merger Agreement Signature page]


 


38

















 


ANNEX A


 


DEFINED TERMS


 


	
  Terms

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Acquisition
  Proposal

  	
   

  	
  7.2(a)

  
	
  Action

  	
   

  	
  5.8

  
	
  Affected Employees

  	
   

  	
  7.8(a)

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Audit Date

  	
   

  	
  5.6(a)

  
	
  Business Day

  	
   

  	
  1.2

  
	
  By-Laws

  	
   

  	
  2.2

  
	
  Certificate

  	
   

  	
  4.1(a)

  
	
  Certificate
  of Merger

  	
   

  	
  1.3

  
	
  Charter

  	
   

  	
  2.1

  
	
  Closing

  	
   

  	
  1.2

  
	
  Closing
  Date

  	
   

  	
  1.2

  
	
  Code

  	
   

  	
  5.11(c)

  
	
  Common Stock

  	
   

  	
  Recitals

  
	
  Company

  	
   

  	
  Preamble

  
	
  Company Board

  	
   

  	
  Recitals

  
	
  Company Disclosure Schedule

  	
   

  	
  Article V

  
	
  Company Material Adverse Effect

  	
   

  	
  5.1

  
	
  Company
  Option

  	
   

  	
  4.5(a)

  
	
  Company Requisite Vote

  	
   

  	
  5.3(a)

  
	
  Contract

  	
   

  	
  5.4

  
	
  D&O Insurance

  	
   

  	
  7.9(b)

  
	
  Debentures

  	
   

  	
  5.2(a)

  
	
  DGCL

  	
   

  	
  1.1

  
	
  Dissenting
  Shares

  	
   

  	
  4.1(a)

  
	
  Dissenting
  Stockholders

  	
   

  	
  4.1(a)

  
	
  EC Merger Regulation

  	
   

  	
  5.4

  
	
  Effective
  Time

  	
   

  	
  1.3

  
	
  ERISA

  	
   

  	
  5.11(a)

  
	
  Exchange Act

  	
   

  	
  5.4

  
	
  Exchange
  Fund

  	
   

  	
  4.2(a)

  
	
  Excluded
  Share

  	
   

  	
  4.1(a)

  
	
  Excluded
  Shares

  	
   

  	
  4.1(a)

  
	
  Exon-Florio

  	
   

  	
  5.4

  
	
  Fairness Opinions

  	
   

  	
  5.15

  
	
  Financial Advisors

  	
   

  	
  5.3(b)

  
	
  GAAP

  	
   

  	
  5.6(b)

  
	
  Governance Agreement

  	
   

  	
  Recitals

  
	
  Government
  Antitrust Entity

  	
   

  	
  7.4(d)

  
	
  Governmental Consents

  	
   

  	
  8.1(b)

  
	
  Governmental Entity

  	
   

  	
  5.4

  



 

















 


	
  herein

  	
   

  	
  10.11(a)

  
	
  hereof

  	
   

  	
  10.11(a)

  
	
  herewith

  	
   

  	
  10.11(a)

  
	
  HSR Act

  	
   

  	
  5.4

  
	
  including

  	
   

  	
  10.11(a)

  
	
  including
  without limitation

  	
   

  	
  10.11(a)

  
	
  Indemnified Person

  	
   

  	
  7.9(a)

  
	
  Indemnified Persons

  	
   

  	
  7.9(a)

  
	
  Injunction

  	
   

  	
  8.1(c)

  
	
  Intellectual Property

  	
   

  	
  5.12(a)

  
	
  Knowledge
  of the Company

  	
   

  	
  5.1

  
	
  Law

  	
   

  	
  5.4

  
	
  Lien

  	
   

  	
  5.2(a)

  
	
  Maximum Annual Premium

  	
   

  	
  7.9(b)

  
	
  Merger

  	
   

  	
  Recitals

  
	
  Merger Consideration

  	
   

  	
  4.1(a)

  
	
  Merger Sub

  	
   

  	
  Preamble

  
	
  New Plans

  	
   

  	
  7.8(b)

  
	
  non-U.S.
  Benefit Plans

  	
   

  	
  5.11(a)

  
	
  non-U.S.
  Employees

  	
   

  	
  5.11(a)

  
	
  Novartis

  	
   

  	
  Preamble

  
	
  Novartis
  Companies

  	
   

  	
  4.1(a)

  
	
  Old Plan

  	
   

  	
  7.8(b)

  
	
  or

  	
   

  	
  10.11(a)

  
	
  Parent

  	
   

  	
  Preamble

  
	
  Paying Agent

  	
   

  	
  4.2(a)

  
	
  Person

  	
   

  	
  4.2(d)

  
	
  Preferred Stock

  	
   

  	
  5.2(a)

  
	
  Recommendation

  	
   

  	
  7.3(b)

  
	
  Representatives

  	
   

  	
  7.2(a)

  
	
  Restricted Common Stock

  	
   

  	
  5.2(a)

  
	
  SEC

  	
   

  	
  5.6(a)

  
	
  Securities Act

  	
   

  	
  5.4

  
	
  Share
  Right

  	
   

  	
  4.5(b)

  
	
  Significant Subsidiary

  	
   

  	
  5.1

  
	
  Stockholders
  Meeting

  	
   

  	
  7.3(a)

  
	
  Subsidiary

  	
   

  	
  5.1

  
	
  Superior
  Proposal

  	
   

  	
  7.2(a)

  
	
  Surviving
  Corporation

  	
   

  	
  1.1

  
	
  Takeover Statute

  	
   

  	
  5.14

  
	
  Tax

  	
   

  	
  5.13

  
	
  Tax Return

  	
   

  	
  5.13

  
	
  Taxes

  	
   

  	
  5.13

  
	
  Termination
  Date

  	
   

  	
  9.2

  
	
  Trade Secrets

  	
   

  	
  5.12(a)

  



 


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