FORM S-4
As filed with the Securities and Exchange Commission on
December 4, 2006
Registration No. [ ]
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
ILLUMINA, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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3826
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33-0804655
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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9885 Towne Centre
Drive
San Diego, California
92121-1975
(858) 202-4500
(Address, including zip code,
and telephone number, including area code, of Registrants
principal executive offices)
Christian G. Cabou
Senior Vice President, General
Counsel and Secretary
Illumina, Inc.
9885 Towne Centre
Drive
San Diego, California
92121
(858) 202-4500
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
COPIES TO:
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Frederick W. Kanner,
Esq.
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James Kitch, Esq.
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Michael J. Aiello,
Esq.
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Jennifer Fonner
Dinucci, Esq.
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Dewey Ballantine LLP
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Cooley Godward Kronish
LLP
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1301 Avenue of the
Americas
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Five Palo Alto Square
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New York, New York
10019
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3000 El Camino Real
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(212) 259-8000
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Palo Alto, California 94306
(650) 843-5000
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effectiveness of
this Registration Statement and the effective time of the merger
of Callisto Acquisition Corp., a direct, wholly-owned subsidiary
of the Registrant, with and into Solexa, Inc. as described in
the Agreement and Plan of Merger, dated as of November 12,
2006, included as Annex A to the joint proxy statement/
prospectus forming a part of this Registration Statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION
OF REGISTRATION FEE
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Amount
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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to be
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Offering Price
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Aggregate
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Registration
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Securities to be Registered
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Registered(2)
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per Share
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Offering Price(3)
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Fee(3)
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Common Stock, par value
$0.01 per share, and associated preferred stock purchase
rights(1)
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16,785,012
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N/A
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$599,185,862.36
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$64,112.89
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(1)
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Includes all preferred stock
purchase rights of Illumina, Inc. (Illumina)
issuable in conjunction with shares of Illumina common stock
pursuant to the Rights Agreement, dated May 3, 2001, by and
between Illumina and EquiServe Trust Company, N.A., as rights
agent.
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(2)
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Based upon the maximum number of
shares of the registrants common stock expected to be
issued in connection with the merger described herein to holders
of shares of common stock of Solexa, Inc. (Solexa).
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(3)
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Estimated solely for purposes of
calculating the registration fee required by Section 6(b)
of the Securities Act of 1933, as amended (the Securities
Act), and calculated pursuant to Rules 457(c) and
457(f)(1) under the Securities Act, the proposed maximum
aggregate offering price of the registrants common stock
was calculated based upon the market value of shares of common
stock of Solexa (the securities to be cancelled in the merger)
in accordance with Rule 457(c) under the Securities Act as
follows: the product of (1) $12.28, the average of the high
and low prices per share of Solexa common stock on
November 29, 2006, as quoted on the NASDAQ Global Market,
multiplied by (2) the maximum number of shares of Solexa
common stock that may be exchanged in the merger, calculated as
48,793,637, which is the resulting amount of (x) 41,800,332
issued and outstanding shares of Solexa common stock, plus
(y) 12,147,944 shares of Solexa common stock issuable
upon the exercise of outstanding options, warrants and other
equity based awards to purchase Solexa common stock, minus
(z) 5,154,639 shares of Solexa common stock held by
Illumina, which are to be cancelled upon consummation of the
merger.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to Section 8(a),
may determine.
Information
contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior to the time the Registration Statement becomes effective.
This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
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MERGER
PROPOSED YOUR VOTE IS VERY IMPORTANT
The board of directors of Illumina, Inc. and the board of
directors of Solexa, Inc. have agreed to the acquisition of
Solexa by Illumina by way of a merger pursuant to the terms of
the Agreement and Plan of Merger, dated as of November 12,
2006, which agreement is referred to as the merger agreement.
Upon completion of the merger of a direct, wholly-owned
subsidiary of Illumina with and into Solexa, Illumina will
acquire Solexa, and Solexa will become a direct, wholly-owned
subsidiary of Illumina.
If the merger is completed, Solexa stockholders will have the
right to receive shares of Illumina common stock for their
shares of Solexa common stock based on an exchange ratio to be
determined at the closing of the merger. This exchange ratio
will be determined by dividing $14.00 by the volume weighted
average trading price of Illumina common stock, which is
referred to as the Illumina Average Price, as reported by the
NASDAQ Global Market for ten randomly selected trading days
during the
20-day
trading period ending five trading days prior to closing of the
merger. However, if the Illumina Average Price is equal to or
greater than $47.30, then the exchange ratio will be fixed at
0.296 of a share of Illumina common stock for each share of
Solexa common stock, and if the Illumina Average Price is equal
to or less than $40.70, then the exchange ratio will be fixed at
0.344 of a share of Illumina common stock for each share of
Solexa common stock. Illumina stockholders will continue to own
their existing Illumina shares. Illumina common stock is listed
and traded on the NASDAQ Global Market under the trading symbol
ILMN, and Solexa common stock is listed and traded
on the NASDAQ Global Market under the trading symbol
SLXA.
At the special meeting of Illumina stockholders, which we refer
to as the Illumina special meeting, Illumina stockholders will
be asked to vote on the issuance of Illumina common stock to
Solexa stockholders, which is necessary to effect the merger.
The stock issuance proposal requires the affirmative vote of
holders of a majority of the shares of Illumina common stock
present or represented and entitled to vote on the proposal at
the Illumina special meeting.
At the special meeting of Solexa stockholders, which is referred
to as the Solexa special meeting, Solexa stockholders will be
asked to vote on the approval and adoption of the merger
agreement. In order to complete the merger, an affirmative vote
of holders of a majority of the outstanding shares of Solexa
common stock must vote, whether in person or by proxy, at the
Solexa special meeting to approve and adopt the merger agreement.
The Illumina board of directors unanimously recommends that
the Illumina stockholders vote FOR the proposal to
issue shares of Illumina common stock in the merger.
The Solexa board of directors unanimously recommends that the
Solexa stockholders vote FOR the proposal to approve
and adopt the merger agreement.
The obligations of Illumina and Solexa to complete the merger
are subject to the satisfaction or waiver of several conditions
set forth in the merger agreement. The enclosed joint proxy
statement/ prospectus provides you with more information about
the merger, Illumina and Solexa. We encourage you to read the
joint proxy statement/ prospectus carefully in its entirety.
In particular, you should carefully read the section entitled
Risk Factors beginning on
page [ ] of the enclosed joint proxy
statement/ prospectus. You may obtain additional information
about Illumina and Solexa from documents Illumina and Solexa
have filed with the Securities and Exchange Commission by
following the procedures discussed under the section entitled
Where You Can Find More Information beginning on
page [ ] of the enclosed joint
proxy statement/ prospectus.
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Sincerely,
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Sincerely,
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Jay T. Flatley
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John West
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President and Chief Executive
Officer
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Chief Executive Officer
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Illumina, Inc.
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Solexa, Inc.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued under this joint proxy statement/
prospectus or determined that this joint proxy
statement/prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
This joint proxy statement/ prospectus is dated
[ ], 2006 and is first being mailed to the
stockholders of Illumina and Solexa on or about
[ ], 2006.
Illumina, Inc.
9885 Towne Centre Drive
San Diego, California
92121-1975
(858) 202-4500
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [ ], 2007
Dear Stockholders of Illumina:
We are pleased to invite you to attend the special meeting of
stockholders of Illumina, Inc., a Delaware corporation, which
will be held at 9885 Towne Centre Drive, San Diego,
California,
92121-1975,
on [ ], 2007 at [ ]
a.m., local time, for the following purposes:
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to consider and vote on a proposal to approve the issuance of
shares of Illumina common stock, par value $0.01 per share,
in connection with the merger contemplated by the Agreement and
Plan of Merger, dated as of November 12, 2006, by and among
Illumina, Callisto Acquisition Corp., a direct, wholly-owned
subsidiary of Illumina, and Solexa, Inc., a copy of which is
attached as Annex A to the joint proxy statement/
prospectus accompanying this notice;
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to vote upon an adjournment of the Illumina special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes for the foregoing proposal; and
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to transact any other business that may properly be brought
before the Illumina special meeting or any adjournments or
postponements thereof.
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Please refer to the attached joint proxy statement/ prospectus
for further information with respect to the business to be
transacted at the Illumina special meeting.
The close of business on [ ],
200[ ] has been fixed as the record date
for the determination of stockholders entitled to notice of, and
to vote at, the Illumina special meeting or any adjournments or
postponements thereof. Only holders of record of Illumina common
stock at the close of business on the record date are entitled
to notice of, and to vote at, the Illumina special meeting.
The issuance of shares of Illumina common stock to Solexa
stockholders requires the affirmative vote of holders of a
majority of the Illumina common stock present or represented and
entitled to vote on the proposal at the Illumina special meeting.
Your vote is important. Whether or not you expect to attend
in person, we urge you to vote your shares as promptly as
possible by (1) accessing the Internet website specified on
your proxy card; (2) calling the toll-free number specified
on your proxy card; or (3) signing and returning the
enclosed proxy card in the postage-paid envelope provided, so
that your shares may be represented and voted at the Illumina
special meeting. If your shares are held in the name of a
bank, broker or other fiduciary, please follow the instructions
on the voting instruction card furnished by the record holder.
A list of the holders of Illumina common stock entitled to vote
at the Illumina special meeting will be available for
examination by any Illumina stockholder, for any purpose germane
to the Illumina special meeting, at Illuminas principal
executive offices at 9885 Towne Centre Drive, San Diego,
California,
92121-1975,
for ten days prior to the Illumina special meeting, between the
hours of 9:00 a.m. and 3:00 p.m., local time, and at
the Illumina special meeting during the entire time thereof.
By Order of the Board of Directors,
Christian G. Cabou
Senior Vice President, General Counsel and Secretary
San Diego, California
[ ], 2006
Solexa, Inc.
25861 Industrial Boulevard
Hayward, California 94545
(510) 670-9300
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [ ], 2007
Dear Stockholders of Solexa:
We are pleased to invite you to attend the special meeting of
stockholders of Solexa, Inc., a Delaware corporation, which will
be held at 25861 Industrial Boulevard, Hayward, California,
94545, on [ ], 2007 at
[ ] a.m., local time, for the following
purposes:
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to consider and vote on a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of November 12,
2006, by and among Illumina, Inc., Callisto Acquisition Corp., a
direct, wholly-owned subsidiary of Illumina, and Solexa, a copy
of which is attached as Annex A to the joint proxy
statement/ prospectus accompanying this notice;
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to vote upon an adjournment of the Solexa special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes for the foregoing proposal; and
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to transact any other business that may properly be brought
before the Solexa special meeting or any adjournments or
postponements thereof.
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Please refer to the attached joint proxy statement/ prospectus
for further information with respect to the business to be
transacted at the Solexa special meeting.
The close of business on [ ],
200[ ] has been fixed as the record date
for the determination of stockholders entitled to notice of, and
to vote at, the Solexa special meeting or any adjournments or
postponements thereof. Only holders of record of Solexa common
stock at the close of business on the record date are entitled
to notice of, and to vote at, the Solexa special meeting.
Approval and adoption of the Agreement and Plan of Merger
requires the affirmative vote of holders of a majority of the
outstanding shares of Solexa common stock entitled to vote on
the proposal at the Solexa special meeting.
Your vote is important. Whether or not you expect to attend
in person, we urge you to vote your shares as promptly as
possible by (1) calling the toll-free number specified on
your proxy card or (2) signing and returning the enclosed
proxy card in the postage-paid envelope provided, so that your
shares may be represented and voted at the Solexa special
meeting. If your shares are held in the name of a bank,
broker or other fiduciary, please follow the instructions on the
voting instruction card furnished by the record holder.
A list of the holders of Solexa common stock entitled to vote at
the Solexa special meeting will be available for examination by
any Solexa stockholder, for any purpose germane to the Solexa
special meeting, at Solexas principal executive offices at
25861 Industrial Boulevard, Hayward, California, 94545, for ten
days prior to the Solexa special meeting, between the hours of
9:00 a.m. and 3:00 p.m., local time, and at the Solexa special
meeting during the entire time thereof.
By Order of the Board of Directors,
Linda Rubinstein
Secretary
Hayward, California
[ ], 2006
ADDITIONAL
INFORMATION
This document incorporates important business and financial
information about Illumina and Solexa from other documents that
are not included in or delivered with this document. This
information is available to you without charge upon your
request. You can obtain the documents incorporated by reference
into this document by requesting them in writing or by telephone
from the appropriate company at the following addresses and
telephone numbers:
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Illumina,
Inc.
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Solexa, Inc.
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9885 Towne Centre Drive
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25861 Industrial Boulevard
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San Diego, California
92121-1975
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Hayward, California 94545
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(858)
202-4500
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(510) 670-9300
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Attn: Investor Relations
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Attn: Investor Relations
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Or
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Or
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InvestorCom, Inc.
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The Altman Group
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110 Wall Street
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1275 Valley Brook Avenue
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New York, New York 10005
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Lyndhurst, New Jersey 07071
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(800)
503-3375
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(201) 460-1200
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Investors may also consult Illuminas or Solexas
website for more information concerning the merger described in
this document. Illuminas website is
www.illumina.com. Solexas website is
www.solexa.com. Information included on
either website is not incorporated by reference into this
document.
If you would like to request any documents relating to the
merger, please do so by [ ], 2007 in order to
receive them before the meetings.
For more information, see Where You Can Find More
Information beginning on
page [ ].
You should rely only on the information contained in, or
incorporated by reference into, this document. No one has been
authorized to provide you with information that is different
from that contained in, or incorporated by reference into, this
document. This document is dated [ ],
2006. You should not assume that the information contained in,
or incorporated by reference into, this document is accurate as
of any date other than that date. Neither our mailing of this
document to Illumina stockholders or Solexa stockholders nor the
issuance by Illumina of common stock in connection with the
merger will create any implication to the contrary.
This document does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the
solicitation of a proxy, in any jurisdiction to or from any
person to whom it is unlawful to make any such offer or
solicitation in such jurisdiction. Information contained in this
document regarding Illumina has been provided by Illumina and
information contained in this document regarding Solexa has been
provided by Solexa.
TABLE OF
CONTENTS
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iii
QUESTIONS
AND ANSWERS
The following are some questions that you, as a stockholder
of Illumina or Solexa, may have regarding the merger and the
other matters being considered at the stockholders
meetings and the answers to those questions. Illumina and Solexa
urge you to read carefully the remainder of this document
because the information in this section does not provide all the
information that might be important to you with respect to the
merger and the other matters being considered at the
stockholders meetings. Additional important information is
also contained in the annexes to, and the documents incorporated
by reference into, this document.
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Q: |
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Why am I receiving this document? |
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A: |
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Illumina and Solexa have agreed to the combination of Solexa
with Illumina under the terms of a merger agreement that is
described in this document. A copy of the merger agreement is
attached to this document as Annex A. |
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In order to complete the merger, Illumina stockholders must vote
to approve the issuance of shares of Illumina common stock in
connection with the merger, and Solexa stockholders must vote to
approve and adopt the merger agreement. |
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Illumina and Solexa will hold separate stockholders
meetings to obtain these approvals. This document contains
important information about the merger and the meetings of the
respective stockholders of Illumina and Solexa, and you should
read it carefully. The enclosed voting materials allow you to
vote your shares without attending your respective
stockholders meeting. |
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Your vote is important. We encourage you to vote as soon as
possible. |
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Q: |
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When and where will the stockholders meetings be
held? |
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A: |
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The Illumina special meeting will be held at 9885 Towne Center
Drive, San Diego, California,
92121-1975,
on [ ], 2007 at [ ]
a.m., local time. The Solexa special meeting will be held at
25861 Industrial Boulevard, Hayward, California, 94545, on
[ ], 2007 at [ ]
a.m., local time. |
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Q: |
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How do I vote? |
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A: |
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If you are a stockholder of record of Illumina as of the record
date for the Illumina special meeting or a stockholder of record
of Solexa as of the record date for the Solexa special meeting,
you may vote in person by attending your stockholders
meeting or, to ensure your shares are represented at the
meeting, you may vote by: |
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accessing the Internet website specified on
your proxy card (applicable only to Illumina stockholders);
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calling the toll-free number specified on your
proxy card; or
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signing and returning the enclosed proxy card
in the postage-paid envelope provided.
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If you hold Illumina shares or Solexa shares in the name of a
bank or broker, please follow the voting instructions provided
by your bank or broker to ensure that your shares are
represented at your stockholders meeting. |
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Q: |
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What will happen if I fail to vote or I abstain from
voting? |
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A: |
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If you are an Illumina stockholder and fail to vote: |
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it will make it difficult for Illumina to
establish a quorum at the stockholders meeting; however,
assuming a quorum is present at the stockholders meeting,
your failure to vote will have no effect on the proposal to
approve the issuance of shares of Illumina common stock in the
merger.
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If you are an Illumina stockholder and vote to abstain: |
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it will have the same effect as a vote against
the proposal to approve the issuance of shares of Illumina
common stock in the merger.
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iv
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If you are a Solexa stockholder and fail to vote or vote to
abstain: |
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it will have the same effect as a vote against
the proposal to approve and adopt the merger agreement.
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Q: |
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If my shares are held in street name by my broker, will my
broker vote my shares for me? |
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A: |
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If you hold your shares in a stock brokerage account or if your
shares are held by a bank or nominee (that is, in street name),
you must provide the record holder of your shares with
instructions on how to vote your shares. Please follow the
voting instructions provided by your bank or broker. In
addition, please note that you may not vote shares held in
street name by returning a proxy card directly to Illumina or
Solexa or by voting in person at your stockholders meeting
unless you provide a legal proxy, which you must
obtain from your bank or broker. Further, brokers who hold
shares of Illumina or Solexa common stock on behalf of their
customers may not give a proxy to Illumina or Solexa to vote
those shares without specific instructions from their customers. |
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If you are an Illumina stockholder and you do not instruct your
broker on how to vote your shares: |
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your broker may not vote your shares on the
proposal to approve the issuance of shares of Illumina common
stock in the merger, which will have no effect on the vote on
this proposal, assuming a quorum is present.
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If you are a Solexa stockholder and you do not instruct your
broker on how to vote your shares: |
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your broker may not vote your shares, which
will have the same effect as a vote against the proposal to
approve and adopt the merger agreement.
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Q: |
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What will happen if I return my proxy card without indicating
how to vote? |
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A: |
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If you return your proxy card without indicating how to vote on
any particular proposal, the Illumina or Solexa common stock
represented by your proxy will be voted in favor of that
proposal. |
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Q: |
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Can I change my vote after I have returned a proxy or voting
instruction card? |
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A: |
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Yes. You can change your vote at any time before your proxy is
voted at your stockholders meeting. |
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You can do this in one of three ways: |
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you can send a signed notice of revocation;
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you can grant a new, valid proxy bearing a
later date; or
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if you are a holder of record, you can attend
your stockholders meeting and vote in person, which will
automatically cancel any proxy previously given, or you may
revoke your proxy in person, but your attendance alone will not
revoke any proxy that you have previously given.
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If you choose either of the first two methods, you must submit
your notice of revocation or your new proxy to the Secretary of
Illumina or Solexa, as appropriate, no later than the beginning
of the applicable stockholders meeting. If your shares are
held in street name by your bank or broker, you should contact
your broker to change your vote. |
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Q: |
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What do I need to do now? |
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A: |
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Carefully read and consider the information contained in and
incorporated by reference into this document, including its
annexes. |
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In order for your shares to be represented at your
stockholders meeting: |
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you can attend your stockholders meeting
in person;
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if you are an Illumina stockholder, you can
vote through the Internet or by telephone by following the
instructions included on your proxy card, and if you are a
Solexa stockholder you can vote by telephone by following the
instructions on your proxy card; or
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v
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you can indicate on the enclosed proxy card
how you would like to vote and return the proxy card in the
accompanying pre-addressed postage paid envelope.
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Q: |
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Should I send in my Solexa stock certificates now? |
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A: |
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No. Solexa stockholders should not send in any stock
certificates now. After the merger is completed, Illuminas
exchange agent will send former Solexa stockholders a letter of
transmittal explaining what they must do to exchange their
Solexa stock certificates for the merger consideration payable
to them. |
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If you are an Illumina stockholder, you are not required to take
any action with respect to your Illumina stock certificates. |
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Q: |
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Where will my shares of Illumina common stock be listed? |
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A: |
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We intend to apply to list the additional shares of Illumina
common stock to be issued in the proposed merger on the NASDAQ
Global Market under the trading symbol ILMN. It is a
condition to the consummation of the proposed merger that the
shares of Illumina common stock issuable in the proposed merger
be approved for listing on the NASDAQ Global Market, subject to
official notice of issuance. |
|
Q: |
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Is the merger taxable? |
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A: |
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Illumina and Solexa each expect the merger to qualify for United
States federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code
and it is a condition to the completion of the merger that legal
counsel will be able to deliver opinions to that effect.
Assuming the merger so qualifies, the receipt of Illumina common
stock in exchange for Solexa common stock pursuant to the merger
generally will be tax-free to the holders of Solexa common stock
except to the extent that holders receive cash instead of
fractional Illumina shares. We describe the material United
States federal income tax consequences of the merger in more
detail on page [ ]. |
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Tax matters are very complicated, and the tax consequences of
the merger to a particular stockholder will depend in part on
such stockholders circumstances. Solexa stockholders are
urged to read the discussion in the section entitled The
Merger Material United States Federal Income Tax
Consequences of the Merger beginning on page
[ ] of this joint proxy statement/
prospectus and to consult their tax advisors as to the United
States federal income tax consequences of the merger, as well as
the effects of state, local and non-United States tax laws. |
|
Q: |
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When do you expect the proposed merger to be complete? |
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A: |
|
We are working to complete the proposed merger as quickly as
possible, and we currently expect to complete the proposed
merger by the end of the first quarter of 2007. However, it is
possible that factors outside our control could require us to
complete the proposed merger at a later time. |
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Q: |
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Who can help answer my questions? |
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A: |
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Illumina or Solexa stockholders who have questions about the
merger or the other matters to be voted on at the
stockholders meetings or desire additional copies of this
document or additional proxy cards should contact: |
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If you are an Illumina
stockholder:
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If you are a Solexa
stockholder:
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InvestorCom, Inc.
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The Altman Group
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110 Wall Street
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1275 Valley Brook Avenue
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New York, New York 10005
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Lyndhurst, New Jersey 07071
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(800)
503-3375
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(201) 460-1200
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vi
SUMMARY
This summary highlights information contained elsewhere in
this document and may not contain all the information that is
important to you. Illumina and Solexa urge you to read carefully
the remainder of this document, including the attached annexes,
and the other documents to which we have referred you because
this section does not provide all the information that might be
important to you with respect to the merger and the other
matters being considered at the applicable stockholders
meeting. See also the section entitled Where You Can Find
More Information beginning on page
[ ]. We have included page
references to direct you to a more complete description of the
topics presented in this summary. Unless the context otherwise
requires, references to we, our and
us in this document refer collectively to Illumina
and Solexa.
The
Companies
Illumina
(See page [ ])
Illumina, Inc.
9885 Towne Centre Drive
San Diego, California
92121-1975
(858) 202-4500
Illumina, Inc. develops and markets next generation tools for
the large-scale analysis of genetic variation and function.
Illumina has developed a comprehensive line of products designed
to provide the performance, throughput, cost effectiveness and
flexibility necessary to enable researchers in the life sciences
and pharmaceutical industries to perform the billions of tests
necessary to extract medically valuable information from
advances in genomics. This information is expected to correlate
genetic variation and gene function with particular disease
states, enhancing drug discovery, allowing diseases to be
detected earlier and more specifically, and permitting better
choices of drugs for individual patients.
Illumina, a Delaware corporation, was founded in 1998 in
San Diego, California. The company completed its initial
public offering and was listed on the NASDAQ Global Market,
which we refer to as NASDAQ, under the symbol ILMN
in July 2000.
Solexa
(See page [ ])
Solexa, Inc.
25861 Industrial Boulevard
Hayward, California 94545
(510) 670-9300
Solexa, Inc. develops and commercializes genetic analysis
technologies. Solexas platform is expected to support many
types of genetic analyses, including whole genome resequencing,
gene expression analysis and small RNA analysis. Solexa believes
that this technology, which can potentially generate over a
billion bases of DNA sequence from a single experiment with a
single sample preparation, will dramatically reduce the cost,
and improve the practicality, of human resequencing relative to
conventional technologies. Solexa commenced commercial shipment
of its first-generation genetic analysis system, which includes
the 1G Genome Analyzer, in the second quarter of 2006.
Solexas longer-term goal is to further reduce the cost of
human resequencing to a few thousand dollars for use in a wide
range of applications from basic research through clinical
diagnostics.
Solexa, a Delaware corporation, was founded in 1992 in Hayward,
California, as Lynx Therapeutics, Inc., a Delaware corporation,
which we refer to as Lynx. On March 4, 2005, Solexa
Limited, a privately-held company registered in England and
Wales, and Lynx completed a business combination. The name of
the company was changed from Lynx Therapeutics, Inc. to Solexa,
Inc. on March 7, 2005. Solexa began trading on the Nasdaq
SmallCap Market under the symbol SLXA in March 2005
and was listed under the symbol LYNX prior to that
time. In February 2006, Solexas listing was transferred to
NASDAQ.
1
The
Merger and the Merger Agreement
The
Merger (See page [ ])
A copy of the agreement and plan of merger, dated
November 12, 2006, among Illumina, Callisto Acquisition
Corp., a direct, wholly-owned subsidiary of Illumina, and
Solexa, which we refer to as the merger agreement, is attached
as Annex A to this document. Illumina and Solexa encourage
you to read the entire merger agreement carefully because it is
the principal document governing the merger.
Form of
Merger (See page [ ])
Subject to the terms and conditions of the merger agreement, at
the effective time of the merger, Callisto Acquisition Corp., a
direct, wholly-owned subsidiary of Illumina formed for the
purposes of the merger, will be merged with and into Solexa.
Solexa will survive the merger as a direct, wholly-owned
subsidiary of Illumina.
Effect of
the Merger; Consideration to be Received in the Merger;
Treatment of Solexa Stock Options and Warrants (See
page [ ])
Solexa stockholders will receive newly issued shares of Illumina
common stock for their shares of Solexa common stock based on an
exchange ratio to be determined at closing. This exchange ratio
will be determined by dividing $14.00 by the volume weighted
average trading price of Illumina common stock as reported by
NASDAQ for ten randomly selected days during the
20-day
trading period ending five trading days prior to closing of the
merger. This volume weighted average price of Illumina common
stock is referred to as the Illumina Average Price. However, if
the Illumina Average Price is equal to or greater than $47.30,
then the exchange ratio will be fixed at 0.296 of a share of
Illumina common stock for each share of Solexa common stock, and
if the Illumina Average Price is equal to or less than $40.70,
then the exchange ratio will be fixed at 0.344 of a share of
Illumina common stock for each share of Solexa common stock.
Upon completion of the merger, each outstanding option and
warrant to acquire Solexa common stock will be automatically
converted into an option or warrant, as applicable, to acquire a
number of whole shares of Illumina common stock equal to the
product of the number of shares of Solexa common stock that were
subject to the original Solexa stock option or warrant
multiplied by the exchange ratio (rounded down to the nearest
whole share) at a per share exercise price or purchase price, as
applicable, equal to the per share exercise price or purchase
price of the original Solexa stock option or warrant divided by
the exchange ratio (rounded up to the nearest whole cent). Each
converted Solexa stock option and warrant will have
substantially the same terms and conditions as were in effect
immediately prior to the completion of the merger, including, as
applicable, vesting and terms of exercise.
Based on the number of outstanding shares of Solexa common stock
and Illumina common stock on November 29, 2006, if the
closing price for a share of Illumina common stock on
November 29, 2006 of $38.29 were used to determine the
exchange ratio, then Illumina would issue approximately
12,606,118 shares of Illumina common stock to Solexa
stockholders in the merger, which would represent approximately
21.2% of the outstanding shares of Illumina common stock,
immediately after the consummation of the merger.
Material
United States Federal Income Tax Consequences of the Merger (See
page [ ])
Illumina and Solexa each expects that the merger will qualify as
a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, which we refer to as the Code. Assuming the merger
qualifies as such a reorganization, for United States federal
income tax purposes, holders of Solexa common stock whose shares
of Solexa common stock are exchanged in the merger for shares of
Illumina common stock will not recognize gain or loss except to
the extent that holders receive cash instead of fractional
shares of Illumina common stock. It is a condition to the
completion of the merger that Illumina and Solexa receive
written opinions from legal counsel to the effect that the
merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code.
2
Tax matters are very complicated, and the tax consequences of
the merger to a particular stockholder will depend in part on
such stockholders circumstances. Solexa stockholders are
urged to read the discussion in the section entitled The
Merger Material United States Federal Income Tax
Consequences of the Merger beginning on page
[ ] of this joint proxy statement/
prospectus and to consult their tax advisors as to the United
States federal income tax consequences of the merger, as well as
the effect of state, local and non-United States tax laws.
Recommendations
of the Boards of Directors
Illumina
(See page [ ])
After careful consideration, the Illumina board of directors, on
November 10, 2006, unanimously approved the merger
agreement. For the factors considered by the Illumina board of
directors in reaching its decision to approve the merger
agreement, see the section entitled The Merger
Illuminas Reasons for the Merger; Recommendation of the
Stock Issuance by the Illumina Board of Directors
beginning on page [ ]. The Illumina
board of directors unanimously recommends that the Illumina
stockholders vote FOR the proposal to approve the
issuance of Illumina common stock in the merger at the Illumina
special meeting.
Solexa
(See page [ ])
After careful consideration, the Solexa board of directors, on
November 12, 2006, unanimously approved and adopted the
merger agreement. For the factors considered by the Solexa board
of directors in reaching its decision to approve and adopt the
merger agreement, see the section entitled The
Merger Solexas Reasons for the Merger;
Recommendation of the Merger by the Solexa Board of
Directors beginning on page [ ].
The Solexa board of directors unanimously recommends that the
Solexa stockholders vote FOR the proposal to approve
and adopt the merger agreement at the Solexa special meeting.
Opinions
of Financial Advisors
Opinion
of Illuminas Financial Advisor (See
page [ ])
On November 10, 2006, Illuminas financial advisor,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
which we refer to as Merrill Lynch, delivered to the Illumina
board of directors its oral opinion, which opinion was
subsequently confirmed in writing, to the effect that, as of the
date of the opinion and based upon the assumptions made, matters
considered and limits of review set forth in its written
opinion, the exchange ratio provided in the merger agreement was
fair from a financial point of view to Illumina. A copy of
Merrill Lynchs written opinion is attached to this joint
proxy statement/ prospectus as Annex C.
Illumina encourages you to read carefully both the section
entitled The Merger Opinions of Financial
Advisors Opinion of Illuminas Financial
Advisor beginning on page [ ] and
Merrill Lynchs written opinion in its entirety for a
description of the assumptions made, matters considered and
limits on the scope of review undertaken by Merrill Lynch.
Merrill Lynchs opinion was intended for the use and
benefit of the Illumina board of directors, does not address the
merits of the underlying decision by Illumina to enter into the
merger agreement or any of the transactions contemplated
thereby, including the merger, and does not constitute a
recommendation as to how any holder of Illumina common stock
should vote on, or take any action with respect to, the merger
or any related matter.
Opinion
of Solexas Financial Advisor (See
page [ ])
Solexas financial advisor, Lazard Frères &
Co. LLC, which we refer to as Lazard, delivered its opinion to
the Solexa board of directors that, as of the date of the
opinion and based upon and subject to the factors, assumptions
and limitations set forth therein, the exchange ratio, as
defined in the merger agreement, was fair from a financial point
of view to the holders of Solexa common stock. A copy of
Lazards written opinion is attached to this joint proxy
statement/ prospectus as Annex D.
3
Solexa encourages you to read carefully both the section
entitled The Merger Opinions of Financial
Advisors Opinion of Solexas Financial
Advisor beginning on page [ ] and
Lazards written opinion in its entirety for a description
of the assumptions made, procedures followed, matters considered
and limitations on the review undertaken in connection with the
opinion. Lazard provided its opinion for the information and
assistance of the Solexa board of directors in connection with
its consideration of the merger. Lazards opinion is
directed to the Solexa board of directors and is one of many
factors considered by the Solexa board of directors in deciding
to approve the merger. The Lazard opinion is not a
recommendation as to how any holder of Solexa common stock
should vote on, or take any action with respect to, the merger
or any related matter.
Interests
of Solexas Directors and Officers in the Merger;
Relationship between Illumina and Solexa (See
page [ ])
When considering the recommendations by the Solexa board of
directors, you should be aware that a number of Solexas
executive officers and directors have interests in the merger
that are different from those of other Solexa stockholders.
Securities
Purchase Agreement (See
page [ ])
On November 13, 2006, Illumina purchased 5,154,639 newly
issued shares of Solexa common stock at a purchase price of
$9.70 per share, representing approximately 12.3% of the
outstanding shares of Solexa common stock as of
November 13, 2006, after giving effect to the issuance.
These shares were purchased pursuant to the securities purchase
agreement, dated November 12, 2006, between Illumina and
Solexa, which we refer to as the securities purchase agreement.
Illumina entered into the securities purchase agreement with
Solexa as part of the transactions contemplated by the merger
agreement and to provide Solexa with financing sufficient to
meet Solexas expected working capital requirements if, for
any reason, the merger is not consummated.
Under the terms of the securities purchase agreement, shares of
Solexa common stock held by Illumina will be voted
proportionately with the votes cast by other Solexa stockholders
at any meeting of the Solexa stockholders to vote on the
proposed merger and any related transactions and matters.
The securities purchase agreement provides Illumina with
registration rights and rights to participate in Solexas
underwritten offerings of Solexa common stock if the merger
agreement is terminated. Additionally, the securities purchase
agreement provides Illumina with the right to require Solexa to
repurchase Illuminas shares of Solexa common stock if the
merger agreement is terminated and subsequently Solexa effects
an alternative transaction, as more fully set forth in the
securities purchase agreement. See the section entitled
The Merger Interests of Solexas
Directors and Officers in the Merger; Relationship Between
Illumina and Solexa beginning on page
[ ] for a discussion of the terms of the
securities purchase agreement.
Directors
and Management Following the Merger (See
page [ ])
Following the merger, the board of directors of the combined
company will consist of ten directors. The board will be
comprised of Illuminas current directors and two
additional independent directors to be selected by the Illumina
board of directors and agreed to by Solexa.
Following the merger, Jay T. Flatley will serve as President and
Chief Executive Officer, and John West will serve as Senior Vice
President and General Manager of the Sequencing Business Unit,
of the combined company.
Regulatory
Approvals Required for the Merger (See
page [ ])
Illumina and Solexa have each agreed to use reasonable efforts
in order to obtain all regulatory approvals required in order to
consummate the merger. These approvals include antitrust filings
with the United States Department of Justice, which we refer to
as the DOJ, and the United States Federal Trade Commission,
which we refer to as the FTC, made by Illumina and Solexa on
November 20, 2006 pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which we
refer to as the HSR Act, and
4
expiration or termination of the required waiting periods. We
also expect to file notices with antitrust and competition
authorities in other jurisdictions to the extent any such
filings are required. Although we do not expect regulatory
authorities to raise any significant objections in connection
with their review of the merger, we cannot assure you that we
will obtain all required regulatory approvals or that these
regulatory approvals will not contain terms, conditions or
restrictions that would be detrimental to the combined company
after the completion of the merger.
Expected
Timing of the Merger (See
page [ ])
We currently expect to complete the merger by the end of the
first quarter of 2007, subject to the receipt of required
stockholder and regulatory approvals and satisfaction of the
other conditions to completion of the merger.
Conditions
to Completion of the Merger (See
page [ ])
The obligations of Solexa and Illumina to complete the merger
are subject to the satisfaction of the conditions specified in
the merger agreement, including the following:
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the adoption of the merger agreement by Solexa stockholders;
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the approval of the issuance of shares of Illumina common stock
in the merger by Illumina stockholders;
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no law, order or other legal prohibition of any court or other
governmental entity shall be in effect that prohibits the
completion of the merger;
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the termination or expiration of the applicable waiting periods
under the HSR Act;
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the receipt of other requisite governmental approvals or
consents required to consummate the transactions contemplated by
the merger agreement;
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the authorization for listing by NASDAQ of the Illumina common
stock issuable to Solexa stockholders in the merger and such
other shares to be reserved for issuance in connection with the
merger;
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the Securities and Exchange Commission, which we refer to as the
SEC, having declared effective the registration statement of
which this document forms a part;
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the representations and warranties of the other party being true
and correct, subject to the material adverse effect standard
provided in the merger agreement;
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the other party having performed or complied with, in all
material respects, all obligations required to be performed or
complied with by it under the merger agreement;
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the receipt of an officers certificate of an executive
officer stating that the two preceding conditions have been
satisfied;
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the other party and its subsidiaries, taken as a whole, not
having suffered any material adverse effect, as defined in the
merger agreement; and
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the receipt of tax opinions of legal counsel to the effect that
the merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code.
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In addition, Illuminas obligation to complete the merger
is subject to the satisfaction or waiver of the following
additional conditions:
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the receipt of all consents, approvals, authorizations,
qualifications and orders of third parties required in
connection with the transactions contemplated by the merger
agreement, other than those previously disclosed to Illumina and
those the absence of which would not reasonably be expected to
have a material adverse effect on Solexa and its subsidiaries,
taken as a whole;
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5
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the absence of pending suits, actions or proceedings by any
governmental entity that relate to the merger, are reasonably
likely to succeed and:
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challenge Illuminas acquisition of shares of Solexa common
stock;
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seek to restrain or prohibit the proposed merger;
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seek to prevent or materially limit the ownership or operation
by Illumina, Solexa or their respective subsidiaries of their
respective businesses or assets;
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compel any of Illumina, Solexa or their respective subsidiaries
to divest or hold separate any material portion of their
businesses or assets; or
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seek to prohibit Illumina or any of its subsidiaries from
effectively controlling in any material respect the businesses
or operations of Solexa or any of its subsidiaries.
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Mr. West, Chief Executive Officer of Solexa, and Tony
Smith, Ph.D., Vice President and Chief Scientific Officer
of Solexa, shall be actively employed by Solexa on the closing
date (unless not employed by reason of death or disability);
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receipt of a FIRPTA certificate from Solexa certifying that an
interest in Solexa is not a real property interest; and
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there being no bonus plans or other arrangements of Solexa other
than those previously disclosed to Illumina.
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Termination
of the Merger Agreement (See
page [ ])
Illumina and Solexa can jointly agree to terminate the merger
agreement at any given time. Either company may also terminate
the merger agreement if the merger is not completed by
May 11, 2007 or under other circumstances described in this
document. See the section entitled The Merger
Agreement Termination of the Merger Agreement
beginning on page [ ] for a discussion
of each of Illuminas and Solexas rights to terminate
the merger agreement.
Expenses
and Termination Fees (See
page [ ])
Generally, all fees and expenses incurred in connection with the
merger agreement and the transactions contemplated by the merger
agreement will be paid by the party incurring those expenses. If
the merger agreement is terminated under specified
circumstances, Solexa or Illumina may be required to pay the
other party a termination fee of $18 million. See the
section entitled The Merger Agreement
Termination Fee beginning on page [ ]
for a discussion of the circumstances under which
termination fees will be required to be paid.
Appraisal
Rights (See page [ ])
Under Delaware law, the holders of Solexa common stock are not
entitled to appraisal rights in connection with the merger.
The
Special Meetings
The
Illumina Special Meeting (See
page [ ])
The Illumina special meeting will be held at the
[ ] at [ ] a.m.,
local time, on [ ], 2007. At the
Illumina special meeting, Illumina stockholders will be asked to:
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approve the issuance of Illumina common stock in the merger;
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vote upon an adjournment of the Illumina special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes for the foregoing proposal; and
|
6
|
|
|
|
|
transact any other business that may properly be brought before
the Illumina special meeting or any adjournments or
postponements thereof.
|
You may vote at the Illumina special meeting if you owned shares
of Illumina common stock at the close of business on
[ ], 200[ ]. On
that date, there were [ ] shares of
Illumina common stock outstanding, less than
[ ]% of which were owned and entitled to
be voted by Illumina directors and executive officers and their
affiliates. We currently expect that Illuminas directors
and executive officers will vote their shares in favor of the
merger, although none of them has entered into any agreements
obligating them to do so.
You can cast one vote for each share of Illumina common stock
you own. The proposals require different percentages of votes in
order to approve them:
|
|
|
|
|
The issuance of shares of Illumina common stock to Solexa
stockholders requires approval by an affirmative vote of holders
of a majority of the Illumina common stock present or
represented and entitled to vote on the proposal at the Illumina
special meeting.
|
|
|
|
Approval of the proposal to adjourn the Illumina special
meeting, if necessary, for the purpose of soliciting additional
proxies requires that the votes cast favoring the proposal
exceed the votes cast opposing the proposal.
|
The
Solexa Special Meeting (See
page [ ])
The Solexa special meeting will be held at the
[ ] at [ ] a.m.,
local time, on [ ], 2007. At the Solexa
special meeting, Solexa stockholders will be asked to:
|
|
|
|
|
approve and adopt the merger agreement;
|
|
|
|
vote upon an adjournment of the Solexa special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes for the foregoing proposal; and
|
|
|
|
transact any other business that may properly be brought before
the Solexa special meeting or any adjournments or postponements
thereof.
|
You may vote at the Solexa special meeting if you owned shares
of Solexa common stock at the close of business on
[ ], 200[ ]. On
that date, there were [ ] shares of
Solexa common stock outstanding, less than
[ ]% of which were owned and entitled to
be voted by Solexa directors and executive officers and their
affiliates. We currently expect that Solexas directors and
executive officers will vote their shares in favor of the
merger, although none of them has entered into any agreements
obligating them to do so.
You can cast one vote for each share of Solexa common stock you
own. The proposals require different percentages of votes in
order to approve them:
|
|
|
|
|
Approval and adoption of the merger agreement requires the
affirmative vote of holders of a majority of the outstanding
shares of Solexa common stock entitled to vote on the proposal.
|
|
|
|
Approval of the proposal to adjourn the Solexa special meeting,
if necessary, for the purpose of soliciting additional proxies
requires that the votes cast favoring the proposal exceed the
votes cast opposing the proposal.
|
7
Selected
Historical Financial Data of Illumina
The following table sets forth selected historical financial
data of Illumina. The selected statement of operations data and
the selected balance sheet data for the fiscal years ended
January 1, 2006, January 2, 2005, December 28,
2003, December 29, 2002 and December 30, 2001 are
derived from Illuminas audited consolidated financial
statements. The selected statement of operations data for the
nine months ended October 1, 2006 and October 2, 2005
and the selected balance sheet data as of October 1, 2006
have been derived from Illuminas unaudited consolidated
financial statements incorporated by reference into this
document. The interim consolidated financial data, in the
opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of
Illuminas financial position and results of operations at
the dates and for the periods indicated. The results of
operations for the nine months ended October 1, 2006 may
not be indicative of the results to be expected for the year
ending December 31, 2006 or any other interim period.
Illuminas historical financial data may not be indicative
of the results of operations or financial position to be
expected in the future.
The selected consolidated financial data should be read together
with Illuminas consolidated financial statements and the
related notes to those financial statements and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations section included in
Illuminas Annual Report on
Form 10-K
for the year ended January 1, 2006 and its Quarterly Report
on
Form 10-Q
for the quarter ended October 1, 2006, which have been
filed with the SEC and are incorporated by reference into this
document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
October 1,
|
|
|
October 2,
|
|
|
January 1,
|
|
|
January 2,
|
|
|
December 28,
|
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Statement of Operations
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
124,151
|
|
|
$
|
50,488
|
|
|
$
|
73,501
|
|
|
$
|
50,583
|
|
|
$
|
28,035
|
|
|
$
|
10,040
|
|
|
$
|
2,486
|
|
Income (Loss) from Operations
|
|
|
21,236
|
|
|
|
(21,463
|
)
|
|
|
(21,447
|
)
|
|
|
(5,513
|
)
|
|
|
(26,622
|
)
|
|
|
(41,855
|
)
|
|
|
(30,319
|
)
|
Net Income (Loss)
|
|
|
22,826
|
|
|
|
(21,200
|
)
|
|
|
(20,874
|
)
|
|
|
(6,225
|
)
|
|
|
(27,063
|
)
|
|
|
(40,331
|
)
|
|
|
(24,823
|
)
|
Net Income (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.52
|
|
|
|
(0.53
|
)
|
|
|
(0.52
|
)
|
|
|
(0.17
|
)
|
|
|
(0.85
|
)
|
|
|
(1.31
|
)
|
|
|
(0.83
|
)
|
Diluted
|
|
|
0.48
|
|
|
|
(0.53
|
)
|
|
|
(0.52
|
)
|
|
|
(0.17
|
)
|
|
|
(0.85
|
)
|
|
|
(1.31
|
)
|
|
|
(0.83
|
)
|
Balance Sheet Data (at end of
period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital
|
|
$
|
187,447
|
|
|
|
|
|
|
$
|
57,992
|
|
|
$
|
64,643
|
|
|
$
|
32,229
|
|
|
$
|
58,522
|
|
|
$
|
91,452
|
|
Total Assets
|
|
|
256,477
|
|
|
|
|
|
|
|
100,610
|
|
|
|
94,907
|
|
|
|
99,234
|
|
|
|
121,906
|
|
|
|
122,465
|
|
Long-term Debt, Including Amounts
Due Within One Year
|
|
|
94
|
|
|
|
|
|
|
|
172
|
|
|
|
|
|
|
|
25,618
|
|
|
|
26,297
|
|
|
|
887
|
|
Stockholders Equity
|
|
|
211,074
|
|
|
|
|
|
|
|
72,497
|
|
|
|
72,262
|
|
|
|
47,388
|
|
|
|
71,744
|
|
|
|
106,791
|
|
8
Selected
Historical Financial Data of Solexa
The following table sets forth selected summary historical
financial data of Solexa. The information presented below was
derived from Solexas audited financial statements as of
December 31, 2005, 2004, 2003 and 2002 and for the years
then ended and the unaudited financial statements as of
September 30, 2006 and for the nine months ended
September 30, 2006 and 2005 and as of December 31,
2001 and for the year then ended. This information is only a
summary. You should read it together with Solexas
historical financial statements and accompanying notes
incorporated by reference into this joint proxy statement/
prospectus.
On March 4, 2005, Solexa Limited, a privately-held company
registered in England and Wales, and Lynx completed a business
combination. Solexa Limited became a wholly-owned subsidiary of
Lynx as a result of the transaction. However, because
immediately following the business combination transaction, the
former Solexa Limited shareholders owned approximately 80% of
the shares of the common stock of Lynx, Solexa Limiteds
designees to the combined companys board of directors
represented a majority of the combined companys directors
and Solexa Limiteds senior management represented a
majority of the senior management of the combined company,
Solexa Limited was deemed to be the acquiring company for
accounting purposes.
Accordingly, the assets and liabilities of Lynx were recorded,
as of the date of the business combination, at their respective
fair values and added to those of Solexa Limited. The results of
operations of the combined company for 2005 reflect those of
Solexa Limited, to which the results of operations of Lynx were
added from the date of the consummation of the business
combination. The results of operations of the combined company
reflect purchase accounting adjustments, including increased
amortization and depreciation expense for acquired assets. In
connection with this business combination transaction, Lynx
changed its name to Solexa, Inc. and its trading symbol to
SLXA.
Solexas historical financial data may not be indicative of
the results of operations or financial position to be expected
in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Statement of Operations
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
2,434
|
|
|
$
|
2,848
|
|
|
$
|
4,150
|
|
|
$
|
96
|
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
|
|
Loss from Operations
|
|
|
(32,366
|
)
|
|
|
(25,244
|
)
|
|
|
(32,573
|
)
|
|
|
(9,958
|
)
|
|
|
(6,718
|
)
|
|
|
(5,316
|
)
|
|
|
(2,613
|
)
|
Net Loss
|
|
|
(29,002
|
)
|
|
|
(25,447
|
)
|
|
|
(29,160
|
)
|
|
|
(8,804
|
)
|
|
|
(5,649
|
)
|
|
|
(4,468
|
)
|
|
|
(2,509
|
)
|
Net Loss Attributable to Common
Stockholders
|
|
|
(29,002
|
)
|
|
|
(25,969
|
)
|
|
|
(29,682
|
)
|
|
|
(10,033
|
)
|
|
|
(5,649
|
)
|
|
|
(4,468
|
)
|
|
|
(2,509
|
)
|
Basic and Diluted Net Loss per
Common Share
|
|
|
(0.80
|
)
|
|
|
(1.53
|
)
|
|
|
(1.51
|
)
|
|
|
(9.68
|
)
|
|
|
(5.45
|
)
|
|
|
(4.31
|
)
|
|
|
(3.31
|
)
|
Balance Sheet Data (at end of
period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital
|
|
$
|
47,592
|
|
|
|
|
|
|
$
|
33,204
|
|
|
$
|
13,402
|
|
|
$
|
8,418
|
|
|
$
|
13,073
|
|
|
$
|
16,279
|
|
Total Assets
|
|
|
87,535
|
|
|
|
|
|
|
|
73,017
|
|
|
|
17,815
|
|
|
|
10,401
|
|
|
|
15,013
|
|
|
|
17,913
|
|
Long-term Debt, Including Amounts
Due Within One Year
|
|
|
55
|
|
|
|
|
|
|
|
75
|
|
|
|
27
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
74,955
|
|
|
|
|
|
|
|
59,773
|
|
|
|
431
|
|
|
|
9,606
|
|
|
|
14,207
|
|
|
|
17,136
|
|
9
Summary
Unaudited Pro Forma Combined Condensed Financial
Statements
The merger will be accounted for under the purchase method of
accounting, which means the assets and liabilities of Solexa
will be recorded, upon completion of the merger, at their
respective fair values and added to those of Illumina.
The summary unaudited pro forma combined condensed financial
information presented below reflects the purchase method of
accounting and is for illustrative purposes only. The summary
pro forma combined condensed financial information may have been
different had the companies actually combined. The summary pro
forma combined condensed financial information does not reflect
the effect of asset dispositions, if any, or revenue, cost or
other operating synergies that may result from the merger, nor
does it reflect the effects of any financing, liquidity or other
balance sheet repositioning that may be undertaken in connection
with or subsequent to the merger. You should not rely on the
summary pro forma combined condensed financial information as
being indicative of the historical results that would have
occurred had the companies been combined or the future results
that may be achieved after the merger. The following summary pro
forma combined condensed financial information has been derived
from, and should be read in conjunction with, the Unaudited Pro
Forma Combined Condensed Financial Statements and related notes
presented elsewhere in this document.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Year Ended
|
|
|
|
October 1, 2006
|
|
|
January 1, 2006
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Operations
Data
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
126,585
|
|
|
$
|
77,651
|
|
Loss from operations
|
|
|
(16,221
|
)
|
|
|
(65,626
|
)
|
Net loss
|
|
|
(10,457
|
)
|
|
|
(61,652
|
)
|
Net loss attributable to common
stockholders
|
|
|
(10,457
|
)
|
|
|
(62,174
|
)
|
Net loss per share, basic and
diluted
|
|
|
(0.19
|
)
|
|
|
(1.18
|
)
|
Weighted average shares
outstanding, basic and diluted
|
|
|
56,215
|
|
|
|
52,596
|
|
|
|
|
|
|
|
|
|
|
October 1, 2006
|
|
|
|
|
Balance Sheet
Data
|
|
|
|
|
|
|
Current assets
|
|
$
|
267,666
|
|
|
|
Working capital
|
|
|
225,489
|
|
|
|
Property and equipment, net
|
|
|
30,343
|
|
|
|
Total assets
|
|
|
620,875
|
|
|
|
Current liabilities
|
|
|
42,177
|
|
|
|
Long-term debt, including amounts
due within one year
|
|
|
149
|
|
|
|
Stockholders equity
|
|
|
562,892
|
|
|
|
10
RISK
FACTORS
In addition to the other information included and
incorporated by reference into this document, including the
matters addressed in the section entitled Cautionary
Statement Regarding Forward-Looking Statements, you should
carefully consider the following risks before deciding whether
to vote for adoption and approval of the merger agreement, in
the case of Solexa stockholders, or for the issuance of shares
of Illumina common stock in the merger, in the case of Illumina
stockholders. In addition, you should read and consider the
risks associated with each of the businesses of Illumina and
Solexa because these risks will also affect the combined
company. These risks can be found in Illuminas Quarterly
Report on
Form 10-Q
for the quarterly period ended October 1, 2006 and in
Solexas Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006, each of
which are filed with the SEC and incorporated by reference into
this document. You should also read and consider the other
information in this document and the other documents
incorporated by reference into this document. See the section
entitled Where You Can Find More Information
beginning on page [ ].
The
value of the shares of Illumina common stock to be received by
Solexa stockholders in the proposed merger could be higher or
lower than $14.00 per share of Solexa common
stock.
In the proposed merger, Solexa stockholders will receive a
fraction of a share of Illumina common stock for each share of
Solexa common stock equal to an exchange ratio, which will be
determined as follows:
|
|
|
|
|
if the Illumina Average Price is greater than $40.70 and less
than $47.30, then the exchange ratio will be determined by
dividing $14.00 by the Illumina Average Price;
|
|
|
|
if the Illumina Average Price is equal to or less than $40.70,
then the exchange ratio will be 0.344; and
|
|
|
|
if the Illumina Average Price is equal to or greater than
$47.30, then the exchange ratio will be 0.296.
|
In this joint proxy statement/ prospectus, we refer to the
volume weighted average (rounded to four decimal places) of the
daily sale prices for shares of Illumina common stock, as
reported by NASDAQ, for ten trading days randomly selected from
the 20 consecutive trading days ending five trading days prior
to the closing date of the merger as the Illumina Average
Price.
As a result of the collar mechanism described above, if the
Illumina Average Price is less than $40.70, then the market
value of the shares of Illumina common stock to be issued to
Solexa stockholders would have a value of less than
$14.00 per share of Solexa common stock. Conversely, if the
Illumina Average Price is greater than $47.30, then the market
value of the shares of Illumina common stock to be issued to
Solexa stockholders would have a value of greater than
$14.00 per share of Solexa common stock.
Moreover, because the date that the merger is completed may be
later than the date of the stockholder meetings, at the time of
your stockholder meeting, you will not know the exact market
value of the Illumina common stock that Solexa stockholders will
receive upon completion of the merger.
Illumina
may be unable to integrate successfully the businesses of Solexa
and realize the anticipated benefits of the
merger.
The success of the merger will depend, in part, on
Illuminas ability to realize the anticipated synergies,
growth opportunities and cost savings from integrating
Solexas businesses with Illuminas businesses.
Illuminas success in realizing these benefits and the
timing of this realization depend upon the successful
integration of the operations of Solexa. The integration of two
independent companies is a complex, costly and time-consuming
process. The difficulties of combining the operations of the
companies include, among other factors:
|
|
|
|
|
lost sales and customers as a result of certain customers of
either of the two companies deciding not to do business with the
combined company;
|
|
|
|
complexities associated with managing the combined businesses;
|
|
|
|
integrating personnel from diverse corporate cultures while
maintaining focus on providing consistent, high quality products
and customer service;
|
|
|
|
coordinating geographically separated organizations, systems and
facilities;
|
11
|
|
|
|
|
potential unknown liabilities and unforeseen increased expenses
or delays associated with the merger; and
|
|
|
|
performance shortfalls at one or both of the companies as a
result of the diversion of managements attention to the
merger.
|
If we are unable to successfully combine the businesses of
Illumina and Solexa in a manner that permits the combined
company to achieve the cost savings and operating synergies
anticipated to result from the merger, such anticipated benefits
of the merger may not be realized fully or at all or may take
longer to realize than expected. In addition, Illumina and
Solexa have operated and, until the completion of the merger,
will continue to operate, independently. It is possible that the
integration process could result in the loss of key employees,
diversion of each companys managements attention,
the disruption or interruption of, or the loss of momentum in,
each companys ongoing businesses or inconsistencies in
standards, controls, procedures and policies, any of which could
adversely affect our ability to maintain relationships with
customers and employees or our ability to achieve the
anticipated benefits of the merger, or could reduce our earnings
or otherwise adversely affect the business and financial results
of the combined company.
Failure
to complete the merger could negatively impact the stock prices
and the future business and financial results of Solexa and
Illumina.
If the merger is not completed, the ongoing businesses of Solexa
or Illumina may be adversely affected and Solexa and Illumina
will be subject to several risks, including the following:
|
|
|
|
|
being required, under certain circumstances under the merger
agreement, to pay a termination fee of $18 million;
|
|
|
|
having to pay certain costs relating to the merger, such as
legal, accounting, financial advisor and printing fees;
|
|
|
|
failure to pursue other beneficial opportunities as a result of
the focus of management of each of the companies on the merger,
without realizing any of the benefits of having the merger
completed; and
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the price of the common stock of Illumina
and/or
Solexa may decline to the extent that the current market price
of their respective common stock reflects an assumption that the
merger will be completed.
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If the merger is not completed, Solexa and Illumina cannot
ensure their stockholders that these risks will not materialize
and will not materially affect the business, financial results
and stock prices of Solexa or Illumina. Moreover, if the merger
is not completed, Illuminas registration and resale rights
related to the shares of Solexa common stock that it holds may
make it more difficult for Solexa to successfully access the
capital markets.
Solexa
stockholders will have a reduced ownership and voting interest
after the merger.
After the mergers completion, Solexa stockholders will own
a significantly smaller percentage of Illumina than they
currently own of Solexa. Consequently, Solexa stockholders may
have less influence over the management and policies of Illumina
than they currently exercise over the management and policies of
Solexa.
The
combined company may fail to realize the anticipated benefits of
the merger as a result of Solexas failure to achieve
anticipated revenue growth following the merger.
Solexas business faces significant risks. These risks
include those described in the section entitled Risk
Factors of Solexas Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006, which
report is incorporated by reference into this document, and may
include additional risks of which Illumina and Solexa are not
currently aware or which Illumina and Solexa currently do not
believe are material. If any of the events or circumstances
underlying these risks actually occur, Solexas business,
financial condition or results of operations could be harmed
and, as a result, Solexa may, among other things, fail to
achieve the anticipated revenue growth following the merger.
12
The
merger will cause dilution of Illuminas earnings per
share.
The merger and the transactions contemplated by the merger
agreement are expected to have a dilutive effect on
Illuminas earnings per share at least through 2007 due to
losses of Solexa, the additional shares of Illumina common stock
that will be issued in the merger, the transaction and
integration-related costs and other factors such as the failure
to realize any benefit from synergies anticipated in the merger.
These factors could adversely affect the market price of
Illumina common stock.
Obtaining
required approvals and satisfying closing conditions may delay
or prevent completion of the proposed transaction.
Completion of the proposed merger is conditioned upon, among
other things, the receipt of all consents and approvals of all
governmental authorities required for consummation of the
proposed transaction. The requirement for these approvals could
delay or prevent the completion of the proposed transaction. In
addition, antitrust authorities may impose conditions in
connection with the proposed transaction that may adversely
affect Illuminas operations after consummation of the
merger. Moreover, the FTC, the DOJ, a state, a private person or
an entity could seek, under federal or state antitrust laws,
among other things, to enjoin or rescind the proposed
transaction. Please see the section entitled The Merger
Agreement Conditions to Completion of the
Merger for a discussion of the conditions to the
completion of the merger and the section entitled The
Merger Regulatory Approvals Required for the
Merger for a description of the regulatory approvals
necessary in connection with the proposed merger. It cannot be
assumed that these consents and approvals will be obtained, or
that their terms, conditions and timing will not be detrimental
to Illumina or Solexa.
Illumina
will depend significantly on key personnel, and the loss of one
or more of Illuminas or Solexas key management
personnel could limit Illuminas ability to execute its
business strategy.
Illumina has depended on, and after the proposed merger will
continue to depend on, the services and management experience of
Mr. Flatley and Illuminas other current executive
officers. If Mr. Flatley or any other executive officers
resign or otherwise are unable to serve following the
consummation of the proposed merger, Illuminas management
expertise and efficiency could be weakened.
Additionally, Illuminas obligation to complete the
proposed merger is conditioned upon, among other things, each of
Mr. West, Solexas Chief Executive Officer, and
Dr. Smith, Solexas Vice President and Chief
Scientific Officer, being actively employed by Solexa on the
closing date of the merger, unless such officer is not actively
employed due to death or disability. Loss of either
Mr. West or Dr. Smith, other than for death or
disability, may cause Illumina to decide not to complete the
proposed merger and may result in the loss of value of shares of
Solexa common stock.
Additionally, Mr. West, in particular, has been a key
member of the Solexa management team, and Solexa has also been
highly dependent on the principal members of Solexas
scientific and commercial staff. The loss of any of these
persons services following the merger could adversely
impact the achievement of Illuminas commercial objectives.
Certain
directors and executive officers of Solexa may have potential
conflicts of interests.
Certain directors and executive officers may have interests that
differ from stockholders. Following completion of the merger,
Mr. West will be Senior Vice President and General Manager
of the Sequencing Business Unit of Illumina. In addition, the
merger agreement requires as a condition to closing the active
employment of each of Mr. West and Dr. Smith,
Solexas Vice President and Chief Scientific Officer, by
Solexa on the closing date of the merger, unless the failure to
be actively employed is the result of death or disability.
Solexa stockholders should be aware that certain members of the
board of directors and executive officers of Solexa have
interests in the merger that are different from, or in addition
to, their interests as Solexa stockholders. These interests may
create a conflict of interest or the appearance of a conflict of
interest. See The Merger Interests of
Solexas Directors and Officers in the Merger; Relationship
between Illumina and Solexa and The Merger
Agreement Conditions to Completion of the
Merger for more information.
13
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document, including the documents incorporated by reference
in this document, includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, which we refer to as the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as
amended, which we refer to as the Exchange Act. We have based
these forward-looking statements on our current expectations and
projections about future events. Our actual results could differ
materially from those discussed in, or implied by, these
forward-looking statements. Words such as expect,
estimate, project, budget,
forecast, anticipate,
intend, plan, may,
will, could, should,
believes, predicts,
potential, continue and similar
expressions are intended to identify such forward-looking
statements. In addition, any statements that refer to
expectations, projections or other characterizations of future
events or circumstances are forward-looking statements.
Forward-looking statements include, but are not necessarily
limited to, those relating to:
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the introduction and development of new products, product
improvements and new services;
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the applicability and usefulness of our technologies in various
markets and industries;
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the success of our technologies;
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emerging markets in functional genetic analysis, namely SNP
genotyping, gene expression profiling and proteomics, and the
future growth of these markets;
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demand for increased throughput in genetic analysis;
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continued advances in genomics;
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the potential to derive medically valuable information from raw
genetic data and the further potential to use this information
to improve drugs and therapies, to customize diagnosis and
treatment, and cure disease;
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potential future partnerships, collaborations and
acquisitions; and
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growth in our research and development and general and
administrative expenses.
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These statements are only predictions. In evaluating these
statements, you should consider various factors, including the
risks outlined under the section entitled Risk
Factors. These factors may cause actual events or our
results to differ materially from those expressed or implied by
any forward-looking statement. These factors include risks and
uncertainties relating to:
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Solexas failure to achieve the anticipated revenue growth;
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the ability to obtain regulatory approvals of the transaction on
the proposed terms and schedule;
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the failure of Illumina or Solexa stockholders to approve the
transaction;
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the risk that the businesses will not be integrated successfully;
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the risk that the anticipated synergies and benefits from the
transaction may not be fully realized or may take longer to
realize than expected;
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disruption from the transaction making it more difficult to
maintain relationships with customers, employees or
suppliers; and
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competition and its effect on pricing, spending, third-party
relationships and revenues.
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Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility
for the accuracy and completeness of these forward-looking
statements. We are under no duty and do not intend to update any
of the forward-looking statements after the date of this
prospectus or to conform our prior statements to actual results.
14
THE
MERGER
The following is a discussion of the proposed merger and the
merger agreement. This is a summary only and may not contain all
of the information that is important to you. A copy of the
merger agreement is attached to this document as Annex A
and is incorporated by reference herein. Illumina and Solexa
stockholders are urged to read this entire document, including
the merger agreement, for a more complete understanding of the
merger.
Effect of
the Merger; Consideration to be Received in the Merger;
Treatment of Solexa Stock Options and Warrants
Under the merger agreement, Callisto Acquisition Corp., a
direct, wholly-owned subsidiary of Illumina, will merge with and
into Solexa, with Solexa continuing as the surviving
corporation. As a result of the merger, Solexa will become a
direct, wholly-owned subsidiary of Illumina.
At the effective time of the merger, each share of Solexa common
stock issued and outstanding immediately prior to the effective
time of the merger, excluding shares of Solexa common stock
owned by Solexa, Illumina or Callisto Acquisition Corp., will be
converted into the right to receive shares of Illumina common
stock based on the exchange ratio provided in the merger
agreement. This exchange ratio will be determined by dividing
$14.00 by the volume weighted average trading price of Illumina
common stock as reported by NASDAQ for ten randomly selected
days during the
20-day
trading period ending five trading days prior to closing of the
merger. The ten randomly selected days will be selected by one
representative of Illumina and one representative of Solexa, who
will, by blind draw, select one date at a time alternately until
all ten days have been selected. This volume weighted average
price of Illumina common stock is referred to as the Illumina
Average Price. However, if the Illumina Average Price is equal
to or greater than $47.30, then the exchange ratio will be fixed
at 0.296 of a share of Illumina common stock for each share of
Solexa common stock, and if the Illumina Average Price is equal
to or less than $40.70, then the exchange ratio will be fixed at
0.344 of a share of Illumina common stock for each share of
Solexa common stock.
In addition, at the effective time of the merger, each option
and warrant to purchase Solexa common stock that is outstanding
immediately prior to the effective time of the merger will be
converted into the right to receive an option or warrant, as
applicable, to purchase Illumina common stock based upon the
exchange ratio. The exercise price per share of each converted
option and the purchase price per share of each converted
warrant shall also be adjusted based upon the exchange ratio.
Illumina and Solexa currently estimate that Illumina will issue
approximately 12,606,118 shares of Illumina common stock to
Solexa stockholders at the effective time of the merger based on
the number of outstanding shares of Solexa common stock on
November 29, 2006. If the closing price for a share of
Illumina common stock on November 29, 2006 of $38.29 were
used to determine the exchange ratio, then each holder of shares
of Solexa common stock would receive 0.344 of a share of
Illumina common stock for each share of Solexa common stock.
Based upon the number of outstanding shares of Solexa common
stock and Illumina common stock on November 29, 2006,
immediately following the completion of the merger, holders of
Solexa common stock immediately prior to the consummation of the
merger would own approximately 21.2% of the combined company and
Illumina stockholders immediately prior to the consummation of
the merger would own approximately 78.8% of the combined
company. This ownership percentage is subject to change based on
the actual exchange ratio as of the closing of the merger.
Background
of the Merger
Solexa has reviewed, from time to time, various business
opportunities to further develop and commercialize its genetic
analysis technologies, including scientific and product-focused
collaborations.
Illumina also has been reviewing, from time to time,
opportunities for growth and expansion, including potential
business collaboration and acquisition opportunities.
Between February 2006 and June 2006, Illuminas and
Solexas senior management and scientists met on a few
occasions to discuss potential opportunities for collaboration,
including the joint development of new
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products based jointly on Illuminas and Solexas
technology. In July 2006, members of Illuminas senior
management visited Solexas headquarters in Hayward,
California, to discuss further collaborative opportunities, as
well as a possible business combination of the two companies.
On July 28, 2006, John West, Chief Executive Officer of
Solexa, discussed with the Solexa board of directors the
potential merger with Illumina at a meeting of the Solexa board
of directors. At this meeting, the Solexa board of directors
authorized Solexa management to pursue further discussions with
Illumina regarding a potential business combination.
On August 9, 2006, Illumina and Solexa entered into a
mutual confidentiality agreement to permit additional
discussions and exchange of information concerning a possible
transaction between the two companies.
On September 9, 2006, Jay T. Flatley, President and Chief
Executive Officer of Illumina, and other members of
Illuminas senior management met with Mr. West and
other members of Solexas senior management to discuss a
potential strategic combination and other potential business
opportunities for the two companies and exchanged certain
financial and other information regarding their respective
companies. On September 14, 2006, Messrs. Flatley and
West met again to further explore the possibility of a business
combination between the two companies. These discussions
included, among other matters, deal rationale considerations and
potential benefits that could result from a combination of the
two companies.
On September 19, 2006, at a meeting of the Solexa board of
directors, the members of the Solexa board of directors,
together with members of Solexas senior management and a
representative of Cooley Godward Kronish LLP, Solexas
legal advisor, reviewed the status of discussions with Illumina
concerning a potential business combination and various other
considerations, including whether any other strategic partner
would enable the same extent of product and technology synergies.
On September 20, 2006, Illumina, together with its
financial advisor Merrill Lynch, and Solexa, together with its
financial advisor, Lazard, met in San Diego, California,
and engaged in due diligence discussions and reviews of each
companys financial information, technology, intellectual
property and other matters. During the week of
September 24, 2006, Illumina, Solexa and their respective
advisors met on several occasions to exchange information and to
discuss key due diligence matters in connection with the
proposed merger.
Throughout the month of October 2006 and part of November 2006,
Illumina and its financial advisor and legal advisor, Dewey
Ballantine LLP, and Solexa and its financial and legal advisors,
continued their due diligence reviews and discussions through
in-person meetings, telephone conferences and exchange and
review of various documents and information relating to the two
companies. These due diligence reviews and discussions included,
among others, visits by representatives of Illumina to
Solexas operations in Cambridge, England and Hayward,
California and a telephone conference among Illumina, Solexa and
their respective independent auditors in which the companies
discussed and reviewed accounting due diligence matters of the
other company.
On October 5, 2006, Illumina and Solexa executed an
amendment to the mutual confidentiality agreement to provide
for, among other obligations, mutual standstill and employee
non-solicitation obligations.
On October 8, 2006, at a meeting of the Illumina board of
directors held via telephone conference, members of
Illuminas senior management reviewed with the Illumina
board of directors preliminary information regarding Solexa and
its business and the possible acquisition of Solexa by way of a
merger. Illuminas financial and legal advisors also
participated in the meeting. At this meeting, the Illumina board
of directors resolved to authorize members of Illuminas
senior management to engage in preliminary negotiations with
Solexa regarding a possible merger of Illumina and Solexa on the
terms discussed with the board.
On October 9, 2006, Illumina verbally communicated to
Solexa an offer to acquire Solexa through a merger for
$11.66 per share, which consideration would be payable in
shares of Illumina common stock.
On October 13, 2006, at a meeting of the Solexa board of
directors, Lazard reviewed for the members of the Solexa board
of directors Lazards preliminary financial analyses of
Solexa and the potential merger
16
between Illumina and Solexa, and Cooley Godward Kronish LLP
advised the Solexa board of directors regarding the boards
fiduciary duties in connection with its consideration of the
proposed transaction. At this meeting, members of the Solexa
board of directors also discussed the proposed terms of the
merger with members of Solexas senior management and legal
advisors. Later that day, Mr. West communicated to Illumina
Solexas counterproposal of $16.00 per share as the
proposed merger consideration, payable in shares of Illumina
common stock.
On October 14, 2006, at a meeting of the Illumina board of
directors held via telephone conference, members of
Illuminas senior management discussed with the Illumina
board of directors the status of ongoing negotiations with
Solexa, including the terms of Solexas counterproposal to
Illuminas proposed terms for the merger. At this meeting,
the Illumina board of directors resolved to authorize members of
Illuminas senior management to continue negotiations with
Solexa regarding the terms of the proposed merger. In addition,
the Illumina board of directors resolved to create a
subcommittee of the Illumina board of directors for the purpose
of providing guidance to members of Illuminas senior
management in their negotiations with Solexa.
On October 19, 2006, Mr. Flatley communicated to
Mr. West Illuminas revised proposal of
$13.00 per share as the merger consideration, payable in
shares of Illumina common stock.
On October 20, 2006, at a meeting of the Solexa board of
directors, Lazard reviewed for the members of the Solexa board
of directors Lazards preliminary financial analyses of
Solexa and the potential merger between Illumina and Solexa. At
this meeting, members of the Solexa board of directors also
discussed the proposed terms of the merger with members of
Solexas senior management and legal advisors. Also on this
day, Solexa communicated to Illumina a counterproposal of
$14.70 per share with a 15% symmetrical fixed price collar
as the merger consideration, payable in shares of Illumina
common stock.
On October 21, 2006, Illumina and Solexa, together with
their respective financial and legal advisors, met in Palo Alto,
California to discuss the terms of the proposed merger. At this
meeting, Illumina and Solexa negotiated, among other terms, the
merger consideration. The terms of the merger consideration
discussed between the parties included Illuminas revised
offer of either $13.50 per share with a 5% symmetrical
fixed price collar or $13.85 per share without a collar
mechanism, and Solexas counter proposal of $14.00 per
share with a 10% symmetrical fixed price collar. In all cases,
the contemplated merger consideration consisted of shares of
Illumina common stock. After extensive negotiations, the parties
agreed, subject to the approval of their respective board of
directors, to the terms of the merger consideration of
$14.00 per share, payable in shares of Illumina common
stock and subject to a symmetrical fixed price collar of plus
and minus 7.5% of the average Illumina stock price that would be
used to determine the exchange ratio. The parties also discussed
other key terms of the proposed transaction, including, in
particular, the terms of a securities purchase agreement, which
would provide for a $50 million cash investment in Solexa
by Illumina. Solexa indicated that it had contemplated an equity
financing within the next few months to fund its capital
requirements and that further discussion with Illumina
concerning a potential merger would be predicated on
Illuminas commitment to make a cash investment in Solexa
to fund Solexas working capital requirements in the
event that the proposed merger was not consummated for any
reason.
On October 25, 2006, Lazard reviewed with the Solexa board
of directors financial analyses of the potential merger between
Illumina and Solexa at a meeting of the Solexa board of
directors. Members of Solexa senior management, together with
its financial and legal advisors, also updated the Solexa board
of directors with the status of discussions with Illumina on the
proposed terms of the merger.
On the same day, at a meeting of the Illumina board of
directors, members of Illuminas senior management provided
an update on their negotiations with Solexa to the Illumina
board of directors and reviewed with the Illumina board of
directors the preliminary understanding between Illumina and
Solexa on certain terms of the proposed transactions. Members of
Illuminas senior management also updated the Illumina
board of directors on the due diligence reviews conducted in
connection with the proposed transactions.
17
On October 30, 2006, at a meeting of a committee of the
Solexa board of directors, those directors present discussed the
proposed terms of the merger with members of Solexas
senior management and legal advisors.
On November 3, 2006, the Solexa board of directors,
together with members of Solexas senior management and its
financial and legal advisors, convened at a meeting of the
Solexa board of directors to receive an update on the
discussions with Illumina on the terms and conditions of the
transaction documents relating to the merger.
During the first week and into the second week of November 2006,
Illumina and Solexa, together with their respective financial
and legal advisors, continued to negotiate and finalize the
terms of the merger agreement, securities purchase agreement and
related transaction documents, while finalizing their mutual
financial, legal and other customary due diligence reviews and
discussions.
On November 10, 2006, at a meeting of the Solexa board of
directors, Lazard reviewed its preliminary financial analyses,
and members of Solexas senior management and legal advisor
reviewed the status of the negotiations of the merger agreement,
the securities purchase agreement and related transaction
documents, as well as the terms of the transaction documents in
their draft form for the Solexa board of directors. In addition,
Solexas legal advisor discussed with the Solexa board of
directors the boards fiduciary duties in reviewing the
proposed transactions and their terms. The Solexa board of
directors engaged in an extensive discussion regarding the terms
of the merger agreement, the securities purchase agreement and
related transaction documents with members of Solexas
senior management and its financial and legal advisors,
including the rationale, prospects, benefits and risks
associated with the proposed transactions and the matters
discussed in the section entitled The Merger
Solexas Reasons for the Merger; Recommendation of the
Merger by the Solexa Board of Directors.
On the same day, at a meeting of the Illumina board of directors
held via telephone conference, members of Illuminas senior
management discussed with the Illumina board of directors the
terms of the proposed transactions and Dewey Ballantine LLP
reviewed with the Illumina board of directors the principal
terms of the transaction documents and the legal issues relevant
to its consideration of the proposed transactions, including a
review of the fiduciary duties of the board of directors and the
legal standards applicable to the board of directors
review of the proposed transactions. Members of Illuminas
senior management also updated the Illumina board of directors
on the due diligence reviews conducted in connection with the
proposed transaction. At this meeting, Merrill Lynch reviewed
with the Illumina board of directors its financial analyses of
the terms of the proposed merger and rendered its oral opinion,
which opinion was subsequently confirmed by delivery of a
written opinion dated November 12, 2006, to the effect
that, as of the date of such opinion and based upon the
assumptions made, matters considered and limits of review set
forth in such written opinion, the exchange ratio provided for
in the merger agreement was fair, from a financial point of
view, to Illumina. See The Merger Opinions of
Financial Advisors Opinion of Illuminas
Financial Advisor for further information regarding
Merrill Lynchs opinion.
Following these discussions, and further review and discussion
among members of the Illumina board of directors, including
consideration of the matters discussed in the section entitled
The Merger Illuminas Reasons for the
Merger; Recommendation of the Stock Issuance by the Illumina
Board of Directors, the Illumina board of directors
unanimously voted to approve the merger agreement, the
securities purchase agreement and the transactions contemplated
thereby and resolved to recommend that the Illumina stockholders
vote to approve the issuance of shares of Illumina common stock
in the merger.
On November 11 and November 12, 2006, representatives of
the senior management of Illumina and Solexa, and their
respective financial and legal advisors, finalized the terms of
the merger and its related transaction documents.
On November 12, 2006, at a meeting of the Solexa board of
directors held via telephone conference, Solexas legal
advisor reviewed with the members of Solexas board of
directors and senior management the final terms of the
transaction documents. The Solexa board of directors discussed
the terms of the merger agreement, the securities purchase
agreement and related transaction documents with members of
Solexas
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senior management and financial and legal advisors. At this
meeting, Lazard stated that its financial analyses of the terms
of the proposed merger had not changed since the analyses
reviewed with the Solexa board of directors at the
November 10, 2006 meeting, and delivered its oral opinion,
which opinion was subsequently confirmed by delivery of a
written opinion of the same date, to the effect that, as of the
date of its opinion and based upon and subject to the factors,
assumptions and limitations stated therein, the exchange ratio,
as defined in the merger agreement, was fair, from a financial
point of view, to the holders of Solexa common stock. See
The Merger Opinions of Financial
Advisors Opinion of Solexas Financial
Advisor for further information regarding Lazards
opinion. Also at this meeting, Cooley Godward Kronish LLP
reviewed with the Solexa board of directors and members of
Solexas senior management the finalized terms of the
transaction documents. In addition, Cooley Godward Kronish LLP
discussed with the Solexa board of directors its fiduciary
duties in reviewing the proposed transactions and their terms.
In light of the Solexa board of directors extensive
discussions at the November 10, 2006 meeting, including the
consideration of the matters discussed in the section entitled
The Merger Solexas Reasons for the
Merger; Recommendation of the Merger by the Solexa Board of
Directors, the boards evaluation and discussion of
the final terms of the transaction documents, the delivery by
Lazard of its opinion described in the preceding paragraph and
the Solexa board of directors prior meetings on these
matters, the Solexa board of directors unanimously determined
that the proposed transactions are advisable and fair and in the
best interests of Solexa and its stockholders, and the Solexa
board of directors voted unanimously to approve the merger
agreement and to recommend the Solexa stockholders to vote to
approve and adopt the merger agreement.
Thereafter, Illumina, Callisto Acquisition Corp., a wholly-owned
subsidiary of Illumina, and Solexa executed the merger
agreement, and Illumina and Solexa executed the securities
purchase agreement. These transactions were announced on the
morning of November 13, 2006 in a press release issued
jointly by Illumina and Solexa. Later in the day on
November 13, 2006, Illumina acquired 5,154,639 shares
of Solexa common stock for an aggregate purchase price of
approximately $50 million pursuant to the securities
purchase agreement.
Illuminas
Reasons for the Merger; Recommendation of the Stock Issuance by
the Illumina Board of Directors
In reaching its decision to adopt and approve the merger
agreement and recommend approval to the Illumina stockholders
the stock issuance, the Illumina board of directors consulted
with Illuminas management, as well as with its legal and
financial advisors, and considered a number of factors,
including the following factors which the Illumina board viewed
as generally supporting its decision to approve the merger and
the merger agreement and recommend the Illumina stockholders
vote FOR approval of the issuance of Illumina common
stock in connection with the merger.
Strategic Considerations. The Illumina board
of directors believes the merger will provide a number of
significant strategic opportunities and benefits, including the
following:
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expand Illuminas genetic analysis product offering to
include Solexas next generation sequencing platform, the
1G Genome Analyzer;
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create the only company to offer both analog and digital gene
expression, enhancing Illuminas rapidly emerging gene
expression franchise;
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add to Illuminas emerging opportunity in molecular
diagnostics and content discovery;
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increase Illuminas addressable markets;
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drive Solexas manufacturing and commercialization;
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leverage Illuminas global sales and support infrastructure;
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accelerate development of future products; and
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leverage the combination of each companys core
technologies.
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Other Factors Considered by the Illumina Board of
Directors. In addition to considering the
strategic factors described above, the Illumina board of
directors considered the following additional factors, all of
which it viewed as supporting its decision to approve the merger
and the stock issuance:
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its knowledge of Illuminas business, operations, financial
condition, earnings and prospects and of Solexas business,
operations, financial condition, earnings and prospects, taking
into account the results of Illuminas due diligence review
of Solexa;
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the current and prospective competitive climate in the
industries in which Illumina and Solexa operate, and the
alternatives reasonably available to Illumina if it did not
pursue the merger;
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the limited availability of alternative next generation
sequencing technologies that are currently on the market;
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Merrill Lynchs opinion to the Illumina board of directors,
to the effect that, as of the date of its opinion and based upon
the assumptions made, matters considered and limits of review
set forth in its subsequent written opinion, the exchange ratio
provided in the merger agreement was fair from a financial point
of view to Illumina (see The Merger Opinions
of Financial Advisors Opinion of Illuminas
Financial Advisor);
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the terms and conditions of the merger agreement and the
likelihood of completing the merger on the anticipated
schedule; and
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corporate governance matters with respect to the combined
company post-merger, as described under The
Merger Board of Directors and Management Following
the Merger, including the fact that Mr. Flatley will
serve as President and Chief Executive Officer of the combined
company, Mr. West will serve as Senior Vice President and
General Manager of the Sequencing Business Unit of the combined
company and the combined companys board of directors will
consist of the current directors of the Illumina board of
directors, with the addition of two new independent directors
selected by the Illumina board of directors and agreed to by
Solexa.
|
The Illumina board of directors weighed these advantages and
opportunities against a number of other factors identified in
its deliberations weighing negatively against the merger,
including:
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the dilutive effect of the proposed merger on Illuminas
estimated earnings per share, which is expected to continue at
least through fiscal year 2007;
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the risk of not capturing all the anticipated cost savings and
operational synergies between Illumina and Solexa and the risk
that other anticipated benefits might not be realized;
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the risk that under certain circumstances where the merger is
not consummated, Illumina will be required to pay a termination
fee to Solexa (see the section entitled The Merger
Agreement Termination Fee);
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the risk that regulatory agencies may not approve the merger or
may impose terms and conditions on their approvals that
adversely affect the projected financial results of the combined
company (see the section entitled The Merger
Regulatory Approvals Required for the Merger); and
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the risks of the type and nature described under the section
entitled Risk Factors, and the matters described
under Cautionary Statement Regarding Forward-Looking
Statements.
|
In view of the wide variety of factors considered in connection
with its evaluation of the merger and the complexity of these
matters, the Illumina board of directors did not find it useful
and did not attempt to quantify or assign any relative or
specific weights to the various factors that it considered in
reaching its determination to approve the merger and the merger
agreement and to recommend that Illumina stockholders vote
FOR the issuance of Illumina common stock in
connection with the merger. In addition, individual members of
the Illumina board of directors may have given differing weights
to different factors. The Illumina board of directors conducted
an overall analysis of the factors described above, including
thorough discussions with, and questioning of, Illuminas
management and outside legal and financial advisors.
20
The Illumina board of directors unanimously determined
that the merger, the merger agreement and the transactions
contemplated by the merger agreement, including the stock
issuance, are advisable and in the best interests of Illumina
and its stockholders and unanimously approved the merger
agreement. The Illumina board unanimously recommends that
Illumina stockholders vote FOR the issuance of
Illumina common stock in connection with the merger.
Solexas
Reasons For the Merger; Recommendation of the Merger by the
Solexa Board of Directors
In reaching its decision to adopt and approve the merger
agreement and recommend approval and adoption of the merger
agreement to the Solexa stockholders, the Solexa board of
directors consulted with Solexas management, as well as
with its legal and financial advisors, and considered a number
of factors, including the following factors which the Solexa
board of directors viewed as generally supporting its decision
to approve the merger and the merger agreement and recommend the
Solexa stockholders vote FOR approval and adoption
of the merger agreement.
The Solexa board of directors considered the following factors,
all of which it viewed as supporting its decision to approve the
merger agreement and the merger:
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the form, value and liquidity of the consideration to be issued
in the merger;
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the relationship between that consideration and current and
historical market prices of Solexa common stock;
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the prospects of the combined company following the merger;
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the technological advantages, broader product offerings and
strategic opportunities of the combined company following the
merger;
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Solexas prospects as a stand-alone entity;
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the terms of the merger agreement and the likelihood of
completing the merger on the anticipated schedule;
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the opinion of Lazard, financial advisor to the Solexa board of
directors, as to the fairness, from a financial point of view,
of the exchange ratio, as defined in the merger agreement, to
the holders of Solexa common stock, as of the date of the
opinion and subject to the factors, assumptions and limitations
set forth therein, and the financial analysis underlying such
opinion (see the section entitled The Merger
Opinions of Financial Advisors Opinion of
Solexas Financial Advisor); and
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Solexas need for additional funding.
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The Solexa board of directors weighed these advantages and
opportunities against a number of other factors identified in
its deliberations weighing negatively against the merger,
including:
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the risk that under certain circumstances where the merger is
not consummated, Solexa will be required to pay a termination
fee to Illumina (see the section entitled The Merger
Agreement Termination Fee);
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the risk that regulatory agencies may not approve the merger or
may impose terms and conditions on their approvals that
adversely affect the projected financial results of the combined
company (see the section entitled The Merger
Regulatory Approvals Required for the Merger);
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the risks of the type and nature described under the section
entitled Risk Factors, and the matters described
under the section entitled Cautionary Statement Regarding
Forward-Looking Statements; and
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the risk that the anticipated benefits of the merger might not
be realized.
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The above discussion of the material factors considered by the
Solexa board of directors is not intended to be exhaustive, but
does set forth the principal factors considered by the Solexa
board of directors. The Solexa board of directors unanimously
reached the conclusion to approve and adopt the merger agreement
and
21
the other transactions contemplated by the merger agreement and
to recommend the merger agreement to the Solexa stockholders for
approval and adoption in light of the various factors described
above and other factors that each member of the Solexa board of
directors felt were appropriate. In view of the wide variety of
factors considered by the Solexa board of directors in
connection with its evaluation of the merger and the complexity
of these matters, the Solexa board of directors did not consider
it practical, and did not attempt, to quantify, rank or
otherwise assign relative weights to the specific factors it
considered in reaching its decision. Rather, the Solexa board of
directors made its recommendation based on the totality of
information presented to, and the investigation conducted by,
it. In considering the factors discussed above, individual
directors may have given different weights to different factors.
The Solexa board of directors unanimously approved and
adopted the merger agreement and the other transactions
contemplated by the merger agreement and recommends that the
Solexa stockholders vote FOR the approval and
adoption of the merger agreement.
Opinions
of Financial Advisors
Opinion
of Illuminas Financial Advisor
The Illumina board of directors engaged Merrill Lynch to act as
its financial advisor in connection with the proposed merger,
and to render an opinion as to whether the exchange ratio
pursuant to the merger agreement was fair from a financial point
of view to Illumina.
On November 10, 2006, Merrill Lynch delivered to the
Illumina board of directors its oral opinion, which opinion was
subsequently confirmed by delivery of a written opinion, dated
November 12, 2006, to the effect that, as of that date and
based upon the assumptions made, matters considered and limits
of review set forth in its written opinion, the exchange ratio
provided in the merger agreement was fair, from a financial
point of view, to Illumina. A copy of Merrill Lynchs
written opinion is attached to this joint proxy
statement/prospectus as Annex C.
Merrill Lynchs written opinion sets forth the assumptions
made, matters considered and limits on the scope of review
undertaken by Merrill Lynch. Each holder of Illumina common
stock is encouraged to read Merrill Lynchs opinion in its
entirety. Merrill Lynchs opinion was intended for the use
and benefit of the Illumina board of directors, does not address
the merits of the underlying decision by Illumina to enter into
the merger agreement or any of the transactions contemplated
thereby, including the merger, and does not constitute a
recommendation to any Illumina stockholder as to how that
stockholder should vote on, or take any action with respect to,
the merger or any related matter. Merrill Lynch was not asked to
address nor does its opinion address the fairness to, or any
other consideration of, the holders of any class of securities,
creditors or other constituencies of Illumina. Additionally,
Merrill Lynch expresses no opinion as to the prices at which the
shares of common stock of either Illumina or Solexa will trade
following the announcement or consummation of the merger. This
summary of Merrill Lynchs opinion is qualified in its
entirety by reference to the full text of the opinion attached
to this joint proxy statement/ prospectus as Annex C.
In preparing its opinion to the Illumina board of directors,
Merrill Lynch performed various financial and comparative
analyses, including those described below. The summary set forth
below does not purport to be a complete description of the
analyses underlying Merrill Lynchs opinion or the
presentation made by Merrill Lynch to the Illumina board of
directors. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the
most appropriate and relevant methods of financial analysis and
the application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its
opinion, Merrill Lynch did not attribute any particular weight
to any analysis or factor considered by it, but rather made its
determination as to fairness on the basis of its experience and
professional judgment after considering the results of all of
its analyses. Accordingly, Merrill Lynch believes that its
analyses must be considered as a whole and that selecting
portions of its analyses and factors, or focusing on information
presented in tabular format, without considering all of the
analyses and factors or the narrative description of the
analyses, would create a misleading or incomplete view of the
process underlying its opinion.
22
In arriving at its opinion, Merrill Lynch, among other things:
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reviewed certain publicly available business and financial
information relating to Illumina and Solexa that it deemed to be
relevant;
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reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets,
liabilities and prospects of Illumina and Solexa as furnished to
it by Illumina and Solexa, respectively, as well as the amount
and timing of the cost savings and related expenses and
synergies expected to result from the merger, which are referred
to as the expected synergies, furnished to it by
Illumina;
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conducted discussions with members of senior management and
representatives of Illumina and Solexa concerning the matters
described in the preceding two bullet points, as well as their
respective businesses and prospects before and after giving
effect to the transaction and the expected synergies;
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reviewed the market prices and valuation multiples for Illumina
common stock and Solexa common stock and compared them with
those of certain publicly-traded companies that it deemed to be
relevant;
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reviewed the results of operations of Illumina and Solexa;
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participated in certain discussions and negotiations among
representatives of Illumina and Solexa and their financial and
legal advisors;
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reviewed the potential pro forma impact of the merger;
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reviewed drafts of the merger agreement; and
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reviewed such other financial studies and analyses and took into
account such other matters as were deemed necessary, including
an assessment of general economic, market and monetary
conditions.
|
In preparing its opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or
otherwise made available to it, discussed with or reviewed by or
for it, or publicly available, and Merrill Lynch did not assume
any responsibility for independently verifying such information
or undertake an independent evaluation or appraisal of any of
the assets or liabilities of Illumina or Solexa and was not
furnished with any such evaluation or appraisal, nor did it
evaluate the solvency or fair value of Illumina or Solexa, under
any state or federal laws relating to bankruptcy, insolvency or
similar matters. In addition, Merrill Lynch did not assume any
obligation to conduct any physical inspection of the properties
or facilities of Illumina or Solexa. With respect to the
financial forecast information and the expected synergies
furnished to or discussed with Merrill Lynch by Illumina or
Solexa, Merrill Lynch assumed that such forecasts were
reasonably prepared and reflected the best currently available
estimates and judgment of Illumina or Solexas management
as to the expected future financial performance of Illumina or
Solexa, as the case may be, and the expected synergies. Merrill
Lynch further assumed that the merger would qualify as a
tax-free reorganization for United States federal income tax
purposes. Merrill Lynch also assumed that the final form of the
merger agreement would be substantially similar to the last
draft reviewed by it.
Merrill Lynchs opinion was necessarily based upon market,
economic and other conditions as they existed and could be
evaluated on, and on the information made available to it as of,
the date thereof. Merrill Lynch assumed that in the course of
obtaining the necessary regulatory or other consents or
approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or
amendments or modifications, would be imposed that would have a
material adverse effect on the contemplated benefits of the
merger. Merrill Lynch expressed no opinion with respect to the
transactions contemplated by the securities purchase agreement,
dated as of November 12, 2006, by and between Illumina and
Solexa.
The following is a summary of the material financial analyses
that Merrill Lynch performed in connection with its oral opinion
to the Illumina board of directors on November 10, 2006.
The financial analyses summarized below include information
presented in tabular format. In order to understand fully the
financial analyses performed by Merrill Lynch, the tables must
be read together with the accompanying text of each summary. The
tables alone do not constitute a complete description of the
financial analyses, and if viewed in isolation could create a
misleading or incomplete view of the financial analyses
23
performed by Merrill Lynch. To the extent the following
quantitative information reflects market data, except as
otherwise indicated, Merrill Lynch based this information on
market data as they existed prior to November 10, 2006.
This information, therefore, does not necessarily reflect
current or future market conditions.
Calculation
of Transaction Value
Merrill Lynch reviewed the financial terms of the merger
agreement. The merger consideration had a total offer value,
subject to certain collar provisions, of $14.00 per share
of Solexa common stock. Merrill Lynch noted that Solexa
stockholders will receive, subject to certain collar provisions,
between 0.296 and 0.344 of a share of Illumina common stock for
each share of Solexa common stock.
Historical
Trading Performance Solexa
Merrill Lynch reviewed the historical trading prices for the
Solexa common stock as background information. This review
indicated that during the
52-week
period ending November 9, 2006, the Solexa common stock
traded as low as $7.20 per share and as high as $12.03 per
share, and during the three-month period ending November 9,
2006, the Solexa common stock traded as low as $7.87 per
share and as high as $10.47 per share. These trading prices
were compared to the closing price of Solexa common stock on
November 9, 2006 of $9.44 per share.
Comparable
Companies Analysis
Merrill Lynch reviewed and compared selected financial
information and trading statistics of Solexa and Illumina to the
publicly available corresponding data for the following
companies in the life sciences tools sector:
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Thermo Fisher Scientific Inc.
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Applied Biosystems, Inc.
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Waters Corporation
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Sigma-Aldrich Corporation
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Millipore Corporation
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Charles River Laboratories, Inc.
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Invitrogen Corporation
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Techne Corporation
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Affymetrix, Inc.
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Bio-Rad Laboratories, Inc.
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Merrill Lynch reviewed enterprise values, calculated as equity
market value, plus total debt, preferred stock and minority
investments, less cash and cash equivalents, of the selected
companies as multiples of estimated 2008 revenues and estimated
2008 earnings before interest and taxes, which is referred to as
EBIT. All multiples were based on closing stock prices on
November 9, 2006. Estimated financial data for the selected
companies were based on Wall Street research analyst reports.
Estimated financial data for Solexa were based on Solexas
management projections, as adjusted by Illuminas
management, and estimated financial data for Illumina were based
on Illuminas management projections. Merrill Lynch then
applied a range of selected revenue multiples for the selected
companies to corresponding data of Solexa, and selected revenue
multiples and EBIT multiples for the selected companies to the
corresponding data of Illumina, to derive implied equity
reference ranges for Solexa and Illumina. This analysis
indicated an implied equity reference range for Solexa of $13.44
to $15.95 per share, as compared to the closing price of
Solexa common stock on November 9, 2006 of $9.44 per
share and the implied value of the merger consideration, subject
to certain collar provisions, of $14.00 per share. This
analysis also indicated implied equity reference ranges for
24
Illumina of $27.84 to $37.98 per share, based on the
selected revenue multiples, and $33.98 to $41.45 per share,
based on the selected EBIT multiples, as compared to the closing
price of Illumina common stock on November 9, 2006 of
$43.42 per share.
No company used in the comparable companies analyses described
above is identical to Solexa, Illumina, or the pro forma
combined company, as the case may be. Accordingly, an analysis
of the results of the foregoing necessarily involves complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the merger,
public trading or other values of the companies to which they
are being compared. Mathematical analyses, such as determining
the mean or median, are not of themselves meaningful methods of
using comparable companies data.
Discounted
Cash Flow Analysis Solexa
Merrill Lynch performed a discounted cash flow analysis to
derive an implied equity reference range for Solexa. Using
Solexas management projections, as adjusted by
Illuminas management, Merrill Lynch performed this
analysis on a stand-alone basis. The reference range was
determined by adding (i) the present value of Solexas
free cash flows through December 31, 2010 and (ii) the
present value of the terminal value of Solexa common
stock. In calculating the terminal value of Solexa common stock,
Merrill Lynch applied multiples ranging from 14.0x to 18.0x to
year 2010 forecasted earnings before interest and taxes.
The free cash flow stream and terminal value were then
discounted back to the present time period using discount rates
ranging from 14.0% to 16.0%, which are rates Merrill Lynch
viewed as the appropriate range for a company with Solexas
risk characteristics.
This analysis indicated an implied equity reference range for
Solexa of $20.73 to $27.57 per share, excluding the
expected synergies, and $21.69 to $28.57 per share,
including the expected synergies.
Discounted
Cash Flow Analysis Illumina
Merrill Lynch performed a discounted cash flow analysis to
derive an implied equity reference range for Illumina. Using
Illuminas management projections, Merrill Lynch performed
this analysis on a stand-alone basis. The reference range was
determined by adding (i) the present value of
Illuminas free cash flows through December 31, 2010
and (ii) the present value of the terminal
value of Illumina common stock. In calculating the
terminal value of Illumina common stock, Merrill Lynch applied
multiples ranging from 14.0x to 18.0x to year 2010 forecasted
earnings before interest and taxes. The free cash flow stream
and terminal value were then discounted back to the present time
period using discount rates ranging from 11.0% to 13.0%, which
are rates Merrill Lynch viewed as the appropriate range for a
company with Illuminas risk characteristics.
This analysis indicated an implied equity reference range for
Illumina of $37.76 to $49.66 per share.
Research
Analyst Price Targets
Merrill Lynch reviewed the most recent Wall Street research
equity analyst per share target prices for Solexa common stock,
which ranged from $13.00 to $15.00, as compared to the closing
price of Solexa common stock on November 9, 2006 of
$9.44 per share and the implied value of the merger
consideration, subject to certain collar provisions, of
$14.00 per share.
Contribution
Analysis
Merrill Lynch also reviewed the relative contributions of
Illumina and Solexa to the pro forma combined company with
respect to certain financial and operating measurements. This
analysis was based on Illuminas management projections and
Solexas management projections, as adjusted by
Illuminas management. Merrill Lynch then compared these
contributions to the estimated pro forma implied stock ownership
interests of Illumina and Solexa resulting from the merger,
based on the exchange ratio and on fully-diluted shares based on
stated shares outstanding and options and warrants accounted for
under the treasury stock method based on the market price as of
November 9, 2006.
25
The following table indicates what Illuminas and
Solexas percentage contributions would have been on a pro
forma basis to the combined company in the categories listed.
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Contribution
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Contribution
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of Illumina
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of Solexa
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2009 Revenue
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67.4
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%
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32.6
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%
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2010 Revenue
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67.1
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%
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32.9
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%
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2009 EBIT
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61.1
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%
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38.9
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%
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2010 EBIT
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62.5
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%
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37.5
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%
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Pro Forma
Financial Impact
Based on an estimated exchange ratio of 0.296 to 0.344 of a
share of Illumina common stock for each share of Solexa common
stock, Merrill Lynch analyzed the pro forma per share financial
impact of the merger on Illuminas cash earnings per share.
This analysis was based on Illuminas management
projections and Solexas management projections, as
adjusted by Illuminas management. The analysis assumed
pre-tax cost synergies equal to one-third of Solexas
operating expenses per year, of which 50% were projected to be
realized in 2007 and 100% in 2008 and thereafter. This analysis
indicated that the proposed merger could be dilutive to
Illuminas stockholders on a cash earnings per share basis
in fiscal year 2007 and accretive to Illuminas
stockholders on a cash earnings per share basis in each of the
fiscal years 2008, 2009 and 2010.
Historical
Implied Exchange Ratio Trading Analysis
Merrill Lynch reviewed the per share daily closing trading
prices for the Illumina common stock and the Solexa common stock
for the one-year period ending November 9, 2006. For
perspective on the related prices at which Illumina and Solexa
common stock have historically traded, Merrill Lynch calculated
the historical implied exchange ratios by dividing the daily
closing prices of Solexa common stock by those of Illumina
common stock. This analysis showed the following implied
exchange ratios, compared in each case to the exchange ratio
range pursuant to the merger of 0.296 to 0.344 of a share of
Illumina common stock for each share of Solexa common stock.
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Implied Exchange Ratio
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Low
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Mean
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High
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Current (11/09/06)
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0.217
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x
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0.217
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x
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0.217x
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One Month
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0.217
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x
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0.240
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x
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0.282x
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|
Three Months
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0.217
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x
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0.249
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x
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0.282x
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One Year
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0.217
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x
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0.366
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x
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0.741x
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|
Relative
Contribution Analysis
Merrill Lynch calculated the relative contributions of Illumina
and Solexa to the combined company of projected revenue and EBIT
for fiscal years 2009 and 2010, respectively, in each case
before giving effect to the expected synergies based upon the
following two combinations of cases:
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Illuminas management projections and Solexas
management projections; and
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Illuminas management projections and Solexas
management projections, as adjusted by Illuminas
management.
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26
This analysis yielded the following implied exchange ratios, in
each case compared to the exchange ratio range pursuant to the
merger of 0.296 to 0.344 of a share of Illumina common stock for
each share of Solexa common stock:
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Implied Exchange Ratio
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Analysis Based on:
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Low
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High
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2009 Revenue
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0.559
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x
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0.920x
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2010 Revenue
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0.552
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x
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0.937x
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|
2009 EBIT
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0.527
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x
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0.711x
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2010 EBIT
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0.516
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x
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0.674x
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|
Relative
Discounted Cash Flow Analysis
Based upon the per share implied equity reference ranges for
Solexa and Illumina that were derived from the discounted cash
flow analyses described above, Merrill Lynch calculated a range
of implied exchange ratios of a share of Solexa common stock to
a share of Illumina common stock, based upon:
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Illuminas management projections and Solexas
management projections, which are referred to as the Management
Cases, and
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Wall Street analyst projections for Illumina, and Solexas
management projections, as adjusted by Illuminas
management, which are referred to as the Street Case / Illumina
Adjusted Case.
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This analysis yielded the following implied exchange ratios, in
each case compared to the exchange ratio range pursuant to the
merger of 0.296 to 0.344 of a share of Illumina common stock for
each share of Solexa common stock:
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|
Implied Exchange Ratio
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Analysis Based on:
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Low
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High
|
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Management Cases
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0.317
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x
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0.552x
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Street Case / Illumina Adjusted
Case
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0.494
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x
|
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0.860x
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|
General
In conducting its analyses and arriving at its opinion, Merrill
Lynch utilized a variety of generally accepted valuation
methods. The analyses were prepared for the purpose of enabling
Merrill Lynch to provide its opinion to the Illumina board of
directors as to the fairness, from a financial point view, to
Illumina of the exchange ratio pursuant to the merger agreement
and do not purport to be appraisals or necessarily to reflect
the prices at which businesses or securities actually may be
sold, which are inherently subject to uncertainty. In connection
with its analyses, Merrill Lynch made, and was provided by the
management of each of Solexa and Illumina with, numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Merrill Lynch, Illumina or
Solexa. Analyses based on estimates or forecasts of future
results are not necessarily indicative of actual past or future
values or results, which may be significantly more or less
favorable than suggested by such analyses. Additionally,
estimates of the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which such
businesses or securities might actually be sold. Because such
analyses are inherently subject to substantial uncertainty,
being based upon numerous factors or events beyond the control
of Solexa, Illumina and their respective advisors, neither
Illumina nor Merrill Lynch nor any other person assumes
responsibility if future results or actual values are materially
different from these forecasts or assumptions.
In addition, as described above, the Merrill Lynch opinion was
among several factors taken into consideration by the Illumina
board of directors in making its determination to approve the
merger agreement and the merger. Consequently, Merrill
Lynchs analyses should not be viewed as determinative of
the decision of the Illumina board of directors with respect to
the fairness to Illumina of the exchange ratio pursuant to the
merger.
27
The Illumina board of directors selected Merrill Lynch to render
a fairness opinion because Merrill Lynch is an internationally
recognized investment banking firm with substantial experience
in transactions similar to the merger. As part of its investment
banking business, Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and
other purposes.
Merrill Lynch acted as financial advisor to Illumina in
connection with the merger and will receive a fee from Illumina
for its services pursuant to a letter agreement dated as of
October 3, 2006. Pursuant to this letter agreement,
Illumina has paid Merrill Lynch for its services a fee upon
delivery of its opinion, which will be credited against the fee
for financial advisory services. This opinion fee is not
contingent upon the consummation of the merger. In addition,
Illumina has agreed to indemnify Merrill Lynch for certain
liabilities arising out of its engagement. Illumina has also
agreed to reimburse Merrill Lynch for its reasonable expenses,
including attorneys fees and disbursements. Merrill Lynch
has, in the past, provided financial advisory and financing
services to Illumina
and/or its
affiliates and may continue to do so and has received, and may
continue to receive, fees for the rendering of such services
including acting as an underwriter in the May 2006 follow-on
public offering of Illuminas common stock.
In addition, Merrill Lynch may actively trade the Illumina
common stock and other securities of Illumina, as well as the
Solexa common stock and other securities of Solexa, for its own
account and for the accounts of its customers and, accordingly,
Merrill Lynch may at any time hold a long or short position in
such securities.
Opinion
of Solexas Financial Advisor
Pursuant to a letter agreement, dated October 24, 2006,
Solexa retained Lazard to, among other things, render an opinion
to the Solexa board of directors as to whether the consideration
to be issued to the holders of Solexa common stock in the merger
was fair from a financial point of view to the holders of Solexa
common stock. On November 12, 2006, Lazard delivered to the
Solexa board its oral opinion that, as of that date, the
exchange ratio to be determined pursuant to the merger agreement
was fair from a financial point of view to the holders of Solexa
common stock. Lazard subsequently confirmed its oral opinion by
delivering a written opinion, dated November 12, 2006.
The full text of the written opinion of Lazard is attached as
Annex D to this joint proxy statement/ prospectus and is
incorporated herein by reference. You are urged to read the
Lazard opinion in its entirety for a description of the
procedures followed, assumptions made, matters considered and
qualifications and limitations on the review undertaken by
Lazard in connection with its opinion. Lazards written
opinion is directed to the Solexa board and only addresses the
fairness of the exchange ratio to the holders of Solexa common
stock from a financial point of view as of the date of the
opinion. Lazards opinion does not address the merits of
the underlying decision by Solexa to engage in the merger and
does not constitute a recommendation to any stockholder of
Solexa as to how the stockholder should vote with respect to the
transaction. The following is only a summary of the Lazard
opinion and is qualified in its entirety by reference to the
full text of the Lazard opinion set forth in Annex D.
In connection with its opinion, Lazard, among other things:
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Reviewed the financial terms and conditions of the merger
agreement and the securities purchase agreement;
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Analyzed certain historical publicly available business and
financial information relating to Solexa and Illumina;
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Reviewed various financial forecasts and other data provided to
us by the management of Solexa relating to the business of
Solexa, which included three sets of forecasts, one of which is
not probability weighted, one of which is probability weighted
at 75%, referred to as the Solexa 75% Case, and one of which is
probability weighted at 90%, referred to as the Solexa 90% Case;
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Reviewed various financial forecasts and other data provided to
us by the management of Illumina relating to the business of
Illumina, which included two alternative sets of forecasts,
which Lazard referred to as Illumina Case A and Illumina Case B,
which differ in that Illumina Case A includes forecasts of
growth in market share and revenue for certain products that are
not included in Illumina Case B;
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Held discussions with members of the senior management of Solexa
and Illumina with respect to the business, prospects and
strategic objectives of Solexa and Illumina, respectively, and
held discussions with the senior management of Solexa and
Illumina with respect to the possible benefits that might be
realized following the Merger as projected by Solexa and
Illumina;
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Reviewed the synergistic savings and benefits and the timing of
their occurrence as projected by Solexa to be realized by Solexa
as part of the combined entity in connection with the Merger and
by Illumina to be realized by Illumina as part of the combined
entity in connection with the Merger;
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Reviewed public information with respect to certain other
companies in lines of business Lazard believed to be generally
comparable to the business of Solexa and Illumina;
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Reviewed the financial terms of certain business combinations
involving companies in lines of businesses Lazard believed to be
generally comparable to those of Solexa and Illumina;
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Reviewed the historical trading prices and trading volumes of
Solexa common stock and Illumina common stock; and
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Conducted such other financial studies, analyses and
investigations as Lazard deemed appropriate.
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Lazard relied upon the accuracy and completeness of the
foregoing information. Lazard did not assume any responsibility
for any independent verification of such information or any
independent valuation or appraisal of any of the assets or
liabilities of Solexa or Illumina, or concerning the solvency or
fair value of Solexa or Illumina. With respect to financial
forecasts, including the synergistic savings and benefits
projected by Illumina and Solexa to be realized following the
merger and the timing thereof, Lazard assumed that they were
reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of each of
Solexa and Illumina as to the future financial performance of
each respective company and as to the performance of the
combined company following the merger. Based on direction from
the management of Solexa, and with the approval of the Solexa
board of directors, in rendering its opinion: (i) for
purposes of its analyses of Solexa on a stand-alone basis,
Lazard used the Solexa 75% Case and (ii) for purposes of
its analyses of Solexa and Illumina as a combined company on a
pro forma basis, Lazard used the Solexa 90% Case, based on
guidance from Solexa management that their projections were more
likely to be achieved if the merger was consummated. Based on
direction from the management of Solexa and guidance of
management of Illumina, and with the approval of the Solexa
board of directors, in rendering its opinion, Lazard relied on
financial forecasts for Illumina which are the average of the
Illumina Case A forecasts and Illumina Case B forecasts prepared
by management of Illumina, referred to as the Illumina Midpoint
Case. Lazard assumed no responsibility for and expressed no view
as to any such forecasts or the assumptions on which they are
based. Lazard noted that the financial forecasts of
Illuminas management do not take into account the possible
impact of certain intellectual property litigation between
Illumina and Affymetrix, Inc. currently scheduled to go to trial
in March 2007, and Lazard did not express any opinion on the
impact such litigation may have on the financial results,
financial condition or share price of Illumina, or of the
combined company after the merger. Lazard further noted that its
opinion was not based on any comparable precedent transaction or
comparable company analyses, because Lazard did not believe that
such analyses are meaningful with respect to Solexa, Illumina or
the merger because Solexa has nominal revenues and negative net
income, and is projected by its management to grow in the future
at a significantly higher rate than other companies in its
industry and because Illumina is currently growing and is
projected by its management to continue to grow at a
significantly higher rate than other companies in its industry.
Further, Lazards opinion was necessarily based on
economic, monetary, market and other conditions as in effect on,
and the information made available to Lazard as of, the date of
the opinion. Lazard assumed no responsibility for updating or
revising its opinion based on circumstances or events occurring
after its date.
29
Lazard did not express any opinion as to the price at which
Solexa common stock or the Illumina common stock may trade at
any time subsequent to the announcement of the merger, nor did
Lazard opine on any aspect of the securities purchase agreement
or the transactions contemplated thereby. Lazard did not express
any opinion as to any tax or other consequences that might
result from the merger, nor did its opinion address any legal,
tax, regulatory or accounting matters, as to which Lazard
understood that Solexa obtained such advice as it deemed
necessary from qualified professionals. In rendering its
opinion, Lazard was not authorized to solicit, and did not
solicit, third parties regarding alternatives to the merger.
In rendering its opinion, Lazard assumed that the merger would
be consummated on the terms described in the merger agreement,
without any waiver of any material terms or conditions by
Solexa. In addition, Lazard assumed that obtaining the necessary
regulatory approvals for the merger will not have an adverse
effect on Solexa, Illumina or the merger and that the
synergistic savings and benefits of the merger will be
substantially realized both in scope and timing. In addition,
Lazard assumed that (i) the merger will be accounted for as
a tax-free reorganization within the meaning of
Section 368(a) of the Code, (ii) the number of
outstanding shares of Solexa common stock and Illumina common
stock will not be materially different than as represented in
the merger agreement and (iii) the other representations
and warranties of Solexa contained in the merger agreement are
true and complete.
The following is a summary of the material financial and
comparative analyses that Lazard deemed to be appropriate for
this type of transaction and that were performed by Lazard in
connection with providing its opinion to the Solexa board of
directors. The summary of Lazards analyses described below
is not a complete description of the analyses underlying
Lazards opinion. The preparation of a fairness opinion is
a complex analytical process involving various determinations as
to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to
summary description. In arriving at its opinion, Lazard
considered the results of all the analyses and did not attribute
any particular weight to any factor or analysis considered by
it; rather, Lazard made its determination as to fairness on the
basis of its experience and professional judgment after
considering the results of all of the analyses.
The evaluation of the results of Lazards analyses is not
entirely mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the
acquisition, public trading or other values of the companies,
business segments or transactions analyzed. The estimates
contained in Lazards analyses and the ranges of valuations
resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than
those suggested by the analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, the estimates used
in, and the results derived from, Lazards analyses are
inherently subject to substantial uncertainty.
The financial analyses summarized below include information
presented in tabular format. In order to understand fully
Lazards financial analyses, the tables must be read
together with the text of each summary. The tables alone are not
a complete description of the financial analyses. Considering
the tables alone without considering the full narrative
description of the financial analyses, including the methodology
and assumptions underlying the analyses, could create a
misleading or incomplete view of Lazards financial
analyses.
Transaction
Overview
Lazard reviewed with the Solexa board of directors the basic
structure of the transaction as described to Lazard by Solexa
management, including the following:
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consideration in the form of 100% Illumina common stock;
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implied merger consideration of $14.00 per share of Solexa
common stock (based on the closing price of Illumina common
stock on November 10, 2006), representing a 44.3% premium
to the closing price of Solexa common stock on November 10,
2006;
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implied exchange ratio of 0.3182 (based on the average of
Illuminas closing stock price for the five day period
ending on November 10, 2006 of $44.00, referred to as the
Illumina
5-day
average price);
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an implied equity value of Solexa of $600 million and an
implied enterprise value of Solexa of $553 million
(calculated as the implied equity value of $600 million
less Solexas net cash of $47 million); and
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consideration subject to a collar such that Solexa stockholders
will receive total consideration of $14.00 if Illuminas
share price increases or decreases by less than 7.5% between
November 12, 2006 and closing of the merger.
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Historical
Stock Trading Analysis and Relative Trading
Lazard reviewed the historical trading prices for shares of
Solexa common stock and Illumina common stock for the one year
period from November 10, 2005 to November 10, 2006.
Lazard also analyzed the historical trading ratio of the
respective common stock of Solexa and Illumina for various
periods during the period from November 10, 2005 to
November 10, 2006 as set forth in the table below, and
compared it to the implied exchange ratio of 0.3182 of a share
of Illumina common stock for each share of Solexa common stock
to be paid pursuant to the merger agreement:
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Ratio
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Current (as of November 10,
2006)
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0.2202x
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3 month average
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0.2484x
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12 month average
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0.3641x
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Merger Agreement
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0.3182x
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Description
of Analyses of Solexa
Discounted Cash Flow Analysis. Using the
Solexa 75% Case, Lazard performed an analysis of the net present
value of (i) projected operating free cash flows for 2006
to 2010 plus (ii) the terminal value of Solexa at the end
of such period. The terminal value of Solexa was calculated
based on projected net income for 2010 and a range of multiples
of 20.0x to 30.0x. The cash flows and terminal value were then
discounted using discount rates ranging from 13% to 17%. This
calculation is referred to as the Solexa DCF. The assumed
discount rate range was derived from the weighted average cost
of capital analysis that Lazard calculated for Solexa. Based on
this analysis, Lazard arrived at an implied value per share
range for Solexa of $8.42 to $13.13 per share. Lazard noted
that this range is below the implied per share merger
consideration of $14.00.
Premia Paid Analysis. Lazard also performed a
premia paid analysis, which is designed to provide a valuation
of Solexa based on the premia paid in selected precedent life
sciences tools transactions for which the trading price of the
target company was available. Lazards analysis was based
on the
one-day,
one-week and one-month implied premia of such transactions. The
implied premia in this analysis were calculated comparing the
transaction price prior to the announcement of the transaction
to the target companys stock price one day, one week and
one month prior to the announcement of the transaction. The
results of these calculations are as follows:
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Range
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Median
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One-Day
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10.4% - 60.3%
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30.2
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%
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One-Week
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17.5 - 91.3
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34.3
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One-Month
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12.0 - 47.5
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36.2
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From these premia, Lazard, based on its experience with merger
and acquisitions transactions, derived a reference range for
Solexa common stock as of November 10, 2006 of $11.40 to
$18.55 and for Solexa common stock for the three month period
ending on November 10, 2006 of $10.67 to $17.37. Lazard
noted that the current market price of $9.70 per Solexa
share was below this range and the implied Solexa per share
merger consideration of $14.00 was within the range.
31
Description
of Analysis of Illumina
Discounted Cash Flow Analysis. Using the
Illumina Midpoint Case, Lazard performed an analysis of the net
present value of (i) projected operating free cash flows
for 2006 to 2010 plus (ii) the terminal value of Illumina
at the end of such period. The terminal value of Illumina was
calculated based on projected net income for 2010 and a range of
multiples of 20.0x to 30.0x. The cash flows and terminal value
were then discounted using discount ranging from 10% to 12%.
This calculation is referred to as the Illumina DCF. The assumed
discount rate range was derived from the weighted average cost
of capital analysis that Lazard calculated for Illumina. Based
on this analysis, Lazard arrived at an implied value per share
range for Illumina of $27.84 to $39.99 per share. Lazard
noted that this range is below the Illumina
5-day
average price.
Description
of Exchange Ratio and Contribution Analyses
Exchange Ratio Analysis. In order to provide
background information and perspective on the relationship
between Solexa and Illumina common stock, Lazard reviewed:
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the Solexa DCF versus the Illumina
5-day
average price, which indicated a range of exchange ratios from
0.1914x to 0.2985x; and
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the Solexa DCF versus the Illumina DCF, which indicated a range
of exchange ratios from 0.2106x to 0.4718x.
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The review indicated a range of exchange ratios from 0.1914x to
0.4718x, compared to the implied exchange ratio in the merger of
0.3812x.
Pro Forma Has-Gets
Analysis. Lazard compared Solexas earnings
before interest and taxes, referred to as EBIT, as estimated in
the Solexa 75% Case for the calendar years 2009 and 2010 to
Illuminas EBIT as estimated in the Illumina Midpoint Case
for the calendar years 2009 and 2010. Based on this analysis, in
2009, Illumina would contribute 78% of the projected EBIT,
compared to 22% contributed by Solexa. In 2010, Illumina would
contribute 75% of the projected EBIT, compared to 25%
contributed by Solexa. The implied exchange ratio between
Illumina and Solexa would be 0.3516 in 2009 and 0.4073 in 2010,
in each case based on the Illumina
5-day
average price. Lazard noted that in 2007 and 2008, Solexa would
contribute 0% of the EBIT of the combined company in all cases,
so a calculation of an implied exchange ratio for those periods
would not be meaningful. The actual results achieved by the
combined company may vary from projected results and the
variations may be material.
Description
of Pro Forma Financial Analysis
Pro Forma Discounted Cash Flow
Analysis. Lazard performed a discounted cash flow
analysis on the combined company in order to derive implied per
share equity values for Solexas share of the combined
company. For Solexa, Lazard used the Solexa 90% Case for fiscal
years 2006 through 2010. For Illumina, Lazard used the Illumina
Midpoint Case for fiscal years 2006 through 2010. Lazard
analyzed this information using revenue and cost synergies
provided by Solexas management with respect to Solexa as
part of the combined company and revenue synergies provided by
Illuminas management with respect to Illumina as part of
the combined company, referred to as Full Synergies. Lazard also
analyzed this information using cost, but not revenue, synergies
provided by Solexas management with respect to Solexa as
part of the combined company and revenue synergies provided by
Illuminas management with respect to Illumina as part of
the combined company, referred to as Partial Synergies. Using
this information, Lazard performed an analysis of the net
present value of (i) projected operating free cash flows
for 2006 to 2010 plus (ii) the terminal value of the
combined company at the end of such period. The terminal value
of the combined company was calculated based on pro forma
projected net income for 2010 and a range of multiples of 20.0x
to 30.0x. The cash flows and terminal value were then discounted
at rates ranging from 10.0% to 12.0%. This analysis indicated
implied equity values per Solexa share of the combined company
(based on the implied exchange ratio in the merger agreement of
0.3182x) ranging from $12.94 to $17.99 when using Full Synergies
and ranging from $10.87 to $15.42 when using Partial Synergies.
Lazard compared these ranges to the implied equity value derived
from the standalone Solexa DCF analysis ranging from $8.42 to
$13.13.
32
Miscellaneous
Lazards opinion and financial analyses were not the only
factors considered by the Solexa board of directors in its
evaluation of the merger and should not be viewed as
determinative of the views of the Solexa board of directors or
management. For a description of the other factors considered by
the Solexa board of directors, see the section entitled
The Merger Solexas Reasons for the
Merger; Recommendation of the Merger by the Solexa Board of
Directors. Lazard has consented to the inclusion of and
references to its opinion in this document.
Under the terms of the engagement letter, Solexa has agreed to
pay Lazard a customary transaction fee, a majority of which is
payable upon completion of the merger. In addition, in the
ordinary course of their respective businesses, affiliates of
Lazard and LFCM Holdings LLC (an entity indirectly owned in
large part by managing directors of Lazard) may actively trade
securities of Solexa or Illumina for their own accounts and for
the accounts of their customers and, accordingly, may at any
time hold a long or short position in such securities.
Lazard is an internationally recognized investment banking firm
and is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, leveraged buyouts, and
valuations for real estate, corporate and other purposes. Lazard
was selected to act as investment banker to Solexa because of
its expertise and its reputation in investment banking and
mergers and acquisitions.
Interests
of Solexas Directors and Officers in the Merger;
Relationship between Illumina and Solexa
In considering the recommendation of the Solexa board of
directors with respect to adopting the merger agreement, Solexa
stockholders should be aware that certain members of the board
of directors and executive officers of Solexa have interests in
the merger that are different from, or in addition to, their
interests as Solexa stockholders. These interests may create a
conflict of interest or the appearance of a conflict of
interest. The Solexa board of directors was aware of these
potential conflicts of interest during its deliberations on the
merits of the merger and in making its decision in approving the
merger, the merger agreement and the related transactions.
Combined
Company Board of Directors
The merger agreement provides that the Illumina board of
directors shall be increased from eight to ten members and two
individuals selected by the Illumina board of directors and
agreed to by Solexa shall be appointed as independent directors
of Illumina.
Combined
Company Management
Following the merger, Mr. West, Chief Executive Officer of
Solexa, will serve as Senior Vice President and General Manager
of the Sequencing Business Unit of the combined company.
Employment
and Other Agreements
Solexa has entered into the following employment and other
agreements with executive officers of Solexa:
John West
Executive Employment Agreement, as Amended
Solexa entered into an executive employment agreement with
Mr. West in June 2005. Under the terms of his employment
agreement, if (i) Mr. Wests employment is
terminated without cause by Solexa or (ii) Mr. West
resigns with good reason, he will be entitled to receive a lump
sum severance payment equal to 12 months of his final base
salary, reimbursement of the cost of continued health insurance
coverage for himself and his eligible dependents for
12 months, and one year acceleration of the vesting and
exercisability of any outstanding stock options granted to him
(except to the extent such options are accelerated in connection
with a change in control). If Mr. Wests employment is
terminated without cause or he resigns for good reason
33
within 6 months prior to or 12 months following a
change in control, he will be entitled to receive a lump sum
severance payment equal to 12 months of his final base
salary, reimbursement of the cost of continued health insurance
coverage for himself and his eligible dependents for
12 months and two years acceleration of the vesting and
exercisability of any outstanding stock options granted to him.
As of November 28, 2006, Mr. West holds options
covering 909,253 shares of Solexa common stock, of which
511,454 are vested. The merger will constitute a change in
control for purposes of the employment agreement. The estimated
cash severance payment payable to Mr. West if he is
terminated without cause or resigns for good reason within six
months prior to, or 12 months following, the merger
(assuming his current base salary and healthcare coverage remain
the same) would be approximately $382,651.
Mr. Wests Change in Control
Bonus. On May 19, 2006, Solexa entered into
an amendment agreement amending Section (d) of
Exhibit B to Mr. Wests employment agreement, to
provide that he is eligible to receive one of two alternative
one-time bonuses in the event of a market capitalization
achievement by Solexa or change in control of Solexa, subject to
the terms and conditions described therein, in lieu of the
potential change in control bonus previously set forth in that
section.
In the event of a change in control of Solexa, Mr. West
shall be eligible to receive a bonus equivalent to 1% of the
amount by which the consideration received by Solexa
stockholders as a direct result of the change in control exceeds
the sum of $150,000,000 plus the aggregate gross proceeds
received by Solexa through sales of equity securities after the
effective date of Mr. Wests employment amendment. The
merger will constitute a change in control for this purpose. The
change in control bonus will be provided to Mr. West in the
same form as the consideration received by Solexa stockholders
as a direct result of the change in control, provided that,
Solexa may in its sole discretion elect to substitute cash for
all or any portion of the securities or other non-cash
consideration that would otherwise be payable based on the value
thereof established in the change in control.
Peter
Lundberg Letter Agreement
On May 19, 2006, Solexa entered into a letter agreement
with Peter Lundberg, Solexas Vice President and Chief
Technical Officer providing that he is entitled to receive a
one-time alternative bonus on substantially the same terms and
conditions as the market capitalization bonus and change in
control bonus provided to Mr. West as described above,
provided that Mr. Lundberg would be entitled to receive
0.25% of the amount by which the consideration received by
Solexas stockholders as a direct result of the change in
control exceeds the sum of $150,000,000 plus the aggregate gross
proceeds received by Solexa through sales of equity securities
after the effective date of the letter agreements under the
change in control bonus. The merger will constitute a change in
control for this purpose.
Linda
Rubinstein Employment Agreement and Letter Agreement
On March 23, 2005, Solexa entered into an employment
agreement with Linda Rubinstein, Solexas Vice President,
Secretary and Chief Financial Officer. Under the agreement, if
(i) Ms. Rubinsteins employment is terminated
without cause by Solexa, (ii) Ms. Rubinstein resigns
with good reason, (iii) Ms. Rubinsteins
employment is terminated without cause by Solexa or any
successor to or acquiring entity of Solexa within 30 days
prior to, upon or within 12 months after an asset sale,
merger, consolidation, or reverse merger or
(iv) Ms. Rubinstein resigns for good reason within
thirty days prior to, upon or within 12 months after an
asset sale, merger, consolidation or reverse merger of Solexa,
she will be eligible to receive severance compensation of
between 4.5 to 6 months of her final base salary, 100% of
her target bonus, prorated to the percent of the year completed,
and two years acceleration of the vesting and exercisability of
any outstanding stock options granted to her. As of
November 28, 2006, Ms. Rubinstein holds options
covering 241,000 shares of Solexa common stock, of which
80,103 are vested. The merger will constitute a change in
control for purposes of the employment agreement. The estimated
cash severance payment payable to Ms. Rubinstein if she is
terminated without cause or resigns for good reason within
30 days prior to, upon or within 12 months following
the merger (assuming her current base salary and target bonus
remain the same) would be between approximately $176,647 and
$209,360, depending on how many months of her final base salary
she is ultimately granted in connection with the termination of
her employment.
34
On May 19, 2006, Solexa entered into a letter agreement
with Linda Rubinstein providing substantially the same change in
control bonus terms to Ms. Rubinstein as were provided to
Mr. Lundberg under Mr. Lundbergs letter
agreement described above.
Tony
Smith, Ph.D., Letter Agreement
On May 22, 2006, Solexa Limited entered into a letter
agreement with Dr. Smith, Solexas Vice President and
Chief Scientific Officer, providing substantially the same
change in control bonus terms to him as were provided to
Mr. Lundberg under Mr. Lundbergs letter
agreement described above.
Omead
Ostadan Letter Agreement
On May 19, 2006, Solexa entered into a letter agreement
with Omead Ostadan, Solexas Vice President of Marketing,
providing substantially the same change in control bonus terms
to him as were provided to Mr. Lundberg under
Mr. Lundbergs letter agreement described above.
Summary
of Change in Control Bonuses
The following is an estimate of the above summarized change in
control bonuses payable to certain executive officers in
connection with the proposed merger, assuming for illustrative
purposes only, among other things, that the value of the merger
consideration will be $14.00 on a per share basis and that the
merger consideration subject to the change in control bonuses
will be approximately $420,203,279. The merger consideration
subject to the change in control bonuses represents that portion
of the total transaction value, assumed to be $615,448,344, that
exceeds the $150,000,000 threshold, net of assumed warrant
proceeds of approximately $45,245,065, the proceeds of which are
not subject to the change in control bonuses. The assumed
transaction value is further based upon approximately
43,960,596 shares of Solexa common stock expected to be
outstanding at the closing of the merger. This number of shares
outstanding represents 36,645,693 shares of Solexa common stock
outstanding as of November 30, 2006 (excluding shares held
by Illumina), plus the assumed exercise of in-the-money warrants
covering an additional 7,314,903 shares of Solexa common stock.
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Estimated
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Change in Control
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Name
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Title
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Bonus Amount
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John West
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Chief Executive Officer
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$4,202,033
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Peter Lundberg
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Vice President & Chief
Technical Officer
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1,050,508
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Omead Ostadan
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Vice President of Marketing
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1,050,508
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Linda Rubinstein
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Vice President & Chief
Financial Officer
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1,050,508
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Tony Smith, Ph.D.
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Vice President & Chief
Scientific Officer
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1,050,508
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Total: $8,404,065
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Outstanding
Options, Warrants and Other Awards
Outstanding options and warrants covering shares of Solexa
common stock will be converted into options and warrants,
respectively, covering shares of Illumina common stock. See the
section entitled The Merger Treatment of
Solexa Stock Options and Warrants for more information on
the treatment of Solexa options and warrants. Furthermore,
pursuant to an offer of employment letter from Solexa, dated
June 8, 2006, Brock Siegel, Ph.D., was awarded a
restricted stock unit award covering 156,000 shares of
Solexa common stock. This restricted stock unit award will vest
over time and shares covered by the award will be issued to
Mr. Siegel as they vest. This restricted stock unit award
will be converted into a restricted stock unit award
representing the right to receive shares of Illumina common
stock, as adjusted based on the exchange ratio upon consummation
of the merger.
35
Lock-Up
Agreement
Shares of Illumina common stock issued in connection with the
merger to Mr. West will be subject to a
lock-up
agreement to be entered into by Mr. West in accordance with
the provisions of the merger agreement for a period of six
months following the closing date of the merger and subject to
certain exceptions. Under the terms of the
lock-up
agreement, for a six-month period beginning on the closing of
the merger, Mr. West will not offer, pledge, sell, contract
to sell and option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the
sale of, make any short sale or otherwise dispose of or transfer
any shares of Illumina common stock, or enter into any swap or
any other agreement or transaction that transfers the economic
consequences of ownership of Illumina common stock held by
Mr. West. The
lock-up
agreement will permit Mr. West to exercise options, sell or
otherwise dispose of up to 25% of Illumina common stock held by
Mr. West during each three month period of the
lock-up
agreement, and make other dispositions pursuant to a gift, by
will or intestacy or to a trust, the beneficiaries of which are
Mr. West or members of his family.
Director
Affiliations with Certain Stockholders
G. Mason Morfit, a member of the Solexa board of directors,
is a non-managing member of VA Partners, LLC, which is the
general partner of ValueAct Capital Master Fund, L.P., a
stockholder of Solexa. Hermann Hauser, a member of the Solexa
board of directors, is a director of Amadeus Capital Partners
Limited and shares the power to vote and control the disposition
of shares held by Amadeus II A LP, Amadeus II B LP,
Amadeus II C LP, Amadeus II D GmbH & Co KG
and Amadeus II Affiliates Fund LP, each of which holds
Solexa common stock and warrants to purchase shares of Solexa
common stock.
Indemnification
and Insurance
The merger agreement provides that Solexa shall indemnify,
defend and hold harmless, and advance expenses to the
individuals who at or prior to the effective time of the merger
were directors or officers of Solexa or any of its subsidiaries,
for all acts and omissions by them in their capacities as such
any time prior to the effective time of the merger, to the
fullest extent required by: (i) the certificate of
incorporation or bylaws (or comparable charter or organizational
documents) of Solexa or any of its subsidiaries as in effect on
November 12, 2006; and (ii) indemnification agreements
between Solexa and its officers and directors disclosed to
Illumina or, with respect to persons who become directors or
officers of Solexa or any of its subsidiaries after
November 12, 2006 and prior to the closing of the merger,
which is entered into and disclosed to Illumina after
November 12, 2006 and which is in the form and substance of
the agreements that have been disclosed to Illumina at or prior
to November 12, 2006. In addition, the merger agreement
provides that for a period of six years after the merger,
Illumina shall provide directors and officers
liability insurance covering acts or omissions occurring prior
to the effective time of the merger with respect to those
indemnitees who are covered by Solexas directors and
officers liability insurance policies as of the closing of
the merger on terms with respect to such coverage and amount no
less favorable in the aggregate than Solexas current
directors and officers liability insurance policies.
If the aggregate annual premiums for such insurance at any time
during such period shall exceed 200% of the per annum rate of
premium paid by Solexa as of November 12, 2006, then
Illumina shall provide only such coverage as shall then be
available at an annual premium equal to 200% of such rate.
Compensation
of Member of the Solexa Strategic Committee
Blaine Bowman, a member of the Solexa board of directors, has
been paid an aggregate of $10,000 in connection with additional
work performed by him as a member of the Solexa Strategic
Committee, which is a special committee of the Solexa board of
directors formed for the purpose of monitoring and advising on
the proposed merger.
36
Proposed
Collaboration Agreement between Solexa and
Illumina
Solexa and Illumina are contemplating certain collaborations or
other arrangements under which Illumina, on a limited basis, may
assist in the marketing of Solexa products or provide field
support to Solexa customers in certain locations, or both.
Solexa and Illumina also are considering other collaboration
arrangements to investigate the feasibility of new products that
the companies may develop once combined, and such arrangements
may involve, among other things, an agreement relating to the
transfer of certain research materials, the allocation of
intellectual property rights and related obligations
and/or
confidentiality obligations between the companies.
Securities
Purchase Agreement
On November 13, 2006, Illumina purchased 5,154,639 newly
issued shares of Solexa common stock for a purchase price of
$9.70 per share pursuant to the securities purchase
agreement, dated November 12, 2006, between Solexa and
Illumina. The shares of Solexa common stock acquired by Illumina
represent approximately 12.3% of the issued and outstanding
shares of Solexa common stock as of November 13, 2006,
after giving effect to the issuance. Illumina entered into the
securities purchase agreement with Solexa as part of the
transactions contemplated by the merger agreement and to provide
Solexa with financing sufficient to meet Solexas expected
working capital requirements if, for any reason, the merger is
not consummated.
The securities purchase agreement contains customary
representations, warranties and covenants. In addition, the
securities purchase agreement provides Illumina with certain
registration rights and put rights, and restricts
Illuminas ability to vote or transfer its shares of Solexa
common stock under specified circumstances. The securities
purchase agreement is attached as Annex B to this document
and is incorporated by reference herein.
Registration
Rights
In the event that the merger agreement is terminated, Solexa has
agreed to, among other things:
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use its best efforts to file a registration statement on
Form S-3
with the SEC within ten days after the date of termination of
the merger agreement to register for resale the shares of Solexa
common stock held by Illumina. Solexa also has agreed to use its
best efforts to cause the registration statement to become
effective under the Securities Act as promptly as practicable
following the filing date and in any event no later than
30 days following the filing date or, if the registration
statement is reviewed by the SEC, no later than 90 days
following the filing date;
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use its best efforts to cause the registered shares of Solexa
common stock to be listed on each securities exchange on which
Solexa common stock is then listed; and
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indemnify Illumina and its related persons from losses, claims,
damages or liabilities arising out of, or based on, any untrue
statement or alleged untrue statement of a material fact
contained in, or any omission or alleged omission of a material
fact in, the registration statement or related prospectus or any
failure by Solexa to fulfill any undertaking in any registration
statement.
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In the event that Solexa elects to file a registration statement
under the Securities Act pertaining to an underwritten public
offering of Solexa common stock, then Solexa is obligated to
notify Illumina ten days prior to the filing and afford Illumina
the opportunity to include its shares of Solexa common stock in
that offering. If, in the course of the offering, Solexas
underwriter determines in good faith that the market conditions
require a limitation on the number of shares to be underwritten,
then the number of shares to be underwritten will be first
allocated to Solexa and then to Illumina and lastly to any other
Solexa stockholders participating in the underwriting; provided
that, in any event, Illumina will be entitled to include in such
offering an amount of its Solexa common stock equal to no less
than 25% of the total number of shares of Solexa common stock
constituting such offering. This piggyback registration right
will terminate on the earlier of (i) the date that
Illuminas shares of Solexa common stock constitute less
than 2.5% of the outstanding
37
shares of Solexa common stock and (ii) two years from the
date that the registration statement registering Illuminas
shares of Solexa common stock is declared effective.
Transfer
Restrictions
The securities purchase agreement contains restrictions on
Illuminas ability to transfer and vote the shares of
Solexa common stock acquired pursuant to the agreement.
In the event the merger agreement is terminated, Illumina may
not effect a Disposition, meaning Illumina cannot sell, offer to
sell, solicit offers to buy, loan, pledge or dispose of any of
its shares of Solexa common stock acquired under the securities
purchase agreement, or effect any Short Sale, meaning Illumina
cannot effect any hedging, short sale or other transaction that
is designed or would reasonably be expected to lead to or result
in a Disposition, in each case, for a period of six months
following termination of the merger agreement. This six-month
period is referred as the Primary
Lock-Up
Period.
Further, Illumina may not effect Dispositions or Short Sales of
more than one-third of the aggregate number of its shares of
Solexa common stock, in each of the three-month periods during
the period beginning six months following termination of the
merger agreement and ending 15 months following termination
of the merger agreement. This nine-month period is referred to
as the Secondary
Lock-Up
Period. However, the securities purchase agreement permits
Illumina to effect one block sale of all or a portion of its
shares of Solexa common stock in a single trade at any time
beginning with the date that the registration statement covering
Illuminas shares of Solexa common stock becomes effective
and ending with the later of (i) three months after the
termination of the merger agreement, (ii) ten days after
the date the registration statement filed by Solexa on behalf of
Illumina becomes effective and (iii) seven months after
November 13, 2006, which, in the case of clause (iii),
results in a one-month extension of the Primary
Lock-Up
Period and the Secondary
Lock-Up
Period.
Voting
Restrictions
Illumina is obligated to cause its shares of Solexa common stock
to be voted proportionally with the balance of votes cast during
any meeting to approve the proposed merger and all related
transactions and matters. Also, starting with the first
stockholder vote or written consent after termination of the
merger agreement, Illumina is required to cause its shares of
Solexa common stock to be voted, at Illuminas option,
either in accordance with the recommendation of the Solexa board
of directors or proportionally with the balance of the votes
cast at any such meeting. This voting requirement will continue
until the earlier of (i) the fifth anniversary of the
termination of the merger agreement or (ii) Illumina being
a beneficial holder of less than 5% of the then outstanding
Solexa common stock.
Illuminas
Put Right
In the event of a termination of the merger agreement and the
consummation of a takeover transaction with a third party by
Solexa under certain circumstances that require Solexa to pay a
termination fee, as described below, Illumina will have the
right to cause Solexa to repurchase Illuminas shares of
Solexa common stock at a purchase price of $9.70 per share,
subject to the consummation of the takeover transaction.
A takeover transaction, as used in the securities purchase
agreement, generally means any of the transactions described
below which is either consummated or with respect to which a
definitive agreement is entered into within the nine-month
period following the termination of the merger agreement:
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any direct or indirect acquisition of the assets of Solexa or
its subsidiaries having a fair market value equal to 50% or more
of the fair market value of the assets of Solexa and its
subsidiaries, taken as a whole, or 50% or more of the voting
power of Solexa or any of its subsidiaries;
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any tender offer or exchange offer that, if consummated, would
result in any person beneficially owning at least 50% of the
voting power of Solexa; or
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38
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any merger, consolidation, business combination,
recapitalization or similar transaction involving Solexa,
subject to specified exceptions.
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Board of
Directors and Management Following the Merger
Following the merger, the board of directors of the combined
company will consist of ten members, including two new
independent directors to be selected by the Illumina board of
directors and agreed to by Solexa, consistent with the policies
of Illuminas nominating/ corporate governance committee.
The board will include Daniel M. Bradbury, Karin Eastham, Paul
Grint, William H. Rastetter, Ph.D., Jack
Goldstein, Ph.D., Mr. Flatley, David R.
Walt, Ph.D., John R. Stuelpnagel, D.V.M., and two
additional independent directors as selected by the Illumina
board of directors and agreed to by Solexa.
Material
United States Federal Income Tax Consequences of the
Merger
The following is a summary of the material United States federal
income tax consequences of the merger that are expected to apply
generally to Solexa stockholders that exchange their shares of
Solexa common stock for shares of Illumina common stock in the
merger. This discussion addresses only Solexa stockholders that
are U.S. Holders (as defined below) and hold
their shares of Solexa common stock as capital assets for United
States federal income tax purposes (generally, assets held for
investment). This summary is for the general information of the
Solexa stockholders only and does not purport to be a complete
analysis of all potential tax effects of the merger, nor does it
constitute tax advice to any particular stockholder. For
example, it does not consider the effect of any applicable
state, local or foreign tax laws, or of any non-income tax laws.
In addition, this discussion does not address the tax
consequences of transactions effectuated prior to or after the
merger (whether or not such transactions occur in connection
with the merger), including, without limitations, any exercise
of a Solexa option or the acquisition or disposition of Solexa
shares other than in exchange for Illumina common stock pursuant
to the merger. This discussion does not address all of the
United States federal income tax consequences that may be
relevant to a particular Solexa stockholder in light of
individual circumstances or to Solexa stockholders that are
subject to special treatment under United States federal income
tax laws, including, without limitation:
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financial institutions, regulated investment companies, real
estate investment trusts and insurance companies;
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tax-exempt organizations;
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stockholders that are not U.S. Holders;
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partnerships, limited liability companies that are not treated
as corporations for United States federal income tax purposes,
subchapter S corporations and other pass-through entities
and investors in such entities;
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stockholders that hold Solexa common stock that constitutes
qualified small business stock for purposes of Section 1202
of the Code;
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dealers, brokers and traders in securities or foreign currencies;
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stockholders that hold Solexa common stock as part of a hedge,
appreciated financial position, straddle, constructive sale or
conversion transaction or other integrated investment; and
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stockholders that acquired their shares of Solexa common stock
pursuant to the exercise of employee stock options, in
connection with employee stock purchase plans or otherwise as
compensation.
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For purposes of this discussion, U.S. Holder
refers to a beneficial holder of Solexa common stock that is,
for United States federal income tax purposes, (i) an
individual citizen or resident of the United States, (ii) a
corporation or other entity taxable as a corporation for United
States federal income tax purposes, created or organized in or
under the laws of the United States, any state thereof or the
District of Columbia, (iii) an estate the income of which
is subject to United States federal income taxation regardless
of its source or (iv) a trust (x) the administration
of which is subject to the primary supervision of a court within
the United States
39
and as to which one or more United States persons, as defined in
Section 7701(a)(30) of the Code, have the authority to
control all substantial decisions or (y) that has a valid
election in effect under applicable United States Treasury
regulations to be treated as a United States person under the
Code.
If an entity treated as a partnership for United States federal
income tax purposes holds Solexa common stock, the tax treatment
of a person holding interests in such entity generally will
depend upon the status of that person and the activities of that
entity. Such entities and persons holding interests in such
entities should consult a tax advisor regarding the tax
consequences of the merger.
The following discussion is based on the Code, applicable
Treasury regulations, administrative interpretations and court
decisions, each as in effect as of the date of this document and
all of which are subject to change, possibly with retroactive
effect. Any such change could materially alter the tax
consequences described herein. This discussion does not purport
to be a comprehensive analysis or description of all potential
United States federal income tax consequences of the proposed
transaction. It is not binding on the Internal Revenue Service,
which we refer to as the IRS, and there can be no assurance that
the IRS (or a court, in the event of an IRS challenge) will
agree with the conclusions stated herein.
Solexa stockholders are urged to consult their tax advisors
as to the specific tax consequences to them of the merger in
light of their particular circumstances, including the
applicability and effect of United States federal, state, local
and foreign income and other tax laws.
Illuminas obligation to complete the merger is conditioned
upon its receipt from Dewey Ballantine LLP of a tax opinion,
dated as of the effective date of the merger, in form and
substance reasonably satisfactory to Illumina, to the effect
that the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code; provided
that if Illumina has not received such an opinion from Dewey
Ballantine LLP, but Cooley Godward Kronish LLP is willing to
provide such an opinion to Illumina, this condition will be
deemed satisfied by the receipt of the Cooley Godward Kronish
LLP opinion. Solexas obligation to complete the merger is
conditioned upon its receipt from Cooley Godward Kronish LLP, of
a tax opinion, dated as of the effective date of the merger, in
form and substance reasonably satisfactory to Solexa, to the
effect that the merger will qualify as a
reorganization within the meaning of
Section 368(a) of the Code; provided that if Solexa has not
received such an opinion from Cooley Godward Kronish LLP, but
Dewey Ballantine LLP is willing to provide such an opinion to
Solexa, this condition will be deemed satisfied by the receipt
of the Dewey Ballantine LLP opinion. Neither Illumina nor Solexa
intends to waive this closing condition. However, in the event
that either Illumina or Solexa does so, Illumina and Solexa will
resolicit the approval of their stockholders after providing
appropriate disclosure.
The opinions to be provided by Dewey Ballantine LLP and Cooley
Godward Kronish LLP will be based on factual representations and
covenants made by Illumina and Solexa (including those contained
in tax representation letters to be provided by Illumina and
Solexa) and on certain facts and customary assumptions set forth
in the opinions. These tax opinions will not be binding on the
IRS or any court and will not preclude the IRS from asserting,
or a court from sustaining, a contrary conclusion. No rulings
have been or will be obtained from the IRS with respect to any
of the matters discussed herein.
Assuming the merger qualifies as a reorganization
within the meaning of Section 368(a) of the Code:
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except for cash received in lieu of a fractional share of
Illumina common stock, Solexa stockholders will not recognize
any gain or loss upon the receipt of Illumina common stock in
exchange for Solexa common stock in connection with the merger;
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a Solexa stockholder will have an aggregate tax basis in the
Illumina common stock received in the merger equal to the
stockholders aggregate tax basis in its shares surrendered
pursuant to the merger, reduced by the portion of the
stockholders tax basis in its shares surrendered in the
merger that is allocable to a fractional share of Illumina
common stock. If a Solexa stockholder acquired any of its shares
of Solexa common stock at different prices or at different
times, United States Treasury Regulations provide guidance on
how such stockholder may allocate its tax basis to shares of
Illumina common stock received in the merger. Solexa
stockholders that hold multiple blocks of Solexa common
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stock are urged to consult their tax advisors regarding the
proper allocation of their basis among shares of Illumina common
stock received under such Treasury Regulations;
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the holding period of the Illumina common stock received by a
Solexa stockholder in the merger will include the holding period
of the Solexa common stock surrendered in the merger;
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cash received by a Solexa stockholder in lieu of a fractional
share of Illumina common stock in the merger will be treated as
if such fractional share had been issued in connection with the
merger and then sold by the Solexa stockholder to Illumina for
such cash payment, and Solexa stockholders generally will
recognize capital gain or loss with respect to such cash
payment, measured by the difference, if any, between the amount
of cash received and the tax basis in such fractional
share; and
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Solexa stockholders will be required to attach a statement to
their tax returns for the year in which the merger is
consummated that contains the information listed in Treasury
Regulation Section 1.368-3T(b), and such statement
must include the stockholders tax basis in the
stockholders Solexa common stock and a description of the
Illumina common stock received.
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Accounting
Treatment
Illumina prepares its financial statements in accordance with
generally accepted accounting principles in the United States,
or U.S. GAAP. The merger will be accounted for using the
purchase method of accounting. This means that Illumina will
allocate the purchase price to the fair value of Solexas
assets and liabilities at the acquisition date, with the excess
purchase price being recorded as goodwill. Under the purchase
method of accounting, goodwill is not amortized but is tested
for impairment at least annually.
Regulatory
Approvals Required for the Merger
Illumina and Solexa have each agreed to use reasonable efforts
in order to obtain all regulatory approvals required in order to
consummate the merger.
Under the HSR Act, the merger cannot be completed until the
expiration of a waiting period that follows the filing of
notification forms by both parties to the transaction with the
FTC and the DOJ. Illumina and Solexa have both filed
notification and report forms under the HSR Act with the FTC and
the DOJ on November 20, 2006. The initial waiting period is
30 calendar days after both parties have filed the notification
forms, but this period may be extended if the reviewing agency
issues a formal request for additional information and
documentary material, which we refer to as a second request. If
the reviewing agency issues a second request, the parties may
not complete the merger until 30 calendar days after both
parties substantially comply with the second request, unless the
waiting period is terminated earlier with the parties consent
not to close the transaction pending additional government
review.
At any time before or after completion of the merger, the DOJ or
the FTC or any state could take such action under the antitrust
laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the completion of the merger, to
rescind the merger or to seek divestiture of particular assets
of Illumina or Solexa. Private parties also may seek to take
legal action under the antitrust laws under certain
circumstances. As in every transaction, a challenge to the
merger on antitrust grounds may be made, and, if such a
challenge is made, it is possible that Illumina and Solexa will
not prevail.
Illumina and Solexa conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be
required or advisable in connection with the completion of the
merger. Illumina and Solexa are currently reviewing whether
filings or approvals may be required or advisable in those
jurisdictions that may be material to Illumina and Solexa. It is
possible that any of the regulatory authorities with which
filings are made may seek regulatory concessions as conditions
for granting approval of the merger.
Prior to completing the merger, the applicable waiting period
under the HSR Act must expire or be terminated. In addition,
Illumina and Solexa must obtain requisite approvals from any
other regulatory authorities if the failure to obtain approvals
of those regulatory authorities would have a material adverse
41
effect on Illumina and its subsidiaries taken as a whole, or
Solexa and its subsidiaries taken as a whole, respectively, in
each case after giving effect to the merger.
Although we do not expect regulatory authorities to raise any
significant objections in connection with their review of the
merger, we cannot assure you that we will obtain all required
regulatory approvals or that these regulatory approvals will not
contain terms, conditions or restrictions that would be
detrimental to the combined company after the completion of the
merger.
Exchange
of Certificates in the Merger
At or prior to the effective time of the merger, an exchange
agent will be appointed to handle the exchange of Solexa stock
certificates for certificates representing shares of Illumina
common stock. Promptly after the effective time of the merger,
the exchange agent will send a letter of transmittal and
instructions to each former Solexa stockholder explaining the
procedure for surrendering Solexa stock certificates in exchange
for certificates representing the number of shares of Illumina
common stock into which the shares of Solexa common stock will
be converted in the merger.
After the effective time of the merger, each certificate that
previously represented shares of Solexa common stock will
represent only the right to receive a certificate representing
the shares of Illumina common stock into which the shares of
Solexa common stock have been converted. In addition, after the
effective time of the merger, Solexa will not register any
transfers of the shares of Solexa common stock. Illumina
stockholders need not exchange their stock certificates.
Treatment
of Solexa Stock Options and Warrants
At the effective time of the merger, each outstanding option and
warrant to acquire Solexa common stock, whether or not
exercisable, will cease to represent a right to acquire Solexa
common stock and will be automatically converted into an option
or warrant, as applicable, to acquire that number of whole
shares of Illumina common stock equal to the product of the
number of shares of Solexa common stock that were subject to the
original Solexa stock option or warrant multiplied by the
exchange ratio (rounded down to the nearest whole share). The
per share exercise price of each converted option and the per
share purchase price of each converted warrant shall be equal to
the per share exercise price or purchase price of the original
Solexa stock option or warrant, respectively, divided by the
exchange ratio (rounded up to the nearest whole cent). Each
converted Solexa stock option and warrant will otherwise have
substantially the same terms and conditions as were in effect
immediately prior to the completion of the merger, including
vesting and terms of exercise, as applicable. The conversion of
options shall be made in a manner so as to preserve as nearly as
possible any exemption from Section 409A of the Code a
Solexa stock option may have,
and/or any
status as an incentive stock option a Solexa stock
option may have, immediately prior to the effective time of the
merger.
Restrictions
on Sales of Shares of Illumina Common Stock Received in the
Merger
Shares of Illumina common stock issued in connection with the
merger to Mr. West will be subject to a
lock-up
agreement to be entered into by Mr. West in accordance with
the provisions of the merger agreement for a period of six
months following the closing date of the merger and subject to
certain exceptions. For a summary of the
lock-up
agreement to be entered into between Mr. West and Illumina,
see the section entitled Interests of Solexas
Directors and Officers in the Merger; Relationship between
Illumina and Solexa.
In addition, shares of Illumina common stock issued to any
Solexa stockholder who may be deemed to be an
affiliate of Illumina or Solexa for purposes of
Rule 145 under the Securities Act may be subject to the
following restrictions.
Under Rule 145, former Solexa stockholders who were
affiliates of Solexa at the time of the Solexa special meeting
and who are not affiliates of Illumina after the completion of
the merger, may sell their Illumina common stock received in the
merger at any time subject to the volume and sale limitations of
Rule 144 under the Securities Act. Further, so long as such
former Solexa affiliates are not considered
42
affiliates of Illumina following the completion of the merger,
and a period of at least one year has elapsed from the
completion of the merger, such former affiliates may sell their
Illumina common stock received in the merger without regard to
the volume and sale limitations of Rule 144 under the
Securities Act so long as there is adequate current public
information available about Illumina in accordance with
Rule 144. After a period of two years has elapsed from the
completion of the merger, and so long as such former affiliates
are not affiliates of Illumina and have not been for at least
three months prior to such sale, such former affiliates may
freely sell their Illumina common stock. Former Solexa
stockholders who become affiliates of Illumina after completion
of the merger will still be subject to the volume and sale
limitations of Rule 144 under the Securities Act, until
each such stockholder is no longer an affiliate of Illumina.
This document does not cover resales of Illumina common stock
received by any person upon completion of the merger, and no
person is authorized to make any use of this document in
connection with any resale.
Listing
of Illumina Common Stock
It is a condition to the completion of the merger that the
Illumina common stock issuable in the merger or upon exercise of
options to purchase Illumina common stock issued in substitution
for Solexa options be approved for listing on NASDAQ, subject to
official notice of issuance.
Appraisal
Rights
Under the General Corporation Law of the State of Delaware,
which we refer to as the DGCL, holders of Solexa common stock
are not entitled to appraisal rights in connection with the
merger. See the section entitled Appraisal Rights.
43
THE
MERGER AGREEMENT
The following summarizes material provisions of the merger
agreement which is attached as Annex A to this document and
is incorporated by reference herein. The rights and obligations
of the parties are governed by the express terms and conditions
of the merger agreement and not by this summary or any other
information contained in this document. Illumina and Solexa
stockholders are urged to read the merger agreement carefully
and in its entirety as well as this document before making any
decisions regarding the merger. The merger agreement has been
attached to this document to provide Illumina and Solexa
stockholders with information regarding its terms. It is not
intended to provide any other factual information about Illumina
or Solexa. In particular, the assertions embodied in the
representations and warranties contained in the merger agreement
(and summarized below) are qualified by information in
confidential disclosure schedules provided by Illumina and
Solexa to each other in connection with the signing of the
merger agreement. These disclosure schedules contain information
that modifies, qualifies and creates exceptions to the
representations and warranties set forth in the merger
agreement. Moreover, certain representations and warranties in
the merger agreement were used for the purpose of allocating
risk between Illumina and Solexa rather than establishing
matters as facts. Accordingly, you should not rely on the
representations and warranties in the merger agreement (or the
summaries contained herein) as characterizations of the actual
state of facts about Illumina or Solexa.
Completion
of the Merger
Unless the parties agree otherwise, the closing of the merger
will take place on a date specified by the parties, but no later
than the third business day after all closing conditions have
been satisfied or waived, at the offices of Dewey Ballantine
LLP, 1950 University Avenue, Suite 500, East Palo Alto,
California, 94303. The merger will be completed when we file a
certificate of merger with the Delaware Secretary of State,
unless we agree to a later time for the completion of the merger
and specify that time in the certificate of merger.
We currently expect to complete the merger by the end of the
first quarter of 2007, subject to receipt of required
stockholder and regulatory approvals and satisfaction of the
other conditions to completion of the merger.
Conditions
to Completion of the Merger
Conditions to Each Partys Obligation to Effect the
Merger. The respective obligations of Solexa and
Illumina to effect the merger are subject to the satisfaction or
waiver of the following conditions:
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the adoption of the merger agreement by Solexa stockholders;
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the approval of the issuance of Illumina common stock in the
merger by Illumina stockholders;
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no law, order or other legal prohibition of any court or other
governmental entity shall be in effect that prohibits the
completion of the merger provided that the terminating party has
used reasonable efforts to prevent the entry of, and to appeal,
the judgment or legal prohibition;
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the termination or expiration of the applicable waiting periods
under the HSR Act;
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the receipt of other requisite approvals or consents of any
governmental entity required to consummate the transactions
contemplated by the merger agreement;
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the authorization for listing by NASDAQ of the shares of
Illumina common stock issuable to Solexa stockholders in the
merger and such other shares to be reserved for issuance in
connection with the merger;
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the SEC having declared effective the registration statement of
which this document forms a part;
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the representations and warranties of the other party being true
and correct, subject to the material adverse effect standard
provided in the merger agreement;
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the other party having complied with, in all material respects,
all agreements, obligations, covenants and conditions required
by it under the merger agreement prior to the closing date;
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the receipt of an officers certificate of an executive
officer stating that the two preceding conditions have been
satisfied;
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the other party and its subsidiaries, taken as a whole, not
having suffered any material adverse effect, as defined in the
merger agreement; and
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the receipt of tax opinions of legal counsel to the effect that
the merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code.
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Conditions to Illuminas Obligation to Effect the
Merger. The obligation of Illumina to effect the
merger is subject to the satisfaction of the following
additional conditions, any one or more of which may be waived,
in writing, by Illumina:
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the receipt of all consents, approvals, authorizations,
qualifications and orders of third parties required in
connection with the transactions contemplated by the merger
agreement, other than those previously disclosed to Illumina and
those the absence of which would not reasonably be expected to
have a material adverse effect on Solexa and its subsidiaries,
taken as a whole;
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the absence of pending suits, actions or proceedings by any
governmental entity that relate to the merger, are reasonably
likely to succeed and:
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challenge Illuminas acquisition of shares of Solexa common
stock;
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seek to restrain or prohibit the proposed merger;
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seek to prevent or materially limit the ownership or operation
by Illumina, Solexa or their respective subsidiaries of their
respective businesses or assets;
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compel any of Illumina, Solexa or their respective subsidiaries
to divest or hold separate any material portion of their
businesses or assets; or
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seek to prohibit Illumina or any of its subsidiaries from
effectively controlling in any material respect the businesses
or operations of Solexa or any of its subsidiaries.
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Mr. West, Chief Executive Officer of Solexa, and
Dr. Smith, Vice President and Chief Scientific Officer of
Solexa, shall be actively employed by Solexa on the closing date
(unless unemployed by reason of death or disability);
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receipt of a FIRPTA certificate from Solexa certifying that an
interest in Solexa is not a real property interest; and
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there being no bonus plans or other arrangements of Solexa other
than those previously disclosed to Illumina.
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No
Solicitation
The merger agreement provides that Solexa will cause its and its
subsidiaries officers, directors and non-employee
advisors, agents and other representatives to, and will use
commercially reasonable efforts to cause their respective
employees to immediately cease and cause to be terminated any
discussions or negotiations with any parties that could
reasonably be expected to lead to a takeover
proposal (as defined below).
Solexa also has agreed that it will not, and will not permit any
of its officers, directors, non-employee advisors, agents or
other representatives to, and will use commercially reasonable
efforts to ensure its and its subsidiaries employees do
not:
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solicit, initiate, or knowingly encourage or facilitate any
takeover proposal (as defined below);
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enter into any agreement, arrangement or understanding with
respect to any takeover proposal;
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enter into any agreement, arrangement, or understanding
requiring it to abandon, terminate or fail to consummate the
merger or any other transaction contemplated in the merger;
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initiate or participate in any negotiations or discussions, or
furnish or disclose any non-public information that could
reasonably be expected to lead to any takeover proposal; or
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grant any waiver or release under any standstill or any similar
agreement with respect to any class of Solexas equity
securities.
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However, Solexa may, at any time prior to the time Solexa
stockholders adopt the merger agreement, furnish information
with respect to Solexa and its subsidiaries pursuant to a
confidentiality agreement, that is no less restrictive than the
one with Illumina, to participate in discussions and
negotiations with, any person making a bona fide, unsolicited,
written takeover proposal if:
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the takeover proposal was not solicited after the date of the
merger agreement in violation of the restrictions described in
this section, was made after the date of the merger agreement,
and did not otherwise result in a breach of any of the
restrictions described under the section entitled The
Merger Agreement No Solicitation;
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the Solexa board of directors determines in good faith judgment
(after consultation with outside legal counsel and a financial
advisor of nationally recognized reputation) that the takeover
proposal constitutes or would reasonably be expected to lead to
a superior proposal (as defined below);
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the Solexa board of directors concludes in good faith, after
consultation with its outside legal counsel, that the failure to
take the above described actions would be inconsistent with the
boards fiduciary duties to Solexa stockholders under
applicable law; and
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all information has been previously provided to Illumina or is
provided to Illumina substantially concurrent with the time it
is provided to such person.
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In addition, Solexa is obligated to provide Illumina with
48 hours prior written notice (or such shorter notice as is
given to Solexas board of directors) of any meeting of its
board of directors at which its board of directors is reasonably
expected to consider any takeover proposal.
Neither the Solexa board of directors nor any committee thereof
shall:
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effect an adverse recommendation change, meaning the board of
directors may not:
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withdraw (or modify in a manner adverse to Illumina) or propose
to withdraw (or modify in a manner adverse to Illumina) the
approval, recommendation or declaration of advisability of the
merger agreement, the proposed merger or the transactions
contemplated by the merger agreement; or
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recommend, adopt, approve, or publicly propose to recommend,
adopt or approve any takeover proposal; or
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approve or recommend, or publicly propose to approve or
recommend or allow Solexa or any of its subsidiaries to enter
into any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement
or other similar agreement constituting or related to any
takeover proposal.
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However, Solexa may make an adverse recommendation change after
the second business day following Illuminas receipt of
written notice from Solexa advising Illumina that the Solexa
board of directors intends to take such action in response to a
superior proposal or a material change in circumstances after
the date of the merger agreement, if the Solexa board of
directors (or a committee thereof) determines that it is
required to do so in order to comply with its fiduciary duties
to the Solexa stockholders. During such two business days,
Solexa is obligated to negotiate in good faith with Illumina to
make adjustments to the terms and conditions of the merger
agreement as would enable Solexa to proceed with its
recommendation of the proposed merger and not make an adverse
recommendation change.
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A takeover proposal is defined in the merger
agreement as any inquiry, proposal or offer from any person or
group relating to:
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any direct or indirect acquisition or purchase of the assets of
Solexa or its subsidiaries having a fair market value equal to
20% or more of the fair market value of the assets of Solexa and
its subsidiaries, taken as a whole, or 20% or more of the voting
power of Solexa or any of its subsidiaries;
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any tender offer or exchange offer that, if consummated, would
result in any person beneficially owning at least 20% of the
voting power of Solexa; or
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any merger, consolidation, business combination,
recapitalization or similar transaction involving Solexa other
than (i) the merger, (ii) mergers, consolidations,
business combinations, recapitalizations or similar transactions
involving solely Solexa
and/or one
or more subsidiaries of Solexa or (iii) mergers,
consolidations, business combinations, recapitalizations or
similar transactions that if consummated would result in a
person beneficially owning not more than 20% of the voting power
of Solexa or any of its subsidiaries.
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A superior proposal is defined in the merger
agreement as a bona fide written takeover proposal, provided
that all references to 20% in the definition of takeover
proposal are deemed to be references to 50% instead, made
by a third party which is:
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on terms which the Solexa board of directors, or any committee
thereof comprised of independent directors, determines in good
faith (after consultation with its financial advisors) to be
more favorable to the stockholders of Solexa (in their capacity
as stockholders) from a financial point of view than the merger
and any alternative proposed by Illumina in accordance with the
merger agreement; and
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in the good faith judgment of the Solexa board of directors, or
any committee thereof, reasonably likely to be consummated,
taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and identity of the
offeror, including, to the extent financing is required, whether
financing is then committed and on terms and conditions that the
Solexa board of directors determines in good faith, after
consultation with its financial advisors and legal counsel, are
reasonably likely to result in disbursement of funds sufficient
for the consummation of the transactions contemplated by such
proposal.
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Termination
of the Merger Agreement
Right to Terminate. The merger agreement may
be terminated at any time prior to the effective time of the
merger, whether before or after receipt of Illumina or Solexa
stockholders approval sought in this joint proxy
statement/ prospectus, under the following circumstances:
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by mutual written consent of Solexa and Illumina, if the board
of directors of each company so determines;
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by either Solexa or Illumina:
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if Illuminas stockholder approval is not obtained at
Illuminas stockholder meeting;
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if Solexas stockholder approval is not obtained at
Solexas stockholder meeting;
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if the merger is not consummated by May 11, 2007; or
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if law or a final and nonappealable order, decree or ruling by a
governmental entity becomes effective that permanently
restrains, enjoins or otherwise prohibits the merger;
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by Solexa upon a breach of any covenants or agreements on the
part of Illumina or Callisto, or if any representation or
warranty of Illumina or Callisto is breached, in either case,
such that the conditions to Solexas obligations to
complete the merger would not then be satisfied and the breach
is incapable of being cured or is not cured in all material
respects within 30 business days after written notice of such
breach is received by Illumina;
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by Solexa if, prior to the obtaining of Illuminas
stockholder approval:
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the Illumina board of directors (or a committee thereof) effects
an adverse recommendation change, meaning if the Illumina board
of directors (or a committee thereof) withdraws (or modifies in
a manner adverse to Solexa) or proposes to withdraw (or modify
in a manner adverse to Solexa) the approval, recommendation or
declaration of advisability of the merger agreement, the
proposed merger or the transactions contemplated by the merger
agreement;
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Illumina fails to include in the joint proxy statement/
prospectus the recommendation of the Illumina board of directors
that its stockholders vote in favor of the issuance of Illumina
shares in connection with the merger; or
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the Illumina board of directors fails to publicly reaffirm its
recommendation of the merger or other transactions contemplated
by the merger after being requested to do so by Solexa;
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by Illumina upon a breach of covenants or agreements on the part
of Solexa, or if any representation or warranty of Solexa is
breached, in either case such that the conditions to
Illuminas obligations to complete the merger would not
then be satisfied and the breach is incapable of being cured or
is not cured in all material respects within 30 business days
after written notice of such breach is received by Solexa;
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by Illumina if, prior to the obtaining of Solexas
stockholder approval:
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The Solexa board of directors effects an adverse recommendation
change;
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Solexa fails to include in the joint proxy statement/ prospectus
the recommendation of the Solexa board of directors that its
stockholders vote in favor of the merger and the transactions
contemplated by the merger;
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the Solexa board of directors fails publicly to reaffirm its
recommendation of the merger or other transactions contemplated
by the merger after being requested to do so by Illumina;
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if a tender or exchange offer constituting a takeover proposal
has commenced and Solexa has not sent to its security holders,
within ten days of the receipt of a written request from
Illumina, a recommendation against such tender or
exchange; or
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by Illumina if Solexa breaches, in any material respect, any of
the provisions under the no solicitation covenant of the merger
agreement.
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Termination
Fee
If the merger agreement is validly terminated, the agreement
will become void without any liability on the part of any party
unless the party is in willful or intentional breach of any
representation, warranty, covenant or agreement contained in the
merger agreement. The provisions of the merger agreement
relating to the effects of termination, fees and expenses,
termination fee payments, governing law, jurisdiction, waiver of
jury trial and specific performance and certain other provisions
will continue in effect notwithstanding termination of the
merger agreement. Also, the termination of the merger agreement
will not relieve a party from liability or damages resulting
from any willful or material breach of the merger agreement.
Upon a termination, a party may become obligated to pay to the
other party a termination fee (which will, in any case, only be
payable once), as described below:
Solexa will be obligated to pay a termination fee of
$18 million if the merger agreement is terminated by either
party because Solexa fails to obtain stockholder approval for
the adoption of the merger agreement at the Solexa special
meeting and:
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prior to the Solexa stockholder meeting a bona fide takeover
proposal has been publicly announced and not withdrawn
(excluding any withdrawals that are not publicly communicated at
least five business days prior to the date of the
meeting); and
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within nine months of the termination of the merger agreement,
Solexa enters into a definitive agreement for a transaction
within the definition of takeover proposal (provided that
references in such definition to 20% shall be deemed
to be references to 50%).
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Solexa will also be obligated to pay a termination fee of
$18 million if the merger agreement is terminated by either
party because the merger is not consummated by May 11, 2007
or by Illumina because Solexa breaches the no solicitation
provision of the merger agreement and:
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prior to the Solexa stockholder meeting a bona fide takeover
proposal has been publicly announced or otherwise communicated
to the Solexa board of directors and not withdrawn; and
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within nine months of the termination of the merger agreement,
Solexa enters a definitive agreement for a transaction within
the definition of the takeover proposal (provided that
references in such definition to 20% shall be deemed
to be references to 50%).
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Additionally, Solexa will be obligated to pay a termination fee
of $18 million if the merger agreement is terminated by
Illumina (and there has not been a material adverse effect on
Illumina) because:
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the Solexa board of directors effected an adverse recommendation
change;
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Solexa failed to include in the joint proxy statement/
prospectus the recommendation of the board of directors;
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the Solexa board failed to publicly reaffirm its recommendation
of the merger following the public announcement of a takeover
proposal after being requested to do so by Illumina; or
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a tender or exchange offer constituting a takeover proposal has
commenced and Solexa has not sent to its security holders,
within ten days after a written request from Illumina, a
statement disclosing that Solexa recommends against acceptance
of such tender or exchange.
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Illumina will be obligated to pay a termination fee of
$18 million if the merger agreement is terminated by Solexa
(and there has not been a material adverse effect on Solexa)
because:
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the Illumina board of directors effected an adverse
recommendation change;
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Illumina failed to include in the joint proxy statement/
prospectus the recommendation of the Illumina board of directors
in connection with the merger; or
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the Illumina board of directors failed to publicly reaffirm its
recommendation of the issuance of shares in connection with the
merger after being requested to do so by Solexa.
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Conduct
of Business
Each of Illumina and Solexa have undertaken certain covenants in
the merger agreement restricting the conduct of their respective
businesses between the date of the merger agreement and the
effective time of the merger. In general, each of Illumina and
Solexa has agreed to (1) conduct its business in the
ordinary course, and (2) use its reasonable efforts to
preserve its business organization and relationships with third
parties and to keep available the services of its present
officers and employees and preserve its relationship with
customers, suppliers and others having business dealings with
Solexa and its subsidiaries. Solexa also has agreed to use its
reasonable efforts to preserve its intellectual property.
Between the date of the merger agreement and the effective time
of the merger, each of Solexa and Illumina, has agreed to
various specific restrictions relating to the conduct of its
business, including the following (subject in each case to
exceptions specified in the merger agreement or previously
disclosed in writing as provided in the merger agreement):
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the issuance or sale of capital stock, voting debt or other
equity interests;
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amendments or changes to its certificate of incorporation or
bylaws or equivalent organizational documents;
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the declaration or payment of dividends or other distributions;
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the reclassification, combination, or split of any of its
capital stock or the issuance of any other securities in
substitution for shares of its capital stock;
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changes in the method of accounting in effect at
December 31, 2005; and
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taking of any action that would reasonably be expected to
prevent, materially delay or impede the consummation of the
proposed merger or other transactions contemplated by the merger
agreement.
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In addition, Solexa has agreed to various specific restrictions
relating to its conduct of business, including the following
(subject in each case to exceptions specified in the merger
agreement or previously disclosed in writing as provided in the
merger agreement):
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the acquisition or disposition of material assets, operations,
business or securities;
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the authorization of any loan, advance, capital contribution to,
or investment in, any person (other than a wholly-owned
subsidiary);
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the incurrence or guarantee of indebtedness for borrowed money
or the issuance of any debt securities;
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capital expenditures in excess of $1,000,000 in the aggregate;
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the payment, discharge, settlement or satisfaction of any
material claims, liabilities or obligations;
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the termination of or any material change to material contracts
or the execution of any material contract;
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dispositions, assignment, license or encumbrance of material
intellectual property and failure to maintain such intellectual
property;
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changes in employee benefit plans and compensation of directors,
officers, employees or consultants;
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establishment of any compensation, severance, retention or
change in control arrangements with employees or other service
providers; and
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transactions with any affiliates or associates of Solexa.
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Reasonable
Efforts to Obtain Required Stockholder Votes
Each company has agreed to give notice of, convene and hold a
meeting of its stockholders as promptly as practicable for the
purpose of obtaining the required stockholder vote to approve
the transactions contemplated by the merger agreement. In
addition, each party has agreed to use its reasonable efforts to
take all actions that are necessary, proper or advisable to
consummate and make effective, in the most expeditious manner,
the transactions contemplated in the merger agreement.
Other
Covenants and Agreements
Expenses. Each company has agreed to pay its
own fees and expenses incurred in connection with the merger and
the merger agreement.
Other Covenants and Agreements. The merger
agreement contains certain other covenants and agreements,
including covenants relating to:
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cooperation between Illumina and Solexa in the preparation and
filing of all forms, registrations and notices;
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timeliness in holding stockholders meetings to propose and
approve the merger, the issuance of Illumina common stock in the
merger and the recommendation of the parties boards of
directors that stockholders vote in favor of the proposals;
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access by each party to certain information about the other
party during the period prior to the effective time of the
merger;
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cooperation between Illumina and Solexa to obtain (and to keep
each other apprised of the status of) all governmental approvals
and consents required to complete the merger;
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waiver by Solexa of state takeover statutes applicable to the
merger;
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employee plans and benefits provided after the merger, as
described in the section entitled The Merger
Agreement Employee Benefits Matters;
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indemnification, exculpation and insurance;
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certain tax matters;
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the Solexa board of directors following the completion of the
proposed merger; and
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the lock-up
arrangement with Mr. West to be entered into at the closing
of the merger, as described in the section entitled The
Merger Restrictions on Sales of Shares of Illumina
Common Stock Received in the Merger.
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Representations
and Warranties
The merger agreement contains reciprocal representations and
warranties, many of which are qualified by materiality, made by
each party to the other. The representations and warranties
relate to, among other topics, the following:
|
|
|
|
|
organization, standing and corporate power, charter documents
and ownership of subsidiaries;
|
|
|
|
capital structure;
|
|
|
|
corporate authority to enter into and perform the merger
agreement, enforceability of the merger agreement, approval of
the merger agreement by the parties boards of directors
and voting requirements to consummate the merger;
|
|
|
|
consents and approvals;
|
|
|
|
filings with the SEC and other governmental entities;
|
|
|
|
absence of certain changes or events;
|
|
|
|
no undisclosed liabilities;
|
|
|
|
contracts;
|
|
|
|
absence of pending or threatened litigation;
|
|
|
|
compliance with applicable laws and validity of permits;
|
|
|
|
intellectual property matters;
|
|
|
|
opinions of financial advisors;
|
|
|
|
board approvals;
|
|
|
|
voting requirements;
|
|
|
|
brokers used in connection with the merger agreement; and
|
|
|
|
accuracy of information supplied or to be supplied in the
registration statement to be filed in connection with the merger.
|
In addition, Solexa has made representations and warranties
related to, among other topics, the following:
|
|
|
|
|
books and records;
|
|
|
|
employment matters, including benefit plans;
|
|
|
|
insurance;
|
51
|
|
|
|
|
tax matters;
|
|
|
|
environmental matters;
|
|
|
|
state takeover statutes;
|
|
|
|
absence of undisclosed related party transactions; and
|
|
|
|
real property, title and valid leasehold interests.
|
The representations described above and included in the merger
agreement were made for purposes of the merger agreement and are
subject to qualifications and limitations agreed by the
respective parties in connection with negotiating the terms of
the merger agreement. In addition, certain representations and
warranties were made as of a specific date, may be subject to a
contractual standard of materiality different from what might be
viewed as material to stockholders, or may have been used for
purposes of allocating risk between the respective parties
rather than establishing matters as facts. This description of
the representations and warranties, and their reproduction in
the copy of the merger agreement attached to this document as
Annex A, are included solely to provide investors with
information regarding the terms of the merger agreement.
Accordingly, the representations and warranties and other
provisions of the merger agreement should not be read alone, but
instead should be read together with the information provided
elsewhere in this document and in the documents incorporated by
reference into this document. See the section entitled
Where You Can Find More Information.
Employee
Benefits Matters
Illumina has agreed to provide employees of Solexa and its
subsidiaries, for a period of at least one year following the
effective time of the merger, with benefits which are comparable
in the aggregate to those provided to similarly situated
employees of Illumina. Notwithstanding the foregoing, the
participation of the employees of Solexa or its subsidiaries in
any of Illuminas option or similar equity grant or
purchase programs or plans shall be subject to the eligibility
requirements of such programs or plans. In connection with any
employee benefit plans or arrangements maintained by Illumina,
Solexa employees will be given credit for service with Solexa
and its subsidiaries, to the same extent such service was
credited for such purposes by Solexa and its subsidiaries,
under: (i) all employee benefit plans, programs, policies
and fringe benefits to be provided to Solexa employees for
purposes of eligibility and vesting (but not benefit accrual);
(ii) severance plans, programs and policies to be provided
to such employees for purposes of calculating severance
benefits; and (iii) vacation and sick leave plans, programs
and policies for purposes of calculating vacation and sick leave.
In connection with the merger, Illumina will waive all
limitations on preexisting conditions or eligibility limitations
with respect to participation and coverage requirements
applicable to the Solexa employees under any welfare benefit
plans, programs or policies maintained by Illumina in which the
employees may be eligible to participate. Illumina has also
agreed to provide each Solexa employee with credit for any
co-payments
and deductibles paid under any Solexa benefit plan that provides
healthcare benefits in the plan year in effect as of the
effective time of the merger in satisfying any applicable
deductible or
out-of-pocket
expenses under any healthcare plans of Illumina.
No provision in the employee benefits covenant of the agreement
shall impede Solexa or Illumina from terminating any employee at
any time for any reason, subject to applicable laws and
contracts. Furthermore, no third party beneficiary rights in any
Solexa employee are created.
Amendments,
Extensions and Waivers
Amendment. No supplement, modification or
amendment to the merger will be binding unless made in a written
instrument that is signed by all the parties to the agreement.
Extension; Waiver. At any time prior to the
effective time of the merger, with certain exceptions, any party
may (a) extend the time for performance of any obligations
or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other
party contained in the merger agreement or in any document
delivered pursuant to the merger agreement or (c) waive
compliance by another party with any of the agreements or
conditions contained in the merger agreement. Any agreement by a
party to an extension or waiver must be in writing.
52
THE
COMPANIES
Illumina,
Inc.
Illumina, Inc. develops and markets next generation tools for
the large-scale analysis of genetic variation and function.
Illumina has developed a comprehensive line of products designed
to provide the performance, throughput, cost effectiveness and
flexibility necessary to enable researchers in the life sciences
and pharmaceutical industries to perform the billions of tests
necessary to extract medically valuable information from
advances in genomics. This information is expected to correlate
genetic variation and gene function with particular disease
states, enhancing drug discovery, allowing diseases to be
detected earlier and more specifically, and permitting better
choices of drugs for individual patients.
Illumina, a Delaware corporation, was founded in 1998 in
San Diego, California. The company completed its initial
public offering and was listed on NASDAQ under the symbol
ILMN in July 2000.
Additional information about Illumina and its subsidiaries is
included in documents incorporated by reference into this
document. See the section entitled Where You Can Find More
Information.
The principal executive office of Illumina is located at 9885
Towne Centre Drive, San Diego, California,
92121-1975.
Callisto
Acquisition Corp.
Callisto Acquisition Corp., is a direct, wholly-owned subsidiary
of Illumina that was incorporated in the State of Delaware on
November 3, 2006. Callisto Acquisition Corp. does not
engage in any operations and exists solely to facilitate the
merger.
Solexa,
Inc.
Solexa, Inc. develops and commercializes genetic analysis
technologies. Solexas platform is expected to support many
types of genetic analyses, including whole genome resequencing,
gene expression analysis and small RNA analysis. Solexa believes
that this technology, which can potentially generate over a
billion bases of DNA sequence from a single experiment with a
single sample preparation, will dramatically reduce the cost,
and improve the practicality, of human resequencing relative to
conventional technologies. Solexa commenced commercial shipment
of its first-generation genetic analysis system, which includes
the 1G Genome Analyzer, in the second quarter of 2006.
Solexas longer-term goal is to further reduce the cost of
human resequencing to a few thousand dollars for use in a wide
range of applications from basic research through clinical
diagnostics.
Solexa, a Delaware corporation, was founded in 1992 in Hayward,
California, as Lynx Therapeutics, Inc. The name of the company
was changed from Lynx Therapeutics, Inc. to Solexa, Inc. on
March 7, 2005 following the business combination of Lynx
Therapeutics, Inc. and Solexa Limited, a privately held company
registered in England and Wales. Solexa Limited became a
wholly-owned subsidiary of Lynx as a result of the transaction
and Lynx Therapeutics, Inc. changed its name to Solexa,
Inc. Solexa began trading on the Nasdaq SmallCap Market
under the symbol SLXA in March 2005 and was listed
under the symbol LYNX prior to that time. In
February 2006, Solexas listing was transferred to NASDAQ.
Additional information about Solexa and its subsidiaries is
included in documents incorporated by reference into this
document. See the section entitled Where You Can Find More
Information.
The principal executive office of Solexa is located at 25861
Industrial Boulevard, Hayward, California, 94545.
53
UNAUDITED
PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed statements of
operations for the nine months ended October 1, 2006 and
the year ended January 1, 2006, and the unaudited pro forma
combined condensed balance sheet as of October 1, 2006, are
presented herein. Illuminas fiscal year consists of 52 or
53 weeks ending the Sunday closest to December 31,
with quarters of 13 or 14 weeks ending the Sunday closest
to March 31, June 30, and September 30. The
unaudited pro forma combined condensed statements of operations
for the nine months ended October 1, 2006 and the year
ended January 1, 2006 combine the historical results of
Illumina and Solexa and give effect to the merger as if it had
occurred on January 3, 2005. The unaudited pro forma
combined condensed statement of operations for the year ended
January 1, 2006 also gives effect to Illuminas April
2005 acquisition of CyVera Corporation, which we refer to as
CyVera, as if it had occurred on January 3, 2005. The
unaudited pro forma combined condensed balance sheet combines
the unaudited condensed balance sheets of Illumina and Solexa
and gives effect to the merger as if it had been completed on
October 1, 2006.
The unaudited pro forma combined condensed financial statements
presented are based on the assumptions and adjustments described
in the accompanying notes. The unaudited pro forma combined
condensed financial statements are presented for illustrative
purposes and do not purport to represent what the financial
position or results of operations would actually have been if
the merger occurred as of the dates indicated or what such
financial position or results would be for any future periods.
The unaudited pro forma combined condensed financial statements
are based upon the respective historical consolidated financial
statements of Illumina and Solexa, and should be read in
conjunction with:
|
|
|
|
|
the accompanying notes to the unaudited pro forma combined
condensed financial statements;
|
|
|
|
the separate historical financial statements of Illumina as of
and for the three and nine months ended October 1, 2006
included in Illuminas Quarterly Report on
Form 10-Q
for the three and nine months ended October 1, 2006, which
is incorporated by reference into this document;
|
|
|
|
the separate historical financial statements of Illumina as of
and for the year ended January 1, 2006 included in
Illuminas Annual Report on
Form 10-K
for the year ended January 1, 2006, which is incorporated
by reference into this document;
|
|
|
|
the separate historical financial statements of Solexa as of and
for the three and nine months ended September 30, 2006
included in Solexas Quarterly Report on
Form 10-Q
for the three and nine months ended September 30, 2006,
which is incorporated by reference into this document; and
|
|
|
|
the separate historical financial statements of Solexa as of and
for the year ended December 31, 2005 included in
Solexas Annual Report on
Form 10-K
for the year ended December 31, 2005, which is incorporated
by reference into this document.
|
The unaudited pro forma combined condensed financial information
was prepared using the purchase method of accounting. Based upon
the terms of the merger and other factors, such as the
composition of the combined companys board and senior
management, Illumina is treated as the acquiror of Solexa for
both legal and accounting purposes. Accordingly, we have
adjusted the historical consolidated financial information to
give effect to the impact of the consideration issued in
connection with the merger.
The unaudited pro forma combined condensed statements of
operations include certain purchase accounting adjustments,
including items expected to have a continuing impact on the
combined results. The unaudited pro forma combined condensed
statements of operations do not include the impact of any
revenue, cost or other operating synergies that may result from
the merger or any related restructuring costs. Cost savings, if
achieved, could result from elimination of redundant spending
such as public company costs, headcount and consolidated
material sourcing.
In the unaudited pro forma combined condensed balance sheet,
Illuminas cost to acquire Solexa has been allocated to the
assets acquired and liabilities assumed based upon
managements preliminary estimate of their respective fair
values as of the date of the merger. Any differences between
fair value of the consideration
54
issued and the fair value of the assets and liabilities acquired
will be recorded as goodwill. The amounts allocated to acquired
assets and liabilities in the unaudited pro forma combined
condensed financial statements are based on managements
preliminary internal valuation estimates. Definitive allocations
will be performed and finalized after the closing of the merger.
Accordingly, the preliminary purchase price allocation
adjustments reflected in the following unaudited pro forma
combined condensed financial statements are preliminary, have
been made solely for the purpose of preparing these statements
and are subject to revision based on a final determination of
fair values after the closing of the merger.
The unaudited pro forma combined condensed financial statements
do not reflect the impact of financing, liquidity or other
balance sheet repositioning that may be undertaken in connection
with or subsequent to the merger. For example, on
November 12, 2006, Illumina entered into a definitive
securities purchase agreement with Solexa in which Illumina
agreed to invest approximately $50 million in Solexa in
exchange for newly issued shares of Solexa common stock. The
purchase by Illumina of shares of Solexa common stock as
contemplated by the securities purchase agreement was completed
on November 13, 2006. Pursuant to the terms of the
securities purchase agreement, Illumina agreed to purchase
5,154,639 newly issued shares of Solexa common stock for
$9.70 per share, representing aggregate cash consideration
of approximately $50 million. The effect of this investment
has not been included in the accompanying pro forma combined
condensed financial statements and notes thereto.
The unaudited pro forma combined condensed financial statements
do not reflect certain amounts resulting from the merger because
we consider them to be of a non-recurring nature. Such amounts
may be comprised of restructuring and other exit and
non-recurring costs related to the integration of the Illumina
and Solexa businesses. To the extent the exit costs relate to
the Solexa business and meet certain criteria, they will be
recognized in the opening balance sheet in accordance with
Emerging Issues Task Force (EITF) Issue No
95-3,
Recognition of Liabilities in Connection with a Purchase
Business Combination. To the extent that such costs relate
to the Illumina business, they will not meet the criteria in
EITF Issue No
95-3, and
will be recorded as expenses pursuant to Statement of Financial
Accounting Standards (SFAS) No. 146, Accounting for
Costs Associated with Exit or Disposal Activities. Illumina
and Solexa have just recently begun collecting information in
order to formulate detailed integration plans to deliver planned
synergies. However, at this time, the status of the integration
plans and the related merger-related costs are too uncertain to
include in the pro forma financial information.
Based on Illuminas preliminary review of Solexas
summary of significant accounting policies disclosed in
Solexas financial statements, the nature and amount of any
adjustments to the historical financial statements of Solexa to
conform their accounting policies to those of Illumina are not
expected to be significant. Upon consummation of the merger,
further review of Solexas accounting policies and
financial statements may result in required revisions to
Solexas policies and classifications to conform to such
policies and classifications of Illumina.
55
COMBINED
PRO FORMA FINANCIAL DATA
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2006
|
|
|
Pro Forma
|
|
|
|
|
|
Pro Forma
|
|
|
|
Illumina
|
|
|
Solexa
|
|
|
Adjustments
|
|
|
Notes
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenue
|
|
$
|
124,151
|
|
|
$
|
2,434
|
|
|
$
|
|
|
|
|
|
|
|
$
|
126,585
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
39,225
|
|
|
|
2,167
|
|
|
|
2,110
|
|
|
|
(a
|
)
|
|
|
43,634
|
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
(c
|
)
|
|
|
|
|
Manufacturing startup and excess
capacity costs
|
|
|
|
|
|
|
2,110
|
|
|
|
(2,110
|
)
|
|
|
(a
|
)
|
|
|
|
|
Research and development expenses
|
|
|
24,547
|
|
|
|
17,621
|
|
|
|
1,463
|
|
|
|
(c
|
)
|
|
|
43,631
|
|
Selling, general and
administrative expenses
|
|
|
39,143
|
|
|
|
12,902
|
|
|
|
(385
|
)
|
|
|
(b
|
)
|
|
|
53,831
|
|
|
|
|
|
|
|
|
|
|
|
|
2,171
|
|
|
|
(c
|
)
|
|
|
|
|
Amortization of acquired
identifiable intangible assets
|
|
|
|
|
|
|
|
|
|
|
1,710
|
|
|
|
(b
|
)
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
21,236
|
|
|
|
(32,366
|
)
|
|
|
(5,091
|
)
|
|
|
|
|
|
|
(16,221
|
)
|
Interest and other income, net
|
|
|
3,420
|
|
|
|
2,072
|
|
|
|
|
|
|
|
|
|
|
|
5,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
24,656
|
|
|
|
(30,294
|
)
|
|
|
(5,091
|
)
|
|
|
|
|
|
|
(10,729
|
)
|
Provision for income taxes (income
tax benefit)
|
|
|
1,830
|
|
|
|
(1,292
|
)
|
|
|
(810
|
)
|
|
|
(d
|
)
|
|
|
(272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
22,826
|
|
|
|
(29,002
|
)
|
|
|
(4,281
|
)
|
|
|
|
|
|
|
(10,457
|
)
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common
stockholders
|
|
$
|
22,826
|
|
|
$
|
(29,002
|
)
|
|
$
|
(4,281
|
)
|
|
|
|
|
|
$
|
(10,457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share,
diluted
|
|
$
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating net
income (loss)
per share, basic
|
|
|
43,766
|
|
|
|
|
|
|
|
12,449
|
|
|
|
(e
|
)
|
|
|
56,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating net
income (loss)
per share, diluted
|
|
|
48,004
|
|
|
|
|
|
|
|
8,211
|
|
|
|
(e
|
)
|
|
|
56,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements
56
UNAUDITED
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2006
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illumina
|
|
|
2005
|
|
|
Pro Forma
|
|
|
|
|
|
Pro Forma
|
|
|
|
Illumina
|
|
|
CyVera(1)
|
|
|
Combined
|
|
|
Solexa
|
|
|
Adjustments
|
|
|
Notes
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenue
|
|
$
|
73,501
|
|
|
$
|
|
|
|
$
|
73,501
|
|
|
$
|
4,150
|
|
|
$
|
|
|
|
|
|
|
|
$
|
77,651
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
23,181
|
|
|
|
|
|
|
|
23,181
|
|
|
|
7,066
|
|
|
|
306
|
|
|
|
(c
|
)
|
|
|
30,553
|
|
Research and development expenses
|
|
|
27,809
|
|
|
|
785
|
|
|
|
28,594
|
|
|
|
17,294
|
|
|
|
3,381
|
|
|
|
(c
|
)
|
|
|
49,269
|
|
Selling, general and
administrative expenses
|
|
|
28,158
|
|
|
|
299
|
|
|
|
28,457
|
|
|
|
12,030
|
|
|
|
(464
|
)
|
|
|
(b
|
)
|
|
|
45,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,019
|
|
|
|
(c
|
)
|
|
|
|
|
Amortization of acquired
identifiable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,280
|
|
|
|
(b
|
)
|
|
|
2,280
|
|
Acquired in-process research and
development
|
|
|
15,800
|
|
|
|
|
|
|
|
15,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,800
|
|
Restructuring charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(21,447
|
)
|
|
|
(1,084
|
)
|
|
|
(22,531
|
)
|
|
|
(32,573
|
)
|
|
|
(10,522
|
)
|
|
|
|
|
|
|
(65,626
|
)
|
Interest and other income, net
|
|
|
573
|
|
|
|
(12
|
)
|
|
|
561
|
|
|
|
414
|
|
|
|
|
|
|
|
|
|
|
|
975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(20,874
|
)
|
|
|
(1,096
|
)
|
|
|
(21,970
|
)
|
|
|
(32,159
|
)
|
|
|
(10,522
|
)
|
|
|
|
|
|
|
(64,651
|
)
|
Income tax benefit related to
research and development costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,999
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(20,874
|
)
|
|
|
(1,096
|
)
|
|
|
(21,970
|
)
|
|
|
(29,160
|
)
|
|
|
(10,522
|
)
|
|
|
|
|
|
|
(61,652
|
)
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(522
|
)
|
|
|
|
|
|
|
|
|
|
|
(522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common
stockholders
|
|
$
|
(20,874
|
)
|
|
$
|
(1,096
|
)
|
|
$
|
(21,970
|
)
|
|
$
|
(29,682
|
)
|
|
$
|
(10,522
|
)
|
|
|
|
|
|
$
|
(62,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and
diluted
|
|
$
|
(0.52
|
)
|
|
|
|
|
|
$
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating net
loss per share, basic and diluted
|
|
|
40,147
|
|
|
|
|
|
|
|
40,147
|
|
|
|
|
|
|
|
12,449
|
|
|
|
(e
|
)
|
|
|
52,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects the results of CyVeras operations from
January 3, 2005 until Illuminas acquisition of CyVera
on April 8, 2005. |
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements
57
UNAUDITED
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2006
|
|
|
Pro Forma
|
|
|
|
|
|
Pro Forma
|
|
|
|
Illumina
|
|
|
Solexa
|
|
|
Adjustments
|
|
|
Notes
|
|
|
Combined
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
44,166
|
|
|
$
|
47,051
|
|
|
$
|
(9,550
|
)
|
|
|
(g
|
)
|
|
$
|
81,667
|
|
Short-term investments
|
|
|
125,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,776
|
|
Accounts receivable, net
|
|
|
29,045
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
29,444
|
|
Inventory, net
|
|
|
19,397
|
|
|
|
3,669
|
|
|
|
|
|
|
|
|
|
|
|
23,066
|
|
Prepaid expenses and other current
assets
|
|
|
2,519
|
|
|
|
5,194
|
|
|
|
|
|
|
|
|
|
|
|
7,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
220,903
|
|
|
|
56,313
|
|
|
|
(9,550
|
)
|
|
|
|
|
|
|
267,666
|
|
Property and equipment, net
|
|
|
25,388
|
|
|
|
4,955
|
|
|
|
|
|
|
|
|
|
|
|
30,343
|
|
Goodwill
|
|
|
2,125
|
|
|
|
22,529
|
|
|
|
266,896
|
|
|
|
(h
|
)
|
|
|
291,550
|
|
Intangible and other assets, net
|
|
|
8,061
|
|
|
|
3,738
|
|
|
|
19,517
|
|
|
|
(i
|
)
|
|
|
31,316
|
|
Acquired in-process research and
development
|
|
|
|
|
|
|
|
|
|
|
254,600
|
|
|
|
(f
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(254,600
|
)
|
|
|
(f
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
256,477
|
|
|
$
|
87,535
|
|
|
$
|
276,863
|
|
|
|
|
|
|
$
|
620,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
$
|
33,362
|
|
|
$
|
8,689
|
|
|
$
|
|
|
|
|
|
|
|
$
|
42,051
|
|
Current portion of long-term debt
|
|
|
94
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
33,456
|
|
|
|
8,721
|
|
|
|
|
|
|
|
|
|
|
|
42,177
|
|
Long-term debt, net of current
portion
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Deferred rent and lease obligations
|
|
|
1,052
|
|
|
|
1,612
|
|
|
|
|
|
|
|
|
|
|
|
2,664
|
|
Deferred gain on sale of land and
building
|
|
|
2,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,562
|
|
Other long-term liabilities
|
|
|
8,333
|
|
|
|
2,224
|
|
|
|
|
|
|
|
|
|
|
|
10,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
45,403
|
|
|
|
12,580
|
|
|
|
|
|
|
|
|
|
|
|
57,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
465
|
|
|
|
366
|
|
|
|
(366
|
)
|
|
|
(j
|
)
|
|
|
589
|
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
(k
|
)
|
|
|
|
|
Additional paid-in capital
|
|
|
331,900
|
|
|
|
152,087
|
|
|
|
(152,087
|
)
|
|
|
(j
|
)
|
|
|
938,194
|
|
|
|
|
|
|
|
|
|
|
|
|
521,432
|
|
|
|
(k
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,862
|
|
|
|
(k
|
)
|
|
|
|
|
Accumulated other comprehensive
income
|
|
|
470
|
|
|
|
3,344
|
|
|
|
(3,344
|
)
|
|
|
(j
|
)
|
|
|
470
|
|
Accumulated deficit
|
|
|
(121,761
|
)
|
|
|
(80,842
|
)
|
|
|
80,842
|
|
|
|
(j
|
)
|
|
|
(376,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(254,600
|
)
|
|
|
(f
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
211,074
|
|
|
|
74,955
|
|
|
|
276,863
|
|
|
|
|
|
|
|
562,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
256,477
|
|
|
$
|
87,535
|
|
|
$
|
276,863
|
|
|
|
|
|
|
$
|
620,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma common shares
outstanding(l)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Financial Statements
58
Notes to
Unaudited Pro Forma Combined Condensed Financial
Statements
On November 12, 2006, Illumina entered into a definitive
merger agreement with Solexa for a
stock-for-stock
merger transaction. Under the terms of the merger agreement,
which has been unanimously approved by the board of directors of
each company, Solexa stockholders will receive shares of
Illumina common stock in exchange for the shares of Solexa
common stock they hold. The exchange ratio will be determined by
dividing $14.00 by the volume weighted average trading price of
Illumina common stock as reported by NASDAQ for ten randomly
selected trading days during the
20-day
trading period ending five trading days prior to the closing of
the merger, which we refer to as the Illumina Average Price,
which represents total consideration of approximately
$616 million. If the Illumina Average Price is equal to or
greater than $47.30, then the exchange ratio will be fixed at
0.296 of a share of Illumina common stock for each share of
Solexa common stock, and if the Illumina Average Price is equal
to or less than $40.70, then the exchange ratio will be fixed at
0.344 of a share of Illumina common stock for each share of
Solexa common stock.
As of November 12, 2006, there were approximately
36.6 million shares of Solexa common stock outstanding.
Based on these amounts and the terms outlined above, Solexa
stockholders will receive a total of approximately
12.2 million shares of Illumina common stock. The exact
number of shares to be issued will depend on the number of
related Solexa shares outstanding at the closing of the merger.
In addition, certain executives at Solexa will receive change in
control bonuses totaling approximately $9.0 million upon
consummation of the merger. These bonuses will be paid in shares
of Illumina common stock and are based on a percentage of the
amount by which the consideration received by Solexa
stockholders as a direct result of the change in control exceeds
the sum of $150 million plus the aggregate gross proceeds
received by Solexa through sales of equity securities after the
effective date of such bonus arrangement. Assuming a market
price of $41.8950 per share of Illumina common stock at
closing, total equity consideration received in the merger of
approximately $600 million, which includes the fair market
value of vested stock options, warrants and restricted stock
assumed, and that executive bonuses will equal an aggregate of
2% of consideration in excess of $150 million, the total
shares issuable in connection with such change in control
bonuses will be approximately 0.2 million shares of
Illumina common stock.
As of November 12, 2006, there were approximately
12.4 million Solexa shares estimated to be issuable upon
exercise of outstanding options, warrants and restricted stock.
These shares will be converted to Illumina shares at the closing
date of the merger. Total estimated merger consideration also
includes approximately $84.9 million representing the fair
market value of the vested options, warrants and restricted
stock assumed. Illumina also expects to recognize approximately
$17.4 million of non-cash stock-based compensation expense
related to unvested stock options at the time the acquisition is
consummated. This expense is expected to be recognized beginning
from the time the acquisition is consummated over a
weighted-average period of approximately two years. These
unvested awards were valued using the following assumptions:
|
|
|
|
|
Interest rate
|
|
|
4.70 5.10
|
%
|
Volatility
|
|
|
58.50 59.85
|
%
|
Expected life
|
|
|
0.4 4.18 yea
|
rs
|
Expected dividend yield
|
|
|
0
|
%
|
The purchase price of the acquisition is approximately
$616 million estimated as follows (in thousands):
|
|
|
|
|
Fair market value of securities
issued
|
|
$
|
512,556
|
|
Transaction costs
|
|
|
9,550
|
|
Fair market value of securities
issued for change in control bonuses
|
|
|
9,000
|
|
Fair market value of vested stock
options, warrants and restricted stock assumed
|
|
|
84,862
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
615,968
|
|
|
|
|
|
|
59
Notes to
Unaudited Pro Forma Combined Condensed Financial
Statements (Continued)
The allocation of the preliminary purchase price is summarized
below (in thousands):
|
|
|
|
|
Current assets
|
|
$
|
56,313
|
|
Property, plant and equipment, net
|
|
|
4,955
|
|
Other assets
|
|
|
455
|
|
Current liabilities
|
|
|
(8,721)
|
|
Other long-term liabilities
|
|
|
(3,859)
|
|
|
|
|
|
|
|
|
|
|
|
Net tangible assets acquired
|
|
|
49,143
|
|
|
|
|
|
|
Identifiable intangible assets
(core technology)
|
|
|
22,800
|
|
In-process research and development
|
|
|
254,600
|
|
Goodwill
|
|
|
289,425
|
|
|
|
|
|
|
|
|
|
|
|
Total net assets acquired
|
|
$
|
615,968
|
|
|
|
|
|
|
The value of the Illumina shares used in determining the
purchase price was $41.8950 per share based on the average
of the closing price of Illumina common stock for a range of
four trading days, including two days prior to and two days
subsequent to the announcement of the offer on November 13,
2006.
The allocation of the purchase price is preliminary. The final
determination of the purchase price allocation will be based on
the fair values of the assets acquired, including fair values of
acquired in-process research and development (IPR&D) and
other identifiable intangibles, and the fair value of
liabilities assumed as of the date that the acquisition is
consummated. The excess of the purchase price over the fair
value of assets and liabilities acquired is allocated to
goodwill. The purchase price allocation will remain preliminary
until Illumina completes its valuation of significant
identifiable intangible assets acquired (including IPR&D),
evaluates integration plans to be undertaken following the
consummation of the merger and determines the fair values of
other assets and liabilities acquired. The final determination
of the purchase price allocation is expected to be completed as
soon as practicable after the consummation of the merger. The
final amounts allocated to assets and liabilities acquired could
cause material differences in the information presented in the
unaudited pro forma combined condensed financial statements.
The amount allocated to acquired IPR&D represents an
estimate of the fair value of acquired, to-be-completed research
projects. The values of the research projects will be determined
by estimating the costs to develop the acquired technology into
commercially viable products, estimating the resulting net cash
flows from the projects, and discounting the net cash flows to
their present value. These cash flows will be estimated by
forecasting total revenues expected from these products and then
deducting appropriate operating expenses, cash flow adjustments
and contributory asset returns to establish a forecast of net
cash flows arising from the in-process technology. These cash
flows will be substantially reduced to take into account the
time value of money and the risks associated with the inherent
difficulties and uncertainties given the projected stage of
development of these projects at closing. For purposes of the
unaudited pro forma combined condensed balance sheet as of
October 1, 2006, $254.6 million of the total purchase
price has been allocated to acquired IPR&D which relates to
products that are not expected to have reached technological
feasibility as of the closing date and have no alternative
future use. At the announcement date, Solexas ongoing
research and development initiatives were primarily involved
with the development of its genetic analysis platform for
sequencing and expression profiling. These projects were
approximately 80% to 90% complete at the announcement date. As
of the date of expected closing of the merger, these projects
are not expected to have reached technological feasibility and
will have no alternative future use. Accordingly, the amounts
allocated to IPR&D are expected to be charged to the
statement of operations in the period the acquisition is
consummated.
60
Notes to
Unaudited Pro Forma Combined Condensed Financial
Statements (Continued)
Pro
Forma Statement of Operations Adjustments
(a) To reclassify Solexa manufacturing
start-up and
excess capacity costs of $2.1 million for the nine months
ended September 30, 2006 to cost of revenue to conform to
Illuminas presentation.
(b) Reflects amortization of $1.7 million and
$2.3 million for the nine months ended October 1, 2006
and the year ended January 1, 2006, respectively, for an
identifiable intangible asset related to core technology based
on the estimated fair value assigned to this asset at the date
of acquisition, assuming an estimated useful life of ten years,
as well as the elimination of historical Solexa intangible
amortization of $0.4 million and $0.5 million for the
nine months ended September 30, 2006 and the year ended
December 31, 2005, respectively.
(c) Reflects non-cash stock compensation expense of
$6.6 million and $8.7 million for the nine months
ended October 1, 2006 and the year ended January 1,
2006, respectively, related to the amortization of the fair
value of the stock options unvested at the time the acquisition
is consummated, as well as the elimination of historical Solexa
non-cash stock compensation expense of $2.8 million for the
nine months ended October 1, 2006.
(d) Reflects the income tax impact of Solexas net
loss into the combined condensed consolidated pro forma
statement of operations for the nine months ended
October 1, 2006, which resulted in lower United States and
California taxable income and alternative minimum tax expense
for the period presented.
(e) The pro forma adjustment to shares used to calculate
basic net income (loss) per share is comprised as follows (in
thousands, except assumed exchange ratio):
|
|
|
|
|
Solexa common shares outstanding
as of November 12, 2006
|
|
|
36,611
|
|
Assumed exchange ratio
|
|
|
0.334
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Illumina shares to be
issued in exchange for Solexa shares
|
|
|
12,234
|
|
Estimated Illumina shares issued
as change in control bonuses
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
Total estimated Illumina shares to
be issued in connection with the acquisition of Solexa
|
|
|
12,449
|
|
|
|
|
|
|
The pro forma adjustment to shares used for diluted net loss per
share is comprised as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Year Ended
|
|
|
|
October 1,
|
|
|
January 1,
|
|
|
|
2006
|
|
|
2006
|
|
|
Shares to be issued in connection
with the acquisition of Solexa
|
|
|
12,449
|
|
|
|
12,449
|
|
Less: Illumina anti-dilutive shares
|
|
|
(4,238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to calculate pro forma
diluted net income (loss) per share
|
|
|
8,211
|
|
|
|
12,449
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma Balance Sheet Adjustments
(f) Reflects the portion of the purchase price allocated to
acquired IPR&D projects that, as of the closing date of the
merger, will not have reached technological feasibility and have
no future alternative use. The preliminary estimate of fair
value of acquired IPR&D is $254.6 million. The amount
of acquired IPR&D is subject to change and will be finalized
upon consummation of the transaction and completion of a
valuation analysis of Solexas assets and liabilities.
Because this expense is directly attributable to the acquisition
and will not have a continuing impact in excess of one year, the
impact of the acquired IPR&D is not reflected in
61
Notes to
Unaudited Pro Forma Combined Condensed Financial
Statements (Continued)
the unaudited pro forma combined condensed statements of
operations. However, this item will be recorded as an expense in
the period that the acquisition is completed. For every
$10.0 million increase to the amount allocated to acquired
IPR&D, there will be a $10.0 million increase to net
loss in the period in which the transaction occurs.
Additionally, goodwill will also decrease by $10.0 million.
(g) Reflects estimated transaction costs consisting
primarily of investment banker fees, legal and professional fees
of approximately $9.6 million.
(h) Reflects the elimination of historical Solexa goodwill
of $22.5 million and the addition of goodwill from the
preliminary purchase price allocation of $289.4 million.
(i) Reflects the portion of the purchase price allocated to
an acquired intangible asset representing core technology of
$22.8 million, less Solexas historical net intangible
assets of $3.3 million. The amount of this intangible asset
is subject to change and will be finalized upon consummation of
the merger and completion of a valuation analysis.
(j) Reflects the elimination of historical Solexa
stockholders equity.
(k) Reflects the issuance of Illumina common stock,
including common stock issued related to change in control
bonuses, and the fair value of Solexas vested stock
options.
(l) Reflects the pro forma shares outstanding as of
October 1, 2006 calculated as follows (in thousands):
|
|
|
|
|
Historical Illumina common shares
outstanding as of October 1, 2006
|
|
|
46,506
|
|
Shares assumed issued in
connection with the acquisition of Solexa
|
|
|
12,449
|
|
|
|
|
|
|
Pro forma common shares
outstanding as of October 1, 2006
|
|
|
58,955
|
|
|
|
|
|
|
62
THE
ILLUMINA SPECIAL MEETING
Date,
Time and Place
The special meeting of Illumina stockholders will be held at the
[ ] on [ ], 2007 at
[ ] a.m., local time.
Purpose
of the Illumina Special Meeting
At the Illumina special meeting, stockholders will be asked to:
|
|
|
|
|
consider and vote on a proposal to approve the issuance of
Illumina common stock in connection with the merger;
|
|
|
|
vote upon an adjournment of the Illumina special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes for the foregoing proposal; and
|
|
|
|
transact any other business that may properly be brought before
the Illumina special meeting or any adjournments or
postponements thereof.
|
Illumina
Record Date; Stock Entitled to Vote
Only Illumina stockholders of record at the close of business on
[ ], 200[ ], the Illumina
record date for the Illumina special meeting, will be entitled
to notice of, and to vote at, the Illumina special meeting or
any adjournments or postponements thereof.
On the Illumina record date, there were a total of
[ ] shares of Illumina common stock
outstanding and entitled to vote at the Illumina special
meeting. Illumina stockholders will have one vote for each share
of Illumina common stock that they owned on the Illumina record
date, exercisable in person or through the Internet or by
telephone or by a properly executed and delivered proxy with
respect to the Illumina special meeting.
On the record date, directors and executive officers of Illumina
and their affiliates owned and were entitled to
vote [ ] shares of Illumina common
stock, or approximately [ ]% of the shares of
Illumina common stock outstanding on that date. We currently
expect that Illuminas directors and executive officers
will vote their shares in favor of the issuance of Illumina
common stock in connection with the merger, although none of
them has entered into any agreements obligating them to do so.
Quorum
The holders of shares having a majority of the voting power of
the common stock of Illumina issued and outstanding and entitled
to vote thereat must be present or represented by proxy to
constitute a quorum for the transaction of business at the
special meeting. All shares of Illumina common stock represented
at the Illumina special meeting, including abstentions and
broker non-votes, will be treated as present for purposes of
determining the presence or absence of a quorum for all matters
for consideration at the Illumina special meeting.
Required
Vote
The proposals require different percentages of votes in order to
approve them:
|
|
|
|
|
The issuance of Illumina common stock to Solexa stockholders,
approval of which is necessary to complete the merger, requires
approval by an affirmative vote of holders of a majority of the
Illumina common stock present or represented and entitled to
vote on the proposal.
|
|
|
|
Approval of the proposal to adjourn the Illumina special
meeting, if necessary, for the purpose of soliciting additional
proxies requires that the votes cast favoring the proposal
exceed the votes cast opposing the proposal.
|
63
Abstentions
Abstentions will be counted toward the tabulations of votes cast
on proposals presented to Illumina stockholders and will have
the same effect as negative votes, whereas broker non-votes will
not be counted for purposes of determining whether a proposal
has been approved.
Voting of
Proxies
A proxy card is enclosed for your use. Illumina requests that
you sign the accompanying proxy and return it promptly in the
enclosed postage-paid envelope. When the accompanying proxy is
returned properly executed, the shares of Illumina common stock
represented by it will be voted at the Illumina special meeting
or any adjournment thereof in accordance with the instructions
contained in the proxy.
If a proxy is returned without an indication as to how the
shares of Illumina common stock represented are to be voted with
regard to a particular proposal, the Illumina common stock
represented by the proxy will be voted in favor of each such
proposal. At the date hereof, management has no knowledge of any
business that will be presented for consideration at the special
meeting and which would be required to be set forth in this
joint proxy statement or the related proxy card other than the
matters set forth in the Notice of Special Meeting of
Stockholders. If any other matter is properly presented at the
special meeting for consideration, it is intended that the
persons named in the enclosed form of proxy and acting
thereunder will vote in accordance with their best judgment on
such matter.
Your vote is important. Accordingly, please sign and return
the enclosed proxy card whether or not you plan to attend the
Illumina special meeting in person.
Shares Held
in Street Name
If you hold your shares in a stock brokerage account or if your
shares are held by a bank or nominee (that is, in street name),
you must provide the record holder of your shares with
instructions on how to vote your shares. Please follow the
voting instructions provided by your bank or broker. Please note
that you may not vote shares held in street name by returning a
proxy card directly to Illumina or by voting in person at your
stockholders meeting unless you provide a legal
proxy, which you must obtain from your bank or broker.
Further, brokers who hold shares of Illumina common stock on
behalf of their customers may not give a proxy to Illumina to
vote those shares without specific instructions from their
customers.
If you are an Illumina stockholder and you do not instruct your
broker on how to vote your shares, your broker may not vote your
shares on the proposal to approve the issuance of shares of
Illumina common stock in the merger, which will have no effect
on the vote on this proposal.
Revocability
of Proxies
You have the power to revoke your proxy at any time before your
proxy is voted at the Illumina special meeting. You can revoke
your proxy in one of three ways:
|
|
|
|
|
send a signed notice of revocation;
|
|
|
|
grant a new, valid proxy bearing a later date; or
|
|
|
|
if you are a holder of record, you can attend the Illumina
special meeting and vote in person, which will automatically
cancel any proxy previously given, or you can revoke your proxy
in person, but your attendance alone will not revoke any proxy
that you have previously given.
|
If you choose either of the first two methods, you must submit
your notice of revocation or your new proxy to Illuminas
Secretary at 9885 Towne Centre Drive, San Diego,
California,
92121-1975,
no later than the beginning of the Illumina special meeting.
64
Solicitation
of Proxies
In accordance with the merger agreement, generally the cost of
proxy solicitation and other expenses incurred in connection
with the filing of the registration statement, of which this
document forms a part, with the SEC and the printing and mailing
of this document will be paid by the party actually incurring
such cost and other expenses. In addition to the use of the
mail, proxies may be solicited by officers and directors and
regular employees of Illumina, without additional remuneration,
by personal interview, telephone, facsimile or otherwise.
Illumina will also request brokerage firms, nominees, custodians
and fiduciaries to forward proxy materials to the beneficial
owners of shares held of record on the record date and will
provide customary reimbursement to such firms for the cost of
forwarding these materials. Illumina has retained InvestorCom,
Inc. to assist in its solicitation of proxies and has agreed to
pay InvestorCom, Inc. approximately $5,500, plus reasonable
expenses, for these services.
65
THE
SOLEXA SPECIAL MEETING
Date,
Time and Place
The special meeting of Solexa stockholders will be held at 25861
Industrial Boulevard, Hayward, California, 94545, on
[ ], 2007 at [ ] a.m.,
local time.
Purpose
of the Solexa Special Meeting
At the Solexa special meeting, stockholders will be asked to:
|
|
|
|
|
consider and vote on a proposal to approve and adopt the merger
agreement;
|
|
|
|
vote upon an adjournment of the Solexa special meeting, if
necessary, to solicit additional proxies if there are not
sufficient votes for the foregoing proposal; and
|
|
|
|
transact any other business that may properly be brought before
the Solexa special meeting or any adjournments or postponements
thereof.
|
Solexa
Record Date; Stock Entitled to Vote
Only Solexa stockholders of record at the close of business on
[ ], 200[ ], the Solexa record
date for the Solexa special meeting, will be entitled to notice
of, and to vote at, the Solexa special meeting or any
adjournments or postponements thereof.
On the Solexa record date, there were a total of
[ ] shares of Solexa common stock
outstanding and entitled to vote at the Solexa special meeting.
Solexa stockholders will have one vote for each share of Solexa
common stock that they owned on the Solexa record date,
exercisable in person or by telephone or by a properly executed
and delivered proxy with respect to the Solexa special meeting.
On the record date, directors and executive officers of Solexa
and their affiliates owned and were entitled to
vote [ ] shares of Solexa common
stock, or approximately [ ]% of the shares of
Solexa common stock outstanding on that date. We currently
expect that Solexas directors and executive officers will
vote their shares in favor of the merger, although none of them
has entered into any agreements obligating them to do so.
Quorum
A majority of the votes entitled to be cast by the shares
entitled to vote must be present or represented by proxy to
constitute a quorum for action on the matters to be voted upon
at the special meeting. All shares of Solexa common stock
represented at the Solexa special meeting, including abstentions
and broker non-votes, will be treated as present for purposes of
determining the presence or absence of a quorum for all matters
voted on at the Solexa special meeting.
Required
Vote
The proposals require different percentages of votes in order to
approve them:
|
|
|
|
|
Approval and adoption of the merger agreement requires the
affirmative vote of holders of a majority of the outstanding
shares of Solexa common stock entitled to vote on the proposal.
|
|
|
|
Approval of the proposal to adjourn the Solexa special meeting,
if necessary, for the purpose of soliciting additional proxies
requires that the votes cast favoring the proposal exceed the
votes cast opposing the proposal.
|
66
Abstentions
Abstentions will be counted toward the tabulations of votes cast
on proposals presented to Solexa stockholders and will have the
same effect as votes against the proposal to approve and adopt
the merger agreement.
Voting of
Proxies
A proxy card is enclosed for your use. Solexa requests that you
sign the accompanying proxy and return it promptly in the
enclosed postage-paid envelope. When the accompanying proxy is
returned properly executed, the shares of Solexa common stock
represented by it will be voted at the Solexa special meeting or
any adjournment thereof in accordance with the instructions
contained in the proxy.
If a proxy is returned without an indication as to how the
shares of Solexa common stock represented are to be voted with
regard to a particular proposal, the Solexa common stock
represented by the proxy will be voted in favor of each such
proposal. A proxy may confer discretionary authority to vote
with respect to any matter presented at the Solexa special
meeting, except as set forth in the proxy and except for matters
proposed by a stockholder who notifies Solexa not later than the
close of business on the tenth day following the day on which
the Notice of Special Meeting of Stockholders was mailed. At the
date hereof, management has no knowledge of any business that
will be presented for consideration at the special meeting and
which would be required to be set forth in this joint proxy
statement or the related proxy card other than the matters set
forth in the Notice of Special Meeting of Stockholders. If any
other matter is properly presented at the special meeting for
consideration, it is intended that the persons named in the
enclosed form of proxy and acting thereunder will vote in
accordance with their best judgment on such matter.
Your vote is important. Accordingly, please sign and return
the enclosed proxy card whether or not you plan to attend the
Solexa special meeting in person.
Shares Held
in Street Name
If you hold your shares in a stock brokerage account or if your
shares are held by a bank or nominee (that is, in street name),
you must provide the record holder of your shares with
instructions on how to vote your shares. Please follow the
voting instructions provided by your bank or broker. Please note
that you may not vote shares held in street name by returning a
proxy card directly to Solexa or by voting in person at your
stockholders meeting unless you provide a legal
proxy, which you must obtain from your bank or broker.
Further, brokers who hold shares of Solexa common stock on
behalf of their customers may not give a proxy to Solexa to vote
those shares without specific instructions from their customers.
If you are a Solexa stockholder and you do not instruct your
broker on how to vote your shares, your broker may not vote your
shares, which will have the same effect as a vote against the
proposal to approve and adopt the merger agreement.
Revocability
of Proxies
You have the power to revoke your proxy at any time before your
proxy is voted at the Solexa special meeting. You can revoke
your proxy in one of three ways:
|
|
|
|
|
send a signed notice of revocation;
|
|
|
|
grant a new, valid proxy bearing a later date; or
|
|
|
|
if you are a holder of record, you can attend the Solexa special
meeting and vote in person, which will automatically cancel any
proxy previously given, or you can revoke your proxy in person,
but your attendance alone will not revoke any proxy that you
have previously given.
|
If you choose either of the first two methods, you must submit
your notice of revocation or your new proxy to Solexas
Secretary at 25861 Industrial Boulevard, Hayward, California,
94545, no later than the beginning of the Solexa special meeting.
67
Solicitation
of Proxies
In accordance with the merger agreement, generally the cost of
proxy solicitation and other expenses incurred in connection
with the filing of the registration statement, of which this
document forms a part, with the SEC and the printing and mailing
of this document will be paid by the party actually incurring
such cost and other expenses. In addition to the use of the
mail, proxies may be solicited by officers and directors and
regular employees of Solexa, without additional remuneration, by
personal interview, telephone, facsimile or otherwise. Solexa
will also request brokerage firms, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners
of shares held of record on the record date and will provide
customary reimbursement to such firms for the cost of forwarding
these materials. Solexa has retained The Altman Group to assist
in its solicitation of proxies and has agreed to pay The Altman
Group approximately $9,000, plus reasonable expenses, for these
services.
68
COMPARATIVE
STOCK PRICES AND DIVIDENDS
For current price information, Solexa stockholders are urged to
consult publicly available sources. The table below presents the
NASDAQ closing market price for Illumina common stock and the
NASDAQ closing market price for Solexa common stock on the two
dates set forth below. The table also presents the equivalent
value of the merger consideration per share of Solexa common
stock on those dates, calculated by multiplying the closing
price of Illumina common stock on those dates by the applicable
exchange ratio as provided in the merger agreement (for a
description of the exchange ratio, see The
Merger Effect of the Merger; Consideration to be
Received in the Merger; Treatment of Solexa Stock Options and
Warrants).
|
|
|
|
|
November 10, 2006, the last trading day before the public
announcement of the signing of the merger agreement; and
|
|
|
|
November 29, 2006, the latest practicable date before the
date of this document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illumina Closing
|
|
|
Solexa
|
|
|
Equivalent per
|
|
Date
|
|
Price
|
|
|
Closing Price
|
|
|
Share Value
|
|
|
November 10, 2006
|
|
$
|
44.05
|
|
|
$
|
9.70
|
|
|
$
|
14.00
|
|
November 29, 2006
|
|
$
|
38.29
|
|
|
$
|
12.23
|
|
|
$
|
13.17
|
|
Market
Prices and Dividend Data
Illumina common stock and Solexa common stock are both traded on
NASDAQ under the symbols ILMN and SLXA,
respectively. The following tables set forth the high and low
intra-day trading prices of each companys common stock as
reported in the consolidated transaction reporting system, and
the quarterly cash dividends declared per share, for the
calendar quarters indicated.
Illumina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
10.24
|
|
|
$
|
6.50
|
|
|
$
|
0.00
|
|
Second Quarter
|
|
$
|
8.88
|
|
|
$
|
6.07
|
|
|
$
|
0.00
|
|
Third Quarter
|
|
$
|
7.72
|
|
|
$
|
4.23
|
|
|
$
|
0.00
|
|
Fourth Quarter
|
|
$
|
9.65
|
|
|
$
|
6.16
|
|
|
$
|
0.00
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
11.35
|
|
|
$
|
6.80
|
|
|
$
|
0.00
|
|
Second Quarter
|
|
$
|
12.95
|
|
|
$
|
7.90
|
|
|
$
|
0.00
|
|
Third Quarter
|
|
$
|
14.83
|
|
|
$
|
10.82
|
|
|
$
|
0.00
|
|
Fourth Quarter
|
|
$
|
16.80
|
|
|
$
|
12.76
|
|
|
$
|
0.00
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
27.98
|
|
|
$
|
13.75
|
|
|
$
|
0.00
|
|
Second Quarter
|
|
$
|
32.00
|
|
|
$
|
21.60
|
|
|
$
|
0.00
|
|
Third Quarter
|
|
$
|
40.00
|
|
|
$
|
27.02
|
|
|
$
|
0.00
|
|
Fourth Quarter (through
November 29, 2006)
|
|
$
|
45.87
|
|
|
$
|
32.20
|
|
|
$
|
0.00
|
|
69
Solexa
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
15.10
|
|
|
$
|
8.14
|
|
|
$
|
0.00
|
|
Second Quarter
|
|
$
|
10.96
|
|
|
$
|
3.84
|
|
|
$
|
0.00
|
|
Third Quarter
|
|
$
|
5.40
|
|
|
$
|
2.56
|
|
|
$
|
0.00
|
|
Fourth Quarter
|
|
$
|
8.20
|
|
|
$
|
4.40
|
|
|
$
|
0.00
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
19.99
|
|
|
$
|
6.20
|
|
|
$
|
0.00
|
|
Second Quarter(a)
|
|
$
|
8.89
|
|
|
$
|
4.48
|
|
|
$
|
0.00
|
|
Third Quarter
|
|
$
|
8.00
|
|
|
$
|
4.65
|
|
|
$
|
0.00
|
|
Fourth Quarter
|
|
$
|
10.99
|
|
|
$
|
5.38
|
|
|
$
|
0.00
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
12.03
|
|
|
$
|
7.20
|
|
|
$
|
0.00
|
|
Second Quarter
|
|
$
|
10.10
|
|
|
$
|
7.84
|
|
|
$
|
0.00
|
|
Third Quarter
|
|
$
|
9.36
|
|
|
$
|
7.87
|
|
|
$
|
0.00
|
|
Fourth Quarter (through
November 29, 2006)
|
|
$
|
13.27
|
|
|
$
|
8.74
|
|
|
$
|
0.00
|
|
|
|
|
(a) |
|
On March 4, 2005, Lynx completed a business combination
with Solexa Limited. Solexa Limited became a wholly-owned
subsidiary of Lynx as a result of the transaction and Lynx
changed its name to Solexa, Inc. |
70
COMPARISON
OF RIGHTS OF ILLUMINA STOCKHOLDERS
AND SOLEXA STOCKHOLDERS
Illumina and Solexa are both organized under the laws of the
State of Delaware. Any differences, therefore, in the rights of
holders of Illumina capital stock and Solexa capital stock arise
primarily from differences in their respective certificates of
incorporation and bylaws. Upon completion of the merger, the
holders of Solexa capital stock will become holders of Illumina
capital stock. Consequently, after the effective time of the
merger, the rights of the former stockholders of Solexa will be
determined by reference to Illuminas certificate of
incorporation and bylaws, each as amended.
The following is a summary of the material differences between
the rights of Solexa stockholders and the rights of Illumina
stockholders. This summary may not contain all of the
information that is important to you and is not intended to be a
complete discussion of the respective rights of Solexa
stockholders and Illumina stockholders. This summary is
qualified in its entirety by reference to Delaware law,
including the DGCL, and the various documents of Solexa and
Illumina referenced in this summary. You should carefully read
this entire joint proxy statement/ prospectus and the other
documents referenced in this joint proxy statement/ prospectus
for a more complete understanding of the differences between
being a stockholder of Solexa and being a stockholder of
Illumina. Solexa and Illumina have filed with the SEC certain
documents referred to herein and will send copies of these
documents to you upon your request. See the section entitled
Where You Can Find More Information.
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|
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Rights of Solexa
Stockholders
|
|
Rights of Illumina
Stockholders
|
|
|
|
|
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Corporate
Governance
|
|
The rights of Solexa stockholders
are currently governed by Delaware law and Solexas
certificate of incorporation and bylaws. Upon completion of the
merger, the rights of former Solexa stockholders will continue
to be governed by Delaware law but will be governed by
Illuminas certificate of incorporation and bylaws.
|
|
Upon completion of the merger, the
rights of Illumina stockholders will be governed by Delaware law
and Illuminas certificate of incorporation and bylaws.
|
Outstanding Capital
Stock
|
|
Solexa has only one class of
common stock outstanding. Holders of Solexa common stock are
entitled to all of the rights and obligations provided to common
stockholders under Delaware law and Solexas certificate of
incorporation and bylaws.
|
|
Illumina has only one class of
common stock outstanding. Holders of Illumina common stock are
entitled to all of the rights and obligations provided to common
stockholders under Delaware law and Illuminas certificate
of incorporation and bylaws.
|
Authorized Capital
Stock
|
|
The authorized capital stock of
Solexa consists of 200,000,000 shares of common stock,
par value $0.01 per share, and 2,000,000 shares of
preferred stock, par value $0.01 per share. No shares of
preferred stock are outstanding.
|
|
The authorized capital stock of
Illumina consists of 120,000,000 shares of common stock,
par value $0.01 per share, and 10,000,000 shares
of preferred stock, par value $0.01 per share. No shares
of preferred stock are outstanding. Following the merger, the
authorized capital stock of Illumina will remain unchanged.
|
Special Meetings of
Stockholders
|
|
Under the DGCL, a special meeting
of the stockholders may be called for any purpose by the board
of directors or by any other person authorized to do so in the
|
|
Illuminas bylaws provide
that a special meeting of stockholders may be called at any time
for any purpose by the board of directors.
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71
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Rights of Solexa
Stockholders
|
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Rights of Illumina
Stockholders
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certificate of incorporation or
bylaws.
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|
Solexas bylaws provide that
a special meeting of stockholders may only be called by the
board of directors pursuant to a resolution adopted by a
majority of the total number of authorized directors.
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Stockholder Action by Written
Consent
|
|
Solexas bylaws provide that
any action required or permitted to be taken by stockholders at
any annual or special meeting may be taken without a meeting,
without prior notice and without a vote, if a consent or
consents in writing, setting forth the action taken, is signed
by the minimum number of votes required for the action.
If action is taken by less than unanimous written consent of
stockholders, prompt notice of the taking of such action without
a meeting must be given to those stockholders who have not
consented in writing.
|
|
As permitted under the DGCL,
Illuminas certificate of incorporation prohibits action by
the written consent of stockholders. Any stockholder action must
be taken at a duly called annual or special meeting of the
stockholders.
|
Stockholder Proposals and
Nominations of Candidates for Election to the Board of
Directors
|
|
Solexas bylaws allow
stockholders to propose business to be brought before an annual
meeting. In addition, Solexas bylaws allow stockholders
who are entitled to vote in the election of directors to
nominate candidates for election to the Solexa board of
directors.
However, such proposals with respect to an annual meeting and
such nominations may only be brought by a stockholder who has
given timely notice in proper written form to Solexas
Secretary prior to the meeting.
To be timely, the notice must be delivered to or mailed and
received at Solexas principal executive offices not less
than 120 days prior to the date of the previous
years proxy statement, unless no annual meeting was held
in the previous year or the date of the annual meeting has been
changed by more than 30 days
|
|
Illuminas certificate of
incorporation provides that action may be taken by the
stockholders only at an annual meeting or a special meeting
called with the approval of the board of directors.
Any notice of meeting of stockholders must be in writing and
must be sent to each stockholder entitled to vote at the meeting
not less than ten nor more than 60 days before the date
of the meeting. The notice must specify the place, date and hour
of the meeting and, in the case of a special meeting, the
purpose or purposes for which such special meeting is called.
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72
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Rights of Solexa
Stockholders
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Rights of Illumina
Stockholders
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|
from the date contemplated at the
time of the previous years proxy statement, then such
notice must be so received by a reasonable time before the proxy
solicitation is made.
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To be in proper written form,
notice of a stockholder proposal must provide:
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|
a brief description
of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual
meeting;
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|
the name and
address, as they appear on Solexas books, of the
stockholder proposing such business;
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|
the class and number
of shares of Solexa stock which are beneficially owned by the
stockholder;
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|
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|
|
any material
interest of the stockholder in the business to be brought before
the meeting; and
|
|
|
|
|
any other
information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Exchange Act in his or her
capacity as a proponent to a stockholder proposal.
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To be in proper written form,
notice of a stockholder nomination to the Solexa board of
directors must provide:
|
|
|
|
|
the name, age,
business address and residence address of such nominee;
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|
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|
|
the principle
occupation or employment of such nominee;
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|
|
the class and number
of shares of Solexa which are beneficially owned by such
nominee;
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|
|
a description of all
arrangements or understandings between such stockholder and each
nominee and any other person or persons pursuant to which the
nominations are to be made by such stockholder; and
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73
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Rights of Solexa
Stockholders
|
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Rights of Illumina
Stockholders
|
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|
any other
information relating to the person to be nominated that is
required to be disclosed in solicitations of proxies for the
election of directors pursuant to Regulation 14A under the
Exchange Act, including such persons written consent to
being named in the proxy statement as a nominee and to serving
as a director if elected.
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Number of
Directors
|
|
The DGCL provides that the board
of directors of a Delaware corporation must consist of one or
more directors as fixed by the corporations certificate of
incorporation or bylaws.
Solexas bylaws provide that the Solexa board of directors
may consist of no less than six and no more than nine directors.
The number of authorized directors can be changed from time to
time as discussed in Amendments to Bylaws below.
|
|
Following the merger, the size of
the Illumina board of directors will be increased from eight to
ten, and two individuals selected by Illumina and agreed to by
Solexa will be appointed as independent directors of
Illumina.
The number of directors may be changed by an amendment to
Illuminas bylaws adopted by the board of directors or the
stockholders, or by an amendment to Illuminas certificate
of incorporation.
|
Classification of Board of
Directors
|
|
The DGCL permits a Delaware
corporation to provide in its certificate of incorporation or
bylaws that the board of directors shall be divided into as many
as three classes of directors with staggered terms of office,
with only one class of directors being elected each year for a
maximum term of three years.
Solexas bylaws provide for only one class of directors
who are to be elected at each annual meeting for a one-year
term.
|
|
Illuminas certificate of
incorporation and bylaws provide that the board of directors is
divided into three separate classes with staggered three-year
terms. At each annual meeting of stockholders, directors elected
to succeed those directors whose terms have expired are elected
for three- year terms.
|
Removal of
Directors
|
|
Under the DGCL, stockholders
holding a majority of shares entitled to vote at an election of
directors may remove any director or the entire board of
directors, except that, unless the certificate of incorporation
provides otherwise, in the case of a corporation whose board of
directors is classified, stockholders may only remove a director
for cause.
|
|
Illuminas bylaws provide
that any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
|
74
|
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Rights of Solexa
Stockholders
|
|
Rights of Illumina
Stockholders
|
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|
Solexas bylaws provide that
a director or the entire board of directors may be removed from
office by stockholders at a special meeting called for such
purpose, with or without cause, by an affirmative vote of the
stockholders holding a majority of the outstanding shares
entitled to vote at an election of directors.
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Filling Director
Vacancies
|
|
Under the DGCL, unless a Delaware
corporations certificate of incorporation and bylaws
provide otherwise, vacancies and newly created directorships
resulting from a resignation, an increase in the authorized
number of directors or otherwise may be filled by a vote of a
majority of the directors remaining in office, even if such
majority is less than a quorum, or by the sole remaining
director.
Solexas certificate of incorporation and bylaws do not
provide otherwise. In addition, they specify that any director
elected in accordance with the above shall hold office for the
unexpired portion of the applicable term of office and until his
or her successor shall have been duly elected and qualified.
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|
Illuminas bylaws provide
that any vacancy in the board of directors or any newly created
directorship resulting from any increase in the authorized
number of directors may be filled by a majority of the directors
then in office, even if less than a quorum, or by the sole
remaining director. A director elected to fill a vacancy will be
elected for the unexpired term of such directors
predecessor in office.
If at any time, Illumina should have no directors in office,
then any officer or any stockholder may call a special meeting
of stockholders or may apply to the Court of Chancery for a
decree summarily ordering an election as provided in Section
211 of the DGCL.
If, at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than
a majority of the whole board, the Court of Chancery may, upon
application of any stockholder or stockholders holding at least
10% of the total number of shares outstanding having the right
to vote for such directors, summarily order an election to fill
such vacancy, as governed by the provisions of Section
211 of the DGCL.
|
Indemnification of Directors
and Officers
|
|
Under the DGCL, a Delaware
corporation must indemnify its present or former directors and
officers against expenses (including attorneys fees)
actually and reasonably incurred to the extent
|
|
Illuminas certificate of
incorporation and bylaws provide that Illumina shall indemnify
each of its directors and officers against expenses (including
attorneys fees), judgments, fines, settlements
|
75
|
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|
Rights of Solexa
Stockholders
|
|
Rights of Illumina
Stockholders
|
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|
that the officer or director has
been successful on the merits or otherwise in defense of any
action, suit or proceeding brought against him or her by reason
of the fact that he or she is or was a director or officer of
the corporation.
The DGCL generally permits a Delaware corporation to indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was
a director or officer of the corporation or is or was serving at
the request of the corporation as a director or officer of
another corporation or entity, against expenses (including
attorneys fees), judgments, fines and amounts paid in
settlement actually or reasonably incurred by such person in
connection with such action, suit or proceeding if the person
acted in good faith and in a manner reasonably believed to be in
or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful.
Solexas bylaws provide that it shall indemnify its
directors and executive officers to the fullest extent permitted
by the DGCL. In addition, Solexas bylaws require it to
advance all expenses incurred by any director or executive
officer in connection with any proceeding, provided that Solexa
receives in writing an undertaking by such director or executive
officer to repay such amounts if it is ultimately determined
that such person is not entitled to be indemnified, and provided
further that no determination is made that such director or
executive officer acted in bad faith or in a manner not in the
best interests of Solexa.
|
|
and other amounts actually and
reasonably incurred in connection with any proceeding, arising
by reason of the fact that such person is or was an agent of
Illumina, to the maximum extent and in the manner permitted by
the DGCL.
Illuminas certificate of incorporation and bylaws also
provide that Illumina has the power to indemnify each of its
employees and agents (other than directors and officers) against
expenses (including attorneys fees), judgments, fines,
settlements and other amounts actually and reasonably incurred
in connection with any proceeding, arising by reason of the fact
that such person is or was an agent of Illumina, to the extent
and in the manner permitted by the DGCL.
Under the DGCL, Illumina may purc hase directors and
officers insurance to protect itself and any director,
officer, employee or agent of Illumina.
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76
|
|
|
|
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|
Rights of Solexa
Stockholders
|
|
Rights of Illumina
Stockholders
|
|
|
|
Solexas bylaws also provide
that it may limit the extent of its indemnification by contract
and shall not be required to indemnify any director or executive
officer in connection with any proceeding initiated by such
person against Solexa, unless (i) indemnity is expressly
required by law, (ii) the proceeding was authorized by the board
of directors, or (iii) indemnification is provided by
Solexa, in its sole discretion, pursuant to the DGCL. In
addition, Solexa may provide indemnification to other officers,
employees and agents of Solexa to the same extent as is provided
to its directors and executive officers.
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|
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|
Solexas bylaws permit it to
purchase and maintain insurance to the fullest extent permitted
under the DGCL, upon approval by the board of directors, on
behalf of any person required or permitted to be indemnified by
the bylaws.
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|
Amendments to Certificate of
Incorporation
|
|
Under the DGCL, a Delaware
corporations certificate of incorporation may be amended
only if the proposed amendment is approved by the board of
directors and the holders of a majority of the outstanding stock
entitled to vote.
Solexas certificate of incorporation reserves the right
to amend, alter, change or repeal any provision contained in the
certificate of incorporation in the manner prescribed by the
DGCL.
|
|
Illuminas certificate of
incorporation reserves the right to amend, alter, change or
repeal any provision contained in the certificate of
incorporation in the manner prescribed by the DGCL, except that
the affirmative vote of
662/3%
of the outstanding stock is required to amend, repeal or modify
the certificate of incorporation with respect to cumulative
voting, number of directors, election of directors,
directors ability to amend the bylaws or location of
meetings of stockholders.
|
Amendments to
Bylaws
|
|
Solexas certificate of
incorporation and bylaws provide that its bylaws may be amended,
supplemented or repealed, or new bylaws may be adopted, by the
board of directors or by the stockholders entitled to vote.
|
|
Illuminas certificate of
incorporation and bylaws provide that Illuminas bylaws may
be altered, amended or repealed, or new bylaws may be adopted,
by the board of directors or by the stockholders entitled to
vote, except that the affirmative vote of
662/3%
of the outstanding stock is required to amend, repeal or modify
the bylaws with respect to special meetings of stockholders,
|
77
|
|
|
|
|
|
|
Rights of Solexa
Stockholders
|
|
Rights of Illumina
Stockholders
|
|
|
|
|
|
notice of stockholders
meetings, stockholder voting, stockholder action by written
consent and number of directors.
|
Business Combination
Statute
|
|
Section 203 of the DGCL
prohibits a Delaware corporation from engaging in a
business combination with a person owning 15% or
more of the corporations voting stock for three years
following the time that person becomes a 15% stockholder, with
certain exceptions.
|
|
Illumina has not opted out of
Section 203 of the DGCL and is therefore governed by the
terms of this provision of the DGCL.
|
|
|
Solexa has not opted out of
Section 203 and is therefore governed by the terms of
this provision of the DGCL.
|
|
|
Stockholder Rights
Plan
|
|
Solexa does not have a stockholder
rights plan.
|
|
Illuminas rights plan
entitles the registered holder to a right to
purchase from Illumina a unit consisting of one one- thousandth
of a share of Series A Junior Participating Preferred
Stock, at a purchase price of $100 per unit, subject to
adjustment. The description and terms of these rights are set
forth in a Rights Agreement dated as of May 3, 2001
between Illumina and EquiServe Trust Company, N.A., as rights
agent.
|
|
|
|
|
Under the agreement, if any person
becomes the beneficial owner of, or commences a tender or
exchange offer the consummation of which would result in such
person becoming the beneficial owner of, 15% or more of the
outstanding shares of Illumina common stock, or thereafter
Illumina is involved in a merger or other business combination
in which 50% or more of Illuminas assets or earning power
is sold, each right entitles its holder to receive, upon
exercise, Illumina preferred stock (or, in the case of a merger
or other business combination, stock of the acquiring company)
having a value equal to two times the exercise price of the
right. Upon exercise, each share of preferred stock will be
entitled to an
|
78
|
|
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|
|
|
|
Rights of Solexa
Stockholders
|
|
Rights of Illumina
Stockholders
|
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|
|
aggregate dividend of 1,000 times
the dividend declared per share of common stock. In the event of
liquidation, the holders of the preferred stock will be entitled
to an aggregate payment of 1,000 times the payment made per
share of common stock. Each share of preferred stock will have
1,000 votes, voting together with the common stock. Finally, in
the event of any merger, consolidation or other transaction in
which common stock is changed or exchanged, each share of
preferred stock will be entitled to receive 1,000 times the
amount received per share of common stock. These rights are
protected by customary anti-dilution provisions.
|
|
|
|
|
Because of the nature of the
preferred stocks dividend, liquidation and voting rights,
the value of one one-thousandth of a share of preferred stock
purchasable upon exercise of each right should approximate the
value of one share of common stock.
The rights have certain anti-takeover effects. The rights will
cause substantial dilution to a person or group that attempts to
acquire Illumina without conditioning the offer on a substantial
number of rights being acquired.
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|
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|
The rights, however, should not
affect any prospective offeror willing to make a permitted
offer. The rights should not interfere with any merger or other
business combination approved by the Illumina board of directors
because the Illumina board of directors may, at its option,
redeem all but not less than all of the then outstanding rights
for a nominal redemption price ($0.01 per right).
|
|
|
|
|
The rights will expire at the
close of business on May 14, 2011, unless earlier
redeemed or exchanged by Illumina.
|
79
APPRAISAL
RIGHTS
Holders of Solexa common stock who dissent to the merger will
not have rights to an appraisal of the fair value of their
shares. Under Delaware law, appraisal rights are not available
for the shares of any class or series if the shares of the class
or series are registered on a national securities exchange or
quoted on the National Association of Securities Dealers, Inc.
automated quotation system on the record date. Solexas
common stock is listed on NASDAQ.
LEGAL
MATTERS
The validity of the shares of Illumina common stock to be issued
in the merger will be passed upon by Christian G. Cabou, Senior
Vice President, General Counsel and Secretary of Illumina.
Certain United States federal income tax consequences relating
to the merger will also be passed upon for Illumina by Dewey
Ballantine LLP, and for Solexa by Cooley Godward Kronish LLP.
EXPERTS
Illumina
The consolidated financial statements of Illumina at
January 1, 2006 and January 2, 2005 and for each of
the three years in the period ended January 1, 2006 and
Illuminas managements assessment of the
effectiveness of internal control over financial reporting,
included in Illuminas Annual Report on
Form 10-K
for the year ended January 1, 2006, which is referred to
and made a part of this joint proxy statement/ prospectus and
registration statement, have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set
forth in their reports incorporated by reference herein, and are
included in reliance upon such reports given on the authority of
such firm as experts in accounting and auditing.
Solexa
The consolidated financial statements of Solexa, Inc. at
December 31, 2005, and for the year then ended, included in
Solexas Annual Report on
Form 10-K
for the year ended December 31, 2005, have been audited by
Ernst & Young LLP Palo Alto, California,
independent registered public accounting firm, as set forth in
their report thereon, included therein and incorporated herein
by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Solexa, Inc. at
December 31, 2004, and for each of the two years in the
period ended December 31, 2004, appearing in Solexas
Annual Report on
Form 10-K
for the year ended December 31, 2005, have been audited by
Ernst & Young LLP Cambridge, England,
independent registered public accounting firm, as set forth in
their report thereon, included therein and incorporated by
reference herein. Such financial statements have been
incorporated by reference herein in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
STOCKHOLDER
PROPOSALS
Illumina
Proposals of stockholders intended to be included in the proxy
statement and proxy card relating to the 2007 Annual Meeting of
Stockholders of Illumina and to be presented at such meeting
must be received by Illumina for inclusion in the proxy
statement and proxy card no later than December 27, 2006.
In addition, the proxy solicited by the Illumina board of
directors for Illuminas 2007 annual meeting will confer
discretionary authority to vote on any stockholder proposal
presented at that meeting, unless Illumina receives notice of
such proposal not later than March 24, 2007. Proposals
should be directed to the attention of the Secretary, Illumina,
Inc., 9885 Towne Centre Drive, San Diego, California,
92121-1975.
80
Solexa
The deadline for submitting a stockholder proposal for inclusion
in Solexas proxy statement and form of proxy for its 2007
annual meeting of stockholders pursuant to
Rule 14a-8
of the SEC is a reasonable time before Solexa begins to print
and mails its proxy materials for its 2007 annual meeting of
stockholders. Solexa stockholders wishing to submit a proposal
or director nomination at Solexas 2007 annual meeting must
notify Solexa of such proposals or nominations in writing to the
Secretary of Solexa within a reasonable time before Solexa
begins to print and mails its proxy materials for its 2007
annual meeting of stockholders. Unless a Solexa stockholder at
Solexas 2007 annual meeting of stockholders notifies
Solexa of such proposals or nominations prior to the meeting and
in accordance with Solexas bylaws, the chairman of the
meeting will have discretionary authority to declare at the
meeting that such matters cannot be transacted. Solexa
stockholders are also advised to review Solexas bylaws,
which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.
Proposals should be directed to the attention of the Secretary,
Solexa, Inc., 25861 Industrial Boulevard, Hayward, California,
94545.
OTHER
MATTERS
As of the date of this document, neither the Illumina board of
directors nor the Solexa board of directors knows of any matters
that will be presented for consideration at either the Illumina
special meeting or the Solexa special meeting other than as
described in this document. If any other matters come before
either of the meetings or any adjournments or postponements of
the meetings and are voted upon, the enclosed proxies will
confer discretionary authority on the individuals named as
proxies to vote the shares represented by the proxies as to any
other matters. The individuals named as proxies intend to vote
in accordance with their best judgment as to any other matters.
WHERE YOU
CAN FIND MORE INFORMATION
Illumina and Solexa file annual, quarterly and special reports,
proxy statements and other information with the SEC under the
Exchange Act. You may read and copy any of this information at
the SECs Public Reference Room at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. Please call the SEC
at
1-800-SEC-0330
for further information on the Public Reference Room. The SEC
also maintains an Internet website that contains reports, proxy
and information statements, and other information regarding
issuers, including Illumina and Solexa, who file electronically
with the SEC. The address of that site is
www.sec.gov.
The information contained on the SECs website is expressly
not incorporated by reference into this document.
Illumina has filed with the SEC a registration statement of
which this document forms a part. The registration statement
registers the shares of Illumina common stock to be issued to
Solexa stockholders in connection with the merger. The
registration statement, including the attached exhibits and
schedules, contains additional relevant information about
Illumina common stock. The rules and regulations of the SEC
allow Illumina and Solexa to omit certain information included
in the registration statement from this document.
In addition, the SEC allows Illumina and Solexa to disclose
important information to you by referring you to other documents
filed separately with the SEC. This information is considered to
be a part of this document, except for any information that is
superseded by information included directly in this document.
This document incorporates by reference the documents listed
below that Illumina has previously filed or will file with the
SEC. They contain important information about Illumina, its
financial condition or other matters.
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|
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Annual Report on
Form 10-K
for the fiscal year ended January 1, 2006.
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|
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Proxy Statement dated April 26, 2006.
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|
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Quarterly Reports on
Form 10-Q
for the quarterly periods ended April 2, 2006, July 2,
2006 and October 1, 2006.
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81
|
|
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Current Reports on
Form 8-K,
dated October 17, 2006, October 31, 2006 and
November 13, 2006 (other than the portions of those
documents not deemed to be filed).
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|
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The description of Illuminas common stock contained in
Illuminas
Form 8-A
filed on April 14, 2006 and any amendment or report filed
with the SEC for the purpose of updating such description.
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|
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The description of Illuminas preferred stock contained in
Illuminas
Form 8-A
filed on May 14, 2001 and any other amendment or report
filed with the SEC for the purpose of updating such description.
|
In addition, Illumina incorporates by reference any future
filings it makes with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this document
and prior to the date of the Illumina special meeting. Such
documents are considered to be a part of this document,
effective as of the date such documents are filed. In the event
of conflicting information in these documents, the information
in the latest filed document should be considered correct.
You can obtain any of the documents listed above from the SEC,
through the SECs website at the address described above or
from Illumina by requesting them in writing or by telephone at
the following address:
Illumina, Inc.
9885 Towne Centre Drive
San Diego, California
92121-1975
(858) 202-4500
These documents are available from Illumina without charge,
excluding any exhibits to them unless the exhibit is
specifically listed as an exhibit to the registration statement
of which this document forms a part.
This document also incorporates by reference the documents
listed below that Solexa has previously filed or will file with
the SEC. They contain important information about Solexa, its
financial condition or other matters.
|
|
|
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|
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005.
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Proxy Statement dated September 1, 2006.
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|
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|
Quarterly Reports on
Form 10-Q
for the quarterly periods ended March 31, 2006,
June 30, 2006 and September 30, 2006.
|
|
|
|
Current Reports on
Form 8-K,
dated May 22, 2006, October 5, 2006 and November 13,
2006 (other than the portions of these documents not deemed to
be filed) and Exhibit 10.49 to the Current Report on
Form 8-K,
dated July 5, 2006.
|
In addition, Solexa incorporates by reference any future filings
it makes with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this document and
prior to the date of the Solexa special meeting. Such documents
are considered to be a part of this document, effective as of
the date such documents are filed. In the event of conflicting
information in these documents, the information in the latest
filed document should be considered correct.
You can obtain any of these documents from the SEC, through the
SECs website at the address described above, or Solexa
will provide you with copies of these documents, without charge,
upon written or oral request to:
Solexa, Inc.
25861 Industrial Boulevard
Hayward, California 94545
(510) 670-9300
If you are a stockholder of Illumina or Solexa and would like to
request documents, please do so by [], 2006 to
receive them before the Illumina special meeting and the Solexa
special meeting. If you request any
82
documents from Illumina or Solexa, Illumina or Solexa will mail
them to you by first class mail, or another equally prompt
means, within one business day after Illumina or Solexa receives
your request.
This document is a prospectus of Illumina and is a joint proxy
statement of Illumina and Solexa for the Illumina special
meeting and the Solexa special meeting. Neither Illumina nor
Solexa has authorized anyone to give any information or make any
representation about the merger or Illumina or Solexa that is
different from, or in addition to, that contained in this
document or in any of the materials that Illumina has
incorporated by reference into this document. Therefore, if
anyone does give you information of this sort, you should not
rely on it. The information contained in this document speaks
only as of the date of this document unless the information
specifically indicates that another date applies.
This document contains a description of the representations and
warranties that each of Illumina and Solexa made to the other in
the merger agreement. Representations and warranties made by
Illumina, Solexa and other applicable parties are also set forth
in contracts and other documents (including the merger
agreement) that are attached or filed as exhibits to this
document or are incorporated by reference into this document.
These representations and warranties were made as of specific
dates, may be subject to important qualifications and
limitations agreed to between the parties in connection with
negotiating the terms of the agreement, and may have been
included in the agreement for the purpose of allocating risk
between the parties rather than to establish matters as facts.
These materials are included or incorporated by reference only
to provide you with information regarding the terms of the
agreements. Accordingly, the representations and warranties and
other provisions of the agreements (including the merger
agreement) should not be read alone, but instead should be read
only in conjunction with the other information provided
elsewhere in this document or incorporated by reference into
this document.
83
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
ILLUMINA, INC.,
CALLISTO ACQUISITION CORP.
and
SOLEXA, INC.
Dated as of
November 12, 2006
Table of
Contents
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ARTICLE
I DEFINITIONS
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A-1
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ARTICLE
II THE MERGER
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A-7
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Section
2.1
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The Merger
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A-7
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Section
2.2
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Closing
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A-7
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Section
2.3
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Effective Time
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A-7
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Section
2.4
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Certificate of Incorporation and
Bylaws
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A-7
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Section
2.5
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Directors and Officers
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A-7
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Section
2.6
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Tax Consequences
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A-7
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ARTICLE
III MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER
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A-8
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Section
3.1
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Effect on Capital Stock
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A-8
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Section
3.2
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Exchange of Company Certificates
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A-8
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Section
3.3
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Company Stock Options/Warrants
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A-10
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ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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A-11
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Section
4.1
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Organization
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A-11
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Section
4.2
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Capitalization
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A-11
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Section
4.3
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Subsidiaries
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A-11
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Section
4.4
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Authority
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A-12
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Section
4.5
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Consents and Approvals; No
Violations
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A-12
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Section
4.6
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Books and Records
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A-13
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Section
4.7
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SEC Reports and Financial
Statements
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A-13
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Section
4.8
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Absence of Certain Changes or
Events
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A-13
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Section
4.9
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No Undisclosed Liabilities
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A-14
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Section
4.10
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Benefit Plans; Employees and
Employment Practices
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A-14
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Section
4.11
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Contracts
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A-16
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Section
4.12
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Insurance
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A-17
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Section
4.13
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Litigation
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A-17
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Section
4.14
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Compliance with Applicable Law
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A-17
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Section
4.15
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Taxes and Tax Returns
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A-18
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Section
4.16
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Environmental Laws and Regulations
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A-20
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Section
4.17
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State Takeover Statutes
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A-20
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Section
4.18
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Intellectual Property
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A-21
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Section
4.19
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Related Party Transactions
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A-23
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Section
4.20
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Opinion of Financial Advisor
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A-23
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Section
4.21
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Board Approval
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A-23
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Section
4.22
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Voting Requirements
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A-23
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Section
4.23
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Brokers and Finders; Third Party
Expenses
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A-23
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Section
4.24
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Information Supplied
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A-23
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Section
4.25
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Real Property; Title; Valid
Leasehold Interests
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A-24
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ARTICLE
V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
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A-24
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Section
5.1
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Organization
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A-24
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Section
5.2
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Capitalization
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A-24
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Section
5.3
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Authority
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A-25
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A-i
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Section
5.4
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Consents and Approvals; No
Violations
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A-25
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Section
5.5
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SEC Reports and Financial
Statements
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A-26
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Section
5.6
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Absence of Certain Changes or
Events
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A-26
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Section
5.7
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No Undisclosed Liabilities
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A-26
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Section
5.8
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Contracts
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A-26
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Section
5.9
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Litigation
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A-27
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Section
5.10
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Compliance with Applicable Law
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A-27
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Section
5.11
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Intellectual Property
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A-27
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Section
5.12
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Merger Sub
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A-27
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Section
5.13
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Opinion of Financial Advisor
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A-27
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Section
5.14
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Board Approval
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A-27
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Section
5.15
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Voting Requirements
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A-28
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Section
5.16
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Brokers and Finders
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A-28
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Section
5.17
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Information Supplied
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A-28
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ARTICLE
VI COVENANTS
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A-28
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Section
6.1
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Interim Operations
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A-28
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Section
6.2
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No Solicitation
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A-31
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Section
6.3
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Parent Recommendation
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A-33
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Section
6.4
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Stockholder Meetings; Preparation
of
Form S-4
Joint Proxy Statement/Prospectus
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A-33
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Section
6.5
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Access to Information
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A-35
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Section
6.6
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Notification of Certain Matters
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A-35
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Section
6.7
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Reasonable Efforts
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A-35
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Section
6.8
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State Takeover Statutes
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A-36
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Section
6.9
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Indemnification, Exculpation and
Insurance
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A-36
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Section
6.10
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Certain Litigation
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A-36
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Section
6.11
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NASDAQ Listing
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A-36
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Section
6.12
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Affiliates
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A-36
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Section
6.13
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Employee Benefits; Options
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A-37
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Section
6.14
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Tax Covenants
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A-37
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Section
6.15
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Parent Board of Directors
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A-38
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Section
6.16
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Lock-up Agreements
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A-38
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ARTICLE
VII CONDITIONS
|
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A-38
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Section
7.1
|
|
Conditions to Each Partys
Obligation to Effect the Merger
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A-38
|
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Section
7.2
|
|
Conditions to Parent and Merger
Subs Obligation to Effect the Merger
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A-39
|
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Section
7.3
|
|
Conditions to the Companys
Obligation to Effect the Merger
|
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A-40
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ARTICLE
VIII TERMINATION AND AMENDMENT
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A-41
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Section
8.1
|
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Termination
|
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A-41
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Section
8.2
|
|
Effect of Termination
|
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A-42
|
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Section
8.3
|
|
Fees and Expenses
|
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A-43
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Section
8.4
|
|
Termination Fee
|
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A-43
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Section
8.5
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|
Extension; Waiver
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A-43
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A-ii
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ARTICLE
IX MISCELLANEOUS
|
|
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A-44
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Section
9.1
|
|
Nonsurvival of Representations and
Warranties
|
|
|
A-44
|
|
Section
9.2
|
|
Notices
|
|
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A-44
|
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Section
9.3
|
|
Interpretation
|
|
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A-45
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Section
9.4
|
|
Counterparts
|
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A-45
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Section
9.5
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|
Entire Agreement; No Third Party
Beneficiaries
|
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A-45
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Section
9.6
|
|
Governing Law
|
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A-45
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Section
9.7
|
|
Publicity
|
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A-45
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Section
9.8
|
|
Assignment
|
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A-45
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|
Section
9.9
|
|
Enforcement
|
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A-45
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|
Section
9.10
|
|
Jurisdiction
|
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A-45
|
|
Section
9.11
|
|
Waiver of Jury Trial
|
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A-46
|
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Section
9.12
|
|
Severability
|
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A-46
|
|
Section
9.13
|
|
Modification
|
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A-46
|
|
A-iii
AGREEMENT AND PLAN OF MERGER (this
Agreement), dated as of November 12,
2006, by and among Illumina, Inc., a Delaware corporation
(Parent), Callisto Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent
(Merger Sub), and Solexa, Inc., a Delaware
corporation (the Company).
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company each have determined that a business combination among
Parent, Merger Sub and the Company is advisable and in the best
interests of their respective companies and stockholders in
order to advance each of their long-term business interests and
accordingly have agreed to effect the Merger provided for herein
upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement and in order to induce the Company to enter into this
Agreement, Parent and the Company are entering into a Securities
Purchase Agreement, pursuant to which Parent will make an equity
investment in the Company subject to the terms and conditions of
such agreement;
WHEREAS, for United States federal income tax purposes it is
intended that the Merger qualify as a reorganization within the
meaning of Section 368(a) of the Code and that this
Agreement will be, and is hereby, adopted as a Plan of
Reorganization for the purposes of Section 368(a) of the
Code;
WHEREAS, the Board of Directors of the Company has
(i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are advisable and
fair to, and in the best interests of, the Company and its
stockholders, (ii) adopted this Agreement and the
transactions contemplated hereby, including the Merger,
(iii) directed that this Agreement be submitted to the
Companys stockholders for their approval and
(iv) resolved to recommend that the Companys
stockholders approve this Agreement; and
WHEREAS, the Board of Directors of Parent has
(i) determined that this Agreement and the transactions
contemplated hereby, including the Merger and the issuance of
Parent Shares in connection with the Merger, are advisable and
fair to, and in the best interests of, Parent and its
stockholders, (ii) adopted this Agreement and the
transactions contemplated hereby, including the Merger,
(iii) directed that the issuance of Parent Shares in
connection with the Merger be submitted to Parents
stockholders for their approval and (iv) resolved to
recommend that Parents stockholders approve the issuance
of Parent Shares in connection with the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties covenants and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, and subject to the conditions set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Affiliate means, with respect to any Person,
any other Person, directly or indirectly, controlling,
controlled by or under common control with, such Person. For
purposes of this definition, the term control
(including the correlative terms controlling,
controlled by and under common control
with) means the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
Agreement shall have the meaning set forth in
the Preamble.
Benefit Plan shall have the meaning set forth
in Section 4.10(a).
Business Day shall mean any day, other than a
Saturday, Sunday or one on which banks are authorized by law to
close in New York, New York.
Certificate of Merger shall have the meaning
set forth in Section 2.3.
Closing shall have the meaning set forth in
Section 2.2.
Closing Date shall have the meaning set forth
in Section 2.2.
A-1
Code shall mean the Internal Revenue Code of
1986, as amended. All citations to provisions of the Code, or to
the Treasury Regulations, shall include any amendments thereto
and any substitute or successor provisions thereto.
Commonly Controlled Entity shall have the
meaning set forth in Section 4.10(d).
Company shall have the meaning set forth in
the Preamble.
Company Adverse Recommendation Change shall
have the meaning set forth in Section 6.2(c).
Company Certificate shall have the meaning
set forth in Section 3.1(c).
Company Contract shall have the meaning set
forth in Section 4.11(b).
Company Converted Option shall have the
meaning set forth in Section 3.3(a).
Company Converted Warrant shall have the
meaning set forth in Section 3.3(b).
Company Disclosure Schedule shall have the
meaning set forth in Article IV.
Company Filed SEC Documents shall have the
meaning set forth in Section 4.8.
Company Financial Advisor shall have the
meaning set forth in Section 4.20.
Company Intellectual Property shall have the
meaning set forth in Section 4.18(h).
Company IP Contracts shall have the meaning
set forth in Section 4.18(b).
Company Material Adverse Effect shall mean a
material adverse effect on the condition (financial or
otherwise), business, prospects or results of operations of the
Company and its Subsidiaries, taken as a whole; provided,
however, that none of the following shall be deemed
either alone or in combination to constitute, and none of the
following shall be taken into account in determining whether
there has been, or is reasonably likely to be, a Company
Material Adverse Effect: (i) any adverse effect resulting
from or arising out of any general market, industry, economic or
political conditions to the extent that they do not have a
disproportionate impact on the Company and its Subsidiaries,
taken as a whole, as compared to other industry participants,
(ii) any adverse effect resulting from or arising out of
any natural disaster or any acts of terrorism, sabotage,
military action or war (whether or not declared) or any
escalation or worsening thereof, (iii) any adverse effect
resulting from or arising out of changes in any laws, rules,
regulations, orders or other binding directives issued by any
governmental authority, in interpretations thereof, to the
extent that they do not have a disproportionate impact on the
Company and its Subsidiaries, taken as a whole, as compared to
other industry participants, (iv) any change in the trading
price or volume of the Company Shares, in and of itself,
(v) the Companys failure to meet internal or
analysts expectations or projections, in and of itself,
(vi) any adverse effect resulting from or arising out of
changes in accounting requirements or principles to the extent
that they do not have a disproportionate impact on the Company
and its Subsidiaries, taken as a whole, compared to other
industry participants, (vii) any adverse effect resulting
from or arising out of the continued incurrence of losses by the
Company in amounts and consistent with the trends substantially
similar to those incurred and in existence prior to the date of
this Agreement, (viii) any adverse effect resulting from or
arising out of the inability to recognize, or delay in
recognition of, revenue on systems shipped, in and of itself,
(ix) any adverse effect resulting from or arising out of
any need to upgrade or replace instruments previously sold, in
and of itself, (x) any adverse effect resulting from or
arising out of the taking of any action required by this
Agreement or specifically consented to in advance by Parent in
writing, (xi) any adverse effect that, in any material
respect, results from or arises out of the execution, delivery,
announcement or performance of this Agreement or the
announcement, pendency or anticipated consummation of the
Merger, (xii) any adverse effect resulting from or arising
out of the failure of the Company to have achieved any level of
technological progress or to have shipped any number of products
and (xiii) any adverse effect resulting from technological
or product developments by competitors of the Company.
Company Option shall have the meaning set
forth in Section 4.2(a).
Company Permits shall have the meaning set
forth in Section 4.14(a).
A-2
Company Preferred Shares shall have the
meaning set forth in Section 4.2(a).
Company Products shall have the meaning set
forth in Section 4.18(h).
Company SEC Documents shall have the meaning
set forth in Section 4.7(a).
Company Share shall mean one (1) share
of common stock, par value $0.01 per share, of the Company.
Company Stockholder Approval shall have the
meaning set forth in Section 4.4.
Company Stockholder Meeting shall have the
meaning set forth in Section 4.22.
Company Warrant shall have the meaning set
forth in Section 3.3(b).
Confidentiality Agreement shall mean the
confidentiality agreement, dated as of August 9, 2006,
between Parent and the Company, as amended and supplemented by
the Standstill/No-Hire Letter Agreement & Amendment to
the Confidentiality Agreement, dated as of October 5, 2006.
Contract shall mean any legally binding note,
bond, mortgage, indenture, lease, license, contract, agreement,
arrangement or other instrument, obligation or understanding
whether written or oral.
DGCL shall mean the General Corporation Law
of the State of Delaware.
Effective Time shall have the meaning set
forth in Section 2.3.
Environmental Law shall have the meaning set
forth in Section 4.16(a).
ERISA shall have the meaning set forth in
Section 4.10(a).
Exchange Act shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Exchange Agent shall have the meaning set
forth in Section 3.2(a).
Exchange Ratio shall mean: (i) if the
20-Day
Parent VWAP Price is equal to or greater than $47.30, then the
Exchange Ratio shall equal 0.296; (ii) if the
20-Day
Parent VWAP Price is between $40.70 and $47.30, then the
Exchange Ratio shall be equal to a fraction (A) whose
numerator is equal to $14.00 and (B) whose denominator is
equal to the
20-Day
Parent VWAP Price; or (iii) if the
20-Day
Parent VWAP Price is equal to or less than $40.70, then the
Exchange Ratio shall equal 0.344.
First Filing shall have the meaning set forth
in Section 4.7(b).
Form S-4
shall have the meaning set forth in Section 6.4(d).
GAAP shall mean United States generally
accepted accounting principles.
Governmental Entity shall mean any
governmental body, court or agency or other governmental
regulatory or other authority, whether federal, state, local or
foreign.
HSR Act shall mean the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
Intellectual Property shall have the meaning
set forth in Section 4.18(h).
IP Contracts shall have the meaning set forth
in Section 4.18(h).
IRS shall mean the Internal Revenue Service.
Joint Proxy Statement/Prospectus shall have
the meaning set forth in Section 6.4(d).
Knowledge of any Person which is not an
individual means, any fact, circumstance or matter that any of
the executive officers (including, in the case of the Company,
the Senior Director of Finance) of such Person knows or
reasonably should have known after due inquiry.
Law shall mean any statute, law, ordinance,
rule or regulation of any Governmental Entity, including any
Environmental Law.
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Letter of Transmittal shall have the meaning
set forth in Section 3.2(c).
Licensed Intellectual Property shall have the
meaning set forth in Section 4.18(h).
Lien shall mean any mortgage, pledge, claim,
lien, charge, encumbrance or security interest of any kind or
nature, but excluding liens with respect to Taxes not yet due
and payable.
Merger shall have the meaning set forth in
Section 2.1.
Merger Consideration shall have the meaning
set forth in Section 3.1(c).
Merger Sub shall have the meaning set forth
in the Preamble.
NASDAQ shall mean the NASDAQ National Market.
non-paying party shall have the meaning set
forth in Section 8.4(c).
Notice of Company Adverse Recommendation
shall have the meaning set forth in Section 6.2(c).
Order shall mean any judgment, decision,
decree, order, writ, preliminary or permanent injunction or
decree of any Governmental Entity.
Owned Intellectual Property shall have the
meaning set forth in Section 4.18(h).
Parent shall have the meaning set forth in
the Preamble.
Parent Adverse Recommendation Change shall
have the meaning set forth in Section 6.3(a).
Parent Disclosure Schedule shall have the
meaning set forth in Article V.
Parent Filed SEC Documents shall have the
meaning set forth in Section 5.6.
Parent Financial Advisor shall have the
meaning set forth in Section 5.11.
Parent Material Adverse Effect shall mean a
material adverse effect on the condition (financial or
otherwise), business, prospects or results of operations of
Parent and its Subsidiaries, taken as a whole; provided,
however, that none of the following shall be deemed
either alone or in combination to constitute, and none of the
following shall be taken into account in determining whether
there has been, or is reasonably likely to be, a Parent Material
Adverse Effect: (i) any adverse effect resulting from or
arising out of any general market, industry, economic or
political conditions to the extent that they do not have a
disproportionate impact on Parent and its Subsidiaries, taken as
a whole, as compared to other industry participants,
(ii) any adverse effect resulting from or arising out of
any natural disaster or any acts of terrorism, sabotage,
military action or war (whether or not declared) or any
escalation or worsening thereof, (iii) any adverse effect
resulting from or arising out of changes in any laws, rules,
regulations, orders or other binding directives issued by any
governmental authority, in interpretations thereof, to the
extent that they do not have a disproportionate impact on Parent
and its Subsidiaries, taken as a whole, as compared to other
industry participants, (iv) any change in the trading price
or volume of Parent Shares, in and of itself,
(v) Parents failure to meet internal or
analysts expectations or projections, in and of itself,
(vi) any adverse effect resulting from or arising out of
changes in accounting requirements or principles, to the extent
that they do not have a disproportionate impact on Parent and
its Subsidiaries, taken as a whole, (viii) any adverse
effect resulting from or arising out of the inability to
recognize, or delay in recognition of, revenue on systems
shipped, in and of itself, (ix) any adverse effect
resulting from or arising out of any need to upgrade or replace
instruments previously sold, in and of itself, (x) any
adverse effect resulting from or arising out of the taking of
any action required by this Agreement or specifically consented
to in advance by the Company in writing, (xi) any adverse
effect that, in any material respect, results from or arises out
of the execution, delivery, announcement or performance of this
Agreement or the announcement, pendency or anticipated
consummation of the Merger and (xii) any adverse effect
arising out of or related to Affymetrix, Inc. v.
Illumina, Inc., Civil Action
No. 04-901
JJF, or any judgment, order, claim, litigation or other
proceeding related thereto.
Parent Permits shall have the meaning set
forth in Section 5.10.
Parent Preferred Share shall have the meaning
set forth in Section 5.2(a).
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Parent SEC Documents shall have the meaning
set forth in Section 5.5(a).
Parent Share shall mean one (1) share of
common stock, par value $0.01 per share, of Parent.
Parent Stockholder Approval shall have the
meaning set forth in Section 5.3.
Parent Stockholder Meeting shall have the
meaning set forth in Section 5.15.
Patents shall have the meaning set forth in
Section 4.18(h).
Pension Plan shall have the meaning set forth
in Section 4.10(a).
Person shall mean an individual, corporation,
limited liability company, partnership, association, trust or
any other entity or organization, including any Governmental
Entities.
Pre-Closing Taxes shall have the meaning set
forth in Section 4.15(c).
Registered Intellectual Property shall have
the meaning set forth in Section 4.18(h).
Registration Authority shall have the meaning
set forth in Section 4.18(h).
Representatives shall have the meaning set
forth in Section 6.2(a).
Sarbanes-Oxley Act shall mean the
Sarbanes-Oxley Act of 2002 and the related rules and regulations
promulgated thereunder or under the Exchange Act.
SEC shall mean the United States Securities
and Exchange Commission or the staff thereof.
Securities Act shall mean the Securities Act
of 1933, as amended, and the rules and regulations promulgated
thereunder.
Short Period means any Taxable Period that
ends on the Closing Date.
Shrink Wrap Licenses shall have the meaning
set forth in Section 4.18(b).
Software shall have the meaning set forth in
Section 4.18(h).
Subsidiary shall mean, with respect to any
Person, another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which
is sufficient to elect at least fifty percent (50%) of its board
of directors or other governing body (or, if there are no such
voting interests, fifty percent (50%) or more of the equity
interests of which) is owned directly or indirectly by such
first Person.
Superior Proposal shall mean a bona fide
written Takeover Proposal, provided that all references
to twenty percent (20%) in the definition of Takeover
Proposal shall be deemed to be references to fifty percent
(50%) instead, made by a third party which is (i) on terms
which the Companys Board of Directors, or any committee
thereof comprised of independent directors, determines in good
faith (after consultation with its financial advisors) to be
more favorable to the stockholders of the Company (in their
capacity as stockholders) from a financial point of view than
the Merger and any alternative proposed by Parent or Merger Sub
in accordance with Section 6.2(c) hereof and (ii) in
the good faith judgment of the Companys Board of
Directors, or any committee thereof, reasonably likely to be
consummated (taking into account, among other things, all legal,
financial, regulatory and other aspects of the proposal and
identity of the offeror, including, to the extent financing is
required, whether financing is then committed and on terms and
conditions that the Companys Board of Directors determines
in good faith (after consultation with its financial advisors
and legal counsel) are reasonably likely to result in
disbursement of funds sufficient for the consummation of the
transactions contemplated by such proposal).
Surviving Corporation shall have the meaning
set forth in Section 2.1.
Takeover Proposal shall mean any inquiry,
proposal or offer from any Person or group (other than Parent
and its Affiliates) relating to (i) any direct or indirect
acquisition or purchase of the assets of the Company or its
Subsidiaries having a fair market value equal to twenty percent
(20%) or more of the fair market value of the assets of the
Company and its Subsidiaries, taken as a whole, or twenty
percent (20%) or more of the voting power of the Company or any
of its Subsidiaries, (ii) any tender offer or exchange
offer
A-5
that, if consummated, would result in any Person beneficially
owning at least twenty percent (20%) of the voting power of the
Company or (iii) any merger, consolidation, business
combination, recapitalization or similar transaction involving
the Company (other than (A) the Merger, (B) mergers,
consolidations, business combinations, recapitalizations or
similar transactions involving solely the Company
and/or one
or more Subsidiaries of the Company and (C) mergers,
consolidations, business combinations, recapitalizations or
similar transactions that if consummated would result in a
Person beneficially owning not more than twenty percent (20%) of
the voting power of the Company or any of its Subsidiaries).
Tax Return shall mean any report, return,
election, notice, estimate, declaration, information statement
or other form or document (including all schedules, exhibits and
other attachments thereto) relating to and filed or required to
be filed with a Taxing authority in connection with any Tax
(including estimated Taxes), and shall include any amendment to
any of the foregoing.
Taxable Period shall mean any taxable year or
any other period that is treated as a taxable year (or other
period, or portion thereof, in the case of a Tax imposed with
respect to such other period; e.g., a quarter or a Short
Period) with respect to which any Tax may be imposed under any
applicable statute, rule, or regulation.
Taxes shall mean any and all federal, state,
local and foreign taxes, assessments and other governmental
charges, duties, impositions, levies and liabilities (including
taxes that are based upon or measured by gross receipts, income,
profits, sales, use or occupation, and also including any and
all value added, ad valorem, transfer, gains, franchise,
withholding, payroll, recapture, employment, excise,
unemployment, insurance, social security, business license,
occupation, business organization, stamp, environmental and
property taxes), together with all interest, penalties and
additions imposed with respect to such amounts. For purposes of
this Agreement, Taxes also includes any obligations
under any agreements or arrangements with any Person with
respect to the liability for, or sharing of, Taxes (including
pursuant to Treas. Reg. § 1.1502-6 or comparable provisions
of state, local or foreign Tax Law) and any liability for Taxes
as a transferee or successor, by contract or otherwise.
Termination Date shall have the meaning set
forth in Section 8.1(b)(ii).
Termination Fee shall have the meaning set
forth in Section 8.4(a).
Trade Secrets shall have the meaning set
forth in Section 4.18(h).
Treasury Regulations shall mean the United
States Treasury regulations promulgated under the Code.
20-Day
Parent VWAP Price shall mean the volume weighted
average trading price of Parent Shares as measured during ten
(10) dates randomly selected (at a meeting at which one
(1) representative selected by Parent and one
(1) representative selected by the Company alternately
select a date by blind draw until ten (10) dates are drawn)
from the twenty (20) consecutive trading days ending five
(5) trading days prior to the Closing Date.
Unauthorized Code means any virus, trojan
horse, worm or other software routines or hardware components
designed to permit unauthorized access or to disable, erase or
otherwise harm any computer, systems or Software or any back
door, time bomb, drop dead device or other software routine
designed to disable a computer program automatically with the
passage of time or under the positive control of a Person other
than an authorized licensee or owner of a copy of the program or
the right and title in and to the program.
Welfare Plans shall have the meaning set
forth in Section 4.10(a).
A-6
ARTICLE II
THE MERGER
Section 2.1 The
Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, Merger Sub
shall be merged with and into the Company in accordance with the
laws of the State of Delaware and the terms of this Agreement
(the Merger), whereupon the separate
corporate existence of Merger Sub shall cease, and the Company
shall be the surviving corporation of the Merger (the Company,
as the surviving entity after the Merger is sometimes referred
to herein as the Surviving Corporation).
Section 2.2 Closing. Subject
to the terms and conditions of this Agreement, the closing of
the Merger (the Closing) shall take place
(a) at the offices of Dewey Ballantine LLP, 1950 University
Avenue, Suite 500, East Palo Alto, California 94303, at
10:00 a.m., local time, no later than the third
(3rd)
Business Day following the satisfaction of the conditions set
forth in Article VII of this Agreement (other than
(i) those conditions that are waived by the party or
parties for whose benefit such conditions exist and
(ii) any such conditions which, by their terms, are not
capable of being satisfied until the Closing Date, but subject
to the satisfaction of such conditions) or (b) at such
other place, time,
and/or date
as the parties hereto may otherwise agree in writing. The date
upon which the Closing occurs is referred to herein as the
Closing Date.
Section 2.3 Effective
Time. If all the conditions to the Merger set
forth in Article VII of this Agreement have been fulfilled
or waived and this Agreement shall not have been terminated as
provided in Article VIII hereof, the parties hereto shall
cause a certificate of merger (the Certificate of
Merger) to be properly executed and filed in
accordance with the laws of the State of Delaware and the terms
of this Agreement on the Closing Date. The Merger shall become
effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of Delaware or at such later
time as is specified by the parties hereto as the Effective Time
in the Certificate of Merger (the Effective
Time). The Merger shall have the effects set forth in
the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the
Effective Time the Surviving Corporation shall possess all the
property, rights, privileges, powers and franchises and be
subject to all of the debts, liabilities and duties of the
Company and Merger Sub.
Section 2.4 Certificate
of Incorporation and Bylaws.
(a) At the Effective Time, the Certificate of Incorporation
of the Company shall be amended and restated in its entirety to
read identically to the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, and
such amended and restated Certificate of Incorporation shall
become the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with its terms and
pursuant to applicable Law; provided, however,
that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows,
The name of the Corporation is Solexa, Inc.
(b) The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the initial Bylaws of the
Surviving Corporation.
Section 2.5 Directors
and Officers.
(a) The directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation until the earlier of their resignation or removal or
until their respective successors are duly elected and
qualified, as the case may be.
(b) The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation until the earlier of their resignation or removal or
until their respective successors are duly elected and
qualified, as the case may be.
Section 2.6 Tax
Consequences. It is intended by the parties
hereto that the Merger shall constitute a
reorganization within the meaning of
Section 368(a) of the Code. The parties hereto adopt this
Agreement as a plan of reorganization within the
meaning and for the purposes of Sections 354 and 361 of the
Code and
Sections 1.368-2(g)
and 1.368-3T(a) of the Treasury Regulations and for all relevant
Tax purposes.
A-7
ARTICLE III
MERGER
CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE
MERGER
Section 3.1 Effect
on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of
Parent, Merger Sub or the Company or their respective
stockholders:
(a) Capital Stock of Merger Sub. Each
issued and outstanding share of common stock of Merger Sub shall
be converted into and become one (1) fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned
Stock. Each Company Share held by the Company or
any Subsidiary of the Company or owned by Parent or any
Subsidiary of Parent immediately prior to the Effective Time
shall be canceled, and no payment shall be made with respect
thereto.
(c) Conversion of Company Shares. Subject
to Sections 3.1(d), 3.2(d) and 3.2(e), each issued and
outstanding Company Share (other than Company Shares to be
canceled in accordance with Section 3.1(b)) shall
automatically be converted into the right to receive a fraction
of a Parent Share equal to the Exchange Ratio (the
Merger Consideration). All Company
Shares converted into the right to receive the Merger
Consideration pursuant to this Section 3.1(c) shall cease
to be outstanding and shall be canceled and retired and shall
cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented such Company
Shares (Company Certificate) shall
thereafter cease to have any rights with respect to such Company
Shares, except the right to receive the Merger Consideration to
be issued in consideration therefor, any cash in lieu of
fractional Parent Shares to be issued or paid in consideration
therefor in accordance with this Article III, and any
dividends or other distributions to which holders of Company
Shares become entitled in accordance with this Article III
upon the surrender of such Company Certificate.
(d) If, between the date of this Agreement and the
Effective Time, there is a reclassification, recapitalization,
stock split, reverse stock split, stock dividend, extraordinary
cash dividend, combination or exchange of shares with respect
to, or rights issued in respect of, Company Shares or Parent
Shares, the Exchange Ratio and Merger Consideration shall be
adjusted accordingly, without duplication, to provide to the
holders of Company Shares the same economic effect as
contemplated by this Agreement prior to such event.
Section 3.2 Exchange
of Company Certificates.
(a) Prior to the mailing of the Joint Proxy
Statement/Prospectus to the record holders of Company Shares,
Parent shall designate a bank or trust company that is
reasonably acceptable to the Company to act as exchange agent
(the Exchange Agent) for payment of the
Merger Consideration.
(b) At or prior to the Effective Time, Parent shall deposit
with the Exchange Agent (i) certificates representing the
total number of Parent Shares to be issued in the Merger and
(ii) any cash payable in lieu of fractional Parent Shares
pursuant to Section 3.2(e).
(c) At or promptly following the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to
each holder of record of Company Certificates, (i) a letter
of transmittal (the Letter of
Transmittal) that shall specify that delivery shall be
effected, and risk of loss and title to Company Certificates
shall pass, only upon proper delivery of Company Certificates to
the Exchange Agent and which shall be in the form and have such
other provisions as Parent may specify and
(ii) instructions for use in effecting the surrender of
Company Certificates in exchange for the Merger Consideration
(which instructions shall provide that at the election of the
surrendering holder, Company Certificates may be surrendered,
and the Merger Consideration in exchange therefor collected, by
hand delivery). Upon surrender of a Company Certificate for
cancellation to the Exchange Agent, together with a Letter of
Transmittal properly completed and validly executed in
accordance with the instructions thereto, and such other
documents as may be reasonably required by the Exchange Agent,
the holder of such Company Certificate shall be entitled to
receive in exchange therefor certificates representing that
number of whole Parent Shares, if any, into which the number of
Company Shares previously represented by such Company
Certificates shall have been
A-8
converted pursuant to Section 3.1 and any cash,
distributions or dividends required to be paid pursuant to
Sections 3.2(d) and (e) below, and Company
Certificates so surrendered shall be forthwith canceled. The
Exchange Agent shall promptly accept such Company Certificates
upon compliance with such reasonable terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof
in accordance with customary exchange practices. No interest
shall accrue on the Merger Consideration (or the cash payable as
described in Sections 3.2(d) and (e) below) payable
upon the surrender of Company Certificates for the benefit of,
or be paid to, the holders of Company Certificates.
(d) No dividends or other distributions with respect to
Parent Shares shall be paid to the holder of any unsurrendered
Company Certificate with respect to the Parent Shares
represented thereby by reason of the conversion of Company
Shares pursuant to Section 3.1, and no cash payment in lieu
of fractional Parent Shares shall be paid to any such holder
pursuant to Section 3.2(e) until such Company Certificate
is surrendered in accordance with this Article III. Subject
to the effect of applicable Laws, following surrender of any
such Company Certificate, there shall be paid, without interest,
to the Person in whose name the Parent Shares representing such
securities are registered (i) at the time of such
surrender, the amount of any cash payable in lieu of fractional
Parent Shares to which such holder is entitled pursuant to
Section 3.2(e) and the proportionate amount of dividends or
other distributions with a record date after the Effective Time
theretofore paid with respect to Parent Shares issued upon
conversion of Company Shares, and (ii) at the appropriate
payment date or as promptly as practicable thereafter, the
proportionate amount of dividends or other distributions, with
(x) a record date with respect thereto after the Effective
Time, but prior to such surrender, and (y) a payment date
subsequent to such surrender, payable with respect to such
Parent Shares.
(e) Notwithstanding any other provision hereof, no fraction
of a Parent Share will be issued and no dividend or other
distribution, stock split or interest with respect to Parent
Shares shall relate to any fractional Parent Share, and such
fractional interest shall not entitle the owner thereof to vote
or to any rights as a security holder of the Parent Shares. In
lieu of any such fractional security, each holder of shares of
Company Shares otherwise entitled to a fraction of a Parent
Share in accordance with the provisions of this Article III
will be entitled to receive from the Exchange Agent a cash
payment in an amount equal to the product of (i) such
fractional part of a Parent Share multiplied by (ii) the
20-Day
Parent VWAP Price.
(f) All Merger Consideration delivered upon the surrender
of Company Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full
satisfaction of all rights pertaining to Company Shares
theretofore represented by such Company Certificates. Until
surrendered as contemplated by this Section 3.2, each
Company Certificate shall be deemed at all times after the
Effective Time to represent only the right to receive upon such
surrender the Merger Consideration into which Company Shares
theretofore represented by such Company Certificate shall have
been converted pursuant to this Article III. No interest
will be paid or will accrue on the cash payable upon the
surrender of any Company Certificate.
(g) At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the
Surviving Corporation of Company Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Company Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article III.
(h) If any Company Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Company Certificate to be lost, stolen
or destroyed and, if required by the Exchange Agent, the posting
by such Person of a bond or other surety in such amount as the
Exchange Agent may reasonably direct as indemnity against any
claim that may be made with respect to such Company Certificate
and subject to such other reasonable conditions as the Exchange
Agent may impose, the Exchange Agent shall deliver in exchange
for such Company Certificate the Merger Consideration into which
Company Shares theretofore represented by such Company
Certificate shall have been converted pursuant to this
Article III.
(i) If any payment under this Article III is to be
made to a Person other than the Person in whose name any Company
Certificate surrendered in exchange therefor is registered, it
shall be a condition of payment that the Company Certificate so
surrendered shall be properly endorsed or otherwise in proper
form for transfer
A-9
and that the Person requesting such payment shall pay any
transfer or other Taxes required by reason of the payment to a
Person other than the registered holder of Company Certificate
surrendered or such Person shall establish to the satisfaction
of the Surviving Corporation that such Tax has been paid or is
not applicable.
(j) The Exchange Agent shall invest any funds held by it
for purposes of this Section 3.2 as directed by Parent, on
a daily basis. Any interest and other income resulting from such
investments shall be paid to Parent.
(k) Parent
and/or the
Exchange Agent shall be entitled to deduct and withhold from the
consideration or other amounts otherwise payable pursuant to
this Agreement (in whatever form) to the holders of Company
Shares an amount equal to the amounts, if any, required to be
deducted or withheld under any provision of U.S. federal
Tax Law, or any provision of state, local or foreign Tax Law,
with respect to the making of such payment. Amounts so withheld
shall promptly be paid to the appropriate Tax authority and
shall be treated for all purposes of this Agreement as having
been paid to the holders of Company Shares in respect of which
such deduction or withholding was made.
(l) None of Parent, Merger Sub, the Company or the Exchange
Agent shall be liable to any Person in respect of any Parent
Shares (or dividends or distributions with respect thereto) or
cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Any Parent Shares or
portion of the cash that has been made available to the Exchange
Agent pursuant to this Section 3.2 that remains unclaimed
by the holder of any Company Certificate six (6) months
after the Effective Time, shall be returned to Parent and any
such holder who has not exchanged such holders Company
Certificate prior to such time shall thereafter look only to
Parent for any claim for Merger Consideration, any cash in lieu
of fractional shares of Parent Shares to which they are entitled
pursuant to Section 3.2(e) and any dividends or other
distributions with respect to Parent Shares to which they are
entitled pursuant to Section 3.2(d) hereunder.
Section 3.3 Company
Stock Options/Warrants.
(a) Company Stock Options. Each Company
Option, whether vested or unvested, that is outstanding
immediately prior to the Effective Time shall, as of the
Effective Time, cease to represent a right to acquire Company
Shares and shall automatically be converted into an option (a
Company Converted Option) to purchase
Parent Shares. The number of Parent Shares subject to each
Company Converted Option shall be equal to the product of the
number of Company Shares subject to such Company Option
multiplied by the Exchange Ratio; provided that any
fractional Parent Shares resulting from such multiplication
shall be rounded down to the nearest whole share. The exercise
price per share of each Company Converted Option shall equal the
quotient of the exercise price per share under the corresponding
Company Option divided by the Exchange Ratio; provided
that such exercise price shall be rounded up to the nearest
whole cent. Each such Company Converted Option will otherwise
have substantially the same terms and conditions as the
corresponding Company Option, including vesting and term of
exercise. The Company agrees to take all actions necessary, if
any, to effectuate the provisions of this Section 3.3.
Notwithstanding anything in this Agreement to the contrary, the
conversion of options under this Section 3.3 shall be made
in a manner so as to preserve as nearly as possible any
exemption from Section 409A a Company Option may have
and/or any
status as an incentive stock option a Company Option
may have immediately prior to the Effective Time.
(b) Company Warrants. Each warrant to
purchase Company Shares (a Company Warrant)
that is outstanding immediately prior to the Effective Time
shall, as of the Effective Time, cease to represent a right to
acquire Company Shares and shall automatically be converted into
a warrant (a Company Converted Warrant) to
purchase Parent Shares. The number of Parent Shares subject to
each Company Converted Warrant shall be equal to the product of
the number of Company Shares subject to such Company Warrant
multiplied by the Exchange Ratio; provided that any
fractional Parent Shares resulting from such multiplication
shall be rounded down to the nearest whole share. The purchase
price per share of each Company Converted Warrant shall equal
the quotient of the purchase price per share under the
corresponding Company Warrant divided by the Exchange Ratio;
provided that such purchase price shall be rounded up to
the nearest whole cent. Each such Company Converted Warrant will
otherwise have substantially the same terms and conditions as
the corresponding Company Warrant, including the term of
exercise.
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ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except, with respect to each Section of this Article IV, as
set forth in any disclosure contained in the disclosure schedule
delivered by the Company to Parent prior to the execution of
this Agreement (the Company Disclosure
Schedule) that relates to such Section or that relates
to other Sections of this Article IV to the extent it is
reasonably apparent from such disclosure that it is applicable
to such Section, the Company represents and warrants to Parent
and Merger Sub as follows:
Section 4.1 Organization. The
Company (i) is a corporation duly incorporated, validly
existing and in good standing under the Laws of the State of
Delaware, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted and
(iii) is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where
the character of the property owned, leased or operated by it or
the nature of its activities makes such qualification necessary,
except where the failure to be so qualified could not reasonably
be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company has made available to
Parent complete and correct copies of its Certificate of
Incorporation and Bylaws and the Certificate of Incorporation
and Bylaws (or similar organizational documents) of each of its
Subsidiaries.
Section 4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
200,000,000 Company Shares and 2,000,000 shares of
preferred stock, par value $0.01 per share, of the Company
(Company Preferred Shares). At the
close of business on November 10, 2006, (i) 36,611,140
Company Shares (excluding treasury shares) were issued and
outstanding, (ii) no Company Shares were held by the
Company in its treasury, (iii) no Company Preferred Shares
were issued and outstanding, (iv) 4,430,172 Company Shares
were reserved for issuance pursuant to outstanding unexercised
options to purchase Company Shares (each a Company
Option), (v) 6,150,504 Company Shares have been
reserved for issuance under the Companys 2005 Equity
Incentive Plan (and sub plans thereunder), (vi) 7,845,889
Company Shares have been reserved for issuance pursuant to the
Company Warrants, and (vii) 37,618 Company Shares have been
reserved for issuance under the Companys 1998 Employee
Stock Purchase Plan. No shares of capital stock of the Company
are owned by any Subsidiary of the Company. All of the
outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive and similar rights. Except
as set forth above, as of the date of this Agreement, there are
no outstanding (i) shares of capital stock, debt securities
or other voting securities of the Company, (ii) securities
of the Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock, debt securities or
voting securities or ownership interests in the Company,
(iii) subscriptions, calls, contracts, commitments,
understandings, restrictions, arrangements, rights, warrants,
options, or other rights to acquire from the Company or any
Subsidiary of the Company, or obligations of the Company or any
Subsidiary of the Company to issue any capital stock, debt
securities, voting securities or other ownership interests in,
or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities, debt
securities or ownership interests in, the Company, or
obligations of the Company or any Subsidiary of the Company to
grant, extend or enter into any such agreement or commitment or
(iv) obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any outstanding
securities of the Company, or to vote or to dispose of any
shares of the capital stock of the Company. All of the
outstanding debt and equity securities of the Company have been
offered and issued in compliance with all applicable securities
laws, including the Securities Act and blue sky laws.
(b) Section 4.2(b) of the Company Disclosure Schedule
lists, as of the date of this Agreement, each outstanding
Company Option and Company Warrant, the holder thereof, the
number of Company Shares issuable thereunder, the vesting
schedule (as applicable), the expiration date and the exercise
price thereof.
Section 4.3 Subsidiaries.
(a) Each Subsidiary of the Company (i) is a
corporation duly incorporated or an entity duly organized and is
validly existing and in good standing under the Laws of its
jurisdiction of incorporation or organization,
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(ii) has all requisite power and authority to own, lease
and operate its assets and to carry on its business as now being
conducted and (iii) is duly qualified to do business as a
foreign corporation or entity and is in good standing in each
jurisdiction where the character of the property owned, leased
or operated by it or the nature of its activities makes such
qualification necessary, except where the failure to be so
qualified could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) All of the outstanding shares of capital stock of, or
other ownership interest in, each Subsidiary of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive and similar rights. All of
the outstanding capital stock or securities of, or other
ownership interest in, each of the Subsidiaries of the Company,
is owned, directly or indirectly, by the Company, and is owned
free and clear of any Lien and free of any other limitation or
restriction (including any limitation or restriction on the
right to vote, sell or otherwise dispose of the stock or other
ownership interests). Except as set forth above, there are no
outstanding (i) shares of capital stock, debt securities or
other voting securities of any Subsidiary of the Company,
(ii) securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock,
debt securities or voting securities or ownership interests in
any Subsidiary of the Company, (iii) subscriptions, calls,
contracts, commitments, understandings, restrictions,
arrangements, rights, warrants, options, or other rights to
acquire from the Company or any of its Subsidiaries, or
obligations of the Company or any of its Subsidiaries to issue
any capital stock, debt securities, voting securities or other
ownership interests in, or any securities convertible into or
exchangeable or exercisable for any capital stock, voting
securities, debt securities or ownership interests in, any
Subsidiary of the Company, or obligations of the Company or any
of its Subsidiaries to grant, extend or enter into any such
agreement or commitment or (iv) obligations of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any outstanding securities of any Subsidiary of the
Company, or to vote or to dispose of any shares of the capital
stock of any Subsidiary of the Company. All of the outstanding
debt and equity securities of each subsidiary of the Company has
been offered and issued in compliance with all applicable
securities laws, including the Securities Act and blue
sky laws.
(c) Section 4.3(c) of the Company Disclosure Schedule
lists (i) each Subsidiary of the Company, (ii) its
jurisdiction of incorporation or organization and (iii) the
location of its principal executive office. Except for the
capital stock of its Subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other ownership
interest in any entity.
Section 4.4 Authority. The
Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by the
Company of the Merger and of the other transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate such transactions,
other than, with respect to the Merger, the adoption of this
Agreement by the holders of a majority of the outstanding
Company Shares (the Company Stockholder
Approval). This Agreement has been duly executed and
delivered by the Company and, assuming due authorization,
execution and delivery hereof by the other parties hereto,
constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except to the extent that enforceability: (a) may be
limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general
application affecting or relating to the enforcement of
creditors rights generally; and (b) is subject to
general principles of equity, whether considered in a proceeding
at law or in equity.
Section 4.5 Consents
and Approvals; No Violations.
(a) The execution, delivery and performance of this
Agreement and the consummation by the Company of the
transactions contemplated by this Agreement do not and will not
require any filing or registration with, notification to, or
authorization, permit, consent or approval of, or other action
by or in respect of, any Governmental Entities other than
(i) the filing of the Certificate of Merger as contemplated
by Article II hereof, (ii) compliance with any
applicable requirements of the HSR Act and (iii) compliance
with any
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applicable requirements of the Securities Act, the Exchange Act,
blue sky laws and NASDAQ Marketplace Rules.
(b) The execution, delivery and performance of this
Agreement and the consummation by the Company of the
transactions contemplated by this Agreement do not and will not
(i) conflict with or result in any breach of any provision
of the Certificate of Incorporation or Bylaws of the Company or
any similar organizational documents of any of its Subsidiaries,
(ii) assuming that the authorizations, consents and
approvals referred to in Section 4.5(a) and the Company
Stockholder Approval are obtained, violate any Order or Law
applicable to the Company, any of its Subsidiaries or any of
their properties or assets or (iii) in any material way,
violate, conflict with, require consent pursuant to, result in a
breach of, constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or
give rise to a right of, or result in, the termination,
amendment, cancellation, modification, acceleration or the loss
of a benefit under, or result in the creation of any Lien upon
any of the properties or assets of the Company or any of its
Subsidiaries under, any of the terms, conditions or provisions
of any Contract to which the Company or any of its Subsidiaries
is a party or by which any of its properties or assets may be
bound.
Section 4.6 Books
and Records. The Companys and its
Subsidiaries books, accounts and records are, and have
been, in all material respects, maintained in the Companys
and its Subsidiaries usual, regular and ordinary manner,
in accordance with GAAP, and all material transactions to which
the Company or any of its Subsidiaries is or has been a party
are properly reflected therein.
Section 4.7 SEC
Reports and Financial Statements.
(a) The Company has filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed
by it since January 1, 2004 (together with all information
incorporated therein by reference, the Company SEC
Documents). At the time of their respective filing
dates, the Company SEC Documents (i) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) complied in
all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder. No
Subsidiary of the Company is required to make any filings with
the SEC.
(b) Except to the extent expressly stated therein, each of
the consolidated financial statements of the Company included in
the Company SEC Documents since the first SEC filing by the
Company covering the fiscal period ending after
December 31, 2004 (the First
Filing) complied in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by
Form 10-Q
of the SEC) and fairly present in all material respects
(subject, in the case of the unaudited statements, to normal,
recurring audit adjustments not material in amount) the
consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended. Since the First Filing, there has been no
change in the Companys accounting methods or principles
that would be required to be disclosed in the Companys
financial statements in accordance with GAAP, except as
described in the notes to such Company financial statements.
Section 4.8 Absence
of Certain Changes or Events. Except as disclosed
in the Company SEC Documents filed and publicly available prior
to the date of this Agreement (the Company Filed
SEC Documents), between June 30, 2006 and the
date of this Agreement, (a) the Company and its
Subsidiaries have conducted their respective businesses in all
material respects in the ordinary course of business,
(b) there has not been any event or events that would be
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect and (c) neither the Company
nor any of its Subsidiaries has taken any action (or failed to
take any action) that would constitute a breach of
clauses (i), (ii) (excluding any issuance of Company
Shares pursuant to exercise or conversion of Company Options or
Company Warrants), (iv), (v),
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(vi), (vii), (viii) or (x) of Section 6.1(a) if
such action was taken (or such failure occurred) after the date
hereof.
Section 4.9 No
Undisclosed Liabilities. Except as disclosed in
the Company Filed SEC Documents (excluding any disclosures set
forth in any risk factor section thereof) and except for
liabilities incurred in the ordinary course of business, since
June 30, 2006 that are not material, neither the Company
nor any of its Subsidiaries has any liabilities, absolute,
contingent, unliquidated or otherwise, whether due or to become
due, of the type required to be disclosed on a balance sheet or
in the related notes to consolidated financial statements
prepared in accordance with GAAP, that, individually or in the
aggregate, are material to the Company or any of its
subsidiaries.
Section 4.10 Benefit
Plans; Employees and Employment Practices.
(a) Section 4.10 of the Company Disclosure Schedule
contains a list, as of the date of this Agreement, of all
written employee pension benefit plans (as defined
in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended (ERISA))
(sometimes referred to herein as Pension
Plans), employee welfare benefit plans (as
defined in Section 3(1) of ERISA and sometimes referred to
herein as Welfare Plans) and each other
Benefit Plan (defined herein as any
Pension Plan, Welfare Plan and any other material plan, fund,
program, arrangement or agreement (including material employment
and consulting agreements) to provide employees, directors
and/or, independent contractors with medical, health, life,
bonus, stock or stock-based right (option, ownership or
purchase), retirement, deferred compensation, severance, salary
continuation, vacation, sick leave, fringe, incentive insurance
or other benefits) maintained, or contributed to, or required to
be contributed to, by the Company or any of its Subsidiaries for
the benefit of any current or former independent contractors,
employees, officers
and/or
directors of the Company or any of its Subsidiaries. The Company
has delivered or made available to Parent true, complete and
correct copies of (i) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof),
(ii) the most recent annual report on Form 5500 filed
with the IRS with respect to each Benefit Plan (if any such
report was required), (iii) the most recent summary plan
description for each Benefit Plan for which such summary plan
description is required pursuant to ERISA, (iv) each trust
agreement and group annuity contract relating to any Benefit
Plan, (v) a list of all assets and liabilities of,
allocated to or accounted for separately with respect to every
material Benefit Plan (including insurance contracts associated
with every material Benefit Plan regardless of whether any
current cash value exists) and (vi) the most recent
determination letter from the IRS, if any. There are no material
amendments to any Benefit Plan (or the establishment of any new
Benefit Plan) that have been adopted or approved nor has the
Company or any of its Subsidiaries committed to make any such
amendment or to adopt or approve any new plans.
(b) Each Benefit Plan has been established, funded,
maintained and administered in all material respects in
accordance with its terms and is in compliance with the
applicable provisions of ERISA, the Code,
and/or all
other applicable Laws. All Company Options have been granted
with an exercise price per share no lower than the fair
market value of a Company Share, as determined in
accordance with the terms of the applicable option plan. The
Company Options have been properly accounted for by the Company
in accordance with GAAP.
(c) All Pension Plans have been and continue to be the
subject of favorable (through any applicable remedial amendment
period) determination letters from the IRS, or a timely
application therefor has been filed, to the effect that such
Pension Plans are qualified and exempt from federal income taxes
under Section 401(a) and 501(a), respectively, of the Code,
and no such determination letter has been revoked nor has any
such Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that
would adversely affect its qualification or materially increase
its costs; and no circumstances exist and no events have
occurred that would reasonably be expected to adversely affect
the qualification of any Pension Plan or the related trust after
taking into account the availability of applicable remedial
action programs. No trust funding any Benefit Plan is intended
to meet the requirements of Section 501(c)(9) of the Code.
(d) Neither the Company, nor any of its Subsidiaries, nor
any other Person that, together with the Company, is or was
treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code (the
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Company and each such other Person a Commonly
Controlled Entity) has (i) maintained, sponsored
or been required to contribute to a plan subject to
Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code or (ii) been required at any time or is
required currently to contribute to any multiemployer
plan (as defined in Section 4001(a)(3) of ERISA). No
Pension Plan for employees outside of the United States is
subject to any funding requirements or has any unfunded
liabilities not reflected on the Companys financial
statements.
(e) With respect to any material Welfare Plan subject to
ERISA, (i) no such Welfare Plan is funded through a
welfare benefits fund, as such term is defined in
Section 419(e) of the Code, (ii) no such Welfare Plan
is self-insured, and (iii) each such material Welfare Plan
that is a group health plan, as such term is defined
in Section 5000(b)(1) of the Code and any Benefit Plan that
is maintained by a Commonly Controlled Entity, complies with the
applicable requirements of Section 4980B(f) of the Code.
(f) Except as set forth on Section 4.10(f) of the
Company Disclosure Schedule, neither the Company, nor any of its
Subsidiaries, nor any Person acting on behalf of the Company or
its Subsidiaries has made or entered into any material, legally
binding commitment (including loans) with, any directors,
officers, employees, consultants or independent contractors of
the Company as of or prior to the date of this Agreement, any of
its Subsidiaries or of any Commonly Controlled Entity to the
effect that, following the date hereof, (i) any new plans,
agreements or arrangements providing new or additional benefits
or compensation will be adopted, (ii) any Benefit Plans
will be continued for any period of time or cannot be amended or
terminated at any time or for any reason, (iii) any plans
or arrangements provided by Parent will be made available to
such employees, or (iv) any trusts or other funding
mechanisms will be required to be funded.
(g) Except as set forth on Section 4.10(g) of the
Company Disclosure Schedule, neither the Company, its
Subsidiaries or any Commonly Controlled Entity has any material
liability for life, health, medical or other welfare benefits
for former employees or beneficiaries or dependents thereof with
coverage or benefits under Benefit Plans other than Pension
Plans, other than as required by Section 4980B of the Code
or Part 6 of Title I of ERISA.
(h) All contributions or premiums owed by the Company or
any of its Subsidiaries with respect to Benefit Plans under law,
contract or otherwise have been made in full and on a timely
basis in all material respects and the Company or its
Subsidiaries are not obligated to contribute with respect to any
such Benefit Plan that involves a material retroactive
contribution, assessment or funding waiver arrangement. All
administrative costs attributable to Benefit Plans have been
paid when due.
(i) To the Companys Knowledge, no Pension Plan or
Welfare Plan or any fiduciary or
party-in-interest
(as such terms are respectively defined by Sections 3(21)
and 3(14) of ERISA) thereto has engaged in a transaction
prohibited by Section 406 of ERISA or 4975 of the Code for
which a valid exception is not available.
(j) There are no pending or, to the Companys
Knowledge, threatened, claims, lawsuits, arbitrations or audits
asserted or instituted against any Benefit Plan, any fiduciary
(as defined by Section 3(21) of ERISA) thereto, the
Company, any of its Subsidiaries or any employee or
administrator thereof in connection with the existence,
operation or administration of a any Benefit Plan, other than
routine claims for benefits.
(k) Nothing in this Agreement or the transactions
contemplated by this Agreement will: (i) cause an adverse
termination or adverse repricing of any insurance contract to
which the Company, any of its Subsidiaries or Benefit Plan is a
party for the purposes of providing employee benefits;
(ii) trigger a right, whether or not conditioned upon
termination of employment or changes in duties or
responsibilities, of any employee of the Company or any of its
Subsidiaries to severance, deferred compensation or retirement
benefits, (iii) trigger a right or payment, whether or not
conditioned upon termination of employment or changes in duties
or responsibilities, that would be considered a parachute
payment within the meaning of Section 280G of the Code or
any reimbursement of any excise taxes under Section 4999 of
the Code or any income taxes under the Code; or (iv) cause
any early withdrawal or premature termination penalty with
respect to any asset held in connection with any Benefit Plan.
The Company has delivered or made available to Parent
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the current base salary and target bonus with respect to each
disqualified individual of the Company (as defined
under Section 280G(c) of the Code).
(l) No amounts payable under any of the Benefit Plans or
any other contract, agreement or arrangement with respect to
which the Company or any of its Subsidiaries may have any
liability that was intended to constitute
performance-based compensation for the purposes of
section 162(m)(4)(C) of the Code would reasonably be
expected to fail to be deductible for federal income tax
purposes by virtue of section 162(m) of the Code.
(m) Neither the Company nor its Subsidiaries is a party to
any collective bargaining agreement. There are no material
threatened or pending controversies, strikes, work stoppages,
slowdowns, lockouts, arbitrations or other material labor
disputes pending or, to the Knowledge of the Company, threatened
between the Company or its Subsidiaries and any representatives
of any of their employees. To the Knowledge of the Company,
there are no material organizational efforts presently being
made involving any of the presently unorganized employees of the
Company or its Subsidiaries. There are no material pending or,
to the Knowledge of the Company, material threatened complaints,
charges or claims against the Company or any of its Subsidiaries
brought or filed with any governmental authority, arbitrator or
court based on, arising out of, in connection with or otherwise
relating to the employment or termination of employment by any
of the Companies or any of its Subsidiaries or, relating to the
employees or other persons providing services to or on behalf of
the Company or any of its Subsidiaries.
(n) The Company and its Subsidiaries are in material
compliance with all material laws, regulations and orders
applicable to such entity or the employees or other persons
providing services to or on behalf of such entity, as the case
may be, relating to the employment of labor, including all such
laws, regulations and orders relating to wages, hours,
employment standards, WARN Act, Title VII of the Civil
Rights Act of 1964, Age Discrimination in Employment Act,
Americans with Disabilities Act, Equal Pay Act, Health Insurance
Portability and Accessibility Act, ERISA, Family and Medical
Leave Act, discrimination, civil rights, safety and health, and
workers compensation.
(o) The Company and each Subsidiary has in all material
respects properly classified the employment or other service
status of all employees or other persons providing services to
or on behalf of the Company or any of its Subsidiaries for
purposes of (i) all applicable law and, (ii) if
applicable, the terms or tax qualification requirements of any
Benefit Plan or other benefit arrangement.
Section 4.11 Contracts.
(a) Neither the Company nor any of its Subsidiaries or, to
the Knowledge of the Company, any other party, is in violation
or is in material breach of or in default under (nor does there
exist any condition which the passage of time or the giving of
notice would result in such a violation or breach of, or
constitute such a default or other condition under) any Company
Contract to which it is a party. No other party to any such
Contract has, to the Knowledge of the Company, alleged that the
Company or any of its Subsidiaries is in violation or breach of
or in default under any such Contract, which allegation has not
been resolved. Each Company Contract is valid and binding on the
Company
and/or any
of its Subsidiaries that is a party thereto and, to the
Knowledge of the Company, each other party thereto, and such
Company Contract is in full force and effect.
(b) As of the date of the Agreement, neither the Company
nor any of its Subsidiaries is a party to, or bound by, any
undischarged (i) Contract obligating the Company or its
Subsidiaries to pay or receive an amount in excess of $500,000,
(ii) employment or consulting Contract with any individual
employee or consultant requiring payment in excess of
$200,000 per annum, (iii) non-competition Contract or
any other Contract that similarly limits the Company or any of
its Subsidiaries, (iv) distributorship, non-employee
commission or marketing agent, representative or franchise
Contract providing for the marketing
and/or sale
of the products or services of the Company or any of its
Subsidiaries, (v) Contract between the Company and any of
its Affiliates (excluding any such item solely between the
Company and its Subsidiaries), (vi) guaranty, performance,
bid or completion bond, or surety or indemnification Contract
(excluding (A) any such item between the Company and its
Subsidiaries and (B) any indemnification Contract entered
into in the Companys
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and or its Subsidiaries ordinary course of business with a
customer of the Company), (vii) loan or credit Contract,
pledge Contract, note, security, mortgage, debenture, indenture,
factoring Contract or letter of credit relating to borrowed
money (other than equipment leases made in the ordinary course
of business relating to capitalized lease obligations of not
more than $100,000 in the aggregate), (viii) Contract
relating to the ownership or control of any interest in a
partnership, corporation, limited liability company, joint
venture or other entity or similar arrangement,
(ix) Contract containing provisions prohibiting assignment
in connection with a change of control of the Company or
(x) Contract material to the condition (financial or
otherwise), business, prospects or results of operations of the
Company and its Subsidiaries taken as a whole. Each Contract of
the type described in this Section 4.11, whether or not set
forth in the Company Disclosure Schedule or in such Company SEC
Documents, is referred to herein as a Company
Contract.
Section 4.12 Insurance. The
Company has delivered or made available to Parent prior to the
date of this Agreement copies of all insurance policies which
are owned by the Company or its Subsidiaries or which names the
Company or any of its Subsidiaries as an insured (or loss payee)
as of the date of this Agreement, including those which pertain
to the Companys or its Subsidiaries assets,
employees or operations. All such insurance policies which are
owned by the Company or its Subsidiaries are in full force and
effect, are valid and enforceable. As of the date of this
Agreement, neither the Company nor any of its Subsidiaries have
received notice of cancellation of any such insurance policies.
Section 4.13 Litigation. There
is no suit, claim, action, proceeding, arbitration or
investigation pending before any Governmental Entity or, to the
Knowledge of the Company, threatened against the Company or any
of its Subsidiaries or their respective assets or properties.
Neither the Company nor any of its Subsidiaries is subject to
any outstanding Order.
Section 4.14 Compliance
with Applicable Law.
(a) The Company and its Subsidiaries hold all material
permits, licenses, variances, exemptions, orders and approvals
of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the Company
Permits). The Company and its Subsidiaries are in
compliance, in all material respects, with the terms of the
Company Permits. The businesses of the Company and its
Subsidiaries are being and have at all times been conducted in
compliance, in all material respects, with applicable Law. 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 any such investigation
or review.
(b) Except as disclosed in the Company Filed SEC Reports,
the Company is in compliance, in all material respects, with
(i) the provisions of the Sarbanes-Oxley Act and
(ii) the listing and corporate governance rules and
regulations of NASDAQ applicable to the Company as of the date
of this Agreement. Except as permitted by the Exchange Act,
including Sections 13(k)(2) and (3) thereof, since the
enactment of the Sarbanes-Oxley Act, neither the Company nor any
of its Subsidiaries has made, arranged, modified, or forgiven
personal loans to any executive officer or director of the
Company in violation of the Sarbanes-Oxley Act.
(c) The management of the Company has (i) designed and
implemented disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) or caused such disclosure control and
procedures to be designed under their supervision to ensure that
material information relating to the Company, including its
consolidated Subsidiaries, is made known to the management of
the Company by others within those entities, and
(ii) disclosed, based on its most recent evaluation to the
Companys outside auditors and the audit committee of the
Board of Directors of the Company, (A) all significant
deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) which are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information, (B) any fraud, whether or
not material, that involves management or other employees who
have a significant role in the Companys internal controls
over financial reporting and (C) any other matter required
to be disclosed by Law, the Companys policies, the listing
standards of NASDAQ, the Companys audit committees
charter or the professional standards of the Public Company
Accounting Oversight Board.
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(d) Between January 1, 2004 and the date of this
Agreement, (i) neither the Company nor any of its
Subsidiaries nor, to the Knowledge of the Company, any director,
officer, employee, auditor, accountant or representative of the
Company or any of its Subsidiaries has received or otherwise has
Knowledge of any complaint, allegation, assertion or claim,
regarding the accounting or auditing practices, procedures,
methodologies or methods of the Company or any of its
Subsidiaries or their respective internal accounting controls
relating to periods after January 1, 2004, including any
material complaint, allegation, assertion or claim that the
Company or any of its Subsidiaries has engaged in questionable
accounting or auditing practices (except for any of the
foregoing which have no reasonable basis), and (ii) 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,
relating to periods after January 1, 2004, by the Company
or any of its officers, directors, employees or agents to the
Board of Directors of the Company or any committee thereof or,
to the Knowledge of the Company, to any director or officer of
the Company.
Section 4.15 Taxes
and Tax Returns.
(a) All Tax Returns required to be filed by or with respect
to the Company or any of its Subsidiaries have been duly and
timely filed. Such Tax Returns (i) were prepared in the
manner required by applicable law, (ii) are true, correct,
and complete in all material respects, and (iii) accurately
reflect the liability for Taxes of the Company and of its
Subsidiaries in all material respects.
(b) True and complete copies of all federal, state, local
and foreign Tax Returns of or including the Company or any of
its Subsidiaries filed since January 1, 2003 have been
provided to Parent and true and complete copies of all
examination reports and statements of deficiencies assessed
against or agreed to by (or affecting) the Company or any
Subsidiary have been provided to Parent.
(c) Except as provided in the sentence that follows, all
Taxes for which the Company or any of its Subsidiaries is or may
be liable in respect of Taxable Periods (or portions thereof)
ending on or before the Closing Date, whether or not shown (or
required to be shown) on a Tax Return (Pre-Closing
Taxes), have been, or as of the Closing Date shall
have been, timely paid. In the case of any Pre-Closing Tax not
yet due and payable as of the Closing Date, either (i) an
accrual properly determined in accordance with GAAP for the
payment of such Pre-Closing Tax (without regard to deferred tax
assets and deferred tax liabilities and similar items) was
provided on the consolidated financial statements of the Company
and its Subsidiaries included in the Company Filed SEC Documents
filed prior to the date hereof, or (ii) (x) the
liability for such Pre-Closing Tax was accrued after the date of
such financial statement, (y) such liability was incurred
in the ordinary course of business and (z) such liability
is not material.
(d) No Tax deficiencies have been claimed, proposed or
assessed against the Company or any of its Subsidiaries in
writing by any Taxing or other governmental authority, and none
of the Company or any of its Subsidiaries has received any
notice, or otherwise has any Knowledge, of any potential claim,
proposal or assessment against the Company or any of its
Subsidiaries with respect to any Tax deficiency.
(e) There are no pending or, to the Companys
Knowledge, threatened audits, investigations or claims for or
relating to any liability of the Company or any of its
Subsidiaries in respect of Taxes, and there are no matters under
discussion between the Company or any of its Subsidiaries on the
one hand and any governmental authority on the other hand with
respect to Taxes. None of the Tax Returns of the Company or any
of its Subsidiaries has been or is currently being examined by
the IRS or any state, local or foreign Taxing authorities. None
of the Company or any of its Subsidiaries (i) has entered
into a closing agreement pursuant to Section 7121 of the
Code or any similar provision of state, local, or foreign law
with any Taxing authority or (ii) has received or sought or
participated in a request for a ruling (or other determination
or form of advice) from any Taxing authority pertaining to the
treatment of any item for Tax purposes. No state of facts exists
or has existed which would constitute grounds for the assessment
of any liability for Taxes with respect to any Taxable Period
(or portion thereof) not yet audited by the IRS or other
applicable Taxing authority.
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(f) Each of the Company and its Subsidiaries has duly and
timely withheld, collected, paid and reported to the proper
governmental authority all material Taxes required to have been
withheld, collected, paid or reported.
(g) No claim has ever been made in writing by any Taxing
authority with respect to the Company or any of its Subsidiaries
in a jurisdiction where the Company or such Subsidiary does not
file Tax Returns that the Company or such Subsidiary is or may
be subject to taxation by that jurisdiction.
(h) There are no liens upon or other security interests in
any property or assets of the Company or any of its Subsidiaries
for or relating to Taxes, except for liens for real and personal
property Taxes not yet due and payable.
(i) There are no outstanding requests, agreements, consents
or waivers to extend the statutory period of limitations
applicable to the assessment of any Taxes or deficiencies
against the Company or any of its Subsidiaries, and no power of
attorney granted by the Company or any of its Subsidiaries with
respect to any Taxes is currently in force except for powers of
attorney in connection with Benefit Plans or powers of attorney
authorizing employees of the Company to act on behalf of the
Company.
(j) Neither the Company nor any of its Subsidiaries has
(i) been a member of an affiliated group (within the
meaning of Section 1504 of the Code) or an affiliated,
combined, consolidated, unitary, or similar group for state,
local, or foreign Tax purposes, other than the group of which
the Company is the common parent, or (ii) any liability for
or in respect of the Taxes of, or determined by reference to the
Tax liability of, another person (other than the Company or any
of its Subsidiaries) under Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(k) Neither the Company nor any of its Subsidiaries has
agreed or is required to include in income any adjustment under
either Section 481(a) or Section 482 of the Code (or
an analogous provision of state, local, or foreign law) by
reason of a change in accounting method or otherwise.
(l) Except for customary agreements to indemnify lessors,
licensors, lenders and debt securityholders in respect of Taxes,
none of which involves any material financial exposure, neither
the Company nor any of its Subsidiaries is a party to any
contract, agreement, plan or arrangement relating to allocating
or sharing the payment of, indemnity for, or liability for,
Taxes with respect to any Taxable Period.
(m) The Company and each of its Subsidiaries is in
compliance with the record retention requirements of Rev. Proc.
98-25.
(n) Neither the Company nor any of its Subsidiaries has
constituted either a distributing corporation or a
controlled corporation in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code (i) in the two (2) years prior to the date of
this Agreement or (ii) in a distribution which would
otherwise constitute part of a plan or series
of related transactions (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(o) For U.S. Federal income tax purposes, neither the
Company nor any of its Subsidiaries has any income reportable
for a period ending after the Closing Date, which income, under
general federal tax principles, would be reportable for a period
ending on or before the Closing Date, that is attributable to a
transaction (e.g., an installment sale) occurring in a
period ending on or prior to the Closing Date or a change of
accounting method or special tax election.
(p) Following the completion of the transactions
contemplated by this Agreement, the Surviving Corporation and
its Subsidiaries will have net operating loss carryovers for
U.S. Federal income Tax purposes in excess of One Hundred
and Thirteen Million Dollars ($113 million).
Section 4.15(p) of the Company Disclosure Schedule lists
the number of remaining taxable years prior to the expiration
thereof.
(q) The Company is not, and has not been, a United
States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of
the Code.
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(r) Neither the Company nor any of its Subsidiaries has
engaged in any listed transaction within the meaning
of Treasury
Regulation Section 1.6011-4(b)(2).
Set forth in Section 4.15(r) of the Company Disclosure
Schedule is a true and complete list of transactions with
respect to which the Company, or any of its Subsidiaries, has
filed a statement pursuant to
Section 1.6011-4
of the Treasury Regulations and, to the Knowledge of the
Company, such list reflects all transactions with respect to
which the Company and its Subsidiaries were required to file
such statement.
(s) Since January 1, 2004, the Company has not,
actually or in substance (including through derivative
transactions such as collars, or put protection arrangements
which would have the economic effect of a transfer of the
burdens, benefits, or other facets of ownership), directly or
indirectly, redeemed any of its stock or made any distributions
with respect to its stock other than regular, normal dividends.
For the purposes of this Section 4.15(s), transactions
occurring pursuant to any Benefit Plan shall not be taken into
consideration.
(t) After the merger, the Surviving Corporation will hold
at least ninety percent (90%) of the fair market value of the
net assets and at least seventy percent (70%) of the fair market
value of the gross assets held by the Company immediately prior
to the Merger. For purposes of this representation, amounts paid
by the Company to dissenters, amounts paid by the Company to
shareholders who receive cash or other property, Company assets
used to pay the Companys transaction expenses and employee
bonuses, and all redemptions and distributions (except for
regular, normal dividends) made by the Company will be included
as assets of the Company held immediately prior to the Merger.
Section 4.16 Environmental
Laws and Regulations. Except as described in any
of the Company Filed SEC Documents (excluding any disclosures
set forth in any risk factor section thereof):
(a) the Company and each of its Subsidiaries is, and at all
times has been, in compliance in all material respects with all
applicable federal, state, local and foreign Laws relating to
pollution or protection of human health, natural resources or
the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) (collectively,
Environmental Laws), except for noncompliance
which could not reasonably be expected to have a Company
Material Adverse Effect;
(b) as of the date of this Agreement, neither the Company
nor any of its Subsidiaries has received written notice of, nor
do any of the executive officers of the Company have actual
Knowledge of, the Company as the subject of, any actions, causes
of action, claims, investigations, demands or notices by any
Person alleging liability under or noncompliance with any
Environmental Law or that the Company or any Subsidiary is a
potentially responsible party at any Superfund site or
state-equivalent site;
(c) to the Knowledge of the Company, there are no hazardous
or toxic substances or materials at, on, under or in any real
property currently or formerly owned or leased by the Company or
any Subsidiary;
(d) the Company and its Subsidiaries have not disposed of
or released hazardous or toxic substances or materials (at a
concentration or level which requires remedial action under any
Environmental Law) at any real property currently owned or
leased by the Company or any Subsidiary or at any other real
property; and
(e) neither the Company nor its Subsidiaries have agreed to
indemnify any predecessor or other party with respect to any
environmental liability, other than customary indemnity
provisions contained in agreements entered into in the ordinary
course of business which could not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
Section 4.17 State
Takeover Statutes. The Company has taken all
actions required to be taken by it in order to exempt this
Agreement and the transactions contemplated hereby from the
provisions of Section 203 of the DGCL, and accordingly,
that section does not apply to the Merger or any of the
transactions contemplated hereby or thereby. No other
control share acquisition, fair price or other
anti-takeover regulations enacted under state or federal laws in
the United States apply to this Agreement or any of the
transactions contemplated hereby.
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Section 4.18 Intellectual
Property.
(a) Section 4.18(a) of the Company Disclosure Schedule
sets forth a complete and accurate list of: (i) any and all
Company Intellectual Property that is Registered Intellectual
Property, in each case, indicating the owner thereof, pertinent
application and registration numbers and any Liens with respect
thereto, and (ii) any and all IP Contracts relating to the
Company Intellectual Property other than Software.
(b) The Company or one of its Subsidiaries is the sole and
exclusive owner of each item of Owned Intellectual Property, or
has the valid right to use pursuant to (i) an IP Contract
listed in Section 4.18(a) of the Company Disclosure
Schedule, (ii) an IP Contract for Software or (iii) a
shrink wrap or similar license for
off-the-shelf
retail available Software used solely on the personal computers
of the Company or its Subsidiaries (collectively,
Shrink Wrap License and, together with the IP
Contracts described in clauses (i) and (ii),
Company IP Contracts) or by virtue of fair
use or public domain all other Company Intellectual Property, in
each case, free and clear of all Liens, milestone payments,
royalties, restrictions and any other third party rights or
interests (including rights or interests of academic entities or
Governmental Entities), except for one-time payment obligations
under the Shrink Wrap Licenses or as otherwise disclosed in
Section 4.18(b) of the Company Disclosure Schedule. The
Company or one of its Subsidiaries is listed in the records of
the appropriate U.S. and/or
non-U.S. Registration
Authority as the sole and exclusive owner of record for each
registration, grant and application for Registered Intellectual
Property included in the Owned Intellectual Property. The
Company and each of its Subsidiaries have obtained from all of
their officers, employees and consultants assignments, or
effective agreements to assign, to the Company or such
Subsidiary all rights to any and all Intellectual Property
invented, conceived, reduced to practice, developed or otherwise
created by such Persons in connection with such Persons
activities on behalf of the Company. The Company Intellectual
Property includes all the Intellectual Property that is material
for the conduct of the business of the Company and each of its
Subsidiaries as currently and as contemplated to be conducted
prior to June 30, 2007, provided that to the extent
that any Patent would be infringed by the manufacture, use,
sale, offer for sale or import of any Company Product, the
Company or one of its Subsidiaries is the exclusive owner of
such Patent or has secured appropriate rights thereto through
license or IP Contract. No Person other than the Company or its
Subsidiaries has ownership rights or license rights granted by
the Company or its Subsidiaries to improvements made by or for
the Company or any of its Subsidiaries to any material Owned
Intellectual Property or Company Products.
(c) The Company Owned Intellectual Property material to the
business of the Company and its Subsidiaries or to any material
Company Product, and all of the Companys and its
Subsidiaries rights therein, is and are valid and
enforceable. There are no facts, proceedings, claims or
challenges that cause or would cause any such material Owned
Intellectual Property to be invalid or unenforceable, or
challenging the Companys or its Subsidiaries rights
in such material Owned Intellectual Property, and the Company
has not received any notice from any Person bringing or
threatening to bring such proceedings, claims or challenges. To
the Companys Knowledge, there are no facts, proceedings,
claims or challenges that cause or would cause any Company
Intellectual Property other than the Owned Intellectual Property
to be invalid or unenforceable. No act has been done or omitted
to be done by the Company, any of its Subsidiaries thereof,
which has, had or would likely have the effect of impairing or
dedicating to the public, or entitling any Person to cancel,
forfeit, modify or consider abandoned, any Owned Intellectual
Property material to the business of the Company and its
Subsidiaries or to any material Company Product. All necessary
registration, maintenance and renewal fees in respect of all
Company Registered Intellectual Property have been paid and all
necessary documents and certificates have been filed with the
relevant Registration Authority for the purpose of maintaining
such Registered Intellectual Property. Neither the Company nor
any of its Subsidiaries has divulged, furnished to or made
accessible any of their material Trade Secrets to any Person who
is not subject to an enforceable written agreement to maintain
the confidentiality of such Trade Secrets, and the Company and
its Subsidiaries otherwise take and have taken reasonable
measures to maintain the confidentiality of their Trade Secrets.
(d) None of the Company, its Subsidiaries or any of their
respective current or contemplated activities, or Company
Products infringes, misappropriates or otherwise violates, or
has infringed, misappropriated or otherwise violated, any
Intellectual Property of any Person, and neither the Company nor
any of its
A-21
Subsidiaries have received any notice or are subject to any
actual or, to the Knowledge of the Company, threatened
proceedings claiming or alleging any of the foregoing. No
proceedings or claims in which the Company or any of its
Subsidiaries alleges that any Person is infringing,
misappropriating or otherwise violating any Owned Intellectual
Property are pending, and none have been served by, instituted
or asserted by the Company or any of its Subsidiaries, nor are
any proceedings, to the Knowledge of the Company, threatened
alleging any such infringement, misappropriation or violation,
nor is the Company or any of its Subsidiaries aware of any such
infringement, misappropriation or violation which could
reasonably be expected to have a Company Material Adverse
Effect. To the Companys Knowledge, there are no material
breaches or defaults of, or any disputes or threatened disputes
concerning, any of the IP Contracts.
(e) All Software used by the Company or any of its
Subsidiaries (other than pursuant to Shrink Wrap Licenses)
performs substantially in conformance with its documentation (to
the extent such documentation is substantially finalized), will
not require third party consents for the consummation of the
transactions contemplated by this Agreement, is free from any
material software defect and, to the Knowledge of the Company,
does not contain any Unauthorized Code which could reasonably be
expected to have a Company Material Adverse Effect. To the
Knowledge of the Company, no person has gained unauthorized
access to the Software.
(f) The consummation of the transactions contemplated by
this Agreement will not (i) result in the loss of, or
otherwise adversely affect, any material rights of the Company
or any of its Subsidiaries in any Company Intellectual Property,
(ii) grant or require the Company or any Subsidiary to
grant to any Person any material rights with respect to any
Company Intellectual Property, (iii) subject the Company or
any of its Subsidiaries to any material increase in royalties or
other payments in respect of any Company Intellectual Property,
(iv) materially diminish any royalties or other payments
the Company or its Subsidiaries would otherwise be entitled to
in respect of any Company Intellectual Property, or
(v) result in the material breach or, by the terms of such
Contract, termination of any IP Contract.
(g) Neither the Company nor any of its Subsidiaries or, to
the Knowledge of the Company, any other party, is in violation
or is in material breach of or in default under (nor does there
exist any condition which the passage of time or the giving of
notice would result in such a violation or breach of, or
constitute such a default or other condition under) any IP
Contract to which it is a party. No other party to any such IP
Contract has, to the Knowledge of the Company, alleged that the
Company or any of its Subsidiaries is in violation or breach of
or in default under any such IP Contract, which allegation has
not been resolved. Each IP Contract is valid and binding on the
Company
and/or any
of its Subsidiaries that is a party thereto and, to the
Knowledge of the Company, each other party thereto, and such IP
Contract is in full force and effect.
(h) For purposes of this Agreement, the terms
(A) Intellectual Property shall mean any
and all of the following: U.S. and
non-U.S. (i) patents,
utility models, supplementary protection certificates and
applications therefor (including provisional applications,
invention disclosures, certificates of invention and
applications for certificates of invention) and divisionals,
continuations,
continuations-in-part,
patents of addition, reissues, renewals, extensions,
re-examinations, and equivalents thereof throughout the world
(Patents), (ii) trade secrets, know-how,
proprietary information, inventions, discoveries, improvements,
technology, technical data and research and development, whether
patentable or not (collectively, Trade
Secrets), (iii) trademarks, service marks, trade
dress, trade names and Internet domain names and registrations
and applications therefor, and equivalents thereof throughout
the world, (iv) copyrights, mask works, registrations and
applications therefor, and equivalents thereof throughout the
world, (v) computer software and firmware, including all
source code, object code, specifications, databases, designs and
documentation (collectively, Software) and
(vi) other intellectual property, industrial property and
proprietary rights and all applications, registrations and
grants related thereto; (B) IP Contracts
shall mean all Contracts to which the Company or any of its
Subsidiaries is a party that assigns, sells, grants, or
otherwise conveys or licenses, waives, options, covenants not to
enforce or otherwise confers any rights under, in or to any
Intellectual Property; (C) Company
Products shall mean any and all products or service
offerings currently marketed, sold or distributed, or currently
contemplated by the Company as of the date hereof to be
marketed, sold or distributed, by or on behalf of the Company or
any of its Subsidiaries prior to June 30, 2007;
(D) Registered Intellectual Property
shall mean any and all Intellectual Property that is the subject
matter of an application, election, designation,
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certificate, filing, registration, recordation, acknowledgement,
document or other communication issued by, filed with, or
recorded by any Governmental Entity or other Person primarily
responsible for issuing, filing or recording any of the
foregoing (such Governmental Entity or other Person, a
Registration Authority);
(E) Owned Intellectual Property shall
mean any and all Intellectual Property in which the Company or
any of its Subsidiaries has an ownership interest;
(F) Licensed Intellectual Property shall
mean any and all Intellectual Property that is used by or
licensed to the Company
and/or any
of its Subsidiaries other than the Owned Intellectual Property;
and (G) Company Intellectual Property
shall mean the Owned Intellectual Property and the Licensed
Intellectual Property.
Section 4.19 Related
Party Transactions. Except as set forth in the
Company Filed SEC Documents (excluding any disclosures set forth
in any risk factor section thereof) or compensation or other
employment arrangements in the ordinary course of business,
there are no transactions, agreements, arrangements or
understandings between the Company or any of its Subsidiaries,
on the one hand, and any Affiliate (including any officer or
director) or associate thereof, but not including any wholly
owned Subsidiary of the Company, on the other hand.
Section 4.20 Opinion
of Financial Advisor. The Company has received
the opinion of Lazard Frères & Co. LLC (the
Company Financial Advisor), dated the date of
this Agreement, to the effect that, as of the date of this
Agreement, the Merger Consideration to be paid to the
Companys stockholders (other than the Company and its
Subsidiaries and Parent and its Subsidiaries) in the Merger is
fair to such stockholders from a financial point of view, and a
complete and correct signed copy of such opinion shall be
delivered to Parent as soon as reasonably practicable following
the date of this Agreement.
Section 4.21 Board
Approval. The Board of Directors of the Company,
at a meeting duly called and held, has by unanimous vote of the
directors present (a) determined that this Agreement and
the transactions contemplated hereby are advisable, fair to and
in the best interests of the stockholders of the Company,
(b) adopted this Agreement and (c) recommended that
the plan of merger contained in this Agreement and the
transactions contemplated hereby be approved by the holders of
Company Shares.
Section 4.22 Voting
Requirements. The affirmative vote of holders of
a majority of the outstanding Company Shares at the meeting of
the Companys stockholders to be held in connection with
the Merger (the Company Stockholder Meeting)
or any adjournment or postponement thereof to adopt this
Agreement is the only vote of the holders of any class or series
of capital stock of the Company necessary to adopt this
Agreement, approve the transactions contemplated hereby and
otherwise for the Company to consummate the transactions
contemplated hereby.
Section 4.23 Brokers
and Finders; Third Party Expenses. No broker,
investment banker, financial advisor or other Person, other than
the Company Financial Advisor (the fees and expenses of which
will be paid by the Company, as reflected in an agreement
between such firm and the Company, a complete and accurate copy
of which has been delivered to Parent), is entitled to any
brokers, finders, financial advisors or other
similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
Section 4.24 Information
Supplied. None of the information supplied or to
be supplied by the Company or any of its Affiliates, directors,
officers, employees, agents or representatives for inclusion or
incorporation by reference in the
Form S-4
and the Joint Proxy Statement/Prospectus or any other documents
filed or to be filed with the SEC in connection with the
transactions contemplated hereby, will, at the respective times
such documents are filed, at the time the
Form S-4
is declared effective at the time of mailing of the Joint Proxy
Statement/Prospectus (or any amendment thereof or supplement
thereto) to the Companys and Parents stockholders,
at the time of the Company Stockholder Meeting and the Parent
Stockholder Meeting or at the Effective Time be false or
misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading or necessary to correct any statement in
any earlier communication. If, at any time prior to the
Effective Time, any event or circumstance relating to the
Company or any of its Subsidiaries, or their respective officers
or directors, should be discovered by the Company which,
pursuant to the Securities Act or Exchange Act, should be set
forth in an amendment or supplement to the
Form S-4
or Joint Proxy
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Statement/Prospectus, the Company shall notify Parent in
writing. All documents that the Company is responsible for
filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act.
Section 4.25 Real
Property; Title; Valid Leasehold Interests.
(a) Neither the Company nor any of its Subsidiaries owns
any real property.
(b) The Company has delivered or made available to Parent a
true and complete, copy of each real property lease of the
Company and its Subsidiaries, together with all amendments,
modifications, and extensions thereof.
(c) The Company and each of its Subsidiaries has valid and
enforceable leasehold interests in each property covered by the
leases described in subsection 4.25(b) except for defects
in title, easements, restrictive covenants, taxes that are not
yet delinquent, and similar encumbrances that, individually or
in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has subleased or granted to any Person the right to
use or occupy any such leased property or any portion thereof.
(d) The Company and each of its Subsidiaries is in
compliance in all material respects with the provisions of the
leases described in subsection 4.25(b), and each such lease
is in full force and effect except for any event that,
individually or in the aggregate, is not reasonably likely to
have a Company Material Adverse Effect.
(e) With respect to the real property covered by the leases
described in subsection 4.25(b), the applicable lessee has
not received any written notice of (i) material violations
of building codes
and/or
zoning ordinances or other governmental or regulatory laws
affecting the applicable real property, (ii) existing,
pending, or threatened condemnation proceedings affecting any
such real property or (iii) existing, pending, or
threatened zoning, building code, or other moratoria
proceedings, or similar matters, which, individually or in the
aggregate; could reasonably be expected to have a Company
Material Adverse Effect.
ARTICLE V
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Except, with respect to each Section of this Article V, as
set forth in any disclosure contained in the disclosure schedule
delivered by Parent and Merger Sub to the Company prior to the
execution of this Agreement (the Parent Disclosure
Schedule) that relates to such Section or to other
Sections of this Article V to the extent it is reasonably
apparent from such disclosure that it is applicable to such
Section, Parent and Merger Sub represent and warrant to the
Company as follows:
Section 5.1 Organization. Each
of Parent and Merger Sub (i) is a corporation duly
organized, validly existing and in good standing under the Laws
of the jurisdiction of its organization, (ii) has all
requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business
as now being conducted and (iii) is duly qualified to do
business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned,
leased or operated by it or the nature of its activities makes
such qualification necessary, except where the failure to be
qualified would not be reasonably expected to prevent or
materially delay the consummation of the Merger.
Section 5.2 Capitalization.
(a) The authorized capital stock of Parent consists of
120,000,000 Parent Shares and 10,000,000 shares of
preferred stock, par value $0.01 per share, of Parent
(Parent Preferred Shares). At the close of
business on November 10, 2006, (i) 46,795,500 Parent
Shares (excluding treasury shares) were issued and outstanding,
(ii) no Parent Shares were held by Parent in its treasury,
(iii) no Parent Preferred Shares were issued and
outstanding and (iv) 16,370,346 Parent Shares were reserved
for issuance pursuant to outstanding unexercised employee stock
options granted pursuant to Parents stock option plans or
otherwise. No shares of capital stock of Parent are owned by any
Subsidiary of Parent. All of the outstanding shares of capital
stock of Parent
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have been duly authorized and validly issued and are fully paid
and nonassessable and free of preemptive and similar rights.
Except as set forth above and for changes since the date hereof
resulting from the exercise of Parent Options outstanding on
such date (as disclosed in Section 5.2(a) of the Parent
Disclosure Schedule) in accordance with their terms, as of the
date of this Agreement there are no outstanding (i) shares
of capital stock, debt securities or other voting securities of
Parent; (ii) securities of Parent or any of its
Subsidiaries convertible into or exchangeable for shares of
capital stock, debt securities or voting securities or ownership
interests in Parent; (iii) subscriptions, calls, contracts,
commitments, understandings, restrictions, arrangements, rights,
warrants, options, or other rights to acquire from Parent or any
Subsidiary of Parent, or obligations of Parent or any Subsidiary
of Parent to issue any capital stock, debt securities, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital
stock, voting securities, debt securities or ownership interests
in, Parent, or obligations of Parent or any Subsidiary of Parent
to grant, extend or enter into any such agreement or commitment;
or (iv) obligations of Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding
securities of Parent, or to vote or to dispose of any shares of
the capital stock of Parent. All of the outstanding debt and
equity securities of Parent have been offered and issued in
compliance with all applicable securities laws, including the
Securities Act and blue sky laws.
(b) All shares of capital stock of Parent to be issued in
connection with the Merger, when issued pursuant to this
Agreement, will be duly authorized, validly issued, fully paid
and non-assessable and free of preemptive and similar rights.
Section 5.3 Authority. Each
of Parent and Merger Sub has all requisite corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation
by Parent and Merger Sub of the Merger and of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub and no
other corporate proceedings on the part of Parent and Merger Sub
are necessary to authorize this Agreement by or to consummate
such transactions, other than, with respect to the Merger, the
adoption of this Agreement by the affirmative vote of a majority
of the votes cast at a meeting of holders of Parent Shares at
which a quorum is present (the Parent Stockholder
Approval). This Agreement has been duly executed and
delivered by Parent and Merger Sub, as the case may be, and
assuming due authorization, execution and delivery hereof by the
other parties hereto, constitutes a valid and binding obligation
of each of Parent and Merger Sub enforceable against them in
accordance with its terms, except to the extent that
enforceability: (a) may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws of general application affecting or relating
to the enforcement of creditors rights generally; and
(b) is subject to general principles of equity, whether
considered in a proceeding at law or in equity.
Section 5.4 Consents
and Approvals; No Violations.
(a) The execution, delivery and performance of this
Agreement and the consummation by Parent and Merger Sub of the
transactions contemplated by this Agreement do not and will not
require any filing or registration with, notification to, or
authorization, permit, consent or approval of, or other action
by or in respect of, any Governmental Entities other than
(i) the filing of the Certificate of Merger as contemplated
by Article II hereof, (ii) compliance with any
applicable requirements of the HSR Act and (iii) compliance
with any applicable requirements of the Securities Act, the
Exchange Act, blue sky laws and NASDAQ Marketplace
Rules.
(b) The execution, delivery and performance of this
Agreement and the consummation by Parent and Merger Sub of the
transactions contemplated by this Agreement do not and will not
(i) conflict with or result in any breach of any provision
of the Certificate of Incorporation, as amended, or Bylaws of
Parent or the Certificate of Incorporation or Bylaws of Merger
Sub, (ii) assuming that the authorizations, consents and
approvals referred to in Section 5.4(a) and the Parent
Stockholder Approval are obtained, violate any Order or Law
applicable to Parent or Merger Sub, any of their Subsidiaries or
any of their properties or assets or (iii) in any material
way, violate, conflict with, require consent pursuant to, result
in the breach of, constitute a default (or an event which,
without due notice or lapse of time or both) under, or give rise
to any right of or result in,
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the termination, amendment, cancellation, modification,
acceleration or the loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of
Parent or Merger Sub or any of their Subsidiaries under, any of
the terms, conditions or provisions of any contract to which
Parent or Merger Sub or any of their Subsidiaries is a party or
by which any of its properties or assets may be bound.
Section 5.5 SEC
Reports and Financial Statements.
(a) Parent has filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed
by it since January 1, 2004 (together with all information
incorporated herein by reference together with all information
incorporated herein by reference, the Parent SEC
Documents). At the time of their respective filing
dates, the Parent SEC Documents (i) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) complied in
all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder. No
Subsidiary of the Parent is required to make any filings with
the SEC.
(b) Except to the extent expressly stated therein, each of
the consolidated financial statements of Parent included in the
Parent SEC Documents complied in all material respects with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects (subject,
in the case of the unaudited statements, to normal, recurring
audit adjustments not material in amount) the consolidated
financial position of Parent and its consolidated Subsidiaries
as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Since
January 1, 2004, there has been no change in Parents
accounting methods or principles that would be required to be
disclosed in Parents financial statements in accordance
with GAAP, except as described in the notes to such Company
financial statements.
Section 5.6 Absence
of Certain Changes or Events. Except as disclosed
in the Parent SEC Documents filed and publicly available prior
to the date of this Agreement (the Parent Filed SEC
Documents), between October 1, 2006 and the date
of this Agreement, (a) Parent and its Subsidiaries have
conducted their respective businesses in all material respects
in the ordinary course of business, (b) there has not been
any event or events that could be reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse
Effect and (c) neither Parent nor any of its Subsidiaries
has taken any action (or failed to take any action) that would
constitute a breach of Section 6.1(b) if such action was
taken (or such failure occurred) after the date hereof.
Section 5.7 No
Undisclosed Liabilities. Except as disclosed in
the Parent Filed SEC Documents (excluding any disclosures set
forth in any risk factor section thereof) and except for
liabilities incurred in the ordinary course of business since
October 1, 2006 that are not material, neither Parent nor
any of its Subsidiaries has any liabilities, absolute,
contingent, unliquidated or otherwise, whether due or to become
due, of the type required to be disclosed on a balance sheet or
in the related notes to consolidated financial statements
prepared in accordance with GAAP, that, individually or in the
aggregate, are material to Parent or any of its Subsidiaries.
Section 5.8 Contracts. Except
as disclosed in the Parent Filed SEC Documents, from and after
October 1, 2006 to the date of this Agreement, neither
Company nor any of its Subsidiaries has entered into any
contract, agreement or other document or instrument (other than
this Agreement) that would be required to be filed with the SEC
under Item 601 of
Regulation S-K
promulgated under the Securities Act as an Exhibit to
Form 10-K
(each, a Parent Contract), any material
amendment, modification or waiver under any Parent Contract
(other than any such amendments, modifications or waivers
entered into following the date of this Agreement in connection
with the transactions contemplated hereby). Each Parent Contract
is valid and binding on Parent
and/or any
of its Subsidiaries that is a party thereto and, to the
Knowledge of Parent each other party thereto and such Parent
Contract is in full force and effect.
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Section 5.9 Litigation. There
is no suit, claim, action, proceeding, arbitration or
investigation pending before any Governmental Entity or, to the
Knowledge of Parent, threatened against Parent or any of its
Subsidiaries or their respective assets or properties. The legal
proceedings disclosed in Section 5.9 of the Parent
Disclosure Schedule have not had, and if decided adversely to
Parent or its Subsidiaries, would not reasonably be expected to
have, a Parent Material Adverse Effect. Neither Parent nor any
of its Subsidiaries is subject to any outstanding Order.
Section 5.10 Compliance
with Applicable Law. Parent and its Subsidiaries
hold all material permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the
Parent Permits). Parent and its Subsidiaries
are in compliance, in all material respects, with the terms of
the Parent Permits. The businesses of Parent and its
Subsidiaries are being and have at all times been conducted in
compliance, in all material respects, with applicable Law. No
investigation or review by any Governmental Entity with respect
to Parent or any of its Subsidiaries is pending or, to the
Knowledge of Parent, threatened, nor has any Governmental Entity
indicated an intention to conduct any such investigation or
review.
Section 5.11 Intellectual
Property.
(a) Parent or one of its Subsidiaries is the owner of each
item of Intellectual Property in which it has an ownership
interest (collectively, the Parent Owned Intellectual
Property), in each case that is registered, issued or
for which an application has been filed, indicating the owner
thereof, and has the valid right to use all other Intellectual
Property that is used by or licensed to Parent or any of its
Subsidiaries and which are material to the business of Parent
and its Subsidiaries, taken as a whole, in each case free and
clear of all Liens. Parent or one of its Subsidiaries is listed
in the records of the appropriate U.S. Governmental Entity
as the owner of record for each registration, grant and
application for Registered Intellectual Property included in the
Parent Owned Intellectual Property. Parent has obtained from all
of its officers, and employees, assignments to Parent of all
rights to any Intellectual Property that are invented,
conceived, reduced to practice, developed or otherwise created
by such persons in connection with such Persons activities
on behalf of Parent.
(b) To the Knowledge of Parent, all patents, including all
patent term extensions and supplementary protection
certificates, registered trademarks, registered service marks
and copyrights under which Parent or any of its Subsidiaries
holds any rights and which are material to the business of
Parent and its Subsidiaries, taken as a whole, are valid and
subsisting. To the Knowledge of Parent, no other person or
entity is infringing, violating or misappropriating any of the
Parent Intellectual Property.
(c) To the Knowledge of Parent, none of the activities or
business currently conducted by Parent and its Subsidiaries
infringes, violates or constitutes a misappropriation, in any
material way, of any Intellectual Property rights of any other
person or entity. Since January 1, 2005, neither Parent nor
any of its Subsidiaries has received any written complaint,
claim or notice alleging any such infringement, violation or
misappropriation.
Section 5.12 Merger
Sub. Merger Sub was formed for the purpose of
engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its
operations solely as contemplated hereby.
Section 5.13 Opinion
of Financial Advisor. Parent has received the
opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the Parent Financial Advisor),
dated the date of this Agreement, to the effect that, as of the
date of this Agreement, the Merger Consideration to be paid by
Parent in the Merger is fair to Parent from a financial point of
view, and a complete and correct signed copy of such opinion
shall be delivered to the Company as soon as reasonably
practicable following the date of this Agreement.
Section 5.14 Board
Approval. The Board of Directors of Parent, at a
meeting duly called and held, has by unanimous vote of the
directors present (a) determined that this Agreement and
the transactions contemplated hereby are advisable, fair to and
in the best interests of the stockholders of Parent,
(b) adopted this Agreement and (c) recommended that
the issuance of Parent Shares in connection with the Merger be
approved by the holders of Parent Shares.
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Section 5.15 Voting
Requirements. The affirmative vote of holders of
a majority of the votes represented at the meeting of
Parents stockholders where a quorum is present to be held
in connection with the Merger (the Parent Stockholder
Meeting) or any adjournment or postponement thereof to
approve the issuance of Parent Shares in connection with the
Merger is the only vote of the holders of any class or series of
capital stock of Parent necessary to approve the issuance of
Parent Shares in connection with the Merger or otherwise for
Parent to consummate the transactions contemplated hereby.
Section 5.16 Brokers
and Finders. No broker, investment banker,
financial advisor or other Person, other the Parent Financial
Advisor, the fees and expenses of which will be paid by Parent,
is entitled to any brokers, finders, financial
advisors or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.
Section 5.17 Information
Supplied. None of the information supplied or to
be supplied by Parent or any of its Affiliates, directors,
officers, employees, agents or representatives for inclusion or
incorporation by reference in, and which is included or
incorporated by reference in the
Form S-4
and the Joint Proxy Statement/Prospectus or any other documents
filed or to be filed with the SEC in connection with the
transactions contemplated hereby, will, at the respective times
such documents are filed, at the time the
Form S-4
is declared effective, at the time of mailing of the Joint Proxy
Statement/Prospectus (or any amendment thereof or supplement
thereto) to the Companys and Parents stockholders,
at the time of the Company Stockholder Meeting and the Parent
Stockholder Meeting or at the Effective Time, be false or
misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading or necessary to correct any statement in
any earlier communication. If, at any time prior to the
Effective Time, any event or circumstance relating to Parent or
any of its Subsidiaries, or their respective officers or
directors, should be discovered by Parent which, pursuant to the
Securities Act or Exchange Act, should be set forth in an
amendment or supplement to the
Form S-4
or Joint Proxy Statement/Prospectus, Parent shall notify the
Company in writing. All documents that Parent is responsible for
filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act.
ARTICLE VI
COVENANTS
Section 6.1 Interim
Operations.
(a) Covenants of the Company. Except as
expressly permitted in this Agreement or as set forth on
Section 6.1(a) of the Company Disclosure Schedule, or
otherwise expressly consented to by Parent (such consent not to
be unreasonably withheld, conditioned or delayed), from the date
hereof until the earlier of the termination date of this
Agreement or the Effective Time: the Company shall, and shall
cause its Subsidiaries to, (i) conduct their business in
the ordinary course; (ii) use reasonable efforts to
preserve intact their business organizations and relationships
with third parties and to keep available the services of their
present officers and employees and preserve their relationships
with customers, suppliers and others having business dealings
with the Company and its Subsidiaries; and (iii) use
reasonable efforts to protect the Company Intellectual Property.
Without limiting the generality of the foregoing, except as
expressly consented to by Parent (such consent not to be
unreasonably withheld, conditioned or delayed), from the date
hereof until the earlier of the termination date of this
Agreement or the Effective Time:
(i) Dividends; Changes in Stock. The
Company shall not, and shall not permit any of its Subsidiaries
to, and shall not propose or commit to, (A) declare or pay
any dividends on, or make other distributions in respect of any
of, its capital stock (except for dividends by a wholly owned
Subsidiary of the Company to its parent), (B) split,
combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock or (C) repurchase, redeem or otherwise
acquire, or modify or amend, any shares of capital
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stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire
any such shares or other securities.
(ii) Issuance of Securities. The Company
shall not, and shall not permit any of its Subsidiaries to,
issue, deliver, sell, pledge or encumber, or authorize, propose
or agree to the issuance, delivery, sale, pledge or encumbrance
of, any shares of its capital stock or any other security (or
any right to acquire such capital stock or other security) other
than the issuance of Company Shares upon the exercise of Company
Options or the exercise or conversion of Company Warrants to
purchase Company Shares outstanding on the date of this
Agreement and in accordance with the terms of such Company
Options or Company Warrants, as applicable.
(iii) Governing Documents. Except to the
extent required to comply with its obligations hereunder or with
applicable Law, the Company shall not and shall cause each of
its Subsidiaries not to amend or propose to amend its
Certificate of Incorporation or Bylaws or similar organizational
documents.
(iv) No Acquisitions. The Company shall
not, and shall not permit any of its Subsidiaries to, acquire or
agree to acquire by merger or consolidation, or by purchasing a
substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree
to acquire any assets (excluding the acquisition of assets in
the ordinary course of business).
(v) No Dispositions. The Company shall
not, and shall not permit any of its Subsidiaries to, sell,
lease, license or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its material assets of the
Company or its Subsidiaries excluding the disposition of assets
in the ordinary course of business.
(vi) Investments; Indebtedness. The
Company shall not, and shall not permit any of its Subsidiaries
to, (i) make any loans, advances or capital contributions
to, or investments in, any other Person, other than
(A) loans or investments by the Company or a wholly owned
Subsidiary of the Company to or in the Company or any wholly
owned Subsidiary of the Company or (B) advances to its
employees for travel and other business expenses incurred in the
ordinary course of business or (ii) incur any additional
indebtedness for borrowed money or guarantee any such
indebtedness of another Person other than a guaranty by the
Company on behalf of one of its Subsidiaries, issue or sell any
debt securities or warrants or other rights to acquire any such
debt securities of the Company or any of its Subsidiaries,
guarantee any debt securities of another Person, enter into any
keep well or other agreement to maintain any
financial statement condition of another Person or enter into
any arrangement having the economic effect of any of the
foregoing.
(vii) Accounting Matters. Except as
disclosed in the Company Filed SEC Documents or as required by a
Governmental Entity or changes in GAAP, the Company shall not
change its methods of accounting in effect at December 31,
2005.
(viii) Capital Expenditures. The Company
shall not, and shall not permit any of its Subsidiaries to, make
or agree to make any capital expenditure or expenditures, or
enter into any agreement or agreements providing for payments
for any capital expenditures in excess of $1,000,000 in the
aggregate (excluding expenditures in the ordinary course of
business that relate to the production of early versions of the
Companys instruments for deployment internally or at
customer sites).
(ix) Certain Actions. The Company and its
Subsidiaries shall not take any action or omit to take any
action that would reasonably be expected to prevent, materially
delay or impede the consummation of the Merger or the other
transactions contemplated by this Agreement.
(x) Discharge of Liabilities. The Company
shall not, and shall not permit any of its Subsidiaries to pay,
discharge, settle or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than (subject to
Section 6.13(c)) the payment, discharge, settlement or
satisfaction, in the ordinary course of business or in
accordance with their terms, of claims, liabilities or
obligations disclosed in the most recent financial statements
(or the notes thereto) of the
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Company included in the Company Filed SEC Documents or incurred
since the date of such financial statements in the ordinary
course of business.
(xi) Material Contracts. Except as
otherwise set forth in this Agreement, the Company shall not,
and shall not permit any of its Subsidiaries to, terminate,
cancel or request any material change in, or agree to any
material change in, any Company Contract or enter into any
Contract material to the business or results of operations of
the Company and its Subsidiaries, taken as a whole, in either
case other than in the ordinary course of business.
(xii) Intellectual Property. The Company
shall not, and shall not permit any of its Subsidiaries to:
(A) sell, assign, license, sublicense, encumber, impair,
abandon or fail to maintain any material Company Intellectual
Property; (B) subject to clauses (D) and
(E) below, grant, extend, amend, waive or modify in any
material way any rights in or to the Company Intellectual
Property; (C) fail to diligently prosecute or maintain the
Companys and its Subsidiaries material Owned
Intellectual Property; (D) enter into any IP Contract
(other than (1) an IP Contract substantially in the form
previously approved by Parent or (2) a non-material IP
Contract for the acquisition by the Company of, or grant of
rights to the Company in, Intellectual Property of a third
party, in each case which is entered into in the ordinary course
of business); or (E) amend, assign, terminate or fail to
exercise a right of renewal or extension under any Company
Intellectual Property Contract.
(xiii) Benefits Changes. The Company
shall not, and shall not permit any of its Subsidiaries to,
(A) increase the compensation or benefits of any director,
officer, employee or consultant (other than increases in
salaries, and wages in connection with promotions and annual
raises in the ordinary course of business consistent with past
practice), (B) adopt any new employee benefit plan or any
amendment to an existing Benefit Plan other than as required by
applicable Law, (C) enter into any agreement with any
director, officer or employee (excluding offers of employment in
the ordinary course of business), (D) enter into any
consulting agreement with any individual consultant obligating
the Company to pay any individual consultant in excess of
$200,000 per annum, (E) accelerate the payment of
material compensation or benefits to any director, officer,
employee or consultant, (F) enter into any compensation,
severance, retention or change of control arrangement with any
employee or other service provider of the Company or any of its
Subsidiaries, (G) grant any stock option or other equity
awards to any officer, director, employee or consultant other
than as required by applicable Law or the terms of agreements in
effect as of the date of this Agreement.
(xiv) Transactions with Affiliates. The
Company shall not, and shall not permit it Subsidiaries to,
enter into any transaction with any of its Affiliates or
associates other than pursuant to arrangements in effect on the
date hereof (excluding intercompany agreements solely among the
Company and its Subsidiaries).
(xv) General. The Company shall not, and
shall not permit any of its Subsidiaries to, authorize any of,
or announce an intention, commit or agree to take any of, the
foregoing actions.
(b) Covenants of Parent. Except as
expressly permitted in this Agreement or otherwise expressly
consented to in writing by the Company (such consent not to be
unreasonably withheld, conditioned or delayed), from the date
hereof until the earlier of the termination date of this
Agreement or the Effective Time: Parent shall, and shall cause
its Subsidiaries to, (i) conduct their business in the
ordinary course; and (ii) use reasonable efforts to
preserve intact their business organizations and relationships
with third parties and to keep available the services of their
present officers and employees and preserve their relationships
with customers, suppliers and others having business dealings
with Parent and its Subsidiaries. Without limiting the
generality of the foregoing, except as expressly consented to by
the Company (such consent not to be unreasonably withheld,
conditioned or delayed), from the date hereof until the earlier
of the termination date of this Agreement or the Effective Time:
(i) Issuance of Securities. Parent shall
not, and shall not permit any of its Subsidiaries to, issue,
deliver, sell, pledge or encumber, or authorize, propose or
agree to the issuance, delivery, sale, pledge or encumbrance of,
any shares of its capital stock or any other security (or any
right to acquire such capital
A-30
stock or other security) other than the issuance of Parent
Shares in accordance with this Agreement and upon the exercise
of Parent options outstanding on the date of this Agreement and
in accordance with the terms of such Parent options.
(ii) Governing Documents. Except to the
extent required to comply with its obligations hereunder or with
applicable Law, Parent shall not amend or propose to amend its
Certificate of Incorporation or Bylaws or similar organizational
or governance documents.
(iii) Dividends; Changes in Stock. Parent
shall not, and shall not permit any of its Subsidiaries to, and
shall not propose or commit to, (A) declare or pay any
dividends on, or make other distributions in respect of any of,
its capital stock (except for dividends by a wholly owned
Subsidiary of Parent to its parent), (B) split, combine or
reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or
(C) repurchase, redeem or otherwise acquire, or modify or
amend, any shares of capital stock of Parent or any of its
Subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities.
(iv) Accounting Matters. Except as
disclosed in the Parent Filed SEC Documents (excluding any
disclosures set forth in any risk factor section thereof) or as
required by a Governmental Entity or changes in GAAP, Parent
shall not change its methods of accounting in effect at
December 31, 2005.
(v) Certain Actions. Parent and its
Subsidiaries shall not take any action or omit to take any
action that would reasonably be expected to prevent, materially
delay or impede the consummation of the Merger or the other
transactions contemplated by this Agreement.
Section 6.2 No
Solicitation.
(a) The Company shall cause its and its Subsidiaries
respective officers, directors, financial advisors, attorneys,
accountants and other non-employee advisors, representatives and
agents (collectively, Representatives) to,
and shall use commercially reasonable efforts to cause its and
its Subsidiaries employees to, immediately cease and cause
to be terminated immediately any discussions or negotiations
with any parties that may be ongoing with respect to, or that
could reasonably be expected to lead to, a Takeover Proposal (it
being understood that commercially reasonable efforts with
respect to the employees of the Company and its Subsidiaries
shall mean causing such employees to comply with this sentence
promptly after an officer or director of the Company discovers
any noncompliance by such employees). The Company shall not, nor
shall it authorize or permit any of its Representatives, to, and
the Company shall use commercially reasonable efforts to cause
its and its Subsidiaries employees not to, directly or
indirectly, (i) solicit, initiate or knowingly encourage or
knowingly facilitate any Takeover Proposal, (ii) enter into
any agreement, arrangement or understanding with respect to any
Takeover Proposal or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by
this Agreement, (iii) initiate or participate in any way in
any negotiations or discussions regarding, or furnish or
disclose to any Person (other than a party to this Agreement)
any non-public information with respect to, or take any other
action to knowingly facilitate, any inquiries or the making of
any proposal that constitutes, or could reasonably be expected
to lead to any Takeover Proposal (it being understood that
commercially reasonable efforts with respect to the employees of
the Company and its Subsidiaries shall mean causing such
employees to comply with this sentence promptly after an officer
or director of the Company discovers any noncompliance by such
employees) or (iv) grant any waiver or release under any
standstill or any similar agreement with respect to any class of
the Companys equity securities; provided,
however, that, notwithstanding anything to the contrary
in this Agreement, at any time prior to obtaining the Company
Stockholder Approval, in response to a bona fide written
Takeover Proposal that the Board of Directors of the Company or
any committee thereof determines in good faith (after
consultation with outside counsel and a financial advisor of
nationally recognized reputation) constitutes or would
reasonably be expected to lead to a Superior Proposal, and which
Takeover Proposal was not solicited after the date hereof in
violation of this Section 6.2 and was made after the date
hereof and did not otherwise result from a breach of this
Section 6.2, the Company may, if its Board of Directors or
any committee thereof determines in good faith (after consulting
with outside counsel) that the failure to do so would be
inconsistent with its fiduciary
A-31
duties to the stockholders of the Company under applicable Law,
and subject to compliance with Section 6.2(c),
(i) furnish information with respect to the Company and its
Subsidiaries to the Person making such Takeover Proposal (and
its Representatives and any other Persons facilitating the
making of such Takeover Proposal) pursuant to a customary
confidentiality agreement not less restrictive of such Person
than the Confidentiality Agreement including the standstill
provisions of the Confidentiality Agreement; provided
that all such information has previously been provided to Parent
or is provided to Parent prior to or substantially concurrent
with the time it is provided to such Person, and
(ii) participate in discussions and negotiations with the
Person making such Takeover Proposal (and its Representatives
and any other Persons facilitating the making of such Takeover
Proposal) regarding such Takeover Proposal.
(b) The Company shall provide Parent with forty-eight
(48) hours prior written notice (or such lesser notice as
is given to the Companys Board of Directors) of any
meeting of its Board of Directors at which its Board of
Directors is reasonably expected to consider any Takeover
Proposal.
(c) Neither the Board of Directors of the Company nor any
committee thereof shall (i) (A) withdraw (or modify in
a manner adverse to Parent), or propose to withdraw (or modify
in a manner adverse to Parent), the approval, recommendation or
declaration of advisability by such Board of Directors or any
such committee thereof of this Agreement, the Merger or the
other transactions contemplated by this Agreement or
(B) recommend, adopt or approve, or publicly propose to
recommend, adopt or approve, any Takeover Proposal (any action
described in this clause (i) being referred to as a
Company Adverse Recommendation Change) or
(ii) approve or recommend, or publicly propose to approve
or recommend or allow the Company or any of its Subsidiaries to
execute or enter into, any letter of intent, memorandum of
understanding, agreement in principle, merger agreement,
acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement
constituting or related to, or that is intended to or would
reasonably be expected to lead to, any Takeover Proposal (other
than a confidentiality agreement referred to in
Section 6.2(a)). Notwithstanding anything to the contrary
in this Agreement, at any time prior to obtaining the Company
Stockholder Approval, the Board of Directors of the Company or
any committee thereof may make a Company Adverse Recommendation
Change in response to a Superior Proposal or a material change
in circumstances after the date of this Agreement if such Board
of Directors or committee thereof determines in good faith
(after consultation with outside counsel) that it is required to
do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable Law;
provided, however, that (i) no Company
Adverse Recommendation Change shall be made until after the
second (2nd) Business Day following Parents receipt of
written notice (a Notice of Company Adverse
Recommendation) from the Company advising Parent that
the Board of Directors of the Company or committee thereof
intends to take such action and specifying the reasons therefor,
including the terms and conditions of any Superior Proposal or
the information describing such material change in circumstances
in reasonable detail, as applicable, that is the basis of the
proposed action by the Board of Directors or committee thereof
(it being understood and agreed that any material amendment to
the financial terms or any other material term of any such
Superior Proposal shall require a new Notice of Company Adverse
Recommendation and a new two (2) Business Day period if
such amendment is adverse to the Company), (ii) during such
two (2) Business Day period the Company shall negotiate
with Parent in good faith to make such adjustments to the terms
and conditions of this Agreement as would enable the Company to
proceed with its recommendation of this Agreement and not make a
Company Adverse Recommendation Change and (iii) the Company
shall not make a Company Adverse Recommendation Change if, prior
to the expiration of such two (2) Business Day period,
Parent makes a binding, written proposal (contingent only on the
Board of Directors of the Company not making a Company Adverse
Recommendation Change) to adjust the terms and conditions of
this Agreement such that the Companys Board of Directors
or committee thereof would no longer be required to make a
Company Adverse Recommendation Change.
(d) The Company agrees that in addition to the other
obligations of the Company set forth this Section 6.2, as
promptly as practicable after the receipt thereof, the Company
shall advise Parent orally and in writing of any request for
information or any Takeover Proposal, or any inquiry,
discussions or negotiations, with respect to any Takeover
Proposal and the terms and conditions of such request, Takeover
Proposal, inquiry, discussions or negotiations and the Company
shall promptly provide to Parent copies of any written
A-32
materials received by the Company in connection with any of the
foregoing, and the identity of the Person or group making any
such request, Takeover Proposal or inquiry or with whom any
discussions or negotiations are taking place. The Company agrees
that it shall promptly keep Parent reasonably informed of the
status and material details (including amendments or proposed
amendments) of any such request, Takeover Proposal or inquiry
and keep Parent reasonably informed as to the material details
of discussions or negotiations with respect to any such request,
Takeover Proposal or inquiry.
(e) Nothing contained in this Section 6.2 shall
prohibit the Company from (i) complying with
Rule 14d-9,
Rule 14e-2
or Item 1012(a) of
Regulation M-A
promulgated under the Exchange Act or (ii) making any
disclosure to the stockholders of the Company if, in the good
faith judgment of the Companys Board of Directors or any
committee thereof (after consultation with outside counsel),
failure to make such disclosure would be inconsistent with its
obligations under applicable Law; provided,
however, that in no event shall the Company or its Board
of Directors or any committee thereof take, or agree or resolve
to take, any action prohibited by 6.2(c).
Section 6.3 Parent
Recommendation.
(a) Neither the Board of Directors of Parent nor any
committee thereof shall withdraw (or modify in a manner adverse
to the Company), or propose to withdraw (or modify in a manner
adverse to the Company), the approval, recommendation or
declaration of advisability by such Board of Directors or any
such committee thereof of this Agreement, the Merger or the
other transactions contemplated by this Agreement, including the
issuance of Parent Shares in connection with the Merger (any
action described in this sentence being referred to as a
Parent Adverse Recommendation Change).
Notwithstanding anything to the contrary in this Agreement, at
any time prior to obtaining the Parent Stockholder Approval, the
Board of Directors of Parent or any committee thereof may make a
Parent Adverse Recommendation Change in response to a material
change in circumstances after the date of this Agreement if such
Board of Directors or committee thereof determines in good faith
(after consultation with outside counsel) that it is required to
do so in order to comply with its fiduciary duties to the
stockholders of Parent under applicable Law; provided,
however, that (i) no Parent Adverse Recommendation
Change shall be made until after the second
(2nd)
Business Day following the Companys receipt of written
notice from Parent advising the Company that the Board of
Directors of Parent or committee thereof intends to take such
action and specifying the reasons therefor, including
description of the material change in circumstances in
reasonable detail, (ii) during such two (2) Business
Day period Parent shall negotiate with the Company in good faith
to make such adjustments to the terms and conditions of this
Agreement as would enable Parent to proceed with its
recommendation of this Agreement and not make a Parent Adverse
Recommendation Change and (iii) Parent shall not make a
Parent Adverse Recommendation Change if, prior to the expiration
of such two (2) Business Day period, the Company makes a
binding, written proposal (contingent only on the Board of
Directors of Parent not making a Parent Adverse Recommendation
Change) to adjust the terms and conditions of this Agreement
such that the Board of Directors of Parent or committee thereof
would no longer be required to make a Parent Adverse
Recommendation Change.
Section 6.4 Stockholder
Meetings; Preparation of
Form S-4
Joint Proxy Statement/Prospectus.
(a) The Company shall, as promptly as practicable following
the effectiveness of the
Form S-4,
establish a record date for, duly call, give notice of, convene
and hold the Company Stockholder Meeting. Subject to
Section 6.2(c) and 6.2(e), the Company shall, through its
Board of Directors, recommend to its stockholders adoption of
this Agreement and shall include such recommendation in the
Joint Proxy Statement/Prospectus. Without limiting the
generality of the foregoing, the Companys obligations
pursuant to the first sentence of this Section 6.4(a) shall
not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company of any
Takeover Proposal or (ii) any Company Adverse
Recommendation Change; provided, however, that no
breach of this Section 6.4(a) shall be deemed to have
occurred if the Company adjourns or postpones the Company
Stockholders Meeting for a reasonable period of time, each such
period of time not to exceed ten (10) Business Days;
provided that (x) at the time of such adjournment or
postponement the Board of Directors shall be prohibited by the
terms of this Agreement from making a Company Adverse
Recommendation Change, and the Company Stockholders Meeting is
then scheduled to
A-33
occur within three (3) Business Days of the time of such
adjournment or postponement or (y) at the time the Board of
Directors announces a Company Adverse Recommendation Change, the
Company Stockholders Meeting is then scheduled to occur no later
than ten (10) Business Days from the date of such Company
Adverse Recommendation Change; provided further
that the Company may not adjourn or postpone the Company
Stockholders Meeting pursuant to this clause (ii) more than
two (2) times or for more than fifteen (15) Business
Days in the aggregate.
(b) Parent shall, as promptly as practicable following the
effectiveness of the
Form S-4,
establish a record date for, duly call, give notice of, convene
and hold the Parent Stockholder Meeting. Parent shall, through
its Board of Directors, recommend to its stockholders approval
of the issuance of Parent Shares in connection with the Merger
and shall include such recommendation in the Joint Proxy
Statement/Prospectus.
(c) Unless otherwise mutually agreed upon by the parties,
the respective record dates and meeting dates for the Company
Stockholder Meeting and for the Parent Stockholder Meeting shall
be the same.
(d) As promptly as practicable after the execution of this
Agreement, (i) Parent and the Company shall prepare and
shall cause to be filed with the SEC a Joint proxy statement
(together with any amendments thereof or supplements thereto,
the Joint Proxy Statement/Prospectus)
relating to the Company Stockholder Meeting and the Parent
Stockholder Meeting and (ii) Parent shall prepare and shall
cause to be filed with the SEC a registration statement on
Form S-4
(together with all amendments thereto, the
Form S-4)
in which the Joint Proxy Statement/Prospectus shall be included
as a prospectus, in connection with the registration under the
Securities Act of the Parent Shares to be issued to the
stockholders of the Company pursuant to the Merger. Each of the
Company and Parent shall cooperate and provide the other with
reasonable opportunity to review and comment on the
Form S-4
and Joint Proxy Statement/Prospectus and any amendment or
supplement thereto prior to filing such document with the SEC.
Each of Parent and the Company shall use reasonable efforts to
cause the
Form S-4
to become effective as promptly as practicable after the
execution of this Agreement, and, prior to the effective date of
the
Form S-4,
Parent shall use reasonable efforts to take all or any action
required under any applicable federal or state securities Laws
in connection with the issuance of Parent Shares pursuant to the
Merger. Each of Parent and the Company shall furnish all
information concerning it as may reasonably be requested by the
other party in connection with such actions and the preparation
of the Joint Proxy Statement/Prospectus and the
Form S-4.
As promptly as practicable after the
Form S-4
shall have become effective, each of the Company and Parent
shall mail the Joint Proxy Statement/Prospectus to its
respective stockholders. Each of Parent and the Company shall
also promptly file, use all of their respective reasonable
efforts to cause to become effective as promptly as practicable
and, if required, mail to the Companys and Parents
stockholders, any amendment to the
Form S-4
or Joint Proxy Statement/Prospectus which may become necessary
after the date the
Form S-4
is declared effective.
(e) No amendment or supplement to the Joint Proxy
Statement/Prospectus or the
Form S-4
will be made by Parent or the Company without the approval of
the other party, which shall not be unreasonably withheld or
delayed. Each of Parent and the Company will advise the other,
promptly after it receives notice thereof, of the time when the
Form S-4
has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the
qualification of the Parent Shares issuable in connection with
the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy
Statement/Prospectus or the
Form S-4
or comments thereon and responses thereto or requests by the SEC
for additional information. If at any time prior to the
Effective Time any information relating to either party, or any
of their respective Affiliates, officers or directors should be
discovered by the Company or Parent, that should be set forth in
an amendment or supplement to the
Form S-4
or the Joint Proxy Statement/Prospectus, so that either of such
documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, the party that discovers such
information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and, to the extent required
by law or regulation, disseminated to the Companys and
Parents stockholders.
A-34
Section 6.5 Access
to Information. The Company and Parent shall, and
shall cause each of its Subsidiaries to, afford to the other
party and its officers, employees, accountants, counsel, agents
and other Representatives reasonable access upon reasonable
advance notice and during reasonable business hours (in a manner
that does not disrupt or interfere with business operations) to
such properties, personnel, books and records of such party and
its Subsidiaries (including Tax Returns filed and those in
preparation, workpapers and other items relating to Taxes) as
the other party shall reasonably request, and shall furnish
promptly all information concerning the business, properties and
personnel of such party and its Subsidiaries as the other party
may reasonably request. All such information shall be kept
confidential in accordance with the terms of the Confidentiality
Agreement; provided that no information or Knowledge
obtained by Parent or the Company in any investigation conducted
pursuant to this Section 6.5 shall affect or be deemed to
modify any representation or warranty of the other party set
forth herein or the conditions to the consummation of the
transaction contemplated hereby.
Section 6.6 Notification
of Certain Matters. The Company shall use
reasonable efforts to give prompt notice to Parent, and Parent
shall use reasonable efforts to give prompt notice to the
Company, of (a) the discovery of any fact or circumstance
that, or the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which, has caused any
representation or warranty made by such party contained in this
Agreement to be untrue such that the condition with respect to
such partys representations set forth in
Section 7.2(a) or Section 7.3(a), as applicable, would
not be satisfied and (b) any Company Material Adverse
Effect or Parent Material Adverse Effect or the occurrence of
any event or events which could be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse
Effect or a Parent Material Adverse Effect; provided,
however, that the delivery of any notice pursuant to this
Section 6.6 shall not be considered in determining whether
any representation or warranty is true for purposes of
Article VII; provided, further, that the
failure to deliver any notice pursuant to this Section 6.6
shall not be considered in determining whether the condition set
forth in Section 7.2(b) or Section 7.3(b) has been
satisfied or any related termination right in Article VIII
is available.
Section 6.7 Reasonable
Efforts.
(a) Subject to the other terms of this Agreement, each of
the parties hereto shall use reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable under applicable Laws and
regulations to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by
this Agreement as promptly as practicable, including
(i) the preparation and filing of all forms, registrations
and notices required to be filed to consummate the transactions
contemplated by this Agreement and the taking of such reasonable
actions as are necessary to obtain any requisite approvals,
consents, orders, exemptions or waivers by any third party or
Governmental Entity, including filings pursuant to the HSR Act
and (ii) using reasonable efforts to cause the satisfaction
of all conditions to Closing. Each party shall promptly consult
with the other with respect to, provide any necessary
information with respect to and provide the other (or its
counsel) copies of, all filings made by such party with any
Governmental Entity or any other information supplied by such
party to a Governmental Entity in connection with this Agreement
and the transactions contemplated by this Agreement;
provided, however, that nothing in this
Section 6.7 shall require or be construed to require Parent
to offer or agree to enter into any agreements, including
agreements to sell, license or otherwise dispose of, or hold
separate or otherwise divest itself of, all or any portion of
Parents businesses or assets or any portion of the
businesses or assets of any of its Subsidiaries or any portion
of the businesses or assets of the Company or any of its
Subsidiaries or agreeing to any limitations or restrictions on
its conduct in order for the Closing to occur.
(b) Each party hereto shall promptly inform the others of
any communication from any Governmental Entity regarding any of
the transactions contemplated by this Agreement. If any party or
Affiliate thereof receives a request for additional information
or documentary material from any such Governmental Entity with
respect to the transactions contemplated by this Agreement, then
such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation
with the other party, an appropriate response in compliance with
such request. Nothing herein shall require any party to waive
any
A-35
substantial rights or agree to any substantial limitation on its
(or the Surviving Corporations) operations or to dispose
of any assets.
Section 6.8 State
Takeover Statutes. The Company and its Board of
Directors shall (a) take all reasonable action necessary to
ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to this Agreement, or the
transactions contemplated by this Agreement and (b) if any
state takeover statute or similar statute becomes applicable to
this Agreement or the transaction contemplated by this
Agreement, take all reasonable action necessary to ensure that
the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated
by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement or the transactions
contemplated by this Agreement.
Section 6.9 Indemnification,
Exculpation and Insurance.
(a) From and after the Effective Time, the Surviving
Corporation shall (and Parent shall cause the Surviving
Corporation to) indemnify, defend and hold harmless, and advance
expenses to, the individuals who at or prior to the Effective
Time were directors or officers of the Company or any of its
Subsidiaries (collectively, the Indemnitees)
with respect to all acts or omissions by them in their
capacities as such at any time prior to the Effective Time, to
the fullest extent required by: (i) certificate of
incorporation or bylaws (or comparable charter or organizational
documents) of the Company or any of its Subsidiaries as in
effect on the date of this Agreement; and (ii) any
applicable contract which has been disclosed to Parent at or
prior to the date hereof and as in effect on the date of this
Agreement or, with respect to persons who become directors or
officers of the Company or any of its Subsidiaries after the
date hereof and prior to the Closing, which is entered into and
disclosed to Parent after the date hereof and which is in the
form and substance of the agreements that have been disclosed to
Parent at or prior to the date hereof.
(b) For six (6) years after the Effective Time, Parent
shall provide directors and officers liability insurance
covering acts or omissions occurring prior to the Effective Time
with respect to those Indemnitees who are covered by the
Companys and its Subsidiaries directors and
officers liability insurance policies as of the Closing on
terms with respect to such coverage and amount no less favorable
in the aggregate than the Companys and its
Subsidiaries current directors and officers
liability insurance policies; provided,
however, that if the aggregate annual premiums for
such insurance at any time during such period shall exceed two
hundred percent (200%) of the per annum rate of premium paid by
the Company as of the date hereof for such insurance, then
Parent shall provide only such coverage as shall then be
available at an annual premium equal to two hundred percent
(200%) of such rate.
(c) This Section 6.9 shall survive the consummation of
the Merger and shall be binding on all successors and assigns of
Parent and the Surviving Corporation. The Indemnitees to whom
this Section 6.9 applies shall be third party beneficiaries
of this Section 6.9. The provisions of this
Section 6.9 are intended to be for the benefit of each
Indemnitee, his or her heirs and his or her representatives.
Section 6.10 Certain
Litigation. The Company agrees that it shall not
settle any litigation commenced after the date hereof against
the Company or any of its directors by any stockholder of the
Company relating to the Merger or this Agreement, without the
prior written consent of Parent.
Section 6.11 NASDAQ
Listing. Prior to the Closing Date, if required
under the rules of the NASDAQ, Parent shall file with the NASDAQ
a Notification Form: Listing of Additional Shares covering the
Parent Shares that Parent reasonably expects, at the time of
such filing, to be issued in connection with the Merger.
Section 6.12 Affiliates. Not
less than ten (10) Business Days prior to the date of the
Company Stockholder Meeting, the Company shall deliver to Parent
a letter identifying all Persons who, in the judgment of the
Company, may be deemed at the time this Agreement is submitted
for adoption by the stockholders of the Company,
affiliates of the Company for purposes of
Rule 145 under the Securities Act and applicable SEC rules
and regulations, and such list shall be updated as necessary to
reflect changes from the date thereof. The Company shall use its
reasonable efforts to cause each Person identified on such list
to deliver to Parent not later than five (5) Business Days
prior to the Effective Time, a written agreement substantially
in the form attached as Exhibit A hereto.
A-36
Section 6.13 Employee
Benefits; Options.
(a) For a period of at least one (1) year following
the Effective Time (such period of time, the Protected
Period), Parent shall cause the Surviving Corporation
or any of its Affiliates to provide to employees of the Company
and its Subsidiaries with benefits which are comparable in the
aggregate to those provided to similarly situated employees of
Parent. Notwithstanding anything set forth above, the
participation of the employees of the Company or its
Subsidiaries in any Parents option or similar equity grant
or purchase programs or plans shall be subject to the
eligibility requirements of such programs or plans.
(b) Employees of the Company and its Subsidiaries as of the
Closing shall be provided credit for all service with the
Company and its Subsidiaries, to the same extent as such service
was credited for such purpose by the Company and its
Subsidiaries for such employees, under: (i) all employee
benefit plans, programs, policies and fringe benefits to be
provided to such employees for purposes of eligibility and
vesting (but not benefit accrual); (ii) severance plans,
programs and policies to be provided to such employees for
purposes of calculating the amount of each such employees
severance benefits; and (iii) vacation and sick leave
plans, programs and policies for purposes of calculating the
amount of each such employees vacation and sick leave.
With respect to each employee benefit plan, program or policy of
Parent or its Subsidiaries that is a welfare benefit
plan (as defined in Section 3(1) of ERISA) in which
employees of the Company or its Subsidiaries participate
following the Effective Time, Parent or its Subsidiaries shall:
(A) cause there to be waived any pre-existing condition or
eligibility limitations; and (B) give effect, in
determining any deductible and maximum
out-of-pocket
limitations payable during the plan year in which the Effective
Time occurs, to claims incurred and amounts paid by, and amounts
reimbursed to, employees of the Company and its Subsidiaries
during such plan year under similar plans maintained by the
Company and its Subsidiaries immediately prior to the Effective
Time.
(c) Notwithstanding anything in this Agreement to the
contrary, nothing in this Section 6.13 shall impede or
limit Parent, Merger Sub, the Company or any of their Affiliates
from terminating any of their employees at any time for any
reason or no reason, subject to the provisions of applicable Law
and applicable Contracts.
(d) As promptly as practicable but no later than fifteen
(15) Business Days after the Effective Time, Parent shall
file with the SEC a registration statement on
Form S-8
covering the sale of Parent Stock issuable pursuant to
outstanding Company Options assumed by Parent pursuant to the
terms hereof, and Parent shall use reasonable efforts to
maintain the effectiveness of such registration statement so
long as any assumed Company Options remain outstanding. The
Company will cooperate and reasonably assist Parent in the
preparation of such registration statement.
(e) No provision of this Section 6.13 shall create any
third-party beneficiary rights in any Company Employee, any
beneficiary or dependent thereof with respect to the
compensation, terms and conditions of employment
and/or
benefits that may be provided to any Company Employee by Parent,
the Surviving Corporation or any of their Subsidiaries under any
benefit plan which they may maintain.
Section 6.14 Tax
Covenants.
(a) The Company shall prepare and timely file or cause to
be prepared and timely filed, in accordance with applicable Law
and (provided consistent therewith) past practice, all Tax
Returns (whether separate or consolidated, combined, group or
unitary Tax Returns that include the Company or any of its
Subsidiaries) that are required to be filed (with extensions) on
or before the Closing Date; provided, however,
that the Company shall deliver substantively complete, final
drafts of all income Tax Returns to Parent at least fifteen
(15) days prior to the due date thereof and shall not file
any such Tax Return without obtaining the prior written consent
of Parent (such consent not to be unreasonably withheld or
delayed); it being understood that the Company shall not be
deemed in breach of this covenant by reason of a failure to
timely file a Tax Return (if the Company shall have provided
Parent with the required draft of such Tax Return at least
fifteen (15) days prior to the filing deadline) if such
failure to timely file is due to Parent having unreasonably
withheld or delayed its consent to the filing of the Tax Return
in question or due to a reasonable, good faith disagreement
between the Parent and the Company with respect to the reporting
of an item on such Tax Return not resolved by the filing
deadline.
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(b) Except as otherwise directed by Parent in writing at
least five (5) days prior to the Closing Date, all
contracts, agreements, arrangements, or intercompany account
systems under which the Company or any of its Subsidiaries may
at any time have an obligation to indemnify for or share the
payment of or liability for any portion of a Tax or any amount
calculated with reference to any portion of a Tax (other than
customary agreements to indemnify lessors, licensors, lenders
and debt securityholders in respect of Taxes none of which
involves any material financial exposure) shall be terminated
with respect to the Company and each such Subsidiary on or prior
to the Closing Date, and the Company and each such Subsidiary
shall thereafter be released from any liability thereunder.
(c) Without the written consent of Parent, which consent
shall not be unreasonably withheld or delayed, the Company shall
not, and shall not permit any of its Subsidiaries to, do any of
the following: (i) make, change or revoke any election in
respect of Taxes, (ii) file any amended Tax Return,
(iii) adopt or change any accounting method or period in
respect of Taxes, (iv) enter into any closing agreement,
(v) settle any claim or assessment in respect of Taxes,
(vi) change any practice with respect to Taxes,
(vii) consent to any extension or waiver of any statute of
limitations applicable to any claim or assessment in respect of
Taxes or (viii) offer or agree to do any of the foregoing
or surrender its rights to do any of the foregoing or to claim
any refund in respect of Taxes.
(d) Parent and Company intend that the Merger will qualify
as a reorganization within the meaning of
Section 368(a) of the Code. Each of Parent, Merger Sub and
the Company agrees that it will not take (and will cause its
Subsidiaries not to take) any action, or fail to take (or allow
any Subsidiary to fail to take) any action, which action or
failure to take action would reasonably be expected to cause the
Merger not to so qualify. Each of Parent and the Company shall
use all reasonable efforts to obtain the Tax opinions referred
to in Section 7.2(i) and Section 7.3(e), respectively.
Section 6.15 Parent
Board of Directors. Effective as of the Effective
Time, the size of the Board of Directors of Parent shall be
increased from eight (8) to ten (10) members and two
(2) individuals selected by the Board of Directors of
Parent and agreed to by the Company, consistent with the
policies of Parents corporate governance committee, shall
be appointed as independent directors of Parent.
Section 6.16 Lock-up
Agreements. The Person listed on
Section 6.16 of the Company Disclosure Schedule shall enter
into a
lock-up
agreement in the form attached as Exhibit B hereto,
pursuant to which, among other things, such Person shall agree
not to sell, assign or otherwise transfer the Parent Shares such
Person receives pursuant to the terms of this Agreement from the
Closing Date until six (6) months after the Closing Date.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions
to Each Partys Obligation to Effect the
Merger. The respective obligation of each party
to effect the Merger shall be subject to the satisfaction or
waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. The Company
Stockholder Approval and the Parent Stockholder Approval shall
have been obtained.
(b) No Injunctions or Restraints. No Law
or Order issued by any court of competent jurisdiction or other
Governmental Entity or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect,
provided, however, that the terminating party
shall have used reasonable efforts to prevent the entry of any
such Order and to appeal as promptly as possibly or any Order
that may be entered.
(c) Governmental Consents and Approvals.
(i) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been
terminated.
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(ii) Other than the filing of the Certificate of Merger and
the expiration or termination of the waiting period under the
HSR Act (which is addressed in Section 7.1(c)(i)), all
necessary consents and approvals of any Governmental Entity
required for the consummation of the transactions contemplated
by this Agreement, shall have been obtained.
(d) NASDAQ Listing. Parent Shares to be
issued in the Merger and such other shares to be reserved for
issuance in connection with the Merger shall have been approved
for listing on the NASDAQ, subject to official notice of
issuance.
(e) Effectiveness of the
Form S-4. The
Form S-4
shall have been declared effective, and no stop order suspending
the effectiveness of the
Form S-4
shall be in effect and no proceedings for such purpose shall be
pending before the SEC.
Section 7.2 Conditions
to Parent and Merger Subs Obligation to Effect the
Merger. The obligation of Parent and Merger Sub
to effect the Merger shall be subject to the satisfaction or
waiver of the following conditions on or prior to the Closing
Date, any one or more of which may be waived, in writing, by
Parent:
(a) Representations and Warranties. Each
of the representations and warranties of the Company contained
in this Agreement shall be true and correct (without giving
effect to any materiality or Company Material Adverse
Effect qualifiers contained therein) at and as of the
Closing Date, as if made as of such time (except for those
representations and warranties which address matters only as of
an earlier date which shall have been true and correct as of
such earlier date), except where the failure of such
representations and warranties to be true and correct,
individually or in the aggregate, has not had, or would not be
reasonably expected to have a Company Material Adverse Effect.
(b) Performance. The Company shall have
complied, in all material respects, with the agreements,
obligations, covenants and conditions required by this Agreement
to be complied with by it on or prior to the Closing Date.
(c) Officers Certificate. Parent
shall have received a certificate of an executive officer of the
Company to the effect set forth in Sections 7.2(a) and
7.2(b).
(d) Consents. Parent shall have received
evidence, in form and substance satisfactory to it, that the
Company shall have obtained all consents, approvals,
authorizations, qualifications and orders of third parties
(other than those listed on Section 4.5 of the Company
Disclosure Schedule) and required in connection with this
Agreement and the transactions contemplated hereby, except where
the failure to obtain such consents, approvals, authorizations,
qualifications or orders has not had and would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(e) Litigation. There shall not be
pending any suit, action or proceeding by any Governmental
Entity that relates to the Merger and is reasonably likely to
succeed (i) challenging the acquisition by Parent or Merger
Sub of any Company Shares, seeking to restrain or prohibit the
consummation of the Merger, or seeking to place material
limitations on the ownership of Company Shares (or shares of
common stock of the Surviving Corporation) by Parent or Merger
Sub, (ii) seeking to prohibit or materially limit the
ownership or operation by the Company, Parent or any of their
respective Subsidiaries of any portion of any business or of any
assets of the Company, Parent or any of their respective
Subsidiaries, or to compel the Company, Parent or any of their
respective Subsidiaries to divest or hold separate any material
portion of any business or of any assets of the Company, Parent
or any of their respective Subsidiaries, as a result of the
Merger, or (iii) seeking to prohibit Parent or any of its
Subsidiaries from effectively controlling in any material
respect the business or operations of the Company or any of its
Subsidiaries.
(f) Company Material Adverse
Effect. Since the date of this Agreement, there
shall not have occurred any event or events that has had, or
would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
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(g) Certain Employees. Each of John West,
Chief Executive Officer of the Company, and Tony Smith, PhD,
Vice President and Chief Scientific Officer of the Company,
shall be actively employed by the Company on the Closing Date
unless such officer is not actively employed due to death or
disability.
(h) FIRPTA Certificate. The Company shall
have furnished to Parent a certification in accordance with
Treas. Reg. § 1.1445-2(c), and otherwise in form and
substance reasonably satisfactory to Parent, certifying that an
interest in the Company is not a real property interest because
the Company is not and has not been a United States real
property holding corporation (as defined in
Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(i) Tax Opinion. Parent shall have
received an opinion of Dewey Ballantine LLP, in form and
substance reasonably satisfactory to Parent, based on facts,
representations and assumptions set forth in such opinion that
are consistent with the state of facts existing at the Effective
Time, dated as of the Effective Time, to the effect that the
Merger will qualify for U.S. federal income tax purposes as
a reorganization within the meaning of
Section 368(a) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such counsel of
appropriate representation letters from each of Parent, Merger
Sub and the Company, at such time or times as counsel may
reasonably request, and, in each case, in form and substance
reasonably satisfactory to such counsel. Each such
representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in
any material respect. If Parent has not received such an opinion
from Dewey Ballantine LLP, but Cooley Godward Kronish LLP is
willing to provide an opinion to Parent, in form and substance
reasonably satisfactory to Parent, based on facts,
representations and assumptions set forth in such opinion that
are consistent with the state of facts existing at the Effective
Time, dated as of the Effective Time, to the effect that the
Merger will qualify for U.S. federal income tax purposes as
a reorganization within the meaning of
section 368(a) of the Code, the delivery of such an opinion
by Cooley Godward Kronish LLP shall be sufficient to cause this
condition to be satisfied.
(j) Bonus Compensation. There shall be no
bonus plans or other bonus arrangements of the Company or its
Subsidiaries other than those listed on Schedule 7.2(j) of
the Company Disclosure Schedule.
Section 7.3 Conditions
to the Companys Obligation to Effect the
Merger. The obligation of the Company to effect
the Merger shall be subject to the satisfaction of the following
conditions on or prior to the Closing Date, any one or more of
which may be waived, in writing, by the Company:
(a) Representations and Warranties. Each
of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct (without
giving effect to any materiality or Parent Material
Adverse Effect qualifiers) at and as of the Closing Date,
as if made as of such time (except for those representations and
warranties which address matters only as of an earlier date
which shall have been true and correct as of such earlier date),
except where the failure of such representations and warranties
to be true and correct, individually or in the aggregate, has
not had, or would not be reasonably expected to have a Parent
Material Adverse Effect.
(b) Performance. Each of Parent and
Merger Sub shall have complied, in all material respects, with
the agreements, obligations, covenants and conditions required
by this Agreement to be complied with by it on or prior to the
Closing Date.
(c) Parent Material Adverse Effect. Since
the date of this Agreement, there shall not have occurred any
event or events that has had, or would be reasonably expected to
have, individually or in the aggregate, a Parent Material
Adverse Effect.
(d) Officers Certificate. The
Company shall have received a certificate of an executive
officer of the Parent and Merger Sub to the effect set forth in
Sections 7.3(a) and 7.3(b).
(e) Tax Opinion. The Company shall have
received an opinion of Cooley Godward Kronish LLP, in form and
substance reasonably satisfactory to the Company, based on
facts, representations and assumptions set forth in such opinion
that are consistent with the state of facts existing at the
Effective
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Time, dated as of the Effective Time, to the effect that the
Merger will qualify for U.S. federal income tax purposes as
a reorganization within the meaning of
section 368(a) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such counsel of
appropriate representation letters from each of Parent, Merger
Sub and the Company, at such time or times as counsel may
reasonably request, and, in each case, in form and substance
reasonably satisfactory to such counsel. Each such
representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in
any material respect. If the Company has not received such an
opinion from Cooley Godward Kronish LLP, but Dewey Ballantine
LLP is willing to provide an opinion to the Company, in form and
substance reasonably satisfactory to the Company, based on
facts, representations and assumptions set forth in such opinion
that are consistent with the state of facts existing at the
Effective Time, dated as of the Effective Time, to the effect
that the Merger will qualify for U.S. federal income tax
purposes as a reorganization within the meaning of
Section 368(a) of the Code, the delivery of such an opinion
by Dewey Ballantine LLP shall be sufficient to cause this
condition to be satisfied.
ARTICLE VIII
TERMINATION
AND AMENDMENT
Section 8.1 Termination. This
Agreement may be terminated at any time prior to the Effective
Time, whether before or after receipt of the Company Stockholder
Approval or the Parent Stockholder Approval:
(a) by mutual written consent of Parent, Merger Sub and the
Company;
(b) by either Parent or the Company:
(i) if (A) the Company Stockholder Approval is not
obtained at the Company Stockholder Meeting or (B) the
Parent Stockholder Approval is not obtained at the Parent
Stockholder Meeting;
(ii) if the Merger shall not have been consummated on or
before May 11, 2007 (the Termination
Date); provided, however, that the right
to terminate this Agreement under this Section 8.1(b)(ii)
shall not be available to any party whose breach of any
provision of this Agreement has been the cause of, or resulted
in, the failure of the Merger to occur on or before the
Termination Date; or
(iii) if any Law or Order shall be in effect such that the
conditions set forth in Section 7.1(b) would not be
satisfied and such Law or Order shall have become final and
nonappealable;
(c) by the Company:
(i) if Parent or Merger Sub (A) shall have breached
any of the covenants or agreements contained in this Agreement
to be complied with by Parent or Merger Sub such that the
closing condition set forth in Section 7.3(b) would not be
satisfied or (B) there exists a breach of any
representation or warranty of Parent or Merger Sub contained in
this Agreement such that the closing condition set forth in
Section 7.3(a) would not be satisfied, and, in the case of
both (A) and (B), such breach is incapable of being cured
by the Termination Date or is not cured by Parent or Merger Sub
within thirty (30) Business Days after Parent or Merger Sub
receives written notice of such breach from the Company; or
(ii) in the event that prior to the obtaining of the Parent
Stockholder Approval (A) a Parent Adverse Recommendation
Change shall have occurred, (B) Parent will have failed to
include in the Joint Proxy Statement/Prospectus the
recommendation of the Board of Directors of Parent that its
stockholders vote in favor of the issuance of Parent Shares in
connection with the Merger or (C) the Board of Directors of
Parent fails publicly to reaffirm its recommendation of this
Agreement, the Merger or the other transactions contemplated by
this Agreement, including the issuance of Parent Shares in
connection with the Merger within ten (10) Business Days
after the Company requests in writing that such recommendation
or determination be reaffirmed (provided that the Company
may not make such a request on more than two
(2) occasions); provided, however, that:
(1) with respect
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to clause (A) above, the Companys right to
terminate this Agreement shall expire fifteen (15) Business
Days after the date of such Parent Adverse Recommendation
Change; (2) with respect to clause (B) above,
the Companys right to terminate this Agreement shall
expire fifteen (15) Business Days after the date the Joint
Proxy Statement/Prospectus is first mailed to Parents
stockholders; and (3) with respect to clause
(C) above, the Companys right to terminate
this Agreement shall expire fifteen (15) Business Days
after the expiration of the ten (10) Business Day period
described in such clause.
(d) by Parent:
(i) if the Company (A) shall have breached any of the
covenants or agreements contained in this Agreement to be
complied with by the Company such that the closing condition set
forth in Section 7.2(b) would not be satisfied or
(B) there exists a breach of any representation or warranty
of the Company contained in this Agreement such that the closing
condition set forth in Section 7.2(a) would not be
satisfied, and, in the case of both (A) and (B), such
breach is incapable of being cured by the Termination Date or is
not cured by the Company within thirty (30) Business Days
after the Company receives written notice of such breach from
Parent or Merger Sub; or
(ii) in the event that prior to the obtaining of the
Company Stockholder Approval (A) a Company Adverse
Recommendation Change shall have occurred, (B) the Company
will have failed to include in the Joint Proxy
Statement/Prospectus the recommendation of the Board of
Directors of the Company that its stockholders vote in favor of
the Merger and the transactions contemplated hereby,
(C) the Board of Directors of the Company fails publicly to
reaffirm its recommendation of this Agreement, the Merger or the
other transactions contemplated by this Agreement within ten
(10) Business Days after Parent requests in writing that
such recommendation or determination be reaffirmed promptly
following the public announcement by a Person of a Takeover
Proposal (provided that (1) Parent may not make such
a request on more than one (1) occasion with respect to any
particular Takeover Proposal where the price and other material
terms of such Takeover Proposal remain unchanged and
(2) any reconfirmation of the Companys Board of
Directors recommendation following the public announcement
by a Person of a Takeover Proposal shall not limit the rights of
the Companys Board of Directors under Section 6.2
with respect to Takeover Proposals, or amended versions of
Takeover Proposals) or (D) a tender or exchange offer that
constitutes a Takeover Proposal has been commenced (and remains
pending) and the Company has not have sent to its security
holders, within ten (10) Business Days after the Company
receives a written request from Parent to recommend against
acceptance of such tender or exchange offer (provided
that (1) Parent shall not make such a request on more than
one (1) occasion with respect to any particular tender or
exchange offer where the offer price and other material terms of
such tender offer remain unchanged and (2) any
recommendation by the Companys Board of Directors against
acceptance of such tender or exchange offer shall not limit the
rights of the Companys Board of Directors under
Section 6.2 with respect to subsequent Takeover Proposals,
or amended versions of Takeover Proposals); provided,
however, that: (1) with respect to clause
(A) above, Parents right to terminate this
Agreement shall expire fifteen (15) Business Days after the
date of such Company Adverse Recommendation Change;
(2) with respect to clause (B) above,
Parents right to terminate this Agreement shall expire
fifteen (15) Business Days after the date the Joint Proxy
Statement/Prospectus is first mailed to the Companys
stockholders; (3) with respect to clause (C)
above, Parents right to terminate this Agreement shall
expire fifteen (15) Business Days after the expiration of
the ten (10) Business Day period described in such clause;
and (4) with respect to clause (D) above,
Parents right to terminate this Agreement shall expire
fifteen (15) Business Days after the expiration of the ten
(10) Business Day period described in such clause; or
(iii) if the Company breaches, in any material respect, its
obligations under Section 6.2.
Section 8.2 Effect
of Termination. Except as otherwise set forth in
this Agreement, in the event of a termination of this Agreement
by either the Company or Parent as provided in Section 8.1,
this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Merger Sub or
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the Company or their respective officers or directors;
provided, however, that no such termination shall
relieve any party hereto of any liability or damages resulting
from any willful and material breach of this Agreement; and
provided further, that the provisions of this
Section 8.2, Section 8.3, Section 8.4 and
Article IX of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
Section 8.3 Fees
and Expenses. Except as otherwise expressly set
forth in this Agreement, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or
not the Merger is consummated.
Section 8.4 Termination
Fee.
(a) If this Agreement shall be terminated pursuant to
(i) Section 8.1(b)(i)(A), 8.1(b)(ii) (provided
that, in the case of a termination pursuant to
Section 8.1(b)(ii), as of the Termination Date, the
conditions set forth in Sections 7.1 and 7.3 have been
waived in writing by the Company or satisfied, other than those
conditions which by their nature are to be satisfied on the
Closing Date) or 8.1(d)(iii) and (A) prior to the Company
Stockholder Meeting a bona fide Takeover Proposal shall have
been (1) publicly announced and not withdrawn (excluding,
any withdrawals that are not publicly communicated at least five
(5) Business Days prior to the date of the Company
Stockholder Meeting), in the case of a termination pursuant to
Section 8.1(b)(i)(A), or (2) publicly announced or
otherwise communicated to the Board of Directors of the Company
and not withdrawn, in the case of a termination pursuant to
Section 8.1(b)(ii) or 8.1(d)(iii), and (B) within nine
(9) months of the termination of this Agreement, the
Company enters into a definitive agreement providing for a
transaction of the type described in the definition of
Takeover Proposal or such transaction is consummated
(it being understood that for all purposes of this clause
(a), all references in the definition of Takeover
Proposal to twenty percent (20%) shall be deemed to be
references to fifty percent (50%) instead), or
(ii) Section 8.1(d)(ii); provided that there
did not exist any event or events that has had or would
reasonably be expected to have a Parent Material Adverse Effect,
either at the time of the action (or failure to act) giving rise
to Parents termination right pursuant to
Section 8.1(d)(ii) or at the time of such termination, then
the Company shall (A) in the case of termination pursuant
to clause (i) of this Section 8.4(a), within one
(1) Business Day following the earlier to occur of the
execution of such definitive agreement and consummation of such
transaction or (B) in the case of termination pursuant to
clause (ii) of this Section 8.4(a), within one
(1) Business Day of such termination, pay Parent a
non-refundable fee in an amount equal to Eighteen Million
Dollars ($18,000,000) (the Termination
Fee), payable by wire transfer of immediately
available funds to an account designated by Parent.
(b) If this Agreement shall be terminated pursuant to
Section 8.1(c)(ii) (provided that there did not
exist any event or events that has had or would reasonably be
expected to have a Company Material Adverse Effect either at the
time of the action (or failure to act) giving rise to the
Companys termination right pursuant to
Section 8.1(c)(ii) or at the time of such termination),
then within one (1) Business Day of such termination,
Parent shall pay the Company the Termination Fee, payable by
wire transfer of immediately available funds to an account
designated by the Company.
(c) The parties acknowledge that the agreements contained
in this Section 8.4 are an integral part of the
transactions contemplated in this Agreement, and that, without
these agreements, the parties would not enter into this
Agreement; accordingly, if either party fails to promptly pay
its respective Termination Fee (the non-paying
party), and, in order to obtain such payment the other
party commences a suit which results in a judgment against the
non-paying party for the Termination Fee, the non-paying party
shall pay to the other party its costs and expenses (including
attorneys fees) in connection with such suit, together
with interest on the amount of the fee at the publicly announced
prime rate of Citibank, N.A. in New York City from the date such
fee was first payable to the date it is paid.
Section 8.5 Extension;
Waiver. At any time prior to the Effective Time,
the parties hereto may, to the extent permitted by applicable
Law, and subject to Section 9.13, (a) extend the time
for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto or (c) waive compliance
with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The
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failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival
of Representations and Warranties. None of the
representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement (other than the
representation letters to be delivered pursuant to
Sections 7.2(i) and 7.3(e) shall survive the Effective
Time. All covenants shall survive in accordance with their terms.
Section 9.2 Notices. All
notices and other communications hereunder shall be in writing
and shall be deemed duly delivered (a) on the date of
delivery if delivered personally, (b) on the day sent by
facsimile provided that such day is a Business Day and
the sender has received confirmation of transmission as of or
prior to 5:00 p.m. local time of the recipient on such day,
(c) the first (1st) Business Day after sent by facsimile to
the extent that the day sent by facsimile is not a Business Day
or the sender has received confirmation of transmission after
5:00 p.m. local time of the recipient on the day sent by
facsimile, (d) four (4) Business Days after being sent
by registered or certified mail, return receipt requested,
postage prepaid, or (v) one (1) Business Day after
being sent via a nationally recognized courier service, fees
prepaid, in each case to the intended recipient as set forth
below:
(a) if to Parent or Merger Sub, to
Illumina, Inc.
9885 Towne Centre Drive
San Diego, California
92121-1975
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Attn:
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Christian G. Cabou
Senior Vice President and General Counsel
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Telecopy:
(858) 202-4599
with a copy to:
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Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attn: Frederick W. Kanner, Esq.
Michael J. Aiello, Esq.
Telecopy:
(212) 259-6333
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(b) if to the Company, to
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Solexa, Inc.
Corporate Head Quarters
25861 Industrial Boulevard
Hayward, California 94545
Attn: John West
Chief Executive Officer
Telecopy:
(510) 670-9303
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with a copy to:
Cooley Godward Kronish LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA
94036-2155
John Brottem, Esq.
Telecopy:
(650) 849-7400
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Section 9.3 Interpretation.
(a) When a reference is made in this Agreement to an
Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(c) This Agreement is the result of the joint efforts of
Parent, Merger Sub and the Company, and each provision hereof
has been subject to the mutual consultation, negotiation and
agreement of the parties and there shall be no construction
against any party based on any presumption of that partys
involvement in the drafting thereof.
(d) The words include, includes or
including shall be deemed to be followed by the
words without limitation.
Section 9.4 Counterparts. This
Agreement may be executed in two (2) or more counterparts,
all of which shall be considered one and the same agreement and
shall become effective when such counterparts have been signed
by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same
counterpart.
Section 9.5 Entire
Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred
to herein) and the Confidentiality Agreement
(a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and
(b) except as provided in Section 6.8, is not intended
to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
Section 9.6 Governing
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law
thereof.
Section 9.7 Publicity. No
party hereto shall issue any press release or otherwise make any
public statement (including all formal Company employee
communication programs or announcements) with respect to the
transactions contemplated by this Agreement without the prior
consent of the other parties as to the form and substance of
such press release or statement, which shall not be unreasonably
withheld; provided that the parties make issue or make
statements that are consistent with the parties prior
press releases and other public statements that were not in
violation of this Section 9.7.
Section 9.8 Assignment. Neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 9.9 Enforcement. The
parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and
provisions of this Agreement, in addition to any other remedy to
which they are entitled at law or in equity.
Section 9.10 Jurisdiction. Except
as otherwise expressly provided in this Agreement, the parties
hereto agree that any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of
or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in the state court located
within New Castle County, State of Delaware (or, in the case of
any claim to which the federal courts have exclusive subject
matter jurisdiction, the federal court sitting in the State of
Delaware, and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court
A-45
has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere
in the world, whether within or without the jurisdiction of any
such court. Without limiting the foregoing, each party agrees
that service of process on such party as provided in
Section 9.2 shall be deemed effective service of process on
such party.
Section 9.11 Waiver
of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.12 Severability. This
Agreement shall be deemed severable; the invalidity or
unenforceability of any term or provision of this Agreement
shall not affect the validity or enforceability of the balance
of this Agreement or of any other term hereof, which shall
remain in full force and effect. If of any of the provisions
hereof are determined to be invalid or unenforceable, the
parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible.
Section 9.13 Modification. No
supplement, modification or amendment of this Agreement will be
binding unless made in a written instrument that is signed by
all of the parties hereto and that specifically refers to this
Agreement.
[SIGNATURE PAGE FOLLOWS]
A-46
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
ILLUMINA, INC.
Jay T. Flatley
President and Chief Executive Officer
CALLISTO ACQUISITION CORP.
Jay T. Flatley
President and Treasurer
SOLEXA, INC.
John West
Chief Executive Officer
A-47
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
November 12, 2006
SOLEXA,
INC.
SECURITIES
PURCHASE AGREEMENT
This Securities
Purchase Agreement (this
Agreement) is made as of
November 12, 2006, by and between
Solexa,
Inc., a Delaware corporation (the
Company) with its principal office at
25861 Industrial Boulevard, Hayward, California 94545, and
Illumina, Inc., a Delaware corporation
(Purchaser) with its principal office
at 9885 Towne Centre Drive, San Diego, CA 92121.
RECITALS
Whereas,
the parties have entered into that certain Agreement and Plan of
Merger (the Merger Agreement) on the
date hereof and, in connection therewith, the Company has agreed
to issue and sell to Purchaser, and Purchaser has agreed to
purchase from the Company, the Common Shares (as defined herein)
at the Closing (as defined herein);
Whereas,
the Company and Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D
(Regulation D), as promulgated by
the SEC (as defined herein) under the Securities Act of 1933, as
amended (the Securities Act); and
Whereas,
capitalized terms not defined herein shall have the meanings
ascribed thereto in the Merger Agreement;
Now,
Therefore, in consideration of the foregoing recitals
and the mutual promises, representations, warranties and
covenants hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Authorization
and Sale of Common Shares
1.1 Authorization. The Company has
authorized the sale and issuance of 5,154,639 shares (the
Common Shares) of the Companys
common stock, par value $0.01 per share (the
Common Stock), at a price per share of
$9.70 (the Per Share Purchase Price).
1.2 Closing. Subject to the terms
and conditions of this Agreement, including without limitation,
the conditions set forth in Article 5 and Article 6 of
this Agreement, there shall be a closing at which the Company
shall issue and sell, and Purchaser shall purchase the Common
Shares, in exchange for the aggregate cash consideration of
$49,999,998.
ARTICLE 2
Closing
Date; Delivery
2.1 Closing Date; Delivery.
(a) Location. The Closing of the purchase
and sale of the Common Shares hereunder (the
Closing) shall be held at the offices
of Dewey Ballantine LLP, 1950 University Avenue, Suite 500,
East Palo Alto, California 94303, on the Closing Date.
(b) Closing. Subject to the satisfaction
(or waiver) of the conditions thereto set forth in
Article 5 and Article 6 of this Agreement, on the date
hereof or at such other time and place upon which the Company
and Purchaser shall agree in writing, the Company will deliver
or cause to be delivered to Purchaser, a certificate
representing the Common Shares, registered in Purchasers
name, in exchange for payment of the purchase price therefor by
Purchaser by wire transfer of immediately available funds to the
Company in accordance with the Companys written wiring
instructions. The date of the Closing is hereinafter referred to
as the Closing Date.
B-1
ARTICLE 3
Representations
and Warranties of the Company
Except, with respect to any Section of this Article III, as
set forth in the disclosure schedule delivered by the Company to
Purchaser herewith (the Disclosure
Schedule) that relates to such Section or to other
Sections of this Article III to the extent it is reasonably
apparent that such disclosure is applicable to such other
Section, the Company represents and warrants to Purchaser:
3.1 Organization and Standing. The
Company is a corporation duly incorporated and validly existing
under, and by virtue of, the laws of the State of Delaware and
is in good standing as a domestic corporation under the laws of
said state. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets
and to carry on its business as now conducted. The Company is
duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the
property owned, leased or operated by it or the nature of its
activities makes such qualification necessary, except where the
failure to be so qualified could not reasonably be expected to
have, individually or in the aggregate, a material adverse
effect on the Company.
3.2 Subsidiaries. Each Subsidiary
of the Company is a corporation duly incorporated and validly
existing under, and by virtue of, the laws of its jurisdiction
of incorporation or organization and is in good standing as a
domestic corporation under the laws of said jurisdiction. Each
Subsidiary has all requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on
its business as now conducted. Each Subsidiary is duly qualified
to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned,
leased or operated by it or the nature of its activities makes
such qualification necessary, except where the failure to be so
qualified could not reasonably be expected to have, individually
or in the aggregate, a material adverse effect on the Company.
Section 3.2 of the Disclosure Schedule lists (i) each
Subsidiary of the Company, (ii) its jurisdiction of
incorporation or organization and (iii) the location of its
principal executive office. Except for the capital stock of its
Subsidiaries, the Company does not own, directly or indirectly,
any capital stock or other ownership interest in any entity.
3.3 Corporate Power;
Authorization. The Company has all requisite
legal and corporate power and has taken all requisite corporate
action to execute and deliver this Agreement, to sell and issue
the Common Shares, and to carry out and perform all of its
obligations under this Agreement. This Agreement constitutes a
legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization or similar
laws relating to or affecting the enforcement of creditors
rights generally and (b) as limited by equitable principles
generally. The execution and delivery of this Agreement does
not, and the performance of this Agreement and the compliance
with the provisions hereof, the issuance, sale and delivery of
the Common Shares by the Company will not conflict with, or
result in, a material breach or violation of the terms,
conditions or provisions of, or constitute a default under, or
result in the creation or imposition of any lien pursuant to the
terms of, the Amended and Restated Certificate of Incorporation,
as amended (the Restated Certificate)
or Bylaws of the Company or any statute, law, rule or regulation
or any state or federal order, judgment or decree or any
indenture, mortgage, lease or other material agreement or
instrument to which the Company or any of its properties is
subject.
3.4 Issuance and Delivery of the
Shares. Upon issuance and delivery in accordance
with this Agreement and payment therefore in accordance with the
terms of this Agreement, the Common Shares will be duly
authorized, validly issued, fully paid and nonassessable. The
issuance and delivery of the Common Shares is not subject to
preemptive or any other similar rights of any Person, and the
Common Shares will be free and clear of any liens or
encumbrances.
3.5 SEC Documents; Financial
Statements. The Company has filed in a timely
manner all documents that the Company was required to file with
the Securities and Exchange Commission (the
SEC) under Sections 13, 14(a) and
15(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), since January 1,
2004. As of their respective filing dates, all such documents
filed by the Company with the SEC
B-2
(the SEC Documents) complied in all
material respects with the requirements of the Exchange Act or
the Securities Act of 1933, as amended (the
Securities Act), as applicable. None
of the SEC Documents as of their respective dates contained any
untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under
which they were made, not misleading. The financial statements
of the Company included in the SEC Documents (the
Financial Statements) comply as to
form in all material respects with applicable accounting
requirements and with the published rules and regulations of the
SEC with respect thereto. The Financial Statements have been
prepared in accordance with GAAP consistently applied and fairly
present the consolidated financial position of the Company and
any Subsidiaries at the dates thereof and the consolidated
results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited
statements, to normal, recurring adjustments or to the extent
that such unaudited statements do not include footnotes). Since
the first SEC filing by the Company covering the fiscal period
ending after December 31, 2004, there has been no change in
the Companys accounting methods or principles that would
be required to be disclosed in the Companys financial
statements in accordance with GAAP, except as described in the
notes to such Company financial statements.
3.6 Governmental Consents. No
consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of
the Company is required in connection with the consummation of
the transactions contemplated by this Agreement except for
(a) compliance with the securities and blue sky laws in the
states in which the Common Shares are offered
and/or sold,
which compliance will be effected in accordance with such laws,
(b) the filing of the Registration Statement (as defined
herein) and all amendments thereto with the SEC as contemplated
by Section 7.2 of this Agreement and (c) the filing of
a Form D pursuant to Regulation D.
3.7 No Material Adverse
Change. Except as otherwise disclosed herein or
in the SEC Documents filed prior to the date of this Agreement
(excluding any disclosures set forth in any risk factor section
thereof), since June 30, 2006, there have not been any
changes on the business, prospects, condition (financial or
otherwise) or results of operations of the Company except for
changes which have not been or could not reasonably be expected
to be, either individually or in the aggregate, materially
adverse.
3.8 Authorized Capital Stock. The
authorized capital stock of the Company consists of
(a) 200,000,000 shares of Common Stock and
(b) 2,000,000 shares of preferred stock, par value
$0.01 per share (Company Preferred
Shares). At the close of business on
November 10, 2006, (i) 36,611,140 shares of
Common Stock (excluding treasury shares) were issued and
outstanding, (ii) no shares of Common Stock were held by
the Company in its treasury, (iii) no Company Preferred
Shares were issued and outstanding,
(iv) 4,430,172 shares of Common Stock were reserved
for issuance pursuant to outstanding unexercised options to
purchase shares of Common Stock, (v) 6,150,504 shares
of Common Stock have been reserved for issuance under the
Companys 2005 Equity Incentive Plan (and sub plans
thereunder), (vi) shares of 7,845,889 Common Stock have
been reserved for issuance pursuant to warrants to purchase
shares of Common Stock, and (vii) 37,618 shares of
Common Stock have been reserved for issuance under the
Companys 1998 Employee Stock Purchase Plan. All of the
outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive and similar rights.
3.9 Litigation. There are no
actions, suits, claims, proceedings, arbitration or
investigations pending before any Governmental Entity or, to the
knowledge of the Company, threatened against the Company or any
of its Subsidiaries or any of their respective assets or
properties which, if adversely determined, (a) could
reasonably be expected to have a material adverse effect on the
Company or (b) would impair the ability of the Company to
perform in any material respect its obligations under this
Agreement.
3.10 NASDAQ Compliance. The Common
Stock is registered pursuant to Section 12(g) of the
Exchange Act and is listed on The Nasdaq Global Market (the
Nasdaq Global Market), and the Company
has taken no action designed to, or likely to have the effect
of, terminating the registration of the Common Stock under the
Exchange Act or de-listing the Common Stock from the Nasdaq
Global Market, nor, to the Companys knowledge, is the SEC
or the National Association of Securities Dealers, Inc. (the
NASD)
B-3
contemplating terminating such registration or listing. The
Company and the Common Stock meet the criteria for continued
listing and trading on the NASDAQ Global Market.
3.11 Form S-3
Eligibility. The Company is eligible to register
the Common Shares for resale by the Purchaser on
Form S-3
promulgated under the Securities Act.
3.12 Use of Proceeds. The proceeds
of the sale of the Common Shares will be used by the Company for
working capital and general corporate purposes. None of the
proceeds of the sale of the Common Shares will be distributed to
any shareholder of the Company or used to redeem any capital
stock of the Company.
3.13 Brokers and Finders. No person
or entity will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or
claim against or upon the Company or Purchaser for any
commission, fee or other compensation pursuant to any agreement,
arrangement or understanding entered into by or on behalf of the
Company.
3.14 No Directed Selling Efforts or General
Solicitation. Neither the Company nor any person
or entity acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of
any of the Common Shares.
3.15 No Integrated
Offering. Neither the Company nor any person or
entity acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or
solicited any offers to buy any security, under circumstances
that would adversely affect reliance by the Company on
Section 4(2) of the Securities Act for the exemption from
registration for the transactions contemplated hereby or would
require registration of the Common Shares under the Securities
Act.
3.16 Private Placement. The offer
and sale of the Common Shares to Purchaser as contemplated
hereby is exempt from the registration requirements of the
Securities Act.
3.17 Internal Accounting
Controls. Except as described in the SEC
Documents, the Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
managements general or specific authorizations,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP,
(iii) access to assets is permitted only in accordance with
managements general or specific authorization, and
(iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
3.18 Compliance with Applicable Law.
(a) The Company and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary in any material respect for the
lawful conduct of the business of the Company and its
Subsidiaries, taken together (the Company
Permits), and are in compliance with the terms of
the Company Permits, except for any such noncompliance that
would not reasonably be expected to have a material adverse
affect on the Company. To the knowledge of the Company, the
businesses of the Company and its Subsidiaries are being and
have at all times been conducted in compliance with applicable
law. To the knowledge of the Company, no investigation or review
by any Governmental Entity with respect to the Company or any of
its Subsidiaries is pending or threatened.
(b) Except as disclosed in the SEC Documents filed by the
Company prior to the date hereof, the Company is in compliance,
in all material respects, with (i) the provisions of the
Sarbanes-Oxley Act and (ii) the listing and corporate
governance rules and regulations of NASDAQ applicable to the
Company as of the date of this Agreement. Except as permitted by
the Exchange Act, including, without limitation,
Sections 13(k)(2) and (3), since the enactment of the
Sarbanes-Oxley Act, neither the Company nor any of its
Subsidiaries has made, arranged, modified, or forgiven personal
loans to any executive officer or director of the Company in
violation of the Sarbanes-Oxley Act.
(c) The management of the Company has (i) designed and
implemented disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) or caused such disclosure control and
procedures to be designed under their supervision to ensure that
material information relating to the Company,
B-4
including its consolidated Subsidiaries, is made known to the
management of the Company by others within those entities, and
(ii) disclosed, based on its most recent evaluation to the
Companys outside auditors and the audit committee of the
Board of Directors of the Company, (A) all significant
deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) which are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information, (B) any fraud, whether or
not material, that involves management or other employees who
have a significant role in the Companys internal controls
over financial reporting and (C) any other matter required
to be disclosed by Law, the Companys policies, the listing
standards of NASDAQ, the Companys audit committees
charter or the professional standards of the Public Company
Accounting Oversight Board.
(d) Since January 1, 2004, (i) neither the
Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any director, officer, employee, auditor, accountant or
representative of the Company or any of its Subsidiaries has
received or otherwise has knowledge of any complaint,
allegation, assertion or claim from or by a
whistleblower regarding the accounting or auditing
practices, procedures, methodologies or methods of the Company
or any of its Subsidiaries or their respective internal
accounting controls relating to periods after January 1,
2004, including any material complaint, allegation, assertion or
claim that the Company or any of its Subsidiaries has engaged in
questionable accounting or auditing practices (except for any of
the foregoing which have no reasonable basis) and (ii) 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,
relating to periods after January 1, 2004, by the Company
or any of its officers, directors, employees or agents to the
Board of Directors of the Company or any committee thereof or,
to the knowledge of the Company, to any director or officer of
the Company.
3.19 Transactions with
Affiliates. Except as disclosed in the SEC
Documents and as contemplated pursuant to this Agreement, none
of the officers or directors of the Company or any of its
Subsidiaries and none of the employees of the Company or any of
its Subsidiaries is presently a party to any loan, lease,
agreement, contract, royalty agreement, management contract or
other transaction with the Company or any of its Subsidiaries or
to a presently contemplated transaction (other than for services
as employees, officers and directors in the ordinary course of
business consistent with past practice) that would be required
to be disclosed pursuant to Item 404 of
Regulation S-K
promulgated under the Securities Act.
3.20 Intellectual Property.
(a) Intellectual Property shall mean
patents, trademarks, service marks, trade names, trade dress,
designs, copyrights, mask works, trade secrets, know-how,
inventions, technical data, databases, software, firmware,
licenses, information, all other intellectual property and
proprietary rights and processes, and any and all applications,
issuances and registrations of or for any of the foregoing.
(b) Except as disclosed in the SEC Documents filed prior to
the date hereof and to the knowledge of the Company, the
Company, together with its Subsidiaries, owns or has the valid
right to use all of the Intellectual Property used or to be used
in the conduct of the business of the Company and its
Subsidiaries as currently conducted or as currently proposed to
be conducted prior to June 30, 2007, as described in the
SEC Documents, free and clear of all material liens and
encumbrances.
(c) Except as disclosed in the SEC Documents filed prior to
the date hereof, and to the knowledge of the Company, neither
the conduct of the business of the Company and its Subsidiaries
(including, without limitation, the provision to and use by
third parties of any products or services of the Company and its
Subsidiaries) as currently conducted or as currently proposed to
be conducted prior to June 30, 2007, as described in the
SEC Documents, materially infringes, misappropriates, conflicts
with or otherwise violates any Intellectual Property rights of
any third party or any confidentiality obligation owed by the
Company or any of its Subsidiaries to a third party, and, to the
knowledge of the Company, the Intellectual Property and
confidential information of the Company and its Subsidiaries are
not being infringed, misappropriated or otherwise violated by
any third party. The Company and each of its Subsidiaries have
taken reasonable
B-5
measures to maintain the confidentiality of all their trade
secrets and the proprietary nature and value of their
Intellectual Property.
(d) Each employee, consultant and contractor of the Company
who has been provided access to confidential information of the
Company or any of its Subsidiaries has executed an agreement to
maintain the confidentiality of such confidential information.
Each employee and consultant of the Company has executed an
agreement assigning to the Company or the applicable Subsidiary
all Intellectual Property invented, conceived, reduced to
practice, developed or otherwise created by such person for or
for the benefit of the Company or any of its Subsidiaries in
connection with their work as employees or consultants of the
Company or its Subsidiaries.
3.21 Insurance. The Company has
delivered or made available to Purchaser prior to the date of
this Agreement copies of all insurance policies which are owned
by the Company or its Subsidiaries or which names the Company or
any of its Subsidiaries as an insured (or loss payee) as of the
date of this Agreement, including those which pertain to the
Companys or its Subsidiaries assets, employees or
operations. All such insurance policies which are owned by the
Company or its Subsidiaries are in full force and effect, are
valid and enforceable. As of the date of this Agreement, neither
the Company nor any of its Subsidiaries have received notice of
cancellation of any such insurance policies.
3.22 No Undisclosed
Liabilities. Except as disclosed in the SEC
Documents (excluding any disclosures set forth in any risk
factor section thereof) filed prior to the date of this
Agreement and except for liabilities incurred in the ordinary
course of business consistent with past practice (in terms of
scope and amount), neither the Company nor any of its
Subsidiaries has any liabilities, absolute, contingent,
unliquidated or otherwise, whether due or to become due of the
type required to be disclosed on a balance sheet or in the
related notes to consolidated financial statements prepared in
accordance with GAAP, that individually, or in the aggregate,
are material to the Company.
3.23 State Takeover Statutes. The
Company has taken all actions required to be taken by it in
order to exempt this Agreement and the transactions contemplated
hereby from the provisions of Section 203 of the DGCL and,
accordingly, that section does not apply to the purchase and
sale of the Common Shares pursuant to this Agreement or any
other transaction contemplated hereby. No other control
share acquisition, fair price or other
anti-takeover regulations enacted under state or federal laws in
the United States apply to this Agreement or any of the
transactions contemplated hereby.
ARTICLE 4
Representations,
Warranties and Covenants of Purchaser
Purchaser hereby represents and warrants to the Company:
4.1 Authorization. Purchaser has
all requisite legal and corporate power and has taken all
requisite corporate action to execute and deliver this
Agreement, to purchase the Common Shares to be purchased by it,
and to carry out and perform all of its obligations under this
Agreement. This Agreement constitutes a legal, valid and binding
obligation of Purchaser, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or
affecting the enforcement of creditors rights generally
and (ii) as limited by equitable principles generally.
4.2 Investment
Experience. Purchaser is an accredited
investor as defined in Rule 501(a) under the
Securities Act. Purchaser is aware of the Companys
business affairs and financial condition and has had access to
and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the
Common Shares. Purchaser has such business and financial
experience as is required so as to be able to evaluate the risks
and merits of its investment in the Company.
4.3 Investment Intent. Purchaser is
purchasing the Common Shares for its own account as principal,
for investment purposes only, and not with a present view to, or
for, resale, distribution or fractionalization thereof, in whole
or in part, within the meaning of the Securities Act, other than
as contemplated by Article 7. Purchaser understands that
its acquisition of the Common Shares has not been registered
under the Securities
B-6
Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature of
Purchasers investment intent as expressed herein.
Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the
Common Shares except in compliance with the Securities Act, and
the rules and regulations promulgated thereunder.
4.4 Brokers and Finders. No person
or entity will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or
claim against or upon the Company or Purchaser for any
commission, fee or other compensation pursuant to any agreement,
arrangement or understanding entered into by or on behalf of
Purchaser.
ARTICLE 5
Conditions
to Closing Obligations of Purchaser
Purchasers obligation to purchase the Common Shares at the
Closing is, at the option of Purchaser, subject to the
fulfillment or waiver of the following conditions:
5.1 Representations and
Warranties. The representations and warranties
made by the Company in this Agreement shall be true and correct
as of the Closing, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct
as of such earlier date.
5.2 Covenants. All covenants,
agreements, obligations and conditions contained in this
Agreement to be performed or complied with by the Company on or
prior to the Closing Date shall have been performed or complied
with in all material respects.
5.3 Certificates. The Company shall
deliver or cause to be delivered to Purchaser a duly executed
certificate representing the Common Shares.
5.4 Legal Opinion. Purchaser shall
have received on the Closing Date an opinion of Cooley Godward
Kronish llp
(Cooley Godward Kronish),
counsel for the Company, dated as of the Closing Date, in
substantially the form of Exhibit B.
5.5 Listing. The Company shall have
complied with all requirements with respect to the listing of
the Common Shares on the Nasdaq Global Market, except for such
requirements not required until after the issuance of the Common
Shares, such requirements to be complied with promptly after the
Closing.
5.6 Officers Certificate. The
Company shall have delivered a Certificate, executed on behalf
of the Company by its Chief Executive Officer or Chief Financial
Officer, dated as of the Closing Date, certifying to the
fulfillment of the conditions specified in Sections 5.1 and
5.2.
5.7 Judgments. No judgment, writ,
order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge,
or any order of or by any governmental authority, shall have
been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or
preventing the consummation of the transactions contemplated
hereby.
ARTICLE 6
Conditions
to Closing Obligations of Company
The Companys obligation to sell and issue the Common
Shares at the Closing is, at the option of the Company, subject
to the fulfillment or waiver of the following conditions:
6.1 Receipt of Payment. Purchaser
shall have delivered payment of the purchase price to the
Company for the Common Shares being issued at the Closing.
6.2 Representations and
Warranties. The representations and warranties
made by Purchaser in this Agreement shall be true and correct as
of the date hereof and at and as of the Closing Date, except to
the
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extent any such representation or warranty expressly speaks as
of an earlier date, in which case such representation or
warranty shall be true and correct as of such earlier date.
6.3 Covenants. All covenants,
agreements, obligations and conditions contained in this
Agreement to be performed by Purchaser on or prior to the
Closing Date shall have been performed or complied with in all
material respects.
ARTICLE 7
Covenants
7.1 Definitions. For the purpose of
this Article 7:
(a) the term Registration
Statement shall mean any registration statement
required to be filed by Section 7.2 below, and shall
include (1) any preliminary prospectus, final prospectus,
exhibit or amendment included (or deemed to be included) in or
relating to such registration statements; and (2) all
documents incorporated or deemed incorporated by reference
therein; and
(b) the term Registrable Shares
shall mean all of the Common Shares issued pursuant to this
Agreement.
7.2 Registration Procedures and Expenses.
(a) The Company shall:
(i) use its best efforts to file a Registration Statement
with the SEC on or before the date that is ten (10) days
after the date of termination of the Merger Agreement in
accordance with its terms (the Merger Termination
Date and, such later tenth (10th) day, the
Filing Date) on
Form S-3
under the Securities Act (providing for shelf registration of
the resale of such Registrable Shares under Rule 415 under
the Securities Act) or on such other form which is appropriate
to register such Registrable Shares for resale from time to time
by Purchaser; such Registration Statement shall be an
automatic shelf registration statement (as defined
in Rule 405 under the Securities Act) (an
Automatic Shelf Registration
Statement) if the Company is then eligible to file
an Automatic Shelf Registration Statement; each Registration
Statement shall comply in all material respects with the
requirements of the Securities Act;
(ii) use its best efforts to cause any such Registration
Statement filed pursuant to Section 7.2(a)(i) above to
become effective under the Securities Act as promptly after
filing of such Registration Statement as practicable but in any
event by the date (the Effectiveness Deadline
Date) that is thirty (30) days following the
Filing Date; provided, however, that in the event that
the Registration Statement is reviewed by the SEC, then such
Effectiveness Deadline Date shall be the date that is ninety
(90) days following the Filing Date;
(iii) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection therewith, or a new Registration Statement,
as may be necessary to, and to use its best efforts to, keep at
least one Registration Statement continuously effective until
termination of such obligation as provided in Section 7.6
below, subject to the Companys right to suspend pursuant
to Section 7.5;
(iv) furnish to Purchaser (and to each underwriter, if any,
of such Registrable Shares) such number of copies of
prospectuses in conformity with the requirements of the
Securities Act and such other documents as Purchaser may
reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Registrable Shares by
Purchaser, including a copy of the prospectus to be furnished to
Purchaser pursuant to Section 7.2(g);
(v) file such documents as may be required of the Company
for normal securities law clearance for the resale of the
Registrable Shares in such states of the United States as may be
reasonably requested by Purchaser; provided, however,
that the Company shall not be required in connection with this
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paragraph (e) to qualify as a foreign corporation or
execute a general consent to service of process in any
jurisdiction;
(vi) with respect to a Registration Statement that is not
an Automatic Shelf Registration Statement, upon notification by
the SEC that such Registration Statement will not be reviewed or
is no longer subject to further review and comment by the SEC,
request, within three business days, acceleration of such
Registration Statement such that it becomes effective at
5:00 p.m. New York Time on the date that effectiveness is
requested (the Registration Effective
Date);
(vii) deliver to Purchaser, by 9:00 a.m. New York
time on the day following the Registration Effective Date,
without charge, an electronic copy of each prospectus or
prospectuses (including each form of prospectus) and each
amendment or supplement thereto, each of which prospectus shall
satisfy the requirements of Section 10(a) of the Securities
Act. The Company hereby consents to the use of such prospectus
and each amendment or supplement thereto by Purchaser in
connection with the offering and sale of the Registrable
Securities covered by such prospectus and any amendment or
supplement thereto;
(viii) advise Purchaser promptly:
(1) of any review initiated by the SEC with respect to the
Registration Statement;
(2) of the effectiveness of the Registration Statement or
any post-effective amendments thereto;
(3) of any request by the SEC for amendments to the
Registration Statement or amendments to the prospectus or for
additional information relating thereto;
(4) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities
commission of the qualification of the Registrable Shares for
offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes; and
(5) of the existence or discovery of any fact or the
happening of any event that makes (1) the Registration
Statement contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
(2) any related prospectus (including any documents
incorporated by reference therein) contain any untrue statement
of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in
each of the foregoing cases, the Company shall promptly file
with the SEC an amended Registration Statement and prospectus,
or a new Registration Statement, which shall not contain any
such untrue statement or omission and, in the case of an amended
Registration Statement or new Registration Statement, use its
best efforts to cause the same to become effective under the
Securities Act as soon as practicable but in no event later than
forty-five (45) days after such filing; and
(ix) use its best efforts to cause all Registrable Shares
to be listed on each securities exchange, if any, on which
equity securities of the Company are then listed.
(b) In the event the Company elects to file a registration
statement under the Securities Act pertaining to an underwritten
public offering of Common Stock of the Company, the Company
shall notify the Purchaser thereof at least ten (10) days
prior to filing and will afford Purchaser the opportunity to
include Registrable Shares therein. In such event, the right of
Purchaser to participate in such underwriting shall be
conditioned upon Purchasers entry into an underwriting
agreement in customary form with the underwriter selected for
such underwriting by the Company. If in the course of the
offering, the underwriter determines in good faith that market
factors require a limitation of the number of shares to be
underwritten, the number of shares shall be allocated first to
the Company, second to Purchaser and third to any other
stockholders participating in such underwriting; provided
that, in any event, Purchaser shall be entitled to include in
such offering an amount of its Common Shares equal to no less
than 25% of the total number of shares of Common Stock
constituting such offering. Purchasers rights under this
Section 7.2(b) shall terminate on the earlier of the date
on which Purchaser first holds Common Shares constituting less
than 2.5% of the outstanding common stock of the Company or two
(2) years after the Registration Effective Date.
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(c) The Company shall bear all reasonable expenses in
connection with the procedures in this Section 7.2 and the
registration and underwriting of the Registrable Shares on such
Registration Statement and the satisfaction of the blue sky laws
of such states; provided, however, that in no event will
the Company be responsible for any underwriting discounts or
commissions due in connection with the sale of Registrable
Shares in any underwritten offering of Registrable Shares.
7.3 Indemnification.
(a) The Company agrees to indemnify and hold harmless
Purchaser, the officers, directors, stockholders and employees
of Purchaser, each other Person who participates as an
underwriter, broker or dealer in the offering or sale of the
Common Shares and each person, if any, who controls Purchaser
within the meaning of the Securities Act or the Exchange Act,
from and against any losses or damages sustained, or liabilities
or claims to which any of them may become subject (under the
Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement or related prospectus
(including the documents incorporated by reference therein),
(ii) any omission or alleged omission to state a material
fact required to be stated in any Registration Statement or any
related prospectus (including the documents incorporated by
reference therein) or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading or (iii) any failure by the Company to fulfill
any undertaking included in any Registration Statement; and the
Company will, as incurred, reimburse such Purchaser, officer,
director, stockholder, employee, participating person or
controlling person for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any
such action, proceeding or claim; provided, however, that
the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability (collectively,
Loss) arises out of, or is based upon,
an untrue statement or omission or alleged untrue statement or
omission made in such Registration Statement or related
prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such
Purchaser, officer, director, stockholder, employee,
participating person or controlling person specifically for use
in preparation of such Registration Statement or prospectus.
(b) Purchaser agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each officer of the Company
who signs the Registration Statement and each director of the
Company), from and against any losses or damages sustained, or
liabilities or claims to which the Company (or any such officer,
director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement
or alleged untrue statement of a material fact contained in a
representation by the Purchaser contained in any Registration
Statement or related prospectus or any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading in
each case, on the effective date thereof for purposes of
Section 11 of the Securities Act, if, and to the extent,
such untrue statement or omission or alleged untrue statement or
omission was made in reliance upon and in conformity with
written information furnished by or on behalf of Purchaser
specifically for use in preparation of such Registration
Statement or related prospectus, and Purchaser will reimburse
the Company (and each of its officers, directors or controlling
persons) for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that in no event
shall any indemnity under this Section 7.3(b) be greater in
amount than the dollar amount of the proceeds (net of the amount
of any damages Purchaser has otherwise been required to pay by
reason of such untrue statement or omission or alleged untrue
statement or omission) received by Purchaser upon the sale of
the Registrable Securities included in the Registration
Statement giving rise to such indemnification obligation.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of
which indemnity is to be sought against an indemnifying person
pursuant to this Section 7.3, such indemnified person shall
notify the indemnifying person in writing of such claim or of
the commencement of such action, but the omission to so notify
the indemnifying party will not relieve it from any liability
which it may have to any indemnified party (except to the extent
that such omission materially
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and adversely affects the indemnifying partys ability to
defend such action). Subject to the provisions hereinafter
stated, in case any such action shall be brought against an
indemnified person, such indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect
by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified
party, shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person.
After notice from the indemnifying person to such indemnified
person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified
person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof;
provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate in the
reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel
at the expense of such indemnifying person; provided,
further, that no indemnifying person shall be responsible
for the fees and expense of more than one separate counsel
(together with appropriate local counsel) for all indemnified
parties. The indemnifying party shall not settle an action
without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld.
(d) If after proper notice of a claim or the commencement
of any action against the indemnified party, the indemnifying
party does not choose to participate, then the indemnified party
shall assume the defense thereof and upon written notice by the
indemnified party requesting advance payment of a stated amount
for its reasonable defense costs and expenses, the indemnifying
party shall advance payment for such reasonable defense costs
and expenses (the Advance Indemnification
Payment) to the indemnified party. In the event
that the indemnified partys actual defense costs and
expenses exceed the amount of the Advance Indemnification
Payment, then upon written request by the indemnified party, the
indemnifying party shall reimburse the indemnified party for
such difference; in the event that the Advance Indemnification
Payment exceeds the indemnified partys actual costs and
expenses, the indemnified party shall promptly remit payment of
such difference to the indemnifying party.
(e) If the indemnification provided for in this
Section 7.3 is held by a court of competent jurisdiction to
be unavailable to an indemnified party with respect to any
losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall to the extent permitted by applicable
law contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified
party on the other, as well as any other relevant equitable
considerations; provided, that in no event shall any
contribution by the Purchaser hereunder be greater in amount
than the dollar amount of the proceeds (net of the amount of any
damages the Purchaser has otherwise been required to pay by
reason of such untrue statement or omission or alleged untrue
statement or omission) received by the Purchaser upon the sale
of the Registrable Securities included in the Registration
Statement giving rise to such indemnification obligation.
7.4 Prospectus Delivery. Purchaser
hereby covenants with the Company not to make any sale of the
Registrable Shares without complying with Section 8.2.
Purchaser acknowledges that there may be times when the Company
must suspend the use of the prospectus related to the
Registration Statement until such time as an amendment to the
Registration Statement has been filed by the Company and becomes
effective under the Securities Act, or until such time as the
Company has filed an appropriate report or prospectus supplement
with the SEC pursuant to the Exchange Act or Securities Act, as
applicable. Purchaser hereby covenants that it will not sell any
Registrable Shares pursuant to said prospectus during the period
commencing at the time at which the Company gives Purchaser
written notice of the suspension of the use of said prospectus
and ending at the time the Company gives Purchaser written
notice that Purchaser may thereafter effect sales pursuant to
said prospectus; provided that such suspension periods
shall in no event exceed thirty (30) days in any twelve
(12) month period and that, in the good faith judgment of
the Companys Board of Directors, the Company would, in the
absence of such delay or suspension hereunder, be required under
state or federal securities laws to disclose any corporate
development, a potentially significant transaction or event
involving the Company, or any negotiations, discussions, or
proposals directly relating thereto, in either case the
disclosure of which would reasonably be expected to have a
material adverse effect on the Company.
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7.5 Termination of Obligations. The
obligations of the Company pursuant to Section 7.2 hereof
shall cease and terminate upon the earlier to occur of
(a) such time as all of the Registrable Shares have been
resold, (b) such time as all Registrable Shares that have
not previously been resold may be resold in a three-month period
pursuant to Rule 144(k) and Purchaser receives an opinion
of counsel to the Company to that effect, or (c) the third
anniversary of the Closing Date.
7.6 Reporting Requirements.
(a) With a view to making available the benefits of certain
rules and regulations of the SEC that may at any time permit the
sale of the Common Shares to the public without registration or
pursuant to a registration statement on
Form S-3,
the Company agrees to use its best efforts to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the
Securities Act;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act
and the Exchange Act; and
(iii) so long as Purchaser owns Registrable Shares, to
furnish to Purchaser upon request (A) a written statement
by the Company as to whether it is in compliance with the
reporting requirements of Rule 144, the Securities Act and
the Exchange Act, or whether it is qualified as a registrant
whose securities may be resold pursuant to SEC
Form S-3,
and (B) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so
filed by the Company.
7.7 Blue Sky. The Company shall
obtain and maintain all necessary blue sky law permits and
qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of Registrable Shares.
ARTICLE 8
Restrictions
on Transferability; Compliance with Securities Act; Voting
8.1 Securities Act
Restrictions. The Common Shares shall not be
transferable in the absence of a registration under the
Securities Act or an exemption therefrom. Each certificate
representing Common Shares shall bear a restrictive legend in
substantially the following form (and a stop transfer order may
be placed against transfer of the certificates for such shares):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR IN ANY
OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE
OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THOSE LAWS.
8.2 Transfer of Securities.
(a) Except as otherwise provided in Article 9,
Purchaser hereby covenants with the Company not to make any sale
of Common Shares except:
(i) in accordance with a Registration Statement, in which
case Purchaser shall have delivered a current prospectus in
connection with such sale; provided, however, that if
Rule 172 is then in effect and applicable, Purchaser shall
have confirmed that a current prospectus was deemed to be
delivered in connection with such sale; or
(ii) in accordance with Rule 144, in which case
Purchaser covenants to comply with Rule 144.
(b) Except as otherwise provided in Article 9,
Purchaser further acknowledges and agrees that, if Purchaser is
selling any of the Common Shares using the prospectus forming a
part of a Registration
B-12
Statement, such Common Shares are not transferable on the books
of the Company unless the certificate evidencing such Common
Shares is submitted to the Companys transfer agent and a
separate certificate executed by an officer of, or other person
duly authorized by, Purchaser in the form attached hereto as
Exhibit A is submitted to Cooley Godward Kronish or
the Companys transfer agent.
8.3 Special Restrictions.
(a) Except as otherwise provided in Section 7.2(b),
this Section 8.3 and Article 9, (i) from the
Closing Date until six (6) months after the Merger
Termination Date (such period being referred to as the
Primary
Lock-up
Period), Purchaser shall not, (A) sell, offer
to sell, solicit offers to buy, dispose of, loan, pledge or
grant any right with respect to (collectively, a
Disposition) the Common Shares; or
(B) engage in any hedging, Short Sale or other transaction
which is designed or could reasonably be expected to lead to or
result in a Disposition of any of the Common Shares by Purchaser
(Short Sales), which shall include,
without limitation, all short sales as defined in
Rule 200 promulgated under Regulation SHO under the
Exchange Act and all types of direct and indirect stock pledges,
forward sale contracts, options, puts, calls, short sales, swaps
and similar arrangements (including on a total return basis),
and sales and other transactions through
non-U.S. broker-dealers
or foreign regulated brokers and (ii) from the expiration
of the Primary
Lock-up
Period until fifteen (15) months after the Merger
Termination Date (the Secondary
Lock-up
Period), Purchaser shall not effect Dispositions
or Short Sales of the Common Shares in excess of one third of
the aggregate number of Common Shares purchased by Purchaser
hereunder in each of the three (3)-month periods in the
Secondary
Lock-up
Period. Notwithstanding any of the foregoing to the contrary,
Purchaser may effect one block sale of all or a portion of the
Common Shares in a single trade at anytime during the period
beginning from the Registration Effective Date and ending on the
later of (x) three (3) months after the Merger
Termination Date, (y) ten (10) days after the
Registration Effective Date and (z) seven (7) months
after the Closing Date (such period being referred to as the
Block Trade Window Period);
provided that, in the case where clause (z) is
applicable for determining the Block Trade Window Period, the
Primary
Lock-up
Period shall expire seven (7) months after the Merger
Termination Date and the Secondary
Lock-up
Period shall expire sixteen (16) months after the Merger
Termination Date. The restrictions set forth in this
Section 8.3 shall terminate, if not earlier terminated in
accordance with its terms, on the first date on which the Common
Shares then held by Purchaser constitute less than 2.5% of the
outstanding Common Stock of the Company.
(b) Each certificate representing Common Shares shall bear
the following legend until Purchasers obligation under
this Section 8.3 has expired:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RESTRAINT ON ALIENATION PROHIBITING THE SALE OR OTHER
TRANSFER OF THE SHARES REPRESENTED HEREBY FOR A SPECIFIED PERIOD
OF TIME UNDER THE TERMS AND CONDITIONS OF AN AGREEMENT BETWEEN
THE HOLDER HEREOF AND SOLEXA, INC. A COPY OF SUCH AGREEMENT WILL
BE FURNISHED WITHOUT CHARGE UPON WRITTEN REQUEST TO SOLEXA, INC.
AT ITS PRINCIPAL PLACE OF BUSINESS.
8.4 Voting of Securities.
(a) Purchaser hereby agrees that, prior to the earlier to
occur of the termination of the Merger Agreement or the
consummation of the Merger, at any meeting of the stockholders
of the Company (and at every adjournment and postponement
thereof), however called, and in any written action by consent
of stockholders of the Company, unless otherwise directed in
writing by the Board of Directors of the Company, Purchaser
shall cause the Common Shares to be voted proportionally with
the balance of the votes cast at such meeting of stockholders or
in connection with such written consent of stockholders of the
Company on all matters relating to the Merger, the execution and
delivery by the Company of the Merger Agreement, the adoption
and approval of the Merger Agreement and the terms thereof, and
each of the other actions contemplated by the Merger Agreement
at such meeting of stockholders or in connection with such
written consent of stockholders of the Company.
(b) Commencing with the first stockholder vote or written
consent after the Merger Termination Date, Purchaser hereby
further agrees that, prior to the earlier of (i) the fifth
anniversary of the date hereof or (ii) the
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first date after the Closing on which Purchaser holds less than
five percent (5.0%) of the outstanding Common stock of the
Company, at any meeting of the stockholders of the Company (and
at every adjournment and postponement thereof), however called,
and in any written action by consent of stockholders of the
Company, Purchaser shall cause the Common Shares or any portion
thereof it holds of record on the applicable record date to be
voted either, at Purchasers sole discretion, in accordance
with the recommendation(s) of the Board of Directors of the
Company set forth in the applicable definitive proxy materials
or information statement on all matters not identified in
Section 8.4(a) above or proportionally with the balance of
the votes cast at such meeting of stockholders or in connection
with such written consent of stockholders of the Company.
(c) Each certificate representing any of the Common Shares
bear the following legend until Purchasers obligations
under this Section 8.4 have expired:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT WHICH PLACES
CERTAIN RESTRICTIONS ON THE VOTING OF THE
SHARES REPRESENTED HEREBY. A COPY OF SUCH AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE UPON WRITTEN REQUEST TO SOLEXA, INC. AT
ITS PRINCIPAL PLACE OF BUSINESS.
ARTICLE 9
Put
Right
9.1 Put Right. Notwithstanding any
other provision of this Agreement to the contrary, Purchaser may
elect, by giving the Company written notice, to exercise the
following put rights in respect to the Common Shares (the
Put Right):
(a) If the Merger Agreement has been terminated and the
Company is required to pay a Termination Fee to Purchaser
pursuant to Section 8.4(a) of the Merger Agreement, then,
notwithstanding any effect (legal or otherwise) of the
consummation of the Takeover Transaction on the Common Shares,
Purchaser may elect to receive, with respect to all or a portion
of the Common Shares held by Purchaser immediately prior to the
consummation of the Takeover Transaction, a cash payment equal
to the Per Share Purchase Price, in exchange for each Common
Share held by Purchaser (the aggregate amount payable with
respect to the Common Shares being referred to as the
Put Purchase Price), and the Company
(and its successor, if any), if the Takeover Transaction is in
fact consummated, shall be obligated to pay the Put Purchase
Price to Purchaser in exchange for delivery of such Common
Shares in accordance with this Article 9. As used herein,
(i) Takeover Transaction shall
mean (A) in the case where the Termination Fee becomes
payable pursuant to Section 8.4(a)(i) of the Merger
Agreement, the transaction referred to in
Section 8.4(a)(i)(B) of the Merger Agreement and
(B) in the case where the Termination Fee becomes payable
pursuant to Section 8.4(a)(ii) of the Merger Agreement, a
Takeover Proposal (as used in Section 8.4 of the Merger
Agreement) with respect to which a definitive agreement is
entered into by the Company within nine (9) months
following the Merger Termination Date or which is consummated
within such period and (ii) Takeover
Transaction Closing Date shall mean the date of
consummation of the Takeover Transaction.
(b) The Company shall be required to provide written notice
to Purchaser of the anticipated Takeover Transaction Closing
Date not more than thirty (30) days and not less than
fifteen (15) days prior to such date. If Purchaser decides
to exercise the Put Right pursuant to this Section 9.1,
then Purchaser shall give written notice to the Company of such
decision (the Put Notice) no later
than five (5) days prior to the Takeover Transaction
Closing Date indicated in the Companys notice;
provided that, if any of the financial or other material
terms of the Takeover Transaction is amended after the delivery
of the Put Notice or if the Takeover Transaction Closing Date is
expected to be delayed by more than three (3) days, then
the Company shall promptly notify Purchaser of such amendment or
delay and take such other actions as would permit Purchaser to
amend or withdraw the Put Notice prior to the Takeover
Transaction Closing Date. The Put Notice shall set forth the
number of Common Shares to be sold pursuant to the Put Right and
the wire instructions for the payment of the Per Share Purchase
Price.
B-14
(c) If Purchaser has delivered, and has not subsequently
withdrawn, a Put Notice pursuant to Section 9.1(b), upon
and subject to the consummation of the Takeover Transaction, the
Company shall be obligated to pay to Purchaser the Put Purchase
Price for the Common Shares subject to the Put Notice, which
payment shall be made no later than the third (3rd) business day
following the Takeover Transaction Closing Date, in exchange for
delivery by Purchaser of such Common Shares (or certificates
formerly representing such Common Shares).
(d) The Company acknowledges that the agreements contained
in this Section 9.1 are an integral part of the
transactions contemplated in this Agreement, and that, without
these agreements, Purchaser would not enter into this Agreement;
accordingly, if the Company (or its successor) fails to promptly
tender the Put Purchase Price in cash or other immediately
available funds, and in order to obtain such payment Purchaser
commences a suit which results in a judgment against the Company
for payment of the Put Purchase Price, the Company (or its
successor) shall pay to Purchaser its costs and expenses
(including attorneys fees) in connection with such suit,
together with interest on the Put Purchase Price at a rate of
twelve percent (12%) per annum.
ARTICLE 10
Miscellaneous
10.1 Definitions. Capitalized terms
used but not otherwise defined herein, shall have the respective
meanings provided such terms in the Merger Agreement.
10.2 Governing Law. This Agreement
shall be governed in all respects by and construed in accordance
with the laws of the State of Delaware without any regard to
conflicts of laws principles.
10.3 Survival. The representations,
warranties, covenants and agreements made in this Agreement
shall survive any investigation made by the Company or Purchaser
and the Closing.
10.4 Successors and
Assigns. Neither party hereto may assign this
Agreement or any of its rights or obligations hereunder without
the written consent of the other party, except that Purchaser
may assign, in its sole and absolute discretion, any or all of
its rights, interests and obligations hereunder to any wholly
owned Subsidiary of Purchaser. Subject to the foregoing, the
provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement.
10.5 Entire Agreement, Amendment and
Waiver. This Agreement constitutes the full and
entire understanding and agreement between the parties with
regard to the subject hereof, and may be amended or waived only
with the written consent of the parties hereto.
10.6 Specific Performance. The
parties hereto hereby declare that it is impossible to measure
in money the damages which will accrue to a party hereto or to
its successors or assigns by reason of a failure to perform any
of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any
party hereto or its successors or assigns institutes any action
or proceeding to specifically enforce the provisions of this
Agreement, any party against whom such action or proceeding is
brought hereby waives the claim or defense therein that such
party or such successor or assign has an adequate remedy at law,
and such party shall not offer in any such action or proceeding
the claim or defense that such remedy at law exists.
10.7 Notices, Etc. All notices and
other communications required or permitted under this Agreement
shall be in writing and may be delivered in person, by telecopy,
overnight delivery service or registered or certified United
States mail, addressed to the Company or Purchaser, as the case
may be, at their respective addresses set forth on the signature
page hereto, or at such other address as the Company or
Purchaser shall have furnished to the other party in writing.
All notices and other communications shall be effective upon the
earlier of actual receipt thereof by the person to whom notice
is directed or (a) in the case of notices and
communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the
applicable address or was successfully sent to the applicable
telecopy number, (b) in the case of notices and
communications sent by overnight delivery service, at noon
(local time) on the second business
B-15
day following the day such notice or communication was sent, and
(c) in the case of notices and communications sent by
United States mail, seven days after such notice or
communication shall have been deposited in the United States
mail.
10.8 Severability of this
Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or
impaired thereby.
10.9 Counterparts. This Agreement
may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute
one instrument.
10.10 Jurisdiction. Except as
otherwise expressly provided in this Agreement, the parties
hereto agree that any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of
or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in the state court located
within New Castle County, State of Delaware (or, in the case of
any claim to which the federal courts have exclusive subject
matter jurisdiction, the federal court sitting in the State of
Delaware) and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court.
Without limiting the foregoing, each party agrees that service
of process on such party as provided in Section 10.7 shall
be deemed effective service of process on such party.
10.11 Waiver of Jury Trial. EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
10.12 Publicity. Except as
disclosure may be required by SEC rules and regulations, no
party hereto shall issue any press release or otherwise make any
public statement with respect to the transactions contemplated
by this Agreement without the prior consent of the other parties
as to the form and substance of such press release or statement
(which consent shall not be unreasonably withheld or delayed).
10.13 Further Assurances. Each
party to this Agreement shall do and perform or cause to be done
and performed all such further acts and things and shall execute
and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request
in order to carry out the intent and accomplish the purposes of
this Agreement and the consummation of the transactions
contemplated hereby.
B-16
The foregoing agreement is hereby executed as of the date first
above written.
Solexa,
Inc., a Delaware corporation
Name: John West
Title: Chief Executive Officer
Address:
Illumina,
Inc., a Delaware corporation
Name: Jay T. Flatley
Title: President, Chief Executive Officer
Address:
Taxpayer ID
Number: 33-0804655
B-17
ANNEX C
[LETTERHEAD
OF MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED]
November 12, 2006
Board of Directors
Illumina, Inc.
9885 Towne Centre Drive
San Diego, CA 92121
Members of the Board of Directors:
Solexa, Inc. (the Company), Illumina, Inc. (the
Acquiror) and Callisto Acquisition Corp., a newly
formed, wholly owned subsidiary of the Acquiror (the
Acquisition Sub), propose to enter into that certain
Agreement and Plan of Merger, dated as of November 12, 2006
(the Agreement), pursuant to which the Acquisition
Sub will be merged with and into the Company in a transaction
(the Merger) in which each outstanding share of the
Companys common stock, par value $0.01 per share (the
Company Shares), other than Company Shares held by
the Company or any subsidiary of the Company or owned by the
Acquiror or any subsidiary of the Acquiror, will be converted
into the right to receive a fraction of a share of the common
stock of the Acquiror, par value $0.01 per share (the
Acquiror Shares), whose numerator is equal to $14.00
and whose denominator is equal to the
20-Day
Parent VWAP Price (as defined in the Agreement) (the
Exchange Ratio). The Agreement also provides that
(i) if the
20-Day
Parent VWAP Price is equal to or greater than $47.30, the
Exchange Ratio will be deemed to be 0.296, and (ii) if the
20-Day
Parent VWAP Price is equal to or less than $40.70, the Exchange
Ratio will be deemed to be 0.344.
You have asked us whether, in our opinion, the Exchange Ratio is
fair from a financial point of view to the Acquiror.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly available business and
financial information relating to the Company and the Acquiror
that we deemed to be relevant;
(2) Reviewed certain information, including financial
forecasts, relating to the business, earnings, cash flow,
assets, liabilities and prospects of the Company and the
Acquiror, as well as the amount and timing of the cost savings
and related expenses and synergies expected to result from the
Merger (the Expected Synergies) furnished to us by
the Company and the Acquiror, respectively;
(3) Conducted discussions with members of senior management
and representatives of the Company and the Acquiror concerning
the matters described in clauses 1 and 2 above, as well as
their respective businesses and prospects before and after
giving effect to the Merger and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for
the Company Shares and the Acquiror Shares and compared them
with those of certain publicly traded companies that we deemed
to be relevant;
(5) Reviewed the results of operations of the Company and
the Acquiror;
(6) Participated in certain discussions and negotiations
among representatives of the Company and the Acquiror and their
financial and legal advisors;
(7) Reviewed the potential pro forma impact of the Merger;
(8) Reviewed the Agreement;
(10) Reviewed such other financial studies and analyses and
took into account such other matters as we deemed necessary,
including our assessment of general economic, market and
monetary conditions.
C-1
In preparing our opinion, we have assumed and relied on the
accuracy and completeness of all information supplied or
otherwise made available to us, discussed with or reviewed by or
for us, or publicly available, and we have not assumed any
responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the
assets or liabilities of the Company or the Acquiror or been
furnished with any such evaluation or appraisal, nor have we
evaluated the solvency or fair value of the Company or the
Acquiror under any state or federal laws relating to bankruptcy,
insolvency or similar matters. In addition, we have not assumed
any obligation to conduct any physical inspection of the
properties or facilities of the Company or the Acquiror. With
respect to the financial forecast information and the Expected
Synergies furnished to or discussed with us by the Company or
the Acquiror, we have assumed that they have been reasonably
prepared and reflect the best currently available estimates and
judgment of the Companys or the Acquirors management
as to the expected future financial performance of the Company
or the Acquiror, as the case may be, and the Expected Synergies.
We have further assumed that the Merger will qualify as a
tax-free reorganization for U.S. federal income tax
purposes.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the
information made available to us as of, the date hereof. We have
assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for
the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed
that will have a material adverse effect on the contemplated
benefits of the Merger. We express no opinion with respect to
the transactions contemplated by the Securities Purchase
Agreement dated as of November 12, 2006, by and between
Acquiror and the Company.
We are acting as financial advisor to the Acquiror in connection
with the Merger and will receive a fee from the Acquiror for our
services, a significant portion of which is contingent upon the
consummation of the Merger. We will also receive a fee from the
Acquiror for providing this opinion, which will be credited
against the fee for financial advisory services. This opinion
fee is not contingent upon the consummation of the Merger. In
addition, the Acquiror has agreed to indemnify us for certain
liabilities arising out of our engagement. We have, in the past,
provided financial advisory and financing services to the
Acquiror
and/or its
affiliates and may continue to do so and have received, and may
receive, fees for the rendering of such services, including
acting as an underwriter in the May 2006 follow-on public
offering of the Acquirors common stock. In addition, in
the ordinary course of our business, we may actively trade the
Company Shares and other securities of the Company, as well as
the Acquiror Shares and other securities of the Acquiror, for
our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of
Directors of the Acquiror. Our opinion does not address the
merits of the underlying decision by the Acquiror to engage in
the Merger and does not constitute a recommendation to any
shareholder of the Acquiror as to how such shareholder should
vote on the proposed Merger or any matter related thereto. In
addition, you have not asked us to address, and this opinion
does not address, the fairness to, or any other consideration
of, the holders of any class of securities, creditors or other
constituencies of the Acquiror. We are not expressing any
opinion herein as to the prices at which the Company Shares or
the Acquiror Shares will trade following the announcement or
consummation of the Merger.
On the basis of and subject to the foregoing, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair
from a financial point of view to the Acquiror.
Very truly yours,
/s/ Merrill
Lynch, Pierce, Fenner & Smith Incorporated
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
C-2
ANNEX D
[LETTERHEAD
OF LAZARD FRÈRES & CO. LLC]
November 12, 2006
The Board of Directors
Solexa, Inc.
Corporate Headquarters
25861 Industrial Boulevard
Hayward, California 94545
Dear Members of the Board:
We understand that Solexa, Inc., a Delaware corporation (the
Company), Illumina, Inc., a Delaware corporation
(Illumina), and Callisto Acquisition Corp., a
Delaware corporation (Acquisition Sub), have entered
into an Agreement and Plan of Merger (the Merger
Agreement), dated as of November 12, 2006, pursuant
to which, among other things, Acquisition Sub will be merged
with and into the Company, and the Company will be the surviving
corporation and a wholly-owned subsidiary of Illumina (the
Merger). Pursuant to the terms of the Merger
Agreement, each share of common stock of the Company, par value
$0.01 per share (the Company Common Stock),
issued and outstanding immediately prior to the effective time
of the Merger, other than shares of Company Common Stock owned
by the Company or its subsidiaries or Illumina or its
subsidiaries, will be converted into the right to receive a
number of shares of common stock of Illumina, par value
$0.01 per share (the Illumina Common Stock),
equal to the Exchange Ratio. As defined in the Merger Agreement,
the Exchange Ratio means (i) if the
20-Day
Parent VWAP Price is equal to or greater than $47.30, then the
Exchange Ratio shall equal 0.296; (ii) if the
20-Day
Parent VWAP Price is between $40.70 and $47.30, then the
Exchange Ratio shall be equal to a fraction (A) whose
numerator is equal to $14.00 and (B) whose denominator is
equal to the
20-Day
Parent VWAP Price; or (iii) if the
20-Day
Parent VWAP Price is equal to or less than $40.70, then the
Exchange Ratio shall equal 0.344. As defined in the Merger
Agreement,
20-Day
Parent VWAP Price means the volume weighted average
trading price of Illumina Common Stock as measured during ten
(10) dates randomly selected (at a meeting at which one
(1) representative selected by Illumina and one
(1) representative selected by the Company alternately
select a date by blind draw until ten (10) dates are drawn)
from the twenty (20) consecutive trading days ending five
(5) trading days prior to the Closing Date (as defined in
the Merger Agreement). Pursuant to the Merger Agreement, shares
of Company Common Stock owned by the Company or its subsidiaries
or Illumina or its subsidiaries immediately prior to the
effective time of the Merger will be cancelled and no payment
will be made with respect thereto. We also understand that
Illumina will purchase $50 million of Company Common Stock
pursuant to a Securities Purchase Agreement dated as of
November 12, 2006 (the Securities Purchase
Agreement).
You have requested our opinion as to the fairness as of the date
hereof, from a financial point of view, to the Company
Stockholders of the Exchange Ratio to be paid in the Merger to
such Company Stockholders. For purposes of this opinion, the
term Company Stockholders means the holders of
Company Common Stock other than the Company and its subsidiaries
and Illumina and its subsidiaries. In connection with this
opinion, we have:
(i) Reviewed the financial terms and conditions of the
Merger Agreement and the Securities Purchase Agreement;
(ii) Analyzed certain historical publicly available
business and financial information relating to the Company and
Illumina;
(iii) Reviewed various financial forecasts and other data
provided to us by the management of the Company relating to the
business of the Company; which included three sets of forecasts,
one of which is
D-1
not probability weighed, one of which is probability weighted at
75% and one of which is probability weighted at 90%;
(iv) Reviewed various financial forecasts and other data
provided to us by the management of Illumina relating to the
business of Illumina, which included two alternative sets of
forecasts, which we refer to as Illumina Case A and
Illumina Case B, which differ in that Illumina Case
A includes forecasts of growth in market share and revenue for
certain products that are not included in Illumina Case B;
(v) Held discussions with members of the senior management
of the Company and Illumina with respect to the business,
prospects and strategic objectives of the Company and Illumina,
respectively, and held discussions with the senior management of
the Company and Illumina with respect to the possible benefits
that might be realized following the Merger as projected by the
Company and Illumina;
(vi) Reviewed the synergistic savings and benefits and the
timing of their occurrence as projected by the Company to be
realized by the Company as part of the combined entity in
connection with the Merger and by Illumina to be realized by
Illumina as part of the combined entity in connection with the
Merger;
(vii) Reviewed public information with respect to certain
other companies in lines of business we believe to be generally
comparable to the business of the Company and Illumina;
(viii) Reviewed the financial terms of certain business
combinations involving companies in lines of businesses we
believe to be generally comparable to those of the Company and
Illumina;
(ix) Reviewed the historical trading prices and trading
volumes of the Company Common Stock and the Illumina Common
Stock; and
(x) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the
foregoing information. We have not assumed any responsibility
for any independent verification of such information or any
independent valuation or appraisal of any of the assets or
liabilities of the Company or Illumina, or concerning the
solvency or fair value of the Company or Illumina. With respect
to financial forecasts, including the synergistic savings and
benefits projected by Illumina and the Company to be realized
following the Merger and the timing thereof, we have assumed
that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of management
of each of the Company and Illumina as to the future financial
performance of each respective company and as to the performance
of the combined company following the Merger. Based on direction
from the management of the Company, and with the approval of the
Board of Directors of the Company, in rendering our opinion:
(i) for purposes of our analyses of the Company on a
stand-alone basis, we used the financial forecasts prepared by
management of the Company that are probability weighted at 75%
and (ii) for purposes of our analyses of the Company and
Illumina as a combined company on a pro forma basis, used
financial forecasts prepared by management of the Company that
are probability weighted at 90%. Based on direction from the
management of the Company and guidance of management of
Illumina, and with the approval of the Board of Directors of the
Company, in rendering our opinion, we relied on financial
forecasts for Illumina which are the average of the
Illumina Case A and Illumina Case B
forecasts prepared by management of Illumina. We assume no
responsibility for and express no view as to any such forecasts
or the assumptions on which they are based. We note that the
financial forecasts of Illuminas management do not take
into account the possible impact of certain intellectual
property litigation between Illumina and Affymetrix, Inc.
currently scheduled to go to trial in March 2007, and we do not
express any opinion on the impact such litigation may have on
the financial results, financial condition or share price of
Illumina, or of the combined company after the Merger. We
further note that our opinion is not based on any comparable
precedent transaction or comparable company analyses, because we
do not believe that that such analyses are meaningful with
respect to the Company, Illumina or the Merger because the
Company has nominal revenues and negative net income, and is
projected by its management to grow in the future at a
significantly higher rate than other companies in its industry
and because Illumina is currently growing and
D-2
projected by its management to continue to grow at a
significantly higher rate than other companies in its industry.
Further, our opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information
made available to us as of, the date hereof. We assume no
responsibility for updating or revising our opinion based on
circumstances or events occurring after the date hereof. We do
not express any opinion as to the price at which the Company
Common Stock or the Illumina Common Stock may trade at any time
subsequent to the announcement of the Merger, nor are we opining
on any aspect of the Securities Purchase Agreement or the
transactions contemplated thereby. We do not express any opinion
as to any tax or other consequences that might result from the
Merger, nor does our opinion address any legal, tax, regulatory
or accounting matters, as to which we understand that the
Company obtained such advice as it deemed necessary from
qualified professionals. In rendering our opinion, we were not
authorized to solicit, and did not solicit, third parties
regarding alternatives to the Merger.
In rendering our opinion, we have assumed that the Merger will
be consummated on the terms described in the Merger Agreement,
without any waiver of any material terms or conditions by the
Company. We have assumed that the executed Merger Agreement and
Securities Purchase Agreement will each conform in all material
respects to the drafts reviewed by us. In addition, we have
assumed that obtaining the necessary regulatory approvals for
the Merger will not have an adverse effect on the Company,
Illumina or the Merger and that the synergistic savings and
benefits of the Merger will be substantially realized both in
scope and timing. In addition, we have assumed that (i) the
Merger will be accounted for as a tax-free
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and
(ii) the number of outstanding shares of Company Common
Stock and Illumina common stock will not be materially different
than as represented in the Merger Agreement and (iii) the
other representations and warranties of the Company contained in
the Merger Agreement are true and complete.
Lazard Frères & Co. LLC (Lazard) is
acting as investment banker to the Company in connection with
the Merger and will receive a fee for its services upon the
consummation of the Merger. In addition, in the ordinary course
of their respective businesses, affiliates of Lazard and LFCM
Holdings LLC (an entity indirectly owned in large part by
managing directors of Lazard) may actively trade securities of
the Company or Illumina for their own accounts and for the
accounts of their customers and, accordingly, may at any time
hold a long or short position in such securities.
Our engagement and the opinion expressed herein are for the
benefit of the Companys Board of Directors, and our
opinion is rendered to the Companys Board of Directors in
connection with its consideration of the Merger. Our opinion
does not address the merits of the underlying decision by the
Company to engage in the Merger and its not intended to and does
not constitute a recommendation to any holder of the Company
Common Stock as to how such holder should vote with respect to
the Merger or any matter relating thereto. It is understood that
this letter may not be disclosed or otherwise referred to
without our prior consent, except as may otherwise be required
by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Exchange Ratio to be paid to
the Company Stockholders in the Merger is fair to such Company
Stockholders from a financial point of view.
Very truly yours,
LAZARD FRÈRES & CO. LLC
David Low
Managing Director
D-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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Item 20.
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Indemnification
of Directors and Officers.
|
Illuminas corrected amended and restated certificate of
incorporation includes provisions that eliminate, to the fullest
extent permitted by the Delaware General Corporation Law (the
DGCL), the personal liability of Illumina directors
to Illumina and its stockholders for monetary damages for breach
of fiduciary duty as a director. Illuminas corrected
amended and restated certificate of incorporation and bylaws
also require Illumina to indemnify its directors and officers to
the fullest extent permitted by the DGCL. Pursuant to these
provisions, Illumina has entered into indemnity agreements with
each of its directors and certain of its officers.
Pursuant to Section 145 of the DGCL, a corporation
generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses
incurred by them in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving
in such positions so long as they acted in good faith and in a
manner that they reasonably believed to be in, or not opposed
to, the best interests of the corporation and, with respect to
any criminal action, had no reasonable cause to believe their
conduct was unlawful.
These provisions do not eliminate the duty of care, and in
appropriate circumstances equitable remedies such as injunctive
or other forms of non-monetary relief may remain available under
Delaware law. Each director will continue to be subject to
liability for breach of the directors duty of loyalty to
Illumina or its stockholders, for acts or omissions not in good
faith or involving intentional misconduct or knowing violations
of law, for unlawful payments of dividends or unlawful stock
repurchases or redemptions under Section 174 of the DGCL or
for any transaction from which the director derived an improper
personal benefit. These provisions also generally do not affect
a directors responsibilities under any other laws, such as
the federal securities laws.
Illuminas bylaws also expressly permit Illumina to
purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of Illumina, or is
or was serving at the request of Illumina as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any
such capacity, or arising out of his or her status as such,
whether or not Illumina would have the power to indemnify him or
her against such liability under the DGCL. Pursuant to this
provision, Illumina has acquired director and officer insurance
policies that cover its directors and executive officers.
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Item 21.
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Exhibits
and Financial Statement Schedules.
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|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
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Agreement and Plan of Merger,
dated as of November 12, 2006, by and among Illumina, Inc.,
Callisto Acquisition Corp. and Solexa, Inc. (included as
Annex A to the joint proxy statement/ prospectus and
incorporated herein by reference)
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|
3
|
.1
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Amended and Restated Certificate
of Incorporation of Illumina, Inc. (incorporated herein by
reference to Exhibit 3.1 to the registrants Annual
Report on
Form 10-K
for the year ended December 31, 2000 filed with the SEC on
March 29, 2001)
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3
|
.2
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By-laws of Illumina, Inc.
(incorporated herein by reference to Exhibit 3.2 to the
registrants Current Report on
Form 8-K
filed with the SEC on October 31, 2006)
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5
|
.1
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Form of opinion of Christian G.
Cabou, Esq. (re: legalities of securities being registered)*
|
|
8
|
.1
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|
Form of opinion of Dewey
Ballantine LLP (re: tax matters)*
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|
8
|
.2
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Form of opinion of Cooley Godward
Kronish LLP (re: tax matters)*
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10
|
.1
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Securities Purchase Agreement,
dated as of November 12, 2006, by and between Illumina,
Inc. and Solexa, Inc. (included as Annex B to the joint
proxy statement/ prospectus and incorporated herein by
reference)
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II-1
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|
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|
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Exhibit
|
|
|
Number
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|
Description
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|
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21
|
.1
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Subsidiaries of Illumina, Inc.
(incorporated herein by reference to Exhibit 21.1 to the
registrants Annual Report on
Form 10-K
for the year ended January 1, 2006 filed with the SEC on
March 6, 2006)
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23
|
.1
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|
Consent of Ernst & Young
LLP (San Diego, California), Independent Registered Public
Accounting Firm, with respect to Illumina, Inc.
|
|
23
|
.2
|
|
Consent of Ernst & Young
LLP (Palo Alto, California), Independent Registered Public
Accounting Firm, with respect to Solexa, Inc.
|
|
23
|
.3
|
|
Consent of Ernst & Young
LLP (Cambridge, England), Independent Registered Public
Accounting Firm, with respect to Solexa, Inc.
|
|
23
|
.4
|
|
Consent of Christian G.
Cabou, Esq. (included in Opinion of Christian G.
Cabou, Esq. in Exhibit 5.1)*
|
|
23
|
.5
|
|
Consent of Dewey Ballantine LLP
(included in Opinion of Dewey Ballantine LLP in
Exhibit 8.1)*
|
|
23
|
.6
|
|
Consent of Cooley Godward Kronish
LLP (included in Opinion of Cooley Godward Kronish LLP in
Exhibit 8.2)*
|
|
24
|
.1
|
|
Power of Attorney (included in the
signature page of this registration statement on
Form S-4
and incorporated herein by reference)
|
|
99
|
.1
|
|
Form of Illumina, Inc. Proxy Card*
|
|
99
|
.2
|
|
Form of Solexa, Inc. Proxy Card*
|
|
99
|
.3
|
|
Consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
|
99
|
.4
|
|
Consent of Lazard
Frères & Co. LLC
|
|
|
|
* |
|
To be filed by amendment. |
II-2
a. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
i. To include any prospectus required in
Section 10(a)(3) of the Securities Act of 1933, as amended;
ii. To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) under the Securities Act if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; and
iii. To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
2. That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof;
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
b. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the registrants annual report pursuant to
Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, as amended (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to Section 15(d) of the Exchange Act) that is incorporated
by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
c. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
d. The undersigned registrant hereby undertakes to deliver
or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report
to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the
requirements of
Rule 14a-3
or
Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3
of
Regulation S-X
are not set forth in the prospectus, to deliver, or cause
II-3
to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such
interim financial information.
e. The undersigned registrant hereby undertakes as follows:
That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) under
the Securities Act of 1933, the issuer undertakes that such
reoffering prospectus will contain the information called for by
the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
f. The registrant undertakes that every prospectus
(i) that is filed pursuant to the immediately preceding
paragraph or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to
Rule 415 under the Securities Act of 1933, will be filed as
a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
g. The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or
13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the
request
h. The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Diego,
California.
ILLUMINA, INC.
Name: Jay T. Flatley
|
|
|
|
Title:
|
President and Chief Executive Officer
|
December 4, 2006
POWER OF
ATTORNEY
Each person whose signature appears below constitutes and
appoints Jay T. Flatley and Christian O. Henry, and each of them
acting individually, as his or her
attorney-in-fact,
for him or her in any and all capacities, to sign any amendments
(including post-effective amendments) to this registration
statement and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
each
attorney-in-fact,
or his or her substitute, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
/s/ Jay
T. Flatley
Jay
T. Flatley
|
|
President, Chief Executive Officer
and Director
(Principal Executive Officer)
|
|
December 4, 2006
|
|
|
|
|
|
/s/ Christian
O. Henry
Christian
O. Henry
|
|
Vice President and Chief Financial
Officer
(Principal Financial Officer and Principal Accounting Officer)
|
|
December 4, 2006
|
|
|
|
|
|
/s/ John
R. Stuelpnagel
John
R. Stuelpnagel
|
|
Senior Vice President, Chief
Operating Officer and Director
|
|
December 4, 2006
|
|
|
|
|
|
/s/ William
H. Rastetter
William
H. Rastetter
|
|
Chairman of the Board of Directors
|
|
December 4, 2006
|
|
|
|
|
|
/s/ Daniel
M. Bradbury
Daniel
M. Bradbury
|
|
Director
|
|
December 4, 2006
|
|
|
|
|
|
/s/ Karin
Eastham
Karin
Eastham
|
|
Director
|
|
December 4, 2006
|
|
|
|
|
|
/s/ Jack
Goldstein
Jack
Goldstein
|
|
Director
|
|
December 4, 2006
|
|
|
|
|
|
/s/ Paul
Grint
Paul
Grint
|
|
Director
|
|
December 4, 2006
|
|
|
|
|
|
/s/ David
R. Walt
David
R. Walt
|
|
Director
|
|
December 4, 2006
|
II-5
EXHIBIT
INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger,
dated as of November 12, 2006, by and among Illumina, Inc.,
Callisto Acquisition Corp. and Solexa, Inc. (included as
Annex A to the joint proxy statement/prospectus and
incorporated herein by reference)
|
|
3
|
.1
|
|
Amended and Restated Certificate
of Incorporation of Illumina, Inc. (incorporated herein by
reference to Exhibit 3.1 to the registrants Annual
Report on
Form 10-K
for the year ended December 31, 2000 filed with the SEC on
March 29, 2001)
|
|
3
|
.2
|
|
By-laws of Illumina, Inc.
(incorporated herein by reference to Exhibit 3.2 to the
registrants Current Report on
Form 8-K
filed with the SEC on October 31, 2006)
|
|
5
|
.1
|
|
Form of opinion of Christian G.
Cabou, Esq. (re: legalities of securities being registered)*
|
|
8
|
.1
|
|
Form of opinion of Dewey
Ballantine LLP (re: tax matters)*
|
|
8
|
.2
|
|
Form of opinion of Cooley Godward
Kronish LLP (re: tax matters)*
|
|
10
|
.1
|
|
Securities Purchase Agreement,
dated as of November 12, 2006, by and between Illumina,
Inc. and Solexa, Inc. (included as Annex B to the joint
proxy statement/prospectus and incorporated herein by reference)
|
|
21
|
.1
|
|
Subsidiaries of Illumina, Inc.
(incorporated herein by reference to Exhibit 21.1 to the
registrants Annual Report on
Form 10-K
for the year ended January 1, 2006 filed with the SEC on
March 6, 2006)
|
|
23
|
.1
|
|
Consent of Ernst & Young
LLP (San Diego, California), Independent Registered Public
Accounting Firm, with respect to Illumina, Inc.
|
|
23
|
.2
|
|
Consent of Ernst & Young
LLP (Palo Alto, California), Independent Registered Public
Accounting Firm, with respect to Solexa, Inc.
|
|
23
|
.3
|
|
Consent of Ernst & Young
LLP (Cambridge, England), Independent Registered Public
Accounting Firm, with respect to Solexa, Inc.
|
|
23
|
.4
|
|
Consent of Christian G.
Cabou, Esq. (included in Opinion of Christian G.
Cabou, Esq. in Exhibit 5.1)*
|
|
23
|
.5
|
|
Consent of Dewey Ballantine LLP
(included in Opinion of Dewey Ballantine LLP in
Exhibit 8.1)*
|
|
23
|
.6
|
|
Consent of Cooley Godward Kronish
LLP (included in Opinion of Cooley Godward Kronish LLP in
Exhibit 8.2)*
|
|
24
|
.1
|
|
Power of Attorney (included in the
signature page of this registration statement on
Form S-4
and incorporated herein by reference)
|
|
99
|
.1
|
|
Form of Illumina, Inc. Proxy Card*
|
|
99
|
.2
|
|
Form of Solexa, Inc. Proxy Card*
|
|
99
|
.3
|
|
Consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
|
|
99
|
.4
|
|
Consent of Lazard
Frères & Co. LLC
|
|
|
|
* |
|
To be filed by amendment. |