Agreement and Plan of Merger

AGREEMENT AND PLAN OF MERGER


Among


RHONE-POULENC S.A.


RP VEHICLE, INC.


and


RHONE-POULENC RORER INC.


Dated as of August 19, 1997


================================================================================


TABLE OF CONTENTS


ARTICLE I


THE OFFER


Page SECTION 1.01. The Offer............................................... 2 SECTION 1.02. Company Action.......................................... 3


ARTICLE II


THE MERGER


SECTION 2.01. The Merger.............................................. 4 SECTION 2.02. Effective Time; Closing................................. 4 SECTION 2.03. Effect of the Merger.................................... 5 SECTION 2.04. Articles of Incorporation; By-laws...................... 5 SECTION 2.05. Directors and Officers.................................. 5 SECTION 2.06. Conversion of Securities................................ 6 SECTION 2.07. Options and Warrants.................................... 6 SECTION 2.08. Dissenting Shares....................................... 7 SECTION 2.09. Surrender of Shares; Stock Transfer Books............... 7 SECTION 2.10. Withholding Rights...................................... 8


ARTICLE III


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


SECTION 3.01. Organization and Qualification; Subsidiaries............ 9 SECTION 3.02. Articles of Incorporation and Bylaws.................... 9 SECTION 3.03. Capitalization.......................................... 10 SECTION 3.04. Authority Relative to this Agreement.................... 10 SECTION 3.05. No Conflict; Required Filings and Consents.............. 10 SECTION 3.06. Compliance.............................................. 11 SECTION 3.07. SEC Filings; Financial Statements....................... 12 SECTION 3.08. Offer Documents; Schedule 14D-9; Schedule 13E-3; Proxy
Statement............................................... 13 SECTION 3.09. Brokers................................................. 13


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ARTICLE IV


REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Page SECTION 4.01. Corporation Organization................................ 14 SECTION 4.02. Authority Relative to this Agreement.................... 14 SECTION 4.03. No Conflict; Required Filings and Consents.............. 14 SECTION 4.04. Offer Documents; Proxy Statement........................ 15 SECTION 4.05. Brokers................................................. 15 SECTION 4.06. Ownership of Merger Subsidiary; No Prior Activities..... 15 SECTION 4.07. Financing............................................... 16


ARTICLE V


COVENANTS


SECTION 5.01. Conduct of the Business Pending the Merger.............. 16 SECTION 5.02. Shareholders' Meeting; Voting of Shares................. 17 SECTION 5.03. Proxy Statement......................................... 17 SECTION 5.04. Access to Information; Confidentially................... 17 SECTION 5.05. Directors' and Officers' Indemnification and Insurance.. 18 SECTION 5.06. Notification of Certain Matters......................... 19 SECTION 5.07. Further Action; Reasonable Best Efforts................. 20 SECTION 5.08. Public Announcements.................................... 20 SECTION 5.09. Termination of Agreements............................... 20 SECTION 5.10. Financing............................................... 20


ARTICLE VI


COVENANTS


SECTION 6.01. Conditions to the Merger................................ 20


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ARTICLE VII


TERMINATION, AMENDMENT AND WAIVER
Page SECTION 7.01. Termination............................................. 21 SECTION 7.02. Effect of Termination................................... 22 SECTION 7.03. Amendment............................................... 23 SECTION 7.04. Waiver.................................................. 23


ARTICLE VIII


GENERAL PROVISIONS


SECTION 8.01. Non-Survival of Representations, Warranties and
Agreement............................................... 23 SECTION 8.02. Notices................................................. 23 SECTION 8.03. Certain Definitions..................................... 24 SECTION 8.04. Severability............................................ 25 SECTION 8.05. Entire Agreement; Assignment............................ 26 SECTION 8.06. Parties in Interest..................................... 26 SECTION 8.07. Specific Performance.................................... 26 SECTION 8.08. Fees and Expenses....................................... 26 SECTION 8.09. Governing Law........................................... 26 SECTION 8.10. Headings................................................ 26 SECTION 8.11. Counterparts............................................ 27 SECTION 8.12. Consent to Jurisdiction: Appointment of Agent for
Service of Process...................................... 27


Annex A: Conditions to the Offer


Glossary of Defined Terms
(Not Part of this Agreement)
---------------------------- Defined Term Location of Definition - ------------ ----------------------


Acquisition Agreement................................. Recitals affiliate............................................. (S)8.03(a) Agent................................................. (S)8.12 Agreement............................................. Preamble beneficial owner...................................... (S)8.03(b) Blue Sky Laws......................................... (S)3.05(b) Board................................................. Recitals business day.......................................... (S)8.03(c) Certificates.......................................... (S)2.09(b) Code.................................................. (S)2.10 Company............................................... Preamble Company Preferred Stock............................... (S)3.03 control............................................... (S)8.03(d) Dissenting Shares..................................... (S)2.08(a) Effective Time........................................ (S)2.02 Exchange Act.......................................... (S)1.02(b) Exercise Amount....................................... (S)2.07(a) Goldman, Sachs........................................ Recitals Governmental Entity................................... (S)3.05(b) Indemnified Parties................................... (S)5.05(b) Law................................................... (S)3.05(a) Material Adverse Effect............................... (S)3.01 Merger ............................................... Recitals Merger Consideration.................................. (S)2.06(a) Merger Documents...................................... (S)2.02 Merger Subsidiary..................................... Preamble Minimum Condition..................................... (S)1.01(a) Money Market Preferred Stock.......................... (S)3.03 Offer................................................. Recitals Offer Documents....................................... (S)1.01(b) Offer to Purchase..................................... (S)1.01(b) Option................................................ (S)2.07(a) Parent................................................ Preamble Parent Shares......................................... Recitals Paying Agent.......................................... (S)2.09(a) Pennsylvania Law...................................... Recitals


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Defined Term Location of Definition - ------------ ----------------------


Per Share Amount...................................... Recitals person................................................ (S)8.03(e) Proxy Statement....................................... (S)3.08 Schedule 14D-1........................................ (S)1.01(b) Schedule 14D-9........................................ (S)1.02(b) Schedule 13E-3........................................ (S)1.01(b) SEC................................................... (S)1.01(b) SEC Reports........................................... (S)3.07(a) Securities Act........................................ (S)3.07(a) Shareholders' Meeting................................. (S)5.02 Shares................................................ Recitals Special Committee..................................... Recitals Special Committee Approval............................ Recitals Subsidiary............................................ (S)3.01 subsidiary............................................ (S)8.03(f) Surviving Corporation................................. (S)2.01 Transactions.......................................... (S)1.01(b)


AGREEMENT AND PLAN OF MERGER, dated as of August 19, 1997 (this "Agreement"), among RHONE-POULENC S.A., a French societe anonyme (hereinafter --------- "Parent"), RP VEHICLE, INC., a Pennsylvania corporation and a direct wholly ------ owned subsidiary of Parent ("Merger Subsidiary"), and RHONE-POULENC RORER INC.,
----------------- a Pennsylvania corporation (the "Company").
-------


WHEREAS, Parent beneficially owns approximately 68.1% (the "Parent Shares")
------------- of the Common Shares (without par value) stated value $1 per share of the Company ("Shares");
------


WHEREAS, Parent and the Company have entered into an Acquisition Agreement, dated as of March 12, 1990 (the "Acquisition Agreement"), pursuant to which
--------------------- Parent acquired a substantial portion of the Parent Shares and pursuant to which Parent agreed to certain restrictions on subsequent acquisitions of Shares;


WHEREAS, Parent has proposed that it acquire all of the issued and outstanding Shares not owned by Parent;


WHEREAS, the Board of Directors of the Company (the "Board") and a special
----- committee comprised of the Independent Directors (as defined in the Acquisition Agreement) of the Board (the "Special Committee") have determined that it is in
----------------- the best interests of the Company to approve Parent's proposed acquisition and have voted (i) to recommend that the shareholders of the Company accept the Offer (as defined below) and tender their Shares pursuant to the Offer and (ii) to approve the merger (the "Merger") of Merger Subsidiary with and into the
------ Company, with the Company being the surviving corporation, in accordance with the Pennsylvania Business Corporation Law of 1988 ("Pennsylvania Law") following
---------------- consummation of the Offer;


WHEREAS, it is proposed that Parent will make a cash tender offer (the
"Offer") in compliance with (i) Section 14(d)(1) of the Exchange Act (as defined - ------ below) and the rules and regulations promulgated thereunder and (ii) the terms of Section 7.6 of the Acquisition Agreement, to acquire all the issued and outstanding Shares for $97.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "Per
--- Share Amount") net to the seller in cash, upon the terms and subject to the - ------------ conditions of this Agreement; and that the Offer will be followed by the Merger, pursuant to which each issued and outstanding Share not owned by Parent will be converted into the right to receive the Per Share Amount, upon the terms and subject to the conditions provided herein; and


WHEREAS, the Special Committee has received the opinion of Goldman, Sachs & Co. ("Goldman, Sachs") that the consideration to be received by the holders of
-------------- Shares (other than Parent and its subsidiaries) pursuant to the Offer and the Merger is fair to such holders;


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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Subsidiary and the Company hereby agree as follows:


ARTICLE I


THE OFFER
---------


SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have
--------- been terminated in accordance with Section 7.01, Parent shall commence within the meaning of Rule 14d-2 under the Exchange Act (as hereinafter defined) the Offer as promptly as practicable after the date hereof, but in no event later than five business days after the initial public announcement of Parent's intention to commence the Offer. Parent shall not accept for payment any Shares tendered pursuant to the Offer unless there shall have been validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares which, when taken together with the Parent Shares, constitutes at least 90% of the then issued and outstanding Shares (the "Minimum Condition"). Parent shall, on the
----------------- terms and subject to the conditions of the Offer (including the Minimum Condition), accept for payment and pay for Shares tendered as soon as practicable after the date which is the later of (x) October 1, 1997 and (y) the date on which it legally may do so. The obligation of Parent to accept for payment and pay for Shares tendered pursuant to the Offer shall be further subject to the satisfaction of the conditions set forth in Annex A hereto. Parent expressly reserves the right to increase the Per Share Amount. Without the prior written consent of the Special Committee, Parent will not (i) decrease the Per Share Amount, (ii) change the number of Shares to be purchased in the Offer, (iii) change the form of the consideration payable in the Offer, (iv) amend or add to the conditions to the Offer set forth in Annex A hereto; or (v) make any other change in the terms or conditions of the Offer which is materially adverse to the holders of Shares. Under no circumstances shall Parent waive the Minimum Condition. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer (including, without limitation, the Minimum Condition), Parent shall pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn.


(b) As soon as reasonably practicable on the date of commencement of the Offer, Parent shall file with the Securities and Exchange Commission (the "SEC")
--- (i) a Tender Offer Statement on Schedule 14D-1, including the exhibits thereto (together with all amendments and supplements thereto, the "Schedule 14D-1"),
-------------- including the exhibits thereto with respect to the Offer and (ii) a Rule 13e-3 Transaction Statement on Schedule 13E-3, including the exhibits thereto (together with all amendments and supplements thereto, the


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"Schedule 13E-3") with respect to the Offer and the other transactions -------------- contemplated hereby (the "Transactions"). The Schedule 14D-1 and the Schedule
------------ 13E-3 shall contain or shall incorporate by reference an offer to purchase (the "Offer to Purchase") and forms of the related letter of transmittal and any ----------------- related summary advertisement (the Schedule 14D-1, the Schedule 13E-3, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Offer
----- Documents"). Parent, Merger Subsidiary and the Company agree to correct promptly - --------- any information provided by any of them for use in the Offer Documents which shall have become false or misleading, and Parent and Merger Subsidiary further agree to take all steps necessary to cause the Schedule 14D-1 and the Schedule 13E-3 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable Law (as defined hereinafter). The Company, the Special Committee and their respective counsel shall be given the opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC. Parent and Merger Subsidiary shall provide the Company, the Special Committee and their respective counsel with a copy of any written comments or telephonic notification of any oral comments Parent or Merger Subsidiary may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof. Parent and its counsel shall provide the Company and the Special Committee and their respective counsel with a reasonable opportunity to participate in all communications with the SEC and its staff, including any meetings and telephone conferences, relating to the Transactions or this Agreement.


SECTION 1.02. Company Action. (a) The Company hereby approves of and
-------------- consents to the Offer and represents that (i) the Special Committee and the Board at meetings duly called and held on August 19, 1997, have each, by unanimous vote of all directors present and voting, (A) determined that this Agreement and the Transactions, including each of the Offer and the Merger, are fair to and in the best interests of the Company, (B) approved this Agreement and the Transactions and (C) resolved to recommend that the shareholders of the Company accept the Offer and tender their Shares pursuant to the Offer and approve and adopt this Agreement and the Transactions; provided that such
-------- recommendation may be withdrawn, modified or amended to the extent the Board or the Special Committee deems it necessary to do so in the exercise of its fiduciary duties, as advised by independent counsel, and (ii) Goldman, Sachs has delivered to the Special Committee a written opinion that the consideration to be received by the holders of Shares (other than Parent and its subsidiaries) pursuant to the Offer and the Merger is fair to the holders of Shares. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Special Committee and the Board described in the immediately preceding sentence.


(b) As soon as reasonably practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on


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Schedule 14D-9, including all exhibits thereto (together with all amendments and supplements thereto, the "Schedule 14D-9"), containing the recommendations of
-------------- the Special Committee and the Board described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
------------ any other applicable federal securities laws. The Company, Parent and Merger Subsidiary agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given the opportunity to review and comment on the Schedule 14D-9 and any amendments thereto prior to the filing thereof with the SEC. The Company shall provide Parent and its counsel with a copy of any written comments or telephonic notification of any oral comments the Company may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt thereof. The Company and its counsel shall provide Parent and its counsel with a reasonable opportunity to participate in all communications with the SEC and its staff, including any meetings and telephone conferences, relating to the Transactions or this Agreement.


(c) In connection with the Transactions, the Company (i) shall promptly furnish Parent with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of Shares and (ii) shall furnish Parent with such additional information, including, without limitation, updated listings and computer files of shareholders, mailing labels and security position listings, and such other assistance as Parent, Merger Subsidiary or their agents may reasonably request in connection with the Offer and the Merger.


ARTICLE II


THE MERGER
----------


SECTION 2.01. The Merger. Upon the terms and subject to the conditions
---------- set forth in this Agreement, and in accordance with Pennsylvania Law, at the Effective Time Merger Subsidiary shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Subsidiary shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation").
---------------------


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SECTION 2.02. Effective Time; Closing. As promptly as practicable after
----------------------- the satisfaction or, if permissible, waiver of the conditions set forth in Article VI, the parties hereto shall cause the Merger to be consummated by delivering to the Secretary of the


Commonwealth of Pennsylvania the articles of merger and any clearance certificates required by Section 139 of Pennsylvania Law, each in such form or forms as may be required by, and executed and acknowledged in accordance with, the relevant provisions of Pennsylvania Law (such documents being referred to collectively as the "Merger Documents"), and shall make all other filings and
---------------- recordings required by Pennsylvania Law in connection with the Merger. The Merger shall become effective at the time of filing of the appropriate Merger Documents with the Secretary of the Commonwealth of Pennsylvania, or at such later time, which shall be as soon as reasonably practicable, specified as the effective time in the Merger Documents (the "Effective Time"). Prior to such
-------------- filing, a closing shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York USA 10022, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VI.


SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of
-------------------- the Merger shall be as provided in the applicable provisions of Pennsylvania Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Merger Subsidiary shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.


SECTION 2.04. Articles of Incorporation; By-laws. (a) The Articles of
---------------------------------- Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation following the Effective Time until thereafter amended as provided by Pennsylvania Law.


(b) The By-laws of the Company, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation following the Effective Time until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such By-laws.


SECTION 2.05. Directors and Officers. (a) The directors of Merger
---------------------- Subsidiary immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and By-laws of the Surviving Corporation.


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(b) The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified.


SECTION 2.06. Conversion of Securities. At the Effective Time, by virtue
------------------------ of the Merger and without any action on the part of Merger Subsidiary, the Company or the holders ...