<PAGE>
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D*
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 10)
----------------
RHONE-POULENC RORER INC.
(NAME OF SUBJECT COMPANY)
----------------
RHONE-POULENC S.A.
(BIDDER)
----------------
COMMON STOCK, WITHOUT PAR VALUE
(TITLE OF CLASS OF SECURITIES)
----------------
76242T 10 4
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
YVES BRISSY
RHONE-POULENC S.A.
25, QUAI PAUL DOUMER
92408 COURBEVOIE CEDEX, FRANCE
011-331-47-68-12-34
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDER)
----------------
WITH COPIES TO:
HUBERTUS V. SULKOWSKI, ESQ. CREIGHTON O'M. CONDON, ESQ.
SHEARMAN & STERLING SHEARMAN & STERLING
114, AVENUE DES CHAMPS-ELYSEES 599 LEXINGTON AVENUE
75008 PARIS, FRANCE NEW YORK, NEW YORK
011-331-53-89-70-00 (212) 848-4000
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE*
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<S> <C>
$4,846,433,601.00 $969,286.72
</TABLE>
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* Calculated by multiplying $97, the per share tender offer price, by
49,963,233 the sum of the number of shares of Common Stock sought in the
Offer and the 4,439,111 shares of Common Stock subject to options vested as
of July 31, 1997.
[_Check]box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: _____________ Filing Party: _______________________
Form or Registration No.: ___________ Date Filed: _________________________
- -------------------------------------------------------------------------------
* This Statement also constitutes Amendment No. 10 to the Statement on
Schedule 13D of Rhone-Poulenc S.A. with respect to the Common Stock, without
par value, of Rhone-Poulenc Rorer Inc. which may be deemed to be
beneficially owned by Rhone-Poulenc S.A.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CUSIP NO. 76242T 10 4
1NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF PERSON
Rhone-Poulenc S.A.
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2CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(See Instructions) (b) [_]
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3
SEC USE ONLY
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4SOURCE OF FUNDS (See Instructions)
WC, BK
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5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [_]
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f)
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6
CITIZENSHIP OR PLACE OF ORGANIZATION
France
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7
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
97,163,370 shares of common stock
- --------------------------------------------------------------------------------
8CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES (See Instructions) [_]
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9
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 68.1%, according to the Company's
records as of July 31, 1997.
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10
TYPE OF REPORTING PERSON (See Instructions)
CO
2
<PAGE>
This Tender Offer Statement on Schedule 14D-1 and Amendment No. 9 to the
Statement on Schedule 13D (this "Statement") filed by Rhone-Poulenc S.A., a
societe anonyme organized under the laws of the Republic of France
("Purchaser") relates to the offer by Purchaser to purchase all of the issued
and outstanding shares (the "Shares") of common stock, without par value, of
Rhone-Poulenc Rorer Inc., a Pennsylvania corporation, at a price of $97 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated August 22, 1997 (the "Offer to
Purchase") and in the related Letter of Transmittal (which together constitute
the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Rhone-Poulenc Rorer Inc., a
Pennsylvania corporation (the "Company"), which has its principal executive
offices at 500 Arcola Road, Collegeville, Pennsylvania, 19426-0107.
(b) The exact title of the class of equity securities being sought is shares
of Common Stock, without par value, of the Company. The Company has advised
Purchaser that, as of July 31, 1997, there were 142,687,492 Shares issued and
outstanding. The information set forth under "INTRODUCTION" and "THE TENDER
OFFER--Section 1. Terms of the Offer; Expiration Date" of the Offer to
Purchase is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in "THE TENDER OFFER--Section 6. Price Range of Shares" of
the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser. The information
concerning the name, state or other place of organization, principal business
and address of the principal office of Purchaser, and the information
concerning the name, business address, present principal occupation or
employment and the name, principal business and address of any corporation or
other organization in which such employment or occupation is conducted,
material occupations, positions, offices or employments during the last five
years and citizenship of each of the executive officers and directors of
Purchaser is set forth under "INTRODUCTION", "THE TENDER OFFER--Section 8.
Certain Information Concerning Purchaser" and Schedule I of the Offer to
Purchase and is incorporated herein by reference.
(e) and (f) During the last five years, neither Purchaser, nor, to the best
knowledge of Purchaser, any of the persons listed in Schedule I of the Offer
to Purchase has been (i) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal
or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth under "SPECIAL FACTORS--Background of the
Offer", "SPECIAL FACTORS--The Merger Agreement", "SPECIAL FACTORS--Related
Party Transactions" and "THE TENDER OFFER--Section 8. Certain Information
Concerning Purchaser" in the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth under "INTRODUCTION", "SPECIAL FACTORS--
Background of the Offer", "SPECIAL FACTORS--Purpose and Structure of the Offer
and the Merger; Reasons of Purchaser for the Offer and the Merger", "SPECIAL
FACTORS--Plans for the Company After the Offer and the Merger; Certain Effects
of the Offer", "SPECIAL FACTORS--The Merger Agreement", "THE TENDER OFFER--
Section 7. Certain Information Concerning the Company" and "THE TENDER OFFER--
Section 8. Certain Information Concerning Purchaser" of the Offer to Purchase
is incorporated herein by reference.
3
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth under "THE TENDER OFFER--Section 9.
Financing of the Offer and the Merger" of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth under "INTRODUCTION", "SPECIAL FACTORS--
Background of the Offer and the Merger", "SPECIAL FACTORS--Purpose and
Structure of the Offer and the Merger; Reasons of Purchaser for the Offer and
the Merger", "SPECIAL FACTORS--Plans for the Company After the Offer and the
Merger; Certain Effects of the Offer" and "SPECIAL FACTORS--The Merger
Agreement" of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth under "SPECIAL FACTORS--Plans for the
Company After the Offer and the Merger; Certain Effects of the Offer" and "THE
TENDER OFFER--Section 11. Effect of the Offer on the Market for the Shares;
the NYSE, the Paris Bourse and Exchange Act Registration" of the Offer to
Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth under "SPECIAL FACTORS--Beneficial
Ownership of Common Stock" and "THE TENDER OFFER--Section 8. Certain
Information Concerning Purchaser" of the Offer to Purchase is incorporated
herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth under "INTRODUCTION", "SPECIAL FACTORS--Background
of the Offer and the Merger", "SPECIAL FACTORS--Purpose and Structure of the
Offer and the Merger; Reasons of Purchaser for the Offer and the Merger",
"SPECIAL FACTORS--Plans for the Company After the Offer and the Merger;
Certain Effects of the Offer", "SPECIAL FACTORS--The Merger Agreement" and
"THE TENDER OFFER--Section 8. Certain Information Concerning Purchaser" of the
Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "INTRODUCTION", "SPECIAL FACTORS--Opinion of
Goldman, Sachs & Co." and "THE TENDER OFFER--Section 14. Fees and Expenses" of
the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Purchaser's Consolidated Financial Statements and related Notes thereto
included in Purchaser's Form 20-F for the fiscal year ended December 31, 1996
and the information set forth under "THE TENDER OFFER--Section 8. Certain
Information Concerning Purchaser" and Schedule VI of the Offer to Purchase are
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) and (e) The information set forth under "THE TENDER OFFER--Section 13.
Certain Legal Matters and Regulatory Approvals" of the Offer to Purchase is
incorporated herein by reference.
4
<PAGE>
(d) The information set forth under "THE TENDER OFFER--Section 11. Effect of
the Offer on the Market for the Shares, the NYSE, the Paris Bourse and
Exchange Act Registration" of the Offer to Purchase is incorporated herein by
reference.
(e) The information set forth under "THE TENDER OFFER--Section 13. Certain
Legal Matters and Regulatory Approvals" of the Offer to Purchase is
incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and Letter of
Transmittal and the Agreement and Plan of Merger, dated as of August 19, 1997
between Purchaser, the Merger Subsidiary (as defined in the Offer to Purchase)
and the Company, copies of which are attached hereto as Exhibits (a)(1),
(a)(2) and (c)(3), is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated August 22, 1997.
(a)(2) Form of Letter of Transmittal sent to holders of Shares.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Morgan Stanley & Co. Incorporated and UBS
Securities LLC to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on
August 22, 1997.
(a)(8) Press Release issued by Purchaser on August 19, 1997.
(a)(9) English translation of French-language Communique published in Les
Echos and La Tribune on August 22, 1997.
(b)(1) Summary of Terms and Conditions (FF 2,500,000 Short Term Credit
Facility) dated August 6, 1997 between Purchaser and *.
(b)(2) Summary of Terms and Conditions (FF 2,000,000,000 Short Term Credit
Facility) dated August 1, 1997 between Purchaser and *.
(b)(3) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit
Loan Facility) dated August 6, 1997 between Purchaser and *.
(b)(4) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit
Facility) dated August 1, 1997 between Purchaser and *.
(b)(5) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit
Facility) dated August 4, 1997 between Purchaser and *.
(b)(6) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit
Facility) dated August 1, 1997 between Purchaser and *.
(b)(7) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit
Facility) dated August 5, 1997 between Purchaser and *.
(b)(8) Summary of Terms and Conditions (FF 750,000,000 Revolving Credit
Facility) dated August 1, 1997 between Purchaser and *.
5
<PAGE>
(b)(9) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated July 31, 1997 between Purchaser and *.
(b)(10) Summary of Terms and Conditions (USD 80,000,000 Five Year Bilateral
Credit Facility) dated July 23, 1997 between Purchaser and *.
(b)(11) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated August 5, 1997 between Purchaser and *.
(b)(12) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit
Facility) dated August 4, 1997 between Purchaser and *.
(b)(13) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated August 4, 1997 between Purchaser and *.
(b)(14) Summary of Terms and Conditions (USD 150,000,000 Revolving Credit
Facility) dated August 7, 1997 between Purchaser and *.
(b)(15) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated August 7, 1997 between Purchaser and *.
(b)(16) Summary of Terms and Conditions (FF 4,000,000,000 Short Term Credit
Facility) dated August 8, 1997 between Purchaser and *.
(b)(17) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit
Facility) undated between Purchaser and *.
(b)(18) Summary of Terms and Conditions (USD 850,000,000 Bridge Loan
Facility) dated August 8, 1997 between Purchaser and *.
(c)(1) Form of Stock Option Agreement.
(c)(2) Acquisition Agreement, dated as of March 12, 1990 between Purchaser
and Rorer Group Inc., predecessor in interest to the Company (incorporated
herein by reference to the registration statement on Form F-4 of the Purchaser
(Registration Number 33-35645)).
(c)(3) Agreement and Plan of Merger, dated as of August 19, 1997 among
Purchaser, the Merger Subsidiary and the Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Complaint filed in Brickell v. Rhone-Poulenc S.A. (Supreme Court of
the State of New York, County of New York, filed July 9, 1997).
(g)(2) Complaint filed in Steiner v. Rhone-Poulenc S.A. (United States
District Court for the Eastern District of Pennsylvania, filed July 15, 1997).
(g)(3) Complaint filed in Krim v. Rhone-Poulenc S.A. et al. (New Jersey
Superior Court, Mercer County, filed July 15, 1997).
(g)(4) Complaint filed in Simon v. Robert E. Cawthorn, et al. (Pennsylvania
Court of Common Pleas, Trial Division, Montgomery County, filed July 31,
1997).
(g)(5) Motion to Dismiss Complaint filed in Brickell v. Rhone-Poulenc S.A.
(Supreme Court of the State of New York, County of New York, filed August 11,
1997).
(g)(6) Motion to Dismiss Complaint filed in Steiner v. Rhone-Poulenc S.A.
(United States District Court for the Eastern District of Pennsylvania, filed
August 6, 1997).
- --------
* Request for Confidential Treatment Filed by Purchaser on August 22, 1997.
6
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
August 22, 1997
RHONE-POULENC S.A.
By:
/s/ Jean-Rene Fourtou
----------------------------------
Name: Jean-Rene Fourtou
Title: Chairman and Chief
Executive Officer
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
(a)(1) Form of Offer to Purchase dated August 22, 1997.
(a)(2) Form of Letter of Transmittal sent to holders of Shares.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Morgan Stanley & Co. Incorporated and UBS
Securities LLC to Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on
August 22, 1997.
(a)(8) Press Release issued by Purchaser on August 19, 1997.
(a)(9) English translation of French-language Communique published in Les
Echos and La Tribune on August 22, 1997.
(b)(1) Summary of Terms and Conditions (FF 2,500,000 Short Term Credit
Facility) dated August 6, 1997 between Purchaser and *.
(b)(2) Summary of Terms and Conditions (FF 2,000,000,000 Short Term Credit
Facility) dated August 1, 1997 between Purchaser and *.
(b)(3) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit
Loan Facility) dated August 6, 1997 between Purchaser and *.
(b)(4) Summary of Terms and Conditions (FF 1,500,000,000 Revolving Credit
Facility) dated August 1, 1997 between Purchaser and *.
(b)(5) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit
Facility) dated August 4, 1997 between Purchaser and *.
(b)(6) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit
Facility) dated August 1, 1997 between Purchaser and *.
(b)(7) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit
Facility) dated August 5, 1997 between Purchaser and *.
(b)(8) Summary of Terms and Conditions (FF 750,000,000 Revolving Credit
Facility) dated August 1, 1997 between Purchaser and *.
(b)(9) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated July 31, 1997 between Purchaser and *.
(b)(10) Summary of Terms and Conditions (USD 80,000,000 Five Year Bilateral
Credit Facility) dated July 23, 1997 between Purchaser and *.
(b)(11) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated August 5, 1997 between Purchaser and *.
(b)(12) Summary of Terms and Conditions (FF 1,000,000,000 Revolving Credit
Facility) dated August 4, 1997 between Purchaser and *.
(b)(13) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated August 4, 1997 between Purchaser and *.
(b)(14) Summary of Terms and Conditions (USD 150,000,000 Revolving Credit
Facility) dated August 7, 1997 between Purchaser and *.
(b)(15) Summary of Terms and Conditions (FF 500,000,000 Revolving Credit
Facility) dated August 7, 1997 between Purchaser and *.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
(b)(16) Summary of Terms and Conditions (FF 4,000,000,000 Short Term Credit
Facility) dated August 8, 1997 between Purchaser and *.
(b)(17) Summary of Terms and Conditions (FF 2,000,000,000 Revolving Credit
Facility) undated between Purchaser and *.
(b)(18) Summary of Terms and Conditions (USD 850,000,000 Bridge Loan Facility)
dated August 8, 1997 between Purchaser and *.
(c)(1) Form of Stock Option Agreement.
(c)(2) Acquisition Agreement, dated as of March 12, 1990 between Purchaser
and Rorer Group Inc., predecessor in interest to the Company
(incorporated herein by reference to the registration statement on
Form F-4 of the Purchaser (Registration Number 33-35645)).
(c)(3) Agreement and Plan of Merger, dated as of August 19, 1997 between
Purchaser, the Merger Subsidiary and the Company.
(g)(1) Complaint filed in Brickell v. Rhone-Poulenc S.A. (Supreme Court of
the State of New York, County of New York, filed July 9, 1997).
(g)(2) Complaint filed in Steiner v. Rhone-Poulenc S.A. (United States
District Court for the Eastern District of Pennsylvania, filed July
15, 1997).
(g)(3) Complaint filed in Krim v. Rhone-Poulenc S.A. et. al. (New Jersey
Superior Court, Mercer County, filed July 15, 1997).
(g)(4) Complaint filed in Simon v. Robert E. Cawthorn, et al. (Pennsylvania
Court of Common Pleas, Trial Division, Montgomery County, filed July
31, 1997).
(g)(5) Motion to Dismiss Complaint filed in Brickell v. Rhone-Poulenc S.A.
(Supreme Court of the State of New York, County of New York, filed
August 11, 1997).
(g)(6) Motion to Dismiss Complaint filed in Steiner v. Rhone-Poulenc S.A.
(United States District Court for the Eastern District of
Pennsylvania, filed August 6, 1997).
</TABLE>
- --------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
Exhibit (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Rhone-Poulenc Rorer Inc.
at
$97 Net Per Share
by
Rhone-Poulenc S.A.
---------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
---------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH
NUMBER OF THE THEN ISSUED AND OUTSTANDING SHARES OF COMMON STOCK,
WITHOUT PAR VALUE PER SHARE (THE "SHARES") OF RHONE-POULENC RORER INC.
(THE "COMPANY"), OTHER THAN SHARES (THE "PURCHASER SHARES") OWNED BY
RHONE-POULENC S.A. ("PURCHASER"), WHICH, WHEN TAKEN TOGETHER WITH
THE PURCHASER SHARES, CONSTITUTES AT LEAST 90% OF THE THEN
ISSUED AND OUTSTANDING SHARES (THE "MINIMUM CONDITION"). SEE
"THE TENDER OFFER--SECTION 12. CERTAIN CONDITIONS TO THE
OFFER".
---------------
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF ALL DIRECTORS
PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS
RECOMMENDATION AND APPROVAL OF A COMMITTEE OF THE BOARD OF DIRECTORS
COMPRISED OF THE INDEPENDENT DIRECTORS (AS DEFINED HEREIN), HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED
HEREIN) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY,
AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares in the United States should either (1) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal and mail or deliver it together with the
certificate(s) evidencing tendered Shares, and any other required documents,
to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") (at the
Depositary's address set forth on the back cover of this Offer to Purchase) or
tender such Shares pursuant to the procedure for book-entry transfer set forth
in "THE TENDER OFFER--Section 3. Procedures for Accepting the Offer and
Tendering Shares" or (2) request such shareholder's broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for such
shareholder.
Any shareholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply
with the procedure for book-entry transfer on a timely basis, may tender such
Shares by following the procedure for guaranteed delivery set forth in "THE
TENDER OFFER--Section 3. Procedures for Accepting the Offer and Tendering
Shares".
Questions or requests for assistance may be directed to Georgeson & Company
Inc. (the "Information Agent"), Morgan Stanley & Co. Incorporated (the "Dealer
Manager") or UBS Securities LLC (the "Co-Dealer Manager") at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust
companies.
---------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
---------------
The Dealer Managers for the Offer are:
MORGAN STANLEY DEAN WITTER UBS SECURITIES
August 22, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.......................................................................... 1
Note to Holders of Shares Desiring to Tender in the United States................... 3
Note to Holders of Shares in France................................................. 3
Note aux Actionnaires en France..................................................... 3
SPECIAL FACTORS....................................................................... 5
Background of the Offer............................................................. 5
Recommendation of the Company Board; Fairness of the Offer and the Merger........... 10
Recommendation of the Special Committee and the Company Board..................... 10
Fairness of the Offer and the Merger.............................................. 10
Opinion of Goldman, Sachs & Co. .................................................... 12
Company Budget Information and Financial Projections................................ 17
Cautionary Statement Concerning Forward-Looking Statements.......................... 19
Position of Purchaser Regarding Fairness of the Offer and the Merger................ 19
Purpose and Structure of the Offer and the Merger; Reasons of Purchaser for the
Offer and the Merger............................................................. 20
Plans for the Company After the Offer and the Merger; Certain Effects of the Offer.. 21
Rights of Shareholders in the Offer and the Merger.................................. 21
Filing Notice of Intention to Demand Fair Value..................................... 22
Record Owners and Beneficial Owners................................................. 22
Notice to Demand Payment............................................................ 22
Payment of Fair Value of Shares..................................................... 23
Estimate by Dissenter of Fair Value of Shares....................................... 23
Valuation Proceedings............................................................... 23
Costs and Expenses of Valuation Proceedings......................................... 23
Other............................................................................... 24
The Merger Agreement................................................................ 24
Interests of Certain Persons in the Offer and the Merger............................ 28
Beneficial Ownership of Common Stock................................................ 29
Related Party Transactions.......................................................... 31
</TABLE>
<TABLE>
<C> <S> <C>
THE TENDER OFFER.......................................................... 33
1. Terms of the Offer; Expiration Date............................... 33
2. Acceptance for Payment and Payment for Shares..................... 34
3. Procedures for Accepting the Offer and Tendering Shares........... 35
4. Withdrawal Rights................................................. 37
5. Certain U.S. Federal and French Income Tax Consequences........... 38
6. Price Range of Shares; Dividends.................................. 39
7. Certain Information Concerning the Company........................ 39
8. Certain Information Concerning Purchaser and the Merger
Subsidiary....................................................... 42
9. Financing of the Offer and the Merger............................. 43
10. Dividends and Distributions....................................... 44
11. Effect of the Offer on the Market for the Shares; the NYSE, the
Paris Bourse and Exchange Act Registration....................... 44
12. Certain Conditions of the Offer................................... 45
13. Certain Legal Matters and Regulatory Approvals.................... 46
14. Fees and Expenses................................................. 49
15. Miscellaneous..................................................... 50
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
SCHEDULE I. Directors and Executive Officers of Purchaser and the
Merger Subsidiary....................................... I-1
SCHEDULE II. Opinion of Goldman, Sachs & Co........................... II-1
SCHEDULE III. Sections 1930(a) and 1571-80 (Subchapter of Chapter 15)
of the Pennsylvania Business Corporation Law............ III-1
SCHEDULE IV. Audited Financial Statements (and Related Notes) for the
Company for the Years Ended December 31, 1995 and
December 31, 1996....................................... IV-1
SCHEDULE V. Unaudited Financial Statements (and Related Notes) for
the Company for the Three-Month and Six-Month Periods
Ended June 30, 1997..................................... V-1
SCHEDULE VI. Summary Financial Statements for Purchaser for the Years
Ended December 31, 1995 and December 31, 1996........... VI-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
Rhone-Poulenc Rorer Inc.
INTRODUCTION
Rhone-Poulenc S.A., a societe anonyme organized under the laws of the
Republic of France ("Purchaser"), hereby offers to purchase all issued and
outstanding shares (the "Shares") of common stock, without par value per share
(the "Common Stock"), of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation
(the "Company"), at a price of $97 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which together constitute the
"Offer"). Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses
of Morgan Stanley & Co. Incorporated ("Morgan Stanley") and UBS Securities LLC
("UBS"), which are acting as the Dealer Manager and the Co-Dealer Manager,
respectively, for the Offer (together, in such capacities, the "Dealer
Managers"), ChaseMellon Shareholder Services, L.L.C. (the "Depositary"),
Societe Generale (the "French Depositary") and Georgeson & Company Inc. (the
"Information Agent") incurred in connection with the Offer. See "THE TENDER
OFFER--Section 14. Fees and Expenses".
Purchaser currently owns 97,163,370 Shares (the "Purchaser Shares"),
constituting approximately 68.1% of the currently issued and outstanding
Shares. The purpose of the Offer is to facilitate the acquisition of all of
the remaining Shares for cash and thereby enable Purchaser to acquire 100% of
the Common Stock of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BY UNANIMOUS
VOTE OF ALL DIRECTORS PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE
UNANIMOUS RECOMMENDATION AND APPROVAL OF A COMMITTEE OF THE BOARD OF DIRECTORS
(THE "SPECIAL COMMITTEE") COMPRISED OF INDEPENDENT DIRECTORS (AS DEFINED
HEREIN) HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND
IN THE BEST INTERESTS OF, THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Company has advised Purchaser that Goldman, Sachs & Co. ("Goldman
Sachs") has delivered to the Board its written opinion that the $97 per Share
in cash to be received by the shareholders of the Company other than Purchaser
and its subsidiaries in the Offer and the Merger (as defined below) is fair to
such holders. See "SPECIAL FACTORS--Opinion of Goldman, Sachs & Co." for
further information concerning the opinion of Goldman Sachs.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to shareholders herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
THE THEN ISSUED AND OUTSTANDING SHARES, OTHER THAN THE PURCHASER SHARES,
WHICH, WHEN TAKEN TOGETHER WITH THE PURCHASER SHARES, CONSTITUTES AT LEAST 90%
OF THE THEN ISSUED AND OUTSTANDING SHARES (THE "MINIMUM CONDITION"). SEE "THE
TENDER OFFER--SECTION 12. CERTAIN CONDITIONS TO THE OFFER", WHICH SETS FORTH
IN FULL THE CONDITIONS TO THE OFFER.
The Company has advised Purchaser that, as of July 31, 1997, there were
142,687,492 Shares (including 5,169,412 Shares held by the Company's Employee
Benefits Trust) issued and outstanding and 10,410 Shares
<PAGE>
held in the treasury of the Company. Employee stock options ("Employee
Options") exercisable for 6,723,603 Shares were outstanding pursuant to the
Company's stock option plan as of July 31, 1997, 4,439,111 of which were
vested as of July 31, 1997. As of July 31, 1997, 1,750 shares of Money Market
Preferred Stock, without par value (liquidation preference $100,000 per share)
of the Company were issued and outstanding. According to Company's records, as
of August 13, 1997, there were approximately 7,054 holders of record of the
issued and outstanding Shares. Purchaser beneficially owns 97,163,370 Shares,
91,669,462 of which were acquired in two transactions completed in July 1990
(taking into account a two-for-one split of the Shares that was effected on
June 7, 1991) and the remainder of which were acquired in subsequent open
market and privately negotiated transactions (see "SPECIAL FACTORS--Background
of the Offer"). Assuming all such vested Employee Options are exercised, the
Minimum Condition would be satisfied if 35,250,573 Shares were validly
tendered in the Offer and not withdrawn.
On March 12, 1990, the Company and Purchaser entered into an Acquisition
Agreement (the "Acquisition Agreement") pursuant to which the Purchaser
acquired approximately 68.68% of the outstanding Shares. Approximately 50.1%
of such Shares were acquired in a cash tender offer at a price which
represented a premium of approximately 58.4% to the pre-announcement price of
the Shares, with the remaining Shares acquired in consideration for the
contribution to the Company of Purchaser's human pharmaceutical business and
certain other consideration.
The Acquisition Agreement prohibited the Purchaser from owning more than
68.68% of the issued and outstanding Shares prior to July 31, 1997. At any
time after July 31, 1997, Purchaser is permitted to increase its ownership of
Shares above 75% of the issued and outstanding Shares, but only pursuant to a
Qualifying Tender Offer (as defined below). As discussed more fully below,
except with respect to the minimum offering period being reduced from 30
business days to 28 business days with the agreement of the Special Committee,
the Offer is a Qualifying Tender Offer under the Acquisition Agreement. The
Minimum Condition satisfies one of the requirements for a Qualifying Tender
Offer, and ensures that in order for the Offer to be successful, approximately
two-thirds of the Shares not owned by Purchaser must be tendered into the
Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 19, 1997 (the "Merger Agreement"), among Purchaser, RP Vehicle,
Inc., a Pennsylvania corporation specifically organized for the purpose of
effecting the Merger and a direct, wholly owned subsidiary of Purchaser (the
"Merger Subsidiary"), and the Company. The Merger Agreement provides that,
among other things, as soon as practicable after the purchase of Shares
pursuant to the Offer and the satisfaction of the other conditions set forth
in the Merger Agreement, in accordance with the requirements of a Qualifying
Tender Offer and the relevant provisions of the Pennsylvania Business
Corporation Law of 1988 ("PBCL"), the Merger Subsidiary will be merged with
and into the Company (the "Merger"), with the Company as the surviving
corporation. At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time held by
shareholders other than Purchaser or any direct or indirect subsidiary of
Purchaser shall be cancelled and shall be converted automatically into the
right to receive $97 in cash, or any higher price that may be paid per Share
pursuant to the Offer, without interest (the "Merger Consideration"), subject
to dissenters rights. Shares held in the treasury of the Company or owned by
Purchaser or any direct or indirect wholly owned subsidiary of Purchaser or
the Company will remain issued and outstanding. The Merger Agreement is more
fully described in "SPECIAL FACTORS--The Merger Agreement". Shareholders who
fully comply with the statutory dissenters procedures set forth in the PBCL,
the relevant portions of which are attached to this Offer to Purchase as
Schedule III, will be entitled to receive, in connection with the Merger, cash
for the fair value of their Shares as determined pursuant to the procedures
prescribed by the PBCL. NO DISSENTERS RIGHTS ARE AVAILABLE IN CONNECTION WITH
THE OFFER. SEE "SPECIAL FACTORS--RIGHTS OF SHAREHOLDERS IN THE MERGER".
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger
Agreement by the requisite vote of the shareholders of the Company. See
"SPECIAL FACTORS--The Merger Agreement". Under the Company's Articles of
Incorporation and the PBCL, the affirmative vote of a majority of the
outstanding Shares is required to approve and adopt the Merger Agreement and
the Merger. Consequently, Purchaser currently has sufficient voting power to
approve and adopt the Merger Agreement and the Merger without the vote of any
other shareholder.
2
<PAGE>
NOTE TO HOLDERS OF SHARES DESIRING TO TENDER IN THE UNITED STATES
This Offer to Purchase and the accompanying documents contain information
required to be disclosed by the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange Act"),
including financial information regarding the Company and Purchaser, a
description of the terms, conditions and background of the Offer, and the
procedures for tendering Shares for purchase.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
NOTE TO HOLDERS OF SHARES IN FRANCE
Any holder of Shares through SICOVAM, the French clearing system, desiring
to tender its Shares in France should refer to the Communique dated as of the
date hereof, published in the August 22, 1997 issues of Les Echos and La
Tribune and the avis published by the Societe des Bourses Francaises on August
22, 1997. Copies of the Communique, as well as the Offer to Purchase and
accompanying documents, are available at the offices of: Rhone-Poulenc S.A.,
25, quai Paul Doumer, 92408 Courbevoie Cedex, France; Morgan Stanley S.A., 25,
rue Balzac, 75008 Paris, France; Union de Banques Suisses S.A., 69 Boulevard
Haussmann, 75008 Paris, France; or the French depositary, Societe Generale,
Tour Societe Generale, 17, Cours Valmy, 92972 Paris-La Defense, France. These
documents can also be obtained, free of charge, from the institution holding
each shareholder's Shares in France. An English translation of the Communique
is also being filed with this Offer and is available through the Commission.
U.S. HOLDERS ARE EXCLUDED FROM TENDERING THEIR SHARES IN FRANCE. ALL HOLDERS
TENDERING IN FRANCE SHOULD READ THE COMMUNIQUE IN ITS ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO SUCH TENDERING.
Due to centralization and settlement delays in France, any holder desiring
to tender its Shares in France will have to send instructions to its financial
intermediary no later than September 25, 1997, unless the Offer is extended.
Any withdrawal with respect to Shares tendered in France will have to be made,
unless the Offer is extended, no later than September 25, 1997. Following such
date, unless the Offer is extended, holders tendering Shares in France will
not have withdrawal rights. Any shareholder may, at all times through the
Expiration Date, tender Shares in the United States. French holders who desire
to tender their Shares in the United States are urged to contact the
Information Agent. As an accommodation to holders tendering their Shares in
France, consideration for such Shares is payable, at the holder's election, in
United States Dollars or the equivalent amount in French Francs converted at
the average weighted rate used by Societe Generale the day after the
expiration of the Offer in the United States to convert funds deposited with
it.
NOTE AUX ACTIONNAIRES EN FRANCE
Les actionnaires dont les actions sont admises en SICOVAM et qui souhaitent
apporter leurs actions a l'Offre en France devront se referer au Communique en
date de la presente Offre, publie dans l'edition du 22 Aout 1997 des Echos et
de La Tribune et a l'avis de la Societe de Bourses Francaises publie le 22
Aout 1997. Le Communique, ainsi que l'Offer to Purchase et les documents qui
l'accompagnent sont tenus a la disposition des actionnaires aux adresses
suivantes: Rhone-Poulenc S.A., 25, quai Paul Doumer, 92408 Courbevoie Cedex,
France; Morgan Stanley S.A., 25, rue Balzac, 75008 Paris, France; Union de
Banques Suisses S.A., 69 boulevard Haussmann, 75008 Paris, France; ou Societe
Generale, Tour Societe Generale, 17, cours Valmy, 92972 Paris-La Defense,
France, l'etablissement centralisateur. Ces documents peuvent egalement etre
obtenus, sans frais, aupres des intermediaires financiers teneurs de compte de
chaque actionnaire. Une version en anglais du communique est deposee avec
cette Offre et peut etre obtenue aupres de la Commission. LES DETENTEURS
D'ACTIONS AUX ETATS-UNIS NE PEUVENT PAS APPORTER LEURS ACTIONS A L'OFFRE EN
FRANCE. TOUS LES ACTIONNAIRES APPORTANT LEURS TITRES EN FRANCE SONT INVITES A
LIRE LE COMMUNIQUE DANS SON INTEGRALITE AVANT DE PRENDRE TOUTE DECISION.
En raison des delais de centralisation des ordres et de reglement livraison
en France, les actionnaires qui souhaitent apporter leurs actions a l'offre en
France devront faire parvenir leurs instructions a leur etablissement teneur
de compte au plus tard le 25 Septembre 1997 inclus sauf prorogation. La
revocation de
3
<PAGE>
tous ordres passes en France devra intervenir avant le 25 Septembre 1997
inclus, sauf prorogation, date apres laquelle les actionnaires apportant leurs
titres en France ne pourront plus revoquer leurs ordres. Tous les actionnaires
peuvent apportent leurs titres aux Etats-Unis, a tout moment jusqu'au 1er
Octobre 1997. Les detenteurs d'Actions en France qui desirent apporter leurs
titres aux Etats-Unis sont invites a contacter l'Information Agent. Pour ceux
qui apporteraient leurs titres en France, le reglement du prix de ces titres
peut etre effectue, au choix de l'actionnaire, en dollars U.S. ou en francs
francais, au taux de change moyen pondere auquel la Societe Generale aura
realise la conversion des fonds le lendemain du jour de cloture de l'Offre aux
Etats-Unis.
4
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE OFFER
Pursuant to the Acquisition Agreement, Purchaser acquired, in two
transactions, Shares representing approximately 68.68% of the Company's then
issued and outstanding Shares on a fully diluted basis. First, upon expiration
on May 5, 1990 of its tender offer for Shares, Purchaser purchased Shares
tendered to it representing approximately 50.1% of the then issued and
outstanding Shares on a fully diluted basis. Then, on July 31, 1990, the
Company issued additional Shares to Purchaser in consideration of the
contribution by Purchaser to the Company of its human pharmaceutical business,
the issuance by Purchaser to the Company of certain contingent value rights
(which were subsequently transferred to holders of Shares other than
Purchaser) and certain other transactions.
In accordance with the terms of the Acquisition Agreement, the Company Board
is comprised of seven individuals selected by Purchaser, three executive
officers of the Company and three individuals (Messrs. Frey and Riepe and Dr.
Topol), who are Independent Directors (as defined in the Acquisition
Agreement).
Pursuant to certain standstill provisions set forth in the Acquisition
Agreement, through July 31, 1997 and subject to certain conditions, Purchaser
was prohibited from making purchases of Shares that would increase its
ownership of Shares above 68.68% of the then issued and outstanding Shares. In
compliance with such provisions, Purchaser has from time to time purchased
Shares in order to maintain its ownership interest in the Company at
approximately 68.68%. The Acquisition Agreement provides that after July 31,
1997, Purchaser is permitted to purchase Shares in open market transactions
provided that such purchases do not increase its ownership interest above 75%
of the then issued and outstanding Shares. Nevertheless, Purchaser is
permitted under the Acquisition Agreement to acquire Shares in excess of the
75% limitation provided that it acquires such additional Shares pursuant to a
tender offer meeting the following conditions (a "Qualifying Tender Offer"):
(i) the offer must be conditioned upon there being validly tendered and not
withdrawn prior to the expiration of the offer such number of the then issued
and outstanding Shares, other than the Purchaser Shares, which, when taken
together with the Purchaser Shares, constitutes at least 90% of the then
issued and outstanding Shares; (ii) the offer must be a "tender offer" for
purposes of, and must be made in compliance with, Section 14(d)(1) of the
Exchange Act; (iii) the offer must not be permitted to expire without the
purchase of any Shares pursuant to the offer unless the offer has been open
for a minimum of 30 business days; and (iv) the offer must be proposed to be
followed by a merger between the Company and Purchaser or a subsidiary of
Purchaser in which all Shares (other than Shares beneficially owned by
Purchaser or its subsidiaries) are converted into the right to receive an
amount in cash equal to the amount paid per Share in the offer and in
connection with which it is proposed that the Company shall enter into
agreements with the holders of any options to purchase Shares pursuant to
which such options shall be purchased at a cash price per option equal to the
excess of the amount paid per Share in the offer over the exercise price of
such option.
In the spring of 1997, as part of a long-term strategic planning process,
management of Purchaser began examining restructuring options, including the
possibility of accelerating its transformation into a life sciences company.
One option considered was a potential business combination with the Company.
During this period, management of the Purchaser contacted UBS and Morgan
Stanley to obtain financial advisory services in connection with management's
study of restructuring options for Purchaser's businesses.
On June 25, 1997, the Board of Directors of Purchaser (the "Purchaser
Board") met in Courbevoie, France, at which meeting Mr. Jean-Rene Fourtou,
Chairman and Chief Executive Officer of Purchaser, and Mr. Igor Landau, a
director of Purchaser and Group President supervising the pharmaceuticals
segment, reported on management's study, including the possibility of a
business combination with the Company. At such meeting, the Purchaser Board
agreed with management's decision to proceed with the study. Following the
meeting, Mr. Landau contacted various members of the Company Board to inform
them of the meeting and of Purchaser's forthcoming press release.
5
<PAGE>
On June 26, 1997, Purchaser issued a press release (the "June 26, 1997
Announcement") announcing that, among other things, it was studying a
potential initiative to continue to strengthen its presence in life sciences
and to increase its strategic flexibility by increasing Purchaser's ownership
of the Company from approximately 68.3% to 100% through a business combination
with the Company at $92 per Share, which, if pursued, would be proposed after
the expiration, on July 31, 1997, of the standstill period under the
Acquisition Agreement. The press release reported that, if a business
combination were pursued, part of the financing would be obtained through a
capital increase by Purchaser. The press release also announced that Purchaser
was studying another potential initiative regarding a possible combination of
Purchaser's chemicals and fibers and polymers businesses into a new company
("NewChemco") and a public offering of shares of NewChemco, market conditions
permitting, with Purchaser retaining a substantial majority interest.
On June 26, 1997, the Company issued a press release indicating that it
intended to review the matters described in the June 26, 1997 Announcement
with the Company Board at a regularly scheduled meeting to be held on July 2,
1997.
On July 2, 1997 in Antony, France, during the regularly scheduled meeting of
the Company Board, Mr. Landau advised the Company Board of Purchaser's studies
and, in view thereof, recommended that the Company Board appoint a special
committee of Independent Directors. The Company Board then voted to form the
Special Committee, comprised of Messrs. Frey and Riepe and Dr. Topol, the
three Independent Directors on the Company Board. The Company Board empowered
the Special Committee to use its best efforts to negotiate with Purchaser in
order to secure the best available transaction on terms and conditions which
the Special Committee believes are fair to and in the best interests of the
Company. In addition, the Company Board authorized, among other things, the
Special Committee to retain independent legal counsel and financial advisors
and the Company to enter into an agreement with each of the members of the
Special Committee requiring the Company to indemnify each of them to the
fullest extent permitted by law in connection with his service as a member of
the Special Committee.
Following the Company Board meeting on July 2, 1997, two members of the
legal department and a member of the finance department of the Company were
appointed by the Chairman and Chief Executive Officer of the Company to assist
the Special Committee in the administrative aspects of its function in order
to ensure that it and its advisors had full and open access to all Company
information and personnel (the "Company Representatives"). In addition, the
Special Committee met and determined to retain the law firms of Skadden, Arps,
Slate, Meagher & Flom LLP ("Skadden, Arps"), as special counsel, and Morgan
Lewis & Bockius LLP, as Pennsylvania counsel. The Special Committee also
determined to send requests for proposals to certain investment banking firms
to serve as financial advisor to the Special Committee. The firms were
selected based on their international reputation, expertise in the
pharmaceutical industry and the belief that they had no relationship with
Purchaser or any of its affiliates.
On July 8, 1997, the Special Committee met by telephone conference with its
legal advisors and the Company Representatives. The Special Committee was
briefed on the process and legal implications relating to any proposal to be
received from Purchaser following the expiration of the standstill period
under the Acquisition Agreement as well as their fiduciary responsibilities
under the PBCL. On July 9, 1997, the Special Committee convened with its legal
advisors and the Company Representatives to review the proposals submitted by
the investment banking firms and to select certain of such firms to interview.
On July 16, 1997 and July 17, 1997, members of the Special Committee met
with representatives of the investment banking firms and on July 21, 1997, the
Special Committee retained Goldman Sachs as its financial advisor based on,
among other things, its expertise in the pharmaceutical industry, advisory
experience in similar transactions and the representation that Goldman Sachs
did not have an existing engagement with Purchaser nor would it accept an
assignment from Purchaser during its engagement by the Special Committee.
On July 23, 1997, members of the Special Committee met with Goldman Sachs,
the Company Representatives and Skadden, Arps to discuss, among other things,
due diligence and timing as well as strategy.
6
<PAGE>
On July 25, 1997, Mr. Landau had a telephone discussion with Mr. Riepe,
Chairman of the Special Committee, during which Mr. Riepe noted that the
standstill period under the Acquisition Agreement was nearing completion and
stated that if Purchaser were to make a proposal concerning a transaction
involving the Company, the Special Committee would prefer that such a proposal
be made formally to the Special Committee. Mr. Landau endorsed this approach
but cautioned that any such proposal would be subject to certain timing
constraints imposed by Purchaser's need to arrange financing. Mr. Riepe later
reported the substance of his conversation to the other members of the Special
Committee, Goldman Sachs and Skadden, Arps.
On July 31 and August 1, Mr. Landau had two telephone discussions with Mr.
Riepe. In each of these conversations, Mr. Landau reiterated that, in the
event Purchaser went forward with a transaction involving the Company, it
would be subject to certain timing considerations in connection with
Purchaser's arrangements for financing such a transaction. In particular, the
capital increase described in the June 26 Announcement would be subject to
timing constraints in view of, among other things, expected market conditions
in France. As a result of these timing constraints, Purchaser believed it
would need to reach a decision no later than August 10 as to whether to
proceed. Mr. Landau expressed Purchaser's preference to proceed with a
consensual transaction, but also indicated that Purchaser would consider
commencing a tender offer prior to obtaining the Special Committee's agreement
in order to retain the ability ultimately to close the tender offer on
Purchaser's desired schedule. In such a case Mr. Landau expected that
discussions with the Special Committee would continue. During the July 31,
1997 telephone conversation, Mr. Riepe explained to Mr. Landau that Goldman
Sachs was continuing its due diligence investigation of the Company but was
awaiting management projections in order to complete its valuation analysis of
the Company. Mr. Riepe also stated to Mr. Landau that any proposal made by
Purchaser needed to be fair to the Company and its minority shareholders, and
in order for the Special Committee and Purchaser to agree expeditiously on the
terms and conditions of any transaction it was essential that the per Share
consideration offered by Purchaser exceed $92 per Share. Messrs. Landau and
Riepe agreed that their respective advisors would have access to the same
Company information (including any projections prepared by management) and
would each participate in management due diligence sessions. Messrs. Landau
and Riepe also agreed that their respective financial advisors should discuss
any proposals before taking them up with the principals.
Shortly following these calls, Mr. Riepe updated Goldman Sachs and Skadden,
Arps on his conversations with Mr. Landau, and Goldman Sachs reported on the
progress of its due diligence investigation. Each of the other Special
Committee members was later contacted by Goldman Sachs to be updated on such
earlier conversation.
On August 7, 1997, Mr. Riepe conferred with Goldman Sachs and Skadden, Arps
for the purpose of receiving a status report on Goldman Sachs' due diligence
and general timing considerations.
On August 9, 1997, the August Projections (as defined below) were delivered
by the Company to Goldman Sachs, who in turn forwarded such projections to
Morgan Stanley.
On Monday, August 11, 1997, Messrs. Landau and Riepe conferred by telephone
and agreed that Morgan Stanley would have the opportunity to conduct
management due diligence sessions with Goldman Sachs in attendance during the
week of August 11, 1997. Mr. Landau informed Mr. Riepe that Purchaser believed
that August 18 would be the last possible date on which Purchaser would
consider announcing a tender offer if it determined to proceed. Messrs. Landau
and Riepe then agreed that their respective financial advisors should meet no
later than Thursday, August 14, 1997, to discuss valuation issues. Mr. Landau
repeated Purchaser's preference to commence a tender offer upon terms and
conditions agreed upon with the Special Committee, and proposed to travel to
the United States to meet with Mr. Riepe over the upcoming weekend, if Mr.
Riepe felt that such a meeting would be justified. Messrs. Landau and Riepe
agreed that the possibility of a meeting would be considered following the
results of the meeting between their respective financial advisors.
On August 12 and 13, 1997, Goldman Sachs and Morgan Stanley met with the
Company's management for due diligence sessions.
On August 13, 1997, the Special Committee met by telephone conference with
Goldman Sachs and Skadden, Arps at which time Goldman Sachs advised the
Special Committee of the progress of its due diligence investigation and its
preliminary views on valuation of the Company. The Special Committee
authorized
7
<PAGE>
Goldman Sachs to discuss with Morgan Stanley at their meeting to be held the
following day their preliminary view of value. In addition, the Special
Committee discussed at length the implications, process and strategy in the
event Purchaser were to commence a unilateral tender offer as Mr. Landau had
intimated to Mr. Riepe.
On August 14, 1997, Morgan Stanley and Goldman Sachs held a meeting to
discuss valuation issues. Although Morgan Stanley noted that Purchaser was not
making a formal proposal, Morgan Stanley informed Goldman Sachs that it
believed, based on the August Projections, that if a proposal were to be made,
such proposal would not exceed $92 per Share and that an unrecommended tender
offer could be commenced at a lower price. On August 15, 1997, Morgan Stanley
confirmed to Goldman Sachs that any proposal that Purchaser might make would
not exceed $92 per Share for a transaction recommended by the Special
Committee and that, due to timing considerations, Purchaser was expected to
reach a decision on whether to make a proposal and, if made, to announce a
tender offer on Monday, August 18, 1997, regardless of whether agreement had
yet been reached with the Special Committee. Morgan Stanley also reiterated
that Purchaser and its advisors were prepared to negotiate and reach agreement
with the Special Committee before such date and, if an agreement was not
reached within such time frame, to continue to negotiate with the Special
Committee after commencement of a tender offer. Goldman Sachs advised Morgan
Stanley that in the Special Committee's view a unilateral tender offer would
be detrimental to the Company and its various constituencies regardless of
Purchaser's intention to continue discussions in order to reach a consensual
transaction.
On August 15, 1997, members of the Special Committee met with Goldman Sachs
and Skadden, Arps by telephone conference. At this meeting Goldman Sachs
summarized the results of its meeting with Morgan Stanley. The Special
Committee concluded that it was appropriate to send the following letter to
Purchaser, Morgan Stanley and Shearman & Sterling, Purchaser's legal advisors:
Dear Igor:
As you are aware, at the request of Rhone-Poulenc, on July 2, 1997, the
Board of Directors of Rhone-Poulenc Rorer Inc. appointed a special
committee of independent directors of RPR to evaluate any proposal made by
Rhone-Poulenc to acquire the remaining common shares of RPR which RP does
not own. Further, the Special Committee's mandate requires us to use our
best efforts to negotiate any proposal in order to secure the best
available transaction on terms and conditions which the Special Committee
believes are fair and in the best interest of RPR and the minority
stockholders. To that end, the Special Committee interviewed and selected
legal and financial advisors in anticipation of receiving a proposal after
the expiration date of the standstill agreement between RP and RPR.
Rhone-Poulenc has expressed its desire to acquire the remaining
outstanding interest in RPR although to date RP has not made a formal
proposal to do so. Nonetheless, the Special Committee and its advisors
stand ready to continue discussions with the objective of developing a
transaction which the Special Committee would be in a position to recommend
to stockholders. You have indicated a preference for a transaction that is
accompanied by such a recommendation. Unfortunately, we understand from a
meeting between our financial advisors yesterday that RP will announce on
Monday its intention to commence a unilateral tender offer at a price at or
below $92.00 per share unless we agree to a transaction at $92.00 by no
later than Sunday evening.
The Special Committee does not believe that this approach is consistent
with RP's obligations as the controlling stockholder of RPR; and we are
confident that our acquiescence to such an approach would be affirmatively
detrimental to RPR and its minority stockholders and would not be
consistent with our fiduciary obligations. In addition, we believe a
unilateral offer by RPR's controlling stockholder which is not accompanied
by a recommendation of the Special Committee would be harmful to RPR's
other important constituencies, including its employees. If you wish to
proceed with a transaction recommended by the Special Committee, it is
incumbent upon Rhone-Poulenc and its advisors to discuss with the Special
Committee and its advisors RP's views as to the valuation of RPR. If you
proceed on a unilateral basis, you will be attempting to circumvent the
protections afforded by a special committee's role in helping to ensure
that a transaction in the best interests of RPR and all of its relevant
constituencies will be completed successfully.
Igor, as you know, the Special Committee and its advisors have been
working as expeditiously and thoroughly as possible to complete our due
diligence process. Much has been accomplished in the last two
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weeks, yet the Special Committee's advisors received RPR financial
projections only one week ago. Consistent with our mandate, we are ready,
willing and able to meet with you and your advisors to negotiate the terms
and conditions of a transaction to acquire the remaining outstanding shares
on a basis reflecting the full and fair value of RPR, provided RP is
prepared to negotiate in good faith and without the threat of a unilateral,
below market, imminent tender offer commenced on an arbitrary date.
Sincerely,
/s/ James S. Riepe
James S. Riepe, Chairman
Special Committee of the Board of
Directors
In response to such letter, on August 16, 1997 Mr. Landau sent the following
letter to Mr. Riepe, the other members of the Special Committee and the
Special Committee's financial and legal advisors:
Dear Jim,
Thank you for your letter of August 15, 1997. I would like to assure you
that I fully agree with you that it is our mutual responsibility to try to
achieve an agreement on the terms of an offer which reflects a fair
valuation of Rhone-Poulenc Rorer. For this reason, Rhone-Poulenc
recommended to RPR's Board of Directors the creation of the Special
Committee to represent the interests of the minority shareholders. The
Special Committee was appointed one and a half months ago, and its advisors
completed their due diligence on RPR's financial projections one week ago.
It therefore seems to us reasonable to expect that, at this time, the
Special Committee and its advisors have all the information they need to
negotiate and reach an agreement.
As you suggested in your letter, in order to proceed with a transaction
recommended by the Special Committee, we and our respective advisors need
to discuss with you our views as to the valuation of RPR. RP's advisors
have already communicated to the Special Committee's advisors our valuation
views. At this point, we are waiting to hear your views. In order to move
forward, I suggest that our respective advisors meet today to take the next
step in preparation for a meeting between you and me and our respective
advisors. I will be in Boston on Sunday for this purpose, as I proposed to
you one week ago.
To summarize, Rhone-Poulenc, as you state in your letter with regard to
the Special Committee, is ready, willing and able to meet and negotiate in
good faith with the expectation of reaching an agreement on the terms and
conditions of an offer.
I look forward to meeting you tomorrow with our respective advisors.
Sincerely,
/s/ Igor Landau
Igor Landau
Directeur General
At a meeting of the Special Committee and its advisors on the morning of
August 16, 1997, the Special Committee discussed the letter received from Mr.
Landau. In addition, Mr. Riepe reported that several Company Board members had
called him to convey their belief that Purchaser preferred to engage in a
transaction which was recommended by the Special Committee, but that Purchaser
was concerned that the market price of the Shares could rise to unrealistic
levels in the near term and that Purchaser needed to commence promptly an
equity offering to finance any transaction. At this meeting, the Special
Committee concluded that it would not be willing to negotiate with the threat
of a unilateral tender offer; however, it would enter into negotiations and
consider reducing the 30-business day offer period required under the
definition of Qualifying Tender Offer if Purchaser agreed not to commence a
unilateral tender offer in the immediate future and gave the Special Committee
an indication of value, which could not be below market.
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On August 16, 1997, in telephone conversations between Morgan Stanley and
Goldman Sachs, Goldman Sachs communicated the terms upon which the Special
Committee was prepared to enter into negotiations with Purchaser.
Following those conversations, Mr. Landau spoke with Mr. Riepe by telephone,
and they agreed that it was in the interest of all parties concerned,
including the Company and its minority shareholders, that, if agreement were
to be reached on the terms and conditions of a transaction, such agreement be
reached as soon as possible and that the Special Committee should have
adequate opportunity to duly consider the proposed terms and conditions.
Messrs. Landau and Riepe further agreed to seek to finalize negotiations no
later than August 19. Messrs. Landau and Riepe decided to meet in Boston,
Massachusetts, on Sunday, August 17, 1997, if Mr. Riepe felt such a meeting
would be useful following further discussions with his financial advisors.
During the evening of August 16, 1997, Morgan Stanley and Goldman Sachs met
to discuss their respective views on valuation. During the morning and
afternoon of August 17, 1997, the Special Committee met with its advisors in
Boston, Massachusetts to discuss in detail Goldman Sachs' views on valuation.
Following the Special Committee meeting and throughout the next day numerous
discussions and meetings were held between Messrs. Landau and Riepe and their
respective advisors. During the evening of August 18, Mr. Landau agreed to
confer with Purchaser Board members the following morning with respect to the
possibility of proceeding with an offer of $97 per Share; Mr. Riepe agreed to
convene a Special Committee meeting on August 19 to consider a $97 per Share
transaction; and it was agreed that the parties' respective legal counsel
would proceed with negotiation of the Merger Agreement.
During the morning of August 19, Mr. Landau called Mr. Riepe to advise him
that the Purchaser Board members with whom he conferred would support a
recommended transaction at $97 per Share.
At a meeting held in the evening of August 19, 1997, the Special Committee
unanimously recommended and approved the Merger Agreement and Merger. The
Company Board then met and approved and adopted the Merger Agreement and the
Merger Agreement was executed. On August 20, Purchaser and the Company
announced the Offer.
RECOMMENDATION OF THE COMPANY BOARD; FAIRNESS OF THE OFFER AND THE MERGER
Recommendation of the Special Committee and the Company Board
On August 19, 1997, the Special Committee unanimously determined that each
of the Offer and the Merger is fair to, and in the best interests of, the
Company, and unanimously voted to recommend and approve the Offer, the Merger
and the Merger Agreement.
On August 19, 1997, the Company Board, by a unanimous vote of all directors
present and voting, based in part on the unanimous recommendation and approval
of the Special Committee, approved the Merger Agreement and the transactions
contemplated thereby and determined that each of the Offer and the Merger is
fair to, and in the best interests of, the Company. The Company Board, by a
unanimous vote of all directors present and voting, has recommended that all
holders of Shares accept the Offer and tender their Shares pursuant to the
Offer. The directors of the Company Board designated by Purchaser and present
at the Company Board meeting (other than Mr. Cawthorn) recused themselves from
voting due to their inherent conflict of interest. Mr. Cawthorn did not recuse
himself because, unlike the other Purchaser designees, he had no affiliations
with Purchaser other than being a Purchaser designee to the Company Board, and
in fact was the former Chairman of the Board, President and Chief Executive
Officer of the Company. Furthermore, Mr. Cawthorn beneficially owns 98,620
Shares and holds options to purchase 326,789 Shares, and therefore has a
significant economic incentive in addition to his fiduciary duties to ensure
that the best available transaction for the Company was obtained.
Fairness of the Offer and the Merger
Special Committee. In reaching its determinations referred to immediately
above, the Special Committee considered the following factors, each of which,
in the view of the Special Committee, supported such determinations:
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(i) the historical market prices and recent trading activity of the
Shares, including (x) that the Offer of $97 per Share represents a premium
of approximately 22% over the $79.44 per Share closing price on June 25,
1997, the day prior to the June 26, 1997 Announcement, a premium of
approximately 20% over the $80.88 per Share closing price on June 13, 1997,
which was the 52-week high closing price for the Shares prior to the June
26, 1997 Announcement, and a premium of approximately 53.1% over the $63.38
per Share closing price on July 24, 1996, which was the 52-week low closing
price prior to the June 26, 1997 Announcement, (y) that the weighted
average per Share price between June 26, 1997 and August 17, 1997 was
$92.48 per Share, and (z) that the Shares never traded on the New York
Stock Exchange (the "NYSE") above $96 per Share following the June 26, 1997
Announcement;
(ii) the history of the negotiations between the Special Committee and
its representatives and Purchaser and its representatives, including that
(a) the negotiations resulted in an increase in the price at which
Purchaser was prepared to acquire the Shares from $92 to $97 per Share, and
(b) the Special Committee's belief that Purchaser would not further
increase the Offer price, and accordingly $97 per Share was, in the opinion
of the Special Committee, the highest price which could be obtained from
Purchaser;
(iii) the opinion of Goldman Sachs that based upon and subject to the
assumptions and qualifications stated therein the $97 per Share to be
received by the shareholders of the Company (other than Purchaser and its
subsidiaries) in the Offer and the Merger is fair to such holders, and the
report and analysis presented to the Special Committee in connection
therewith (See "SPECIAL FACTORS--Opinion of Goldman Sachs & Co.);
(iv) the fact that the standstill provisions in the Acquisition Agreement
expired on July 31, 1997 after which time Purchaser is permitted to acquire
in the open market such number of Shares which together with the Shares
owned by Purchaser would not exceed 75% of the outstanding Shares, and to
the extent Purchaser wanted to exceed the 75% threshold, Purchaser was
entitled to commence a Qualifying Tender Offer which could be at a price
per Share below Purchaser's original price of $92 per Share or otherwise
substantially below the $97 per Share Offer price;
(v) the belief that a Qualifying Tender Offer unilaterally commenced by
Purchaser without a recommendation of the Special Committee may have been
successfully completed at a price lower than that negotiated and
recommended by the Special Committee;
(vi) the possibility that, because of potentially lower than expected
projected Company earnings or a decline in the trading price of the Shares
or the stock market in general, the consideration the minority shareholders
would obtain in a future transaction might be less advantageous than the
consideration they will receive pursuant to the Offer and the Merger;
(vii) the Special Committee recognized that the sale of control of the
Company to Purchaser occurred in 1990 upon consummation of the transactions
contemplated in the Acquisition Agreement;
(viii) Purchaser has sufficient stock ownership to control a disposition
of the Company and the Special Committee and Goldman Sachs were not
authorized to, and did not, solicit third party indications of interest for
the acquisition of the Company or its businesses;
(ix) the terms of the Offer, the Merger and the Merger Agreement,
including (a) that the Minimum Condition may not be waived; (b) that the
terms and conditions of the Offer may not be changed in any manner which is
materially adverse to the minority shareholders without the consent of the
Special Committee; (c) that the recommendation of the Special Committee may
be withdrawn, modified or amended to the extent the Special Committee
believes it necessary to do so in the exercise of its fiduciary duties; (d)
that the Offer is not subject to any financing condition; (e) that the
terms of the Merger Agreement may only be amended or waived by the Special
Committee; and (f) the limited nature of other conditions to the Offer and
the Merger;
(x) the Minimum Condition requirement that the Offer not be consummated
unless at least 68.7% of the Shares not held by Purchaser be validly
tendered pursuant to the Offer and not withdrawn;
(xi) the availability of dissenters' rights for the minority shareholders
under the PBCL in connection with the Merger; and
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<PAGE>
(xii) the risk that the Company would suffer the loss of key employees
and other adverse consequences if Purchaser were to commence a unilateral
tender offer.
Company Board. In reaching its determinations referred to above, the Company
Board considered the following factors, each of which, in the view of the
Company Board, supported such determinations: (i) the conclusions and
recommendations of the Special Committee; (ii) the factors referred to above
as having been taken into account by the Special Committee, including the
receipt by the Special Committee of the opinion of Goldman Sachs addressed
solely to the Special Committee that based upon and subject to the assumptions
stated therein the $97 per Share to be received by the shareholders of the
Company (other than Purchaser and its subsidiaries) in the Offer and the
Merger is fair to such holders and the analysis presented to the Company
Board; and (iii) the fact that the Offer price and the terms and conditions of
the Merger Agreement were the result of arm's-length negotiations between the
Special Committee and Purchaser.
The members of the Company Board, including the members of the Special
Committee, evaluated the Offer and the Merger in light of their knowledge of
the business, financial condition and prospects of the Company, and based upon
the advice of financial and legal advisors. In light of the number and variety
of factors that the Company Board and the Special Committee considered in
connection with their evaluation of the Offer and the Merger, neither the
Company Board nor the Special Committee found it practicable to assign
relative weights to the foregoing factors, and, accordingly, neither the
Company Board nor the Special Committee did so.
The Company Board, including the members of the Special Committee, believes
that the Offer and the Merger are procedurally fair because, among other
things: (i) the Offer is in all material respects a Qualifying Tender Offer as
defined in the Acquisition Agreement and the Merger will be conducted in
accordance with requirements of the Acquisition Agreement; (ii) the Special
Committee consisted of Independent Directors appointed to represent the
interests of the shareholders other than Purchaser; (iii) the Special
Committee retained and was advised by independent legal counsel; (iv) the
Special Committee retained Goldman Sachs as its independent financial advisor
to assist it in evaluating a potential transaction with Purchaser and received
advice from Goldman Sachs; (v) the existence of the Minimum Condition (which
may not be waived) has the effect of requiring approximately two-thirds of the
Company's shareholders (other than Purchaser) to tender their Shares into the
Offer in order for it to be consummated; (vi) the deliberations pursuant to
which the Special Committee evaluated the Offer and the Merger and
alternatives thereto; and (vii) the fact that the $97 per Share price and the
other terms and conditions of the Merger Agreement resulted from active arm's-
length bargaining between representatives of the Special Committee, on the one
hand, and representatives of Purchaser, on the other.
The Board and the Special Committee recognized that the Merger is not
structured to require the approval of a majority of the shareholders of the
Company other than Purchaser, and that Purchaser currently has sufficient
voting power to approve the Merger without the affirmative vote of any other
shareholder of the Company. A condition to the Merger, however, is that the
Purchaser shall have purchased all Shares tendered in the Offer. Consummation
of the Offer is conditioned upon there being validly tendered, and not
withdrawn, such number of the then issued and outstanding Shares, other than
the Purchaser Shares, which, when taken together with the Purchaser Shares,
constitutes 90% of the then issued and outstanding Shares, which effectively
requires that approximately two-thirds of the minority shareholders tender
their Shares.
OPINION OF GOLDMAN, SACHS & CO.
Goldman Sachs has acted as financial advisor to the Special Committee in
connection with the Merger, as described under "SPECIAL FACTORS--Background of
the Offer and the Merger". On August 19, 1997, Goldman Sachs delivered its
oral opinion, which was subsequently confirmed in writing, to the Special
Committee that, as of the date of such opinion, the $97 per Share in cash to
be received by the holders of Shares other than Purchaser and its subsidiaries
in the Offer and the Merger is fair to such holders.
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<PAGE>
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AUGUST 19, 1997,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
SCHEDULE II AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS OF THE
COMPANY ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) the Annual Reports to Shareholders and Annual
Reports on Form 10-K of the Company for the five years ended December 31,
1996; (iii) certain interim reports to shareholders and Quarterly Reports on
Form 10-Q; (iv) certain other communications from the Company to its
shareholders; and (v) certain internal financial analyses and forecasts for
the Company prepared by its management. Goldman Sachs held discussions with
members of the senior management of the Company regarding its past and current
business operations, financial condition and future prospects. Goldman Sachs
also held discussions with members of the senior management of Centeon L.L.C.
("Centeon"), a joint venture in which the Company has a 50% interest. In
addition, Goldman Sachs reviewed the reported price and trading activity for
the Shares, compared certain financial and stock market information for the
Company with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and has assumed such accuracy
and completeness for purposes of rendering its opinion. In addition, Goldman
Sachs has not made an independent evaluation or appraisal of the assets and
liabilities of the Company or any of its subsidiaries, and Goldman Sachs has
not been furnished with any such evaluation or appraisal. Goldman Sachs was
not requested or authorized to solicit, and did not solicit, interest from any
party with respect to an acquisition of the outstanding Shares, the Company or
its constituent businesses. The opinion of Goldman Sachs referred to herein
was provided for the information and assistance of the Special Committee in
connection with its consideration of Offer and the Merger and does not
constitute a recommendation as to whether any holder of Shares should tender
such Shares in the Offer.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its opinion to the Special
Committee on August 19, 1997.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Shares for the period from
August 14, 1995 to August 18, 1997. Such analysis indicated that the
closing price per Share during such period ranged from $42.13 to $95.94.
Goldman Sachs also reviewed the weighted average trading prices for the
Shares for four periods. Such analysis indicated that the weighted average
price per Share for the period from July 31, 1993 (the date of the
retirement of the Company's contingent value rights) to June 25, 1997 (the
day prior to the June 26, 1997 Announcement) was $52.31; for the one year
period ending June 25, 1997 was $72.22; for the period from October 10,
1996 (the date a product recall by Centeon was announced) to June 25, 1997
was $73.11; and for the period from June 26, 1997 to August 18, 1997 was
$92.48
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to the Company to corresponding
financial information, ratios and public market multiples for publicly
traded corporations: Abbott Laboratories, American Home Products Corp.,
Bristol-Myers Squibb Co., Eli Lilly & Co., Merck & Co. Inc., Pfizer Inc.,
Pharmacia & Upjohn, Inc., Schering-Plough Corp. and Warner-Lambert Co. (the
"Selected Companies"). The Selected Companies were chosen because they are
publicly traded companies with operations that for purposes of analysis may
be considered similar to the Company. Goldman Sachs calculated and compared
various financial multiples and ratios. The multiples of the Company were
calculated using per Share prices of $79.44 and $94.56, the closing prices
of the Shares on the NYSE on June 25, 1997 and August 18, 1997,
respectively, and a per Share price of $97.00, the price to be paid in the
Offer. The multiples and ratios for the Company were based on publicly
available information and information provided by the Company's management
and the multiples for each of the Selected Companies were based on the most
recent publicly available information. With
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<PAGE>
respect to the Selected Companies, Goldman Sachs considered levered market
capitalization in United States dollars (i.e., the market value of common
equity plus book value of debt less cash) as a multiple of Latest Twelve
Months ("LTM") sales, as a multiple of LTM earnings before interest, taxes,
depreciation and amortization ("EBITDA") and as a multiple of LTM earnings
before interest and taxes ("EBIT"). Goldman Sachs' analyses of the Selected
Companies indicated levered multiples of LTM sales, which ranged from 2.5x
to 6.0x with a mean and median of 5.0x, LTM EBITDA, which ranged from 8.2x
to 26.9x with a mean of 16.8x and a median of 16.1x, and LTM EBIT, which
ranged from 10.5x to 32.9x with a mean of 19.8x and a median of 18.0x,
compared to levered multiples of 2.6x, 11.9x and 17.0x, respectively, for
the Company based on a stock price of $79.44 per Share, 3.1x, 13.8x and
19.6x, respectively, for the Company based on a stock price of $94.56 per
Share and 3.1x, 14.1x and 20.0x, respectively, for the Company based on a
stock price of $97.00 per Share. Goldman Sachs also considered estimated
calendar year 1997 and 1998 price/earnings ratios, which, for the Selected
Companies, ranged from 20.3x to 38.9x with a mean of 26.6x and a median of
24.2x for estimated calendar year 1997 and 17.3x to 29.6x with a mean of
22.2x and a median of 20.5x for estimated calendar year 1998 compared to
22.1x and 18.7x, respectively, for the Company based on a stock price of
$79.44 per Share, 26.3x and 22.3x, respectively, for the Company based on a
stock price of $94.56 per Share and 26.9x and 22.8x, respectively for the
Company based on a stock price equal to $97.00 per Share; LTM EBITDA
margins, LTM EBIT margins and LTM net margins, which, for the Selected
Companies, ranged from 18.8% to 38.1% with a mean of 30.2% and a median of
30.4%, 15.3% to 31.0% with a mean of 25.6% and a median of 26.8% and 10.3%
to 21.7% with a mean of 17.5% and a median of 17.6%, respectively, compared
to 22.2%, 15.5% and 7.6%, respectively, for the Company; estimated calendar
year 1997 price/earnings to total return ratios, which, for the Selected
Companies, ranged from 1.4x to 2.2x with a mean of 1.7x and a median of
1.6x compared to 1.4x for the Company based on a stock price of $79.44 per
Share, 1.7x for the Company based on a stock price of $94.56 per Share and
1.8x based on a stock price equal to the $97.00 per Share; estimated
calendar year 1997 and 1998 price/earnings growth multiples which, for the
Selected Companies, ranged from 1.7x to 2.4x with a mean and median of 2.0x
for estimated calendar year 1997 and 1.5x to 1.8x with a mean and median of
1.7x for estimated calendar year 1998 compared to 1.6x and 1.3x,
respectively, for the Company based on a stock price of $79.44 per Share
and 1.9x and 1.6x, respectively, for the Company based on stock price of
$94.56 per Share and 1.9x and 1.6x, respectively, for the Company based on
a stock price equal to $97.00 per Share; and a five-year average earnings
per Share ("EPS") growth rate (obtained through Institutional Brokers
Estimate System) for the Selected Companies ranging from 10.0% to 16.5%
with a mean of 13.4% and a median of 13.0% compared to 14.0% for the
Company.
(iii) Discounted Cash Flow Analysis. Goldman Sachs performed discounted
cash flow analyses using the August Projections (as hereinafter defined)
prepared by the Company (the "Base Case") and using the August Projections
and adding to the Base Case certain products in the Company's research and
development pipeline that were excluded ("Excluded Pipeline") from the Base
Case (the "Base Case Plus Excluded Pipeline"). Goldman Sachs calculated a
net present value of free cash flows for the fourth quarter of 1997 and for
the years 1998 through 2002 using discount rates ranging from 10.0% to
11.0%. Goldman Sachs calculated the Company's terminal values in the year
2002 based on the marginal free cash flow growth rate in 2002 to estimate
free cash flow in 2003 and perpetual growth rates of free cash flows
ranging from 5.0% to 6.0%. These terminal values were then discounted to
present value using discount rates ranging from 10.0% to 11.0%. Such
analyses indicated implied per Share values ranging from $72.88 to $114.54
in the Base Case and $84.70 to $132.93 in the Base Case Plus Excluded
Pipeline.
(iv) Component Analysis. Goldman Sachs performed separate valuation
analyses on three financial components of the Company: the Base Case
excluding the contribution to earnings and cash flow from Centeon L.L.C.
("Centeon"), the Company's 50/50 joint venture with Behringwerke AG, a
subsidiary of Hoechst AG ("Base Case without Centeon"), the Excluded
Pipeline and Centeon. Goldman Sachs performed discounted cash flow analyses
on the Base Case without Centeon, calculating a net present value of free
cash flows for the fourth quarter of 1997 and the years 1998 through 2002
using discount rates ranging from 10.0% to 11.0%. Goldman Sachs calculated
terminal values in the year 2002 based on the marginal free cash flow
growth rate in the year 2002 to estimate free cash flow in 2003 and
perpetual growth
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rates of free cash flows ranging from 5.0% to 6.0%. These terminal values
were then discounted to present value using discount rates ranging from
10.0% to 11.0%. Such analysis indicated implied per Share values ranging
from $62.76 to $99.72.
Goldman Sachs also performed discounted cash flow analyses on the Base
Case without Centeon including the Excluded Pipeline, calculating the net
present value of free cash flows for the fourth quarter of 1997 and the
years 1998 through 2002 using discount rates ranging from 10.0% to 11.0%.
Goldman Sachs calculated terminal values in the year 2002 based on the
marginal free cash flow growth rate in the year 2002 to estimate free cash
flow in 2003 and perpetual growth rates of free cash flows ranging from
5.0% to 6.0%. These terminal values were then discounted to present value
using discount rates ranging from 10.0% to 11.0%. Goldman Sachs then
subtracted the net present values obtained for the Base Case without
Centeon from the net present values obtained for the Base Case without
Centeon including the Excluded Pipeline to determine the implied net
present value of the Excluded Pipeline. Such analyses indicated implied per
Share values of the Excluded Pipeline ranging from $9.55 to $14.84.
Goldman Sachs also valued the Excluded Pipeline by using a Monte Carlo
simulation to determine the probability-weighted value of the Excluded
Pipeline using management estimates for probability of technical success
and cash flows for the initial development period and the first ten years
from date of launch for each product for the Excluded Pipeline and standard
pharmaceutical product lifecycle sales and cash flow curves for an
additional 15 years for each product. Such analysis indicated implied per
Share values for the Excluded Pipeline, assuming 1 standard deviation
around the mean, ranging from $9.00 to $17.00.
Goldman Sachs calculated the net present value of Centeon using
management's projections for the years 1998 through 2000 and a terminal
value equal to 10.0x year 2000 operating income. Using discount rates of
12.0% to 15.0%, such analysis indicated implied per Share values of Centeon
of $7.88 and $7.31, respectively.
(v) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to the following transactions involving sales of
control in the pharmaceutical industry since 1990: Hoechst/Marion-Merrell
Dow; Glaxo plc/Wellcome plc; American Home Products/American Cyanamid;
Roche Ltd./Syntex; Rhone-Poulenc S.A./Rorer Group Inc. (the "Selected
Transactions"). Such analysis indicated that for the Selected Transactions
(i) total entity value as a multiple of LTM sales ranged from 2.0x to 3.6x
with a mean of 2.7x and a median of 2.5x, as compared to 3.2x for the total
entity value of the Company, (ii) total entity value as a multiple of LTM
EBIT ranged from 10.2x to 23.4x with a mean of 15.7x and a median of 12.3x,
as compared to 20.4x for the total entity value of the Company and (iii)
the total equity market value as a multiple of LTM net income ranged from
15.8x to 38.7x with a mean of 24.2x and a median of 22.1x, as compared to
35.8x for the total equity market value of the Company.
(vi) Selected Buyouts By Significant Existing Shareholders. Goldman Sachs
analyzed certain information relating to the premiums paid in selected
transactions involving buyouts of a minority interest by an existing
significant shareholder since 1988. Such analysis indicated initial bid
price premiums over market price one month prior to the announcement of the
transaction which ranged from negative 8.4% to 241.7% with a mean of 27.0%
and a median of 20.0% and final premiums over market price one month prior
to the announcement of the transaction ranging from negative 20.0% to
241.7% with a mean of 34.2% and a median of 26.1%, each as compared to a
30.8% premium of the $97.00 per Share to be paid in the Offer over the per
Share closing price on the NYSE on May 28, 1997 (four weeks prior to the
June 26, 1997 Announcement).
(vii) Present Value of Implied Future Stock Price. Goldman Sachs
performed an analysis to determine the present value of implied future
Share prices based on four different scenarios of estimates of EPS for the
Company for the years 1998 through 2002. Goldman Sachs used the EPS
estimates from the Base Case and the Base Case Plus Excluded Pipeline, each
with and without including the impact of reducing the Company's excess
inventory position with customers included in the Company's management's
projections ("De-load", respectively without De-load, the "Base Case
Without De-load"
15
<PAGE>
and the "Base Case Plus Excluded Pipeline Without De-load"). Goldman Sachs
calculated the implied future Share prices using price/earnings multiples
of 21.0x and 23.0x. These implied future Share prices were then discounted
to present value using discount rates of 10.5% and 14.0%. This analysis
indicated that the present value of the implied future Share price for the
years 1997 through 2001 using price/earnings multiples of 21.0x and 23.0x
and based upon a discount rate of 10.5% ranged from $72.03 to $112.03 in
the Base Case, $78.54 to $112.32 in the Base Case Without De-load, $72.24
to $129.74 in the Base Case Plus Excluded Pipeline and $78.75 to $130.04 in
the Base Case Plus Excluded Pipeline Without De-load, and, based upon a
discount rate of 14.0% ranged from $72.03 to $99.21 in the Base Case,
$78.54 to $99.49 in the Base Case Without De-load, $72.24 to $114.86 in the
Base Case Plus Excluded Pipeline and $78.75 to $115.14 in the Base Case
Plus Excluded Pipeline Without De-load.
(viii) Impact on EPS Analysis. Goldman Sachs performed an analysis to
determine the impact on Purchaser of an acquisition of the Shares held by
holders other than Purchaser and its subsidiaries at prices per Share
ranging from $92.00 to $104.00. Such analysis indicated substantial
dilution to Purchaser's 1998 estimated EPS and that Purchaser's pro forma
net debt to total capital ratio ranged from 53.8% to 54.4%.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses. No
company or transaction used in the above analyses as a comparison is directly
comparable to the Company or Purchaser or the contemplated transaction. The
analyses were prepared solely for purposes of Goldman Sachs' providing its
opinion to the Special Committee as to the fairness of the $97 per Share in
cash to be received by the holders of Shares in the Offer and the Merger and
do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts
of future results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of the Company, Purchaser, Goldman Sachs or
any other person assumes responsibility if future results are materially
different from those forecast. As described above, Goldman Sachs' opinion to
the Special Committee was one of many factors taken into consideration by the
Special Committee in making its determination to recommend the adoption of the
Merger Agreement to the Board of Directors of the Company. The foregoing
summary does not purport to be a complete description of the analysis
performed by Goldman Sachs and is qualified by reference to the written
opinion of Goldman Sachs set forth on Schedule II attached hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. The Special Committee
selected Goldman Sachs as its financial advisor because it is an
internationally recognized investment banking firm, has substantial experience
in transactions similar to the Offer and the Merger, has expertise in the
pharmaceutical industry and represented that it did not have an existing
engagement with Purchaser, nor would it accept an assignment from Purchaser
during its engagement by the Special Committee.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of the Company and/or Purchaser for its own account and for the
account of customers. As of the date hereof, Goldman Sachs holds for its own
account a long position of 828,962 Shares.
Pursuant to a letter agreement dated July 21, 1997 (the "Engagement
Letter"), the Company engaged Goldman Sachs to act as exclusive financial
advisor to the Special Committee in connection with its consideration of any
proposals made by Purchaser to acquire all or substantially all of the
outstanding Shares held by shareholders other than Purchaser. Pursuant to the
terms of the Engagement Letter, the Company agreed
16
<PAGE>
to pay Goldman Sachs (i) a financial advisory fee of $500,000, (ii) a fee of
$1,500,000 upon the delivery of its opinion and (iii) a transaction fee equal
to (A) (I) 1.5% of the amount by which $96.00 exceeds $93.50 plus (II) 2.0% of
the amount by which $97.00 exceeds $96.00 times (B) the number of Shares
(including Shares issuable pursuant to options, warrants and convertible
securities) acquired by Purchaser. The Company has agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including attorney's fees,
and to indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the federal securities laws.
COMPANY BUDGET INFORMATION AND FINANCIAL PROJECTIONS
The Company does not, as a matter of course, make public forecasts or
projections as to future sales, earnings or other income statement data.
However, in connection with Purchaser's position as a controlling shareholder
of the Company, Purchaser has received and examined certain analyses prepared
by the Company which include projections of future financial results. In
addition, as a result of the review of the Company's financial position and
outlook, in the context of preparing for the Offer, Purchaser has received and
examined the August Projections for the years 1997 through 2002. Such
information has been set forth below for the limited purpose of giving the
Company's shareholders access to financial projections by the Company's
management that were available for review by Purchaser in connection with the
Offer.
Preliminary 1997 Budget. In connection with its preparation of its annual
budget in December 1996, the Company's management provided projections for the
year ended December 31, 1997 (the "Preliminary 1997 Budget") to the Company
Board at its meeting on December 13, 1996. The Preliminary 1997 Budget did not
take into account the potential impact of the voluntary suspension (the
"Centeon Suspension") of certain production and distribution activities by
Centeon and accordingly reflects the operating plan of Centeon for 1997. The
Company's management was unable to take into account such effect due to the
uncertain outcome of (i) the then ongoing review by the U.S. Food & Drug
Administration of manufacturing processes at a U.S. production facility of
Centeon and (ii) an upcoming meeting of Centeon's Board of Directors that was
to discuss the Centeon 1997 budget. For information regarding the Centeon
Suspension, see "Schedule IV--Note 5 to Consolidated Financial Statements".
The Preliminary 1997 Budget also assumed sustainable growth in net sales,
increased cost reduction, a deceleration of research and development expenses
and further improvements to gross margins due to changes in the Company's
product mix. The Preliminary 1997 Budget further assumed a French franc/U.S.
dollar exchange rate of FF5.50 = $1. Selected information presented in the
Preliminary 1997 Budget is set forth below:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
1996 FORECAST 1997 BUDGET
------------- -----------
(DOLLARS IN MILLIONS,
EXCEPT FOR PER SHARE
INFORMATION)
<S> <C> <C>
Net Sales....................................... $5,403 $5,409
Gross Margin.................................... 3,736 3,915
Operating income................................ 751 897
Income before tax(1)............................ 686 926
Earnings per Share.............................. 3.12 4.30
</TABLE>
--------
(1) Includes equity in earnings of Centeon of $82 million and $179
million in 1996 and 1997, respectively.
1997 Budget. In light of the impact of the Centeon Suspension, the Company
Board appointed a special budget committee (the "Budget Committee"), comprised
of Messrs. Frey, Landau and Riepe, to update the Preliminary 1997 Budget to
reflect the impact of the Centeon Suspension. At the February 20, 1997 meeting
of the Company Board, the Company's management informed the Company Board on
the status of its initial review of the Preliminary 1997 Budget and indicated
that projected earnings per Share for 1997 could be reduced from $4.30 to
approximately $3.65 per Share, principally to reflect the impact of the
Centeon Suspension.
17
<PAGE>
Following approval of Centeon's 1997 budget by Centeon's Board of Directors
at its March 4, 1997 meeting, the Budget Committee met on March 24, 1997 to
approve budgetary data projecting earnings per Share for 1997 of $3.65. The
Preliminary 1997 Budget was finalized by management in April 1997 and
presented to the Company Board at its meeting on May 7, 1997 (the "1997
Budget"). The 1997 Budget included the effect of the Centeon Suspension, but
was otherwise based on the same assumptions as the Preliminary 1997 Budget.
Selected information presented in the 1997 Budget is set forth below:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
------------------------------------
1996 ACTUAL 1997 BUDGET
---------------- -----------
(DOLLARS IN MILLIONS, EXCEPT FOR
PER SHARE INFORMATION)
<S> <C> <C>
Net sales.......................... $5,421 $5,414
Gross margin....................... 3,755 3,900
Operating income................... 661 869
Income before tax(1)............... 699 800
Earnings per Share................. 3.16 3.65
</TABLE>
--------
(1) Includes equity in earnings of Centeon of $85 million and $36
million in 1996 and 1997, respectively.
August Projections. On August 9, 1997, certain projections for the years
ending December 31, 1997 through 2002 (the "August Projections") were
delivered by the Company's management to Goldman Sachs, which in turn
forwarded such projections to Morgan Stanley. Morgan Stanley delivered the
August Projections to Purchaser on August 11, 1997. The August Projections
were produced by the Company in connection with a study commenced in July,
1997 at the request of the Special Committee and were delivered to Goldman
Sachs at the request of the Special Committee. The August Projections are
based on the following assumptions: a French franc/U.S. dollar exchange rate
from 1998-2002 of FF5.50 = $1; increased competition in the US respiratory
market, and the continuation of French government pressure to contain health
care costs; a gross margin improvement due to the product mix and to
divestitures of certain product lines; increased expenditures in promotional
efforts regarding the Company's strategic products; and an increase in French
corporate income taxes as proposed recently by the French government from
36.6% to 41.6% for calendar years 1997 and 1998.
It was also indicated by the Company that there was at the end of June 1997
a high level of inventory of certain of the Company's products currently held
by certain U.S. customers. The Company has not made any determination as to
whether and over what time period any inventory adjustments may be necessary.
If the Company decides to take actions to reduce inventories on a basis of a
three year adjustment (as was assumed in the August Projections that
management provided to Goldman Sachs), the projected increase in net sales
would be reduced by $80 million in each of the years 1998, 1999 and 2000, with
the impact on sales and earnings per Share as reflected below.
The August Projections are summarized below:
AUGUST PROJECTIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
FORECAST
FORECAST '97 IN '98
1997 STRUCTURE(1) 1998 1999 2000 2001 2002
-------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $5,112 $5,041 $5,262 $5,648 $6,071 $6,573 $7,001
Gross margin............ 3,694 3,642 3,842 4,125 4,444 4,758 5,046
Operating income........ 780 731 822 947 1,082 1,233 1,372
Centeon joint ven-
ture(2)................ (41) (41) 55 75 120 150 180
Income before tax....... 722 653 777 930 1,123 1,302 1,492
Earnings per Share...... 3.28 2.93 3.43 4.14 5.11 5.97 6.88
</TABLE>
- --------
(1) Excludes the effect of certain product lines divested by the Company in
1997.
(2) Equity in earnings of Centeon.
18
<PAGE>
Excluding the impact of any adjustments to inventory levels, the projected
net sales and earnings per Share would be as reflected below:
(DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
FORECAST
FORECAST '97 IN '98
1997 STRUCTURE 1998 1999 2000 2001 2002
-------- ---------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $5,112 $5,041 $5,342 $5,728 $6,151 $6,573 $7,001
Earnings per Share....... 3.28 2.93 3.72 4.43 5.40 5.97 6.88
</TABLE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS:
Certain matters discussed herein are forward-looking statements that involve
risks and uncertainties. Forward-looking statements include the information
set forth above concerning the Preliminary 1997 Budget, the 1997 Budget and
the August Projections (together, the "Projections"). Such information has
been included in this Offer to Purchase for the limited purpose of giving the
Company's shareholders access to financial projections by the Company's
management that were made available to Purchaser. Such information was
prepared by the Company's management for internal use and not with a view to
publication. The foregoing budget information and Projections were based on
assumptions concerning the Company's products and business prospects in 1997
through 2002, including the assumption that the Company would continue to
operate under the same ownership structure as then existed. The budget
information and Projections were also based on other revenue and operating
assumptions. Information of this type is based on estimates and assumptions
that are inherently subject to significant economic and competitive
uncertainties and contingencies, all of which are difficult to predict and
many of which are beyond the Company's control. Accordingly, there can be no
assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those set forth above. In
addition, neither the budget information nor the Projections were prepared
with a view to public disclosure or compliance with the published guidelines
of the Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections and forecasts and are
included in this Offer to Purchase only because such information was made
available to Purchaser by the Company. Neither the Purchaser's nor the
Company's independent accountants have examined, compiled or applied any
agreed upon procedures to this information and, accordingly, assume no
responsibility for this information. Neither the Purchaser nor the Company nor
any other party assumes any responsibility for the accuracy or validity of the
foregoing projections.
POSITION OF PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER
Purchaser believes that the consideration to be received by the Company's
shareholders, other than Purchaser, pursuant to the Offer and the Merger is
fair to the Company's shareholders other than Purchaser. Purchaser bases its
belief on the following facts: (i) the fact that the Special Committee
concluded that the Offer and the Merger are fair to, and in the best interests
of, the Company (ii) notwithstanding the fact that Goldman Sachs' opinion was
provided solely for the information and assistance of the Special Committee
and that Purchaser is not entitled to rely on such opinion, the fact that the
Special Committee received an opinion from Goldman Sachs that the $97 per
Share in cash to be received by the holders of Shares other than Purchaser and
its subsidiaries in the Offer and the Merger is fair to such holders (iii) the
Offer is a Qualifying Tender Offer under the Acquisition Agreement (other than
with respect to the minimum offering period, which has been reduced from 30
business days to 28 business days with the agreement of the Special Committee)
and as such is consistent with the original intent of the parties to the
Acquisition Agreement, and furthermore the Merger will be conducted in
accordance with the requirements of the Acquisition Agreement, (iv) the
presence of the Minimum Condition ensures that in order for the Offer to be
successful approximately two-thirds of the Shares not held by Purchaser will
have to be tendered into the Offer, (v) the historical and projected financial
performance of the Company and its financial results, (vi) the consideration
to be paid in the Offer represents a premium of 24.8% over the average closing
price for the one month period prior to June 26, 1997, (vii) the
19
<PAGE>
consideration to be paid in the Offer represents a premium of 22.1% over the
reported closing price on the last full trading day prior to the June 26, 1997
Announcement of Purchaser's study of a possible business combination with the
Company, on which date the last reported sale price was near its historic
closing high, (viii) the Acquisition Agreement was negotiated on an arm's-
length basis in 1990 and has resulted in the shareholders of the Company
benefiting from substantial appreciation in the value of their Shares since
1990, (ix) the same consideration will be paid in both the Offer and the
Merger and (x) the Offer and the Merger will each provide consideration to the
shareholders entirely in cash. Purchaser did not find it practicable to
assign, nor did it assign, relative weights to the individual factors
considered in reaching its conclusion as to fairness. In light of the nature
of the Company's business, Purchaser did not deem net book value or
liquidation value to be relevant indicators of the value of the Shares.
PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF PURCHASER FOR
THE OFFER AND THE MERGER
The purpose of the Offer and the Merger is for Purchaser directly to
increase, within the terms established by the Acquisition Agreement, its
ownership of Shares from approximately 68.1% to 100%. Upon consummation of the
Merger, the Company will become a direct wholly owned subsidiary of Purchaser.
The acquisition of the Shares not owned by Purchaser has been structured as a
cash tender offer followed by a cash merger in order to (i) comply with the
requirements of the Acquisition Agreement, (ii) effect a prompt and orderly
transfer of ownership of the Company from the public shareholders to Purchaser
and (iii) provide shareholders with cash for all of their Shares.
Under the PBCL, the approval of the Company Board and the affirmative vote
of the holders of a majority of the issued and outstanding Shares are required
to approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger. The Company Board has approved and adopted the
Merger Agreement and the transactions contemplated thereby, and the only
remaining required corporate action of the Company is the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the affirmative vote of the holders of a majority of the Shares. Purchaser
already has sufficient voting power to cause the approval and adoption of the
Merger without the affirmative vote of any other shareholder of the Company.
Pursuant to the Acquisition Agreement, however, Purchaser may only exercise
such voting power to effect a merger of the Company subsequent to a Qualifying
Tender Offer as defined in the Acquisition Agreement. The Offer satisfies the
requirements of a Qualifying Tender Offer except for the reduction in the
minimum offering period from 30 business days to 28 business days as approved
by the Special Committee,
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a special meeting of its shareholders as soon as practicable
following consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby and
to use its reasonable best efforts to obtain such approval and adoption.
Purchaser has agreed that all Shares owned by it and its subsidiaries will be
voted in favor of the Merger Agreement and the transactions contemplated
thereby.
Purchaser's principal strategic objective has been to reinforce its position
in the life sciences. In order to further this objective, Purchaser has
considered various means of expanding its collaboration with the Company,
including increasing its voting equity interest to 100%. Purchaser concluded
that such an acquisition would enhance Purchaser's strategic flexibility and
allow it to benefit from opportunities in the businesses in which Purchaser
and the Company operate. Purchaser also concluded that the combination of
Purchaser and the Company would result in Purchaser and its affiliates having
only one life sciences company with publicly-listed common stock, and a
separate listing of the specialty chemicals and services to industry business.
Such steps would bring about a clearer differentiation between life sciences,
on the one hand, and specialty chemicals and services, on the other. Purchaser
concluded that this clarification should promote an improvement in Purchaser's
market valuation. Consequently, Purchaser concluded that an acquisition by
Purchaser of the remaining Shares should be considered. Purchaser chose to
undertake the transaction at this time because (i) such a transaction was
prohibited by the Acquisition Agreement prior to the end of the standstill
period on July 31, 1997 and (ii) such transaction is consistent with
Purchaser's stated strategy of reinforcing its position in life sciences.
20
<PAGE>
PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE
OFFER
Pursuant to the Merger Agreement, upon completion of the Offer, Purchaser
and the Merger Subsidiary intend to effect the Merger in accordance with the
Merger Agreement. See "SPECIAL FACTORS--The Merger Agreement".
Except as otherwise described in this Offer to Purchase, Purchaser has no
current plans or proposals which relate to or would result in: (a) other than
the Merger, an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company; (b) a sale or transfer of
a material amount of assets of the Company; (c) any change in the management
of the Company or any change in any material term of the employment contract
of any executive officer; or (d) any other material change in the Company's
corporate structure or business.
Nevertheless, Purchaser may initiate a review of the Company and its assets,
corporate structure, capitalization, operations, properties, policies,
management and personnel to determine what changes, if any, would be desirable
following the Merger in order best to organize and integrate the activities of
the Company and Purchaser. In particular, Purchaser may study the possibility
of changing the Company Board by changing the number or term of directors, and
may also consider material changes in the present dividend rate and policy,
indebtedness and capitalization of the Company. In particular, Purchaser
expressly reserves the right to make any changes that it deems necessary or
appropriate in light of its review or in light of future developments.
As a result of the Offer, the direct and indirect interest of Purchaser in
the Company's net book value and net earnings will increase to the extent of
the number of Shares acquired under the Offer. Following consummation of the
Merger, Purchaser's direct and indirect interest in such items will increase
to 100% (other than the issued and outstanding shares of preferred stock of
the Company), and Purchaser and its subsidiaries will be entitled to all
benefits resulting from that interest, including all income generated by the
Company's operations (other than income payable to holders of such preferred
stock), and any future increase in the Company's value and the right to elect
all members of the Company Board (other than the right of holders of preferred
stock to elect members of the Company Board under certain circumstances).
Similarly, Purchaser will also bear the risk of losses generated by the
Company's operations and any decrease in the value of the Company after the
Merger. Upon consummation of the Merger, the Company will become a privately
held corporation. Accordingly, shareholders will not have the opportunity to
participate directly in the earnings and growth of the Company after the
Merger and will not have any right to vote on corporate matters. Similarly,
shareholders will not face the risk of losses generated by the Company's
operations or decline in the value of the Company after the Merger.
Following the consummation of the Merger, the Shares will no longer be
quoted on the NYSE and Purchaser intends to cause the Shares to be no longer
quoted on the Premier Marche (marche a reglement mensual) of the Bourse de
Paris (the "Paris Bourse"). In addition, the registration of the Shares under
the Exchange Act will be terminated. Accordingly, following the Merger there
will be no publicly-traded Common Stock of the Company outstanding. See "THE
TENDER OFFER--Section 11. Effect of the Offer on the Market for the Shares;
the NYSE, Paris Bourse and Exchange Act Registration". It is expected that, if
Shares are not accepted for payment by Purchaser pursuant to the Offer and the
Merger is not consummated, the Company's current management, under the general
direction of the Company Board, will continue to manage the Company as an
ongoing business.
RIGHTS OF SHAREHOLDERS IN THE OFFER AND THE MERGER
NO DISSENTERS RIGHTS ARE AVAILABLE IN CONNECTION WITH THE OFFER. However, if
the Merger is consummated, shareholders who fully comply with the statutory
dissenters procedures set forth in the PBCL, the relevant portions of which
are attached to this Offer to Purchase as Schedule III, will be entitled to
receive cash for the fair value of their Shares as determined pursuant to the
procedures prescribed by the PBCL. Merely voting against the Merger Agreement
will not perfect a shareholder's dissenters rights. Shareholders are urged to
review
21
<PAGE>
carefully the dissenting shareholders' rights provisions of the PBCL, a
description of which is provided below and the full text of which is attached
to this Offer to Purchase as Schedule III and incorporated herein by
reference. SHAREHOLDERS WHO FAIL TO COMPLY STRICTLY WITH THE APPLICABLE
PROCEDURES WILL FORFEIT THEIR DISSENTERS RIGHTS IN CONNECTION WITH THE MERGER.
See Schedule III to this Offer to Purchase.
Sections 1571-80 of the PBCL ("Subchapter D") and 1930(a) of the PBCL,
copies of which are attached to this Offer to Purchase as Schedule III,
entitle any holder of record of Shares who objects to the Merger, in lieu of
receiving the consideration for such Shares provided under the Merger
Agreement, to demand in writing that he be paid in cash the fair value of his
Shares. Section 1572 of the PBCL defines "fair value" as: "The fair value of
shares immediately before the effectuation of the corporate action to which
the dissenter objects, taking into account all relevant factors, but excluding
any appreciation or depreciation in anticipation of the corporate action".
Any shareholder contemplating making demand for fair value is urged to
review carefully the provisions of Subchapter D, particularly the procedural
steps required to perfect his dissenters' rights thereunder. DISSENTERS RIGHTS
WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SUBCHAPTER D ARE NOT FULLY AND
PRECISELY SATISFIED. The following summary does not purport to be a complete
statement of the provisions of Subchapter D of the PBCL and is qualified in
its entirety by reference to Schedule III and the PBCL.
FILING NOTICE OF INTENTION TO DEMAND FAIR VALUE
Before the vote of the shareholders is taken on the Merger, the dissenting
shareholder must deliver to the Company a written notice of intention to
demand that he be paid the fair value of his Shares if the Merger is effected.
Such written notice must be sent to the Secretary of the Company at Rhone-
Poulenc Rorer Inc., 500 Arcola Road, Collegeville, Pennsylvania 19426. Neither
the tendering of Shares in the Offer, nor a vote against the Merger, is
sufficient to satisfy the requirement of delivering a written notice to the
Company. In addition, the shareholder must not effect any change in the
beneficial ownership of his Shares from the date of filing the notice with the
Company through the consummation of the Merger, and Shares for which payment
of fair value is sought must not be voted in favor of the Merger. Failure by a
dissenting shareholder to comply with any of the foregoing will result in the
forfeiture of any right to payment of fair value for his Shares.
RECORD OWNERS AND BENEFICIAL OWNERS
A record holder of Shares held in whole or in part for the benefit of
another person may assert dissenters rights as to fewer than all of the Shares
registered in his name only if he dissents with respect to all the Shares
beneficially owned by any one person and discloses the name and address of the
person or persons on whose behalf he dissents. A beneficial owner of Shares
who is not the record holder may assert dissenters rights with respect to
Shares held on his behalf if he submits to the Company the written consent of
the record holder not later than the time of assertion of dissenters rights. A
beneficial owner may not dissent with respect to fewer than all of the Shares
owned by him, whether or not such Shares are registered in his name.
NOTICE TO DEMAND PAYMENT
If the Merger is approved, the Company shall mail to all dissenters who gave
due notice of their intention to demand payment of fair value and who
refrained from voting in favor of the Merger, a notice stating where and when
a demand for payment must be sent and certificates for Shares deposited in
order to obtain payment. The notice shall be accompanied by a copy of
Subchapter D and a form for demanding payment. The time set for the receipt of
demands and the deposit of certificates shall not be less than 30 days from
the mailing of the notice. Failure by a shareholder to demand payment or
deposit certificates pursuant to such notice will cause such shareholder to
lose all right to have a court determine the fair value of his Shares. If the
Merger has not been effected within 60 days after the date set for demanding
payment and depositing certificates, the Company
22
<PAGE>
shall return any certificates that have been deposited. The Company, however,
may at any later time send a new notice regarding demand for payment and
deposit of certificates with like effect.
PAYMENT OF FAIR VALUE OF SHARES
Promptly after the consummation of the Merger or upon timely receipt of
demand for payment if the Merger has already been effected, the Company shall
remit to dissenters who have made timely demand and deposited their
certificates the amount the Company estimates to be the fair value of their
Shares or give written notice that no remittance will be made under Section
1577 of the PBCL. Such remittance or notice shall be accompanied by (i) the
closing balance sheet and statement of income of the Company for a fiscal year
ending not more than 16 months prior to the date of remittance or notice
together with the latest available interim financial statements, (ii) a
statement of the Company's estimate of the fair value of the Shares, and (iii)
a notice of the right of the dissenting shareholder to demand payment or
supplemental payment, as the case may be, accompanied by a copy of Subchapter
D. If the Company does not remit the amount of its estimate of the fair value
of the Shares, it shall return all certificates that have been deposited and
may make a notation thereon that a demand for payment has been made.
If Shares with respect to which notation has been so made shall be
transferred, each new certificate issued therefor shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such Shares. A transferee of such Shares shall not acquire by such transfer
any rights in the Company other than those that the original dissenter had
after making demand for payment of fair value for such Shares.
ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES
If a dissenting shareholder believes that the amount estimated or paid by
the Company for his Shares is less than their fair value, the shareholder may
send to the Company his own estimate of the fair value which shall be deemed a
demand for payment of the amount of the deficiency. If the dissenter does not
file his own estimate of fair value within 30 days after the mailing by the
Company of its remittance or estimate of fair value, the dissenter shall be
entitled to no more than the amount remitted to him or estimated by the
Company.
VALUATION PROCEEDINGS
Within 60 days after the latest of (i) the consummation of the Merger, (ii)
timely receipt of any demands for payment and (iii) timely receipt of any
shareholder estimates of fair value, if any demands for payment remain
unsettled, the Company may file in court an application for relief requesting
that the fair value of the Shares be determined by the court. Each dissenter
whose demands have not been settled shall be made a party to the proceeding
and shall be entitled to recover the amount by which the fair value of his
Shares is found to exceed the amount, if any, previously remitted, plus
interest. Such dissenter shall also be entitled to interest on such amount
from consummation of the Merger until the date of payment as is fair and
equitable under the circumstances, taking into account all relevant factors
including the average rate currently paid by the Company on its principal bank
loans. If the Company fails to file an application within the 60-day period,
any dissenter who has not settled his claim may do so in the name of the
Company within 30 days after the expiration of this 60-day period. If no
dissenter files an application within such 30-day period, each dissenter who
has not settled his claim shall be paid no more than the Company's estimate of
the fair value of his Shares and may bring an action to recover any amount not
previously remitted.
COSTS AND EXPENSES OF VALUATION PROCEEDINGS
The costs and expenses of any valuation proceedings, including the
reasonable compensation and expenses of any appraiser appointed by the court,
shall be determined by the court and assessed against the Company except that
any part of such costs and expenses may be assessed as the court deems
appropriate against all or some of the dissenters whose action in demanding
supplemental payment is found by the court to be dilatory, obdurate,
arbitrary, vexatious or in bad faith. The court may also assess the fees and
expenses of counsel and
23
<PAGE>
experts for any or all of the dissenters against the Company if the Company
fails to comply substantially with Subchapter D or acts in bad faith or in a
dilatory, obdurate, arbitrary or vexatious manner. The court can also assess
any such fees or expenses incurred by the Company against a dissenter if such
dissenter is found to have acted in bad faith or in a dilatory, obdurate,
arbitrary or vexatious manner. If the court finds that the services of counsel
for any dissenter were of substantial benefit to the other dissenters and
should not be assessed against the Company, it may award to such counsel
reasonable fees to be paid out of the amounts awarded to the dissenters who
were benefitted.
OTHER
Section 1712 of the PBCL provides that a director of a Pennsylvania
corporation stands in a fiduciary relation to such corporation and must
perform his duties as a director in good faith, in a manner he reasonably
believes to be in the best interests of the corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. Section 1105 of the PBCL
provides in substance that a shareholder of a Pennsylvania corporation shall
not have any right to obtain, in the absence of fraud or fundamental
unfairness, an injunction against any proposed merger, nor any right to claim
the right to valuation and payment of the fair value of his Shares because of
the merger, except that he may dissent and claim such payment if and to the
extent provided in Subchapter D of PBCL Chapter 15, described above. Absent
fraud or fundamental unfairness, such dissenters rights are the exclusive
remedy of such shareholders. However, the United States Court of Appeals,
Third Circuit, interpreting the predecessor statute to Section 1105 of the
PBCL in Herskowitz v. NutriSystem, Inc., concluded that dissenters rights co-
exist with common law causes of action, such as rescission or money damages,
in the context of an action for breach of fiduciary duty or misrepresentation
in a cash-out merger. Shareholders should be aware that due to the enactment
of the PBCL in 1988 it is unclear whether the decision in Herskowitz remains
applicable to dissenters' rights. IN VIEW OF THE COMPLEXITIES OF THESE
PROVISIONS OF PENNSYLVANIA LAW, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING
FROM THE MERGER SHOULD CONSULT THEIR OWN LEGAL COUNSEL.
SEE SCHEDULE III ATTACHED HERETO FOR A REPRODUCTION OF THE TEXT OF THE
RELEVANT SECTIONS OF THE PBCL.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Schedule 14D-1 filed by Purchaser with the Commission in
connection with the Offer. Such summary is qualified in its entirety by
reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable after the date thereof, but in no event later than
five business days after the initial public announcement of Purchaser's
intention to commence the Offer. The obligation of Purchaser to accept for
payment and pay for Shares tendered pursuant to the Offer is subject to the
satisfaction of certain conditions that are described in "THE TENDER OFFER--
Section 12. Certain Conditions of the Offer" hereof. Purchaser has agreed that
no change in the Offer may be made which decreases the price per Share payable
in the Offer, which changes the number of Shares to be purchased in the Offer,
which changes the form of the consideration payable in the Offer, which amends
or adds to the conditions to the Offer set forth in "THE TENDER OFFER--Section
12. Certain Conditions of the Offer" or which makes any other change in the
terms or conditions of the Offer which is materially adverse to the holders of
Shares.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Pennsylvania Law, at the
Effective Time, the Merger Subsidiary will be merged with and into the
Company. The Company will continue as the surviving corporation of the Merger
and will become a direct wholly owned subsidiary of Purchaser. At the
Effective Time, each Share issued and outstanding immediately prior to the
Effective Time held by shareholders (other than any Shares owned directly or
indirectly by Purchaser), shall be cancelled and, subject to dissenters rights
under Pennsylvania law, shall be converted automatically into the right to
receive from the Company the Merger Consideration.
24
<PAGE>
The Merger Agreement provides that the directors of the Merger Subsidiary
immediately prior to the Effective Time will be the initial directors of the
Company and that the officers of the Company immediately prior to the
Effective Time remain officers of the Company. The Merger Agreement provides
that, at the Effective Time, the Articles of Incorporation and Bylaws of the
Company will remain unmodified.
The Merger Agreement provides, in accordance with the requirement of the
Acquisition Agreement that this Offer be a Qualifying Tender Offer (see
"INTRODUCTION"), that immediately prior to the Effective Time, each
outstanding option to purchase Shares (in each case, an "Option"), whether or
not then exercisable, shall be cancelled and each holder of a cancelled Option
shall be entitled to receive an indemnity payment (the "Exercise Amount") in
cash, in consideration for the cancellation of each such Option, at the same
time as the Merger Consideration is received by the holders of Shares, equal
to the product of (i) the number of Shares to be issued upon the exercise of
such Option and (ii) the excess, if any, of the amount paid per Share pursuant
to the Offer over the exercise price per Share previously subject to such
Option. The Merger Agreement also provides that Purchaser and the Company's
Compensation Committee will define, prior to the Effective Time, alternatives
to such treatment of Options, which alternatives may include deferral of the
payment of the Exercise Amount and conversion into options to purchase
securities of Purchaser.
Purchaser or the designated paying agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to the Merger
Agreement to any holder of Shares and/or Options such amounts that Purchaser
or the paying agent is required to deduct and withhold with respect to the
making of such payment under the United States Internal Revenue Code of 1986,
as amended, the rules and regulations promulgated thereunder or any provision
of state, local or foreign tax law. Purchaser is making no representation
regarding the tax consequences of the treatment of Options described above,
and each holder of Options should consult his or her tax advisor with respect
to such consequences.
Agreements of Purchaser, the Merger Subsidiary and the Company. Pursuant to
the Merger Agreement, the Company shall, in accordance with applicable law and
the Company's Articles of Incorporation and Bylaws, (i) duly call, give notice
of, convene and hold a special meeting of its shareholders as soon as
practicable following consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby (the "Shareholders' Meeting"), (ii) include in the proxy statement for
the Shareholders' Meeting the recommendation of the Company Board and the
Special Committee that the shareholders of the Company approve and adopt the
Merger Agreement and the transactions contemplated thereby, subject to their
respective fiduciary duties as advised by independent counsel and (iii) use
its reasonable best efforts to obtain such approval and adoption. At the
Shareholders' Meeting, Purchaser shall cause all Shares then owned by it and
its subsidiaries to be voted in favor of the approval and adoption of the
Merger Agreement and the transactions contemplated thereby. Purchaser
currently has sufficient voting power to approve the Merger, even if no other
shareholder votes in favor of the Merger.
The Merger Agreement provides that the Company shall, if required by
applicable law, as soon as practicable following consummation of the Offer,
file a proxy statement with the Commission under the Exchange Act (the "Proxy
Statement"), and shall use its reasonable best efforts to have the Proxy
Statement cleared by the Commission and to cause the Proxy Statement and all
required amendments and supplements thereto to be mailed to the holders of
Shares entitled to vote at the Shareholders' Meeting at the earliest
practicable time.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the Effective Time, unless
Purchaser shall otherwise agree in writing, the businesses of the Company and
its subsidiaries shall be conducted only in, and the Company and its
subsidiaries shall not take any action, except in the ordinary course of
business and in a manner consistent with past practice; and the Company shall
use its reasonable best efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep available the
services of the current officers, employees and consultants of the Company and
its subsidiaries and to preserve the current relationships of the Company and
its subsidiaries
25
<PAGE>
with customers, suppliers and other persons with which the Company or any of
its subsidiaries has significant business relations.
The Company and Purchaser are each obligated under the Merger Agreement to
give each other prompt notice of (i) the occurrence, or nonoccurrence, of any
event the occurrence, or nonoccurrence, of which would be likely to cause any
representation or warranty contained in the Merger Agreement to be untrue or
inaccurate in any material respect and (ii) any failure of the Company,
Purchaser or the Merger Subsidiary, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it thereunder.
Pursuant to the Merger Agreement, the Company shall, to the fullest extent
permitted under applicable law and regardless of whether the Merger becomes
effective, indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company and each of its
subsidiaries (collectively, the "Indemnified Parties") against all costs and
expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission in their capacity as an
officer, director, employee, fiduciary or agent, whether occurring before or
after the Effective Time, until the expiration of the statute of limitations
relating thereto (and shall pay any expenses in advance of the final
disposition of such action or proceeding to each Indemnified Party to the
fullest extent permitted under Pennsylvania law, upon receipt from the
Indemnified Party to whom expenses are advanced of any undertaking to repay
such advances required under Pennsylvania law). In the event of any such
claim, action, suit, proceeding or investigation, (i) the Company shall pay
the reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to the Company,
promptly after statements therefor are received and (ii) the Company shall
cooperate in the defense of any such matter; provided, however, that the
Company shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld); and provided
further that the Company shall not be obligated to pay the fees and expenses
of more than one counsel (plus appropriate local counsel) for all Indemnified
Parties in any single action except (x) that the persons who served as
directors of the Company who were not designees of Purchaser shall be entitled
to retain one additional counsel (plus appropriate local counsel) to represent
them at the expense of the Company, and (y) to the extent that two or more of
such Indemnified Parties shall have conflicting interests in the outcome of
such action, in which case such additional counsel (including local counsel)
as may be required to avoid any such conflict or likely conflict may be
retained by the Indemnified Parties at the expense of the Company, and
provided further that, in the event that any claim for indemnification is
asserted or made within the period prior to the expiration of the applicable
statute of limitations, all rights to indemnification in respect of such claim
shall continue until the disposition of such claim. All rights pursuant to the
foregoing indemnification provisions of the Merger Agreement are deemed to be
a contract between the Company and each of the Indemnified Parties.
The Merger Agreement provides that the Company shall use its reasonable
efforts to maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
maintained by the Company covering those persons who are currently covered by
such policies (provided that the Company may substitute therefor policies of
at least the same coverage containing terms and conditions which are not
materially less favorable) with respect to matters occurring prior to the
Effective Time; provided, however, that in no event shall the Company be
required to expend more than an amount per year equal to 150% of current
annual premiums paid by the Company for such insurance. In the event that, but
for the proviso to the immediately preceding sentence, the Company would be
required to expend more than 150% of current annual premiums, the Company
shall obtain the maximum amount of such insurance obtainable by payment of
annual premiums equal to 150% of current annual premiums. In the event the
Company or any successor or assign (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successor and assign of the
Company, or at Purchaser's option, Purchaser, shall assume the foregoing
indemnification obligations and the
26
<PAGE>
indemnification agreements dated as of July 2, 1997, between the Company and
the members of the Special Committee.
Pursuant to the terms of the Merger Agreement and subject to the conditions
thereof, each of the parties thereto shall (i) use its reasonable best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement, including, without limitation, using its reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for the consummation of
the transactions and to fulfill the conditions to the Offer and the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of the Merger Agreement, the proper
officers and directors of each party to the Merger Agreement and the Company
shall use their reasonable best efforts to take all such action.
Pursuant to the Merger Agreement, the parties thereto agreed that the
Acquisition Agreement shall be terminated as of the Effective Time and that
all representations, warranties and agreements between the parties thereto
which, by the terms of such agreement, survive either or both the Closing Date
(as that term is defined in the Acquisition Agreement) or the termination of
such agreement shall all be terminated as of the Effective Time.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company, Purchaser and the Merger Subsidiary as to the
enforceability of the Merger Agreement and by the Company as to compliance
with law, corporate status and capitalization and the accuracy of financial
statements and filings with the Commission.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) to the
extent required by Pennsylvania law and the Company's Articles of
Incorporation and Bylaws, the Merger Agreement and the transactions
contemplated thereby shall have been approved and adopted by the affirmative
vote of the shareholders of the Company; (b) no foreign, United States or
state governmental authority or other agency or commission or foreign, United
States or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of preventing or
prohibiting consummation of the Merger or the effective operation of the
business of the Company and its subsidiaries after the Effective Time; and (c)
Purchaser or its permitted assignee shall have purchased all Shares validly
tendered and not withdrawn pursuant to the Offer; provided, however, that this
condition shall not be applicable to the obligations of Purchaser or Merger
Subsidiary if, in breach of the Merger Agreement, Purchaser fails to purchase
any Shares validly tendered and not withdrawn pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement may be terminated and
the Merger and the other transactions contemplated by the Merger Agreement may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the shareholders of the Company: (a) by mutual written
consent duly authorized by the Boards of Directors of Purchaser, the Merger
Subsidiary and the Special Committee on behalf of the Company; or (b) by
either Purchaser or the Special Committee on behalf of the Company if (i) the
Effective Time shall not have occurred on or before March 31, 1998; provided,
however, that such right to terminate the Merger Agreement shall not be
available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date or (ii) any court of competent
jurisdiction or other governmental authority shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable; or (c) by Purchaser (i) if due to an
occurrence or circumstance that would result in a failure to satisfy any
condition to the Offer, Purchaser shall have (A) failed to commence the Offer
within 30 days following the date of the Merger Agreement, (B) terminated the
Offer without having accepted any Shares for payment thereunder or (C) failed
to pay for Shares pursuant to the Offer within 90 days
27
<PAGE>
following the commencement of the Offer, unless such termination or failure to
pay for Shares shall have been caused by or resulted from the failure of
Purchaser or Merger Subsidiary to perform in any material respect any material
covenant or agreement of either of them contained in the Merger Agreement or
the material breach by Purchaser or Merger Subsidiary of any material
representation or warranty of either of them contained in the Merger Agreement
or (ii) if prior to the purchase of Shares pursuant to the Offer, the Special
Committee shall have withdrawn or modified in a manner adverse to Purchaser or
the Merger Subsidiary its approval or recommendation of the Offer, the Merger
Agreement, the Merger or any transaction contemplated by the Merger Agreement
or shall have resolved to do any of the foregoing; or (d) by the Company, upon
approval of the Special Committee, if due to an occurrence or circumstance
that would result in a failure to satisfy any of the conditions to the Offer,
Purchaser shall have (i) failed to commence the Offer within 30 days following
the date of the Merger Agreement, (ii) terminated the Offer without having
accepted any Shares for payment thereunder or (iii) failed to pay for Shares
pursuant to the Offer within 90 days following the commencement of the Offer,
unless such termination or failure to pay for Shares shall have been caused by
or resulted from the failure of the Company to perform in any material respect
any material covenant or agreement of it contained in the Merger Agreement or
the material breach by the Company of any material representation or warranty
of it contained in the Merger Agreement; or (e) by the Company, upon approval
of the Special Committee, (i) if any representation or warranty of Purchaser
and the Merger Subsidiary in the Merger Agreement which is qualified as to
materiality shall not be true and correct or any such representation or
warranty that is not so qualified shall not be true and correct in any
material respect, in each case as if such representation or warranty was made
as of such time on or after the date of the Merger Agreement, or (ii)
Purchaser or the Merger Subsidiary shall have failed to perform in any
material respect any obligation or to comply in any material respect with any
agreement or covenant of Purchaser or the Merger Subsidiary to be performed or
complied with by it under the Merger Agreement. In the event of the
termination of the Merger Agreement, the Merger Agreement shall forthwith
become void.
Except as set forth below, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such fees and expenses, whether or not the
transactions contemplated by the Merger Agreement are consummated.
Amendment and Waiver. The Merger Agreement may be amended in writing by the
parties thereto by or on behalf of their respective Boards of Directors (and
approved by the Special Committee) at any time prior to the Effective Time.
Except as otherwise provided by the Merger Agreement, any party thereto may
(i) extend the time for the performance of any obligation or other act of any
other party thereto, (ii) waive any inaccuracy in the representations and
warranties contained therin and (iii) waive compliance with any agreement or
condition contained therein, other than the Minimum Condition.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendation of the Company Board and the Special
Committee with respect to the Offer and the Merger, shareholders should be
aware that certain officers and directors of Purchaser and the Company have
interests in the Offer and the Merger which are described below and which may
present them with certain potential conflicts of interest. Currently, of the
thirteen directors of the Company, one is also a director of Purchaser and
three are executive officers of Purchaser. Mr. Jean Marc Bruel, a director of
the Company, is also a Vice-Chairman and a director of Purchaser; Mr. Igor
Landau, a director of the Company, is also a Group President of Purchaser; Mr.
Jean-Pierre Tirouflet, a director of the Company, is also Senior Executive
Group Vice-President of Purchaser; and Mr. Michel de Rosen, Chairman and Chief
Executive Officer of the Company, is also an executive officer of Purchaser.
Mr. Robert E. Cawthorn is a designee of Purchaser to the Company Board,
although Mr. Cawthorn is not an employee of Purchaser. See "SPECIAL FACTORS--
Beneficial Ownership of Common Stock" for information regarding Shares and
options to acquire Shares beneficially owned by certain of Purchaser's
executive officers or directors. See also "Schedule I--Directors and Executive
Officers of Purchaser".
Shareholders also should be aware that Purchaser has certain interests that
present actual or potential conflicts of interest in connection with the Offer
and the Merger. As a result of Purchaser's current ownership of
28
<PAGE>
approximately 68.1% of the issued and outstanding Shares and its nominees
constituting a majority of the Company's directors, Purchaser may be deemed to
control the Company.
The Special Committee and the Board were aware of these actual and potential
conflicts of interest and considered them along with the other matters
described under "SPECIAL FACTORS--Recommendation of the Company Board;
Fairness of the Offer and the Merger".
Purchaser has been advised that Mr. Antoine Jeancourt-Galignani,
representative of Assurance Generales de France on the Purchaser's Board of
Directors, and Messrs. Philippe Desmarescaux, Landau and Michel de Rosen,
executive officers of Purchaser, intend to tender Shares owned by them
pursuant to the Offer. Purchaser has not been advised by any other executive
officers, directors or affiliates of the Company whether any of such persons
intends to tender Shares owned by them pursuant to the Offer.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of August 8, 1997,
regarding the ownership of Common Stock by each person known by the Company to
be the beneficial owner of more than 5% of the issued and outstanding Common
Stock, and any director or executive officer of the Company or Purchaser who
is the beneficial owner of Shares or Options issued by the Company:
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO PERCENTAGE OF
OPTIONS ISSUED COMMON STOCK
NUMBER OF SHARES BY THE BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED DIRECTLY COMPANY(1) OWNED
- ------------------------ ---------------- ---------------- -------------
<S> <C> <C> <C>
Purchaser...................... 97,163,370 0 68.1%
Alain Audubert................. 0 6,685 *
Jean-Jacques Bertrand.......... 3,267 64,864 *
John A. Bond................... 0 2,957 *
Robert E. Cawthorn............. 98,620 326,789 *
Richard T. Collier............. 3,000 22,929 *
Stephen P. Connelley........... 1,397 45,645 *
Philippe Desmarescaux.......... 2,863 0 *
Charles-Henri Filippi.......... 2,000 10,000 *
Richard Forrest................ 0 70,256 *
Dale F. Frey................... 0 4,000 *
Claude Helene.................. 0 20,000 *
Antoine Jeancourt-Galignani
(representative of Assurances
Generales de France).......... 210 0 *
Manfred E. Karobath, M.D....... 6,911 140,993 *
Igor Landau.................... 200 20,000 *
Hadia Lefavre.................. 0 1,251 *
Philippe Maitre................ 0 10,702 *
John D. Michelmore............. 7,046 62,155 *
Bernard Reculeau............... 4,040 70,902 *
James S. Riepe................. 864 10,000 *
Michel de Rosen................ 8,629 106,814 *
Timothy G. Rothwell............ 0 15,702 *
S.G. Equities International,
subsidiary of Societe
Generale...................... 5,000 0 *
Societe Generale............... 2,000 0 *
Jean-Pierre Tirouflet.......... 0 20,000 *
</TABLE>
- --------
(1) Certain of the directors and executive officers of Purchaser listed in
Schedule I attached hereto (6 persons in all) have the right to acquire
options to purchase from Purchaser up to an aggregate of 628,500 of the
issued and outstanding Shares which are currently owned by Purchaser and
included in the amount of Shares set forth opposite Purchaser's name
above. Michel de Rosen has the right to acquire options to purchase up to
146,000 of such Shares.
* Represents less than 1%.
29
<PAGE>
BNP Arbitrage, an affiliate of the Banque Nationale de Paris, a director of
Purchaser, has effected the following transactions in Shares during the past 60
days:
<TABLE>
<CAPTION>
AMOUNT
DATE OF SHARES PRICE PER SHARE PLACE OF TRADE TYPE OF TRADE
- ---- --------- --------------- -------------- --------------------
<S> <C> <C> <C> <C>
June 19, 1997.... 200 $78.88 NYSE Open Market Purchase
June 19, 1997.... 500 $79.00 NYSE Open Market sale
June 19, 1997.... 200 $78.88 NYSE Open Market sale
June 19, 1997.... 200 $78.88 NYSE Open Market sale
June 26, 1997.... 1,500 $90.56 NYSE Open Market purchase
June 26, 1997.... 2,500 $91.19 NYSE Open Market purchase
June 26, 1997.... 1,000 $91.06 NYSE Open Market sale
June 26, 1997.... 1,000 $91.00 NYSE Open Market sale
June 26, 1997.... 1,100 $91.06 NYSE Open Market sale
June 27, 1997.... 500 $91.38 NYSE Open Market purchase
June 27, 1997.... 1,000 $91.06 NYSE Open Market sale
June 30, 1997.... 1,000 $90.81 NYSE Open Market purchase
June 30, 1997.... 1,000 $90.81 NYSE Open Market sale
July 1, 1997..... 1,000 $91.19 NYSE Open Market purchase
July 2, 1997..... 600 $92.00 NYSE Open Market purchase
July 2, 1997..... 1,000 $92.13 NYSE Open Market sale
July 3, 1997..... 1,000 $92.25 NYSE Open Market purchase
July 3, 1997..... 1,400 $93.00 NYSE Open Market sale
July 3, 1997..... 200 $92.50 NYSE Open Market sale
July 7, 1997..... 2,300 $93.25 NYSE Open Market purchase
July 7, 1997..... 400 $93.33 NYSE Open Market sale
July 7, 1997..... 100 $93.23 NYSE Open Market sale
July 7, 1997..... 1,000 $93.00 NYSE Open Market sale
July 8, 1997..... 1,000 $93.38 NYSE Open Market purchase
July 9, 1997..... 1,000 $93.63 NYSE Open Market sale
July 9, 1997..... 300 $93.63 NYSE Open Market sale
July 9, 1997..... 500 $93.63 NYSE Open Market sale
July 10, 1997.... 1,600 $93.69 NYSE Open Market purchase
July 10, 1997.... 1,100 $93.75 NYSE Open Market sale
July 10, 1997.... 500 $93.69 NYSE Open Market sale
July 15, 1997.... 500 $93.44 NYSE Open Market purchase
July 17, 1997.... 500 $93.44 NYSE Open Market sale
July 18, 1997.... 400 $92.75 NYSE Open Market purchase
July 18, 1997.... 400 $92.75 NYSE Open Market purchase
July 18, 1997.... 300 $92.75 NYSE Open Market sale
July 18, 1997.... 500 $92.75 NYSE Open Market sale
July 24, 1997.... 2,000 $93.31 NYSE Open Market purchase
July 25, 1997.... 200 $93.38 NYSE Open Market sale
July 25, 1997.... 500 $93.38 NYSE Open Market sale
July 25, 1997.... 1,000 $93.44 NYSE Open Market sale
July 28, 1997.... 300 $93.56 NYSE Open Market sale
July 30, 1997.... 1,000 $94.38 NYSE Open Market purchase
July 30, 1997.... 300 $94.38 NYSE Open Market sale
July 30, 1997.... 700 $94.00 NYSE Open Market sale
</TABLE>
30
<PAGE>
Purchaser has effected the following transactions in Shares during the past
60 days:
<TABLE>
<CAPTION>
AMOUNT
DATE OF SHARES PRICE PER SHARE PLACE OF TRADE TYPE OF TRADE
- ---- --------- --------------- -------------- --------------------------------
<S> <C> <C> <C> <C>
July 15, 1997........... 6,000 $32.125 Private sale Sale pursuant to option exercise
July 30, 1997........... 1,000 $32.125 Private sale Sale pursuant to option exercise
</TABLE>
The Company has not effected any transactions in Shares during the past 60
days. To the best of the Company's knowledge, no officer or director of the
Company has effected any transaction in Shares during the past 60 days.
According to Purchaser's records, since January 1, 1995, the Company and
Purchaser have purchased the following number of Shares at the following
average price per Share:
<TABLE>
<CAPTION>
COMPANY PURCHASER
----------------------- -----------------------
NUMBER OF AVERAGE PRICE NUMBER OF AVERAGE PRICE
SHARES PER SHARE SHARES PER SHARE
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
1995:
First Quarter................. 264 $63.0000 45,800 $40.76
Second Quarter................ 0 0.0000 72,000 41.28
Third Quarter................. 0 0.0000 25,000 44.87
Fourth Quarter................ 237 49.0042 185,585 48.66
1996:
First Quarter................. 1,511 $59.5071 207,500 $59.38
Second Quarter................ 3,143 64.5041 781,500 59.78
Third Quarter................. 192 71.3958 0 0.00
Fourth Quarter................ 102 75.3297 1,406,337 72.69
1997:
First Quarter................. 728 $71.6250 0 $ 0.00
Second Quarter................ 171,035 74.0218 531,436 77.58
Third Quarter (through August
15, 1997).................... 0 0.0000 0 0.00
</TABLE>
RELATED PARTY TRANSACTIONS
Purchaser and its affiliates manage their cash separately. In certain large
countries such as the United States, France, the United Kingdom and Germany,
the local entities have access to Purchaser's cash pooling arrangements
whereby they can, at their own request, lend to or borrow from Purchaser at
market terms and conditions. Amounts receivable from Purchaser and affiliates
totaled $48.9 million and $61.3 million at December 31, 1996 and 1995,
respectively. The 1996 balance included $6.3 million of accounts receivable
from sales of products and services to Purchaser (1995: $8.5 million) and
$39.4 million classified as other current assets (1995: $36.8 million).
Accounts payable related to purchase of materials and services from Purchaser
and affiliates were $16.8 million at December 31, 1996 (1995: $12.2 million);
accrued and other liabilities due to Purchaser at December 31, 1996 were $30.0
million (1995: $20.9 million). In 1996, sales to Purchaser and affiliates were
$31.3 million (1995: $31.1 million). Materials purchased from Purchaser
totaled $38.7 million in 1996 (1995: $41.4 million). At December 31, 1996,
debt to Purchaser and affiliates totaled $259.8 million (1995: $653.0
million). Interest expense incurred with respect to Purchaser indebtedness in
1996 was $22.3 million (1995: $12.4 million). In addition, Purchaser provides
the Company with a $500.0 million medium-term currency facility, with interest
based on London Interbank Offer Rate ("LIBOR") plus a margin, and has
guaranteed certain obligations of the Company under certain joint ventures.
Purchaser charges the Company for expenses incurred on its behalf, including
research, data processing, insurance, legal, tax, advertising, public
relations and management fees. Such charges are reflected in the financial
statements and amounted to approximately $24.0 million in 1996 (1995: $23.6
million). Purchaser believes that the expenses so charged are representative
of amounts that the Company would have incurred if it had been operated as an
unaffiliated entity.
In 1995, the Company acquired from Purchaser the businesses of Cooperation
Pharmaceutique Francaise ("Cooper"), primarily in France, and a
pharmaceuticals business in Brazil for cash and preferred stock of a
31
<PAGE>
subsidiary of the Company aggregating approximately $273.2 million. The
preferred shares, accounted for as minority interest in other liabilities,
have a liquidation preference of approximately FF645.0 million (approximately
$123.1 million) and pay dividends of 7.5% per annum on a stated value of
FF145.0 million. The acquisition agreements call for potential adjustments to
the purchase price of the businesses based on several factors, including
earnings performance.
In December 1995, the Company issued $500.0 million of undated capital
equity notes to Purchaser. The notes have a liquidation preference that ranks
senior to the Shares, but junior to all existing and future Company preferred
stock. Semiannual remuneration on the unpaid principal balance of the equity
notes is based on LIBOR plus a margin and was approximately $35.2 million in
1996. The capital equity notes are redeemable only at the Company's option,
but not earlier than five years after issuance, subject to certain exceptions.
In addition, the Company has entered into various licensing and
confidentiality agreements with Purchaser and its affiliates regarding certain
intellectual property rights.
In the ordinary course of their businesses, Purchaser and the Company engage
in a variety of commercial and financial transactions with several of the
companies (and/or their affiliates) which are represented on the Purchaser
Board (such as the Banque Nationale de Paris, Credit Lyonnais, Credit Suisse
First Boston, Fiat and Societe Generale). These commercial and financial
transactions are conducted on an arm's-length basis in accordance with the
Purchaser's standard business practices.
32
<PAGE>
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept
for payment, and will pay for, all Shares validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn as permitted by
"THE TENDER OFFER--Section 4. Withdrawal Rights". The term "Expiration Date"
means 5:00 p.m., New York City time, on Wednesday, October 1, 1997, unless and
until Purchaser, in its sole discretion (but subject to the terms and
conditions of the Merger Agreement), shall have extended the period during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by Purchaser,
shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from
time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the conditions specified in
"THE TENDER OFFER--Section 12. Certain Conditions of the Offer", by giving
oral or written notice of such extension to the Depositary. During any such
extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering shareholder to
withdraw such shareholder's Shares. See "THE TENDER OFFER--Section 4.
Withdrawal Rights".
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time,
(i) to delay acceptance for payment of, or, regardless of whether such Shares
were theretofore accepted for payment, payment for, any Shares, pending
receipt of any regulatory approval specified in "THE TENDER OFFER--Section 13.
Certain Legal Matters and Regulatory Approval", (ii) to terminate the Offer
and not accept for payment any Shares upon the occurrence of any of the
conditions, specified in "THE TENDER OFFER--Section 12. Certain Conditions of
the Offer" and (iii) to waive any condition, other than the Minimum Condition,
or otherwise amend the Offer in any respect, by giving oral or written notice
of such delay, termination, waiver or amendment to the Depositary and by
making a public announcement thereof. The Merger Agreement provides that,
without the consent of the Special Committee, Purchaser will not (i) decrease
the price per Share payable in the Offer, (ii) change the number of Shares to
be purchased in the Offer, (iii) change the form of consideration payable in
the Offer, (iv) impose conditions to the Offer in addition to those set forth
in "THE TENDER OFFER--Section 12. Certain Conditions of the Offer" or (v) make
any other change in the terms or conditions of the Offer which is materially
adverse to the holders of Shares. Purchaser acknowledges that (i) Rule 14e-
1(c) under the Exchange Act requires Purchaser to pay the consideration
offered or return the Shares tendered promptly after the termination or
withdrawal of the Offer and (ii) Purchaser may not delay acceptance for
payment of, or payment for (except as provided in clause (i) of the first
sentence of this paragraph), any Shares upon the occurrence of any of the
conditions specified in "THE TENDER OFFER--Section 12. Certain Conditions of
the Offer" without extending the period of time during which the Offer is
open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement
in the case of an extension to be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act, which require that material changes be promptly disseminated
to shareholders in a manner reasonably designed to inform them of such
changes) and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service and, in France, to Les
Echos and La Tribune.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-
4(c), 14d-6(d) and 14e-1 under the Exchange Act.
33
<PAGE>
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to decrease the number of Shares being sought or
to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Share being sought or such increase or decrease in
the consideration being offered will be applicable to all shareholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time
notice of any such decrease in the number of Shares being sought or such
increase or decrease in the consideration being offered is first published,
sent or given to holders of such Shares, the Offer is scheduled to expire at
any time earlier than the period ending on the tenth business day from and
including the date that such notice is first so published, sent or given, the
Offer will be extended at least until the expiration of such ten business day
period. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or United States federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on
the Company's shareholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies, and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment),
Purchaser will accept for payment, and will pay for, all Shares validly
tendered prior to the Expiration Date and not properly withdrawn, promptly
after the latest to occur of (i) the Expiration Date and (ii) the satisfaction
or waiver of the conditions to the Offer set forth in "THE TENDER OFFER--
Section 12. Certain Conditions of the Offer". Subject to applicable rules of
the Commission, Purchaser expressly reserves the right to delay acceptance for
payment of, or payment for, Shares pending receipt of any regulatory approvals
specified in "THE TENDER OFFER--Section 13. Certain Legal Matters and
Regulatory Approvals" or in order to comply in whole or in part with any other
applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (A)
the certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depositary Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in "THE TENDER OFFER--Section 3. Procedures for Accepting
the Offer and Tendering Shares", (B) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message (as
defined below) in lieu of the Letter of Transmittal and (C) any other
documents required under the Letter of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary or the French Depositary of Purchaser's acceptance for payment of
such Shares pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payments from Purchaser and transmitting such payments to
tendering shareholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for Shares be paid,
regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the
tendering shareholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedure set forth in "THE TENDER OFFER--Section 3.
Procedures for Accepting the Offer and
34
<PAGE>
Tendering Shares", such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser shall increase the consideration
offered to any holders of Shares pursuant to the Offer, such increased
consideration shall be paid to all holders of Shares that are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such
transaction or assignment will not relieve Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering shareholders to
receive payment for Shares validly tendered and accepted for payment pursuant
to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares in the United States pursuant to the
Offer, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal) and any other documents required by the Letter of Transmittal,
must be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase and either (i) the Share Certificates
evidencing tendered Shares must be received by the Depositary at such address
or such Shares must be tendered pursuant to the procedure for book-entry
transfer described below and a Book-Entry Confirmation must be received by the
Depositary (including an Agent's Message if the tendering shareholder has not
delivered a Letter of Transmittal), in each case prior to the Expiration Date,
or (ii) the tendering shareholder must comply with the guaranteed delivery
procedures described below. The term "Agent's Message" means a message,
transmitted by a Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares
which are the subject of such book-entry confirmation, that such participant
has received and agrees to be bound by the terms of the Letter of Transmittal
and that Purchaser may enforce such agreement against such participant.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of any Book-Entry
Transfer Facility may make a book-entry delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-
Entry Transfer Facility's procedures for such transfer. However, although
delivery of Shares may be effected through book-entry transfer at a Book-Entry
Transfer Facility, either the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and
any other required documents, must, in any case, be received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date, or the tendering shareholder must comply with
the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution", as such
35
<PAGE>
term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing
referred to as an "Eligible Institution"), except in cases where Shares are
tendered (i) by a registered holder of Shares who has not completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear
on the Share Certificate, with the signature(s) on such Share Certificate or
stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5
of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and the Share Certificates evidencing such shareholder's Shares are
not immediately available or such shareholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such shareholder cannot complete the procedure for
delivery by book-entry transfer on a timely basis, such Shares may
nevertheless be tendered, provided that all the following conditions are
satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees, and any other
documents required by the Letter of Transmittal are received by the
Depositary within three NYSE trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
form of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any
Shares of any particular shareholder, whether or not similar defects or
irregularities are waived in the case of other shareholders. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Purchaser, the Dealer
Manager, the Co-Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution,
36
<PAGE>
in the manner set forth in the Letter of Transmittal, to the full extent of
such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser (and with respect to any and
all other Shares or other securities issued or issuable in respect of such
Shares on or after August 19, 1997). All such proxies shall be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, Purchaser accepts such Shares for
payment. Upon such acceptance for payment, all prior proxies given by such
shareholder with respect to such Shares (and such other Shares and securities)
will be revoked without further action, and no subsequent proxies may be given
nor any subsequent written consent executed by such shareholder (and, if given
or executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such shareholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's shareholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH
SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP
WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED
TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF
THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of the Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after October 21,
1997. If Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 4.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder of such Shares, if different from that
of the person who tendered such Shares. If Share Certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on the such Share Certificates must be submitted to
the Depositary and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution, unless such Shares have been tendered
for the account of an Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer as set forth in "THE TENDER
OFFER--Section 3. Procedures for Accepting the Offer and Tendering Shares",
any notice of withdrawal must specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, the Dealer
Manager, the Co-Dealer Manager, the Depositary, the Information Agent or any
other person will be under duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
37
<PAGE>
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "THE TENDER OFFER--Section 3. Procedures for Accepting
the Offer and Tendering Shares".
5. CERTAIN U.S. FEDERAL AND FRENCH INCOME TAX CONSEQUENCES. U.S. Federal
Income Tax. The receipt of cash for Shares pursuant to the Offer or in the
Merger will be a taxable transaction for U.S. federal income tax purposes
under the Code and may also be a taxable transaction under applicable state,
local or foreign tax laws. In general, a shareholder will recognize gain or
loss for U.S. federal income tax purposes equal to the difference between the
amount of cash received in exchange for the Shares sold and such shareholder's
adjusted tax basis in such Shares. Assuming the Shares constitute capital
assets in the hands of the shareholder, such gain or loss will be capital gain
or loss and, in the case of an individual shareholder, will be taxable at
various preferential rates depending on the extent to which such shareholder's
holding period for the Shares tendered pursuant to the Offer or converted
pursuant to the Merger exceeds one year. Gain or loss will be calculated
separately for each block of Shares tendered pursuant to the Offer or
converted pursuant to the Merger. The deduction of capital losses is subject
to certain limitations. Prospective investors should consult their own tax
advisors in this regard.
In general, in order to prevent backup federal income tax withholding at a
rate of 31% on the cash consideration to be received in the Offer or pursuant
to the Merger, each shareholder who is not otherwise exempt from such
requirements must provide such shareholder's correct taxpayer identification
number (and certain other information) by completing the Substitute Form W-9
in the Letter of Transmittal.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
SHAREHOLDERS, INCLUDING BROKER-DEALERS, SHAREHOLDERS WHO ACQUIRED SHARES
PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES AND FOREIGN CORPORATIONS.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO
CHANGE POSSIBLY WITH RETROACTIVE EFFECT. SHAREHOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER
AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
French Income Tax. The receipt of cash for Shares pursuant to the Offer or
in the Merger will be a taxable transaction for French tax purposes for French
tax residents. In general, a resident of France for tax purposes who is a
shareholder will recognize gain or loss for French tax purposes equal to the
difference between the amount of cash received in exchange for the Shares sold
and such shareholder's tax basis in such Shares. French resident individuals
will generally be subject to tax in France at a rate of 20.9% if their sales
of securities exceed FF 100,000 in 1997. Capital losses can be offset against
capital gains of the same nature, but such deduction is subject to certain
limitations. No assurance is provided as to whether the indemnity paid to
shareholders in connection with the Merger will be subject to treatment as
capital gains tax. French resident corporations will generally be subject to
tax at the effective rate of 36 2/3%, as ordinary income, unless the Shares
were held in a special participation account for more than two years, in which
case the rate is reduced to an effective rate of 20.9%. The French government
has announced that the rate of ordinary corporate income tax will be increased
to 41.6% for gain recognized in 1997 for corporations with sales of FF 50
million or more.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN SHAREHOLDERS,
INCLUDING SHAREHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR WHOSE PARTICIPATION IN
THE COMPANY IS AT LEAST EQUAL TO THE EQUIVALENT OF FF 150 MILLION.
THE FRENCH INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO CHANGE
POSSIBLY WITH RETROACTIVE EFFECT. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE
MERGER TO THEM.
38
<PAGE>
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NYSE under the symbol "RPR". The following table sets forth, for
the quarters indicated, the high and low prices per Share on NYSE as reported
by the Dow Jones News Service and the quarterly dividends paid per Share:
<TABLE>
<CAPTION>
DIVIDEND
NYSE: HIGH LOW PAID
----- ---- ---- --------
<S> <C> <C> <C>
1995:
First Quarter.................................... $43 1/2 $35 7/8 $ .30
Second Quarter................................... 43 1/4 40 1/8 .30
Third Quarter.................................... 45 7/8 40 3/8 .30
Fourth Quarter................................... 54 1/2 43 3/4 .30
1996:
First Quarter.................................... $66 7/8 $50 1/2 $ .30
Second Quarter................................... 69 1/4 58 .32
Third Quarter.................................... 77 3/4 62 1/8 .32
Fourth Quarter................................... 80 1/2 66 .32
1997:
First Quarter.................................... $78 1/8 $70 1/8 $ .32
Second Quarter................................... 91 9/16 68 .32
Third Quarter (through August 21, 1997).......... 96 1/8 90 3/4 --
</TABLE>
On June 25, 1997, the last full trading day prior to the public announcement
of Purchaser's consideration of a possible business combination with the
Company, the closing price per Share as reported on the NYSE was $79 7/16. On
August 19, 1997, the last full trading day prior to announcement of the
commencement of the Offer, the closing price per Share as reported on the NYSE
was $95 1/8.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company
or has been taken from or based upon publicly available documents and records
on file with the Commission and other public sources. Purchaser assumes no
responsibility for the accuracy or completeness of the information concerning
the Company furnished by the Company or contained in such documents and
records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information
but which are unknown to Purchaser.
General. The Company is a Pennsylvania corporation with its principal
offices located at 500 Arcola Road, Collegeville, Pennsylvania 19426. The
Company is primarily engaged in the discovery, development, manufacture and
marketing of a broad line of pharmaceutical products for human use.
Financial Information. Set forth below is certain selected financial
information relating to the Company which has been excerpted or derived from
the audited financial statements contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (the "Form 10-K") and
the unaudited financial statements contained in the Company's June 30 Form 10-
Q. More comprehensive financial information is included in the Form 10-K and
the Company's June 30 Form 10-Q and other documents filed by the Company with
the Commission. The financial information that follows is qualified in its
entirety by reference to such reports and other documents may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth below. In addition, Schedules IV and V hereto set forth the Company's
audited financial statements for the fiscal year ended December 31, 1996 and
the Company's unaudited financial statements for the period ended June 30,
1997, respectively.
39
<PAGE>
RHONE-POULENC RORER INC.
SELECTED FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30, DECEMBER 31,
------------------ --------------------
1997 1996 1996 1995
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.......................... $2,323.8 $2,618.5 $5,420.6 $5,142.1
Cost of products sold.............. 691.4 878.0 1,666.0 1,746.4
Selling, delivery and administra-
tive expenses..................... 946.2 1,046.7 2,109.7 1,863.7
Research and development expenses.. 405.2 414.3 882.1 766.2
Restructuring and other charges.... -- -- 102.6 126.5
-------- -------- -------- --------
Operating income................. 281.0 279.5 660.2 639.3
Interest expense, net.............. 76.2 84.5 169.6 84.9
Other (income) expense, net........ (20.8) (77.4) (199.8) 16.4
-------- -------- -------- --------
Income before income taxes....... 225.6 272.4 690.4 538.0
Provision for income taxes......... 70.1 85.2 216.9 181.5
-------- -------- -------- --------
Net income....................... 155.5 187.2 473.5 356.5
Dividends on preferred stock and
remunerations on capital
equity notes...................... 21.9 21.3 44.8 18.7
-------- -------- -------- --------
Net income available to common
shareholders.................... $ 133.6 $ 165.9 $ 428.7 $ 337.8
======== ======== ======== ========
PER SHARE DATA:
Average number of shares issued and
outstanding during period(1)....... 137.0 135.3 135.8 134.2
Primary earnings per common share.. $ .98 $ 1.23 $ 3.16(2) $ 2.50(3)
======== ======== ======== ========
</TABLE>
- --------
(1) Does not include shares held in the Company's treasury or Employee Benefits
Trust.
(2) Net income available to common shareholders.
(3) Net income available to common shareholders, pro forma.
40
<PAGE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
------------------ -------------------
1997 1996 1996 1995
-------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
ASSETS
Cash and cash equivalents............. $ 114.4 $ 60.9 $ 100.6 $ 115.4
Cash pooling arrangements with Rhone-
Poulenc S.A.......................... 4.2 10.4 3.2 16.0
Short-term investments and notes re-
ceivable............................. 63.1 66.7 38.7 --
Trade accounts receivable, less re-
serves............................... 858.6 870.6 984.1 956.8
Inventories........................... 796.7 832.8 800.7 765.6
Other current assets.................. 762.3 797.1 846.2 935.8
-------- -------- --------- --------
Total current assets.............. 2,599.3 2,638.5 2,773.5 2,789.6
Time deposits, at cost................ 128.4 83.0 128.4 83.0
Property, plant and equipment, net of
accumulated depreciation............. 1,426.5 1,556.5 1,525.9 1,621.0
Goodwill, net of accumulated amortiza-
tion................................. 2,601.0 2,836.9 2,739.0 2,953.5
Intangibles, net of accumulated amor-
tization............................. 707.4 849.2 766.7 866.8
Other assets.......................... 839.1 769.1 834.6 673.2
-------- -------- --------- --------
Total assets...................... $8,301.7 $8,733.2 $ 8,768.1 $8,987.1
======== ======== ========= ========
LIABILITIES
Short-term debt....................... $ 157.9 $ 414.6 126.7 511.8
Accounts payable...................... 427.1 529.8 594.7 601.8
Other current liabilities............. 1,109.4 1,143.4 1,331.5 1,291.5
-------- -------- --------- --------
Total current liabilities......... 1,694.4 2,087.8 2,052.9 2,405.1
Long-term debt........................ 2,432.0 2,415.2 2,272.0 2,159.0
Notes payable to Rhone-Poulenc S.A.
and affiliates....................... 187.9 249.5 253.0 525.4
Deferred income taxes................. 241.6 363.1 218.0 365.5
Other liabilities, including minority
interests............................ 1,208.4 1,201.5 1,322.4 1,174.9
-------- -------- --------- --------
Total liabilities................. $5,764.3 $6,317.1 $ 6,118.3 $6,629.9
======== ======== ========= ========
SHAREHOLDERS' EQUITY
Money market preferred stock without
par value (liquidation preference
$100,000 per share); authorized,
issued and outstanding 1,750 shares.. 175.0 175.0 175.0 175.0
Capital equity notes.................. 500.0 500.0 500.0 500.0
Common stock, without par value;
stated value $1 per share;
authorized 600,000,000 shares........ 142.6 141.0 141.6 139.5
Capital in excess of stated value..... 273.9 204.2 234.8 153.2
Retained earnings..................... 1,883.8 1,662.3 1,837.9 1,580.3
Employee Benefits Trust............... (198.1) (185.7) (185.7) (185.7)
Cumulative translation adjustments.... (239.8) (80.7) (53.8) (5.1)
-------- -------- --------- --------
Total shareholders' equity........ 2,537.4 2,416.1 2,649.8 2,357.2
-------- -------- --------- --------
Total liabilities and sharehold-
ers' equity...................... $8,301.7 $8,733.2 $ 8,768.1 $8,987.1
======== ======== ========= ========
</TABLE>
Company Budget Information and Financial Projections. The Company does not,
as a matter of course, make public forecasts or projections as to future
sales, earnings or other income statement data. However, in connection with
Purchaser's review of the transactions contemplated by the Offer and the
Merger, Purchaser examined certain projections prepared by the Company. See
"SPECIAL FACTORS--Company Budget Information and Financial Projections".
41
<PAGE>
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in proxy statements distributed
to the Company's shareholders and filed with the Commission. Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048 and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Information regarding the public reference facilities may be
obtained from the Commission by telephoning 1-800-SEC-0330. The Company's
filings are also available to the public on the SEC Internet site
(http://www.sec.gov.). Copies of such materials may also be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Certain reports and other
information concerning the Company may also be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND THE MERGER
SUBSIDIARY. Purchaser is a societe anonyme organized under the laws of the
Republic of France. Its principal offices are located at 25, quai Paul Doumer,
92408 Courbevoie Cedex, France. Purchaser and its affiliates comprise one of
the leading groups worldwide in life sciences and specialty chemicals.
The Merger Subsidiary is a Pennsylvania corporation established on August
18, 1997 and has not carried on any activities other than the execution of the
Merger Agreement. Its principal offices are located at Twelfth Floor, Packard
Building, 111 South 15th Street, Philadelphia, Pennsylvania 19102-2678. The
Merger Subsidiary is a direct wholly owned subsidiary of Purchaser.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Purchaser and the Merger Subsidiary and certain other information
are set forth in Schedule I hereto.
Purchaser owns 97,163,370 Shares, representing approximately 68.1% of the
142,687,492 Shares issued and outstanding at July 31, 1997.
Except as described in this Offer to Purchase, (i) none of Purchaser, the
Merger Subsidiary, nor, to the best knowledge of Purchaser and the Merger
Subsidiary, any of the persons listed in Schedule I to this Offer to Purchase
or any associate or majority-owned subsidiary of Purchaser or the Merger
Subsidiary or any of the persons so listed beneficially owns or has any right
to acquire, directly or indirectly, any Shares and (ii) none of Purchaser, the
Merger Subsidiary, nor, to the best knowledge of Purchaser and the Merger
Subsidiary, any of the persons or entities referred to above nor any director,
executive officer or subsidiary of any of the foregoing has effected any
transaction in the Shares during the past 60 days.
Except as provided in the Merger Agreement or as otherwise described in this
Offer to Purchase, none of Purchaser, the Merger Subsidiary nor, to the best
knowledge of Purchaser and the Merger Subsidiary, any of the persons listed in
Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting
of such securities, finder's fees, joint ventures, loan or option
arrangements, puts or call, guarantees of loans, guaranties against loss,
guaranties of profits, division of profits or loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, since
January 1, 1995, none of Purchaser, the Merger Subsidiary nor, to the best
knowledge of Purchaser and the Merger Subsidiary, any of the persons listed on
Schedule I hereto, has had any business relationship or transaction with the
Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as
42
<PAGE>
set forth in this Offer to Purchase, since January 1, 1995, there have been no
contacts, negotiations or transactions between Purchaser or any of their
subsidiaries or, to the best knowledge of Purchaser, any of the persons listed
in Schedule I to this Offer to Purchase, on the one hand, and the Company or
its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
Purchaser is subject to the informational reporting requirements of the
Exchange Act applicable to foreign private issuers, and in accordance
therewith files reports, including annual reports on Form 20-F, and other
information with the Commission. Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the Commission's regional offices located at Seven World Trade Center, Suite
1300, New York, New York 10048, and the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public
reference facilities may be obtained from the Commission by telephoning 1-800-
SEC-0330. Copies of such materials may also be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Certain reports and other
information concerning the Purchaser may also be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required
by Purchaser to consummate the Offer and the Merger and to pay related fees
and expenses is estimated to be approximately $4.8 billion. Purchaser has
entered into binding term sheets with Societe Generale, Banque Nationale de
Paris, Credit Lyonnais and Union Bank of Switzerland regarding multicurrency
credit facilities pursuant to which it intends to borrow up to an aggregate of
approximately FF8.5 billion and $850 million of unsecured indebtedness
maturing in less than one year. The all-in cost of such drawn short-term
indebtedness ranges from 0.10% to 0.125% over LIBOR or Paris Interbank Offer
Rate ("PIBOR"). Purchaser has entered into binding term sheets with the
following banks creating multicurrency credit facilities pursuant to which it
intends to borrow up to an aggregate of approximately FF12.75 billion and $230
million of unsecured indebtedness maturing in five years: Societe Generale,
Banque Nationale de Paris, Natexis, Banque Paribas, Credit Agricole Indosuez,
Bayerische Landesbank, Caisse Centrale des Banques Populaires, Royal Bank of
Canada, Credit Commercial de France, Credit Commercial et Industriel de Paris,
Midland Bank plc, Credit Lyonnais, Citibank, N.A. and Union Bank of
Switzerland. The all-in cost of such drawn medium-term indebtedness ranges
from 0.17% to 0.20% over LIBOR or PIBOR. The balance will be drawn on existing
credit facilities.
Purchaser may also use funds from its working capital and/or its affiliates'
working capital, or from existing undrawn credit facilities. The decision as
to the allocation of funding among existing or anticipated credit facilities
and working capital will be made based on Purchaser's review from time to time
of the advisability of particular actions, as well as on prevailing interest
rates and financial and other economic conditions and such other factors as
Purchaser may deem appropriate.
Purchaser anticipates that any indebtedness incurred through borrowings
under the credit facilities listed above will be repaid from a variety of
sources, which may include, but may not be limited to, funds generated
internally by Purchaser and its affiliates (including, following the Merger,
funds generated by the Company), bank refinancing, and the public or private
sale of debt or equity securities. Purchaser intends to repay a portion of the
indebtedness related to the Offer from proceeds of a public offering of shares
of the Purchaser to be commenced, market conditions permitting, following the
successful completion of the Offer. Purchaser expects the proceeds of such
offering to be approximately FF 7 billion (which is currently approximately
$1.155 billion). In addition, Purchaser expects to make a public offering of
shares of NewChemco in 1998, subject to, among other things, market
conditions, and to make dispositions of certain non-strategic assets. The
source and allocation of various methods of repayment will be determined and
may be modified by Purchaser based on market conditions and such other factors
as Purchaser may deem appropriate.
43
<PAGE>
10. DIVIDENDS AND DISTRIBUTIONS. If, on or after August 19, 1997, the
Company should declare or pay any dividend on the Shares or make any other
distribution (including the issuance of additional shares of capital stock
pursuant to a stock dividend or stock split, the issuance of other securities
or the issuance of rights for the purchase of any securities) with respect to
the Shares that is payable or distributable to shareholders of record on a
date prior to the transfer to the name of Purchaser or its nominee or
transferee on the Company's stock transfer records of the Shares pursuant to
the Offer, then, without prejudice to Purchaser's rights under "THE TENDER
OFFER--Section 12. Certain Conditions of the Offer", (i) the purchase price
per Share payable by Purchaser pursuant to the Offer will be reduced (subject
to the Merger Agreement) to the extent any such dividend or distribution is
payable in cash and (ii) any non-cash dividend, distribution or right shall be
received and held by the tendering shareholder for the account of Purchaser
and will be required to be promptly remitted and transferred by each tendering
shareholder to the Depositary for the account of Purchaser, accompanied by
appropriate documentation of transfer. Pending such remittance and subject to
applicable law, Purchaser will be entitled to all the rights and privileges as
owner of any such non-cash dividend, distribution or right and may withhold
the entire purchase price or deduct from the purchase price the amount or
value thereof, as determined by Purchaser in its sole discretion.
11. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; THE NYSE, THE PARIS
BOURSE AND EXCHANGE ACT REGISTRATION. The Purchase of Shares by Purchaser
pursuant to the Offer will reduce the number of Shares that might otherwise
trade publicly and will reduce the number of holders of Shares, which could
adversely affect the liquidity and market value of the remaining Shares held
by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in the NYSE or
the Paris Bourse.
According to the NYSE's published guidelines, the Shares would not be
eligible to be included for listing if, among other things, the number of
Shares publicly held falls below 600,000, the number of holders of Shares
falls below 1,200 (holding at least 100 Shares) or the aggregate market value
of such publicly held Shares does not exceed $5,000,000. If, as a result of
the purchase of Shares pursuant to the Offer, the Merger or otherwise, the
Shares no longer meet the requirements of the NYSE for continued listing, and
the listing of the Shares might be discontinued and, in such event, the market
for the Shares could be adversely affected. According to the Paris Bourse's
published regulations, a number of factors would be considered in determining
whether the Shares would no longer be eligible for listing, including whether
(i) the market capitalization of the Shares listed on the Paris Bourse is less
than FF 50 million at year-end, (ii) the Shares are traded less than every two
trading days and (iii) the average daily trading volume is less than one
hundred Shares. In the event the Shares were no longer eligible for listing on
the NYSE or the Paris Bourse, quotations might still be available from other
sources. The extent of the public market for the Shares and the availability
of such quotations would, however, depend upon the number of holders of such
Shares remaining at such time, the interest in maintaining a market in such
Shares on the part of securities firms, the possible termination of
registration of such Shares under the Exchange Act as described below and
other factors.
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of such securities.
Depending upon factors similar to those described above regarding listing and
market quotations, following the Offer it is possible that the Shares might no
longer constitute "margin securities" for purposes of the margin regulations
of the Federal Reserve Board, in which event such Shares could no longer be
used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the
Commission if the Shares are not listed on a national securities exchange and
there are fewer than 300 record holders. The termination of the registration
of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and
to the Commission and would make certain provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement in connection with
44
<PAGE>
shareholders' meetings and the requirements of Rule 13e-3 under the Exchange
Act with respect to the "going private" transactions, no longer applicable to
the Shares. In addition, "affiliates" of the Company and persons holding
"restricted securities" of the Company may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin
securities" or be eligible for NYSE reporting. Purchaser currently intends to
seek to cause the Company to terminate the registration of the Shares under
the Exchange Act as soon as practicable after consummation of the Offer if the
requirements for termination of registration are met.
12. CERTAIN CONDITIONS OF THE OFFER. Purchaser shall not accept for payment
any Shares tendered pursuant to the Offer unless such number of the then
issued and outstanding Shares, other than the Purchaser Shares, which, when
taken together with the Purchaser Shares, constitutes at least 90% of the then
issued and outstanding Shares, shall have been validly tendered and not
withdrawn prior to the expiration of the Offer (the "Minimum Condition").
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay, subject to the applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act,
for any Shares tendered pursuant to the Offer, and may terminate or amend the
Offer to the extent expressly provided in the Merger Agreement and may
postpone the acceptance for payment of and payment for Shares tendered, if (i)
the Minimum Condition shall not have been satisfied or (ii) at any time on or
after the date of the Merger Agreement, and prior to the acceptance for
payment of Shares, any of the following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding by any Governmental Entity (as defined in the Merger Agreement)
(i) challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit or make materially more costly
the making of the Offer, the acceptance for payment of, or payment for, any
Shares by Purchaser or any other affiliate of Purchaser or the consummation
of any other transaction contemplated by the Merger Agreement, (ii) seeking
to prohibit or limit materially the ownership or operation by the Company,
Purchaser or any of their subsidiaries of all or any material portion of
the business or assets of the Company or any of its subsidiaries, or to
compel the Company, Purchaser or any of their subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of the
Company or any of its subsidiaries, as a result of the transaction
contemplated by the Merger Agreement, (iii) seeking to impose or confirm
limitations on the ability of Purchaser or any other affiliate of Purchaser
to exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by Purchaser
pursuant to the Offer or otherwise on all matters properly presented to the
Company's shareholders, including, without limitation, the approval and
adoption of the Merger Agreement and the Merger, (iv) seeking to require
divestiture by Purchaser or any other affiliate of Purchaser of any Shares,
or (v) which otherwise has a Material Adverse Effect (as defined in the
Merger Agreement) on the Company.
(b) there shall have been any order or injunction issued, or any Law (as
defined in the Merger Agreement) enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to Purchaser, the Company or any
subsidiary or affiliate of Purchaser or the Company which has resulted, or
is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or development
that has a Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the NYSE
or the Paris Bourse; (ii) any general suspension of, or limitation on
prices for, trading in equity securities on the Paris Bourse; (iii) any
decline, measured from the date hereof, in the Standard & Poor's 500 Index
by an amount in excess of 20%; (iv) any change in currency exchange rates,
measured from the close of business on August 19, 1997, resulting in an
increase of 15% or more in the Per Share Amount (as defined in the Merger
Agreement) as translated from United States Dollars into French Francs; (v)
a declaration of a banking moratorium or any suspension of payments in
respect of banks
45
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PURCHASER AND THE MERGER SUBSIDIARY
1. Directors and Executive Officers of Purchaser. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
director and executive officer of Purchaser. Unless otherwise indicated, the
current business address of each person is Rhone-Poulenc S.A., 25, quai Paul
Doumer, 92408 Courbevoie Cedex, France. Unless otherwise indicated, each such
person is a citizen of France.
A. DIRECTORS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------
<S> <C>
Jean-Rene Fourtou....... Director, Chairman of the Board and Chief Executive Of-
ficer of Rhone-Poulenc S.A. (since 1986); Director of
Rhone-Poulenc Japan, Rhone-Poulenc Limited, Rhone-
Poulenc Quimica S.A., Air France, The Equitable, Axa
Assurances Iard, Axa Assurance Vie Mutuelle, Axa Assur-
ance Vie, Axa Iard Mutuelle, Midi Participations, As-
surance Iard Mutuelle, Alpha Assurance Vie, Alpha As-
surance Vie Mutuelle, Uni Europe Assurance Mutuelle,
Schneider S.A., Societe Generale and Pernod Ricard;
Vice-President of the Supervisory Board of Axa UAP;
Member of the Supervisory Board of Gerot Holding A.G.
and the Supervisory Board of Casino.
Jean-Marc Bruel......... Director of Rhone-Poulenc S.A. (since December 1993),
Institut Merieux S.A., Rhone-Poulenc Rorer Inc., Rhone-
Poulenc Japan, Rhone Poulenc Quimica, Sita, V.E.V.,
Wilson Gestion and Ecole Centrale des Arts et des Manu-
factures de Paris; Vice Chairman of Rhone-Poulenc (su-
pervises Quality, Safety and Environmental Protection,
Industrialization and South American and Asian-Pacific
operations) (since November 1992); Chairman of Rhone-
Poulenc China and Fondation Vilette-Entreprises; Member
of the Supervisory Board of Banque Paribas and the Ex-
ecutive Committee of Institut de Protection et de
Surete Nucleaire.
Serge Kampf............. Director of Rhone-Poulenc S.A. (since March 1993), Cap
c/o Cap Gemini Sogeti Gemini America (U.S.A.), Cap Gemini Holding Inc.
11, rue Tilsit (U.S.A.), Gemini Consulting Holding Ltd (U.K.), Hoskyns
75017 Paris, France Group plc (U.K.), Cap Gemini France S.A., Cap Gemini
Telecom S.A. and Gemini Consulting Holding S.A.; Chair-
man and Chief Executive Officer of Cap Gemini Sogeti
(business management consulting) (since January 1975);
Chief Executive Officer of Cap Gemini (Switzerland)
S.A., Gemini Consulting Holding BV, Gemini Consulting
Inc. (Delaware) and Cap Gemini Service S.A.; Managing
Director of Cap Gemini Europe BV and Cap Gemini Benelux
BV; Cap Gemini S.A.'s representative on the Board of
Cap Gemini Universite S.A. and the Board of Cap Gemini
Innovation S.A.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------
<S> <C>
Alain Merieux........... Director of Rhone-Poulenc S.A. (since 1986), Compagnie
c/o Institut Merieux Generale d'Industrie et de Participation S.A. and Com-
S.A. pagnie Plastic Omnium S.A.; Chairman and Chief Execu-
17, rue Bourgelat tive Officer of Institut Merieux S.A. (research and de-
69002 Lyon, France velopment in biology, medicine and pharmaceuticals)
(since July 1965), Biomerieux S.A., Biomerieux Alliance
S.A. and Transgene S.A.
Didier Pineau- Director of Rhone-Poulenc S.A. (since January 1997),
Valencienne............. Compagnie Generale d'Industrie et de Participation
c/o Schneider S.A. (CGIP) (since 1992), Equitable (USA) (since 1991) and
64-70, avenue J.B. Sema Group plc (United Kingdom) (since 1990); Chairman
Clement and Chief Executive Officer of Schneider S.A.
92646 Boulogne- (industrial/electric) (since 1981), Schneider Electric
Billancourt Cedex, S.A. and Square D; Member of the European Advisory
France Board of Bankers Trust Company (USA) (since 1990), the
Advisory Board of Booz Allen & Hamilton (since 1992),
the Supervisory Committee of AXA-UAP (since 1990), the
Supervisory Board of Banque Paribas (since 1989) and
the Advisory Committee of Banque de France (since
1989).
Michel Renault.......... Director of Rhone-Poulenc S.A. (since March 1993),
c/o Credit Lyonnais Aerospatiale, Albatros Investissement, Bertrand Faure,
19, boulevard des D.M.C. (Dollfus Mieg & Cie) and V.E.V. S.A.; Chief Ex-
Italiens ecutive Officer of Credit Lyonnais (banking) (since
75001 Paris, France September 1992); Chairman of Slivam, Consortium
Auxiliaire de Participations, Credit Lyonnais Europe
S.A., Credit Lyonnais Espana (since 1995) and the Su-
pervisory Board of Bfg Bank A.G. (since 1995); Credit
Lyonnais' representative on the Board of Clinvest, the
Board of Credito Bergamasco (since 1995), the Board of
Groupe Flo and the Supervisory Board of Lagardere
Groupe.
Assurances Generales de
France, represented by
Antoine Jeancourt- Assurances Generales de France: Director of Rhone-
Galignani............... Poulenc S.A (since March 1993), AGF-IART (since June
c/o Assurances Generales 1996), Comptoir des Entrepreneurs (since June 1996),
de France Eustache (since February 1997), AGF 2X (since 1997) and
87, rue de Richelieu Credit National (since 1997); Member of the Supervisory
75060 Paris Cedex 02, Board of Euler (since November 1996) and the Supervi-
France sory Board of Worms & Cie (since December 1995).
Antoine Jeancourt-Galignani: Assurances Generales de
France's representative on the Board of Rhone-Poulenc
(since February 1994), the Board of Credit National and
the Board of Euler; Chairman and Chief Executive Offi-
cer of Assurances Generales de France (insurance)
(since January 1994), Chairman and Chief Executive Of-
ficer of Banque Indosuez (1979-1993), AGF Internation-
al, AGF-IART, AGF-Vie and Compagnie Financiere du Phe-
nix; Director of Bouygues, Societe Generale, Total, and
Kaufman and Broad Home Corporation Los Angeles; Chair-
man of the Supervisory Board of Euro Disney SCA; Member
of the Supervisory Board of Compagnie Financiere de
Paribas, the Supervisory Board of Aachener u. Munchener
(AMB), Aix la Chapelle and the Supervisory Board of
Pinault-Printemps-Redoute.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------------------
<S> <C>
Banque Nationale de
Paris, represented by Banque National de Paris: Director of Rhone-Poulenc
Baudouin Prot........... S.A. (Since April 1994), Director and Member of the Su-
c/o Banque Nationale de pervisory Board of a large number of companies.
Paris
16, boulevard des
Italiens
75009 Paris, France
Baudouin Prot: Banque Nationale de Paris' representa-
tive on the Board of Rhone-Poulenc S.A. (since December
1996); President of Banque Nationale de Paris (banking)
(since September 1996); Chairman of the Board of Compa-
gnie Immobiliere de France; Chairman of the Supervisory
Board of Meunier Promotion; Director of Banque
Nationale de Paris Intercontinentale, BNP U.K. Holdings
Limited, Pechiney and Banque de Bretagne; Member of the
Supervisory Board and Banque pour l'Expansion
Industrielle (Banexi); Banque Nationale de Paris' rep-
resentative on the Board of Lucia and the Supervisory
Board of Accor.
Credit Suisse First
Boston, a Swiss
corporation, represented Credit Suisse First Boston: Director of Rhone-Poulenc
by Rudolph Hug.......... S.A. (since December 1993).
c/o Credit Suisse
Uetlbergstrasse 231
8001 Zurich, Switzerland
Rudolph Hug: Director of Rhone-Poulenc S.A. (since De-
cember 1993); President of Credit Suisse (through
1996); Director of Credit Suisse First Boston Aktien-
gesellschaft Frankfurt, Krupp Hoesch Maschinenbau GmbH
Essen, Siemens Beteiligungen AG Zurich, Societe Inter-
nationale Pirelli S.A. Bale, Societe Internationale
Saint-Gobain Fribourg and Sulzer S.A. Winterthour; Mem-
ber of the Executive Board and Credit Suisse Zurich
(banking) (since 1987); President of Credit Suisse
(Luxembourg) S.A. Luxembourg, Credit Suisse First Bos-
ton Canada Toronto and Credit Suisse First Boston (Mos-
cow) Limited Moscow.
Fiat France S.A.,
represented by Giorgio Fiat France S.A.: Director of Rhone-Poulenc S.A. (since
Frasca.................. December 1993) and Europ Assistance S.A.
c/o Societe Fiat France
140, avenue des Champs-
Elysees
75008 Paris, France
Giorgio Frasca: Fiat France S.A.'s representative on
the Board of Europ Assistance S.A. (since 1994) and the
Board of Rhone-Poulenc S.A. (since December 1993);
Chairman and Chief Executive Officer of Fiat France
S.A. (automobiles) (since 1984) and Iveco France S.A.;
Director of Le Continent & Le Continent Vie, Magneti
Marelli France, Saint Louis and Ufima; La Stampa
S.p.A.'s representative on the Board of Le Monde Presse
S.A.; Member of the Coordination Committee of Fiat
S.p.A.
Societe Financiere et
Immobiliere, Marcel
Dassault, represented by Financiere et Immobiliere Marcel Dassault: Director of
Philippe Hustache....... Rhone-Poluenc S.A. (since April 1994), Electricite et
c/o Societe Financiere Eaux de Madagascar and Genset.
et Immobiliere
Marcel Dassault
9, rond-point des
Champs-Elysees
75008 Paris, France
Philippe Hustache: Director of Rhone-Poulenc S.A.
(since June 1995); President and Director of Societe
Financiere et Immobiliere Marcel Dassault (real estate
management) (since April 1994); Chief Executive Officer
of EIF Aquitaine S.A. (1988-1994); Director of
Transgene, Banque Odier Bungener Courvoisier (OBC),
Sanofi, Societe Centrale d'Investissement (SCI),
Dassault Electronique, Banque Vernes and Compagnie
Nationale Porte-Feuille (CNP) Belgium; Societe
Financiere et Immobiliere Marcel Dassault's representa-
tive on the Board of Kapt and Kapt Aquitaine.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------------------
<S> <C>
Societe Generale,
represented by Marc Societe Generale: Director of Rhone-Poulenc S.A. (since
Vienot.................. December 1993), Bertrand Faure, Credit General
c/o Societe Generale Industriel, Europe Computer Systeme Finextel, Union
Tour Societe Generale Immobiliere de France, Genefim, Klepierre, Salvepar,
92972 Paris La Defense Sefimeg, Silic and TF1; Member of the Supervisory Board
Cedex, France of Accor, the Supervisory Board of Siparex and the Su-
pervisory Board of Worms & Cie.
Marc Vienot: Societe Generale's representative on the
Board of Rhone-Poulenc S.A. (since December 1993);
Chairman and Chief Executive Officer of Societe
Generale (banking) (since 1986); Director of Associa-
tion Francaise des Banques, Association Francaise des
Entreprises Privees, Alcatel Alsthom, Association
Nationale des Societes par Actions (A.N.S.A.), Compa-
gnie Generale des Eaux, Havas and Societe Generale
Marocaine de Banques; Societe Generale's representative
on the Board of TF1; Member of Conseil National du
Credit.
Jean Eldin.............. Director of Rhone-Poulenc S.A. (since June 1994); Em-
ployee of Rhone-Poulenc S.A. (since 1953).
Pierre Houche........... Director of Rhone-Poulenc S.A. (since June 1994); Em-
ployee of Rhone-Poulenc S.A. (since 1970).
Alain Magnanelli........ Director of Rhone-Poulenc S.A. (since June 1994); Em-
ployee of Rhone-Poulenc S.A. (since 1961).
</TABLE>
B. EXECUTIVE OFFICERS
Purchaser's current executive officers and certain biographical information
concerning such individuals are set forth below.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------------------
<S> <C>
Jean-Rene Fourtou....... Director, Chairman of the Board and Chief Executive Of-
ficer of Rhone-Poulenc S.A. (since 1986); Director of
Rhone-Poulenc
Japan, Rhone-Poulenc Limited, Rhone-Poulenc Quimica
S.A., Air France, The Equitable, Axa Assurances Iard,
Axa Assurance Vie Mutuelle, Axa Assurance Vie, Axa Iard
Mutuelle, Midi Participations, Assurance Iard Mutuelle,
Alpha Assurance Vie, Alpha Assurance Vie Mutuelle, Uni
Europe Assurance Mutuelle, Schneider S.A., Societe
Generale and Pernod Ricard; Vice-President of the Su-
pervisory Board of Axa UAP; Member of the Supervisory
Board of Gerot Holding A.G. and the Supervisory Board
of Casino.
Jean-Marc Bruel......... Director of Rhone-Poulenc S.A. (since December 1993),
Institut Merieux S.A., Rhone-Poulenc Rorer Inc., Rhone-
Poulenc Japan, Rhone Poulenc Quimica, Sita, V.E.V.,
Wilson Gestion and Ecole Centrale des Arts et des Manu-
factures de Paris; Vice Chairman of Rhone-Poulenc (su-
pervises Quality, Safety and Environmental Protection,
Industrialization and South American and Asian-Pacific
operations) (since November 1992); Chairman of Rhone-
Poulenc China and Fondation Vilette-Entreprises; Member
of the Supervisory Board of Banque Paribas and the Ex-
ecutive Committee of Institut de Protection et de
Surete Nucleaire.
</TABLE>
I-4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------------------
<S> <C>
Philippe Desmarescaux... Group President (since December 1992), supervises the
Chemical segment, Research and Development and North
American operations (since January 1995); Chairman and
Director of Rhone-Poulenc Inc.; Director of Rhone-
Poulenc Japan, Groupe Seb S.A., SNPE, Societe Francaise
de Chimie and Universite Catholique de Lyon; Chairman
of the Board of Institut de Chimie et de Physique de
Lyon and the Board of Ecole Normale Superieure de Lyon;
Vice-Chairman of Ecole de Chimie, Physique and
Electronique de Lyon.
Alain Godard............ Chairman of Animal and Plant Health segment (January
1997); Chief Executive Officer, Agro Segment (1992-
1996); Director of Rhone-Poulenc Animal Nutrition,
Merial, Centre de Cooperation Internationale en Recher-
che Agronomique pour le Developpement and Institut Na-
tional de la Recherche Agronomique.
Igor Landau............. Group President. (Supervises the Pharmaceuticals seg-
ment, Corporate Communication and operations in the Eu-
ropean Union and the European Free Trade Association)
(since December 1992); Director of Rhone-Poulenc Rorer,
Pasteur Merieux Serums & Vaccins Institut Merieux; Mem-
ber of the Supervisory Board of Rhodia AG, Institut de
Developpement Industriel and Rhone-Poulenc Limited.
Rene Penisson........... Group Senior Vice President Human Resources (since
1990); Director of Rhone-Poulenc Fibres & Polymeres
S.A. (since 1994) and Rhone-Poulenc Japan, Ltd.
Martin Pinot............ Executive Vice President of the Chemical segment and
President of the segment's European Zone (since March
1997), President of Fibers and Polymers segment (1993-
February 1997).
Michel de Rosen......... Chairman of Rhone-Poulenc Rorer Inc. (since 1996);
c/o Rhone-Poulenc Rorer Chief Executive Officer of Rhone-Poulenc Rorer Inc.
Inc. (since 1995), President of Rhone-Poulenc Rorer Inc.
500 Arcola Road (1993-1996), President of Fibers and Polymers Segment
Collegeville, (1988-1993).
Pennsylvania 19426-0107
USA
Jean-Pierre Tirouflet... Group Executive Vice President (since November 1992);
President of the Fibers and Polymers segment, Group Fi-
nance, Corporate Strategy and Development, Control, In-
formation Systems and Legal Functions, and Interna-
tional Affairs, the Garden Care division and operations
in Central and Eastern Europe and the CIS; Director of
Rhone-Poulenc Fibres & Polymeres, Rhone-Poulenc Inc.,
Rhone-Poulenc Chemicals Asia Pacific Pte Ltd, Rhone-
Poulenc Rorer Inc., Rhone-Poulenc Viscosuisse (starting
September 1997), Institut Merieux (since April 1994)
and Objectif Rendement (since June 1986); Member of Su-
pervisory Board of Cecar (since December 1993), Super-
visory Board of Cap Gemini (since May 1996) and Super-
visory Board of Indosuez (since March 1996).
</TABLE>
I-5
<PAGE>
2. Directors and Executive Officers of the Merger Subsidiary. The following
table sets forth the name, current business address, citizenship and present
principal occupation or employment, and material occupations, positions,
offices or employments and business addresses thereof for the past five years
of each director and executive officer of the Merger Subsidiary. Unless
otherwise indicated, the current business address of each person is c/o Rhone-
Poulenc S.A., 25, quai Paul Doumer, 92408 Courbevoie Cedex, France.
A. DIRECTORS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------
<S> <C>
Igor Landau............. Sole Director; Group President of Purchaser (since De-
cember 1992); Director of Rhone-Poulenc Rorer, Pasteur
Merieux Serums & Vaccins, Institut Merieux; Member of
the Supervisory Board of Rhodia AG, Institut de
Developpement Industriel and Rhone-Poulenc Limited.
Citizen of France.
</TABLE>
B. EXECUTIVE OFFICERS
The Merger Subsidiary's current executive officers and certain biographical
information concerning such individuals are set forth below.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST
AND CURRENT BUSINESS ADDRESS FIVE YEARS AND BUSINESS ADDRESSES THEREOF
- ---------------------------- -------------------------------------------
<S> <C>
Igor Landau............. President; Group President of Purchaser (since December
1992); Director of Rhone-Poulenc Rorer, Pasteur Merieux
Serums & Vaccins, Institut Merieux; Member of the Su-
pervisory Board of Rhodia AG, Institut de Developpement
Industriel and Rhone-Poulenc Limited. Citizen of
France.
Harold Frederick Secretary and Treasurer; Executive Vice President and
Boardman, Jr. ......... General Counsel of Rhone-Poulenc Inc. (since February
1996); Vice President and General Counsel of Hoffman
LaRoche Inc. (since January 1989). Citizen of the
United States of America.
</TABLE>
I-6
<PAGE>
SCHEDULE II
Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004
Tel: 212-902-1000
PERSONAL AND CONFIDENTIAL [LOGO OF
GOLDMAN SACHS]
August 19, 1997
Special Committee of the Board of Directors
Rhone-Poulenc Rorer Inc.
500 Arcola Road
Collegeville, PA 19426
Gentleman:
You have requested our opinion as to the fairness to the holders, other than
Rhone-Poulenc S.A. ("Rhone-Poulenc") and its subsidiaries, (the "Public
Shareholders") of the outstanding shares of Common Stock without par value
(the "Common Shares") of Rhone-Poulenc Rorer, Inc. (the "Company") of the
$97.00 per Common Share in cash proposed to be paid to the Public Shareholders
by Rhone-Poulenc in the Tender Offer (as defined below) and the Merger (as
defined below) pursuant to the Agreement and Plan of Merger dated as of August
19, 1997 among Rhone-Poulenc, RP Vehicle, Inc., a wholly owned subsidiary of
Rhone-Poulenc, and the Company (the "Agreement").
The Agreement provides for a tender offer (the "Tender Offer") for all of
the issued and outstanding Common Shares pursuant to which Rhone-Poulenc will
pay $97.00 per Common Share in cash for each Common Share accepted. The
Agreement further provides that following completion of the Tender Offer,
Merger Sub will be merged with and into the Company (the "Merger") and each
issued and outstanding Common Share (other than Common Shares owned directly
or indirectly by Rhone-Poulenc) will be converted into the right to receive
$97.00 in cash.
We have been informed that as of the date hereof Rhone-Poulenc is the holder
of approximately 68.1% of the outstanding Common Shares. The Common Shares
held by Rhone-Poulenc were acquired pursuant to the Acquisition Agreement
between Rhone-Poulenc and Rorer Group Inc. (the predecessor name of the
Company), dated as of March 12, 1990 (the "Acquisition Agreement"). We have
also been informed that a standstill provision contained in the Acquisition
Agreement expired on July 31, 1997.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company, having acted as the financial
advisor to the Special Committee of the Board of Directors of the Company in
connection with, and having participated in certain of the negotiations
leading to, the Agreement. In the course of the trading activities of Goldman,
Sachs & Co. prior to our retention in connection with this matter, the Firm
accumulated a long position of 828,962 Common Shares.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1996; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management.
We have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects. We also have held discussions with members of the senior
management of Centeon L.L.C., a joint venture in which the Company has a 50%
interest, regarding its past and current business operations, financial
condition and future prospects. In
II-1
<PAGE>
addition, we have reviewed the reported price and trading activity for the
Common Shares, compared certain financial and stock market information for the
Company with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the pharmaceutical industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of
the Company or any of its subsidiaries and we have not been furnished with any
such evaluation or appraisal. We were not requested or authorized to solicit,
and did not solicit, interest from any party with respect to an acquisition of
the outstanding Common Shares, the Company or its constituent businesses. Our
advisory services and the opinion expressed herein are provided for the
information and assistance of the Special Committee of the Board of Directors
of the Company in connection with its consideration of the transactions
contemplated by the Agreement and such opinion does not constitute a
recommendation as to whether any holder of Common Shares should tender such
Common Shares in the Tender Offer.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $97.00
per Common Share in cash to be received by the Public Shareholders in the
Tender Offer and the Merger is fair to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
- ----------------------
(GOLDMAN, SACHS & CO.)
II-2
<PAGE>
SCHEDULE III
SECTIONS 1930(A) AND 1571-80
(SUBCHAPTER OF CHAPTER 15)
OF THE PENNSYLVANIA BUSINESS CORPORATION LAW
SECTION 1930. DISSENTERS RIGHTS
(A) GENERAL RULE. -- If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of
merger or consolidation objects to the plan of merger or consolidation and
complies with the provisions of Subchapter D of Chapter 15 (relating to
dissenters rights), the shareholder shall be entitled to the rights and
remedies of dissenting shareholders therein provided, if any. See also section
1906(c) (relating to dissenters rights upon special treatment).
CHAPTER 15
SUBCHAPTER D. -- DISSENTERS RIGHTS
SECTION 1571. APPLICATION AND EFFECT OF SUBCHAPTER
(A) GENERAL RULE. -- Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from,
and to obtain payment of the fair value of his shares in the event of, any
corporate action, or to otherwise obtain fair value for his shares, where this
part expressly provides in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special exchanges).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
Section 7104(b)(3) (relating to procedure).
(B) EXCEPTIONS. --
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listing on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders; shall not have
the right to obtain payment of the fair value of any such shares under
this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or
solely into such shares and money in lieu of fractional shares.
III-1
<PAGE>
(ii) Shares of any preferred or special class unless the articles,
the plan or the terms of the transaction entitle all shareholders of
the class to vote thereon and require for the adoption of the plan or
the effectuation of the transaction the affirmative vote of a majority
of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the
other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(C) GRANT OF OPTIONAL DISSENTERS RIGHTS. -- The bylaws or a resolution of
the board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(D) NOTICE OF DISSENTERS RIGHTS. -- Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall
be included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(E) OTHER STATUTES. -- The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part
that makes reference to this subchapter for the purpose of granting dissenters
rights.
(F) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE. -- This subchapter may not
be relaxed by any provision of the articles.
(G) CROSS REFERENCES. -- See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to a de facto transaction doctrine
abolished) and 2512 (relating to dissenters rights procedure).
SECTION 1572. DEFINITIONS
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"CORPORATION." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation for
the purposes of this subchapter. The successor corporation in a division shall
have sole responsibility for payments to dissenters and other liabilities
under this subchapter except as otherwise provided in the plan of division.
"DISSENTER." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"FAIR VALUE." The fair value of shares immediately before the effectuation
of the corporation action to which the dissenter objects, taking into account
all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
III-2
<PAGE>
"INTEREST." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
SECTION 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS
(A) RECORD HOLDERS OF SHARES. -- A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of
the same class or series beneficially owned by any one person and discloses
the name and address of the person or persons on whose behalf he dissents. In
that event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(B) BENEFICIAL OWNERS OF SHARES. -- A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the
corporation not later than the time of the assertion of dissenters rights a
written consent of the record holder. A beneficial owner may not dissent with
respect to some but less than all shares of the same class or series owned by
the owner, whether or not the shares so owned by him are registered in his
name.
SECTION 1574. NOTICE OF INTENTION TO DISSENT
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect
no change in the beneficial ownership of his shares from the date of such
filing continuously through the effective date of the proposed action and must
refrain from voting his shares in approval of such action. A dissenter who
fails in any respect shall not acquire any right to payment of the fair value
of his shares under this subchapter. Neither a proxy nor a vote against the
proposed corporate action shall constitute the written notice required by this
section.
SECTION 1575. NOTICE TO DEMAND PAYMENT
(A) GENERAL RULE. -- If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice
of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the
corporation shall send to all shareholders who are entitled to dissent and
demand payment of the fair value of their shares a notice of the adoption of
the plan or other corporate action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(B) TIME FOR RECEIPT OF DEMAND FOR PAYMENT. -- The time set for receipt of
demand and deposit of certificated shares shall be not less than 30 days from
the mailing of the notice.
III-3
<PAGE>
SECTION 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.
(A) EFFECT OF FAILURE OF SHAREHOLDER TO ACT. -- A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(B) RESTRICTION ON UNCERTIFICATED SHARES. -- If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms
of section 1577(a) (relating to failure to effectuate corporate action).
(C) RIGHTS RETAINED BY SHAREHOLDER. -- The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
SECTION 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES
(A) FAILURE TO EFFECTUATE CORPORATE ACTION. -- Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares
from any transfer restrictions imposed by reason of the demand for payment.
(B) RENEWAL OF NOTICE TO DEMAND PAYMENT. -- When the uncertificated shares
have been released from transfer restrictions and deposited certificates have
been returned, the corporation may at any later time send a new notice
conforming to the requirements of section 1575 (relating to notice to demand
payment), with like effect.
(C) PAYMENT OF FAIR VALUE OF SHARES. -- Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that the
corporation estimates to be the fair value of the shares, or give written
notice that no remittance under this section will be made. The remittance or
notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(D) FAILURE TO MAKE PAYMENT. -- If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such
certificate or on the records of the corporation relating to any such
uncertificated shares that such demand has been made. If shares with respect
to which notation has been so made shall be transferred, each new certificate
issued therefor or the records relating to any transferred uncertificated
shares shall bear a similar notation, together with the name of the original
dissenting holder or owner of such shares. A transferee of such shares shall
not acquire by such transfer any rights in the corporation other than those
that the original dissenter had after making demand for payment of their fair
value.
SECTION 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES
(A) GENERAL RULE. -- If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
III-4
<PAGE>
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the
fair value of his shares, he may send to the corporation his own estimate of
the fair value of the shares, which shall be deemed a demand for payment of
the amount or the deficiency.
(B) EFFECT OF FAILURE TO FILE ESTIMATE. -- Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the
corporation.
SECTION 1579. VALUATION PROCEEDINGS GENERALLY
(A) GENERAL RULE. -- Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating to
estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the
shares be determined by the court.
(B) MANDATORY JOINDER OF DISSENTERS. -- All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served
on each such dissenter. If a dissenter is a nonresident, the copy may be
served on him in the manner provided or prescribed by or pursuant to 42
Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and
international procedure).
(C) JURISDICTION OF THE COURT. -- The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(D) MEASURE OF RECOVERY. -- Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found
to exceed the amount, if any, previously remitted, plus interest.
(E) EFFECT OF CORPORATION'S FAILURE TO FILE APPLICATION. -- If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file
an application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not
previously remitted.
SECTION 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS
(A) GENERAL RULE. -- The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, vexatious or in bad faith.
(B) ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH
APPEAR. -- Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the
III-5
<PAGE>
requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds
that the party against whom the fees and expenses are assessed acted in bad
faith or in a dilatory, obdurate, arbitrary or vexatious manner in respect to
the rights provided by this subchapter.
(C) AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS. -- If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefitted.
III-6
<PAGE>
SCHEDULE IV
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Rhone-Poulenc Rorer Inc.:
We have audited the accompanying consolidated balance sheets of Rhone-
Poulenc Rorer Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Rhone-Poulenc
Rorer Inc. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
- -------------------------------------
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
January 22, 1997
IV-1
<PAGE>
AUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) FOR THE COMPANY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1996
RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
RESTATED
1996 1995 1994
---------- ---------- -------------
<S> <C> <C> <C>
Net sales.................................. $ 5,420.6 $ 5,142.1 $ 4,486.6
Cost of products sold...................... 1,666.0 1,746.4 1,555.8
Selling, delivery and administrative
expenses.................................. 2,109.7 1,863.7 1,605.8
Research and development expenses.......... 882.1 766.2 606.1
Restructuring and other charges............ 102.6 126.5 121.2
---------- ---------- ----------
Operating income......................... 660.2 639.3 597.7
Interest expense........................... 212.7 105.2 55.3
Interest income............................ (43.1) (20.3) (8.2)
Gain on sales of assets.................... (110.7) (49.5) (46.2)
Other (income) expense, net................ (89.1) 65.9 83.9
---------- ---------- ----------
Income before income taxes............... 690.4 538.0 512.9
Provision for income taxes................. 216.9 181.5 145.8
---------- ---------- ----------
Net income............................... 473.5 356.5 367.1
Dividends on preferred stock and
remuneration on capital equity notes...... 44.8 18.7 19.2
---------- ---------- ----------
Net income available to common
shareholders............................ $ 428.7 $ 337.8 $ 347.9
========== ========== ==========
Primary earnings per common share:
Net income available to common
shareholders............................ $ 3.16
==========
Net income available to common
shareholders, pro forma................. $ 2.50 $ 2.50
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
IV-2
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents.................................. $ 100.6 $ 115.4
Cash pooling arrangements with Rhone-Poulenc S.A........... 3.2 16.0
Short-term investments..................................... 38.7 --
Trade accounts receivable less reserves of $111.3 (1995:
$87.3).................................................... 984.1 956.8
Inventories................................................ 800.7 765.6
Assets held for sale....................................... 1.0 228.8
Other current assets....................................... 845.2 707.0
-------- --------
Total current assets................................... 2,773.5 2,789.6
Time deposits, at cost..................................... 128.4 83.0
Property, plant and equipment, net......................... 1,525.9 1,621.0
Goodwill, net.............................................. 2,739.0 2,953.5
Intangibles, net........................................... 766.7 866.8
Other assets............................................... 834.6 673.2
-------- --------
Total assets........................................... $8,768.1 $8,987.1
======== ========
LIABILITIES
Current:
Short-term debt............................................ $ 119.9 $ 384.2
Notes payable to Rhone-Poulenc S.A. & affiliates........... 6.8 127.6
Accounts payable........................................... 594.7 601.8
Income taxes payable....................................... 110.5 91.0
Accrued employee compensation.............................. 153.2 137.8
Other current liabilities.................................. 1,067.8 1,062.7
-------- --------
Total current liabilities.............................. 2,052.9 2,405.1
Long-term debt............................................. 2,272.0 2,159.0
Notes payable to Rhone-Poulenc S.A. & affiliates........... 253.0 525.4
Deferred income taxes...................................... 218.0 365.5
Other liabilities, including minority interests............ 1,322.4 1,174.9
-------- --------
Total liabilities...................................... 6,118.3 6,629.9
-------- --------
Contingencies..............................................
SHAREHOLDERS' EQUITY
Money market preferred stock, without par value
(liquidation preference $100,000 per share); issued and
outstanding: 1,750 shares................................. 175.0 175.0
Capital equity notes....................................... 500.0 500.0
Common stock, without par value; stated value $1 per share;
authorized 600,000,000 shares; issued and outstanding:
136,615,917 shares (1995: 134,528,487 shares)............. 141.6 139.5
Capital in excess of stated value.......................... 234.8 153.2
Retained earnings.......................................... 1,837.9 1,580.3
Employee Benefits Trust.................................... (185.7) (185.7)
Cumulative translation adjustments......................... (53.8) (5.1)
-------- --------
Total shareholders' equity............................. 2,649.8 2,357.2
-------- --------
Total liabilities and shareholders' equity............. $8,768.1 $8,987.1
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
IV-3
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
RESTATED
1996 1995 1994
----------- ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 473.5 $ 356.5 $ 367.1
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.......... 339.0 225.2 193.2
Provision for deferred income taxes.... (61.1) (15.8) (67.5)
Deferred royalty income................ 200.6 (24.0) 24.0
Gain on sales of assets................ (110.7) (49.5) (46.2)
Reassessment of asset carrying values.. 102.6 25.4 30.6
(Increase) decrease in trade accounts
receivable, net....................... (71.3) (35.2) 47.3
Increase in inventories................ (116.8) (104.1) (37.6)
Increase in accounts payable........... 26.7 83.5 19.6
Increase (decrease) in income taxes
payable............................... (24.9) (81.4) 13.3
Restructuring charges (payments), net.. (125.9) 3.5 68.3
Noncash (income) losses of equity
affiliates, net....................... (11.7) 35.4 21.1
Other items, net....................... (117.3) 82.4 52.2
----------- ----------- ---------
Net cash provided by operating
activities.......................... 502.7 501.9 685.4
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Assets sold.............................. 462.7 86.2 143.8
Capital expenditures..................... (341.6) (281.5) (229.9)
Sales/prepayments of investments and
product rights.......................... 147.1 34.2 18.8
Purchases of investments and product
rights.................................. (96.0) (154.0) (26.8)
Businesses acquired, net of cash acquired
of $474.7 in 1995....................... (30.0) (2,763.3) --
Net investment hedging, net.............. (1.8) (14.8) (29.8)
----------- ----------- ---------
Net cash provided by (used in)
investing activities................ 140.4 (3,093.2) (123.9)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net............... (364.1) 420.3 (223.1)
Proceeds from issuance of long-term
debt.................................... 2,256.0 2,231.3 67.9
Repayment of long-term debt.............. (2,393.9) (173.0) (47.4)
Shares repurchased for Employee Benefits
Trust................................... -- -- (109.9)
Dividends and remuneration paid.......... (215.9) (179.9) (170.7)
Issuance of capital equity notes......... -- 500.0 --
Redemption of Market Auction Preferred
Shares.................................. -- (225.0) --
Issuances of common stock................ 78.1 14.0 2.6
----------- ----------- ---------
Net cash provided by (used in)
financing activities................ (639.8) 2,587.7 (480.6)
----------- ----------- ---------
Effect of exchange rate changes on cash.. (18.1) .2 2.5
----------- ----------- ---------
Net increase (decrease) in cash and cash
equivalents............................. (14.8) (3.4) 83.4
Cash and cash equivalents at beginning of
year.................................... 115.4 118.8 35.4
----------- ----------- ---------
Cash and cash equivalents at end of
year.................................... $ 100.6 $ 115.4 $ 118.8
=========== =========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
CASH PAID DURING YEAR FOR:
Interest, net of amounts capitalized... $ 133.7 $ 99.2 $ 61.7
Income taxes........................... $ 302.7 $ 259.3 $ 201.0
RECONCILIATION OF ASSETS ACQUIRED AND
LIABILITIES ASSUMED:
Fair value of assets acquired.......... $ -- $ 4,505.2 $ 280.1
Liabilities assumed.................... -- (1,348.2) (173.0)
----------- ----------- ---------
Net assets acquired.................. $ -- $ 3,157.0 $ 107.1
=========== =========== =========
Cash paid for acquisitions............. $ -- $ 3,238.0 $ --
Capital contribution from RP S.A....... -- (273.2) 107.1
Preferred stock of subsidiary issued... -- 131.6 --
Other non-cash items................... -- 60.6 --
----------- ----------- ---------
Total consideration.................. $ -- $ 3,157.0 $ 107.1
=========== =========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
IV-4
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Principles of Accounting
The Company's consolidated financial statements are prepared on a basis in
conformity with U.S. generally accepted accounting principles ("U.S. GAAP").
The preparation of the financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates. Certain prior year items have been reclassified to conform to
current classifications.
Principles of Consolidation
The consolidated financial statements include the accounts of Rhone-Poulenc
Rorer Inc. and subsidiaries which are more than 50 percent owned and/or
controlled. All subsidiaries are consolidated on the basis of twelve-month
periods ending December 31. Investments in corporate joint ventures and other
companies in which the Company has a 20 to 50 percent ownership and has no
control are accounted for by the equity method. Cost investments, less than 20
percent owned, are carried at their original cost.
Cash and Cash Equivalents, Time Deposits and Restricted Cash
The Company considers cash on hand, cash in banks, certificates of deposit,
time deposits and U.S. government and other short-term securities with
maturities of three months or less when purchased as cash and cash
equivalents. Investments with a maturity period of greater than three months
but less than one year are classified as short-term investments. Certain
mortgage-backed certificates, repurchase obligations and certificates of
deposit with maturities of more than one year are classified as long-term time
deposits. At December 31, 1996, the Company has $61.5 million (1995: $109.6
million) of restricted cash, of which approximately $40.1 million (1995: $53.7
million) is classified as a current asset, representing funds on deposit with
a bank in an interest-bearing escrow account for payment of future operating
lease obligations.
Inventories
Inventories are valued at the lower of cost or market, using the first-in,
first-out (FIFO) or average cost methods.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. For financial accounting
purposes, depreciation is computed principally on the straight-line method
over the estimated useful lives of the assets (generally, 20 to 30 years for
buildings and 5 to 15 years for machinery and equipment). For income tax
purposes, certain assets are depreciated using accelerated methods.
Goodwill and Intangible Assets
Goodwill represents the excess of cost over the fair market value of net
assets of businesses acquired. Goodwill is amortized on a straight-line basis
over a period not to exceed forty years and is reported net of accumulated
amortization of $294.9 million in 1996 and $241.6 million in 1995. The Company
assesses potential impairment of enterprise goodwill by comparing the carrying
value of goodwill at the balance sheet date with anticipated undiscounted
future operating income before amortization. Intangibles, which principally
represent the cost of acquiring patents and product rights, are amortized over
their estimated useful lives and are reported net of accumulated amortization
of $231.4 million in 1996 and $106.3 million in 1995.
IV-5
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, including related allocated
goodwill, and identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In determining the amount of an impairment loss, the Company
compares an asset's carrying value to its fair market value as measured by
market price or discounted future cash flows.
Royalties
The Company recognizes royalties paid (received) as increases (reductions)
in cost of products sold.
Advertising
Advertising costs are generally expensed within the fiscal year that the
costs are incurred, except for direct response advertising, which is
capitalized and amortized over the expected period of future benefit.
Advertising expenses primarily associated with the use of public media,
medical publications and symposia totaled $238.9 million in 1996 and $200.3
million in 1995.
Foreign Currency Translation
Financial information relating to the Company's subsidiaries located outside
the United States is translated using the current rate method. Local
currencies are considered the functional currencies except in countries with
highly inflationary economies.
Income Taxes
The Company and substantially all of its United States subsidiaries file a
consolidated federal income tax return. No provision has been made for United
States income taxes or withholding taxes on the unremitted earnings of non-
U.S. subsidiaries which are intended to be indefinitely reinvested. The
Company follows Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes."
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," effective for fiscal periods ending after December
15, 1997. The Statement simplifies earnings per share calculations and
requires presentation of both basic and fully diluted earnings per share on
the face of the statement of income. The Company does not expect that adoption
of SFAS No. 128 will have a material impact on the Company's earnings per
share calculations.
NOTE 2. ACQUISITIONS FROM RHONE-POULENC S.A.
In 1995, the Company acquired from Rhone-Poulenc S.A. ("RP") the businesses
of Cooperation Pharmaceutique Francaise ("Cooper"), primarily in France, and a
pharmaceutical business in Brazil for cash and preferred stock of a French
subsidiary aggregating approximately $273.2 million. The preferred shares,
accounted for as minority interest in other liabilities, have a liquidation
preference approximating FF645.0 million and pay dividends of 7.5% per annum
on a stated value of FF145.0 million. The acquisition agreements call for
potential adjustments to the purchase price of the businesses based on several
factors, including earnings performance.
For accounting purposes, the acquisitions of these entities under common
control were treated on an "as-if pooling" basis and, accordingly, the Company
restated its 1994 results to include the accounts of Cooper and
IV-6
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Brazilian business as of April 1, 1994 (the date that Cooper was acquired
by RP) and January 1, 1994, respectively. The effect of restatements in
periods prior to 1994 was not material. The assets and liabilities of the
acquired businesses were recorded by the Company at the carrying values used
by RP as of the restatement dates. Earnings per share for the restated periods
reflect pro forma adjustments giving effect to interest on indebtedness and
preferred dividends relative to the acquisition transactions.
NOTE 3. FISONS
In October 1995, the Company acquired the outstanding shares of Fisons plc
("Fisons"), a U.K.-based pharmaceutical company, for a total purchase price
including expenses of $2,993.0 million. The acquisition was accounted for
under the purchase method and, accordingly, the purchase price was allocated
based upon the fair values of the assets and liabilities acquired. Purchase
price allocations, which were finalized in 1996, resulted in goodwill of
$2,159.0 million and intangibles of $640.0 million, to be amortized on a
straight-line basis over lives of 40 years and 20 years, respectively. The net
reduction to the preliminary goodwill balance of $2,278.0 million estimated at
December 31, 1995 primarily reflected adjustments to tax reserves and pension
liabilities, and contingencies associated with the sale of the Scientific
Instruments Division. Total net deferred tax and other liabilities, including
restructuring of the Fisons business and disposal contingencies, included in
the purchase price allocation approximated $495.0 million. In connection with
the acquisition, the Company recorded a charge of $21.0 million for acquired
research and development in 1995 related to Fisons research and development
activities for which technological feasibility had not yet been established
and no alternative future use existed.
In addition to its pharmaceutical operations, the Fisons business included
certain discontinued operations, namely the Laboratory Supplies Division, a
distributor of laboratory equipment and supplies and clinical diagnostic
products, and the Scientific Instruments Division, a manufacturer of
instruments used in surface science and in elemental spectrometry and
analysis. Substantially all of the Laboratory Supplies Division was sold prior
to completion of the acquisition with related proceeds of $336.2 million. A
smaller unit of the division was sold in November 1995 for approximately $35.0
million. In March 1996, the sale of the majority of Fisons' Scientific
Instruments Division to Thermo Instruments Systems Inc. was completed; the
remaining mass spectrometry and PlasmaTrace assets of the division were also
sold in March. Total consideration approximated $271.8 million, representing
$235.9 million in cash and the assignment of $35.9 million of external debt.
At December 31, 1995, the net assets of the Scientific Instruments Division
were recorded at their estimated net realizable value and classified as assets
held for sale on the consolidated balance sheet. Results of operations of the
Scientific Instruments Division from the date of acquisition to the date of
sale were not material.
In July 1996, the Company finalized its agreement with Medeva plc to sell
certain U.S.-based ex-Fisons fixed assets and license certain intellectual
property rights for total cash consideration of $370.0 million. At the end of
a four-and-one-half year period, Medeva has the option to purchase the
intellectual property rights. The upfront cash payment includes fixed asset
sale proceeds and certain prepayments under the licensing arrangement,
including licensing fees and a purchase option payment which are refundable in
certain circumstances.
NOTE 4. APPLIED IMMUNE SCIENCES, INC.
In both 1995 and 1994, Applied Immune Sciences, Inc. ("AIS"), in which the
Company had a 37% interest, achieved a development milestone requiring RPR to
purchase an additional one million AIS shares approximately equal to an
additional 5% interest. In connection therewith, the Company recorded pretax
charges for acquired research and development expense in equity losses of
affiliates totaling $13.0 million and $11.0 million, respectively.
IV-7
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In the fourth quarter of 1995, the Company purchased for a cash price of
$91.6 million, including expenses, the remaining 53%, or 7.2 million
outstanding shares, of AIS not previously owned by RPR. Under the step-
purchase method, the Company recorded additional intangible assets of
approximately $73.5 million. The Company also recorded a charge to operations
of $22.6 million for acquired research and development related to research and
development activities for which technological feasibility had not yet been
established and no alternative future use existed.
In 1996, the Company recorded pretax charges of $102.6 million from the
reassessment of the carrying values of certain AIS-related assets, principally
intangibles and fixed assets, following the Company's decision to
substantially curtail ex-vivo cell processing projects which had been mainly
initiated by AIS.
NOTE 5. CENTEON JOINT VENTURE
Under terms of a September 28, 1995 Amendment to the Joint Venture Agreement
(the "Amendment"), the Company's Armour Pharmaceutical Company subsidiary
("Armour") and Behringwerke AG ("Behring"), a subsidiary of Germany's Hoechst
AG, completed the formation of Centeon, a 50/50 global joint venture in the
plasma proteins business. The joint venture's Board of Directors was formally
established on January 1, 1996, at which time joint control and profit-sharing
provisions took effect. Accordingly, the Company deconsolidated Armour's net
assets at December 31, 1995. The operations of the Armour plasma businesses
are included in the Company's reported results for the twelve months ended
December 31, 1995; in 1996, the Company's interest in the results of the joint
venture is reported as (income) losses of equity affiliates included in other
(income) expense, net (see Note 9).
In October 1996, Centeon initiated a voluntary worldwide recall of all in-
date lots of Albuminar(R)/Plasma-Plex(R) products as a precautionary measure
in response to manufacturing concerns with respect to these products at a U.S.
production facility. The manufacture of Albuminar(R)/Plasma-Plex(R) and other
plasma-derived products at the location was temporarily suspended by Centeon
while the U.S. Food and Drug Administration ("FDA") and Centeon conducted a
comprehensive review of the manufacturing processes at the facility. In
December 1996, Centeon voluntarily suspended the production of certain
pharmaceutical products (such as Dilacor XR(R) and calcitonin products)
manufactured for the Company at the U.S. facility. Due to available inventory
and alternate sources of supply, there has been no significant interruption in
supply of the Company's pharmaceutical products.
In January 1997, Centeon entered into a consent decree with the U.S.
Government which specifies conditions for the shipment by Centeon of both
plasma-based products and certain pharmaceutical products. The consent decree,
which has a term of at least five years, provides, among other things, that
Centeon will not distribute product manufactured at the facility until (1) a
third party expert retained by Centeon has inspected the facility and reported
to the FDA the status of both the observations made by the FDA and Centeon's
compliance with current Good Manufacturing Practices ("GMPs"), (2) Centeon has
certified to its compliance with GMPs and (3) the FDA has made such
inspections at the facility as it deems necessary and has notified Centeon
that it appears to be in compliance with GMPs and may distribute the
manufactured products.
Centeon resumed production of both plasma-based and pharmaceutical products
at the facility in late January 1997. In March, Centeon voluntarily halted
production of both plasma-based and pharmaceutical products in order to
address certain production issues. In mid-March, Centeon and the FDA received
a first report from the third party expert as contemplated by the consent
decree. This report indicated that Centeon had made significant corrective
actions consistent with the observations made during the FDA investigation and
identified certain additional actions needed to be taken. Centeon is
addressing these additional actions. Centeon believes
IV-8
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
that these actions together with the other conditions of distribution under
the consent decree will be satisfied, so that, based on a phased-in resumption
of manufacturing, distribution of plasma-based products, after completion of
testing and lot release by the FDA, will begin during the second quarter of
1997. Centeon also expects that it will be in a position to resume
distribution during the second quarter of the pharmaceutical products
manufactured for the Company at the facility.
The Company's interest in Centeon's results for the year ended December 31,
1996 included charges of $44.0 million, representing charges associated with
anticipated returns of recalled products from customers, writeoff of certain
inventories, and related expenses.
Summarized financial information with respect to Centeon for the year ended
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
1996
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Current assets...................................... $529.4
Noncurrent assets................................... 318.6
Current liabilities................................. 409.0
Noncurrent liabilities.............................. 284.0
Net sales*.......................................... $904.3
Gross margin........................................ 384.5
Income before income taxes.......................... 125.2
</TABLE>
- --------
* Includes sales to certain RPR affiliates totaling $27.8 million.
NOTE 6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma financial information has been prepared as
if the acquisitions of Fisons and AIS and the formation of Centeon had
occurred at the beginning of the periods presented. The results of operations
of Fisons' Laboratory Supplies Division and Scientific Instruments Division
are not included in the pro forma results for 1995 and 1994. The pro forma
information presents the results of the Armour businesses contributed to
Centeon as non-operating income from equity affiliates; sales recorded by
these businesses approximated $489.0 million and $415.1 million in 1995 and
1994, respectively. The pro forma information also reflects 100% of the
operating results of AIS as research and development expenses and eliminates
the equity losses associated with the Company's prior equity investment in
AIS. Adjustments have been made for financing charges and goodwill
amortization, and income taxes are provided at an effective income tax rate of
36%. The pro forma information does not purport to be indicative of the
Company's results of operations had the transactions actually occurred on the
dates presented nor is it necessarily indicative of future operating results.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1995 1994
----------- -----------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales.......................................... $ 5,316.1 $ 4,799.3
Operating income................................... 607.5 162.0
Net income (loss) from continuing operations before
nonrecurring charges available to common
shareholders...................................... 341.6 (66.4)
Earnings (loss) per common share, restated pro
forma............................................. $ 2.53 $ (.56)
Average common shares outstanding.................. 134.2 135.3
</TABLE>
Pro forma operating income for the year ended December 31, 1995 excludes
$126.5 million of acquisition-related charges recorded by the Company
including pretax restructuring charges of $60.0 million, acquired research and
development expense of $43.6 million, and integration and other costs related
to the Fisons acquisition of $22.9 million.
IV-9
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pro forma operating income for the year ended December 31, 1994 includes
charges of $259.3 million recorded by Fisons in connection with the
restructuring of its pharmaceutical operations and charges of $121.2 million
for an RPR global restructuring plan.
Pro forma net income (loss) from continuing operations before nonrecurring
charges excludes a $133.4 million pretax gain on Fisons' sale of the greater
portion of its research and development operations in the second quarter of
1995. Research and development expenses associated with the activities sold
approximating $23.9 million are also excluded from the 1995 pro forma results.
Pro forma net income (loss) from continuing operations before nonrecurring
charges also excludes one-time charges related to the Company's investments in
AIS, including acquired research and development expense and the reassessment
of call option values, totaling $13.0 million and $31.4 million in 1995 and
1994, respectively.
NOTE 7. RESTRUCTURING CHARGES
In 1995, the Company recorded a $60.0 million pretax charge related to the
restructuring of RPR operations as a direct result of the Fisons acquisition.
As part of the Fisons purchase price allocation, the Company also recorded a
$100.0 million liability for the restructuring of Fisons operations. The
combined $160.0 million liability represented expected cash outlays,
principally severance-related, associated with eliminating positions primarily
in the marketing, administrative and manufacturing functions. As of December
31, 1996, workforce reductions approximated 1,900 positions, many of which
were based in the U.S. and the U.K. although other locations were also
affected.
A rollforward of the remaining 1995 restructuring provision from January 1,
1996 is as follows:
<TABLE>
<CAPTION>
TRANSLATION
JANUARY 1, ADJUSTMENTS/ DECEMBER 31,
1996 PAYMENTS OTHER 1996
---------- -------- ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Social costs................... $148.5 $ (99.3) $(8.0) $41.2
Third parties.................. 11.5 (17.0) 5.5 --
------ ------- ----- -----
Total........................ $160.0 $(116.3) $(2.5) $41.2
====== ======= ===== =====
</TABLE>
In 1994, the Company recorded a $121.2 million pretax charge in connection
with a global restructuring plan that was substantially completed in 1995.
Workforce reductions approximated 1,100 positions and were primarily from
manufacturing, sales/marketing and administrative functions in North America
and in France, although other locations in Europe and elsewhere were also
affected. At December 31, 1996, the remaining reserve was $11.3 million
representing outstanding social costs. Total cash outlays related to the plan
through December 31, 1996 totaled $89.2 million, with outlays of $7.5 million
in 1996, $47.6 million in 1995 and $34.1 million in 1994. Asset writeoffs in
conjunction with certain production facilities totaled $26.9 million, of which
$7.5 million and $19.4 million were recorded in 1995 and 1994, respectively.
NOTE 8. GAIN ON SALES OF ASSETS
In 1996, the Company recorded a pretax gain of $81.5 million on the sale of
certain nonstrategic European self-medication product rights and inventories
to Hoffmann-La Roche. The Company also recorded pretax gains on the sales of a
nonstrategic product in France and its Belgium over-the-counter business
totaling $29.2 million.
In 1995, the Company recorded pretax gains of $49.5 million on sales of
assets, principally the transfer of the Company's Canadian over-the-counter
business to Ciba-Geigy Ltd. ("Ciba"), and the sale of certain European product
rights. In 1994, similar gains, including the gain on the sale of certain
assets related to the
IV-10
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's U.S. over-the-counter business to Ciba, totaled $46.2 million. Under
terms of the U.S. transfer agreement with Ciba, the Company received a one-
time payment totaling $178.0 million which included a prepaid royalty of $24.0
million for the year 1995. Additional royalties of $24.0 million are expected
per year for six years. At the end of the seven-year period, Ciba has the
option to purchase the U.S. product intellectual property assets for
approximately $143.0 million.
NOTE 9. OTHER (INCOME) EXPENSE, NET
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
(Income) losses of equity affiliates................ $ (83.0) $ 44.4 $ 46.5
Minority interest................................... 8.7 4.9 3.3
Foreign exchange (gains) losses..................... (3.5) (4.7) 10.5
Other, net.......................................... (11.3) 21.3 23.6
------- ------ ------
Other (income) expense, net......................... $ (89.1) $ 65.9 $ 83.9
======= ====== ======
</TABLE>
(Income) losses of equity affiliates in 1996 principally represented the
Company's interest in the Centeon joint venture (see Note 5). Equity losses
associated with AIS prior to the Company's 1995 acquisition of AIS' remaining
outstanding shares totaled $38.3 million in 1995 and $28.6 million in 1994,
including acquired research and development of $13.0 million and $11.0
million, respectively.
Other, net for 1996 included gains on sales of nonstrategic cost investments
and increased provisions for anti-hemophilic factor litigation. Other, net for
1995 and 1994 included charges of $25.4 million and $30.6 million,
respectively, related to the reassessment of the carrying value of certain
assets including those associated with the Company's prior investment in The
Immune Response Corporation (1995) and AIS call options (1994).
NOTE 10. EARNINGS PER SHARE
Earnings per common share were computed by dividing net income available to
common shareholders by the weighted average number of shares of common stock
outstanding. For purposes of earnings per share calculations, net income
available to common shareholders in 1995 and 1994 was adjusted for the pro
forma effects of interest on indebtedness and preferred dividends relative to
the acquisitions of businesses from RP totaling $1.6 million and $9.1 million,
respectively. The weighted average number of shares used to compute primary
earnings per common share was 135,790,590, 134,228,677 and 135,254,692 for the
years 1996, 1995 and 1994, respectively. Common share equivalents in the form
of stock options were excluded from the calculation as their dilutive effect
was not material.
NOTE 11. INVENTORIES
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Finished goods........................................ $ 376.9 $ 346.2
Work in process....................................... 159.8 140.6
Raw materials and supplies............................ 264.0 278.8
---------- ----------
Inventories........................................... $ 800.7 $ 765.6
========== ==========
</TABLE>
IV-11
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Land.................................................. $ 76.3 $ 62.2
Buildings............................................. 839.7 880.0
Machinery and equipment............................... 1,731.7 1,604.0
Construction in progress.............................. 339.3 330.3
---------- ----------
2,987.0 2,876.5
Less accumulated depreciation......................... 1,461.1 1,255.5
---------- ----------
Property, plant and equipment, net.................... $ 1,525.9 $ 1,621.0
========== ==========
</TABLE>
The Company incurred $217.6 million and $109.9 million in interest cost in
1996 and 1995, respectively, of which $4.9 million and $4.7 million,
respectively, was capitalized as part of the cost of additions to property,
plant and equipment.
NOTE 13. DEBT
Short-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Notes payable to banks................................. $ 89.3 $ 354.7
Current portion of long-term debt...................... 30.6 29.5
---------- ----------
Short-term debt........................................ $ 119.9 $ 384.2
========== ==========
Notes payable to Rhone-Poulenc S.A. and affiliates..... $ 6.8 $ 127.6
========== ==========
</TABLE>
The weighted average interest rate of total outstanding short-term debt was
10.8% at December 31, 1996 (1995: 7.9%).
Long-term debt, net of current portion, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Notes payable at variable rates averaging 5.2% and
5.9% at 1996 and 1995 year-end, respectively
(expected to be refinanced long-term)............... $ 1,940.5 $ 1,825.0
9.25% Series A Senior Notes due 2004, with interest
payable quarterly (guaranteed by Rhone-Poulenc
S.A.)............................................... 48.3 52.7
9.05% Series B Senior Notes due 1997, with interest
payable quarterly (guaranteed by Rhone-Poulenc
S.A.)............................................... -- 4.3
Notes, mortgages and capitalized lease obligations at
rates averaging 7.8% (1995: 8.1%)................... 283.2 277.0
---------- ----------
Long-term debt....................................... $ 2,272.0 $ 2,159.0
========== ==========
Notes payable to Rhone-Poulenc S.A. and affiliates at
rates averaging 3.9% and 6.0% at 1996 and 1995 year-
end, respectively (expected to be refinanced long-
term)............................................... $ 39.2 $ 500.0
Notes payable to Rhone-Poulenc S.A. and affiliates
principally due in 2000 at rates averaging 5.0%
(1995: 8.4%)........................................ 213.8 25.4
---------- ----------
Notes payable to Rhone-Poulenc S.A. and affiliates... $ 253.0 $ 525.4
========== ==========
</TABLE>
IV-12
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, the Company had total committed lines of credit of
$2,325.0 million. Of this amount, $1,825.0 million represented multicurrency
medium-term facilities with fourteen banks expiring in the year 2000. The
additional $500.0 million represented two medium-term credit agreements with
Rhone-Poulenc S.A. expiring in 2000 and 2002. Borrowings under these medium-
term credit facilities bear interest at the London Interbank Offered Rate
("LIBOR"), plus any applicable margin and commitment fee. At December 31,
1996, borrowings outstanding under the above arrangements totaled $594.7
million. These borrowings plus an additional $1,385.0 million of short-term
borrowings were classified as long-term debt at December 31, 1996 as the
Company had the ability and intent to refinance these amounts on a long-term
basis under the above medium-term facilities. The $1,979.7 million of
reclassified borrowings were in various currencies with interest rates as
follows: $874.6 million in U.S. Dollars at 5.7%, $140.1 million in French
Francs at 3.8%, $714.7 million in German Marks at 5.7%, $145.0 million in
Japanese Yen at .7% and $105.3 million in Great British Pounds at 6.3%.
Amounts available under unused uncommitted lines of credit approximated
$991.0 million at December 31, 1996 (1995: $624.0 million).
The aggregate maturities of all long-term debt at December 31, 1996,
including related party debt, were: $30.6 million in 1997, $43.2 million in
1998, $206.1 million in 1999, $2,200.4 million in 2000, $17.7 million in 2001,
and $57.6 million thereafter.
The weighted average interest rate of total debt outstanding at December 31,
1996 was 6.0% (1995: 6.4%).
Pursuant to the remaining portion of a U.S. shelf registration for $500.0
million, the Company has the ability to issue $325.0 million in public debt
securities and/or preferred shares.
NOTE 14. LEASE COMMITMENTS
The Company's capital lease obligations pertain primarily to certain
administrative and research facilities. Effective January 1, 1996, the Company
leased to Centeon under capital lease arrangements certain buildings,
machinery and equipment in the U.S. and France which support production and
research and development activities. Related rental income in 1996 totaled
$3.6 million.
The Company occupies certain facilities and leases certain equipment and
large-load vehicles under operating lease agreements. In 1992, the Company
sold its U.S. corporate offices and research facility to a third party and
leased it back for an initial term of thirty years with options to renew for a
longer period. The Company also leased the underlying land to the third party
for sixty years and subleased it back for thirty years with the facility.
Related average annual accounting rent is $22.5 million. Rent expense under
operating leases was $125.5 million, $104.2 million and $55.0 million in 1996,
1995 and 1994, respectively. Related rental income totaled $55.4 million and
$37.7 million in 1996 and 1995, respectively.
IV-13
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease commitments and lease receivables under all leases with
initial or remaining noncancelable lease terms in excess of one year at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
----------------------- -----------------------
LEASE LEASE LEASE LEASE
COMMITMENTS RECEIVABLES COMMITMENTS RECEIVABLES
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
1997........................ $ 8.2 $ 6.9 $123.1 $41.4
1998........................ 6.2 6.5 80.0 19.7
1999........................ 3.7 6.3 63.6 11.0
2000........................ 3.2 5.9 45.5 --
2001........................ 3.2 5.7 43.4 --
Thereafter.................. 15.4 94.5 585.7 --
----- ------ ------ -----
Minimum lease
payments/receipts.......... 39.9 125.8 $941.3 $72.1
====== =====
Less imputed
interest/unearned income... (8.0) (66.5)
----- ------
Present value of minimum
lease payments
(current--$6.6,
noncurrent--$25.3)......... $31.9
=====
Net investment in capital
leases
(current--$2.9, non-
current--$56.4)............ $ 59.3
======
</TABLE>
NOTE 15. INCOME TAXES
The components of income before income taxes are:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
United States....................................... $ 23.5 $ 241.3 $ 241.0
Non-U.S. ........................................... 666.9 296.7 271.9
------- ------- -------
Income before income taxes.......................... $ 690.4 $ 538.0 $ 512.9
======= ======= =======
</TABLE>
The components of the provision for income taxes are:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Current:
United States................................... $ 62.0 $ 96.9 $ 103.4
Non-U.S......................................... 216.0 100.4 109.9
------- ------- -------
278.0 197.3 213.3
------- ------- -------
Deferred:
United States................................... (89.0) (22.6) (51.7)
Non-U.S......................................... 27.9 6.8 (15.8)
------- ------- -------
(61.1) (15.8) (67.5)
------- ------- -------
Provision for income taxes........................ $ 216.9 $ 181.5 $ 145.8
======= ======= =======
</TABLE>
IV-14
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes are provided for temporary differences between book
and tax bases of the Company's assets and liabilities. Temporary differences
giving rise to a significant portion of the deferred tax assets and
liabilities at December 31 are:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Assets (liabilities):
Depreciation and amortization..................... $ (231.7) $ (328.2)
Intercompany profit in ending inventory........... 81.8 60.8
Net operating loss carryforwards.................. 64.0 57.5
Pension........................................... 42.1 69.2
Tax credit carryforwards.......................... 38.6 --
Deferred royalty income........................... 37.9 --
Restructuring..................................... 27.4 35.8
Distributable earnings............................ (6.6) (66.9)
Other, including nondeductible accruals........... 114.7 188.6
---------- ----------
168.2 16.8
Less valuation allowance.......................... (5.1) (91.9)
---------- ----------
Deferred income taxes, net........................ $ 163.1 $ (75.1)
========== ==========
</TABLE>
The portion of the above net deferred tax assets (liabilities) classified as
current was $278.7 million and $211.1 million at December 31, 1996 and 1995,
respectively. At December 31, 1996, total deferred tax assets were $585.0
million and total deferred tax liabilities were $416.8 million before netting.
At December 31, 1995, similar temporary differences gave rise to total
deferred tax assets of $587.0 million and total deferred tax liabilities of
$570.2 million. The decrease in the valuation allowance in 1996 was primarily
Fisons-related and was accordingly reflected as a reduction in goodwill.
The differences between the U.S. statutory income tax rate and the Company's
effective income tax rate are:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(PERCENT OF INCOME
BEFORE INCOME TAXES)
<S> <C> <C> <C>
U.S. statutory income tax rate.......................... 35.0% 35.0% 35.0%
Puerto Rico operations.................................. (2.8) (3.1) (5.0)
Non-U.S. tax rate differential.......................... 1.4 (2.2) (1.8)
Research and development tax credits.................... (0.8) (1.0) (1.4)
Acquired research and development....................... -- 2.8 --
Other, net.............................................. (1.4) 2.2 1.6
------ ------ ------
Effective income tax rate............................... 31.4% 33.7% 28.4%
====== ====== ======
</TABLE>
The Company has subsidiaries in Ireland, Puerto Rico and Singapore, where
earnings are either exempt or substantially exempt from income taxes under
local government incentive programs, the latest of which expires in the year
2010.
The Company has net operating loss carryforwards of $180.7 million for tax
return purposes which expire principally through the years 1997 to 2011.
IV-15
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's U.S. income tax returns have been examined and settled with
the Internal Revenue Service through 1989. The Company believes that potential
adjustments from any open years would not have a material impact on the
Company's financial position or results of operations.
At December 31, 1996, unremitted earnings of subsidiaries which are intended
to be indefinitely reinvested and, accordingly, for which no additional U.S.
income taxes or foreign withholding taxes have been provided totaled $832.0
million. It would not be practical to compute the estimated deferred tax
liability on these earnings.
NOTE 16. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
PENSIONS
The Company has several defined benefit pension plans which cover a majority
of its employees throughout the world. In the United States, the Company's
funding policy is to contribute funds to a trust as necessary to provide for
current service and for any unfunded projected benefit obligation over a
reasonable period. To the extent that these requirements are fully covered by
assets in the trust, a contribution may not be made in a particular year.
Obligations under non-U.S. plans are systematically provided by depositing
funds with trustees, under insurance policies or through book reserves.
The funded status of the Company's plans at December 31 was as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ----------------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- -------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Vested benefit
obligations............ $(676.0) $(449.7) $(716.5) $(428.6)
Nonvested benefits...... (3.6) (90.7) (3.5) (87.8)
------- ------- ------- -------
Accumulated benefit
obligation............. (679.6) (540.4) (720.0) (516.4)
Projected future salary
increases.............. (25.6) (76.0) (6.8) (65.5)
------- ------- ------- -------
Projected benefit
obligation............. (705.2) (616.4) (726.8) (581.9)
Fair value of plan
assets (invested
primarily in equities
and bonds)............. 895.8 226.2 782.0 184.3
------- ------- ------- -------
Plan assets in excess of
(less than) projected
benefit obligation..... 190.6 (390.2) 55.2 (397.6)
Unrecognized net
transition (asset)
liability.............. .2 5.5 (.8) 2.5
Unrecognized net (gain)
loss................... (43.6) 67.2 (27.1) 86.6
Unrecognized prior
service cost........... 17.4 3.9 20.1 (3.8)
Adjustment required to
recognize minimum
liability.............. -- (66.3) -- (63.5)
------- ------- ------- -------
Prepaid (accrued)
pension cost........... $ 164.6 $(379.9) $ 47.4 $(375.8)
======= ======= ======= =======
</TABLE>
The accumulated benefit obligation of U.S. plans included in the above table
was $190.0 million in 1996 and $186.1 million in 1995. U.S. plan assets were
$201.1 million and $165.4 million at December 31, 1996 and 1995, respectively.
Of the net accrued pension cost, $356.6 million and $359.4 million are
included in other noncurrent liabilities in 1996 and 1995, respectively.
IV-16
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following items were the components of net periodic pension cost for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost........................................ $ 26.4 $ 21.3 $ 19.5
Interest cost....................................... 98.6 56.7 46.2
Actual return on plan assets........................ (102.1) (39.7) (26.6)
Amortization and deferral........................... 17.9 8.2 5.7
------- ------ ------
Net periodic pension cost........................... $ 40.8 $ 46.5 $ 44.8
======= ====== ======
</TABLE>
Net periodic pension cost for U.S. plans included in the above amounts was
$6.7 million, $9.0 million and $12.2 million for 1996, 1995 and 1994,
respectively.
The following weighted average assumptions, which are based on the economic
environment of each applicable country, were used to determine the return on
plan assets and benefit obligations:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate................................................. 8.2% 8.1% 7.9%
Expected return on plan assets................................ 9.4% 9.1% 9.6%
Rate of future compensation increases......................... 4.3% 4.7% 3.8%
</TABLE>
For U.S. plans, the discount rate was 7.75% in 1996 and 1995 and 8.5% in
1994. The expected return on plan assets of 9.5% remained constant from 1994
through 1996. The rate of future compensation increases of 4.5% remained
constant from 1994 through 1996.
SAVINGS PLANS
The Company sponsors defined contribution savings plans covering
substantially all U.S. employees. Company contributions to the plans may not
exceed three thousand dollars per employee. Amounts charged to expense were
$5.9 million, $7.1 million and $7.3 million in 1996, 1995 and 1994,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In the United States, the Company grants retirees access to its medical,
prescription and life insurance programs for a premium targeted to equal the
cost of such benefits. The Company's non-U.S. affiliates generally contribute
to government insurance programs during the employees' careers and do not
sponsor additional postretirement programs.
POSTEMPLOYMENT BENEFITS
Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." The new standard did not materially
affect the Company's financial position or results of operations.
NOTE 17. STOCK PLANS
Stock options and restricted shares have been granted to employees under
plans approved by the shareholders in 1982 and 1985, as amended and restated
in 1988 and 1990 ("the Stock Plan"). The aggregate number of shares originally
available for issuance or transfer to employees under these plans was
7,000,000. Option prices are equal to the fair market value of the shares on
the date of grant. Options are exercisable during
IV-17
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
a period determined by the Company, but in no event later than ten years from
the date granted. Shares issued under a restricted grant may not be sold or
otherwise disposed of for a period designated by the Company. Restricted
shares are returned to the Company if the grantee's employment terminates
during the period of restriction. During the restriction period, the grantee
is entitled to vote the shares and receive any dividends paid. Effective
January 1, 1993, the Company substantially curtailed the granting of
restricted shares to employees. The Stock Plan, as amended and restated,
permits the Company to grant stock appreciation rights in tandem with stock
options. As of December 31, 1996, no such rights have been granted. The Equity
Compensation Plan adopted in 1990 supplements the Stock Plan by providing for
an additional 6,000,000 shares that may be issued to participants after all
shares authorized pursuant to the terms of the Stock Plan have been utilized.
The terms of the Equity Compensation Plan are substantially the same as those
of the Stock Plan. The 1995 Equity Compensation Plan further supplements the
Stock Plan by providing for an additional 5,000,000 shares. The terms of the
1995 Equity Compensation Plan are substantially the same as those of the Stock
Plan and the Equity Compensation Plan.
The Company applies Accounting Principles Board Opinion 25 ("APB 25") in
accounting for its fixed stock option plans. Under the intrinsic value method
prescribed by APB 25, no compensation expense has been recorded by the Company
in the periods reported. Had compensation expense for awards made in 1996 and
1995 from these plans been determined under the fair value method of SFAS No.
123, "Accounting for Stock-Based Compensation," the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31
-----------------------
1996 1995
----------- -----------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income.......................................... $ 421.3 $ 334.0
Primary earnings per common share................... $ 3.10 $ 2.48
</TABLE>
The Company used the Black-Scholes pricing model to determine the fair value
of stock options granted in 1996 and 1995 using the following assumptions:
expected life of the option ranging from 5 to 6 years and expected forfeiture
rate ranging from 12.8% to 17.9% depending on the job grade classification;
expected stock price volatility of 22.2%; expected dividend rate of 2.5%; and
risk-free interest rate ranging from 5.6% to 5.9% in 1996 and 7.0% to 7.1% in
1995 depending on expected life of the option. The impact of applying SFAS No.
123 in this pro forma disclosure is not indicative of the impact on future
years' reported net income because SFAS No. 123 does not apply to stock
options granted prior to 1995, the Company's stock options vest over three
years, and additional stock options awards are anticipated in future years.
IV-18
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's stock option plans as of December
31, 1996, 1995 and 1994 and changes during the years then ended is presented
below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(IN THOUSANDS) PRICE (IN THOUSANDS) PRICE (IN THOUSANDS) PRICE
-------------- --------- -------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
January 1.............. 7,991 $42.14 7,147 $42.06 5,815 N/A
Additions (deductions):
Granted................ 1,414 61.56 1,702 40.74 1,898 N/A
Exercised.............. (2,108) 37.07 (433) 32.60 (116) N/A
Canceled............... (431) 50.44 (425) 44.26 (450) N/A
------------ ------------ ------------
Options outstanding at
December 31............ 6,866 47.03 7,991 42.14 7,147 N/A
============ ============ ============
Options exercisable at
December 31............ 4,382 44.98 4,693 41.26 3,443 N/A
============ ============ ============
Weighted average fair
value of options
granted during the
year................... $15.38 $10.89 N/A
============ ============ ============
Shares reserved for
future grants.......... 5,564 6,551 2,862
============ ============ ============
Price range of options
exercised during the
year................... $4.67-$63.00 $4.67-$46.38 $8.24-$30.18
============ ============ ============
Price range of options
outstanding............ $4.67-$64.00 $4.67-$64.00
============ ============
Price range of options
exercisable............ $4.67-$64.00 $4.67-$64.00
============ ============
</TABLE>
The following table summarizes information about stock options outstanding
and stock options exercisable at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ -------------------------------
WEIGHTED AVERAGE
SHARES REMAINING WEIGHTED AVERAGE SHARES WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES (IN THOUSANDS) CONTRACTUAL LIFE EXERCISE PRICE (IN THOUSANDS) EXERCISE PRICE
- ------------------------ -------------- ---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 8.24-$14.61........... 68 1.8 years $12.38 68 $12.38
$30.13-$38.75........... 1,549 6.2 years $33.85 1,173 $33.45
$40.00-$49.25........... 2,991 6.8 years $42.12 2,035 $42.80
$52.38-$55.50........... 31 5.5 years $55.36 31 $55.36
$60.25-$67.38........... 2,227 7.6 years $63.73 1,075 $63.46
----- -----
$ 8.24-$67.38........... 6,866 6.9 years $47.03 4,382 $44.98
===== =====
</TABLE>
IV-19
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 18. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARKET MONEY COMMON CAPITAL IN
AUCTION MARKET CAPITAL STOCK AT EXCESS OF EMPLOYEE CUMULATIVE
PREFERRED PREFERRED EQUITY STATED STATED RETAINED BENEFITS TRANSLATION
SHARES STOCK NOTES VALUE VALUE EARNINGS TRUST ADJUSTMENTS
--------- --------- ------- -------- ---------- -------- -------- ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993................... $ 225.0 $175.0 $ -- $139.0 $ 290.0 $1,207.3 $ (75.8) $(139.3)
Net income--1994........ -- -- -- -- -- 367.1 -- --
Cash dividends, $1.12
per common share....... -- -- -- -- -- (151.5) -- --
Dividends on preferred
shares................. -- -- -- -- -- (19.2) -- --
Capital contributions
from Rhone-Poulenc
S.A. .................. -- -- -- -- 107.1 -- -- --
Shares repurchased for
Employee Benefits
Trust.................. -- -- -- -- -- -- (109.9) --
Issuance of shares under
employee benefit
plans.................. -- -- -- .1 15.1 -- -- --
Translation adjustments,
including hedging...... -- -- -- -- -- -- -- 80.4
------- ------ ------ ------ ------- -------- ------- -------
Balance, December 31,
1994................... 225.0 175.0 -- 139.1 412.2 1,403.7 (185.7) (58.9)
Net income--1995........ -- -- -- -- -- 356.5 -- --
Cash dividends, $1.20
per common share....... -- -- -- -- -- (161.2) -- --
Dividends on preferred
shares................. -- -- -- -- -- (18.7) -- --
Redemption of Market
Auction Preferred
Shares................. (225.0) -- -- -- -- -- -- --
Issuance of capital
equity notes to Rhone-
Poulenc S.A............ -- -- 500.0 -- -- -- -- --
Adjustment of capital
contributions for
acquisition
liabilities............ -- -- -- -- (273.2) -- -- --
Issuance of shares under
employee benefit
plans.................. -- -- -- .4 14.2 -- -- --
Translation adjustments,
including hedging...... -- -- -- -- -- -- -- 53.8
------- ------ ------ ------ ------- -------- ------- -------
Balance, December 31,
1995................... -- 175.0 500.0 139.5 153.2 1,580.3 (185.7) (5.1)
Net income--1996........ -- -- -- -- -- 473.5 -- --
Cash dividends, $1.26
per common share....... -- -- -- -- -- (171.1) -- --
Dividends on preferred
shares................. -- -- -- -- -- (9.6) -- --
Remuneration on capital
equity notes........... -- -- -- -- -- (35.2) -- --
Issuance of shares under
employee benefit
plans.................. -- -- -- 2.1 81.6 -- -- --
Translation adjustments,
including hedging...... -- -- -- -- -- -- -- (48.7)
------- ------ ------ ------ ------- -------- ------- -------
Balance, December 31,
1996................... $ -- $175.0 $500.0 $141.6 $ 234.8 $1,837.9 $(185.7) $ (53.8)
======= ====== ====== ====== ======= ======== ======= =======
</TABLE>
The Company has outstanding $175.0 million of money market preferred stock
issued in three series consisting of 750 shares, 500 shares and 500 shares,
respectively. The initial dividend period for all series commenced on August
1, 1993 at initial dividend rates of 4.7% per annum for a two-year period for
Series 1; 5.125% per annum for a three-year period for Series 2; and 5.84% per
annum for a five-year period for Series 3. After expiration of the initial
dividend periods, dividends are determined at separate auctions for each
series. The average dividend rate in 1996 on Series 1 stock was 5.21% per
annum (1995: 5.11%) and on Series 2 stock was 5.20% per annum. The money
market preferred stock ranks prior to common shares of the Company as to
dividends. Holders have no voting rights except in the event that preferred
dividends are in arrears for at least 180 consecutive days. In such event, the
authorized number of the Company's Board of Directors would be increased by
two and the holders of record of the preferred shares may elect these
additional directors. The preferred stock is not convertible into common stock
or other shares of the Company and holders thereof have no preemptive rights.
Upon the liquidation, dissolution, or winding up of the Company, or upon
redemption of the preferred stock at the Company's option, holders would be
entitled to a liquidation preference of $100,000 per share plus any
accumulated and unpaid dividends thereon.
In 1995, the Company redeemed its remaining outstanding Market Auction
Preferred Shares ("MAPS") Series A, C and D for $225.0 million plus accrued
dividends. Dividend rates, determined at separate auctions for each series,
averaged 5.98% during 1995 (1994: 4.63%).
In December 1995, the Company issued $500.0 million of undated capital
equity notes to Rhone-Poulenc S.A. The notes have a liquidation preference
that ranks senior to all RPR common stock, but junior to all existing
IV-20
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and future RPR preferred stock. Semiannual remuneration on the unpaid
principal balance of the equity notes is based on LIBOR plus a margin. If the
Company is unable to meet statutory standards for dividend payments on
outstanding common or preferred stock, the Company may satisfy the equity note
remuneration requirements with the issuance of additional capital equity notes
("remuneration notes"). Terms of the remuneration notes would be similar to
the equity notes except for a higher rate of remuneration. The capital equity
notes are redeemable only at the Company's option, but not earlier than five
years after issuance, subject to certain exceptions.
At December 31, 1996 and 1995, there were 2,676,800 preferred shares without
par value authorized and unissued.
In 1996, the Company increased the number of authorized common shares to
600,000,000. In 1994, the Company completed the open market repurchase of five
million of its common shares as authorized by the Board of Directors in March
1993 with the acquisition of 3.1 million shares at a cost of $109.9 million.
These shares are being held in an Employee Benefits Trust to fund future
benefits in the United States.
In 1995, the Company acquired Cooper and a pharmaceutical business in Brazil
from Rhone-Poulenc S.A. For accounting purposes, the acquisitions of these
entities under common control were treated on an "as-if pooling" basis and,
accordingly, the Company restated its 1994 results to include the accounts of
Cooper and the Brazilian business as of April 1, 1994 and January 1, 1994,
respectively. The assets and liabilities of the acquired businesses were
recorded by the Company at the carrying values used by RP as of the
restatement dates and the value of net assets acquired was reflected in the
1994 capital in excess of stated value account as a capital contribution from
RP. The Company subsequently reduced capital in excess of stated value to
reflect the purchase obligations related to the acquisition transactions of
approximately $273.2 million.
NOTE 19. FINANCIAL INSTRUMENTS
The Company's financial instruments consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
(ASSET (LIABILITY) IN MILLIONS)
<S> <C> <C> <C> <C>
Cash and cash equivalents..... $ 100.6 $ 100.6 $ 115.4 $ 115.4
Cash pooling arrangements with
RP........................... 3.2 3.2 16.0 16.0
Time deposits, generally
maturing within 1-5 years.... 146.4 146.4 83.0 83.0
Cost investments:
Practical to estimate....... 18.0 29.8 9.0 13.6
Not practical to estimate... 14.2 N/A 19.9 N/A
Other investments, including
restricted cash.............. 85.2 89.4 112.6 118.7
Long-term debt................ (2,555.6) (2,561.2) (2,713.9) (2,722.7)
Foreign currency exchange
contracts.................... 10.4 * 10.4 (7.6)* (7.6)
Interest swap arrangements.... (23.7)* (42.0) (3.7)* (3.8)
</TABLE>
- --------
* The carrying amount represents the net unrealized gain (loss) or net
interest receivable (payable) associated with the contracts at the end of
the period.
None of the Company's financial instruments are held for trading purposes.
IV-21
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
Cash, cash equivalents and cash pooling arrangements with RP
The carrying amount approximates the fair value due to the short-term
maturity of these instruments.
Time deposits
The carrying amount approximates the fair value due to the variable rate
nature of the long-term deposits.
Cost and other investments
For those investments for which it was practical, fair value was estimated
using quoted or best estimates of market prices or pricing models. An estimate
of fair market value could not be reasonably made for certain cost investments
for which there are no quoted market prices.
Long-term debt
The majority of the Company's long-term debt is at variable rates of
interest and, therefore, the Company believes that the carrying amount
approximates fair value. For long-term debt at fixed interest rates, fair
value was determined by discounting future cash flows based on interest rates
currently available to the Company for debt with similar terms and maturities.
Foreign currency exchange contracts
The fair value of foreign currency exchange contracts was estimated by
valuing the contracts at current exchange rates.
Interest swap arrangements
The fair value of interest swap arrangements reflects the amount at which
they could be settled based on bank pricing models.
CREDIT RISK
The Company places its cash investments and time deposits with credit-
worthy, high quality financial institutions and, by policy, limits the amount
of credit exposure to any one institution. The Company therefore does not
anticipate nonperformance by any of the counterparties to these financial
instruments.
Concentrations of credit risk with respect to trade receivables is limited
due to a large customer base in a wide geographic area.
Foreign currency exchange contracts do not expose the Company to accounting
risk due to exchange rate movements as gains and losses on the contracts
offset gains and losses on the transactions being hedged. Management believes
that the risk of incurring losses on these contracts due to default by the
counterparty is remote as the contracts are entered into with major financial
institutions.
Interest swap arrangements do not involve exchanges of underlying principal
amounts, therefore the Company's exposure to credit loss is significantly less
than the notional amounts of the contracts. Management believes that the risk
of incurring losses due to default by the counterparty is remote as the
arrangements are entered into with major financial institutions.
IV-22
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
NET INVESTMENT HEDGES
Unhedged net investment positions fluctuate with currency movements with
corresponding translation adjustments recorded in shareholders' equity. The
Company may utilize foreign currency arrangements, including foreign currency
exchange contracts and foreign currency-denominated borrowings, to limit the
exposure of its net investments in foreign subsidiaries to currency
fluctuations and limit the volatility of reported equity. Gains and losses
from these arrangements, which are designated as hedges of the Company's net
foreign investments, are recorded as translation adjustments in shareholders'
equity and offset the gains and losses on the related net investments. For the
year ended December 31, 1996, the increase in shareholders' equity, net of tax
effects, associated with net investment hedging arrangements totaled $16.8
million (1995: reduction of $5.2 million).
In determining which, if any, net investment positions to hedge, the Company
considers such factors as the magnitude of the exposed position and the cost
of financing the hedging instruments. The Company's significant net foreign
investment positions at December 31, 1996 included the Great British Pound
("GBP"), French Franc, German Mark and Japanese Yen. Throughout the year, the
Company hedged a portion of these net investment exposures utilizing foreign
currency exchange contracts and foreign currency-denominated borrowings. At
December 31, 1996, the Company was party to foreign currency exchange
contracts to sell French Francs with notional amounts totaling FF431.4 million
($82.4 million). These contracts matured in the first quarter of 1997. The
Company also had certain variable-rate foreign currency-denominated borrowings
outstanding in the U.S. including FF499.3 million ($95.3 million) and
(Yen)15,147 million ($130.1 million). The Company had no net investment
hedging instruments outstanding at December 31, 1995.
FOREIGN CURRENCY TRANSACTION HEDGES
The Company enters into foreign currency exchange contracts to minimize
exposure of foreign currency transactions (such as export sales, raw materials
purchases, and short-term intercompany financings) and firm commitments to
fluctuating exchange rates. Gains or losses from these contracts are
recognized in the basis of the transaction being hedged. Cash flows from these
contracts are classified in the same category as the hedged transactions.
The Company's principal net transactional exposures by major currency before
the effects of foreign currency exchange contracts were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------- ---------------------
LOCAL U.S. DOLLAR LOCAL U.S. DOLLAR
CURRENCY EQUIVALENT CURRENCY EQUIVALENT
-------- ----------- -------- -----------
(ASSET (LIABILITY) IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. dollars*......................... 619 $ 619 139 $ 139
FF.................................... 506 97 (332) (68)
GBP................................... (318) (540) (158) (246)
DEM................................... (77) (50) 73 51
All other (generally <$45 million).... various (15) various 82
----- -----
Total............................. $ 111 $ (42)
===== =====
</TABLE>
- --------
* Represents U.S. dollar-denominated transactions of affiliates with
functional currencies other than the U.S. dollar.
IV-23
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's policy is to hedge substantially all of its foreign currency
transactional exposures. At December 31, 1996, the Company had entered into
multiple forward contracts maturing in the first quarter of 1997 to buy and
sell various currencies with notional amounts totaling $819.8 million and
$936.9 million, respectively. Similar contracts which matured in the first
quarter of 1996 totaled $478.3 million and $445.7 million, respectively, at
December 31, 1995. At the acquisition date, Fisons had certain foreign
currency exchange contracts in place that were speculative in nature to sell
various currencies totaling $238.0 million. These contracts were effectively
closed out at December 31, 1995 through the purchase of opposite contracts and
the $9.2 million cost of settlement was fully accrued. The contracts were
settled in 1996.
As the Company conducts a significant portion of its operations outside the
U.S., it is exposed to the impact of foreign exchange fluctuations on the U.S.
dollar value of reported earnings. To manage this exposure, the Company may
hedge a portion of its non-U.S.-based forecasted quarterly pretax earnings
utilizing foreign currency exchange contracts. The portion of earnings that
the Company hedges is based on a cost-benefit assessment which considers
naturally offsetting exposures and the cost of hedging instruments. Such
foreign currency exchange contracts are marked to market in other (income)
expense, net. For the periods reported, the net gains/losses on these
contracts were not significant due principally to the general stability vis-a-
vis the U.S. dollar of the currencies hedged. Cash flows associated with the
contracts are reported as part of cash flows from operating activities. There
were no related contracts outstanding at December 31, 1996 and 1995.
As part of the treasury services the Company performs for Centeon, at
December 31, 1996, the Company had outstanding certain foreign currency
exchange contracts to which Centeon was the counterparty. The notional amounts
of these contracts to buy and sell various foreign currencies totaled $19.9
million and $7.2 million, respectively. The contracts, which expired in
January 1997, reflected rates that were established on an arms-length basis;
the related carrying values at December 31, 1996 was not significant.
INTEREST SWAP ARRANGEMENTS
The Company enters into interest rate swap contracts to manage its exposures
to movements in interest rates and minimize its overall cost of borrowings.
The net receivable or payable under the interest rate swaps is recognized as
an adjustment to interest expense over the life of the underlying contracts.
In 1996 and 1995, the Company was party to contracts to convert certain
floating rate obligations into fixed rate instruments and contracts to convert
certain fixed rate debt into floating rate debt as determined by the interest
rate environment of the currency in which the underlying obligation was
denominated. The Company's weighted average interest rate for the year ended
December 31, 1996 was reduced by 8 basis points or approximately $2.3 million
(1995: 6 basis points or $.5 million; 1994: 17 basis points or $1.3 million)
as a result of interest rate swap contracts.
In 1996, the Company initiated a long-term GBP-denominated intercompany loan
from a U.S. subsidiary to a U.K. subsidiary totaling GBP 544.9 million ($850.0
million). The foreign exchange on the loan is recorded as a translation
adjustment in shareholders' equity in accordance with SFAS No. 52 and resulted
in an increase in shareholders' equity approximating $66.7 million in 1996.
Interest on the intercompany loan is paid in GBP based on one-year LIBOR. With
respect to the transaction, the Company entered into certain five-year
arrangements ("dual currency swaps") with several banks whereby the U.S.
subsidiary pays the banks GBP at rates based on one-year LIBOR times specified
GBP principal amounts equal in total to the intercompany loan. The subsidiary
receives from the banks U.S. dollars at rates based on one-month LIBOR plus a
margin. There is no exchange of underlying principal. The interest
income/expense differential is recorded as an adjustment to interest expense
and was not significant in 1996.
IV-24
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest rate swap arrangements outstanding at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
NOTIONAL U.S. DOLLAR FIXED OR CARRYING FAIR MARKET
AMOUNT EQUIVALENT VARIABLE AMOUNT VALUE TERM AVERAGE RATE
-------- ----------- -------- -------- ----------- ----------- -----------------------------
(RECEIVABLE (PAYABLE) IN MILLIONS)
<C> <C> <C> <C> <C> <S> <C> <C>
INTEREST RATE SWAPS*:
$300 $300 Fixed $ (0.1) $ (3.8) 11/95-11/00 Pay 5.81%;
Receive 3-month LIBOR (5.55%)
(Yen)3000 26 Fixed (0.1) (0.4) 4/95- 4/98 Pay 2.01%;
Receive 3-month LIBOR (5.91%)
GBP100 170 Variable 1.4 2.5 3/96- 1/99 Pay 6-month LIBOR (6.0%);
Receive 7.3%
DUAL CURRENCY SWAPS:
GBP545 $843 N/A $(24.9) $(40.3) 8/96- 7/01 Pay 1-year LIBOR (6.34%);
Receive 1-month LIBOR (6.38%)
</TABLE>
- --------
*The Company was party to similar interest rate swap contracts at December 31,
1995.
NOTE 20. INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREA
The Company is primarily engaged in the discovery, development, manufacture
and marketing of a broad line of pharmaceutical products for human use. Among
the Company's principal markets are France, currently the Company's largest
market presence, the United States, Germany, the United Kingdom and Italy. The
Company also has an expanding presence in Japan and South American countries.
The Company has twelve pharmaceutical plants in France, two in the U.S., nine
in Other Europe and twenty-four in the Rest of World region.
The principal markets in which the Company conducts its business are subject
to various governmental regulations with respect to the approval, manufacture
and marketing of pharmaceutical products. In many markets, governments have
instituted programs that impact pharmaceutical prices, reimbursement levels or
prescription volumes. The nature of these regulations and their effect vary
greatly from country to country. It is not possible to predict the extent to
which the Company or the pharmaceutical industry might be affected by future
legislative or regulatory developments.
Information about the Company's operations for the years 1996, 1995 and 1994
by geographic area follows. Inter-area affiliated sales are not significant.
Corporate loss before income taxes includes corporate administrative expenses,
worldwide net interest expense and worldwide (income) losses of equity
affiliates.
IV-25
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net sales:
United States................................ $1,280.1 $1,314.2 $1,261.9
France....................................... 1,794.6 1,819.6 1,506.7
Other Europe................................. 1,417.4 1,207.4 1,015.5
Rest of World................................ 928.5 800.9 702.5
-------- -------- --------
Total net sales............................ $5,420.6 $5,142.1 $4,486.6
======== ======== ========
Income before income taxes:
United States................................ $ 207.4 $ 351.9 $ 356.9
France....................................... 107.2 245.9 172.6
Other Europe................................. 372.5 132.0 92.8
Rest of World................................ 200.3 62.5 77.6
Corporate.................................... (197.0) (254.3) (187.0)
-------- -------- --------
Total income before income taxes........... $ 690.4 $ 538.0 $ 512.9
======== ======== ========
Identifiable assets:
United States................................ $1,467.1 $4,232.9 $1,107.2
France....................................... 2,099.6 1,801.9 1,519.6
Other Europe................................. 2,126.8 1,140.4 1,001.7
Rest of World................................ 1,142.1 787.4 518.6
Corporate.................................... 1,932.5 1,024.5 505.2
-------- -------- --------
Total identifiable assets.................. $8,768.1 $8,987.1 $4,652.3
======== ======== ========
</TABLE>
In 1996, U.S. income before income taxes ("IBT") included $97.4 million of
charges related to the reassessment of certain intangibles and fixed asset
carrying values associated with the ex-vivo cell processing initiatives of
AIS. France IBT included $23.2 million of gains on the sale of nonstrategic
assets. Other Europe IBT included $87.5 million of gains on the sales of
nonstrategic assets including certain self-medication product rights.
Corporate IBT reflected income from equity affiliates totaling $83.0 million
which included $44.0 million of charges associated with the estimated impact
of Centeon's voluntary recall of all in-date lots of albumin products.
In 1995, U.S. IBT included $13.1 million of restructuring charges and $35.6
million of AIS-related acquired research and development. France IBT included
$22.8 million from gains on sales of certain product rights. Other Europe IBT
included $46.9 million of restructuring charges and $37.3 million of other
charges related to the Fisons plc acquisition, including acquired research and
development expense.
In 1994, U.S. IBT included gains on asset sales, net of restructuring
charges, of $15.1 million. France and Other Europe IBT included $49.0 million
and $28.8 million, respectively, of restructuring charges, net of gains on
sales of assets. The Rest of World area IBT included restructuring charges of
$13.2 million.
For presentation purposes, goodwill and intangibles and related amortization
expense recorded in connection with the acquisition of Fisons were allocated
to the U.S. at December 31, 1995. In 1996, these balances were reflected in
the appropriate geographic region.
NOTE 21. RELATED PARTY TRANSACTIONS
RHONE-POULENC S.A.
The entities comprising the Company manage their cash separately. In the
largest countries such as the U.S., France, the U.K. and Germany, the local
entities have access to RP cash pooling arrangements whereby they can, at
their own request, lend to or borrow from RP at market terms and conditions.
IV-26
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
Amounts receivable from RP and affiliates totaled $48.9 million and $61.3
million at December 31, 1996 and 1995, respectively. The 1996 balance included
$6.3 million of accounts receivable from sales of products and services to RP
(1995: $8.5 million) and $39.4 million classified as other current assets
(1995: $36.8 million).
Accounts payable related to purchase of materials and services from RP and
affiliates were $16.8 million at December 31, 1996 (1995: $12.2 million);
accrued and other liabilities due to RP at December 31, 1996 were $30.0
million (1995: $20.9 million).
In 1996, sales to RP and affiliates were $31.3 million (1995: $31.1 million;
1994: $29.7 million). Materials purchased from RP totaled $38.7 million in
1996 (1995: $41.4 million; 1994: $36.8 million).
At December 31, 1996, debt with RP and affiliates totaled $259.8 million
(1995: $653.0 million). Interest expense incurred with respect to RP
indebtedness in 1996 was $22.3 million (1995: $12.4 million; 1994: $15.8
million).
RP charges the Company for expenses incurred on its behalf, including
research, data processing, insurance, legal, tax, advertising, public
relations and management fees. Such charges are reflected in the financial
statements and amounted to approximately $24.0 million in 1996 (1995: $23.6
million; 1994: $24.5 million). Management believes that the expenses so
charged are representative of amounts that the Company would have incurred if
it had been operated as an unaffiliated entity.
In the 1995 second quarter, the Company acquired Cooper and a pharmaceutical
business in Brazil from RP for cash and preferred stock of an RPR subsidiary
aggregating approximately $273.2 million. The preferred shares, accounted for
as minority interest in other liabilities, have a liquidation preference
approximating FF645.0 million (approximately $123.1 million) and pay dividends
of 7.5% per annum on a stated value of FF145.0 million. The acquisition
agreements call for potential adjustments to the purchase price of the
businesses based on several factors, including earnings performance.
In December 1995, the Company issued $500.0 million of undated capital
equity notes to RP. Semiannual remuneration on the unpaid principal balance of
the equity notes is based on LIBOR plus a margin and approximated $35.2
million in 1996.
CENTEON
The Company and Centeon participate in a cash pooling arrangement whereby
the entities comprising Centeon can borrow from or lend to RPR at market terms
and conditions. Receivables and investments related to Centeon classified as
current assets totaled $50.2 million at December 31, 1996. At December 31,
1996, the Company's net investment in capital leasing arrangements with
Centeon totaled $59.3 million; related rental income for the year totaled $3.6
million. Current liabilities due to Centeon totaled $35.3 million. Notes
payable to Centeon totaled $8.4 million at December 31, 1996.
Purchases of certain plasma-based products from Centeon totaled $27.8
million in 1996. The Company is a party to a toll manufacturing agreement with
Centeon with respect to the manufacture, finishing and/or packaging of certain
pharmaceutical compounds and products. Charges at full standard cost to RPR
under this agreement totaled $49.5 million in 1996.
In 1996, the Company received a net cash distribution from Centeon totaling
$71.3 million.
The Company and Centeon have entered into certain service agreements which
are generally renewable on an annual basis. The Company charges Centeon for
such services as treasury, accounting, information systems, product
distribution, tax and legal. These charges approximated $6.0 million in 1996.
IV-27
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NOTE 22. CONTINGENCIES
The Company is involved in litigation incidental to its business including,
but not limited to: (1) approximately 541 pending lawsuits in the United
States, Canada and Ireland against the Company and its Armour Pharmaceutical
Company subsidiary ("Armour"), in which it is claimed by individuals infected
with the Human Immunodeficiency Virus ("HIV") that their infection with HIV
and, in some cases, resulting illnesses, including Acquired Immune Deficiency
Syndrome-related conditions or death therefrom, may have been caused by
administration of anti-hemophilic factor ("AHF") concentrates processed by
Armour in the early and mid-1980's. Armour has also been named as a defendant
in certain proposed class action lawsuits filed on behalf of HIV-infected
hemophiliacs and their families. None of these cases involve Armour's
currently distributed AHF concentrates. In August 1996, the Company, with
three other U.S. plasma fractionators defending the U.S. AHF litigation,
signed a Settlement Agreement with the plaintiffs with respect to this
litigation which, subject to certain conditions, provides for payment of
$100,000 to each eligible claimant or claimant group and the payment of up to
$40 million in attorneys fees. One significant condition of the settlement is
that potential subrogation claims by third party medical providers be resolved
to the mutual satisfaction of the parties and that the class members'
eligibility for federal program entitlements be maintained. The Company and
the other fractionator-defendants are working with the plaintiffs' counsel to
resolve these issues; (2) legal actions pending against one or more
subsidiaries of the Company and various groupings of more than one hundred
pharmaceutical companies, in which it is generally alleged that certain
individuals were injured as a result of the development of various
reproductive tract abnormalities because of in utero exposure to
diethylstilbestrol ("DES") (typically, two former operating subsidiaries of
the Company are named as defendants, along with numerous other DES
manufacturers, when the claimant is unable to identify the manufacturer); (3)
antitrust actions alleging that certain pharmaceutical companies, including
the Company, engaged in price discrimination practices to the detriment of
certain independent community pharmacists and consumers; and (4) alleged
breach of contract by a subsidiary of the Company with respect to agreements
involving a bisphosphonate compound and Lozol(R).
The eventual outcomes of the above matters of pending litigation cannot be
predicted with certainty. The defense of these matters and the defense of
expected additional lawsuits related to these matters may require substantial
legal defense expenditures. The Company follows Statement of Financial
Accounting Standards No. 5 in determining whether to recognize losses and
accrue liabilities relating to such matters. Accordingly, the Company
recognizes a loss if available information indicates that a loss or range of
losses is probable and reasonably estimable. The Company estimates such losses
on the basis of current facts and circumstances, prior experience with similar
matters, the number of claims and the anticipated cost of administering,
defending and, in some cases, settling such claims. The Company has also
recorded as an asset certain insurance recoveries which are determined to be
probable of occurrence. If a contingent loss is not probable but is reasonably
possible, the Company discloses this contingency in the notes to its
consolidated financial statements if it is material. Based on the information
available, the Company does not believe that reasonably possible uninsured
losses in excess of amounts recorded for the above matters of litigation would
have a material adverse impact on the Company's financial position, results of
operations or cash flows.
The Company has been advised of its potential liability related to alleged
past waste disposal practices, including potential involvement at five sites
on the U.S. National Priority List created by the Comprehensive Environmental
Response Compensation and Liability Act (Superfund). For the majority of these
sites, the Company's estimated liability is not significant. With respect to
two of the sites, the Company is currently not able to estimate its share of
potential liability as the assessment of site conditions, the identification
of remediation methods and costs, and the quantification of relative
contributions among potentially responsible parties have not yet advanced to
the stage where a reasonable estimate of loss can be made.
As of December 31, 1996, the Company had unused standby letters of credit
outstanding of $101.5 million. The letters of credit are issued primarily in
the form of guarantees or performance bonds.
IV-28
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Rhone-Poulenc Rorer Inc. is responsible for the
information and representations contained in this report. Management believes
that the financial statements have been prepared in conformity with generally
accepted accounting principles and that the other information in this annual
report is consistent with those statements. In preparing the financial
statements, management is required to include amounts based on estimates and
judgments which it believes are reasonable under the circumstances.
In fulfilling its responsibilities for the integrity of the data presented
and to safeguard the Company's assets, management employs a system of internal
accounting controls designed to provide reasonable assurance, at appropriate
cost, that the Company's assets are protected and that transactions are
appropriately authorized, recorded and summarized. This system of control is
supported by the selection of qualified personnel, by organizational
assignments that provide appropriate delegation of authority and division of
responsibilities, and by the dissemination of written policies and procedures.
This control structure is further reinforced by a program of internal audits
including a policy that requires responsive action by management.
Coopers & Lybrand L.L.P., the Company's independent accountants, performs
audits in accordance with generally accepted auditing standards. The
independent accountants conduct a review of internal accounting controls to
the extent required by generally accepted auditing standards and perform such
tests and procedures as they deem necessary to arrive at an opinion on the
fairness of the financial statements presented herein.
The Board of Directors, through the Audit Committee comprised solely of
directors who are not employees of the Company, meets with management, the
internal auditors and the independent accountants to ensure that each is
properly discharging its respective responsibilities. Both the independent
accountants and the internal auditors have free access to the Audit Committee,
without management present, to discuss the results of their work, including
internal accounting controls and the quality of financial reporting. The Audit
Committee met three times in 1996.
/s/ Michel de Rosen
- -------------------------------------
MICHEL DE ROSEN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
/s/ Patrick Langlois
- -------------------------------------
PATRICK LANGLOIS
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
/s/ Philippe Maitre
- -------------------------------------
PHILIPPE MAITRE
VICE PRESIDENT AND CORPORATE
CONTROLLER
IV-29
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
QUARTERLY DATA (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED 1996 QUARTER ENDED 1995
------------------------------------------- -------------------------------------------
RESTATED
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $1,272.4 $1,346.1 $1,278.0 $1,524.1 $1,098.4 $1,241.3 $1,212.7 $1,589.7
Gross profit............ 838.2 902.3 907.4 1,106.7 694.4 813.6 792.8 1,094.9
Net income available to
common shareholders.... 74.0 91.9 97.4 165.4 89.5 85.7 107.3 55.3
Earnings per common
share.................. .55 .68 .72 1.21 .66 .64 .80 .41
Market price per common
share:
High................... 66.875 69.250 77.750 80.500 43.500 43.125 45.875 54.500
Low.................... 50.500 58.000 62.125 66.000 36.250 40.375 40.500 43.750
Common dividends paid... .30 .32 .32 .32 .30 .30 .30 .30
</TABLE>
- --------
Results for the third quarter of 1996 included charges of $33.8 million ($.17
per share) associated with the estimated impact of Centeon's voluntary
worldwide recall of albumin products sold under the trademarks Albuminar(R)
and Plasma-Plex(R).
Results for the fourth quarter of 1996 included charges of $102.6 million
($.50 per share) from the reassessment of certain intangibles and fixed asset
carrying values related to AIS. Fourth quarter 1996 results also included
gains on the sales of certain nonstrategic European assets totaling $110.7
million ($.51 per share).
Results for the first quarter of 1995 are restated to include the results of
Cooperation Pharmaceutique Francaise and a pharmaceutical business in Brazil,
acquired from Rhone-Poulenc S.A., and earnings per common share for the period
reflect pro forma adjustments giving effect to interest and preferred
dividends relative to these acquisitions.
Results for the first quarter of 1995 included pretax income of $11.1 million
($.04 per share) from gains on sales of certain assets and product rights
($49.5 million), including the Company's U.S. and Canadian over-the-counter
businesses, net of charges for acquired research and development expense
($13.0 million) and the reassessment of certain asset carrying values ($25.4
million).
Results for the fourth quarter of 1995 included $126.5 million ($.75 per
share) of acquisition-related restructuring and other charges, including $60.0
million of pretax restructuring charges, $43.6 million of acquired research
and development charged to operations and $22.9 million of integration and
other costs.
Earnings per common share amounts for each quarter are required to be computed
independently and, therefore, the sum of the four quarters does not
necessarily equal the amount computed for the total year.
Rhone-Poulenc Rorer Inc. (ticker symbol: RPR) common shares are listed and
traded on the New York and Paris stock exchanges, and are traded, unlisted, on
the Philadelphia, Boston, Pacific and Midwest stock exchanges. On February 28,
1997, there were 7,339 holders of record of RPR common shares.
IV-30
<PAGE>
SCHEDULE V
UNAUDITED FINANCIAL STATEMENTS (AND RELATED NOTES)
FOR THE COMPANY FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Rhone-Poulenc Rorer Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Rhone-Poulenc Rorer Inc. and subsidiaries as of June 30, 1997, and the related
condensed consolidated statements of income and cash flows for the three- and
six-month periods ended June 30, 1997 and 1996. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Rhone-Poulenc Rorer Inc. and
subsidiaries as of December 31, 1996, and the related consolidated statements
of income and cash flows for the year then ended (not presented herein); and
in our report dated January 22, 1997, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of December
31, 1996, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
_____________________________________
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
July 17, 1997
V-1
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED--AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- -------------------
1997 1996 1997 1996
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales.......................... $ 1,238.0 $ 1,346.1 $2,323.8 $ 2,618.5
Cost of products sold.............. 367.0 443.8 691.4 878.0
Selling, delivery and
administrative expenses........... 500.4 532.5 946.2 1,046.7
Research and development expenses.. 220.2 214.4 405.2 414.3
--------- --------- -------- ---------
Operating income................. 150.4 155.4 281.0 279.5
Interest expense, net.............. 37.5 43.5 76.2 84.5
Other (income), net................ (15.4) (36.6) (20.8) (77.4)
--------- --------- -------- ---------
Income before income taxes....... 128.3 148.5 225.6 272.4
Provision for income taxes......... 39.6 46.3 70.1 85.2
--------- --------- -------- ---------
Net income....................... 88.7 102.2 155.5 187.2
Dividends on preferred stock and
remuneration on capital equity
notes............................. 11.8 10.3 21.9 21.3
--------- --------- -------- ---------
Net income available to common
shareholders.................... $ 76.9 $ 91.9 $ 133.6 $ 165.9
========= ========= ======== =========
Primary earnings per common share.. $ .56 $ .68 $ .98 $ 1.23
========= ========= ======== =========
Cash dividends per common share.... $ .32 $ .32 $ .64 $ .62
========= ========= ======== =========
Average common shares outstanding.. 137.1 135.7 137.0 135.3
========= ========= ======== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
V-2
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED--DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents............................... $ 114.4 $ 100.6
Cash pooling arrangements with Rhone-Poulenc S.A. ...... 4.2 3.2
Short-term investments and notes receivable............. 63.1 38.7
Trade accounts receivable, less reserves of $88.0 (1996:
$111.3)................................................ 858.6 984.1
Inventories............................................. 796.7 800.7
Other current assets.................................... 762.3 846.2
-------- --------
Total current assets................................ 2,599.3 2,773.5
Time deposits, at cost.................................. 128.4 128.4
Property, plant and equipment, net of accumulated
depreciation of $1,435.5 (1996: $1,461.1).............. 1,426.5 1,525.9
Goodwill, net of accumulated amortization of $320.3
(1996: $294.9)......................................... 2,601.0 2,739.0
Intangibles, net of accumulated amortization of $252.2
(1996: $231.4)......................................... 707.4 766.7
Other assets............................................ 839.1 834.6
-------- --------
Total assets........................................ $8,301.7 $8,768.1
======== ========
LIABILITIES
Current:
Short-term debt......................................... $ 157.9 $ 126.7
Accounts payable........................................ 427.1 594.7
Other current liabilities............................... 1,109.4 1,331.5
-------- --------
Total current liabilities........................... 1,694.4 2,052.9
Long-term debt.......................................... 2,432.0 2,272.0
Notes payable to Rhone-Poulenc S.A. & affiliates........ 187.9 253.0
Deferred income taxes................................... 241.6 218.0
Other liabilities, including minority interests......... 1,208.4 1,322.4
-------- --------
Total liabilities................................... 5,764.3 6,118.3
Contingencies...........................................
SHAREHOLDERS' EQUITY
Money market preferred stock, without par value
(liquidation preference $100,000 per share);
authorized, issued and outstanding 1,750 shares........ 175.0 175.0
Capital equity notes.................................... 500.0 500.0
Common stock, without par value; stated value $1 per
share; authorized 600,000,000 shares; issued and
outstanding 137,401,319 shares (1996: 136,615,917
shares)................................................ 142.6 141.6
Capital in excess of stated value....................... 273.9 234.8
Retained earnings....................................... 1,883.8 1,837.9
Employee Benefits Trust................................. (198.1) (185.7)
Cumulative translation adjustments...................... (239.8) (53.8)
-------- --------
Total shareholders' equity.......................... 2,537.4 2,649.8
-------- --------
Total liabilities and shareholders' equity.......... $8,301.7 $8,768.1
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
V-3
<PAGE>
RHONE-POULENC RORER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED--DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities................ $ 13.0 $ 46.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................... (130.5) (165.9)
Assets sold, net........................................... 25.7 226.0
Purchases of investments/product rights.................... (44.6) (49.7)
Sales of investments/product rights........................ 20.9 29.5
Net investment hedging, net................................ 7.7 --
-------- --------
Net cash provided by (used in) investing activities.... (120.8) 39.9
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings (repayments):
Short-term debt, net..................................... 40.3 (71.7)
Long-term debt, net...................................... 168.5 (9.9)
Dividends and remuneration paid............................ (109.5) (105.2)
Issuances of common stock.................................. 39.8 52.5
Repurchases of common stock for the Employee Benefits
Trust..................................................... (12.4) --
-------- --------
Net cash provided by (used in) financing activities.... 126.7 (134.3)
Effect of exchange rate changes on cash and cash
equivalents............................................... (5.1) (6.6)
-------- --------
Net increase (decrease) in cash and cash equivalents....... 13.8 (54.5)
Cash and cash equivalents at beginning of period........... 100.6 115.4
-------- --------
Cash and cash equivalents at end of period................. $ 114.4 $ 60.9
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
V-4
<PAGE>
RHONE-POULENC RORER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. RESULTS FOR INTERIM PERIODS
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect the adjustments, all of which are of
a normal recurring nature, necessary for a fair presentation of financial
position, cash flows and results of operations for the periods presented.
Certain prior year items have been reclassified to conform to current
classifications.
The Company's consolidated financial statements are prepared on a basis in
conformity with U.S. generally accepted accounting principles ("U.S. GAAP").
The preparation of the financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates. See Note 10 for disclosure of contingent liabilities and related
matters.
The statements are presented in accordance with the requirements of Form 10-
Q and do not include all disclosures required by generally accepted accounting
principles or those made in the Annual Report on Form 10-K. The Annual Report
on Form 10-K for the year 1996 is on file with the Securities and Exchange
Commission and should be read in conjunction with these condensed consolidated
financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share,"
effective for periods ending after December 15, 1997. The Statement simplifies
earnings per share calculations and requires presentation of both basic and
diluted earnings per share on the face of the statement of income. Adoption of
SFAS No. 128 will not have a material impact on the Company's earnings per
share calculations.
NOTE 2. ACCOUNTING POLICIES FOR DERIVATIVE FINANCIAL INSTRUMENTS
FOREIGN CURRENCY EXCHANGE CONTRACTS
Foreign Currency Transactions
The Company enters into foreign currency exchange contracts to minimize
exposure of foreign currency transactions (such as export sales, raw materials
purchases, and short-term intercompany financings) and firm commitments to
fluctuating exchange rates. The Company's foreign currency transaction hedges
are executed centrally to minimize transaction costs and to monitor
consolidated net exposures in all currencies and the effectiveness of the
hedging relationships. Contracts hedging foreign currency transactions are
marked to market at each balance sheet date under the fair value method; the
resulting gains or losses are recognized in other (income), net, offsetting
the corresponding losses or gains on the transactions being hedged. Cash flows
associated with these foreign currency exchange contracts are classified in
the same category as the hedged transactions.
The Company may also seek to minimize exposure of its non-U.S.-based
forecasted quarterly pretax earnings to foreign currency fluctuations by
utilizing foreign currency exchange contracts. These contracts are marked to
market in other (income), net at each balance sheet date. Related cash flows
are classified as cash flows from operating activities.
Net Investment Hedges
The Company may utilize foreign currency exchange contracts and foreign
currency-denominated borrowings to limit the exposure of its net investments
in foreign subsidiaries to currency fluctuations and
V-5
<PAGE>
RHONE-POULENC RORER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
thereby limit the volatility of reported equity. These arrangements are
designated as hedges of the Company's net foreign investments. Both realized
and unrealized gains and losses on these arrangements which offset the gains
and losses on the related net investments are recorded as cumulative
translation adjustments ("CTA") in shareholders' equity. Cash flows associated
with the hedging instruments are classified as cash flows from investing
activities. If a foreign currency-denominated borrowing or foreign currency
exchange contract that qualifies as a hedge of a net investment is terminated,
any gains or losses previously recorded in CTA remain in CTA. These gains or
losses would be recognized upon liquidation or sale of all or substantially
all of the net foreign investment.
The net receivables (payables) related to the Company's foreign currency
exchange contracts are included in other current assets (liabilities).
Interest Rate Swap Contracts
The Company may enter into interest rate swap contracts to manage its
exposures to movements in interest rates and to minimize its overall cost of
borrowings. The net receivables (payables) under interest rate swap contracts
are recorded in other current assets (liabilities) and recognized as
adjustments to interest expense. Cash flows related to interest rate swap
contracts are included in cash flows from operating activities.
If an interest rate swap contract that hedges underlying debt on the balance
sheet is terminated, the gain or loss on the contract is deferred and
amortized into income as an adjustment to interest expense over the shorter of
the remaining life of the terminated swap contract or the remaining time to
maturity of the hedged debt. If an interest rate swap contract remains
outstanding after termination of the hedging relationship, changes in the
market value of the contract are recognized currently in income.
NOTE 3. LICENSING AGREEMENT
In June 1997, the Company licensed to Watson Laboratories, Inc. ("Watson")
exclusive worldwide (except for New Zealand and Korea) distribution rights for
Dilacor XR(R) and its generic equivalents for a period of four and one-half
years after which time Watson has the option to purchase the product rights.
Over the licensing period, RPR expects to receive from Watson annual licensing
fees approximating $135.0 million and royalties on future sales of diltiazem
products. In connection with the transaction, the Company transferred
remaining related inventory to Watson in the second quarter for a value
approximating its normal wholesaler selling price. The Company also recorded a
pretax gain of $16.0 million in the second quarter on the termination of a
generics diltiazem-related partnership with Watson. In July 1997, the Company
received a $55 million cash payment from Watson representing the prepayment of
both the second half of 1997 licensing fees/royalties and the purchase option,
which is refundable if not exercised by Watson.
NOTE 4. OTHER (INCOME), NET
CENTEON
Losses from equity affiliates, principally the Company's interest in the
Centeon joint venture, totaled $14.2 million in the second quarter of 1997 and
$19.8 million on a year-to date basis as compared with income of $40.6 million
and $77.7 million, respectively, for the comparable prior year periods.
Centeon's first half of 1997 results were adversely affected by the temporary
suspension of production and distribution at its U.S. facility related to an
October 1996 voluntary worldwide recall of Albuminar(R)/Plasma-Plex(R)
products and a January 1997 consent decree with the U.S. Food and Drug
Administration ("FDA"). The negative contribution from Centeon
V-6
<PAGE>
RHONE-POULENC RORER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
for the first six months of 1997 was also impacted by $31.5 million of pretax
recall-related and manufacturing start-up costs, including costs related to
work-in-process and idle capacity issues and costs associated with compliance
with the consent decree.
In May 1997, the FDA notified Centeon that it appeared to be in compliance
with current Good Manufacturing Practices and authorized resumption of
distribution of plasma-based products, subject to FDA testing and lot release,
and pharmaceutical products at its U.S. facility. Based on a phased-in
production schedule, newly-manufactured plasma-based products were sent to the
FDA for lot release in June and distribution of new production has begun on a
limited basis. Centeon expects product distribution to ramp up gradually over
the remainder of the year.
Centeon sales for the second quarter of 1997, including sales to certain RPR
affiliates, totaled $175.9 million (1996: $259.0 million). Gross margin
approximated 28% of sales (1996: 48%). Losses before the effect of income
taxes totaled $17.8 million compared to income before taxes ("IBT") of $59.6
million in 1996. On a year-to-date basis, sales totaled $348.0 million (1996:
$496.7 million). Gross margin approximated 32% (1996: 52%) and losses before
the effect of income taxes totaled $16.5 million (1996: IBT of $141.6)
Other Items
Other (income), net included a pretax gain of $16.0 million on the
termination of a partnership arrangement with Watson.
Other (income), net also included net gains totaling $7.3 million and $14.4
million for the three- and six-month periods, respectively, on foreign
currency exchange contracts used to hedge a portion of the Company's non-U.S.-
based forecasted quarterly pretax earnings. Similar gains totaled $4.7 million
for both the comparable prior year periods.
NOTE 5. INCOME TAXES
The Company records income tax expense based on an estimated full year
effective income tax rate. The year-to-date June 30 reported effective income
tax rate approximated 31.1% in 1997 compared with 31.3% in 1996.
In July 1997, the French government proposed legislation to increase the
corporate income tax on both ordinary income and capital gains. The
legislation is expected to be enacted in September 1997 with retroactive
effect to January 1, 1997. The Company is in the process of quantifying the
impact such changes would have on its worldwide effective income tax rate, but
estimates that the legislation has the potential to increase the Company's
effective income tax rate by up to one and one-half percentage points.
NOTE 6. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Finished goods......................................... $364.7 $376.9
Work in process........................................ 142.7 159.8
Raw materials and supplies............................. 289.3 264.0
------ ------
$796.7 $800.7
====== ======
</TABLE>
V-7
<PAGE>
RHONE-POULENC RORER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
NOTE 7. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
MONEY
MARKET CAPITAL COMMON CAPITAL IN EMPLOYEE CUMULATIVE
PREFERRED EQUITY STOCK AT EXCESS OF RETAINED BENEFITS TRANSLATION
STOCK NOTES STATED VALUE STATED VALUE EARNINGS TRUST ADJUSTMENTS
--------- ------- ------------ ------------ -------- -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1997................... $175.0 $500.0 $141.6 $234.8 $1,837.9 $ (185.7) $ (53.8)
Net income.............. 155.5
Cash dividends, $.64 per
common share........... (87.7)
Dividends on preferred
stock.................. (4.7)
Remuneration on capital
equity notes........... (17.2)
Repurchase of shares for
Employee Benefits
Trust.................. (12.4)
Issuance of shares under
employee benefit
plans.................. 1.0 39.1
Translation adjust-
ments.................. (186.0)
Balance, June 30, 1997.. $175.0 $500.0 $142.6 $273.9 $1,883.8 $(198.1) $(239.8)
====== ====== ====== ====== ======== ======== =======
</TABLE>
In 1997, the Company's Board of Directors approved the open market
repurchase from time to time of up to five million of the Company's common
shares. In the second quarter of 1997, the Company repurchased approximately
168,000 of its common shares at a cost totaling $12.4 million. These shares
are held in an Employee Benefits Trust to fund future employee benefits in the
United States.
In August 1997, the Company redeemed the outstanding 750 shares of Series 1
money market preferred stock for $75.0 million plus accrued dividends.
NOTE 8. RESTRUCTURING
In December 1995, the Company established a combined $160.0 million reserve
related to the restructuring of Fisons and RPR operations as a direct result
of the acquisition of Fisons. The liability represented expected cash outlays,
primarily severance-related, associated with eliminating approximately 1,900
positions principally in the marketing, administrative and manufacturing
functions. At June 30, 1997, the remaining 1995 restructuring reserve of $28.9
million represented outstanding social costs. For the three- and six-month
periods ended June 30, 1997, cash outlays associated with the 1995
restructuring program totaled $2.7 million and $10.4 million, respectively
(1996: $49.0 million and $76.8 million, respectively).
NOTE 9. RELATED PARTY TRANSACTIONS
RHONE-POULENC S.A.
The entities comprising the Company manage their cash separately. In the
largest countries such as the U.S., France, the U.K. and Germany, the local
entities have access to RP cash pooling arrangements whereby they can, at
their own request, lend to or borrow from RP at market terms and conditions.
Receivables from RP at June 30, 1997 included $8.9 million in accounts
receivable from sales of products to RP, $16.0 million classified as other
current assets, and $6.1 million classified as other non-current assets.
V-8
<PAGE>
RHONE-POULENC RORER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
Accounts payable related to the purchase of materials and services from RP
were $13.6 million at June 30, 1997; accrued and other liabilities due to RP
totaled $16.6 million. As of June 30,1997 the Company had $2.7 million of
short-term and $187.9 million of long-term debt outstanding with RP.
Sales to RP totaled $6.0 million in the second quarter and $10.7 million on
a year-to-date basis. Services purchased from and interest paid to RP totaled
$7.4 million in the second quarter and $15.4 million for the six-month period.
For the comparable 1996 periods, sales to RP were $7.9 million and $17.7
million respectively. Materials and services purchased from and interest paid
to RP totaled $4.3 million and $16.0 million, respectively.
In connection with the 1995 acquisitions from RP, a subsidiary of the
Company issued preferred shares to RP which have a liquidation preference
approximating 645.0 million French francs (approximately $109.7 million) and
pay dividends of 7.5% per annum on a stated value of 145.0 million French
francs. The preferred shares are accounted for as minority interest and are
reflected in other liabilities. The acquisition agreements call for potential
adjustments to the purchase price of the businesses based on several factors,
including earnings performance.
CENTEON
Short-term notes receivable from Centeon, which bear interest after 45 days
at LIBOR plus a margin, totaled $33.5 million at June 30, 1997. Other current
receivables related to Centeon totaled $2.0 million at June 30, 1997. At June
30, 1997, the Company's net investment in capital leasing arrangements with
Centeon totaled $55.9 million. In 1997, the Company issued a shareholders loan
to Centeon totaling $22.0 million and bearing interest at LIBOR plus a margin.
The shareholder loan is due on September 30, 1997, but is renewable for
successive 90-day periods, ending on December 31, 1999, subject to certain
partial repayment provisions and financial ratio requirements of Centeon.
Current liabilities due to Centeon at June 30, 1997 totaled $6.2 million;
notes payable to Centeon totaled $18.3 million. In the second quarter, the
Company made a $16.0 million cash payment to Centeon representing the return
of an excess distribution made in 1996 of RPR's share of Centeon's 1996
earnings.
NOTE 10. CONTINGENCIES
The Company is involved in litigation incidental to its business, including,
but not limited to: (1) approximately 557 pending lawsuits in the United
States, Canada and Ireland against the Company and its Armour Pharmaceutical
Company subsidiary ("Armour"), in which it is claimed by individuals infected
with the Human Immunodeficiency Virus ("HIV") that their infection with HIV
and, in some cases, resulting illnesses, including Acquired Immune Deficiency
Syndrome-related conditions or death therefrom, may have been caused by
administration of antihemophilic factor ("AHF") concentrates processed by
Armour in the early-and mid-1980's. Armour has also been named as a defendant
in certain proposed class action lawsuits filed on behalf of HIV-infected
hemophiliacs and their families. None of the cases involves Armour's currently
distributed AHF concentrates. In August 1996, the Company, with the three
other U.S. plasma fractionators defending the U.S. AHF litigation, signed a
Settlement Agreement with the plaintiffs with respect to this litigation
which, subject to certain conditions, provides for payment of $100,000 to each
eligible claimant or claimant group and the payment of up to $40 million in
attorneys fees. Following a fairness hearing in May 1997, the court declared
the class settlement offer to be fair to the class. In July 1997, two appeals
filed with respect to the settlement were withdrawn and then dismissed by the
Seventh Circuit Court of Appeals. Payment into the settlement fund will begin
in August 1997; (2) antitrust actions alleging that certain pharmaceutical
companies, including the Company, engaged in price discrimination practices to
the detriment of certain independent community pharmacists and consumers; and
(3) alleged breach of contract by a subsidiary of the Company with respect to
agreements involving a bisphosphonate compound and Lozol(R).
V-9
<PAGE>
RHONE-POULENC RORER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
The eventual outcomes of the above matters of pending litigation cannot be
predicted with certainty. The defense of these matters and the defense of
additional lawsuits related to these matters may require substantial legal
defense expenditures. The Company follows Statement of Financial Accounting
Standards No. 5 in determining whether to recognize losses and accrue
liabilities relating to such matters. Accordingly, the Company recognizes a
loss if available information indicates that a loss or range of losses is
probable and reasonably estimable. The Company estimates such losses on the
basis of current facts and circumstances, prior experience with similar
matters, the number of claims and the anticipated cost of administering,
defending and, in some cases, settling such claims. The Company has also
recorded as an asset certain insurance recoveries which are determined to be
probable of occurrence. If a contingent loss is not probable but is reasonably
possible, the Company discloses this contingency in the notes to its
consolidated financial statements if it is material. Based on the information
available, the Company does not believe that reasonably possible uninsured
losses in excess of amounts recorded for the above matters of litigation would
have a material adverse impact on the Company's financial position, results of
operations or cash flows.
The Company has been advised of its potential liability related to alleged
past waste disposal practices, including potential involvement at three sites
on the U.S. National Priority List created by the Comprehensive Environmental
Response Compensation and Liability Act (Superfund). The Company's estimated
liability for these sites is not significant.
V-10
<PAGE>
SCHEDULE VI
SUMMARY FINANCIAL STATEMENT FOR PURCHASER
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
Purchaser's Consolidated Financial Statements, and the Notes related
thereto, are incorporated herein by reference to pages F-1 to F-29 of the
Purchaser's Annual Report on Form 20-F for the fiscal year ended December 31,
1996. Such report and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048, and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Information regarding the public reference facilities may be
obtained from the Commission by telephoning 1-800-SEC-0330. Copies of such
materials may also be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Certain reports and other information concerning the Company may also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
Solely for the convenience of the reader, summary financial information
regarding Purchaser is set forth below. Such summary information is qualified
in its entirety by reference to the Consolidated Financial Statements, and the
Notes related thereto contained in the Purchaser's 1996 Form 20-F,
incorporated herein by reference.
<TABLE>
<CAPTION>
1996 1995
------------- -------------
(IN MILLIONS FRENCH FRANCS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales........................................ 85,818 84,793
Operating expenses
Production costs and expenses.................. (54,282) (54,829)
Administrative and selling expenses............ (22,041) (20,781)
Amortization of intangible assets.............. (1,623) (1,235)
Provision for restructuration.................. (457) (1,095)
Other charges--Fisons/AIS...................... (523) (630)
------------- -------------
Operating income................................. 6,892 6,223
Other income (expenses)
Equity in earnings (losses) of affiliated com-
panies........................................ 829 406
Interest expense--net.......................... (2,151) (1,726)
Gains on sales of assets--net.................... 844 100
Other income--net................................ (228) (45)
Income before taxes and minority interests....... 6,186 4,958
Provision for income taxes....................... (1,597) (887)
Income before minority interests................. 4,589 4,071
Minority interests in net income of consolidated
subsidiaries.................................... (718) (753)
------------- -------------
Net income before preferred remuneration..... 3,871 3,318
Preferred remuneration........................... (1,131) (1,184)
Net income available for distribution to com-
mon shareholders............................ 2,740 2,134
============= =============
PER SHARE IN FF:
. Common stock--Ordinary shares "A".............. 8.44 6.71
. Preferred shares "B"........................... 9.69 7.96
BALANCE SHEET DATA:
Current Assets
Cash........................................... 1,040 1,050
Short-term deposits............................ 3,100 1,452
Marketable securities.......................... 1,321 1,821
Net trade accounts and notes receivable........ 12,357 12,090
Inventories.................................... 16,266 15,583
Prepaid expenses and other current assets...... 12,830 13,355
------------- -------------
Total current assets......................... 46,914 45,351
</TABLE>
VI-1
<PAGE>
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Investments and other assets
Investments in equity method investees..................... 3,721 3,938
Deposits and long-term receivables......................... 2,085 1,839
Other investments.......................................... 2,771 2,580
Deferred charges and other assets.......................... 9,816 7,791
------- -------
18,393 16,148
Property, plant and equipment
At cost.................................................... 83,796 79,407
Less: accumulated depreciation............................. (46,901) (44,388)
------- -------
36,895 35,019
Intangible assets
Gross value................................................ 46,728 44,010
Less accumulated amortization.............................. (7,090) (5,120)
39,638 38,890
------- -------
TOTAL ASSETS............................................. 141,840 135,408
======= =======
Current liabilities
Bank overdrafts............................................ 2,991 2,577
Trade accounts and notes payable........................... 8,816 8,974
Current portion of long-term debt.......................... 2,624 1,981
Short-term borrowings...................................... 6,673 9,881
Other current liabilities.................................. 18,141 16,699
------- -------
Total current liabilities................................ 39,245 40,112
======= =======
Long-term debt
Debentures................................................. 9,101 9,203
Bank borrowings............................................ 17,840 17,276
------- -------
26,941 26,479
Other long-term liabilities
Deferred income taxes...................................... 3,595 2,719
Provision for supplementary pension and retirement indemni-
ties...................................................... 6,681 6,275
Provision for restructuration.............................. 740 1,018
Other provisions long-term liabilities..................... 6,594 5,770
------- -------
17,610 15,782
Commitments and contingencies
Mandatorily redeemable partnership interest................ 2,429 2,273
Minority interests in net assets of consolidated subsidiar-
ies....................................................... 6,334 5,763
Amortizable preferred securities........................... 2,728 2,830
Shareholders' equity
Participating shares--1983 and Series A-1989............... 996 997
Capital equity notes--1986, 1991 and 1993.................. 5,767 5,767
Preference shares, Series A--1993.......................... 2,312 2,312
Preferred shares "B", Par value FF25: 926,820 outstanding.. 23 23
Common stock--Ordinary shares "A", Par value
FF25:327,320,864 outstanding.............................. 8,183 8,003
Additional paid-in capital of Rhone-Poulenc S.A............ 16,146 15,558
Retained earnings and other additional paid-in capital..... 17,877 15,903
Translation reserve........................................ (4,751) (6,394)
Total shareholders' equity............................... 46,553 42,169
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... 141,840 135,408
======= =======
</TABLE>
VI-2
<PAGE>
Facsimiles of the Letter of Transmittal, properly completed and duly signed,
will be accepted. The Letter of Transmittal and certificates evidencing Shares
and any other required documents should be sent or delivered by each
shareholder or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT
TRANSMISSION: COURIER:
CHASEMELLON CHASEMELLON
SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON
SERVICES, L.L.C. INSTITUTIONS SERVICES, L.L.C. SHAREHOLDER
P.O. BOX ONLY) (201) 329- 120 BROADWAY, SERVICES
3305SOUTH 8936 13TH FLOOR NEW L.L.C. 85
HACKENSACK, NJ YORK, NY 10271 CHALLENGER
07606 ATTN: ROADMAIL DROP
ATTN: REORGANIZATION REORG. DEPT.
REORGANIZATION DEPT. RIDGEFIELD
DEPT. PARK, NJ 07660
ATTN:
REORGANIZATION
DEPT.
CONFIRM BY
TELEPHONE:
(201) 296-4860
--------------
Questions or requests for assistance may be directed to the Information
Agent, the Dealer Manager or the Co-Dealer Manager at their respective
addresses and telephone numbers listed below. Additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be obtained from the Information Agent. A shareholder may also contact
brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON
& COMPANY INC.]
UNITED STATES: EUROPE:
Wall Street Plaza Moor House--17th Floor
New York, New York 10005 119 London Wall
Bankers and Brokers Call London EC2Y 5ET
Collect: England
(212) 440-9800 +44-171-454-7100
ALL OTHERS CALL TOLL
FREE:
(800) 223-2064
The Dealer Managers for the Offer are:
MORGAN STANLEY DEAN WITTER UBS SECURITIES
Morgan Stanley & Co. Incorporated UBS Securities LLC
1585 Broadway 299 Park Avenue
New York, New York 10036 New York, New York 10171
(212) 761-7139 Call Toll Free: 1-888-821-5176
<PAGE>
Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
Rhone-Poulenc Rorer Inc.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 22, 1997
OF
Rhone-Poulenc S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT
CHASEMELLON TRANSMISSION: CHASEMELLON COURIER:
SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON
SERVICES, L.L.C. INSTITUTIONS ONLY) SERVICES, L.L.C. SHAREHOLDER
P.O. BOX 3305 (201) 329-8936 120 BROADWAY, 13TH SERVICES L.L.C.
SOUTH HACKENSACK, CONFIRM BY FLOOR 85 CHALLENGER ROAD
NJ 07606 TELEPHONE: NEW YORK, NY 10271 MAIL DROP REORG.
ATTN: (201) 296-4860 ATTN: DEPT.
REORGANIZATION REORGANIZATION RIDGEFIELD PARK, NJ
DEPT. DEPT. 07660
ATTN:
REORGANIZATION
DEPT.
----------------
DELIVERY OF THIS LETTER OF TRANSMITTAL, OR TRANSMISSION OF INSTRUCTIONS VIA
FACSIMILE TRANSMISSION, TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
HOLDER(S)
(PLEASE FILL
IN, IF BLANK,
EXACTLY AS
NAME(S)
APPEAR(S) ON
SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ----------------------------------------------------------------
SHARE TOTAL NUMBER OF NUMBER OF
CERTIFICATE SHARES EVIDENCED BY SHARES
NUMBER(S)* SHARE CERTIFICATE(S)* TENDERED**
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES.....................
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by each Share Certificate delivered to the Depositary are
being tendered hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC") or the
Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer
Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to
the book-entry transfer procedure described under "THE TENDER OFFER--Section
3. Procedures for Accepting the Offer and Tendering Shares" in the Offer to
Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Shareholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined under "THE TENDER OFFER--Section 1. Terms of the Offer;
Expiration Date" in the Offer to Purchase) or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis and who wish
to tender their Shares must do so pursuant to the guaranteed delivery
procedure described under "THE TENDER OFFER--Section 3. Procedures for
Accepting the Offer and Tendering Shares" in the Offer to Purchase. See
Instruction 2.
[_]CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) [_] DTC [_] PDTC
Account Number ___________________________
Transaction Code Number __________________
[_]CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket No. (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivery is by book-entry transfer, check box of applicable Book-Entry
Transfer Facility:
(CHECK ONE) [_] DTC [_] PDTC
Account Number ___________________________
Transaction Code Number __________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Rhone-Poulenc S.A., a societe anonyme
organized under the laws of the Republic of France ("Purchaser"), the above-
described shares (the "Shares") of common stock, without par value per share,
of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"),
pursuant to Purchaser's offer to purchase all issued and outstanding Shares,
at $97 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated August 22, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase, constitute
the "Offer"). The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, the right to purchase all or any portion of the issued and
outstanding Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed
in respect of such Shares on or after August 19, 1997 (collectively,
"Distributions") and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (i)
deliver Share Certificates evidencing such Shares and all Distributions, or
transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility, together, in either case, with
all accompanying evidences of transfer and authenticity, to or upon the order
of Purchaser, (ii) present such Shares and all Distributions for transfer on
the books of the Company and (iii) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares and all Distributions, all
in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Igor Landau and Yves Brissy and
each of them, as the attorneys and proxies of the undersigned, each with full
power of substitution, to vote in such manner as each such attorney and proxy
or his substitute shall, in his sole discretion, deem proper and otherwise act
(by written consent or otherwise) with respect to all the Shares tendered
hereby which have been accepted for payment by Purchaser prior to the time of
such vote or other action and all Shares and other securities issued in
Distributions in respect of such Shares, which the undersigned is entitled to
vote at any meeting of shareholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of
any such meeting or otherwise. This proxy and power of attorney is coupled
with an interest in the Shares tendered hereby, is irrevocable and is granted
in consideration of, and is effective upon, the acceptance for payment of such
Shares by Purchaser in accordance with other terms of the Offer. Such
acceptance for payment shall revoke all other proxies and powers of attorney
granted by the undersigned at any time with respect to such Shares (and all
Shares and other securities issued in Distributions in respect of such
Shares), and no subsequent proxy or power of attorney shall be given or
written consent executed (and if given or executed, shall not be effective) by
the undersigned with respect thereto. The undersigned understands that, in
order for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance of such Shares for payment, Purchaser must be able to exercise full
voting and other rights with respect to such Shares, including, without
limitation, voting at any meeting of the Company's shareholders then
scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment
by Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restriction,
charges and encumbrances, and that none of such Shares and Distributions will
be subject to any adverse claim. The undersigned, upon request, shall execute
and deliver all additional documents deemed by the assignment and transfer of
the Shares tendered hereby and all Distributions.
3
<PAGE>
In addition, the undersigned shall remit and transfer promptly to the
Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby, or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Offer to Purchase under "THE TENDER OFFER--Section
3. Procedures for Accepting the Offer and Tendering Shares" and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased
or not tendered in the name(s) of the registered holder(s) appearing above
under "Description of Shares Tendered". Similarly, unless otherwise indicated
in the box entitled "Special Delivery Instructions", please mail the check for
the purchase price of all Shares purchased and all Share Certificates
evidencing Shares not tendered or not purchased (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares
purchased and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of, and mail such check and Share Certificates to,
the person(s) so indicated. Unless otherwise indicated herein in the box
entitled "Special Payment Instructions", please credit any Shares tendered
hereby and delivered by book-entry transfer, but which are not purchased by
crediting the account at the Book-Entry Transfer Facility designated above.
The undersigned recognizes that Purchaser has no obligation, pursuant to the
Special Payment Instructions, to transfer any Shares from the name of the
registered holder(s) thereof if Purchaser does not purchase any of the Shares
tendered hereby.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check To be completed ONLY if the check
for the purchase price of Shares for the purchase price of Shares
or Share Certificates evidencing purchased or Share Certificates
Shares not tendered or not pur- evidencing Shares not tendered or
chased to be issued in the name not purchased are to be mailed to
of someone other than the under- someone other than the under-
signed, or if Shares tendered signed, or the undersigned at an
hereby and delivered by book-en- address other than that shown un-
try transfer which are not pur- der "Description of Shares Ten-
chased are to be returned by dered".
credit to an account at one of
the Book-Entry Transfer Facili-
ties other than that designated
above.
Mail [_] check [_] Share Cer-
tificate(s) to:
Name______________________________
PLEASE PRINT
Issue [_] check [_] Share Address __________________________
Certificate(s) to: __________________________________
(ZIP CODE)
Name _____________________________ __________________________________
PLEASE PRINT TAXPAYER IDENTIFICATION OR SOCIAL
Address __________________________ SECURITY NUMBER (SEE SUBSTITUTE
__________________________________ FORM W-9 ON REVERSE SIDE)
(ZIP CODE)
__________________________________
TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER (SEE SUBSTITUTE
FORM W-9 ON REVERSE SIDE)
[_]Credit Shares delivered by
book-entry transfer and not
purchased to the account set
forth below:
Check appropriate box:
[_] DTC [_] PDTC
Account Number: __________________
5
<PAGE>
IMPORTANT
SHAREHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
------------------------------------------------------
------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: _____________ , 1997
(Must be signed by registered holder(s) exactly as
name(s) appear(s) on Share Certificates or on a
security position listing by a person(s) authorized
to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person
acting in a fiduciary or representative capacity,
please provide the following information and see
Instruction 5).
Name(s): _____________________________________________
------------------------------------------------------
PLEASE PRINT
Capacity (full title) ________________________________
Address: _____________________________________________
------------------------------------------------------
(ZIP CODE)
Area Code and Telephone No: __________________________
Taxpayer Identification or Social Security No.: ______
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL
INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Medallion Signature
Guarantee Program, or by any other "eligible guarantor institution", as such
term is defined in Rule 17Ad-5 promulgated under the Securities Exchange Act
of 1934, as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered hereby
and such holder(s) has (have) completed neither the box entitled "Special
Payment Instructions" nor the box entitled "Special Delivery Instructions" on
the reverse hereof or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to
the procedure set forth under "THE TENDER OFFER--Section 3. Procedures for
Accepting the Offer and Tendering Shares" in the Offer to Purchase. Share
Certificates evidencing all physically tendered Shares, or a confirmation of a
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of all Shares delivered by book-entry transfer as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
any other documents required by this Letter of Transmittal, must be received
by the Depositary at one of its addresses set forth on the reverse hereof
prior to the Expiration Date (as defined in Section 1 under "THE TENDER
OFFER--Section 1. Terms of the Offer; Expiration Date" in the Offer to
Purchase). If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Shareholders whose Share Certificates are not
immediately available, who cannot deliver their Share Certificates and all
other required documents to the Depositary prior to the Expiration Date or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis may tender their Shares pursuant to the guaranteed delivery procedure
described in under "THE TENDER OFFER--Section 3. Procedures for Accepting the
Offer and Tendering Shares" in the Offer to Purchase. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Expiration Date; and (iii) the Share Certificates
evidencing all physically delivered Shares in proper form for transfer by
delivery, or a confirmation of a book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility of all Shares delivered by book-
entry transfer, in each case together with a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange, Inc. ("NYSE") trading days after the date of execution of such
Notice of Guaranteed Delivery, all as described under "THE TENDER OFFER--
Section 3. Procedures for Accepting the Offer and Tendering Shares" in the
Offer to Purchase.
The method of delivery of this Letter of Transmittal, Share Certificates and
all other required documents, including delivery through any Book-Entry
Transfer Facility, is at the option and risk of the tendering shareholder, and
the delivery will be deemed made only when actually received by the
Depositary. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of
Transmittal (or a facsimile hereof), all tendering shareholders waive any
right to receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
7
<PAGE>
4. Partial Tenders (not applicable to shareholders who tender by book-entry
transfer). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered". In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates
delivered to the Depositary herewith will be sent to the person(s) signing
this Letter of Transmittal, unless otherwise provided in the box entitled
"Special Delivery Instructions" on the reverse hereof, as soon as practicable
after the expiration or termination of the Offer. All Shares evidenced by
Share Certificates delivered to the Depositary will be deemed to have been
tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the Share Certificates evidencing such Shares without
alteration, enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate
stock powers are required, unless payment is to be made to, or Share
Certificates evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), in which case,
the Share Certificate(s) evidencing the Shares tendered hereby must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on such Share
Certificate(s). Signatures on such Share Certificate(s) and stock powers must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on
such Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of such person's authority so to act
must be submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6,
Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or
Share Certificate(s) evidencing Shares not tendered or not purchased are to be
issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer
to such other person will be deducted from the purchase price of such Shares
purchased, unless evidence satisfactory to Purchaser of the payment of such
taxes, or exemption therefrom, is submitted. Except as provided in this
Instruction 6, it will not be necessary for transfer tax stamps to be affixed
to the Share Certificates evidencing the Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such
8
<PAGE>
Share Certificate is to be sent to someone other than the person(s) signing
this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal but at an address other than that shown in the box entitled
"Description of Shares Tendered" on the reverse hereof, the appropriate boxes
on the reverse of this Letter of Transmittal must be completed. Shareholders
delivering Shares tendered hereby by book-entry transfer may request that
Shares not purchased be credited to such account maintained at a Book-Entry
Transfer Facility as such shareholder may designate in the box entitled
"Special Payment Instructions" on the reverse hereof. If no such instructions
are given, all such Shares not purchased will be returned by crediting the
account at the Book-Entry Transfer Facility designated on the reverse hereof
as the account from which such Shares were delivered.
8. Questions and Requests for Assistance or Additional Copies. Questions and
requests for assistance may be directed to the Information Agent or the Co-
Dealer Managers at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Information
Agent or from brokers, dealers, commercial banks or trust companies.
9. Substitute Form W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalty of perjury, that such number is correct and that
such shareholder is not subject to backup withholding of federal income tax.
If a tendering shareholder has been notified by the Internal Revenue Service
that such shareholder is subject to backup withholding, such shareholder must
cross out item (2) of the Certification box of the Substitute Form W-9, unless
such shareholder has since been notified by the Internal Revenue Service that
such shareholder is no longer subject to backup withholding. Failure to
provide the information on the Substitute Form W-9 may subject the tendering
shareholder to a 31% federal income tax withholding on the payment of the
purchase price of all Shares purchased from such shareholder. If the tendering
shareholder has not been issued a TIN and has applied for one or intends to
apply for one in the near future, such shareholder should write "Applied For"
in the space provided for the TIN in Part I of the Substitute Form W-9, and
sign and date the Substitute Form W-9. If "Applied For" is written in Part I
and the Depositary is not provided with a TIN within 60 days, the Depositary
will withhold 31% on all payments of the purchase price to such shareholder
until a TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION
DATE (AS DEFINED IN THE OFFER TO PURCHASE).
9
<PAGE>
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the
shareholder may be subject to a $50 penalty imposed by the Internal Revenue
Service, and payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
If a shareholder makes a false statement that results in no imposition of
backup withholding, and there is no reasonable basis for such statement, a
$500 penalty may also be imposed by the Internal Revenue Service.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such
statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. A shareholder should consult his or her advisor as to
such shareholder's qualification for exemption from backup withholding and the
procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such shareholder is awaiting a TIN), and that (i) such
shareholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the Internal Revenue Service has notified such
shareholder that such shareholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are held in more than one name or are not in
the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report. If the tendering shareholder
has not been issued a TIN and has applied for a number or intends to apply for
a number in the near future, the shareholder should write "Applied For" in the
space provided for the TIN in Part I, and sign and date the Substitute Form W-
9. If "Applied For" is written in Part I and the Depositary is not provided
with a TIN within 60 days, the Depositary will withhold 31% of all payments of
the purchase price to such shareholder until a TIN is provided to the
Depositary.
10
<PAGE>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE PART I--Taxpayer Identification
FORM W-9 Number--For all accounts, enter ---------------------
taxpayer identification number Social Security
in the box at right (For most Number
individuals, this is your so-
cial security number. If you do
not have a number, see Ob-
taining a Number in the en-
closed Guidelines.) Certify by
signing and dating below. Note:
If the account is in more than
one name, see the chart in the
enclosed Guidelines to deter-
mine which number to give the
payer.
OR __________________
Taypayer
Identification
Number
(If awaiting TIN
write "Applied For")
---------------------------------------------------------
Payer's request PART II--For Payees Exempt From Backup Withholding,
for Taxpayer see the enclosed Guidelines and complete as
Identification instructed therein.
Number (TIN)
- -------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
receive another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
SIGNATURE: _______________________________________ DATE _________ , 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE>
FACSIMILES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY SIGNED,
WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL AND CERTIFICATES EVIDENCING SHARES
AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH
SHAREHOLDER OR SUCH SHAREHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH
BELOW.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT
TRANSMISSION: COURIER:
CHASEMELLON CHASEMELLON
SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON
SERVICES, L.L.C. INSTITUTIONS ONLY) SERVICES, L.L.C. SHAREHOLDER
P.O. BOX 3305 (201) 329-8936 120 BROADWAY, SERVICES L.L.C.
SOUTH HACKENSACK, 13TH FLOOR 85 CHALLENGER ROAD
NJ 07606 NEW YORK, NY 10271 MAIL DROP REORG.
ATTN: CONFIRM BY ATTN: DEPT.
REORGANIZATION TELEPHONE: REORGANIZATION RIDGEFIELD PARK,
DEPT. (201) 296-4860 DEPT. NJ 07660
ATTN:
REORGANIZATION
DEPT.
----------------
QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT OR THE CO-DEALER MANAGERS AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE
NUMBERS LISTED BELOW. ADDITIONAL COPIES OF THE OFFER TO PURCHASE, THE LETTER
OF TRANSMITTAL AND THE NOTICE OF GUARANTEED DELIVERY MAY BE OBTAINED FROM THE
INFORMATION AGENT. A SHAREHOLDER MAY ALSO CONTACT BROKERS, DEALERS, COMMERCIAL
BANKS OR TRUST COMPANIES FOR ASSISTANCE CONCERNING THE OFFER.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO OF GEORGESON
& COMPANY INC.]
UNITED STATES: EUROPE:
Wall Street Plaza Moor House--17th Floor 119 London
New York, New York 10005 Wall London EC2Y 5ET England +44-
Banks and Brokers Call Collect: 171-454-7100
(212) 440-9800
ALLOTHERS CALL TOLL FREE: (800) 223-2064
THE DEALER MANAGERS FOR THE OFFER ARE:
MORGAN STANLEY DEAN WITTER UBS SECURITIES
MORGAN STANLEY & CO. INCORPORATED UBS SECURITIES LLC
1585 BROADWAY 299 PARK AVENUE
NEW YORK, NEW YORK 10036 NEW YORK, NY 10171
(212) 761-7139 CALL TOLL FREE: 1-888-821-5176
August 22, 1997
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
Rhone-Poulenc Rorer Inc.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of common stock, without value per
share (the "Shares"), of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation
(the "Company"), are not immediately available, (ii) if Share Certificates and
all other required documents cannot be delivered to ChaseMellon Shareholder
Services, L.L.C., as Depositary (the "Depositary"), prior to the Expiration
Date (as defined in Section 1 under "THE TENDER OFFER" in the Offer to
Purchase (as defined below)) or (iii) if the procedure for delivery by book-
entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or mail or transmitted by
facsimile transmission to the Depositary. See Section 3 under "THE TENDER
OFFER" in the Offer to Purchase.
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
BY MAIL: BY FACSIMILE BY HAND: BY OVERNIGHT
TRANSMISSION: COURIER:
CHASEMELLON CHASEMELLON
SHAREHOLDER (FOR ELIGIBLE SHAREHOLDER CHASEMELLON
SERVICES, L.L.C. INSTITUTIONS ONLY) SERVICES, L.L.C. SHAREHOLDER
P.O. BOX 3305 (201) 329-8936 120 BROADWAY, SERVICES L.L.C.
SOUTH HACKENSACK, 13TH FLOOR 85 CHALLENGER ROAD
NJ 07606 NEW YORK, NY 10271 MAIL DROP REORG.
ATTN: CONFIRM BY ATTN: DEPT.
REORGANIZATION TELEPHONE: REORGANIZATION RIDGEFIELD PARK,
DEPT. (201) 296-4860 DEPT. NJ 07660
ATTN:
REORGANIZATION
DEPT.
--------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Rhone-Poulenc S.A., a societe anonyme
organized under the laws of the Republic of France, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated August 22, 1997
(the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with the Offer to Purchase, constitute the "Offer"), receipt of each
of which is hereby acknowledged, the number of Shares specified below pursuant
to the guaranteed delivery procedure described under "The TENDER OFFER--
Section 3. Procedures for Accepting and Tendering Shares" in the Offer to
Purchase.
Number of Shares: ___________________
-------------------------------------
Certificate Nos. (If Available): -------------------------------------
Signature(s) of Holder(s)
- -------------------------------------
Dated: , 1997
- -------------------------------------
Name(s) of Holders:
Please Check one box if Shares will
be delivered by book-entry transfer:
-------------------------------------
Please Type or Print
[_] The Depository Trust Company
-------------------------------------
[_] Philadelphia Depository Trust Address
Company
-------------------------------------
Account No. _________________________ Zip Code
-------------------------------------
Area Code and Telephone Number
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of the Medallion Signature
Guarantee Program, guarantees to deliver to the Depositary, at one of its
addresses set forth above, either Share Certificates evidencing the Shares
tendered hereby, in proper form for transfer, or confirmation of book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company or the Philadelphia Depository Trust Company, in each case with
delivery of a Letter of Transmittal (or facsimile thereof) properly completed
and duly executed, and any other required documents, all within three New York
Stock Exchange, Inc. trading days of the date hereof.
- --------------------------------- ---------------------------------
Name of Firm Authorized Signature
- --------------------------------- ---------------------------------
Address Title
- --------------------------------- Name:_________________________________
Zip Code Please Type or Print
- --------------------------------- Dated:_________________________ , 1997
Area Code and Telephone No.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
MORGAN STANLEY DEAN WITTER UBS SECURITIES
Morgan Stanley & Co. Incorporated UBS Securities LLC
1585 Broadway 229 Park Avenue
New York, New York 10036 New York, New York
10171
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
of
Rhone-Poulenc Rorer Inc.
at
$97 NET PER SHARE
by
Rhone-Poulenc S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIREAT 5:00 P.M., NEW YORK CITY TIME,
ONWEDNESDAY, OCTOBER 1, 1997 UNLESS THE OFFERIS EXTENDED.
August 22, 1997
To Brokers, Dealers, Commercial Banks,Trust Companies and Other Nominees:
Morgan Stanley & Co. Incorporated and UBS Securities LLC have been appointed
by Rhone-Poulenc S.A., a societe anonyme organized under the laws of the
Republic of France ("Purchaser"), to act as Dealer Managers in connection with
Purchaser's offer to purchase all issued and outstanding shares (the "Shares")
of common stock, without par value per share, of Rhone-Poulenc Rorer Inc., a
Pennsylvania corporation (the "Company"), at a price of $97 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase, dated August 22, 1997 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with the
Offer to Purchase, constitute the "Offer") enclosed herewith. Please furnish
copies of the enclosed materials to those of your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
THE THEN ISSUED AND OUTSTANDING SHARES, OTHER THAN SHARES OWNED BY PURCHASER
(THE "PURCHASER SHARES"), WHICH, WHEN TAKEN TOGETHER WITH THE PURCHASER
SHARES, CONSTITUTES AT LEAST 90% OF THE THEN ISSUED AND OUTSTANDING SHARES.
Enclosed for your information and use are copies of the following documents:
1. Offer to Purchase, dated August 22, 1997;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
<PAGE>
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") by the Expiration Date (as defined in the Offer to Purchase)
or if the procedure for book-entry transfer cannot be completed by the
Expiration Date;
4. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
5. A letter to shareholders of the Company from Michel de Rosen,
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or
facsimile thereof) properly completed and duly executed and any other required
documents.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedure described under "THE TENDER OFFER--Section 3. Procedures for
Accepting the Offer and Tendering Shares" in the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Managers, the Depositary and the
Information Agent as described in the Offer) in connection with the
solicitation of tenders of Shares pursuant to the Offer. However, Purchaser
will reimburse you for customary mailing and handling expenses incurred by you
in forwarding any of the enclosed materials to your clients. Purchaser will
pay or cause to be paid any stock transfer taxes payable with respect to the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Morgan Stanley & Co. Incorporated, UBS Securities LLC, or Georgeson & Company,
Inc. (the "Information Agent") at their respective addresses and telephone
numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the addresses and telephone numbers set forth on the
back cover page of the Offer to Purchase.
VERY TRULY YOURS,
MORGAN STANLEY DEAN WITTER
UBS SECURITIES
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU, OR
ANY OTHER PERSON, THE AGENT OF PURCHASER, THE DEALER MANAGERS, THE INFORMATION
AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU
OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND
THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
of
Rhone-Poulenc Rorer Inc.
at
$97 NET PER SHARE
by
Rhone-Poulenc S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIREAT 5:00 P.M., NEW YORK CITY TIME,ON
WEDNESDAY, OCTOBER 1, 1997 UNLESS THE OFFERIS EXTENDED.
August 22, 1997
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated August 22,
1997 (the "Offer to Purchase"), and a related Letter of Transmittal in
connection with the offer by Rhone-Poulenc S.A., a societe anonyme organized
under the laws of the Republic of France ("Purchaser"), to purchase all issued
and outstanding shares (the "Shares") of common stock, without par value per
share, of Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the
"Company"), at a price of $97 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase and in
the related Letter of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer"). We are the holder of record of Shares held by us for
your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms
and subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $97 per Share, net to you in cash.
2. The Offer is being made for all issued and outstanding Shares.
3. The Board of Directors of the Company and a special committee thereof
comprised of the independent directors have each determined that each of
the Offer and the Merger Agreement (as defined in the Offer to Purchase) is
fair to, and in the best interests of, the Company, and recommend that
shareholders accept the Offer and tender their Shares pursuant to the
Offer.
4. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
<PAGE>
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer such number
of the then issued and outstanding Shares, other than Shares owned by
Purchaser (the "Purchaser Shares"), which, when taken together with the
Purchaser Shares, constitutes 90% of the then issued and outstanding
Shares.
6. You will not be obligated to pay brokerage fees or commissions or,
except as otherwise provided in Instruction 6 of the Letter of Transmittal,
stock transfer taxes with respect to the purchase of Shares by Purchaser
pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE SO THAT WE WILL HAVE AMPLE TIME
TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If Purchaser becomes
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, Purchaser will make a good faith effort
to comply with such state statute. If, after such good faith effort, Purchaser
cannot comply with such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of Purchaser by Morgan Stanley & Co. Incorporated, UBS
Securities LLC or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF RHONE-POULENC RORER INC.
BY RHONE-POULENC S.A.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated August 22, 1997, and the related Letter of Transmittal
(which together constitute the "Offer") in connection with the offer by Rhone-
Poulenc S.A., a societe anonyme organized under the laws of the Republic of
France, to purchase all issued and outstanding shares (the "Shares") of common
stock, without par value per share, of Rhone-Poulenc Rorer Inc., a
Pennsylvania corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: , 1997 SIGN HERE
_______________________________________
_______________________________________
Signature(s)
Number of Shares to be _______________________________________
Tendered:
_______________________________________
Please type or print name(s)
Shares* _______________________________________
_______________________________________
Please type or print address
_______________________________________
Area Code and Telephone Number
_______________________________________
Taxpayer Identification or Social
Security Number
- --------
*Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner
of the account
or, if combined
funds, any one
of the
individuals(1)
3. Husband and wife (joint account) The actual owner
of the account
or, if joint
funds, either
person(1)
4. Custodian account of a minor (Uniform Gift to Minors Act) The minor(2)
5. Adult and minor (joint account) The adult or, if
the minor is the
only
contributor, the
minor(1)
The ward, minor,
6. Account in the name of guardian or committee for a or incompetent
designated ward, minor, or incompetent person person(3)
7. a The usual revocable savings trust account (grantor is The grantor-
also trustee) trustee(1)
b So-called trust account that is not a legal or valid The actual
trust under State law owner(1)
8. Sole proprietorship account The owner(4)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ------------------------------------------------------------------------------
<S> <C>
9. A valid trust, estate, or pension trust The legal entity
(Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational organization The organization
account
12. Partnership account held in the name of the business The partnership
13. Association, club, or other tax-exempt organization The organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of Agriculture in the name The public
of a public entity (such as a State or local government, entity
school district, or prison) that receives agricultural
program payments
</TABLE>
- -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your num-
ber, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual re-
tirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDEN-
TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend, in-
terest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are re-
quired to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Cer-
tain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
EXHIBIT (A)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase, dated August 22, 1997 and the related Letter of
Transmittal, and is being made to all holders of Shares. Purchaser (as defined
below) is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by Morgan Stanley & Co. Incorporated, UBS Securities LLC or
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares
of
Common Stock of Rhone-Poulenc Rorer Inc.
at
$97 Net Per Share
by
Rhone-Poulenc S.A.
Rhone-Poulenc S.A., a societe anonyme organized under the laws of the
Republic of France ("Purchaser"), is offering to purchase all of the issued and
outstanding shares (the "Shares") of common stock, without par value, of
Rhone-Poulenc Rorer Inc., a Pennsylvania corporation (the "Company"), at a
price of $97 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated August 22, 1997
(the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer"). Following the Offer, Purchaser intends to
effect the Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON WEDNESDAY, OCTOBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer such number of
the then issued and outstanding Shares, other than Shares owned by Purchaser
(the "Purchaser Shares"), which, when taken together with the Purchaser Shares,
constitutes 90% of the then issued and outstanding Shares.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 19, 1997 (the "Merger Agreement"), among Purchaser, Merger
Subsidiary (as defined below) and the Company. The Merger Agreement provides
that, among other things, as soon as practicable after the purchase of Shares
pursuant to the Offer and the satisfaction of the other conditions set forth in
the Merger Agreement and in accordance with relevant provisions of the
Pennsylvania Business Corporation Law of 1988 (the "PBCL"), RP Vehicle, Inc.
("Merger Subsidiary"), a Pennsylvania corporation specifically organized for
the purpose of effecting the merger and a direct wholly owned subsidiary of
Purchaser, will be merged with and into the Company (the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation. At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time held by
shareholders other than Purchaser or any direct or indirect subsidiary of
Purchaser shall be cancelled and shall be converted automatically into
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<PAGE>
the right to receive $97 in cash, or any higher price that may be paid per Share
in the Offer, without interest. Shareholders who fully comply with the statutory
dissenters procedures set forth in the PBCL will be entitled to receive, in
connection with the Merger, cash for the fair value of their Shares as
determined pursuant to the procedures prescribed by the PBCL. No dissenters
rights are available in connection with the Offer.
The Board of Directors of the Company, by unanimous vote of all directors
present and voting, based upon, among other things, the unanimous recommendation
and approval of a special committee of the Board of Directors comprised of the
Merger that shareholders accept the Offer and tender their Shares pursuant to
the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") of Purchaser's acceptance for
payment of such Shares pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payments from Purchaser and transmitting such payments to
tendering shareholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price for Shares be paid,
regardless of any delay in making such payment. In all cases, payment for
Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) the certificates evidencing
such Shares (the "Share Certificates") or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities (as defined in Section 2 under "THE TENDER OFFER" in the
Offer to Purchase) pursuant to the procedure set forth in Section 3 under "THE
TENDER OFFER" in the Offer to Purchase, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or in the case of a book-entry transfer an Agent's Message
(as defined in Section 3 under "THE TENDER OFFER" in the Offer to Purchase) and
(iii) any other documents required under the Letter of Transmittal.
Purchaser expressly reserves the right, in its sole discretion, subject to
the terms of the Merger Agreement, at any time and from time to time, to extend
for any reason the period of time during which the Offer is open,
occurrence of any condition specified in Section 12 under "THE TENDER OFFER" in
the Offer to Purchase, by giving oral or written notice of such extension to
the Depositary. Any such extension will be followed as promptly as practicable
by public announcement thereof, such announcement to be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the rights of a tendering shareholder to withdraw such shareholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 5:00 p.m., New York City
time, on Wednesday, October 1, 1997 (or the latest time and date at which the
Offer, if extended by Purchaser, shall expire) and, unless theretofore accepted
for payment by Purchaser pursuant to the Offer, may also
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<PAGE>
be withdrawn at any time after October 21, 1997. For the withdrawal to be
effective, a written, telegraphic or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover page of the Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of such
Shares, if different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in Section 3 under
"THE TENDER OFFER" in the Offer to Purchase), unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 under "THE TENDER OFFER" in the Offer to Purchase, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares. All questions as to
the form and validity (including the time of receipt) of any notice of
withdrawal will be determined by Purchaser, in its sole discretion, whose
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein
by reference.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read in their entirety before any
decision is made with respect to the Offer.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Managers as
set forth below, and copies will be furnished promptly at Purchaser's expense.
No fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent and the Dealer Managers) for soliciting tenders of
Shares pursuant to the Offer.
The Information Agent for the Offer is:
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
Call Toll Free: 1-800-223-2064
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<PAGE>
The Dealer Managers for the Offer are:
MORGAN STANLEY DEAN WITTER UBS SECURITIES
Morgan Stanley & Co. Incorporated UBS Securities LLC
1585 Broadway 299 Park Avenue
New York, New York 10036 New York, New York 10171
(212) 761-7139 Call Toll Free: 1-888-821-5176
August 22, 1997
-4-
<PAGE>
EXHIBIT (A)(8)
LAUNCH OF TENDER OFFER BY RHONE-POULENC
FOR SHARES OF RHONE-POULENC RORER:
AGREEMENT REACHED ON $97 PER SHARE
(Paris, August 20, 1997) -- Rhone-Poulenc (NYSE: RP) announced today its
decision to increase its ownership of Rhone-Poulenc Rorer Inc. (NYSE: RPR) to
100% by launching a cash tender offer for RPR common stock that it does not
already own at a price of $97 per share. The transaction amounts to
approximately FF 27 billion.
Rhone-Poulenc Rorer's board of directors, having received a unanimous
recommendation from the Special Committee composed of its independent board
members, has given its approval, to the offer proposed by Rhone-Poulenc. A
definitive agreement was signed between the two companies yesterday evening. It
stipulates that shares not acquired in the offer will be acquired in a second
step merger at the same price.
The offer will commence within the next five business days, the maximum
amount of time permitted under Securities and Exchange Commission (SEC)
regulations. The terms and conditions of the tender offer will at that time be
made public in the United States by a filing with the SEC, in France by the
publication of a notice issued by the Societe des Bourses Francaises (SBF) and
in both countries through an announcement in the press.
The offer is conditional on enough shares being tendered such that Rhone-
Poulenc would own, following the closing of the tender offer, at least 90
percent of Rhone-Poulenc Rorer's outstanding shares. Rhone-Poulenc currently
owns 68.1 percent of Rhone-Poulenc Rorer's Shares.
Recalling that this decision is in keeping with the two major initiatives
announced on June 26, 1997, (increasing its ownership of Rhone-Poulenc Rorer to
100 percent and combining the chemicals/fibers businesses within one company
which would be listed in 1998) Jean-Rene Fourtou, Chairman and Chief Executive
Officer of Rhone-Poulenc said: "This is an important step in our plan to
reinforce our position in life sciences. We are offering an attractive price to
Rhone-Poulenc Rorer's minority shareholders, and we look forward to completing
the transaction quickly."
Rhone-Poulenc Rorer is a global pharmaceuticals company dedicated to improving
human health. The Company has sales of $5.4 billion and invested $882 million in
research and development in 1996.
Rhone-Poulenc is one of the world's leading life sciences and specialty
chemicals companies. Through its innovative products, Rhone-Poulenc contributes
to the improvement of human, animal and plant health and to the quality and
safety of products used in industry and daily life. In 1996, the Group recorded
sales of FF 86 billion ($16 billion).
<PAGE>
Exhibit (A)(9)
Unofficial Translation
COMMUNIQUE
Tender Offer for the Shares of
RHONE-POULENC RORER [LOGO]
Listed on the Premier Marche (monthly settlement market)
of the Paris Bourse
By
RHONE-POULENC [LOGO]
- --------------------------------------------------------------------------------
. Price : 97 US$ per share
. Payment : in US dollars or, at the discretion of the shareholder, in French
francs
. Period: from August 22, 1997 through October 1, 1997.
. Transmission of tender of the Shares in France: to banks, brokerage firms or
financial agents at the discretion of the shareholders, through September 25,
1997.
. Orders placed in France may be cancelled through September 25, 1997.
. Number of shares sought: 100% of the share capital of Rhone-Poulenc Rorer Inc.
("Rorer").
. Minimum number of shares that must be tendered for the Offer to close: 90% of
the capital of Rorer, including the approximately 68.1% held by Rhone-Poulenc.
. Should the Offer succeed, it is planned that the Rorer shares that are not
tendered in the Offer be cancelled against payment of an indemnity per share
equal (in U.S. dollars) to the tender offer price, as part of a merger under
the laws of the State of Pennsylvania (United States). Shareholders in France
will be paid in French francs.
. After these operations, the Rorer shares will no longer be listed.
- --------------------------------------------------------------------------------
This communique is available to shareholders at Rhone-Poulenc S.A., 25,
quai Paul Doumer, 92408, Courbevoie Cedex, Morgan Stanley S.A., 25, rue Balzac,
75406 Paris Cedex 08, UBS S.A., 69, boulevard Haussmann, 75362 Paris Cedex 08,
and at Societe Generale, Tour Societe Generale, 17, cours Valmy, 92972 Paris-La
Defense, the French depositary, and can be obtained at no cost from financial
agents.
Global Coordinators
MORGAN STANLEY DEAN WITTER UBS SECURITIES
1
<PAGE>
1. PRESENTATION OF THE OFFER
I. TERMS OF THE OFFER
A. PRICE, DURATION
Rhone-Poulenc S.A. ("Rhone-Poulenc") offers to purchase at the price of
US$ 97, net, all the shares of Rhone-Poulenc Rorer Inc. ("Rorer") which are
tendered according to the stipulations, terms and conditions summarized
hereafter ("the Offer "). Rorer shares are listed on the New York Stock Exchange
and on the Premier Marche (monthly settlement market) of the Paris Bourse. The
Offer is for 100% of the capital of Rorer.
Because Rorer is a company governed by the laws of the State of
Pennsylvania (United States), the Offer is subject to American federal law and
the laws of the State of Pennsylvania. The provisions of the general regulations
of the Council of French Exchanges do not apply to the Offer.
The Offer is open from August 22, 1997 through 5:00 p.m., October 1, 1997,
New York time, unless Rhone-Poulenc decides to extend the period of time during
which the Offer is open or a change in certain terms of the Offer makes it
necessary to extend the Offer. In the event this date is extended, all shares
tendered and not withdrawn shall remain subject to the Offer.
Institutions at which accounts are held must communicate the instructions
of their clients and transfer the corresponding shares to Societe Generale, the
French depositary, no later than October 1, 1997 at 12 noon, Paris time, unless
the Offer is extended.
Therefore, shareholders wishing to tender their shares in France must
instruct the institution holding their shares no later than September 25, 1997,
unless the Offer is extended. Shares tendered in Paris may be withdrawn no later
than October 1, 1997, unless the Offer is extended.
Rhone-Poulenc reserves the right to extend the term of the Offer, to
postpone acceptance of or payment for the shares tendered until it obtains the
authorizations which may be required, to terminate the Offer should one or more
of the conditions set forth in paragraph B hereinafter occur, to waive any such
condition, or to change the price or the other terms of the Offer. However,
Rhone-Poulenc has agreed not to reduce the price per share of the Offer, not to
reduce the minimum number of shares that must be tendered in the Offer, and not
to add additional conditions to the Offer without the agreement of Rorer.
Any change in the closing date or in the terms of the Offer shall be
communicated through a notice from the Societe des Bourses Francaises and a
press release.
Any distribution of dividends, shares or otherwise made with respect to the
Rorer shares between August 20, 1997 and the delivery of the shares to Rhone-
Poulenc shall reduce the price of the Offer (insofar as the distribution is made
in cash) or must be transferred to Rhone-Poulenc (in other cases).
A notice from the Societe des Bourses Francaises, setting forth the terms
of the Offer, was published on August 22, 1997.
Shareholders can tender their shares in the United States until October 1,
1997, unless the Offer is extended. Any shares tendered in the United States
may be withdrawn until October 1, 1997, unless the Offer is extended. They are
advised to consult the American documentation and to contact Georgeson &
Company, Inc. at Wall Street Plaza, New York, New York 10005, (800)
223-2064, or at Moor House - 17th floor, 119 London Wall, London EC2Y
5ET, 44 171 454-7100.
A copy of the American documentation relating to the Offer, including the
"Offer to Purchase", which includes all the information required by American
federal law and the laws of the State of Pennsylvania and which is summarized in
this communique, is available to shareholders from Rhone-Poulenc S.A., 25, quai
Paul Doumer, 92408 Courbevoie Cedex, from Morgan Stanley S.A., 25, rue Balzac,
75406 Paris Cedex 08, from UBS S.A., 69,
2
<PAGE>
boulevard Haussmann, 75362 Paris Cedex 08, and from Societe Generale, Tour
Societe Generale, 17, cours Valmy, 92972 Paris - La Defense, and may be obtained
at no cost from financial agents.
This Communique, as well as an English language summary ad, may be viewed
on the Internet at http://www.rhone-poulenc.com. (Heading: current events). The
Offer to Purchase may be viewed on the Internet at http://www.sec.gov.
B. CONDITIONS
The Offer shall be consummated only if all the Rorer shares tendered in the
Offer (which have not been withdrawn on the expiration date) represent at
least 90% of the Rorer shares, taking into account the 97,163,370 shares already
held by Rhone-Poulenc, which represent, out of a total of 142,687,492 shares as
of July 31, 1997, approximately 68.1% of the capital of Rorer. This condition
would be fulfilled if 37,306,616 shares were tendered in the Offer (and assuming
that all exercisable options were exercised).
Furthermore, Rhone-Poulenc reserves the right to modify or terminate the
Offer or extend the date of acceptance or payment for the Rorer shares tendered
in the Offer if any of the following conditions shall exist prior to the
acceptance for payment of the Shares:
. The initiation of any legal action or governmental proceeding by any entity,
or the institution of measures, governmental orders or new laws which might
have an adverse effect on the Offer, the merger or Rorer and its
subsidiaries, including, in particular, any measure that might limit, delay
or materially increase the cost of the Offer;
. The occurrence of any events which might have a material adverse effect on
Rorer.
. The suspension (or aggravation of suspension) or general limitation of trading
of Rorer shares on the New York Stock Exchange or the Paris Bourse or, of
shares in general on the Paris Bourse, a decrease of more than 20% in the
Standard & Poor's 500 Index from August 22, 1997, a change in the exchange
rate between the French franc and the U.S. dollar from August 19, 1997 which
causes an increase in the French franc price of the Offer of at least 15%, a
moratorium or suspension of payments affecting banks in the United States or
France, any limitation imposed by a governmental authority which would have a
materially adverse effect on Rhone-Poulenc's ability to finance the purchase
of the Rorer shares, or a war, conflict or catastrophe involving the United
States of America or France;
. The withdrawal or modification in a manner adverse to Rhone-Poulenc or RP
Vehicle Inc. of the approval or recommendation of the Special Committee.
. Inaccurate declaration or breach by Rorer of any representation or
covenant set forth in the merger agreement.
. The termination of the merger agreement.
. An agreement among Rhone-Poulenc, RP Vehicle Inc. and Rorer (with the
agreement of the Special Committee) for Rhone-Poulenc to delay or terminate
the Offer.
C. PARTICIPATION IN THE OFFER
Rorer shareholders desiring to tender their shares in the Offer in France
must, no later than September 25, 1997, transmit a sell order to the bank,
brokerage firm or financial agent of their choice. The French depositary is
Societe Generale, and in the United States, the depositary is ChaseMellon
Shareholder Services, L.L.C.
D. WITHDRAWAL
Rorer shareholders who have tendered their shares to the Offer in France
may withdraw their shares up to and including September 25, 1997.
3
<PAGE>
Any shareholder wishing to withdraw his shares must so instruct the agent
holding his account. Shares which have been withdrawn may again be tendered
before the expiration date.
E. SETTLEMENT
Settlement of Rorer shares tendered in the Offer shall be made after the
orders have been centralized in France and the United States. Shareholders
presenting their shares in France will be paid in U.S. dollars, unless they have
expressly indicated on the sell order their election for payment in French
francs, in which case the exchange rate used shall be the average weighted
exchange rate used by Societe Generale the day after the closing of the Offer in
the United States. Shareholders shall receive the Offer price, net of all
brokerage or stock market fees.
F. FINANCING
The total amount of the funds required to close the Offer and the second-
step merger (including fees and expenses) is approximately US$ 4.8 billion.
Rhone-Poulenc has entered into binding term sheets with leading banks to borrow
(a) approximately FF 8.5 billion and US$ 850 million to be reimbursed in less
than one year at LIBOR or PIBOR plus a margin of 0.10% to 0.125%, and (b)
approximately FF 12.75 billion and US$ 230 million to be reimbursed in five
years at LIBOR or PIBOR plus a margin of 0.17% to 0.20%. In relation to the
balance, Rhone-Poulenc has lines of available credit.
Rhone-Poulenc intends to reimburse these loans from a variety of sources,
which may include the self-financing of the Rhone-Poulenc group (including
Rorer), bank refinancing, or the issue of securities. Thus, Rhone-Poulenc plans,
if the Offer is successfully completed, to proceed with a public issue of its
shares for an amount of approximately FF 7 billion. In addition, Rhone-Poulenc
plans to offer to the public in 1998, market conditions permitting, a minority
share of the capital of a new subsidiary grouping its specialty chemicals and
fibers and polymers activities. Furthermore, Rhone-Poulenc has announced a plan
to divest non-strategic assets.
The decision as to the sources and allocation of funding which will be used
will be determined, and may be modified, depending on market conditions and such
other factors as Rhone-Poulenc may deem appropriate. This amount does not
include the Commission of the holding account agencies, which is to be borne by
Rhone-Poulenc and is equal to 1% of the sum of each transaction, capped at
FF 2.000 per file. Neither Rorer nor Rhone-Poulenc has the necessary
information to provide a realistic estimate relation to this.
G. EXPENSES RELATING TO THE OFFER
The legal and administrative expenses and the total amount of payments to
third parties relating to the Offer are estimated to be US$ 10.000.000.
II. FRENCH TAX TREATMENT
Shareholders should note that the information provided herein is only a
summary of the tax treatment at the time of the launch of the Offer
applicable only to capital gains on securities and that their individual
situation should be reviewed with a tax advisor. Rhone-Poulenc cannot guarantee
that the indemnity paid in connection with the merger to non-tendering
shareholders will be treated as capital gains. Rhone-Poulenc declines all
liability with respect to the tax consequences of the Offer or the merger for
shareholders.
A. FRENCH RESIDENTS
1. FRENCH RESIDENT INDIVIDUALS
Under current law (Article 92 B of the General Tax Code ("CGI")), capital
gains on the sale of securities realized in 1997 are taxed in their entirety if
the annual amount of securities sold exceeds, by taxable household, a threshold
of FF 100,000, at the current rate of 20.9 %, which consists of:
. 16% (Article 200A.2) as income tax,
. 3.4% as general social security contribution,
4
<PAGE>
. 1% as withholding for social security contributions,
. 0.50% as the contribution towards reimbursement of the social security
debt.
Capital losses can only be charged against capital gains of a similar
nature realized during 1997 or the following five years.
2. FRENCH RESIDENT CORPORATIONS
Capital gains realized in 1997 are taxable at the ordinary rate, which is
currently a rate of 33.33% plus a temporary surtax of 10% (36.67%). However,
when the securities sold have been held through an investment securities account
or in a special account and have been held for more than two years, the capital
gains realized upon disposal are eligible to be taxed at the reduced tax rate
for long-term capital gains, which is currently 19% plus a temporary surtax of
10% (20.9%), subject to satisfying the obligation to allocate to the special
reserve for long-term capital gains.
Shareholders should note that the French Government has proposed a new
temporary increase of 15% in corporate income tax for companies with revenues of
at least FF 50 million, so that the effective corporate tax rate would increase
to 41.67% for 1997. Investment securities will, nevertheless, continue to
benefit from the reduced rate on long-term capital gains subject to satisfying
the conditions mentioned above.
B. NON-RESIDENTS
Taxation as set forth in Article 92 B of the General Tax Code does not
apply to capital gains realized upon the sale of securities in return for
payment made by corporations or persons who are not fiscally domiciled in France
within the meaning of Article 4B of the General Tax Code, or whose headquarters
are outside France, provided that the capital gains are not attributable to a
permanent establishment or a fixed base in France.
III. PURPOSE OF THE DEAL AND THE BIDDER'S INTENTIONS
A. PURPOSE OF THE OFFER
The Offer is motivated by Rhone-Poulenc's desire to strengthen its presence
in the life sciences sector by holding 100% of Rorer, its subsidiary. Should the
Offer and merger be successfully completed, the Rorer shares would no longer be
listed and the Rhone-Poulenc share would be the only listed share of the Rhone-
Poulenc group in the life sciences industry. Furthermore, Rhone-Poulenc has
announced that the future specialty chemicals and fibers and polymers company
would be listed on the market in 1998, market conditions permitting, so as to
create a clear distinction between the shares listed in the life sciences sector
and those listed in the specialty chemicals sector.
The increase of Rhone-Poulenc's interest in Rorer to 100% will be carried
out as a tender offer followed by a merger, as set forth in the agreement signed
on March 12, 1990, between Rhone-Poulenc and Rorer, pursuant to which Rhone-
Poulenc acquired in 1990 about 68% of Rorer's capital. The agreement further
provided that Rhone-Poulenc could not increase its interest in Rorer's capital
beyond 68.68% until July 31, 1997. After that date, Rhone-Poulenc may acquire
Rorer shares on the market up to 75%. Rhone-Poulenc may increase its interest
above 75% through a tender offer, provided that such tender offer be subject to
the condition that a minimum number of shares be tendered so that Rhone-Poulenc
will hold at least 90% of Rorer's capital and be followed by a merger between
Rorer and Rhone-Poulenc (or a subsidiary of Rhone-Poulenc) which must satisfy
certain conditions and result in the purchase of 100% of Rorer's capital. The
merger planned by Rhone-Poulenc and described below complies with the agreement
of March 12, 1990.
B. THE MERGER
On August 19, 1997, Rhone-Poulenc, its subsidiary, and Rorer signed an
agreement providing for a merger pursuant to the laws of the State of
Pennsylvania which will be completed as soon as possible after the close of the
Offer. Through the merger, RP Vehicle, Inc., Pennsylvania corporation created
for the transaction and a wholly owned subsidiary of Rhone-Poulenc will merge
with and into Rorer. After the merger, all the Rorer shares held by shareholders
other than Rhone-Poulenc or its direct or indirect subsidiaries will be
canceled. The holders of these
5
<PAGE>
canceled shares will receive consideration per share equal to the Offer price
(without interest) in U.S. dollars and Rorer will become a wholly owned
subsidiary of Rhone-Poulenc. Shareholders who hold their shares through the
Sicovam will receive a sum in French francs, equal to the counter-value of the
Offer price, the applicable rate being the average weighted exchange rate used
by Societe Generale the day after the closing of the Offer in the United States.
The shares issued by RP Vehicle, Inc. will be canceled without any consideration
received in exchange.
At the close of the merger, each option to purchase Rorer shares, whether
exercisable or not, will be canceled in exchange for payment of an indemnity
equal, for each share underlying such option, to the Offer price, minus the
exercise price for such options. This indemnity will be paid on the date of
payment for shares canceled in the merger.
The merger agreement provides that Rhone-Poulenc and the compensation
committee of Rorer will define, prior to close of the merger, alternatives to
such immediate cash payment referred to above, which may include deferred
payment and conversion into options to purchase Rhone-Poulenc shares, in
substitution for Rorer's shares.
The tax treatment of the options depends on the specific conditions which
apply to each beneficiary, and the holders are advised to consult a tax advisor.
The merger shall be submitted for approval to a Rorer shareholders' meeting
to be held as soon as possible after the close of the Offer. Rhone-Poulenc
intends to vote in favor of the merger and has sufficient voting power to
approve and adopt the Merger Agreement.
The merger is subject to the following other conditions:
. the absence of new laws or regulations or decision by a public
authority prohibiting or limiting the planned transaction, prohibiting
the operation or limiting the activity of Rorer or its subsidiaries
after completion of the merger.
. the acquisition by Rhone-Poulenc of the tendered shares (unless this
condition is not met because of a violation by Rhone-Poulenc of its
obligations under the Merger Agreement).
The Merger Agreement may be terminated by agreement of the Boards of
Directors of Rhone-Poulenc, RP Vehicle, Inc., and Rorer and the Special
Committee, if the merger is not definitively completed at the very latest on
March 31, 1998, if a court or authority prohibits the merger, if Rhone-Poulenc
cannot complete the Offer, if the Special Committee modifies its recommendation
or in the event of breaches of representations made by Rhone-Poulenc and RP
Vehicle, Inc. in the Merger Agreement, or in the event they breach their
obligations thereunder.
Under the laws of the State of Pennsylvania, a shareholder contesting the
price of shares canceled at the time of a merger may demand payment of fair
value for his shares. The Offer to Purchase, which is made available to
shareholders, summarizes the procedure and the applicable provisions of the
1988 Pennsylvania Business Corporation Law.
Shortly after the announcement on June 26, 1997 of the possibility of an
offer on the Rorer shares by Rhone-Poulenc, four separate shareholders class
actions were filed against Rhone-Poulenc in the United States. The
shareholders claim, among other things, Rhone-Poulenc's abuse of its dominant
position as majority shareholder, an infringement of minority rights, and an
unfair price. They seek an injunction against the Offer and, if applicable, its
rescission and the payment of damages in an unspecified amount. Rhone-Poulenc
believes these suits lack merit and intends to vigorously defend against them.
C. CONSEQUENCES OF THE TRANSACTION
If the merger is successfully completed, Rhone-Poulenc intends to cause the
Rorer shares not to be listed on the Premier Marche (monthly settlement market)
of the Paris Bourse or on the New York Stock Exchange.
Rhone-Poulenc has no current plans or proposals to modify materially the
business or structure of Rorer. Nevertheless, Rhone-Poulenc may initiate a
review of Rorer's operations in order to proceed, should it be necessary,
6
<PAGE>
with the modifications required for the benefit of Rorer. In particular, Rhone-
Poulenc may plan a change in the number of its directors or in their terms of
office or Rorer's dividend distribution policy and indebtedness ratio.
IV. FACTORS TO BE CONSIDERED IN ASSESSING THE OFFER
A. MARKET PRICE
The table below sets forth the Rorer share prices on the Paris Bourse and
the New York Stock Exchange and the quarterly dividend paid per share:
<TABLE>
<CAPTION>
Paris Bourse /(1)/ NYSE /(1)/ Dividend paid
(French francs) (U.S. dollars)
High Low High Low
<S> <C> <C> <C> <C> <C>
1995:
1st quarter 211.50 186.10 43.500 36.250 0.30
2nd quarter 211.00 197.00 43.250 40.375 0.3
3rd quarter 227.00 194.30 45.875 40.500 0.3
4th quarter 269.00 217.00 54.500 43.750 0.3
1996:
1st quarter 334.00 251.00 66.875 50.500 0.3
2nd quarter 358.60 301.00 69.250 58.000 0.32
3rd quarter 399.00 305.10 77.750 62.125 0.32
4th quarter 423.00 341.10 80.500 66.000 0.32
1997:
1st quarter 448.00 390.20 78.125 70.125 0.32
2nd quarter 535.00 389.90 94.5625 68.000 0.32
3rd quarter 588.00 584.00 96.000 90.750 --
(until August
19)
</TABLE>
/(1)/ Source: SBF- Bourse de Paris
/(2)/ Source: Dow Jones News Source
On June 25, 1977, the trading day preceding the announcement by Rhone-
Poulenc of the possibility of a business combination with Rorer, the reported
closing price of Rorer shares was FF 468.60 on the Paris Bourse and US$ 79.4375
on the New York Stock Exchange. The reported closing price of the Rorer shares
was FF 588 on the Paris Bourse and US$ 95,125 U.S. dollars on the New York Stock
Exchange on August 19, 1997, the last trading day preceding the announcement of
the Offer on each of these markets.
B. THE OPINION OF RHONE-POULENC
Rhone-Poulenc believes that the price per share offered in the Offer and
the merger is fair to Rorer's other shareholders. The criteria used by Rhone-
Poulenc in making this determination are the following:
. The Special Committee has determined that the Offer and the merger are fair
to and in the interests of Rorer and has received the opinion of Goldman,
Sachs & Co. described below;
. The projected financial performance of Rorer and its financial results;
. The Offer price represents a premium of 22.1% over the reported closing price
on the New York Stock Exchange prior to the announcement of the possibility of
an offer on June 26, 1997, the date on which the price of Rorer's share had
almost reached its historical maximum, and a premium of 24.8% over the average
closing prices for the one-month period preceding June 26, 1997;
7
<PAGE>
. The acquisition agreement of March 12, 1990 between Rhone-Poulenc and Rorer
was the subject of real negotiations and allowed Rorer shareholders to benefit
from a significant appreciation in the value of their shares since that date;
. The Offer and the merger generally comply with the conditions of the
agreement of March 12, 1990;
. The Offer cannot be completed unless it results in Rhone-Poulenc's controlling
at least 90% of Rorer's capital, which guarantees that about two-thirds of the
shares held by the public must be tendered in the Offer for it to be
successful;
. The Offer price and the merger consideration shall have the same value
expressed in U.S. dollars;
. All the shareholders will receive a cash payment.
Rhone-Poulenc did not use the criteria of net book value and Rorer's
liquidation value in its valuation.
C. THE OPINION OF RORER'S BOARD OF DIRECTORS
On July 2, 1997 after the announcement by Rhone-Poulenc of the possibility
of a tender offer for the Rorer shares, the Board of Directors of Rorer
established a special committee, comprised of three independent directors
(Messrs. Frey and Riepe and Dr. Topol), to examine any proposal made by Rhone-
Poulenc to acquire Rorer. The special committee retained independent legal and
financial advisors.
After discussions and negotiations with Rhone-Poulenc, the special
committee unanimously approved and recommended the Offer and the merger on
August 19, 1997. The Board of Directors of Rorer unanimously approved the merger
agreement during its meeting of August 19, 1997 and felt that the Offer and the
merger were fair and in the interests of Rorer. The Board unanimously
recommended to the shareholders to accept the Offer and tender their shares.
In reaching its determinations referred to immediately above, the special
committee considered the following factors, each of which, in the view of the
special committee, supported such determinations:
. the historical market prices and recent trading activity of the Rorer
shares, including (x) the Offer of US$ 97.00 per share represents a
premium of approximately 22% over the US$ 79.44 per share closing price
on June 25, 1997, the day prior to the June 26, 1997 announcement, and
a premium of approximately 20% over the US$ 80.88 per share closing
price on June 13, 1997, which was the 52-week high closing price for
the shares prior to the June 26, 1997 announcement, (y) that the
weighted average per share price between June 26, 1997 and August 17,
1997 was US$ 92.48 per share, and (c) that the shares never traded on
the New York Stock Exchange (the "NYSE") above US$ 96.00 per share
following the June 26, 1997 announcement.
. the history of the negotiations between the special committee and its
representatives and Rhone-Poulenc and its representatives, including
that (a) the negotiations resulted in an increase in the price at which
Rhone-Poulenc was prepared to acquire the shares from US$ 92.00 to US$
97.00 per share, and (b) the special committee's belief that Rhone-
Poulenc would not further increase the Offer price and, accordingly,
US$ 97.00 per share was, in the opinion of the special committee, the
highest price which could be obtained from Rhone-Poulenc.
. the opinion from Goldman, Sachs & Co. based upon and subject to the
assumptions and qualifications stated therein that the U.S.$ 97.00 per
share to be received by the holders other than Rhone-Poulenc and its
subsidiaries in the Offer and merger is fair to such holders; a copy of
the opinion of Goldman, Sachs & Co. is attached as annex to the Offer
to Purchase. Shareholders are urged to, and should reach such opinion
in its entirety.
. the fact that the standstill provisions in the agreement dated March
12, 1996, expired on July 31, 1997, after which time Rhone-Poulenc is
permitted to acquire in the open market such number of shares, which,
together with the shares owned by Rhone-Poulenc, would not exceed 75%
of the outstanding shares, and to the extent Rhone-Poulenc wanted to
exceed the 75% threshold,
8
<PAGE>
Rhone-Poulenc was entitled to commence a tender offer complying with
the requirements of the March 12, 1990 agreement, which could be at a
price per share below Rhone-Poulenc's original price of US$ 92.00 per
share or otherwise substantially below the US$ 97.00 per share Offer
price.
. the belief that a tender offer complying with the requirements of the
March 12, 1990 agreement unilaterally commenced by Rhone-Poulenc
without a recommendation of the special committee may have been
successful at a price lower than that negotiated and recommended by the
special committee.
. the possibility that, because of potentially lower than expected
projected Rorer earnings, or a decline in the trading price of the
shares or the stock market in general, the consideration that the
minority shareholders would obtain in a future transaction might be
less advantageous than the consideration they will receive pursuant to
the Offer and the merger.
. the special committee recognized that the sale of control of Rorer to
Rhone-Poulenc occurred in 1990 upon consummation of the transactions
contemplated in the March 12, 1990 agreement.
. Rhone-Poulenc has sufficient stock ownership to control a disposition
of Rorer, and the special committee and Goldman, Sachs & Co. were not
authorized to, and did not, solicit third-party indications of interest
for the acquisition of Rorer or its businesses.
. the terms of the Offer, the merger and the merger agreement, including
(a) that the 90% minimum condition may not be waived; (b) that the
terms and conditions of the Offer may not be changed in a manner which
is materially adverse to the minority shareholders without the consent
of the special committee; (c) that the recommendation of the special
committee may be withdrawn, modified or amended to the extent the
special committee believes it necessary to do so in the exercise of its
fiduciary duties; (d) that the Offer is not subject to any financing
condition; (e) that the terms of the merger agreement may only be
amended or waived by the special committee; and (f) the limited nature
of other conditions to the Offer and the merger.
. the 90% minimum condition requirement that the Offer not be consummated
unless at least 68.7% of the shares not held by Rhone-Poulenc be
validly tendered pursuant to the Offer and not withdrawn.
. the availability of dissenters' rights for the minority shareholders
under Pennsylvania law in connection with the merger.
. the risk that Rorer would suffer the loss of key employees and other
adverse consequences if Rhone-Poulenc were to commence a unilateral
tender offer.
The Board believes that the Offer and the merger are fair on the procedural
level, in particular, because they comply with the agreement of March 12, 1990,
the independence of the members of the special committee, the engagement by the
special committee of independent legal and financial advisors, because of the
fact that at least about two-thirds of the shares (other than those held by
Rhone-Poulenc) must be contributed to the Offer for the Offer to be completed,
the deliberations of the special committee, and the fact that the price of US$
97 has been truly negotiated by the special committee and Rhone-Poulenc.
The special committee and the Board have noted that Rhone-Poulenc's vote
would be sufficient to approve the merger, but have noted that Rhone-Poulenc
must acquire all shares tendered, and that the Offer is subject to the condition
that Rhone-Poulenc hold at least 90% of the capital of Rorer at the close of the
Offer, taking into account the shares it already holds.
2. PRESENTATION OF RHONE-POULENC S.A.
The document de reference of Rhone-Poulenc was filed with France's
Commission des Operations de Bourse on March 11, 1997 under number R 97-036.
9
<PAGE>
3. PRESENTATION OF RORER
A. GENERAL INFORMATION ON RORER AND ITS CAPITAL
The information below was provided by Rorer or was obtained from public
sources, and consequently, Rhone-Poulenc assumes no responsibility with respect
to this information.
1. INFORMATION ON RORER
Rorer is incorporated in the State of Pennsylvania (United States of
America). Its headquarters are located at 500 Arcola Road, Collegeville,
Pennsylvania 19426.
Rorer is primarily engaged in the discovery, development, production and
marketing of a wide range of pharmaceutical products for human health.
2. INFORMATION ON RORER'S CAPITAL
According to information provided by Rorer, on July 31, 1997, there were
142,687,492 common shares issued and outstanding with no par value (of which
5,169,412 were common shares with no par value held by Rorer's employee benefit
trust) and there were 10,410 common shares with no par value held by Rorer. A
maximum of 4,439,111 options granted to employees pursuant to Rorer's stock
option plan were exercisable on July 31, 1997. As of July 31, 1997, there were
also 1,750 preferred shares (Money Market Preferred Stock) with no par value,
and with a preferred liquidation right of $100,000 per preferred share. On July
31, 1997 Rhone-Poulenc held 97,163,370 shares of Rorer, i.e., 68.1% of the
issued and outstanding shares. There were 7,054 shareholders of record of issued
and outstanding shares of Rorer as of August 13, 1997. This figure includes
financial intermediaries holding Rorer shares on behalf of their clients.
Rorer shares are listed on the Premier Marche (monthly settlement market)
of the Paris Bourse and on the New York Stock Exchange.
B. FINANCIAL INFORMATION
1. SUMMARIES OF RORER'S INCOME STATEMENTS AND BALANCE SHEET
The income statements of Rorer for fiscal years 1995 and 1996 and for the
first six months of fiscal years 1996 and 1997 are summarized below.
<TABLE>
<CAPTION>
1st six months Fiscal year
(not audited) (audited)
(In US$ million) 1997 1996 1996 1995
<S> <C> <C> <C> <C>
Net sales 2,323.8 2,618.5 5,420.6 5,142.1
Cost of products sold 691.4 878 1,666.0 1,746.4
Selling, delivery and
administrative expenses 946.3 1,046.7 2,109.7 1,863.7
Research & development
expenses 405.2 414.3 882.1 766.2
Restructuring and other
charges 102.6 126.5
Operating income 281 279.5 660.2 639.3
Interest expense, net 76.2 84.5 169.6 84.9
Other income (expenses), net (20.8) (77.4) (199.8) 16.4
Income before taxes 225.6 272.4 690.4 538
Provision for income taxes 70.1 85.2 216.9 181.5
Net income 155.5 187.2 473.5 356.5
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Dividends on preferred stock
and remuneration on capital
equity notes 21.9 21.3 44.8 18.7
Net income available to
common shareholders 133.6 165.9 428.7 337.8
Per Share Data:
1st six months Fiscal year
(not audited) (audited)
(In US$ million) 1997 1996 1996 1995
Average number of shares
issued and outstanding
during period/(1)/ 137.0 135.3 135.8 134.2
Net earnings per common 0.98 1.23 3.16/(2)/ 2.50/(3)/
share
</TABLE>
/(1)/ Does not include shares held by Rorer or by Rorer's Employee Benefits
Trust
/(2)/ Net income available to common shareholders
/(3)/ Income available to common shareholders pro forma.
The consolidated balance sheets of Rorer as of December 31, 1995 and 1996
and as of June 30, 1996 and 1997 are summarized below:
<TABLE>
<CAPTION>
At June 30 At December 31
(unaudited) (audited)
(In US$ million) 1997 1996 1996 1995
<S> <C> <C> <C> <C>
ASSETS
Cash & cash equivalents 114.4 60.9 100.6 115.4
Cash pooling arrangements
with Rhone-Poulenc S.A. 4.2 10.4 3.2 16.0
Short-term investments and
notes receivables 63.1 66.7 38.7
Trade accounts, less reserves 858.6 870.6 984.1 956.8
Inventories 796.7 832.8 800.7 765.6
Other current assets 762.3 797.1 846.2 935.8
Total current assets 2,599.3 2,638.5 2,773.5 2,789.6
Time deposits, at cost 128.4 83.0 128.4 83.0
Property, plant and
equipment, net of
accumulated depreciation 1,426.5 1,556.5 1,525.9 1,621.0
Goodwill, net of
accumulated amortization 2,601.0 2,836.9 2,739.0 2,953.5
Intangibles, net of
accumulated amortization 707.4 849.2 766.7 866.8
Other assets 839.1 769.1 834.6 673.2
Total assets 8,301.7 8,733.2 8,768.1 8,987.1
</TABLE>
11
<PAGE>
LIABILITIES
<TABLE>
At June 30 At December 31
(unaudited) (audited)
<S> <C> <C> <C> <C>
Short-term debt 157.9 414.6 126.7 511.8
Accounts payable 427.1 529.8 594.7 601.8
Other current liabilities 1,109.4 1,143.4 1,331.5 1,291.5
Total current liabilities 1,694.4 2,087.8 2,052.9 2,405.1
Long-term debt 2,432.0 2,415.2 2,272.0 2,159.0
Notes payable to Rhone-
Poulenc S.A. and affiliates 187.9 249.5 253.0 525.4
Deferred income 241.6 363.1 218.0 365.5
Other liabilities, including
minority interests 1,208.4 1,201.5 1,322.4 1,174.9
Total liabilities 5,764.3 6,317.1 6,118.3 6,629.9
Shareholders equity
Money market preferred
stock without par value
(liquidation preference
$100,000 per share);
authorized, issued and
outstanding 1,750 shares 175.0 175.0 175.0 175.0
Capital equity notes 500.0 500.0 500.0 500.0
Common stock, without par
value, stated value $1 per
share; authorized
600,000,000 shares 142.6 141.0 141.6 139.5
Capital in excess of stated
value 273.9 204.2 234.8 153.2
Retained earnings 1,883.8 1,662.3 1,837.9 1,580.3
Employee Benefits Trust (198.1) (185.7) 185.7) (185.7)
Cumulative translation (239.8) (80.7) (53.8) (5.1)
adjustments
Total shareholders' equity 2,537.4 2,416.1 2,649.8 2,357.2
Total liabilities and
shareholders' equity 8,301.7 8,733.2 8,768.1 8,987.1
</TABLE>
Rorer is subject to the disclosure obligations of the Securities Exchange
Act of 1934 with respect to the communication of financial data. The audited
consolidated accounts of Rhone-Poulenc for fiscal years ending December 31, 1995
and 1996 are attached to the "Offer to Purchase" available to shareholders.
2. RORER'S BUDGETS AND FINANCIAL FORECASTS
As a general rule, Rorer does not publish projections of its activity or
its financial position. Nevertheless, Rhone-Poulenc, as part of the planned
transaction, has received and reviewed certain projections prepared by Rorer.
PRELIMINARY 1997 BUDGET
Rorer's management presented a budget forecast for 1997 to the Rorer Board
of Directors on December 13, 1996. This budget does not take into account the
possible impact of the suspension of certain production and distribution
operations of Centeon L.L.C., the joint venture between Rorer and Behringwerke
A.G. (a subsidiary of Hoechst A.G.) and reflects the operation and plan of
Centeon. Indeed, the inspection of a production unit by the U.S. Food
12
<PAGE>
& Drug Administration was being conducted and this budget had thus to be
submitted for the approval of the Board of Directors of Centeon on May 4, 1997.
The 1997 budget is also based on the assumption of a significant increase in net
sales, a continuing decrease in expenses, a decrease in research and development
costs, an improvement in gross margins due to changes in the mix of Rorer
products, and an exchange rate of US$ 1 to FF 5.50.
<TABLE>
<CAPTION>
1996 1997
(Projections) (Budget)
In US$ million
<S> <C> <C>
Sales 5,403 5,409
Gross margin 3,736 3,915
Operating income 686 897
Income before tax /(1)/ 686 926
Earnings per share 3.12 4.30
</TABLE>
/(1)/ Including Rorer's share in Centeon's profits of US$ 82 million and
of US$ 1789 million in 1996 and 1997, respectively.
1997 BUDGET (MAY 1997)
This projected budget was later revised by a committee established for this
purpose and by Rorer's management, and it was approved by Rorer's Board of
Directors on May 7, 1997. This budget takes into account the effects of the
suspension of Centeon's activities, and is also based on the same assumptions as
the 1997 preliminary budget. The main items of the revised budget are indicated
below:
<TABLE>
<CAPTION>
1996 1997
(Actual) (Budget)
In US$ million, except for per share information
<S> <C> <C>
Net sales /(1)/ $5,421 $5,414
Gross margin 3,755 3,900
Operating income 661 869
Income before tax /(1)/ 699 800
Earnings per share 3.16 3.65
</TABLE>
/(1)/ Including Rorer's shares in Centeon's profits of US$ 85 million and of
US$ 36 million in 1996 and 1997, respectively.
NEW PROJECTIONS
These projections, which were developed by Rorer for the years 1997 to
2002, are the result of a study performed at the request of the special
committee.
The projections are based on the following assumptions, among others: a
rate of exchange of FF 5.50 to US$ 1.00 from 1998 to 2002, the increased
competition in the United States in the respiratory domain, a continued pressure
from the French Government to limit health expenses, an improvement in gross
margin resulting from an improvement in product mix and the termination of
certain product lines, an increase in expenses for the marketing of Rorer's
strategic products, and an increase in the French corporate income tax from
36-2/3% to 41-2/3% proposed by the government for 1997 and 1998.
Rorer has also indicated that at the end of June 1997, there was an
increased amount of stock in relation to certain products of Rorer with certain
American clients. Rorer has not yet determined if any adjustment of stock is
necessary or over what period such adjustment would have to be made. If Rorer
determined to take measures to reduce the stock over a period of three years
(hypothesis retained by Goldman, Sachs & Co. for the August Projections), the
increase in net sales would be reduced by US$ 80 million for each of the years
1998, 1999 and 2000, with an effect on sales and earnings per share as set out
below (net profit per ordinary share).
13
<PAGE>
These projections are summarized below:
Six Year Plan Comparison - Preliminary Simulation
(U.S. dollars in millions, except per share information)
<TABLE>
<CAPTION>
1997 1997 1998 1999 2000 2001 2002
forecast forecast
with 1998
structure/1/
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales 5,112 5,041 5,262 5,648 6,071 6,573 7,001
Gross margin 3,694 3,642 3,842 4,125 4,444 4,758 5,046
Operating income 780 731 822 947 1,082 1,233 1,372
Centeon joint venture/(2)/ (41) (41) 55 75 120 150 180
Income before income taxes 722 653 777 930 1,123 1,302 1,492
Earnings per share
Adjusted Earnings per share/(3)/ 3.28 2.93 3.43 4.14 5.11 5.97 6.88
</TABLE>
/(1)/ Does not include the effect of the sale of certain product lines realized
by Rorer in 1997.
/(2)/ Rorer's share in Centeon earnings.
Excluding adjustments to the stocks level, projected sales and earnings per
share would be as follows:
(US dollars in millions except per share information)
<TABLE>
<CAPTION>
1997
forecast
1997 with 1988
forecast structure 1998 1999 2000 2001 2002
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales 5,112 5,041 5,342 5,728 6,151 6,573 7,001
Adjusted Earnings per share 3.28 2.93 3.72 4.43 5.40 5.97 6.88
</TABLE>
It is important to note that this budget and these projections were based
on certain production assumptions and anticipated sales for the years 1997
through 2002 and, notably, on the assumption that the share ownership structure
is not modified) as well as on certain assumptions regarding sales and business
activities. Information of this type is based on estimates and assumptions that
are inherently subject to significant economic and competitive uncertainties and
contingencies, all of which are difficult to predict and many of which are
beyond the Company's control. Accordingly, there can be no assurance that the
projected results would be realized or that actual results would not be higher
or lower than those set forth above. In addition, the budget information and the
projections were prepared by Rorer's management for internal purposes and not
with a view to public disclosure and, as such, do not comply with the guidelines
established for the publication of this type of information. These data have
been included in this communique to make available to Rorer shareholders
financial projections provided to Rhone-Poulenc. Rorer's auditors have not
reviewed or verified the projections or the procedures used in their
preparation. None of Rhone-Poulenc, Rorer, Rorer's auditors, nor any
other party to the Offer and the subsequent merger assumes any responsibility
for the accuracy or validity of these projections.
14
<PAGE>
3. RELATIONSHIP BETWEEN RORER AND RHONE-POULENC
1. COMMON DIRECTORS AND SENIOR EXECUTIVES
At present, only one of Rorer's thirteen directors is also a director of
Rhone-Poulenc and three are senior executives of Rhone-Poulenc. Jean-Marc
Bruel, Igor Landau and Jean-Pierre Tirouflet, Rorer directors, are,
respectively, Vice-Chairman and director, President and Executive Vice President
of Rhone-Poulenc. Michel de Rosen, Chief Executive Officer and Chairman of
Rorer's Board of Directors, is also a member of Rhone-Poulenc's executive
committee.
2. CONTRACTUAL RELATIONS
Certain Rorer subsidiaries, particularly in the United States, France, the
United Kingdom and Germany, may participate in Rhone-Poulenc's cash pooling
arrangements and, as such, lend or borrow from Rhone-Poulenc at prevailing
market terms and conditions. Rhone-Poulenc invoices Rorer for certain expenses
incurred in Rorer's interest (research, data processing, insurance, legal, tax,
advertising, public relations and management fees). Rorer and Rhone-Poulenc
believe that the amounts invoiced to Rorer are the amounts that would have been
invoiced to Rorer if it were independent from Rhone-Poulenc. The table below
provides the amounts outstanding from cash pooling operations between them and
the services provided by Rhone-Poulenc over the last two fiscal years.
<TABLE>
<CAPTION>
Amounts at December 31
(in US$ millions)
1996 1995
<S> <C> <C>
Amounts receivable from Rhone-
Poulenc and affiliates 48.9 61.3
Accounts receivable from sales of
products and services to Rhone-
Poulenc 6.3 8.5
Other current assets 39.4 36.8
Amounts at December 31
(in US$ millions)
1996 1995
Amounts payable related to
purchase of materials and services
from Rhone-Poulenc and affiliates 16.8 12.2
Accrued and other liabilities due to
affiliates 30.0 20.9
Debt to Rhone-Poulenc and
affiliates 259.8 653.0
Amounts accrued yearly
(in US$ million)
Sales to Rhone-Poulenc and
affiliates 31.3 31.1
Materials purchased from Rhone-
Poulenc 38.7 41.4
Interest expense incurred with
respect to Rhone-Poulenc
indebtedness 22.3 12.4
Services invoiced by Rhone-
Poulenc 24.0 23.6
</TABLE>
15
<PAGE>
In addition, Rhone-Poulenc has granted Rorer a medium-term credit facility
for five hundred million dollars, at LIBOR plus margin, and has guaranteed
certain indebtedness of Rorer related to certain joint ventures.
In 1995, Rorer acquired from Rhone-Poulenc the businesses of Cooperation
Pharmaceutique Francaise ("Cooper"), primarily in France, and a pharmaceuticals
business in Brazil for cash and preferred stock of a subsidiary of Rorer
aggregating approximately US$ 273.2 million paid respectively in preferred
shares of an affiliate or Rorer and in cash. The preferred shares, accounted for
as minority interest in other liabilities, have a liquidation preference of
approximately FF 645 million (approximately US$ 123.1 million) and pay dividends
of 7.5% per annum on a stated value of FF 145 million. Furthermore, the
acquisition agreement calls for potential adjustments to the purchase price
based on several factors, including earnings performance.
In December 1995, Rorer issued US$ 500 million of undated capital equity
notes to Rhone-Poulenc. The notes have a liquidation preference that ranks
senior to the Rorer shares, but junior to all existing and future Rorer
preferred stock. Semiannual remuneration on the unpaid principal balance of the
equity notes is based on LIBOR plus a margin, and was approximately US$ 35.2
million in 1996. The capital equity notes are redeemable only at Rorer's option,
but not earlier than five years after issuance, subject to certain exceptions.
In addition, Rorer has entered into various licensing and confidentiality
agreements with Rhone-Poulenc and its affiliates regarding intellectual property
rights.
In the ordinary course of their businesses, Rorer and Rhone-Poulenc engage
in a variety of commercial and financial transactions with several of the
companies which are represented on the Board of Directors of Rhone-Poulenc (such
as the Banque Nationale de Paris, Credit Lyonnais, Credit Suisse First Boston,
Fiat and Societe Generale).
Global Coordinators
MORGAN STANLEY DEAN WITTER UBS SECURITIES
Centralizing Agency in France
SOCIETE GENERALE
Information Agent
GEORGESON
& COMPANY INC.
--------------
RHONE-POULENC S.A.,
25, QUAI PAUL DOUMER - 92408 COURBEVOIE CEDEX
16
<PAGE>
Exhibit (B)(1)
[LOGO OF RHONE-POULENC S.A. APPEARS HERE]
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 2,500,000,000 SHORT TERM CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A ("RP").
Short Term Facility Amount: FRF 2,500,000,000 or its equivalent in any
freely available and convertible currency.
Short Term Facility Description: A revolving credit facility ("the Short Term
Facility") which shall be repaid and redrawn
throughout its life. The Short Term Facility
will be denominated in, but not limited to,
French Francs and committed in, but not
limited to, French Francs, or their equivalent
in US Dollars, and may be used in other
currencies on an as-available basis.
Short Term Facility Purpose: bridge facility granted in conjunction with
the acquisition of the shares of Rhone-Poulenc
Rorer Inc not currently held by the Borrower
in connection with a proposed tender offer to
be made by the Borrower.
Lender: *
Final Maturity: 30 June 1998.
Repayment Date The Short Term Facility will be repaid in
instalments on the dates and in amount shown
in the following table:
(1) Repayment Dates (2) Amounts (FRF)
29 December 1997 1,030,000,000
Final Maturity 1,470,000,000
Availability : Subject to 2 (two) business days' notice for
French Francs and 3 (three) business days'
notice for other currencies, the Borrower may
draw Advances in minimum amounts of FRF
100,000,000 and in integral multiples of FRF
20,000,000 (or equivalents in other
currencies) for periods of 1, 2, 3 or 6 months
or such other periods of up to 12 months as
the Lender may agree ("Advances").
No more than 5 Advances shall be outstanding
at any one time in a maximum of 4 currencies.
Any drawing notice shall be received by the
Lender from the Borrower by not later than
10.00 a.m. (Paris time) for French francs and
by not later than 10.00 a.m. (London time) for
other currencies.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Cancellation: Upon 10 business days' written notice the
Borrower may cancel without premium or penalty
all or part of undrawn part of the Short Term
Facility in a minimum amount of FRF
100,000,000 and in integral multiples of FRF
20,000,000.
Prepayment: Prepayment of Advances shall be permitted in
cases of illegality and increased cost
(including the requirement for tax gross-ups).
Interest and Margin: The Borrower will pay interest at PIBOR in the
case of French Francs and at LIBOR for any other
relevant currency, plus 0.05% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a 365
day basis).
For interest periods greater than 6 months,
interests will be paid after the end of every
period of 6 months and on the latest day of
such interest period.
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference
Banks, as published 1 (one) Business Day
(PIBOR) or 2 (two) Business Days (LIBOR) prior
the date of an Advance.
LIBOR or PIBOR, as the case may be, will be
replaced by any applicable rate in consequence
of the introduction of the EURO currency after
1 January 1999.
Facility Fee The Borrower will pay a facility fee in French
Francs at a rate p.a. of 0.05% on the total
amount (reduced and uncancelled) of the Short
Term Facility, calculated as of the date of
signing on an actual/360 day basis and payable
quarterly in arrears.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with
certification of relevant signing
authorities; and
(D) Legal Opinion provided by the General
Counsel of the Borrower.
Representations and Representations and warranties to be made in
Warranties : respect of the Borrower at signing, and (i),
(ii), (iii), (iv), (v), (vii), (xii) and
(xiii) inclusive to be repeated at each
Advance date.
(i) The Borrower is duly incorporated and
validly existing;
(ii) The Borrower has power to enter into
and perform pursuant to the Short Term
Facility Agreement and all necessary
corporate actions relevant thereto have
been taken;
(iii) Obligations of the Borrower under the
Short Term Facility Agreement will rank
pari passu with other unsecured and
unsubordinated obligations;
<PAGE>
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Short Term Facility are
legally valid, binding and enforceable;
(vi) Execution and performance of Short Term
Facility Agreement will not be in conflict
with or in breach of obligations in other
agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Short Term Facility have
been obtained and are in full force and
effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there has
been no adverse change in the financial
condition of the Borrower which is material in
the context of its operation taken as a whole
which could have a material adverse effect on
the Borrower's capacity to meet its
obligations under the Short Term Facility
Agreement.
(x) No material litigation or other proceedings at
the date of signing which is material in the
context of its operation taken as a whole (to
the best of the Borrower's knowledge and
belief) which could have a material adverse
effect on the Borrower's capacity to meet its
obligations under the Short Term Facility
Agreement;
(xi) No stamp, registration or similar tax, (other
than French "Timbres de Dimension") in
connection with the execution, delivery,
performance or enforcement of the Short Term
Facility Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available and
in any event within 180 days of financial
year-end, an English copy of which shall be
delivered within 45 days thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's obligations
under the Short Term Facility.
<PAGE>
(B) Financial covenant:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Short Term Facility by
reference to the 1996 Consolidated Financial
Statements.
In the event of a breach in the performance of this
requirement, the Lender shall be entitled to declare
a Potential Termination Event under the Short Term
Facility. In this event the Lender may (i) declare
any undrawn portion of the Short Term Facility to be
cancelled (and no further notice of drawing may be
issued) and/or (ii) any drawn portion of the Short
Term Facility to become due and payable prior to its
maturity as a result of such a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Short Term Facility.
(ii) Pari passu status vis-a-vis all the Borrower'
other unsecured and unsubordinated creditors.
(iii) To notify the Lender in writing of any Event
of Default;
(iv) Negative Pledge: The Borrower shall not create
or permit to be outstanding any encumbrance in
respect of Financial Indebtedness unless the
Lender give its consent, except encumbrances:
- In connection with the purchase, maintenance
or improvement of an asset, providing the
amount of Financial Indebtedness secured
remains confined to such asset or such
improvements.
- Created to secure Financial Indebtedness
owing to EIB, FONDS INDUSTRIEL DE
MODERNISATION, FONDS DE DEVELOPPEMENT
ECONOMIQUE ET SOCIAL or any other
governmental or EEC controlled financial
institution which in its normal lending
practice requires such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so long
as the claims secured are being contested in
good faith.
<PAGE>
- Created over assets held in trust by another
person, which assets are to be used by such other
person solely for satisfying the Borrower's,
scheduled payment obligations in respect of
principal and/or interest in respect of any
Financial Indebtedness of the Borrower, (the
"Borrower's Obligations",) in circumstance where
such other person has undertaken responsibility for
the discharge of the Borrower's Obligations.
- Over a deposit made by the Borrower using the
proceeds of a Financial Indebtedness of the
Borrower provided that (A) the depositary of such
proceeds lends an amount at least equal to the
amount of the deposit to a subsidiary of the
Borrower and (B) that such loan has a maturity date
which is not earlier that the date for repayment of
such deposit.
- Over assets or receivables of the Borrower which
encumbrances have been given in connection with the
refinancing of such assets or receivables and where
the risks (except in relation to any credit
enhancement provided by the Borrower in respect of
such assets or receivables) relating to non-payment
in respect of such assets or receivables are, as a
result of such refinancing, not borne by the
Borrower.
- Not in one of the above categories to secure
Financial Indebtedness as long as the amount of
Financial Indebtedness secured thereby does not
exceed 7,5% of Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or registration
fees or similar taxes or charges which may become
payable.
(vi) Borrower will maintain its corporate existence and
its rights to carry on its operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment on the due
date under the terms of the Short Term Facility,
unless such failure occurs solely for administrative
or technical reasons and the default is not remedied
within 5 Business Days after the Lender has given a
notice to the Borrower.
(B) Breach of other obligations which, where capable of
remedy in the reasonable opinion of the Lender,
remains unremedied for 20 Business Days after notice
by the Lender of such default. (The breach referred to
under Undertaking (B) above may give rise to a right
(x) to cancel the undrawn portion of the Short Term
Facility and to refuse future drawings and/or (y) to
declare any drawn portion of the Short Term Facility
to become due and payable prior to its maturity).
(C) Any Financial Indebtedness of the Borrower exceeding
FRF 150,000,000 (or equivalent) becomes due and
payable before its stated maturity by way of a
declared default after expiry of any applicable grace
period, unless such default is contested in good faith
by the Borrower by appropriate proceedings.
(D) Any representation or warranty of the Borrower is
materially incorrect in any respect when made or
repeated.
<PAGE>
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation, dissolution, etc.
of the Borrower except in the case of the liquidation
or the dissolution where the terms have been approved
by the Lender. This excludes a merger for arm's length
consideration within the Borrower's group.
(G) A moratorium or restructuring is made or declared in
respect of all or any indebtedness of Borrower whereby
the assets are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in respect
of the Borrower.
(I) Borrower is declared insolvent or declares in writing
that it is unable to pay its debts as and when they
are due.
(J) It becomes unlawful for the Borrower to comply with
its obligations under the Short Term Facility.
Documentation: French language.
Documentation will also include other customary provisions
for a transaction of this type including, inter alia,
Changes in circumstances, illegality, market disruption and
increased costs.
Taxation: All payments of principal, interest and fees will be made
free and clear of all present and future taxes, levies,
duties or other deductions of any nature whatsoever, levied
either now or at any future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under a
guarantee, security, indemnity or other commitment
designed to protect any creditor against loss in
respect of any financial indebtedness of any third
party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note, bill of
exchange, bonds, commercial paper, certificate of
deposit or similar instrument on which either of
the Borrower is liable;
(v) Any indebtedness for money owing in respect of any
interest swap, or currency swap, such indebtedness
to be measured on a mark-to-market basis at the
relevant time and to include, vis-a-vis any
particular counterparty, application of the
relevant ISDA netting procedures;
(vi) Any payment obligations under any lease entered
into for the purpose of obtaining or raising
finance.
<PAGE>
Material Adverse Change shall mean any event on the assets
or financial condition of the RP Group taken as a whole
having a material adverse effect in the reasonable opinion
of the Lender on the ability of the Borrower to perform in
a timely manner all or any of its payment obligations under
the Short Term Facility Agreement.
Consolidated Indebtedness shall mean the difference between
(i) the sum of Long Term Debt (26,941) (including
Participating Loans), Bank Overdrafts (2,991), Current
Portion of Long Term Debt (2,624) and Short Term Borrowings
(6,673) and (ii) the sum of Cash (1,040), Short Term
Deposits (3,100) and Marketable Securities (1,321) as each
of the foregoing amounts shall be determined from the items
so described in the consolidated balance sheet of RP
included in the annual financial statements most recently
delivered by RP to the Lender.
Consolidated Net Worth shall mean the difference between
(i) Total Liabilities and Total Stockholders Equity
(141,848) and (ii) the sum of Total Current Liabilities
(39,245), Long Term Debt (including Participating Loans)
(26,941), Other Long Term Liabilities (17,610) and
Mandatorily Redeemable Partnership Interest (2,429) as each
of the foregoing amounts shall be determined from the items
so described in the consolidated balance sheet of RP and
its subsidiaries included in the annual financial
statements most recently delivered by RP to the Lender.
Governing Law -
Jurisdiction The Short Term Facility Agreement will be governed by
French law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms October 31, 1997.
and Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the Borrower.
Please signify your acceptance of the terms and conditions
set out above by signing and returning a copy of this
Summary of Terms and Conditions.
for and on behalf Date: August 6, 1997.
of RHONE-POULENC S.A.
/s/ Michel DELRUE
--------------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf Date: August 6, 1997.
of *
..............
*
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(2)
[LOGO OF RHONE-POULENC S.A. APPEARS HERE]
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 2,000,000,000 SHORT TERM CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
<TABLE>
<CAPTION>
<S> <C>
Borrower: RHONE-POULENC S.A.("RP").
Short Term Facility Amount: FRF 2,000,000,000 or its equivalent in any freely
available and convertible currency.
Short Term Facility A revolving credit short term facility ("the Short
Description: Term Facility") which shall be repaid and redrawn
throughout its life. The Short Term Facility will
be denominated in French Francs and committed in
French Francs and may be used in FRF and US
Dollars or in any other Convertible Currency on an
as-available basis.
Convertible Currency means CHF, DEM, GBP, and ESP.
Short Term Facility Purpose: bridge loan granted in conjunction with the
acquisition of the shares of Rhone-Poulenc Rorer
Inc not currently held by the Borrower in
connection with a proposed tender offer to be made
by the Borrower
Lender: *
Final Maturity: The Short Term Facility will be repaid in full 364
days from the date of first Advance under the
Short Term Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 100,000,000 and
in integral multiples of FRF 20,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to
364 days ("Advances").
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other
currencies.
No more than 10 Advances shall be outstanding at
any one time in a maximum of five currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the undrawn part of the Short Term Facility in
a minimum amount of FRF 100,000,000 and in
integral multiples of FRF 20,000,000.
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups).
</TABLE>
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
<TABLE>
<S> <C>
Interest and Margin: The Borrower will pay interest at LIBOR for the
relevant currency (with the exception of PIBOR in
the case of French Francs), plus 0.05% (Margin)
p.a.
For interest periods greater than 6 months,
interests will be paid after the end of every
period of 6 months and on the latest day of such
interest period.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in GBP
which will be calculated on a 365 day basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks.
LIBOR or PIBOR, as the case may be, will be
replaced by any applicable rate in consequence of
the introduction of the EURO currency after 1
January 1999.
Default rate If the Borrower fails to pay any sums due by it
under the Facility, the Borrower shall, from the
date when such sum fell due, pay interest on the
unpaid sum up to the date upon which such sum is
actually received by the Lender at the rate per
annum which is the aggregate of (i) one per cent
(1%) and (ii) the rate which would have been
applied to the Advances outstanding under the
Short Term Facility at the time of the default.
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate p.a. of 0.05% on the total
amount (reduced and uncancelled) of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
In the event of Cancellation, the facility fee
will be calculated at the beginning of each
quarter.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification of
relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower, reasonably satisfactory to
the Lender.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vi), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Short Term Facility
Agreement and all necessary corporate actions
relevant thereto have been taken;
(iii) Obligations of the Borrower under the Short
Term Facility Agreement will rank pari passu
with other unsecured and unsubordinated
obligations;
</TABLE>
<PAGE>
(iv) No encumbrance exists over present or
future assets or revenues, except as
expressly permitted or disclosed to the
Lender (see below);
(v) Obligations under the Short Term Facility
are legally valid, binding and enforceable;
(vi) Execution and performance of Short Term
Facility Agreement will not be in conflict
with or in breach of obligations in other
agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Short Term Facility
have been obtained and are in full force
and effect;
(viii) Accuracy and fairness of (x) 1996 audited
financial statements (the "1996
Consolidated Financial Statements") and (y)
subsequent audited financial statements
(the "Annual Consolidated Financial
Statements"), to the best of the Borrower's
knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet
its obligations under the Short Term
Facility Agreement.
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Short Term Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Short
Term Facility Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower's Annual Consolidated
Financial Statements as soon as available and
in any event within 180 days of financial
year-end, and, in any event within 60 days
after the end of each financial year, delivery
of a certificate certifying compliance with
the financial covenant referred to in
paragraph (B) below.
Delivery of the Borrower's unaudited semi
annual consolidated financial statements as
soon as available and in any event within 90
days of the first half of each of RP's
financial year.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower (the "1997
Consolidated Financial Statements") and Annual
Consolidated Financial Statements to reflect
any changes that have occurred in accounting
practices since the 1996 Consolidated
Statements.
<PAGE>
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Short Term Facility by
reference to the Annual Consolidated Financial
Statements.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the Borrower'
other unsecured and unsubordinated creditors.
(iii) To notify the Lender in writing of any
Event of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event, provided that
such encumbrance remains confined to such
asset and improvements and additions
thereto and does not secure any Financial
Indebtedness not so secured at the time of
such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such
acquisition provided that such encumbrance
remains confined to such asset and
improvements and additions thereto and does
not secure any Financial Indebtedness not
so secured at the time of such event.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above, provided that such
Financial Indebtedness is not increased or
secured by any additional assets or
revenues.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
<PAGE>
- Created over assets held in trust by
another person, which assets are to be used
by such other person solely for satisfying
the Borrower's, scheduled payment
obligations in respect of principal and/or
interest in respect of any Financial
Indebtedness of the Borrower, (the
"Borrower's Obligations",) in circumstance
where such other person has undertaken
responsibility for the discharge of the
Borrower's Obligations.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness of
the Borrower provided that (A) the
depositary of such proceeds lends an amount
at least equal to the amount of the deposit
to a subsidiary of the Borrower and (B)
that such loan has a maturity date which is
not earlier that the date for repayment of
such deposit.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or
charges which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment on
the due date under the terms of the Facility,
unless such failure occurs solely for
administrative or technical reasons and the
default is not remedied within 5 Business Days
after the Lender has given a notice to the
Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion of
the Lender, remains unremedied for 20 Business
Days after notice by the Lender of such
default.
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period.
(D) Any representation or warranty of the Borrower
is materially incorrect in any respect when
made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
<PAGE>
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the dissolution
where the terms have been approved by the
Lender. This excludes a merger for arm's
length consideration within the Borrower's
group.
(G) A moratorium or restructuring is made or
declared in respect of all or any indebtedness
of Borrower whereby the assets are submitted
to the control of its creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
(J) It becomes unlawful for the Borrower to comply
with its obligations under the Facility.
(K) In the event of a breach of the requirement
referred to under Undertaking (B) above, the
Lender shall be entitled to declare a Event of
Default under the Facility.
If this breach remains unremedied for 90 days
after notice by the Lender of such Event of
Default, the Lender may (i) declare any
undrawn portion of the Short Term Facility to
be cancelled (and no further notice of drawing
may be issued) and/or (ii) any drawn portion
of the Short Term Facility to become due and
payable immediately as a result of such a
breach.
Documentation: French language.
Documentation (to be established by the Lender)
will also include other customary provisions for a
transaction of this type including, inter alia,
Changes in circumstances, illegality, market
disruption and increased costs.
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
<PAGE>
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Short Term Facility Agreement.
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(including Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short Term
Borrowings and (ii) the sum of Cash, Short Term
Deposits and Marketable Securities as each of the
foregoing amounts shall be determined from the
items so described in the consolidated balance
sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Fees and expenses The Borrower will pay to the Lender all reasonable
fees and expenses including legal fees, incurred
in connection with the preparation, negotiation
and execution of this Short Term Facility and with
the enforcement of its rights under the Short Term
Facility Agreement upon presentation of duly
documented evidence.
Notwithstanding the above, the Borrower shall
require the Lender to respect guidelines as to the
legal expenses which the Borrower wish to cap
after further discussion with Lender.
Governing Law - The Short Term Facility Agreement will be governed
Jurisdiction by French law. Any dispute arising from this
Agreement shall be submitted to the Courts of
Paris.
Validity of Terms and October 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower and to the set up of a satisfactory
documentation.
<PAGE>
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 1, 1997
RHONE-POULENC S.A.
/s/ Michel DELRUE
---------------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of
* Date: August 1, 1997
/s/
--------------------------------------
*
/s/
--------------------------------------
*
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
Exhibit (B)(3)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 1,500,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A ("RP").
Facility Amount: FRF 1,500,000,000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-available basis.
Facility Purpose: this Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 2 (two) business days' notice for French
Francs and 3 (three) business days' notice for
other currencies, the Borrower may draw Advances in
minimum amounts of FRF 100,000,000 and in integral
multiples of FRF 20,000,000 (or equivalents in
other currencies) for periods of 1, 2, 3 or 6
months or such other periods of up to 12 months as
the Lender may agree ("Advances").
No more than 5 Advances shall be outstanding at
any one time in a maximum of 4 currencies.
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of undrawn part of the Facility in a minimum
amount of FRF 100,000,000 and in integral
multiples of FRF 20,000,000.
Any cancellation will apply first to the Short
Time Facility entered into between the Lender and
the Borrower on the date of the Facility.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups).
Interest and Margin: The Borrower will pay interest at PIBOR in the case
of French Francs and at LIBOR for any other
relevant currency, plus 0.09% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a 365 day
basis).
For interest periods greater than 6 months,
interests will be paid after the end of every
period of 6 months and on the latest day of such
interest period.
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks,
as published 1 (one) Business Day (PIBOR) or 2
(two) Business Days (LIBOR) prior the date of an
Advance.
LIBOR or PIBOR, as the case may be, will be
replaced by any applicable rate in consequence of
the introduction of the EURO currency after 1
January 1999.
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate p.a. of 0.09% on the total amount
(reduced and uncancelled) of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
<PAGE>
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet
its obligations under the Facility
Agreement.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender offer to be made by the Borrower
shall not be considered by the Lender as a
material adverse change in the financial
condition of the Borrower;
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
<PAGE>
(B) Financial Covenant:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference
to the 1996 Consolidated Financial Statements.
In the event of a breach in the performance of
this requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
Facility. In this event the Lender may (i) declare
any undrawn portion of the Facility to be
cancelled (and no further notice of drawing may be
issued) and/or (ii) any drawn portion of the
Facility to become due and payable prior to its
maturity as a result of such a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the Borrower'
other unsecured and unsubordinated creditors.
(iii) To notify the Lender in writing of any Event
of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, FONDS INDUSTRIEL DE
MODERNISATION, FONDS DE DEVELOPPEMENT
ECONOMIQUE ET SOCIAL or any other
governmental or EEC controlled financial
institution which in its normal lending
practice requires such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
<PAGE>
- Created over assets held in trust by
another person, which assets are to be used
by such other person solely for satisfying
the Borrower's, scheduled payment
obligations in respect of principal and/or
interest in respect of any Financial
Indebtedness of the Borrower, (the
"Borrower's Obligations",) in circumstance
where such other person has undertaken
responsibility for the discharge of the
Borrower's Obligations.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness of
the Borrower provided that (A) the
depositary of such proceeds lends an amount
at least equal to the amount of the deposit
to a subsidiary of the Borrower and (B)
that such loan has a maturity date which is
not earlier that the date for repayment of
such deposit.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5 Business
Days after the Lender has given a notice to
the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default. (The breach referred to under
Undertaking (B) above may give rise to a
right (x) to cancel the undrawn portion of
the Facility and to refuse future drawings
and/or (y) to declare any drawn portion of
the Facility to become due and payable prior
to its maturity).
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period, unless
such default is contested in good faith by
the Borrower by appropriate proceedings.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
<PAGE>
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
Documentation: French language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, Changes in circumstances,
illegality, market disruption and increased costs.
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures;
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
<PAGE>
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations
under the Facility Agreement.
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(26,941) (including Participating Loans), Bank
Overdrafts (2,991), Current Portion of Long Term
Debt (2,624) and Short Term Borrowings (6,673)
and (ii) the sum of Cash (1,040), Short Term
Deposits (3,100) and Marketable Securities
(1,321) as each of the foregoing amounts shall be
determined from the items so described in the
consolidated balance sheet of RP included in the
annual financial statements most recently
delivered by RP to the Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity (141,848) and (ii) the sum of
Total Current Liabilities (39,245), Long Term
Debt (including Participating Loans) (26,941),
Other Long Term Liabilities (17,610) and
Mandatorily Redeemable Partnership Interest
(2,429) as each of the foregoing amounts shall be
determined from the items so described in the
consolidated balance sheet of RP and its
subsidiaries included in the annual financial
statements most recently delivered by RP to the
Lender.
Governing Law - Jurisdiction The Facility Agreement will be governed by French
law. Any dispute arising from this Agreement
shall be submitted to the Courts of Paris.
Validity of Terms and October 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 6, 1997.
RHONE-POULENC S.A.
/s/ Michel DELRUE
.............
Michel DELRUE
Directeur des Services Financiers
for and on behalf of Date: August 6, 1997
*
..............
*
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(4)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 1,500,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
Borrower: RHONE-POULENC S.A. ("RP")
Facility Amount: FRF 1,500,000,000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in French Francs
and committed in French Francs and may be used in
FRF and US Dollars or in any other Convertible
Currency on an as-available basis.
Convertible Currency means CHF, DEM, GBP, and ESP.
Facility Purpose: this Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 100,000,000 and
in integral multiples of FRF 20,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances").
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
No more than 10 Advances shall be outstanding at
any one time in a maximum of five currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the undrawn part of the Facility in a minimum
amount of FRF 100,000,000 and in integral
multiples of FRF 20,000,000.
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups).
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Interest and Margin: The Borrower will pay interest at LIBOR for the
relevant currency (with the exception of PIBOR in
the case of French Francs), plus 0.11% (Margin)
p.a.
For interest periods greater than 6 months,
interests will be paid after the end of every
period of 6 months and on the latest day of such
interest period.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in GBP
which will be calculated on a 365 day basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks.
LIBOR or PIBOR, as the case may be, will be
replaced by any applicable rate in consequence of
the introduction of the EURO currency after 1
January 1999.
Default rate If the Borrower fails to pay any sums due by it
under the Facility, the Borrower shall, from the
date when such sum fell due, pay interest on the
unpaid sum up to the date upon which such sum is
actually received by the Lender at the rate per
annum which is the aggregate of (i) one per cent
(1%) and (ii) the rate which would have been
applied to the Advances outstanding under the
Facility at the time of the default.
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate p.a. of 0.08% on the total amount
(reduced and uncancelled) of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
In the event of Cancellation, the facility fee
will be calculated at the beginning of each
quarter.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification of
relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower, reasonably satisfactory to
the Lender.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vi), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
<PAGE>
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii)Accuracy and fairness of (x) 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") and (y) subsequent
audited financial statements (the "Annual
Consolidated Financial Statements"), to the
best of the Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there has
been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet its
obligations under the Facility Agreement.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed tender
offer to be made by the Borrower shall not be
considered by the Lender as a material
adverse change in the financial condition of
the Borrower;
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a whole
(to the best of the Borrower's knowledge and
belief) which could have a material adverse
effect on the Borrower's capacity to meet its
obligations under the Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension") in
connection with the execution, delivery,
performance or enforcement of the Facility
Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower's Annual
Consolidated Financial Statements as soon as
available and in any event within 180 days
of financial year-end, and, in any event
within 60 days after the end of each
financial year, delivery of a certificate
certifying compliance with the financial
covenant referred to in paragraph (B) below.
Delivery of the Borrower's unaudited semi
annual consolidated financial statements as
soon as available and in any event within 90
days of the first half of each of RP's
financial year.
<PAGE>
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower (the "1997
Consolidated Financial Statements") and
Annual Consolidated Financial Statements to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's obligations
under the Facility.
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference to
the Annual Consolidated Financial Statements.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower' other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any
Event of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase, maintenance
or improvement of an asset, providing the
amount of Financial Indebtedness secured
remains confined to such asset or such
improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event, provided that
such encumbrance remains confined to such
asset and improvements and additions thereto
and does not secure any Financial
Indebtedness not so secured at the time of
such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such acquisition
provided that such encumbrance remains
confined to such asset and improvements and
additions thereto and does not secure any
Financial Indebtedness not so secured at the
time of such event.
<PAGE>
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above, provided that such
Financial Indebtedness is not increased or
secured by any additional assets or
revenues.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so long
as the claims secured are being contested in
good faith.
- Created over assets held in trust by another
person, which assets are to be used by such
other person solely for satisfying the
Borrower's, scheduled payment obligations in
respect of principal and/or interest in
respect of any Financial Indebtedness of the
Borrower, (the "Borrower's Obligations",) in
circumstance where such other person has
undertaken responsibility for the discharge
of the Borrower's Obligations.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the Borrower.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness of
the Borrower provided that (A) the
depositary of such proceeds lends an amount
at least equal to the amount of the deposit
to a subsidiary of the Borrower and (B) that
such loan has a maturity date which is not
earlier that the date for repayment of such
deposit.
- Not in one of the above categories to secure
Financial Indebtedness as long as the amount
of Financial Indebtedness secured thereby
does not exceed 7,5% of Consolidated Net
Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5 Business
Days after the Lender has given a notice to
the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default.
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period.
<PAGE>
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
(K) In the event of a breach of the requirement
referred to under Undertaking (B) above, the
Lender shall be entitled to declare a Event
of Default under the Facility.
If this breach remains unremedied for 90 days
after notice by the Lender of such Event of
Default, the Lender may (i) declare any
undrawn portion of the Facility to be
cancelled (and no further notice of drawing
may be issued) and/or (ii) any drawn portion
of the Facility to become due and payable
immediately as a result of such a breach.
Documentation: French language.
Documentation (to be established by the Lender)
will also include other customary provisions for a
transaction of this type including, inter alia,
Changes in circumstances, illegality, market
disruption and increased costs.
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
<PAGE>
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(including Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short Term
Borrowings and (ii) the sum of Cash, Short Term
Deposits and Marketable Securities as each of the
foregoing amounts shall be determined from the
items so described in the consolidated balance
sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Fees and expenses The Borrower will pay to the Lender all reasonable
fees and expenses including legal fees, incurred
in connection with the preparation, negotiation
and execution of this Facility and with the
enforcement of its rights under the Facility
Agreement upon presentation of duly documented
evidence.
Notwithstanding the above, the Borrower shall
require the Lender to respect guidelines as to the
legal expenses which the Borrower wish to cap
after further discussion with Lender.
Governing Law-Jurisdiction The Facility Agreement will be governed by French
law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and October 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower and to the set up of a satisfactory
documentation.
<PAGE>
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 1, 1997
RHONE-POULENC S.A.
/s/ Michel DELRUE
-------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of Date: August 1, 1997
*
/s/ /s/
-------------- --------------
* *
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(5)
[LOGO OF RHONE-POULENC S.A.
APPEARS HERE]
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 2,000,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
Borrower: RHONE-POULENC S.A ("RP").
Facility Amount: FRF 2,000,000,000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 50,000,000 and
in integral multiples of FRF 10,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances").
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
No more than 10 Advances shall be outstanding at
any one time in a maximum of 5 currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or
undrawn part of the Facility in a minimum amount
of FRF 100,000,000 and in integral multiples of
FRF 10,000,000.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups).
Interest and Margin: The Borrower will pay interest at LIBOR for the
relevant currency (with the exception of PIBOR in
the case of French Francs), plus 0.10% (Margin)
p.a.
For interest periods greater than 6 months,
interests will be paid after the end of every
period of 6 months and on the latest day of such
interest period.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in GBP
which will be calculated on a 365 day basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks.
LIBOR or PIBOR, as the case may be, will be
replaced by any applicable rate in consequence of
the introduction of the EURO currency after 1
January 1999.
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate of 0.10% p.a. on the total amount
of the Facility, calculated as of the date of
signing on an actual/360 day basis and payable
each semester in arrears.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
<PAGE>
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet
its obligations under the Facility
Agreement.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender offer to be made by the Borrower
shall not be considered by the Lender as a
material adverse change in the financial
condition of the Borrower;
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement.
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower (the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
<PAGE>
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference
to the 1996 Consolidated Financial Statements.
In the event of a breach in the performance of
this requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
Facility. If this breach remains unremedied for 90
days after notice by the Lender of a Potential
Termination Event, the Lender may declare any
undrawn portion of the Facility to be cancelled
(and no further notice of drawing may be issued).
No drawn portion of the Facility to become due and
payable prior to its maturity as a result of such
a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the Borrower'
other unsecured and unsubordinated creditors.
(iii) To notify the Lender in writing of any
Event of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such Encumbrance.
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
<PAGE>
- Created over assets held in trust by
another person, which assets are to be used
by such other person solely for satisfying
the Borrower's, scheduled payment
obligations in respect of principal and/or
interest in respect of any Financial
Indebtedness of the Borrower, (the
"Borrower's Obligations",) in circumstance
where such other person has undertaken
responsibility for the discharge of the
Borrower's Obligations.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness of
the Borrower provided that (A) the
depositary of such proceeds lends an amount
at least equal to the amount of the deposit
to a subsidiary of the Borrower and (B)
that such loan has a maturity date which is
not earlier that the date for repayment of
such deposit.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5 Business
Days after the Lender has given a notice to
the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default. (The breach referred to under
Undertaking (B) above may only give rise to a
right to cancel the undrawn portion of the
Facility and to refuse future drawings).
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period, unless
such default is contested in good faith by
the Borrower by appropriate proceedings.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
<PAGE>
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, changes in circumstances,
including illegality and increased costs.
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent)
under a guarantee, security, indemnity or
other commitment designed to protect any
creditor against loss in respect of any
financial indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
<PAGE>
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(including Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short Term
Borrowings and (ii) the sum of Cash, Short Term
Deposits and Marketable Securities as each of the
foregoing amounts shall be determined from the
items so described in the consolidated balance
sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Governing Law - The Facility Agreement will be governed by French
Jurisdiction law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and December 31, 1997.
Conditions:
The commitment of the Borrower and the Lender are
subject to the realisation of the acquisition of
the shares of Rhone-Poulenc Rorer Inc not currently
held by the Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 4, 1997.
RHONE-POULENC S.A.
/s/ Michel DELRUE
............................
Michel DELRUE
Directeur des Services Financiers
for and on behalf of
* Date: August 4, 1997.
/s/ /s/
........................... .....................
* *
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(6)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 1,000,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A ("RP").
Facility Amount: FRF 1,000,000,000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 50,000,000 and
in integral multiples of FRF 10,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances"). For
interest periods greater than 6 months, interests
will be paid after the end of every period of 6
months and on the latest day of such interest
period.
No more than 5 Advances shall be outstanding at
any one time in a maximum of 4 currencies.
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the undrawn part of the Facility in a minimum
amount of FRF 50,000,000 and in integral multiples
of FRF 10,000,000.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups). In this case:
the Borrower will pay to the Lender a prepayment
commission (the "Prepayment Commission") equal to
the amount by which
(i) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date. The reinvestment interests mean the
interests calculated in accordance with the
investment rate (the "Reinvestment Rate").
The Reinvestment Rate means the PIBOR (or the
LIBOR for Advances in currencies other than French
Francs) quoted one (two in the case of the LIBOR)
Business Days before the Prepayment Date, for the
period from and including the Prepayment Date to
and excluding the Maturity Date.
The discount rate applicable to the calculation of
the present value of interests referred to (i) and
(ii) will be the PIBOR (or the LIBOR for Advances
in currencies other than French Francs) applicable
to the remaining period. If not available,
discount rate will be the rate offered to the
Lender by Reference Banks.
Interest and Margin: The Borrower will pay interest at PIBOR in the
case of French Francs and GBP and at LIBOR for any
other relevant currency, plus 0.18% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a 365 day
basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks,
as published 1 (one) Business Day (PIBOR) or 2
(two) Business Days (LIBOR) prior the date of an
Advance .
LIBOR or PIBOR, as the case may be, will be
replaced by any applicable rate in consequence of
the introduction of the EURO currency after 1
January 1999.
Commitment Fee: The Borrower will pay a commitment fee in French
Francs at a rate p.a. of 0.09% on any undrawn
(reduced and uncancelled) part of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
<PAGE>
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification of
relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii)Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there has
been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet its
obligations under the Facility Agreement.
<PAGE>
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed tender
offer to be made by the Borrower shall not be
considered by the Lender as a material
adverse change in the financial condition of
the Borrower;
(x) No material litigation or other proceedings
current, pending or threatened against the
Borrower at the date of signing which is
material in the context of its operation
taken as a whole (to the best of the
Borrower's knowledge and belief) which could
have a material adverse effect on the
Borrower's capacity to meet its obligations
under the Facility Agreement;
(xi) No stamp, registration or similar tax, (other
than French "Timbres de Dimension") in
connection with the execution, delivery,
performance or enforcement of the Facility
Agreement.
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii)No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available and
in any event within 180 days of financial
year-end, an English copy of which shall be
delivered within 45 days thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's obligations
under the Facility.
(B) Undertakings as to financial condition:
. Ratio of Consolidated Indebtedness to
Consolidated Net Worth (as such terms are
defined below) not to exceed 1.
. Consolidated Net Worth greater to or equal to
FRF 50,000,000,000
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference
to the 1996 Consolidated Financial Statements.
In the event of a breach in the performance of
this requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
Facility. If this breach remains unremedied for 45
days after notice by the Lender of a Potential
Termination Event, the Lender may declare any
undrawn portion of the Facility to be cancelled
(and no further notice of drawing may be issued).
No drawn portion of the Facility to become due and
payable prior to its maturity as a result of such
a breach.
<PAGE>
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the Borrower'
other unsecured and unsubordinated creditors.
(iii) To notify promptly the Lender in writing of
any Event of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
- Created over assets held in trust by
another person, which assets are to be used
by such other person solely for satisfying
the Borrower's, scheduled payment
obligations in respect of principal and/or
interest in respect of any Financial
Indebtedness of the Borrower, (the
"Borrower's Obligations",) in circumstance
where such other person has undertaken
responsibility for the discharge of the
Borrower's Obligations.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness of
the Borrower provided that (A) the
depositary of such proceeds lends an amount
at least equal to the amount of the deposit
to a subsidiary of the Borrower and (B)
that such loan has a maturity date which is
not earlier that the date for repayment of
such deposit.
<PAGE>
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5 Business
Days after the Lender has given a notice to
the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default. (The breach referred to under
Undertaking (B) above may only give rise to a
right to cancel the undrawn portion of the
Facility and to refuse future drawings).
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period, unless
such default is contested in good faith by
the Borrower by appropriate proceedings.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, merger, etc. of the Borrower
except in the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
<PAGE>
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
(K) There occurs any change in the situation of
the Borrower as provided for by Article 60 of
the French law n(DEGREES)84-46 of the 24th
January 1984.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, the following:
(A) Changes in circumstances, including
illegality, market disruption and increased
costs; and
(B) The ability of the Lender to transfer its
rights and obligations in minimum amounts of
FRF 100,000,000 (or equivalent) and integral
multiple of FRF 20,000,000 (or equivalent)
with the prior written consent of the
Borrower (such consent not to be unreasonably
withheld). This ability will be possible only
six (6) months after signing of the Facility
Agreement.
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent)
under a guarantee, security, indemnity or
other commitment designed to protect any
creditor against loss in respect of any
financial indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
<PAGE>
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(including Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short Term
Borrowings and (ii) the sum of Cash, Short Term
Deposits and Marketable Securities as each of the
foregoing amounts shall be determined from the
items so described in the consolidated balance
sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Governing Law - Jurisdiction The Facility Agreement will be governed by French
law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and October 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 1, 1997.
RHONE-POULENC S.A.
/s/ Michel DELRUE
.....................
Michel DELRUE
Directeur des Services Financiers
for and on behalf of Date: August 1, 1997.
*
/s/ /s/
......................... .................
* *
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(7)
[LOGO OF RHONE-POULENC S.A. APPEARS HERE]
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 1,000,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A ("RP").
Facility Amount: FRF 1,000,000,000 or its equivalent in any freely
available and convertible currency as agreed with
the Lender.
Facility Description: A revolving credit facility (the "Facility") which
shall be repaid and may be redrawn throughout its
life. The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-agreed basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 100,000,000 and
in integral multiples of FRF 20,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances").
No more than 5 Advances shall be outstanding at
any one time in a maximum of 4 currencies.
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
Cancellation: Upon a minimum of 10 business days' written notice
the Borrower may cancel without premium or penalty
all or part of the Facility in a minimum amount of
FRF 100,000,000 and in integral multiples of FRF
20,000,000.
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups).
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Interest and Margin: The Borrower will pay interest at PIBOR in the
case of French Francs and at LIBOR for any other
relevant currency, plus 0.18% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a 365 day
basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks,
as published 1 (one) Business Day (PIBOR) or 2
(two) Business Days (LIBOR) prior the date of an
Advance, or any PIBOR (or LIBOR) page
corresponding to the relevant currency.
LIBOR or PIBOR, as the case may be, will be
replaced by the succeeding rate in consequence of
the introduction of the EURO currency after 1
January 1999.
Commitment Fee The Borrower will pay a commitment fee in French
Francs at a rate p.a. of 0.10% on any undrawn
(reduced and uncancelled) part of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken and the Facility
complies with the corporate purpose of the
Borrower;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
<PAGE>
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet
its obligations under the Facility
Agreement.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender offer to be made by the Borrower
shall not be considered by the Lender as a
material adverse change in the financial
condition of the Borrower;
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement.
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default or Potential
Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower (the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
assess compliance with Borrower's
obligations under the Facility.
<PAGE>
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference
to the 1996 Consolidated Financial Statements.
In the event of a breach in the performance of
this requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
Facility. If this breach remains unremedied for 45
days after notice by the Lender of a Potential
Termination Event, the Lender may declare any
undrawn portion of the Facility to be cancelled
(and no further notice of drawing may be issued).
No drawn portion of the Facility to become due and
payable prior to its maturity as a result of such
a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower' other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any
Event of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EU controlled
financial institution which in its normal
lending practice requires such
Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and
not created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
<PAGE>
- Created over assets held in trust by
another person, which assets are to be
used by such other person solely for
satisfying the Borrower's, scheduled
payment obligations in respect of
principal and/or interest in respect of
any Financial Indebtedness of the
Borrower, (the "Borrower's Obligations",)
in circumstance where such other person
has undertaken responsibility for the
discharge of the Borrower's Obligations.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness
of the Borrower provided that (A) the
depositary of such proceeds lends an
amount at least equal to the amount of the
deposit to a subsidiary of the Borrower
and (B) that such loan has a maturity date
which is not earlier that the date for
repayment of such deposit.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or
charges which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5
Business Days after the Lender has given a
notice to the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default. (The breach referred to under
Undertaking (B) above may only give rise to
a right to cancel the undrawn portion of the
Facility and to refuse future drawings).
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period,
unless such default is contested in good
faith by the Borrower by appropriate
proceedings.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable
settlement ("reglement amiable") under
French law.
<PAGE>
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares
in writing that it is unable to pay its
debts as and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
(K) A final judgement or final judgements for
the payments of money are entered by a court
or courts of competent jurisdiction against
the Borrower and a such judgement or
judgements remain unstayed or undischarged
for a period of 30 days, and the aggregate
amount of such judgements exceeds USD
60,000,000 or the equivalent thereof in
other currencies.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, Changes in circumstances,
illegality, market disruption and increased costs.
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent)
under a guarantee, security, indemnity or
other commitment designed to protect any
creditor against loss in respect of any
financial indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
<PAGE>
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(including Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short Term
Borrowings and (ii) the sum of Cash, Short Term
Deposits and Marketable Securities as each of the
foregoing amounts shall be determined from the
items so described in the consolidated balance
sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Potential Event of Default shall mean any event
which ,with the giving of notice or the lapse of
any period of time, in each case under the
Facility Agreement, would constitute an Event of
Default under the Facility Agreement and which is
not capable of being cured without material
adverse effect on the Borrower.
Governing Law - The Facility Agreement will be governed by French
Jurisdiction law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and December 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 5, 1997.
RHONE-POULENC S.A.
/s/ Michel Delrue
-------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of Date: August 5, 1997.
*
/s/ /s/
--------------------- --------------------
* *
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(8)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 750,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A ("RP").
Facility Amount: FRF 750,000,000 or its equivalent in any
Convertible Currency.
Convertible Currency means USD, CHF, DEM, ECU and ESP.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 2 (two) business days' notice for
French Francs and for other currencies, the
Borrower may draw Advances in minimum amounts of
FRF 50,000,000 and in integral multiples of FRF
10,000,000 (or equivalents in other currencies)
for periods of 1, 2, 3 or 6 months or such other
periods of up to 12 months as the Lender may agree
("Advances").
No more than 6 Advances shall be outstanding at
any one time in a maximum of 4 currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the Facility in a minimum amount of FRF
50,000,000 and in integral multiples of FRF
10,000,000.
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups).
Interest and Margin: The Borrower will pay interest at LIBOR for the
relevant currency plus 0,085% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in GBP
which will be calculated on a 365 day basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or, if not
available, by Reference Banks.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate of 0.085% p.a. on the total
amount (reduced and uncancelled) of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification of
relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and
validly existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet
its obligations under the Facility
Agreement.
<PAGE>
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender offer to be made by the Borrower
shall not be considered by the Lender as a
material adverse change in the financial
condition of the Borrower;
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement.
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
(B) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower' other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any Event
of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
<PAGE>
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such
Encumbrance.
- Existing on any asset prior to the
acquisition thereof by the Borrower and
not created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
- Created over assets held in trust by
another person, which assets are to be
used by such other person solely for
satisfying the Borrower's, scheduled
payment obligations in respect of
principal and/or interest in respect of
any Financial Indebtedness of the
Borrower, (the "Borrower's Obligations",)
in circumstance where such other person
has undertaken responsibility for the
discharge of the Borrower's Obligations.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness
of the Borrower provided that (A) the
depositary of such proceeds lends an
amount at least equal to the amount of the
deposit to a subsidiary of the Borrower
and (B) that such loan has a maturity date
which is not earlier that the date for
repayment of such deposit.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or
charges which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5
Business Days after the Lender has given a
notice to the Borrower.
<PAGE>
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default.
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period,
unless such default is contested in good
faith by the Borrower by appropriate
proceedings.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable
settlement ("reglement amiable") under
French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares
in writing that it is unable to pay its
debts as and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
(K) There occurs any change in the situation of
the Borrower as provided for by Article 60
of the French law n(degrees)84-46 of the
24th January 1984.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, the following:
(A) Changes in circumstances, including
illegality and increased costs; and
(B) The ability of the Lender to transfer its
rights and obligations in minimum amounts of
FRF 50,000,000 (or equivalent) and integral
multiple of FRF 20,000,000 (or equivalent)
with the prior written consent of the Borrower
(such consent not to be unreasonably
withheld).
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
<PAGE>
(ii) Any indebtedness (actual or contingent)
under a guarantee, security, indemnity or
other commitment designed to protect any
creditor against loss in respect of any
financial indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
Governing Law-Jurisdiction The Facility Agreement will be governed by French
law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and October 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
The commitment of the Lender is subject to the set
up of a satisfactory documentation.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 1, 1997.
RHONE-POULENC S.A.
/s/ Michel DELRUE
-----------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of Date: August 1, 1997.
*
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
------------------------ ------------------------
* *
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(9)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 500,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A.
Facility Amount: FRF 500.000.000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 50,000,000 and
in integral multiples of FRF 10,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances").
No more than 10 (ten) Advances shall be
outstanding at any one time in a maximum of 5
(five) currencies.
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the Facility in a minimum amount of FRF
50,000,000 and in integral multiples of FRF
10,000,000.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups). In this case:
(A) the Borrower will pay to the Lender a
prepayment commission (the "Prepayment
Commission") equal to the amount by which
(i) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date. The reinvestment interests mean the
interests calculated in accordance with the
investment rate (the "Reinvestment Rate");
or, if such is the case:
(B) the Lender will pay to the Borrower a
Prepayment Commission equal to the amount by which
(i) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date;
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the interest due under the Facility on they
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date;
The Reinvestment Rate means the PIBOR (or the
LIBOR for Advances in currencies other than French
Francs) quoted one (two in the case of the LIBOR)
Business Days before the Prepayment Date, for the
period from and including the Prepayment Date to
and excluding the Maturity Date.
The discount rate applicable to the calculation of
the present value of interests referred to (A) (i)
and (ii) and (B) (i) and (ii) will be the PIBOR
(or the LIBOR for Advances in currencies other
than French Francs) applicable to the remaining
period. If not available, discount rate will be
the rate offered to the Lender by Reference Banks.
Interest and Margin: The Borrower will pay interest at PIBOR in the
case of French Francs and at LIBOR for any other
relevant currency, plus 0.11% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a 365 day
basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks,
as published 1 (one) Business Day (PIBOR) or 2
(two) Business Days (LIBOR) prior the date of an
Advance.
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate of 0.09% p.a. on the total amount
of the Facility, calculated as of the date of
signing on an actual/360 day basis and payable
quarterly in arrears.
<PAGE>
Management Fee: The Borrower will pay a Management Fee in French
Francs to the Lender, of 0.01% flat on the total
Facility Amount and payable within 5 days of the
date of signing of the Facility.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities; and
(D) Legal Opinion provided by the General
Counsel of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and
validly existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
<PAGE>
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet
its obligations under the Facility
Agreement.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender offer to be made by the Borrower
shall not be considered by the Lender as a
material adverse change in the financial
condition of the Borrower;
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement.
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year end, an English copy of
which shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference to
the 1996 Consolidated Financial Statements.
<PAGE>
In the event of a breach in the performance of
this requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
Facility. If this breach remains unremedied for
180 days after notice by the Lender of a Potential
Termination Event, the Lender may declare any
undrawn portion of the Facility to be cancelled,
and no further notice of drawing may be issued. No
drawn portion of the Facility shall become due and
payable prior to its maturity solely as a result
of such a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the Borrower'
other unsecured and unsubordinated creditors.
(iii) To notify the Lender in writing of any Event
of Default;
(iv) Negative Pledge: The Borrower shall not create
or permit to be outstanding any encumbrance in
respect of Financial Indebtedness unless the
Lender give its consent, except encumbrances:
-In connection with the purchase, maintenance
or improvement of an asset, providing the
amount of Financial Indebtedness secured
remains confined to such asset or such
improvements.
-Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such Encumbrance.
-Existing at a time when a corporation is
merged into, consolidated with or acquired by
the Borrower and not created in contemplation
of such event.
-Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such acquisition.
-Arising out of a refinancing of any
indebtedness secured by encumbrance permitted
above.
-Arising after orders of attachment, distraint
or similar legal process arising in
connection with court proceedings so long as
the claims secured are being contested in
good faith.
-Created over assets held in trust by another
person, which assets are to be used by such
other person solely for satisfying the
Borrower's, scheduled payment obligations in
respect of principal and/or interest in
respect of any Financial Indebtedness of the
Borrower, (the "Borrower's Obligations",) in
circumstance where such other person has
undertaken responsibility for the discharge
of the Borrower's Obligations.
<PAGE>
-Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit enhancement
provided by the Borrower in respect of such
assets or receivables) relating to non-
payment in respect of such assets or
receivables are, as a result of such
refinancing, not borne by the Borrower.
-Over a deposit made by the Borrower using the
proceeds of a Financial Indebtedness of the
Borrower provided that (A) the depositary of
such proceeds lends an amount at least equal
to the amount of the deposit to a subsidiary
of the Borrower and (B) that such loan has a
maturity date which is not earlier that the
date for repayment of such deposit .
-Not in one of the above categories to secure
Financial Indebtedness as long as the amount
of Financial Indebtedness secured thereby
does not exceed 7,5% of Consolidated Net
Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate existence
and its rights to carry on its operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment on
the due date under the terms of the Facility,
unless such failure occurs solely for
administrative or technical reasons and the
default is not remedied within 5 Business Days
after the Lender has given a notice to the
Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion of
the Lender, remains unremedied for 20 Business
Days after notice by the Lender of such
default. (The breach referred to under
Undertaking (B) above may only give rise to a
right to cancel the undrawn portion of the
Facility and to refuse future drawings).
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period, unless
such default is contested in good faith by the
Borrower by appropriate proceedings.
(D) Any representation or warranty of the Borrower
is materially incorrect in any respect when
made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the dissolution
where the terms have been approved by the
Lender. This excludes a merger for arm's
length consideration within the Borrower's
group.
<PAGE>
(G) A moratorium or restructuring is made or
declared in respect of all or any indebtedness
of Borrower whereby the assets are submitted
to the control of its creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
(J) It becomes unlawful for the Borrower to comply
with its obligations under the Facility.
Documentation: French language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, the following:
(A) Changes in circumstances, including illegality
and increased costs; and
(B) The ability of the Lender to transfer its
rights and obligations in minimum amounts of
FRF 50,000,000 (or equivalent) and integral
multiple of FRF 10,000,000 (or equivalent) with
the prior written consent of the Borrower (such
consent not to be unreasonably withheld).
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
<PAGE>
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(including Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short Term
Borrowings and (ii) the sum of Cash, Short Term
Deposits and Marketable Securities as each of the
foregoing amounts shall be determined from the
items so described in the consolidated balance
sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Governing Law - The Facility Agreement will be governed by French
Jurisdiction law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and December 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: July 30, 1997
RHONE-POULENC S.A.
/s/ Michael DELRUE
---------------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of
* Date: July 30, 1997
/s/
---------------------------------
*
/s/
---------------------------------
*
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(10)
[LETTERHEAD OF * APPEARS HERE]
Rhone-Poulenc S.A.
25 quai Paul Doumer
92408 Courbevoie Cedex
Attention: Mr. Michel Delrue
Paris La Defense, July 23, 1997.
Dear Sirs,
USD 80 Million Five Year Bilateral Credit Facility (the "Facility")
1 - Commitment terms
- --------------------
You have advised us that Rhone-Poulenc (the "Company") desires to establish the
Facility, the proceeds of which would be used for the acquisition of shares of
Rhone-Poulenc Rorer Inc. * is pleased to inform you of its commitment to provide
the amount of the Facility, subject to the terms and conditions described in
this letter (the "Letter") and the attached Annex I. This letter and Annex I are
referred to collectively as the "Documents".
2 - Conditions Precedent
- ------------------------
This commitment is subject to: (i) the preparation, execution and delivery of
mutually acceptable financing documentation, incorporating, inter alia,
substantially the terms and conditions outlined in Annex I, (ii) in *'s opinion,
the absence of a material adverse change in (A) the business, condition
(financial or otherwise), operations, performance or prospects of the Company
since December 31, 1996 and (B) any change in the loan, financial or capital
market conditions generally that in * opinion would materially affect the
relative economic return on the Facility; (iii) the accuracy and completeness of
all representations that you make to us and all information that you furnish to
us and your compliance with the terms of the Documents.
3 - Commitment Termination
- --------------------------
* commitment set forth in this Letter will terminate on December 31, 1997.
Prior to such date, this Letter may be terminated by * if any event occurs or
information has become available such that, in its judgement, it believes that
any
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
condition set forth in this Letter and Annex I is or may not be satisfied. The
provisions under Paragraphs 5 and 6 below shall survive the expiration or
termination of this Letter.
4. Indemnification
- -----------------
4.1 Whether of not the Facility is consummated, you agree to indemnify and hold
harmless *, each of its affiliates and in each case their directors, officers,
employees, agents, advisers and representatives (each, an "Identified Party")
from and against any and all damages, losses, liabilities, costs and expenses
(including, without limitation, fees and disbursements of counsel), joint or
several, that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or relating to any
investigation, litigation or proceeding (which is commenced against an
Indemnified Party or in which it is involved or the preparation of any defence
with respect thereto (and irrespective of the identity of the person commencing
the relative action), arising out of or in connection with or relating to the
Documents or the financing documentation or the transactions contemplated hereby
or any use made or proposed to be made with the proceeds of the Facility, except
to the extent such damage, loss, liability, cost or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
4.2 You agree that no Indemnified Party shall have any liability whatsoever to
the Company for or in connection with the transactions referred to above, except
to the extent such liability results from such Indemnified Party's gross
negligence or wilful misconduct but save that in those circumstances no
Indemnified Party shall have any liability to the Company for loss (whether
direct or indirect) of profits, business or anticipated savings or for any
indirect or consequential loss.
5. Confidentiality/Information
- ------------------------------
5.1 You agree that the Documents are for your confidential use and benefit only
and may not be relied on by any other person and may only be disclosed by you to
your officers, employees advisors, and then to any third party on a "need to
know" basis.
5.2 * may be providing banking services to parties whose interests may conflict
with yours. Neither * nor any of its affiliates will furnish confidential
information obtained from you to any of its other customers or make available to
you confidential information from any other customer.
5.3 You represent and warrant that (i) all information that has been or will
hereafter by made available to * by you or any of your representatives in
connection with the transactions contemplated hereby is and will be complete and
correct in all material respects in light of the circumstances under which such
statements are made and (ii) all financial projections (if any) provided by your
to * will be prepared in good faith and based upon reasonable assumptions,
although we recognize they can be subject to uncertainties as to their
realisation. You further agree that you will ensure
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
all such information remains correct in all material respects and up to date,
* will not verify, and will not rely on, the accuracy of any information you
provide.
6. Governing Law/Entire Agreement
- ---------------------------------
The Documents shall be governed by, and construed in accordance with, the laws
of England. The parties hereto submit to the non-exclusive jurisdiction of the
English court and waive any defence of inconvenience forum which may be
available. The Documents set forth the entire agreement between the parties with
respect to the matters addressed therein and supersedes all prior
communications, written or oral, with respect thereto and may only be modified
in writing.
Please indicate your acceptance of the provisions hereof by signing the enclosed
copy of this Letter and returning them to * before September 1, 1997, date by
which the commitment offer of * set forth above (if not so accepted prior
thereto) will expire. If you elect to deliver the above documents by facsimile
(which shall be effective upon receipt), please arrange for the executed
originals to follow by next-day courier.
Yours faithfully
*
[SIGNATURE APPEARS HERE]
By: ACCEPTED AND AGREED
Title: Vice President on:
/s/ Michel Delrue
By: Michel Delrue
Title: Director des Service Financiers
July 31, 1997
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
SUMMARY OF LEGAL TERMS AND CONDITIONS
-------------------------------------
Borrower: RHONE-POULENC SA
Facility Amount: USD 80,000,000 or its equivalent in any freely
available and convertible currency.
Facility description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life. The
Facility will be denominated in, but not limited to US
Dollars and committed in, but not limited to US
Dollars, and may be used in other currencies on an as-
available basis.
Facility Purpose: The proceeds of the Facility will be used for the
acquisition of shares of Rhone-Poulenc Rorer Inc. not
currently held by the Borrower. The Facility will be
available for general corporate purpose.
Lender: *
Final Maturity: The Facility will be repaid in full five years from the
date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business day's notice for French
Francs and 2 (two) business days' notice for other
currencies, the Borrower may draw Advances in minimum
amounts of USD 20,000,000 and in integral multiples of
USD 5,000,000 (or equivalents in other currencies) for
periods of 1, 2, 3, or 6 months or such other periods
of up to 12 months as the Lender may agree
("Advances"). No more than 10 Advances shall be
outstanding at any one time in a maximum of five
currencies.
Cancellation: Upon 10 business days' written notice, the Borrower may
cancel without premium or penalty all or part of the
Facility in a minimum amount of USD 20,000,000 and in
integral multiples of USD 5,000,000.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
2
Prepayment: Prepayment of Advances shall be permitted in cases of
illegality and increased costs) including the
requirements for tax gross-ups).
Interest and Margin: The Borrower will pay interest at Libor for the relevant
currency (with the exception of PIBOR in the case of
French Francs), plus a Margin of 20 bp p.a.
Interest will be payable at the end of each interest
period and will be calculated on an actual/360 days
basis (except for Advances in GBP which will be
calculated on 365 day basis).
Interest rates will be set by reference to Telerate page
3750/3740 (LIBOR) or page 20041 (PIBOR) or, if not
available, by Reference Banks.
Commitment fee: 10 bp payable quarterly on the unused portion of the
Facility.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board Resolutions;
(C) Copies of all other consents and authorisations,
together with certification of relevant signing
authorities; and
(D) Legal Opinion provided by the General Counsel of the
Borrower.
Representations and
Warranties: Representations and Warranties to be made in respect of
the Borrower at signing, and (i), (ii), (iii), (iv),
(v), (vii), (xii) and (xiii) inclusive to be repeated at
each Advance date.
(i) the Borrower is duly incorporated and validly
existing;
(ii) the Borrower has power to enter into and perform
pursuant to the Facility Agreement and all necessary
corporate actions relevant thereto have been taken;
(iii) Obligations of the Borrower under the Facility
Agreement will rank pari passu with other unsecured and
unsubordinated obligations;
<PAGE>
3
(iv) No encumbrances exists over present or future
assets or revenues, except as expressly permitted or
disclosed to the Lender (see below);
(v) Obligations under the Facility are legally valid,
binding and enforceable;
(vi) Execution and performance of Facility Agreement
will not be in conflict with or in breach of obligations
in other agreements;
(vii) All necessary consents, licenses, permits, etc.
relevant to the Facility have been obtained and are in
full force and effect;
(viii) Accuracy and fairness of 1996 audited financial
statements (the "1996 Consolidated Financial
Statements") to the best of the Borrower's knowledge and
belief;
(ix) Between the 1996 Consolidated Financial Statements
and the date of signing, there has been no adverse
change in the financial condition of the Borrower which
is material in the context of its operation taken as a
whole which could have a material adverse effect on the
Borrower's capacity to meet its obligations under the
Facility Agreement;
The acquisition of the shares of Rhone-Poulenc Rorer
Inc. not currently held by the Borrower in connection
with a proposed tender offer to be made by the Borrower
shall not be considered by the Lender as a material
adverse change in the financial condition of the
Borrower;
(x) No material litigation or other proceedings at the
date of signing which is material in the context of its
operation taken as a whole (to the best of the
Borrower's knowledge and belief) which could have a
material adverse effect on the Borrower's capacity to
meet its obligations under the Facility Agreement;
(xi) No stamp, registration, or similar tax (other than
French "Timbres de Dimension") in connection with the
execution, delivery, performance or enforcement of the
Facility Agreement;
(xii) No proceedings pending or threatened for winding-
up, dissolution, or similar process;
<PAGE>
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information
(i) Delivery of the Borrower's consolidated financial
statements as soon as available and in any event within
180 days of financial year-end, an English copy of which
shall be delivered within 45 days thereafter.
(ii) Preparation of 1997 audited consolidated financial
statements for Borrower (the "1997 Consolidated
Financial Statements") to reflect any changes that have
occurred in accounting practice since the 1996
Consolidated Statements.
(iii) Provision of such other information as the Lender
may reasonably request in order to access compliance
with Borrower's obligations under the Facility.
(B) Undertakings as to financial condition
Maximum Gearing Ratio: not to exceed 1.
The Borrower shall ensure that this financial covenant
is met as at 31st December of each year throughout the
term of the Facility by reference to the 1996
Consolidated Financial Statements.
(C) Other usual undertakings including
(i) Compliance with all relevant laws, permits, and
licenses material in the context of the Facility.
(ii) Pari passu status vis-a-vis all the Borrower's
other unsecured and unsubordinated creditors.
(iii) To notify the Lender in writing of any Event of
Default.
(iv) Negative pledge: The Borrower shall not create or
permit to be outstanding any encumbrance in respect of
Financial Indebtedness unless the Lender give its
consent, except encumbrances:
. in connection with the purchase, maintenance or
improvement of an asset, providing the amount of
Financial Indebtedness secured remains confined to such
asset or improvement.
<PAGE>
5
. Created to secure Financial Indebtedness owing to
EIB, CREDIT NATIONAL, FONDS INDUSTRIEL DE
MODERNISATION, FONDS DE DEVELOPPEMENT ECONOMIQUE ET
SOCIAL, or any other governmental or EEC controlled
financial institution which in its normal lending
practice requires such Encumbrance.
. Existing at a time when a corporation is merged into,
consolidated with or acquired by the Borrower and not
created in contemplation of such event.
. Existing on any asset prior to the acquisition
thereof by the Borrower and not created in
contemplation of such acquisition.
. Arising out of a refinancing of any indebtedness
secured by encumbrance permitted above.
. Arising after orders of attachment, distraint or
similar legal process arising in connection with
court proceedings so long as the claims secured are
being contested in good faith.
. Created over assets held in trust by another person,
which assets are to be used by such other person
solely for satisfying the Borrower's scheduled
payment obligations in respect of principal and/or
interest in respect of any Financial Indebtedness of
the Borrower (the "Borrower's Obligations"), in
circumstance where such other person has undertaken
responsibility for the discharge of the Borrower's
obligations.
. Over assets or receivables of the Borrower which
encumbrances have been given in connection with the
refinancing of such assets or receivables and where
the risks (except in relation to any credit
enhancement provided by the Borrower in respect of
such assets or receivables) related to non-payment in
respect of such assets or receivables are, as a
result of such refinancing, not borne by the
Borrower.
<PAGE>
6
. Over a deposit made by the Borrower using the
proceeds of a Financial Indebtedness of the
Borrower provided that (A) the depositary of
such proceeds lends an amount at least equal to
the amount of the deposit to a subsidiary of the
Borrower and (B) that such loan has a maturity
date which is not earlier that the date for
repayment of such deposit.
. Not in one of the above categories to secure
Financial Indebtedness as long as the amount of
Financial Indebtedness secured thereby does no
exceed 7.5% of Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its right to carry on its
operations.
Events of Default Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the Facility,
unless such failure occurs solely for
administrative or technical reasons and the
default is not remedied within 5 business days
after the Lender has given a notice to the
Borrower.
(B) Breach of the above Maximum Gearing Ratio
Undertaking.
(C) Breach of other obligations which, where
capable of remedy in the reasonable opinion of
the Lender, remains unremedied for 20 business
days after notice by the Lender of such default.
(D) Any Financial Indebtedness of the Borrower
exceeding FFR 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period, unless
such default is contested in good faith by the
Borrower by appropriate proceedings.
(E) Any representation or warranty of the
Borrower is materially incorrect in any respect
when made or repeated.
(F) Borrower is subject to an amicable
settlement ("reglement amiable") under French
law.
<PAGE>
7
(G) Merger, change of ownership, insolvency,
bankruptcy, liquidation, dissolution, etc. of
the Borrower except in the case of the
liquidation or the dissolution where the terms
have been approved by the Lender. This excludes
a merger for arm's length consideration within
the Borrower's group.
(H) A moratorium or restructuring is made or
declared in respect of all or any indebtedness
or Borrower whereby the assets are submitted to
the control of its creditors.
(I) Appointment of an administrator, receiver in
respect of the Borrower.
(J) Borrower is declared insolvent or declares
in writing that is unable to pay its debts as
and when they are due.
(K) It becomes unlawful for the Borrower to
comply with its obligations under the Facility.
Documentation: English language
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, the following:
(A) Changes in circumstances, including
illegality and increased costs;
(B) Right of set-off, and
(C) The ability of the Lender to transfer its
rights and obligations in minimum amounts of USD
20,000,000 (or equivalent) and integral multiple
of USD 5,000,000 (or equivalent) with the prior
written consent of the Borrower (such consent
not to be unreasonably withheld).
<PAGE>
8
Taxation: All payments of principal, interest and fees will be
made free and clear of all present and future taxes,
levies, duties or other deductions of any nature
whatsoever, levied either now or at any future time.
Key definitions: "Financial Indebtedness" shall mean:
-----------------------------------
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under a
guarantee, security, indemnity or other commitment
designed to protect any creditor against loss in respect
of any financial indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under nay debenture, note, bill
of exchange, bonds, commercial paper, certificate of
deposit or similar instrument on which either of the
Borrower is liable;
(v) Any indebtedness for money owing in respect of
any interest swap, or currency swap, such indebtedness
to be measured on a mark-to-market basis at the relevant
time and to include, vis-a-vis any particular
counterparty, application of the relevant ISDA netting
procedures;
(vi) Any payment obligations under any lease entered
into for the purpose of obtaining or raising finance.
"Material Adverse change" shall mean:
------------------------------------
any event on the assets or financial condition of the RP
Group taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the ability
of the Borrower to perform in a timely manner all or any
of its payment obligations under the Facility Agreement.
"Consolidated Indebtedness" shall mean the difference
-----------------------------------------------------
between:
-------
(i) the sum of Long Term Debt (including
Participating Loans), Bank Overdrafts, Current Portion
of Long Term Debt and Short Term Borrowings and
<PAGE>
9
(ii) the sum of Cash, Short Term Deposits and Marketable
Securities as each of the foregoing amounts shall be
determined from the items so described in the
consolidated balance sheet of RP included in the annual
financial statements most recently delivered by RP to
the Lender.
"Consolidated Net Worth" shall mean the difference
--------------------------------------------------
between:
--------
(i) Total Liabilities and Total Stockholders Equity and
(ii) the sum of Total Current Liabilities, Long Term
Debt (including Participating Loans), other Long term
Liabilities and Mandatorily Redeemable Partnersip
Interest as each of the foregoing amounts shall be
determined from the items so described in the
consolidated balance sheet of RP and its subsidiaries
included in the annual financial statements most
recently delivered by RP to the Lender.
Validity of terms December 31, 1997
and conditions: The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of Rhone-
Poulenc Inc. not currently held by the Borrower.
[SIGNATURE APPEARS HERE]
[SIGNATURE APPEARS HERE]
<PAGE>
Exhibit (B)(11)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 500,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A.
Facility Amount: FRF 500,000,000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 100,000,000 and
in integral multiples of FRF 20,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances").
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
No more than 10 (ten) Advances shall be
outstanding at any one time in a maximum of 5
(five) currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the undrawn part of the Facility in a minimum
amount of FRF 100,000,000 and in integral
multiples of FRF 20,000,000.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups). In this case:
(A) the Borrower will pay to the Lender a
prepayment commission (the "Prepayment
Commission") equal to the amount by which
(i) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date. The reinvestment interests mean the
interests calculated in accordance with the
investment rate (the "Reinvestment Rate");
or, if such is the case:
(B) the Lender will pay to the Borrower a
Prepayment Commission equal to the amount by which
(i) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date;
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date;
The Reinvestment Rate means the PIBOR (or the
LIBOR for Advances in currencies other than French
Francs) quoted one (two in the case of the LIBOR)
Business Days before the Prepayment Date, for the
period from and including the Prepayment Date to
and excluding the Maturity Date.
The discount rate applicable to the calculation of
the present value of interests referred to (A) (i)
and (ii) and (B) (i) and (ii) will be the PIBOR
(or the LIBOR for Advances in currencies other
than French Francs) applicable to the remaining
period. If not available, discount rate will be
the rate offered to the Lender by Reference Banks.
Interest and Margin: The Borrower will pay interest at PIBOR in the
case of French Francs and at LIBOR for any other
relevant currency, plus 0.10% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a 365 day
basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks,
as published 1 (one) Business Day (PIBOR) or 2
(two) Business Days (LIBOR) prior the date of an
Advance . LIBOR or PIBOR, as the case may be, will
be replaced by any applicable rate in consequence
of the introduction of the EURO currency after 1
January 1999.
<PAGE>
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate p.a. of 0.10% on the total
amount (reduced and uncancelled) of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
Conditions Precedent: Shall comprise the following :
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities; and
(D) Legal Opinion provided by the General
Counsel of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and
validly existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no Material Adverse Change.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender offer to be made by the Borrower
shall not be considered by the Lender as a
Material Adverse Change;
<PAGE>
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference to
the most recent Consolidated Financial Statements
of the Borrower.
In the event of a breach in the performance of this
requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
facility. If this breach remains unremedied for 90
days after notice by the Lender of a Potential
Termination Event, the Lender may (i) declare any
undrawn portion of the Facility to be cancelled
(and no further notice of drawing may be issued)
and/or (ii) any drawn portion of the Facility to
become due and payable prior to its maturity as a
result of such a breach.
(C) Other usual undertakings uncluding:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower' other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any Event
of Default;
<PAGE>
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such
Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and
not created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
- Created over assets held in trust by
another person, which assets are to be
used by such other person solely for
satisfying the Borrower's, scheduled
payment obligations in respect of
principal and/or interest in respect of
any Financial Indebtedness of the
Borrower, (the "Borrower's Obligations",)
in circumstance where such other person
has undertaken responsibility for the
discharge of the Borrower's Obligations.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness
of the Borrower provided that (A) the
depositary of such proceeds lends an
amount at least equal to the amount of the
deposit to a subsidiary of the Borrower
and (B) that such loan has a maturity date
which is not earlier that the date for
repayment of such deposit.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
<PAGE>
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or
charges which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5
Business Days after the Lender has given a
notice to the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default. (The breach referred to under
Undertaking (B) above may give rise to a
right (x) to cancel the undrawn portion of
the Facility and to refuse future drawings
and/or (y) to declare any drawn portion of
the Facility to become due and payable prior
to its maturity).
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable
settlement ("reglement amiable") under
French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares
in writing that it is unable to pay its
debts as and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, changes in circumstances,
including illegality, market disruption and
increased costs
<PAGE>
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Transferability The Lender will be able to transfer its rights and
obligations under the Facility in minimum amounts
of FRF 50,000,000 (or equivalent) and integral
multiple of FRF 20,000,000 (or equivalent) with
the prior written consent of the Borrower (such
consent not to be unreasonably withheld), to the
extent that such transfer takes place after the
expiration of a 6 months' period after signing of
the Facility Agreement.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
Consolidated Indebtedness shall mean the
difference between (i) the sum of Long Term Debt
(including Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short Term
Borrowings and (ii) the sum of Cash, Short Term
Deposits and Marketable Securities as each of the
foregoing amounts shall be determined from the
items so described in the consolidated balance
sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Governing Law - The Facility Agreement will be governed by English
Jurisdiction law. Any dispute arising from this Agreement shall
be submitted to the Courts of England.
<PAGE>
Validity of Terms and 31 October, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 5, 1997
RHONE-POULENC S.A.: /s/ Michel DELRUE
---------------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of Date: August 5, 1997
*
/s/
----------------------------------
*
/s/
----------------------------------
*
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(12)
[LOGO OF RHONE-POULENC
S.A. APPEARS HERE]
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 1,000,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A ("RP").
Facility Amount: FRF 1,000,000,000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but not
limited to, French Francs, or their equivalent in
US Dollars, and may be used in other currencies on
an as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business days' notice for
French Francs and 2 (two) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 100,000,000 and
in integral multiples of FRF 20,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances").
No more than 6 Advances shall be outstanding at
any one time in a maximum of 4 currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the Facility in a minimum amount of FRF
100,000,000 and in integral multiples of FRF
20,000,000.
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups). In this case:
(A) the Borrower will pay to the Lender a
prepayment commission (the "Prepayment
Commission") equal to the amount by which
(i) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date. The reinvestment interests mean the
interests calculated in accordance with the
investment rate (the "Reinvestment Rate");
or, if such is the case:
(B) the Lender will pay to the Borrower a
Prepayment Commission equal to the amount by which
(i) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date;
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date;
The Reinvestment Rate means the PIBOR (or the
LIBOR for Advances in currencies other than French
Francs) quoted one (two in the case of the LIBOR)
Business Days before the Prepayment Date, for the
period from and including the Prepayment Date to
and excluding the Maturity Date.
The discount rate applicable to the calculation of
the present value of interests referred to (A) (i)
and (ii) and (B) (i) and (ii) will be the PIBOR
(or the LIBOR for Advances in currencies other
than French Francs) applicable to the remaining
period. If not available, discount rate will be
set by Reference Banks.
Interest and Margin: The Borrower will pay interest at LIBOR for the
relevant currency (with the exception of PIBOR in
the case of French Francs), plus 0,10% (Margin)
p.a.
LIBOR or PIBOR, as the case may be, will be
replaced by any applicable rate in consequence of
the introduction of the EURO currency after 1
January 1999.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in GBP
which will be calculated on a 365 day basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks.
<PAGE>
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate of 0.10% p.a. on the total amount
of the Facility, calculated as of the date of
signing on an actual/360 day basis and payable
quarterly in arrears.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification of
relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and
validly existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet
its obligations under the Facility
Agreement.
<PAGE>
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender offer to be made by the Borrower
shall not be considered by the Lender as a
material adverse change in the financial
condition of the Borrower;
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement.
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference
to the 1996 Consolidated Financial Statements.
In the event of a breach in the performance of
this requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
Facility. If this breach remains unremedied for
90 days after notice by the Lender of a Potential
Termination Event, the Lender may (i) declare any
undrawn portion of the Facility to be cancelled
(and no further notice of drawing may be issued)
and/or (ii) any drawn portion of the Facility to
become due and payable prior to its maturity as a
result of such a breach.
In this case the Prepayment Commission will be
paid by the Borrower, or the Lender, in
accordance with Prepayment provisions.
<PAGE>
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower' other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any Event
of Default;
(iv) Negative Pledge : The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such
Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and
not created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
- Created over assets held in trust by
another person, which assets are to be
used by such other person solely for
satisfying the Borrower's, scheduled
payment obligations in respect of
principal and/or interest in respect of
any Financial Indebtedness of the
Borrower, (the "Borrower's Obligations",)
in circumstance where such other person
has undertaken responsibility for the
discharge of the Borrower's Obligations.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness
of the Borrower provided that (A) the
depositary of such proceeds lends an
amount at least equal to the amount of the
deposit to a subsidiary of the Borrower
and (B) that such loan has a maturity date
which is not earlier that the date for
repayment of such deposit.
<PAGE>
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or
charges which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5
Business Days after the Lender has given a
notice to the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default. (The breach referred to under
Undertaking (B) above may only give rise to
a right to cancel the undrawn portion of the
Facility and to refuse future drawings).
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period,
unless such default is contested in good
faith by the Borrower by appropriate
proceedings.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable
settlement ("reglement amiable") under
French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares
in writing that it is unable to pay its
debts as and when they are due.
<PAGE>
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, the following:
(A) Changes in circumstances, including illegality
and increased costs; and
(B) The ability of the Lender to transfer its
rights and obligations in minimum amounts of
FRF 100,000,000 (or equivalent) and integral
multiple of FRF 20,000,000 (or equivalent)
with the prior written consent of the Borrower
(such consent not to be unreasonably
withheld).
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on the
assets or financial condition of the RP Group taken
as a whole having a material adverse effect in the
reasonable opinion of the Lender on the ability of
the Borrower to perform in a timely manner all or
any of its payment obligations under the Facility
Agreement.
Consolidated Indebtedness shall mean the difference
between (i) the sum of Long Term Debt (including
Participating Loans), Bank Overdrafts, Current
Portion of Long Term Debt and Short Term Borrowings
and (ii) the sum of Cash, Short Term Deposits and
Marketable Securities as each of the foregoing
amounts shall be determined from the items so
described in the consolidated balance sheet of RP
included in the annual financial statements most
recently delivered by RP to the Lender.
<PAGE>
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
Governing Law- The Facility Agreement will be governed by French
Jurisdiction law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and October 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 4, 1997.
RHONE-POULENC S.A.
/s/ Michel DELRUE
------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of
* Date: August 4, 1997.
/s/ /s/
------------------------ ------------------------
* *
- -------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(13)
[LOGO OF RHONE-
POULENC S.A.
APPEARS HERE]
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 500,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A.
Facility Amount: FRF 500,000,000 or its equivalent in any freely
available and convertible currency.
Facility Description: A revolving credit facility ("the Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, French Francs and committed in, but
not limited to, French Francs, or their equivalent
in US Dollars, and may be used in other currencies
on an as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years
from the date of signing of the Facility Agreement.
Availability: Subject to 2 (two) business days' notice for
French Francs and 3 (three) business days' notice
for other currencies, the Borrower may draw
Advances in minimum amounts of FRF 50,000,000 and
in integral multiples of FRF 10,000,000 (or
equivalents in other currencies) for periods of 1,
2, 3 or 6 months or such other periods of up to 12
months as the Lender may agree ("Advances").
No more than 10 (ten) Advances shall be
outstanding at any one time in a maximum of 5
(five) currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the Facility in a minimum amount of FRF
50,000,000 and in integral multiples of FRF
10,000,000.
- -------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirement for tax gross-ups). In this case:
(A) the Borrower will pay to the Lender a
prepayment commission (the "Prepayment
Commission") equal to the amount by which
(i) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date. The reinvestment interests mean the
interests calculated in accordance with the
investment rate (the "Reinvestment Rate");
or, if such is the case:
(B) the Lender will pay to the Borrower a
Prepayment Commission equal to the amount by which
(i) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including
the Prepayment Date to and excluding the Maturity
Date;
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the interest due under the Facility on the
principal repaid amount for the period from and
including the Prepayment Date to and excluding the
Maturity Date;
The Reinvestment Rate means the PIBOR (or the
LIBOR for Advances in currencies other than French
Francs) quoted one (two in the case of the LIBOR)
Business Days before the Prepayment Date, for the
period from and including the Prepayment Date to
and excluding the Maturity Date.
The discount rate applicable to the calculation of
the present value of interests referred to (A) (i)
and (ii) and (B) (i) and (ii) will be the PIBOR
(or the LIBOR for Advances in currencies other
than French Francs) applicable to the remaining
period. If not available, discount rate will be
the rate offered to the Lender by Reference Banks.
Interest and Margin: The Borrower will pay interest at PIBOR in the
case of French Francs and at LIBOR for any other
relevant currency, plus 0.10% (Margin) p.a.
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a 365 day
basis).
Interest rates will be set by reference to
Telerate page 3750/3740 (LIBOR) or page 20041
(PIBOR) or, if not available, by Reference Banks,
as published 1 (one) Business Day (PIBOR) or 2
(two) Business Days (LIBOR) prior the date of an
Advance.
Facility Fee: The Borrower will pay a facility fee in French
Francs at a rate of 0.10% p.a. on the total amount
of the Facility, calculated as of the date of
signing on an actual/360 day basis and payable
each quarter in arrears.
<PAGE>
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification of
relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii)
inclusive to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu with
other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii)Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there has
been no adverse change in the financial
condition of the Borrower which is material
in the context of its operation taken as a
whole which could have a material adverse
effect on the Borrower's capacity to meet its
obligations under the Facility Agreement.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed tender
offer to be made by the Borrower shall not be
considered by the Lender as a material
adverse change in the financial condition of
the Borrower;
<PAGE>
(x) No material litigation or other proceedings
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement;
(xi) No stamp, registration or similar tax,
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement.
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower' consolidated
financial statements as soon as available
and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days
thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
(B) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower' other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any Event
of Default;
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or EEC controlled
financial institution which in its normal
lending practice requires such
Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
<PAGE>
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
- Created over assets held in trust by
another person, which assets are to be used
by such other person solely for satisfying
the Borrower's, scheduled payment
obligations in respect of principal and/or
interest in respect of any Financial
Indebtedness of the Borrower, (the
"Borrower's Obligations",) in circumstance
where such other person has undertaken
responsibility for the discharge of the
Borrower's Obligations.
- Over assets or receivables of the Borrower
which encumbrances have been given in
connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness of
the Borrower provided that (A) the
depositary of such proceeds lends an amount
at least equal to the amount of the deposit
to a subsidiary of the Borrower and (B)
that such loan has a maturity date which is
not earlier that the date for repayment of
such deposit.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise the following:
(A) failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5 Business
Days after the Lender has given a notice to
the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default.
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period.
<PAGE>
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, the following:
(A) Changes in circumstances, including illegality
and increased costs; and
(B) The ability of the Lender to transfer its
rights and obligations in minimum amounts of
FRF 50,000,000 (or equivalent) and integral
multiple of FRF 10,000,000 (or equivalent)
with the prior written consent of the Borrower
(such consent not to be unreasonably
withheld).
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other deductions of any
nature whatsoever, levied either now or at any
future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
<PAGE>
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on
the assets or financial condition of the RP Group
taken as a whole having a material adverse effect
in the reasonable opinion of the Lender on the
ability of the Borrower to perform in a timely
manner all or any of its payment obligations under
the Facility Agreement.
Governing Law - The Facility Agreement will be governed by French
Jurisdiction law. Any dispute arising from this Agreement shall
be submitted to the Courts of Paris.
Validity of Terms and October 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of Date: August 4, 1997
RHONE-POULENC S.A.: [SIGNATURE APPEARS HERE]
------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of
*
*
Date: August 4, 1997
[SIGNATURE APPEARS HERE]
------------------------ -----------------------
- -------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997
<PAGE>
Exhibit (B)(14)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
USD 150,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A.
Facility Amount: USD 150,000,000,000 or its equivalent in any freely
available and convertible European currency.
Facility Description: A revolving credit facility (the "Facility") which
shall be repaid and redrawn throughout its life.
The Facility will be denominated in, but not
limited to, U.S. Dollars and committed in, but not
limited to, U.S. Dollars, or their equivalent in
any freely available and convertible European
currency, and may be used in other currencies on an
as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years from
the date of signing of the Facility Agreement.
Availability: Subject to 2 (two) business days' notice for French
Francs and 2 (two) business days' notice for other
currencies, the Borrower may draw Advances in
minimum amounts of USD 20,000,000 and in integral
multiples of USD 5,000,000 (or equivalents in other
currencies) for periods of 1, 2, 3 or 6 months or
such other periods of up to 12 months as the Lender
may agree ("Advances").
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m.
(Paris time) for French francs and by not later
than 10.00 a.m. (London time) for other currencies.
No more than 10 (ten) Advances shall be outstanding
at any one time in a maximum of 5 (five)
currencies.
_______
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
2
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part
of the undrawn part of the Facility in a minimum
amount of USD 20,000,000 and in integral multiples
of USD 5,000,000.
Prepayment: Prepayment of Advances shall be permitted in cases
of illegality and increased cost (including the
requirements for tax gross-ups).
In this case the Borrower will pay to the Lender a
prepayment commission (the "Prepayment Commission")
equal to the amount by which
(i) the present value (on the Prepayment Date) of
the interest due (including Margin) under the
Facility on the principal repaid amount for the
period from and including the Prepayment Date to
and excluding the Maturity Date
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able
to obtain on an amount equal to the principal
repaid amount for the period from and including the
Prepayment Date to and excluding the Maturity Date.
The reinvestment interests mean the interests
calculated in accordance with the investment rate
(the "Reinvestment Rate").
The Reinvestment Rate means the PIBOR (or the LIBOR
for Advances in currencies other than French
Francs) quoted one (two in the case of the LIBOR)
Business Days before the Prepayment Date, for the
period from and including the Prepayment Date to
and excluding the Maturity Date.
The discount rate applicable to the calculation of
the present value of interests referred to (i) and
(ii) will be the PIBOR (or the LIBOR for Advances
in currencies other than French Francs) applicable
to the remaining period. If not available, discount
rate will be the rate offered to the Lender by
Reference Banks (according to mechanism to be
agreed with the Lender).
Interest and Margin: The Borrower will pay interest at PIBOR in the case
of French Francs and at LIBOR for any other
relevant currency, plus 0.20% (Margin) p.a.
<PAGE>
3
Interest will be payable at the end of each
interest period and will be calculated on an
actual/360 day basis (except for Advances in
currency where the market calculates on a
365 day basis).
For interest periods greater than 6 months,
interest will be paid after the end of every
period of 6 months and on the latest day of
such interest period.
Interest rates will set by reference to
Telerate page 3750/3740 (LIBOR) or page
20041 (PIBOR) or, if not available, by
Reference Banks (according to mechanism to
be agreed with the Lender), as published 1
(one) Business Day (PIBOR) or 2 (two)
Business Days (LIBOR) prior the date of an
Advance. LIBOR or PIBOR, as the case may be,
will be replaced by any applicable rate in
consequence of the introduction of the EURO
currency after 1 January 1999.
Commitment Fee: The Borrower will pay a commitment fee in US
Dollars at a rate p.a. of 0.10% on the undrawn
(reduced and uncancelled) part of the Facility,
calculated as of the date of signing on an
actual/360 day basis and payable quarterly in
arrears.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities; and
(D) Legal Opinion from the General Counsel of
the Borrower together with a legal opinion
as to English law from UK Counsel to the
Lender.
Representations and Representations and warranties to be made in respect of
Warranties: the Borrower at signing, and (i), (ii), (iii), (iv), (v),
(vii), (xii) and (xiii) inclusive to be repeated at each
Advance date.
(i) The Borrower is duly incorporated and
validly existing;
<PAGE>
4
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions
relevant thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank pari passu
with other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or
future assets or revenues, except as
expressly permitted or disclosed to the
Lender (see below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or
in breach of obligations in other
agreements (or with any law, regulation or
judicial official order);
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996
Consolidated Financial Statements") to the
best of the Borrower's knowledge and
belief;
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there
has been no Material Adverse Change.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed
tender Offer to be made by the Borrower
shall not be considered by the Lender as a
Material Adverse Change;
(x) No material litigation or other proceeding
at the date of signing which is material in
the context of its operation taken as a
whole (to the best of the Borrower's
knowledge and belief) which could have a
material adverse effect on
<PAGE>
5
the Borrower's capacity to meet its
obligations under the Facility Agreement;
(xi) No stamp, registration or similar tax
(other than French "Timbres de Dimension")
in connection with the execution, delivery,
performance or enforcement of the Facility
Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower's annual audited
consolidated financial statements as soon
as available and in any event within 120
days of financial year-end, and, in any
event within 45 days after the end of each
financial year, delivery of a certificate
certifying compliance with the financial
covenant referred to in paragraph (B)
below.
Delivery of the Borrower's unaudited
semiannual consolidated financial
statements as soon as available and in any
event within 90 days of the first half of
each of RP's financial year, and, in any
event within 45 days after the end of each
financial year, delivery of a certificate
certifying compliance with the financial
covenant referred to in paragraph (B)
below.
(ii) Preparation of audited consolidated
financial statements for Borrower (the
"Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements, and compliance of
Consolidated Financial Statements with US
GAAP.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's
obligations under the Facility.
<PAGE>
6
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to
Consolidated Net Worth (as such terms are
defined below) not to exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December and 30 June of
each year throughout the term of the Facility by
reference to its Consolidated Financial Statements.
In the event of a breach in the performance of this
requirement, the Lender shall be entitled to
declare a Potential Termination Event under the
Facility. If this breach remains unremedied for 90
days after notice by the Lender of a Potential
Termination Event, the Lender may declare (i) any
undrawn portion of the Facility to be cancelled
(and no further notice of drawing may be issued)
and/or (ii) any drawn portion of the Short Term
Facility to become due and payable prior to its
maturity as a result of such a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower's other unsecured and
unsubordinated creditors.
(iii) To notify the Lender in writing of any
Event of Default.
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvements.
- Created to secure Financial Indebtedness
owing to EIB, CREDIT NATIONAL, FONDS
INDUSTRIEL DE MODERNISATION, FONDS DE
DEVELOPPEMENT ECONOMIQUE ET SOCIAL or any
other governmental or
<PAGE>
7
EEC controlled financial institution which
in its normal lending practice requires
such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or acquired
by the Borrower and not created in
contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and not
created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceedings so
long as the claims secured are being
contested in good faith.
- Created over assets held in trust by
another person, which assets are to be used
by such other person solely for satisfying
the Borrower's scheduled payment
obligations in respect of principal and/or
interest in respect of any Financial
Indebtedness of the Borrower (the
"Borrower's Obligations"), in circumstance
where such other person has undertaken
responsibility for the discharge of the
Borrower's Obligations.
- Over assets or receivables of the
Borrower which encumbrances have been given
in connection with the refinancing of such
assets or receivables and where the risks
(except in relation to any credit
enhancement provided by the Borrower in
respect of such assets or receivables)
relating to non-payment in respect of such
assets or receivables are, as a result of
such refinancing, not borne by the
Borrower.
- Over a deposit made by the Borrower using
the proceeds of a Financial Indebtedness of
the Borrower provided (A) that the
depositary of such proceeds lends an amount
at least equal to the amount of the deposit
to a subsidiary of the Borrower and (B)
that such loan has a
<PAGE>
8
maturity date which is not earlier than the
date for repayment of such deposit.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or
charges which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
(vii) Borrower does not modify its activities
so as to change significantly the nature or
scope of its business other than pursuant
to its strategy as publicly announced on
26th June 1997.
(viii) Borrower to remain the principal Borrowing
Vehicle of the RP Group.
Events of Default: Events of Default shall comprise the following:
(A) Failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5
Business Days after the Lender has given
notice to the Borrower.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 20
Business Days after notice by the Lender of
such default. (The breach referred to under
Undertaking (B) above may give rise to a
right (x) to cancel the undrawn portion of
the Facility and to refuse future drawings
and/or (y) to declare any drawn portion of
the Facility to become due and payable
prior to its maturity.)
(C) Any Financial Indebtedness of the Borrower
(or any Subsidiary as defined below)
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
<PAGE>
9
maturity by way of a declared default after
expiry of any applicable grace period.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable
settlement ("reglement amiable") under
French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration
within the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver
in respect of the Borrower.
(I) Borrower is declared insolvent or declares
in writing that it is unable to pay its
debts as and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
(K) Material qualification of Consolidated
Financial Statements.
(L) Change of ownership of the Borrower.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type
including, inter alia, changes in circumstances,
including illegality, market disruption and
increased costs.
Taxation: All payments of principal, interest and fees will
be made free and clear of all present and future
taxes, levies, duties or other
<PAGE>
10
deductions of any nature whatsoever, levied
either now or at any future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent)
under a guarantee, security, indemnity or
other commitment designed to protect any
creditor against loss in respect of any
financial indebtedness of any third party;
(iii) Any indebtedness under any acceptance
credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar
instrument on which either of the Borrower
is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap,
such indebtedness to be measured on a mark-
to-market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
Consolidated Indebtedness shall mean the difference
between (i) the sum of Long Term Debt (including
Participating Loans), Bank Overdrafts, Current
Portion of Long Term Debt and Short Term Borrowings
and (ii) the sum of Cash, Short Term Deposits and
Marketable Securities as each of the foregoing
amounts shall be determined from the items so
described in the consolidated balance sheet of RP
included in the annual financial statements most
recently delivered by RP to the Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt (including
Participating Loans), Other Long Term Liabilities
and Mandatorily Redeemable Partnership Interest as
each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included
in the annual financial statements most recently
delivered by RP to the Lender.
<PAGE>
11
Subsidiary means any company or other entity
controlled by the Borrower under the terms
of Article 355-1 of the French law no 66-537
of the 24th July 1966.
Transferability: The Lender shall have the right at any time to
assign its rights and liabilities under the
Facility Agreement (in minimum amounts of USD
20,000,000 and in integral multiples of USD
5,000,000 or equivalents in other currencies) to
any other prime bank with the prior written consent
of the Borrower, such consent not to be reasonably
withheld by the Borrower and for such purpose the
Lender shall give one month's prior notice of its
intention to the Borrower).
The effect of any assignment shall not be to
require the Borrower to bear any obligation
to gross up for additional taxes or to incur
liability for increased costs.
Expenses: The Borrower will pay to the Lender all reasonable
fees and expenses including legal fees (subject to
agreed caps), incurred in connection with the
preparation, negotiation and execution of the
Facility Agreement and with the enforcement of its
rights under the Facility Agreement upon
presentation of duly documented evidence.
Governing Law -
Jurisdiction: The Facility Agreement will be governed by English
law. Any dispute arising from this Agreement shall
be submitted to the Courts of England.
Validity of Terms and December 31, 1997.
Conditions:
The commitment of the Borrower is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower.
<PAGE>
12
Please signify your acceptance of the terms
and conditions set out above by signing and
returning a copy of this Summary of Terms
and Conditions.
for and on behalf of
RHONE-POLENC S.A.: Date: August 7, 1997
/s/
------------------------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of
*: Date: August 7, 1997
/s/
----------------------------------------
/s/
----------------------------------------
_______
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
Exhibit (B)(15)
RHONE-POULENC S.A.
(the "Borrower")
*
(the "Lender")
FRF 500,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
Borrower: RHONE-POULENC S.A. ("RP")
Facility Amount: FRF 500.000.000 or its equivalent in US dollars or
any freely available and convertible European
currency.
Facility Description: A revolving credit facility (the "Facility") which
shall be repaid and redrawn throughout its life. The
Facility will be denominated in, but not limited to,
French Francs and committed in, but not limited to,
French Francs, or their equivalent in US Dollars, and
may be used in other major European currencies on an
as-available basis.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years from
the date of signing of the Facility Agreement (the
"Final Maturity Date").
Availability: Subject to 1 (one) business day's notice for French
Francs and 2 (two) business days' notice for other
currencies, the Borrower may draw Advances in minimum
amounts of FRF 50,000,000 and in integral multiples
of FRF 10,000,000 (or equivalents in other
currencies) for periods of 1, 2, 3 or 6 months or
such other periods of up to 12 months as the Lender
may agree ("Advances"), provided, however, that no
such period may exceed the Final Maturity Date.
Any drawing notice shall be received by the Lender
from the Borrower by not later than 10.00 a.m. (Paris
time) for French francs and by not later than 10.00
a.m. (London time) for other currencies.
______
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
2
No more than 10 (ten) Advances shall be outstanding
at any one time in a maximum of 5 (five) currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part of
the undrawn part of the Facility in a minimum amount
of FRF 50,000,000 and in integral multiples of FRF
10,000,000.
Prepayment: Prepayment of Advances shall be permitted in cases of
illegality and increased cost (including the
requirement for tax gross-ups).
In this case the Borrower will pay to the Lender a
prepayment commission (the "Prepayment Commission")
equal to the amount by which
(i) the present value (on the Prepayment Date) of the
interest due under the Facility on the principal
repaid amount for the period from and including the
Prepayment Date to and excluding the Maturity Date
exceeds
-------
(ii) the present value (on the Prepayment Date) of
the reinvestment interest that the Lender is able to
obtain on an amount equal to the principal repaid
amount for the period from and including the
Prepayment Date to and excluding the Maturity Date.
The reinvestment interests mean the interests
calculated in accordance with the investment rate
(the "Reinvestment Rate").
The Reinvestment Rate means the PIBOR (or the LIBOR
for Advances in currencies other than French Francs)
quoted one (two in the case of the LIBOR) Business
Days before the Prepayment Date, for the period from
and including the Prepayment Date to and excluding
the Maturity Date.
The discount rate applicable to the calculation of
the present value of interests referred to (i) and
(ii) will be the PIBOR (or the LIBOR for Advances in
currencies other than French Francs) applicable to
the remaining period. If not available, discount rate
will be the rate offered to the Lender by Reference
Banks.
<PAGE>
3
Interest and Margin: The Borrower will pay interest at PIBOR in the case
of French Francs and at LIBOR for any other relevant
currency, plus 0.20% (Margin) p.a.
Interest will be payable at the end of each interest
period and will be calculated on an actual/360 day
basis (except for Advances in currency where the
market calculates on a 365 day basis).
Interest rates will be set by reference to Telerate
page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if
not available, by Reference Banks, as published (or
obtained from the Reference Banks) 1 (one) Business
Day (PIBOR) or 2 (two) Business Days (LIBOR) prior to
the date of an Advance. LIBOR or PIBOR, as the case
may be, will be replaced by any applicable rate in
consequence of the introduction of the EURO currency
after 1 January 1999.
Default rate: If the Borrower fails to pay any sums due by it under
the Facility, the Borrower shall, from the date when
such sum fell due, pay interest on the unpaid sum up
to the date upon which such sum is actually received
by the Lender at the rate per annum which is the
aggregate of (i) one per cent (1%) and (ii) the rate
which would have been applied to the relevant Advance
outstanding under the Facility at the time of the
default.
Commitment Fee: The Borrower will pay a commitment fee in French
Francs at a rate of 0.10% p.a. on any undrawn
(reduced and uncancelled) part of the Facility,
calculated as of the date of signing on an actual/360
day basis and payable quarterly in arrears.
Conditions Precedent: Shall comprise the following on signing:
(A) Constitutional documents of the Borrower;
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities;
(D) Legal Opinion provided by the General Counsel
of the Borrower; and
<PAGE>
4
(E) No Event of Default or Material Adverse Change
at the date of signing.
Representations and Representations and warranties to be made in
Warranties: respect of the Borrower at signing, and (i), (ii),
(iii), (iv), (v), (vii), (xii) and (xiii) inclusive
to be repeated at each Advance date.
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement and
all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the Facility
Agreement will rank pari passu with other
unsecured and unsubordinated obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed on the date of the
signature of the Facility Agreement to the
Lender (see below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of 1996 audited
financial statements (the "1996 Consolidated
Financial Statements");
(ix) Between the 1996 Consolidated Financial
Statements and the date of signing, there has
been no adverse change in the consolidated
financial condition of the Borrower which is
material in the context of its operation taken
as a whole which could have a material adverse
effect on the
<PAGE>
5
Borrower's capacity to meet its obligations
under the Facility Agreement.
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed tender
Offer to be made by the Borrower shall not be
considered by the Lender as a material
adverse change in the financial condition of
the Borrower;
(x) No material litigation or other proceeding at
the date of signing which is material in the
context of its operation taken as a whole
which could have a material adverse effect on
the Borrower's capacity to meet its
obligations under the Facility Agreement;
(xi) No stamp, registration or similar tax (other
than French "Timbres de Dimension") in
connection with the execution, delivery,
performance or enforcement of the Facility
Agreement;
(xii) No proceedings pending of threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default or Potential
Event of Default.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower's audited
consolidated financial statements as soon as
available and in any event within 180 days of
financial year-end, an English copy of which
shall be delivered within 45 days thereafter.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower (the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's obligations
under the Facility.
<PAGE>
6
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference to
the audited Consolidated Financial Statements (the
"Consolidated Financial Statements") furnished
pursuant to (A)(i) "Undertakings".
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower's other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any Event
of Default or Potential Event of Default.
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender give its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined
to such asset or such improvements.
- Created to secure Financial
Indebtedness owing to EIB, CREDIT
NATIONAL, FONDS INDUSTRIEL DE
MODERNISATION, FONDS DE DEVELOPPEMENT
ECONOMIQUE ET SOCIAL or any other
governmental or EEC controlled
financial institution which in its
normal lending practice requires such
Encumbrance.
<PAGE>
7
- Existing at a time when a corporation
is merged into, consolidated with or
acquired by the Borrower and not
created in contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and
not created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process
arising in connection with court
proceedings so long as the claims
secured are being contested in good
faith.
- Created over assets held in trust by
another person, which assets are to be
used by such other person solely for
satisfying the Borrower's scheduled
payment obligations in respect of
principal and/or interest in respect of
any Financial Indebtedness of the
Borrower (the "Borrower's
Obligations"), in circumstance where
such other person has undertaken
responsibility for the discharge of the
Borrower's Obligations.
- Over assets or receivables of the
Borrower which encumbrances have been
given in connection with the
refinancing of such assets or
receivables and where the risks (except
in relation to any credit enhancement
provided by the Borrower in respect of
such assets or receivables) relating to
non-payment in respect of such assets
or receivables are, as of such
refinancing, not borne by the Borrower.
- Over a deposit made by the Borrower
using the proceeds of a Financial
Indebtedness of the Borrower provided
(A) that the depositary of such
proceeds lends an amount at least equal
to the amount of the deposit to a
subsidiary of the Borrower and (B) that
such loan has a maturity date
<PAGE>
8
which is not earlier than the date for
repayment of such deposit.
- Not in one of the above categories to
secure Financial Indebtedness as long
as the amount of Financial Indebtedness
secured thereby does not exceed 7,5% of
Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
(vii) The Borrower will not modify its activities
so as to change significantly the nature or
scope of its business other than pursuant to
its strategy as publicly announced on 26th
June 1997.
Events of Default: Events of Default shall comprise the following:
(A) Failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is not remedied within 5 Business
Days.
(B) Breach of other obligations which, where
capable of remedy in the reasonable opinion
of the Lender, remains unremedied for 15
Business Days (except in the case of the
undertaking as to financial condition under
Undertaking (B) above, for which the period
shall be 90 days) after notice by the Lender
of such default. (The breach referred to
under Undertaking (B) above may give rise to
a right (x) to cancel the undrawn portion of
the Facility and to refuse future drawings
and/or (y) to declare any drawn portion of
the Facility to become due and payable prior
to its maturity.)
(C) (i) Any Financial Indebtedness of the
Borrower exceeding an aggregate principal
amount of FRF 150,000,000 (or equivalent), or
any Financial Indebtedness of the Borrower
and any of its Subsidiaries, as defined
below, exceeding an
<PAGE>
9
aggregate principal amount of FRF 250,000,000
(or equivalent), becomes due and payable
before its stated maturity by way of a
declared default after expiry of any
applicable grace period, or
(ii) Any Financial Indebtedness of the
Borrower or any Subsidiary of the Borrower in
respect of which the Lender or any member of
the * (as defined below) is a
lender, exceeding an aggregate principal
amount of FRF 25,000,000 (or equivalent) or
any amount of interest on such Financial
Indebtedness, is not paid when due or becomes
due and payable before its stated maturity,
in each case after expiry of any applicable
grace period.
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of Borrower whereby the assets
are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) Borrower is declared insolvent or declares in
writing that it is unable to pay its debts as
and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
(K) The Borrower consolidates or merges with any
other entity unless the Borrower is the
surviving entity or the surviving entity
shall have assumed expressly and effectively
or by
- -----------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
10
law all obligations of the Borrower under the
Facility Agreement.
(L) There occurs an event or series of events
which, in the reasonable opinion of the
Lender, irremediably compromises the ability
of the Borrower to perform in a timely manner
any of its payment obligations under the
Facility Agreement as provided for by Article
60 of the French law n(degree)84-46 of the
24th January 1984.
Documentation: English language.
Documentation will also include other customary
provisions for a transaction of this type including,
inter alia, changes in circumstances, including
illegality, market disruption and increased costs.
Taxation: All payments of principal, interest and fees will be
made free and clear of all present and future taxes,
levies, duties or other deductions of any nature
whatsoever, levied either now or at any future time.
Key definitions: Financial Indebtedness shall mean:
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time
<PAGE>
11
and to include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures;
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
Material Adverse Change shall mean any event on the
assets or financial condition of the RP Group taken
as a whole having a material adverse effect in the
reasonable opinion of the Lender on the ability of
the Borrower to perform in a timely manner all or any
of its payment obligations under the Facility
Agreement.
Consolidated Indebtedness shall mean the difference
between (i) the sum of Long Term Debt (including
Participating Loans), Bank Overdrafts, Current
Portion of Long Term Debt and Short Term Borrowings
and (ii) the sum of Cash, Short Term Deposits and
Marketable Securities as each of the foregoing
amounts shall be determined from the items so
described in the consolidated balance sheet of RP
included in the annual financial statements most
recently delivered by RP to the Lender.
Consolidated Net Worth shall mean the difference
between (i) Total Liabilities and Total Stockholders
Equity and (ii) the sum of Total Current Liabilities,
Long Term Debt (including Participating Loans), Other
Long Term Liabilities and Mandatorily Redeemable
Partnership Interest as each of the foregoing amounts
shall be determined from the items so described in
the consolidated balance sheet of RP and its
subsidiaries included in the annual financial
statements most recently delivered by RP to the
Lender.
Potential Event of Default shall mean any event which
with the giving of notice or the lapse of any period
of time would constitute an Event of Default under
the Facility Agreement.
* shall mean * and any other company or other entity
the accounts of which are consolidated therewith.
Subsidiary means any company or other entity
controlled by the Borrower under the terms of Article
355-1 of the French law n(degree)66-537 of the 24th
July 1966.
- -----------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
12
Transferability: The Lender shall have the right at any time to assign
its rights and liabilities under the Facility
Agreement to any bank or any financial institution
within the * .
The Lender shall have the right at any time to assign
its rights and liabilities under the Facility
Agreement to any other prime bank with the prior
written consent of the Borrower, such consent not to
be reasonably withheld by the Borrower and for such
purpose the Lender shall give one month's prior
notice of its intention of the Borrower).
The effect of any assignment shall not be to require
the Borrower to bear any obligation to gross up for
additional taxes or to incur liability for increased
costs.
Costs: The Borrower shall be liable for all expenses of the
Lender incurred in connection with the negotiation,
preparation or completion of the Facility Agreement,
up to a maximum of FRF 50,000.
Governing Law - The Facility Agreement will be governed by French
Jurisdiction: law. Any dispute arising from the Facility Agreement
shall be submitted to the Courts of Paris.
Validity of Terms and The parties shall negotiate in good faith a Facility
Conditions: Agreement based on the above Summary Terms and
Conditions with a view to be executed by the parties
no later than December 31, 1997.
- -----------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
13
Please signify your acceptance of the terms and
conditions set out above by signing and returning a
copy of this Summary of Terms and Conditions.
for and on behalf of
RHONE-POULENC S.A.:
Date: August 7, 1997
/s/
----------------------------------
Michel DELRUE
Directeur des Services Financiers
for and on behalf of
*:
Date: August 7, 1997
/s/
----------------------------------
______
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
Exhibit (B)(16)
RHONE POULENC SA
(the "Borrower")
FRF 4,000,000,000 SHORT TERM CREDIT FACILITY
SUMMARY OF LEGAL TERMS AND CONDITIONS
-------------------------------------
Borrower: RHONE POULENC S.A.
Facility Amount: Short Term FRF 4,000,000,000 or its equivalent in any
freely available and convertible currency.
Facility Description: A revolving credit facility (the "Facility") which
shall be repaid and redrawn throughout its life. The
Facility will be denominated in French Francs and
committed in French Francs and may be used in other
currencies listed below on an as-available basis:
USD, JPY, DEM, GBP, CHF, CAD.
Facility Purpose: Bridge financing for the partial financing of the
acquisition of the minority shareholding in R.P.
Rorer.
Lender: *
Final Maturity: The Facility will be repaid in full 365 days from the
date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business day's notice for French
Francs and 2 (two) business days' notice for other
currencies, the Borrower may draw Advances in minimum
amounts of FRF 100,000,000 and in integral multiples
of FRF 20,000,000 (or equivalents in other
currencies) for periods of 1, 2, 3 or 6 months or
such monthly periods of up to 12 months as the Lender
may agree ("Advances").
No more than 10 Advances shall be outstanding at any
one time in a maximum of five currencies.
Cancellation: Upon 10 business days' written notice the Borrower
may cancel without premium or penalty all or part of
the Facility in a minimum amount of FRF 100,000,000
and in integral multiples of FRF 20,000,000.
______
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
2
Prepayment: Prepayment of Advances shall be permitted in cases of
illegality and increased cost (including the
requirement for tax gross-ups), subject to payment of
break-up costs.
Interests: The Borrower will pay interest at LIBOR for the
relevant currency (with the exception of PIBOR in the
case of French Francs), plus Margin p.a.
Interest will be payable at the end of each interest
period and will be calculated on an actual 360 day
basis (except for Advances in GBP which will be
calculated on a 365 day basis); provided, however,
that, in case of Advances lasting more than six
months, the Margin portion of the interests shall be
paid in two payments, the first one falling due after
six months for amounts accrued at that time, the
second one on the day the Advance shall be repaid.
Interest rates will be set by reference to Telerate
page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if
not available, by Reference Banks.
Utilization Margin: 0,05%
Facility Fee: 0,05%
payable quarterly in arrears on the total amount of
the Facility.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower and
"Kbis";
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorizations, together with certification
of relevant signing authorities; and
(D) Legal Opinion provided the General Counsel of
the Borrower.
<PAGE>
3
Representations and
Warranties: Representations and warranties to be made in respect
of the Borrower at signing, to be repeated at each
Advance date, except (vii), (ix), (x), (xi), shall
include inter alia
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank at least pari
passu with other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of the Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licenses, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of latest audited
financial statements (the "Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Since the latest Consolidated Financial
Statements, there has been no adverse change
in the financial condition of the Borrower
which is material in the context of its
operation taken as a whole which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement.
<PAGE>
4
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed tender
offer to be made by the Borrower shall not be
considered by the Lender as a material
adverse change in the financial condition of
the Borrower;
(x) No material litigation or other proceedings
which is material in the context of its
operation taken as a whole (to the best of
the Borrower's knowledge and belief) which
could have a material adverse effect on the
Borrower's capacity to meet its obligations
under the Facility Agreement;
(xi) No stamp, registration or similar tax (other
than French "Timbres de Dimension") in
connection with the execution, delivery,
performance or enforcement of the Facility
Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default; and
(xiv) The Borrower has subscribed all customary
insurance policies consistent and prudent in
his line of business, covering risks of loss
and liabilities, and environmental risks.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower's corporate and
consolidated financial certified statements
as soon as available and in any event within
180 days of financial year-end.
(ii) Preparation of 1997 audited consolidated
financial statements for the Borrower (the
"1997 Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
<PAGE>
5
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with the Borrower's
obligations under the Facility.
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference to
the latest Consolidated Financial Statements.
In the event of a breach in the performance of this
requirement, the Lender shall be entitled to declare
a Potential Termination Event under the Facility. If
this breach remains unremedied for 180 days after
notice by the Lender of a Potential Termination
Event, the Lender may declare any undrawn portion of
the Facility to be cancelled, and no further notice
of drawing may be issued. No drawn portion of the
Facility shall become due and payable prior to its
maturity solely as a result of such a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licenses material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower's other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of an Event
of Default.
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrances in respect of Financial
Indebtedness unless the Lender gives its
consent, except encumbrances
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvement.
<PAGE>
6
- Created to secure Financial Indebtedness
owing to EIB, FONDS INDUSTRIEL DE
MODERNISATION, FONDS DE DEVELOPPEMENT
ECONOMIQUE ET SOCIAL or any other
governmental or EU controlled financial
institution which in its normal lending
practice requires such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or
acquired by the Borrower and not created
in contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and
not created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by an encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process
arising in connection with court
proceedings so long as the claims
secured are being contested in good
faith.
- Created over assets held in trust by
another person, which assets are to be
used by such other person solely for
satisfying the Borrower's scheduled
payment obligations in respect of
principal and/or interest in respect of
any Financial Indebtedness of the
Borrower (the "Borrower's Obligations")
in circumstance where such other person
has undertaken responsibility for the
discharge of the Borrower's Obligations.
- Over assets or receivables of the
Borrower, which encumbrances have been
given in connection with the refinancing
of such assets or receivables and where
the risks (except in relation to any
credit enhancement provided by the
Borrower in respect of such assets or
receivables) relating to non-payment in
respect of such assets or receivables
are, as a result of such refinancing,
not borne by the Borrower.
<PAGE>
7
- Over a deposit made by the Borrower
using the proceeds of a Financial
Indebtedness of the Borrower provided
(A) that to the depositary of such
proceeds lends an amount at least equal
to the amount of the deposit to a
subsidiary of the Borrower and (B) that
such loan has a maturity date which is
not earlier than the date for repayment
of such deposit.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the global amount of Financial
Indebtedness secured does not exceed
7,5% of Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise inter alia the
following:
(A) Failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is remedied within 5 Business
Days after the Lender has given a notice to
the Borrower.
(B) Breach of other obligations unless, to the
extent it can be remedied, it shall have been
remedied within 20 Business Days after notice
by the Lender of such default. (The breach
referred to under Undertaking (B) above may
only give rise to a right to cancel the
undrawn portion of the Facility and to refuse
future drawings.)
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period, unless
such default is contested in good faith by
the Borrower by appropriate proceedings.
<PAGE>
8
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of the Borrower whereby the
assets are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) The Borrower is declared insolvent or
declares in writing that it is unable to pay
its debts as and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
Documentation: French language.
Documentation will also include other customary
provisions for a transaction of this type including,
inter alia, changes in circumstances, including
illegally and increased costs.
Law: French law.
Taxation: All payments of principal, interest and fees will be
made free and clear of all present and future taxes,
levies, duties or other deductions of any nature
whatsoever, levied either now or at any future time.
Key definitions: "Financial Indebtedness" shall mean:
<PAGE>
9
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures.
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
"Consolidated Indebtedness" shall mean the difference
between:
(i) The sum of Long Term Debt (including
Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short
Term Borrowings, and
(ii) The sum of Cash, Short Term Deposits and
Marketable Securities
as each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
"Consolidated Net Worth" shall mean the difference
between:
(i) Total Liabilities and Total Stockholders
Equity and
<PAGE>
10
(ii) The sum of Total Current Liabilities, Long
Term Debt (including Participating Loans),
Other Long Term Liabilities and Mandatorily
Redeemable Partnership Interest
as each of the foregoing amounts shall be
determined from the items so described in
the consolidated balance sheet of RP and its
subsidiaries included in the annual
financial statements most recently delivered
by RP to the Lender.
The commitment of the Lender is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc. not currently held by the
Borrower, and to negociation in good-faith of a
satisfactory documentation.
Please signify your acceptance of the terms and
conditions set out above by signing and returning
a copy of this Summary of Terms and Conditions.
for and on behalf of
RHONE-POULENC S.A.: Date:
/s/
-----------------------
for and on behalf of
THE LENDER: Date: August 8, 1997
/s/
-----------------------
*
- ------------
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
Exhibit (B)(17)
RHONE POULENC SA
(the "Borrower")
FRF 2,000,000,000 REVOLVING CREDIT FACILITY
SUMMARY OF LEGAL TERMS AND CONDITIONS
-------------------------------------
Borrower: RHONE POULENC S.A.
Facility Amount: Medium Term FRF 2,000,000,000 or its equivalent in
any freely available and convertible currency.
Facility Description: A revolving credit facility (the "Facility") which
shall be repaid and redrawn throughout its life. The
Facility will be denominated in French Francs and
committed in French Francs and may be used in other
currencies listed below on an as-available basis:
USD, JPY, DEM, GBP, CHF, CAD.
Facility Purpose: The Facility will be used for general corporate
purposes.
Lender: *
Final Maturity: The Facility will be repaid in full five years from
the date of signing of the Facility Agreement.
Availability: Subject to 1 (one) business day's notice for French
Francs and 2 (two) business days' notice for other
currencies, the Borrower may draw Advances in minimum
amounts of FRF 100,000,000 and in integral multiples
of FRF 20,000,000 (or equivalents in other
currencies) for periods of 1, 2, 3 or 6 months or
such monthly periods of up to 12 months as the Lender
may agree ("Advances").
No more than 10 Advances shall be
outstanding at any one time in a maximum of
five currencies.
Cancellation: Upon 10 business days' written notice the
Borrower may cancel without premium or
penalty all or part of the Facility in a
minimum amount of FRF 100,000,000 and in
integral multiples of FRF 20,000,000.
________
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
<PAGE>
2
Prepayment: Prepayment of Advances shall be permitted in cases of
illegality and increased cost (including the
requirement for tax gross-ups) subject to payment of
break-up costs.
Interests: The Borrower will pay interest at LIBOR for the
relevant currency (with the exception of PIBOR in the
case of French Francs), plus Margin p.a.
Interest will be payable at the end of each interest
period and will be calculated on an actual 360 day
basis (except for Advances in GBP which will be
calculated on a 365 day basis); provided, however,
that, in the case of Advances lasting more than six
months, the Margin portion of the interest shall be
paid in two payments, the first one falling due after
six months for amounts accrued at that time, the
second one on the day the Advance shall be repaid.
Interest rates will be set by reference to Telerate
page 3750/3740 (LIBOR) or page 20041 (PIBOR) or, if
not available, by Reference Banks.
Utilisation Margin: Depends on the ratio "R" EBITDA/interest:
Margin of 0,11% if R less than 6
0,09% if R greater than or = 6
Facility Fee: Depends on the ratio "R" EBITDA/interest:
Margin of 0,11% if R less than 6
0,09% if R greater than or = 6
payable quarterly in arrears on the total amount of
the Facility.
Conditions Precedent: Shall comprise the following:
(A) Constitutional documents of the Borrower and
"Kbis";
(B) Copies of all relevant Board resolutions;
(C) Copies of all other consents and
authorisations, together with certification
of relevant signing authorities; and
(D) Legal Opinion provided by the General Counsel
of the Borrower.
<PAGE>
3
Representations and
Warranties: Representations and warranties to be made in respect
of the Borrower at signing, to be repeated at each
Advance date, except (vii), (ix), (x), (xi), shall
include inter alia
(i) The Borrower is duly incorporated and validly
existing;
(ii) The Borrower has power to enter into and
perform pursuant to the Facility Agreement
and all necessary corporate actions relevant
thereto have been taken;
(iii) Obligations of the Borrower under the
Facility Agreement will rank at least pari
passu with other unsecured and unsubordinated
obligations;
(iv) No encumbrance exists over present or future
assets or revenues, except as expressly
permitted or disclosed to the Lender (see
below);
(v) Obligations under the Facility are legally
valid, binding and enforceable;
(vi) Execution and performance of Facility
Agreement will not be in conflict with or in
breach of obligations in other agreements;
(vii) All necessary consents, licences, permits,
etc. relevant to the Facility have been
obtained and are in full force and effect;
(viii) Accuracy and fairness of latest audited
financial statements (the "Consolidated
Financial Statements") to the best of the
Borrower's knowledge and belief;
(ix) Since the latest Consolidated Financial
Statements, there has been no adverse change
in the financial condition of the Borrower
which is material in the context of its
operation taken as a whole which could have a
material adverse effect on the Borrower's
capacity to meet its obligations under the
Facility Agreement.
<PAGE>
4
The acquisition of the shares of Rhone-
Poulenc Rorer Inc not currently held by the
Borrower in connection with a proposed tender
offer to be made by the Borrower shall not be
considered by the Lender as a material
adverse change in the financial condition of
the Borrower;
(x) No material litigation or other proceeding
which is material in the context of its
operation taken as a whole (to the best of
the Borrower's knowledge and belief) which
could have a material adverse effect on the
Borrower's capacity to meet its obligations
under the Facility Agreement;
(xi) No stamp, registration or similar tax (other
than French "Timbres de Dimension") in
connection with the execution, delivery,
performance or enforcement of the Facility
Agreement;
(xii) No proceedings pending or threatened for
winding-up, dissolution or similar process;
(xiii) No existing Event of Default;
(xiv) The Borrower has subscribed all customary
insurance policies consistent and prudent in
his line of business, covering risks of loss
and liabilities, and environmental risks.
Undertakings: (A) Undertakings as to financial information:
(i) Delivery of the Borrower's corporate and
consolidated financial certified statements
as soon as available and in any event within
180 days of financial year-end.
(ii) Preparation of 1997 audited consolidated
financial statements for Borrower (the "1997
Consolidated Financial Statements") to
reflect any changes that have occurred in
accounting practices since the 1996
Consolidated Statements.
<PAGE>
5
(iii) Provision of such other information as the
Lender may reasonably request in order to
access compliance with Borrower's obligations
under the Facility.
(B) Undertakings as to financial condition:
Ratio of Consolidated Indebtedness to Consolidated
Net Worth (as such terms are defined below) not to
exceed 1.
The Borrower shall ensure that this financial
covenant is met as at 31st December of each year
throughout the term of the Facility by reference to
the latest Consolidated Financial Statements.
In the event of a breach in the performance of this
requirement, the Lender shall be entitled to declare
a Potential Termination Event under the Facility. If
this breach remains unremedied for 180 days after
notice by the Lender of a Potential Termination
Event, the Lender may declare any undrawn portion of
the Facility to be cancelled, and no further notice
of drawing may be issued. No drawn portion of the
Facility shall become due and payable prior to its
maturity solely as a result of such a breach.
(C) Other usual undertakings including:
(i) Compliance with all relevant laws, permits,
and licences material in the context of the
Facility.
(ii) Pari passu status vis-a-vis all the
Borrower's other unsecured and unsubordinated
creditors.
(iii) To notify the Lender in writing of any Event
of Default.
(iv) Negative Pledge: The Borrower shall not
create or permit to be outstanding any
encumbrance in respect of Financial
Indebtedness unless the Lender gives its
consent, except encumbrances:
- In connection with the purchase,
maintenance or improvement of an asset,
providing the amount of Financial
Indebtedness secured remains confined to
such asset or such improvement.
<PAGE>
6
- Created to secure Financial Indebtedness
owing to EIB, FONDS INDUSTRIEL DE
MODERNISATION, FONDS DE DEVELOPPEMENT
ECONOMIQUE ET SOCIAL or any other
governmental or EU controlled financial
institution which in its normal lending
practice requires such Encumbrance.
- Existing at a time when a corporation is
merged into, consolidated with or
acquired by the Borrower and not created
in contemplation of such event.
- Existing on any asset prior to the
acquisition thereof by the Borrower and
not created in contemplation of such
acquisition.
- Arising out of a refinancing of any
indebtedness secured by an encumbrance
permitted above.
- Arising after orders of attachment,
distraint or similar legal process
arising in connection with court
proceedings so long as the claims
secured are being contested in good
faith.
- Created over assets held in trust by
another person, which assets are to be
used by such other person solely for
satisfying the Borrower's scheduled
payment obligations in respect of
principal and/or interest in respect of
any Financial Indebtedness of the
Borrower (the "Borrower's Obligations")
in circumstance where such other person
has undertaken responsibility for the
discharge of the Borrower's Obligations.
- Over assets or receivables of the
Borrower, which encumbrances have been
given in connection with the refinancing
of such assets or receivables and where
the risks (except in relation to any
credit enhancement provided by the
Borrower in respect of such assets or
receivables) relating to non-payment in
respect of such assets or receivables
are, as a result of such refinancing,
not borne by the Borrower.
<PAGE>
7
- Over a deposit made by the Borrower
using the proceeds of a Financial
Indebtedness of the Borrower provided
(A) that the depositary of such proceeds
lends an amount at least equal to the
amount of the deposit to a subsidiary of
the Borrower and (B) that such loan has
a maturity date which is not earlier
than the date for repayment of such
deposit.
- Not in one of the above categories to
secure Financial Indebtedness as long as
the global amount of Financial
Indebtedness secured does not exceed
7,5% of Consolidated Net Worth.
(v) Borrower will pay all transfer, stamp or
registration fees or similar taxes or charges
which may become payable.
(vi) Borrower will maintain its corporate
existence and its rights to carry on its
operations.
Events of Default: Events of Default shall comprise inter alia the
following:
(A) Failure of the Borrower to make any payment
on the due date under the terms of the
Facility, unless such failure occurs solely
for administrative or technical reasons and
the default is remedied within 5 Business
Days after the Lender has given a notice to
the Borrower.
(B) Breach of other obligations unless, to the
extent it can be remedied, it shall have been
remedied within 20 Business Days after notice
by the Lender of such default. (The Breach
referred to under Undertaking (B) above may
only give rise to a right to cancel the
undrawn portion of the Facility and to refuse
future drawings.)
(C) Any Financial Indebtedness of the Borrower
exceeding FRF 150,000,000 (or equivalent)
becomes due and payable before its stated
maturity by way of a declared default after
expiry of any applicable grace period, unless
such default is contested in good faith by
the Borrower by appropriate proceedings.
<PAGE>
8
(D) Any representation or warranty of the
Borrower is materially incorrect in any
respect when made or repeated.
(E) Borrower is subject to an amicable settlement
("reglement amiable") under French law.
(F) Insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower except in
the case of the liquidation or the
dissolution where the terms have been
approved by the Lender. This excludes a
merger for arm's length consideration within
the Borrower's group.
(G) A moratorium or restructuring is made or
declared in respect of all or any
indebtedness of the Borrower whereby the
assets are submitted to the control of its
creditors.
(H) Appointment of an administrator, receiver in
respect of the Borrower.
(I) The Borrower is declared insolvent or
declares in writing that it is unable to pay
its debts as and when they are due.
(J) It becomes unlawful for the Borrower to
comply with its obligations under the
Facility.
Documentation: French language.
Documentation will also include other customary
provisions for a transaction of this type including,
inter alia, changes in circumstances, including
illegality and increased costs.
Law: French law.
Taxation: All payments of principal, interest and fees will be
made free and clear of all present and future taxes,
levies, duties or other deductions of any nature
whatsoever, levied either now or at any future time.
Key definitions: "Financial Indebtedness" shall mean:
<PAGE>
9
(i) Any indebtedness for monies borrowed;
(ii) Any indebtedness (actual or contingent) under
a guarantee, security, indemnity or other
commitment designed to protect any creditor
against loss in respect of any financial
indebtedness of any third party;
(iii) Any indebtedness under any acceptance credit;
(iv) Any indebtedness under any debenture, note,
bill of exchange, bonds, commercial paper,
certificate of deposit or similar instrument
on which either of the Borrower is liable;
(v) Any Indebtedness for money owing in respect
of any interest swap, or currency swap, such
indebtedness to be measured on a mark-to-
market basis at the relevant time and to
include, vis-a-vis any particular
counterparty, application of the relevant
ISDA netting procedures;
(vi) Any payment obligations under any lease
entered into for the purpose of obtaining or
raising finance.
"Consolidated Indebtedness" shall mean the difference
between:
(i) The sum of Long Term Debt (including
Participating Loans), Bank Overdrafts,
Current Portion of Long Term Debt and Short
Term Borrowings, and
(ii) The sum of Cash, Short Term Deposits and
Marketable Securities
as each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP included in the annual financial
statements most recently delivered by RP to the
Lender.
"Consolidated Net Worth" shall mean the difference
between:
(i) Total Liabilities and Total Stockholders
Equity and
<PAGE>
10
(ii) The sum of Total Current Liabilities, Long
Term Debt (including Participating Loans),
Other Long Term Liabilities and Mandatorily
Redeemable Partnership Interest
as each of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries included in
the annual financial statements most recently
delivered by RP to the Lender.
<PAGE>
11
Validity of Terms and
Conditions: December 31, 1997.
The commitment of the Lender is subject to the
realisation of the acquisition of the shares of
Rhone-Poulenc Rorer Inc not currently held by the
Borrower, and to negotiation in good faith of a
satisfactory documentation.
Please signify your acceptance of the terms and
conditions set out above by signing and returning a
copy of this Summary of Terms and Conditions.
for and on behalf of
RHONE-POULENC S.A.: Date:
/s/
----------------------------------
for and on behalf of
THE LENDER: Date:
/s/
----------------------------------
<PAGE>
Exhibit (B)(18)
PROJECT JUPITER
US$850,000,000 BRIDGE LOAN FACILITY (THE "BRIDGE LOAN FACILITY")
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
* is pleased to provide below an outline of the terms and conditions upon
which it would be prepared to make the Bridge Loan Facility available.
1. BORROWER: Rhone-Poulenc S.A. ("RP").
2. LENDER: *
3. FACILITY: A bridge loan facility of up to US$850,000,000
to be made available to the Borrower. The
facility will be available in US Dollars and
other freely available eurocurrencies.
4. PURPOSE: The proceeds of the Bridge Loan Facility will
be used by the Borrower in discharge of the
consideration payable by the Borrower for the
acquisition of the shares of Rhone-Poulenc
Rorer ("RPR") not currently owned by the
Borrower (the "RPR MINORITY SHARES") in
connection with a proposed tender offer (the
"TENDER OFFER") to be made by the Borrower for
the RPR Minority Shares.
5. DRAWDOWN: Subject to satisfaction of all conditions
precedent to the availability of the Bridge
Loan Facility, the Bridge Loan Facility will be
available to be drawn in one amount during the
period commencing on the date on which the
Tender Offer is effective and ending on the
earlier of (i) lapse of the Tender Offer and
(ii) 30 November 1997 (the "AVAILABILITY
PERIOD").
6. INTEREST: (i) Interest and advance periods will be 1, 3
or 6 months or such other periods as may
be agreed with the Lender.
(ii) The rate of interest shall be LIBOR plus
the Margin. Interest will accrue from day
to day and be calculated on the basis of
accrual days elapsed and a 360 day year.
(iii) The Margin shall be 0.125% per annum.
(iv) If the Borrower fails to pay any amount
owing by it on the due date for payment
the Margin applicable to the unpaid sum
shall be increased by 1% with effect from
the due date.
7. FEES: The Borrower will pay commitment fees to the
Lender at a rate of 0.06125% per annum on the
daily undrawn uncancelled portion of the Bridge
Loan Facility quarterly in arrears and on the
expiry of the Availability Period from the date
of signing of the Bridge Loan Facility
agreement (whether or not the financing
transactions contemplated herein are completed)
(such fees to accrue from day to day and to be
calculated on the basis of actual days elapsed
and a 360 day year).
8. FINAL MATURITY:
The date (the "FINAL REPAYMENT DATE") falling
364 days after (and including), the date of
signing of the Bridge Loan Facility.
________
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
1
<PAGE>
9. REPAYMENT: The Bridge Loan Facility shall be repaid in
installments on the dates and in the amounts
shown in the following table:
<TABLE>
<CAPTION>
(1) REPAYMENT DATES (2) AMOUNT (US$)
<S> <C>
29 December 1997.......... 125,000,000
31 March 1998............. 270,000,000
30 June 1998.............. 265,000,000
Final Repayment Date...... 190,000,000
</TABLE>
10. MANDATORY PREPAYMENT: (i) in full on a change of control of the Bor-
rower;
(ii) within 5 business days of realisation, the
* Percentage (as defined in paragraph 24)
of the net proceeds of any equity of-fering
or other capital raising exercise by any
member of the RP Group (excluding equity
offerings for employees pursuant to
employee share schemes and employee share
option schemes) (including, for the avoid-
ance of doubt the IPO of the RP Chemicals
and Fibres and Polymers business)) each an
"EQUITY OFFERING");
(iii) in full on recission of the Acquisition
and/or the Bridge Loan Facility agreement
or any documents entered into in connec-
tion therewith.
(iv) in full in the event that either:
(a) it becomes unlawful for the Borrower
to comply with its obligations under
or in connection with the Bridge Loan
Facility agreement; or
(b) any provision of the Bridge Loan Fa-
cility agreement become unenforceable;
Mandatory prepayment of part to be applied
against scheduled repayment installments in
order of maturity. No amounts prepaid may be
redrawn.
11. VOLUNTARY PREPAYMENT: Permitted at any time, upon at least seven
business days' notice, subject to:
(i) the relevant prepayment being in a minimum
amount of US$50,000,000;
(ii) broken funding indemnity from the Borrow-
er.
No amounts prepaid may be redrawn.
12. CANCELLATION: Automatic cancellation of undrawn amounts on
the last day of the Availability Period.
The Bridge Loan Facility may be canceled in
whole or in part upon seven business days prior
written notice to the Lender in minimum amounts
of US$50,000,000 and integral multiples
thereof. Any cancellation of the Bridge Loan
Facility shall be irrevocable.
13. DOCUMENTATION:
The Bridge Loan Facility arrangements will be
documented by a facility agreement (on normal
Euromarket syndicated loan terms) which will
set out, inter alia, the conditions precedent
to drawing, the representations and warranties,
the undertakings and the events of default.
Increased costs, pro-rata sharing, set-off,
market
________
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
2
<PAGE>
disruption, illegality and currency exposure
protection provisions will be documented in the
Bridge Loan Facility agreement in accordance
with normal banking practice.
14. CONDITIONS PRECEDENT: (a) Conditions precedent to signing of the
Bridge Loan Facility to be completed to the
satisfaction of the Lender prior to the
Bridge Loan Facility becoming available
will include:
(i) copies of the up to date constitu-
tional documents and corporate author-
ities for the Borrower accompanied by
related incumbency certificates;
(ii) legal opinions from legal counsel to
the Borrower together with a legal
opinion as to English law from UK
counsel to the Lender.
(b) Conditions precedent to drawing of the
Bridge Loan Facility to be completed to the
satisfaction of the Lender prior to the
Bridge Loan Facility becoming available
will include:
(i) copies of the up to date constitu-
tional documents and corporate author-
ities for the Borrower accompanied by
related incumbency certificates;
(ii) due execution of the Bridge Loan Fa-
cility agreement;
(iii) representations and warranties are
true and accurate on the date of ini-
tial drawdown of the Bridge Loan
Facility;
(iv) no event of default or potential event
of default (as defined in paragraph
24).
15. REPRESENTATIONS AND Representations and warranties from the
WARRANTIES: Borrower in relation to itself and material
Subsidiaries (as defined in paragraph 24), to
include:
(i) the Borrower is duly incorporated and val-
idly existing;
(ii) obligations of the Borrower under the
Bridge Loan Facility agreement will rank
pari passu with other unsecured and
unsubordinated obligations;
(iii) the Borrower has power to enter into and
perform pursuant to the Bridge Loan Fa-
cility agreement and all necessary corpo-
rate actions relevant thereto have been
taken;
(iv) all material consents, licences, permits,
filings, etc. relevant to the Bridge Loan
Facility agreement have been obtained or
made and are in full force and effect;
(v) execution and performance of Bridge Loan
Facility agreement will not be in conflict
with or in breach of any material obliga-
tions in other agreements;
(vi) obligations under the Bridge Loan Facility
agreement are legally valid, binding and
enforceable;
(vii) no insolvency events;
(viii) no material litigation or other proceed-
ings which would, or would be reasonably
likely to, constitute a material adverse
change;
3
<PAGE>
(ix) no security interests or guarantees save
for agreed exceptions;
(x) good title to and/or valid leases or
licences of, or other valid right to use,
all material assets necessary to conduct
its business;
(xi) accuracy and fairness of published ac-
counts;
(xii) no material adverse change since 31 De-
cember 1996;
(xiii) (a) no event of default has occurred un-
der the Bridge Loan Facility agreement;
and (b) to its best knowledge and be-
lief, having made due and careful en-
quiry no default has occurred under any
other material agreement to which it
and/or any Material Subsidiary is a par-
ty;
(xiv) no material outstanding tax liabilities
(unless such liabilities are being con-
tested in good faith and by appropriate
proceedings);
(xv) contents of Legal Report, management bud-
get and other information provided to the
Lender accurate in all material respects
as at date given;
(xvi) no material undisclosed facts relating to
the Acquisition;
(xvii) no liability to make deductions or with-
holdings from payments to the Lender;
(xviii) no stamp, registration or similar tax,
(other than French "Timbres de Dimen-
sion") in connection with the execu-
tion, delivery, performance or enforce-
ment of the Bridge Loan Facility agree-
ment;
(xix) continued availability of Group loan fa-
cilities after drawdown under the Bridge
Loan Facility;
Representations and warranties to be
given/repeated as appropriate on date of
signing of the Bridge Loan Facility agreement,
on the date of any request for a utilisation
thereof, on each drawdown date and quarterly
thereafter (with the exception of
representations (xii), (xiii)(b), (xv), (xvi),
(xvii) and (xviii) which shall be given on the
date of the Bridge Loan Facility).
16. GENERAL UNDERTAKINGS: Undertakings from the Borrower in relation to
itself and ech Material Subsidiary, to include:
(i) maintenance of authorisations and consents
required in relation to the Acquisition and
the Bridge Loan Facility agreement and all
documents entered into in connection
therewith;
(ii) subject to exceptions agreed between RP and
the Lender (including, for this purpose,
intra group restructurings) limitations or
amalgamation, merger or consolidation or
material change in the nature or scope of
the business of the Borrower and any other
Material Subsidiary without the prior
approval of the Lender;
(iii) compliance with all relevant laws, per-
mits and licences and making of all fil-
ings material in the context of the
Bridge Loan Facility agreement;
4
<PAGE>
(iv) each Borrower and Material Subsidiary to
maintain its corporate existence and its
right to carry on its operations, provided
that (except for any merger of the Bor-
rower with any entity) the merger of Mate-
rial Subsidiaries in relation to the IPO
of the RP chemicals business will be per-
mitted;
(v) pari passu status vis-a-vis all the Bor-
rower's other unsecured and unsubordinated
creditors;
(vi) maintenance of insurances, including pub-
lic liability cover;
(vii) payment of all taxes before penalties be-
come payable (unless being contested in
good faith and by appropriate proceed-
ings);
(viii) restrictions on creation of security
over Borrower or Material Subsidiary as-
sets save for Permitted Security (as de-
fined in paragraph 24);
(ix) maximum amount of financial indebtedness
in aggregate of RP Group not to exceed
Ffr66,000,000,000 or equivalent;
(x) no loans or other similar financial accom-
modations other than in normal course of
business for intra-group funding transac-
tions;
(xi) no repayment of Financial Indebtedness in-
curred in connection with the acquisition
of the RPR Minority Shares (other than to
the Lender) prior to the Final Repayment
Date except for
(a) an amount of FF1,000,000,000 of the
Balancing Bridge Loan Facilities on
31st December, 1997;
(b) an amount of FF1,500,000,000 of the
Balancing Bridge Loan Facilities on
30th June, 1998; and
(c) repayments and immediate redrawings of
such Financial Indebtedness to the ex-
tent such Financial Indebtedness
arises under revolving credit facili-
ties;
(xii) hedging activity of the Borrower and each
Material Subsidiary to be carried out in
accordance with the Borrower's usual
business practice;
(xiii) (a) as soon as available and in any event
within 90 days after the end of the
first half of each of RP's financial
years (aa) RP's unaudited financial
statements for that financial half
year (in English) and (bb) the unau-
dited consolidated financial state-
ments of the RP Group (in English),
for that financial half year, and as
soon as available and in any event
with 45 days after the end of the
first half of each of RP's financial
years, delivery of a certificate of a
director on the executive board of RP
certifying compliance with the finan-
cial covenant referred to in para-
graph (xxi) below and the non-exist-
ence of any event of default or po-
tential event of default;
(b) as soon as available and in any event
within 120 days after the end of each
of RP's financial years (aa) RP's au-
dited financial statement for that fi-
nancial year (in
5
<PAGE>
English) and (bb) the audited consoli-
dated financial statements of the RP
Group (in English), for that financial
year, and, as soon as available and in
any event within 45 days after the end
of each of RP's financial years, deliv-
ery of a certificate of a director on
the executive board of RP certifying
compliance with the financial covenant
referred to in paragraph (xxi) below and
the non-existence of any event of de-
fault or potential event of default;
(xiv) delivery to the Lender of details of liti-
gation or other similar proceedings which
would be likely to result in material ad-
verse change;
(xv) provision of such other information as the
Lender may reasonably request in order to
assess compliance by the Borrower with its
obligations under the Bridge Loan Facility
agreement;
(xvi) requirement to notify Lender of any event
of default or potential event of default;
(xvii) requirement to notify the Lender of any
change in the auditors;
(xviii) ratio of Consolidated Indebtedness to
Consolidated Net Worth (as such terms
are defined in paragraph 24) not to ex-
ceed 1:1. Covenant compliance to be
tested on 31 December and 30 June of
each year. Compliance by reference to
audited accounts to be certified by RP's
auditors;
(xix) Residual Percentage of the net proceeds of
any Equity Offering to be applied in pre-
payment of the Balancing Bridge Loan Fa-
cilities.
17. EVENTS OF DEFAULT: Events of default to include:
(i) payment default (with 3 business days rem-
edy period for technical or administrative
delay only) and other breach of the Bridge
Loan Facility agreement) (with 15 business
days remedy period from date of default,
if capable of remedy);
(ii) any representation or warranty of the Bor-
rower is materially incorrect in any re-
spect when made or repeated;
(iii) cross default in respect of financial in-
debtedness of the Borrower or any other
member of the RP Group in excess of
US$30,000,000 or its equivalent);
(iv) the Borrower or any Material Subsidiary is
subject to an amicable settlement
("reglement amiable") under French law or
any similar proceedings;
(v) insolvency, bankruptcy, liquidation,
dissolution, etc. of the Borrower or any
Material Subsidiary except in the case of
a liquidation or dissolution where the
terms have been approved by the Lender.
This excludes a solvent merger for arm's
length consideration within the RP Group;
(vi) a moratorium or restructuring is made or
declared in respect of all or any
indebtedness of the Borrower or any
Material Subsidiary or any such person
proposes, makes or enters into
6
<PAGE>
a general assignment, arrangement or
composition with or for the benefit or
creditors;
(vii) appointment of an administrator, receiver,
trustee or similar officer in respect of
the Borrower or any Material Subsidiary;
(viii) enforcement or distress or execution
against property material in the context
of the Borrower or any Material Subsidiary
unless such distress or execution is dis-
charged within 45 days;
(ix) the Borrower or any Material Subsidiary is
declared insolvent or declares in writing
that it is unable to pay its debts as and
when they are due;
(x) anything analogous to (iv), (v), (vi),
(vii), (viii) or (ix) shall occur to the
Borrower or any Material Subsidiary under
the laws of the jurisdiction under which
such person is incorporated;
(xi) cessation of business;
(xii) material change to constitutional documents
detrimental to the Lender;
(xiii) compulsory acquisition of material assets
of Material Subsidiary where the effect of
such compulsory acquisition might materi-
ally prejudice the interest of the Lender;
(xiv) security interests securing financial in-
debtedness in excess of US$30,000,000 (or
its equivalent) becoming enforceable;
(xv) material qualification of financial state-
ments by RP Group auditors.
18. FUNDING PROTECTION: Customary for a transaction of this type
including breakage costs, compensation for
increased costs and compliance with capital
adequacy and other regulatory provisions and
market disruption provisions (LIBOR substitute in
event of market disruption to be determined in
accordance with normal banking practice).
19. TAXES: All payments by the Borrower will be made free
and clear of future taxes, levies, duties or
deductions whatsoever imposed. Save for agreed
exceptions, any withholding or other deduction
will be grossed up. All transfer, stamp and
registration taxes and other like charges and
fees will be paid by the Borrower.
20. EXPENSES: All reasonable expenses including but not limited
to legal fees (subject agreed caps) and all other
out-of-pocket expenses incurred in connection
with the preparation, negotiation, documentation,
signing and publicizing of the Bridge Loan
Facility shall be for the account of the
Borrower, whether or not the Acquisition or
financing transactions contemplated herein are
completed.
21. ASSIGNMENTS &
TRANSFER:
Standard provisions will be included in the
Bridge Loan Facility agreement permitting the
assignment transfer of Bridge Loan Facility
commitments and outstandings of the Lender
subject to RP's consent (such consent not to be
unreasonably withheld or
7
<PAGE>
delayed). In the case of a partial transfer,
minimum assignment to be US$50,000,000 and
thereafter integral multiples of US$10,000,000
unless otherwise agreed with RP.
22. LAW: The Bridge Loan Facility agreement will be
governed by English Law. Borrower will subject
to the non-exclusive jurisdiction of the
English Courts.
23. PUBLICITY: The Arranger may publicise the financing of the
Acquisition. The Borrower will be informed of
the form and substance of any announcement made
by the Lender.
24. DEFINITIONS: For the purposes of the Bridge Loan Facility
agreement:
"BALANCING BRIDGE LOAN FACILITIES" means bridge
loan facilities provided by a bank other than
the Lender for the purposes of funding the
Acquisition and entered into on or about the
same date as this Facility in an aggregate
amount which when taken together with this
Facility and the Balancing Medium Term Loan
Facilities is sufficient to fund the purchase
price of the Acquisition;
"BALANCING MEDIUM TERM LOAN FACILITIES" means
medium term loan facilities entered into for
the purposes of funding the Acquisition entered
into on or about the date of this Facility and
in an aggregate amount which when taken
together with the amount of this Facility and
the Balancing Bridge Loan Facilities is
sufficient to fund the purchase price of the
Acquisition;
"CONSOLIDATED INDEBTEDNESS" means the
difference between (i) the sum of Long Term
Debt, Participating Loans, Bank Overdraft,
Current Portion of Long Term Debt and Short
Term Borrowing and (ii) the sum of Cash, Short
Term Deposits and Marketable Securities as each
of the foregoing amounts shall be determined
from the items so described in the consolidated
balance sheet of RP and its subsidiaries
included in the half yearly or annual financial
statements most recently delivered by RP to the
Lender;
"CONSOLIDATED NET WORTH" means the difference
between (i) Total Liabilities and Total
Stockholders Equity and (ii) the sum of Total
Current Liabilities, Long Term Debt,
Participating Loans and Other Long Term
Liabilities as each of the foregoing amounts
shall be determined from the items so described
in the half yearly or annual consolidated
financial statements of RP and its subsidiaries
most recently delivered by RP to the Lender;
"FINANCIAL INDEBTEDNESS" shall mean:
(i) any indebtedness for monies borrowed;
(ii) any indebtedness (actual or contingent)
under a guarantee, security, indemnity or
other commitment designed to protect any
creditor against loss in respect of any
financial indebtedness of any third party;
(iii) any indebtedness under any acceptance
credit;
(iv) any indebtedness under any debenture,
note, bill of exchange, bonds, commercial
paper, certificate of deposit or similar
instrument;
8
<PAGE>
(v) Any indebtedness for money owing in re-
spect of any interest swap, or currency
swap, such indebtedness to be measured on
a mark-to-market basis at the relevant
time and to include, vis-a-vis any partic-
ular counterparty, application of the rel-
evant ISDA netting procedures;
(vi) Any payment obligations under any lease
entered into for the purposes of obtaining
or raising finance.
"MATERIAL ADVERSE CHANGE" means any event
having a material adverse effect in the
reasonable opinion of the Lender on the ability
of (i) the Borrower to perform in a timely
manner all or any of its obligations,
including, without limitation, its payment
obligations, under the Bridge Loan Facility
agreement or any other documentation entered
into in connection therewith or (ii) on the
business, assets or financial conditions of the
RP Group taken as a whole in the context of the
ability of the Borrower to discharge its
payment obligations;
"MATERIAL SUBSIDIARY" means Institut Merieux
S.A. (France), Pasteur Merieux Connaught,
Rhone-Poulenc Rorer Inc. (U.S.A.). Rhone-
Poulenc Holdings Inc. (U.S.A.), Rhone Poulenc
Agrochimie, Rhone-Poulenc Chimi and Rhone-
Poulenc Nutrition Animale;
"POTENTIAL EVENT OF DEFAULT" means any event
which with the giving of notice or the lapse of
any period of time, in each case under the
terms of the Bridge Loan Facility agreement,
would constitute an event of default under the
terms of the Bridge Loan Facility agreement;
"PERMITTED SECURITY" means Security Interests:
(i) in connection with Financial Indebtedness
incurred for the purchase, maintenance or
improvement of an asset, provided (a) the
amount of Financial Indebtedness secured
remains confined to the acquired assets
and (b) that in relation to maintenance
and improvement, the amount of Financial
Indebtedness secured under any security
granted for the financing of such mainte-
nance and/or improvement does not exceed
the cost of such maintenance and/or im-
provement;
(ii) created at the time of incurring the Fi-
nancial Indebtedness to secure Finance In-
debtedness owing to EIB, CREDIT NATIONAL,
FONDS INDUSTRIEL DE MODERNISATION, FONDS
DE DEVELOPPMENT ECONOMIQUE ET SOCIAL or
any other governmental or EEC controlled
financial institution which in its normal
lending practice requires such encum-
brance;
(iii) existence at a time when a corporation is
merged into, consolidated with or ac-
quired by the Borrower or any Material
Subsidiary and not created in contempla-
tion of such event provided such Security
Interest remains confined to such as-
9
<PAGE>
sets and improvements and additions thereto
and does not secure any financial indebted-
ness not so secured at the time of such
event;
(iv) existing on any asset prior to the acquisi-
tion thereof by the Borrower or any Material
Subsidiary and not created in contemplation
of such acquisition provided such Security
Interest remains confined to such asset and
improvements and additions thereto and does
not secure any financial indebtedness not so
secured at the time of such event;
(v) arising out of a refinancing of any
financial indebtedness secured by
encumbrances permitted above provided that
such financial indebtedness is not
increased or secured by any additional
assets or revenues;
(vi) arising after orders of attachment,
distraint or similar legal process arising
in connection with court proceeding so long
as execution or other enforcement thereof is
effectively stayed and the claims secured
are being contested in good faith and by ap-
propriate proceedings and the attachment,
distraint or other proceedings do not result
in an event of default or other breach of
the terms of the Bridge Facility agreement;
(viii) created over assets held in trust by an-
other person, which assets are to be used
by such other person solely for satisfying
the Borrower's or any Material
Subsidiary's scheduled payment obligations
in respect of principal and/or interest in
respect of any financial indebtedness of
the Borrower or any Material Subsidiary
(the "OBLIGOR'S OBLIGATIONS") in circum-
stances where such other person has under-
taken responsibility for the discharged of
the Obligor's Obligations;
(viii) created over a deposit made by the Bor-
rower or any Material Subsidiary using the
proceeds of Financial Indebtedness lent by
the depositary or such proceeds provided
that (a) the depositary of such proceeds
lends an amount at least equal to the
amount of the deposit to a subsidiary of
the Borrower or relevant Material Subsidi-
ary and (b) such loan has a maturity date
which is not earlier than the date for re-
payments of such deposit;
(ix) not in one of the above categories to secure
financial indebtedness as long as the amount
of financial indebtedness secured thereby
does not exceed 7.5% of Consolidated Net
Worth.
"RESIDUAL PERCENTAGE" means the percentage equal
to the aggregate of 100% less the * Percentage;
"* PERCENTAGE" means the percentage borne by
US$850,000,000 to the aggregate of US$850,000,000
and the aggregate US$ initial amount of the
Balancing Bridge Loan Facilities;
__________
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
10
<PAGE>
25. CONDITION: This offer is made on condition that there is
no material adverse change in the financial
condition of the Borrower, nor in the
international credit markets, between now and
the signing of the Bridge Loan Facility
agreement.
11
<PAGE>
Please signify your acceptance of the terms and conditions set out above by
signing and returning a copy of this Summary of Terms and Conditions by no
later than [11th August] 1997 after which date this offer will expire unless
previously accepted.
For and on behalf of RHONE-POULENC
S.A.
/s/
- -------------------------------------
Date:
For and on behalf of *:
/s/ /s/
- ------------------------------------- -----------------------------------
Date: 8/8/97 Date: 8/8/97
________
* Request for Confidential Treatment filed by Purchaser on August 22, 1997.
12
<PAGE>
EXHIBIT (C)(1)
UNOFFICIAL TRANSLATION
DRH Cadres
RHONE-POULENC S.A.
ETABLISSEMENT INTERSERVICES
25, QUAI PAUL DOUMER
92408 COURBEVOIE CEDEX
TEL (1) 47 68 12 34 FAX (1) 47 68 19 11
TLX 610500 F RHONE
Courbevoie, [ ]
To: [ ]
RHONE-POULENC RORER STOCK OPTIONS
Dear Sir,
The Executive Committee, at its [ ] meeting has decided to grant you, in
your capacity as [ ], [ ] Rhone-Poulenc Rorer stock options. The
conditions for the exercise of these options are as follows:
1. EXERCISE DATE AND DURATION
The options will be exercisable from [ ] through [ ].
Each option gives a right to buy a common share of RHONE-POULENC RORER.
During the exercise period, the options can be exercised in one or several
exercises. Each option exercise shall be notified to the company pursuant to
conditions to be specified at a later date.
2. EXERCISE PRICE
The exercise price of the options is [ ] per option. This price has been
determined on the basis of the market price of RHONE POULENC RORER shares.
3 OPTION PRICE
The purchase price per option is $2. It is payable, at the latest, upon
exercise of the options and, in any case, before [ ].
4. EMPLOYMENT CONDITIONS
The options can be exercised only if you are an employee of a company of the
RHONE POULENC Group at the time of exercise.
Nevertheless,
a) if an option holder has retired, has taken early retirement, or is
permanently disabled at the time of exercise, he will be allowed to
exercise his options on the same terms as those that would apply if he
were still an employee of RHONE-POULENC, and
b) if an option holder dies before exercising his options, his heirs will
be entitled to exercise his options in his place on the same terms as
those applying to the deceased.
5. SHARES TRANSFER RESTRICTIONS
The shares acquired through the exercise of the options shall not be
transferable until 12 months after the exercise date, unless RHONE-POULENC
S.A. shall set a shorter period.
In case of transfer, the shares shall first be offered to RHONE POULENC
S.A., under conditions to be specified at a later date. RHONE POULENC shall
indicate within 30 days if it intends to acquire such shares.
RHONE POULENC S.A. shall purchase the shares at the market price applicable
on the day of transfer.
For this contract to be enforceable, we would ask you to please sign this
contract, preceding your signature with the handwritten notation "read and
approved", and return it to us.
Sincerely yours,
<PAGE>
EXHIBIT (C)(3)
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
RHONE-POULENC S.A.
RP VEHICLE, INC.
and
RHONE-POULENC RORER INC.
Dated as of August 19, 1997
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
THE OFFER
Page
<S> <C> <C>
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
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Page
<S> <C> <C>
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
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Page
<S> <C> <C>
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
</TABLE>
Annex A: Conditions to the Offer
<PAGE>
<TABLE>
<CAPTION>
Glossary of Defined Terms
(Not Part of this Agreement)
----------------------------
<S> <C>
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
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
<PAGE>
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;
<PAGE>
2
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
<PAGE>
3
"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
<PAGE>
4
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").
---------------------
<PAGE>
5
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.
<PAGE>
6
(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 of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned directly or indirectly by Parent)
shall be cancelled and, subject to Section 2.08, shall be converted
automatically into the right to receive from the Company an amount equal to
the Per Share Amount in cash (the "Merger Consideration") payable, without
--------------------
interest, to the holder of such Share, upon surrender, in the manner
provided in Section 2.09, of the certificate that formerly evidenced such
Share;
(b) Each Share issued and outstanding immediately prior to the
Effective Time owned directly or indirectly by Parent shall remain issued
and outstanding and no payment or distribution shall be made with respect
thereto;
(c) Each share of Common Stock, par value $.01 per share, of
Merger Subsidiary issued and outstanding immediately prior to the Effective
Time shall be cancelled and no payment or distribution shall be made with
respect thereto; and
(d) Each outstanding share of Money Market Preferred Stock (as
hereinafter defined) issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding and no payment or
distribution shall be made with respect thereto.
SECTION 2.07. Options and Warrants. (a) Immediately prior to the
--------------------
Effective Time, each outstanding option to purchase Shares (in each case, an
"Option"), whether or not then exercisable, shall be canceled and each holder
-------
of a canceled Option shall be entitled to receive an indemnity payment (the
"Exercise Amount") in cash from the Company, in consideration for the
---------------
cancellation of each such Option, at the same time as the Merger Consideration
is received by the holders of Shares, equal to the product of (i) the number of
Shares to be issued upon the exercise of such Option and (ii) the excess, if
any, of the amount paid per Share pursuant to the Offer over the exercise price
per Share previously subject to such Option;
(b) Parent and the Company hereby agree that Parent, on the one hand,
and the Compensation Committee of the Company, on the other hand, will define,
prior to the Effective Time, alternatives to the treatment of Options set forth
in Section 2.07(a), which
<PAGE>
7
alternatives may include (i) deferral of the payment of the amount payable
pursuant to Section 2.07(a) and (ii) conversion into options to purchase
securities of Parent.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any provision
-----------------
of this Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and which are held by shareholders who shall have neither
voted in favor of the Merger nor consented thereto in writing and who shall have
filed with the Company, prior to the vote on the Merger by the Company's
shareholders, a written notice of intention to demand that such shareholder be
paid the fair value for his Shares if the proposed action is effected and
thereafter demanded properly in writing payment of fair value for such Shares in
accordance with, and otherwise complied in all respects with, Sections 1930 and
1571 through 1580 of Pennsylvania Law (collectively, the "Dissenting Shares")
-----------------
shall be canceled but not be converted into or represent the right to receive
the Merger Consideration. Such shareholders shall be entitled instead to
receive payment of the court determined fair value of such Shares (which may be
more than, equal to, or less than the Merger Consideration) in accordance with
the provisions of such Sections 1930 and 1571 through 1580, except that all
Dissenting Shares held by shareholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to fair value for such
Shares under such Sections 1930 and 1571 through 1580 shall thereupon be deemed
to have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 2.09, of the
certificate or certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
payment of fair value received by the Company, withdrawals of such demands, and
any other instruments served pursuant to Pennsylvania Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for payment of fair value under Pennsylvania Law. The
Company shall not, except with the prior written consent of Parent, make any
payment with respect to any demands for payment of fair value or offer to settle
or settle any such demands.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior
-----------------------------------------
to the Effective Time, Parent shall designate a bank or trust company to act as
agent (the "Paying Agent") for the holders of Shares in connection with the
------------
Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 2.06(a). Such funds shall be deposited with the Paying
Agent by the Surviving Corporation promptly following the Effective Time and
shall be invested by the Paying Agent as directed by the Surviving Corporation.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of Shares
<PAGE>
8
entitled to receive the Merger Consideration pursuant to Section 2.06(a) a form
of letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the certificates evidencing such Shares (the
"Certificates") shall pass, only upon proper delivery of the Certificates to the
------------
Paying Agent) and instructions for use in effecting the surrender of the
Certificates pursuant to such letter of transmittal. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration for each Share formerly evidenced by such Certificate. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
(c) At any time commencing 180 days after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made available
to it), and thereafter such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them. Notwithstanding
the foregoing, neither Parent, the Company nor the Paying Agent shall be liable
to any holder of a Share for any Merger Consideration delivered in respect of
such Share to a public official pursuant to any abandoned property, escheat or
other similar law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of Shares on the records of the Company. From and after the Effective
Time, except for Parent, the holders of Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided herein or by applicable law.
SECTION 2.10. Withholding Rights. The Surviving Corporation and the
------------------
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares and/or
Options such amounts that the
<PAGE>
9
Surviving Corporation or the Paying Agent is required to deduct and withhold
with respect to the making of such payment under the United States Internal
Revenue Code of 1986, as amended (the "Code"), the rules and regulations
----
promulgated thereunder or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by the Surviving Corporation or the
Paying Agent, such amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares and/or Options in respect of
which such deduction and withholding was made by the Surviving Corporation or
the Paying Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Parent and Merger
Subsidiary that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of
--------------------------------------------
the Company and each subsidiary of the Company (a "Subsidiary") is a corporation
----------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect (as defined below). The Company and
each Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect. The term "Material Adverse
----------------
Effect" means any change or effect that is or is reasonably likely to be
- ------
materially adverse to the business, operations, properties, financial condition,
assets or liabilities of the Company and the Subsidiaries taken as a whole.
SECTION 3.02. Articles of Incorporation and Bylaws. The Company has
------------------------------------
heretofore furnished to Parent a complete and correct copy of the Articles of
Incorporation and the Bylaws or equivalent organizational documents, each as
amended to date, of the Company. Such Articles of Incorporation, Bylaws or
equivalent organizational documents are in full force and effect, and neither
the Company nor any Subsidiary is in violation of any provision of its Articles
of Incorporation, Bylaws or equivalent organizational documents.
<PAGE>
10
SECTION 3.03. Capitalization. The authorized capital stock of the
--------------
Company consists of 600,000,000 Shares and 3,000,000 shares of preferred stock,
without par value ("Company Preferred Stock"). As of July 31, 1997, (i)
-----------------------
142,687,492 Shares (including 5,169,412 Shares held by the Rhone-Poulenc Rorer
Inc. Employee Benefits Trust) are issued and outstanding, all of which are
validly issued, fully paid and nonassessable, (ii) 10,410
Shares are held in the treasury of the Company, and (iii) 6,723,603 options were
outstanding pursuant to the Company's employee stock option plans, each such
Option entitling the holder thereof to purchase one Share. As of July 31, 1997,
1,750 shares of Money Market Preferred Stock, without par value (liquidation
preference $100,000 per share), of the Company (the "Money Market Preferred
----------------------
Stock") are issued and outstanding. Except as set forth above, there are no
- -----
options, warrants or other rights, agreements, arrangements or commitments of
any character issued or authorized by the Company relating to the issued or
unissued capital stock of the Company or any Subsidiary or obligating the
Company or any Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Subsidiary. All Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Shares or any capital stock of any Subsidiary or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any person. Each outstanding share of capital
stock of each Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by the Company or another Subsidiary is
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's or such other
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever.
SECTION 3.04. Authority Relative to this Agreement. The Company has
------------------------------------
all necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder and the consummation by the Company of the
Transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Transactions (other
than, with respect to the Merger, the approval and adoption of this Agreement by
the holders of a majority of the then outstanding Shares if and to the extent
required by applicable law, and the filing and recordation of appropriate merger
documents as required by Pennsylvania Law). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Subsidiary,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. The restrictions on business
combinations contained in
<PAGE>
11
Subchapter F of Chapter 25 of Pennsylvania Law have been satisfied with respect
to the Transactions.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Articles of Incorporation or Bylaws or equivalent organizational
documents of the Company or any Subsidiary, (ii) conflict with or violate any
United States federal, state or local or any foreign statute, law, rule,
regulation, ordinance, code, order, or any other requirement or rule of law (a
"Law"), applicable to the Company or any Subsidiary or by which any property or
---
asset of the Company or any Subsidiary is bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of either of them is bound or affected,
except for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a Material
Adverse Effect or prevent or materially delay the performance by the Company of
any of its obligations under this Agreement or the consummation of any of the
Transactions.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States federal, state or local or any foreign government or any
court, administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), except (i)
-------------------
for applicable requirements, if any, of the Exchange Act, French securities
laws, state securities or "blue sky" laws ("Blue Sky Laws") and state takeover
-------------
laws and the filing of the applicable Merger Documents with the Secretary of the
Commonwealth of Pennsylvania and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate have a Material Adverse Effect or
prevent or materially delay the performance by the Company of any of its
obligations under this Agreement or the consummation of any of the Transactions.
SECTION 3.06. Compliance. Except as previously disclosed, neither
----------
the Company nor any Subsidiary is in conflict with, or in default or violation
of, (i) any Law applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or affected, or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to
<PAGE>
12
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of the Company or any Subsidiary is bound or
affected, except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
materially delay the performance by the Company of any of its obligations under
this Agreement or the consummation of any of the Transactions.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company
---------------------------------
has filed all forms, reports and documents required to be filed by it with the
SEC since December 31, 1994, and has heretofore delivered to Parent, in the form
filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years
ended December 31, 1994, 1995, and 1996, respectively, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31 and June 30, 1997, (iii) all
proxy statements relating to the Company's meetings of shareholders (whether
annual or special) held since December 31, 1994, and (iv) all other forms,
reports and other registration statements (other than Quarterly Reports on Form
10-Q not referred to in clause (ii) above) filed by the Company with the SEC
since December 31, 1994 (the forms, reports and other documents referred to in
clauses (i), (ii), (iii) and (iv) above being referred to herein, collectively,
as the "SEC Reports"). The SEC Reports (i) were prepared in all material
-----------
respects in accordance with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, as the case may
--------------
be, and the rules and regulations thereunder and (ii) did not at the time they
were filed 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 made therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary is required to file any form, report or
other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports was prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of the unaudited interim financial statements, as
permitted by Form 10-Q under the Exchange Act) and each fairly presented the
consolidated financial position, results of operations and changes in financial
position of the Company and the consolidated Subsidiaries as at the respective
dates thereof and for the respective periods indicated therein, except that the
unaudited interim financial statements are subject to normal and recurring year-
end adjustments which are not expected to be material in amounts.
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries at December 31, 1996,
including the notes thereto, included in the Company's Annual Report on Form 10-
K for the fiscal year then ended, or on the unaudited consolidated balance sheet
of the Company and the consolidated Subsidiaries at June 30, 1997, including the
notes thereto, included in the Company's
<PAGE>
13
Quarterly Report on Form 10-Q for the period then ended, the Company and the
consolidated Subsidiaries have no liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) which would be required to be
reflected on a consolidated balance sheet, or in the notes thereto, prepared in
accordance with generally accepted accounting principles, except for liabilities
and obligations incurred in the ordinary course of business consistent with past
practice since June 30, 1997 and which would not have a Material Adverse Effect.
SECTION 3.08. Offer Documents; Schedule 14D-9; Schedule 13E-3; Proxy
------------------------------------------------------
Statement. Neither the Schedule 14D-9 nor any information supplied by the
- ---------
Company for inclusion in the Offer Documents or the Schedule 13E-3 shall, at the
respective times the Schedule 14D-9, the Offer Documents, the Schedule 13E-3 or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to shareholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. Neither the proxy statement to be sent to the shareholders of the
Company in connection with the Shareholders' Meeting (as hereinafter defined)
nor the information statement to be sent to such shareholders, as appropriate
(such proxy statement or information statement, as amended or supplemented,
being referred to herein as the "Proxy Statement"), shall, at the date the Proxy
---------------
Statement (or any amendment or supplement thereto) is first mailed to
shareholders of the Company, at the time of the Shareholders' Meeting, be false
or misleading with respect to any material fact, or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Shareholders' Meeting which
shall have become false or misleading. Notwithstanding the foregoing, the
Company makes no representation and warranty with respect to information
supplied by Parent, Merger Subsidiary or any of their representatives which is
contained in any of the foregoing documents or the Offer Documents. The
Schedule 14D-9 and the Proxy Statement shall comply in all material respects as
to form with the requirements of the Exchange Act and the rules and regulations
thereunder.
SECTION 3.09. Brokers. No broker, finder or investment banker (other
-------
than Goldman, Sachs) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Goldman,
Sachs pursuant to which such firm would be entitled to any payment relating to
the Transactions.
<PAGE>
14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
OF PARENT AND MERGER SUBSIDIARY
-------------------------------
Parent and Merger Subsidiary hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 4.01. Corporate Organization. Parent is a societe anonyme
----------------------
duly organized and validly existing under the laws of the Republic of France and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of Pennsylvania.
SECTION 4.02. Authority Relative to this Agreement. Each of Parent
------------------------------------
and Merger Subsidiary has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
Parent and Merger Subsidiary, the performance by Parent and Merger Subsidiary of
their respective obligations hereunder and the consummation by Parent and Merger
Subsidiary of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Parent or Merger Subsidiary are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the filing
and recordation of appropriate merger documents as required by Pennsylvania
Law). This Agreement has been duly and validly executed and delivered by Parent
and Merger Subsidiary and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
each of Parent and Merger Subsidiary enforceable against each of Parent and
Merger Subsidiary in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Parent and Merger Subsidiary do not,
and the performance of this Agreement by Parent and Merger Subsidiary will not,
(i) conflict with or violate the statuts (articles of association) and By-laws
of Parent or the Articles of Incorporation or By-laws of Merger Subsidiary, (ii)
conflict with or violate any Law applicable to Parent or Merger Subsidiary or by
which any property or asset of either of them is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of Parent
or Merger Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Merger Subsidiary is a party or by which Parent or Merger
Subsidiary or any property or asset of either of them is bound or affected,
<PAGE>
15
except for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent, individually or in the aggregate have a
Parent Material Adverse Effect or materially delay the performance by Parent or
Merger Subsidiary of any of its obligations under this Agreement or the
consummation of any of the Transactions. The term "Parent Material Adverse
-----------------------
Effect" means any change of effect that is or is reasonably likely to be
- ------
materially adverse to the business, operations, properties, financial condition,
assets or liabilities of Parent and its subsidiaries taken as a whole.
(b) The execution and delivery of this Agreement by Parent and Merger
Subsidiary do not, and the performance of this Agreement by Parent and Merger
Subsidiary will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity, except (i) for
applicable requirements, if any, of the Exchange Act, French securities laws,
Blue Sky Laws and state takeover laws, and the filing of the applicable Merger
Documents with the Secretary of the Commonwealth of Pennsylvania and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
have a Parent Material Adverse Effect or prevent or materially delay the
performance by Parent or Merger Subsidiary of any of its obligations under this
Agreement or the consummation of any of the Transactions.
SECTION 4.04. Offer Documents; Proxy Statement. None of the Offer
--------------------------------
Documents nor any of the information supplied by Parent or Merger Subsidiary
specifically for inclusion in the Schedule 14D-9 shall, at the time the
respective documents or the Schedule 14D-9 are filed with the SEC or are first
published, sent or given to shareholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to shareholders of the Company, at the time
of the Shareholders' Meeting, contain any statement which, at such time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Shareholders' Meeting which
shall have become false or misleading. Notwithstanding the foregoing, Parent
and Merger Subsidiary make no representation or warranty with respect to any
information supplied by the Company or any of its representatives which is
contained in any of the foregoing documents or the Offer Documents. The Offer
Documents shall comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
<PAGE>
16
SECTION 4.05. Brokers. No broker, finder or investment banker (other
-------
than Morgan Stanley & Co. Incorporated, Union de Banques Suisses Paris and UBS
Limited) is entitled to any brokerage, finder's or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Parent or Merger Subsidiary.
SECTION 4.06. Ownership of Merger Subsidiary; No Prior Activities.
---------------------------------------------------
(a) Merger Subsidiary was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) As of the date hereof through the Effective Time, all of the
outstanding capital stock of the Merger Subsidiary will be owned directly by
Parent. As of the date hereof and through the Effective Time, there will be no
options, warrants or other rights (including registration rights), agreements,
arrangements or commitments to which Merger Subsidiary is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, Merger Subsidiary or obligating Merger Subsidiary to grant, issue
or sell any shares of the capital stock of, or other equity interests in, Merger
Subsidiary, by sale, lease, license or otherwise. There are no obligations,
contingent or otherwise, of Merger Subsidiary to repurchase, redeem or otherwise
acquire any shares of the capital stock of Merger Subsidiary.
(c) As of the date hereof and as of the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Merger
Subsidiary has not and will not have incurred, directly or indirectly, through
any subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 4.07. Financing. Parent has or will have available, prior to
---------
the expiration of the Offer, and will, as necessary, provide to Merger
Subsidiary on a timely basis, sufficient funds to enable Parent and Merger
Subsidiary to consummate the Offer, the Merger and the other transactions
contemplated hereby and to pay all related fees and expenses.
ARTICLE V
COVENANTS
---------
SECTION 5.01. Conduct of the Business Pending the Merger. The
------------------------------------------
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, the businesses
of the Company and the Subsidiaries
<PAGE>
17
shall be conducted only in, and the Company and the Subsidiaries shall not take
any action except in, the ordinary course of business and in a manner consistent
with past practice; and the Company shall use its reasonable best efforts to
preserve substantially intact the business organization of the Company and the
Subsidiaries, to keep available the services of the current officers, employees
and consultants of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has significant business
relations.
SECTION 5.02. Shareholders' Meeting; Voting of Shares. In order to
---------------------------------------
consummate the Merger, the Company, acting through the Board, shall, in
accordance with applicable law and the Company's Articles of Incorporation and
Bylaws, (a) duly call, give notice of, convene and hold a special meeting of its
shareholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on this Agreement and the Transactions
(the "Shareholders' Meeting") and (b) (i) include in the Proxy Statement the
---------------------
recommendation of the Board and the Special Committee that the shareholders of
the Company approve and adopt this Agreement and the Transactions, subject to
their respective fiduciary duties as advised by independent counsel and (ii) use
its reasonable best efforts to obtain such approval and adoption. At the
Shareholders' Meeting, Parent shall cause all Shares then owned by it and its
subsidiaries to be voted in favor of the approval and adoption of this Agreement
and the Transactions.
SECTION 5.03. Proxy Statement. If required by applicable law, as
---------------
soon as practicable following consummation of the Offer, the Company shall file
the Proxy Statement with the SEC under the Exchange Act, and shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC. Parent,
Merger Subsidiary and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the opportunity to review
the Proxy Statement prior to its being filed with the SEC and shall give Parent
and its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Company, Parent and Merger Subsidiary agrees to use its reasonable best
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of and requests by the SEC and to cause the Proxy Statement
and all required amendments and supplements thereto to be mailed to the holders
of Shares entitled to vote at the Shareholders' Meeting at the earliest
practicable time.
<PAGE>
18
SECTION 5.04. Access to Information; Confidentiality. (a) From the
--------------------------------------
date hereof to the Effective Time, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of the
Company and the Subsidiaries to, afford the officers, employees and agents,
including financing sources, of Parent and Merger Subsidiary complete access
during normal business hours and without disrupting the orderly conduct of
business by the Company and its Subsidiaries to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company and each Subsidiary, and shall furnish Parent and Merger Subsidiary with
all financial, operating and other data and information as Parent or Merger
Subsidiary, through its officers, employees or agents, may reasonably request.
(b) No investigation pursuant to this Section 5.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 5.05. Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) The By-laws of the Surviving Corporation shall contain provisions no less
favorable with respect to indemnification than are set forth in Article VII of
the Bylaws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
the Effective Time were directors, officers, employees, fiduciaries or agents of
the Company, unless such modification shall be required by law.
(b) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee, fiduciary and
agent of the Company and each Subsidiary (collectively, the "Indemnified
-----------
Parties") against all costs and expenses (including attorneys' fees), judgments,
- -------
fines, losses, claims, damages, liabilities and settlement amounts paid in
connection with any claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee, fiduciary or
agent, whether occurring before or after the Effective Time, until the
expiration of the statute of limitations relating thereto (and shall pay any
expenses in advance of the final disposition of such action or proceeding to
each Indemnified Party to the fullest extent permitted under Pennsylvania Law,
upon receipt from the Indemnified Party to whom expenses are advanced of any
undertaking to repay such advances required under Pennsylvania Law). In the
event of any such claim, action, suit, proceeding or investigation, (i) the
Company or the Surviving Corporation, as the case may be, shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Company or
<PAGE>
19
the Surviving Corporation, promptly after statements therefor are received and
(ii) the Company and the Surviving Corporation shall cooperate in the defense of
any such matter; provided, however, that neither the Company nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld); and provided further
that neither the Company nor the Surviving Corporation shall be obligated
pursuant to this Section 5.05(b) to pay the fees and expenses of more than one
counsel (plus appropriate local counsel) for all Indemnified Parties in any
single action except (x) that the persons who served as directors of the Company
who were not designees of Parent shall be entitled to retain one additional
counsel (plus appropriate local counsel) to represent them at the expense of the
Company or the Surviving Corporation, and (y) to the extent that two or more of
such Indemnified Parties shall have conflicting interests in the outcome of such
action, in which case such additional counsel (including local counsel) as may
be required to avoid any such conflict or likely conflict may be retained by the
Indemnified Parties at the expense of the Company or the Surviving Corporation;
and provided further that, in the event that any claim for indemnification is
asserted or made within the period prior to the expiration of the applicable
statute of limitations, all rights to indemnification in respect of such claim
shall continue until the disposition of such claim. All rights under this
Section 5.05(b) shall be deemed to be a contract between the Company and each of
the Indemnified Parties.
(c) The Surviving Corporation shall use its reasonable best efforts to
maintain in effect for six years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by the
Company covering those persons who are currently covered by such policies
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 5.05(c) more than an amount per year equal to
150% of current annual premiums paid by the Company for such insurance. In the
event that, but for the proviso to the immediately preceding sentence, the
Surviving Corporation would be required to expend more than 150% of current
annual premiums, the Surviving Corporation shall obtain the maximum amount of
such insurance obtainable by payment of annual premiums equal to 150% of current
annual premiums.
(d) In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, or at Parent's option, Parent, shall
assume the obligations set forth in this Section 5.05 and the indemnification
agreements, dated as of July 2, 1997, between the Company and the members of the
Special Committee.
<PAGE>
20
SECTION 5.06. Notification of Certain Matters. The Company shall
-------------------------------
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence, or nonoccurrence, of any event the occurrence,
or nonoccurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect and (ii) any failure of the Company, Parent or Merger Subsidiary, as the
case may be, to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.06
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
SECTION 5.07. Further Action; Reasonable Best Efforts. Upon the
---------------------------------------
terms and subject to the conditions hereof, each of the parties hereto shall (i)
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the Transactions, including, without limitation, using its reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of each Governmental Entity and parties to contracts
with the Company and the Subsidiaries as are necessary for the consummation of
the Transactions and to fulfill the conditions to the Offer and the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement and the Surviving Corporation shall
use their reasonable best efforts to take all such action.
SECTION 5.08. Public Announcements. Parent, Merger Subsidiary and
--------------------
the Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or any
Transaction and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with a securities exchange to which Parent or the Company is a
party.
SECTION 5.09. Termination of Agreements. The parties hereto hereby
-------------------------
agree that the Acquisition Agreement shall be terminated as of the Effective
Time. For purposes of clarity, it is understood by the parties hereto that all
representations, warranties and agreements between the parties which, by the
terms of such agreement, survive either or both the Closing Date (as that term
is defined in the Acquisition Agreement) or the termination of such agreement
shall all be terminated as of the Effective Time.
SECTION 5.10. Financing. Parent shall ensure that it or Merger
---------
Subsidiary, as the case may be, has sufficient funds to acquire all the
outstanding Shares in the Offer and the Merger and pay all related fees and
expenses.
<PAGE>
21
ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
SECTION 6.01. Conditions to the Merger. The respective obligations
------------------------
of each party to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement and the Transactions
--------------------
shall have been approved and adopted by the affirmative vote of the
shareholders of
the Company to the extent required by Pennsylvania Law and the Articles of
Incorporation and Bylaws of the Company;
(b) No Order. No Governmental Entity shall have enacted, issued,
--------
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) which is then in effect and has the effect of preventing or
prohibiting consummation of the Merger or the effective operation of the
business of the Company and the Subsidiaries after the Effective Time;
(c) Offer. Parent or its permitted assignee shall have purchased
-----
all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that this condition shall not be applicable to the
obligations of Parent or Merger Subsidiary if, in breach of this Agreement
or the terms of the Offer, Parent fails to purchase any Shares validly
tendered and not withdrawn pursuant to the Offer.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
SECTION 7.01. Termination. This Agreement may be terminated and the
-----------
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions by the shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent, Merger Subsidiary and the Special Committee on behalf
of the Company; or
<PAGE>
22
(b) by either Parent or the Special Committee on behalf of the
Company if (i) the Effective Time shall not have occurred on or before
March 31, 1998; provided, however, that the right to terminate this
Agreement under this Section 7.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date or (ii) any court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(c) by Parent, if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Annex A
hereto, Parent shall have (A) failed to commence the Offer within 30 days
following the date of this Agreement, or (B) terminated the Offer without
having accepted any Shares for payment thereunder or failed to pay for
Shares pursuant to the Offer within 90 days following the commencement of
the Offer, unless such termination or failure to pay for Shares shall have
been caused by or resulted from the failure of Parent or Merger Subsidiary
to perform in any material respect any material covenant or agreement of
either of them contained in this Agreement or the material breach by Parent
or Merger Subsidiary of any material representation or warranty of either
of them contained in this Agreement or (ii) prior to the purchase of Shares
pursuant to the Offer, the Special Committee shall have withdrawn or
modified in a manner adverse to Parent or Merger Subsidiary its approval or
recommendation of the Offer, this Agreement, the Merger or any other
Transaction or shall have resolved to do any of the foregoing; or
(d) by the Company, upon approval of the Special Committee, if
due to an occurrence or circumstance that would result in a failure to
satisfy any of the conditions set forth in Annex A hereto, Parent shall
have (i) failed to commence the Offer within 30 days following the date of
this Agreement, or (ii) terminated the Offer without having accepted any
Shares for payment thereunder or (iii) failed to pay for Shares pursuant to
the Offer within 90 days following the commencement of the Offer, unless
such termination or failure to pay for Shares shall have been caused by or
resulted from the failure of the Company to perform in any material respect
any material covenant or agreement of it contained in this Agreement or the
material breach by the Company of any material representation or warranty
of it contained in this Agreement; or
(e) by the Company, upon approval of the Special Committee, if
any representation or warranty of Parent and Merger Subsidiary in this
Agreement which is qualified as to materiality shall not be true and
correct or any such representation or warranty that is not so qualified
shall not be true and correct in any material respect, in
<PAGE>
23
each case as if such representation or warranty was made as of such time on
or after the date of this Agreement; or Parent or Merger Subsidiary shall
have failed to perform in any material respect any obligation or to comply
in any material respect with any agreement or covenant of Parent or Merger
Subsidiary to be performed or complied with by it under this Agreement.
SECTION 7.02. Effect of Termination. In the event of the termination
---------------------
of this Agreement pursuant to Section 7.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except (i) as set forth in Section 8.01 and (ii) nothing herein shall relieve
any party from liability for any willful breach hereof.
SECTION 7.03. Amendment. This Agreement may be amended by the
---------
parties hereto by action taken by or on behalf of their respective Boards of
Directors (and approved by the Special Committee) at any time prior to the
Effective Time; provided, however, that, after the approval and adoption of this
Agreement and the Transactions by the shareholders of the Company, no amendment
may be made which would reduce the amount or change the type of consideration
into which each Share shall be converted upon consummation of the Merger,
imposes conditions to the Merger other than set forth in Section 6.01 or would
otherwise amend or change the terms and conditions of the Merger in a manner
materially adverse to the holders of the Shares (other than Parent and its
affiliates) or would adversely affect the rights of the Indemnified Persons
under Section 5.05. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
SECTION 7.04. Waiver. At any time prior to the Effective Time except
------
as otherwise provided in this Agreement, any party hereto may (i) extend the
time for the performance of any obligation or other act of any other party
hereto, (ii) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any agreement or condition contained herein, other than the
Minimum Condition. Any such extension or waiver shall be valid if set forth in
an instrument in writing signed by the party or parties to be bound thereby and,
in the case of any extension or waiver by which the Company is to be bound, only
if approved by the Special Committee.
ARTICLE VIII
GENERAL PROVISIONS
------------------
SECTION 8.01. Non-Survival of Representations, Warranties and
-----------------------------------------------
Agreements. The representations, warranties and agreements in this Agreement
- ----------
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, as the case
<PAGE>
24
may be, except that (i) the agreements set forth in Articles II and VIII and
Section 5.05 shall survive the Effective Time indefinitely and (ii) the
agreements set forth in Article VIII shall survive the termination of this
Agreement indefinitely.
SECTION 8.02. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8.02):
if to Parent or Merger Subsidiary:
Rhone-Poulenc S.A.
25, quai Paul Doumer
92408 Courbevoie
Cedex, France
Telecopier No: (33-1) 47-68-11-33
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No: (212) 848-7179
Attention: Creighton O'M. Condon, Esq.
if to the Company:
Rhone-Poulenc Rorer Inc.
500 Arcola Road
Collegeville, PA 19426
Telecopier No: (610) 454-8985
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
<PAGE>
25
Telecopier No: (212) 735-2000
Attention: Margaret L. Wolff, Esq.
SECTION 8.03. Certain Definitions. For purposes of this Agreement,
-------------------
the term:
(a) "affiliate" of a specified person means a person who directly
---------
or indirectly through one or more intermediaries controls, is controlled
by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any Shares means a person
----------------
who shall be deemed to be the beneficial owner of such Shares (i) which
such person or any of its affiliates or associates (as such term is defined
in Rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "business day" means any day on which the principal offices
------------
of the SEC in Washington, D.C. are open to accept filings, or, in the case
of determining a date when any payment is due, any day on which banks are
not required or authorized by law or executive order to close in the City
of New York;
(d) "control" (including the terms "controlled by" and "under
------- ------------- -----
common control with") means the possession, directly or indirectly or as
-------------------
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "person" means an individual, corporation, partnership,
------
limited partnership, limited liability company, syndicate, person
(including, without limitation, a "person" as defined in Section 13(d)(3)
of the Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and
<PAGE>
26
(f) "subsidiary" or "subsidiaries" of the Company, the Surviving
---------- ------------
Corporation, Parent or any other person means an affiliate controlled by
such person, directly or indirectly, through one or more intermediaries.
SECTION 8.04. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 8.05. Entire Agreement; Assignment. The Acquisition
----------------------------
Agreement and this Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and supercede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Merger Subsidiary may
assign all or any of their rights and obligations hereunder to any wholly-owned
subsidiary Parent provided that no such assignment shall relieve the assigning
party of its obligations hereunder if such assignee does not perform such
obligations. To the extent that any terms of the Acquisition Agreement and this
Agreement are inconsistent, the terms of this Agreement shall control.
SECTION 8.06. Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 5.05 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 8.07. Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 8.08. Fees and Expenses. All fees and expenses incurred in
-----------------
connection with this Agreement and the Transactions shall be paid by the party
incurring such fees and expenses, whether or not such transactions are
consummated.
<PAGE>
27
SECTION 8.09. Governing Law. Except to the extent that Pennsylvania
-------------
Law is mandatorily applicable to the Transactions, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of New York
(without regard to conflicts of laws principle thereof). All actions and
proceedings arising out of or relating to this Agreement shall be heard and
exclusively determined in any New York state or federal court sitting in the
County of New York and the parties hereto hereby consent to the jurisdiction of
such courts in any such action or proceeding.
SECTION 8.10. Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 8.11. Counterparts. This Agreement may be executed in one or
------------
more counterparts (including by facsimile transmission), and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
SECTION 8.12. Consent to Jurisdiction: Appointment of Agent for
-------------------------------------------------
Service of Process. Parent hereby (a) submits to the jurisdiction of any New
- ------------------
York State and Federal courts sitting in New York City with respect to such
matters arising out of or relating hereto, (b) agrees that all claims with
respect to such action or proceeding may be heard and determined in such New
York State or Federal court, (c) waives the defense of an inconvenient forum,
(d) consents to service of process upon it by mailing or delivering such service
to its agent CT Corporation System, 1633 Broadway, New York, New York 10019 (the
"Agent") and authorizes and directs its Agent to accept such service, (e) agrees
-----
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law, and (f) to the extent that it or its properties have or
hereafter may acquire immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise),waives such immunity in
respect of its obligations under this Agreement.
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
RHONE-POULENC S.A.
By /s/ Igor Landau
________________________________________________
Name:
Title:
RP VEHICLE, INC.
By /s/ Igor Landau
________________________________________________
Name:
Title:
RHONE-POULENC RORER INC.
By /s/ Timothy Rothwell
________________________________________________
Name:
Title:
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
-----------------------
Notwithstanding any other provision of the Offer, Parent shall not be
required to accept for payment or pay, subject to the applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, for any
Shares tendered pursuant to the Offer, and may terminate or amend the Offer to
the extent expressly provided in this Agreement and may postpone the acceptance
for payment of and payment for Shares tendered, if (i) the Minimum Condition
shall not have been satisfied or (ii) at any time on or after the date of this
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding by any Governmental Entity, (i) challenging or seeking to make
illegal, materially delay or otherwise directly or indirectly restrain or
prohibit or make materially more costly the making of the Offer, the
acceptance for payment of, or payment for, any Shares by Parent or any
other affiliate of Parent or the consummation of any other Transaction;
(ii) seeking to prohibit or limit materially the ownership or operation by
the Company, Parent or any of their subsidiaries of all or any material
portion of the business or assets of the Company or any of its
subsidiaries, or to compel the Company, Parent or any of their subsidiaries
to dispose of or hold separate all or any material portion of the business
or assets of the Company or any of its subsidiaries, as a result of the
Transactions; (iii) seeking to impose or confirm limitations on the ability
of Parent or any other affiliate of Parent to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right
to vote any Shares acquired by Parent pursuant to the Offer or otherwise on
all matters properly presented to the Company's shareholders, including,
without limitation, the approval and adoption of the Agreement and the
Merger; (iv) seeking to require divestiture by Parent or any other
affiliate of Parent of any Shares; or (v) which otherwise has a Material
Adverse Effect on the Company;
(b) there shall have been any order or injunction issued, or any Law
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to Parent, the Company or any subsidiary or affiliate of Parent
or the Company which has resulted, or is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities of the Company on the NYSE
or the Paris Bourse; (ii)
<PAGE>
A-2
any general suspension of, or limitation on prices for, trading in equity
securities on the Paris Bourse; (iii) any decline, measured from the date
hereof, in the Standard & Poor's 500 Index by an amount in excess of 20%;
(iv) any change in currency exchange rates, measured from the close of
business on the date of this Agreement, resulting in an increase of 15% or
more in the Per Share Amount as translated from U.S. dollars into French
Francs; (v) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or the Republic of
France; (vi) any limitation (whether or not mandatory) by any Governmental
Entity, on, or other event that, could reasonably be expected to have a
material adverse effect on the extension of credit by banks or other
lending institutions, which limitation or other event is reasonably likely
to materially affect the ability of Parent to pay for the Shares; (vii) a
commencement of war or armed hostilities or other national or international
calamity directly or indirectly involving the United States or the Republic
of France; or (viii) in the case of any of the foregoing existing on the
date hereof, a material acceleration or worsening thereof;
(e) (A) the Special Committee shall have withdrawn or modified in a
manner adverse to Parent or Merger Subsidiary the adoption or
recommendation of the Offer, the Merger or the Agreement, or (B) the
Special Committee shall have resolved to do any of the foregoing;
(f) any representation or warranty of the Company in this Agreement
which is qualified as to materiality shall not be true and correct or any
such representation or warranty that is not so qualified shall not be true
and correct in any material respect; provided in any such case, such
representation and warranty shall continue to be incorrect in any material
respect at the time of such termination;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(h) this Agreement shall have been terminated in accordance with its
terms; or
(i) Parent, Merger Subsidiary and the Company (with the approval of
the Special Committee) shall have agreed that Parent shall terminate the
Offer or postpone the acceptance for payment of or payment for Shares
thereunder;
which, in the reasonable judgment of Parent in any such case, and regardless of
the circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
<PAGE>
A-3
The foregoing conditions are for the sole benefit of Parent and may be
asserted by Parent regardless of the circumstances giving rise to any such
condition or may be waived by Parent in whole or in part at any time and from
time to time in its reasonable discretion. The failure by Parent at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
<PAGE>
EXHIBIT (G)(1)
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK
++
BRICKELL PARTNERS, A Florida +
Partnership, Individually On Its Own +
Behalf And On Behalf Of All Others + Index No. 603493 97,
Similarly Situated, +
+
+
+ CLASS ACTION COMPLAINT
Plaintiff, +
++
+
+ JURY TRIAL DEMANDED
- against - +
+
RHONE-POULENC S.A., +
+
Defendant. +
++
Plaintiff, by its attorneys, for its class action complaint against
defendant, alleges upon information and belief, except as to Paragraph 2,
which is alleged upon knowledge. Plaintiff's information and belief is based
on, inter alia, the investigation conducted by its attorneys, including review
of documents filed with the Securities and Exchange Commission, articles in
the financial news media, press releases, and other publicly available
information.
1. Plaintiff brings this action individually and as a class action on behalf
of all persons, other than defendant and persons or entities related to it,
who own the common stock of Rhone-Poulenc Rorer Inc. ("Rorer" or the
"Company") and thus are similarly situated (the "Class"), for injunctive and
other relief. Plaintiff seeks injunctive relief herein to, inter alia, enjoin
the implementation of an inherently unfair transaction whereby the defendant,
the Company's majority shareholder, Rhone-Poulenc S.A. ("Rhone-Poulenc")--
which owns approximately 60% of the outstanding common stock of Rorer and
controls the operations of the Company--will acquire all of the remaining
shares of the Company that it does not already own for a grossly inadequate
price. Alternatively, in the event that the proposed transaction is
implemented, plaintiff seeks to recover damages caused by the breach of
fiduciary duties owed by the defendant.
PARTIES
2. Plaintiff Brickell Partners is a Florida partnership, and at all relevant
times has been, the owner of Rorer common stock.
3. Defendant Rhone-Poulenc is a corporation duly organized and existing
under the laws of France and maintains its principal place of business at 25
Quai Paul Doumer, 92408 Courbevoie Cedex, France. Rhone-Poulenc's American
depositary receipts ("ADRs") trade on the New York Stock Exchange ("NYSE").
Rhone-Poulenc researches, develops, produces, markets, and sells human and
animal pharmaceuticals and is engaged in the chemical, fiber, and polymer
business. Rhone-Poulenc presently owns or controls approximately 68.3% of
Rorer's outstanding stock.
4. By reason of its dominant position as the majority stockholder of Rorer
and its ability to control the business and corporate affairs of Rorer at all
relevant times, Rhone-Poulenc owed and owes Rorer stockholders fiduciary
duties of fairness and trust, and was and is obligated to refrain from using
its dominant position over Rorer to enrich itself at the expense of other
stockholders.
JURISDICTION AND VENUE
5. Venue in this action lies in New York County. Rhone-Poulenc's ADRs are
listed and traded on the NYSE.
6. At all relevant times, Rhone-Poulenc did or performed acts within or
without the State that subject it to the jurisdiction of the Courts of the
State of New York.
<PAGE>
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this class action in its own behalf and as a class
action, pursuant to Article 9 of the Civil Practice, Law and Rules, on behalf
of itself and all stockholders of Rorer, except defendant herein and any
person, firm, trust, corporation, or other entity related to or affiliated
with defendant, all of whom are being and will continue to be threatened with
injury arising from defendant's actions as is described more fully below.
8. This action is properly maintainable as a class action.
9. The Class is so numerous that joinder of all members is impracticable.
Approximately 43 million shares of the Company's common stock are owned by at
least several hundred public shareholders of record other than Rhone-Poulenc.
10. There are questions of law and fact common to the Class including, inter
alia, whether;
a. the offer is grossly unfair to the public stockholders of the Company;
b. defendant willfully and wrongfully failed to maximize stockholder
value through an adequate auction or market check process;
c. defendant, by virtue of its dominant and control position over Rorer,
has breached and will continue to breach its fiduciary and other common law
duties owed by it to plaintiff and the other members of the Class; and
d. plaintiff and the other members of the Class would be irreparably
damaged by the wrongs complained of herein.
11. Plaintiff is committed to prosecuting the action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Plaintiff is an adequate
representative of the Class.
12. The prosecution of separate actions by individual members of the Class
would create the risk of inconsistent or varying adjudications with respect to
individual members of the Class which would establish incompatible standards
of conduct for defendant, or adjudications with respect to individual members
of the Class which would, as a practical matter, be dispositive of the
interests of the other members not parties to the adjudications or
substantially impair or impede their ability to protect their interests.
13. Defendant has acted, or refused to act, on grounds generally applicable
to, and causing injury to, the Class and therefore, preliminary and final
injunctive relief on behalf of the Class as a whole is appropriate.
SUBSTANTIVE ALLEGATIONS
14. Rorer is a corporation duly organized and existing under the laws of the
State of Pennsylvania and which maintains its principal executive offices at
500 Arcola Road, Collegeville, Pennsylvania 19242. Rorer is primarily engaged
in the development, manufacture, and marketing of a line of pharmaceutical
products, including prescription drugs, over-the-counter medicines and plasma-
derived products. Rorer is a majority-owned subsidiary of Rhone-Poulenc. Rorer
has approximately 136.8 million shares of common stock outstanding, of which
approximately 68.3% are owned by Rhone-Poulenc. The remaining approximately 43
million shares are held by at least several hundred public shareholders of
record other than defendant. Rorer's stock is publicly traded on the NYSE.
15. On June 26, 1997, Rhone-Poulenc announced it was considering an offer
(the "Offer") to acquire all of the shares of Rorer it does not already own in
a cash transaction whereby Rhone-Poulenc would pay $92.00 cash for each of
such shares. The proposed transaction would provide Rorer shareholders with a
premium of only 16% over the trading price of Rorer stock at the close of
business on June 25, 1997.
2
<PAGE>
16. Rhone-Poulenc is taking advantage of its majority stock ownership
position in Rorer by posing the inadequate Offer on Rorer's public
stockholders. The Offer is part of a sweeping corporate overhaul of Rhone-
Poulenc, meant to benefit Rhone-Poulenc. Pursuant to the planned overhaul,
Rhone-Poulenc intends to spin off its chemical, fibers, and polymer
operations, in order to become one of the world's biggest pharmaceutical
companies, by combining Rorer's business with Rhone-Poulenc's vaccine and
animal health businesses. According to The Wall Street Journal of June 27,
1997, the chemical business has been less profitable than the pharmaceutical
business and has weighed down Rhone-Poulenc's profits and price share. Thus,
Rhone-Poulenc's plan is to divest itself of its less profitable businesses
and, taking advantage of its dominant position over Rorer, acquire from the
public shareholders of Rorer, at an inadequate consideration, Rorer's more
profitable pharmaceutical business.
17. Rhone-Poulenc announced the Offer during the period when a so-called
"standstill agreement" precludes it from acquiring all of the publicly traded
shares of Rorer. The restriction under the "standstill agreement", dating from
a 1990 merger with Rorer Inc. that created the current Rorer, expires July 31,
1997.
18. Because of its position of dominance and control of Rorer, Rhone-Poulenc
has announced the Offer at this time so that it can cap the price of Rorer at
no more than the approximate amount of the Offer, thereby limiting the price
it will have to pay for the balance of Rorer's stock. By announcing the Offer
now, Rhone-Poulenc has locked in the offer price and avoided having to make a
higher offer were Rorer's stock, unaffected by the Offer, to rise between now
and July 31, 1997.
19. Rhone-Poulenc is presently the largest stockholder of Rorer, and seeks
to acquire Rorer's pharmaceutical business, growth, and cash flow to squeeze
out Rorer's public stockholders at a price which is wholly inadequate.
20. Even in light of what has been publicly disclosed about Rorer's present
business and future prospects, the Offer is grossly unfair, inadequate, and
provides value to Rorer's shareholders substantially below the fair or
inherent value of the Company. The intrinsic value of the equity of Rorer is
materially greater than the consideration contemplated by the Offer price,
taking into account Rorer's pharmaceutical business, asset value, liquidation
value, its expected growth, and it revenues and cash flow.
21. The Offer is wrong, unfair, harmful to Rorer's public stockholders,
wholly inadequate, and will deny Class members their right to share
proportionately in the true value of Rorer's valuable assets, profitable
business and future growth in profits and earnings, while usurping the same
for the benefit of defendant.
22. The Offer is not the result of arm's length negotiations but was fixed
arbitrarily by Rhone-Poulenc, which dominates and controls Rorer, as part of
its unlawful plan and scheme to obtain 100% ownership of Rorer at the lowest
possible price and to usurp for itself Rorer's profitable pharmaceutical
business.
23. Defendant has violated fiduciary and other common law duties owed to
plaintiff and the other members of the Class in that it is using its dominant,
control position over Rorer to enrich itself at the expense of Rorer's other
stockholders.
24. As a result of defendant's actions, plaintiff and the Class have been
and will be damaged by the breaches of fiduciary duty and, therefore,
plaintiff and the Class will not receive the fair value of Rorer's assets and
businesses.
25. Unless enjoined by this Court, defendant will continue to breach its
fiduciary duties owed to plaintiff and the Class, and will succeed in its plan
to exclude plaintiff and the Class from the fair proportionate share of
Rorer's valuable assets and businesses, all to the irreparable harm of the
Class.
26. Plaintiff and the Class have no adequate remedy of law.
3
<PAGE>
WHEREFORE, plaintiff prays for judgment and relief as follows:
a. declaring that this lawsuit is properly maintainable as a class action
and certifying plaintiff as representative of the Class;
b. declaring that defendant has committed, or sided and abetted in
committing, a gross abuse of trust and have breached its fiduciary duties
to plaintiff and the other members of the Class;
c. preliminarily and permanently enjoining defendant and its counsel,
agents, employees, and all persons acting under, in concert with, or for
them, from proceeding with the Offer;
d. awarding compensatory damages against defendant, in an amount to be
determined at trial, together with prejudgment interest at the maximum rate
allowable by law;
e. ordering defendant to permit a shareholders' committee comprised of
Class members and the proposed Class representative, to ensure a fair
procedure, adequate procedural safeguards, and independent input by
plaintiff and the Class in connection with any transaction for the shares
of Rorer;
f. awarding plaintiff and the Class their costs and disbursements and
reasonable allowances for plaintiff's counsel and experts' fees and
expenses; and
g. granting such other and further relief as may be just and proper.
Dated: July 8, 1997
Respectfully submitted
WECHSLER HARWOOD HALEBIAN & PFEIFFER
LLP
805 Third Avenue
New York, New York 10022
(212) 735-7400
Attorneys for Plaintiffs
Of Counsel:
SAVETT, FRUTKIN, PODELL & RYAN, P.C.
320 Walnut Street, Suite 508
Philadelphia, PA 19106
(215) 923-5400
4
<PAGE>
EXHIBIT (G)(2)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
++
KENNET STEINER, +
+
Plaintiff, +
+
+ CIVIL ACTION NO.
+
- against - ++
+ COMPLAINT FOR INJUNCTIVE RELIEF
+
RHONE-POULENC S.A., +
+
Defendant. +
++
Plaintiff, by his attorneys, alleges upon personal knowledge as to himself
and his own acts, and upon information and belief as to all other matters
based upon the investigation conducted by and through his attorneys which
included, among other things, a review of the filings by Rhone-Poulenc Rorer
Inc. ("Rorer" or the "Company") and Rhone-Poulenc S.A. ("Rhone-Poulenc") with
the Securities and Exchange Commission ("SEC"), news wire services, news
releases, and other publicly disseminated filings and materials, as follows:
JURISDICTION AND VENUE
1. This action is brought to remedy violations of Sections 14(d) and 14(e)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 15
U.S.C. (S)(S) 78n(d) and 78n(e).
2. The subject matter jurisdiction of this Court is based upon Section 27 of
the Exchange Act, 15 U.S.C. (S) 78aa.
3. Venue is properly laid in the Eastern District of Pennsylvania, because
many of the acts, transactions, and conduct constituting violations of law
complained of herein, including, inter alia, communications to Rorer, the
target of an improper tender offer by Rhone-Poulenc, have occurred in this
District.
4. In connection with the acts, conduct, and other wrongs complained of
herein, defendant, directly and indirectly, used the means and
instrumentalities of interstate commerce, including the mails and the
facilities of national securities markets, i.e., the facilities of the New
York Stock Exchange ("NYSE").
THE PARTIES
5. Plaintiff Kenneth Steiner, at all relevant times, has been the owner of
common stock of Rorer.
6. Defendant Rhone-Poulenc is a corporation duly organized and existing
under the laws of France and maintains its principal place of business at 25
Quai Paul Doumer, 92408 Courbevoie Cedex, France. Rhone-Poulenc's American
depository receipts ("ADRs") trade on the NYSE. Rhone-Poulenc researches,
develops, produces, markets, and sells human and animal pharmaceuticals and is
engaged in the chemical, fiber, and polymer business. Rhone-Poulenc presently
owns or controls approximately 68.3% of the outstanding stock of Rorer.
FACTS
7. Rorer is a corporation duly organized and existing under the laws of the
State of Pennsylvania and which maintains its principal executive offices at
500 Arcola Road, Collegeville, Pennsylvania 19242. Rorer is primarily engaged
in the development, manufacture, and marketing of a line of pharmaceutical
products, including prescription drugs, over-the-counter medicines and plasma-
derived products. Rorer is a majority-owned subsidiary of Rhone-Poulenc. Rorer
has approximately 136.8 million shares of common stock outstanding, of which
approximately 68.3% are owned by Rhone-Poulenc. The remaining approximately 43
million shares are held by at least several hundred public shareholders of
record other than defendant. Rorer's stock is publicly traded on the NYSE.
<PAGE>
8. On June 26, 1997, Rhone-Poulenc announced it was considering an offer
(the "Offer") to acquire all of the shares of Rorer it does not already own in
a cash transaction whereby Rhone-Poulenc would pay $92.00 cash for each of
such shares.
9. Rhone-Poulenc is taking advantage of its majority stock ownership
position in Rorer by imposing the inadequate Offer on Rorer's public
stockholders. The offer is part of a sweeping corporate overhaul of Rhone-
Poulenc, meant to benefit Rhone-Poulenc. Pursuant to the planned overhaul,
Rhone-Poulenc intends to spin off its chemical, fibers, and polymer
operations, in order to become one of the world's biggest pharmaceutical
companies, by combining Rorer's business with Rhone-Poulenc's vaccine and
animal health businesses. According to The Wall Street Journal of June 27,
1997, the chemical business has been less profitable than the pharmaceutical
business and has weighed down Rhone-Poulenc's profits and price share. Thus,
Rhone-Poulenc's plan is to divest itself of its less profitable businesses
and, taking advantage of its dominant position over Rorer, acquire from the
public shareholders of Rorer, without complying with the requirements of the
Exchange Act, Rorer's more profitable pharmaceutical business.
10. Rhone-Poulenc announced the Offer during the period when a so-called
"standstill agreement" precludes it from acquiring all of the publicly traded
shares of Rorer. The restriction-under the "standstill agreement", dating from
a 1990 merger with Rorer Inc. that created the current Rorer, expires July 31,
1997.
11. Because of its position of dominance and control of Rorer, Rhone-Poulenc
announced the offer on June 26, 1997 to manipulate the price of Rorer shares
so that they do not trade at a price materially higher than the Offer, thereby
limiting the price it will have to pay for the balance of Rorer's stock. By
announcing the Offer on June 26, 1997, Rhone-Poulenc began the tender offer
process without complying with the requirements of the Exchange Act and the
rules promulgated thereunder, attempted to limit the offer price, and avoided
having to make a materially higher offer were Rorer's stock, unaffected by the
Offer, to rise materially between now and July 31, 1997.
12. On July 8, 1997, when the price of Rorer shares rose to $93.625, $1.625
above the Offer price, Jean-Rene Fourtou, Chairman and Chief Executive Officer
of Rhone-Poulenc, stated in an interview with Bloomberg Information
Television: "The share price of (Rorer) is slightly above our offer price,
which clearly poses a problem.
"We are going to move as quickly as possible . . . Fast, if we reach a rapid
accord with the minority shareholders and their representatives on the board--
which I hope will happen--a little more slowly otherwise. As of August 1 we'll
be ready to move quickly." (Emphasis added).
13. Following the announcement of the Offer, shareholders of Rorer who did
not possess crucial material information regarding their decisions whether to
hold or sell their shares of Rorer and who were, and are, otherwise poorly
informed as a result of defendant's incomplete or non-existent disclosures,
were required to make their decisions without the requisite disclosures being
made by Rhone-Poulenc.
CLAIM
VIOLATION OF SECTIONS 14(D) AND 14(E) OF THE EXCHANGE ACT
14. Plaintiff repeats and realleges the preceding paragraphs of this
Complaint as though fully set forth herein.
15. This claim, pursuant to Sections 14(d) and 14(e) of the Exchange Act, is
being brought by plaintiff against defendant to enjoin the Offer, which is an
improper tender offer, commenced by defendant.
16. In preparing, publishing and disseminating the Offer, and subsequently
commenting publicly on the Offer, defendant knowingly or recklessly commenced
and continued an improper tender offer in violation of Sections 14(d) and
14(e) of the Exchange Act.
2
<PAGE>
17. By reason of the foregoing, defendant violated Sections 14(d) and 14(e)
of the Exchange Act and defendant should be preliminary and permanently
enjoined from continuing the Offer, together with such other and further
relief as may be proper.
WHEREFORE, plaintiff demands judgment as follows:
1. preliminarily and permanently enjoining defendant's conduct;
2. awarding plaintiff the costs of this suit, including reasonable
attorneys' and experts' fees and other disbursements; and
3. such other and further relief as may be just and proper.
Dated: July 15, 1997
SAVETT FRUTKIN PODELL & RYAN, P.C.
By: /s/ Robert P. Frutkin
-------------------------------
Robert P. Frutkin (I.D. No. 21366)
320 Walnut Street, Suite 508
Philadelphia, PA 19106
(215) 923-5400
WECHSLER HARWOOD HALEBIAN &
FEFFER LLP
Robert I. Harwood
Samuel K. Rosen
805 Third Avenue
New York, New York 10022
(212) 935-7400
Attorneys for Plaintiff
3
<PAGE>
EXHIBIT (G)(3)
KANTROWITZ & GOLDHAMER
111 Chestnut Ridge Road Montvale, New Jersey 07645 (201) 391-7000
STULL, STULL & BRODY
6 East 45th Street New York, New York 10017 (212) 687-7230
LAW FIRM OF HARVEY GREENFIELD
10 East 40th Street New York, NY 10016 (212) 679-0600
SCHIFFRIN & CRAIG
3 Bala Plaza East, Suite 400 Bala CynWyd, PA 19004 (610) 667-7706
Attorneys for Plaintiff
SUPERIOR COURT OF NEW JERSEY
COUNTY OF MERCER
++
JERRY KRIM, on behalf of himself and +
all others similarly situated, + Index No. MER-L-002486-97
+
+
Plaintiff, + CLASS ACTION COMPLAINT
+
+
-against- +
++
RHONE-POULENC S.A., JEAN JACQUES +
BERTRAND, JEAN MARC BRUEL, +
ROBERT E. CAWTHORN, MICHEL DE ROSEN, + JURY TRIAL
CHARLES-HENRI FILIPPI, CLAUDE + DEMANDED
HELENE, IGOR LANDAU and JEAN-PIERRE +
TIROUFLET +
+
Defendants. +
++
Plaintiff, by his attorneys, alleges upon information and belief, based, in
part, upon an investigation conducted by and through the undersigned counsel,
except with respect to their ownership of Rhone Poulenc Rorer, Inc. ("RPR" or
the "Company") common stock and their suitability to serve as class
representatives, which are alleged upon personal knowledge as follows:
1. Plaintiff is, and has been at all relevant times, the owner of shares of
the common stock of the Company, RPR.
2. Defendant Rhone-Poulenc S.A. ("Rhone"), is incorporated in France and has
its principal U.S. office in Princeton, New Jersey, County of Mercer.
Accordingly, venue is properly placed in Mercer Country pursuant to R 4:3-2.
Rhone, through its consolidated subsidiaries and associated companies,
produces chemicals, pharmaceuticals, fibers, polymers and other products.
<PAGE>
3. RPR is a corporation duly organized and existing under the laws of the
State of Pennsylvania. The number of shares of RPR common stock outstanding as
of the close of business on April 30, 1997 was 137,175,187. As of June 26,
1997, Rhone currently owned 68.3% of the outstanding voting securities of RPR.
RPR maintains its principal corporate offices at 500 Arcola Road,
Collegeville, Pennsylvania 19426-0107.
4. Defendant Jean-Jacques Bertrand ("Bertrand"), has been Chairman and Chief
Executive Officer of RPR since 1995 and a director of RPR since 1990. Bertrand
was selected to be a director of RPR by Rhone.
5. Defendant Jean Marc Bruel ("Bruel"), has been Vice-Chairman of the Rhone-
Poulenc Group since 1992 and a director of RPR since 1990. Bruel is a member
of the Executive Committee of Rhone and a director of Rhone. Bruel was
selected to be a director of RPR by Rhone.
6. Defendant Robert E. Cawthorn ("Cawthorn"), has been Chairman Emeritus of
RPR since 1996 and a director of RPR since 1984. Cawthorn was selected to be
director of RPR by Rhone.
7. Defendant Michel de Rosen ("Rosen"), has been Chairman of RPR since 1996
and Chief Executive Officer since 1995 and a director of RPR since 1993. Rosen
is also a member of the Executive Committee of Rhone.
8. Defendant Charles-Henri Filippi ("Filippi"), has been a director of RPR
since 1990. Filippi was selected to be a director of RPR by Rhone.
9. Defendant Claude Helene ("Helene"), has been Senior Vice President and
Director Scientific of Rhone since 1990 and a director of RPR since 1990.
Helene was selected to be a director of RPR by Rhone.
10. Defendant Igor Landau ("Landau"), has been President and Chairman of the
RPR's Health Sector since 1996 and a director since 1990. Landau has been
Chairman of Rhone's Health Sector since 1990 and is also a member of the
Executive Committee of Rhone. Landau was selected to be a director of RPR by
Rhone.
11. Defendant Jean Pierre Tirouflet ("Tirouflet"), has been Executive Vice
President of Chief Financial Officer of RPR since 1992 and a director of RPR
since 1990. Tirouflet has been a member of the Executive Committee of Rhone
since 1990. Tirouflet was selected to be a director of RPR by Rhone.
12. The defendants described in paragraphs 4-11 above are hereinafter
sometimes collectively referred to as the "individual defendants" or the
"director defendants."
13. By virtue of the individual defendants' positions as officers and/or
directors of RPR, said defendants are in a fiduciary relationship with the
plaintiff and other public shareholders of RPR and owe plaintiff and other
members of the Class the highest obligation of good faith, fair dealing,
loyalty and due care.
14. The individual defendants are members of the board of RPR and are
affiliated with Rhone. Rhone, by virtue of its 68.3% interest in RPR is a
controlling shareholder of RPR and is orchestrating the proposed transaction
to take RPR private, which is at issue in this Complaint, for its own benefit,
and at the expense of RPR's minority shareholders. Shareholders not affiliated
with the controlling shareholder, Rhone, are minority shareholders, holding
only 31.7% of RPR's shares.
15. The individual defendants, by reason of their corporate directorships,
stand in a fiduciary position relative to RPR's minority shareholders, whose
fiduciary duties, at all times relevant herein, require them to exercise their
best judgment, and to act in a prudent manner, and in the best interests of
the Company's minority shareholders. Said defendants owe the public minority
of RPR the highest duty of good faith, fair dealing, due care, loyalty, and
full, candid and adequate disclosure.
16. Each defendant herein is sued individually as an aider and abettor, as
well as in his capacity as a director of the Company (in the case of the
individual defendants), or as a control person and the liability of each
arises from the fact that he has engaged in all or part of the unlawful acts,
plans, schemes, or transactions herein.
2
<PAGE>
CLASS ACTION ALLEGATIONS
17. Plaintiff brings this action on his own behalf and as a class action,
pursuant to New Jersey law, on behalf of all shareholders of the common stock
of RPR (except the defendants herein and any person, firm, trust, corporation,
or other entity related to or affiliated with any of the defendants) and their
successors in interest, who are or will be threatened with injury arising from
defendants' action as more fully described herein.
18. This action is properly maintainable as a class action.
19. The class is so numerous that joinder of all members is impracticable.
As of the close of business on April 30, 1997, there were 137,175,187 shares
of RPR common stock outstanding and which were held by at least thousands of
shareholders throughout the United States.
20. A class action is superior to other methods for the fair and efficient
adjudication of the claims herein asserted, and no unusual difficulties are
likely to be encountered in the management of this class action. The
likelihood of individual class members prosecuting separate claims is remote.
21. There are questions of law and fact which are common to the class and
which predominate over questions affecting any individual class member. The
common questions include, inter alia, the following:
(a) whether defendants have breached their fiduciary and other common law
duties owed by them to plaintiff and the other members of the class;
(b) whether defendants are pursuing a scheme and course of conduct
designed to eliminate the public shareholders of RPR in violation of the
laws of the State of New Jersey in order to benefit from a proposed
acquisition of RPR by Rhone at the expense and to the detriment of the
plaintiff and the other public minority shareholders who are members of the
class;
(c) whether defendants are acting on both sides of the possible going-
private transaction, thus presenting a conflict of interest, self-dealing
and overreaching;
(d) whether the said proposed acquisition, hereinafter described,
constitutes a breach of the duty of fair dealing with respect to the
members of the class; and,
(e) whether the class is entitled to injunctive relief or damages as a
result of the wrongful conduct of the defendants.
22. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. A class
action is superior to any other type of adjudication of this controversy.
23. Defendants have acted in a manner which affects plaintiff and all other
members of the class, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the class as a whole.
SUBSTANTIVE ALLEGATIONS
24. For the last few months RPR has not been performing particularly well.
Centeon, a joint venture plasma proteins company of which RPR owns 50%, has
had recent manufacturing and regulatory problems having a negative
contributory effect upon RPR's earnings. Now it appears that RPR's misfortunes
appear to have either leveled off or begun to improve.
25. On or about April 24, 1997, RPR announced that the three month earnings
per share was $0.41, vs. $0.55 for the same period in the previous year.
Excluding Centeon's contribution, earnings per share would have risen 33%.
26. Despite the sharp first quarter decline, sales for 1997 were expected to
post modest growth and RPR is now poised for continuing future growth.
Domestic pharmaceutical sales were to benefit from healthy gains in
3
<PAGE>
Lovenox, low molecular weight heparin, and RPR's Azmacort and Nasacort
asthma/allergy treatments, while overseas volume were to be bolstered by gains
in the Doliprane and Imovane analgesic/neurological lines. New products such
as Rilutek for Lou Gehrig's disease and Taxotere and Campto anticancer agents
were also expected to contribute to gains. Earnings per share were projected
at $3.50 for 1997 and $4.25 for 1998.
27. Timothy Rothwell, President of RPR, said on April 24, 1997, "Based on
the incremental contribution of our new products, I believe that it is quite
realistic for us to generate sales of 5-6% on a comparable basis for all of
1997," and "Results that will drive future growth in our four key therapeutic
areas are beginning to emerge. The ESSENCE trial demonstrated that Lovenox is
superior to heparin in unstable angina, a treatment currently regarded as
standard therapy. This, in addition to ongoing trials in other cardiovascular
indications, may enable Lovenox to become RPR's first billion dollar drug
within the next five years." (emphasis added).
28. On June 26, 1997, Rhone announced that it was in the process of a major
initiative to increase Rhone's ownership of RPR from 68.3% to 100% through a
business combination with RPR, which would entitle the public minority
shareholders of RPR to receive $92 per share. Such business combination would
be proposed after the expiration on July 31, 1997, of the standstill period
under the Rhone-RPR acquisition agreement of March 12, 1990.
29. The proposed purchase price of $92, which is only a 16% premium over the
June 25, 1997 closing price of $79 per share, does not represent the true
value of the assets or the future prospects underlying each share of RPR.
30. By virtue of its dominance and control over RPR, Rhone, together with
the individual defendants, has engaged in a plan involving acts which are
grossly unfair to plaintiff and the other members of the class. The purpose of
the plan is to enable Rhone to acquire 100% equity ownership of RPR and its
assets for its own benefit, and at the expense of the other RPR minority
stockholders, who would be deprived of their equity investment and the
benefits to accrue thereafter, for a grossly inadequate price.
31. Defendants' announcement of the proposed bid fails to disclose the
improving prospects for RPR due to the growth prospects for the Company.
32. Because of Rhone's almost 70% equity power and overwhelming control over
RPR's board of directors and operations, no third party, as a practical
matter, can attempt any competing bid for RPR, as the success of any such bid
would require the consent and cooperation of Rhone. In fact, because of the
predominant control of RPR by Rhone, it is a foregone conclusion that whatever
Rhone may offer, such offer will be accepted.
33. The proposed transaction serves no legitimate business purpose of RPR
but rather is an attempt by defendants to unfairly benefit Rhone from the
transaction at the expense of RPR's minority public stockholders. The proposed
plan will deny plaintiff and the other members of the class their right to
share proportionately in the future success and growth in profitability of RPR
and its valuable assets, while permitting defendants to reap huge benefits
from the contemplated transaction.
34. The price of $92 per share to be paid to the class members is
unconscionable, unfair and grossly inadequate. The terms of the proposed
merger constitute an unfair and illegal business practice upon the minority
stockholders because, among other things:
(a) the intrinsic value of the stock of RPR is materially in excess of
$92 per share, giving due consideration to the possibilities of growth and
profitability of RPR in light of its business, earnings and earnings power,
both present and future.
(b) The $92 per share price is not the result of arm's length
negotiations and was not based upon any independent evaluation of the
current value of RPR shares, assets or business, but was fixed arbitrarily
by defendants, as part of a plan by Rhone to obtain complete ownership of
RPR's assets and business at the lowest possible price, to obtain for
itself benefits disproportionate with those to be received by the public
stockholders, which facts were not and perhaps will not be disclosed since
it is not in defendants' interests to disclose such facts.
35. Because the defendants are in possession of corporate information
concerning RPR's assets, businesses and future financial prospects, the degree
of knowledge and economic power between defendants and the public
4
<PAGE>
stockholders is unequal, making it grossly and inherently unfair and comprises
"unfair dealing" by Rhone to obtain ownership of RPR's assets from the
minority public common shareholders.
36. By reason of the foregoing acts, practices and course of conduct, Rhone
has breached and continues to breach its duty as a controlling stockholder of
RPR and the individual defendants have breached and continue to breach their
duties as directors of RPR, to the remaining stockholders including plaintiff
and the other members of the class herein.
37. Plaintiff and the other members of the class will suffer irreparable
damage unless defendants are enjoined from continuing to breach their
fiduciary duties and from carrying out the aforesaid plan and scheme.
38. Plaintiff and the other members of the class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment against the defendants jointly and
severally, as follows:
(1) declaring this action to be class action and certifying plaintiff as
the class representatives and his counsel as class counsel;
(2) enjoining, preliminary and permanently, Rhone's offer for acquisition
of the RPR stock owned by plaintiff and the other members of the class;
(3) to the extent, if any, that the contemplated transaction or
transactions complained of are consummated prior to the entry of this
Court's final judgment, rescinding such transaction or transactions, and
granting, inter alia, rescissionary damages;
(4) directing that defendants pay to plaintiff and the other members of
the class all damages caused to them and account for all profits and any
special benefits obtained as a result of their unlawful conduct;
(5) awarding to plaintiff the costs and disbursements of this action,
including a reasonable allowance for the fees and expenses of plaintiff's
attorney's and experts; and
(6) Granting plaintiff and the other members of the class such other and
further relief as may be just and proper.
Dated: June 27, 1997
KANTROWITZ & GOLDHAMER
By: /s/ Gary S. Graifman
----------------------------
GARY S. GRAIFMAN
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
Attorneys for Plaintiff
OF COUNSEL:
STULL, STULL & BRODY
6 East 45th Street New York, New York 10017 (212) 687-7230
LAW FIRM OF HARVEY GREENFIELD
10 East 40th Street New York, NY 10016 (212) 679-0600
SCHIFFRIN & CRAIG
3 Bala Plaza East, Suite 400 Bala CynWyd, PA 19004 (610) 667-7706
5
<PAGE>
DESIGNATION OF TRIAL ATTORNEY
Please take notice that in accordance with R. 4:25-4 Gary S. Graifman, Esq.
is designated as trial counsel.
Dated: Montvale, New Jersey June 27, 1997
KANTROWITZ & GOLDHAMER
BY: _________________________________
Gary S. Graifman, Esq. (GSG-2276)
JURY DEMAND
Plaintiff, JERRY KRIM, by his attorneys, KANTROWITZ & GOLDHAMER, pursuant to
Rule 4:35-1(a) hereby makes demand for a jury trial on all issues which may be
tried by a jury to be determined in the above entitled action.
Dated: Montvale, New Jersey June 27, 1997
KANTROWITZ & GOLDHAMER
BY: _________________________________
Gary S. Graifman, Esq. (GSG-2276)
CERTIFICATION PURSUANT TO R. 4:5-1
I hereby certify that the matter in controversy is not the subject of any
other action or proceeding, pending or contemplated of which I presently know,
and that I know of no other party who should be joined as a party at this time
except that, to the best of my knowledge. I know of no other cases filed by
unrelated plaintiffs.
Dated: Montvale, New Jersey June 27, 1997
KANTROWITZ & GOLDHAMER
_____________________________________
GARY S. GRAIFMAN
6
<PAGE>
EXHIBIT (G)(4)
Sherrie R. Savett THIS IS NOT AN ARBITRATION
Attorney No. 17646 ASSESSMENT OF DAMAGES HEARING
Stephen D. Ramos REQUIRED
Attorney No. 35010
Berger & Montague, P.C. Plaintiff Mark L. Simon
1622 Locust Street
Philadelphia, Pennsylvania 19103
Telephone: (215) 875-3000
Attorneys for Plaintiff
++
MARK L. SIMON, On Behalf Of + MONTGOMERY COUNTY COURT OF COMMON
Himself, And All Others + PLEAS, TRIAL DIVISION
Similarly Situated, 212 East +
39th Street New York, NY 10016 +
+
+ CIVIL ACTION NO. 97-14262
+
+
Plaintiff, ++ CLASS ACTION COMPLAINT
+
+
-against- + JURY TRIAL DEMANDED
+
ROBERT E. CAWTHORN, CLAUDE +
HELENE, JEAN-JACQUES BERTRAND, +
MICHEL DE ROSEN, DALE F. FREY, +
JEAN-MARC BRUEL, CHARLES-HENRI +
FILIPPI, E. MANFRED KAROBATH, +
TIMOTHY G. ROTHWELL, ERIC J. +
TOPOL, IGOR LANDAU, JEAN-PIERRE +
TIROUFLET, RHONE-POULENC, S.A., +
and RHONE-POULENC RORER, INC., +
500 Arcola Road +
Collegeville, Pennsylvania +
+
Defendants. +
++
NOTICE TO DEFEND
You have been sued in court. If you wish to defend against the claims set
forth in the following pages, you must take action within twenty (20) days
after this complaint and notice are served, by entering a written appearance
personally or by attorney, and filing in writing with the court your defense
or objections to the claims set forth against you. You are warned that if you
fail to do so this case may proceed without you, and a judgment may be entered
against you by the court without further notice for any money claimed in the
complaint or for any other claim or relief requested by the plaintiff. You may
lose money or property or other rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A
LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO
FIND OUT WHERE YOU CAN GET LEGAL HELP.
LAWYER REFERENCE SERVICE
Montgomery County
100 West Airy Street
Norristown, PA 19401
(610) 279-9660
<PAGE>
Sherrie R. Savett THIS IS NOT AN ARBITRATION
Attorney No. 17646 ASSESSMENT OF DAMAGES
Stephen D. Ramos HEARING REQUIRED
Attorney No. 35010
Berger & Montague, P.C. Plaintiff Mark L. Simon
1622 Locust Street
Philadelphia, Pennsylvania 19103
Telephone: (215) 875-3000
Attorneys for Plaintiff
MARK L. SIMON, On Behalf Of MONTGOMERY COUNTY
Himself, And All Others COURT OF COMMON PLEAS,
Similarly Situated, 212 East TRIAL DIVISION
39th Street New York, NY 10016
CIVIL ACTION NO. 97-14262
Plaintiff,
CLASS ACTION COMPLAINT
-against-
JURY TRIAL DEMANDED
ROBERT E. CAWTHORN, CLAUDE
HELENE, JEAN-JACQUES BERTRAND,
MICHEL DE ROSEN, DALE F. FREY,
JEAN-MARC BRUEL, CHARLES-HENRI
FILIPPI, E. MANFRED KAROBATH,
TIMOTHY G. ROTHWELL, ERIC J.
TOPOL, IGOR LANDAU, JEAN-PIERRE
TIROUFLET, RHONE-POULENC, S.A.,
and RHONE-POULENC RORER, INC.,
500 Arcola Road Collegeville,
Pennsylvania
Defendants.
Plaintiff, by his attorneys, alleges upon information and belief, except as
to paragraph 1 which plaintiff alleges upon knowledge, as follows:
1. Plaintiff, Mark L. Simon, is and has been at all times relevant to this
action, the owner of shares of Rhone-Poulenc Rorer, Inc. ("RPR" or the
"Company") common stock.
2. Defendant RPR is a corporation duly organized and existing under the laws
of the state of Pennsylvania and is located at 500 Arcola Road, Collegeville,
Pennsylvania. The Company discovers, develops, manufactures and markets a
broad line of pharmaceutical products for human use, including prescription
medicines, over-the-counter medicines and plasma-derived products,
manufactures and sells bulk pharmaceuticals and limited quantities of other
chemicals and develops, manufactures and commercializes both in-vivo and ex-
vivo cell and gene therapy products. As of March 14, 1997, there were more
than 141 million shares of RPR common stock outstanding. RPR's common stock
trades on the New York Stock Exchange. The Company had 1996 sales of $5.42
billion.
3. (a) Defendant Rhone-Poulenc, S.A. ("RP"), is a corporation duly organized
and existing under the laws of France and is located at 25, Quai Paul Doumer,
92408 Courbevoie, France. Pursuant to the terms of an acquisition agreement
between the Company and RP dated as of March 12, 1990 (the "Acquisition
Agreement"), RP acquired approximately 68.3% or 96.8 million shares of RPR's
outstanding shares in the following two transactions in 1990: (i) Upon the
expiration on May 5, 1990 of RP's tender offer, RP purchased RPR shares
tendered to it representing approximately 50.1% of RPR's outstanding shares;
(ii) On July 31, 1990, RPR issued additional shares to RP in consideration of
the contribution to the Company by RP of its Human Pharmaceutical Business. By
virtue of its stock ownership of 68.3% of RPR common stock, RP controls RPR.
2
<PAGE>
(b) Pursuant to the terms of the Acquisition Agreement, RP is subject to a
standstill period extending until July 31, 1997, during which RP can not
acquire additional shares except under certain conditions provided for in the
Acquisition Agreement. The Acquisition Agreement further provided that RP
would vote all of its RPR shares to elect, and the Company would use its best
efforts to cause to be elected to the Company's Board of Directors, seven
directors selected by RP (the "RP Designees"), three executive officers of the
Company (the "Rorer Designees"), and three individuals who were independent
persons selected by the nominating committee of the RPR board of directors.
4. Defendant Michel de Rosen ("de Rosen") is and, at all relevant times, was
Director, Chairman and Chief Executive Officer of the Company. Defendant de
Rosen is a Rorer Designee and also serves as a member of the Executive
Committee of RP.
5. Defendants Robert E. Cawthorn ("Cawthorn"), Jean-Marc Bruel ("Bruel"),
Charles-Henri Filippi ("Filippi"), Claude Helene ("Helene"), Jean-Jacques
Bertrand ("Bertrand"), Igor Landau ("Landau") and Jean-Pierre Tirouflet
("Tirouflet") are and, at all relevant times, were RP Designees to the
Company's Board of Directors. Defendant Cawthorn is Chairman Emeritus of RPR.
Defendant Bruel is Vice Chairman of Rhone-Poulenc Group, and a director and
member of the Executive Committee of RP. Defendant Helene is Senior Vice
President and Director Scientifique of RP. Defendant Bertrand was Executive
Vice President of the Company until 1993. Defendant Landau is President and
Chairman, Health Sector, of RP. Defendant Tirouflet is Executive Vice
President and Chief Financial Officer and a member of the Executive Committee
of RP.
6. Defendants E. Manfred Karobath ("Karobath") and Timothy G. Rothwell
("Rothwell") are RPR Designees and, at all relevant times, have been members
of the RPR Board of Directors. Defendant Karobath is executive Vice President
of RPR and President of RPR Research & Development. Defendant Rothwell is
President of RPR.
7. Defendants James S. Riepe ("Riepe"), Eric J. Topol, M.D. ("Topol") and
Dale F. Frey ("Frey") are and, at all relevant times, were members of the RPR
Board of Directors.
8. The directors of RPR referred to in paragraphs 4-7 (collectively, the
"Individual Defendants") owe fiduciary duties to RPR and its stockholders,
including plaintiff.
9. Defendant RP, as the majority stockholder and a control person of RPR,
and the Individual Defendants, as officers and/or directors of RPR, are in a
fiduciary relationship with RPR and its stockholders and owe to plaintiff and
the other RPR shareholders the highest obligations of good faith, loyalty,
fair dealing, due care and candor.
CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action on his own behalf and as a class action,
pursuant to Pa.R.Civ.P. 1701 et. seq., on behalf of all common stockholders of
RPR, or their successors in interest, who are being and will be harmed by
defendants' actions described below (the "Class"). Excluded from the Class are
defendants herein and any person, firm, trust, corporation or other entity
related to or affiliated with any of defendants.
11. This action is properly maintainable as a class action for the following
reasons:
(a) The Class is so numerous that joinder of all members is
impracticable. Members of the Class own, in the aggregate, approximately 44
million shares of RPR common stock, which trades on the New York Stock
Exchange, a developed and efficient market. While the exact number of the
members of the Class is unknown to plaintiff at this time, and can only be
ascertained through appropriate discovery, plaintiff believes that the
Class is comprised of at least hundreds of members.
(b) Common questions of law and fact exist as to all members of the Class
and predominate over any questions affecting only individual members of the
Class. Among the questions of law and fact common to the Class are:
3
<PAGE>
(i) whether defendants have engaged in or are continuing to act in a
manner constituting a breach of their fiduciary duties to plaintiff and
the Class, including those of good faith, loyalty, fair dealing, due
care and candor and to refrain from self-dealing;
(ii) whether defendants have engaged or are continuing to act in a
manner calculated to benefit themselves at the expense of the RPR
stockholders other than defendants;
(iii) whether plaintiff and the other Class members would be
irreparably damaged if the defendants are not enjoined in the manner
described below; and
(iv) whether plaintiff and the other members of the Class have
sustained damages and, if so, what is the proper measure of their
damages.
(c) Plaintiff's claims are typical of the claims of the Class in that
plaintiff, plaintiff has the same interests as the other members of the
Class, and all members of the Class have been and will be harmed by
defendants wrongful conduct as complained of herein.
(d) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Plaintiff will
fairly and adequately represent the interests of the Class. Plaintiff has
no conflict of interest in the maintenance of this action as a class action
and plaintiff has or can acquire adequate financial resources to assure
that the interests of the Class will not be harmed.
(e) A class action will provide fair and efficient adjudication of this
controversy since the prosecution of separate actions by individual members
of the Class would create a risk of (1) inconsistent or varying
adjudications which would confront defendant with incompatible standards of
conduct; and (2) adjudications with respect to individual members of the
Class which would as a practical matter be dispositive of the interests of
other members not parties to the adjudications or substantially impair or
impede their ability to protect their interests.
(f) Plaintiff does not anticipate any difficulties in the management of
this action as a class action.
(g) This forum is appropriate for the litigation of the claims of the
entire Class.
(h) In view of the complexities of the issues and the expenses of the
litigation, the separate claims of individual Class members are
insufficient in amount to support separate actions.
(i) It is unlikely that the amount which may be recovered by individual
Class members will be so small in relation to the expense and effort of
administering the action as not to justify a class action.
12. Class certification is also appropriate pursuant to PA.R.Civ.P. 1701 et.
seq., because separate adjudications would pose a risk of establishing
incompatible standards of conduct for defendants and/or of substantially
impeding the ability of other shareholders to protect their interests in this
matter, and because defendants have acted on grounds generally applicable to
the class, making appropriate final injunctive and/or declaratory relief with
respect to the class as a whole.
13. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this controversy
and the requirements of PA.R.Civ.P. 1701 et. seq., are satisfied.
CLAIM FOR RELIEF
14. On or about June 26, 1997, RP announced that is seeking to purchase the
31.7% interest in RPR it does not already own in a transaction valued at
approximately $4.3 billion or $92 per share. RP has stated that it will not
make a definite decision on buying the minority stake until the standstill
provisions of the Acquisition Agreement expire on July 31, 1997. RP will
present its proposal at the RPR Board of Directors meeting on July 2, 1997.
15. By announcing the price at which it would make an offer, if it
determined after July 31, 1997 to make a definitive offer, defendant RP
artificially capped the price which shareholders of RPR could receive in any
proposed transaction. This effort to cap the price was exacerbated by comments
made by RP's Chairman and
4
<PAGE>
Chief Executive Officer, Jean-Rene Fortou. When asked whether the deal could
be in jeopardy if RPR's share price rises above $92 per share, Fortou replied:
"I don't imagine a situation like that could happen," explaining that he
expects RPR's price to remain stable.
16. Concurrent with the announcement of RP's intentions, an announcement was
made by an advisory panel of the U.S. Food and Drug Administration that RPR
should be permitted to market its blood thinning drug Lovenox for patients
with serious heart conditions. RPR has high hopes for Lovenox and has stated
that expanded uses of the drug could help it become a $1 billion a year
seller. Worldwide sales of Lovenox are currently $500 million. Had this
announcement regarding the FDA panel recommendation been in the absence of the
RP announcement, it is likely that RPR stock would have surged. Thus, the
purported premium represented by the $92 per share price RP would pay if it
made an offer does not represent a genuine 16% premium and further illustrates
the manner in which the RP announcement caps the price of RPR's shares.
17. The timing of RP's announcement is designed to take advantage of RPR's
depressed stock price which is a function of the recall of plasma products by
RPR's Centeon joint venture, which recall had a devastating effect on RPR's
1996 earnings. In October 1996, Centeon, a joint venture in which the Company
has a 50% interest, initiated a voluntary worldwide recall of all in-date lots
of Albuminar/Plasma-Plex products as a precautionary measure in response to
manufacturing concerns with respect to these products at a U.S. production
facility and temporarily suspended the manufacture of plasma-derived products
at the location. In January 1997, Centeon entered into a consent decree with
the U.S. Government which set conditions for the shipment by Centeon of both
plasma-based products and certain pharmaceutical products manufactured for the
Company at the facility. As a result of the foregoing, RPR's shares price
lagged through mid-1997. As Marie Helene Leopold, a pharmaceutical analyst at
Paribas Capital Markets, noted:
It if weren't for Centeon, the price Rhone-Poulenc would have had to pay
would have been much higher.
The outlook for RPR predicts a sharp earnings recovery during the second half
of 1997 and earnings growth of 20% annually for the rest of the decade.
18. RP's announcement is purportedly part of a plan to focus its business on
pharmaceuticals. In its June 26th announcement, RP also said it will spin off
its chemicals and fibers businesses into a new company in 1998. As David Scott
of Institutional Capital, an institutional investor noted: "This step turns a
mediocre company [RP] into a good company and even more importantly a great
stock." Indeed, upon announcement of RP's intentions to acquire the
outstanding minority RPR shares held by the Class at $92 per share, the price
of RP's own stock increased sharply, indicating that RP's proposed buyout of
the RPR minority is a great deal for RP, though not for the Class.
19. As set forth above, RP already owns 68.3% of the outstanding common
stock of RPR. Accordingly, RP has the power to squeeze out RPR's minority
shareholders, i.e., the Class, at an unfair price. The loyalties of the
Director Defendants, seven of whom are RP designees to the Company's Board of
Directors, are, at best, divided. The Individual Defendants are beholden to
RP, the majority owner of RPR, and cannot be expected to act in the best
interest of the Class consisting of RPR's minority stockholders, even though
the Board announced the formation of a special committee of purportedly
independent directors to "review" any proposal made by RP.
20. The purpose of the proposed transaction is to enable RP to acquire the
remaining shares of RPR it does not already own and to acquire RPR's valuable
assets for RP's own benefit at the expense of the Class of RPR's public
stockholders, who will be deprived of the opportunity to reap the benefit of
RPR's imminent and expected financial improvement.
21. The proposed acquisition comes at a time when RPR is expected to
increase revenues and perform well. In fact, management expects
Lovenox/Clexane, RPR's new core product, with sales of $500 million in 1996,
to become its first billion dollar drug in five years. RP and the Director
Defendants have timed this transaction to capture RPR's positive performance
and use it to their own ends, without paying an adequate or fair price for the
remaining RPR shares owned by the members of the Class.
5
<PAGE>
22. Defendants, including the Director Defendants who are under the control
and influence of RP, are in a position of control and power over the RPR
minority stockholders and have access to internal financial information about
RPR, its true value, expected increase in true value and the benefits to RP of
100% ownership of RPR to which plaintiff and the Class members are not privy.
Defendants are using their positions of power and control, including the
disparity of knowledge of RPR's true value, to benefit RP in this transaction,
to the detriment of plaintiff and the Class.
23. In making the June 26th announcement, RP has undervalued the RPR common
stock by ignoring the full value of its assets and future prospects. The
proposed merger consideration does not reflect the value of RPR's valuable
assets, as known to Defendants, to the detriment and disadvantage of RPR's
minority public stockholders.
24. The Director Defendants have clear and material conflicts of interest
and are acting to better the interests of RP at the expense of RPR's public
stockholders.
25. The June 26th announcement serves no legitimate business purpose of RPR
but rather is an attempt by defendants to unfairly benefit RP and the RPR
Designees at the expense of RPR's public stockholders. The proposed plan will
provide for a grossly inadequate consideration, deny plaintiff and the other
members of the class their right to share proportionately in the future
success of RPR and its valuable assets, while permitting RP to reap
substantial benefits from any transaction.
26. Because defendants, as the controlling shareholder, officers, and
directors of RPR, are in possession of corporate information concerning the
assets, businesses and future financial prospects of those affiliates, the
degree of knowledge and economic power between defendants and the public
stockholders of RPR is unequal, making it grossly and inherently unfair for RP
to obtain ownership of RPR's assets from the public common shareholders at the
unfair and inadequate price which defendants have publicly announced.
27. In light of the foregoing, the Individual Defendants must, as their
fiduciary obligations require:
. undertake an appropriate evaluation of RPR's worth as an acquisition
candidate;
. act vigorously and independently so that the interests of RPR's public
stockholders will be protected from overreaching by RP, including but
not limited to the retention of independent advisors by the special
committee to evaluate critically the proposed RP offer and negotiate at
arm's length with RP on behalf of RPR's minority stockholders;
. adequately ensure that no conflicts of interest exist between
defendants' own interests and their fiduciary obligation to maximize
stockholder value or, if such conflicts exist, to ensure that all
conflicts be resolved in the best interests of RPR's public
stockholders; and
. if a merger transaction is to go forward, require that it be approved by
a majority of the minority, i.e., by a majority of the 31.7% of RPR
shares held by the Class, and not crammed down by a vote of the
controlling block of RPR shares held by RP.
28. As a result of defendants' failure to take such steps to date, plaintiff
and the other members of the Class have been and will be damaged in that they
have not and will not receive their proportionate share of the value of the
Company's assets and business, and have been and will be prevented from
obtaining a fair price for their common stock.
29. Defendants, in failing to disclose the material non-public information
in their possession as to the true value of RPR's assets and business
prospects, the full extent of the future earnings potential of the Company and
its expected increase in profitability, are engaging in self-dealing, are not
acting in good faith toward plaintiff and the other members of the Class, and
have breached and are breaching their fiduciary duties to the member of the
Class.
6
<PAGE>
30. As a result of the defendants' unlawful actions, plaintiff and the other
members of the Class will be irreparably harmed in that they will not receive
their fair portion of the value of RPR's assets and business and will be
prevented from obtaining the real value of their equity ownership in the
Company. Unless the proposed merger is enjoined by the Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and the members of
the Class, will not engage in vigorous, bona fide, arm's length negotiations
on the terms of RPR's buy-out proposal, and will not supply to RPR's public
stockholders all material information to enable them to determine the fair
value of their RPR shares and to cast informed votes on the proposed merger,
and so defendants will be able to consummate the proposed transaction on
grossly unfair terms, all to the irreparable harm of the members of the Class.
Once the proposed transaction is consummated and RP has secured total control
of RPR, it will be impossible to undo the transaction.
31. Plaintiff and the other members of the Class have no adequate remedy at
law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. Ordering that this action may be maintained as a class action and
certifying plaintiff as the Class representative;
B. Declaring that defendants have breached their fiduciary and other
duties to plaintiff and the other members of the Class;
C. Entering an order requiring defendants to take the steps set forth
hereinabove;
D. Preliminarily and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in concert with,
or for them, from proceeding with, consummating or closing the proposed
buy-out transactions;
E. In the event the proposed buy-out is consummated, rescinding it and
setting it aside;
F. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
G. Awarding costs and disbursements, including plaintiff's counsels' fees
and experts' fees; and
H. Granting such other and further relief as to the Court may deem just
and proper.
JURY TRIAL DEMAND
Plaintiff demands a trial by jury on all issues.
Dated: July 31, 1997
BERGER & MONTAGUE, P.C.
/s/ Sherrie R. Savett
-----------------------------------
Sherrie R. Savett
Stephen D. Ramos
1622 Locust Street
Philadelphia, Pennsylvania 19103
(215) 875-3000
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
7
<PAGE>
VERIFICATION
I, MARK L. SIMON, do hereby verify that the statements made in the Class
Action Complaint are true and correct according to my knowledge, information
and belief. I understand that the statements in said Complaint are made
subject to the penalties of 18 Pa.C.S.(S)494 relating to unsworn falsification
to authorities.
Dated: July 28, 1997
/s/ Mark L. Simon
------------------------------------
MARK L. SIMON
8
<PAGE>
EXHIBIT (G) (5)
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- ------------------------------------------------------x
:
BRICKELL PARTNERS, a Florida :
Partnership, Individually On Its Own :
Behalf And On Behalf Of All Others :
Similarly Situated, :
: Index No. 603493/97
Plaintiff, :
: NOTICE OF MOTION
- against - : TO DISMISS
:
RHONE-POULENC S.A., : ORAL ARGUMENT
: REQUESTED
Defendant. :
:
- ------------------------------------------------------x
PLEASE TAKE NOTICE, that upon the affidavit of Brian Schwab, sworn to
August 8, 1997, the accompanying memorandum of law, and upon the pleadings in
this action, Defendant Rhone-Poulenc S.A. will move this Court on September 9,
1997, at the Motion Support Office Courtroom (Room 130), 60 Centre Street, New
York, New York at 9:30 a.m. or as soon thereafter as counsel may be heard, for
an order pursuant to Sections 3211(a)(2), 3211(a)(8) and 327 of the New York
Civil Practice Law and Rules:
(a) Dismissing the Complaint in its entirety for lack of proper service;
(b) Dismissing the Complaint for lack of personal jurisdiction;
(c) Dismissing the Complaint for lack of subject matter jurisdiction;
(d) Dismissing the Complaint based on the doctrine of forum non
conveniens; and
<PAGE>
2
(e) Awarding such other and further relief as the Court may deem just
and equitable.
PLEASE TAKE FURTHER NOTICE that, pursuant to CPLR (S) 2214(b), answering
affidavits, if any, shall be served at least seven (7) days prior to the return
date of this motion.
Dated: New York, New York
August 11, 1997
SHEARMAN & STERLING
Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 848-4000
Attorneys for Defendant Rhone-Poulenc S.A.
To: WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
805 Third Avenue
New York, New York 10022
(212) 935-7400
Attorneys for Plaintiff
<PAGE>
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- ------------------------------------------------------x
:
BRICKELL PARTNERS, FLORIDA :
PARTNERSHIP, INDIVIDUALLY ON ITS OWN :
BEHALF AND ON BEHALF OF ALL OTHERS :
SIMILARLY SITUATED, :
: Index No. 603493/97
Plaintiff, :
:
v. :
:
RHONE-POULENC S.A., :
:
Defendant. :
:
- ------------------------------------------------------x
AFFIDAVIT OF BRIAN J. SCHWAB IN SUPPORT OF
RHONE-POULENC S.A.'S MOTION TO DISMISS THE COMPLAINT
----------------------------------------------------
COUNTRY OF FRANCE)
) SS.:
CITY OF PARIS )
BRIAN J. SCHWAB, being duly sworn, deposes and says:
1. I am a senior legal counsel of Rhone-Poulenc S.A. based in Courbevoie,
France. The following facts are true to the best of my knowledge.
2. Rhone-Poulenc S.A. ("RPSA") is a French Societe anonyme organized and
existing under the laws of the French Republic.
3. RPSA's legal headquarters are in Courbevoie, France.
4. RPSA is not a citizen of any State of the United States.
5. RPSA is not registered or otherwise licensed to do business in New
York.
6. RPSA does not maintain an office, mailing address, telephone listing
or bank account in New York.
7. RPSA does not own or lease any property or real estate in New York.
<PAGE>
8. RPSA is not required to pay sales, use or any other tax in New York.
9. RPSA does not contract to supply goods in New York.
10. RPSA does not market goods or advertise goods in New York.
11. RPSA has never held a shareholders' meeting in New York.
12. Rhone-Poulenc Inc. ("RPI"), a New York Corporation with its principal
place of business in Cranbury, New Jersey, is an indirect subsidiary of RPSA.
13. RPI is a free-standing corporation, with sales in 1996 of
approximately 52.3 billion dollars. RPI and RPSA observe all traditional
corporation formalities.
14. RPI and RPSA each maintain their own bank accounts, accounting
systems, payroll systems, financial records and budgets.
15. RPI and RPSA have separate boards of directors, with no commonality of
directors between the two companies.
16. RPI and RPSA each file separate tax returns.
17. RPI and RPSA do not commingle corporate assets.
18. RPSA does not exercise any control over RPI's day-to-day business
operations.
/s/ Brian J Schwab
----------------------
Brian J. Schwab
[NOTARY STAMP APPEARS HERE]
<PAGE>
INDEX NO. 603493/97
================================================================================
NEW YORK SUPREME COURT
COUNTY OF NEW YORK
--------------------
BRICKELL PARTNERS,
A FLORIDA PARTNERSHIP, INDIVIDUALLY ON ITS OWN BEHALF AND
ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
PLAINTIFF,
-AGAINST-
RHONE-POULENC S.A.,
DEFENDANT.
================================================================================
MEMORANDUM OF LAW OF DEFENDANT RHONE-POULENC S.A.
IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT
================================================================================
SHEARMAN & STERLING
CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212)848-4000
ATTORNEYS FOR DEFENDANT
RHONE-POULENC S.A.
OF COUNSEL:
KENNETH M. KRAMER
KATHRYN TABNER
JENNIFER M. DANNEL
AUGUST 11, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
TABLE OF AUTHORITIES........................................................ ii
PRELIMINARY STATEMENT....................................................... 1
STATEMENT OF FACTS.......................................................... 2
ARGUMENT.................................................................... 3
I. PLAINTIFF HAS FAILED TO EFFECT SERVICE ON DEFENDANT
RHONE-POULENC..................................................... 3
II. THIS COURT DOES NOT HAVE PERSONAL JURISDICTION OVER
RHONE-POULENC..................................................... 6
III. AS NO OFFER TO PURCHASE THE REMAINING SHARES HAS
BEEN MADE, AND INDEED MAY NOT BE MADE UNTIL THE
STANDSTILL AGREEMENT EXPIRES, THERE IS NO JUSTICIABLE
CASE OR CONTROVERSY BEFORE THIS COURT............................. 9
IV. THIS COURT SHOULD EXERCISE ITS DISCRETION UNDER THE
DOCTRINE OF FORUM NON CONVENIENS AND DISMISS THIS
ACTION AGAINST A FRENCH CORPORATION REGARDING
DECISIONS MADE AND ACTIONS TAKEN IN FRANCE........................ 10
A. The Alleged Transaction Out Of Which This Dispute Arose
Occurred In A Foreign Jurisdiction........................... 12
B. Burden On The New York Courts................................ 13
C. Burden On The Defendants..................................... 14
D. An Alternative Forum......................................... 16
E. The Residency of the Parties................................. 16
CONCLUSION.................................................................. 17
</TABLE>
<PAGE>
TABLE OF AUTHORITIES
<TABLE>
<CAPTION>
Cases Page(s)
- ----- -------
<S> <C>
Apple Records, Inc. v. Capitol Records, Inc., 137 A.D.2d 50,
- --------------------------------------------
529 N.Y.S.2d 279 (1st Dep't 1988) ........................................7
Brooke Group Ltd. v. JCH Syndicate 488, 214 A.D.2d 486, 625 N.Y.S.2d
- --------------------------------------
223 (1st Dep't 1995), aff'd, 87 N.Y.2d 530, 640 N.Y.S.2d 479 (1996) .....12
-----
Continental Ins. Co. v. Polaris Indus. Partners L.P. 199 A.D.2d 222,
- ----------------------------------------------------
606 N.Y.S.2d 164 (1st Dep't 1993) .......................................14
De Torres v. Arocena, 155 Misc. 2d 52, 587 N.Y.S.2d 495
- --------------------
(Sup. Ct. N.Y. Co. 1992) ................................................13
Derso v. Volkswaeen of America, Inc., 159 A.D.2d 937,
- -------------------------------------
552 N.Y.S.2d 1001 (4th Dep't 1990) .......................................5
Frank Management, Inc. v. Weber, 145 Misc. 2d 995.
- --------------------------------
549 N.Y.S.2d 317 (Sup. Ct. N.Y. Co. 1989) ................................7
Grossman v. Sapphire Petroleums Ltd., 195 N.Y.S.2d 851
- ------------------------------------
(Sup. C. Kings Co. 1959) .................................................8
Heaps v. Simon & Schuster Co., 150 A.D.2d 164,
- -----------------------------
540 N.Y.S.2d 437 (1st Dep't 1989) ................................ 11,14,15
Inspection Security and Law Enforcement Employees, District Council 82,
- -------------------------------------------------
v. Cuorio, 64 N.Y.2d 233, 485 N.Y.S.2d 719 (1984) ........................9
---------
Irrigation & Indus, Dev. Corp. v. Indus S.A., 37 N.Y.2d 522,
- --------------------------------------------
375 N.Y.S.2d 296 (1975) .................................................12
Islamic Republic of Iran v. Pahlavi, 62 N.Y.2d 474, 478 N.Y.S.2d 597
- -----------------------------------
(1984), cert. denied, 469 U.S. 1108 (1985) .....................11,13,15,16
------------
In re: Jamaica Water Supply Co., 158 Misc. 2d 378. 600 N.Y.S.2d 914
- -------------------------------
(Sup. Ct. Queens Co. 1993) ............................................9,10
Joseph Walker & Sons v. Lehigh Coal & Navigation Co., 8 Misc. 2d 1005,
- ----------------------------------------------------
167 N.Y.S.2d 632 (Sup. Ct. N.Y. Co. 1957) ................................8
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Cases Page(s)
- ----- -------
<S> <C>
Loeneard v. Santa Fe Indus..Inc., 70 N.Y.2d 262, 519 N.Y.S.2d 801 (1987)................................. 7
- --------------------------------
Mollendo Equip. Co. v. Sekisan Trading Co., 56 A.D.2d 750, 392 N.Y.S.2d 427
- ------------------------------------------
(1st Dep't 1977), aff'd, 43 N.Y.2d 916, 403 N.Y.S.2d 729 (1978)..................................... 14
-----
Morley v. Morley. 191 A.D. 2d 372. 595 N.Y.S.2d 200
- ----------------
(1st Dep't 1993).................................................................................... 16
P.T. Delami Garrent Indus. v. Cassa di Risparmio di Torino. 164 Misc.
- ----------------------------------------------------------
2d 38. 623 N.Y.S.2d 476 (Sup. Ct. N.Y. Co. 1994).
aff'd sub nom. World Point Trading PTE. Ltd. v. Credito Italiano.
-------------- -------------------------------------------------
225 A.D. 26 153 (1st Dep't 1996).................................................................... 13
Piper Aircraft Co, v. Reyno. 454 U.S. 235 (1981)......................................................... 13,14
- ---------------------------
Robbins v. Ring, 9 Misc. 2d 44. 166 N.Y.S.2d 483
- ---------------
(Sup. Ct. N.Y. Co. 1957)............................................................................ 8
Silver v. Great Am. Ins. Co., 29 N.Y.2d 356. 328 N.Y.S.2d 398 (1972)..................................... 13,16
- ----------------------------
Tetra Finance (HK) Ltd. v. Patrv, 115 A.D.2d 408, 490 N.Y.S.2d 37
- --------------------------------
(1st Dep't 1985).................................................................................... 12
Vazquez v. Sund. Emba AB. 152 A.D.2d 389, 548 N.Y.S.2d 728
- ------------------------
(2d Dep't 1989)..................................................................................... 4
Zelouf v. Republic Nat'l Bank of New York, 225 A.D.2d 419, 640 N.Y.S.2d 15
- -----------------------------------------
(1st Dept't 1996.................................................................................... 12
Statutes
- --------
BCL (S) 307 (McKinney 1997).............................................................................. 3,4,5
CPLR (S) 302 (a)(2) (McKinney 1997)...................................................................... 6,8
CPLR (S) 302 (a)(3) (McKinney 1997)...................................................................... 6,8
CPLR (S) 311 (a)(1) (McKinney 1997)...................................................................... 5
CPLR (S) 327 (McKinney 1997)............................................................................. 1,10
CPLR (S) 327 (a) (McKinney 1997)......................................................................... 11
</TABLE>
iii
<PAGE>
STATUTES
- --------
CPLR (S) 3211 (a)(2) (McKinney 1997).......................................1
CPLR (S) 3211 (a)(g) (McKinney 1997).......................................1
iv
<PAGE>
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
- ---------------------------------------x
BRICKELL PARTNERS, a Florida :
Partnership, Individually On Its Own :
Behalf And On Behalf Of All Others :
Similarly Situated, :
: Index No. 603493/97
Plaintiff, :
:
- against - :
:
RHONE-POULENC S.A., :
:
Defendant. :
- ---------------------------------------x
MEMORANDUM OF LAW OF DEFENDANT
RHONE-POULENC S.A. IN SUPPORT OF
ITS MOTION TO DISMISS THE COMPLAINT
-----------------------------------
Defendant Rhone-Poulenc S.A. ("Rhone-Poulenc") respectfully submits
this memorandum of law in support of its motion, pursuant to N.Y. CIV. PRAC. L.
& R. ("CPLR") (S) 3211(a)(2), (8) and 327, to dismiss the complaint of Brickell
Partners (the "Complaint") (1) for lack of proper service on Rhone-Poulenc; (2)
for lack of personal jurisdiction over Rhone-Poulenc; (3) for lack of subject
matter jurisdiction under the ripeness doctrine; and (4) based upon the doctrine
of forum non conveniens.
PRELIMINARY STATEMENT
---------------------
This lawsuit does not belong in any court, much less one located in
the State of New York. Plaintiff, who hails from Florida, is suing Rhone-
Poulenc, a French corporation, over an event which has not even occurred, and
indeed, according to the
<PAGE>
2
allegations of the Complaint itself, cannot even occur until after a fixed date
in the future. The allegations of the Complaint demonstrate that the alleged
harm to plaintiff is nonexistent; so too is any conceivable nexus to New York.
Courts in this State, as in any other jurisdiction, have much more pressing
business than to be available to render advisory opinions in disputes having
absolutely no connection to this State. Perhaps plaintiff, in what it does not
allege in the Complaint, concedes this; along with its failure to articulate a
nonspeculative, justiciable cause of action against Rhone-Poulenc, it was unable
either to effect proper service on or to establish a basis for personal
jurisdiction over Rhone-Poulenc. As it is lacking in substance, fails to follow
proper procedure, and does not assert any conceivable basis for burdening the
Courts of this State, the Complaint should be dismissed.
STATEMENT OF FACTS/1/
------------------
Plaintiff is a Florida partnership that owns common stock of Rhone-
Poulenc Rorer Inc. ("Rorer"). Complaint (P) 2. Rorer, a majority-owned
subsidiary of Rhone-Poulenc, is a corporation duly organized and existing under
the laws of the Commonwealth of Pennsylvania, with its principal place of
business in Collegeville, Pennsylvania. Id. (P) 14. Defendant Rhone-Poulenc is
---
a corporation duly organized and existing under the laws of France, with its
principal place of business in France. Id. (P) 3. Rhone-Poulenc is engaged in
---
the research, development, production, marketing and sale of human and animal
pharmaceuticals, and is also involved in the chemical, fiber and polymer
businesses. Id.
---
____________________
/1/ Except where indicated, the facts set forth herein are taken from the
Complaint, and those facts are assumed to be true only for the purposes of this
motion.
<PAGE>
3
Rhone-Poulenc's American depository receipts ("ADRs") are traded on the New York
Stock Exchange ("NYSE"). Id. Rhone-Poulenc is the majority shareholder of
---
Rorer, with present ownership of approximately 68.3% of Rorer's outstanding
stock. Id. Rorer's stock is publicly traded on the NYSE. Id. (P) 14.
--- ---
On June 26, 1997, Rhone-Poulenc stated that it was considering the
possibility of acquiring the remaining shares of Rorer by making an offer to
purchase these shares at $92.00 per share. Complaint (P) 15. Under the terms
of a "standstill agreement," in effect since 1990, Rhone-Poulenc is prohibited
from acquiring any Rorer shares until July 31, 1997. Id.
---
ARGUMENT
--------
I. PLAINTIFF HAS FAILED TO EFFECT SERVICE ON DEFENDANT RHONE-POULENC
Rhone-Poulenc is a foreign corporation not authorized to do business
in New York. Affidavit of Brian J. Schwab ("Schwab Affidavit") (P)(P) 2, 5,
sworn to August 8, 1997. Section 307 of the Business Corporation Law (and the
Hague Convention on Service) governs the service of process on foreign
corporations who are subject to the general jurisdiction of the New York courts
but who are not authorized to do business in New York. BCL (S) 307 ("Section
307"). The provisions of Section 307 are not available if -- as Rhone-Poulenc
so maintains -- New York lacks personal jurisdiction over the party being
served. See Point II infra. If, however, this Court determines that it has
--- -----
personal jurisdiction over
<PAGE>
4
Rhone-Poulenc, thereby bringing this action under the ambit of Section 307, it
is clear that plaintiff failed to effect proper service on Rhone-Poulenc.
The procedures to effect service under Section 307 involve several
steps. First, plaintiff must serve a copy of the summons and complaint on the
Secretary of State by personally delivering to him or his deputy a copy of the
process together with a statutory filing fee. Second, plaintiff must serve
notice of the service and a copy of the process on the foreign corporation by
either: i) delivering notice and a copy of the process personally to Rhone-
Poulenc in France and in accordance with the French laws covering the service of
process; or ii) mailing notice and a copy of the process to Rhone-Poulenc by
registered mail with return receipt requested at the post office address
specified for the purpose of mailing process./2/ Finally, plaintiff must file an
affidavit of compliance and a copy of the process with the clerk of the court
within thirty (30) days after the personal service or the receipt of the return
receipt (or other official proof of delivery) if the service was made by mail.
Service of process shall be complete ten (10) days after the affidavit of
compliance and the process are filed with the clerk of the court. BCL (S) 307
(McKinney 1997).
Plaintiff failed to complete any of the above service requirements,
and instead attempted only to serve Rhone-Poulenc Inc., an indirect subsidiary
of Rhone-Poulenc with its principal place of business in Cranbury, New Jersey.
Schwab Affidavit (P) 12. Even
___________________
/2/ It should be noted that if Section 307 applies, plaintiff is required to
comply with the terms of the Hague Convention on Service when serving Rhone-
Poulenc with copies of notice and process in France. Vazquez v. Sund Emba AB,
-----------------------
152 A.D. 2d 389, 395, 548 N.Y.S.2d 728, 731 n.4 (2d Dep't 1989).
<PAGE>
5
disregarding plaintiff's failure to follow Section 307's requirements for
service on a foreign corporation, service on Rhone-Poulenc Inc. cannot effect
service on defendant Rhone-Poulenc. The CPLR allows for service upon a domestic
or foreign corporation -- although unlike Rhone-Poulenc, only one authorized to
business in New York -- to be made through personal delivery of the summons upon
"an officer, director, managing or general agent, or cashier or assistant
cashier or to any other agent authorized by appointment or by law to receive
service." CPLR (S) 311(a)(1).
Thus, under the CPLR, service of process on a subsidiary does not
constitute adequate service on a foreign parent corporation unless the
subsidiary is an agent of the parent. A subsidiary is an agent for purposes of
service only when it "is so dominated by its parent corporation that it is
acting as a `mere department' of the parent." Derso v. Volkswagen of America,
-------------------------------
Inc., 159 A.D.2d 937, 937, 552 N.Y.S. 2d 1001, 1002 ( 4th Dep't 1990) (quoting
- ----
Low v. Bayerische Motoren Werke, AG, 88 A.D.2d 504, 506, 449 N.Y.S.2d 733 (1st
- -----------------------------------
Dep't 1982)). Rhone-Poulenc Inc. is not a "mere department" of Rhone-Poulenc
S.A., as the two corporations observe all corporate formalities, have separate
boards of directors and maintain their own bank accounts, accounting and payroll
systems, financial records and budgets. See Schwab Affidavit (P)(P) 13, 14, 15.
---
Most importantly, Rhone-Poulenc does not exercise any control over RPI's day-to-
day operations. Id. (P) 18. As Rhone-Poulenc Inc. is not an agent of its
---
parent Rhone-Poulenc, this Court should dismiss the Complaint for lack of proper
service.
<PAGE>
6
II. THIS COURT DOES NOT HAVE PERSONAL JURISDICTION OVER RHONE-POULENC
Because Rhone-Poulenc is a foreign corporation, it is subject to the
personal jurisdiction of a New York court only through application of CPLR (S)
302, New York's "long-arm" statute, which establishes various bases of personal
jurisdiction over nondomiciliaries by virtue of their acts. Seemingly
attempting to apply the long-arm statute, plaintiff bases this Court's
jurisdiction over nonresident Rhone-Poulenc on its contention that "[a]t all
relevant times, Rhone-Poulenc did or performed acts within or without the State
that subject it to the jurisdiction of the Courts of the State of New York."
Complaint (P) 6. With the noteworthy omission of the word "tortious," this
allegation tracks the language of CPLR (S) 302(a)(2) and (3). CPLR (S)
302(a)(2) and (3) provide, in pertinent part, that a non-domiciliary is subject
to the jurisdiction of New York if it:
(a)(2): "commits a tortious act within the state. . . "
(a)(3): "commits a tortious act without the state causing injury to person
or property within the state. . . .if he
(i) regularly does or solicits business, or engages in any other
persistent course of conduct, or derives substantial revenue from
goods used or consumed or services rendered, in the state, or (ii)
expects or should reasonably expect the act to have consequences in
the state and derives substantial revenue from interstate or
international commerce."
CPLR (S) 302(a)(2)-(3) (McKinney 1997).
Plaintiff's reliance on either of these bases of personal jurisdiction
is both strikingly, and fatally, flawed. The statute on its face applies only
to tort claims, and plaintiffs did not -- and indeed cannot -- plead the
performance of a "tortious act."
<PAGE>
7
Plaintiff's claims are "breach of fiduciary and other common law duties,"
Complaint (P) 23, causes of action which New York courts have refused to treat
as tort claims. See Loengard v. Santa Fe Indus., Inc., 70 N.Y.2d 262, 519
--- ---------------------------------
N.Y.S.2d 801 (1987) (holding that the six-year contract statute of limitations,
rather than the three-year tort statute of limitations, applied to an action
based on a claim of unjust enrichment resulting from a breach of fiduciary
duty); Frank Management, Inc. v. Weber, 145 Misc. 2d 995, 549 N.Y.S.2d 317 (Sup.
-------------------------------
Ct. N.Y. Co. 1989) (applying the contract statute of limitations to a claim for
breach of fiduciary obligation where damages were sought).
Loengard v. Santa Fe Indus., Inc., 70 N.Y.2d 262, 519 N.Y.S.2d 801
---------------------------------
(1987), is particularly instructive, as it involves virtually identical facts.
In Loengard, minority shareholders brought an action against majority
--------
fiduciaries to recover damages resulting from an alleged underpayment for their
shares following a "freeze-out" merger. Id. at 264, 802. The Loengard
--- --------
plaintiffs' claims, as in this case, were based on alleged breaches of fiduciary
duty. Id. Holding that a claim based on a breach of fiduciary duty is
---
"essentially equitable in nature," the Court of Appeals concluded that such a
claim was governed by the six-year contract statute of limitations. Id. at 266-
---
67, 803-04. While a breach of fiduciary duty claim may, in some circumstances,
be actionable in tort, see Apple Records, Inc. v. Capitol Records, Inc., 137
--- --------------------------------------------
A.D.2d 50, 529 N.Y.S.2d 279 (1st Dep't 1988), the proper "focus is on whether a
noncontractual duty was violated; a duty imposed on individuals as a matter of
social policy, as opposed to those imposed consensually as a matter of
contractual agreement." Id. at 55, 282. Here, however, as in Loengard, no such
--- --------
noncontractual duty
<PAGE>
8
exists. Plaintiff's claim regarding Rhone-Poulenc's alleged breach of its
fiduciary duties to Rorer's shareholders does not sound in tort, and thus the
CPLR's "tortious act" long-arm provisions do not apply to subject Rhone-Poulenc
to personal jurisdiction in New York.
Moreover, even if this Court were to determine that plaintiff's claims
are actionable in tort, and that the acts complained of did not occur within the
State of New York, plaintiff fails to plead the New York contacts required by
CPLR (S) 302(a)(3), which include: regularly doing business or engaging in
conduct in New York, deriving substantial revenue from, or expecting the act to
have consequences in, New York. As detailed in the Schwab Affidavit, Rhone-
Poulenc is not registered or licensed to do business in New York and is not
required to pay any taxes in New York. Id. (P)(P) 5, 8. Rhone-Poulenc also
---
does not contract to supply any goods in New York nor does it market or
advertise goods in New York. Id. (P)(P) 9, 10. In short, Rhone-Poulenc has no
---
connection to New York.
Plaintiff further alleges that venue properly lies in New York because
Rhone-Poulenc's ADRs are listed and traded on the NYSE. Complaint (P) 5. This
allegation should not suffice to establish venue, and it similarly does not
establish jurisdiction. It is long settled in this State that trading of a
foreign corporation's stock on a stock exchange in New York does not create
jurisdiction over the corporation. Joseph Walker & Sons v. Lehigh Coal &
-------------------------------------
Navigation Co., 8 Misc. 2d 1005, 1006-07, 167 N.Y.S.2d 632, 632-34 (Sup. Ct.
- --------------
N.Y. Co. 1957); Robbins v. Ring, 9 Misc. 2d 44, 45-46, 166 N.Y.S.2d 483, 484-85
---------------
(Sup. Ct. N.Y. Co. 1957); see also Grossman v. Sapphire Petroleums Ltd., 195
-------- ------------------------------------
N.Y.S. 2d 851,
<PAGE>
9
853 (Sup. Ct. Kings Co. 1959). Thus, this Court should dismiss the Complaint
for lack of personal jurisdiction over Rhone-Poulenc.
III. AS NO OFFER TO PURCHASE THE REMAINING SHARES HAS BEEN MADE, AND INDEED MAY
NOT BE MADE UNTIL THE STANDSTILL AGREEMENT EXPIRES, THERE IS NO JUSTICIABLE
CASE OR CONTROVERSY BEFORE THIS COURT
Under the ripeness doctrine, it is axiomatic that courts are to decide
cases and controversies, and refrain from rendering "advisory opinions." See,
---
e.g., New York State Inspection, Sec. and Law Enforcement Employees v. Cuomo, 64
- ---- ---------------------------------------------------------------------
N.Y.2d 233, 241, 485 N.Y.S.2d 719, 723 n.2 (1984) (holding that, as the ripeness
doctrine barred consideration of the matter brought, "any further consideration
would require this court to tender an advisory opinion, a practice not in accord
with the settled policy in this State"). "Where the harm sought to be enjoined
is contingent upon events which may not come to pass, the claim to enjoin the
purported hazard is nonjusticiable as wholly speculative and abstract." Id. at
---
723. As "nonjusticiability implicates the subject matter jurisdiction of the
Court, the petition must be dismissed." In re Jamaica Water Supply Co., 158
------------------------------
Misc. 2d 378, 396, 600 N.Y.S.2d 914, 927 (Sup. Ct. Queens Co. 1993).
It is precisely this kind of speculative harm that plaintiff seeks to
enjoin in this case. By plaintiff's own admission, Rhone-Poulenc has merely
announced that it was "considering an offer" to purchase Rorer's stock.
Complaint (P) 15. As such, the allegations of the Complaint are based on an
uncertain future event that may or may not occur. Indeed, plaintiff concedes
the uncertain nature of its claim by its references to "the proposed
transaction" and the "planned overhaul." Id. (P)(P) 15, 16. Moreover, as
---
plaintiff further
<PAGE>
10
concedes, Rhone-Poulenc currently is prohibited, by virtue of the standstill
agreement, from taking any action to acquire Rorer's shares until July 31, 1997.
Id. (P) 17. Thus, not only does plaintiff plead that the allegedly injurious
- ---
event has not yet happened, it goes on to admit that any possibility of the
"offer" taking place may only happen some time in the future, if at all.
Any consideration by this Court of claims stemming from such a
concededly contingent event necessarily should be barred by the ripeness
doctrine. Accordingly, as the Complaint "does not present a justiciable
question in that it calls for an advisory opinion, presents a question which is
not ripe for judicial review, and presents a question which is contingent," In
--
re Jamaica Water Supply Co., 158 Misc. 2d at 396, 600 N.Y.S. 2d at 927, this
- ---------------------------
Court should dismiss plaintiff's Complaint.
IV. THIS COURT SHOULD EXERCISE ITS DISCRETION UNDER THE DOCTRINE OF FORUM
NON CONVENIENS AND DISMISS THIS ACTION AGAINST A FRENCH CORPORATION
REGARDING DECISIONS MADE AND ACTIONS TAKEN IN FRANCE
Even if this Court were to find that plaintiff has alleged a
justiciable controversy and that Rhone-Poulenc is subject to the jurisdiction of
the New York courts, this Court should decline to exercise its jurisdiction over
this case. As is evident from a review of the Complaint, this case simply has
no connection to New York.
The principle that New York courts should not accept jurisdiction over
actions that have no connection with this State is codified in CPLR 327, which
provides that "[w]hen the court finds that in the interest of substantial
justice the action should be heard in another
<PAGE>
11
forum, the court, on the motion of any party, may stay or dismiss the action in
whole or in part on any conditions that may be just." CPLR 327(a) (McKinney
1997). Under the doctrine of forum non conveniens, a court may dismiss an
action where it determines that, although jurisdictionally sound, the action
would be better adjudicated elsewhere. Islamic Republic of Iran v. Pahlavi, 62
-----------------------------------
N.Y.2d 474, 478-79, 478 N.Y.S.2d 597, 599 (1984), cert. denied, 469 U.S. 1108
------------
(1985). The Court should consider the following factors in determining whether
to dismiss an action on forum non conveniens grounds: (1) the fact that the
transaction out of which the cause of action arose occurred primarily in a
foreign jurisdiction; (2) the potential hardship to the defendant; (3) the
unavailability of an alternative forum; (4) the residency of the parties; and
(5) the burden on the New York courts. Id. at 479, 600. No one factor is
---
determinative and this Court acts within its discretion when it considers and
applies the relevant factors. Id. at 479, 600.
---
In deciding a motion based on forum non conveniens, the "overall focus
must relate to the question or whether New York is an inconvenient forum and
whether another forum is available which will best serve the ends of justice
and the convenience of the parties.'" Heaps v. Simon & Schuster Co., 150 A.D.2d
-----------------------------
164, 165, 540 N.Y.S.2d 437, 438 (1st Dep't 1989) (quoting Irrigation & Indus.
-------------------
Dev. Corp. v. Indag, S.A., 37 N.Y.2d 522, 525, 375 N.Y.S.2d 296, 299
- -------------------------
(1975)(quoting Silver v. Great Am. Ins. Co., 29 N.Y.2d 356, 361, 328 N.Y.S.2d
----------------------------
398, 402 (1972)). Because there is absolutely no connection between this
lawsuit and the state of New York, all factors point to dismissal.
<PAGE>
EXHIBIT (G)(6)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
- -------------------------------------X
KENNETH STEINER, :
:
Plaintiff, :
: Civ. Action No.
v. : 97-4605 (WHY)
:
RHONE-POULENC S.A., :
:
Defendant. :
:
- -------------------------------------X
MOTION TO DISMISS COMPLAINT
---------------------------
Defendant Rhone-Poulenc S.A. hereby moves this Court for an Order
dismissing plaintiff's Complaint for insufficient service of process pursuant to
Fed. R. Civ. P. 12(b)(5), for failure to state a claim pursuant to Fed. R. Civ.
P. 12(b)(6), and for such other and further relief as the Court may deem just
and proper. In support of its motion, defendant Rhone-Poulenc S.A. relies upon
the accompanying Memorandum of Law and the annexed declaration of Yves Brissy.
<PAGE>
Defendant Rhone-Poulenc S.A. requests that the Court schedule oral
argument on the motion.
Dated: August 6, 1997
Philadelphia, Pennsylvania
/s/ Martha Johnston
-------------------
Jay A. Dubow
Martha Johnston
WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP
Twelfth Floor Packard Building
S.E. Corner 15th and Chestnut Streets
Philadelphia, PA 19102-2678
(215) 977-2058
Counsel for Defendant Rhone-Poulenc S.A.
Of Counsel:
Kenneth M. Kramer
Kathryn Tabner
Jennifer M. Dehmel
SHEARMAN & STERLING
153 East 53rd Street
New York, NY 10022
(212) 848-4000
<PAGE>
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
- --------------------------------------x
KENNETH STEINER, :
:
Plaintiff, :
: Civ. Action No.
: 97-4605 (WHY)
v. :
:
RHONE-POULENC S.A., :
:
Defendant. :
- --------------------------------------x
DEFENDANT RHONE-POULENC S.A.'S MEMORANDUM OF LAW
IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT
-------------------------------------------------
Jay A. Dubow
Martha Johnston
WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP
Twelfth Floor Packard Building
S.E. Corner 15th and Chestnut Streets
Philadelphia, PA 19102-2678
(215)977-2058
Counsel for Defendant Rhone-Poulenc S.A.
Of Counsel:
Kenneth M. Kramer
Kathryn Tabner
Jennifer M. Dehmel
SHEARMAN & STERLING
153 East 53rd Street
New York, NY 10022
(212) 848-4000
<PAGE>
TABLE OF CONTENTS
PAGE
----
PRELIMINARY STATEMENT....................................................... 1
STATEMENT OF FACTS.......................................................... 2
ARGUMENT.................................................................... 3
I. Plaintiff's Service of RPI is Insufficient Service on Rhone-Poulenc... 3
II. The Complaint Must be Dismissed as it Fails to Allege that Rhone-Poulenc
Has Commenced a Tender Offer.......................................... 4
CONCLUSION.................................................................. 8
<PAGE>
TABLE OF AUTHORITIES
CASES
Akzona Inc. v. E.I. Du Pont de Nemours & Co., 607 F.Supp. 227 (D.Del. 1984)....3
- --------------------------------------------
E.H.I. of Florida, Inc. v. Insurance Co. of N. Am., 499 F.Supp. 1053 (E.D.Pa
- --------------------------------------------------
1980), affd, 652 F.2d 310 (3rd Cir. 1981)....................................6,7
----
Hanson Trust PLC v. SCM Corp., 774 F.2d 47 (2d Cir. 1985)....................5,6
- -----------------------------
Lasky v. Continental Prods. Corp., 97 F.R.D. 716 (E.D. Pa. 1983)...............3
- ---------------------------------
Mirrow v. Club Med. Inc., 118 F.R.D. 418 (E.D. Pa. 1986).......................3
- ------------------------
Pension Benefit Guar. Corp. v. White Consol. Indus. Inc., 998 F.2d 1192
- --------------------------------------------------------
(3d Cir. 1993), cert. denied, 510 U.S. 1042 (1994).............................4
------------
Sturm v. Clark, 835 F.2d 1009 (3d Cir. 1987)...................................4
- --------------
Wellman v. Dickinson, 475 F. Supp. 783 (S.D.N.Y. 1979), affd. 682 F.2d 355 (2d
- -------------------- -----
Cir. 1982), cert. denied, 460 U.S. 1069 (1983).................................5
------------
STATUTES
Fed. R. Civ. P. 12(b)(5) and
12(b)(6).......................................................................1
<PAGE>
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
- -------------------------------------X
KENNETH STEINER, :
:
Plaintiff, :
: Civ. Action No.
v. : 97-4605 (WHY)
:
RHONE-POULENC S.A., :
:
Defendant. :
:
- -------------------------------------X
DEFENDANT RHONE-POULENC S.A.'S MEMORANDUM OF LAW
IN SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT
-------------------------------------------------
Defendant Rhone-Poulenc S.A. ("Rhone-Poulenc") respectfully submits this
Memorandum of Law in support of its motion to dismiss plaintiff's Complaint
pursuant to Fed. R. Civ. P. 12(b)(5) and 12(b)(6).
PRELIMINARY STATEMENT
---------------------
On July 15, 1997, plaintiff attempted to bring suit against Rhone-
Poulenc to enjoin an alleged tender offer that had not even commenced by serving
its Complaint not on Rhone-Poulenc, but on one of its subsidiaries. In its haste
to bring suit to enjoin conduct that Rhone-Poulenc was not even contractually
permitted to take prior to July 31, 1997, plaintiff has filed a Complaint that
is lacking in any substantive allegations and then served it in a procedurally
deficient manner. The Complaint must be dismissed as plaintiff has failed in
serve process upon the defendant itself. In the alternative, the Complaint must
be dismissed because it fails to allege that Rhone-Poulenc has engaged in any
conduct that violates the federal securities law.
<PAGE>
STATEMENT OF FACTS/1/
------------------
Rhone-Poulenc is a French societe anonyme with its principal place of
business in Courbevoie Cedex, France. Complaint (Paragraph) 6. Kenneth Steiner
owns shares of Rhone-Poulenc Rorer Inc. ("Rorer"), a Pennsylvania corporation.
Id. (Paragraphs) 5,7. Rhone-Poulenc owns or controls approximately 68.3% of the
- --
outstanding shares of Rorer. Id. (Paragraph) 6.
--
Based upon the terms of the 1990 standstill agreement between Rhone-
Poulenc and Rorer, Rhone-Poulenc is precluded from acquiring the remainder of
the publicly traded shares of Rorer prior to July 31, 1997. Complaint
(Paragraph) 10. According to the Complaint, on June 26, 1997, Rhone-Poulenc
announced that it was "considering an offer to acquire" the remaining shares of
Rorer at a price of $92.00 per share. Id. (Paragraph) 8.
--
Rhone-Poulenc Inc. ("RPI), an indirect subsidiary of Rhone-Poulenc, is a
New York corporation with its principal place of business in Cranbury, New
Jersey. Declaration of Yves Brissy ("Brissy Dec.") sworn to August 6, 1997,
attached hereto as Exhibit A, (Paragraph) 5. RPI and Rhone-Poulenc observe all
corporate formalities, have separate boards of directors and maintain separate
bank accounts. Id. (Paragraphs) 6,7,8. In addition, Rhone-Poulenc does not
--
exercise any control over RPI's day-to-day business operations. Id. (Paragraph)
--
11.
- -------------------
1 Except where indicated, the facts set forth herein are taken from the
Complaint and those facts are assumed to be true only for the purposes
of this motion.
2
<PAGE>
ARGUMENT
--------
I.
PLAINTIFF'S SERVICE ON RPI IS INSUFFICIENT SERVICE ON RHONE-POULENC
-------------------------------------------------------------------
Plaintiff served his Complaint on RPI, a subsidiary of Rhone-Poulenc, at
one of RPI's offices in New Jersey. Plaintiff's purported service on Rhone-
Poulenc via RPI is insufficient as a matter of law and since RPI is not the
alter ego or the agent of its parent Rhone-Poulenc, this Court should dismiss
the action for lack of proper service.
Service on a subsidiary as a means of obtaining jurisdiction over its
parent is insufficient where the parent and the subsidiary maintain separate
corporate identities, unless the subsidiary is shown to be the alter ego or the
agent of the parent. See Mirrow v. Club Med. Inc., 118 F.R.D. 418, 419 (E.D.
----------------------------
Pa. 1986); see also Lasky v. Continental Prods. Corp., 97 F.R.D. 716, 716-17
------------------------------------------
(E.D. Pa. 1983) (service on subsidiary insufficient to obtain jurisdiction over
parent as plaintiff failed to allege that subsidiary was "so dominated and
controlled" by parent). To meet its burden of proof that RPI is the alter ego or
agent of Rhone-Poulenc, plaintiff must demonstrate that "the separate corporate
identities of the subsidiary and parent are a fiction and that the subsidiary
is, in fact, being operated as a department of the parent." Akzona
------
Inc. v. E.I. Du Pont de Nemours & Co., 607 F. Supp. 227,237 (D. Del. 1984).
- -------------------------------------
As demonstrated in the Brissy Declaration, Rhone-Poulenc and RPI do
maintain separate corporate identities and observe all traditional corporate
formalities. Brissy Dec. (Paragraph) 6. RPI is also not the alter ego or agent
of Rhone-Poulenc. RPI is a significant operating corporation
3
<PAGE>
with sales in 1996 of approximately $2.3 billion dollars. Id. (Paragraph) 6.
--
Most importantly, Rhone-Poulenc does not interfere in the day-to-day operations
of RPI. Id. (Paragraph) 11. In sum, Rhone-Poulenc and RPI are separate
--
companies. The Complaint simply lacks any allegations to the contrary and in
fact nowhere does it allege any basis for service Rhone-Poulenc via RPI.
Therefore, service on RPI did not qualify as service on Rhone-Poulenc and the
Complaint must be dismissed./2/
II.
THE COMPLAINT MUST BE DISMISSED AS IT FAILS TO ALLEGE THAT
RHONE-POULENC HAS COMMENCED A TENDER OFFER
------------------------------------------
Plaintiff seeks to enjoin the "offer" that Rhone-Poulenc has allegedly
commenced for the remaining shares of Rorer. In considering a motion to dismiss
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, "all
allegations in the complaint and all reasonable inferences that can be drawn
therefrom must be accepted as true and viewed in the light most favorable to the
non-moving party." Sturm v. Clark, 835 F.2d 1009, 1011 (3d Cir. 1987). When
--------------
deciding motions to dismiss, the court must generally confine its review to
"allegations contained in the complaint, exhibits attached to the complaint and
matters of public record." Pension Benefit Guar. Corp. v. White Consol. Indus.
---------------------------------------------------
Inc., 998 F.2d 1192, 1196 (3d Cir. 1993), cert. denied, 510 U.S. 1042 (1994).
- ---- ------------
Even accepting all of the allegations of the Complaint as true, the Complaint
does not allege that
- -------------------
2 Plaintiff has failed to comply with the requirements of the Hague
Convention on Service which, since France is a signatory to it, governs
service upon a foreign defendant such as Rhone-Poulenc.
4
<PAGE>
Rhone-Poulenc has commenced a tender offer and in doing so, has violated either
Section 14(d) or 14(e) of the Securities Exchange Act of 1934.
The Complaint does not allege that Rhone-Poulenc has commenced a
"conventional" tender offer by publishing the required information and filing
and circulating a Form 14D-1. Nor is there any allegation that Rhone-Poulenc
has commenced an "unconventional" tender offer. Two judicially created tests
have been used for determining whether certain conduct gives rise to an
"unconventional" tender offer. In Wellman v. Dickinson, 475 F. Supp. 783
--------------------
(S.D.N.Y. 1979), aff'd, 682 F.2d 355 (2d Cir. 1982), cert. denied, 460 U.S. 1069
----- ------------
(1983), the court established an eight factor test as follows:
(1) active and widespread solicitation of public shareholders for the
shares of an issuer;
(2) solicitation made for a substantial percentage of the issuer's
stock;
(3) offer to purchase made at a premium over the prevailing market
price;
(4) terms of the offer are firm rather than negotiable;
(5) offer contingent on the tender of a fixed number of shares, often
subject to a fixed maximum number to be purchased;
(6) offer open only for a limited period of time;
(7) offeree subjected to pressure to sell his stock;
. . .
[8] public announcements of a purchasing program concerning the target
company precede or accompany rapid accumulation of large amounts of the
target company's securities.
Id. at 823-24. As an alternative to the eight factor test, the Second Circuit
- --
has also developed a test based upon the statutory purpose of the Williams Act
to determine whether that Act should apply to particular conduct. Hanson Trust
------------
PLC v. SCM Corp., 774 F.2d 47 (2d Cir. 1985). Under the Hanson test,
- ---------------- ------
the question of whether a solicitation constitutes a "tender offer"
within the meaning of (Section) 14(d) turns on whether, viewing the
transaction in the light of the totality of circumstances, there
5
<PAGE>
appears to be a likelihood that unless the preacquisition filing
strictures of that statute are followed there will be a substantial risk
that solicitees will lack information needed to make a carefully
considered appraisal of the proposal put before them.
774 F.2d at 57.
Under either test, the allegations of the Complaint are insufficient to
allege that Rhone-Poulenc has commenced an unconventional tender offer. There
has been no active and widespread solicitation for the shares of Rorer. Rather,
as the Complaint alleges, there has been a statement by Rhone-Poulenc that it
might consider making an offer in the future. Complaint (Paragraph) 8. Since
- -----
there has been no offer by Rhone-Poulenc, there has been no solicitation for a
substantial percentage of the shares of Rorer, the "offer" did not include a
premium and the terms of the alleged offer did not state that it was for a fixed
number of shares or contingent on the tender of a certain number of shares.
There is no set time on this alleged offer and since there is no offer, there
is no pressure on any of the alleged offerees to sell their shares. Finally,
since Rhone-Poulenc was contractually barred from purchasing shares of Rorer at
the time when plaintiff alleged that it had commenced a tender offer, there has
been no rapid accumulation of Rorer shares. Even under the Hanson test,
------
Rhone-Poulenc's conduct does not constitute a tender offer because there is
simply no information that a solicitee would require to consider and evaluate a
nonexistent offer. 774 F.2d at 57. Therefore, since Rhone-Poulenc has not
commenced a tender offer, it could not have violated Section 14(d).
Section 14(e) of the Williams Act, which is a general antifraud
provision, only applies to a tender offer. E.H.I. of Florida, Inc. v. Insurance
------------------------------------
Co. of N. Am., 499 F. Supp. 1053, 1063 (E.D. Pa. 1980), aff'd, 652 F.2d 310 (3d
- ------------- -----
Cir. 1981). As the allegations in the
6
<PAGE>
Complaint cannot meet the standards for a finding that Rhone-Poulenc has
commenced a tender offer, any statements made by Rhone-Poulenc do not qualify
for analysis under Section 14(e). Id. (holding that Section 14(e) only applies
--
if the alleged conduct constituted a tender offer). Accordingly, since
Rhone-Poulenc has not commenced a tender offer, the Complaint fails to state a
claim and must be dismissed.
7
<PAGE>
CONCLUSION
----------
For the foregoing reasons, this Court should dismiss the Complaint
pursuant to Fed. R. Civ. P. 12(b)(5) and 12(b)(6) and grant defendant such other
and further relief that the Court deems appropriate.
Respectfully submitted,
/s/ Martha Johnston
-------------------
Jay A. Dubow
Martha Johnston
WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP
Twelfth Floor Packard Building
S.E. Corner 15th and Chestnut Streets
Philadelphia, PA 19102-2678
(215) 977-2058
Counsel for Defendant Rhone-Poulenc S.A.
Dated: August 6, 1997
Philadelphia, Pennsylvania
Of Counsel:
Kenneth M. Kramer
Kathryn Tabner
Jennifer M. Dehmel
SHEARMAN & STERLING
153 East 53rd Street
New York, NY 10022
(212) 848-4000
8
<PAGE>
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
- -------------------------------------X
KENNETH STEINER, :
:
Plaintiff, :
: Civ. Action No.
v. : 97-4605 (WHY)
:
RHONE-POULENC S.A., :
:
Defendant. :
:
- -------------------------------------X
DECLARATION OF YVES BRISSY IN SUPPORT OF
RHONE-POULENC S.A.'S MOTION TO DISMISS THE COMPLAINT
----------------------------------------------------
Yves Brissy, pursuant to 28 U.S.C. (Section) 1746, declares under penalty of
perjury:
1. I am the General Counsel of Rhone-Poulenc S.A. ("RPSA") based in
Courbevoie, France. The following facts are true to the best of my
knowledge.
2. RPSA is a French Societe anonyme organized and existing under the
laws of the French Republic.
3. RPSA's legal headquarters are in Courbevoie, France.
4. RPSA is not a citizen of any State of the Untied States.
5. Rhone-Poulenc Inc. ("RPI"), a New York corporation with its
principal place of business in Cranbury, New Jersey, is an indirect
subsidiary of RPSA.
6. RPI is a free-standing corporation, with sales in 1996 of
approximately $2.3 billion dollars. RPI and RPSA observe all
traditional corporate formalities.
<PAGE>
7. RPI and RPSA each maintain their own bank accounts, accounting
systems, payroll systems, financial records and budgets.
8. RPI and RPSA have separate boards of directors, with no commonality
of directors between the two companies.
9. RPI and RPSA each file separate tax returns
10. RPI and RPSA do not commingle corporate assets.
11. RPSA does not exercise any control over RPI's day-to-day business
operations.
I declare under penalty of perjury under the laws of the United States
of America that the foregoing is true and correct.
/s/ Yves Brissy
Yves Brissy
General Counsel
Executed on August 6, 1997 at Courbevoie, France
<PAGE>
CERTIFICATE OF SERVICE
----------------------
I hereby certify that a true and correct copy of defendant Rhone-Poulenc
S.A.'s Memorandum of Law and the annexed declaration of Yves Brissy was served
by hand on August 6, 1997 on:
Robert P. Frutkin
Savett Frutkin Podell & Ryan, P.C.
320 Walnut Street, Suite 508
Philadelphia, Pennsylvania 19106
and by pre-paid Federal Express on:
Robert I. Harwood
Samuel K. Rosen
Wechsler Harwood Halebian & Feffer LLP
805 Third Avenue
New York, New York 10022
/s/ Martha Johnston
-------------------------
Martha Johnston
<PAGE>
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
- -------------------------------------X
KENNETH STEINER, :
:
Plaintiff, :
: Civ. Action No.
v. : 97-4605 (WHY)
:
RHONE-POULENC S.A., :
:
Defendant. :
:
- -------------------------------------X
ORDER
-----
AND NOW, upon consideration of the Motion of Defendant Rhone-Poulenc
S.A. to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(5) and 12(b)(6),
and any response thereto; and the Court finding that good cause exists for
granting the Motion; it is hereby ORDERED and DECREED that defendants' Motion to
Dismiss the Complaint is GRANTED, and the above-entitled action is hereby
dismissed with prejudice.
BY THE COURT:
-------------------------------
J.
